Vodafone plunges into heavy loss

Vodafone slumped into a net loss of almost £2.0 billion during its first half on massive writedowns of assets linked to indebted eurozone countries Spain and Italy, the British mobile phone giant said Tuesday. Vodafone posted a loss after tax of £1.977 billion ($3.138 billion, 2.473 billion euros) for the six months to September 30, following one-off charges of £5.9 billion linked to financial turmoil in the two eurozone nations. The net loss compared with profit after tax of £6.679 billion in the first half of Vodafone's 2011-12 financial year, the company said in its earnings statement. Vodafone also dived into a pre-tax loss of £492 million in the reporting period, compared with profit of £8.01 billion last time around. Total revenue slid 7.4 percent to £21.78 billion. Chief executive Vittorio Colao said the latest results "reflect tougher market conditions, mainly in southern Europe" which would continue to impact the company in the short term. However he voiced optimism about the longer term owing to Vodafone's growth in emerging markets such as India and Turkey. Vodafone took a hit of £3.2 billion linked to its operations in Spain and an impairment charge of £2.7 billion for Italy during its first half. The company added that it would carry out a share buyback totalling £1.5 billion on receipt by the end of 2012 of a £2.4-billion dividend from US company Verizon Wireless, in which Vodafone has a 45-percent stake. "We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular," Colao said. "We remain very positive about the longer-term opportunities." In the wake of the earnings and share buyback announcements, Vodafone's share price sank 2.46 percent to close at 162.5 pence on London's benchmark FTSE 100 index, which ended up 0.33 percent at 5,786.25 points. "The European outlook is far from comforting and the shares have paid the price... for these factors," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers. "Even so, positives remain for this behemoth of the telecoms industry. The payout from Verizon is yet another vindication of Vodafone's decision to retain its stake, enabling it to embark on a further share buyback programme. "Meanwhile, the growth of data usage continues apace, and the emerging markets businesses are looking healthy." The weak eurozone economy remains a major concern for Vodafone and other large European companies after Spain's biggest airline Iberia last week announced plans to axe 4,500 jobs to save the loss-making carrier from collapse. Spain's economy is in deep recession as an austerity programme chokes consumer spending amid unemployment that has surged to more than 25 percent of the workforce. And the eurozone's fourth-largest economy is hovering on the edge of a sovereign bailout, after already securing a eurozone rescue loan of up to 100 billion euros ($127 billion) for its banks. In Italy, unemployment has also shot higher since the heavily debt-laden country entered into recession at the end of last year.