Monday 25 September 2017

Vodafone's 2015 earnings hit by network investment

The Vodafone logo is seen at the counter of the shop in Prague February 7, 2012. REUTERS/David W Cerny
The Vodafone logo is seen at the counter of the shop in Prague February 7, 2012. REUTERS/David W Cerny

Britain's Vodafone said next year's earnings would be hit by vital investment in its network, as it reported a £6.6bn dent to its 2014 results from writing down the value of European operations struggling in a tough market.

The world's second-largest mobile operator has reported record falls in underlying revenue in the last 18 months, due to fierce competition, regulator-imposed price cuts and European consumers reducing the number of calls they make to save money.

The weak results, which sent its shares down 3.8pc on Tuesday, mirrored those of rivals Telefonica, Deutsche Telekom and Orange which have all reported lower profits due to competition and the need to rebuild.

Vodafone has taken the lead on improving its network, earmarking billions for investment in Europe and across its emerging market operations in a bid to get ahead of its rivals, after selling its U.S. business in a $130 billion deal.

It bought cable operators in Germany and Spain to increase the range of services it can sell - betting, like its rivals, on fibre-optic networks and packages of services combining mobile and fixed-line phone, high-speed internet and TV to attract customers and boost future growth.

It has also pinned its future on the sale of superfast fourth-generation mobile networks, or 4G, and said on Tuesday it had 4.7 million 4G customers across 14 countries. Europe has lagged other regions, like the United States, in rolling out 4G. Verizon, Vodafone's former U.S. partner, had 26.3 million 4G subscribers by the end of the first quarter.

In the meantime Vodafone has been hit particularly hard in Germany, Italy and other European markets and said on Tuesday it had been forced to write down the value of its assets across Europe due to lower projected cash flows.

"Vodafone continues to spin the plates with mixed success," Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said.

"The writedowns across several European regions are further proof of the challenges the company is facing, with underlying profit continuing to move in the wrong direction."

Online Editors

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