Vodafone to be hit by roaming cuts

Vodafone warned on Tuesday that it expects to take a revenue hit of between £200m and £250m during the financial year 2007-2008, as a result of regulator imposed caps on roaming charges. The warning comes as Vodafone continues to struggle in the more mature markets of Europe. On Tuesday, the operator reported that revenues for the region were almost flat at £24.2bn during the year to end March 31. In a statement, chief executive Arun Sarin, said: “The Europe region, where market penetration exceeds 100 per cent, continues to experience intense competition from established mobile operators and new market entrants as well as ongoing regulator imposed rate reductions on incoming calls.”Last week, the European Parliament voted to introduce regulation on retail and wholesale roaming prices. “We expect roaming revenues to be lower year on year in 2008 due to the combined effect of Vodafone’s own initiatives and this direct regulatory intervention,” Sarin said. Vodafone maintains that many of its subscribers already get a better roaming deal than the EU’s proposition via its Passport offering. Vodafone Passport has over 11 million customers and contributed to increasing the volume of organic roaming minutes by 15.8 per cent during the last financial year. Around 50 per cent of the operator’s roaming minutes within Europe are now on Vodafone Passport. The Big V has also pledged to reduce the average cost of roaming in the EU by 40 per cent by April 2007, compared to summer 2005 and many Passport subscribers are expected to stay on their existing subscription. Despite its struggles in Europe, the company is seeing strong growth in its emerging markets business, with revenues for the year jumping 14.3 per cent to £19.3bn. Last year, Vodafone bought up Turkish operator Telsim and recently extended its portfolio with the acquisition of Hutchison Essar in India. The group’s loss for the financial year came in at £4.8bn, after a sizeable writedown on the value of its 3G licenses in the previous year, resulting in a loss of £17.2bn. Group revenues climbed 6 per cent to £31bn, while adjusted operating profit, which the company is now focusing on, increased 1.4 per cent to £9.5bn.John Delaney, principal analyst at Ovum, said, “There are no nasty surprises here: Vodafone has delivered a solid set of results. But they show that the fundamental long-term problem of the business, although being tackled, is still far from being solved. That problem, of course, is the heavy concentration of Vodafone’s business in the mature markets of Western Europe.”But he added: “We must also acknowledge that this set of results does not yet show the effects of some major projects, undertaken during the past year, to address the underlying problem of market maturity.”