Vodafone reports record falls in revenue
20 May 2014 | Kavit Majithia
Vodafone has reported record falls in underlying revenue for the last 18 months after struggling to gain momentum in Europe following an aggressive investment strategy.
The world’s second-largest mobile provider said its 2014 results were in line with forecasts and warned that core earnings will fall further in 2015 as a result of investments they are making in the business.
The sharp revenue falls in mature European markets caused a £6.6 billion writedown, with Vodafone expecting lower earnings next year as a result of continued competitive, macroeconomic and regulatory pressures.
In recent months, Vodafone has focussed on a £7 billion investment plan across its network as part of “Project Spring”, and this has seemingly heavily weighed on 2014 results.
According to the Financial Times, shares in Vodafone also dropped sharply this week as a result of AT&T’s proposed $48.4 billion acquisition of DirecTV, which has mooted any possible takeover of the UK-based operator by the US telco.
Vodafone’s European revenues have dropped sharply in countries including Germany, Spain, Portugal, the Czech Republic and Romania, and with these latest results, Vodafone has taken a hit of approximately £20 billion across Europe over the last three years.
The company performed better in emerging markets, and Vittorio Colao, CEO, said there was hope for the company to recover given its recent investments in fibre and mobile.
He said the impacts of the “Spring” investments, particularly in markets like Germany and India, will become evident next year.
Vodafone is targeting wider 4G coverage across Europe and rolling out 3G in emerging countries.
The company reported profits of almost £60 billion, but analysts warn that the figure is artificial given its $130 billion stake sale in Verizon Wireless confirmed late last year.
Colao said cash flow “will be depressed during the investment phase”, and the company said earnings forecasts for 2015 will now be lower as a result.