Vodafone Ireland revenue rises as company invests in network

Group says rollout of faster 4G in Europe helped boost earnings in first half of year

Revenue at telecoms firm Vodafone Ireland rose in the three months to the end of September.

Mobile and fixed service revenue rose 2 per cent year on year to €240.7 million, while enterprise revenues were 10.29 per cent higher during the period.

The company said it maintained its total base of 2.3 million customers during the second quarter of the year as it added 11,400 subscribers as it moved some customers from pay as you go to bill pay during the period. Vodafone also added customers to its fixed line business during the year.

On its mobile network, data usage rose 22.3 per cent as the company unveiled new pay as you go data packages, upgraded its national network and introduced new Vodafone branded smartphones.


However, earnings before interest, depreciation,tax and amortisation were lower as vodafone invested significantly in subsidising smartphones for both new and existing customers.

“Our performance this quarter demonstrates improved momentum with increased service revenue and growth in customer numbers, particularly in our contract base,” Vodafone Ireland CEO Anne O’Leary said. “We are also encouraged by strong growth in our enterprise division with significant customer wins during the period.”

The company made a number of significant moves during the period, including the beginning of the rollout for its fibre network joint venture with the ESB, SIRO. Five locations are currently getting the high speed data line – Cavan, Dundalk, Carrigaline, Sligo and Ratheniska, with the latter chosen as a pilot village for the network in rural areas.

Vodafone also invested €7 million in its data centre services, and opened a European sales hub in Carrickmines, Dublin.

Globally, the group’s first-half earnings rose for the first time in four years after investment in faster 4G networks started to pay off and full-year results may be better than forecast, the company said.

The world’s second biggest mobile phone company has spent billions of pounds on its networks over the past two years and can now offer faster 4G services to 80 per cent of its customers in Europe when the economic climate is steadily improving.

Chief executive Vittorio Colao said Vodafone's underlying service revenue grew in seven out of 13 European markets in the first half, with southern Europe in particular showing a strong rate of recovery.

“We have reached an important turning point for the group with a return to organic growth in service revenue and EBITDA (core earnings) in the first half,” Mr Colao said.

Vodafone’s core earnings, or earnings before income tax, depreciation and amortisation (EBITDA), for the six months to the end of September rose 1.9 per cent to £5.79 billion, beating analyst expectations of £5.69.

Underlying second-quarter service revenue, on a like-for-like basis and stripping out currency changes, climbed 1.2 per cent, better than a 0.8 per cent rise in the first quarter and above the 0.9 per cent analysts were expecting.

Colao said markets remained competitive, however, and while the trend in Europe was improving, service revenue there still fell in the three months to the end of September.

The company said it now expects full-year earnings to come in between £11.7 billion and £12.0 billion, raising the floor of the forecast range from £11.5 billion.

Analysts at Jefferies, calling the numbers “encouraging”, said Vodafone still envisaged improving service revenue trends in the second half, and it sounding notably confident of improvement in Germany.

Investors are looking closely at Vodafone's performance in markets such as Germany, Spain and Britain after its talks with cable operator Liberty Global about an exchange of assets were abandoned in September.

With the Liberty talks dropped, Mr Colao said Vodafone would continue to develop its own services combining mobile, broadband and TV content in Spain, Portugal, Italy and Germany.

Mr Colao said Vodafone’s mobile networks were at least as good as European rivals but former monopolies such as BT and Deutsche Telekom had an unfair advantage in being able to use old copper technology, which was often funded by tax-payers, when rolling out combined services.

“There is a clear agenda on the part of these companies to undo 30 years of customer choice, re-establish their former monopolies and make it very difficult for other players to compete,” he said.

BT has been cleared to buy leading mobile operator EE, which will result in owners Orange from France and Deutsche Telekom holding stakes in the former British monopoly provider.

Mr Colao said European regulators needed to favour investment in fibre networks and to consider imposing stronger operating conditions on the owners of legacy networks.

Taking into account currency movements, Vodafone said growth in the period was dampened. It said it would start reporting in euro rather than sterling from the 2017 financial year, a move it said was logical as half of its revenues were in euro.

It also reiterated it had started preparations to float its Indian unit, potentially in its next fiscal year, Mr Colao said.

Additional reporting: Reuters

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist