Vodafone's Revenue Steadily Improves Amid Europe Recovery -- Update

By Simon Zekaria 

LONDON-- Vodafone Group PLC on Thursday said improved demand in Europe, the mobile operator's most important market, underpinned a rise in fiscal third-quarter revenue.

The U.K.-based group said its revenue, excluding handset sales, acquisitions and mergers, on a constant currency basis--its preferred sales measure--rose 1.4% in the three months to end-December. This was a turnaround from a 0.4% decline in the same period a year ago, and up from 1.2% growth in the previous three months. Vodafone's performance was in line with market forecasts.

It is Vodafone's sixth consecutive quarter of improving revenue by that metric.

In Europe, Vodafone posted revenue of GBP6.04 billion ($8.81 billion), down 0.6% on the same basis, but improved from a 2.7% fall in the same period a year earlier and a 1% fall in the previous three months.

In nominal terms, excluding handset sales, Vodafone's overall revenue fell 6.3% to GBP9.17 billion, in line with forecasts.

"We have taken another step forward," said Chief Executive Vittorio Colao. Vodafone cited improving top-line trends in Germany and Italy as boosting trading, that countered Spain's worsening performance and a slowdown in mobile sales.

In early dealing, Vodafone's shares ticked up 1.5% to 216 pence.

Analysts say telecoms firms in Europe are benefiting from demand for faster-speed mobile Internet data and media-driven bundled subscriptions, pricing and a recovery in consumer spending. Vodafone also says the burden of regulation is easing in the continent.

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Central to Vodafone's revenue growth is building customer loyalty by connecting products and services for retail bundling, such as high-definition television and Internet broadband. These multi-service packages keep down "churn," or the rate at which customers leave services.

"We have maintained our good commercial momentum in mobile and are beginning to accelerate in fixed [services]," said Mr. Colao.

Vodafone is spending billions of dollars to improve its world-wide fixed and mobile telecoms networks to raise consumer sales from increased Internet browsing and move the business out of a yearslong tough period, which dented its numbers. It is particularly focused on building speed, capacity and coverage in Europe, including with fiber-optic cable rollouts.

To cement its recovery in Europe, Vodafone is also seeking partnerships.

Wednesday, Vodafone confirmed it is discussing a potential venture with rival Liberty Global to jointly house their businesses in the Netherlands. The move came four months after it shelved the so-called asset swap talks with Liberty--media mogul John Malone's U.S. cable giant, that is also focused on Europe.

The two companies, eager to shore up their businesses across Europe's competitive telecoms and media markets, have also long been connected with the possibility of a full-blown merger, but neither company has commented on that scenario. RBC analysts say industrial logic for a merger, producing $30 billion of synergies, remains high.

On Thursday, Mr. Colao declined to comment further on any talks with Liberty, but said the Vodafone remains "pragmatic" as it hones the reach of its operations.

In emerging telecoms economies, Vodafone noted a "strong" quarterly performance in South Africa.

Mr. Colao noted a disappointing performance in India, its major developing market along with Turkey, but said Vodafone's intention to a launch an initial public offering of its Indian business is on track.

The company's improving fortunes overall have been reflected by changes to its guidance. In November, the Newbury, England-based firm said it now expects fiscal-year earnings before interest, taxes, depreciation and amortization of between GBP11.7 billion and GBP12 billion. Its previous guidance was for the lower end of the range at GBP11.5 billion.

Thursday, it confirmed that improved forecast.

Write to Simon Zekaria at [e-mail]

(END) Dow Jones Newswires

February 04, 2016 04:36 ET (09:36 GMT)

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