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Vodafone sees limited growth from consumer mobile

In a first-quarter trading statement, Vodafone says it is beginning to return to growth in its European markets, thanks to a growing consumer base

Vodafone has hailed a return to stability in its core European markets after a slowdown in consumer contract churn, a growing customer base, and more reliable average revenues per user (ARPU) saw overall sales figures improve during its first quarter.

Mobile service revenue trends in the region declined by 2.5% in the three months to the end of June 2015, compared with 3.4% in the previous quarter. Data use grew significantly, led by 4G take-up.

However, out of its four main European markets – Germany, Italy, Spain and the UK – it was only the UK where Vodafone posted meaningful organic revenue growth of just 0.2%.

The mobile network operator (MNO) added 83,000 new contract customers in Q1, compared with just 49,000 in the previous period, and slowed contract churn to just under 16%, which it attributed to the “continued popularity of our 4G plans with content”.

Vodafone now claims 4.7 million 4G customers in the UK, with outdoor population coverage now at 68%, or 78% based on Ofcom’s criteria.

Fixed services revenue, which is entirely enterprise-related, continued to improve, declining by just 1.3% compared with 5.7% in the previous quarter. Vodafone said it expected this to turn around during the coming months as its newly launched consumer broadband offer is rolled out nationwide.

Factoring in Vodafone’s other operating theatres, group revenue for the quarter came in at £10.11bn, up by 3.3% on an organic basis, with organic group service revenue up by 0.8%, helped by growth of 6.1% in Africa, the Middle East and Asia-Pacific.

Vodafone CEO Vittorio Colao said the emerging markets had successfully maintained their momentum, and more of the European businesses were returning to growth.

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“We continue to hit our Project Spring build milestones and customers are beginning to value the improvement in service that is resulting,” he said.

“Our other key growth areas – unified communications and enterprise – are performing strongly, benefiting from the increased capabilities and footprint that our higher levels of investment are delivering.

“However, our markets are, as always, highly competitive and we therefore have to remain very focused on efficiency, cost control, and excellent value and service to customers, while continuing to deliver a good return for shareholders,” he added.

Project Spring, the multibillion-pound network upgrade project currently underway at Vodafone, is now 71% complete on the mobile side, with thousands of new 2G, 3G and 4G sites deployed and 71,000 sites upgraded to high-capacity backhaul. Its 4G network in Europe now reaches 75% of the population outdoors, up from 52% a year ago.

In fixed line, Vodafone extended its cable and fibre network to another 820,000 premises in Europe during the quarter and it can now touch 26 million properties, 62 million on a wholesale basis.

On the enterprise side, Vodafone grew by 1.8% during the quarter, with strong growth across the cross-border business of Vodafone Global Enterprise, machine to machine (M2M), and cloud and hosting services.

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