May 19 (Bloomberg) -- Vodafone Group Plc, the world’s largest mobile-phone company, will speed up cost cuts to counter the economic slump and said earnings this year may fall.

Vodafone brought forward a 1 billion-pound ($1.55 billion) plan to cut some jobs and reduce spending on network equipment, advertising and logistics. It now aims to achieve at least 65 percent of that program in the year ending March 2010, ahead of an initial target of 50 percent, the Newbury, England-based company said today.

Vodafone is cutting costs as clients in some markets spend less on voice calls and messaging amid the economic slowdown. It joins other European phone companies including Deutsche Telekom AG, Royal KPN NV and Mobistar SA in saying the recession is hurting profitability and sales as consumers and businesses cut back on travel and mobile-phone use.

“Negative trends in the economic environment put strong pressure on usage in some customer segments,” Chief Executive Officer Vittorio Colao said today.

The company said adjusted operating profit is predicted to be between 11 billion pounds and 11.8 billion pounds in the 12 months through March, compared with 11.8 billon pounds before impairment charges a year earlier.

Vodafone declined 4 percent to 122.4 pence in London trading, giving the company a market value of 64.2 billion pounds.

‘Organic’ Sales

“Global usage trends are weak,” Saeed Baradar, a telecommunications sales specialist at Societe Generale, wrote in an e-mail to clients today. “A look at organic trends reveals the magnitude of the deterioration.”

So-called organic sales, excluding currency swings and acquisitions, fell 2.7 percent in the fourth quarter, compared with a 0.3 percent slide in the third quarter, as growth in Asia and Africa failed to make up for a decline in Europe, where the company generates about two-thirds of its sales.

In the year ended March, Vodafone’s net income dropped to 3.08 billion pounds from 6.76 billion pounds a year earlier as the company had impairment charges of 5.9 billion pounds, most of it related to Spain.

Earnings before interest, taxes, depreciation and amortization in the 12 months to March increased to 14.5 billion pounds from 13.2 billion pounds the previous year, as the pound weakened against the euro and revenue advanced in emerging markets such as India. Analysts had predicted Ebitda of 14.43 billion pounds on sales of 40.94 billion pounds, the average of estimates compiled by Bloomberg.

Emerging Markets

“These results demonstrate the impact of the early actions we took to address the current economic conditions and highlight the benefits of our geographic diversity,” Colao said. “The business continues to generate cash strongly and we have made good progress in implementing the strategy announced in November.”

Vodafone expanded in emerging markets in the past two years with acquisitions in Turkey, India and Ghana to make up for slower growth in Europe. In the financial year, the pound’s 14 percent slump against the euro boosted the value of Vodafone’s European sales and earnings when converted into the British currency.

In Spain, service revenue dropped by 4.9 percent in the year, with an 8.6 percent slump in the fourth quarter.

In the U.K., service sales fell 1.1 percent. In Germany, Vodafone’s biggest market, they dropped 2.5 percent.

“In our more mature European and Central European operations, voice and messaging revenue has declined, primarily driven by lower growth in usage and continued double-digit price declines,” Colao said. “Roaming revenue fell due to lower business and leisure travel.”

New Customers

Vodafone added 7 million new customers in the fourth quarter for a total of 303 million on March 31.

The company bought a 52 percent stake in Hutchison Essar Ltd., now India’s third-largest wireless provider, for $10.7 billion in May 2007, and purchased Turkey’s Telsim Mobil Telekomunikasyon Hizmetleri AS for $4.55 billion in 2006. On May 28, Vodafone and a local partner said they would pay $2.1 billion for Qatar’s second wireless license.

Underlying Ebitda margins, before acquisitions and disposals, foreign exchange and business mix, are predicted to decline by a similar amount as a year earlier. Total Ebitda is expected to decline at a “slightly” slower rate, the company said.

The company didn’t give a sales forecast for the current year. In the last year, Vodafone cut its sales forecast twice.

Vodafone will pay a final dividend of 5.2 pence a share for a total dividend of 7.77 pence a share. That’s 3.5 percent more than last year.

To contact the reporters on this story: Simon Thiel in London at sthiel1@bloomberg.net.

Last Updated: May 19, 2009 11:49 EDT