London: Vodafone, the world’s largest mobile operator by revenue, surprised investors with an upbeat outlook for 2012 on Tuesday after posting resilient results driven by customers upgrading to smartphones.
Analysts had expected the British group to be more cautious after recent weak updates from rivals, but Vodafone said it was gaining or holding market share in most major markets and leading the switch to higher-tariff smartphones.
Revenue and adjusted operating profits were both up over 3% for the full year and free cash flow was comfortably ahead of forecasts.
“Vodafone’s historic performance as a serial underperformer versus peers appears to be a thing of the past,” said Bernstein analyst Robin Bienenstock, adding it was now outperforming competitors in practically every major market in Europe.
Chief executive Vittorio Colao said the group was benefiting from an early move into data revenue generated from Internet access and the development of integrated and tiered pricing plans.
He said the group was also expected to improve further as customers increasingly based their choice of operator on the quality of the network.
“Continuing network investment is an important differentiator for Vodafone, improving the customer experience and giving us leadership in smartphone penetration and in customer take up of data plans,” he said.
“We enter the new financial year well-positioned.”
Financial results for 2010-11 were boosted by a strong performance in the key emerging markets of India and South Africa and resilient trading in northern Europe such as Britain and Germany, which offset weakness in Spain and Italy.
Vodafone reiterated its financial targets for 2011-12, which a few analysts had started to question after Dutch company KPN and Belgian group Belgacom cut their outlooks due to weak domestic demand and intense competition.
Vodafone shares had fallen almost 6% since 20 April, the day before KPN cut its forecast and warned about the state of the market.
Telefonica also reported tough trading in Spain, Deutsche Telekom showed weakness in Greece and regulatory pain in its domestic market and France Telecom showed intensifying competition in France.
“Market fears following the Belgacom and KPN warnings were exaggerated, as we expected,” Morgan Stanley said in a note. “What is true is that southern Europe remains constrained by austerity, but that is not the same as a secular change.”
The group recorded an impairment charge of £6.1 billion due to businesses in Spain, Greece, Portugal, Italy and Ireland, and recorded a net income of £5.3 billion due to disposals and a tax settlement.
Vodafone core earnings were in line with forecasts, down 0.4%, but free cash flow was at the top of the range at £7.05 billion, compared with a forecast of £6.7 billion.
The closely watched metric of service revenue, which covers ongoing offerings such as voice, data, texts and Internet access but not one-off costs such as handsets, was also ahead of forecasts in the fourth quarter, up 2.5% on an organic basis and in line with third quarter growth.
European organic service revenue was down 0.4% during the year. India reported growth of 16.2% and Vodacom, which operates mostly in South Africa, the Democratic Republic of Congo and Tanzania, posted growth of 5.8%.
The group said it expected adjusted operating profit to be in the range of £11-11.8 billion for 2012, with free cash flow at £6-6.5 billion, lower than 2011 due to disposals.
It said it would also work more closely with its US joint venture partner Verizon in handling multinational corporate accounts, developing technology and in procurement.
Vodafone may sell 2-3% in Indian arm
London:Vodafone Group Plc, the world’s biggest mobile phone operator, said it may sell as much as 3% of its Indian division Vodafone Essar Ltd to a local partner to comply with foreign ownership rules.
Vodafone in March said it would buy an additional 33% stake in Vodafone Essar for $5 billion from Essar Group. The deal will increase Vodafone’s direct equity stake in the venture to 75%, while India doesn’t allow foreign companies to own more than 74% in a local mobile phone operator.
“The company may sell 2-3% of Vodafone Essar,” chief financial officer Andy Halford said on Tuesday.