Vodafone received no relief from tough market conditions in the first quarter, with a slowdown in Spain and South Africa resulting in another heavy drop in its key revenue measure.

The world’s second-biggest mobile operator said the pace of decline in organic service revenue, which strips out items such as handset sales and currency movements, accelerated to 4.2 per cent in the three months to June 30.

That compared with a rate of 4 per cent, including a full contribution from Italy, in the last quarter of its past financial year.

Chief executive Vittorio Colao said the year had started in line with the company’s expectations and its performance had improved in markets such as Germany.

“Through our commercial actions and investment, our performance is beginning to stabilise quarter-on-quarter in several of our European markets, with customer appetite for 4G services clearly growing,” Colao said yesterday.

The limited number of analysts who provide forecasts for the first quarter had on average expected group service revenue to decline by 4.2 per cent.

Vodafone has had to contend with the impact of changes in regulation and weakened demand in struggling European economies. This quarter the damage was done by regulatory changes in South Africa, which cuts some of the fees it could charge, resulting in flat growth for its Vodacom unit against 5.1 per cent growth last quarter.

A further deterioration in Spain, where competition increased and the market shifted towards cheaper SIM-only deals, resulted in service revenue falling 15.3 per cent, versus a 12.6 per cent drop last quarter.

Improvements were seen however, in Germany, Italy and Britain, where the rate of decline moderated, the company said.