Mobile group Vodafone cut its full-year revenue outlook and will reduce costs by 1 billion pounds, but it increased its forecast for free cash flow after reporting first half results slightly ahead of expectations.
The world's largest mobile phone company by revenues, which also maintained its forecast for adjusted operating profit, now expects full-year group revenues to be between 38.8 billion pounds ($61.25 billion) to 39.7 billion.
It is the second time Vodafone has cut the forecast after saying in July it expected full-year revenues at around the bottom of its previously forecast range of 39.9 billion pounds to 40.7 billion pounds.
"Operating conditions are expected to continue to be challenging in Europe given ongoing competitive and regulatory pressures and recent economic conditions in certain markets," the group said.
"Whilst the current economic environment is also impacting emerging markets, increasing market penetration is expected to continue to result in overall strong growth for the EMAPA (emerging markets) region."
Analysts said first half results were good and the revenue cut had been expected, and they welcomed the company's comments on free cash flow and the dividend.
The group said it would introduce a "progressive" dividend policy.
First half revenue was slightly ahead of forecasts, up 17.1 percent at 19.9 billion pounds, earnings before interest, tax, depreciation and amortization (EBITDA) were in line with forecasts at 7.2 billion pounds and adjusted operating profit was up 10.5 percent to 5.8 billion pounds.
Analysts had been expecting first-half revenues of 19.6 billion pounds, EBITDA of 7.2 billion pounds and adjusted operating profit of 5.6 billion pounds, according to Reuters Estimates.
Vodafone said it remained comfortable with its liquidity and committed to its single A credit rating.
"Given our credit rating and the current level of cash flow and dividends, this leaves limited debt capacity," it said.
"We expect to reduce current operating costs by approximately 1 billion pounds per year by the 2011 financial year to offset the pressures from cost inflation and the competitive environment and to enable investment in revenue growth opportunities"
It said it had reviewed its strategy after entering into more difficult macroeconomic environment and said it would focus on growing mobile data revenues, from surfing the Internet or sending pictures, and on its execution in emerging markets.
It will also focus on driving operational performance and strengthening capital discipline.
"We are already represented in most of the key emerging markets, where significant growth is expected in the coming years," it said. "Our principal focus now will be on execution in these markets, in particular in India, Turkey and our African footprint."
