Vodafone's Q3 hurt by weak performance in Italy and Spain

Vodafone missed its third-quarter revenue forecast as poor results from Italy and Spain weighed down the group and overshadowed  strong performances in Turkey and India.

For the quarter ending Dec. 31, the company said that its global revenues fell 2.3 per cent to £11.62 billion, with Vodafone's European operations suffering a 1.9 per cent (against expectations of 1.4 per cent) decline to £8.1 billion.

Vodafone's highlight for the quarter was Turkey, where revenues grew 23.3 per cent as it added 163,000 net new subscribers. India recorded a 6.3 per cent increase in turnover, helped by a 20 per cent surge in service revenues. South Africa and Ghana also performed strongly.

However, Italian revenues fell by 5.4 per cent to £1.3 billion, while Spanish revenues fell even faster, down 9.3 per cent to £1.06 billion.

Vodafone CEO Vittorio Colao told the Financial Times that he blamed the company's poor performance in Italy on "consumer confidence rather than pricing" and a "squeeze on disposable income," but stressed that the country's economic woes would not spiral down to the levels seen in Spain.

Commenting on the overall quarterly results, Colao said: "Despite the further deterioration of the southern European economic environment during the quarter, our broad geographic mix is delivering a resilient overall performance."

Speaking more broadly, Colao told the Daily Telegraph that he expected some consolidation among European operators and more "efficient co-operation between players", for example by sharing infrastructure. He confirmed that it was holding talks with Wind Hellas about a possible network sharing agreement, following the failure of recent merger talks.

Mark James, an analyst with the UK-based investment bank Liberum, told Reuters: "Our view remains that Vodafone is the best of a bad bunch. Better value, better run and more shareholder friendly than most of the European telco incumbents where we remain negative."

Separately, Vodafone confirmed that it is reviewing its European billing systems in readiness for any need to start billing subscribers in a currency other than the euro. Vodafone joins a growing list of companies reviewing their operations in the event that a eurozone country might be forced to leave the currency union amid the continuing monetary crisis.

For more:
- see this release
- see this Daily Telegraph article
- see this Financial Times article (sub. req.)
- see this Reuters article
- see this WSJ article (sub. req.)

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