Vodafone Shares Jump as Europe Recovery Helps RevenueAmy Thomson
Vodafone Group Plc shares rose the most in 14 months in London after the wireless carrier reported a smaller decline in service revenue than analysts estimated, showing signs of recovery in European markets.
Service revenue, the money Vodafone gets from customers’ plans and traffic on its network, fell 1.5 percent last quarter, excluding currency swings and acquisitions, the Newbury, England-based company said today. That compared with the average 2.6 percent decline predicted by five analysts surveyed by Bloomberg. Earnings also beat analysts’ estimates.
The numbers underscore the early results of Vodafone’s 19-billion pound ($30 billion) network-improvement program to entice customers to spend more on Web surfing and video downloads. Vodafone is the latest European carrier to show improvement after years of price wars, as rivals from Germany’s Deutsche Telekom AG to France’s Orange SA also exceeded estimates for the latest quarter.
“You have further weight to the theme that European wireless is recovering,” said Guy Peddy, an analyst at Macquarie Research in London. As more carriers report better-than-expected results, “it’s more of a stampede.”
The shares rose 5.4 percent to close at 219.05 pence in London, the steepest increase since Aug. 29, 2013, the day Vodafone said it was in talks to sell its stake in Verizon Wireless to U.S. partner Verizon Communications Inc. The $130 billion transaction was completed this year.
Vodafone announced the spending boost, called Project Spring, a year ago and since then rolled out more high-speed fourth-generation mobile and fiber-broadband infrastructure. The project will run through 2016.
Customers “are showing an increasing propensity to trade up to bigger data allowances as a result of the 4G experience,” Vodafone said. Still, only 6 percent of its European customers are using 4G, which allows faster Web access and video streaming.
The company also saw less of an effect from mobile-termination-rate cuts -- regulators’ limits to what carriers can charge to complete a call from a customer on a different network.
“Our network initiative and focus on quality is starting to be more visible, and there is a general improvement in some of the market conditions,” Chief Executive Officer Vittorio Colao said on a call with reporters.
Deutsche Telekom, Europe’s largest phone company, last week reported earnings that topped estimates as profit at its European division increased for the first time in more than two years. Orange and BT Group Plc last month reported revenue that topped predictions. Spain’s Telefonica SA reports tomorrow.
Vodafone narrowed its full-year earnings forecast. Earnings before interest, taxes, depreciation and amortization will fall to 11.6 billion pounds to 11.9 billion pounds, compared with 12.8 billion pounds last year. It had previously projected 11.4 billion pounds to 11.9 billion pounds. The forecast excludes Spanish cable unit Ono.
Ebitda for the first half ended Sept. 30 was 5.9 billion pounds on sales of 20.8 billion pounds. Analysts had predicted Ebitda of 5.78 billion pounds on 20.8 billion pounds in sales, according to data compiled by Bloomberg.
Second-quarter service revenue in Germany declined 3.4 percent, and in the U.K. it fell 3 percent. In Spain and Italy it dropped more than 9 percent.
Vodafone is also expanding in fixed-line services, saying today it’ll start a U.K. broadband-Internet service that will include TV for consumers in the spring. Rival EE Ltd., co-owned by Orange and Deutsche Telekom, added a TV service last month, and BT and Liberty Global Plc’s Virgin Media also offer bundled service packages.