Vodafone Group has produced flat results following struggles in Europe, and customers increasingly turning away from core revenue streams such as voice calling.
Vodafone Group, the largest mobile operator in the world, reported flat revenue growth of just 1.2% to £46.4bn for the financial year, and a fall in profits from £7.9bn to £7bn (down 11%). Its cashflow is £6.1bn.
This was due to a £4bn impairment charge relating to poor business performance in Italy, Spain, Portugal and Greece, countries which are struggling in general.
"Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment. Our commercial performance and our ability to leverage scale continue to be strong, enabling us to gain or hold market share in most of our key markets, and reduce the rate of margin decline," said Vodafone’s CEO Vittorio Colao.
In the UK, the company reported revenue of £5.4bn (up 2%) and an adjusted operating profit of £402m up 13.4%.
The company is feeling a squeeze familiar to most mobile operators; users are changing their usage habits, turning away from voice calls and text messaging, preferring instead to use data based apps and services such as Viber and Skype to message and call their contacts.
This has seen Vodafone’s voice revenue fall from £27.2bn to £25.7bn (6%), while data revenue has risen 18% to £6.2bn. Increased data usage is following increased smartphone penetration, up 8.3% for 2011 to 26.9% (amongst Vodafone customers). Capital expenditure rose 2.3% to £6.4bn to cope.
The company also saw a £2.8 billion dividend from its 45% holding in U.S. mobile company Verizon Wireless. It said the bulk of this would be returned to shareholders.
Vodafone also announced that it had made an offer to purchase UK company Cable and Wireless, owner of the country’s largest fibre optic network, for £1.04bn. The deal is not included in this years figures, and is expected to be completed in July, subject to CWW shareholder approval.
The company is expecting the coming year to remain flat, offering guidance of £11.1bn to £11.9bn for the 2013 financial year, with cash flows of £5.3bn to £5.8bn.
However, Vodafone notes that this does not include the impact of licence and radio spectrum purchases. The UK’s 4G radio spectrum auction is scheduled for the end of the year. This is expected to net the Government around £2bn to £4bn across the industry as a total. Vodafone is expected to compete aggressively, and will almost certainly be spending several £100 millions here.
"Our goal over the next three years is to continue to strengthen our technology and commercial platforms through reliable and secure high speed data networks, significantly enhanced customer service across all channels, and improved data pricing models, to enrich customers’ experience and maximise our share of value in the markets in which we operate," said Collao.
The company’s shares were up 2% at 168 pence (at the time of print), valuing the company at approximately £83bn.