After a remarkable run against a sagging economy that has sucker-punched many industry sectors, it appears the telecom sector is beginning to show signs of wearing down. In particular, Vodafone cut its revenue outlook today, citing that consumers were putting off buying new wireless devices. The effect of the news also dragged down shares of Vodafone’s competitor Telefonica as well as its equipment supplier Ericsson.
Vodafone said in a statement that full-year sales were forecast to be at the low end of its guidance range of between $79-$81 billion. The operator blamed part of the slowdown on the market in Spain where a home construction slump caused many immigrant workers, and Vodafone subscribers, to leave the country. It also cited lower-than-expected equipment revenue.
Meanwhile, Ericsson reported a 70% collapse of net profit for Q2 and a two-thirds fall in operating margins. Ericsson’s share price dropped 8.52% on the news.
Vodafone shares fell 14.4%, pulling the European telecoms index shares down 7.8%. Telefonica shares fell 7.5%, Deutsche Telekom 6.4% and France Telecom 4.4%.
Although the operator pointed fingers at the economy, some analysts said the European mobile markets were reaching saturation and the revenue slowdown was inevitable.
Belgium’s Mobistar and Belgacom, Dutch KPN, Nordic operator TeliaSonera and Norway’s Telenor are all due to report quarterly results later this week.
In January, AT&T CEO Randall Stephenson and Verizon Communications COO Dennis Strigl disagreed on how the U.S. economy was affecting each company’s performance. When Stephenson pointed to the recession as a reason for an increase in bad debt at the carrier, AT&T stock dropped and the U.S. telecom market shivered. On the other hand, Strigl said that his small business and enterprise markets were performing as expected, although he had noted a slight increase in some subscribers not paying their bills.