By Simon Zekaria
LONDON-- Vodafone Group PLC on Tuesday reported a rise in
quarterly revenue for the first time in nearly three years, hailing
a steady recovery in its key European telecommunications
markets.
The U.K.-based mobile telecom giant said revenue excluding
handset sales, acquisitions, disposals and currency impacts ticked
up 0.1% in its fiscal fourth quarter to March 31--the first growth
for 11 consecutive quarters.
However, despite the rise in quarterly revenue and upbeat
comments, Vodafone shares traded down 2.2% in early trading in
London at 229 pence. Analysts said that while the group's comments
on Europe are welcome, absorbing the costs of an overhaul are
hitting profit.
"Competition in the sector remains as fierce as ever," said
Richard Hunter at Hargreaves Lansdown.
Still, the rise is a positive sign for Vodafone--the world's
second-largest mobile operator by subscribers after China Mobile
Inc.--as it has struggled in recent years because of its exposure
to sluggish Southern European markets such as Italy and Spain,
where fierce competition and a squeeze on consumer spending has
dragged down sales for telecom operators.
"We have seen increasing signs of stabilization in many of our
European markets, supported by improvements in our commercial
execution and very strong demand for data," Chief Executive
Vittorio Colao said.
To boost the appeal of its services the Newbury, England-based
company has bought up fixed-telecom assets and is rolling out
fiber-optic cable to offer bundled media offers in Europe and
spending billions of dollars to boost wireless network speed that
can match the continent's rising demand for Internet data across
faster fourth-generation mobile networks
"In Europe, 4G coverage now extends to over 70% of our
footprint, and voice quality and reliability have improved
noticeably," he added. "We have significant opportunities ahead of
us, with only 13% of our European mobile customers using 4G."
For the full year Vodafone reported a fall in net profit to
GBP5.76 billion from GBP59.3 billion in the same period last year.
Last year's result was boosted by the sale of its U.S. wireless
operations in a landmark deal worth $130 billion, for which it
received a one-off contribution of GBP48.2 billion.
Annual revenue rose 10.1% year-over-year to GBP42.2 billion, but
fell 0.8% excluding handset sales, acquisitions, disposals and
currency effects.
Revenue excluding handset sales rose 9.4%. On the same basis,
sales in Europe gained 15%, but fell 4.7% when also excluding
acquisitions, disposals and currency effects.
Operating profit adjusted for exceptional items--a key
performance metric--fell 19% to GBP3.51 billion as the company
invested in its global network.
It posted earnings before interest, tax, depreciation and
amortization of GBP11.9 billion, up 7.5% year-over-year. It
forecasts Ebitda in the range of GBP11.5 billion to GBP12 billion
in fiscal 2016.
Emerging markets revenue excluding handset sales fell 0.8% in
the fiscal year, but climbed 5.8% also excluding acquisitions,
disposals and currency effects. In those developing economies
across Africa, the Middle East and Asia, a "good growth trend has
continued," Mr. Colao said.
Vodafone, which has over 400 million mobile customers, said it
would pay a dividend of 11.2 pence a share, up 2%.
As well as commenting on the company's earnings, CEO Mr. Colao
also noted that it would be "good" for Vodafone if the U.K.
remained in the European Union, amid wider investor and business
concern over a possible exit from the bloc.
"Europe needs a large digital marketplace in order to be
competitive with America and China," Mr. Colao said.
Mr. Colao also commented on consolidation in the industry,
saying regulators in the U.K. must take a firm approach on BT Group
PLC's planned multibillion-dollar acquisition of mobile operator
EE, with Vodafone asking for a range of concessions to alleviate
antitrust concerns. "[This is] something which has to be watched
with extreme care."
BT has said the deal for EE--the latest in the U.K.'s
rapidly-developing bundled telecom market--would benefit customers
and businesses.
Write to Simon Zekaria at simon.zekaria@wsj.com
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