Vodafone sheds £9bn amid market jitters

Vodafone has taken a hammering - just because it said sales will be at the lower end of expectations...

Last Updated: 31 Aug 2010

Telecoms giant Vodafone said this morning that full-year revenues would be ‘around the bottom of our outlook range’ (of £39.8bn to £40.7bn), blaming the revision on ‘first quarter performance, recent economic weakness and lower than expected equipment revenue’. Its share price promptly plummeted 12%, wiping an eye-watering £9bn off its market value. Clearly the market feels this is a sign that even the biggest corporates are not immune to the economic slowdown...

There were some slightly worrying figures for Vodafone watchers in today’s trading update. Organic revenue growth (i.e. not including fresh acquisitions) was slower than expected throughout its key European markets, with the biggest miss coming in Spain – it was predicting growth of 3% (last quarter it managed 5.1%), but ended up seeing sales shrink by 2.5%. Vodafone blamed ‘a challenging macro economic and competitive environment’ – neither of which are very good news if you’re running a massive telecoms company.

On the other hand, let’s not get carried away. First quarter results may have been underwhelming, but Vodafone still delivered revenues of nearly £10bn, a 19% hike (even Europe was 15% up, all in). Data revenues (i.e. its internet services) were up nearly 30%, as more and more of us embrace email on-the-go, and another 8.5m people signed up to its mobile phones. And thanks to its cost reduction programme, it’s still expecting to deliver full-year profits of just over £11bn – which is exactly what it was predicting back in May. So it’s not quite on the breadline.

And just to put today’s results into context, they came on the same day as rival Ericsson reported a 70% drop in second-quarter profits, due to the cost of redundancies and the dismal performance of its mobile phone joint venture Sony Ericsson. Ordinarily, Vodafone would be cheered by news that there’s someone considerably worse off – but given that this probably helped to drag its share price even lower this morning, we imagine it will find it hard to look on the bright side.

But even if today’s hammering does seem like rather an over-reaction, it’s still an unwelcome headache for new boss Vittorio Colao, who takes over next week. Looks like departing CEO Arun Sarin is getting out at just the right time...

In today's bulletin:
Petrol and mortgages getting cheaper
Vodafone sheds £9bn amid market jitters
British films rule the world (sort of)  
Google overtakes Microsoft again  
Big guys bully the little guys

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