Vodafone today reported its first fall in annual revenues since 2005 and a 90 percent fall in profits, as the firm battles tough economic conditions in southern Europe.

The operator said full-year revenues fell by 4.2 percent to €52.5 billion as the recession in southern Europe hit it particularly hard.

Service revenues there fell by almost 17 percent to €11.3 billion as Italy declined by 12.8 percent and Spain dropped by 11.5 percent.

Consequently, Vodafone said it has revised down the value of its Italy and Spain businesses by a further €2.1 billion, bringing the total write-down for the year to €9.1 billion.

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

Service revenues were also down 3.2 percent to €14.5 billion in Africa, the Middle East and Asia-Pacific, but there was better news in Northern and Central Europe where sales were up 2.8 percent to €22.1 billion.

Profit for the year totaled just €793 million – a 90 percent fall on last year – but Colao said he remained "very excited" about the firm's long-term growth prospects.

US mobile operator Verizon Wireless, which is 45 percent-owned by Vodafone, performed well again, with Vodafone receiving a 30.5 percent rise in profits - to €7.5 billion.

The company added that it would keep a €2.4 billion dividend payment from Verizon, rather than returning it to shareholders.

"Thanks to further strong progress this year in our key areas of strategic focus - data, enterprise and emerging markets - and an excellent performance from Verizon Wireless, we have achieved good growth in adjusted operating profit and adjusted earnings per share," Colao added.

Last month, Verizon denied reports that it was planning to acquire or merge with Vodafone.

Steven Hartley, telecoms strategy analyst at Ovum, described Vodafone's results as a "continuation of the story" of the challenges facing Europe's telecoms firms.

"Ovum has always maintained that the primary goal of Europe's telcos is to stabilise their performance at home," he said.

"Emerging markets are good but our forecasts for 2017 warn of 'emerging maturity' as emerging market growth slows."

A combination of a more robust economy and telcos taking an innovative and pragmatic approach to their operations will help stabilise European performance, Hartley added.

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