Vodafone shares down over growth fears
Shares in mobile phone group Vodafone suffered a sharp fall today after investors took fright at the prospect of slower growth next year.
The 8% fall in shares of the London market’s fourth biggest company came despite strong half-year results showing a 58% rise in underlying earnings and a 12.9% rise in its customer base over the past year to 171 million.
Vodafone lifted its dividend by 15% and promised to buy back more shares, but still failed to win over shareholders after it said the cost of turning around its struggling telecoms unit in Japan would leave its mark on margins.
The company also warned that progressively higher levels of mobile-phone penetration and the impact of lower rates for calls connected to other networks would reduce the trend for revenue growth in the next financial year.
Chief executive Arun Sarin described the figures for the six months to September 30 as a “another strong set of results”.
He said: “They show a robust operational performance. Vodafone has continued to outperform its principal competitors in Europe and the United States.”
But analysts were more concerned by Japan, where margins fell 6% and were set to come under further pressure as Vodafone looked to rebuild momentum through investments in handsets and the swifter build-out of its 3G network.
Mr Sarin said Vodafone remained committed to the region, adding: “Japan is a strategic asset for the company. Customers in Japan are very mobile-centric and we learn a lot from our company in Japan.”
Some analysts also expressed concern about the performance in the UK, which Vodafone described as one of its most competitive markets.
Revenues were broadly unchanged at £2.57bn (€3.8bn), even though the company achieved an 8% gain in customer numbers in the UK to 15.76 million.
Average revenues per user fell by 6.4% to £24.90 (€37), reflecting the effect of some rate cuts and a higher proportion of lower spending pre-pay customers.
Non-voice services proved to be the main growth area in the UK after a 12.1% gain in revenues reflected offerings such as Vodafone live! With 3.96 million active devices and 3G, with 438,000 devices.
Richard Hunter of Hargreaves Lansdown stockbrokers said: “Japan is a very important market for Vodafone and what they have said has totally overshadowed the results, which were at the top end of the range.
“There’s a big dividend increase and a very positive share buy-back programme, which would normally be positive indicators for the stock.”
Across the group, earnings before one-off items reached £6.7bn (€10bn) in the six months to September 30, but the impact of a write-down following the sale of operations in Sweden meant the bottom-line figure dipped to £4.1bn (€6.1bn), from £4.54bn (€6.7bn).
Shareholders will get a dividend of 2.2p a share – equivalent to £1.4bn (€2.1bn) and up 15% on a year ago – while Vodafone will increase the amount it plans to buy back in shares, by £2bn (€3bn) to £6.5bn (€10bn) in this financial year.
Meanwhile, Vodafone Ireland’s customer base grew to 2,013,000, with the addition of 32,000 new customers.
The company now has 93,800 Irish subscribers to its 3G service.
Blended monthly ARPU grew from €51.40 for the quarter to June 30, 2005, to €53.10 for the quarter ending September 30, 2005.
Vodafone Ireland CEO Teresa Elder said: “Today’s figures are a testament to Vodafone’s leadership of the mobile market.
“Our continuing growth is based upon our ability to deliver customer-focused, easy-to-use, value-for-money mobile services.
“Vodafone has continued to deliver increasing value to its customers during the period, with the launches of Perfect Fit, Perfect Fit for Business and Vodafone Passport, all of which are proving to be extremely popular with our customers."
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