Vodafone Banks on Emerging Markets; India Looks Promising
Vodafone Group plc (VOD) reported mixed financial numbers for the six-month period ended Sep 30, 2014. Adjusted earnings per share declined 46.5%, while revenues increased 8.9% year over year on a reported basis. The revenue upside was primarily driven by an 18.6% jump in sales in the European region. The company is banking on expansion in emerging markets including Eastern Europe, India and Africa, and growth in machine-to-machine, near-field communications for improved profits.
Vodafone is also building its mobile financial services brand – M-Pesa – by implementing developmental initiatives mostly in the African continent. Currently, Vodafone has 200,000 active M-Pesa agents globally and it has processed 2.8 billion worth of transactions last year. M-Pesa is now available across 10 markets covering 18.5 million customers, increasing at a healthy rate of 16% year over year. Moreover, India holds a lucrative business opportunity with 700 million untapped customers in the mobile financial services segment. The company aims to tap this market with nearly 56,000 agents, covering 65% of the rural areas, which is way higher than coverage of various banks in rural India that accounts for only 5%.
Vodafone had already completed a 100% stake acquisition of its Indian joint venture, Vodafone India, in Apr 2014. Further, on May 7, Vodafone fortified its relation with French telecommunications company, SFR, by renewing its alliance for a span of four years. The company also entered into a Partner Market agreement with Rogers Communications in Canada on Jun 3, 2014.
On the downside, Vodafone’s core European wireless markets are highly matured, given high subscriber penetration rates. Over the next two to three years, the company will likely struggle to counter declining voice revenues. Further, weak economic conditions have compelled consumers to switch to cheaper alternative services offered by Vodafone’s competitors. This may weigh on the company’s future performance.
Vodafone currently has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked stocks worth considering in this sector include SK Telecom Co. Ltd. (SKM), BlackBerry Limited (BBRY) and Chunghwa Telecom Co., Ltd. (CHT). SK Telecom sports a Zacks Rank #1 (Strong Buy), whereas BlackBerry and Chunghwa Telecom hold a Zacks Rank #2 (Buy).
Read the Full Research Report on SKM
Read the Full Research Report on CHT
Read the Full Research Report on VOD
Read the Full Research Report on BBRY
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