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Vodafone growth boosts in first quarter as Turkey and Egypt surge

Vodafone has reported improved growth in the first few months of its new financial year thanks to strong growth in the Africa, Middle East and Asia Pacific (AMAP) region.

Organic service revenue in the first quarter, excluding the deconsolidation of its Indian and Dutch operations, accelerated to 2.2% from 1.5% in the fourth quarter, as Europe grew 0.8% and AMAP 7.9%.

Good momentum was seen in Europe, with robust growth in Italy and Spain, similar underlying trends in Germany, and the UK said to be "recovering" though still somewhat of problem.

UK revenues fell by 2.7%, although this was a slower rate of decline than the previous quarter.

However, in India, where earlier in the year Vodafone took a multi-billion euro write-down and split this operation from the wider group in a hasty merger with Idea Cellular, revenues remained depressed, down 13.9% year-on-year but stabilising on the fourth quarter.

Some low-end market share gains in India have mitigate continued unit price declines amid competition that chief executive Vittorio Colao said "remains intense".

But it was a "good start" for Europe he said, with commercial momentum robust and enterprise sales increased 1.5%, led by share gains in fixed-line and with the 'internet of things' business seeing a 15.1% gain.

"Our substantial investments in network leadership, an excellent customer experience and even greater 'more-for-more' propositions for customers are enabling us to monetise strong demand for mobile data," Colao said.

"We are gaining profitable market share in broadband, and a growing proportion of our customers now take our fully converged offers," he said, adding that the cost efficiency programme remained line with plan.

"Overall, this performance gives us confidence in reiterating our outlook for the year."

Shares in the FTSE 100 group rose 2% to 228.25p in early trade on Friday, approaching a two-month high.

Broker Hargreaves Lansdown said the service revenue figures were better than expected in most regions.

While Vodafone was still feeling the effects of the Indian body blow, analyst George Salmon felt first quarter results painted a far more favourable picture of the European businesses: "Crucially, it also looks like Vodafone is gaining traction in the long-running quest to increase customer retention.

"All too often, telecom companies find there is little to differentiate their service from rivals other than the price they charge, and customers hop about accordingly. After some significant investments, Vodafone can now increasingly offer bigger 4G data packages, and bundle them together with a growing broadband offering. Consequently, customers are staying on the books, giving the group a stable foundation on which to build."

Neil Wilson at ETX Capital said was impressed by the numbers, which showed how Vodafone was benefiting from consumers’ insatiable desire for data, with a 39% increase in data usage per smartphone customer in Europe and data traffic growing 63% worldwide which is equivalent to all the quarterly data traffic two years ago.

"Carriers are enjoying something of a boon in emerging market data usage as consumers upgrade mobile phones for smartphones," he said, with this trend underpinning a lot of the AMAP growth.

"Vodafone will be pleased it can exclude India from these results after its decision to combine the business Idea Cellular. Despite adding 3.4 million 3G/4G customers and seeing data usage double, fierce pricing competition led to a 13.9% drop in organic service revenue.

"Spinning it off was a smart move and one that will shield shareholders as the price war continues. It wasn’t that long ago the company took a €5bn write-down from increased competition in India, which was down to plunging data prices.”



Source: https://www.digitallook.com/news/news-and-announcements/vodafone-growth-accelerates-in-first-quarter-as-turkey-and-egypt-surge--2780909.html

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