Summary:

The rise of smartphones has meant a big boost in data use and data revenues, but in many cases that is still not offsetting declines for mob…

The rise of smartphones has meant a big boost in data use and data revenues, but in many cases that is still not offsetting declines for mobile operators in other areas, a trend illustrated by Vodafone’s quarterly results, issued today.

Group service revenue growth — which includes Vodafone’s retail offerings such as voice, messaging and data services — rose by 1.5 percent to £10.9 billion. That included an 8.7 percent growth in emerging markets like India but also included a 1.3 percent decline in service revenues in the much bigger market of Europe. The decrease in mobile termination rates (the fees paid between operators when traffic from the others’ networks goes to the others), which have been mandated by regulators, has also played a significant role.

Overall revenues were up 3.5 percent to £11.7 billion, which slightly beat analysts’ projections, according to Bloomberg.

We could see further declines looking ahead. A research note from Morgan Stanley, released after the results, noted that service revenues could further decline by as much as one percent in the next quarter.

The operator now has some 382 million customers across its footprint, with nearly 80 percent of them on prepaid contracts.

Data revenue: This was up grew by 24.5 percent to £1.5 billion, with emerging markets leading in growth rate (41.4 percent versus 19 percent growth in Europe).

Data now accounts for 13.7 percent of Group service revenue. Mobile internet revenues were up 44.1 percent in Europe and 52.7 percent in the rest of the world. In contrast, voice revenues are around five times that amount, at £6.7 billion, and declined by 4.2 percent.

Smartphones trumping mobile broadband: Across Vodafone’s footprint, smartphones make up 19.5 percent of the devices on its networks.

Vittorio Colao, the CEO, noted in the earnings call that he expects that to rise as the company continues to introduce cheaper smart devices to the market, particularly in emerging economies where smartphone usage is lower compared to regions like Europe. In Europe the aim is to make smartphones 70 percent of all new devices on its network by the end of this year.

Interestingly, he noted that its data revenues did not seem especially affected by services like WiFi hotspots potentially offloading traffic. Only two percent of usage came from these, he said.

There is also a question on what is happening with mobile broadband, which in contrast to mobile data only grew six percent. Is that a sign that dongle-based adoption has peaked or that the operators is turning its focus from pushing it as much as before?

Tablets, he noted, were counted like smartphones rather than PCs using dongles on its network.

Spain: The continuing economic problems and competitive pressures in Europe have hit Vodafone (NYSE: VOD) hard. That has been particularly acute in Spain where it had a 9.9 percent decline in revenues to £1.14 billion. Spain, Greece, Portugal, Italy and Ireland are all being written down by Vodafone to the tune of £6.1 billion, a move originally annnounced in May.

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