Vodafone’s results for the six months to the end of September are a mixed bag. Group revenue was up 0.2% organically (down 7.4% as reported) to £21.8bn reflecting a weakened macroeconomic environment in Southern European. Conditions in Spain and Italy offset gains made by increasing demand for Vodafone’s data services (due to continuing penetration of smartphones) and growth in emerging markets.
Group EBITDA was down 2.9% (organic basis) to £6.6bn. The inclusion of CWW (Cable & Wireless) for the first time contributed to a decline in EBITDA in Northern Europe of 3.3% to £2.8bn (with margin down 2.4 percentage points year-on-year).
Smartphone usage of course continues to grow, but the affect on mobile providers is both positive and negative. In the UK, Vodafone’s EBITDA decreased by 7.5% due to higher retention costs associated with smartphones. However, increasing mobile internet usage pushed Vodafone’s data revenue up by 5% for the half-year period.
Despite the hit Vodafone has taken as a result of its purchase of CWW, the entity will play a key role as Vodafone develops its product offerings around cloud services and hosting. These not only provide growth opportunities in the enterprise market, but could also help to diversify Vodafone’s revenue base – countering challenging voice and consumer markets. The question is to what extent Vodafone will allow the CWW team to follow the strategic path it has set for its hosting business (see Will the Vodafone acquisition strengthen CWW’s hosting business?). Without doubt, we’re going to be writing more about Vodafone as a player in the IT services market.