Vodafone is showing some signs of improvement in its financial performance, with 4% organic growth in its top line, year-on-year, in the three months ending 30 June 2007, increasing to 7.5% when revenue from acquisitions is added in.
The Newbury, UK-based international mobile group yesterday published a series of Key Performance Indicators, most notably its revenue for what is its first quarter in for the fiscal year 2007/2008. This came in at 8.3bn pounds ($17bn), or 7.5% up on the same quarter last year.
Vodafone also highlighted the fact that service revenue growth was up 8%, comprising 4.2% organic and 3.8% from acquisitions, and highlighted the fact that, while service revenue was up 1.4% in its core European territories, in other parts of the world it grew 18.2%. This is to highlight the explosive growth in countries like India, where Vodafone just bought out its partner Hutchison in Essar.
Subscriber growth, 3G and non-SMS data revenue
It’s no longer as fashionable to talk about total subscriber base, but in any case, this reached 232m at the end of June, thanks to 9.1 million proportionate net additions (i.e. total subscribers added minus subscribers lost), which was up from 4.8 million net additions in the same quarter last year.
Other elements on the progress report included the fact that, by the end of the quarter in question, the group has a total of 18.5 million 3G devices in operation, having added 2.6 million during the three months, while organic growth in non-messaging data revenue, i.e. everything except SMS, was up 32%. And since Vodafone has now moved from a mobile-only to a multi-service strategy that includes fixed broadband and TV, it noted that it now offers Vodafone At Home in eleven countries.
Ovum sees cause for optimism
John Delaney, principal analyst at Ovum, commented that the KPIs from the carrier meant that, after all the calls for CEO Arun Sarin to quite this time in 2006, when the extent of its problems became visible, A year later, Vodafone can point with some satisfaction to a strong set of figures that show the company delivering on those parts of its strategy that arguably matter most: the ones aimed at fuelling subscriber and revenue growth.
He also pointed to Essar’s contribution in terms of non-organic top-line growth. Star of the show, of course, is India, he began. It is the bold acquisition of Hutchison Essar that has done most to boost Sarin’s prestige during the past year. Even at this early stage of the Indian operator’s life as part of the Vodafone group it is clear how important India will be to Vodafone’s top-line growth going forward, immediately adding almost 31 million customers in a market in which revenue growth is currently running at around 50%.
As for its European heartland, said Delaney, Vodafone’s core Western European markets continue to be a case study for the proverb ‘What you lose on the swings, you gain on the roundabouts’. Swingers this time include Vodafone’s biggest European market, Germany, where the price pressure initiated by E-Plus in 2006 continues to bite. The UK operator, on the other hand, is looking stronger now than it has for a while; and Vodafone Spain continues to provide a stellar performance by European standards.
The carrier holds its AGM next week, so Sarin can at least go into the meeting armed with signs of improvement, though clearly other issues will be on the agenda too. Controversy at this year’s AGM is likely to centre on the vexed question of whether Vodafone should continue to hang on to its minority stake in the US operator Verizon Wireless, said Delaney. The issue is big and complicated, but ultimately, it is not a question upon which the fundamental health of Vodafone as a business depends. On those questions, Vodafone’s shareholders sound considerably less restive now than they did a year ago.
The world’s largest mobile operator has been undergoing a major change in direction over the last year. The Indian transaction indicates its ambitions in the fast-growing emerging markets where the next billion mobile subscribers will come from. In the developed world, it has joined the fixed-mobile convergence camp via partnerships with broadband providers and generally begun diversifying its offering beyond cellular telephony.
In terms of its services to business, it has begun to beef up its offering, with flat-rate data charges across its footprint and serious offerings in terms of integration into back-end systems. There is still a way to go, but Sarin at least has more cover from which to weather the storm.