Economic woes hit the telecom sector

Economic woes hit the telecom sector

So far the wireless sector has some how avoided the doldrums of the economic havoc that’s upon the financial and other sectors. Vodafone’s announcement might have changed that. The UK based operator cut its revenue forecast and had a bleak future outlook.

From NYT

PARIS — New evidence that the European economic slowdown was hitting consumers emerged Tuesday as the Vodafone Group, the British cellphone operator, warned that its results would suffer.

“There’s a big macroenomic picture that’s playing through, and frankly, as a company, we’re not immune to it,” the chief executive, Arun Sarin, said in a conference call.

He said Vodafone, the world’s largest cellphone operator, was cutting its revenue forecast for the year to around $79.6 billion, the lower end of its previous estimate.

Mr. Sarin said business was weaker in Britain and throughout Europe, but that the picture was particularly bleak in Spain, which like Britain, Ireland and the United States, was undergoing a painful adjustment as a property bubble deflated.

The decline in the Spanish housing industry has led many of its customers among the migrant work force there to go home. As a result, revenue growth in the Spanish market has stalled after years of 10 percent or more annual increases.

“The business isn’t falling apart,” he said, “but within this business that’s a segment that’s having a hard time.”

He noted that the company had not changed its forecast for full-year profit of £11 billion to £11.5 billion or $21.9 billion to $22.9 billion. Shares of Vodafone fell nearly 15 percent in London afternoon trading, giving them a loss of nearly 21 percent in the last 12 months. Telefónica, Vodafone’s main rival in Spain, fell 7.4 percent in Madrid.

Mark James, an analyst at Collins Stewart, said telecommunications companies had displayed remarkable resistance to the economic slowdown, but that Vodafone had shown that they could not hold out indefinitely.

“The Spanish and U.K. telecoms markets, resilient to the economic slowdown to date, finally look to have cracked,” he told Reuters.

Results from Ericsson, the Swedish maker of wireless networking gear, also hurt technology stocks. Ericsson’s shares fell 9.3 percent in Stockholm after it said second-quarter net profit fell 70 percent, to about $320 million from a year earlier. Revenue rose 2 percent.