Vodafone has taken a £6bn hit after writing down the value of its Spanish and Italian operations, pushing it into a near £2bn loss for the first half of the year
Vodafone has taken a £6bn hit after writing down the value of its Spanish and Italian operations, pushing it into a near £2bn loss for the first half of the year.
The writedown takes the total value slashed from its European businesses to £10bn this calendar year, after a £4bn markdown announced in May. Investors reacted by sending shares down nearly 4% to 160p, although the sell off was tempered by news that Vodafone will receive a £2.4bn dividend from its American joint venture Verizon Wireless this year.
The eurozone slump pushed organic service revenues into decline for the first time since 2010. The measure is a key one which includes income from calls, texts and internet and excludes one-offs like handset sales.
Chief executive Vittorio Colao said the results reflected "tougher market conditions, mainly in Southern Europe", as phone companies discounted prices and consumers curbed spending.
He lowered expectations by saying free cashflow would be at the bottom of the predicted range. Profits are likely to be at the upper end of forecasts, thanks to a strong contribution from Verizon.
Organic service revenue was down 1.4% across the group in the second quarter. It was down by 11.3% in southern Europe, up 0.7% in northern Europe and up 4.1% in Africa, the middle east and Asia Pacific.
UK organic service revenues were down 3.2%, but the overall number of customers was up 247,000 to 19.3m.
Overall, Vodafone reported a loss of £1.9bn for the half year to 30 September, down from a profit of £6.6bn last year.
However, the results were lifted by growth at Verizon, which has finally announced that it will pay a dividend this year, nearly 18 months after its last payout.
The US company, the largest mobile network in its home market, declared a dividend of $8.5bn (£5.3bn), of which Vodafone's share will be £2.4bn. The money will be paid by the end of the calendar year, and Vodafone promised a £1.5bn share buyback once funds are received. The cash will help pay for a rise in the interim dividend, up 7.2% to 3.27p per share.
A new strategy to counter falling consumer spending in Europe was announced, with Coalo promising "worry free usage" for subscribers who are increasingly reluctant to breach their monthly calls and data limits.
From September Vodafone pricing models have been simplified, "giving clear visibility of the cost of ownership". There are now unlimited voice and text tariffs, and "much larger" data allowances. The company is also promising more attractive roaming prices for those wanting to use their phones abroad.
Analysts at Espirito Santo bank said the results were "weak on a number of measures" including service revenues, and that the dividend from Verizon was lower than expected.
"We are a little disappointed by the size of the dividend," the bank said in a note. "We believe VZW has the capacity to pay much more."