Southern Europe woes see Vodafone record revenue decline in FY13

21 May 2013

Difficult macroeconomic conditions in southern Europe have seen UK mobile giant Vodafone Group post a year-on-year decline in turnover in both reported and organic terms in the twelve months ended 31 March 2013.

In the company’s 2013 fiscal year it generated total revenues of GBP44.445 billion (USD70.25 billion), down by 4.2% compared with FY12 in reported terms, and representing a 1.4% decline in organic terms. Service revenues, meanwhile, totalled GBP40.942 billion in the year under review, representing a 4.5% drop y-o-y in reported terms, or a 1.9% drop in organic terms. Notably, organic service revenue at the group’s Southern Europe unit fell by 11.6% against FY12, with Vodafone Group noting that ‘the effects of severe macroeconomic weakness were intensified by strong competition, and steep cuts to mobile termination rates (MTRs) in Italy and Greece’. Excluding the cuts to MTRs, the company noted that Southern Europe service revenue declined by 8.4% y-o-y. By comparison, the group’s Northern and Central Europe subsidiaries collectively saw organic service revenue fall by 0.2% in the twelve-month period, with Vodafone Group noting that excluding the impact of MTR cuts, service revenue was actually up by 1.6% y-o-y. More positive was the performance of the group’s Africa, Middle East and Asia Pacific (AMAP) unit, which recorded organic service revenue growth of 3.9% compared to FY12, with the UK-based company noting that it had seen ‘continued growth’ in all markets in the region bar Australia and New Zealand.

Group EBITDA in the year to end-March 2013 totalled GBP13.3 billion, an 8.3% decline against the previous fiscal year, with the drop primarily attributed to the reduction in revenues and higher restructuring costs; Vodafone Group noted, however, that its operating cost efficiencies had partly offset the drop. Adjusted operating profit for the year increased by 3.7% to GBP, driven by a 31.9% jump in the group’s share of profits from Verizon Wireless to GBP6.4 billion. Vodafone Group, however, revealed an impairment loss of GBP7.7 billion, recorded in relation to Italy and Spain, with the write-down ‘primarily driven by adverse performance against previous plans and adverse movements in discount rates’.

In operational terms, at the end of March 2013 Vodafone Group’s total mobile subscriber base, not including its share of Verizon Wireless customers, stood at 403.875 million, down marginally from the 404.691 million it reported a year earlier. Customer numbers for the group’s Southern Europe unit fell by 6.4% y-o-y to 49.805 million, with Vodafone Spain the biggest loser, recording an almost 19% dip in customer numbers; the group noted, however, that in the last quarter of the financial year the Spanish cellco shed 331,000 subscribers due to ‘a change in the disconnection policy’. Total subscribers in Northern and Central Europe, meanwhile, numbered 92.293 million at end-March 2013, representing a 3.1% year-on-year drop. Again proving a bright spot, Vodafone Group’s AMAP division recorded a 1.7% increase in subscribers against end-March 2012, ending the period under review with 211.365 million mobile accesses.

Looking ahead, Vodafone Group has outlined its financial expectations for the coming fiscal year, forecasting adjusted operating profit for the FY 2014 in the range of GBP12.0 billion to GBP12.8 billion. Free cash flow, meanwhile, is expected to be around GBP7.0 billion, including a GBP2.1 billion dividend due from Verizon Wireless in June 2013, while capital expenditure will ‘remain broadly steady on a constant currency basis’.

United Kingdom, Vodafone Group