Vodafone writes down value of Italy and Spain units

Vodafone is to receive another big dividend from Verizon Wireless in the US

Vodafone has written down the value of its units in Spain and Italy by £5.9bn which the firm has blamed on the tough market conditions in the two countries.

The news came as the mobile phone firm reported a pre-tax loss of £492m for the six months to 30 September, against an £8bn profit a year earlier.

But there was better news from Verizon Wireless, a US business of which Vodafone owns 45%.

It said on Monday that it would pay an $8.5bn (£5.4bn) dividend.

The dividend is due to be paid to its owners - Verizon Communications and Vodafone - by the end of the year.

It is the second dividend that Verizon Wireless has paid this year, following a $10bn one in January.

For several years before that, Verizon Wireless had been using its spare cash to pay off debt instead of paying dividends.

Vodafone said it expected to receive £2.4bn of the Verizon dividend and plans to use part of it to start a £1.5bn share buyback programme.

Under such a programme, a company buys its own shares and cancels them, which increases the value of the existing shares.

There was better news for broadband, TV and home phone company Talk Talk, which has seen an improvement in its subscription numbers.

Shares in the company ended up 18% after it reported a net loss of 4,000 customers (the difference between those who join and leave) in its second quarter. This compares with a net loss of 19,000 in its first quarter.

Write-off 'disappointing'

Announcing its latest results, Vodafone chief executive Vittorio Colao said: "Our results reflect tougher market conditions, mainly in southern Europe."

But he added that he was positive about longer term opportunities, partly as a result of the group's "attractive and growing exposure to emerging markets", such as India and Turkey.

Richard Hunter, from Hargreaves Lansdown stockbrokers, said: "The wider market has held concerns over southern Europe for some time now, and these numbers from Vodafone are uncomfortable proof that the financial fears are well-founded.

"News of the impairment in Spain and Italy is very disappointing, whilst organic revenue overall has fallen and net debt has risen."

Revenue in southern Europe fell 17.5%, including an 8.2% decline due to the euro weakening against the pound.

Vodafone said the pressure from price competition and continuing economic problems in the eurozone had been partially offset by improved revenue from data services, as more people had smartphones.

It said customers in Italy and Spain had been reducing their spending on mobile phone tariffs because of economic weakness in those countries.