Vodafone rises as customer revenues stabilise

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The Independent Online

The mobile phone operator Vodafone gave investors cause for hope yesterday after confirming that its customers' average spending was showing signs of stabilising while shrugging aside disappointing subscriber growth.

Vodafone added another 1.3 million subscribers around the world in the three months to 31 March – well beneath analysts' expectations of about 2 million new customers – boosting its total to 101.1 million.

Shares in the company, however, closed up 5 per cent, or 5.25p, yesterday at 112.75p, making the shares the biggest riser in the FTSE 100 index.

Sir Chris Gent, Vodafone's chief executive, said: "This year has seen ARPU [average revenues per user] stabilise in our major markets, ahead of our previous expectations."

Vodafone yesterday said customers in the UK spent an average of £24 a month in March, an increase of £2 a month from February, but the same amount they spent in March of last year.

In Italy, it was a similar story with customers spending an average of €30 (£19) a month in March, up from €26 in February, but which is the same level they spent in March.

In Germany, however, customers spent an average of €25 a month in March, up from €23 in February, but down from €27 in March of last year.

"The improvement in mix towards higher quality customers and the continued adoption of data services provide a solid base for an expected improvement in ARPU in most of our major European markets in the year ahead," Sir Chris said.

Vodafone, along with rival mobile phone operators, has been concentrating on increasing the average revenues it gets from users rather than chasing new customers.

Nevertheless, the mobile phone giant's subscriber additions in the three-month period still fell short of analysts' expectations, particularly in its main markets including Germany, the UK and Italy.

It blamed the weak subscriber growth mainly due to its strategy of focussing on more lucrative customers while disconnecting the less lucrative handsets.

In the UK, the company added just 22,000 new users, boosting its total number of customers to 13.2 million. Some analysts had been expecting upwards of 150,000 new users.

In Germany, the company actually lost 399,000 subscribers, causing its subscriber base there to fall to 21.4 million. Analysts at Dresdner Kleinwort Wasserstein had been expecting a 12,000 reduction.

In Italy, meanwhile, the company won another 219,000 new users, boosting its total to 13.6 million. The figure was, however, again well beneath analysts' forecasts of a 280,000 rise.

The Dresdner Kleinwort Wasserstein analysts said the company's ARPU figures had offset the weak subscriber numbers although they highlighted Germany as a weak spot.

"The slightly better 12 month ARPU [numbers] offsets the weaker headline subscriber numbers such that at this stage, we feel our full-year sales expectation will be realised," the analysts said.

Vodafone also said that the amount of revenue it gets from data, rather than voice calls, had risen to more than 13 per cent of sales in March and to more than 11 per cent for the year.

Separately, T-Mobile, the mobile phone operator owned by Deutsche Telekom, said yesterday that it had signed up some 330,000 new customers in the UK in the first quarter of the year, boosting its customer base to about 10.8 million.

Telecoms in trouble: mm02 'worthless' unless it shuts german loss-maker

The mobile phone operator mmO2, which used to be owned by BT, was dealt a hefty blow yesterday after one investment boutique deemed its shares worthless unless it shut its loss-making German division.

Collins Stewart argued that shares in the mobile phone group would be worth around 24p each if mmO2 closed Viag, its German operation. If it did not, Collins Stewart said it believed the shares were worth 0p.

"The bulls would try to undermine this approach by stating that it does not capture the potential sharp increase in data revenues that they believe will be brought about by the launch of 3G [mobile phone] services," said Mustapha Omar, the telecoms analyst at Collins Stewart.

However, Mr Omar said he believed that bull argument was becoming "more fanciful by the day" given the poor take-up of next generation mobile phone services in Japan and consumers' reluctance to use their handsets for transmitting and receiving data.

Shares in mmO2 fell 5 per cent, or 2.5p, to close at 47.5p after Mr Omar slapped a "sell" rating on the business, making the stock the third biggest faller in the FTSE 100 index. He said that all the UK's mobile phone operators were likely to come under pricing pressure later in the year when Hutchison launched its UK service.

"It [Hutchison] has deep pockets and, being the only one of the five 3G licence holders in the UK without any subscribers, it is likely to be aggressive with its voice call tariffs," Mr Omar said.

The note comes just two months after Mr Omar published a diatribe against mmO2's rival Vodafone, saying its shares were worth as little as 73p.