BT must shed its Openreach arm and divest spectrum before it can be allowed to take over EE, Vodafone's Group CEO has claimed, as he revealed a marginally improving picture for the operator's service revenues.

Vittorio Colao was speaking as Vodafone reversed almost three years of falling sales in its most recent quarter. The UK-based operator reported full year EBITDA of £11.9 billion, down 6.9 percent on an organic basis.

For the full financial year, group service revenues were down 1.6 percent on a like for like basis to £38.5 billion. Underlying service revenues increased by 0.1 percent in the three months to March, reversing a downward trend for the last 10 quarters brought about by underperforming European economies.

While the operator noted a "steady recovery" across the continent, Europe continued to be a drag on sales, with underlying service revenues in the most recent quarter down 2.4 percent, compared to its Africa, Middle East and Asia Pacific regions, which saw organic service revenues increase 6.0 percent.

Vodafone blamed the European woes on the usual competition, macroeconomic and regulatory issues. However, it pointed to an improving picture across the continent, thanks to growth in contract customers, as "some evidence" of stability in ARPU and increased data usage.

It said the UK, the Netherlands and the Czech Republic all returned to growth in the second half of 2014, with Germany, Italy Spain, Greece and Romania all reducing their rate of decline.

Across the year, Spain was the worst performing European market, with organic service revenue falling 10.2 percent and EBITDA plummeting 29.5 percent on a like for like basis.

Germany was the best performing European market, with service revenues dropping 3.2 percent on a like for like basis and organic EBITDA declining 10.9 percent.

Nevertheless, Germany CEO Jens Schulte-Bockum announced his intention to leave the company this morning. While Colao paid tribute to his work at the operator, he added: "We need [better] speed of execution and intensity of execution because we need to improve vis a vis the competitors."

Colao also had strong words about the BT takeover of EE, which is currently being examined by the Competition Market Authority. He said as things stood, the combined BT/EE organisation would provide "a complete imbalance in competition" in the UK market.

[Read more: BT poaches Vodafone HR Director]

He wanted three things to happen. The first was the separation of EE's infrastructure sharing program with Three. The second was a "rebalancing" of spectrum, as the combined BT/EE operation would have a 60 percent share of the UK market's spectrum holdings.

The third was the separation of the Openreach network from BT. Colao said it would be unfair for it to provide backhaul services to its sister mobile network as well as EE's rivals. He added he would accept guarantees on access conditions to backhaul and price as an alternative.

Vodafone said the 6.9 percent fall in group EBITDA reflected continuing struggles in Europe and an increase in expenses as it looks to strengthen its global network through the Project Spring investment programme.

The operator said that while it was benefiting from efficiencies, it was spending more on Project Spring, which is now 63 percent complete, and continued to be hit by falling sales.

LTE coverage has reached 72 percent in Europe, with 28 million homes connected to its 4G network.

In total, Vodafone now boasts 20.2 million LTE customers across 18 markets, with data usage up 81 percent year on year during Q4. The UK is the operator's biggest LTE market, with five million customers.

On the fixed side, broadband net additions for the year were 0.9 million, meaning Vodafone now has a European base of 11.3 million broadband customers.

Vodafone said sales from its M2M business, which saw it strengthened by the purchase of Cobra Automotive in August 2014, grew 24.7 percent.

Looking ahead the operator said earnings would be broadly flat for the year, sitting between £11.5 billion and £12 billion.

Capital expenditure would be similar to 2015's spend of £9.2 billion, at between £8.5 billion and £9 billion.

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