Vodafone shows net loss, revenue growth

Fueled by takeovers and joint ventures, Vodafone Group saw its proportionate operating profit and revenue increase significantly over the last year, the company reported Tuesday.

In its preliminary results for the fiscal year ending March 31, Vodafone said that proportionate operating profit at the company's mobile businesses before goodwill and exceptional items was up 26% at 5.02 billion pounds ($7.16 billion) compared to 3.98 billion pounds in the previous fiscal year.

All figures are proportionate to Vodafone's holdings in companies around the world; if an operator is partially owned by Vodafone, the percentage owned by Vodafone is included in the results.

Vodafone attributes the increase in the proportionate figures chiefly to the acquisition of Mannesman in Germany and the formation of Verizon Wireless in the U.S.

The net figures show a loss, mainly due to 5.3 billion pounds in goodwill amortization. Vodafone's net loss for the year was 9.76 billion pounds, compared to a net profit of 487 million pounds in the previous year. The loss stems from costs related to the 180 billion euro ($155 billion) Mannesman takeover early last year, and other acquisitions.

Proportionate revenue at the mobile businesses came in at 21.43 billion pounds, up 29% from 16.59 billion pounds the previous year.

Group net debt on March 31 was 6.7 billion pounds, or 5.4% of Vodafone's market capitalization, the company noted. Payment for 3G mobile telecommunication licenses has been taken into account. Spending on 3G infrastructure will start in the current financial year and commercial launches of services are expected in the second half of 2002, Vodafone said.

Vodafone is shifting focus from customer growth and winning market share to margin improvement and cash flow growth.

"Most markets are reaching maturity," said Vodafone CEO Chris Gent, explaining the move in a conference call. As a result, the company is moving away from the acquisition path and has already, for example, cut back on handset subsidies, resulting in higher costs for consumers.

"Vodafone is trying to grow organically, rather than through acquisitions, and is seeking advantages from synergies. More acquisitions will only weaken the company's financial situation," said Paolo Pescatore, senior research analyst in wireless mobile communications at IDC.

Vodafone is already large enough to let customers benefit, Pescatore said.

"As a result of the strength and the large customer base we will see new pan-European and eventually worldwide services. When GPRS is rolled out, we will see clear benefits for business users with international roaming possibilities," he said. An example would be Vodafone's Eurocall tariff, which offers a single price for mobile calling in a number of European countries.

Vodafone expects data to be a big driver of growth. Revenue from mobile data traffic is expected to account for 20% to 25% of Vodafone's total revenue in 2004, Vodafone's COO Julian Horn-Smith said in the conference call.

Already the share of revenue from services such as Short Message Service (SMS) has grown to over 8% in the year. Horn said new services will include e-commerce and voice access to e-mail on the mobile phone.

Vodafone, in Newbury, England, is at www.vodafone.com/

The IDG News Service is a Network World affiliate.