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 The world's second largest mobile operator has been hit hard by the
constraints on consumer spending in its big European markets, fierce
competition in India and by regulator-imposed price cuts around the
world.
But on Tuesday it finally forecast 2016 core earnings growth on an
organic basis following seven straight years of declines.
That follows updates from the likes of Telefonica and Deutsche
Telekom which also showed signs of gradual, if slow, improvement in
Europe.
Vodafone, which has 446 million mobile customers in countries
ranging from Albania to Ireland, Qatar, India, South Africa and New
Zealand, posted fourth quarter organic service revenue, which strips
out one off costs such as handsets, up 0.1 percent following 10
quarters of declines.
That was helped by 6 percent growth from the Africa, Middle East and
Asia Pacific division and an improvement in Europe where it fell by
2.4 percent, compared with the 2.7 percent fall in the previous
quarter.
"We have seen increasing signs of stabilization in many
of our European markets, supported by improvements in our commercial
execution and very strong demand for data," Chief Executive Vittorio
Colao said.
Shares in the group slipped 2 percent in early trading, pulling back
from a 9 percent rise in just over two months as investors
anticipated the better results.
"For some time now, Vodafone has been trying to shake off the
shackles of being regarded as a company which is "ex growth" and
today's annual reflection points toward some future promise," said
Hargreaves Lansdown Stockbrokers.
BRIGHTER FUTURE
Analysts believe the European mobile market is set to stabilize in
2015 and 2016 and should return to top-line growth after that,
helped by demand for the more expensive fixed-line fiber services
and superfast 4G mobile connections.
They believe Vodafone should be well placed to reap the rewards
after it embarked on a program called Project Spring which was
designed to bolster its mobile speeds and either build or buy
superfast fixed-line broadband networks.
"We have significant opportunities ahead of us, with only 13 percent
of our European mobile customers using 4G, and our market share in
fixed services only a fraction of our share in mobile," it said.
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The one weak spot in the results was Germany, where it was hit by
stiff competition. The group said the CEO of Vodafone Germany, Jens
Schulte-Bockum, would stand down during the 2015-16 financial year.
One other longer-term concern for Vodafone investors has been the
thought that it could seek to upgrade its networks in one go by
buying Europe's biggest cable operator Liberty Global.
Analysts at Jefferies said they would like to hear the company
predict strengthening revenue trends through the year.
"We view this as key to reassuring investors on Project Spring
delivery and calming fears that Vodafone may need to reinforce
itself with Liberty in due course," they said.
Vodafone forecast a range for 2015-16 core earnings of 11.5 billion
pounds ($18.0 billion) to 12 billion pounds, which would indicate
core organic earnings growth of between 1 to 5 percent.
The group said it also intended to grow its dividends per share
annually after a 2 percent rise in 2014-15.
Analysts at Citi said the results and guidance were in line with
forecasts. "We see the positives as probably not quite positive
enough to keep the stock moving up today," they said.
(Reporting by Kate Holton; Editing by Paul Sandle and Sophie Walker)
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