Vodafone loses £5.2bn in 2016 but shares rise

World’s second biggest mobile operator was dragged down by its troubled Indian unit

(Getty)

Vodafone, the world's second biggest mobile operator, reported a €6.1bn (£5.2bn) loss for the year to the end of March, dragged down by the troubled Indian unit it is spinning off.

Seeking to reassure investors about the future, however, the group forecast growth in earnings and a jump in free cash flow for the current year, driven by stabilising average revenue from its contract customers and lower spending.

It predicted a rise in organic adjusted core earnings growth of between 4 and 8 per cent and free cash flow of about €5bn, up from €4.1bn in the previous year. Shares rose almost 4 per cent.

“We expect to sustain our momentum in the coming financial year, generating free cash flow of around €5bn,” chief executive Vittorio Colao said on Tuesday.

“Our confidence in the outlook is demonstrated by another 2 per cent increase in our dividend.”

The forecast growth in free cash flow this year, which will come as the company reduces investment in its network following its Project Spring upgrade, is ahead of analysts' predictions of €4.66bn.

Vodafone's organic service revenue growth slowed to 1.5 per cent in the final quarter from 2.1 per cent in the third, due to regulatory headwinds in Europe that analysts say will ease in the year ahead.

Organic service revenue in Europe grew by just 0.1 per cent in the quarter, while Africa, Middle East and Asia Pacific grew 6.8 per cent, it said.

Facing cut-throat competition in India, it has agreed to merge its operations with Idea Cellular.

Reuters