Woe in Italy and Spain hits Vodafone

Mobile giant Vodafone is dialling up more cost cuts after sales growth was dragged down by belt-tightening customers in southern Europe.

The company said its underlying service revenue in the region fell by 1.6 per cent, compared to a decline of 0.2 per cent in the previous quarter.

The main culprits were Italy and Spain where revenues dipped by 7.7 per cent and 10 per cent respectively. But Vodafone's British arm, which has 19 million customers, also slipped into reverse, reporting a 0.8 per cent fall.

Chief executive Vittorio Colao flagged in May that the company may struggle to grow this year, but sweetened the outlook with a bumper increase in the dividend to make it the FTSE's biggest payer.

However, the troubles in Europe were offset during the quarter by 6.1 per cent growth in Vodafone's other operating division which comprises Africa, the Middle East and Asia Pacific, making a 0.6 per cent increase in service revenue to £10bn for the group overall.