Vodafone sees strong rise in first-half revenue

Vodafone Group PLC, the world's largest mobile phone company, reported Tuesday a 14 percent rise in global revenue from existing operations for the first half of its financial year 2002-2003.

Including the company's Japanese acquisitions, revenue surged 67 percent to £14.9 billion (US$23.3 billion) on Sept. 30, the last day of the period being reported), the company said in a statement.

"We are making the transition to the new growth environment enabled by our new data services, with a better financial performance than expected. We expect to achieve good year-on-year growth on key performance parameters and are very confident in the future prospects for our business," said Chris Gent, chief executive officer of Vodafone, in a conference call.

In the second half of the last financial year, J-Phone Co. Ltd. and Japan Telecom Co Ltd. became Vodafone subsidiaries and were consolidated in its accounts for the first time.

Vodafone cut its first-half net loss to £4.34 billion from £9.74 billion for the same period the year before.

Excluding goodwill and exceptional items, the company made a pretax profit of £4.3 billion for the half-year, up 41 percent compared to a year earlier.

The Newbury, England, wireless company was also able to reduce its sizable net debt load from £12 billion in the first half of the year to £10.7 billion, the company said. The net debt in the second half of the year was still larger than the same time last year when it was £9.2 billion, Vodafone said.

Gent forecast a decrease in operating profit in the first half of the 2003-2004 financial year but promised "significant" growth in the second half of next year, due in large part to growth in its data services. He also predicted "average customer growth of over 10 percent" in fiscal year 2004.

The company added 9.4 million subscribers through organic growth in the 12-month period ending Sept. 30, bringing the proportionate total (that is, the total adjusted in proportion to its holding in the operating subsidiaries) to 107.5 million.

Average revenues per user (ARPU), increasingly seen within the industry as an important indicator of company growth, showed improvement in a number of Vodafone's key markets, said Julian Horn-Smith, Vodafone's chief operating officer, at the news conference. Higher ARPU was driven "by increased voice and data usage and improved customer mix and activity levels," Horn-Smith said.

The company was particularly encouraged by customer growth in Germany, Italy, Japan and the U.S. "All around the world our brand is becoming more broadly known and used," Horn-Smith said.

The total customer base of Vodafone subsidiary, Verizon Wireless Inc., was 31.5 million as of Sept. 30, of which approximately 94 percent were contract customers. There were also about 1.5 million data users, mainly Mobile Web customers, Vodafone said. SMS (Short Message Service) usage grew "significantly in the last six months due to the launch of inter-carrier interoperability earlier this year," the company said.

However, Vodafone suffered from declines in average customer spending in some of its largest markets, including the U.K., where contract ARPU fell almost 3.5 percent in the period due to "the continued migration of higher value prepaid customers onto tariff contracts," the company said.

Data service revenues in the group's controlled mobile businesses rose to 13.2 percent of total service revenue for the year to the end of September 2002, compared with 11.1 percent for the year ended March 31, with continued growth in the use of text messaging and the emergence of picture messaging services, Vodafone said.

The company expects further revenue growth to come from its new data services, Vodafone Live, the company's consumer mobile Internet service launched in six European countries in October, and Vodafone Mobile Office. "The effects should be felt in the second half of next year," Gent said.

The Vodafone Live service, which operates on Vodafone's GPRS (General Packet Radio Service) networks, is entertainment-oriented with such features as chat, downloadable ring tones and games, and offers access to e-mail and information services such as financial news through content partners.

The company declined to disclose how much it is spending to promote its data services, though Horn-Smith credited Vodafone's ad campaigns promoting new services and existing ones as a key driver behind the growth of those services.

In terms of up-coming services using the much touted and highly expensive 3G (third generation) technology, Vodafone's 3G infrastructure will be made technically ready and operational in major markets over the next 12 months, with Japan being the first of the company's networks to launch in December. "We don't anticipate opening any services based on 3G technology until next year," Gent said.

Gent also addressed Vodafone's bid to purchase a majority share in France's biggest private telecom operator, Groupe Cégétel SA from U.K.-based BT Group PLC, U.S.-based SBC Communications Inc. and Vivendi Universal SA. BT and SBC have already agreed to sell their individual stakes in the company, though debt-laden Vivendi is deciding if it will sell its share to Vodafone or exercise its option to make a matching offer for the company.

"The ball is firmly with Vivendi. It's up to them to decide (if they will accept Vodafone's offer)," Gent said.

Vivendi currently owns 44 percent of Cégétel, which in turn controls mobile operator Société Française du Radiotéléphone SA (SFR) with an 80 percent share of the company. Vodafone has been keen to increase its 32 percent share in SFR, 20 percent of which it owns directly, with the rest coming from its 15 percent stake in Cégétel. Vivendi has until Dec. 10 to either accept Vodafone's offer or to match its rival's bids to BT and SBC.

"Vivendi has not engaged in negotiations with us so it seems likely they are focused on a preemptive offer," Gent said.

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