Vodafone profits receive smartphone boost

Vodafone’s annual profits received a smartphone boost despite an overall fall in net profits of 7.8 per cent, the carrier revealed Tuesday. Despite a £6bn+ impairment charge on operations in its European “PIIGS” markets (Portugal, Ireland, Italy, Greece, Spain), a 26.4 per cent boost in mobile data revenue made a significant contribution to its overall profit of £9.5bn for the year.

According to Vodafone, mobile data now accounts for 12 per cent of group service revenue, up 26.4 per cent year-on-year to £5.1bn. The telco pointed to an increase in smartphone penetration as a key driver of data adoption, with the move from all-you-can-eat packages to tiered pricing driving profits. According to the firm’s annual report, “Mobile broadband, which still accounts for the majority of data traffic on our network, has significant scope for growth, as we are seeing the emergence of a new and incremental category – tablets – which we believe have the potential to become mass-market devices in the medium term.”

Vodafone also pointed to its “attractive level of exposure to emerging markets” as a driver of growth. Key operations in India, South Africa and Turkey were up 16.2 per cent, 5 per cent and 28.9 per cent respectively. European revenues were, in contrast, down 2.5 per cent, thanks largely to a difficult foreign exchange and economic climate, with voice revenues down in many key markets.

In addition to growth in its emerging and data markets, Vodafone said that it expected to raise in excess of £14bn from its disposal of interests in China Mobile, SoftBank and SFR. £6.8bn has been committed to share buyback programmes. The carrier further added that it would be continuing its commercial relationship with Verizon, “to address the global enterprise market, target procurement savings and develop technology standardisation.”

Looking to the future, Vodafone said that it anticipated a weaker performance next year, pointing to tough economic  conditions in the Spanish and Italian markets and the fallout from the sale of French partner SFR as likely to hit profits to the tune of £0.8bn. The end of call termination charges, which are to be phased out from 2012, will have a “significant negative impact” on business in the UK, according to the company.