Vodafone (LSE: VOD) (NASDAQ: VOD.US) continues to struggle due to its high exposure to listless European markets, and in 2014 recorded a £6.6bn writedown on its assets in Germany, Spain, Portugal, the Czech Republic and Romania.
How bad is Europe?
Organic service revenue declined 3.8% in the fourth quarter as European customers made less calls during the recession. Vodafone was hampered by increasing price competition from rivals as well as regulatory pressures and, as such, Vodafone saw revenue declines in every major European market.
Performance could have been worse if not for a strong showing in emerging markets, notably in India where data traffic increased 125% year-on-year, with service revenue gains of 13%.
Earnings forecast
Core earnings declined 7.4% to £12.8bn, and in the next two years Vodafone intends to invest some £19bn of the proceeds from the Verizon Wireless sale, which includes capital expenditure on Project Spring.
Earnings, therefore, are set to tumble further in 2015 to somewhere between £11.4bn and £11.9bn, Vodafone said.
Share performance
The share price fell 3% during early trade this morning and, with a market cap of £55bn, Vodafone shares presently trade at 26 times forecast earnings.
The total dividend amounted to 11p in 2014, up 8% year-on-year, and the board’s policy is to grow dividends per share annually.
