Europe: Vodafone writes down $11.1 billion, plans more investments

Despite suffering from slow sales and tough competition in Europe, Vodafone Group said it was still looking to invest in its mobile network.
When the London-based carrier reported earnings for its fiscal year ending March 31, it noted $11.1 billion in “impairments” from its operations in Germany, Spain, Portugal, the Czech Republic and Romania. At the same time, the world’s No. 2 mobile operator said it is planning to invest $32.1 billion, including its planned Project Spring investments.
Vodafone CEO Vittorio Colao called the past year one of “substantial progress” and sought to assure investors that they would see results from the investment plan soon. “While cash flow will be depressed during this investment phase, our intention to continue to grow dividends per share annually demonstrates our confidence in strong future cash flow generation,” he said in a statement.
For the past fiscal year, Vodafone Group’s revenue dropped 1.9% to $73.6 billion for the year. Global service revenue ― the sales of voice, data and messaging ― dropped 4.3%, to $66.8 billion. Earnings before interest, taxes, depreciation and amortization was $21.6 billion, a decrease of 7.4%, and its organic EBITDA margin was down 1.3 percentage points.
For the coming year, Vodafone predicted an EBITDA in the range of $19.2 billion to $20.1 billion, reflecting the impact of its two-year Project Spring investment plan.
In February, Vodafone sold its stake in the U.S. carrier Verizon Wireless for $130 billion, resulting in record setting dividend payouts in the United Kingdom. The move also seems to have prompted the telecom giant to look for acquisitions within Europe. This year Vodafone purchased Kabel Deutschland in Germany and a pending $10 billion deal to purchase cable provider Ono in Spain.
Ovum analyst Dario Talmesio noted that while Vodafone’s business in the developing markets of Africa and India is still growing, the company needs to focus on Europe where the majority of its business (66%) now lies.
“According to Ovum’s forecast, none of Vodafone’s major markets will be growing revenues in the coming years meaning that they need to squeeze more off what they have,” Talmesio said.
More telecom news from Europe:
—Telefónica’s plans to buy KPN’s German unit, E-Plus, have been delayed again. European Union anti-trust regulators pushed back their decision date on the potential $11.8 billion acquisition from June 26 to July 3. If successful, the deal would reduce the number of competitors in Germany’s telecom market to from four to three.
France’s Orange may partner with Bouygues Telecom. After a great deal of movement among it rivals, France’s No. 1 carrier is now moving into the fray as it considers some sort of tie-up with Bouygues Telecom, which is currently No. 3 in the market. Earlier, Bouygues lost out to Numericable on its bid to buy SFR, France’s No. 2 carrier. Previously, there had been discussion of a merger between Bouygues and No. 4 carrier Iliad.
–Also in France, Numericable has entered into exclusive talks to buy mobile virtual network operator Virgin Mobile France for $445.4 million.
—América Móvil makes bid to buy rest of Telekom Austria. After buying a joint controlling stake in Telekom Austria, billionaire Carlos Slim’s América Móvil has proposed to buy the remaining shares that aren’t owned by América Móvil or its partner, OIAG, the holding company representing the Austrian government. The buy-out will cost América Móvil as much as $2 billion.
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