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U.K.-based telco group expects to meet the lower end of its full-year EBITDA guidance range.
Vodafone on Thursday reported slower year-on-year growth in group service revenue for its fiscal third quarter ended 31 December, as fierce competition and demonetisation in India took its toll.
The U.K.-based telco group said it expects to meet the lower end of its full-year EBITDA guidance range.
India is "affected by free services from the new entrant," said Vodafone CEO Vittorio Colao, in a statement. That new entrant is Reliance Jio Infocomm, which will continue offering free mobile voice and 4G data until the end of March, after which it is expected to begin charging a nominal fee for data.
The aggressive strategy has caused havoc, sparking another brutal price way in the mobile market. In November, Vodafone wrote down the value of Vodafone India by €5 billion.
Furthermore, India’s demonetisation programme, which aims to do away with high-denomination banknotes, had a negative impact on prepaid top-up volumes during the quarter, Vodafone said.
"We anticipate intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions, including the extension of 4G services to 17 leading [telecom] circles. As announced earlier this week, we have also entered discussions with the Aditya Birla Group about an all-share merger of Vodafone and Idea [Cellular]," said Colao.
On Monday, Vodafone confirmed it is in early negotiations about an all-share deal with Idea. A combination of the two mobile operators would create by far India’s biggest player by subscribers; however, divestments would have to be made in order to comply with local regulations designed to preserve telco competition.
In the last three months of calendar 2016, Vodafone India’s service revenue came in at €1.45 billion, down 1.9% year-on-year on an organic basis. That took the shine off solid performances at elsewhere at Vodafone’s Africa, Middle East and Asia Pacific (AMAP) unit, namely Vodacom in South Africa and its ‘Other’ unit, which turned in service revenue growth of 4% and 10.5% respectively.
Overall, Vodafone’s AMAP unit saw quarterly service revenue rise 3.9% organically year-on-year. At the end of the corresponding quarter last year, that growth rate stood at a healthier 6.5%.
Meanwhile, Vodafone’s European unit turned in another mixed performance. Service revenues were up organically in Germany, Italy and Spain, reflecting Vodafone’s significant presence in both the fixed and mobile markets.
However, in the U.K. – where Vodafone only returned to the fixed market relatively recently – service revenue fell 3.2% organically to €1.61 billion, driven by increased competition in enterprise, lower MVNO revenues and the ongoing impact of roaming regulation.
On a group basis, quarterly service revenue grew 1.7% organically year-on-year to €12.3 billion, while EBITDA for the six months to 31 December came in at €27.05 billion, down from €28.15 billion a year ago.
Vodafone confirmed its full-year guidance of free cash flow of €4 billion. It also expects to meet the low end of its EBITDA growth range of 3%-6%.
