Vodafone’s recovery takes hold as service revenue rises

Vittorio Colao said the main drivers were the continuing and rapidly increasing demand for mobile data

Shares in Vodafone climbed just shy of 3 per cent as the mobile phone operator reported its second consecutive quarter of growth and the first growth in its UK market for just over three years.

“We saw improvements across Europe and a very good quarter in emerging markets,” said the company’s chief executive, Vittorio Colao.

First-quarter organic growth in service revenue – the measure most closely watched by investors – rose by 0.8 per cent to £9.2bn. This was above forecasts of 0.5 per cent and well ahead of the 0.1 per cent growth achieved in the previous quarter.

Mr Colao said the main drivers were the continuing and rapidly increasing demand for mobile data, which lets people watch films and TV on their smartphones and tablets, a growing fixed-line broadband business in Germany and a revival of growth in Africa, India and Turkey. Vodafone had been suffering from weak consumer spending in Europe in recent years before it managed to post its first quarterly sales increase in May. In the latest quarter, European service revenues fell by 1.5 per cent, an improvement on the 2.6 per cent fall in the previous three months.

“Vodafone has bucked the trend of a weak wider market with an update which confirms its ongoing improvement,” said Richard Hunter, an analyst at Hargreaves Lansdown.

But as Mr Colao prepared to launch Vodafone’s full-blown, fixed-line broadband service in the UK at the end of the summer, he launched an attack on BT and its ownership of Openreach, the networks business which the regulator Ofcom recently said might have to be be separated from BT. Vodafone, like Sky and TalkTalk, has to use Openreach to deliver broadband to customers in their homes.

“It is a classic case of a monopoly company holding the country to ransom,” said Mr Colao. “We are used to that across Europe but don’t really expect it in the UK. BT’s priority seems to be buying more expensive football content rather than investing in the fibre network this country needs.”

He wants Ofcom to recommend a break-up of BT, but if it doesn’t he has three demands for an improved Openreach. “There must be access to fibre and ducts at a reasonable price,” he said. “The service provided by Openreach must become world-class – not the mediocre service we get now. And access to content for everyone must be at a decent rather than exhorbitant price.”

Vodafone said last month that it was in talks with John Malone’s Liberty Global about swapping assets, but Mr Colao issued no update on the talks yesterday. He also declined to comment on whether it would float off its Indian business. Vodafone shares rose by 6.5p, or 2.8 per cent, to 238.45p.