The world's largest wireless services provider, Motley Fool Inside Value pick Vodafone (NYSE:VOD), gave investors some cheery news Thursday in its interim management report on first-quarter results. The company logged a 7.5% increase in revenue (4% organic growth) to $17 billion with the addition of 9.1 million customers. Though the number pales compared with behemoth China Mobile's (NYSE:CHL) 321 million customers, Vodafone's 232 million customers are bigger spenders on average.
The highlight of the report was growth in the emerging markets segment, where service revenue was up 18.2%. Vodafone spent more than $15 billion to acquire operators in India and Turkey, where year-over-year subscriber growth this quarter was 75% and 32%, respectively. These operators and others in emerging markets are helping offset meager growth in saturated Europe, where competition is intense.
Verizon Wireless -- Vodafone's joint venture with Verizon Communications (NYSE:VZ) -- did its part by kicking in 1.6 million new subscribers. Vodafone has been under pressure from shareholders to spin off its U.S. assets, but management defends the decision to continue to hold its 45% stake in Verizon Wireless as the best course of action for shareholders. Vodafone believes the business, a prized asset that sports better operational metrics than competitors AT&T (NYSE:T) and Sprint Nextel (NYSE:S), will continue to appreciate in value.
One major concern threatening a significant portion of revenue for Vodafone and competitors France Telecom (NYSE:FTE) and Deutsche Telekom (NYSE:DT) has been an EU mandate to lower roaming fees across member nations. But Vodafone said it has already lowered customer roaming fees by 40% since the summer of 2005, and initiatives to increase voice minutes used have largely offset the lower rates.
Strong growth of 32.2% in non-messaging data revenue is also helping to make up for voice revenue that is showing anemic growth, and even declines, across most developed markets. The rollout of third-generation (3G) services and subsequent uptake of multimedia services is already helping the bottom line, and should improve it in future quarters.
Overall, the numbers were good enough for Vodafone management to reiterate its outlook for the balance of the fiscal year. And if the company continues to execute well and make continued progress in recent acquisitions, there's even room for positive surprises in the future.
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Fool contributor Dave Mock is fired up about many things, including naps, sunbathing, and leisurely strolls. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. China Mobile is a Global Gains recommendation, and France Telecom is an Income Investor recommendation. The Fool's disclosure policy is en fuego.
