Vodafone hit by poor Southern Europe revenues again, CEO puts less emphasis on M2M in 2013

Vodafone logo Vodafone has launched the first of an annual series of M2M adoption barometers

Vodafone today announced disappointing figures for its year ending March 31, 2013. Group revenue was down by 4.2% to £44.4 billion (€52.2bn) and full year organic service revenue declined -1.9%* (Q4 -4.2%*).

Earnings before interest, tax, depreciation and amortisation (EBITDA) were also down -3.1%* this year at £13.3 billion (€15.6 billion). Vodafone’s “organic EBITDA” margin figures (adjusted to discount mergers & acquisitions and currency fluctuations) were down -0.1%*, excluding restructuring costs.

The damage to group revenues was mostly done by a fall in Southern Europe. Group service revenues in Northern and Central Europe were £18.7 billion (€22.0 billion), up 2.8%, but Southern Europe revenues only reached £9.6 (€11.3 billion) a drop of 16.7% year-on-year.

In the group chief executive’s statement, Vittorio Colao said, “We have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment. I remain very excited about our longer term prospects, as customer appetite for high speed data grows rapidly, and companies look to embed mobility into their corporate strategies.

“In machine-to-machine (M2M), we intend to leverage our new business unit organisation, global technical platform and vertical sector competences to exploit the current wave of adoption of M2M solutions across many industry and service sectors,” he added.


Steven Hartley, telco strategy analyst at Ovum, commented: “Leaving aside the ‘what everyone wants to hear’ story on Verizon Wireless, Vodafone’s results are a continuation of the story of the challenges facing Europe’s telcos. In particular, Southern Europe remains a key concern which has led Vodafone to a further write down of £1.8 billion in Italy and Spain, resulting in a £7.7 billion write down over the past year. Ovum has always maintained that the primary goal of Europe’s telcos is to stabilise their performance at home. Emerging markets are good but our forecasts for 2017 warn of ’emerging maturity’ as emerging market growth slows. Besides, low ARPU across emerging markets means that these markets generate less revenue and profit relative to their subscriber base.

“What then must be done to stabilise European performance?” Hartley asked. Firstly, it will help for the economy to return to robust growth. Ovum’s research on how telcos can adapt to the recession shows that telecoms is a lagging indicator to the economy. People first lose their jobs (or worry about losing them) before they rein in their telecoms spend.

“Secondly, Europe’s telcos must be innovative and pragmatic. This is not a call to invent the ‘next big thing’. Rather, as we demonstrated in our recently published research, Understanding How Telcos Innovate, telcos should focus their innovation in their business models and pricing strategies. Vodafone is heeding this call with its Vodafone Red tariff plan. Vodafone is also pragmatically transforming itself. It has assimilated Cable and Wireless globally, has a fixed broadband deal with Deutsche Telekom in Germany, signed an LTE network sharing deal with O2 in the UK, will co-build fibre with Orange in Spain and was until the deal with Deutsche Telekom rumoured to be interested in buying Kable Deutschland.

“Finally, Vodafone rightly worries that regulation in Europe is not making it easy for it to run its European business profitably. But it should also worry about speeding up its palliative care for its European operations while it still has the Verizon Wireless cash cow.”

* All amounts above marked with an “*” represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates.



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