Vodafone points to future with rising fixed revenue

Vodafone points to future with rising fixed revenue

11 NOV 2014

Figures from Vodafone’s first-half results show the extent to which one of the world’s leading operator groups is heading in a fixed direction.

“Our transition from a predominantly mobile company to a unified communications provider is well advanced,” noted CEO Vittorio Colao in a statement. “Our fixed broadband customer base grew to around 11.2 million (10.5 million in Europe) at the end of the period, including 1.6 million customers gained from the acquisition of Ono in Spain in July 2014, making us one of the largest fixed broadband providers in Europe. Fixed service revenue across the Group now accounts for 18.7 per cent of total service revenue.”

The company projects 25 per cent of European service revenue will come from its cable businesses in 2014/15, expressed on a pro forma basis. As recently as the end of 2012, the figure was only 11 per cent.

And in a further sign of how this side of the business is growing, Vodafone is planning to launch a residential broadband and TV service in the UK in Spring next year.

The 2014/15 figure includes Ono as well as Germany’s Kabel Deutschland, two acquisitions over the past year. And there are additional fibre build outs by the operator in Portugal, Italy and Ireland.

More than half of Vodafone’s fixed broadband customers are in Germany, hence the strategic importance of Kabel. However, Vodafone faces court action in Germany from hedge fund Elliott Management, which claims last year’s acquisition seriously undervalued Kabel.

We are very relaxed. There is more nervousness on their side, I think.

Group CEO Vittorio Colao downplayed the threat from the hedge fund: “With Elliott, it’s a well-known game that is not surprising. We are very relaxed. There is more nervousness on their side, I think. It is causing no interference on the operational side.”

Vodafone expects further benefits from cross-ownership of fixed and mobile assets. For instance, its first fixed-mobile bundle went on sale in Germany this month.

The strategic shift to fixed-mobile is partly explained by the ongoing decline in pure-play mobile service revenue in leading Europe markets.

The company pointed to improved performances, yet European service revenue declined by 6.5 per cent in the six months to the end of September. This figure was produced organically, excluding the effects of any M&A and movements in foreign exchange rates. Including those numbers produced a 19 per cent growth in service revenue.

But total revenue was buoyed by performance in emerging markets. The net effect was group service revenue of £19.1 billion, down 2.8 per cent on an organic basis. Including M&A and currency movements, the figure was up by 9.2 per cent.

Total group revenue fell by three per cent (organic basis) to £20.8 billion in the first half. Including M&A and currency movements, the figure increased by 8.9 per cent.

Data traffic boost
Its first half group data traffic rose 77 per cent year on year, “accelerating to +80 per cent in Q2, driven by 4G in Europe and 3G in India.”

The operator is also turning around its mobile performance in Europe through the take-up of mobile data services. Only half of Vodafone’s base in its four leading European markets make use of data services. “That’s how big is the potential,” said Colao.

Greater take-up will follow from greater smartphone adoption, as well as users appreciating the benefits of higher speed networks, the CEO argued. Currently 4G users only make up six per cent of customers in Germany, UK, Italy and Spain but Colao pointed to the fact that its 4G population coverage in Europe will reach 90 per cent within the next 18 months (up from 59 per cent today). It currently has 10.5 million 4G customers across its footprint.

Meanwhile, Vodafone nudged up its full-year core earnings forecast to between
£11.6 billion and £11.9 billion, compared with previous guidance of between £11.4 billion and £11.9 billion.


Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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