Vodafone's European woes drive down Q1 revenue

Vodafone continues to struggle with cutthroat price competition and a difficult economic environment in Europe, as lower revenue in Germany, the UK and southern Europe caused first-quarter group service revenue to drop 3.5 per cent to £10.15 billion (€11.8 billion).

According to Reuters, the operator said it does not expect the various competitive, economic and regulatory pressures on its business to ease in the coming three months.

In its first quarter, the operator said "increased competitive intensity" in Northern and Central Europe caused revenue to decline by 5.1 per cent in Germany and 4.5 per cent in the UK, while conditions remain very difficult in Southern Europe. Revenue dropped by as much as 17.6 per cent in Italy and 10.6 per cent in Spain.

Meanwhile, the operator's U.S. joint venture Verizon Wireless, in which Vodafone holds a 45 per cent stake, remained a bright spot, with 7.2 per cent revenue growth to $20 billion (€15.2 billion). Verizon Wireless accounts for about half of Vodafone's adjusted operating profit, Bloomberg noted.

In addition, the emerging markets business continued to do well, with 15.5 per cent service revenue growth in Turkey, 13.8 per cent growth in India and 3.2 per cent growth at Vodacom in South Africa.

"Although regulation, competitive pressures and weak economies, particularly in Southern Europe, continue to restrict revenue growth, we continue to lay strong foundations for the longer term," CEO Vittorio Colao said in a statement.

Reuters noted that the 3.5 per cent decline in group service revenue was a slight improvement on the record fall of 4.2 per cent recorded in the fourth quarter, but it is still a sharp drop for a group that was posting growth only 12 months ago.

"Underlying trends have slipped in our view as German competition rises and Italian pricing becomes even more brutal," UBS analyst Nick Lyall wrote in a note to investors ahead of the results, according to Bloomberg.

In terms of the further development of services across its various markets, Vodafone said the all-inclusive Vodafone Red plans are now available in 16 markets and have secured 5.2 million customers. LTE services are now available in 10 markets.

The company is also pressing ahead with its "unified communication" plans, under which it plans to offer bundles of fixed and mobile services. Vodafone recently acquired Kabel Deutschland in Germany and expects that deal to complete by the end of this year, and has also signed an agreement in Spain on sharing a network to enable fibre-to-the-home network. Vodafone also reached agreement on wholesale fibre access in Italy.

For more:
- see this Reuters article
- see this Bloomberg article
- see this FT article (sub. req.)

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