Vodafone cuts sales target on European woes


Vodafone today cut a medium-term sales growth target as customers in southern Europe slashed spending and regulators upped the pressure on the world's largest mobile operator.

The company took impairment charges of £4 billion relating to its businesses in Italy, Spain, Portugal and Greece.

Vodafone posted full-year results in line with forecasts and said it expected growth in adjusted operating profit in 2013 as strength in emerging markets and Germany and Turkey offset a slump in spending in Spain and Italy.

But with trading in the two big southern European markets showing few signs of improving and regulatory and foreign exchange pressures due to continue, Vodafone said it now expected organic service revenue growth in 2013 to be slightly below its previous medium-term target range of 1-4 per cent.

Group organic service revenue for the 2012 financial year from the provision of ongoing services to customers was up 1.5 per cent, with Europe down 1.1 per cent and Africa, Middle East and Asia Pacific up 8 per cent.

The British-based group is the latest in a long line of major companies to be hit by government austerity measures being imposed across Europe, where consumers facing tax rises, inflation and muted wage growth are under pressure to cut spending.

A reluctance to spend on discretionary goods, particularly in Italy, Spain and Greece, has hit Europe's biggest retailer Carrefour, drinks group Diageo and electrical retailer Kesa among others in recent weeks.

In the telecoms sector specifically, rivals have also struggled, with net profit at Spain's Telefonica halved in the first quarter due to torrid conditions in Italy and Spain.

"Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment," chief executive Vittorio Colao said.

Group revenue was up 1.2 per cent to £46.4 billion, in line with forecasts, but core earnings slipped 1.3 per cent due to the tough trading and increasing regulatory pressure.

"Given larger regulatory reductions than previously envisaged, we now expect organic service revenue growth in the 2013 financial year to be slightly below our previous medium term guidance range," the group said.