The Low Post News

Vodafone Profit Drops Amidst Spending

Vodafone Group forecasted earnings for the year would contract up to 11% amidst price wars in the largest of its markets. In addition, the company’s spending plan of billions of dollars to reverse its declines in revenue in certain markets will affect profits.

Shares for Vodafone fell by 4.5% on the news. Earnings prior to interest, depreciation, amortization and taxes for the year through March 2015 will drop to between 11.4 billion pounds and 11.9 billion pounds, the mobile handset company announced.

Vodafone announced it had written down more than 6.6 billion pounds against the value of businesses in its largest market Germany, along with Spain, Romania, the Czech Republic and Spain last year.

Vodafone has been tackling seven consecutive quarters of contracting services sales, which is the revenue generated from data and calling plans. Germany suffered poor data and voice quality during the past year along with lower prices across the market, said Vittorio Colao the CEO of the company during a conference call.

Colao said two big markets have been quite challenging for the company: Italy and Germany. At the same time, two markets are already showing signs of improving: Spain and the UK.

The CEO said Germany likely would improve, while Italy remains questionable.

Vodafone fell 9.75% for its biggest drop intraday since February 24. It was down by 4.4% in London trading, making in the second largest decliner on the day for the Stoxx 600. Vodafone stock has fallen by 12% over the past 12 months prior to Tuesday.

Organic service revenue for the fourth quarter was down by 3.8%, which was compared to an estimate of analysts for a decline of 3.9%.

The biggest markets for the company are in Europe, which is where price wars along with sluggish economies pushed sales downward.

Vodafone Red, the company’s plan offers unlimited calling and texts to its customers who sign you for the data package.

Last quarter Vodafone said those plans, which contribute to lower prices, reduced the amount of customer turnover.

In Europe, service revenue was down 9.1% in 2013. Spain and Italy were hit the hardest falling 13.4% and 17% respectively. Germany fell 6.2%.

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