Vodafone reports decline in quarterly revenues

Vodafone on Thursday posted a drop in group revenue for the last three months of 2012, blaming difficult market conditions in Europe.

The FTSE 100 telecoms company said revenues fell 1.8% to £11.38bn year-on-year for the quarter, experiencing the biggest decline in the take up of services in Europe.

Emerging market operations continued to grow, but it was offset by macroeconomic regulatory and competitive pressures across Europe causing group service revenue to drop by 2.6% to £10.37bn.

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Southern Europe services were hit the hardest, plummeting 11.9% to £2.3bn.

In Italy service revenue tumbled 13.8%, due to lower mobile termination rates and a poor economic climate.

Spain was down 11.3% after experiencing a drop in customers following the temporary removal of handset subsidies, competitive pressures in the value segment and the increased popularity of converged consumer offers in the market.

On the up side, Africa, Middle East and Asia Pacific service revenue jumped 2.7% to £3.14bn.

Verizon Wireless, the company's joint venture with Verizon, continued to perform well as service revenue grew 8.7% bolstered by expanding connections base and increased smartphone penetration. In the US the venture added more than 2.2m net mobile retail connections during the quarter.

The mobile network operator provided a £2.4bn dividend which helped reduce net debt reduced to £23.3bn.

"Our results continue to reflect very difficult market conditions in Europe," Chief Executive, Vittorio Colao, said.

"We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential.

"We continue to make progress in our Vodafone 2015 strategy, with good revenue growth in data and emerging markets, the launch of LTE services in another four markets and the acquisition of new spectrum.

"Vodafone Red, our new strategic pricing approach in Europe, has been launched in five markets with positive early take-up, and to drive growth in enterprise we have created a new enterprise business unit and accelerated our integration plans for Cable & Wireless Worldwide."

The company said it expects adjusted operating profit in the upper range of £11.1bn to £11.9bn for the 2013 financial year, while projecting free cash flow at the lower range of £5.3bn to £5.8bn.

The results follow market forecasts of "growth deterioration" at the firm and a reliance on Verizon Wireless for revenues.

Last month Deutsche bank lowered its recommendation from 'buy' to 'hold' citing concerns about the telecom company's worsening cash returns.

"We forecast growth deterioration through calendar 2013 with the outlook for financial FY14 set to confirm declining free cash flow (FCF), no further dividend-per-share growth and a scaled down buyback to avoid increased leverage."

RD