The Swiss investment bank trimmed its target price for the telecoms group to 230p from 250p due to the expected impact of higher costs at its Italian business and the prospect of weaker earnings in the UK as well as a lower valuation for the VodafoneZiggo joint venture.
“Italy is being impacted by the entry of Iliad into the mobile market and the group is being further impacted by handset financing drag in the UK - accounting treatment means revenues are reclassified from service revenues into equipment revenues,” UBS analysts said in a note to clients.
"However, we think second quarter results will show that the broader group remains resilient and that underlying estimates should remain underpinned,” they added.
The bank expects the FTSE 100 telecoms firm do deliver second-quarter organic service revenue growth of -0.6% (+0.3% in Q1) with organic earnings (EBITDA) growth of +1.6% in the first half.
Shares in Vodafone were 1.2% up at 145.70p in mid-morning trade.