Vodafone cut a medium term sales growth target as customers in southern Europe slashed spending and regulators upped the pressure on the world's largest mobile operator.
It took impairment charges of £4 billion relating to its businesses in Italy, Spain, Portugal and Greece.
Vodafone Ireland said that it performed well during the year despite high customer acquisition costs driven by handset subsidies.
It noted a 59% year on year increase in the number of smartphones on its network, and said 37.7% of its customers now use a smartphone.
It also said that its mobile internet users rose by 14% during the year to stand at 1.05 million.
Its fixed line and DSL customers numbers grew by 10.3% to reach 239,600. By the end of March, its total mobile telecoms base stood at 2.22 million.
Vodafone Ireland's average revenue per user fell by 3.4% to €31.20 in the quarter to March compared to the same time last year.
But with trading in the two big southern European markets showing few signs of improving and regulatory and foreign exchange pressures due to continue, Vodafone said it now expected organic service revenue growth in 2013 to be slightly below its previous medium-term target range of 1-4%.
Group organic service revenue for the 2012 financial year from the provision of ongoing services to customers was up 1.5%, with Europe down 1.1% and Africa, Middle East and Asia Pacific up 8%.
Vodafone is the latest in a long line of major companies to be hit by government austerity measures being imposed across Europe, where consumers facing tax rises, inflation and muted wage growth are under pressure to cut spending.
A reluctance to spend on discretionary goods, particularly in Italy, Spain and Greece, has hit Europe's biggest retailer Carrefour, drinks group Diageo and electricals retailer Kesa among others in recent weeks.
In the telecoms sector specifically, rivals have also struggled, with net profit at Spain's Telefonica halved in the first quarter due to torrid conditions in Italy and Spain.
"Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult macroeconomic environment," chief executive Vittorio Colao said.
Group revenue was up 1.2% to £46.4 billion, in line with forecasts, but core earnings slipped 1.3% due to the tough trading and increasing regulatory pressure.
"Given larger regulatory reductions than previously envisaged, we now expect organic service revenue growth in the 2013 financial year to be slightly below our previous medium term guidance range," the group said.
