Vodafone: A Bad Omen for Europe?
- added July 23, 2008
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- unclepete
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A cut in the wireless company's sales forecast makes investors fear the slowdown in Spain could spread elsewhere on the Continent.
When Finnish handset maker Nokia (NOK) came in with better than expected quarterly results on July 17, the telecom sector was encouraged. Sales and shipments of Nokia's handsets were up. Just as important, a big part of the Finnish company's growth in the quarter came from Nokia Siemens Networks, its joint venture in telecom equipment with Siemens (SI). Sales for the network business surged 18% in the quarter, to more than $6.34 billion. The market took that as an indication demand remained strong for mobile handsets, despite economic uncertainty, and telcos would still put money into building and upgrading wireless networks.
But that optimism evaporated on July 22, when Vodafone (VOD), the world's largest mobile-phone company, reduced its sales forecast. The company said organic growth was lower than the previous quarter, primarily due to a decline in customer spending in Spain, which it characterized as a difficult "macroeconomic and competitive environment."
Vodafone's news was seen as an ominous sign that telecom operators, which have thus far been shielded from the economic slowdown, are starting to feel the pinch. The fear is the slowdown in Spain will spread elsewhere in Europe and that telco operators will respond by cutting back orders of mobile handsets and networking equipment.
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When Finnish handset maker Nokia (NOK) came in with better than expected quarterly results on July 17, the telecom sector was encouraged. Sales and shipments of Nokia's handsets were up. Just as important, a big part of the Finnish company's growth in the quarter came from Nokia Siemens Networks, its joint venture in telecom equipment with Siemens (SI). Sales for the network business surged 18% in the quarter, to more than $6.34 billion. The market took that as an indication demand remained strong for mobile handsets, despite economic uncertainty, and telcos would still put money into building and upgrading wireless networks.
But that optimism evaporated on July 22, when Vodafone (VOD), the world's largest mobile-phone company, reduced its sales forecast. The company said organic growth was lower than the previous quarter, primarily due to a decline in customer spending in Spain, which it characterized as a difficult "macroeconomic and competitive environment."
Vodafone's news was seen as an ominous sign that telecom operators, which have thus far been shielded from the economic slowdown, are starting to feel the pinch. The fear is the slowdown in Spain will spread elsewhere in Europe and that telco operators will respond by cutting back orders of mobile handsets and networking equipment.
Read more...
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