Don't mind the gap? Vodafone results

Features

Vodafone's data revenue growth continued to match its traffic growth in the last three months of 2011 — puncturing the current industry orthodoxy that data traffic growth is running out of control, threatening profitability as a result.

The operator reported data revenue growth in its third quarter (Oct-December 2011) of 22%, and traffic volume growth of 20%.

CEO Vittorio Colao told Mobile Europe on a results call this morning that the operator had achieved parity between revenue and traffic growth by "proactive management", especially of "ultra high" data users, mainly through more targetted tariff and traffic management. The slowdown in the growth rate of bandwidth demand on the network was also "a little bit the numbers" he said, meaning that previously high rates of growth were bound to slow a little in any case.

Many operators reported a doubling of data volumes year on year from 2008 to 2010 and many industry projections assume this will continue. The recent slowdown in Vodafone's data volume growth across the group casts some doubt on those forecasts. It is possible that there will be a second wave of growth, however, as smartphone penetration increases, and LTE networks are rolled out.

In fact in the UK, a market with a combination of high smartphone penetration, high data usage (84% of Voda customers have a data tariff) and a competitive market, Vodafone did see a slight gap between data traffic and service revenue growth. Data revenues grew 13% with traffic growing 20%. But across the group Vodafone reiterated its position of the 2nd quarter, that it had closed the gap between data revenue and traffic growth

However, although data revenues are growing, they are only part of the story. Overall, Vodafone saw service revenues rise by just 1.7% in Europe, and Group revenue reduce by 2.3%. The operator said that Mobile Termination Rate cuts in some markets, as well as declining revenues in Southern European markets, were adversely impacting results.

Excepting Turkey, there was a North/South divide in results, with Germany and the UK seeing slight rises in revenues, and Spain and Italy contributing declines of 8.8% and 4.9% respectively.

"We continue to grow revenues, compensating voice decline with data growth and emerging market growth, as well as continued growth in enterprise," Colao said. Voice revenues declined 4.7% year on year, but still account for 70% of all revenues.

Although there was a small stir around the "revelation" that Vodafone is removing cash from Greece at the end of every day, Colao emphasised that this has been the case for every operating unit in the group for the past ten years. The company operates a centralised treasury, which is "good and normal practice", he added.