Vodafone raises earnings outlook on growing mobile services demand

Vodafone raised its forecasts for core earnings on Tuesday after reporting a sharp improvement in its main quarterly revenue measurement helped by growing demand for mobile services in its big European markets.

The British telecommunication group reported second-quarter organic service revenue, which strips out items like handset sales and currency movements, down 1.5 per cent, compared with the near 4 or 5 per cent falls it recorded in the last six quarters. It also beat the consensus of a fall of 2.8 per cent.

Vodafone, which is the world's second-biggest mobile operator, said it now expected its full-year core earnings to be between 11.6 billion pounds and 11.9 billion pounds, compared with the previous guidance in the range of 11.4 billion pounds and 11.9 billion pounds.

"We have made encouraging progress during the quarter," said Chief Executive Vittorio Colao. "There is growing evidence of stabilisation in a number of our European markets, supported by improvements in our commercial execution and very strong demand for data.

Our two year, 19 billion pound investment programme is well underway, and customers are beginning to see the benefits," Colao added.

Having sold its operations in the United States, Vodafone is investing some of the proceeds on new, faster 4G networks to satisfy the growing appetite of consumers for data.

However, that has come against the backdrop of cut-throat competition as operators battle weak demand in some struggling European economies. Regulatory changes, such as cutting the charges operators can impose to connect calls across networks, have also been a drag.

Results on Tuesday, however, showed some of the pressures in its biggest European markets had eased. While service revenue remained negative in the four big markets of Germany, Italy, Britain and Spain, all four showed an improvement on the previous quarter.

(Reuters)