Vodafone profits surge on Verizon exit but challenges remain

Vodafone has announced a huge leap in profits for the financial year to end March 2014, thanks largely to the sale of its stake in Verizon Wireless, completed earlier this year. Profit for the year stood at £59.42bn, up from £673m for the previous financial year. However, group revenues were down 1.9 per cent to £46.62bn, while service revenue was down 2.4 per cent to £39.53bn.

The company reported impairments totalling £6.6bn in Germany, Spain, Portugal, the Czech Republic and Romania. While Vodafone’s emerging market properties performed strongly, according to CEO Vittorio Colao, combined regulatory, competitive and macroeconomic pressures in Europe continue to challenge the firm. Nonetheless Colao described the year as one of “substantial strategic progress,” citing the acquisition of Kabel Deutschland, the agreement to acquire Spanish cable player Ono and the firm’s network investment programme, Project Spring, alongside the exit from Verizon.

“I am confident about the future of the business given the growth prospects in data, emerging markets, enterprise and unified communications,” Colao said in a statement. “We have commenced our Project Spring two-year investment programme which will accelerate our plans to establish stronger network and service differentiation for our customers. I expect the first signs of this to become evident later this year, with wider 4G coverage in Europe and 3G coverage in emerging markets, improved network performance and increased customer advocacy.”

Dario Talmesio, principal analyst for Ovum’s European Service Provider & Markets research channel, pointed to strong LTE subscriber growth as one sign of positive performance for Vodafone, but noted that revenue growth is proving more challenging. “Fortunately, video consumption is driving customer demand and upgrades from 3G phones to more advanced ones. Unfortunately, the uptake of data fails to deliver in financial terms: revenues continue to fall for Vodafone Group, meanwhile margins have severely deteriorated,” he said.

“There is a certain paradox here: Vodafone is putting most of its commercial and investment efforts in something that is not turning revenues and that is mainly because of regulation and competitive pressure— Europe is clearly the issue that needs to be addressed.”

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