India takes the shine off Vodafone's results

Emeka Obiodu/Ovum
OvumVodafone’s full-year results for the period ending 31 March 2010 are encouraging given the challenges it faced in the middle of the year. However, although Europe is gradually recovering, the £2.3 billion impairment charge in India and the tightening competitive landscape across its emerging market footprint pose major concerns.
 
Vodafone’s most important challenge now is to stabilize its European base before its emerging market base matures.
 
Overall, Vodafone has performed reasonably well in its last financial year, ending 31 March 2010, with the last quarter proving particularly good for the mobile giant. Headline revenue growth for the year was up 8.4%, although much of this was down to currency gains, as organic revenues (stripping out the impact of currency fluctuations and new M&A) fell by 2.3% for the year.
 
Although European revenues are yet to turn into growth, much of the underlying weaknesses in the region are being flushed out. Organic revenues for the year in Europe fell by 3.5% year-on-year. But a closer look at the quarterly performance shows that the trend has been improving since the second quarter.
 
Away from Europe, the result is rosier. The group’s turnaround in Turkey has gone well, with revenues in Turkey jumping 31.3% in the fourth quarter of the year. Vodacom in Africa also had a good year, with revenue growth of 4.6%. Meanwhile, at Verizon Wireless the results are good too, with revenue growth of 6.3%.
 
Despite the encouraging news, India is becoming a difficult market. While Vodafone boosted its revenues in India by 14.7% in the financial year, much of the concern is focused on the challenges facing the business in the market. For a start, Vodafone has taken a £2.3 billion impairment charge in India, largely due to an intense price war and the regulator’s sudden readjustment of 2G spectrum fees. But this is only the beginning of Vodafone’s worries in India, as three underlying obstacles remain ahead.
 

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