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* Q1 revenue rises 2.2 pct, beating forecasts of 1.9 pct
* Spain, Germany and Italy perform strongly, UK lags
* Shares up 4.5 pct (Adds CEO reaction, analyst reaction, shares)
By Paul Sandle
LONDON, July 22 (Reuters) - Spain, Germany and Italy helpedVodafone to produce stronger than expected first-quartersales growth despite a drag from European Union roaming chargecuts and a weak home market.
The world's second-largest mobile operator said on FridayEurope was stable, with three out of its four biggest marketsdoing well. Europe only returned to growth for Vodafone in thefinal quarter of 2015/2016 after five years of contraction dueto sluggish economies in the region.
The notable exception was Britain, where Vodafone has beentrying to fix problems encountered with a new billing system.The company also said it was too early to tell what Brexit wouldmean for Vodafone's business.
Chief Executive Vittorio Colao said the group was makinggood progress in Europe, led by Germany, Spain and Italy. "Weare focused on improving our performance in the UK," he said.
Vodafone's performance marked an eighth consecutivequarterly rise in its main growth measure - organic servicerevenue.
"This momentum should steadily raise confidence in thesustainability of the recent return to growth, and underpins ourbelief that this growth profile is now top-tier amongst theincumbent Telco universe," JP Morgan Cazenove said in a note.
Shares in Vodafone topped the FTSE 100 gainers. They weretrading up 4.5 percent at 235.5 pence by 0858 GMT.
Analysts at Citi said they saw the 2.2 percent rise inorganic revenue to 12.3 billion euros ($13.55 billion) as a"modest beat". "The solid progress in Germany and Spain isencouraging."
Growth of 0.3 percent in Europe beat analysts' forecasts ofa flat result. Sales in Britain fell 3.2 percent, more thanexpected.
Africa, Middle East and Asia-Pacific (AMAP) grew by 7.7percent in the three months to end-June, also beating analystforecasts for a 7 percent rise.
"Our growth momentum in AMAP remains strong, with excellentperformance in South Africa, Turkey and Egypt and ongoingrecovery in India," Colao said.
He said a planned listing of Vodafone's Indian operationwould provide clarity on its value, giving it more flexibilityto pursue options like a deeper tie-up with Liberty Global, although no talks were ongoing or were planned.
LOOKING ABROAD
Vodafone has floated the idea of switching its home base toanother European country after Britain voted to leave theEuropean Union last month.
Colao said it was too soon to have any clarity on this. "Ourposition is we continue to care a lot for the single digitalmarket," he said. "We believe pragmatic solutions will be foundto make sure Britain does not get disadvantaged from not beingpart of it."
Vodafone has switched to reporting in euros from pounds -reflecting the relatively bigger size of its combined euro zonebusinesses, which make up about half of its sales.
In the short term, the company was seeing more shifts intraffic on its networks from the threat of terrorism in sometourist markets, Colao said.
Holiday makers from Britain and Germany have shifted fromdestinations like Turkey and North Africa this year in favour ofperceived safer locations like Spain, holiday companies havesaid.
Vodafone is making less money from business and consumercalls when people travel after the EU cut charges at the end ofApril. Roaming charges will be abolished in June 2017.
But Colao said more than half of calls made when travellingwere now included in bundles, a move that was boosting overallusage and helping to compensate for the roaming cuts.
The drag on revenue from roaming charges was 40 basis pointsin the quarter, although analysts at Mirabaud said they believedthe changes would have a bigger impact in the second quarter.
Analysts had expected Vodafone to report organic servicerevenue growth of 1.9 percent, against underlying growth of 1.8percent in the final quarter of 2015/16. ($1 = 0.9079 euros) (Editing by Kate Holton and Jane Merriman)
