U.K’s telecom giant Vodafone (VOD, Financial) has posted positive revenue in its quarterly sales report for the first time in the last three years, indicating that the European markets may finally be on the recovery path after a long recession. With a marginal rise of 0.1%, the revenues for the mobile telecom giant grew to 42.4 billion pounds in the last quarter of the financial year.
Vodafone CEO Vittorio Colao spoke on the company’s slow but gradual improvement in the last quarter along with the future plans for the business giant.
The current market scenario
Vodafone which has around 446 million customers using its services worldwide in countries from India to Ireland and from South Africa to New Zealand has been hard hit by the market recession in the last couple of years as the group’s revenues dropped due to several reasons like decrease in consumer spending, tough competition in the Indian market & regulators around the world imposing price cuts on mobile tariffs.
But finally after 10 quarters of decline, the company has shown an increase in revenue with growing number of people going for 4G plans & choosing mobile, TV & broadband bundles in all major markets across Europe. The last time the company saw any increase in sales was in 2012.
With the other telecom majors like Telefonica (TEF, Financial) and Deutsche Telekom (DTEGY, Financial) sharing similar results, the markets are seeing this as a slow but sure sign of improvement in the market conditions. As the Chief Executive of Vodafone, Vittorio Colao said, “We have seen increasing signs of stabilization in many of our European Markets, supported by improvements in our commercial execution and very strong demand for data”.
Brighter Outlook
Improving economic conditions in the European markets along with consolidation amongst its competitors have helped the mobile giant reduce market competition in the U.K. & Italy sectors, further aiding it to regain some of its revenues in the last quarter. Though the organic service revenue saw a decline of 4.7%, the full year service revenue declined by 1.6% before it finally managed to tickle up in the last quarter by 0.1%.
As Mr Colao puts it, “It has been a year of continued progress, culminating with a return to organic growth in Q4”.
Looking at the positive results, the mobile major has announced an increase in the final dividend to its shareholders by 2% to 7.62 pounds, which means they will now get a pay-out of 11.22 pounds for the March 31, 2015 financial year.
The road ahead
Vodafone has undertaken a major up-gradation of its mobile network across the U.K. as part of its Project Springs initiative. With an investment of over 9.2 billion pounds, the group is looking at improving its network services by reducing the dropped calls and increasing 3G & 4G coverage capacity for its existing and future customers.
Though till now almost 72% of Europe has been covered with 4G network coverage, Chief Vittali Colao believes the company has immense growth opportunities in the mobile & 4G services along with fixed line services. Mr Colao has said “We have significant opportunities ahead of us, with only 13% of our European mobile customers using 4G, and our market share in fixed services only a fraction of our share in mobile”.
The company has expanded its markets with a number of acquisitions like Kabel Deutschland in Germany & Ono in Spain in the last few years. There are also talks that the telecom major may upgrade its fixed cable network in one go by merging with the U.S. cable giant Liberty Global.
To conclude
Market analysts believe that the European mobile and telecom markets should improve in the next two years. With the increase in demand for data connections & fixed line services, the markets will see good growth in the coming years.
Since Vodafone is prepared for this increase in demand with its Spring Project, the analysts believe that the company is ready to reap in the benefits in the future. Vodafone itself has forecasted the 2015-2016 core earnings to be around 12 billion pounds which is 1%-5% higher than the current earnings.
With the completion of Project Spring & integration of its fixed cable businesses, Vodafone has said that the “this is not just about providing the best coverage and connectivity, but also about making everything about being a Vodafone customer easier, clearer & more reliable”.
