(Adds details from statement, analyst comments)
LONDON (Thomson Financial) - Vodafone Group Plc. said Tuesday it sees its
full-year revenue at the bottom of its outlook range based on economic weakness
and trading in the first quarter, in spite of organic revenue growth of 1.7
percent during the period.
The mobile operator said lower-than-expected equipment revenue is also
likely to take its toll on the full-year outlook, which is forecast to come in
at the bottom of its target of 39.8 billion pounds to 40.7 billion pounds.
Shares in the world's largest mobile phone company by revenue plummeted on
the news, dropping 12.60 percent to 130.45 pence at 9:05 a.m.
Vodafone said its group revenue for the three months ending June 30,
increased by 19.1 percent, or 1.7 percent on an organic basis, compared to the
same quarter last year, to 9.8 billion pounds.
"Notwithstanding this more challenging operating environment, we continue to
benefit from a diversity of assets and services, with strong revenue growth in
EMAPA and another good quarter of data revenue growth offsetting weakness in
Spain," said Chief Executive Arun Sarin.
Overall revenue was bolstered by continued growth in the Eastern Europe,
Middle East, Africa & Asia and Pacific (EMAPA) region as revenue climbed 9.2
percent on an organic level, and 30.5 percent including acquisitions and
disposals.
However, lower growth in Egypt and Romania, as well as the inclusion of
Turkey in the calculation, meant revenue in the EMAPA region was not as strong
as the previous quarter, despite a strong contribution from India.
Vodafone generates about a quarter of its revenues from the EMAPA region,
following a series of acquisitions in emerging markets, including the $10.7
billion buy of a controlling stake in India's Hutchison Essar last year.
The mobile operator said Vodafone Essar added 5.1 million customers in the
quarter out of total 49.2 million customers in India and 122.6 million in the
region.
The strategy to expand into developing markets was spearhead by outgoing CEO
Sarin, who will leave the mobile operator at the end of July. He will be
replaced by Vittorio Colao.
Vodafone added that revenues in Europe in the first quarter were weaker,
declining by 0.2 percent on an organic basis, as a slowdown in customer spending
in Spain hit the group's bottom line. Vodafone added 1.3 million new mobile
customer in the quarter, in line with the previous quarter.
Data revenue, or revenue from PC connectivity devices and services, stood at
664 million pounds for the quarter compared to 441 million pound last year.
The mobile operator is looking to boost data revenues in order to offset a
decline in voice revenue, which fell 3.6 percent or an organic basis in the
quarter compared to last year.
Vodafone added that Verizon Wireless, its U.S. joint venture, added 1.5
million net mobile customers during the quarter.
Collins Stewart downgraded the shares to 'hold' from 'buy' on the news.
However, analysts agreed the news from Vodafone was not all bad,
highlighting the stock's defensive qualities.
Richard J. Hunter at Hargreaves Lansdown said ongoing revenue growth in
emerging markets and an attractive yield at nearly 6 percent are positives from
the statement.
"The strong cashflows which the company enjoys provides it with a very
positive market consensus, although this may come under some pressure following
today's guidance," he said.
Cazenove said the revised full-year outlook implies a downgrade of perhaps 1
percent to 2 percent, but highlighted how the shares have stayed broadly flat
against a 4 percent decline in the All-Share index, prior to Tuesday's
announcement.
"This strong performance is comparable to the European sector and reflects,
at least in part, the sector's defensive characteristics," Cazenove said.
The broker also said the group has an attractive profile in terms of
exposure to mobile data growth and emerging markets.
lorraine.turner@thomsonreuters.com
lht/kf1/lht/kf1
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