Vodafone Hit By Declines Across Europe

Mobile phone giant Vodafone has seen its quarterly revenue decline across key markets in Europe and the UK.

Total group service revenue for the first quarter, ending June 30, was down 3.5% at £10.15bn.

Vodafone said conditions in Europe remain "challenging", with its revenue in Italy down 17.6%, Spain down 10.6% and other southern European markets down 13.6%.

The company said quarterly revenue was also down 4.5% in the UK and down Germany 5.1%.

It cited a "challenging macroeconomic and competitive environment" for its decline in Italy and Spain.

Although it was the first phone operator in Spain to launch faster 4G services, in May, the loss of customers was not stemmed.

However, it did see good growth in Africa, the Middle East and Asia Pacific regions.

Revenue was up 13.8% in India, with data usage up 29% compared to the previous quarter.

The overall performance in Q1 was in line with management's expectations.

Chief executive Vittorio Colao said: "We have made a good start to the year in our areas of strategic focus - growth in emerging markets has accelerated.

"Although regulation, competitive pressures and weak economies, particularly in southern Europe, continue to restrict revenue growth, we continue to lay strong foundations for the longer term."

Net debt at the end of June was £24.9bn, a reduction of £2.1bn on the previous quarter.

:: In late Friday trades in London Vodafone shares were up around 1%.

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Fracking Water Warning As Tax Break Announced

UK water companies have warned shale gas 'fracking' should not be allowed to compromise public health as the Chancellor unveiled plans for a "generous" tax relief regime for the industry.

Water UK policy and business adviser Dr Jim Marshall said public health should not be put at risk by attempts to cash in on the controversial energy resource.

"Provision of drinking water is a cornerstone of our public health and as such a service that cannot be compromised," he said.

"There are arguments for and against fracking and the water industry is not taking sides. If it goes ahead, we want to ensure corners are not cut and standards compromised, leaving us all counting the cost for years to come.

"We want greater clarity from the shale gas industry on what its needs related to water are really going to be and a true assessment of the impacts."

George Osborne's planned new shale gas allowance will more than halve the tax due on a proportion - which will be determined following consultation - of income from production in order to encourage exploration of the unconventional energy resource in the UK.

Supporters say fracking will reduce the UK's reliance on energy imports

The backing from the Treasury comes after a recent report from the British Geological Survey revealed there was twice as much shale gas in the north of England as previously thought. Other areas of the country could also be exploited for the gas.

Ministers believe the experience of the US, which has seen a shale gas boom, shows it could boost tax revenues, create jobs, reduce energy imports - which have reached record highs in the UK - and bring down household fuel bills.

George Osborne said: "Shale gas is a resource with huge potential to broaden the UK's energy mix. We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.

"This new tax regime, which I want to make the most generous for shale in the world, will contribute to that. I want Britain to be a leader of the shale gas revolution - because it has the potential to create thousands of jobs and keep energy bills low for millions of people."

But opponents warn that the process for extracting shale gas, by fracturing rock with high-pressure liquid to release the gas, or "fracking", can cause earthquakes, pollute water supplies, blight the countryside and affect house prices.

Questions have also been raised about how much of an impact efforts to develop home-grown shale resources will have on household energy bills, and environmental campaigners warn a new "dash for gas" will undermine efforts to develop clean energy, cut emissions and create green jobs and growth.

Environmentalists warn against 'industrialising' the countryside

Greenpeace energy campaigner Lawrence Carter said: "The Chancellor is telling anyone who will listen that UK shale gas is set to be an economic miracle, yet he's had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable.

"Experts from energy regulator Ofgem to Deutsche Bank and the company in receipt of this tax break, Cuadrilla, admit that it won't reduce energy prices for consumers.

"Instead we're likely to see the industrialisation of tracts of the British countryside, gas flaring in the Home Counties and a steady stream of trucks carrying contaminated water down rural lanes."

New planning guidance on shale gas is set to be published by the Communities Department as the Government attempts to drive forward exploration.

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Blaze: Innovation Aims To Keep Cyclists Safe

By Naomi Kerbel, Sky News

Inventor Emily Brooke gave up reading physics at Oxford University to study product design at Brighton. The gamble paid off.

She graduated top of her year, was sent on an entrepreneurial scholarship to America and has raised thousands of pounds to develop her invention Blaze.

A keen cyclist, Ms Brooke was inspired when cycling around town.

The inventor was inspired by her own experiences as a cyclist

She noticed how often motorists failed to spot her, particularly at night, so she decided to find a way to make cyclists more visible.

She began developing Blaze, a super-bright LED with a laser which projects the image of cyclists up to six metres ahead of the bike.

The aim is to alert motorists that the cyclist is coming well before they have arrived.

Ms Brooke hopes the warning image will be striking enough to alert motorists to the passage of a cyclist through heavy traffic or along dark city roads.

She is launching Blaze in the autumn and then hopes to take it worldwide, as well as developing other products for cyclists.

:: For more on Blaze, watch the latest episode of The Lab, Sky News' science and technology partnership with Yahoo!

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Petrol Prices Set To Jump By 5p Over Summer

Petrol pump prices could soar 5p a litre - burning a hole in the pockets of holiday motorists, the AA has warned.

A surge in the wholesale cost of petrol across Europe has already led to a rise in UK petrol and diesel prices, with more misery possibly to come, the AA said.

On average, UK petrol prices have risen from 134.61p a litre in mid-June to 135.78p now, while diesel has gone up from 139.16p a month ago to 140.24p now.

The AA said: "A $100-a-ton increase in the cost of petrol across northwest Europe, combined with a weaker pound, heralds a potential 5p increase in pump petrol costs."

It added that should petrol go up 5p a litre then a family from Hounslow in west London, for example, heading off on holiday in a typical family car to Cornwall will pay £2.90 more for the return trip than it would have done in June.

The AA said a survey of last year's visitors to Cornwall found that 26% of visitors came from London and southeast England so that for every 100,000 trips to Cornwall from London and the South East, with 86% of visitors coming by car, the petrol price spike could siphon nearly £250,000 away from the tourism industry into the pockets of the fuel industry.

At present, London and the North West have the cheapest petrol, at 135.5p a litre on average.

Northern Ireland, although enjoying the smallest price rise over the past month, is still the most expensive region for petrol at 136.6p.

Scotland and East Anglia share the position of most expensive areas in the UK for diesel, both averaging 140.8p a litre, while the North West has the cheapest, at 139.7p.

AA president Edmund King said: "After the price of petrol stabilised at around 134.6p a litre through much of this June, and weeks were filled with beautiful weather and sporting excellence, it was perhaps inevitable that oil and fuel market speculators would cast a black cloud over what was promising to be a glorious summer."

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Gulf Keystone Close To Ending Shareholder Row

By Mark Kleinman, City Editor

The London-listed oil explorer Gulf Keystone Petroleum is on the brink of resolving a row with some of its leading shareholders with a deal that would avert a revolt against its new chairman.

Sky News understands Gulf Keystone is poised to announce that it will accept the nominations of four new independent directors to its board following a row over their credibility with investors led by M&G, the fund management arm of Prudential.

The quartet will include Jeremy Asher, a former director of the company, who quit the board several years ago after falling out with Todd Kozel, the chief executive.

Gulf Keystone recently labelled Mr Asher "a disruptive influence" and cast doubt on his professional credentials.

Under the proposed agreement, Gulf Keystone will also appoint at least two of its own candidates to join the board, including Philip Aiken, a former head of BHP Billiton's energy operations.

In return, the reform-minded shareholders, which also include Capital Research Global Investors, would agree to support the election of Simon Murray as Gulf Keystone's chairman, and the continued chairmanship of board committees by other directors.

The current chairman of the remuneration committee, Mehdi Varzi, and Ali al Qabandi, another non-executive director, would step down from the board, insiders said.

People close to the talks cautioned that the volatile nature of discussions in recent weeks between Gulf Keystone and its shareholders meant it was possible that the proposed deal could still fall apart.

If it does get signed off by the Gulf Keystone board, it would represent a welcome compromise for both sides in the wake of one of the ugliest corporate governance disputes at a major public company for some time.

Friday is the final day on which investors can submit votes for the annual meeting, which takes place in Bermuda later this month.

The rebel shareholders have been supported by a group of Malaysian investors and are confident that they will have sufficient backing to secure the election of their nominees.

Investors have long been unhappy with governance and pay at Gulf Keystone, which specialises in exploring for oil in Kurdistan but which has seen its share price fall sharply during the last year.

Mr Kozel has been a divisive figure at the helm of the company. People familiar with the situation said that his ex-wife, Ashley, was likely to use her roughly 17 million shares to vote against the company at the AGM.

Gulf Keystone has been one of the most controversially-governed companies on London's junior AIM market and scrutiny by shareholders has been intensified by the apparent intention to move its listing to the main market.

Mr Kozel's £8.8m award for 2012 actually represented a sharp decline on his pay in the previous year, which topped $22.2m (£14.4m).

Mr Kozel has sought to defend his remuneration by arguing that Gulf Keystone has delivered more than £1bn of value to shareholders and a return of more than 4,000% since the company's listing.

An ally of his said recently that the chairman's pay reflected an "overall balanced mix of remuneration and reflects exceptional performance for the year and confidence in future cash flows".

However, Gulf Keystone's shares have fallen sharply from highs triggered by takeover speculation, while it has also been embroiled in legal action brought by a former adviser which has claimed it is owed roughly £1bn in compensation.

Gulf Keystone declined to comment.

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Greece: Wealthy Shipowners To Bail Out Economy

The owners of Greece's wealthy shipping industry, under fire over low tax bills amid recession and austerity, have agreed to help out the struggling economy.

The government says the agreement with the Hellenic Shipowners Association will bring in about 140m euros (£120m) a year.

According to an official statement, 441 shipping companies with 2,769 ships will make voluntary payments over a three-year period.

Prime Minister Antonis Samaras said: "The agreement for your voluntary participation in the state budget with 90% of the fleet sailing under a Greek flag, and 65% of the fleet sailing under a foreign flag, is truly moving."

The government estimates it will be worth about 75m euros (£64m) for the rest of 2013 and up to 140m euros in a full year.

The Merchant Marine Ministry said in a statement: "The signing of the agreement confirms the willingness of the shipping community to voluntarily contribute, for three years, to the national efforts in stabilising the country's economy."

Greek shipowners are leaders in their sector internationally, controlling about 15% of the world's merchant fleet, but only about a third of their vessels sail under the Greek flag.

Greece is going through its sixth consecutive year of recession amid brutal austerity cuts and pressure for more jobs to be slashed in the public sector.

This has increased resentment against the shipowners because vessels registered under foreign flags generate profits in low-tax regimes, and in Greece the shipping sector benefits from special tax advantages.

Earlier this year, the shipowners were forced to accept a tax imposed on vessels sailing under foreign flags.

Greece's merchant marine sector accounts for more than 48% of the country's balance of payments, topping the list between 2009 and 2011, followed by tourism.

The announcement of the voluntary payments comes after the Greek parliament approved a package of further reforms putting thousands of public sector jobs at risk.

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OECD Warns Of 'Double-Tax Chaos' For Firms

By Ed Conway, Economics Editor

The OECD has raised the prospect of a global tax war, with companies caught having to pay double the levels of previous years, unless countries agree to a new international deal on corporate tax avoidance.

In a landmark report, the Organisation for Economic Co-operation and Development has warned that the international agreements set up in the 1920s to prevent companies paying double the tax on their profits in different countries could be abandoned, leaving "chaos" in their wake.

The warning came as it presented a 15-point action plan aimed at tackling tax avoidance by multinational companies such as Google and Starbucks.

It said that many companies - particularly those involved in the digital and internet sectors - were able to reduce their tax bills by shifting profits around the world to areas where rates are lowest, taking advantage of 90-year old rules aimed at preventing them being charged tax twice in different countries.

The perverse upshot of these League of Nation "double taxation" rules, it pointed out, was "double non-taxation".

However, it warned that unless Governments agreed an international scheme to police this, countries were likely to throw away the existing rules, resulting in "the replacement of the current consensus-based framework by unilateral measures, which could lead to global tax chaos marked by the massive re-emergence of double taxation".

The report added: "In fact, if the Action Plan fails to develop effective solutions in a timely manner, some countries may be persuaded to take unilateral action for protecting their tax base, resulting in avoidable uncertainty and unrelieved double taxation."

The report was delivered as finance ministers from the G20 group of nations met in Moscow for their annual meeting.

The OECD's hope is that the action plan is adopted either at this conference or at the heads-of-state meeting in St Petersburg next month.

However, some countries, including Russia and the United States, have expressed concern about the consequences of rewriting international corporate tax agreements that have been in place for almost a century.

The OECD plan suggests an investigation into measuring the creation of value in internet firms (in order to identify where taxes ought to be paid), as well as proposals to tackle complex structures which help companies avoid tax.

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Google And Microsoft In Mobile Device Struggle

Tech giants Google and Microsoft have seen significant share price slides, hours after they revealed worse-than-expected second quarter results.

The market sell-off saw Microsoft lose more than 11% in Friday trades, while Google's share price, which was down nearly 4% earlier in the day, recovered to finish 1.55% down.

The negative sentiment occurred after the results showed both firms struggling to adapt to a small-screen, mobile world.

Although Google was a trendsetter for desk-based computer searches, it now appears to have hurdles with advertising amid the technological transition to smartphones and tablets.

The devices pose a financial challenge for Google because their smaller screen sizes fetch lower ad rates than the marketing spend made on traditional desktop and laptop computers.

Google's average ad rate fell by 6% from the same time last year during the three months ending in June.

It marks the seventh consecutive quarter that Google's average ad price, or cost per click, has fallen from the previous year.

The magnitude of the declines had eased in each of the previous three quarters, raising hopes that the worst was over.

Instead, things deteriorated from the 4% decline in ad rates posted during the first three months of the year.

Google earned $3.2bn (£2bn) in the quarter, up 16% from $2.8bn (£1.81bn) a year earlier, with gross revenue up 19% to $14.1bn (£9.2bn).

But after subtracting Google's ad commissions, revenue stood about $275m (£180m) below analyst projections.

Meanwhile, Microsoft also missed forecasts and struggled to ship one million Surface tablets in each of the last two quarters and has a meagre 2% of the market's share.

Microsoft's revenue grew 10% to $19.9bn (£13bn), with a net income between April and June of $4.97bn (£3.2bn), but it incurred a $900m (£590m) write-down over the poor sales of Surface.

The results came a week after the company announced a major reorganisation to help it transform into a "devices and services" company that is less reliant on providing software for personal computers.

The quarterly profit missed by Microsoft was the most in a decade and raised new questions as to whether the transition will succeed.

Both Windows 8 and the Surface tablet represent Microsoft's big bets on the tablet computer market as PC sales continue to decline.

Research firms IDC and Gartner said last week that global PC shipments fell 11% in the April-June quarter - the fifth consecutive quarterly decrease.

Acknowledging the company's difficulties with the change, Microsoft chief financial officer Amy Hood told investors that "this journey will take time".

On Thursday both IBM and chipmaker Intel reported their own struggles amid a decline in PC sales.

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2012 Olympics Have Given UK A £10bn Boost

By Paul Kelso, Sports Correspondent

The UK economy has received a massive trade and investment boost from the London Olympic and Paralympic Games, according to a new report.

It says additional export sales have brought in £5.9bn, while £1.5bn has come from firms winning new contracts and £2.5bn from new foreign investment.

The latter includes the redevelopment of London's Battersea Power Station by a Malaysian consortium and projects involving the Chinese technology company Huawei.

Prime Minister David Cameron said: "This £9.9bn boost to the UK economy is a reminder to the world that, if you want the best, if you want professionalism, if you want jobs done on time and on budget then you should think British.

"With companies across the country we are harnessing the Olympic momentum and delivering the lasting business legacy of the Games that will help make Britain a winner in the global race.

"But that's not where the good news ends. The Games are also delivering a strong social legacy.

The success of UK athletes has not had a dramatic effect on participation

"Last summer, Games Makers changed the way Britain views volunteering. Since then, thousands of people have been inspired to get involved with their local sports clubs."

Business Secretary Vince Cable has rejected claims the £9.9bn figure is exaggerated.

"It has been independently audited and not been plucked out of the air," he told Sky News.

He also rejected suggestions a lot of the investment would have happened anyway, saying: "The people who've done the analysis have adopted a method of working that tries to screen that out."

Research carried out for the Government suggests that over the long term the total benefit could reach up to £41bn by 2020.

With four golds, David Weir was one of Britain's star performers

But a poll conducted exclusively for Sky News suggests a lasting legacy for sport and volunteering is proving harder to achieve.

The poll found that while more than half of respondents believe the Games delivered on their promise to "inspire a generation", the vast majority were unmoved to take up a new sport or commit to volunteering.

Asked if London 2012 had inspired them to take up a new sport or recreation activity, 88% said it had not.

Among existing participants there was also very little impact, with 80% of those asked saying the Olympics had not prompted them to do more sport.

Among volunteers there was a similar picture, with 89% of respondents saying they had not increased the amount of time they gave as a result of the Olympic example.

The Aquatics Centre may encourage the public when it opens next year

Just 6% said they had done more and 3% said they had done less.

While the results challenge the notion that the Olympics could transform behaviour, they do offer some comfort to organisers of what was otherwise a hugely successful Olympics.

Among 16 to 18-year-olds, responses were more positive, with 20% saying they had tried a new sport, 31% saying they had done more sport and 21% saying they had spent more time volunteering.

The poll also revealed mixed attitudes to the Games one year on.

Lord Coe says he believes more young people are now playing sport

Asked if the Olympics were value for the near £9bn spent on staging them, 41% of people said they were good or very good value for money, while 30% felt they were not worth the investment.

As to whether Britain should stage the Games again the poll revealed a split, with 40% in favour and the same percentage opposed to repeating the 2012 experiment.

Despite these findings, key figures in the Olympic project insist that the Games are delivering on the legacy promises.

Lord Sebastian Coe, chairman of the organising committee and now the Prime Minister's legacy ambassador, told Sky News: "I think in large part we have inspired.

"Look at waiting lists in sports clubs, they are both optimistic and challenging, but I think there are more people playing sport, and a good chunk of them are young people."

Lord Coe said his experience was that the appetite was particularly keen in schools.

"I've spent a lot of time in the last year, particularly with my legacy work in schools, in primary schools, secondary schools and even in colleges.

"And there's no doubt at all that PE teachers - and certainly teachers - that did not get sport up until the Games recognise that there is a very powerful momentum and that young people want more sport and so do their parents."

Sports minister Hugh Robertson said participation was growing, citing Sport England figures that show 1.4 million more people doing sport at least once a week than before London successfully bid for the Games.

"The legacy is undoubtedly genuine," he said. "More people are playing sport now than when we started on the Olympic journey, but this was never ever going to be one smooth uphill journey."

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Mothercare Mulls Sale Of Early Learning Centre

By Mark Kleinman, City Editor

Mothercare is considering the sale of its loss-making Early Learning Centre (ELC) chain as it bids to meet a target of restoring its UK operations to profitability by 2015.

Sky News has learnt that Mothercare has been holding talks with potential advisers about a sale in recent weeks, although the company has not yet made a formal decision to offload the specialist retailer of educational toys for young children.

Analysts believe that disposing of the business, which has perennially underperformed during the six years that it has been owned by Mothercare, may be difficult because of its poor track record.

It may, however, appeal to firms which are accustomed to investing in struggling high street chains, such as Hilco, which snapped up HMV for a token price earlier this year.

In a trading update published on Thursday, Mothercare said that it had continued to close stores in the UK amid difficult trading conditions.

"The UK market has been very competitive during the last quarter and we have continued to focus on delivering cash margin," it said.

"In line with our plan, we closed a further 13 loss-making stores (four Mothercare and nine Early Learning Centre) during the first quarter of the year.

"We now have 242 stores (192 Mothercare and 50 Early Learning Centre) in the UK. Space is down 7.7% year-on-year and is reflected in the 7.9% decline in total UK sales for the first quarter."

The talks with banks about a sale of ELC could result in an appointment imminently, with Lazard understood to be in the frame for the role.

Mothercare paid £85m for ELC but is unlikely to recoup anything like that sum if it manages to sell the chain.

The group wants to cash in on the imminent birth of the royal baby with the launch of a range of themed products, Simon Calver, the former Lovefilm executive who now runs Mothercare, said on Thursday.

Mothercare, which has a market value of around £400m, now has a much larger business outside the UK than in its home market. It's share price has rebounded strongly since Mr Calver's arrival.

A Mothercare spokeswoman declined to comment.

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