By Eamon Quinn
Vodafone revenue growth in Ireland in the latest quarter outpaced many of its other areas in Europe even as it posted sharp falls in much larger markets in Italy and Spain.
A pledge to cut costs, however, sent the share of the mobile phone giant sharply higher.
They surged over 8% in London, paring losses over the past year to 22%, after its new chief executive Nick Read said he would reduce operating costs by €1.2bn by 2021, and review its mobile phone tower assets to drive higher returns.
It reported group service revenue of over €10.9bn in the three months to the end of September, of which over €7.58bn was sourced from its European operations, including its huge markets of Germany, UK, Italy, and Spain.
In Ireland, part of its “other Europe” territories of businesses, it posted over €241m in revenues in the quarter, up 3.3% from a year earlier on an underlying basis — compared with growth rates of 1.1% in Portugal and 1.2% growth in Greece.
Other big mainland European markets fared poorly. In Spain, it posted a 7.2% fall in service revenues to around €1.1bn. Revenues in Italy fell 6.3% to €1.26bn.
Mr Read said he had taken decisive action to respond to challenging conditions in Italy and Spain, and would reduce Vodafone’s costs for the third year running.
The group figures showed it was operating generally in line with analysts forecasts and said it would freeze the dividend until it reduced its debt pile, easing worries over a possible cut.
“The reason why the share price is up [Tuesday] is upgraded guidance for free cash flow… Essentially it is the pot of money that is used to pay back debt and pay the dividend,” said Helal Miah, analyst at The Share Centre.
“Having a bigger pot of money raises hopes that the dividend isn’t going to be cut,” he said.
The shares had fallen sharply since the beginning of the year as investors fret about the cost of acquiring John Malone’s Liberty Global’s cable assets in Germany, the outlay on new spectrum for 5G services, and tougher conditions in some European markets.
Mr Read laid out first priorities that included delivering more consistent results and getting more out of Vodafone’s infrastructure.
He said he was forming a company to house its 58,000 telecom towers in Europe to cut operating costs and was considering the best strategic options for its tower assets.
“We’ll explore all options,” Mr Read said, saying the towers were the first step to improving the way Vodafone uses its assets to improve shareholder returns.
Analysts at Bernstein said the results were “expectedly wretched”.
But they added that the full-year earnings guidance, the upgrade to free cash flow and the commitment to the dividend were “all positive and good news for investors in this beleaguered name”.
- Additional reporting Reuters and Bloomberg