Full-year sales of mobile giant Vodafone down first time in eight years

The full-year sales of mobile giant Vodafone have fallen for the first time in eight years after European revenues took a hit on tough economic conditions.

Annual revenues were down 4.4 per cent to £44.4 billion, after prices were cut by the firm in Europe in its bid to retain customers.

Service revenue in Italy was down 12.8 per cent, as against a drop of 11.5 per cent in Spain.

According to Vodafone it had written down the value of its businesses in Italy and Spain by a further £1.8 billion, which took the total writedown for the year to £7.7 billion.

With the writedowns, earnings following taxation fell to £673 million in the group's financial year to the end of March, as against £7 billion in 2011-2012.

According to chief executive Vittorio Colao, Vodafone had faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe and an adverse European regulatory environment.

Colao said, however,  he remained "very excited" about the longer term prospects of Vodafone.

US mobile operator, Verizon Wireless, 45-per cent owned by Vodafone, was the one bright spot in the results. The company reported a 30.5-per cent year-on-year rise in the profits from its stake to £6.4 billion.

Recent weeks have seen majority owner Verizon Communications which made no secret of its wish to buy out its British partner, ramp up pressure, saying that it believed it could buy the asset in a tax-efficient way.

According to analysts, the full-year results highlighted the dilemma for Colao, with Verizon's continuous rapid rate expansion and assets in the core European markets that had been struggling for several years.

Vodafone reported a quarterly drop of 4.2 per cent in organic service revenue, which was broadly in line with forecasts, though much worse than the 2.6 per cent it recorded in the third quarter, as also the largest quarterly drop since the company started using the measurement in 2003.

Southern Europe reported the steepest fall where operators had been cutting prices to win business from struggling consumers. Italy service revenue was down 12.8 per cent, while in Spain it was down 11.5 per cent.

The group also took a £1.8 billion impairment charge on its business in Italy, which took the  writedowns for Spain and Italy for the year to £7.7 billion.

With the completion of a three year dividend programme that guaranteed 7 per cent growth per year, Vodafone said it now aimed at least to maintain the ordinary dividend per share at current levels.