Revenue growth slows at Vodafone

Vodafone Group has been hit by "regulation, competitive pressures and weak economies, particularly in southern Europe", restricting revenue growth.

In an interim management statement for the quarter ended 30 June, published on Friday, the mobile phone operator unveiled a 3.5% drop in service revenue, with its biggest European market, Germany, declining by 5.1%. Service revenues in southern Europe fell by 14.4%, with a 17.6% decline in Italy and a 10.6% drop in Spain as customers sought to save money by making fewer calls and retaining older handsets, and as rivals stepped up competition.

Indeed, Vodafone wrote down the value of its enterprises in Italy and Spain by £7.7 billion in the last financial year. In response, it has shored up its business by investing or buying fixed-line assets to enable it to offer a wider range of services, including the purchase of the country's largest cable operator Kabel Deutschland for €7.7 billion (£6.6 billion).

It has also moved customers onto a new tariff called Vodafone Red, which enables users to pay a monthly fee dependent on how much data they want to use, and including unlimited calls and text messages for free.

Still, the results' announcement had little downside effect on the company's share price on Friday because the 3.5% drop in overall revenues was in line with expectations, with Vodafone confirming its outlook for the full financial year.

Investors also banked on decent dividend payouts in the coming year, hoping the group would sell its 45% stake in the Verizon Wireless joint venture in a deal that could exceed $120 billion (£78.7 billion).

Analyst view

EGR Broking managing director Kyri Kangellaris said Vodafone was a stock worth having for its dividend yield, although its results looked uninspiring. "Vodafone's quite a good yielder, but I wouldn't trade off these results," he said.

Investor view

"After reading the interim management statement, although most of the woes in Europe were expected, I would not be thinking of selling [the stake in Verizon Wireless], which to me looks like the JEWEL in the crown," stated Interactive Investor discussion board user 'idontwanttolose'.

'Realreal' was of the view that Vodafone was "undervalued compared to the rocketing market and its competitors".

The user added: "Vodafone has built the infrastructure the world over and continue[s] to improve it further and will remain leader for the forseeable future, ensuring better returns."