Europe's fragile mobile market continues to show improving trends

In May a selection of quarterly results from some of Europe's largest operators indicated that the tide might be turning in the region's mobile sector. Now, as results for the April-June period start to emerge, the omens still look good as some operators report a return to revenue growth for the first time in some years.

In May, Vodafone posted a rise in quarterly sales for the first time in nearly three years, a development hailed at the time by some industry commentators as a possible sign of a general recovery in the mobile sector.

Now as we move towards the end of July, Vodafone made some "confident commentary about the pricing environment in Europe", in the words of Jefferies International analysts, who also noted that the group's year-on-year decline in European group service revenues of 1.5 per cent in its fiscal Q1--the three months to end-June--was lower than the 1.8 per cent expected by most analysts. Overall group revenue also increased by 0.8 per cent on an organic basis in the fiscal first quarter.

Meanwhile UK-based EE also hailed a return to operating revenue growth in the second quarter of 2015, although growth in the UK-based operator's fixed business lifted the overall revenue trend as mobile service revenue continued to slide. Indeed, Q2 mobile revenue fell by 1.8 per cent year on year, while fixed revenue rose by 18 per cent. On the plus side, the company reported what CEO Olaf Swantee described as "our best ever EBITDA margin", which rose by 2.2 percentage points year-on-year to reach 26.6 per cent.

Now Orange--which still owns 50 per cent of EE until BT is given permission to buy the mobile operator--has reported a return to revenue growth after regulatory effects for the first time since 2011. Jefferies analysts attributed this improvement to strong commercial and cost-cutting momentum.

Even in other markets where results have been a little more mixed, results have been more stable than before. For example, Telenor said business stabilised in its largest single market, Norway, in Q2, although at group level the operator primarily benefited from "another extraordinary result" from its operators in Myanmar.

Mobistar in Belgium reported a drop in Q2 profits and revenue, but the company said it is confident it will achieve its full-year EBITDA guidance for 2015.

No doubt a clearer pattern will emerge as we move through the year. Certainly, the situation remains fragile, and challenges from over-the-top and low-cost service providers--as well as the requirement to become nimbler players--will continue to tax the minds of Europe's mobile operators in the months to come.--Anne

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