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Vodafone suffers revenue slip as EE broadens 4G network Vodafone suffers revenue slip as EE broadens 4G network
(35 minutes later)
Fierce competition has pushed Vodafone's UK business deeper into decline as the UK's largest mobile phone operator, EE, has lured high spending customers with the first 4G network. Fierce competition has pushed Vodafone's UK business deeper into decline as the UK's largest mobile phone operator, EE, has lured high-spending customers with the first 4G network.
On the day Vodafone reported a 5.2% revenue drop at its British business during the Christmas quarter, EE thumbed its nose by announcing it had switched on its superfast, fourth generation, mobile internet service in Vodafone's home town of Newbury. On the day Vodafone reported a 5.2% fall in revenue at its British business during the Christmas quarter, EE thumbed its nose by announcing it had switched on its superfast, fourth generation, mobile internet service in Vodafone's home town of Newbury.
"We suspect EE is taking some share," said Lawrence Sugarman at the brokers Liberum. "The weakness in the UK service revenue … principally reflects the tough macro and accelerating competition.""We suspect EE is taking some share," said Lawrence Sugarman at the brokers Liberum. "The weakness in the UK service revenue … principally reflects the tough macro and accelerating competition."
Customer numbers in the UK were up 230,000 to 19.5 million, suggesting the fall in revenue, which is Vodafone's biggest in more than three years, has been driven by a less profitable mix of subscribers, according to analysts.Customer numbers in the UK were up 230,000 to 19.5 million, suggesting the fall in revenue, which is Vodafone's biggest in more than three years, has been driven by a less profitable mix of subscribers, according to analysts.
Vodafone said the drop was due to a change in its prices and customers chasing bargains elsewhere rather than the arrival of 4G last October. Vodafone said the drop was owing to a change in its prices and customers chasing bargains elsewhere rather than the arrival of 4G last October.
"I haven't got reports of customers flying away to 4G," said Vodafone chief executive's, Vittorio Colao. "The kind of people who are going for it are technology freaks." "I haven't got reports of customers flying away to 4G," said Vodafone's chief executive, Vittorio Colao. "The kind of people who are going for it are technology freaks."
With Spain and Italy in double digit decline, battered by the continuing impact of the recession in Europe, and price cuts imposed by regulators in Brussels, Vodafone missed forecasts. With its markets in Spain and Italy in double digit decline, battered by the continuing impact of the recession in Europe, and price cuts imposed by regulators in Brussels, Vodafone missed forecasts.
Organic service revenues, which exclude items like handset sales but include calls, texts and data, fell 2.6%, worse than the expected 2.4%. It was also an acceleration on last quarter's decline of 1.4%, which marked the first drop since 2010.Organic service revenues, which exclude items like handset sales but include calls, texts and data, fell 2.6%, worse than the expected 2.4%. It was also an acceleration on last quarter's decline of 1.4%, which marked the first drop since 2010.
In Spain, service revenues fell 11%, and the network lost one million customers after Vodafone decided to stop subsidising handsets for a period. The German business, traditionally a star performer in Europe, lost 1.2 million customers and was tipped into a slight service revenue decline.In Spain, service revenues fell 11%, and the network lost one million customers after Vodafone decided to stop subsidising handsets for a period. The German business, traditionally a star performer in Europe, lost 1.2 million customers and was tipped into a slight service revenue decline.
"Telecoms is a lagging indicator to the economy," said Emeka Obiodu, at the research firm Ovum. "Given Europe's economic woes in 2012 we expect telcos that rely on Europe for the majority of their revenues to struggle. Customers feel the pinch in their pockets before they reduce their telecoms spend." "Telecoms is a lagging indicator to the economy," said Emeka Obiodu, at the research firm Ovum. "Given Europe's economic woes in 2012 we expect telcoms that rely on Europe for the majority of their revenues to struggle. Customers feel the pinch in their pockets before they reduce their telecoms spend."
The strongest markets were Turkey, where revenues surged 18%, India where revenues rose 9%, and Vodacom in Africa, which grew 1.9%. The strongest markets were Turkey, where revenues surged 18%; India, where revenues rose 9%; and Vodacom in Africa, which grew 1.9%.
"Our results continue to reflect very difficult market conditions in Europe," said Colao. "We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential.""Our results continue to reflect very difficult market conditions in Europe," said Colao. "We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential."
As its 4G network went live in Newbury, EE said the service now extended to 45% of the UK population and would cover 55% by the summer when it reached 65 towns and cities.As its 4G network went live in Newbury, EE said the service now extended to 45% of the UK population and would cover 55% by the summer when it reached 65 towns and cities.
Slough, home to the O2 network, and Maidenhead, where rival Three is based, were switched on last year.Slough, home to the O2 network, and Maidenhead, where rival Three is based, were switched on last year.
The cab firm Addison Lee, the estate agents Foxtons, Gatwick Airport and Microsoft were among the businesses now subscribing to 4G, the company said. EE's move comes amid reports that buyout firms have accelerated funding talks for a possible £10bn bid for the business formed by the 2010 merger of Orange and T-Mobile. The cab firm Addison Lee, the estate agents Foxtons, Gatwick airport and Microsoft were among the businesses now subscribing to 4G, the company said. EE's move comes amid reports that buyout firms have accelerated funding talks for a possible £10bn bid for the business formed by the 2010 merger of Orange and T-Mobile.