Vodafone shares fall on gloomy outlook

Arun Sarin said Vodafone's outlook has been affected by economic weakness

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Tuesday, 22, Jul 2008 11:18

Vodafone has warned investors full year revenue will be at the bottom of its £39.8 billion to £40.7 billion outlook range, blaming recent "economic weakness".

Shares in the mobile network provider fell 14.64 per cent by 09:30 BST to 127.4p on the announcement.

Chief executive Arun Sarin said: "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."

This will be Mr Sarin's last results announcement, as he is stepping down on July 29th to be replaced by his deputy Vittorio Colao.

Customers are buying and using their handsets less, particularly in Spain, the company said.

Rather than buy a new device, customers are holding onto their old handsets and buying a new SIM to save money, Mr Sarin told reporters.

Although Vodafone posted first quarter revenue in line with market expectations at £9.8 billion, the gloomy outlook led to a drop in its share value.

New regulations on roaming and termination tariffs across Europe also led to a decline in revenues. Roaming revenue declined 6.5 per cent, while incoming voice revenue declined by 6.7 per cent.

A competitive market in the UK also meant the mobile provider had to lower its prices, leading to a 4.4 per cent decline in revenue made from calls.

In order to grow sales in a slowing and competitive European market, the group has expanded into emerging markets. However, lower growth in Egypt and Romania and the inclusion of Turkey meant growth in this area was lower than the previous quarter.

Vodafone is looking to expand into the South African and Ghanaian markets next and is in talks with South Africa's Telkom to buy more of its jointly owned mobile operator, Vodacom.