Vodafone Earnings Drop Again

Vodafone is the second-largest mobile service provider (by subscribers) in the world, after China Mobile. So it is worth noting when Vodafone Group not only reports a fall in revenue for the quarter ended Dec. 31, 2013, but also that the dip was the seventh straight quarterly decline.

Still, emerging markets including India, Turkey and South Africa represent about 75 percent of Vodafone customers. And in Africa, Middle East and Asia Pacific markets, Vodafone revenue grew 5.5 percent in the quarter.

So worsening performance in key markets across Europe explains the weakness. Revenue from Europe fell 9.6 percent, with Italy down 16.6 percent and Spain lower by 14.1 percent, while U.K. revenue fell 5.1 percent.

In Germany, which is Vodafone’s largest market, revenue fell 7.9 percent.

Some observers think the weak U.K. results will lead Vodafone to enter the video subscription business in the United Kingdom for the first time.

That is a move some might argue is long overdue, given the centrality of video and broadband revenues for fixed network operations.

In fact, Vodafone already had bought German cable company Kabel Deutschland in 2013.

Also, fixed operations have become more important for providers of mobile service, principally because ownership of both fixed and mobile assets enables the creation of quadruple-play bundles of mobile, Internet access, entertainment and voice services that boost average revenue per account and reduce churn.

Vodafone revenue in the three months ended Dec. 31 fell 3.6 percent to $17.91 billion, from £11.39 billion for the same quarter in 2012.

Even at the time of its decision to sell its minority stake in Verizon Wireless to Verizon Communications for $130 billion, there were some questions about the timing of the move.

Some questioned how well Vodafone would fare after exiting its stake in a unit growing revenue eight percent a year, against a backdrop of declining growth overall. 

Others suggested Vodafone was getting out “right at the top,” as many have been forecasting a fierce marketing war in the U.S. market certain to hit carrier revenues and gross margins.

For better or worse, Vodafone now is even more reliant on its emerging markets for revenue growth.