Vodafone revenues hit by turmoil in Europe

Mobile giant forecast operating profit may rise as much as 6.9% as it eliminates jobs in Europe

Vodafone has reported a smaller-than-projected decline in fourth-quarter wireless service revenue. Photo: Bloomberg

Vodafone has reported a smaller-than-projected decline in fourth-quarter wireless service revenue. Photo: Bloomberg

Tue, May 21, 2013, 09:44

Vodafone reported a smaller-than-projected decline in fourth-quarter wireless service revenue and forecast operating profit may rise as much 6.9 per cent this year as it eliminates jobs in Europe.

Service sales fell 4.2 per cent in the three months ended March 2013, the third straight quarterly decline. Analysts predicted a 4.4 per cent drop on average.

Operating profit excluding some items will be between £12 billion (€14.1 billion) and £12.8 billion in the 12 months ending in March 2014.

Analysts projected £12 billion, according to the average of estimates compiled by Bloomberg.

Vodafone is struggling with weak economies in its biggest markets and a cut to the rates it can charge other carriers for call termination as it debates the future of one of its best- performing units, US-based Verizon Wireless.

The company has announced network-sharing partnerships with Deutsche Telekom and Telefonica in Germany and Spain as it looks for more cost-efficient ways of expanding its services.

“A combination of competition and regulation are increasingly likely to erode Vodafone’s” profit, Robin Bienenstock, a Sanford C Bernstein analyst, said in a note to investors ahead of the report.

“The company is falling behind faster-moving integrated companies in most countries. As such, it is increasingly hard for us to see how Vodafone can remain a meaningful player in Europe without making major purchases.”

Vodafone increased its ordinary dividend by 7 per cent for the full year, and will retain the most recent Verizon Wireless payment, according to the statement.

Adjusted operating profit rose 9.3 per cent to £12 billion in the 12 months ending in March 2013, just beating the £11.7 billion predicted by analysts on average.

Total revenue was in line with analyst estimates, falling 4.2 per cent to £44.4 billion for the fiscal year.

To combat costs, Vodafone has trimmed European operations, closing stores and saying it may cut almost 2,000 jobs in Italy, Spain and Germany to counter service-revenue declines.

“We see a significant opportunity in unifying network and IT management across multiple markets, in further centralizing and standardizing procurement, and in offshoring more business functions to shared service centers,” Vodafone said in the statement.

The company’s target is to cut European operating expenses from these and other programs by £300 million in the 2014 financial year.

Vodafone rose 0.2 per cent at 8.37am to 198 pence in London. The stock had risen 28 per cent this year before today.

Verizon Wireless’s profit contributed £6.4 billion to Vodafone for the year, an increase of 30.5 per cent, highlighting the unit’s importance as partner Verizon Communications moves toward a buyout of the stake.

Bloomberg