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Vodafone reports first ever fall in revenues as southern Europe slumps Vodafone reports first ever fall in revenues as southern Europe slumps
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Vodafone has recorded its first ever fall in annual revenues as the recession in southern Europe caused its takings there to dip by almost 17%. Vodafone has recorded its first ever fall in annual revenues as the recession in southern Europe caused its income there to dip by almost 17%.
With its finances under pressure, the British mobile phone giant said it would reinvest next month's £2.1bn dividend from US subsidiary Verizon Wireless in the business, rather than returning cash to shareholders. With its finances under pressure, the British mobile phone company said it would reinvest next month's £2.1bn dividend from US subsidiary Verizon Wireless in the business, rather than return cash to shareholders.
Overall revenues at the British mobile phone company fell by 4.2% to £44.4bn, marking the first such contraction in the company's history. Overall revenues at the British mobile phone company fell by 4.2% to £44.4bn, marking the first such contraction since Vodafone was spun off from Racal as an independent company on the London and New York stock exchanges in 1991.
Tuesday's results also marked the largest fall in organic service revenue, which counts income from calls but excludes handset sales, and takes into account mergers and disposals and changes in currency values, since the measure was introduced in 2003. Tuesday's results also marked the largest fall in organic service revenue since the measure was introduced in 2003. It counts income from calls but excludes handset sales and takes into account mergers and disposals and currency changes.
The company wrote down the value of its businesses by £1.8bn, bringing to £7.7bn the reduction in book value of its operations in Italy and Spain this year.The company wrote down the value of its businesses by £1.8bn, bringing to £7.7bn the reduction in book value of its operations in Italy and Spain this year.
Amid the financial gloom, Vodafone has delayed plans to switch on its 4G network in Britain, saying it wants to ensure its network will be ready. The service, for which Vodafone spent £790m on spectrum in February's government airwaves auction, had been expected to go live in May or June, but will now come at the end of the summer.
"We have faced headwinds from a combination of continued tough economic conditions, particularly in southern Europe, and an adverse European regulatory environment," said the Vodafone chief executive, Vittorio Colao."We have faced headwinds from a combination of continued tough economic conditions, particularly in southern Europe, and an adverse European regulatory environment," said the Vodafone chief executive, Vittorio Colao.
Regulation has been gradually reducing the cost of connections to mobile phones in recent years, bringing down service revenues for operators.Regulation has been gradually reducing the cost of connections to mobile phones in recent years, bringing down service revenues for operators.
Colao made no comment on Vodafone's discussions over selling all or part of the 45% stake in its US network to co-owner Verizon Communications. Colao gave no update on Vodafone's discussions over selling all or part of the 45% stake in its US network to co-owner Verizon Communications. Investor hopes of a big dividend from a potential $130bn (£85bn) cash and shares deal have boosted Vodafone shares in recent months.
Vodafone's ordinary final dividend will increase to 6.92p, a 7% increase this year and a 22% rise over the past three years. The firm said it would "at least maintain" the ordinary dividend per share at current levels. "If an offer comes that is more advantageous than the current situation of course we will be open to it," said Colao.
With results slightly better than City forecasters had feared, shares remained flat at just under 198p during morning trading on Tuesday. Analyst Jerry Dellis at Jefferies bank said the decision not to return any of the Verizon dividend to shareholders was "disappointing and a break with previous policy". There have been suggestions Verizon Communications, which has the power to veto payouts from their shared mobile business, could block further dividends this year as it attempts to wrest control of the asset.
Vodafone's ordinary final dividend will rise to 6.92p, a 7% increase this year and a 22% rise over the past three years. The firm said it would "at least maintain" the ordinary dividend per share at current levels.
With results slightly better than City forecasters had feared, the shares rose about 1% to 199.7p during late trading on Tuesday.
Operating profit was £12.3bn, comfortably above the top of the range set by the company last May. Vodafone guided that profit next year would be between £12bn and £12.8bn.Operating profit was £12.3bn, comfortably above the top of the range set by the company last May. Vodafone guided that profit next year would be between £12bn and £12.8bn.
Revenue from internet connections rose 13.8%, while major emerging markets remained buoyant, with India up nearly 11% and Turkey up 17%.Revenue from internet connections rose 13.8%, while major emerging markets remained buoyant, with India up nearly 11% and Turkey up 17%.
Vodafone said it would continue investing to build video-quality networks across Europe so that it could manage the high demand for data from smartphones, and extend 4G coverage across 40% of its networks in its top five European markets by March next year.Vodafone said it would continue investing to build video-quality networks across Europe so that it could manage the high demand for data from smartphones, and extend 4G coverage across 40% of its networks in its top five European markets by March next year.