Vodafone reaps European rebound

Vodafone REUTERS Picture: Reuters

Stockholm - Vodafone Group, the second-largest mobile-phone company by customers, reported service revenue that showed a rebound in Europe and said growth in Africa and Asia was supported by strong demand for mobile voice and data services.

Service revenue, the money the Newbury, England-based company gets from customers’ plans and traffic on its network, rose 1.4 percent on an organic basis in the third quarter ended December, Vodafone said in a statement Thursday. That’s the sixth consecutive quarter of improvement, according to the company, and matched the average prediction of growth based on analyst estimates compiled by Bloomberg.

Vodafone shares rose 1.7 percent at 8:05 a.m. in London. The stock is down 1.9 percent this year, giving the operator a market value of 58 billion pounds ($85 billion).

Vodafone is benefiting from a rebound in European consumer spending, where intense competition and sluggish economies have weighed on prices, and continued mobile growth in Africa and Asia. CEO Vittorio Colao has spent billions in past years beefing up the carrier’s networks to improve quality and enable new products such as TV and high-speed Internet.

Also read: Vodacom aims to stay ahead of the pack

"European trends point to an inflection to growth in 2017 with signs of benefits from the recent network investment," Goldman Sachs Group Inc. analyst Andrew Lee said in a note to clients. Better consumer mobile and fixed-line growth offset price pressure in the business market, he said. Outside of Europe, growth in African operation Vodacom Group and Turkey offset worsening trends in India, "which could persist for several quarters." Goldman rates the shares neutral.

Sales in the quarter fell 5.5 percent to 10.3 billion pounds ($15 billion). Service revenue outside of Europe rose an organic 6.5 percent in the quarter while in Europe the measure fell 0.6 percent.

The company still expects full-year earnings before interest, taxes, depreciation and amortisation of 11.7 billion pounds to 12 billion pounds. Organic measures strip out the effects of currency movements and acquisitions and divestments.

Booming demand

Vodafone’s network modernisation and fibre extension is an attempt to tap into the booming demand for data needed to watch sports and video on smartphones and tablets. While more users are moving to faster fourth-generation networks, only about a quarter of its European customers use 4G, an opportunity for Vodafone.

Vodafone is in talks with Liberty Global over the creation of a joint venture in the Netherlands that would incorporate both companies’ local businesses. The discussions don’t extend beyond the Netherlands, Vodafone said in a statement Tuesday in response to a Bloomberg News report that the companies had resumed talks.

A deal with John Malone’s pay-TV giant Liberty Global could be a way for Vodafone to bolster its plan to expand its fixed network, while taking control of Liberty would speed up its convergence strategy and improve growth prospects, Jefferies Group analysts, including Jerry Dellis, said in a note to clients.

BLOOMBERG

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