London : Vodafone Group Plc, the world's largest mobile phone operator by revenue, raised its outlook yesterday after posting third-quarter revenue ahead of forecasts due to cost cuts and an improving picture in Europe.
Analysts said the improved trading in Europe and particularly the turnaround in Turkey should boost sentiment after fears the recent revenue weakness was more structural than cyclical.
Vodafone was the first major European telcoms carrier to report in this quarter and the news sent its shares up 4 per cent at £1.398 (Dh8.20), to top the FTSE gainers' list.
"Vodafone results can often feel like a game of dodgems," Bernstein analyst Robin Bienenstock said. "There are bright spots, but these are often overshadowed by some peripheral business blowing up [for example Turkey] or huge currency swings that muddy the waters.
"This set of results is free of torpedoes and brings signs of cyclical recovery."
Vodafone said it now saw adjusted operating profit for 2010 in the upper end of its forecast range due to lower depreciation and amortisation. It also lifted its free cash flow range by £0.5 billion after an improvement in working capital and timing effects, which Collins Stewart noted was unrepeatable.
Vodafone said its improved trading followed growth in Italy and improving trends in Britain and Germany, while Spain stabilised. Turkey, which has undergone a turnaround programme, returned to growth with a 12.9 per cent rise in service revenue.
Overall organic service revenue in Europe, which has been hit by the economic downturn and a market saturation, was down 3.2 per cent, compared with a 4.5 per cent fall in the first half and an analyst poll forecast for Reuters of a 4.1 per cent drop.
The European market was boosted by increased text messaging, a 10 per cent increase in fixed-line revenues, good data revenue growth and a noticeable improvement in roaming activity from business customers.
Competition in India however remained fierce.
Vodafone, which entered India as part of its high-profile push into emerging markets, has managed to maintain strong customer growth in the country but a fierce pricing war and the push into more rural areas has hit margins.
Bharti Airtel, India's top mobile operator, said in January it had recorded slowest profit growth in more than three years as the price war and entry of global players overshadowed subscriber growth in the world's fastest growing market.
