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Vodafone's European operations have lost 6.6 billion pounds in value

The mobile operator has struggled with tough competition in Europe, not to mention shaky economies.

by Emma Haslett
Last Updated: 11 Nov 2014

Not a great day for Vodafone boss Vittorio Colao: not only has revenue at the mobile phone operator fallen 1.9% to £43.6bn, but it’s had to write £6.6bn off the value of its European operations. Probably best just to go back to bed, mate…

The company said in the year to the end of March, organic service revenue (which is an industry measure of Vodafone’s main business) fell 4.3%. In Europe it fell 9.1%, which suggests any gains were made in emerging markets (Vodafone has a huge presence in India). Not surprisingly, shares fell just over 4% this morning.

To be fair, pre-tax profit rose to £44.5bn, but that’s only because it sold its 45% share of Verizon Wireless to AT&T. Take that out, and it actually made a pre-tax loss of £5.3bn. So this is the inevitable comedown after the high of selling that stake.

So what’s going on in Europe? Until recently, Vodafone has been expanding like billy-o in the region, buying up Spanish broadband firm Ono for €7.2bn (£6bn) and German cable operator Kabel Deutschland for €7.7bn.  

But now the company says it’s struggling with tight regulation, a ‘tougher macroeconomic environment and heavy price competition’, particularly in Germany where mobile contracts are getting cheaper, fast. He also said Vodafone had ‘mishandled’ its German network.

Still, at least ‘Project Spring’ has got under way: last year the company promised to invest some of the cash it made from the Verizon sale on building its network. So far, it’s put money into Germany and India under the programme, but eventually it wants to increase European 4G coverage to 91% of the population and Indian 3G coverage to 95%, lay more fibre in Europe and some emerging economies, develop its enterprise products and services and modernise its shops.

But what of the promise of a buyout by AT&T, which the market was all gung ho about up until a few months ago? It sounds like that’s come to nothing: yesterday, AT&T confirmed plans to buy US cable operator DirecTV for $48.5bn, which doesn’t leave it much extra to buy, say, large European mobile operators. Also, in March, AT&T boss Randall Stephenson said that ‘the window may be closing on perhaps owning wireless assets’ in Europe. Which basically means, ‘it’s unlikely’.

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