Vodafone, dependent on voice, set for more cost cuts

Despite increased profit in the first half of its fiscal year, Vodafone has decided to double its planned cost reductions, the operator said on Tuesday.

The operator said it will have cut £1 billion (US$1.5 billion) from its annual costs by the end of 2009, which is a year ahead of schedule. Another £1 billion will be cut by 2012, it said. Increased competition is the reason for the additional cost cuts, it said in a statement.

Vodafone reported revenue of £21.8 billion (US$36.4 billion), a year-on-year increase of 9.3 percent, for the first half of its fiscal year, which ended Sept. 30. However, revenue would have dropped 3 percent without the help of favorable exchange rates and acquisitions.

Vodafone's net profit during the period was £4.8 billion, up from about £2.2 billion a year ago.

In Europe, voice revenue dropped, in terms of constant exchange rates. Messaging revenue also dropped in several countries in the region. Those declines were partly offset by increases in data and fixed-line revenue, but service revenue in Europe was down 4.5 percent, according to Vodafone.

India was one of the highlights in the rest of the world, with service revenue growing by 20.5 percent on a constant currency basis.

Globally, total data revenue increased 35.2 percent to £1.9 billion. Vodafone said it will push data services hard going forward. In Europe only one third of its customers have a data contract, so there is room for growth, it said.

The company is still dependent on voice revenue, which was about £14 billion during the first half of its fiscal year, up slightly from £13.3 billion during the year-earlier period.

The IDG News Service is a Network World affiliate.