Vodafone shares jump on improved organic growth

Added 22nd July 2016

The telecom operator’s share price rose 4.7% to 235.7p during morning trading undeterred by group revenue losses in the first quarter.

Vodafone shares jump on improved organic growth

Vodafone confirmed another quarter of organic growth in revenue, after reporting a transformative year of organic growth in revenue and EBIDTA in May.    

Organic group service revenue expanded by 2.2% over the period and service revenue improved by 0.3% in Europe and 7.7% in Africa, the Middle East and Asia-Pacific (AMAP). Service revenue includes revenue from services like monthly access charges, roaming and airtime usage.

Despite this, group revenue tumbled in Q1 by 4.5% to €13.4bn (£11.3bn).

Like many FTSE 100 giants reporting after Brexit, Vodafone bore the brunt of volatile foreign exchange rate movements, which accounted for a 5.3 percentage point negative impact on group revenue.

The UK market remained an area of weakness for Vodafone, as service revenue took a 3.2% hit compared with a 0.1% drop in the previous quarter.

Vodafone claimed UK service revenue and mobile service revenue, which derives from minutes or messages in excess of the amount included in customer bundles, were still susceptible to operational challenges brought on by a billing system migration and a decline in out-of-bundle usage compared to the prior year.

The telecoms company said it remained reassured by the sustained growth in its 4G customer base as it continues its coverage expansion in the UK, now at 95%. And group chief executive, Vittorio Colao, said Vodafone remains "focussed on improving our performance in the UK."

As with its year-end results, Vodafone continued to classify revenue growth in Europe as “stable.” Its primary European markets in Germany, Spain and Italy, all experienced revenue growth, in spite of lower roaming fees and persistent regulatory pressures.

Colao left investors with a similar outlook to his remarks in May: "We continued to make good progress during the first quarter. Customers in multiple markets are attracted by our 'more-for-more' commercial offerings of larger data bundles and extra services, while we are seeing continued success with our fixed broadband and enterprise strategies."

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