Vodafone says recovery in Europe still on track

LONDON (Reuters) - Mobile phone company Vodafone VOD.L delivered its sixth consecutive quarter of underlying revenue growth on Thursday, as Germany and Italy led an improvement in Europe, its biggest regional business.

Branding for Vodafone is seen on the exterior of a shop in London, Britain, September 10, 2015. REUTERS/Toby Melville

The world’s second largest mobile operator met expectations with a 1.4 percent rise in underlying revenue in its third quarter ended Dec. 31, saying it was helped by a more stable pricing environment and growing demand for data traffic.

Vodafone also said it was on track to deliver full-year earnings before interest, tax, depreciation and amortization of between 11.7 billion and 12 billion pounds, which compares with a reported EBITDA of 11.92 billion pounds last year and the average of analysts’ forecasts of 11.6 billion pounds.

“Although in-line (with forecasts) at the headline level, we see these (third-quarter) results as a positive given improvements in Germany and Italy and the likelihood that the pressures in India will pass,” Citi analyst Simon Weeden said.

Under ‘Project Spring’, Vodafone has committed to spending 19 billion pounds on building 4G high-speed networks in Europe and fast 3G networks in emerging markets, while also buying up fixed-line networks in markets where consumers are increasingly opting for bundles of pay-TV and telecoms services.

The company said on Thursday it was still making “steady progress” toward returning to underlying revenue growth in Europe - the decline slowed to 0.6 percent in the last quarter, from 1 percent in the second quarter - but some analysts want a harder push into converged services.

Last year it was in talks with pay-TV cable group Liberty Global LBTYA.O about a tie-up or exchange of assets that could have covered as many as seven European markets, but they failed to reach agreement on a deal.

On Tuesday Vodafone said talks had resumed, but this time were limited to the idea of creating a joint venture in the Netherlands.

Chief Executive Vittorio Colao declined to say more on Thursday, or if similar joint ventures made sense elsewhere.

“Every market is different,” he said. “We are very pragmatic, we do whatever it takes to give better services and have better returns.”

In its emerging markets division, which contribute about a third of revenue, Vodafone said underlying revenue rose 6.5 percent, thanks to strong performances in South Africa, Turkey and Egypt.

“The market that slightly disappointed us this quarter is India, where we have slowed down,” Colao said.

“There has been quite a bit of pressure on voice (and) there has been quite some pressure on data, but we had a very good quarter in terms of net additions,” he said after reporting revenue growth in India slowed to 2.3 percent in the third quarter from 5.6 percent in the second.

Meanwhile Vodafone said adverse moves in exchange rates in both Europe and its emerging markets proved a headwind for the group’s overall revenue performance, knocking reported revenues down by 7.9 percentage points in the last quarter.

Vodafone is due to switch to reporting in euros in its next financial year, as more than half of all its revenue now comes from euro zone markets.

Editing by Kate Holton, Greg Mahlich