Why Vodafone's Quarterly Statement Disappoints The Market

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By

Barry James

Published in Company Comment on 20 July 2012

The global mobile communications supplier struggles to meet expectations.

Vodafone Group (LSE: VOD) dropped 4p, or 2%, this morning to 179p after it announced its interim management statement for the quarter ended 30 June 2012.

Group revenue at £10.8 billion was a reported 7.7% down on the previous year and group service revenue (£10.0 billion) decreased by 8.1%. European service revenue fell 1.6% with the UK (0.8%), Italy (7.7%) and Spain (10%) all contributing to the decrease. Bright notes were provided by Germany with a rise in service revenue of 4.2% and the emerging markets of Turkey (18.7%) and India (16.2%).

Free cash flow also fell by 24.9% to £0.9 billion after capital investment of £1.1 billion.

Vittorio Colao, chief executive, commented: "Despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining tight control of our cost base. We remain focused on driving through significant improvements to our customers' experience through our ongoing investment in our networks, stores and IT platforms."

The results underline the challenge faced by the telecoms companies in the current global climate although in the United States Verizon Wireless is performing well with service revenue growth of 8.2%

Vodafone is expected to complete the acquisition of Cable & Wireless Worldwide (LSE: CWW) on 27 July 2012. The cash consideration for the acquisition of CWW is approximately £1,048 million.

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> Barry does not own shares in any of the companies mentioned.

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Comments

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alarmbells 20 Jul 2012 , 12:06pm

Not an article but cut 'n paste of a press release.

End this nonsense!

Excluding the quote this article is, what, 200 words!

Please see Seeking Alpha for some guidance on appropriate writing for a financial site

kool4kats 20 Jul 2012 , 1:53pm

What I want to know is why no mention of what Neil Woodford or Warren Buffet are doing viz a vis Vodafone?

Are they buying, selling or what?

Please tell me, I need to know what to do!!!

Luniversal 20 Jul 2012 , 4:31pm

All the Euro telecoms giants have been labouring under the burden of capex demands for a couple of years, but some Wise guys such as Jacob De Tusch-Lec of Artemis Global Income thinks they are on the turn now multiples are so low v. yields.

VOD with its kicker from Verizon Wireless handouts may be due for a boost.

ANuvver 20 Jul 2012 , 8:07pm

My feeling is that there will be another - and further - special dividends. Verizon Wireless is spitting out huge earnings (USD too - and we're the pleasant end of that exchange rate at the moment) and its other owner, the one with the whiphand, wants a payout just as much as Voda does.

They may wish they could pay one and not the other, but that's not the way it works.

I don't think anyone could really have been surprised that periphery European markets have suffered, nor that general guidance is downbeat. So they missed earnings estimates and the shares sulked. Big deal.

Sure, there's a risk that VW will find a way of not having to cough up. But I suspect the lack of news on dividend policy is just an opening gambit in the bartering procedure. And I'd give greater odds on further special distributions from VOD than on, say, NG managing to maintain its basic payout.

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