Vodafone suffers revenues fall

Europe’s economic woes were felt by Vodafone today after the mobile phone giant reported its first drop in annual revenues for seven years.

Sales of £44.4bn (€51.8bn) for the year to March 31 were 4.2% lower than a year ago, despite benefiting from stronger trading in emerging markets and increased smartphone usage.

Vodafone’s service revenues in southern Europe slumped 11.6% in the year, driven by economic weakness and competition in Spain and Italy, while the figure in the UK was 4% lower.

It described trading in its home market as robust and said the decline was in part due to the impact of regulatory cuts in the charges it sets other operators for terminating calls on its network.

Data revenues grew by 4.2% in the UK, driven by higher penetration of smartphones, but price competition and economic weakness meant there was a reluctance among consumers to use their phones outside of bundled deals.

Group operating profits were 3.7% higher at just under £12bn, but when including a £7.7bn charge on the shrinking value of its assets in Spain and Italy the company’s pre-tax profits fell 66% to £3.2bn.

The company gave no update on the future of its 45% stake in US operator Verizon Wireless, amid recent speculation that the firm’s majority owner Verizon is preparing a deal to buy the holding.

Vodafone’s share of profits from the US business rose 30% to £6.4bn and it is due to receive a Verizon dividend of £2.1bn next month.

Despite the pressure on major European markets, chief executive Vittorio Colao said the year saw further strong progress in its areas of strategic focus, such as data and emerging markets.

He said that Vodafone Red, which offers unlimited voice, text and internet to monthly subscribers, had attracted 4.1 million customers across 14 markets and was on track to achieve 10 million by next March.

Mr Colao added: “I remain very excited about our longer term prospects, as customer appetite for high speed data grows rapidly, and companies look to embed mobility into their corporate strategies.”

The company’s dividend rose by 7% to 10.19p and has grown by more than 22% in the last three years, Vodafone added.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “There are many opposing factors within these results and on balance the glass is just about half full.”

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