Vodafone’s southern European struggles spread to Northern European strongholds
Vodafone suffered a worse than expected 2.6 percent decline in revenue during the fourth quarter of 2012 as income from Northern Europe decreased.
Service revenue in the UK decreased by 5.2 percent, while Germany experienced a smaller decline of 0.2 percent, but the news will be worrying for the UK company as Northern Europe has previously been immune to the troubles currently facing markets in Southern Europe, where customers are using their phones less frequently.
Last year, Vodafone separated its Northern and Central European business from its Southern European unit as part of a structural overhaul. It said that conditions in Southern Europe continued to remain challenging, with revenues in Italy falling by 13.8 percent and Spain by 11.3 percent.
Vodafone Q4 results
“Our results continue to reflect very difficult market conditions in Europe. We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential,” said Vittorio Colao, Vodafone Chief Executive. “We continue to make progress in our Vodafone 2015 strategy, with good revenue growth in data and emerging markets, the launch of LTE services in another four markets and the acquisition of new spectrum.”
Some have blamed the problems in the UK and Germany on increased competition, regulatory changes limiting the amount that operators can charge and the ongoing economic struggles in Europe as a whole.
“Vodafone’s results reflect the challenging economic environment in its core market. Sadly, this is to be expected. Ovum’s research has shown that telecoms is a lagging indicator to the economy,” commented Emeka Obiodu, principal analyst at Ovum. “Accordingly, given Europe’s economic woes in 2012, we expect telcos that rely on Europe for the majority of their revenues to struggle. Customers feel the pinch in their pockets before they reduce their telecoms spend.
“Vodafone must get the balance right between investment and profitability. And this is where European regulatory authorities should help by not imposing huge burdens on them.”
The struggles in the European telecoms market have encouraged American operator AT&T to investigate the possibility of acquiring a European carrier as executives at the company sense a “unique opportunity” to expand on the continent.
AT&T has apparently debated entering the European market for the last decade, but now believes that conditions are more favourable for expansion than those that currently exist in the US.
EE in the UK and Dutch network KPN have been mentioned as potential targets as revenues in Europe are still largely dependent on voice and text services. AT&T believes that there is a chance to get a head start on shifting customers onto lucrative data-based pricing schemes that are common in the US.
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