Vodafone Group Plc (VOD: Quote,VOD.L) Friday reported lower first-quarter revenues, hurt by ongoing challenging conditions, mainly in Spain and Italy, as well as the impact of Mobile termination rates cuts. The emerging markets, notably India and Turkey, showed improvement. Data revenue climbed organically reflecting an increase in Europe smartphone penetration.
Going ahead, the British telecom giant confirmed its fiscal 2013 forecast noting that its first-quarter trading was consistent with management's expectations.
Mobile termination rates, or MTRs, are the fees mobile operators charge other carriers for completing outgoing calls on their networks.
Chief Executive Vittorio Colao said, "Despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining tight control of our cost base."
For the first quarter, total revenues declined 7.7 percent to 10.767 billion pounds. On an organic basis, total revenues edged up 1 percent. Service revenue fell 8.1 percent to 9.98 billion pounds, while it edged up 0.6 percent organically. Excluding the impact of MTR cuts, service revenues increased 2.3 percent on an organic basis.
The company's total mobile customers, including Verizon Wireless, as of June 30 were 448.78 million, compared to 446.54 million as of April 1. Net additions during the quarter were 6.75 million mainly from emerging countries.
Europe experienced mixed trends as relatively stable macroeconomic environment in northern Europe was offset by intensified macroeconomic and competitive pressures in southern Europe. Revenue decreased 8.2 percent, including a 7.1 percentage point impact from unfavorable foreign exchange rate movements. On an organic basis, growth in Germany and Turkey was offset by declines in most other markets, in particular Italy, Spain, Greece and Portugal. UK was hurt by increased competition and a weaker economy.
Africa, Middle East and Asia Pacific or AMAP recorded a 4 percent decline in reported revenues, while organic revenues increased 6.1 percent, with continued strong service revenue growth in emerging markets. In India, service revenue climbed 16.2 percent organically, but growth slowed down from the previous fourth quarter due to regulatory impacts on data and messaging. Turkey also experienced strong growth.
The company's U.S. joint venture Verizon Wireless continues to perform strongly led by continued growth in data revenue and rising data ARPU driven by increased smartphone penetration.
While announcing a decline in fiscal 2012 earnings, back in May, Vodafone had said that it expected organic service revenue growth in the 2013 financial year to be slightly below previous medium term guidance range, citing larger than expected regulated cuts to MTRs. The cautious forecast also reflected weak European market and a stronger euro.
The company also said it expected fiscal year adjusted operating profit in the range of 11.1 billion to 11.9 billion pounds, in comparison to prior year's 11.5 billion pounds. Excluding foreign exchange rate movements, it anticipates growth in adjusted operating profit.
According to Vodafone, weak consumer demand from poor macroeconomic conditions, a harsh regulatory backdrop and ongoing competition create material barriers to growth.
In London, Vodafone shares are currently trading at 179.59 pence, down 3.46 pence or 1.89 percent.
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by RTT Staff Writer
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