Vodafone Maintains Outlook as Service Revenue Growth Slows in Q1

Vodafone Group reported a small slowdown in underlying revenue growth in its fiscal first quarter to June, but said it’s on track with its cost savings efforts and full-year outlook. Total revenues dropped 4.9 percent to EUR 10.91 billion, hurt by the new accounting rules and negative currency effects. Organic service revenue was up 1.1 percent, or grew 0.3 percent based on the old accounting standards.

CEO Vittorio Colao said the slowdown was expected, due to increased competition in Italy and Spain. In its other larger markets, Germany saw ongoing momentum and the UK a further underlying recovery, and the company continued to expands its converged customers and IoT platform. In addition, it received preliminary clearance to close the merger with Idea Cellular in India, allowing the deal to go ahead by end-August.

For the full year, the group still expects organic adjusted EBITDA (excluding settlements and UK handset financing) to grow by 1-5 percent, and free cash flow (pre-spectrum) of at least EUR 5.2 billion. While this is based on IAS 18 accounting standards, the new IFRS 15 rules are not expected to have a material impact on these results.

In Europe, quarterly revenue fell 0.8 percent, including a 0.3 point negative effect from currencies. On an organic basis and under the old accounting standards, service revenue declined by 1.3 percent, compared to 1.8 percent growth in the previous quarter. Vodafone said the decline would have been only 0.5 percent excluding regulatory effects, UK handset financing and a legal settlement in Germany in Q4.

The slowdown in underlying quarterly trends largely reflected a delay in price changes in Italy to offset the shift from 28-day to monthly billing and commercial actions taken to reposition its offers in Spain, the company said. Service revenues were down 6.5 percent in Italy, 2.2 percent in Spain and 4.9 percent in the UK, compared to growth of 2.4 percent in Germany.

Revenue in the AMAP region decreased 6.0 percent, with organic service revenue growth of 7.0 percent offset by significant forex effects, especially the weaker Turkish lira, and the sale of Vodafone Qatar. The company said it saw continued strong commercial momentum and data growth in South Africa, Turkey, and Egypt. Vodacom showed organic service revenue growth of 5.1 percent and the other countries 9.4 percent.

Vodafone also saw a slowdown in the fixed market in Q1. It added 128,000 new broadband customers in Europe, down from 237,000 a year earlier, due to customer losses in Spain and competitor promotions in Germany. In total, the company counted 19.9 million fixed broadband customers at the end of June, of which 13.6 million take a high-speed service over fibre or cable, 13.8 million TV customers and 6.0 million consumer converged customers. The number of converged customers, taking both fixed and mobile, rose by 289,000 in the quarter. Overall, European fixed service revenue grew 4.0 percent on an organic basis in Q1 and contributed 29.9 percent of service revenue in Europe.

In the mobile market, the group finished June with a total of 274.85 million customers, up by around 1.4 million from the end of March. The figure excludes Vodafone India, which is classified as discontinued operations pending completion of the joint venture with Idea. – telecompaper