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Vodafone cash supply choked as Europe tightens pursestrings

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Vodafone Group's UK revenue dropped more than five per cent in its third quarter ended 31 December 2012, demonstrating that Northern Europe just isn't the counterweight to southern losses it used to be.

The UK was particularly bad, thanks to intense competition from Telefonica (O2) and EE's 4G monopoly - which stole profitable customers away. Critically, out-of-bundle use was down as customers cut down on calls in an effort to shave costs. This, combined with a legislated cut in Mobile Termination Rates, made the UK a poor performer in Vodafone's last quarter.

Overall, the group saw revenue down by a little more than two per cent, compared to the same period in 2011, though still hitting £11.4bn in the last three months of 2012. Interim statements don't give figures for profit, but the company reckons it is on track to make more than £11bn (but less than 12) in profit over the course of 2013.

That's despite revenue being down across most of Europe, but income from Germany is only down a smidgen and growth in Turkey turns the revenue figure across Northern & Central Europe into an upward trend, if only a little.

Southern Europe is heading firmly downwards, with revenue down more than 10 per cent. That's partly down to the same mandated cut in termination rates, but is also down to fewer customers stepping outside their bundle - this is in turn partly because Vodafone is offering bigger bundles to avoid customers leaving and to lure prepaid customers onto contracts.

More than half the European revenue is now coming from bundles, with 48.3 per cent coming from out-of-bundle spending and assorted other stuff.

Growth in India has also slowed down, with customers disappearing thanks to new regulations requiring them to prove their identify to the operator. Indians now comprise 33.1 million of the Vodafone group's 400 million customers, and are rapidly getting into data as smartphones penetrate the subcontinent.

Almost 10 million of Vodafone's customers are machines these days, so they're easy money as they don't need much support, but conversely, very rarely exceed their data allowance, so aren't very profitable.

This is just an interim statement, not full accounts, and it wasn't as bad as some had predicted, so Vodafone shares rose two per cent almost immediately.

Vodafone says its cost-cutting measures will make for a better future. The UK network-sharing deal with Telefonica, for example, only kicked off in November, so hasn't had a chance to save either company money yet. ®

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