Weak markets see another revenue drop for Vodafone

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Vodafone reported another big quarterly drop in its main revenue measure, as weakness in South Africa and Spain offset stabilisation elsewhere in Europe, and said a broader improvement is not expected until later in the year.

The world’s second-biggest mobile operator is ramping up spending on new, faster 4G networks to satisfy customers’ growing appetite for data.

But that comes against the backdrop of cut-throat competition as operators battle weak demand in some struggling European economies. Regulatory changes, such as cutting the charges operators can impose to connect calls across networks, have also been a drag.

Vodafone said yesterday the pace of decline in organic service revenue, which strips out items such as handset sales and currency movements, accelerated to 4.2 per cent in the three months to June 30, the company’s financial first quarter.

That was in line with analysts’ forecasts and compared with a rate of 4.0 per cent, including a full contribution from Italy, in the last quarter of its previous financial year.

Chief executive Vittorio Colao said the group was doing better in some European markets, such as Germany and Britain.

“It is encouraging that quarter-on-quarter some markets seem to be stabilising but I think it is early to call any low point,” he said. The company is hoping for a broader improvement in the second half of its financial year.

Analysts at Jefferies, who have a ‘hold’ rating on Vodafone, said that given the stock’s de-rating and dividend support, the market would focus on the positives.

“As expected, Vodafone’s top-line starts to see some benefits of heavy commercial and network investment,” they said.

Colao said the company’s £19bn investment programme, called Project Spring, had taken off quickly.

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