Vodafone banks on 4G in ailing Europe

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br vodafone Bloomberg Customers shop in a Vodafone store in London. The company's organic service revenue fell in Britain by 5.1 percent year on year in the fourth quarter, whereas its emerging market division grew service revenue by 5.5 percent. Photo: Bloomberg

London - Vodafone was confident a growing number of customers and the take-up of faster fourth-generation (4G) services would help lift its revenue, the British cellular operator said yesterday after reporting yet another poor quarter due to fierce competition in Europe.

The second-largest cellular operator has posted sharp falls in organic service revenue in the past 18 months, due also to regulator-imposed price cuts and European consumers making fewer calls during the economic downturn.

The company, which is investing to improve the speed and coverage of its networks after selling its US arm in a $130 billion (R1.4 trillion) deal, said organic service revenue was down 4.8 percent year on year in the quarter to December. That was in line with forecasts and followed a 4.9 percent drop in the previous quarter.

The company, second only to China Mobile in terms of subscribers and Britain’s third-largest company by market capitalisation, also confirmed its full-year outlook.

Yesterday’s trading update showed quarterly organic service revenue – which strips out items such as handset sales, currency and acquisitions – was down 9.6 percent in its larger European division, which accounts for a third of the firm’s revenue. It was up 5.5 percent in its faster-growing emerging market division of Africa, Middle East and Asia Pacific.

“In Europe, conditions are still difficult, and we continue to mitigate these challenges through ongoing improvements to our operating model and cost efficiency,” chief executive Vittorio Colao said. “In addition, the shift to 4G is gaining momentum and we have seen improving mobile customer net addition trends. We are optimistic that our revenue performance will begin to improve as regulatory headwinds ease and customer appetite for video and content services increases.”

To improve its offering, he said the group was in talks with local content providers, which could mirror the deals it did in Britain where it offers a music service or sports clips with its faster 4G offering.

Vodafone described the pressures in Europe, where it competes with the likes of Telefonica, Orange and Deutsche Telekom, as intense.

That fits with the only other trading updates given so far for this quarter by the big telecom groups, with Nordic operator TeliaSonera posting quarterly profit below expectations due to weak trading in its developed markets.

For Vodafone, service revenue in its biggest European market, Germany, was down 7.9 percent, while it fell by 5.1 percent in Britain and by 16.6 percent in Italy.

The group is also present in markets such as South Africa, Turkey and India, which have all been hit by falls in their currencies in recent weeks.

Despite the relentless pressures on the business in the core European markets, shares in Vodafone have rallied in the past year as it negotiated the sale of its 45 percent stake in US operator Verizon Wireless.

With the deal due to complete this month, Vodafone has been seen as a takeover target. Its shares were trading up 1.6 percent by 9.25am in London. – Reuters

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