Vodafone hit by European weakness

Reported revenues at telecoms giant Vodafone declined in the first quarter with unfavourable foreign exchange movements in Europe providing a drag.

Nevertheless, the group said that trading was in line with expectations and the outlook for the full year is maintained.

Group revenue totalled £10,767m in the three months to June 30th, down 7.7% year-on-year. However, on an organic basis, revenues actually increased by 1.0%.

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Service revenue fell by 8.1% to £9,975m, still up 0.6% organically. However, excluding the impact of mobile termination rate (MTR) cuts, service revenue increased by 2.3%. The group said it is continuing to benefit from a stable environment in northern Europe, but the macroeconomic and competitive pressures in southern Europe have "intensified further".

Reported revenue fell by 8.2% in Europe, including a 7.1 percentage point negative impact from a weak euro. Organically, service revenue fell 1.6% due to the impact of MTR cuts, competitive pricing pressures and continued macroeconomic weakness, partially offset by growth in data revenue. Particular weakness was seen in markets in Italy and Spain.

Emerging markets are continuing to deliver strong growth (organic service revenue up 6.1%), while its US peer Verizon Wireless, in which it owns a 45% stake, performed very well (organic service revenue up 8.2%).

"Despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining tight control of our cost base," said Chief Executive Vittorio Colao.

"We remain focused on driving through significant improvements to our customers' experience through our ongoing investment in our networks, stores and IT platforms."

Free cash flow fell by 24.9% year-on-year to £943m, while net debt stove at £22.7bn.

BC