Vodafone Group Plc
) reported its financial results for the six months ended Sep 30,
The company reported adjusted earnings per share of 7.85 pence
(approximately cents), down 2.6% year over year. The drop was due
to lower adjusted operating profit, given the termination of
equity accounting for Verizon Wireless of
Verizon Communications Inc.
) beginning Sep 2, 2013.
The company recorded consolidated revenues of £22 billion
($28.5 billion), which was up 1.2% year over year on a reported
basis but down 3.2% on an organic basis. Group service revenues
(91% of total revenue) increased 0.1% year over year to £20
billion ($26 billion) on a reported basis but decreased 4.2% on
an organic basis.
Northern and Central Europe
: Revenues increased 5.1% on a reported basis but decreased 3.5%
on an organic basis year over year to £10.2 billion ($13.2
billion). The organic decline was due to poor economic conditions
in some markets, competitive pressure and the impact of MTR cuts,
partially offset by growth of mobile in-bundle revenues. Service
revenues in this segment were up 4.6% year over year on a
reported basis but dropped 3.9% on an organic basis to £9.5
billion ($12.3 billion).
: Revenues of £4.9 billion ($6.4 billion) were down 8.6% on a
reported basis and 13.5% year over year. Service revenues
decreased 10.1% on reported basis and 14.9% on an organic basis
year over year to £4.5 billion ($5.8 billion). The decline was
due to reductions in interconnection charges, pricing pressure
and macroeconomic weakness that offset the growth in data
revenues. Declining revenues across all major markets were also
responsible for this slump.
, Middle East & Asia Pacific
(AMAP):Revenues from thissegment nudged up 1.2% on a reported
basis and 7.0% organically year over year to £6.7 billion ($8.7
billion). Service revenues dipped 0.5% year over year on a
reported basis but grew 5.8% on an organic basis to £5.9 billion
($7.7 billion) driven by customer additions, increased usage,
solid pricing and robust performances in Vodacom. This was offset
by the negative impact of MTR reductions, regulatory pressure and
poor market conditions in certain countries. Country wise, India,
Qatar, Ghana and Egypt delivered strong performance offsetting
service revenue declines in Australia and New Zealand.
During the six-month period under review, Vodafone's total
mobile subscriber base reached 411.5 million (79.8% represented
by prepaid). In Europe, the company added 503,000 million
subscribers, bringing the region's total customer base to 142
million at the end of Sep 2013. Africa, the Middle East &
Asia Pacific added 2 million customers, taking the total
subscription to 216 million.
Vodafone Group generated free cash flow of £1.8 billion ($2.3
billion), down 3.9% year over year. Capital expenditure was £2.3
billion ($3 billion), up 14.3% from the corresponding year-ago
Vodafone's fiscal 2013 management expects adjusted operating
profit of £5 billion and free cash flow in the range of £4.5-£5.0
Vodafone assumes completion of the Verizon Wireless stake sale
by the first quarter of calendar year 2014 and considering this,
it expects a 8.0% hike in the final dividend per share. For
fiscal 2014, the company expects annual dividend payment of 11
pence, which includes interim dividend payment of 3.53 pence.
Despite the strong growth prospects of Vodafone, we are
concerned about a decline in service revenues and subscriber
count, particularly in the European Continent. Continued economic
weakness, regulatory pressure, stiff competition, reduction in
mobile termination rates (MTRs) and roaming prices remained
detrimental to the company's growth. However, Vodafone's strong
growth in emerging markets can partially offset challenging
market conditions and provide a high profit margin given lower
infrastructural costs. Further, the company is increasingly
making efforts to shift toward more data-centric services as the
level of data services in these markets is considerably low,
providing opportunities for deeper penetration.
Vodafone, which operates with other European carriers like
and Orange (
currently has a Zacks Rank #2 (Buy).
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