Vodafone reports huge slump in profits

Vodafone's profits in the UK have fallen by almost 50 per cent, according to the firm's latest financial filing.

The UK suffered particularly from a decrease in voice and roaming revenues, and customers opting out of extra 'bundle' packages when entering into a contract or upgrading their handsets.

Vodafone's statement also mentioned "increased competition in a challenging economic environment" as contributing to revenue falls.

Vodafone announced group revenues of £41bn for the full year, up 15.6 per cent, and gross profit growth of 17 per cent to £11.8bn. However, this took a further knock of £5.9bn thanks to poor performing Spanish and Turkish operations.

After tax and other expenses, group profit was £3.1bn, down from £6.8bn last year. UK revenues decreased only slightly from £5.42bn in 2008 to £5.39bn, but profit fell from £431m to £235m.

Vodafone said that it grew its customer base over the year, taking it up to 303 million at the end of March. But figures for Europe show that Vodafone customers took fewer foreign business and leisure tips, shaving valuable roaming revenues off the operator's bottom line, while voice and messaging revenue also declined.

Vodafone said that its enterprise revenue growth had also slowed as its " business customers reduced activity and headcount".

"Our £1bn cost reduction programme is ahead of plan and we continue to explore further ways to reduce cost. We maintain our tight focus on capital discipline and returns to shareholders," said Vodafone chief executive Vittorio Colao.

"In the 2009 financial year, we achieved approximately £200m of cost savings, which were partially offset by restructuring charges. We now intend to deliver at least 65 per cent of the total programme in the 2010 financial year, ahead of plan."

However, analysts were less positive. "Today's results show that Vodafone is making the best of the hard times that we're going through," said John Delaney, research director for European consumer mobile at IDC.

"But for the coming year, at least, those times are going to get harder still. We believe that the European mobile operators, Vodafone included, have more trouble ahead of them on the revenue front."