The world’s largest mobile operator today posted 14% drop in profit to £3.6bn for the second half of the 2012/2011 financial year, on revenues of £22.9bn. This time last year the company posted £4.2bn profits on revenues of £23.3bn.
Germany, Italy and Spain all saw profits fall for the year, by 10%, 16% and 43% respectively, reflecting the ongoing problems on the continent.
The UK’s profits grew by 3% to £217m, while revenues grew by 2% to £2.7bn.
The company announced in May that it would be writing down the value of its assets by £4bn. CEO Vittorio Collao said that the company will be embarking on a new wave of cost cuts, which are as yet unspecified.
"Despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining tight control of our cost base. We remain focused on driving through significant improvements to our customers’ experience through our ongoing investment in our networks, stores and IT platforms," he said.
Vodafone says customers are saving money by making fewer calls and deferring handset upgrades.
Voice call revenue continued to fall for the company overall, falling from £6.7bn for the quarter this time last year to just £5.8bn (a decline of 13%). Fixed Line revenue also fell by 4%.
Reflecting industry trends, much of this has been picked up by data usage, which grew from £1.5bn to £1.6bn, and now accounts for 16% of the company’s service revenues.
Much of this has been drive by European smartphone penetration, with Vodafone says is now up to 28.7%. Amongst contract customers this is even higher at 49.8%. In addition, integrated voice, SMS and data plans now represent 50% of Vodafone’s consumer contract revenue in Europe.
Ovum Senior Analyst Emeka Obiodu believes that the company cant afford to rely on the weak EU markets.
"The significant point from this result is that emerging markets are no longer sufficiently rescuing poor performances from Vodafone’s European markets. Ovum’s research in 2008/2009 highlighted that telecoms revenues tend to lag economic trends; people firstly experience deteriorating personal finances before they start cutting back on telecoms spend. Therefore, as long as the economic headaches persist in Southern Europe (and with concerns mounting in the UK too), the road ahead will be uncertain for Vodafone and other Europe-centric telcos," he said.
Much of the company’s downturn has been eased by the continued strong performance of Verizon Wireless in the US, in which Vodafone has a 45% stake. It saw growth of 8.2%.
"Ironically, the main shining star in the results is Verizon Wireless. Had Vodafone’s management capitulated to shareholder pressure few years ago to sell the stake, the Vodafone group’s results would have even being more worrying."
The company has also reduced its net debt to £22.7 billion after its receipt of final SoftBank proceeds (£1.5 billion) and £0.8 billion of share buybacks (£6.8 billion share buyback programmes almost complete).
Collao said that the company is making good progress with its proposed acquisitions of Cable & Wireless Worldwide (for £1bn) and New Zealand’s TelstraClear network for NZ$840 million (£430m). The TelstraClear deal will have to pass regulatory authorities, which may be troublesome as it potentially creates a duopoly in that country.
Vodafone also announced that it has entered into network sharing agreements in five markets, including the UK, where it shares with Telefonica’s O2 network.
Overall Vodafone expects to hit its projections for the 2013 financial year. The company’s shares slipped from £183.05 (close yesterday) to £178.65 (at the time of print), a decline of 2.4%.
