Vodafone Group revenue for its fiscal first quarter dropped 4.9 per cent year-on-year to €10.9 billion, a decline the company attributed to foreign exchange headwinds, increased competition in Spain and Italy and changes in accounting procedures.
For its new financial year, Vodafone began using an accounting standard which strips out handset financing – largely impacting Europe. Even using the old measure, however, revenue was still down for the three months to the end of June, but only by 2.1 per cent.
Profit figures are not provided in its Q1 update.
During its trading statement Vodafone pointed to the impact of increased competition in both Spain and Italy taking its toll on service revenue in those countries.
In Italy, the launch of new entrant Iliad in late May contributed to an almost 10 per cent year-on-year decline in mobile service revenue, despite the new rival only being in operation for the last month of the quarter.
In an apparent response to entry offers from Iliad, Vodafone launched its own discount brand Ho in late June.
The company said its Italy performance was also hit by a delay in “price adjustments” to account for a switch from 28 days to monthly billing – a change required by regulators in the country.
In Spain, Vodafone’s revenue declined on “commercial actions to improve the competitiveness” which saw it launch offers at the lower end of the market.
Outgoing CEO Vittorio Colao – who leaves the role in October – described Vodafone’s commercial performance in Q1 as “solid” and “in line with expectations”.
Analyst Paolo Pescatore however noted that a slowdown in growth during the quarter “takes the shine off the final set of results from Colao.”
During a media conference call, Colao said the company was making solid progress on meeting regulators to discuss its €18.4 billion deal for Liberty Global.
During the months since the announcement CEO-in-waiting Nick Read visited Brussels and several European capitals to gather reaction to the proposed deal.
At the meetings, he added, he got a sense the creation of a pan-European converged provider would be “welcomed”, despite the position of rival Deutsche Telekom – which has been heavily critical of the deal.
Vodafone India continued its string of difficult quarters, ahead of its proposed merger with rival Idea Cellular. Revenue declined 22 per cent compared to Q1 2017 to €959 million, though Vodafone noted the drop was smaller than previous quarters.
Reports emerged earlier this week the company had cleared the last major regulatory hurdle after meeting the Department of Telecommunication’s demand for INR39 billion (€484 million) to clear a long-standing spectrum dispute.
Although not confirming on the payment of the sum, Colao said he expected the transaction – which was meant to be complete by the end of June – to be closed by the end of August.
Overall, analyst Pescatore warned of tough times ahead for the operator group: “Incoming CEO will have his hands full,” he wrote. “Retaining subscribers will be tough given the slew of promotional offers, new players especially in Southern Europe. Receiving regulatory approval for the Liberty Global deal will be no easy feat.”