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Voda struggling in EuropeVoda struggling in Europe

James Middleton

February 3, 2009

2 Min Read
Voda struggling in Europe

Wireless behemoth Vodafone reported a continuing deterioration in revenues among its mature operations, with emerging market subsidiaries struggling to offset the decline.

However, the weakness of the pound helped the company achieve a 14.3 per cent increase in quarterly revenues on a non-organic basis, and also prompted Vittorio Colao, chief executive, to raise annual sales forecasts.

On Tuesday, the World’s Biggest Carrier in terms of Revenue, said that turnover for the final quarter of 2008 declined 1 per cent year on year on an organic basis to £10.5bn, with Europe’s decline only partially offset by Asia Pacific & Middle East and Africa & Central Europe.

Revenues for European operations dropped 2.8 per cent year on year on an organic basis to £7.5bn, hit by the deteriorating economy in Europe, ongoing competitive pricing pressures and lower termination rates. But in Africa and Central Europe, quarterly revenues increased 3.5 per cent on an organic basis to £1.4bn, boosted by sustained growth in Vodacom South Africa, slightly offset by weakening trends in Turkey and Romania. Revenues in the Asia pacific and Middle East region were also up 9.2 per cent year on year to £1.5bn.

In November, Voda began implementing a strategy with an emphasis on customer value offers, mobile data, enterprise and fixed broadband. This week, the firm said the actions taken have helped generate a 10.3 per cent organic increase in minutes, organic data revenue growth of 25.3 per cent, positive revenue growth in enterprise revenue and over 280,000 fixed broadband additions in Europe.

The company has also established a cost saving programme which targeted a £1bn reduction in operating costs by the 2011 financial year. Cost savings of approximately £500m are expected to be generated by the end of the 2010 financial year, with the full £1bn expected to be generated by 2011.

But Michael Kovacocy, European telecoms analyst and sector strategist at Daiwa Securities said that with the group’s total revenue now showing organic year on year YoY declines, “We are now seeing the inability of ex-European operations to fully make up for a difficult and mature Western European marketplace where Vodafone still generates the majority of its value.”

Daiwa maintains a view that Voda is one of the more exposed players in the European telecoms market, because of its stand alone, traditional mobile business model. “We can see investor sentiment returning quickly to a deteriorating fundamentals picture,” Kovacocy said.

About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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