VOD Vodafone Group PLC

By Simon Zekaria 

LONDON-- Vodafone Group PLC on Tuesday signaled the continued recovery of its key European markets after raising its full-year earnings guidance despite swinging to a first-half loss on infrastructure costs.

The U.K.-based telecommunications giant reported a net loss of GBP1.7 billion ($2.57 billion) for the six months to Sept. 30, compared with a GBP5.42 billion profit in the same period last year. Vodafone is spending heavily on its network across the world, including mobile spectrum, to boost consumer sales from increased Internet data usage and move the business out of a tough period.

Earnings before interest, taxes, depreciation and amortization fell 1.7% to GBP5.79 billion although beat analysts' forecast of GBP5.69 billion. Operating profit before exceptional items--a key performance metric--fell 6.5% to GBP1.64 billion.

But the world's second-largest mobile operator by subscribers after China Mobile Ltd. said revenue excluding mergers, acquisitions and currency effects rose 2.8% to GBP20.3 billion, slightly above consensus forecasts of GBP20.2 billion. Revenue was down 2.3% on a reported basis.

Second-quarter revenue excluding handset sales, mergers, acquisitions and currency effects rose 1.2%. This is an improvement from a 0.8% rise in the previous three months and a 1.5% fall in the same period a year earlier.

In Europe, revenue on the same basis fell 1%--an improvement on a decline of 1.5% posted in the previous three months and the fifth consecutive quarter of improving performance, with southern Europe in particular showing a strong rate of recovery. Vodafone also said the burden of regulation and macroeconomic pressures are easing in Europe.

"We expect progress to continue in the second half of the year," Chief Executive Vittorio Colao said.

The Newbury, U.K.-based firm now expects full-year Ebitda of between GBP11.7 billion and GBP12 billion. It previously guided the bottom end of the range at GBP11.5 billion.

The company also boosted its interim dividend by 2.2% to 3.7 pence a share.

Vodafone shares rose more than 4% in early trading in London. "The overall takeaways are encouraging," said Jefferies analyst Jerry Dellis.

For years, Vodafone has been stung by its high exposure to Europe's anemic wireless markets; a region where it generates most of its sales. Pinched consumer spending, intensive competition and regulation have combined to curtail the company's performance in its main geographies of Germany, Spain and Italy, as well as elsewhere.

Still, this year it has hailed the recovery of its key European business, backed up by deal-making and network investment to meet consumer demand for faster-speed mobile Internet data and media-driven bundled subscriptions, which include pay-television.

The focus on Vodafone's regional performance has intensified in recent months after it failed to come to an agreement with U.S.-based cable giant Liberty Global over an asset swap.

High-speed data infrastructure is one of Vodafone's chief concerns. It said it now has nearly 30 million so-called fourth-generation wireless customers. In the first half, mobile data traffic grew 75%, it said, with average usage per customer in Europe jumping 39% in the second quarter.

While Vodafone's focus on Europe was strengthened by the sale of its U.S. operations, its greatest growth comes from emerging markets such as Turkey, India and South Africa. In the second quarter, revenue on the same basis from emerging markets rose 6.7%, up modestly from the previous quarter.

Mr. Colao told reporters the company is ready to launch an initial public offering of its Indian business and would make a decision after the end of the fiscal year. "We are preparing for it," he said.

"The market is huge. The potential is huge," said Mr. Colao, on telecom prospects in India.

The company said it is moving to reporting in euros from April 1 2016.

Write to Simon Zekaria at simon.zekaria@wsj.com

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(END) Dow Jones Newswires

November 10, 2015 04:22 ET (09:22 GMT)

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