Vodafone blames European competition for quarterly decline

World's second-largest mobile phone operator continues to see key service sales drop in reversal of fortunes since growth just 12 months ago

Mobile phone giant Vodafone was today poised to buy Germany's biggest cable operator in a deal worth £9.1 billion. (PA)

Mobile phone giant Vodafone has blamed conditions in Europe for disappointing sales figures.

Unexpectedly fierce competition in Germany and the UK, and massive falls in sales in Italy and Spain, meant the company reported a 3.5 per cent drop in crucial service revenues up to June this year.

The reduction in sales is nonetheless a slight improvement on analysts’ predictions, and is not as bad as the staggering 4.2 per cent recorded last quarter. It is still a worrying pattern, given that Vodafone was a growing business just 12 months ago.

The company told reporters that, with performance roughly in line with expectations, it was confident in its outlook for the year as a whole and saw shares going up half a per cent.

Chief Executive Vittorio Colao said: “Conditions remain challenging in northern and central and southern Europe.”

Analysts at Espirito Santo said: ”Vodafone's first quarter was in line with consensus expectations but the detail points to a further deterioration in revenue trends in the core European businesses.“

After withdrawing funds from Italy and Spain and refocusing on Germany, including the purchase of the country's largest cable operator Kabel Deutschland for €7.7 billion, the company will be disappointed to see service revenues there fall 5.1 per cent.

Vodafone has 454 million customers worldwide, and the European figures as a whole put a bit of a dampener on positive outlooks from its better-performing, emerging businesses, including India which showed signs of stability and an increasing demand for internet services after years of a ferocious price war.