Vodafone Group?PLC Friday reported robust first-quarter revenue as improving trends across northern Europe and strong performances in India and Turkey offset continued weakness in southern Europe.
Vodafone, which is the first of the major mobile operators to report, will likely have beaten its European competitors in the quarter, said Sanford Bernstein analyst Robin Bienenstock. The deteriorating Spanish market doesn’t bode well for?Telefonica,?which is due to report July 28.
High but low
The world’s biggest mobile operator by revenue said first-quarter group revenue rose 3.5% to ?11.66 billion ($19.04 billion) for the three months ended June 30. While the results came in slightly ahead of market expectations, Vodafone still reported a slowdown in comparable first-quarter service revenue growth as trading conditions across southern Europe remained challenging, particularly in Spain where it was forced to cut prices in the face of intense competition and high unemployment.
Group service revenue on a comparable basis?one of the key figures tracked by U.K. analysts?increased by 1.5% to ?10.86 billion, driven by double-digit growth in India and Turkey. Analysts were expecting a 1.4% increase.
That’s a slowdown from growth of 2.5% in the previous two quarters. Service revenue in Europe, the company’s biggest region, fell 1.3%, but was up 8.7% in Africa, the Middle East and Asia. Spanish service revenue fell 9.9%, and Italy posted a 1.5% drop.
Double-digit growth in India and Turkey, as well as a “resilient performance” in northern Europe led the company to reaffirm its guidance for the full year.
Higher data revenue was key to the company’s growth as the rising popularity of smartphones means customers are increasingly spending on data rather than voice or messaging. Comparable data revenue rose 25% to ?11.66 billion.
However, Vodafone’s strongest revenue growth came from?Turkey, reporting a 28.9 percent increase in revenues, following re-branding and a major network upgrade. The customer base in the country grew by 86 percent to reach 4.7 million high-ARPU subscribers in total. This is significant, as the rest of the operator’s?Europe?revenues witnessed a significant drop due to the ongoing recession, causing overall net profits to fall by 8 percent.
Vodafone has a strong presence in the Middle East and Africa, with majority stakes in telecommunication services in Egypt, Ghana, Lesotho, Mozambique, Qatar, Tanzania, Congo and South Africa, and having a presence, but no ownership, in the Middle Eastern countries of Kuwait, Bahrain and the UAE.
The group has a partner network agreement with?Du, the second-largest operator of the UAE, announced in 2009. The agreement involves co-operation on international clients, handset procurement, mobile broadband etc.
Middle East telecom operators continue to lead international growth efforts via mergers and acquisitions, despite the increased cost of capital since the outbreak of political unrest in the region and North Africa, according to key regional players, investment bankers, and industry experts.
Telecoms M&A will be driven by in-market consolidation and increased competition in growth markets says STC International CEO. Leaders from Saudi Telecom Company, Etisalat, Qtel, Batelco, Oger Telecom and Global investment banks had convened in Dubai in May to assess opportunities.
Etisalat, the largest telecom operator in the UAE, is a major international player, with operations in 17 countries outside its home market, in Africa, Asia and elsewhere in the Middle East.
“There is a great deal of positive momentum among key Middle East telecom operators who are pressing on with expansive strategies, as shown by?STC and?Qtel?submitting bids for the third Syrian mobile license auction last week,” said Dominic Lowndes, Managing Director of BroadGroup TMT Ventures, the organizers of the conference, and Editor of TMT Finance News Alert. “Although there is a short term requirement to manage risk, the region does not need lots of external capital to grow, so we expect a strong continued flow of activity.”
Sources:? Globserver, ameinfo, telecomlead,WSJ