Vodafone posts 45 per cent profit loss in Q1

Vodafone UK's Q1 results reveal that the company is struggling against the economic decline as its customer base dropped 450,000. The company posted a 45 per cent profit loss in the results.

The network said it would ramp up its £1 billion cost savings programme to 65 per cent from the earlier target of 50 per cent, but did not spell out whether this would entail further job cuts to the 500 already slated for its UK operations.

Vodafone's UK service revenues were down 0.8 per cent and its EBITDA was shrunk 14.8 per cent. Its total customer base now stands ate 18.7i6 million, 58.5 per cent of which are on prepay. The total churn is up 41 per cent from 35.7 per cent in the same period last year and 34.6 per cent in Q4.

Across the group, its annual net profit for the last financial year plummeted 54 per cent to £3.08 billion, down from £6.76 billion in the previous year, with the telecom major taking £5.9 billion mainly on impairment charges relating to its performance in Spain and Turkey. It added 7 million new customers in Q1, increasing its global total to 303 million at the end of March.

Vodafone group chief executive Vittorio Colao said the company would accelerate its cost cutting programme by identifying new cost savings to offset pressures from the economy. Some of the cost cutting had been achieved through network sharing, outsourcing of field force and job cuts.

He said the UK remained a challenging market with margins under pressure, heavy cross net offers and depressing margins. He added that the UK market was a structurally challenging one with a 3.5-per cent decline in growth. He said the there were other players that were doing better but their margins were not significantly better than Vodafone's.

In the UK, the company's service revenue declined by 1.1 per cent on an organic basis, due to falling voice revenues on account of increased competition in adverse economic times.

Colao said the company had focussed on more value offers to the market to link this with Vodafone's overall identity.

According to Colao Spain was a 'challenging market' with 'weakness across the board'. He identified India as a source of potential growth and in Turkey though revenues were down 18 per cent, the company was on track to launch 3G by the second half of the year.

The company's South Africa operations saw revenue grow 11 per cent and the company was listed in on the country's stock exchange.

He said that the company expected voice and SMS growth to continue to voice and SMS growth to continue to be negative. He added that the company would be looking at hwo quickly it could close the gaps that exist in some countries and the extent to which it would reinvest its cost savings into growth areas including DSL and data.

According to analysts Vodafone was reaping the fruits of some contentious decisions taken by its management in recent years such as the decision to extend interests in emerging markets to drive the operators corporate strategy.

They add that the company, in its established markets had shown that it saw mobile broadband and data as the way forward as traditional revenues decline.