By Paul Sandle

LONDON (Reuters) -Vodafone is making progress towards resolving issues in its biggest market Germany after suffering a drop in service revenue there, its chief executive said on Monday.

The mobile phone and broadband group said it lost 79,000 TV and 64,000 broadband customers in the first quarter, resulting in a 0.5% decline in service revenue in the country after a new law ended automatic renewals and an IT system underperformed.

But it said customer losses were not as bad as in the previous quarter after it fixed IT problems, and churn related to the law that came into effect in December started to abate.

Chief Executive Nick Read said the British group had made good progress towards stabilising its German operation.

“We’re on track to resolve the issues in Germany by the end of the summer as planned, which will further support a gradual recovery in our commercial performance,” Read told reporters.

Vodafone’s service revenue growth accelerated slightly quarter-on-quarter to 2.5%, helped by Turkey, where high inflation is providing a boost, and Britain.

It said it was on track to hit its full-year targets.

Shares in Vodafone, which have risen 10% in the last 12 months, were flat at 129 pence.

Read said in November he was pursuing consolidation in Europe, as well as opportunities for its Vantage Towers business. Vodafone has not announced any big deals since.

Two of its three major rivals in Spain – Orange and MasMovil – signed a $19 billion merger in Spain on Saturday.

“We continue to actively pursue opportunities with Vantage Towers and to strengthen our market positions in Europe,” Read said. Market turbulence had added “a degree of complexity” to talks, he said, but a “lot was going on behind the scenes”.

“We are progressing across the four markets that we identified,” he said.

One is Britain, where Vodafone has been in talks with Hutchison’s Three network, according to reports. Read declined to comment on any potential deal but reiterated there was room for consolidation in Britain.

(Editing by David Evans and David Holmes)