Vodafone Group PLC (VOD.LN) Thursday reported solid third quarter revenue driven by an explosion in the use of smartphones for surfing the web, emailing and social networking, as well as strong free cash flow generation.

Vodafone, the world's biggest mobile operator by revenue, posted a 2.1% rise in group service revenue--one of the key figures tracked by U.K. analysts--to GBP10.96 billion for the three months to Dec. 31, slightly ahead of market expectations of GBP10.9 billion, underpinned by good growth in India, Turkey, the U.K. and South Africa. It is the fifth sequential quarter of improvement.

The company said data revenue continues to drive its growth strategy and grew 27% on the back of "strong smartphone and mobile connectivity sales." On an annualised basis, Vodafone's data revenue is more than GBP5 billion, and exceeded messaging revenue for the first time.

"Our performance has been driven by the effective execution of our strategy to strengthen our businesses and deliver growth, particularly in data services and emerging markets," Chief Executive Vittorio Colao said.

By the end of December, Vodafone had launched its new tiered-data pricing in eight European markets and by the end of the current quarter will have rolled it out across all European markets, he added.

Third-quarter group revenue rose 3% to GBP11.89 billion from a year earlier.

Vodafone, which appointed a new chairman a day earlier, said adjusted operating profit for the full year is now expected to be towards the upper end of its guided range of GBP11.8 billion to GBP12.2 billion, before the impact of the Verizon Wireless iPhone launch in February 2011.

Free cash flow before licence and spectrum payments and one-off tax related payments was GBP1.1 billion, lower than last year due primarily to working capital movements. Cumulative free cash flow generation to Dec. 31 of GBP4.6 billion was consistent with Vodafone's expectations of free cash flow of more than GBP6.5 billion in fiscal 2011.

At Verizon Wireless, in which Vodafone holds a 45% stake, comparable service revenue rose 7% in the third quarter, driven by net customer growth and higher data revenue.

Service revenue on a comparable basis was up 7% in the U.K., 17% in India, 32% in Turkey and 5.6% in South Africa. However, it was down 7.4% in Spain, hurt by continued economic weakness, including high unemployment and increased price competition.

Vodafone didn't provide profit figures for the third quarter but will report full year results May 17.

Sanford Bernstein analyst Robin Bienenstock said the company's results show "a stable core European market, notwithstanding Turkey, and strong emerging market growth, making results much clearer." She has an outperform rating on the stock and 240 pence target price.

At 0818 GMT, Vodafone shares were down 1 pence, or 0.9%, at 176 pence, valuing the company at GBP92.48 billion. The stock has risen 30% over the past 12 months, outperforming the FTSE 100 index, which has risen 13% over the same period.

Colao said text messaging services in Egypt, which have been down since last week amid civil unrest in the country, will be restored when authorized. Some of Vodafone's antennae are also down in Egypt, but Colao couldn't say how many have been damaged or turned off.

"It will be restored when we are authorized to restore it, and of course we are very keen to have our customers enjoy the full suite of services," Colao told reporters on a conference call.

U.K.-based Vodafone restored its voice services in Egypt on Saturday, 24 hours after authorities ordered operators to shut them down. Data was restored in the country on Wednesday, he added.

With regards to Vodafone's long-awaited sale of its 44% stake in French telecom group SFR to Vivendi SA (VIVHY), Chief Financial Officer Andy Halford said there was nothing to report.

Vodafone Wednesday appointed Royal Philips Electronics NV's (PHIA.AE) chief executive and president, Gerard Kleisterlee, as its new chairman, succeeding John Bond, who came under fire from some shareholders last year over the mobile giant's strategy and track record on acquisitions.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com