Vodafone see improvement in UK & German Markets despite decline in Spain

Revenues at Vodafone, the mobile phone operator, continued to decline in its key European markets in the final three months of last year, although it said trends were improving in the UK and Germany.

A deep £1bn cost-cutting programme undertaken by the group in the last year resulted in Vodafone raising its forecasts for free cash flow for 2009-10 by £500m to between £6.5bn and £7bn.

Vittorio Colao, chief executive, said organic service revenue fell 1.2 per cent in the third quarter to December 31 but it represented a 1.8 percentage point improvement on the previous quarter. In Europe service revenues fell 3.2 per cent but were up by 1.4 percentage points on the preceding three months.

“It’s better in the UK and Germany and there’s a stable rate of decline in Spain,” said Mr Colao. “Spain is the country where we don’t see a significantly different trend for the last quarter. The economy is clearly biting,” he said. “But if I have one concern, it’s unemployment.”

When Mr Colao became chief executive of Vodafone in July 2008, investors were hopeful he would turnround its underperforming European businesses. Since his appointment, the group’s shares have lagged the FTSE Eurofirst 300 telecoms index by 4 per cent.

Group revenue for the third quarter to December 31 rose 10.3 per cent to £11.5bn as it benefited from the appreciation of the euro.

It said margins for earnings before interest, tax, depreciation and amortisation was consistent with the expectations set last November when it said profit margins would deteriorate by 2.1 percentage points.

On a reported basis, revenue from its European operations rose 1.6 per cent to £7.7bn, boosted by favourable exchange rates. Organic revenue in the period fell 4.3 per cent.

It also said data revenue exceeded £1bn for the first time, up 17.7 per cent on the year.