Vodafone Establishes Contingency Plans as Economics Hurt Business in Southern Europe

Vodafone, a telecommunications company, is hurting from the wider economic crisis now impacting Europe and the company is putting some contingency plans in place.

If the overall economic picture weren’t bad enough, unstable financial markets have been leading the company to move its “spare cash” back into the United Kingdom “each evening to minimize its exposure to each market,” Reuters reported. In addition, the Vodafone Group is even looking at billing systems now used by the company in Europe “in case the mobile operator needs to start billing customers in a currency other than the euro,” warns The Wall Street Journal – which is a sign of the current currency crisis in Europe.

Vodafone missed third quarter revenue projections on Thursday as it got hurt by conditions in Italy and Spain. Consumers and businesses in southern Europe are apparently spending less due to the economy.

Better results for Vodafone are found in northern Europe and in emerging markets. A defiant Vodafone claims, "We expect to continue to face challenging market conditions, but remain confident of executing well,” according to a company statement quoted by Rethink Wireless.

"Despite the further deterioration of the southern European economic environment during the quarter, our broad geographic mix is delivering a resilient overall performance," CEO Vittorio Colao was also quoted by The Guardian.

Turkey, India and South Africa were among the better-performing units of the company. On the other hand, Italy decreased by 4.9 percent and Spain fell by 8.8 percent. Lower spending by customers and cuts in prices implemented by government regulators were key reasons for the loss, according to The Guardian.

There is even an economic impact in the United Kingdom, as Colao stated, “The UK has seen slightly weaker consumer confidence, translating into lower out-of-bundle usage and lower roaming revenues as UK consumers cut back on overseas travel.” The UK business edged up 1.1 percent in the recent quarter, but it was less than second quarter growth, when revenues edged up by 2.5 percent, The Guardian said.

In a related matter, Vodafone is moving toward holding an initial public offering of its Indian business, perhaps in 2013. Vodafone India confirmed Friday it may offer an IPO, the company’s new chairman, Analjit Singh, told the Hindustan Times. "There is an idea that we should take the company to the market for IPO … Now we will consider it."

On a positive note, research from Five Star Equities predicts that LTE growth will benefit both Vodafone and Verizon.