Iiiad proves an Achilles’ heel for outgoing Vodafone boss
TOUGH competition in Spain, Italy and India and foreign-exchange swings marred Vittorio Colao’s final quarterly update as chief executive of Vodafone.
The world’s second-largest mobile phone operator suffered a 4.9pc dip in revenue to €10.9bn (£9.7bn) in the three months to June, partly due to a switch to a new accounting standard, IFRS 15, which forced it to change the way it books income from phone contracts.
Organic service revenue, excluding that and other one-offs, M&A and currency swings, was up 0.3pc, though that was a slowdown from 1.4pc in the previous quarter.
Mr Colao, who will hand over to chief financial officer Nick Read in October, said competition in Italy had “intensified” thanks to the low prices offered by French competitor Iliad, which entered the market in May.
“Iliad has launched very low price offers, which are getting some traction in the market,” he said. “We believe these are levels where it’s not easy to make money in the long term.”
Service revenues also fell in Spain, where Vodafone cut prices to remain competitive, and India, where it is in the process of merging with rival Idea Cellular. But Germany was strong, with 2.4pc growth in service revenue bolstered by an extra 46,000 broadband customers. Mr Colao said the group’s overall performance gave him the confidence that it would meet its expectations of 1pc to 5pc growth in earnings before interest, tax, depreciation and amortisation for the full year.
The performance was not a big surprise after Vodafone warned of a weak first quarter earlier in the year. George Salmon, of Hargreaves Lansdown, said Vodafone was struggling to differentiate itself amid a tough price war in the telecoms industry but that there were some “silver linings” in the results.
He added: “Emerging market growth is strong, driven by Egypt, Turkey and South Africa, while more European customers are electing to take on multiple services from the group.
“Bundling TV, phone and broadband together is Vodafone’s solution to the age-old problem of customer retention, so investors will be keeping a keen eye on progress in from here on.”