Competition pressures Vodafone results

Stiff competition in some European countries is putting pressure on Vodafone Group, but growth in emerging markets such as Egypt and South Africa helped the operator report solid customer growth for its third quarter, Vodafone announced on Tuesday.

During Vodafone’s quarter ending Dec. 31, 2005, the operator reported 7.1 million proportionate organic net new customers, which is 30% more than the same quarter in the previous year. The figure excludes customers added through recent acquisitions, and includes a proportion of customers from operators that Vodafone owns only a part of.

Mobile services revenue for the quarter grew 7% compared to the previous year.

Increasing competition in Germany, Italy and the U.K. slowed Vodafone’s growth, said Arun Sarin, Vodafone’s chief executive, during a conference call to discuss the results. In Germany, for example, mobile virtual network operators are putting a strain on the market.

“The low-frills Internet offers in Germany are causing pricing to decline in that segment faster than we would have expected,” Sarin said. He expects to see this intense competition continue in some markets for as long as another year and a half.

But strong growth in markets with lower penetration rates, such as Romania, Egypt and South Africa, helped boost gains for the operator. Service revenues grew 39% in Romania, 36% in Egypt and 22% in South Africa. The results at Oskar Vodafone in the Czech Republic have exceeded Vodafone’s expectations, and the company expects good results from its recent acquisition in Turkey, where cell phone penetration is low and the population is young, Sarin said.

Vodafone also continues to add more data customers. The operator added 3.1 million 3G customers in the quarter ending in December, 80% more than in the immediate prior quarter. Vodafone now has 8 million 3G users, with 7.4 million using consumer devices. The operator expects to have 10 million 3G users by the end of its fiscal year.

Data services revenue also continues to grow. Vodafone saw a 24% increase in non-messaging data revenue in the quarter compared to the same quarter in the previous year. Excluding Japan, where Vodafone has struggled to gain market share and revenue, non-messaging data services revenues grew 53% compared to the same quarter in the previous year.