Vodafone Q3 revenues decline 2.6pc due to struggling European economy

7 Feb 2013

Vodafone’s third-quarter revenues declined 2.6pc – its second quarterly loss in row – to €11.3bn due to challenging conditions in Southern Europe and declines in Northern and Central Europe.

Revenues in the UK were down 5.2pc and revenues in Germany were down 0.2pc.

Southern European revenues fell by close to 12pc – in Italy and Spain revenues fell 13.8pc and 11.3pc respectively.

Group data revenues, however, grew 12.8pc due to an increase in European smartphone penetration to 33.4pc.

The company reported continued growth in emerging markets like India and Turkey.

“Our results continue to reflect very difficult market conditions in Europe,” Vodafone CEO Vittorio Colao said.

“We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential. We continue to make progress in our Vodafone 2015 strategy, with good revenue growth in data and emerging markets, the launch of LTE services in another four markets and the acquisition of new spectrum.

“Vodafone Red, our new strategic pricing approach in Europe, has been launched in five markets with positive early take-up, and to drive growth in enterprise we have created a new enterprise business unit and accelerated our integration plans for Cable & Wireless Worldwide,” Colao said.

Continued smartphone growth for Vodafone

In Ireland, Vodafone said the number of smartphone users increased by 95,000 during the quarter, up 37.5pc, while contract subscribers grew 18,300 during the quarter.

Vodafone’s total customer base in Ireland at the end of the quarter stood at 2.45m, out of which 2.2m were mobile customers.

The operator said the total number of customers using smartphones on its network stood at 972,000.

Vodafone said its €160m purchase of 4G spectrum licences from ComReg in November will enable it to roll out 4G services in urban areas and expand its mobile broadband coverage in rural areas.

It said its 4G services will enable users to upload content faster than existing broadband and experience download speeds up to four times faster than 3G.

Vodafone’s total contract base stood at 778,900, up 18,300, which it attributed to smartphone and tablet computer adoption.

Average blended monthly ARPU fell by 0.3pc to €31.40.

Vodafone’s fixed-line voice and broadband subscriber base increased 3.2pc quarter-on-quarter to reach 246,600 at the end of the quarter.

Analysis: Vodafone’s challenges and opportunities lie in the ‘connected future’

Looking at Vodafone as a whole, Emeka Obiodu, principal analyst at Ovum, said Vodafone’s results reflect the challenging economic environment in its core market.

“Sadly, this is to be expected. Ovum’s research has shown that telecoms is a lagging indicator to the economy. Accordingly, given Europe’s economic woes in 2012, we expect telcos that rely on Europe for the majority of their revenues to struggle. Customers feel the pinch in their pockets before they reduce their telecoms spend.

“The challenge for Vodafone and other European operators is to stabilise their performance and ensure that their share of the customer’s wallet holds firm.

“For Vodafone in particular, Ovum warned in 2009 that its emerging market operations must not be relied on to perpetually offset poor performance at home. This has proved to be a prescient warning. Growth in its emerging markets operations has slowed and Vodafone is now relying on Verizon Wireless. It is to Vodafone’s credit that its management fended off pressure to sell the Verizon stake in the past.

“But there is hope for Vodafone. Opportunities exist for telcos to play a bigger role in the ‘connected future’. Better pricing design can also unlock additional value, and telcos should look to become active enablers of the digital society.

“In doing this, Vodafone must get the balance right between investment and profitability. And this is where European regulatory authorities should help by not imposing huge burdens on them,” Obiodu said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years