Vodafone reported a further slowdown in its fiscal third quarter to December, amid continued weakness in its big European markets. Revenues fell 6.8 percent to EUR 10.996 billion, with a 5.6 percent fall in Europe and 11.1 percent lower sales in the rest of the world. Organic service revenue grew just 0.1 percent, slowing from 0.5 percent growth in Q2 and 1.1 percent in Q1.
Vodafone blamed the lower revenues on negative currency effects, the change in accounting rules and the divestment of its activities in Qatar. The company said it's already taking action to offset the impact on the costs side, with the recent restructuring announced in the UK and Spain, more network sharing such as the deal with Telefonica UK, and plans to monestise its tower assets in the UK.
CEO Nick Read said mobile postpaid churn was improving and the group saw improving customer trends in the challenging Spanish and Italian markets, but this was not yet translating into financial results. Emerging markets did better, apart from South Africa, where it's changing pricing, allowing the company to maintain its full-year guidance for EBITDA and cash flow.
Spain, Italy lead drop in Europe
In Europe, quarterly consumer service revenues (excluding the impact of UK handset financing) declined by 1.3 percent on an organic basis (Q2: -1.2%) and accounted for just under half group service revenue. Excluding Spain and Italy, which were impacted by price competition, European consumer service revenues grew by 2.4 percent, Vodafone said.
Total service revenue was down 4.6 percent in Italy, 4.5 percent in the UK and 7.4 percent in Spain, with Germany the only one of the big four markets to show growth, of 1.1 percent. The other European markets grew by 2.2 percent on an organic basis.
Fixed consumer revenues in Europe grew 1.4 percent on an organic basis, slower than the 3.0 percent growth in Q2 following the strategic decision not to renew unprofitable football rights in Spain. Vodafone added 226,000 broadband customers in the quarter, including 414,000 NGN customers, and the fixed-mobile converged base increased by 188,000.
Mobile consumer revenues fell 2.4 percent on an organic basis in Europe, slightly better than the 2.7 percent fall in Q2. Postpaid churn improved by 1.4 percent points compared to a year ago, with single-digit rates achieved in four markets. The operator added 184,000 contract customers, and data growth remained strong at 52 percent, with average smartphone usage increasing to 3.3 GB per month.
Business price pressure
At Vodafone Business, which accounts for 30 percent of group service revenue, performance also deteriorated. Organic service revenues declined by 0.5 percent in Q3, compared to growth of 1.1 percent in Q2. Fixed, which represents 32 percent of segment revenues, grew 3.5 percent due to ongoing market share gains and strong growth in Cloud services, Vodafone said. This was offset by a mobile decline of 2.2 percent, worse than the fall of 0.5 percent in Q2.
Slower business mobile growth reflected a weaker performance at Vodacom and increased pricing pressure in Europe, particularly in the SoHo segment, as well as a slowdown in the Automotive part of the IoT business, the company said. IoT Sims were still up 27 percent to 80.9 million.
In its emerging markets, consumer service revenues grew 6.4 percent on an organic basis, slowing from 9.0 percent in Q2 due mainly to the shift in pricing strategy in South Africa to reduce out-of-bundle revenues. However, good growth continued in Turkey, Egypt and other African markets, the company said. In euro terms, service revenues still declined by 7.4 percent, mainly due to the devaluation of the Turkish lira. Data users grew by 8 percent in Q3, and 69 percent of customers now use data, supporting 53 percent growth in data usage.
Total mobile customers reached 275.216 million at the end of December, down from 275.834 million in September. This followed declines in several large markets, including Turkey, Egypt, Spain, Italy and Germany. Fixed broadband customers totaled 17.056 million, up by 341,000 from the previous quarter, thanks to growth across all markets apart from Spain.
