Telecom Lead Europe: Mobile Internet has assisted Vodafone Group plc’s third quarter revenue to reach £11.38 billion.
Group data revenue grew by 12.8 percent to £1.7 billion and now accounts for 16.2 percent of Group service revenue.
33.4 percent of its European customers use smartphones, compared to 24.4 percent at December 2011.
Vodafone is relying heavily on mobile data.
Vittorio Colao, CEO of Vodafone, said “We continue to make progress in our Vodafone 2015 strategy, with good revenue growth in data and emerging markets, the launch of LTE services in another four markets and the acquisition of new spectrum. Vodafone Red, our new strategic pricing approach in Europe, has been launched in five markets with positive early take-up, and to drive growth in enterprise we have created a new enterprise business unit and accelerated our integration plans for Cable & Wireless Worldwide.”
The 1.8 percent decrease in revenue was mainly due to tough market conditions in Europe.
Emeka Obiodu, principal analyst at Ovum, said: “Vodafone’s results reflect the challenging economic environment in its core market. Given Europe’s economic woes in 2012, we expect telcos that rely on Europe for the majority of their revenues to struggle. Customers feel the pinch in their pockets before they reduce their telecoms spend.”
Capital Expenditure (Capex) of Vodafone Group increased 2 percent to £1.498 billion. Its investment remains focused on network quality in terms of coverage, reliability and speed.
Vodafone Group’s enterprise revenue decreased 2.5 percent.
The challenge for Vodafone and other European operators is to stabilize their performance and ensure that their share of the customer’s wallet holds firm.
For Vodafone in particular, Ovum warned in 2009 that its emerging market operations must not be relied on to perpetually offset poor performance at home. This has proved to be a prescient warning. Growth in its emerging markets operations has slowed and Vodafone is now relying on Verizon Wireless. It is to Vodafone’s credit that its management fended off pressure to sell the Verizon stake in the past.
Ovum says there is hope for Vodafone. Opportunities exist for telcos to play a bigger role in the connected future. Better pricing design can also unlock additional value, and telcos should look to become active enablers of the digital society.
GEOGRAPHICAL REVENUE FOR VODAFONE GROUP
Northern and Central Europe
Revenue increased by 5.2 percent. Growth in Turkey was more than offset by declines in all other markets, in particular, the UK and the Netherlands.
Germany
Service revenue decreased 0.2 percent, reflecting lower gross customer additions in both mobile and fixed line as a result of more focused commercial investment, an ARPU decline in the consumer contract segment and an MTR cut on 1 December 2012. In addition there was also a decline in revenue in the prepaid segment. This was partially offset by an increase in data revenue of 10.8 percent, driven by higher smartphone penetration and an increase in smartphones sold with a data bundle. Enterprise revenue growth slowed to 2.4 percent, with pricing pressure in the market being offset by strong customer wins. The roll out of LTE services has continued and it has around 53 percent population coverage. The rate of customer acquisitions accelerated during the quarter, with 283,000 fixed line substitution customers and 135,000 LTE enabled mobile devices using the service at 31 December 2012 in both rural and urban areas.
UK
Service revenue decreased 5.2 percent principally driven by continued intense competition and macroeconomic weakness, which impacted consumer confidence and, in turn, led to lower out-of-bundle usage, as well as the impact of an MTR cut effective from April 2012. Data revenue grew by 6.2 percent* due to higher smartphone penetration and growth in smartphones sold with a data bundle. There has been a positive uptake of new Vodafone Red integrated price plans, which were launched in September 2012.
Other Northern and Central Europe
Service revenue increased 1.9 percent as growth in Turkey more than offset declines in the rest of Other Northern and Central Europe. Service revenue in Turkey increased 18.4 percent, with strong growth in data revenue driven by mobile internet and higher penetration of smartphones, as well as continued expansion of the contract customer base, and growth in incoming and enterprise revenue. In the Netherlands service revenue declined 3.5 percent as higher inbundle revenue was more than offset by a decline in roaming revenue, as well as out-of-bundle revenue due to the increasing popularity of value plans, as macroeconomic conditions become more challenging.
Southern Europe
Revenue declined 16 percent including a -5.2 percentage point negative impact from adverse foreign exchange rate movements. Revenue declined in all major markets in the region.
Italy
Service revenue declined 13.8 percent, driven by a challenging macroeconomic and competitive environment resulting in intense price competition, as well as the impact of an MTR cut effective from 1 July 2012. Data revenue grew by 1.8 percent as the 24.4 percent increase in mobile internet revenue was partially offset by the continued decline in mobile broadband revenue. Mobile internet revenue growth was supported by higher smartphone penetration and the ongoing move to integrated tariffs in prepaid, with a new integrated offer launched during the quarter. Vodafone Red tariffs, branded as ‘Vodafone Relax’ in Italy, which were launched in October 2012, are proving popular with contract customers and have also resulted in the migration of some prepaid customers to contracts. Fixed revenue declined 8.1 percent driven by a reduction in the customer base due to the decision to stop commercial activities in areas where margins are impacted by unfavorable regulated wholesale prices.
Spain
Service revenue declined 11.3 percent, principally driven by macroeconomic weakness and high unemployment, which has impacted on consumer confidence and has led to customers reducing or optimizing their spend on tariffs. The decision to remove handset subsidies for a period earlier in the year has resulted in a lower customer base, which has, in turn, impacted on service revenue. Data revenue grew by 17.5 percent driven by an improvement in smartphone penetration and customers taking integrated tariffs. The early uptake of Vodafone Red price plans, which were launched during the quarter, has been encouraging. Fixed line revenue declined by -8.0 percent primarily driven by intense competition.
AMAP
Revenue declined 0.1 percent including a -6.4 percentage point negative impact from adverse foreign exchange rate movements and a 3.0 percentage point positive impact from M&A and other activity. On an organic basis service revenue increased by 2.7 percent driven by customer and data revenue growth, partially offset by the impact of MTR cuts, regulatory changes and competitive pressures. Growth was driven by robust performances in India, Egypt, Ghana and Qatar, and continued growth from Vodacom, partially offset by service revenue declines in Australia and New Zealand.
Vodacom
Service revenue increased 1.9 percent, mainly driven by growth in data services and international markets. Service revenue in South Africa declined by -1.8 percent, with the slowdown from Q2 primarily due to lower net prepaid customer additions as the business focused on improving the quality of its customer base, contract customers optimizing their spend on tariffs and a decline in messaging revenue. Strong data revenue growth in South Africa of 17.2 percent was driven by higher smartphone penetration and an increase in those sold with a data bundle.
Vodacom’s operations outside of South Africa delivered service revenue growth of 23.0 percent driven by a higher customer base offsetting lower pricing. M-Pesa continues to perform well in Tanzania with approximately 4.7 million active users.
South Africa launched its LTE network in October 2012, with over 540 operational LTE sites in major cities at 31 December 2012.
