x Abu Dhabi, UAESunday 23 July 2017

Lack of chatter in Europe hits Vodafone in pocket

Giant mobile operator writes down the value its business in Italy and Spain.

The reluctance of residents in southern Europe to talk to each other has cost the world's second-biggest mobile operator almost £6 billion (Dh35bn).

Vodafone yesterday said it wrote down the value of its business in Spain and Italy by £5.9bn and lowered its full-year outlook after reporting its first fall since 2010.

"In the short-term … our results reflect tougher market conditions, mainly in southern Europe," said Vittorio Colao, the chief executive.

Vodafone was hit by customers making fewer calls in southern Europe, the weakening of currencies in its major markets and the slowdown of still-solid growth in emerging markets such as India and South Africa.

The British company posted a 1.4 per cent fall in service sales fell in the second quarter that ended on September 30, excluding the impact of acquisitions and currency fluctuations, because of the sharp slowdown in its southern European business.

That marks the first decline for the company in 10 quarters.

Analysts had projected a 0.7 per cent contraction, according to the average of estimates compiled by Bloomberg.

The company has been helped, however, by the strong performance of its joint venture Verizon Wireless, which operates in the United States.

Verizon, 45 per cent owned by Vodafone, said yesterday it would distribute a US$8.5bn (Dh31.22bn) dividend to the parent companies, including Vodafone, by the end of this year.

The British operator said it would start a £1.5bn share buyback programme.

The company said its performance during the first half of this fiscal year has been "slightly below our expectations" and would be little changed for the rest of the year as the global economy weakens.

But Mr Colao remained upbeat.

"We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular," he said.

* compiled from Reuters and Bloomberg News