Vodafone Group reported a revenue drop in the quarter to 30 June 2012, noting that “macroeconomic and competitive pressures in Southern Europe have intensified further”.
In a statement, Vittorio Colao, the company’s chief executive, said that “despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining our tight control of our cost base”.
Revenue for the period was £10.77 billion, down 7.7 percent year-on-year. Group service revenue was £9.98 billion, down 8.1 percent.
The company ended the period with 146.95 million customers, down from 148.49 million at 1 April, mainly due to losses in its core Northern European businesses.
Service revenue in Europe fell by 8.7 percent on a reported basis, which was attributed to increased macroeconomic and competitive pressures in markets such as Greece, Spain, Italy and Portugal. Contrasting with this, the company said that it “continues to benefit from a relatively stable macroeconomic environment in northern Europe.”
For specific markets, the company noted weakness in the UK due to increased competitive activity and a weaker economy; a service revenue decline in the Netherlands due to a temporary network outage; and the reduction of handset subsidies for new customers in Spain, in order to cut costs and increase focus on customer retention.
For its Africa, Middle East and Asia Pacific unit, service revenue fell by 4 percent, with growth in India slowing due to regulatory impacts on data and messaging. Vodacom experienced some weakness in South Africa, due to increased competition on mobile voice and data pressure.
The company was also muted on the performance of its Vodafone Hutchison Australia joint venture, noting “ongoing weakness in brand perception”, also stating that “we do not expect to see a significant recovery in our Australian joint venture for at least 12 months.”
Data revenue increased 7.6 percent to £1.6 billion, and now accounts for 16 percent of Group service revenue. European smartphone penetration is 28.7 percent, up 8.6 points year-on-year, and for contract customers, the penetration is 49.8 percent, up 13.8 points.
Integrated voice, data and SMS plans now represent 50 percent of consumer contract revenue in European markets, up from 32 percent one year ago.
Vodafone said that fixed-line revenue now makes up 8.7 percent of its Group service revenue, with the company having 6.3 million fixed broadband customers.
Also noted was strong growth at affiliate Verizon Wireless.
Free cash flow of £0.9 billion was down £0.3 billion year-on-year, due to the timing of dividend payments to minority shareholders in Vodacom and Vodafone Egypt, and the end of dividends from SFR following the disposal of its stake in this business.
Capital expenditure of £1.1 billion was £0.1 billion lower year-on-year, with the company stating that its investment focus remains on network quality “in terms of coverage, reliability and speed.”
Net debt at 30 June 2012 was £22.7 billion, benefiting from a £1.5 billion final payment for its Softbank Mobile stake.
The group has maintained its outlook for the financial year.