Vodafone hikes full-year outlook on growth in emerging markets

Strong growth in emerging markets has seen Vodafone lift its full-year profit outlook. The company booked a net profit of £6.68 billion for six months ending September on higher than expected turnover of £23.52 billion, up 4.1 per cent from a year ago.

On this performance, Vodafone now expects to report full-year adjusted operating profit of between £11.4 billion and £11.8 billion (excluding impairment charges), as against the £11 billion to £11.8 billion it set in May. This improved confidence has been boosted by good numbers from India and Turkey, and solid performances in Germany, Britain and the Netherlands.

"They're really great numbers," Will Draper, an analyst at Espirito Santo, told Reuters. "The revenue is strong in a quarter that we expected to be the weakest in the year. The fading impact of (regulatory cuts) from now onwards, in Germany especially, gives us optimism that service revenue growth and EBITDA margin will improve further in the second half."

However, the company has not escaped the economic troubles facing southern European countries. Its Spanish subsidiary reported margins slipped by 0.6 per cent, Italy's service revenue fell by 3 per cent in the second quarter, and Vodafone recorded an impairment loss of £450 million in relation to its Greek business.

To balance these issues, CEO Vittorio Colao highlighted that Vodafone would benefit from a £2.8 billion dividend from Verizon Wireless--the first in seven years, to be paid in January.

Colao also pleased market analysts with a 2.3 per cent increase in EBITDA (a figure that excludes one-off events and is watched closely by the financial community) to £7.53 billion in the first half, up from £7.36 billion a year earlier, and beating analysts' expectations of £7.4 billion.

According to Dow Jones Newswires, Colao said that Vodafone is making "clear progress" with its strategy of exploiting customer demand for mobile data, as well as its focus on its main markets in Europe, Africa and India. "Although we remain mindful of the uncertain economic outlook, we are confident that we have the right strategy and capabilities to continue to perform consistently through top line growth, cost efficiency, investment and cash generation," he said.

But a report carried by CityWire questioned Vodafone's track record in India. The company made virtually zero operating profits from India in the half year, and yet boosted revenues in the country to £2 billion.

Analysts at the brokerage firm Liberum Capital estimate Vodafone has invested £12 billion in India to date but has yet to generate a meaningful return. However, Liberum suggests that things could improve, and that there are "a few glimmers of hope" in recent price increases by Vodafone's rivals and indications that the government may formally regulate the sector.

For more:
- see this Reuters article
- see this Dow Jones Newswire article (sub. req.)
- see this CityWire article

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