Vodafone beats market expectations in Q2, but S. Europe causes pain

Vodafone beat market estimates by reporting first-quarter service revenue of £10.86 billion, up 1.5 per cent, slightly better than analysts' forecast of 1.4 per cent growth, helped by a 25 per cent surge in data revenue growth.


Key to achieving this growth were strong performances from Vodafone's subsidiaries in India and Turkey--with service revenue up 17 per cent and 32 per cent, respectively--which helped to offset dismal results from Spain where service revenue fell by nearly 10 per cent.

"We have made a good start to the year, reporting robust results despite challenging macroeconomic conditions across southern European economies and the impact of cuts to mobile termination rates," CEO Vittorio Colao said in a statement. 

Two of Vodafone's major markets, the UK and Germany, managed to stay positive, with growth up 1.7 per cent in the UK while Germany remained flat. Italy was down 1.5 per cent, an improvement on the previous quarter.

In May, the company said it would write down the value of its subsidiaries in Spain, Greece, Portugal, Italy and Ireland by £6.1 billion.

 "It's a robust set of numbers, if anything slightly ahead of what people were looking for," Morten Singleton, an analyst at London-based Investec Securities, told Bloomberg.

With Vodafone being the first of Europe's larger operators to unveil its quarterly earnings, Sanford C. Bernstein analyst Robin Bienenstock told Dow Jones Newswires that the company will likely have set the benchmark. Telefónica, which will detail its quarterly results later this week, is seen as very exposed to the ongoing troubles in its home market of Spain.

Looking to the future, Vodafone's CFO, Andy Halford, told Reuters that the proceeds from its recent disposal around the world had enabled the company to reduce its net debt down to £23.1 billion. He added: "I think the balance sheet is in good shape and if there are opportunities out there we can look at them but there's not a rush to do that and it's not driven by the cash position."

For more:
- see this Bloomberg article
- see this Reuters article
- see this Dow Jones Newswire article

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