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Vodafone revenues dented by European economic woes

Mobile phone giant misses forecasts amid slump in spending power in Spain and Italy and price cuts imposed by regulators.

Vodafone store

Vodafone revenues have been hit by the eurozone crisis, with income from Italy 4.9% lower and the Spanish market down 8.8%. Photograph: David Sillitoe for the Guardian

Vodafone’s UK customers are cutting back on their phone bills, forcing the telecoms multinational to miss third-quarter revenue forecasts as it battles economic headwinds across Europe.

“The UK has seen slightly weaker consumer confidence, translating into lower out-of-bundle usage and lower roaming revenues as UK consumers cut back on overseas travel,” said chief executive Vittorio Colao.

Price cuts imposed by regulators, and deteriorating spending power in Spain and Italy, pushed down Vodafone’s European service revenues (which do not include the sale of handsets) by £237m, or 1.7%, to £7.42bn in the third quarter to 31 December – further than a forecast 1.5% fall.

Income from Italy fell 4.9% compared with the same period last year, and the Spanish market was down 8.8%. The UK rose 1.1% as growth slowed from the second quarter, when revenues increased by 2.5%.

Vodafone largely held on to its UK market share, adding 174,000 contract customers and losing 175,000 pay-as-you-go subscribers to finish the quarter 1,000 down at 19.33 million customers. Contract holders account for 47% of the UK base.

Overall group revenues edged up 1.6% to £11.6bn, thanks to a strong performance from India, which grew 20%, and Vodacom in southern Africa, up 8%.

Colao said: “Despite the further deterioration of the southern European economic environment during the quarter, our broad geographic mix is delivering a resilient overall performance.”

Shares edged down 0.32% by midday on Thursday to 173p as Colao reiterated November’s profit guidance for the full year, saying operating profit would be in the £11.4bn to £11.8bn range.

Telecoms analyst Jerry Dellis at Jefferies warned that revenue predictions would probably be lowered. “We expect forecasts to be trimmed, taking Europe further away from return to growth,” he said.

The growth in smartphones pushed data revenues up nearly 22%, and data represents 15% of group service revenue compared with 12% in the same period last year. However, the rate at which users are increasing their use of mobile phone networks to access the internet is slowing.

Jefferies suggests that “Wi-Fi offload”, where smartphone browsers connect via Wi-Fi rather than mobile phone networks, could reduce data revenues in the long term. However, Vodafone’s data revenues have risen to £6.3bn over the past 12 months, compared with £5bn for the previous financial year.

Colao said Vodafone was advancing towards the widely expected initial public offering of its Indian business, but a regulatory review of India’s mobile phone industry meant it was unlikely this year. “IPO is probably a 2013 event,” he added.

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