With that process pretty much complete, attention can return to how well
Vodafone performs as a telecoms company.
The full-year results suggest it is doing a decent job, at least compared with
peers. Its strength in emerging markets such as India – where service
revenue rose 16 per cent, albeit at a low margin – just about made up for a
stagnant Europe.
And even Europe is only stagnant in aggregate. Vodafone has to deal with two
Europes: a core where revenue is rising slightly and a periphery where
revenue and profitability are falling. Indeed, Vodafone took a £6bn
impairment charge on businesses in Spain, Greece, Portugal, Italy and
Ireland. Vodafone can fairly blame these countries’ economic woes.
Meanwhile, it did well in the UK and Germany thanks to the strength of its
networks. That helped win new smartphone customers, who tend to spend more
per month.
But investors’ big concern about the growth of smartphones and tablets still
lingers. Can operators deliver all that data profitably or will they have to
spend a fortune on networks to cope with the extra traffic? During the past
four years, Vodafone’s capital expenditure as a percentage of sales has
declined from 14.3 to 13.6 per cent. It expects investment to be flat next
year too.
If a capex race does break out between Europe’s operators, Vodafone will enter
it as one of the fitter runners. Its shares have outperformed European
telecoms peers by some 24 per cent since the beginning of last year and
should continue to lead the pack.
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