The economic crisis in southern Europe hurt Vodafone’s second quarter results, with revenues falling by 7.7% year-on-year to £10.77bn ($16.9bn).
Problems in Spain and Italy offset growth elsewhere, though the firm managed a slight (0.6%) rise in group service revenue, which would have been 2.3% without the effect of mobile termination rate cuts. The company does not report quarterly profit figures.
CEO Vittorio Colao said in a statement: ‘Despite the difficult market conditions, particularly in southern Europe, we continue to make progress in the key areas of data, enterprise and emerging markets, while maintaining tight control of our cost base. We remain focused on driving through significant improvements to our customers’ experience through our ongoing investment in our networks, stores and IT platforms.’
In Spain, service revenue was down by 10% and in Italy by 7.7%. The UK also saw slippage, down by 0.8% in a highly competitive market, and The Netherlands fell by 1.5%. However, Germany delivered service revenue growth of 4.2% and Turkey was a star performer with an 18.7% rise. Meanwhile, outside Europe, the AMAP (Africa, Middle East and Asia Pacific) group turned in growth of 6.1%, boosted by a 16.2% leap in India, though Vodacom saw weakening revenue growth in Africa, at just 1.8%. And service revenue in the Australian joint venture dropped by 15.2%, a performance Vodafone does not expect to improve significantly for at least another year.
In terms of subscribers, the group lost 1.6m customers in its four main European markets (Germany, Italy, Spain, UK) during the quarter, taking its total down to 94.75m. The rest of Europe gained 82,000 customers, taking the base down to 52.2m. In India and Africa, Vodafone added 7.1m subscribers, but also lost 4.5m due to inactive disconnections. The cellco ended with 210.3m users across the two continents. Its global total was 448.8m as of the end of June, including 524,000 from the Verizon Wireless joint venture.
Its partner in that venture, Verizon Communications, saw strong growth in Q2, mainly propelled by the wireless arm. Verizon Wireless posted a 7.3% year-on-year increase in service revenues to $15.8bn, offsetting its parent’s 3.1% decline in fixed line sales. Mobile data revenues were up 18.5% to $6.9bn while postpaid ARPU hit a record $56.13, a rise of 3.7%. Total operating revenue was $18.57bn.
The cellco added 1.2m retail net mobile customers in the quarter, including 888,000 postpaid, bringing its total to 94.2m. Smartphones made up 50% of the postpaid base, up from 47% in the previous quarter. Verizon sold 5.9m smartphones in the period ‘ including 2.9m Android smartphones and 2.7m iPhones, a balance which is expected to shift once it is able to offer an Apple handset for its rapidly growing LTE network. In the year-ago quarter it had sold 2.3m iPhones, but the figure was 3.2m in Q112, so users may be waiting for the next, presumably 4G-capable model.
The rise in 4G and data services helped push Verizon Wireless to its highest ever EBITDA margin, at 49%, up from 45.4% a year earlier. The LTE network now covers 230m POPs in 337 markets across the country, or nearly 75% of the population.
Meanwhile, as Vodafone adjusts to a period with minimal revenue growth, it will be redoubling efforts to reduce expenditure and offset some of the costs of upgrading mobile broadband systems. Network sharing is an important element of that for many large carriers, and Vodafone has signed deals in The Netherlands and Ireland in the past week.
It is to share towers with Dutch incumbent KPN from September, initially as a pilot limited to a certain area, so that the regulator and the competition authority can monitor the effects. They want to investigate whether the sharing of the sites can lower costs and deliver coverage and environmental benefits, without hitting quality of service. The operators will pool tower sites and supporting facilities such as air conditioning, power supply and transmission.
Operators are already required to support rivals’ antennas on their masts if there is space but this pilot scheme will extend such agreements to non-tower sites such as rooftops. However, no active equipment, such as antennas, will be shared. At the end of the year, the partners and the regulators will review the deal and decide whether to expand it.
Vodafone’s second deal is with 3 Ireland, a pact which some analysts say has enabled the Hutchison unit to remain viable in the country. The two firms will set up a joint venture to run their 2,000 Irish sites. Informa analyst Francesco Radicati commented: ‘For Vodafone, as the largest player in the Irish market, this deal presents a cost saving opportunity; for Three it’s an opportunity for survival.’
The new agreement mirrors Vodafone’s existing 50:50 joint venture with O2 in the UK (where 3 has its own pact with Everything Everywhere). It will manage shared cell sites and backhaul, but continue to operate separate core networks and spectrum. Duplicate sites will be decommissioned and about 80 employees will be transferred. Vodafone Ireland CEO Jeroen Hoencamp commented: ‘At a retail level, we will continue to compete with each other and with other operators as aggressively as before’.