Vodafone pinched as customers phone less

Kate Holton London

Trading worsened in Vodafone’s third quarter to December last year as customers in previously robust northern Europe joined those in the south by cutting back on using their phones, adding impetus to the UK group’s efforts to cut costs.

A worse-than-expected 2.6 percent drop in organic service revenue in the three months to December marked an acceleration from the 1.4 percent fall recorded in the second quarter and showed the intense pressure on Vodafone.

Shares in Vodafone were up 2 percent by 1pm in London, however, as the group maintained its outlook for the year and as analysts said the results were not quite as bad as feared.

They also took strength from the statement that earnings margins should show an improving trend as the group continues with cost restructuring and savings programmes.

Telecoms firms across Europe are struggling with the macroeconomic pressures at a time when they need to build networks that offer faster speeds for consumers increasingly accessing the internet on mobile devices.

They are also facing regulatory changes across the region and fierce competition.

“We expect peer results to show that Vodafone is doing worse than peers,” Bernstein analyst Robin Bienenstock said. “The pace of decline almost doubled in Europe while [emerging market] growth fell by about a third.”

Of Vodafone’s 403 million customers, those in Britain and Germany cut back on usage to stick within their price plans while fewer customers signed up to the Vodafone network.

Within such a difficult environment, Telefonica’s O2 turned more competitive in Britain and Deutsche Telekom’s T-Mobile upped the pressure in Germany. – Reuters