Vodafone (VOD) reported first-half results that slightly outperformed our expectations, and we will likely increase our 223p fair value estimate by a small amount. Our narrow moat rating remains unchanged. The firm's reported revenue declined 2.3% year over year, versus our full-year projection of a 3% decline. The strength of sterling continues to be a headwind; in local-currency terms, revenue grew 2.8%.
Vodafone's primary growth driver remains its Africa, Middle East and Asia Pacific, or AMAP, region, which increased revenue by 4.2% in reported terms and 8.8% in local terms. India continues to add wireless subscribers, with its base up 7% to 188.2 million, and data usage jumped 74%. However, data pricing has become more competitive recently, and we expect this to continue, as Reliance Jio has entered the market. In our view, this new entrant, who enjoys deep pockets and large spectrum holdings, will likely become increasingly aggressive in its promotions in order to gain scale once it develops confidence in its network capabilities. However, offsetting a potentially more hostile Indian market, Vodafone saw solid improvements in its operations in South Africa and Turkey.
Importantly for the future, the firm is seeing a recovery in many of its European markets, with seven of 13 generating service revenue growth. In reported terms, revenue declined 4.8%, but it actually increased slightly in local-currency terms on an organic basis before acquisitions. We are particularly happy to see Vodafone formally launch its quad-play services in Spain and Germany, where it has now integrated its acquired cable TV businesses with its wireless operation to offer a true converged product. In our view, convergence will be key to future competition.
Vodafone's EBITDA margin came in at 28.6%, versus our full-year projection of 28.5%. We think the shares are fairly valued.
