Vodafone posted a rise in quarterly sales for the first time in nearly three years, a development hailed by some industry commentators as a possible sign of a general recovery in the mobile sector.
Although the company's fiscal fourth-quarter (calendar Q1) recorded organic service revenue growth of only 0.1 per cent, Reuters noted this followed 10 quarters of declines. While service revenue in Europe still fell by 2.4 per cent, this compares with a 2.7 per cent decline in the previous quarter.
Could this be the start of a trend? Reuters noted that both Deutsche Telekom and Telefónica have seen "gradual, if slow, improvement in Europe" in recent quarterly updates. Elsewhere, eircom's mobile business reported its highest EBITDA margin in four and a half years in the three months to end-March; Iliad received a strong boost from Free Mobile in its first quarter; Telenor generated record Q1 revenue with growing mobile data consumption fuelling a 6 per cent year-on-year rise in Norwegian revenues…I could go on.
Vodafone has attributed the slight growth in organic revenue in the three months to the end of March to the strong demand for both 3G and 4G data, reporting 80 per cent data growth for the full year. "As video and music services proliferate, and data coverage widens and becomes more consistent, customers are increasingly using their smartphones and tablets for entertainment, work and social interaction," the company observed.
To be sure, demand for 4G has provided a fillip for operators across the continent. There is also considerable potential ahead: the UK-based operator noted that only 13 per cent of its European mobile customers are using 4G, "providing us with a very substantial opportunity for future growth."
It's certainly a change in tone from previous years, when mobile operators faced some difficult strategic decisions after suffering declining revenues from the traditional cash cows of mobile voice and texts.
However, the situation remains fragile. Europe's mobile market is still in a state of flux, as consolidation and convergence continue to occupy the thoughts and minds of operators. Operators such as Vodafone are also investing heavily in their networks to ensure future growth, but investors still need assurances that programmes such as Project Spring will deliver.
Indeed, Germany's regulator recently provided a timely insight into the delicate balance between network investment and revenue generation. The 2014 market report from Bundesnetzagentur noted that while the German industry is investing like never before, overall mobile revenue fell slightly from €26.22 billion to €26.04 billion last year.
Vodafone's results also still included some ongoing worrying traits, such as a 7 per cent drop in organic EBITDA for the full fiscal year to £11.9 billion. It is to be hoped that the green shoots of growth in the recent quarter will grow into something more tangible, but there is still a lot of work ahead before everything in the garden is rosy.--Anne