Vodafone (VOD) reported solid fiscal 2011 results. Revenue increased 3.2% from the previous year, ahead of the 2.4% we expected thanks to acquisitions and currency movements. Service revenue on a comparable basis increased 2.1%. The Africa, Middle East, and Asia Pacific region provided the majority of the firm's growth, with sales improving 11.8%. The two major businesses in the region, India and Vodacom, increased revenue 16.2% and 5.8%, respectively. Vodafone's Indian subscriber base continued to show strong growth, jumping 39% during the year to 136.9 million, but average revenue per user declined as many of these new customers have lower incomes and use their phones less. We expect the rate at which the firm adds subscribers will decline, with the trend toward lower ARPU continuing.
Vodafone's strongest revenue growth by country was in Turkey, in the firm's European division. The Turkish unit's revenue jumped 28.9% year over year, continuing the strong rebound that has followed a rebranding and significant network upgrade. The contract customer base in the country popped 86% to 4.7 million, allowing a significant improvement in ARPU.
Operations in much of the rest of Europe struggled because of mobile termination rate cuts, increased competition and weak economies in peripheral countries. The Greek business was the hardest hit, with service revenue falling 19.4%. As a result of higher government interest rates and lower cash flows, Vodafone wrote down the value of its stakes in Spain, Italy, Ireland, Greece, and Portugal by a total of £6.15 billion ($10 billion).
The firm cut costs faster than we had expected, allowing its EBITDA margin to come in at 32%, ahead of our estimate. We expect Vodafone's margins to decline as a result of further MTR cuts and continued weakness in the economies of Southern Europe.
Vodafone also increased its dividend 7.1%, in line with its goal of increasing dividends at least 7% annually through fiscal 2013. With the asset sales Vodafone has completed and the stock it is buying back, we think the firm will be able to continue to increase its dividend. The one additional asset sale that we expect in the short term is its stake in Polkomtel in Poland, where an auction is ongoing. We expect Vodafone to hold on to its stake in Verizon Wireless for some time yet.
