Vodafone set to hit lower end of earnings outlook amid growing competition

Mobile giant Vodafone warned it will only meet the lower end of its full-year earnings outlook as it faces mounting competition in the UK and India

MOBILE phone giant Vodafone has cautioned it will meet the lower end of its full-year earnings outlook as it faces mounting competition in the UK and India.

The group reported a 3.2 per cent drop in organic UK service revenues over its third quarter to December 31, with chief executive Vittorio Colao blaming "heightened price competition" in its business services division Enterprise.

On a reported basis, UK revenues plunged 19 per cent to £1.7 billion.

Revenues also fell 1.9 per cent in India, or 5.5 per cent on a reported basis, as it has been hit by the launch of new rival Jio, which is offering customers free services.

Vodafone revealed on Monday that its Indian unit is in discussions over an all-share merger with Idea Cellular in a deal that would create India's biggest telecoms firm.

Overall group revenues were 3.9 per cent lower in the final three months of 2016, with organic service revenues up 1.7 per cent but down 3.2 per cent on a reported basis.

Shares fell more than 2 per cent as Vodafone said it expects to meet the lower end of its underlying earnings growth range of 3 per cent to 6 per cent.

Mr Colao said: "In the UK we have made good progress in improving customer service but face heightened price competition in Enterprise.

"We anticipate intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions, including the extension of 4G services to 17 leading circles.

"As announced earlier this week, we have also entered discussions with the Aditya Birla Group about an all-share merger of Vodafone India and Idea."

It said it added 99,000 contract customers on an underlying basis in the UK over its third quarter thanks to better customer service, but this excludes 125,000 customers quitting due to a "one-off customer base adjustment".

Vodafone said it saw a 32,000 consumer broadband customer increase in the third quarter, taking the total to 183,000.

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