ARUN Sarin's tenure of mobile phone giant Vodafone has ended on a sour note after the group's share price plunged yesterday as it became the latest victim of the credit crunch.
Annual revenues will now struggle to reach £40 billion, the bottom end of a previously forecast range stretching to almost £41bn, after tougher economic conditions forced consumers to hold back from buying and using new handsets.
The warning pushe
d shares in Vodafone almost 14 per cent lower, to close at 129p, dragging the FTSE 100 down with it. Some £10bn was wiped from the value of the group.
Vodafone, the world's largest mobile phone company by sales, has shown remarkable resilience to date to the economic slowdown. However, yesterday's weak sales outlook cast a shadow over the whole of the European telecoms sector, knocking down shares in rival Telefonica – the Spanish owner of Britain's O2 network – and equipment supplier Ericsson.
The slide comes as Vodafone chief executive Sarin prepares to hand over the reins to his deputy, Vittorio Colao, next week after five years in charge.
Sarin put a brave face on the trading update, saying: "Whilst we expect revenue around the bottom of the outlook range, our continued focus on cost reduction enables us to reiterate our operating profit and cash flow guidance for the year."
Investec analyst Jonathan Groocock said the forecast for lower sales "shattered" the perception that Vodafone would be a defensive play in a weakening economy. "This is going to trigger a derating and I'm going to be moving towards more defensive stocks," he added.
Vodafone said its business in Spain had been hit by heavy competition and a fall-off in customer spending as consumers tightened their belts.
In the UK, where the group boasts some 18.5 million customers, underlying revenue growth eased amid "signs of an economic slowdown".
Sarin has spearheaded Vodafone's push into emerging markets to try and offset slowing growth in more mature European countries such as the UK.
The firm has recently signed a deal to buy a 70 per cent stake in Ghana Telecom, the country's third-largest mobile phone operator. It is also in talks with South Africa's Telkom over buying a further 12.5 per cent stake in Vodacom, jointly owned by Vodafone and Telkom.
Vodafone said overall revenues had risen 19.1 per cent to £9.8bn in the three months to the end of June, while 8.5 million subscribers had joined, taking the global total to 269 million.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said Sarin could have wished for better results on his way out, but noted that "there remain positives within the statement, such as the ongoing revenue growth in emerging markets."
The full article contains 468 words and appears in The Scotsman newspaper.
