Vodafone Group Plc (VOD), the largest wireless carrier in the world by revenue, has announced interim results for fiscal year 2010 with adjusted net income of £4.58 billion (US$7.3 billion) increasing 15% year over year from £3.99 billion (US$6.4 billion) reported a year ago, driven by favorable exchange rate movements and reduced tax. Adjusted earnings exclude one-time items such as impairment losses.

Group Revenue & EBITDA

The telecom giant reported consolidated revenues of £21.8 billion (US$34.8 billion) for the period, representing a 9.3% year over year growth. Favorable exchange rate (euro-sterling) swings and net impact of merger and acquisition initiatives contributed to this growth. Excluding these impacts (organic basis), revenue declined 3% year over year.

Group service revenue declined 2.6% year over year on an organic basis to £20.5 billion (US$32.7 billion), primarily due to weaker contributions from European markets as recessionary conditions curbed demand for wireless services. Adjusted EBITDA increased 2.9% year over year to £7.5 billion (US$12 billion) driven by cost control.  

Results by Segment


Revenues for the European segment increased 3% year over year (down 5.1% on organic basis) to £14.9 billion (US$23.8 billion). Service revenue in Europe declined 4.5% organically as growth in Italy and the Netherlands was more than offset by decreases across Spain, Germany and the UK due to a weaker economy, regulatory pressure and intense competition.

Decline in voice revenue continues to offset growth in data. Revenue in Germany and the UK remains under pressure due to mobile termination rate (inter-operator fees) cuts. Vodafone is also losing customers in the UK as subscribers switch to its major rival Telefonica’s (TEF) O2 which is marketing iPhone in the UK.

Moreover, Deutsche Telekom (DT) and France Telecom (FTE) have recently finalized an agreement to combine their UK units, which will create the largest mobile carrier in the UK.

Africa & Central Europe

This segment posted revenues of £3.7 billion (US$5.9 billion), up 36% year over year. Organically, service revenue fell 3.2% as consistent growth at Vodacom (South Africa) and increase in subscriber count were partly offset by weak contributions from Romania and Turkey. Service revenue at Vodacom increased 4.2% on an organic basis as a result of healthy subscriber accretion.  

Asia Pacific & Middle East

Asia Pacific & Middle East segment continues to perform in line with expectation. Revenue surged 15.9% year over year (11.3% organically) to £3.1 billion (US$4.9 billion), driven by continued strong growth in India , the single biggest contributor to organic revenue growth. Service revenue in India increased 20.5% organically boosted by roughly 55% growth in wireless customer base amid intense price competition.

Subscriber Trends

During the six-month period, Vodafone registered roughly 20.6 million net new mobile connections across its operations, bringing the total subscriber base to 323.3 million (83.5% represented by prepaid). India continues to be a key driver for subscriber growth with a net addition of 14 million customers in the first six months of fiscal 2010.

In Europe, the company registered a net loss of 262,000 subscribers during the half-year period. Verizon’s (VZ) mobile unit, Verizon Wireless, in which Vodafone holds a 45% stake, however, posted a net addition of 1.1 million customers.


Management has confirmed its outlook for fiscal 2010 with adjusted operating profit projected in the range of £11.0 billion to £11.8 billion (US$17.5 billion to US$18.8 billion), assuming a favorable foreign exchange environment. Free cash flow is projected between £6.0 billion and £6.5 billion (US$9.6 billion to US$10.4 billion).

Vodafone is aggressively pursuing its cost reduction program that includes workforce reduction in Europe . The company has increased its annual savings target to £2 billion (US$3.2 billion) by 2012 from £1 billion (US$1.6 billion) as per earlier expectation. Roughly 50% of the total savings is expected to be realized in 2011.

Moreover, Vodafone continues to accelerate 3G wireless service deployments and expand network availability across Asia, Eastern Europe and Africa. The company’s HSDPA technology based 3G mobile broadband network offers network speeds of 7.2 megabits per second (Mbps) across Europe.

Vodafone has recently upgraded its 3G network in the UK to offer peak download speeds of 14.4 Mbps. Efforts are underway to further upgrade the existing 3G HSDPA network to HSPA+ standard, which will offer future throughput up to 42 Mbps. Moreover, Vodafone is set to launch iPhone in the UK in early 2010.
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