Vodafone under pressure

Vodafone has lowered its full-year earnings guidance, blaming pressure from increased competition in key markets such as India and the UK.

Competition in India has been ramped up by free offers from new entrant Reliance Jio Infocomm, but Vodafone plans to fight back by merging its Indian subsidiary with smaller rival Idea Cellular.

Vodafone is the world’s second-biggest mobile operator. Echoing a similar warning from BT last week, the company yesterday said that the rate of growth in its international business division had slowed. Reporting its third-quarter figures, Vodafone said it was seeing lower rates of growth in its global enterprise division and a marked slowdown in its international order book.

In Ireland, Vodafone said service revenue for its third quarter amounted to €235m, with underlying revenue rising 1.4% for the year.

“We have had another strong quarter and continue to see positive momentum across our customer base,” said Vodafone Ireland chief executive Anne O’Leary.

Service revenue in Europe increased 0.7%, down from 1% in the second quarter.

In its emerging markets — including India, Africa, and Turkey — growth slowed to 3.9% from 7.1%. Shares in the company fell up to 3% in early trading, yesterday, before paring back to close just under 1% down.

Vodafone reported a 1.7% rise in overall organic service revenue for the quarter, broadly in line with analyst expectations.

The company reiterated its target to generate at least €4bn of free cashflow in the year to the end of March, but it said it now expects core earnings to come in at the lower end of a range of 3% to 6% growth.

“These results are not surprising given the evidence of the deterioration in India but have few specific positives either,” said Citi analysts. “The effective cut to earnings befores interest, tax, depreciation, and amortisation, guidance looks realistic but will raise questions about full-year 2018 trajectory.”

Britain remained a tough market for the company in the third quarter, with service revenue down 3.2%.

It said this reflected increased competition in the business sector, an area of strength for the operator.

Finance director Nick Read said the company was seeing competition in corporate business from EE, now owned by BT, and from O2, owned by Telefonica.

“Everyone is chasing growth and customers,” he said.


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