Vodafone increased its 12-months earnings guidance, following improved organic growth in two of its most challenging markets such as Spain and Italy.

The world’s second largest mobile operator reported an organic growth of 0.3% in its service revenue in the first half, as it returned to growth in the second quarter thanks to improvements in South Africa, Spain and Italy and a solid retail performance in Germany.

Organic core earnings rose 1.4% in the half, and it said its growth rate would accelerate in the second half, enabling it to up its forecast for adjusted core earnings to 14.8-15.0 billion euros from its previous forecast of 13.8-14.2 billion euros.

Vodafone has however lowered its free cash flow forecast to “around” 5.4 billion euros, from “at least” 5.4 billion euros, as it expects lower inflows from India and the sale of New Zealand offset the initial accretion from its Liberty Global acquisition.

Vodafone CEO Nick Read said he was pleased at the speed with which he was executing his plan.

“This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa,” said Read.

Earlier in May, Read cut Vodafone’s dividend for the first time following tough market conditions. Vodafone’s shares have largely recovered by 30% since the dividend cut.

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Tags: earnings, earnings guidance, forecast, Germany, guidance, Italy, Liberty Global acquisition, markets, mobile operator, Nick Read, organic growth, performance, retail, service revenue, South Africa, Spain, Vodafone