Vodafone Sees Trouble Ahead

November 16, 2005 - source: BWCS

Shares in UK-based global mobile giant, Vodafone, plunged by over 10% yesterday following its reported 9.5% fall in interim pre-tax profits. Ashen-faced analysts and market pundits also reacted badly to the company's warning of falling revenue growth and profits margins for the coming year.

Vodafone warned of erosion in mobile profit margins for the financial year ending in March 2007. According to the company, this is due to the increasing levels of saturation in its main European markets which, it pointed out, is turning up the heat on all mobile operators.

Despite the less than rosy outlook, company CEO, Arun Sarin described yesterday's figures for the six months to September 30 as "another strong set of results." He went on to say "They show a robust operational performance. Vodafone has continued to outperform its principal competitors in Europe and the United States."

However, facing up to the stiff competition in Europe is undoubtedly forcing operators to take strong measures. Some European mobile operators have already introduced plans intended to retain customers in ways that could trim profits. SFR of France, for example, gives its customers free calls to a limited number of other SFR customers.

For the six months ending 30th September Vodafone reported a profit of £2.8 billion (US$4.9 billion), down 23.5%. The company attributed the decline mainly to a £515 million (US$894 million) charge for leaving the Swedish market and one-time tax liabilities. Revenues stood at £18.3 billion (US$31.8 billion) for the six months, which was actually a 9% increase on the same period one year ago.