Vodafone sees data growth as Euro economy bites

Growth in data service and enterprise revenues have kept Vodafone's results in line with analyst hopes, counterbalancing falling income from southern Europe
Written by David Meyer, Contributor

Vodafone is pinning its strategy on mobile data, the telecoms company said on Tuesday as it unveiled its annual results.

The results showed a 1.2 percent increase in revenue to £46.4bn, but a 2.4 percent drop in operating profits to £11.5bn. Profits would have been 2.5 percent were it not for currency exchange rates and the dire economic situation in southern Europe, the operator said.

Data revenue was 22.2 percent up on the previous year. In Europe, 44.9 percent of Vodafone's contract customers are now using smartphones — up 11.5 percentage points on the previous year. Overall, 14.5 percent of the group's revenues now come from data.

"Data services offer the single biggest growth opportunity for the mobile industry since the launch of voice services over 25 years ago," Vodafone said in a statement. "Increasing data speeds, combined with the proliferation of new mobile devices and customer applications, are leading to rapid adoption. Our success in data is absolutely central to our strategy."

Data is indeed becoming ever more important for telcos, as a gradual consumer switch to IP voice apps such as Skype whittles down voice calling revenue. Rival operator O2 recently released its own VoIP app as a reaction to the trend.

Business customers

Enterprise services are another growing segment of Vodafone's portfolio, up 2.2 percent on the previous year. Business customers now account for 23 percent of overall service revenue, it said.

"Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment," chief executive Vittorio Colao said.

"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," he added.

In April, Vodafone signed a deal to buy communications provider Cable & Wireless Worldwide for just over £1bn, as part of its enterprise strategy. The acquisition brings C&W's fibre network in the UK to Vodafone and is expected to help boost the company above rivals O2 and Everything Everywhere to become the UK's second-biggest telco, after BT.

Vodafone noted a "broad divide" between the north and south of Europe — revenue was up by just over one percent in Germany, the UK and the Netherlands, but down in Italy and Spain, by 3.4 percent and 9.4 percent respectively.

Gartner research director Katja Ruud said Vodafone's results were in line with analyst expectations, given the current economic situation.

"They've got a fairly good spread in terms of the geographical areas where they have presence, which helps cushion some of the pressure we've seen in southern Europe," Ruud told ZDNet UK. "And also in the balance between enterprise and consumer — they have a spread, so they're not completely exposed to one region or segment."

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