Vodafone lost pounds 3bn of stockmarket value yesterday in its biggest one-day share price fall for more than five years after warning its 2015 earnings would be lower than the City expected. The shares closed down 5.5% at 205p.
The world's second-largest mobile operator is using cash from last year's sale of its US subsidiary Verizon Wireless to invest pounds 19bn to upgrade networks and high street stores over the next two years. It plans to bring superfast 4G services to 91% of Europe by 2016, and more 3G mobile internet to emerging markets.
Vodafone announced full-year results in line with City forecasts but shareholders took fright as Vodafone said underlying Ebitda earnings (before interest, tax, depreciation and amortisation) would fall to between pounds 11.4bn and pounds 11.9bn by next March, down from pounds 12.8bn this year. The new estimate was worse than the fall to pounds 12.1bn City analysts had been forecasting.
"Vodafone continues to spin the plates with mixed success," said Richard Hunter at Hargreaves Lansdown stockbrokers. "The writedowns across several European regions are further proof of the challenges the company is facing, with underlying profit continuing to move in the wrong direction."
Citing "significant ongoing pressures", the company revealed it had written down by pounds 6.6bn the value of its companies in Germany, Spain, Portugal, the Czech Republic and Romania, taking the amount wiped off the book value of its European operations in the past three years to pounds 18bn.
Moody's said Vodafone's credit rating could be downgraded over the next 12 months unless strengthens its financial profile. Revenues continued to fall, down nearly 2% across the group to pounds 43.4bn, but the rate of decline has slowed from over 4% last year, and finance director Nick Read said revenues could begin to recover from the second half of this financial year.
Vodafone now has 637,000 4G subscribers in Britain, up from 500,000 at Christmas, and plans to get superfast mobile internet to 99% of the UK population within two years. Chief executive
Vittorio Colao said it was time to "muscle up" the UK business, but said he was still not happy with the quality of indoor reception over his network in London.
Vodafone's network improvements will increase its capital expenditure from an average of pounds 6bn to nearly pounds 10bn a year over the next two years, but the company yesterday warned the returns would not come for another seven years.
Dario Talmesio at research firm Ovum, said: "Unfortunately, the uptake of data fails to deliver in financial terms. There is a certain paradox here: Vodafone is putting most of its commercial and investment efforts in something that is not turning revenues."