Vittorio Colao, Chief Executive, commented:
“Our results continue to reflect very difficult market conditions in Europe. We are addressing this through firm actions on cost efficiency, and continuing to invest in areas of growth potential. We continue to make progress in our Vodafone 2015 strategy, with good revenue growth in data and emerging markets, the launch of LTE services in another four markets and the acquisition of new spectrum. Vodafone Red, our new strategic pricing approach in Europe, has been launched in five markets with positive early take-up, and to drive growth in enterprise we have created a new enterprise business unit and accelerated our integration plans for Cable & Wireless Worldwide.”

Group overview
Reported Group revenue for the quarter was £11.4 billion and Group service revenue was £10.4 billion. On an organic basis Group service revenue decreased by -2.6%. Excluding the impact of MTR cuts, Group service revenue decreased by -0.4%. Our emerging market1 operations continued to grow and we saw an increasing uptake of data services across the Group, but this was offset by macroeconomic, regulatory and competitive pressures across Europe which intensified in the quarter.

Northern and Central Europe service revenue decreased by -0.9%, a -1.6 percentage point decline compared to the previous quarter. In Germany service revenue declined by -0.2%*, reflecting a cut in MTRs on 1 December 2012, lower gross customer additions, and an ARPU decline in the consumer contract segment. Service revenue in the UK fell by -5.2% with a decline in ARPU and lower out-of-bundle usage. In the Netherlands service revenue fell by -3.5%, with a decline in roaming revenue and out-of-bundle usage, and increased popularity of value plans in the market. In Turkey service revenue grew by 18.4%* driven by strong growth in data and enterprise, and the continued expansion of the contract customer base.

Southern Europe service revenue fell by -11.9% , a -0.6 percentage point decline compared to the previous quarter, with market conditions remaining difficult. In Italy service revenue declined by -13.8%, impacted by lower MTRs as well as ongoing competitive and macroeconomic pressures. In Spain service revenue declined by -11.3% with a lower customer base following our decision to remove handset subsidies for a period earlier in the year, competitive pressures in the value segment and the increased popularity of converged consumer offers in the market. In AMAP service revenue grew by 2.7%, a slowdown of -1.4 percentage points from the previous quarter. In India service revenue was up 9.0% with the benefits of a more stable competitive environment offset by the impact of new subscriber verification rules and regulations relating to messaging and processing fees. Data revenue growth in India continues to be strong and we now have 2.5 million 3G subscribers. Service revenue growth at Vodacom slowed to 1.9% with a decline in South Africa, reflecting competitive pricing pressures and a lower level of customer additions, offset by continued strong growth in the international businesses. In Australia service revenue fell by -16.0%. The business continues to focus on network improvements and arresting weakness in brand perception. Despite continued macroeconomic and political uncertainty service revenue in Egypt grew by 3.1% with a continued increase in the take-up of data services. Group data revenue grew by 12.8% to £1.7 billion and now accounts for 16.2% of Group service revenue. 33.4% of our European customers now use smartphones, compared to 24.4% at December 2011.

Vodafone Red has now been launched in five markets and early take-up has been positive with over two million customers so far. Integrated voice, SMS and data plans now represent 62.0% of consumer contract revenue in Europe with 48.3% of European mobile service revenue now in-bundle.

Enterprise revenue decreased by -2.5% with a decline of -11.3% in Southern Europe partially offset by growth of 0.8% in Northern and Central Europe driven by new customer wins, and 5.9% growth in AMAP. Our Vodafone Global Enterprise business, which serves our multinational customers, continues to grow, adding 118 new accounts and growing service revenue by 3.6% in the quarter. Vodafone One Net, our converged fixed and mobile proposition targeted at small-to-medium-sized businesses, increased the number of users by 33.4% year-on-year to 2.4 million, helping to drive fixed enterprise revenue growth of 10.5%. We continue to see significant demand for machine-tomachine (‘M2M’) services and now have 9.7 million connections. The Group has created a new Group Enterprise unit consisting of four vertical teams: Vodafone Global Enterprise, Vodafone Carrier Services, Machine-to-Machine Solutions, and Hosting and Cloud Services. We have also accelerated the Cable & Wireless Worldwide (‘CWW’) integration plan to realise better the growth opportunity from offering converged services to our enterprise customers. VZW continues to perform strongly. Organic service revenue grew by 8.7%* led by strong growth in accounts and rising average revenue per account (‘ARPA’) driven by increased smartphone penetration (now 58.1% of the retail postpaid base) and take-up of 4G LTE services. VZW’s 4G LTE network now covers a population of more than 273 million and handles almost 50% of all data traffic. Net debt at 31 December 2012 was US$9.3 billion (31 December 2011: US$0.7 billion net cash) after payment of an US$8.5 billion dividend to its parents. Capital expenditure of £1.5 billion in the quarter was broadly similar to the previous year. Our investment remains focused on network quality in terms of coverage, reliability and speed.

Vodafone Group plc