Vodafone CEO sees “steady recovery” in Europe

Vodafone CEO sees “steady recovery” in Europe

05 FEB 2015

Vodafone Group managed to put the brakes on organic service revenue decline during Q3 (the three months ended December 2014), due to what CEO Vittorio Colao described as “improving revenue trends in most of our major markets”.

Group organic service revenue – which strips out handset sales, M&A activity and currency movements – fell by 0.4 per cent, to £9.79 billion, compared with Q3 2013. It’s an improvement on the 1.5 per cent year-on-year drop registered the previous quarter.

According to Reuters, analysts were expecting a 0.7 per cent fall in group organic service revenue.

And take out the impact of MTR cuts, Vodafone Group service revenue – again, on an organic basis – grew 0.2 per cent (as opposed to a year-on-year decline of 0.9 per cent, on this basis, during the previous quarter).

“In Europe, improved commercial execution in both mobile and fixed over the last few quarters, combined with strong data demand and a more stable pricing environment, is supporting the steady recovery in the top line,” said Colao (pictured). “Our recent cable acquisitions continue to perform well, with good progress made on integration.”

He added that Project Spring, Vodafone Group’s accelerated network investment programme, is “well advanced” with 4G coverage in Europe now 65 per cent, dropped-call rates down to 0.64 per cent, and 26 million homes now passed by “next generation networks”.

“Our customers are really beginning to notice the difference in experience that this investment delivers,” said Colao. “We are confident that, over time, this will translate into further improvements in customer perception, ARPU and churn.”

Although the CEO hailed a “steady recovery” in Europe, there is still some clawing back to do before Vodafone’s operations in the region – as a whole – enter positive growth territory.

Indeed, Bengt Nordstrom of consultancy Northstream told Mobile World Live: “It is becoming increasingly obvious that Vodafone has historically underinvested in its networks in Germany, Spain, Italy and the UK. The signs are that its Project Spring network upgrade is beginning to pay off, especially in Germany and the UK, but there is still some way to go.”

Organic service revenue in the region still dropped 2.7 per cent, to £6.6 billion, although that was a much better performance than the five per cent year-on-year fall registered the previous quarter.

Vodafone attributed improvement to “contract customer growth, the early benefits to ARPU of 4G migration, and increased data usage”. The company says it now has over 10 million 4G customers across Europe (and 13.7 million 4G customers in total across the group).

Region-by-region
Indeed, in the UK, organic service revenue actually increased, by 0.9 per cent, to £1.53 billion (versus a 0.3 per cent year-on-year drop the previous quarter). The company pointed to “strong contract net additions” in the quarter (76,000), and 2.2 million 4G customers by end-2014 as contributory factors (although this is some way behind market leader EE, which has over 7 million 4G customers).

In Germany, Vodafone Group’s biggest market in Europe, there are signs of top-line stabilisation, with organic service revenue falling just 1 per cent, to £1.97 billion. “Ongoing contract customer growth” was one reason given for the improvement (Q2: -3.4 per cent).

Spain and Italy continue to weigh heavily, however, with service revenue declines of 8.9 per cent and 7.4 per cent respectively, although Vodafone is seeing some revenue uplift in its fixed-line broadband operations in both these countries.

Organic service revenue in the AMAP region increased 5.9 per cent (Q2: 6.8 per cent), to £3.06 billion, “with continued momentum in most markets”.

The region, added Vodafone, “continues to benefit from strong customer growth, increased usage of voice and data services, and effective marketing and pricing strategies”.

The total customer base there grew to 318.2 million, with voice and data usage up 9 per cent and 110 per cent respectively.

In India, service revenue increased by 15 per cent, to £3.06 billion, with an acceleration in quarterly revenue trends (growth was 13.2 per cent in Q2) driven by data uptake and customer growth. Mobile internet revenue in India was up 70 per cent.

Total group revenue during Q3, on a reported basis, was up 13.5 per cent, to £10.88 billion.

Group performance, said the company, “remains in line with our expectations” and that the target is still to deliver EBITDA for the 2015 financial year in the range of £11.6 billion to £11.9 billion, and expect free cash flow to be positive (after all capex).

The guidance excludes Ono, the fixed-line provider in Spain that Vodafone Group is in the process of integrating.

Author

Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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