Vodafone, the UK-based mobile phone company, yesterday unveiled one of the biggest post-acquisition writedowns, saying increased competition and tougher regulation had cut its expectations of long-term growth in the industry.
The decision to cut the value of goodwill on its books by between £23 billion (€33.74 billion) and £28 billion marked a low point in Vodafone's relations with its shareholders. Several said the move would increase pressure on Arun Sarin, the group's chief executive.
The group said recent price competition in mature markets and the threat from new technologies such as internet telephony, had prompted it to lower its long-term growth assumptions.
The "overall proportionate mobile revenue growth", Vodafone's preferred measure, would be in the range of 5-6.5 per cent, the company said. This was below the guidance it gave a month ago that organic growth would be in the middle of a 6-9 per cent range.
Some of the group's largest shareholders had already expressed their deteriorating confidence in Mr Sarin's ability to deliver strong returns. "This will only swell their ranks," one of the company's top-10 investors said yesterday.
Mr Sarin repeated that he had the board's full support, and only one big shareholder expressed dissatisfaction in public.
David Cumming, Standard Life's head of investments, said: "This further downward revision to guidance highlights that Vodafone has to review its global strategy in light of continued operational disappointment." Vodafone shares fell in London by more than 5 per cent initially before closing down 3¼p at 113¾p.
"It's another incremental worsening of management expectations," said Robert Grindle at Dresdner Kleinwort Wasserstein (DKW).
"It will put Sarin under more pressure. The more the share price falls, the more pressure he will be under."
The firm is facing increased competitive intensity and lower mobile tariffs in several of its key markets in Western Europe, notably Germany and Italy. - (Financial Times service, Reuters)
