Vodafone feels pressure in Europe

Mobile phone giant Vodafone has reported a “mixed” year after its annual earnings fell in the face of continued pressure on European revenues.

Vodafone feels pressure in Europe

Mobile phone giant Vodafone has reported a “mixed” year after its annual earnings fell in the face of continued pressure on European revenues.

The group has been growing strongly in emerging markets such as India, but its European arm is still weighed down by economic conditions, competition and regulator-imposed price changes.

Earnings fell 7.4% to £12.8 billion on an underlying basis in the year to March 31 and are set to decline again to between £11.4 billion and £11.9 billion this year as it focuses on a two-year investment programme.

The £19 billion plan, called Project Spring, aims to accelerate improvements to its network, resulting in wider 4G coverage in Europe and 3G coverage in emerging markets.

It is being funded through Vodafone’s $130bn sale of its 45% stake in Verizon Wireless to joint venture partner, Verizon.

One of the biggest transactions in corporate history, it resulted in around £50 billion in shares and cash being returned to shareholders.

Chief executive Vittorio Colao said it had been a year of “substantial strategic progress” but described the operational performance as mixed.

He added: “In Europe, where we continue to face competitive, regulatory and macroeconomic pressures, we have taken steps to improve our commercial performance, particularly in Germany and Italy, and are beginning to see encouraging early signs.”

The company has now launched 4G in all its major European markets, as well as South Africa, Australia and New Zealand.

It said its early experience shows that customers use roughly twice as much data compared to 3G data usage, driven principally by video streaming.

Smartphone adoption continues to grow strongly in all markets and the increased availability of mobile applications and low cost devices has driven significant growth in data usage.

Data traffic in India increased 125% year-on-year, and at the end of the year Vodafone had 52 million data customers in India alone, with seven million being 3G data customers.

Group revenues were down 1.9% to £43.6 billion in the year, with service revenues off 4.3%. However, the trend improved in the final quarter of the period following a decline in service revenues of 3.8%.

In the three months to the end of March, Vodafone UK’s service revenues fell 3.6% quarter on quarter to £1.5 billion, including the impact of reductions to mobile termination rates. That compares with a decline of 5.1% in the previous quarter and a 6.6% decline in the fourth quarter last year.

Vodafone is this year celebrating 30 years since it was first launched as a ”portable and mobile public telecommunications service” – marking the start of the mobile phone revolution in Britain.

Now one of the biggest companies in the world, it was originally part of the Racal Electronics Group, which announced the name of its new venture on March 22 1984, after winning a bid for the private sector UK cellular licence.

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