Vodafone Group PLc, the world's largest mobile phone operator by revenue, has warned of a sharper than expected reduction in its profit margin in 2009-10, saying that competition in India was taking its toll.
India nonetheless continues to be the UK group's key market, accounting for 65 per cent of its new customer additions. And despite the cutthroat competition, its revenues from India grew 23 per cent on a year-on-year basis.
Vodafone tried to reassure investors by revealing a $1.6 billion cost-cutting programme. It also held out the possibility of a dividend from Verizon Wireless, the US mobile operator in which Vodafone has a 45 per cent stake, during 2011. Last year Vodafone said a pay-out was unlikely until 2012.
The first half performance was boosted by sterling's weakness, acquisitions, and a £1.7 billion ($2.85 billion) impairment charge in the equivalent results for 2008-09. Underlying revenue fell 3 per cent and earnings before interest, tax, depreciation and amortisation dropped 8 per cent.
Vodafone said in May that its EBITDA margin was expected to decline by 1.8 percentage points in 2009-10, but on Tuesday said the deterioration was expected to be 2.1 percentage points.
This is partly because of the price war in India. Its Indian business recorded an EBITDA margin of 24 per cent in the first half of 2009-10, against 28.4 per cent in the same period last year.