Vodafone's year dragged down by eurozone crisis
Turkey, India and US are main growth drivers but carrier takes £4bn in impairment charges on southern Europe businesses
Published: 22 May, 2012
The eurozone crisis hit Vodafone's annual results, which saw the giant's net profits falling by almost 13% year-on-year to £6.96bn ($11.02bn) Revenue was up 1.2% to £46.4bn.
CEO Vittorio Colao said performance in the fiscal year had been "steady", but the company highlighted the pressure of its native Europe in its financial statement, saying it had taken impairment charges of £4bn related to subsidiaries in the recession-hit countries of Italy, Spain, Portugal and Greece. The charge was "primarily driven by lower projected cashflows within business plans and an increase in discount rates, resulting from adverse changes in the economic environment," said the firm. However, it did make a net gain of £3.5bn from the sale of stakes in SFR and Polkomtel.
As at European rivals like Telefonica, emerging market businesses have helped offset the pressures on traditional territories where saturation and sluggish economies are combining to slow or even reverse growth. Colao said: "Our major emerging markets operations have had a very strong year." So the AMAP (Africa Middle East and Asia-Pacific) unit recorded service revenues of £12.75bn, up 3.7% year-on-year, while Europe, though still the larger division at £29.91bn, saw its service revenues fall by 0.6%. The CEO added: "The tough macroeconomic and regulatory environment in much of Europe has made revenue growth in that region increasingly challenging."
In a service revenues total of £42.89bn, the star performers in growth terms were Turkey, up 25.1%, and India, up 19.5%. The South African venture Vodacom also did well, increasing revenues by 7.1%. Other important drivers were data and enterprise business, which enjoyed year-on-year growth of 22% apiece.
Across the group, the customer base stood at 404.7m as of the end of March, up by a net 6.6m since the start of 2012, with prepaid customers accounting for 80.5% because of the rising influence of emerging markets, as well as a shift to pay-as-you-go even in developed economies. However, the European mobile customer base fell by a net 1.41m people in the quarter, to reach 148.5m, while AMAP's base grew by 8m net subscribers to 256.2m, with over 92% of that prepaid.
For the current fiscal year, Vodafone expects operating profit to be in the range of £11.1bn to £11.9bn, reflecting the continuing pressures of the weak euro, offset by continued profit growth from the US joint venture, Verizon Wireless. Colao said of Verizon that it "combined continued good revenue growth with substantial cashflow" in the fiscal year.
In the latest global ranking of world operators by Wireless Intelligence, Verizon Wireless actually leapfrogged its UK parent (which owns 45%) in terms of mobile revenue (though not customers). Verizon reported $15.1bn in mobile revenues last year compared to $14.7bn at Vodafone.
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