Comment: Vodafone revenues reliant on currency swings

24th Jul 2009 09:07

Vodafone saw revenues rise 9.3% in the quarter to June boosted by exchange rate movements and acquisitions but if you strip those out, the like-for-like figures were fairly grim.Almost all the regions were lower compared to the same period last year. Europe, where Vodafone gets around 70% of its revenues, was down due to the tough conditions created by the recession and stiffer competition. Germany, Spain and the UK all saw a fall in revenue on a like-for-like basis. Italy was the only area to show a gain. Africa and Central Europe revenues were up 26.3% with the help of Vodacom. But organically, that region too was lower, down 2.6% and if Vodacom is taken out of the equation, the figure is even grimmer.The only area with no nasty surprises was Asia Pacific and Middle East. Service revenue in the region was up 14.3% on an organic basis thanks to the stellar growth seen in India.The majority of Vodafone's revenue is denominated in foreign currencies and is translated into sterling when figures are reported, which makes the group's forecasts very susceptible to exchange rate movements. It said today that trading is in line with expectations in the current financial year, assuming its foreign exchange assumptions stay the same. At the present moment, the group's overall revenue may be benefiting from the weak pound but if the currency gets firmer in the year that could change. Vodafone pointed out that a 1% swing by Sterling against the dollar or the euro will impact adjusted operating profit by £60m and £40m respectively. So if the currency swing becomes more negative by the end of the financial year, not only will the like-for-like revenue growth figures be in negative territory, overall revenue growth in certain areas will be in the red too.