Vodafone Group reveals GBP5.9 billion write-down as Southern European woes continue

13 Nov 2012

On the back of a 9.8% year-on-year slump in organic service revenue at its Southern European units for the six-month period ended 30 September 2012, UK-based Vodafone Group has confirmed that it incurred a total impairment charge of GBP5.9 billion (USD9.34 billion) related to ‘the carrying value of goodwill of its operations in Spain and Italy as a result of challenging market conditions and adverse movements in discount rates’.

In the period under review group organic service revenue fell to GBP20.157 billion, representing a 0.4% drop against the first half of Vodafone Group’s 2012 fiscal year (which ended 30 March 2012). Excluding the impact of mobile termination rate (MTR) cuts, the company said that service revenues in H1 2013 had actually grown by 1.4%. Looking at figures from its operational regions, Vodafone Group registered solid growth in its emerging markets, while it also saw a continued uptake of data services group-wide, with such positive factors offset by macroeconomic pressures in Southern Europe. Indeed, the group’s Northern and Central Europe unit saw an overall 1.5% y-o-y uptick in service revenue in the first half of FY2013, with Turkey notably registering an 18% annual rise in turnover, helping to offset declines of 3.2% and 2.3% in the UK and Netherlands respectively. The group’s Africa, Middle East and Asia Pacific (AMAP) division, meanwhile, reported a 5.2% annual increase in service revenue in H1 2013, with solid, if slowing, turnover increases in India and South Africa offsetting a 14.4% drop in Australia, where the company ‘continued to focus on network improvements and arresting weakness in brand perception’. By comparison, Southern European service revenue fell by 9.8% to GBP5.378 billion, with Spain, Italy, Greece and Portugal all registering year-on-year service revenue declines.

Group earnings before interest, tax, depreciation and amortisation (EBITDA), meanwhile, fell by 2.9% on an organic basis in the first six months of FY2013, though on a reported basis it dropped by almost 12% to GBP6.6 billion, predominantly as a result of foreign exchange rate movements. Adjusted operating profit for the six-month period stood at GBP6.2 billion, up 8.5% y-o-y on an organic basis.

In terms of accesses, at the end of September 2012 Vodafone Group’s total subscriber base stood at 407.354 million, up from 391.365 million a year earlier. Only the group’s AMAP division reported an overall customer growth compared to H1 2012, counting 260.876 million mobile subscribers at the end of the most recent reporting period, up from 239.119 million a year earlier, and representing an increase of more than nine percentage points. Northern and Central Europe and Southern Europe, by comparison, recorded year-on-year customer declines of 1.6% and 1.7% respectively.

Commenting on the results, Vodafone Group CEO Vittorio Colao Group noted: ‘We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular. In the short-term, however, our results reflect tougher market conditions, mainly in Southern Europe.’

United Kingdom, Vodafone Group