Vodafone’s Q2 results affected by difficult market conditions

Vodafone Group reported a revenue drop in the quarter to June 30, 2012, noting that “macroeconomic and competitive pressures in southern Europe have intensified further”.

In a statement, Vittorio Colao, the company’s chief executive, said that “despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining our tight control of our cost base”.

Revenue for the period was £10.77 billion (US$16.71 billion), down 7.7 per cent year-on-year. Group service revenue was £9.98 billion, down 8.1 per cent. The company did not provide profit figures for this quarter, it only reports profit half-yearly, for the periods to September 30 and March 31.

The company ended the period with 146.95 million customers, down from 148.49 million at April 1, mainly due to losses in its core northern European businesses.

For its Africa, Middle East and Asia Pacific unit, service revenue fell by four per cent, with growth in India slowing due to regulatory impacts on data and messaging. Vodacom experienced some weakness in South Africa, due to increased competition on mobile voice and data pressure. Specifically, there were small revenue rises in Turkey (up  three per cent) and Egypt (up six per cent) in the quarter.

Integrated voice, data and SMS plans now represent 50 per cent of consumer contract revenue in European markets, up from 32 per cent one year ago.

Vodafone said that fixed-line revenue now makes up 8.7 per cent of its Group service revenue, with the company having 6.3 million fixed broadband customers.

Free cash flow of £900 million was down £300 million year-on-year, due to the timing of dividend payments to minority shareholders in Vodacom and Vodafone Egypt, and the end of dividends from SFR following the disposal of its stake in this business.

Capital expenditure of £1.1 billion was £100 million lower year-on-year, with the company stating that its investment focus remains on network quality “in terms of coverage, reliability and speed.”

The group has maintained its outlook for the financial year.