LONDON: Britain’s Vodafone said next year’s earnings would be hit by vital investment in its network, as it again wrote down the value of some of its European business — this time by £6.6bn — owing to tough market conditions.
Shares in the stock dropped 4.3 percent, wiping £2bn off the market value of Vodafone — which has reported record falls in underlying revenue in the last 18 months, and made several multi-billion impairment charges as it grapples with fierce competition, regulator-imposed price cuts and consumers who are making fewer calls to save money.
The latest charge takes the total impairment figure for Vodafone in the last four years to £24.4bn.
To fight back, Vodafone has stepped up spending on its network — the first among its rivals Telefonica, Deutsche Telekom and Orange to boost its investment plans. All have all reported lower profits due to competition and the need to rebuild.
But before the spending and improvements can kick in, Vodafone has suffered particularly poor revenues in Germany, Italy and other European markets and said yesterday it had been forced to write down the value of its assets across Europe due to lower projected cash flows.
“Vodafone continues to spin the plates with mixed success,” Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said.
“The writedowns across several European regions are further proof of the challenges the company is facing, with underlying profit continuing to move in the wrong direction.”
Vodafone has earmarked £19bn over the next two years for investment in Europe and across its emerging market operations in a bid to get ahead of its rivals, after selling its US business in a $130bn deal.
It has bought cable operators in Germany and Spain to increase the range of services it can sell —betting, like its rivals, on fibre-optic networks and packages of services combining mobile and fixed-line phone, high-speed internet and TV to attract customers and boost future growth.
In its mobile business, it has pinned its hopes on the sale of superfast fourth-generation mobile networks, or 4G, and said on Tuesday it had 4.7 million 4G customers across 14 countries. Europe has lagged regions like the United States in rolling out 4G and much of Vodafone’s spending will go on this development.
Reuters
