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SALES SHOCK WIPES £11BN OFF VODAFONE

RESILIENT: Sarin says group’s troubles are part of wider picture

Wednesday July 23,2008

By Peter Cunliffe

NEARLY £11billion was wiped off the market value of Vodafone yesterday after the mobile phone giant admitted sales were being hit by slowing economic growth.

Its confession rattled investors who had previously seen the company as a safe haven during the economic turbulence.

The world’s biggest mobile phone company reported worse-than-expected three-month revenues and said full-year figures would be at the bottom end of its target range of £39.8billion to £40.7billion.

Its shares dived more than 13 per cent, down 20bp to 129p, taking its value to £68.6billion.

Outgoing chief executive Arun Sarin, unveiling his last set of figures before conceding his place to his deputy Vittorio Colao, said: “We are part of a wider economic picture. We are not immune from it but we are more resilient than most other companies.”

He denied going out on a low note and insisted the company remained on track for annual profits of £11billion to £11.5billion after increasing worldwide customer numbers to 269million.

Total group revenues rose 19 per cent to £9.8billion in the three months to the end of June but, excluding expansion in India, underlying sales were up just 1.7 per cent.

Vodafone suffered most in Spain where sales fell 2.5 per cent after a slump in the construction industry. “Migrant workers are going home and, because we had a disproportionately high market share, Spain is coming off the boil a little bit,” explained Sarin.

In the UK, revenues rose 2.1 per cent, driven by a 31 per cent growth in data traffic fuelled by increased use of BlackBerry hand-held computers and demand for “dongles”, the plug-in devices used to connect laptop computers to the internet.

Income from phone calls fell 4.4 per cent as increased usage was offset by a drop of more than 9 per cent in charges per minute after fierce competition among operators.

Sarin said the group would “look at everything” to keep down costs but ruled out dropping the sponsorship deal with Formula One driver Lewis Hamilton.

“If it’s good value, it stays,” he said.