Vodafone said it did not expect any let-up in the pressures weighing on its business, as the world’s second-largest mobile operator reported first-quarter results hit by regulation and recession across Europe.

The British group, battling regulator-ordered price cuts, economic pressures and competition throughout its European markets, said on Friday it expected the next three months to follow broadly the same trends after reporting yet another sharp drop in its key revenue measurement.

With competition increasing in its once-reliable markets of Germany and Britain, and with Italy and Spain posting double-digit revenue falls, Vodafone posted a 3.5 per cent drop in its key organic service revenue figure in the three months to June.

The fall in the measure – based on revenue from providing ongoing services and stripping out the impact of one-off costs such as handset sales – was slightly improved on the record 4.2 per cent fall in the fourth quarter.

But it is still another sharp drop for a group that was posting growth only 12 months ago.

It said the performance was in line with expectations, allowing it to reiterate its outlook for the year and sending its shares up half a per cent.

“Conditions in Europe remain challenging in Northern, Central and Southern Europe,” chief executive Vittorio Colao said.

The falls across the core region of Europe took the shine off some of Vodafone’s better-performing businesses, including India which showed signs of stability and an increasing demand for internet services after years of a ferocious price war.

“Vodafone’s first quarter was in line with consensus expectations but the detail points to a further deterioration in revenue trends in the core European businesses,” analysts at Espirito Santo said.

The tougher competition in Germany has surprised investors who only last year saw the market as a haven of growth and high margins.

Vodafone, with 454 million mobile customers globally, reported a worse-than-expected 5.1 per cent drop in service revenue in Germany and 4.5 per cent in Britain.

Spain, where Vodafone has struggled throughout the downturn, was down 10.6 per cent and Italy down 17.6 per cent.