Profits up at Vodafone UK, but prepay decline hits customer numbers

Profits up at Vodafone UK, but prepay decline hits customer numbers

Vodafone UK has reported an increase in sales and profit for its latest financial year, although the weak prepaid market is continuing to hit customer numbers.

The operator lost 163,000 customers during its fourth quarter to 31 March 2012, although it was bolstered by a leap in contract customers of 93,000. Overall customer numbers at the end of the quarter were 19.2m, up 0.1% on 2011. Service revenues for the quarter were up 1.1% to £1.25bn on a like for like basis. Sales would have increased by 4.5% if the effects of changes to mobile termination rates (MTRs) were stripped out. Voice revenues for the quarter were up from £275m to £277m, but data revenues leapt by more than 50% to £220m, continuing the trend for greater data use among customers as smartphone adoption increases.

Its blended average revenue per user (ARPU) for the quarter was flat at £21.20. However, contract ARPU fell from £36.40 to £34.60 and prepay dropped from £6.20 to £5.80. Across the entire year, service revenues were up 1.6% to £4.97bn on a like for like basis and 5.2% when the effects of mobile termination rate cuts were removed. Total sales were up 2.6% to £5.40bn.

The operator's UK EBIDTA (earnings before interest, taxation, depreciation and amortisation) for the full year was £1.29bn, up 5% on a like for like basis. Adjusted operating profit was up 15% to £402m, due to a range of cost saving initiatives at the company.

Across Vodafone's entire business, it said its smartphone penetration was 26.9% and up 11.5 percentage points to 44.8% in Europe. This resulted in Vodafone increasing its data sales to £6.2bn, around £1bn more than what it earns from messaging, and it now accounts for 14.5% of group service revenue. Vodafone CEO Vittorio Colao said: 'Data services offer the single biggest growth opportunity for the mobile industry since the launch of voice services over 25 years ago.'

Voice revenue was down from £27.21bn to £25.69bn. Overall service revenues were up 1.5% to £42.89bn.

EBITDA for the wider company was down 0.5% on an organic basis and 1.3% underlying to £14.48bn. Its profit for the financial year fell 11.01% to £7bn.

Looking ahead, Colao said the European trading environment was 'set to remain very difficult'. He blamed poor macroeconomic conditions, 'a harsh regulatory backdrop' and ongoing competition.

Colao said: 'Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment. Our commercial performance and our ability to leverage scale continue to be strong, enabling us to gain or hold market share in most of our key markets, and reduce the rate of margin decline. Our robust cash generation and the dividend received from Verizon Wireless have enabled us to translate this operational success into good returns for shareholders.

'Our goal over the next three years is to continue to strengthen our technology and commercial platforms through reliable and secure high-speed data networks, significantly enhanced customer service across all channels, and improved data pricing models, to enrich customers’ experience and maximise our share of value in the markets in which we operate.'

Emeka Obiodu, senior analyst at Ovum, described the results as 'encouraging' and said this was down to its global diversification. He said: 'While operations in Northern Europe, emerging markets and the stake in Verizon Wireless all did well, operations in Southern Europe struggled. This is no surprise. Indeed, at a time of worsening economic conditions, especially in Greece, Italy, Spain and Portugal, it would have been too much of a miracle for Vodafone’s numbers in those regions to come out well. Spain and Italy were particularly hit hard.

'But Vodafone has worked hard to stabilise things as the impressive performance of data connectivity shows. Particularly, Vodafone’s effort to move customers to ‘integrated tariffs’ (bundle of voice, SMS and data) is welcome. Not doing so, while persisting with per unit pricing for voice and SMS, opens the way for OTT services such as WhatsApp and Skype to gain inroads in the market.'

Editor: Graeme Neill

Written by Mobile Today
Mobile Today


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