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(Sharecast News) - Telecoms giant Vodafone said revenues fell in the third quarter as the economic slowdown hit trading in Continental Europe and offset a good performance in the UK.
The company on Wednesday said service revenue fell 1.3% to €9.52bn and continued to target its updated full-year guidance of adjusted core earnings after leases of €15-15.2bn and adjusted free cash flow of €5.1bn.
On an organic basis the rise was 1.8%, assisted by hyperinflation in Turkey, but down from 2.5% in the second quarter and below expectations.
Interim chief executive Margherita Della Valle - who took over after Nick Read resigned in December - said the recent decline in revenue in Europe "shows we can do better" and added that Vodafone now had initiatives underway to generate around half of its €1bn cost savings target.
This will involve around 500 jobs being cut in Vodafone's head office. Read introduced the savings target in an effort to quell a potential shareholder revolt after cutting current-year earnings estimates and cash flow guidance as higher energy costs and inflation took a toll.
"There is more to do and our focus is to provide a better service to our customers, become a simpler business and deliver growth," Della Valle said.
Intense competition in Spain resulted in a fall of 8.7% in service revenue in the quarter. There was also a worsening performance in Germany, with a fall of 1.8% reflected customer losses after it was badly prepared for past changes in legislation.
Della Valle said remedial action in Germany would deliver growth from Vodafone's new financial year starting in April.
Service revenue in Italy fell 3.3%, but Britain performed well, rising 5.3% driven by good customer growth and price increases.
AJ Bell investment director Russ Mould said: "Hemmed in by regulators on one side and competition on another, Vodafone may still be fighting on too many fronts in too many countries, especially as it remains saddled by an awful lot of debt."
"The debt burden makes it harder for Vodafone to invest and compete on so many fronts, especially as the interest payments will siphon off cash that could be otherwise used to buttress the company's competitive position."
"In addition, the German market, already competitive, is tougher still following the introduction of the new Telecommunications Act in 2021, which made it easier for consumers to cancel contracts and harder for providers to automatically renew them."
"Vodafone continues to flag Germany an area of difficulty and organic revenues have now shrunk year-on-year for three straight quarters. Only the UK, of Vodafone's four big European markets, is showing any real momentum."
Reporting by Frank Prenesti for Sharecast.com
