Hammering for Vodafone pulls Footsie into the red

Jul 23 2008 by Peter McCusker, The Journal

RATTLED investors gave Vodafone a stock market hammering after the mobile phone giant warned of revenues at the bottom end of hopes.

Its shares fell as much as 16% – wiping more than £11bn off the value of the business – and dragging the FTSE 100 Index into the red virtually single-handed.

Vodafone has suffered from weaker trading in the UK and Spain, as well as lower-than-expected sales of equipment such as handsets and USB data cards in the three months to June 30.

This will leave annual revenues at the foot of its expected range of between £39.8bn and £40.7bn.

Vodafone has escaped the full extent of the falls seen by the wider Footsie during the past year as investors sought a safe haven for their money.

But Collins Stewart analyst Mark James downgraded Vodafone following the update. He said: “Perhaps it was always too good to be true. The Spanish and UK telecoms markets, resilient to the economic slowdown to date, finally look to have cracked.

“It seems likely that earnings expectations, regardless of management’s statements, are likely to get scaled back.”

Sweden’s Ericsson also hit sentiment in the sector yesterday after a 70% fall in second- quarter profits in the wake of disappointing trading at its Sony Ericsson mobile joint venture.

The firm warned of slowing market growth in mid to high-end phones and increased competition. It expects tough market conditions to prevail for the rest of 2008.

Vodafone’s slide marks a disappointing exit for Arun Sarin as he prepares to hand over the reins to deputy chief executive Vittorio Colao next week after five years in charge.

Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said: “The CEO would not have wished for these numbers as a swansong, nor the accompanying share price performance.”

Vodafone said business in Spain has been hit by heavy competition and a fall-off in customer spending as consumers tighten their belts.

In the UK, organic revenue growth slipped to 2.1%, which the group also put down to continued competition in the UK market and signs of an economic slowdown.

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