Vodafone doubles cost cut target to 2 bln stg

By Kate Holton

LONDON (Reuters) - Vodafone, the world's largest cellphone operator by revenue, has doubled its cost cutting target to 2 billion pounds ($3.33 billion) by 2012 to counter fierce competition in India and Europe.

Vodafone reported first-half revenue and profits in line with forecasts and repeated its earnings guidance for the year, but analysts said the decision to raise the savings target by a billion pounds reflected weak underlying trading.

"Management looks to be doing well in controlling the levers it can to sustain performance in spite of the cyclical and structural issues," Collins Stewart analyst Morten Singleton said. "There was no good news in the top line, however, with the organic metrics showing deterioration on Q1."

European rivals Deutsche Telekom, Telenor, KPN and TeliaSonera all reported higher than expected earnings thanks to cost cuts, and Deutsche would not venture an outlook for 2010 due to economic uncertainty.

Shares in Vodafone were down 1.7 percent at 135.6 pence late in London, which analysts pinned on the 2.1 percentage point decline in the group earnings margin, due to competition in India and a turnaround plan in Turkey.

On an organic basis, group revenue was down 3 percent.

"It is clear that for the time being, Vodafone is scaling down, battening the hatches and set for a period of difficult growth prospects, with austerity a necessity," Daiwa analyst Michael Kovacocy said.

Vodafone's initial 1 billion pound cost-cutting scheme was launched last November, with completion due by 2011, but the company accelerated that in May due to saturation in Europe and slowing growth in emerging markets.