Vodafone sales softness masked by currency changes
Published: 3 February, 2009
READ MORE: Vodafone
Vodafone's interim results show a 14% year-on-year increase in sales for its third quarter,- but without acquisitions and currency changes, notably the crash in sterling, there would have been a sales drop of 1%.
Sales in the quarter, which ended on December 31, were £10.47bn ($14.9bn), compared to £9.16bn ($13.1bn) a year earlier. The brightest spot was a rise in revenues from India, and the figures show how dependent Vodafone will be, during downturn in its core territories, on continuing to expand and make strategic acquisitions in emerging markets.
CEO Vittorio Colao said in his statement: "Our underlying performance showed similar trends to the previous quarter, with pro forma service revenue up 1.4% including India and at constant exchange rates. In the context of the current economic environment, we have continued to implement our strategy, with an emphasis on customer value, mobile data, enterprise and fixed broadband. This has driven increased usage, 25% organic growth in data revenue and over 280,000 fixed broadband additions in Europe. We have also made progress on our plans to reduce costs by £1bn by March 2011. Underlying guidance is confirmed."
Data revenue across the group was up 25.3% on an organic basis to £786m, and the operator reported 9.5m net adds, to achieve a customer base of 289m.
The company is forecasting full year adjusted operating profit in the range of £11.5bn to £12bn, an increase of £500m. Free cashflow is expected to be between £5.5bn and £6bn, an increase of around £300m.
Service revenue in India grew by 37.3%, or by 29.6% at constant exchange rates, lower than the previous quarter due to the increasingly competitive market and the impact of travel cuts and the Mumbai bombings on roaming revenues.
In Europe, service revenue was up 15% year-on-year, but organically it was down 1.4%. Germany and Italy were the star performers in the region, and the formerly flaky UK stabilized, while Spain, Portugal and Ireland were low points.
In the UK, mobile data services were the brightest point, but prepaid voice revenues dragged down performance; Spain, the worst market last year, was still a black sheep, with organic service revenues falling even more rapidly, by 5.8%; Ireland and Portugal were hit by deteriorating market conditions, price competition and, in the latter, a termination rate cut last August.
Africa & Central Europe revenue increased by 6.9%, with 4.5 positive percentage points from exchange rates and a 1.1 negative point from a change in the consolidation status of Safaricom. Vodacom saw good growth in South Africa and other territories, but Turkey was weak. Vodafone also gains from the solid results of its US joint venture Verizon Wireless, which last week reported service revenue up 12.2% and data revenue up 49.4%.
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