Vodafone sees 90 per cent drop in full year profit

Operator group Vodafone has seen a 90 per cent year on year drop in profit for the full year ended March 2013. The operator posted a profit of just £673m, down from £7bn a year earlier, hit hard by a £7.7bn impairment charge in Italy and Spain over the course of the year. The company was forced to write down the value of its south European operations as the Eurozone crisis bit hard.

Group revenue also fell by 4.2 per cent to £44.4bn while full year organic service revenues declined by 1.9 per cent. The profit Vodafone saw from US operator Verizon Wireless, in which it has a 45 per cent stake, rose 30.5 per cent to reach £6.4bn.

“Thanks to further strong progress this year in our key areas of strategic focus − data, enterprise and emerging markets − and an excellent performance from Verizon, we have achieved good growth in adjusted operating profit and adjusted earnings per share,” commented Vittorio Colao, group chief executive.

“However, we have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment.”

Despite the good performance from Verizon Wireless, Vodafone’s results are a continuation of the story of the challenges facing Europe’s telcos, according to Steven Hartley, telco strategy analyst, at research firm Ovum.

“Ovum has always maintained that the primary goal of Europe’s telcos is to stabilise their performance at home. Emerging markets are good but our forecasts for 2017 warn of ’emerging maturity’ as emerging market growth slows. Besides, low ARPU across emerging markets means that these markets generate less revenue and profit relative to their subscriber base,” he said.

“What then must be done to stabilise European performance? Firstly, it will help for the economy to return to robust growth”

He added that secondly, Europe’s telcos must be innovative and pragmatic.

“Telcos should focus their innovation in their business models and pricing strategies. Vodafone is heeding this call with its Vodafone Red tariff plan. Such a plan would eliminate the panic about voice and SMS revenue erosion from OTT services which Ovum expects will cost telcos $106bn globally by 2016.”

The operator launched its Vodafone Red tariff during 2012, offering subscribers unlimited voice and SMS services and up to 2GB of data on 3G. The plan is now in 14 markets, with 4.1 million customers subscribed to it as at 12 May 2013.

Hartley added that Vodafone is also pragmatically transforming itself; it has assimilated Cable and Wireless globally, has a fixed broadband deal with Deutsche Telekom in Germany, signed an LTE network sharing deal with O2 in the UK and will co-build fibre with Orange in Spain.