Vodafone cuts revenue forecast

Mobile group Vodafone cut its full-year revenue outlook and will reduce costs by £1 billion, 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 (€30.489 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 to £40.7 billion. "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.

"While 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 per cent at £19.9 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) were in line with forecasts at £7.2 billion and adjusted operating profit was up 10.5 per cent to £5.8 billion.

Analysts had been expecting first-half revenues of £19.6 billion, EBITDA of £7.2 billion and adjusted operating profit of £5.6 billion, 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.