Vodafone hit by turmoil in Europe as sales fall

Tough economic conditions in Italy and Spain have hit Vodafone

Mobile giant Vodafone's full-year sales have slipped for the first time in eight years after tough economic conditions in Europe hit revenues.

Annual revenues fell 4.4% to £44.4bn, after the firm cut prices in Europe in an attempt to retain customers.

In Italy service revenue fell 12.8%, while in Spain it dropped 11.5%.

Vodafone said it had written down the value of its businesses in Italy and Spain by a further £1.8bn, taking the total writedown for the year to £7.7bn.

The writedowns meant that earnings after taxation plunged to £673m in the group's financial year to the end of March, compared with £7bn in 2011-2012.

"We have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment," chief executive Vittorio Colao said.

However, Mr Colao said he remained "very excited" about Vodafone's longer term prospects.

Verizon Wireless, the US mobile operator 45%-owned by Vodafone, was the one bright spot in the results. Vodafone received a 30.5% year-on-year rise in the profits from its stake to £6.4bn.

There has been speculation over whether Vodafone will sell off its stake in Verizon Wireless, worth an estimated £88bn, an amount almost equal to Vodafone's total market capitalisation.

However, on a conference call following the results Mr Colao said that he had "nothing new to announce" about its stake in Verizon Wireless, and added that it was a "fantastic asset".