Vodafone final results dull but it stands by full-year cash and earnings targets
London — Tough trading in Italy and Spain took the shine off the final set of results delivered by outgoing Vodafone boss Vittorio Colao, with the company reporting a slowdown in first-quarter organic service revenue growth on Wednesday.
The world’s second-biggest mobile operator and Vodacom parent had warned that growth would slow at the start of the new financial year, but it reiterated its full-year cash and earnings targets.
For the quarter to the end of June, organic service revenue grew by 0.3% under the International Accounting Standard (IAS) 18 accounting basis, a sharp slowdown from the previous year but slightly ahead of consensus forecasts at 0.2%. The results reflected some of the challenges that Colao, an Italian, has encountered in his 10 years in charge — competition in Italy and Spain and an intense price war in India. Vodafone has merged its Indian unit with Idea Cellular to enable it to better compete.
The Italian market has been shaken up by the entry of French operator Iliad, which signed up 1-million customers in its first 50 days after its launch on May 29.
"The competitive situation in Italy has intensified," Colao told reporters, adding that he did not believe it was easy to be profitable at the prices offered by Iliad in the long term. "We have responded to it, with a combination of our own Vodafone-branded offers and a second brand that we just recently launched, and we will continue to be competitive."
In Spain, the group said a slowdown in growth followed an attempt to make its offers more competitive, especially in the budget end of the market, which more than offset recent price increases and growth in the customer base.
Vodafone is cutting its soccer coverage in Spain in favour of movies and entertainment programming. Colao said soccer was essential to just 20% of households, the vast majority of whom were Telefonica customers. "We think the economics are not good any more given where the rights have gone," he said.
Shares in the group were broadly flat at 177p at 8.07am GMT.
Analysts at Goldman Sachs noted that in Europe, only Germany beat consensus, with Britain, Italy and Spain struggling.
"Into the second half, there are easier comparatives and fewer temporary headwinds, but this will likely be offset by Iliad’s launch impact in Italy," they said, adding that they welcomed the reiteration of guidance.
Colao will be replaced by Nick Read, finance director since 2014, in October. His departure was announced a week after Vodafone clinched a long discussed deal when it agreed to pay $21.8bn to buy Liberty Global’s assets in Germany and eastern Europe. This should allow it to take the fight to rivals with a broader range of super-fast cable TV, broadband and mobile services.