Broker snap: Competitive pressures rise for Vodafone

20th Jul 2012 12:53

Jefferies has maintained its 'hold' rating for telecoms group Vodafone saying that the highlight of the first-quarter statement is the uptick in competitive pressures across several markets.The figures came in slightly below consensus estimates. In particular, group service revenues grew 0.6% compared with the forecast of 0.8% growth, with growth having slowed in Italy, UK, Czech Republic, Greece, Portugal, Romania, India and Turkey.The broker said: "While management continues to note macro pressure leading customers to optimise tariffs, especially in Italy/Spain, more intense competitive pressures are also now emphasised in these markets as well as Greece and Portugal." Meanwhile, competitive pressures in the UK hare arisen from rivals introducing new unlimited tariffs."We see downside risk to consensus controlled free cash flow forecasts at three levels (lower revenues, less scope to stabilise margins through lower commercial costs, weaker euro)," the broker said.Jefferies says that the results have reinforced its view that Vodafone's dividend pay-out ratio is getting "uncomfortably tight".The broker has kept its 180p target price on the stock.By 12:51 on Friday, shares were trading 2.32% lower at 210.6p.BC