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Vodafone takes $9.4-bn writedown on Europe

Reuters/London 14 Nov 12 | 12:43 AM

Vodafone wrote down the value of its business in Spain and Italy by £5.9 billion ($9.4 billion) and lowered its full-year outlook on Tuesday after reporting its first fall since 2010 in its key organic service revenue metric.

The British company posted a 1.4 per cent fall in group organic service revenue in the second quarter due to the sharp slowdown in its southern European business.

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It also said it expected its free cash flow for the year to be in the lower half of the guidance range for the full year.

Vodafone was hit by customers trying to make fewer calls in southern Europe, the weakening of currencies in its major markets and the slowdown of still-solid growth in emerging markets such as India and South Africa.

It has been helped however by the strong performance of its joint venture Verizon Wireless in the United States. It said it expected to get a £2.4 billion dividend from Verizon Wireless by the end of the year and said it would start a £1.5-billion share buyback programme.

"We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular," Chief Executive Vittorio Colao said.

"In the short-term, however, our results reflect tougher market conditions, mainly in Southern Europe."

Group service revenue, which reflects ongoing income and not one-off items such as handsets, was down 1.4 per cent on an organic basis in the second quarter. It was down by 11.3 per cent in southern Europe, up 0.7 per cent in northern Europe and up 4.1 per cent in its emerging markets.

Espirito Santo analyst Will Draper said the top-line revenue and earnings looked to be in line but said free cash flow had missed forecasts.

Free cash flow for the first half was £2.2 billion , compared with an analyst forecast of £2.5 billion.

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