Data revenues drive Vodafone profits

Reno News.Net Tuesday 22nd May, 2012

LONDON - Hit by economic downturn in Europe, UK mobile phone major Vodafone has reported near flat profits after a 4 billion pounds write down on the value of its assets in Italy, Spain, Portugal and Greece.

The company's pre-tax profits for the fiscal year ending March 31, 2012 were 9.549 billion pounds up 0.5% from 9.498 billion pounds in the previous year.

The mobile phone group's adjusted operating profit of 11.5 billion pounds was up 2.5% on a year earlier but 2.4% lower when including currency changes.

The euro crisis together with a tough regulatory environment in much of Europe made revenue growth in region "increasingly challenging", the company stated Tuesday announcing the annual results for 2011-12 fiscal.

"As in the prior year, we saw a broad divide between the more stable major markets of northern Europe, with Germany, the UK and the Netherlands all growing; and the much weaker markets of southern Europe, with Italy and Spain suffering from strong competition and a very poor macroeconomic environment," the company stated.

Revenue across the group rose by 1.2% to 46.4 billion pounds, but the company warned that revenue growth might miss expectations in the current financial year.

Vittorio Colao, Group Chief Executive stated, "Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment."

Service revenue growth driven by focus on data witnessed 22.2% growth while emerging markets like India witnessed 19.5% growth and Turkey 25.1%.

Vodafone said it capitalised on the proliferation of mobile devices and faster speeds to boost revenues from data by 22% in the year to March 31, representing 14.5% of the company's 43 billion in service revenues.

The company reported that smartphone penetration in Europe witnessed 26.9% growth, a rise of 8.3 percentage points year-on-year. Smartphones are now used by 45% of its contract customers in Europe and a similar proportion of customers take integrated tariffs, which combine voice, SMS and data in one monthly charge.

Vodafone's service revenues were 1.3% higher in the UK, up 2.7% in Germany and ahead 19.5% in India but this was offset by an 8% slump in Spain and a 1.9% drop in Italy as the economic crisis in southern Europe and rising unemployment hits demand.

The company's ability to leverage scale continue to be strong, enabling it to gain or hold market share in most of its key markets, and reduce the rate of margin decline.

In addition, the 2.9 billion pounds cash generation and the dividend received from Verizon Wireless has helped it to translate the operational success into good returns for shareholders, Colao stated.

The company has paid 2.0 billion pounds out of 2.9 billion pounds received from Verizon Wireless as a special dividend to Vodafone shareholders.

"Given larger regulatory reductions than previously envisaged, we now expect organic service revenue growth in the 2013 financial year to be slightly below our previous medium term guidance range," Vodafone said.

The company had previously forecast revenue growth of between 1% and 4%.

"Our goal over the next three years is to continue to strengthen our technology and commercial platforms through reliable and secure high speed data networks, significantly enhanced customer service across all channels, and improved data pricing models, to enrich customers' experience and maximise our share of value in the markets in which we operate," Colao said.

Market analyst said the results are in line with expectations and show particular strength in its preferred strategic areas, such as data and emerging markets.

Last month, Vodafone agreed to buy telecoms group Cable Wireless Worldwide in a deal valuing the firm at just over 1billion pounds.

The takeover will make it the UK's second biggest telecoms operator, improve its network and allow it to make efficiency savings.

Vodafone's offer needs the support of three-quarters of shareholder votes but has yet to receive the backing of fund manager Orbis, which owns 19% of CWW. The mobile phone company hopes to complete the deal by the end of July.