The world’s biggest operator in terms of revenue and arguably the most important bellwether of the global carrier market, demonstrated Tuesday that telecoms might not be as resistant to the economic downturn as everyone thought.

Vodafone reported a 34 per cent drop in profits for the first half of the year, to £2.17bn, while revenues climbed 17.1 per cent on an historical basis and 0.9 per cent on an organic basis to £19.9bn.

The results were better than analysts expected, but most industry watchers pointed out a the Big V’s warning that its full year underlying revenues are expected to be about £1bn lower than expected three months ago.

Industry analyst IDC’s John Delaney notes however that Voda CEO Vittorio Colao is promising cost savings of £1bn on average per year, over three years, reiterating a profit forecast of £11bn to £11.5bn. Sigh of relief.

“It could have been worse. But a fall of about 2.5 per cent in the revenue forecast is still pretty worrying,” said Delaney. “It’s one of the biggest indications so far that, contrary to the prevailing consensus, telecoms is not immune to damage from the consumer downturn.”

The analyst highlights prepaid as the most problematic area in the consumer downturn, because end users can reduce spend on a prepaid SIM as much as they need to. “In Europe, and other markets where the calling party pays, you can actually reduce your spend to zero without depriving yourself of telecoms. Your phone can still receive incoming calls,” Delaney said.

Vodafone reported that group voice revenue for the six month period declined 4.3 per cent on an organic basis, hit particularly hard by roaming revenue losses, which declined 11.8 per cent on an organic basis to £700m.

Messaging revenue grew by 1.4 per cent and data revenue increased 23.5 per cent on an organic basis, largely thanks to the increased penetration of PC connectivity devices and mobile email applications. The number of customers connected by handheld enterprise devices and mobile PC devices grew from 3.6 million at the end of September 2007 to 6.8 million at September 30, 2008.

The operator’s subscriber base increased from 269 million at the end of June to 279.5 million at the end of September and consists of around 83 per cent prepaid users.

Michael Kovacocy, European telecoms analyst and sector strategist at Daiwa Institute of Research, commented that whilst Colao has stated that he will cut operating costs by £1bn per annum by 2011, “The magnitude of top-line weakness may call into question the ability to offset such a material hit to the top-line in so short a space of time.”

With Vodafone citing competition, regulation and the economy as drivers of its revenue guidance decrease, and stating that conditions in Europe continue to be ‘challenging’, Kovacocy believse these results and guidance underline the vulnerability of the mobile-centric business model. “Vodafone will have to manage an increasingly soft top-line in a mature European mobile market where it has significant exposure – where delivery of cost-control is the name of the game,” he said.