Vodafone Q3 results hit by weak southern Europe

Vodafone posted third-quarter results slightly below forecasts as increasingly tough trading in Spain and Italy overshadowed solid performances in emerging markets and northern Europe at the world's largest mobile operator.
Vodafone, which kept its outlook for the year unchanged, said on Thursday group organic service revenue from the provision of ongoing services to customers was up 0.9%, compared with an analyst forecast of 1.1%.
European organic service revenue was also worse than expected, down 1.7% as the financial squeeze on consumers in Italy, Spain and Greece from austerity measures pulled down solid performances in the two big northern markets of Britain and Germany.
Analysts had been expecting Europe to be down by 1.4%. Spain and Italy were both particularly weak, down 8.8% and 4.9%, respectively.
"Europe service revenue decreased by 1.7%, a 0.5 percentage point deterioration compared to the previous quarter, reflecting increased economic pressures in a number of markets," the group said.
Espirito Santo analyst Will Draper said the figures were slightly below the consensus published by Vodafone a few weeks ago. However, he said the company had cautioned in recent days that trading had toughened in southern Europe.
"The one source of trauma is Italy," he told Reuters. "Spain looks slightly better than expected although it's still bad. The figures are a shade light against the consensus but what has happened since then is that much weaker consumer confidence in Italy has obviously had an impact.
"They're sticking to all of their full-year guidance, so that is encouraging."
Balancing out southern Europe, growth within the faster-growing division of Africa, Middle East and Asia Pacific, known as AMAP, was 7.6% – solid but slightly below the forecast of 8.3%.
Service revenue in Britain was up 1.1% while Germany was up 0.7% , with both being driven by consumers using their mobile phones to access the internet.
"Despite the further deterioration of the southern European economic environment during the quarter, our broad geographic mix is delivering a resilient overall performance," Chief Executive Vittorio Colao said.
Vodafone's free cash flow for the period was at 1.46 bln pounds ($2.3 bln), slightly below forecasts at 1.58 bln pounds, while capital expenditure was trimmed by 5% on the previous year.