Vodafone calls up £11bn drop in shares

MOBILE phone giant Vodafone saw shares plummet this morning, after warning that the economic slowdown would see its full-year revenues at the bottom of expected figures.

The firm, the world's largest mobile phone company by revenues, made the statement as it posted first-quarter revenues of £9.8 billion, in line with expectations.

The cautious forecast rattled investors, however, and the company took a stock market hammering, with shares falling as much as 16 per cent, wiping more than £11bn off the value of the business and dragging the FTSE 100 Index into the red.

Vodafone said it added 8.5 million subscribers in the three months to the end of June, taking the company's proportionate customer base to around 269 million. Group revenues over the period climbed 19.1 per cent to £9.8bn, in line with analysts' expectations.

But, despite hitting its targets amid the ongoing slowdown, the company said it now expected its full-year revenue to be around the bottom of its previously stated range of £39.8bn to £40.7bn.

This forecast was down to the recent economic weakness and lower than expected equipment revenue. The company said business in Spain had been hit by heavy competition and a fall-off in customer spending as consumers tightened their belts.

Analysts had previously said they expected any impact of a consumer slowdown to be modest in Europe for now, especially as Vodafone's exposure to the low-end consumer market remains relatively low.

In the UK, where it has around 18.5 million customers, organic revenue growth was down slightly to 2.1 per cent, driven by mobile broadband and messaging, and the group put the slow growth down to "continued competition in the UK market and signs of an economic slowdown".

The company also suffered from weaker than expected sales of equipment such as handsets and USB data cards.

Across the wider European market, it was only the increased strength of the euro against the pound compared with a year earlier which boosted revenues.

Despite the revenue warning, Vodafone still expects to achieve operating profits of between £11bn and £11.5bn.

Vodafone's EMAPA operation, which includes fast growing markets in Eastern Europe, the Middle East, Africa and Asia, and Pacific regions, lifted overall revenues by more than 30 per cent.

In India, the group bought Hutchison Essar last year and added more than five million customers in the first quarter.

Outgoing chief executive Arun Sarin said: "Notwithstanding this more challenging operating environment, we continue to benefit from a diversity of assets and services, with strong revenue growth in emerging countries and another good quarter of data revenue growth offsetting weakness in Spain."