India troubles see Vodafone slump into the red
Mobile phone giant Vodafone has slumped into the red with annual losses of 6.1 billion euro (£5.2 billion) after taking a mammoth hit on its Indian arm.
The group confirmed a 3.7 billion euro (£3.2 billion) writedown on its under-pressure Indian business after striking a deal in March to merge the operation with Idea Cellular to help tackle a raging price war in the country.
Vodafone also suffered a 15.8% plunge in underlying earnings in the UK as it was hit by falling sales and the impact of the pound's plunge since the Brexit vote.
Overall underlying earnings lifted 5.8% to 14.1 billion euro (£12 billion), excluding the Indian division, and the group forecast stronger profit growth of up to 8% over the current financial year.
Vittorio Colao, group chief executive of Vodafone, cheered the group's "confidence in the outlook" as he announced a 2% rise in the dividend payout to investors despite the hefty bottom line loss.
The Indian writedown comes after it has suffered from the emergence of a new competitor in the once lucrative market, with new network Jio blowing rivals out the market by offering free calls and data until April 1.
Vodafone's deal with Idea Cellular will see it own a 45% stake in the new entity, which will give it greater might in the Indian market and deliver cost savings of around 10 billion US dollars (£8 billion).
But the group is also suffering amid stiff competition in its domestic UK market, where service revenues fell 17%, or 3.3% with the impact of the weaker pound stripped out.
UK earnings plunged 31% to 1.2 billion euro (£1 billion) including the exchange rate hit from the pound, or 15.8% lower excluding currency changes.
But it said there was "good momentum" in UK broadband, with 33,000 customers added in the final three months of its year to March 31 on a net basis - those joining less those leaving.
Vodafone added that growth across the wider European business slowed in the second half of the year, with service revenue up 0.1% in the final quarter as it was knocked by regulation on roaming charges.
Vodafone said it had begun to turn the corner for customer service in the UK after major billing system errors in 2015 led to a £4.6 million fine from Ofcom for "serious breaches" of consumer protection rules.
The group said: "We have now resolved these challenges, with billing accuracy improving to 99.9% and customer service levels now above those achieved prior to the implementation of the new system."
But it admitted the turnaround in customer service had not fed through yet to financial performance.
Vodafone, which operates in 26 countries, saw shares rise 4% as investors were cheered by the dividend hike and on the better profits outlook for the new financial year.
Analysts at Jefferies said Vodafone's earnings guidance for the year ahead was "well ahead" of market expectations and contrasts with rival BT's "more hesitant outlook" last week.