Vodafone sounds warning over revenue

23 Jul 2008

(Associated Press via NewsEdge) Vodafone Group shares plummeted 14% after the mobile phone company scaled back its full-year sales forecast as tough economic conditions led consumers to refrain from buying and using new handsets.

Vodafone said it now expects revenue to be at the bottom of its 39.8 billion pound ( €49.8 billion, $79.8 billion) to 40.7 billion pound ( €51 billion, $81.6 billion) range, dragging the telecommunications sector lower and casting a shadow over the last set of results presided over by outgoing CEO Arun Sarin.

'Telecoms results, globally, have shown remarkable resilience to date to the economic slowdown, but Vodafone has kicked off the telco results season with a reminder that nothing is immune,' said Collins Stewart analyst Mark James.

Vodafone, the world's biggest mobile phone provider by sales, was the biggest loser on the London Stock Exchange midmorning Tuesday, down 14.1% lower at 128.2 pence ( €1.6, US$2.56).

In its first quarter trading update, Vodafone said that revenue rose just 1.7% to 9.8 billion pounds ( €12.3 billion, US$19.6 billion) in the three months to June 30.

The company said its Spanish operations took a hit from falling customer spending and fierce competition while voice revenues in Britain were depressed by the darkening economic climate.

Excluding the impact of currency exchange rates, acquisitions and disposals, revenue actually fell slightly in Europe _ something the company attributed in part to tightening margins on voice communications and reduced roaming charges mandated by the EU.

'The Spanish and U.K. telecoms markets, resilient to the economic slowdown to date, finally look to have cracked,' said James.

Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockborkers, said Sarin could have wished for better numbers on his way out, but noted that 'there remain positives within the statement, such as the ongoing revenue growth in emerging markets.'

The company registered 5.1 million customer net additions in India over the quarter and posted an 18.2% growth in service revenue in Egypt.

Sarin, who is due to be replaced by his deputy Vittorio Colao next week, said that the company's focus on cost reduction would support its operating profit for the full year 'notwitstanding this more challenging operating environment.'

© 2008 The Associated Press

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