There is always a problem corner in Vodafone's empire - first it was Turkey, then Spain, then the UK - now it is India
There is always a problem corner in Vodafone's empire. Two years ago, it was Turkey. Then it was Spain. Then it was the UK, where O2 used its exclusive rights to the iPhone to secure the most significant gains in market share in ages.
These headaches are usually resolved before long (Vodafone will be selling iPhones next year, for example) but the latest worry is slightly different.
India is supposed to be Vodafone's biggest and most exciting bet in emerging markets. It still fits that description but growth rates have slowed from 34% a year ago to 18%. An intense price war has raged since the Indian government allowed more competition into the market and it shows no sign of abating.
Vodafone's investors long ago accepted that their company offered utility-style returns in western Europe but hoped that the likes of India and South Africa would provide fizz. But the script requires the boom periods in these countries to last longer than a couple of years. It would be ridiculous, of course, to file India under "mature market" already but consolidation of the mobile industry– the next logical step – is not happening either.
In the meantime, shareholders have the usual consolations. Chief executive Vittorio Colao thinks he can wring another £1bn of cost savings out of the business. In the US, Verizon Wireless, where Vodafone owns 45%, is producing impressive sums of cash – about $10bn a year. The problem, of course, is that none of it is flowing into Vodafone in the form of dividends. That will change eventually but probably not before 2011.
Vodafone's 3.5% increase in its interim dividend captures the slow rate of progress. The various pots of gold remain tantalisingly out of reach.
Copyright Speakers Corner 2016