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Vodafone returns to organic service revenue growth

Vodafone returns to organic service revenue growth
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First Published: Fri, Jul 23 2010. 02 01 PM IST
Updated: Fri, Jul 23 2010. 02 01 PM IST
London: Vodafone, the world’s largest mobile operator by sales, has returned to growth for the first time since the economic downturn hit due to improvements in Germany, Britain and Turkey, and strong sales of data plans.
Vodafone said its key service revenue, which is made up of revenue related to ongoing services, was £10.6 billion ($16.1 billion), up 1.1% organically, compared with a 0.2% drop in the fourth quarter.
The performance shows a continuing improvement in the company’s recent trading, as group organic service revenue declined by 1.2% in the third quarter and by 3% in the second quarter.
The improvement enabled the group to reiterate its full-year outlook and pledge an update later this year on its strategy to drive shareholder value and push further the adoption of data services for accessing the Internet.
In a further boost to the group, Vodafone said it had also finally settled a long-running deal with British tax authorities and would pay £1.25 billion to settle all outstanding issues, which was less than had been expected.
Chief executive Vittorio Colao said he was happy with the performance and the return to growth could help lift some of the pressure on Vodafone, after one shareholder called for a board shakeup over its strategy.
Shares in the group were up 1.9% to 151.012 pence at 2:18pm, ahead of the FTSE 100 Index, which was up 0.07%.
“These are the first quarterly results to show service revenue growth since the global recession impacted,” Chief Executive Colao said.
“I’m happy but not very happy. Yes we have returned to revenue growth but there are still parts of Vodafone which are not in a revenue growth situation and this is linked to challenging economies.”
The European service revenue was down by 1.7% but this was better than the previous quarter and reflected an improvement in Germany and Britain and a focus on selling smartphones with data plans for accessing the Internet.
Trading in the Africa and Central Europe division was driven by a strong performance in Turkey which has undergone a turnaround plan and enjoyed an improving economic environment.
Strong customer growth and better usage trends in India boosted the Asia Pacific and Middle East division, as the price war which hit all operators in the market stabilised.
Total group revenue for the period were £11.3 billion. Analysts had been expecting service revenue of 10.5 billion pounds and total revenue of £11.2 billion, according to a Reuters poll.
“Vodafone’s results beat our estimates and consensus convincingly for group organic service revenue growth and showed continued recovery biased to certain markets, notably India, UK, Germany and Turkey,” Citi analysts said.
“The acceleration in mobile data revenue is particularly encouraging and the selling of data plans and increased take up of smartphones were repeatedly cited as a positive driver in the developed markets.”
The group also said it had agreed to adjust the payments that would be made with the Essar Group to have first option on buying Essar’s stake if Essar were to sell.
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First Published: Fri, Jul 23 2010. 02 01 PM IST
More Topics: Company Results | Vodafone | Revenue | Sales | Europe |