It's not just housing that's feeling the pain in Spain. Vodafone has revealed that Spanish revenues dropped 2.5% as a "more challenging operating environment than expected" hit both first-quarter numbers and the share price, which slid by 14%. Revenue also fell 1.9% in Germany, and the world's largest mobile phone group further referred to "signs of an economic slowdown" in the UK, where sales grew just 2.1%.
That "shattered" the widespread view that Vodafone "will be defensive in a weakening economy", said Investec analyst Jonathan Groocock. It's the first acknowledgement by a telecoms firm that it's "not immune" to a downturn, noted Dean Reynolds of Execution. After the overall 0.2% sales slide, revenue forecasts for this year have been cut to around £40bn, the lower end of previous estimates. But profit and cashflow targets are being maintained as "the damage is quite limited for now", according to departing CEO Arun Sarin.
What next ?
"Vodafone only provided full-year forecasts just eight weeks ago," says Una Galani of Breakingviews, so "investors are rightly spooked" as "any revision in such a short space of time is worrying". And "when a company says it's monitoring trends on a daily basis it indicates an alarming lack of earnings visibility", added the FT's Lex.
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Some cheer was provided by Vodafone's £1bn share buyback announcement following the plunge and the 60% year-on-year increase in Indian subscribers. But that won't last forever. "Today's emerging markets are tomorrow's developed markets," said Mark James of Collins Stewart. "The prospects for a medium-term slowdown are there."
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