Vodafone’s interim results were a nasty surprise. The mobile giant reported a loss of £492m in the six months to the end of September compared to an £8bn profit in the same period last year. Revenue fell slightly to £21.8bn.
The crisis in southern Europe prompted a write-down of almost £6bn in the value of its Spanish and Italian divisions as consumers sharply cut their mobile usage.
On the plus side, America’s Verizon Wireless, in which Vodafone holds a 45% stake, announced another dividend payment, and Vodafone will also return money to shareholders through a buyback.
What the commentators said
Over the years, many Vodafone (VOD) investors have criticised the group for remaining a minority investor in Verizon Wireless. But they can now
“”breathe a sight of relief that successive chief executives have clung on”, said Alex Brummer in the Daily Mail. Now that it has paid down its debts, “the dividend income is producing an Atlantic gusher”.
VOD
Meanwhile, noted Jonathan Guthrie in the FT, Vodafone manages its other businesses well enough, and its net debt is low enough, to ensure that it will raise its overall payout by 7% a year for the third successive year.
Emerging markets, which now account for a third of revenues, were also “a bright spot”, said Renee Schultes in The Wall Street Journal. They are still “expanding strongly” and beginning to match the profitability of the rest of the company.
But any improvement in Europe will take time to deliver, while analysts have also pointed out that as a minority shareholder in Verizon Wireless, Vodafone has little control over a key growth engine.
The upshot is that thanks to the euro crisis, “hopes that Vodafone has really turned a corner” in the past few years are “on hold”. Until the European outlook clears, concluded Lex in the FT, the shares “may struggle to make progress”.