(Bloomberg) — Vodafone Group Plc narrowly missed a consensus analyst forecast for third-quarter revenue after competition in southern Europe continued to bite and it cut prices in South Africa, sending its shares down as much as 2.7 percent.
Service revenue fell 3.9 percent to 9.79 billion euros ($11.1 billion) in the three months to Dec. 31, narrowly below the average analyst forecast of 9.82 billion euros in a company-compiled survey. Organic service revenue rose 0.1 percent.
Key Insights
Vodafone is sandwiched between big former monopolies and low-cost challengers in fiercely competitive markets and new CEO Nick Read is under pressure to stop its European business shrinking. In Europe, organic service revenue fell 1.1 percent.The carrier said there were “improving customer and financial trends in Italy, robust retail growth in Germany, reduced churn in Spain and a consistent performance in the U.K.” Goldman Sachs analysts noted the improved commercial trajectory in Italy and Spain but said a rebound to growth was unlikely to happen before next year. Vodafone needs regulators to clear its 18.4 billion-euro purchase of Liberty Global Plc assets in central Europe so it can better compete with Deutsche Telekom AG. It’s put its telecom towers into a separate business unit, which would make it easier to share masts with other carriers and cut costs.
Market Reaction
The stock has fallen by more than a third over the past twelve months, compared to a 14 percent drop in the Stoxx 600 Telecommunications index. The stock was down 1.1 percent at 8:28 a.m. in London.The drop means Vodafone now offers a dividend yield of 9.5 percent. RBC analysts led by Wilton Fry say its dividend policy is “unsustainable.”
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“Lower mobile contract churn across our markets and improved customer trends in Italy and Spain are encouraging, however these have not yet translated into our financial results, with a similar revenue trend in Europe to Q2,” Read said in the statement. NOTE: More on Vodafone trading statement
(Adds share price fall in first paragraph.)
To contact the reporter on this story: Thomas Seal in London at [email protected]
To contact the editors responsible for this story: Rebecca Penty at [email protected], Thomas Pfeiffer
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