Vodafone Posts Full-Year Organic Revenue, Profit Growth -- Update
May 17 2016 - 8:09AM
Dow Jones News
By Stu Woo
LONDON-- Vodafone Group PLC's GBP19 billion ($27.4 billion) bet
is starting to pay off.
Vodafone, the world's second-largest mobile carrier behind China
Mobile Ltd., on Tuesday reported its first full year of organic
growth in both revenue and core earnings since 2008. The U.K.-based
company said it was finally reaping benefits from "Project Spring,"
its recently completed two-year, GBP19 billion effort to improve
and expand its network.
The mobile operator said its revenue for the fiscal year ended
March was GBP41 billion, down 3% compared with the previous year
and in line with analysts' expectations. Vodafone attributed that
decline to foreign-exchange movements and said its organic revenue
growth, which excludes the impact of foreign exchange, was
2.3%.
Vodafone's full-year earnings before interest, taxes,
depreciation and amortization were GBP11.6 billion, also in line
with analysts' expectations. The company said that was down 2.5%
from the previous year because of foreign-exchange movement, and
that the organic growth was 2.7%.
The company reported a full-year loss of GBP3.8 billion,
compared with a profit of GBP5.9 billion a year earlier.
The markets applauded the growth, sending Vodafone shares up
2.4% in midday London trading.
"This has been a year of strong execution," Vodafone Chief
Executive Vittorio Colao said in a conference call.
Vodafone announced Project Spring in September 2013, at the same
time it said it was selling its 45% stake in Verizon Communications
Inc. for $130 billion. The company said it would invest GBP19
billion from March 2014 to March 2016 to improve its mobile
networks and its customer service, which subscribers have long
griped about.
That has paid off, especially in Europe, where Vodafone's
revenue increased organically by 0.5% in the fourth quarter.
"Customers who want the best service are increasingly willing to
pay a premium for it," said Morningstar analyst Allan Nichols.
While Vodafone once focused on selling only mobile
subscriptions, it used Project Spring to add fixed lines for cable
television and broadband, especially in Germany. That enabled
Vodafone to sell combo packages with both wireless and fixed-line
services.
Vodafone said it added 1.3 million new broadband customers in
the fiscal year and now has a total of 13.4 million.
Besides stabilizing revenue in what had been a declining market
in Europe, Vodafone saw big growth in its newer markets of Turkey
and South Africa. Service revenue in Turkey grew organically by
19.7%, while in South Africa, where the company operates under the
name Vodacom, service revenue grew 4.7% organically.
The growth did come at a cost, and Vodafone indicated Tuesday
that it would continue to spend heavily. It had previously
anticipated that capital expenditures for the current fiscal year
would decline from the 20% range during Project Spring to about 13%
to 14%, but the company said it now expected that figure to be
closer to 15% as it continues to improve it networks.
Analysts wondered if that figure could be even higher. "You're
digging holes in the ground and putting fiber there, which is a
costly endeavor, " said Bengt Nordstrom, a former telecom executive
who now runs the Swedish consultancy Northstream. "The upside is,
once you connect the customer, they're your customer for the next
20 to 30 years."
Write to Stu Woo at Stu.Woo@wsj.com
(END) Dow Jones Newswires
May 17, 2016 07:54 ET (11:54 GMT)
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