European telecom stocks experienced selling pressure during Tuesday's trading. The selloff came after Vodafone Group Plc (VOD) and LM Ericsson Telephone Co. (ERIC) both reported quarterly earnings.
Vodafone stock fell 14%, closing down $4.20 at $25.53 a share. Shares of the United Kingdom-based company broke support and finished at their lowest level since November 2006.
Meanwhile, Ericsson stock dropped 9% as it finished down $1.13 at $11.22 per share. Shares of the Sweden-based company gave back gains made last week and moved firmly below its 50-day and 200-day moving averages, both technical trading barriers.
German-based Deutsche Telekom Ag (DT) also posted a notable decline, finishing down about 5%.
Tuesday before the opening bell, Ericsson reported second-quarter net income attributable to stockholders of the parent company, excluding minority interests, of SEK 1.9 billion, compared with net income of SEK 6.4 billion a year ago. The current-year quarter results included restructuring charges of SEK 1.8 billion.
Earnings per share declined to SEK 0.60 from SEK 2.02 in the previous year.
The company also reported sales of SEK 48.5 billion in the quarter, up 2% from SEK 47.6 billion in the same quarter last year. In constant currencies, the sales growth was 7%.
Sony Ericsson Mobile Communications, the joint venture with Sony Corp. (SNE), shipped 24.4 million units in the quarter, the company noted.
"With no major changes in the market environment, we still find it prudent to plan for a flattish mobile infrastructure market in 2008 and our focus on adjusting our cost base remains," Ericsson's President and CEO Carl-Henric Svanberg said.
Before the opening bell on Tuesday, Vodafone reported first-quarter revenue of 9.83 billion pounds, higher than 8.25 billion pounds last year. The growth was 1.7% on an organic basis.
The company noted that the net impact of acquisitions and disposals, principally Vodafone Essar, contributed 4.9 percentage points to revenue growth, while exchange rate movements contributed a further 12.5 percentage points.
Europe revenue increased 15.5%, and EMAPA revenue grew 30.5%. Proportionate mobile customer base was 269.0 million, up 8.5 million from last year.
Looking ahead, the company expects revenue to be around the bottom of the 39.8 billion pounds to 40.7 billion pounds outlook range, reflecting first quarter performance, recent economic weakness and lower than expected equipment revenue.
Further, the company continues to expect adjusted operating profit in the range 11.0 billion pounds to 11.5 billion pounds.
Arun Sarin, Chief Executive, commented, "Notwithstanding this more challenging operating environment, we continue to benefit from a diversity of assets and services, with strong revenue growth in EMAPA and another good quarter of data revenue growth offsetting weakness in Spain. Whilst we expect revenue around the bottom of the outlook range, our continued focus on cost reduction enables us to reiterate our operating profit and cash flow guidance for the year."
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