Vodafone cuts revenue outlook

By Kate Holton and Sven Nordenstam

LONDON/STOCKHOLM (Reuters) - Vodafone (VOD.L) cut its revenue outlook on Tuesday, knocking confidence in the telecoms sector and dragging down shares in European rival Telefonica (TEF.MC) and supplier Ericsson (ERICb.ST).

The world's biggest mobile group by sales was hit by consumers delaying buying new phones, sending its shares to a 20-month low and wiping about 10 billion pounds off its market value.

Ericsson (ERICb.ST) reported better-than-expected results but these were overshadowed by Vodafone's warning of a tough economic outlook and the news reverberated throughout the sector, hitting Spain's Telefonica (TEF.MC) and others.

"We are beginning to see an impact from the current economic environment which is greater than we expected," outgoing Vodafone Chief Executive Arun Sarin told investors and analysts on a conference call.

Collins Stewart analyst Mark James said telecoms companies had shown remarkable resilience to date to the macro-economic slowdown, but Vodafone had kicked off the telecoms results season with a reminder that nobody was immune.

Dutch KPN (KPN.AS), Norway's Telenor (TEL.OL), Nordic operator TeliaSonera (TLSN.ST) and Belgium's Mobistar (MSTAR.BR) and Belgacom (BCOM.BR) are all due to report quarterly results later this week.

"This shatters the widespread perception that Vodafone will be defensive in a weakening economy," Investec analyst Jonathan Groocock said. "The Spanish and UK telecoms markets, resilient to the economic slowdown to date, finally look to have cracked."

The biggest single cause of Vodafone's woes was an unexpectedly sharp fall in the Spanish market, where large numbers of immigrant construction workers who had been Vodafone customers left the country as the housing market slowed.