Vodafone Says Europe is Stable as Sales Beat Expectations --2nd Update

By Simon Zekaria 

LONDON-- Vodafone Group PLC's investment bet in Europe is paying off.

March this year marked the end of the British telecommunication giant's two-year spending plan, worth tens of billions of dollars, to upgrade its operations around the world, including in Europe where Vodafone makes over half its earnings and two-thirds of its sales.

It has reaped the benefits of this with improved results and on Friday the Newbury, England-based firm reported better-than-expected revenue and its eighth consecutive quarter of sales growth.

The world's second-largest mobile carrier by subscribers after China Mobile Ltd. said revenue excluding handset sales, currency movements and mergers or acquisitions--a key gauge of performance in the telecom sector--rose 2.2% in the three months ended June 30.

This figure, ahead of a consensus forecast of 1.9%, compares with a 2.5% gain in the previous quarter of the last fiscal year, which was boosted by an extra day's trading and accounting changes.

In Europe, growth on the same basis was 0.3%, compared with a 0.5% gain in the previous three months. In the same period a year earlier, Europe revenue dipped 1.5%.

"We continued to make good progress," said Chief Executive Vittorio Colao, adding that the result showed Europe was "stable."

In recent years, Vodafone has plowed billions of dollars into its European operations to turn around yearslong anemic trading across the region. To jump-start its performance, it has bought up fixed-telecom assets to expand its reach, rolled out fiber-optic cable to spearhead a push into bundled media services and upgraded wireless network speed to tap consumers' rising consumption of internet data.

Germany, Spain and Italy revenue rose 1.6%, 1.3% and 1.2%, respectively. U.K. revenue fell 3.2%.

Outside of Europe, revenue grew at a faster clip of 7.7% as Vodafone tapped large populations in fast-growing telecom economies like India, Turkey and Egypt, as well as across Africa.

Vodafone's overall first-quarter revenue dipped 4.5% year-over-year to EUR13.4 billion ($14.8 billion).

The company didn't disclose profit figures and kept its outlook unchanged.

Vodafone shares rose 3.5% in early deals as investors warmed to the numbers. 'Eurozone recovery plays are few and far between in the U.K. market, and Vodafone is easily the largest and most liquid that we can identify," said Hargreaves Lansdown analyst Nicholas Hyett.

Mr. Colao on Friday said it would take several months for the firm to effectively assess the impact of Brexit.

"It is very early days," said Mr. Colao, adding that the process should be handled "pragmatically."

The company campaigned for the U.K. to remain in the European Union and last month said it would consider moving its headquarters out of the country after Britain's vote to leave the bloc, although it said it is too early to make that call.

Vodafone, whose key European operations are in Spain, Italy and Germany, as well as the U.K, has stressed the benefits from the EU's single market trade rules and freedom of movement.

On Friday, the company switched to reporting in euros from sterling for the first time, signaling the company's increased European focus.

Write to Simon Zekaria at [e-mail]

(END) Dow Jones Newswires

July 22, 2016 05:33 ET (09:33 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.