Mobile operator Vodafone wrote down the value of its assets by £4bn and cut its medium-term sales target, as the debt crisis hit customers in southern Europe, forcing them to save money on phone calls.
Vodafone, the largest telecom operator in the world, posted full-year results in line with forecasts and stood out from its peers by paying a record dividend as strength in emerging markets, Germany, Britain and Turkey offset a slump in spending in Spain and Italy.
But with poor prospects for the two big southern European markets, coupled with persistent regulatory and foreign exchange pressures, Vodafone said 2013 revenue growth would be slightly below its previous medium-term target of one to four per cent.
The British group is the latest in a line of major companies to report a knock-on effect from austerity measures, as consumers grapple with higher taxes, inflation, fewer public services and muted wage growth.
Vodafone took the writedown against its units in Spain, Italy, Greece and Portugal, all at the heart of the crisis, where customers are taking lower tariffs and using their phones less.
“Europe continues to be challenging,” chief executive Vittorio Colao told reporters.
“It is clear that (Italy) has a crisis of confidence and especially a lot of uncertainty.
“It’s very obvious that this is a moment where people are defensive.
“The whole European concept needs to be reinvigorated, not diluted down,” he added, saying he hoped Greece would remain in the euro zone but was prepared for a possible exit.
The travails in southern Europe pulled the key metric of European organic service revenue down 1.1 per cent. Combined with eight per cent growth from Africa, the Middle East and Asia Pacific, however, the group overall was up 1.5 per cent on last year.
Organic service revenue comes from the provision of ongoing services, excluding one-off items, and is watched closely by analysts as a true sign of the health of the business. With the medium-term target downgraded, finance director Andy Halford said the group would target growth in 2013.
As well as tough macro-economic conditions, the telecoms sector has also been hit by cuts to fees paid to mobile carriers.