By Paul Sandle
LONDON (Reuters) -Vodafone reported a sharp downturn in top market Germany in its second quarter, hit by a change in the law on TV sales and competition in the enterprise sector, sending its shares down 4.5% on Tuesday.
But the British company said growth in Turkey, Africa and other European markets offset the customer losses in Germany, helping revenue grow in the first half of its financial year and keeping it on track to meet its full-year forecasts.
Shares in Vodafone (NASDAQ:VOD) fell to a three-month low of 69 pence in early deals.
Chief Executive Margherita Della Valle said Vodafone had delivered in-line overall results, and the building blocks were in place to return Germany to growth after the TV transition.
“A transformation on this scale will take time but the direction of travel is clearly the right one,” she said, adding that she had installed new management in Germany.
Vodafone reported first-half service revenue of 15.1 billion euros ($16.1 billion), up 4.8% on an organic basis, and a 3.8% rise in adjusted core earnings to 5.4 billion euros, meeting market forecasts.
Service revenue in Germany fell 6.2% in the second quarter compared with a 1.5% fall in the first.
Although the change in the law to end bulk TV sales to apartment blocks accounted for most of the drop, increased competition in the enterprise market also took a toll, finance director Luka Mucic told reporters.
Vodafone has lost 4.5 million of its 8.5 million TV customers in apartment blocks as a result of the law change in July. It also lost 88,000 broadband customers in the half.
Mucic said the revenue impact from the law change in the current quarter would be similar to the 3.8 percentage points seen in the second, before it started to taper in the fourth.
Della Valle said approvals for her deals to sell Vodafone Italia to Swisscom (SIX:SCMN) and to merge Vodafone UK with Hutchison’s Three UK were nearing conclusion.
Britain’s Competition and Markets Authority said last week it believed the deal could be “pro-competitive”.
Vodafone reiterated its guidance to deliver core earnings of around 11 billion euros and adjusted free cash flow of at least 2.4 billion euros for the full year.
($1 = 0.9403 euros)