Vodafone, the world's largest mobile operator by sales, has returned to growth for the first time since the economic downturn and indicated it could reconsider its strategy to drive further value later this year.
Vodafone said there was still room for further economic improvements in many of its markets but said the changes it had made so far - to focus on the sales of data plans for internet access and emerging markets - had worked well. Later this year it will set out how it intends to accelerate its strategy to drive further shareholder value.
The Ontario Teachers' Pension Plan, which holds a 0.4 percent stake in the firm, called earlier this week for a shake-up of the telecom operator's board in protest at what it deemed to be "significant structural and strategic weaknesses".
Chief Executive Vittorio Colao declined to comment on the OTPP request and said he would rather focus on the strong first quarter results instead. The company's AGM is on Tuesday. "I and we listen to all of the shareholders and in relation to that I can say that today's results confirm that our strategy is delivering," Colao told reporters.
"My original strategy was set out in November 2008, so two years down the road it is about time to refresh and update and inform the financial community. We are working on it." Vodafone has faced calls in the past to resolve situations where it owns minority stakes in assets, such as in the United States where it owns a 45 percent in Verizon Wireless, and in France where it owns a 44 percent stake in SFR.
Its 3 percent holding in China Mobile could be another option for disposal. Bernstein analyst Robin Bienenstock said she expected a portfolio review and a clearer commitment to change whether in the form of disposals or structural change. For now, the stronger than expected performance in the first quarter, boosted by improvements in Germany, Britain, Turkey and India, is likely to buy the group some breathing space. Vodafone said its key service revenue, which is made up of revenue related to ongoing services, was 10.6 billion pounds ($16.1 billion), up 1.1 percent organically, compared with an adjusted 0.6 percent drop in the fourth quarter.
The performance shows a continuing improvement in the company's recent trading, as it declined by 1.2 percent in the third quarter and by 3 percent in the second quarter. The improvement enabled the group to reiterate its outlook. In a further boost, Vodafone said it had also finally settled a long-running deal with British tax authorities and would pay 1.25 billion pounds to settle all outstanding issues, which was less than had been expected.
Shares were up 0.8 percent to 150 pence at 0916 GMT, ahead of the FTSE 100 Index, which was down 0.3 percent. "These are the first quarterly results to show service revenue growth since the global recession impacted," Colao said. The European service revenue was down by 1.7 percent but this was better than the previous quarter.
Total group revenues for the period were 11.3 billion pounds. Analysts had been expecting service revenue of 10.5 billion pounds and total revenue of 11.2 billion pounds, according to a Reuters poll. "Vodafone's results beat our estimates and consensus convincingly for group organic service revenue growth and showed continued recovery biased to certain markets, notably India, UK, Germany and Turkey," Citi analysts said.
"The acceleration in mobile data revenue is particularly encouraging." The group also said it had agreed to adjust the payments that would be made with the Essar Group to have first option on buying Essar's stake if Essar were to sell.
Comments
Comments are closed.