Sarin announces strong Vodafone interim figures


And Vodafone’s chief executive did not disappoint, unveiling a forecast-busting set of interim figures and hiking the amount of money he expects the company to bring in the next six months.

Vodafone shares were threatening to break the 200p mark this week after climbing to levels not seen since December 2001, when the dotcom boom was fading out.

But it was once again a story of two Vodafones: a fast growing emerging markets business riding high on the back of rapid mobile take-up in India and Turkey, and a pedestrian European business that is squeezing costs to counter tumbling prices amid huge competitive pressures.

Good revenue growth in Spain and Britain was offset by declines in Germany and Italy. Vodafone was hit by a triple regulatory whammy on pricing but reckons pressure from the watchdogs may ease next year; a blessed relief for it after several years of downward pressure on termination and roaming charges.

Sarin reckons mobile call prices in Europe tumbled 15-20 per cent this year and, even without regulatory pressure, says he expects the trend to continue for the next two years. But a happy side effect is people are making more mobile calls, driving volumes up. On average, European Vodafone users spend 150 minutes a month making calls, but Sarin reckons there is huge potential for this to increase.

In the US, for instance, customers of Vodafone’s affiliate Verizon Wireless spend 700 minutes a month chatting, while its Indian customers spend 400 minutes on their mobiles.

More importantly, mobile data is starting to take hold in Europe. Vodafone’s businesses here reported growth of some 41 per cent in revenue from data services as businesses signed up for BlackBerry-type emailing devices and laptop data cards, and consumers used mobiles to download music and pictures.

That news gave cheer to even Vodafone’s harshest critics, who have long feared its massive 3G investment might never pay off.

Wesley McCoy, investment director at Standard Life Investments, a major shareholder which last year openly opposed Sarin’s re-election as chief executive, said: “Vodafone continues to show good progress on revenue growth, profit conversion and cash flow conversion. It is very encouraging to see increases to its future guidance and, after some difficult years, its core western European businesses appear to have stabilised.”

Jim McCafferty, telecoms analyst at stockbroker Seymour Pierce, agreed: “These results show the company is managing to deliver improved service revenue growth by virtue of its efforts to encourage non-voice traffic.”

As for the emerging markets, growth was almost 40 per cent. Vodafone’s business in India, where it owns a controlling stake in one of the country’s top operators, Vodafone Essar, saw revenues rise by a 53 per cent – but this missed some market expectations of up to 60 per cent.

Sarin noted the company was winning 1.6 million new customers per month and had seen its customer base swell to 35 million in India alone.

Vodafone also saw revenues grow by more than 33 per cent in Egypt, 24 per cent in Romania and 19.6 per cent in South Africa.

Sarin also said he expects clarity on whether – and at what cost – Vodafone could increase its 50 per cent stake in South African joint venture Vodacom in “a couple of months”.

Back in Europe, Vodafone has been criticised for failing to win any iPhone contracts. But Sarin claimed his UK business had not been affected by last weekend’s launch on O2, with footfall in Vodafone stores up 10 per cent on last year.

He said a groundbreaking device like the iPhone, and the hype, created “noise” in the market which encouraged people to think about buying other phones too, especially if they can’t afford the £269 price tag.

He admitted, however, it was “too early to call” the long-term effects of Vodafone not selling it.

Meanwhile, O2 chief executive Peter Erskine wouldn’t be drawn on sales figures for the iPhone (Apple makes its partners sign fierce confidentiality agreements), but market sources said between 20,000 and 40,000 were sold over the first three days.

Erskine sought to kill talk that the phone is selling at a slower than expected rate, saying the device had become its “fastest-selling” ever.

As for rumours punters were being put off by the £269 price tag and an 18-month contract starting at £35 per month, Erskine added “that’s certainly not what we are finding”.

“We have hundreds of thousands more coming into stock over the coming weeks, and demand and interest are huge,” he said, adding O2 UK was on target to hit 200,000 iPhone customers by Christmas.

Carphone chief Charles Dunstone wouldn’t be drawn on any sales figures either, having reported strong interim profits of £56 million last week.

He did, however, predict that the device could be Carphone’s biggest seller this Christmas and would boost second-half sales. That’s a pretty safe bet, I would say.