Vodafone shares hit four-year low

Vodafone dealt a body blow to the fragile telecoms market yesterday, as Europe's largest wireless operator published reduced forecasts for Germany and Italy, knocking its shares down 10 per cent to a four-year low.

The group offered projected earnings for subsidiaries D2 in Germany and Italy's Omnitel well below expectations for the next two years, leading some analysts to call it a profit warning.

Others were less pessimistic, pointing to a better outlook for three years out - if investors were willing to wait that long.

The statement pounded Vodafone's stock to as low as 96½p sterling, closing at 98p as nearly one billion shares changed hands.

The stock has now lost 45 per cent of its value since the start of 2002, underperforming European peers by 18 per cent.

Vodafone owns the largest mobile operator in the Republic and has close to half a million small Irish shareholders on its books, a hangover from the Eircom flotation. "The market is clearly worrying that there might be a more fundamental problem than what's come out today," said Mr Gareth Lewis, fund manager at Singer & Friedlander.

The news helped push Deutsche Telekom and France Telecom to record lows. Among Vodafone's European rivals, Orange lost 4 per cent while Telefónica Moviles fell 3 per cent. MmO2, Europe's fifth-largest mobile phone operator with German troubles of its own, fell 5 per cent.

Vodafone forecast EBITDA (earnings before interest, tax, depreciation and amortisation) at €5.995 billion for D2 and Omnitel in 2002-03, down 5.2 per cent on a figure it published last July.

It also pencilled in €6.731 billion of EBITDA for D2-Omnitel in 2003-04, down 8 per cent from before. In the first half to September 30th, Vodafone's German and Italian mobile businesses accounted for a quarter of proportionate group turnover and a third of EBITDA.

Vodafone said the new figures were from a valuation report approved by an independent expert, and the group itself had not revised its own views on current trading or future prospects.

But the news followed last month's fourth-quarter subscriber and average revenue figures that also disappointed the market. It reported a near 400,000 drop in German subscriber numbers.

Despite Vodafone saying the statement should not be seen as a revision on current trading views, investors baulked at the way the forecasts appeared buried below news about its buyout plans for minority shareholders in the German operation.They are also wary Vodafone may have to write down goodwill on its German assets when it reports full-year results on May 28th.