Vodafone Revenue Growth Boosted by Emerging Markets

Emerging markets such as Romania, Egypt and South Africa continued to drive results at Vodafone Group while mature regions, like Europe, produced only stagnant growth, the operator reported Monday.

Vodafone’s second-quarter revenue increased 6.4 percent from a year earlier, excluding recent acquisitions and counting only a proportion of the growth for companies in which Vodafone owns only a partial share. It’s a measure Vodafone calls organic proportionate growth.

Different regions grew at dramatically different rates. Revenue from Europe grew just 1.3 percent, while revenue from the company’s emerging markets grew 13.9 percent.

Other operators and handset makers are experiencing a similar pattern of growth, as regions like Europe become increasingly saturated and new markets start to invest more heavily in mobile phones.

Across markets, Vodafone added 4.5 million proportionate organic customers, not including 11.7 million from its acquisition of Telsim in Turkey. Vodafone’s total proportionate customer base is 186.6 million.

The company said it sold 1.3 million third-generation (3G) devices during the quarter. The 3G growth is as expected, and Vodafone is still confident in wireless data, despite recent news that it wouldn’t build a 3G network in the Czech Republic as previously planned, said Arun Sarin, Vodafone’s chief executive, speaking during a conference call to discuss the results.

Vodafone decided not to build the network after considering the cost of the implementation and the fact that it has just 20 percent market share in the Czech Republic, he said. In other markets where Vodafone has low market shares, it is examining strategies such as network sharing with other operators for deploying new networks, he said.

Vodafone said earlier this year that it would implement a number of cost-cutting initiatives, including one that would reduce the number of Vodafone suppliers from 2,500 to around three, and those projects are on track, Sarin said.

Vodafone continues to work on its plan to begin offering DSL along with mobile services. The operator intends to launch DSL service in all of its markets by the end of this financial year, Sarin said.

The move to offer bundled DSL and mobile services is in line with the rest of the telecommunications market but presents a challenge to Vodafone, which currently owns a portion of a DSL operator in Germany but otherwise operates exclusively as a mobile service provider.

Vodafone and other operators are likely to face pressure on roaming revenues in the future. Vodafone expects the European Commission to implement a new regulation that will limit roaming costs starting in the second quarter of 2007. In the meantime, Vodafone has been marketing its international roaming program, called Passport—which, although it offers lower prices, has seen increased usage, resulting in stable roaming revenues, Sarin said.

-Nancy Gohring, IDG News Service (Dublin Bureau)

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