Surging energy costs hit profits at Vodafone sending shares crashing to  a 20-year low

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Vodafone shares fell to a 20-year low as rising electricity prices and fierce competition hit the business.

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As telecoms giant FTSE 100 struggles in key markets including Spain, Germany and Italy, it warned that earnings for the year will top £13.4bn, up from an earlier forecast of £13.6bn.

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Vodafone also warned that it would generate less cash than expected as the economic outlook deteriorated.

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Shares drop: Vodafone has warned that earnings for the year will top £13.4bn, up from an earlier forecast of £13.6bn.

Stock fell 7.9%, or 8.27 pence, to 95.89 pence, the lowest level since 2002.

The latest slide puts new pressure on chief executive Nick Reed, who has faced criticism over Vodafone’s poor share price performance.

Shares have fallen by more than a third since he took over in 2018. Under his leadership, Vodafone experienced sluggish growth and failed to complete significant M&A deals.

The firm is under pressure from investors, including French tycoon Xavier Niel and activist Cevian Capital, who bought a stake earlier this year and are pushing for the business to close more deals and simplify its structure. Cevian urged Reed to get rid of inefficient parts of the business.

Reid insisted that plans to merge his UK business with rival Three were “well on their way”.

The companies confirmed last month that they were in talks to merge to create the UK’s largest mobile service provider, with more than 27 million customers.

The company plans to retain a 51% stake in the combined business, while Three’s owner, Hong Kong-based conglomerate CK Hutchison, will own the rest.

Reed has expressed a desire to pursue the merger in markets that he believes suffer from excessive competition, including the UK.

Matt Britzman, an equity analyst at Hargreaves Lansdown, said the telecommunications firm was “certainly not all smooth sailing.”

He said: “Warnings that weaker economic conditions and rising costs could lead to lower full-year results from previous forecasts dampened half-year results.”

The bleak outlook for Vodafone came after the company said its total sales in the six months to September 30 were up just 2% to £20.2bn.

Profit fell 2.6% to £6.4bn as the company struggled with rising energy prices and rising inflation.

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