Vodafone Quarterly Revenues Drop on Weaker European Markets

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Vodafone has issued its interim quarterly financial results and says that its revenues declined by 3.6 percent hurt especially by declines in European markets.

However, revenues rose in India, Turkey and across Africa.

In India service revenue grew 13.2% driven by a higher customer base, improved voice pricing and strong data growth. Mobile internet users in India increased 38% in the quarter to 45.7 million and data usage continues to grow strongly with 3G usage now averaging in excess of 700MB per month.

Conditions in Europe remain challenging with organic service revenue in the UK down by 5.1%, Germany -7.9%, Spain -14.1%, and Italy -16.6%. Performance across the region remained under pressure mainly due to continued price competition.

Revenues, on a reported basis for the last three months of 2013 were down 3.6% to £10.98 billion, although they would have fallen further -- by 4.3% excluding acquisitions.

Net debt including joint ventures was £31.5 billion, an increase of £5.8 billion in the quarter following the acquisition of
76.6% of KDG for £7.0 billion including acquired debt. Net debt excluding joint ventures was £29.8 billion.

The company said that it remains on target to deliver adjusted operating profit of around £5 billion and free cash flow in the £4.5- £5.0 billion range, based on the pro forma guidance 2 given on 2 September 2013.

Country Overview

Germany

Service revenue decreased 7.9%, driven by intense price competition in both the consumer and enterprise segments and an MTR cut effective from December 2012. The total customer base continued to grow during the quarter with 292,000 net additions, driven by increased customer investment, stable contract churn and the continued success of Vodafone Red plans which had 2.4 million customers at 31 December 2013.

Italy

Service revenue declined 16.6% driven by a challenging macroeconomic and competitive environment, leading to intense price competition, as well as the negative impact of MTR cuts effective from January and July 2013. During the quarter, the prepaid market showed signs of price stabilisation following the end of summer promotions, yet the negative price impact on the base remains. 

UK

Service revenue decreased 5.1% principally driven by continued intense price competition and MTR cuts. The contract base grew by 191,000 customers supported by stable churn and strong take-up of Vodafone Red plans, with 2.3 million customers at 31 December 2013.

Spain

Service revenue declined 14.1% driven by continued macroeconomic weakness, intense price competition in a converged market and the impact of an MTR cut effective July 2013. During the quarter the contract customer base began to stabilise, as a result of a stronger commercial performance and lower customer churn from an improved customer experience.

Other Europe

Service revenue declined 7.1% as growth in Romania, Hungary and Malta was offset by declines in the rest of Other Europe. Macroeconomic weakness, price competition and MTR cuts resulted in service revenue declines of 6.6%, 5.2% and 13.4% in Netherlands, Portugal and Greece respectively.

In the Netherlands, mobile in-bundle revenue increased 4.3% driven by the success of Vodafone Red plans. In Portugal, the broadband customer base and fixed line revenues continued to grow as the fibre rollout gained momentum, whilst in Greece the customer base grew as a result of successful customer base management.

India

Service revenue increased 13.2% driven by continued customer growth, higher voice usage, improved voice pricing and increased data usage. Mobile customers increased by 4.9 million during the quarter giving a closing customer base of 160.4 million at 31 December 2013, up 8.8% on last year.

Data usage grew 117%, primarily due to a 38% increase in mobile internet users and a 65% increase in usage per customer. At 31 December 2013 active data customers totalled 45.7 million, including 5.2 million 3G subscribers.

Vodacom

Service revenue grew 3.5% driven by growt in Vodacom's mobile operations outside South Africa. In South Africa, organic service revenue increased 0.6% as strong growth in data revenues of 31%, driven by higher smartphone penetration and the strong demand for prepaid bundles following a successful summer campaign, was partly offset by the 2.8 percentage point adverse impact of an MTR cut effective from March 2013.

Vodacom's mobile operations outside South Africa, excluding Vodacom Business Africa, delivered service revenue growth of 15.1% driven by a higher customer base.

Other AMAP

Service revenue increased 1.9%, with growth in Turkey, Qatar, Egypt and Ghana being partly offset by declines in  New Zealand and Australia.

Service revenue growth in Turkey was 3.9% after a 7.1 percentage point negative impact from voice and SMS MTR cuts effective from 1 July 2013. Mobile in-bundle revenue grew 24.1% driven by higher smartphone penetration, the success of Vodafone Red plans and continued growth in enterprise.

In Egypt service revenue increased 1.1% following the removal of the curfews. Service revenue growth in Qatar was driven by strong net customer additions and the success of targeted commericial offers. In Ghana service revenue grew 17.9% driven by an increase in customers, higher usage and out-of-bundle pricing.

The joint venture in Australia experienced a service revenue decline of 8.0%, similar to the last two quarters.

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