Vodafone slashes revenue outlook due to regulatory pressure and lower demand in Europe

Telecom Lead Europe: Leading mobile operator Vodafone on Tuesday
announced it is lowering medium-term target for revenue growth mainly due to the
drop in customer spending in southern Europe and the increasing pressure from
regulators, Reuters reported.

The company’s group organic service revenue from the
provision of ongoing services to customers was up 1.5 percent in the year, with
Europe down 1.1 percent and Africa, Middle East and Asia Pacific up 8 percent,
the report said.

The company’s strong performance in emerging markets as well
as in Germany and Turkey has offset a slump in spending in Spain and Italy.

The company now expects organic service revenue growth in
2013 to be slightly below its previous medium term target range of 1-4 percent.
The change in growth target is mainly attributed to sluggish trading in Italy
and Spain as well as the regulatory and foreign exchange pressures the company faces

Vodafone is largely hit by the austerity measures adopted by
several European countries. Tax rises, inflation and muted wage growth have
forced consumers to cut spending. The change is more significant in Spain, Italy
and Greece.

Meanwhile in India, the telecom major is facing
severe financial crisis following the tax controversy surrounding the Hutchison
buy. Vodafone U.K. is facing Rs 20,000 crore tax demand in India following the
controversial tax issue.

In another recent regulatory crisis surrounding Vodafone in India, the company, along with other telecom
providers in India including Tata Teleservices and Dishnet (Aircel), was framed
by TRAI for allegedly causing losses to the Indian government by booking higher
revenues towards long-distance calls.

TRAI, in its communication to the telecom department, said
that these three companies were booking higher revenues in their STD business
to avoid higher license fee. The regulator has also pointed out that telcos
share only 6 percent of their revenues from long distance with the government.

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