Vodafone Group reported quarterly sales down 2.3 percent from a year earlier to GBP 11.62 billion. Service revenues for the three months to December were down 3.2 percent to GBP 10.61 billion, but improved 0.9 percent on an organic basis and were up 3.1 percent after excluding the effect of termination rate cuts. Vodafone said it saw economic conditions worsen in some parts of southern Europe during the quarter. This was offset by continued strong growth in emerging markets such as India, Turkey and Africa, and positive sales growth in Germany and the UK. Vodafone finished the quarter with a total 398.13 million customers, up by 6.76 million from three months earlier. That includes over 10 million new customers and the loss of 3.4 million from the sale of Polkomtel in Poland.
Overall revenues from Europe fell 1.9 percent to GBP 8.10 billion. Organic service revenue fell 1.7 percent, or half a point more than in the previous quarter, led by an 8.8 percent decline in Spain and 4.9 percent drop in Italy. Organic service revenue was up 0.7 percent in Germany and 1.1 percent in the UK, supported by growth in data and enterprise services, while continued growth in the contract market in Turkey helped revenues grow 23.5 percent there. The Asia, Middle East and Asia Pacific division posted total revenues down 0.6 percent to GBP 3.47 billion due to negative forex effects. Service revenues in AMAP were up 7.6 percent on an organic basis, led by 20 percent growth in India and an 8 percent rise at Vodacom in Africa. This was offset by a 11 percent decline in Australia and 1.5 percent drop in Egypt.
Data service revenues rose 18.1 percent to GBP 1.57 billion, and data grew to 14.8 percent of total service revenues, from 12.1 percent a year ago. In Europe, 24.4 percent of the customer base now has a smartphone. Enterprise revenue slowed to 0.8 percent organic growth, comprising a decline of 0.1 percent in Europe and growth of 9.2 percent in AMAP. Revenue from fixed-line services increased by 3.2 percent to GBP 907 million, and Vodafone reached a total 8.8 million fixed-line customers, including 6.4 million with fixed broadband.
Capital expenditure fell 5.2 percent from a year ago to GBP 1.46 billion, while free cash flow improved by GBP 0.4 billion to a total GBP 1.47 billion. Vodafone maintained its guidance for the fiscal year to March, with adjusted operating profit at GBP 11.4-11.8 billion and a smaller decline in the EBITDA margin. Free cash flow is still expected at GBP 6.0-6.5 billion, excluding the GBP 2.8 billion dividend received from Verizon Wireless in January. The company said it will continue to focus on cost and capital efficiency in the face of "challenging" market conditions.
