Persistently tough conditions and competitive pressure on pricing in southern European nations, weakness in markets such as the UK, and a slowdown in growth in India weighed on telecom giant Vodafone in the past quarter, overshadowing robust performances in German and Turkey.
Organic group revenues were up one per cent in the quarter ended in June, slightly below analyst expectations, as the impact of the ongoing Euro Zone crisis continued to take its toll, with its Italian and Spanish operations seeing another sharp dip in service revenues, alongside Greece, Ireland and Portugal.
Lowest in 9 quarters
While German service revenue grew by 4.2 per cent, and Turkey was up by 18.7 per cent, growth in India was slower than it had been the previous quarter – growing by 16.2 per cent, against 20 per cent and 21.1 per cent in the previous two quarters.
“Vodafone India has also slowed, again a more negative dynamic, as this business is a key growth engine for Vodafone Group,” analysts at Merrill Lynch wrote in a note following the results. Societe General noted that the 0.6 per cent growth in Group service revenues was the lowest growth in the past nine quarters.
“The environment in Europe is difficult, which we are offsetting through our geographic spread,” said its CEO, Mr Vittorio Colao, on a call following the results. The company is sticking to its current guidance for the year, while Mr Colao indicated that efficiency plans did not include major cuts to its workforce.
Vodafone shares were down 2.3 per cent in early afternoon trading London. Its shares fell 1 per cent the day before, following news from its joint venture Verizon Wireless that a dividend was not on the agenda of its forthcoming board meeting.
India business
Growth in India was dampened by the slowdown of wholesale traffic growth at Indus Towers, and several regulator changes, including a ban on bundling SMS and voice, and controls on the sale of premium rate services.
Still, business in India was doing very well, Mr Colao insisted. “We don’t talk about margins for individual countries but we are heading in the right direction, the business is doing well,” he said, adding that the company was waiting to see the consequences of changes in legislation.
Its CFO, Mr Andy Halford, said that the dialogue on the structuring of forthcoming auctions was continuing, though a balance between revenue-raising for the government and the knock on impact on consumers would have to be struck.
“It goes without saying, if prices are high in the auction there will be a pricing impact for the end user.”
Asked about the recent debate on economic policy, Mr Colao said: “India’s a great market, it just needs to be seen as an investor-friendly and business-friendly environment for which you need continuity of policy and long-term policy. India doesn’t need a reboot, it’s the frequency of reboots that need to be taken down.”