Vodfone group revenues dip 3.6% in Q3 despite emerging market gains

Vodafone Group Plc has reported a 3.6-per cent fall in third-quarter revenue to £10.98 billion ($17.91 billion), from £11.39 billion a year earlier, although revenues were above market expectations of £10.86 billion.

Vodafone saw a worsening performance in key markets across Europe, but revenues from emerging markets rose substantially.

Organic group service revenues were down 4.8 per cent, the company said in a regulatory release.

In Europe, where Vodafone said conditions "are still difficult," sales dropped 9.6 per cent, with Germany down (-) 7.9 per cent, the UK (-) 5.1 per cent and Italy (-)16.6 per cent.

In Africa, Middle East and Asia Pacific, the figure rose 5.5 per cent. Emerging market service revenue grew 13.2 percent in India and by 3.9 per cent in Turkey while Vodacom revenues were up 3.5 per cent during October-December 2013.

Revenue was hurt by price competition in Germany and the UK, as well as by weak southern European markets.

However, the company said "the shift to 4G is gaining momentum," so it's optimistic that its "revenue performance will begin to improve.

"Vodafone reiterated its fiscal-year guidance for adjusted operating profit of £5B and free cash flow of £4.5-5B.The company didn't disclose profit figures.

In India service revenue grew 13.2 per cent for the quarter ended 31 December 2013, driven by a higher customer base, improved voice pricing and strong data growth.

Mobile internet users in India increased 38 per cent in the quarter to 45.7 million and data usage continues to grow strongly with 3G usage now averaging in excess of 700MB per month, Vodafone pointed.

''In India we have added over 2,000 more 3G sites and now have 33,000 sites connected with high capacity backhaul.''

In India, however, the company is entangled in ''legal proceedings,'' although the group did not carry a provision for the litigation or in respect of the retrospective legislation at 30 September 2013 or at previous reporting dates.

Vodafone said it has 9.8 million customers now and is well on target to achieve 11-12 million customers by March 2014.

Net debt of the group, including joint ventures increased to £31.5 billion.

Vodafone expects full year adjusted operating profit of around £5 billion and free cash flow of £4.5-£5.0 billion.

''Our emerging market businesses are growing strongly, supported by consistent execution and accelerating demand for data. In Europe, conditions are still difficult, and we continue to mitigate these challenges through on-going improvements to our operating model and cost efficiency. In addition, the shift to 4G is gaining momentum and we have seen improving mobile customer net addition trends. We are therefore optimistic that our revenue performance will begin to improve as regulatory headwinds ease and customer appetite for video and content services increases,'' said chief executive Vittorio Colao.

''During the quarter we have made further progress in executing our long-term strategy. Project Spring, our £7 billion organic investment programme, will accelerate our plans to establish stronger network and service differentiation for our customers, with the first elements of the programme already initiated. After the imminent completion of the Verizon Wireless transaction, we will be very attractively positioned, with a strong balance sheet, improved dividend cover and the financial and strategic flexibility to make further investments in the business or returns to shareholders in the future,'' he added.