LONDON (Reuters) - Intense competition in Spain and Italy took the shine off Vodafone’s third-quarter revenues on Thursday, sending the British group’s shares lower as its overall growth rate slowed.
Vodafone (VOD.L), the world’s second largest mobile operator behind China Mobile, reported a 1.1 percent rise in organic service revenue for the three months ended December 31, down from the 1.7 percent recorded in the first half.
The results were also held back by weakness in its home market, where it has changed the way it accounts for the cost of handsets. The slowdown in Italy came before the new challenger entrant, Iliad, arrives this year.
Germany, South Africa, Turkey and Egypt remained the bright spots.
The company said competition in Spain had eased since the quarter ended on Dec. 31, and the group remains on track for its full-year target of growing adjusted core earnings by around 10 percent.
“It was a heavy promotional quarter, specifically Orange was pretty aggressive, and specifically targeting ourselves,” Finance Director Nick Read told reporters of the Spanish market, where Vodafone competes with Orange (ORAN.PA) and Telefonica (TEF.MC).
“We clearly had to respond and there was a degree of churn that we experienced. All of those promotions are now out of the market place.”
Group service revenue in the quarter was 10.19 billion euros ($12.68 billion), broadly in line with consensus according to broker Jefferies.
Shares in Vodafone fell 1.6 percent by 0948 GMT. Analysts at Bernstein described the performance of Spain and Britain as “so-so” but said they were concerned by the deterioration in Italy.
“It suggests corrosive competition, despite the change of guard/CEO at Telecom Italia,” they said. “And this in the lead-up to Iliad’s entry into the market?”
($1 = 0.8038 euros)
Reporting by Paul Sandle; editing by Kate Holton and Adrian Croft