Vodafone sales hit as weakness spreads across Europe

LONDON Thu Feb 7, 2013 7:42pm IST

A woman talks on her mobile phone in front of a Vodafone store at Vodafone Turkey headquarters in Istanbul May 4, 2010. REUTERS/Murad Sezer/Files

A woman talks on her mobile phone in front of a Vodafone store at Vodafone Turkey headquarters in Istanbul May 4, 2010.

Credit: Reuters/Murad Sezer/Files

Related Topics

Stocks

   
Kishore Pandey, 82, lies on a bed as his daughter, Usha Tiwari, holds him and a priest stands by them (L) at Mukti Bhavan (Salvation House) in Varanasi, in the northern Indian state of Uttar Pradesh, June 19, 2014. REUTERS/Danish Siddiqui

Waiting to die at Salvation House

The city of Varanasi is Hinduism's holiest city and many Hindus believe that dying there and having their remains scattered in the Ganges allows their soul to escape a cycle of death and rebirth.  Slideshow 

LONDON (Reuters) - Trading at Vodafone (VOD.L) worsened in the third quarter as customers in previously robust northern Europe joined those in the south by cutting phone usage, adding impetus to the British group's efforts to cut costs.

A worse than expected 2.6 percent drop in organic service revenue in the three months to December 31 marked an acceleration from the 1.4 percent fall recorded in the second quarter and showed the intense pressure on the world's second largest mobile operator.

Shares in Vodafone rose by 1.7 percent however as the group maintained its outlook for the year and as analysts said the results were not quite as bad as some had feared after torrid results from Dutch group KPN (KPN.AS) and Belgium's Mobistar earlier this week.

Investors also took strength from the line that the full-year decline in earnings margins should show an improving trend, due to cost restructuring and savings programmes.

"Today's early spike in the share price is acknowledgment of progress being made," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers. "There is also much to do.

"Plans are afoot to ratchet up the cost efficiency programme. Meanwhile, the Indian tax case, general regulatory overhang and the fiercely competitive nature of Vodafone's industry remain serious headwinds."

Telecoms firms across Europe are struggling with the macroeconomic pressures at a time when they need to build networks that offer faster speeds for consumers increasingly accessing the internet on mobile devices. They are also facing regulatory changes across the region and fierce competition.

"We expect peer results to show that Vodafone is doing worse than peers," Bernstein analyst Robin Bienenstock said. "The pace of decline almost doubled in Europe while (emerging market) growth fell by about a third."

FIERCE COMPETITION

Vodafone is the first major operator to report its results for the final three months of the year.

Of its 403 million customers, those in Britain and Germany cut back on usage to stick within their price plans while fewer customers signed up to the network, opting for cheaper tariffs.

Telefonica's O2 (TEF.MC) turned more competitive in Britain and Deutsche Telekom's (DTEGn.DE) T-Mobile upped the pressure in Germany by offering cheaper deals for smartphone contracts.

The worsening picture in Germany and Britain, which had previously remained resilient, compounded the ongoing problems in the big southern European markets of Spain and Italy where customers have cancelled contracts altogether.

Germany was also hit by regulatory cuts due to changes in the amount operators can charge each other for connecting and disconnecting calls, intended to lower costs to consumers.

Overall, revenue was down on an organic basis in Germany by 0.2 percent, down in Britain by 5.2 percent, down in Italy by 13.8 percent and down in Spain by 11.3 percent.

The group has also faced slowing growth in its emerging markets such as India, where it recorded revenue growth of 9 percent, two percentage points lower than the previous quarter.

"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."

In response the group is increasing its cost-cutting programme - it is considering cutting its workforce in Spain by up to a quarter to counter an escalating price war - and it has rolled out a Vodafone Red price plan in five markets.

The new offering, which has been taken up by 2 million customers, offers unlimited calls and text messages combined with data plans for Internet access, to prevent customers using so-called over-the-top services to message friends for free.

The new plan has contributed to the lower revenue, Colao told reporters, but he added that this had been expected and that the new service would increase customer loyalty.

(Reporting by Kate Holton; Editing by Paul Sandle and Hans-Juergen Peters)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-Nepal Ties

REUTERS SHOWCASE

Tackling Food Prices

Tackling Food Prices

India to free up extra 10 million tonne wheat in open market  Full Article 

Facebook Results

Facebook Results

Facebook beats Wall Street targets, stock hits record high  Full Article 

GM Recall

GM Recall

GM recalls 717,950 vehicles in U.S., not for ignition switches  Full Article 

Hyundai Motor Results

Hyundai Motor Results

Hyundai Motor Q2 profit slips as firmer won, U.S. discounts hurt  Full Article 

Nokia Results

Nokia Results

Nokia raises networks outlook after Q2 profit beats estimates  Full Article 

Factory Sector

Factory Sector

China July HSBC flash PMI at 18-month high of 52.0   Full Article 

Breakingviews

Breakingviews

Apple winds up earnings hope for new gadgets  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage