Vodafone profits decline, forced to write down European operations

Blaming tough market conditions in Europe, Vodafone has reported net losses of $3.18bn in the six months leading to September 30.

Due to this, the U.K.-based telecommunications giant has been forced to write down the value of its units based in Italy and Spain. Impairments of £5.9 billion ($9.4bn), caused by volatile economic conditions and changes to discount rates, resulted in net losses of £1.98 billion ($3.18bn) compared to a net profit of £6.68bn a year ago.

Mainly due to these impairments, the firm has reported a basic loss of 4.01 pence (£0.04) per share.

Revenue fell overall by 7.4 percent, dropping to £21.8 billion ($34.6bn). In southern Europe, revenue fell 17.5 percent. The firm said that customers in these countries have been reducing their spending due to the economic climate.

However, the loss has been slightly offset due to increased data usage as smartphone adoption continues to expand.

Thanks to Verizon Wireless, adjusted operating profit rose to £6.2 billion, up 8.5 percent organically year-on-year, and 2.2 percent on a reported basis. Free cash flow declined 16.7 percent to £2.18 billion ($3.46bn).

Vittorio Colao, Group Chief Executive, commented:

"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. In the short-term, however, our results reflect tougher market conditions, mainly in Southern Europe."

Colao also mentioned that Vodafone's plans to recoup losses would be focused on changes to European consumer pricing and "an increasing focus on unified communications in enterprise." In addition, the company will be investing more in high-speed networks, cost efficiency and accelerated execution of new standards and schemes.

Vodafone does stand to receive a dividend worth £2.4 billion ($3.8bn) by the end of the year from Verizon Wireless, of which the firm owns a 45 percent stake.

Within its earnings report, Vodafone said the majority of these funds would be used as part of a share buyback scheme worth £1.5 billion ($2.38bn).