Vodafone’s service revenues dented by MTR cuts and Southern Europe challenges

7 Feb 2013

Vodafone Group has revealed a 2.6% decline in group service revenue on an organic basis for the three months ended 31 December 2012, though claimed that excluding the impact of mobile termination rate (MTR) cuts, the drop would have been just 0.4%. For the last quarter of 2012 (its fiscal Q3) the UK-based mobile giant posted a group turnover of GBP11.39 billion (USD7.09 billion), while group service revenues stood at GBP10.37 billion. Notably, Vodafone’s Southern Europe unit – which includes operations in Spain, Italy, Greece, Portugal, Albania and Malta – continued to struggle, as conditions in the region remained ‘challenging’. Indeed, in the period under review the Southern Europe group registered an 11.9% year-on-year decline in turnover on an organic basis, with revenues falling to GBP2.34 billion. By comparison, the Northern and Central Europe unit posted a 0.9% drop in turnover to GBP4.84 billion, while the Africa, Middle East and Asia Pacific (AMAP) division saw an organic increase of 2.7% to reach GBP3.15 billion. Group data revenue, meanwhile, rose by 12.8% y-o-y to GBP1.7 billion, accounting for 16.2% of total group service revenues, with Vodafone noting that 33.4% of its European customers now use smartphones, compared to 24.4% at December 2011.

Free cash flow of GBP1.2 billion in the quarter was down GBP300 million compared to the year-ago period, with Vodafone attributing the decline in part to adverse movements in foreign exchange rates. In terms of capital expenditures, Vodafone said that it spent GBP1.5 billion in the quarter, roughly the same as the same period in 2011, while confirming that its investment ‘remains focused on network quality in terms of coverage, reliability and speed’.

Looking ahead, Vodafone said that it still expects to report adjusted operating profit in the upper half of GBP11.1 billion-GBP11.9 billion range, adding that free cash flow is still expected to be in the lower half of the range of GBP5.3 billion-GBP5.8 billion.

Highlighting some of its operational achievements over the quarter, Vodafone pointed to the launch of LTE services in South Africa, Italy and Greece – it also noted that it had inaugurated 4G services in Romania last month. As at end-December 2012 the group’s total mobile subscriber base, including its share of Verizon Wireless connections, stood at 447.52 million, up from 450.51 million three months earlier.

United Kingdom, Vodafone Group