Vodafone slumps to £2 bn loss on Spain, Italy woes

Mobile phone giant Vodafone on Tuesday revealed it had slumped into a net loss of almost £2 bn during its first half on massive writedowns linked to indebted eurozone countries Spain and Italy. Vodafone's loss after tax for the six months to September 30, equivalent to $3.138 billion or 2.473 billion euros, came as the company said it suffered charges of £5.9 billion linked to financial turmoil in Spain and Italy. The net loss of £1.977 bn compared with profit after tax of £6.679 billion in the first half of Vodafone's 2011-12 financial year, the company said in its earnings statement. Total revenue meanwhile dropped 7.4 percent to £21.78 billion in the first half. Chief executive Vittorio Colao said the latest results "reflect tougher market conditions, mainly in southern Europe" which would continue to impact the company in the short term. However he voiced optimism about the longer term owing to Vodafone's growth in emerging markets such as India and Turkey. Vodafone took a hit of £3.2 billion linked to its operations in Spain and an impairment charge of £2.7 billion for Italy during its first half. The company added that it would carry out a share buyback totalling £1.5 billion on receipt by the end of 2012 of a £2.4-billion dividend from US company Verizon Wireless, in which Vodafone has a 45-percent stake. "We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular," Colao said. "We remain very positive about the longer-term opportunities." In the wake of the earnings and share buyback announcements, Vodafone's share price slid 3.0 percent to 161.6 pence in early deals on London's benchmark FTSE 100 index, which was down 0.45 percent at 5,741.36 points. "The European outlook is far from comforting and the shares have paid the price in early trade for these factors," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers. "Even so, positives remain for this behemoth of the telecoms industry. The payout from Verizon is yet another vindication of Vodafone's decision to retain its stake, enabling it to embark on a further share buyback programme. "Meanwhile, the growth of data usage continues apace, and the emerging markets businesses are looking healthy," the analyst added. But the weak eurozone economy remains a major concern for Vodafone and other large European companies after Spain's biggest airline Iberia last week announced plans to axe 4,500 jobs to save the loss-making carrier from collapse. Spain's economy is in deep recession as an austerity programme chokes consumer spending amid unemployment that has surged to more than 25 percent of the workforce. And the eurozone's fourth-largest economy is hovering on the edge of a sovereign bailout, after already securing a eurozone rescue loan of up to 100 billion euros ($127 billion) for its banks. In Italy, unemployment has also shot higher since the heavily debt-laden country entered into recession at the end of last year.