Vodafone Group PLC (LON:VOD) posted a drop in third quarter revenue, reflecting the sale of its Dutch sUBSidiary and foreign exchange headwinds.
Revenue fell 3.6% to €11.8bn in the three months ended 31 December 2017, including a 3.8 percentage point impact from the sale of Vodafone Netherlands to Deutsche Telekom subsidiary T-Mobile Nederland and a 3.5ppts hit from foreign exchange rate movements.
Shares fell 3.59% to 216.5p around noon.
READ: Vodafone earnings to benefit from growing top line and cost savings, says UBS
Vodafone completed the disposal in December 2016 as a concession to European Union regulators to gain approval for the merger of its Dutch operations with Liberty Global’s Dutch subsidiary Ziggo.
Service revenue increased 1.1% on an organic basis, easing back from the 1.3% growth reported in the second quarter.
Vodafone had a more promotional quarter in some European countries, particularly in Spain, as it tackled new mobile roaming regulations and a shift towards SIM-only contracts.
As a result, organic service revenue growth in Europe moderated to 0.3% from 0.8% in the second quarter.
In the Africa, Middle East, Asian and Pacific region, organic service revenue growth accelerated to 6.8% from 6.2% the previous quarter, driven by an increase in customers and an improvement at its South African mobile business Vodacom.
Price war rages on in India
The struggling India division continued to contend with price competition with organic service revenue falling 23.1%.
In March 2017, the company announced a deal to combine its Vodafone India subsidiary with Idea Cellular, joining forces to tackle a price war in the world's second-largest mobile-phone market.
“While the competitive and regulatory environment in India remains intense, we continue to make good progress in securing the required approvals for the merger with Idea Cellular, and we have taken steps to strengthen the combined company's financial position,” said chief executive Vittorio Colao.
Vodafone tops 100mln 4G customer milestone
Data usage grew 61% during the third quarter as the number of 4G customers jumped 57% to a milestone of 105 million with smartphone usage continuing to grow rapidly.
"The modern world is hungry for mobile data, as more services ranging from music streaming to banking move over to smartphones," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"Vodafone stands in a position to capitalise on this trend and has seen a big jump in its 4G customer base, which now stands at over 105 million.
"However monetising the data needs of the smartphone generation is more tricky, which is why Vodafone is trying to tempt customers to upgrade through “more for more” propositions."
The company achieved 379,000 broadband net additions for its fixed lines.
The enterprise business grew service revenue by 0.4%, compared to 0.5% in the previous quarter, as emerging market growth and a strong performance in its fixed-line services offset the impact of tough regulation.
Full year guidance maintained
“Overall, this consistent performance underpins our confidence that we will meet our guidance for the full year,” said Colao.
The group expects full year organic adjusted underlying earnings growth of 10%, implying a range of €14.75bn to €14.95bn, and predicts free cash flow pre-spectrum will exceed €5bn.
The unchanged earnings guidance for the full year "should provide reassurance to the large number of people who own the shares purely for its generous dividend, currently yielding in the region of 5.7%", according to AJ Bell investment director, Russ Mould.