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Vodafone - Europe improves but competition growing in India

In its half-year results, Vodafone says that Europe is performing ahead of plan, however competitive intensity in India has increased. Group service revenue fell by 3.1%, but rose by 2.3% on an organic basis (which strips out the effect of M&A activity and currency movements). The shares rose 1.4% on the news.

George Salmon, Equity Analyst at Hargreaves Lansdown:

"Amid competitive pressures rising in India, Vodafone has taken a €5bn impairment. Writing off that kind of amount is never nice, and the fact that it is in one of its key emerging markets will be particularly difficult to stomach. However, Vodafone’s European businesses have now returned to growth, so today’s results are something of a mixed bag.

The group’s strategy is to focus on selling ‘more for more’, expanding its data packages, and increase the roll-out of fixed line broadband and TV services across Europe. With customers always on the look-out for the cheapest deal, Vodafone’s strategy of bundling services together to reduce customer churn makes sense to us.

Having spent huge amounts on the infrastructure that allows for a broad 4G roll-out, group debt is growing, however. It now stands at €40.7bn, which a further €2.7bn due to be added from the group’s recent purchase of more mobile data spectrum in India. With debts of close to three times what the group expects in earnings this year, the pressure is on the group to pull-off its plans."


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