Vodafone to focus on cost control after revenue cut

Mobile phone group Vodafone cut its full-year revenue outlook for the second time in four months on Tuesday but said it would maintain profits and boost free cash flow by cutting 1 billion pounds ($1.6 billion) of costs.

Investors and analysts welcomed the focus on cost controls and on improving performance, instead of on growth by expansion, pushing shares in the world's largest mobile phone group up 9.5 percent to 118.6 pence by 1125 GMT in a falling wider market.

Vodafone Group Plc, reporting its first set of figures under new Chief Executive Vittorio Colao, also reported first-half results that met expectations, but said conditions would be challenging.

Vodafone is rated A- by both Standard & Poor's and Fitch Ratings and Baa1 by Moody's Investors Service.

Vodafone said it had reviewed its strategy due to the more difficult economic environment and said it would focus on growing mobile data and on its execution in emerging markets.

It will also focus on driving operational performance and strengthening capital discipline.

"We are already represented in most of the key emerging markets, where significant growth is expected in the coming years," it said. "Our principal focus now will be on execution in these markets."

Analysts at Cazenove said the new strategy made sense and others welcomed the suggestion that Vodafone would focus on its current markets rather than chase further acquisitions.

But Society Generale said investors should sell into strength and said the results benefited from favourable currency movements.

"This is a large downgrade pre-currency and highlights the cyclicality of Vodafone," it said in a note.

Telecoms groups had previously been seen as resilient to a downturn, but so far this year the European telecoms shares have not done any better than the wider market.