Drop in UK revenues highlights Vodafone's challenges
Published: 24 July, 2009
Despite strong efforts to develop new revenue streams in services and emerging markets, Vodafone is still over dependent on saturating markets like western Europe, as seen in its interim results report. In particular, it suffered a 4.7% drop in revenues in its native UK, one of the world's most competitive mobile markets.
The giant cellco blamed "intense" competition and the impact of the recession on ARPUs, and also reported lower prepaid activity and foreign roaming revenues, plus higher cost of retaining subscribers after a higher percentage of customers received upgrades after 18 months. The highlight was strong growth in data revenues, mainly from mobile internet services, and higher wholesale revenues.
Across the group, first quarter revenues in the first half of the year rose by 9.3% to £10.74bn ($17.67bn), as the firm confirmed previous guidance for its full year results, sending shares up by more than 2%. Analysts had predicted £10.66bn. The markets were also pleased that Vodafone's cost cutting program is on track, targeting savings of £650m by year end and £1bn in total by 2011.
CEO Vittorio Colao commented: "In the first quarter the service revenue trend in Europe was consistent with the previous quarter and we continued to see good growth in India and South Africa [where Vodafone increased its stake in Vodacom during the quarter]. Our total communications strategy is delivering well, with organic data revenue up 19% and organic fixed line revenue 7% ahead of the comparative period. Free cashflow generation was strong at £1.9bn, up 21%." The cashflow improvement mainly came from foreign exchange movements and a £200m dividend from the Verizon Wireless joint venture, deferred from the previous quarter. Group net debt decreased to £31.2bn.
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