Vodafone wrote down the value of its business in Spain and Italy by £5.9 billion (R82.5bn) and lowered its cash flow forecast as recession-hit southern Europeans cut back on using their cellphones.

The British cellular operator yesterday became the latest company to fall victim to a plunge in demand in peripheral euro zone countries, as they drive through austerity measures to cut government deficits.

Last week, French bank Credit Agricole took a e2bn (R22bn) write-down on the sale of its Greek business, while firms from steelmakers to brewers have warned of weakening trade across EU.

Vodafone is in a better position than many rivals thanks to its strength in faster-growing US and emerging markets, and continues to pay a dividend when others have cut back.

However, its growth in emerging markets is slowing, and some investors were disappointed by a smaller-than-expected dividend from its US joint venture Verizon Wireless, announced on Monday.

“If you stripped out the impact from the US then these results would look pretty poor, and that’s a problem,” said Espirito Santo analyst Will Draper.

Vodafone shares were down 3.9 percent at £1.60 in early trade yesterday, the biggest fall on the UK’s FTSE 100 index.

It said organic service revenue fell 1.4 percent in the three months to September, worse than the 0.7 percent decline predicted by analysts.

That included a 11.3 percent plunge in southern Europe, where consumers are suffering a prolonged recession.

Data last week showed a quarter of a million Spaniards ditched their cellphones in September.

As a result of weak trading, as well as adverse currency moves, Vodafone said that it expected free cash flow for the full financial year to be in the lower half of its guidance range. – Reuters