Vodafone shareholders dial in despite falling sales

Emerging markets are switching to smartphones and chief exec Vittorio Colao is confident.

by Rachel Savage
Last Updated: 11 Nov 2014

Vodafone shares rose almost 3% today, after it announced revenues had fallen a teensy bit less than investors had expected and said it was confident about its growth in emerging markets.  

Organic service revenue (basically sales from roaming, wireless contracts and various other 'ongoing services) fell 4.8% to £9.8bn in the third quarter, a whisker less than the 4.9% predicted by analysts.

Shareholders can seem like an odd bunch sometimes – outperforming expectations by 0.1% doesn’t seem like a good reason for a party, especially after a ‘tough’ previous quarter. However, there may be method in their madness.

Firstly, emerging markets put in a good quarter – organic revenues in Africa, Middle East and Asia Pacific (AMAP) were up 5.5%. India was positively booming, with sales up 13.2% and mobile internet users up 38% to 45.7 million, and is already Vodafone’s biggest market by customers.

That stands in stark contrast to Vodafone’s European sales, which fell 9.6% on an organic basis. Southern Europe was especially rubbish – Spain revenues were down 14.1% and Italy 16.6%.

Secondly, chief exec Vittorio Colao was pretty confident. ‘The shift to 4G is gaining momentum and we have seen improving mobile customer net addition trends [bit of a mouthful but you get the gist…]. We are therefore optimistic that our revenue performance will begin to improve,’ he said.

‘After the imminent completion of the Verizon Wireless transaction, we will be very attractively positioned… to make further investments in the business or returns to shareholders in the future,’ Colao added, referring to the whopping $130bn sale of its US arm.

Could this be what AT&T needs to justify an acquisition of Vodafone? The US telecoms giant promised EU competition authorities last month that it wouldn't make a move on the company for six months. But if Vodafone can keep this up, AT&T is going to have to think of a pretty good excuse not to strongly consider it, at the very least. Especially since some in the City have been touting a possible BSkyB-Vodafone merger...

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