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Vodafone Joins BT Warning of Pressures on International Corporate Business

February 2, 2017, 10:32 PM UTC
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The Vodafone Group Plc logo sits illuminated on top of a telecommunications mast in Berlin, Germany, on Thursday, Nov. 5, 2015. Liberty Global and Vodafone ended talks about an exchange of assets -- the companies' operations overlap the most in the U.K., Germany and the Netherlands -- denying the cable and mobile-phone giants a chance to consolidate in their key markets. Photographer: Krisztian Bocsi/Bloomberg via Getty Images
Krisztian Bocsi — Bloomberg via Getty Images

Vodafone, the world’s second-biggest mobile operator, said on Thursday that the rate of growth in its international business division had slowed, echoing a similar warning given by British rival BT last week.

BT, Britain’s dominant fixed-line telecoms operator that provides networked IT and cloud services to companies and governments around the world, had said that it had seen a marked slowdown in its international order book, prompting it to take a more cautious approach to the sector.

Vodafone (VOD), reporting its third-quarter results on Thursday, said it was also seeing lower rates of growth in its global enterprise division, and said it was taking a more disciplined approach to agreeing contracts.

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Neither spelled out whether the slowdown in spending was due to concerns by corporate customers for the global economy or whether it reflected competitive pressures from cloud service specialists such as Amazon Web Services.

“Global enterprise used to grow (around) 5%, now it’s 2, so yes there is a deceleration,” Vodafone Chief Executive Vittorio Colao told reporters.

“What I hear, what I see is there is a pressure on revenues and we are a little bit stricter on the profitability of some contracts, so we don’t always bid to the last penny to win.”

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BT issued a major profit warning last week, with the business hit by a slowdown in British government work and an accounting scandal discovered in its Italian business.

The firm also said it had seen a drop in new work from multinational companies, forcing it to lower its growth forecasts for the unit.

“We’re taking action to address this trend,” BT Finance Director Simon Lowth told analysts. “We are now more cautious on the outlook for the international markets for this year and next and we’ve revised downwards our expectations of future growth rates in this part of our business.”

IT research firm Gartner has predicted that spending on global communications services will rise by 1.7% this year, while it expects IT services to rise by 4.2%.