6-K 1 a11-12595_16k.htm 6-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer

 

Pursuant to Rules 13a-16 or 15d-16 under
the Securities Exchange Act of 1934

 

Dated May 18, 2011

 

Commission File Number: 001-10086

 

VODAFONE GROUP

PUBLIC LIMITED COMPANY

(Translation of registrant’s name into English)

 

VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN, ENGLAND

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

 

Form 20-F      ü       

Form 40-F           

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):         

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):         

 

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

 

Yes           

No      ü       

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-        .

 


 

This Report on Form 6-K contains a news release issued by Vodafone Group Plc on 17 May 2011 entitled “Vodafone Announces Results for the year ended 31 March 2011”.

 


 

17 May 2011

 

 

VODAFONE ANNOUNCES RESULTS FOR THE YEAR ENDED 31 MARCH 2011

 

Improved results: sustained revenue growth and strong cash generation

 

·

Group revenue up 3.2% to £45.9 billion; full year organic service revenue growth +2.1%(*); Q4 +2.5%(*), driven by a strong AMAP performance (+11.8%(*))

 

 

·

EBITDA down 0.4% at £14.7 billion; EBITDA margin 1.1 percentage points lower at 32.0%, in line with expectations

 

·

Verizon Wireless service revenue up 5.8%(*); our share of profits up 8.5%(*) to £4.6 billion

 

 

·

Adjusted operating profit at guidance exchange rates(1) £12.2 billion, after Verizon Wireless iPhone launch costs

 

 

·

Other net income of £5.3(2) billion and goodwill impairment charges of £6.1 billion

 

 

·

Free cash flow £7.0 billion; consistent level of capital expenditure and strong working capital performance

 

 

·

Final dividend 6.05 pence, giving total dividends for the year of 8.90 pence per share, + 7.1%

 

Financial highlights

 

 

 

Year ended

 

Change year on year

 

Year on year
Q4 vs. Q4

 

 

 

31 March 2011

 

Reported

 

Organic

 

Organic

 

 

 

£m

 

%

 

%

 

%

 

Group revenue

 

45,884

 

+3.2

 

+2.8

 

+4.2

 

 

 

 

 

 

 

 

 

 

 

Group service revenue

 

42,738

 

+2.4

 

+2.1

 

+2.5

 

Europe

 

30,097

 

(3.4

)

(0.4

)

(0.8

)

Africa, Middle East and Asia Pacific

 

12,292

 

+20.0

 

+9.5

 

+11.8

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

11,818

 

+3.1

 

+1.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

7,049

 

(2.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

15.20

p

(7.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS

 

16.75

p

+4.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Final dividend per share

 

6.05

p

+7.1

 

 

 

 

 

 

 

Good progress on strategic delivery

 

·

Strong performance in key revenue growth areas: Data +26.4%(*), Emerging Markets +11.8%(3) (*), Fixed +5.2%(*), Europe Enterprise +0.5%(*)

 

 

·

Successful drive to increase smartphone penetration in Europe - up from 11.6% to 18.7% year-on-year

 

 

·

£14.2 billion expected to be raised from agreed disposals of interests in China Mobile, SoftBank and SFR; £6.8 billion committed to share buyback programmes

 

 

·

Continuing commercial relationship with Verizon to address the global enterprise market, target procurement savings and develop technology standardisation

 


 

Guidance for the 2012 financial year

 

·

Adjusted operating profit expected to be in the range of £11.0 billion to £11.8 billion, reflecting the loss of our £0.5 billion share of profits from SFR as the result of the disposal of our 44% interest

 

 

·

Free cash flow expected to be in the range of £6.0 billion to £6.5 billion, reflecting continued strong cash generation offset by the reduction of £0.3 billion in dividends from SFR and China Mobile, and the more limited working capital improvements available going forward

 

 

Vittorio Colao, Group Chief Executive, commented:

 

“The past year has seen further strong performances in our key revenue growth areas of data, emerging markets and enterprise, and we have gained or held market share in most of our key markets. Continuing network investment is an important differentiator for Vodafone, improving the customer experience and giving us leadership in smartphone penetration and in customer take up of data plans. We enter the new financial year well positioned to deliver further value to our shareholders.”

 

 

 

Notes:

(*)

All amounts in this document marked with an “(*)” represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and foreign exchange rates.

(1)

See ‘Guidance’ on page 8

(2)

Other net income includes a £2.8 billion net gain on the sale of the Group’s interest in China Mobile Limited, £0.9 billion tax benefit and a £0.9 billion interest benefit relating to the settlement of a tax case and £0.5 billion from the disposal of investments in SoftBank.

(3)

Emerging markets include India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji.

 

2


 

CHIEF EXECUTIVE’S STATEMENT

 

 

Financial review of the year

 

We have performed well this year, combining a better operational performance with good strategic progress. Organic service revenue growth improved during the year, with a strong result from emerging markets and signs of renewed growth in some parts of Europe.

 

Customers have adopted data services in increasing numbers, as smartphones proliferate and the tablet market begins to take off. Our network investment is becoming a key differentiator, as we are leading the migration to smartphones in most of our European operations. Through this and our continued stronger commercial focus, we are growing our market share again in most of our markets.

 

However, markets remain competitive and the economic environment, particularly across southern Europe, is challenging. We continue to keep a tight rein on costs and working capital, allowing us to maintain our levels of investment while again delivering a strong free cash flow performance.

 

Group revenue for the year was up 3.2% to £45.9 billion, with Group service revenue up 2.1%(*) on an organic basis and up 2.5%(*) in Q4. Group EBITDA margin fell 1.1 percentage points, reflecting continuing weakness across southern Europe, higher growth in lower margin markets, and the increased investment in migrating customers to higher value smartphones. As a result, EBITDA fell 0.4% year-on-year.

 

Group adjusted operating profit rose 3.1% to £11.8 billion, at the top end of our guidance range after allowing for currency movements and despite the additional costs incurred by Verizon Wireless’s iPhone launch. The main drivers were good growth in the Africa, Middle East and Asia Pacific region (‘AMAP’) and a strong performance from Verizon Wireless.

 

During the year we recorded other net income of £5.3 billion, primarily in relation to a £2.8 billion net gain on the sale of the Group’s interests in China Mobile Limited, £1.8 billion on the settlement of a tax case and £0.5 billion from the disposal of investments in SoftBank Mobile Corp. We also recorded impairment charges of £6.1 billion relating to our businesses in Spain, Greece, Portugal, Italy and Ireland, which were primarily driven by higher discount rates given sharply increased interest rates. The impairment in Spain represented approximately half of the total.

 

Free cash flow was £7.0 billion, at the top end of our medium-term guidance, as a result of our continued financial discipline and a strong working capital performance. Capital expenditure was £6.2 billion, broadly flat on last year and in line with our target, as we focused on widening our data coverage and improving network performance.

 

Adjusted earnings per share was 16.75 pence, up 4.0% on last year, reflecting higher profitability and lower shares in issue as a result of the ongoing £2.8 billion buyback programme. The Board is recommending a final dividend per share of 6.05 pence, to give total dividends per share for the year of 8.90 pence, up 7.1% year-on-year.

 

Europe

Organic service revenue in Europe was down 0.4%(*) during the year and down 0.8%(*) in Q4. This represents a good recovery on last year (-3.8%(*)) and is the result of two different trends: the more stable economies of northern Europe (Germany, UK, Netherlands) were up 2.7%(*), while the rest of Europe was down 2.9%(*) as a result of the ongoing macroeconomic challenges. Data revenue growth continued to be strong, but was offset by continued voice price declines and cuts to mobile termination rates (‘MTRs’).

 

Organic EBITDA for Europe was down 3.7%(*) and the EBITDA margin fell 1.7 percentage points as a result of the decline in revenue, ongoing competitive activity and higher commercial costs as we accelerated smartphone adoption.

 

3


 

CHIEF EXECUTIVE’S STATEMENT

 

 

AMAP

Organic service revenue growth in AMAP was 9.5%(*), accelerating through the year to a level of 11.8%(*) in Q4. Our two major businesses, India and Vodacom, reported growth of 16.2%(*) and 5.8%(*) respectively.  Our performance in India has been driven by increasing voice penetration and a more stable pricing environment. In South Africa, Vodacom continues to be highly successful in promoting data services.

 

Organic EBITDA was up 7.5%(*), with EBITDA margin falling 0.6 percentage points(*). The two main factors behind the margin decline were the adverse impact from higher recurring licence fee costs in India and the change in regional mix from the strong growth in India.

 

Verizon Wireless

Our US associate, Verizon Wireless, has continued to perform strongly. Organic service revenue was up 5.8% (*) and EBITDA was up 6.7%(*), with good growth in customers and strong data take-up. In Q4, Verizon Wireless launched a CDMA version of the iPhone, ending the exclusivity of its main competitor. We are continuing to work closely with Verizon, putting together unified account teams to handle large multinational enterprise accounts, gaining efficiencies through procurement and aligning our technical roadmaps. Our share of profits from Verizon Wireless amounted to £4.6 billion, up 8.5%(*).

 

Delivering a more valuable Vodafone

 

In November 2010 we announced an updated strategy, designed to build on the progress made during my first two years as CEO. There are four main elements to the strategy to build a more valuable Vodafone:

 

1.            Focus on key areas of growth potential;

2.            Deliver value and efficiency from scale;

3.            Generate liquidity or free cash flow from non-controlled interests; and

4.            Apply rigorous capital discipline to investment decisions.

 

I am pleased to say that we are making good progress in each area.

 

1)           Focus on key areas of growth potential

 

Mobile data: data revenue was up 26.4%(*) year-on-year to £5.1 billion, and now represents 12.0% of Group service revenue. We have continued to increase the penetration of smartphones into our customer base as these are a key driver of data adoption. Mobile broadband, which still accounts for the majority of data traffic on our network, has significant further scope for growth as we are seeing the emergence of a new and incremental category – tablets – which we believe have the potential to become mass market devices in the medium-term.

 

We are successfully growing data revenue by moving away from “all-you-can-eat” packages to tiered data pricing. At the same time, we are increasing the penetration of data tariffs within our base, with 48% of our European smartphone customers now taking some form of data plan.

 

Network quality is absolutely central to our data strategy and we have made further significant investments over the last 12 months to improve the speed and reliability of our coverage. Based on third party tests performed in 16 of our main 3G markets, we rank first for overall data performance in 13 markets.

 

Enterprise: revenue in the overall European enterprise segment was up 0.5%(*) year-on-year and represented 29.5% of our European service revenue. Within this, Vodafone Global Enterprise, which serves our multinational customers, delivered revenue growth of around 8%(*) thanks to some important customer wins and increased penetration of existing customer accounts. This market offers attractive growth opportunities, as multinationals and smaller companies alike look not only to manage costs but also to move to converged platforms and improve mobile connectivity for their workforces. Vodafone One Net, our converged voice proposition targeted at the small-to-medium-sized enterprise market, has now

 

4


 

CHIEF EXECUTIVE’S STATEMENT

 

 

been introduced into six countries and is gaining traction in an attractive segment. Enterprise customer satisfaction scores are at record levels, with customers increasingly focusing not just on price but on network quality and value-added services too – playing directly to our strengths.

 

Emerging markets: the Group has an attractive level of exposure to emerging markets, where penetration is lower and GDP growth higher than in the more mature markets of western Europe. In addition, the lack of fixed line infrastructure in many of these markets means that mobile operators will be the primary providers of internet connectivity. Organic service revenue growth in our emerging markets was 11.8%(*), with our key operations in India, South Africa and Turkey up 16.2%(*), 5.0%(*) and 28.9%(*) respectively.

 

Total communications: we continue to develop our fixed line capabilities to meet our customers’ total communications needs beyond mobile connectivity. In the enterprise market we have made significant progress in the development of converged services, giving us an attractive opportunity to grow our share of companies’ total telecoms spend.

 

In residential, our focus has been on developing innovative new services such as the Vodafone DSL Router, which combines mobile and fixed broadband services, and Vodafone TV, which delivers free and premium video content through a range of connections using satellite DTT, broadband (either fixed or mobile), or cable. Revenue from our fixed line operations amounted to £3.4 billion, up 5.2%(*) year-on-year.

 

New services: machine-to-machine platforms (‘M2M’), mobile financial services and near-field communications, among other new services, all offer potential for incremental growth. During the year we made good progress in our M2M business and continued the growth and expansion of our mobile money transfer platform, which now has over 20 million customers and is currently being trialled in India.

 

2)           Deliver value and efficiency from scale

 

The current composition of the Group has enabled us to increase efficiency and achieve favourable comparable cost positions in many markets. We aim to continue to generate savings from technology standardisation, off-shoring, outsourcing, platform sharing and Group purchasing. During the year we also established a more formal relationship with Verizon to leverage our purchasing power across a wide range of suppliers.

 

3)           Generate liquidity or free cash flow from non-controlled interests

 

During the year we agreed disposals of our 3.2% stake in China Mobile Limited and our SoftBank interests for a total cash consideration of £7.4 billion. Subsequent to the year end, we announced the sale of our 44% holding in SFR, the number two mobile operator in France, to Vivendi, the majority shareholder, for £6.8 billion.  These three transactions crystallised significant value for shareholders, with £6.8 billion of proceeds being committed to share buyback programmes.

 

4)           Apply rigorous capital discipline to investment decisions

 

We continue to apply capital discipline to our investment decisions. We apply rigorous commercial analysis and demanding hurdle rates to ensure that any investment or corporate activity will enhance shareholder returns. Adhering to our target credit rating of low single A continues to provide the Group with a low cost of debt and good access to liquidity. We will continue to undertake regular reviews of Vodafone’s entire portfolio to ensure that we optimise value for shareholders.

 

Prospects for 2012 financial year

 

We enter the new financial year in a strong position. We are gaining or holding market share in most of our major markets, and are leading our competitors in the drive to migrate customers to smartphones and data packages. We will continue to focus on our key growth areas of data, enterprise and emerging markets, while maintaining investment in network quality and the development of new services.

 

5


 

CHIEF EXECUTIVE’S STATEMENT

 

 

However, we continue to face challenging macroeconomic conditions across our southern European footprint, and we expect further regulated cuts to mobile termination rates to have a negative impact of about 2.5 percentage points on service revenue growth in the 2012 financial year.

 

The Group EBITDA margin is expected to continue to decline, albeit at a lower rate than in the 2011 financial year. The main driver is the persistent revenue decline in some of our southern European operations.

 

Adjusted operating profit is expected to be in the range of £11.0 billion to £11.8 billion, reflecting the loss of our £0.5 billion share of profits from SFR as a result of the disposal of our 44% interest.

 

Free cash flow is expected to be in the range of £6.0 to £6.5 billion, reflecting continued strong cash generation offset by the £0.3 billion reduction in dividends from SFR and China Mobile Limited in the 2012 financial year, and the more limited working capital improvements available going forward. Capital expenditure is expected to be at a similar level to last year on a constant currency basis.

 

We are well positioned to continue to deliver value to shareholders through the achievement of our medium-term targets for revenue, free cash flow and dividend growth; our commitment to investment in profitable growth areas; and our clear capital discipline.

 

6


 

GROUP FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

2011

 

2010

 

% change

 

 

Page

 

£m

 

£m

 

Reported

 

Organic

 

Financial information(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

25

 

45,884

 

44,472

 

3.2

 

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

25

 

5,596

 

9,480

 

(41.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before taxation 

 

25

 

9,498

 

8,674

 

9.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the financial year

 

25

 

7,870

 

8,618

 

(8.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (pence)

 

25

 

15.20p

 

16.44p

 

(7.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure

 

32

 

6,219

 

6,192

 

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash generated by operations

 

20

 

15,392

 

15,337

 

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance reporting(1)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group EBITDA

 

9

 

14,670

 

14,735

 

(0.4

)

(0.7

)

 

 

 

 

 

 

 

 

 

 

 

 

Group EBITDA margin

 

 

 

32.0%

 

33.1%

 

(1.1pp

)

(1.1pp

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

9,34

 

11,818

 

11,466

 

3.1

 

1.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted profit before tax

 

11,34

 

11,003

 

10,564

 

4.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted effective tax rate

 

11

 

24.5%

 

24.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted profit attributable to equity shareholders

 

12

 

8,776

 

8,471

 

3.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings per share (pence)

 

12

 

16.75p

 

16.11p

 

4.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow(3)

 

20

 

7,049

 

7,241

 

(2.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt

 

20,21

 

29,858

 

33,316

 

(10.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes:

(1)

Amounts presented at 31 March or for the year then ended.

(2)

See page 31 for “Use of non-GAAP financial information” and page 36 for “Definitions of terms”.

(3)

All references to free cash flow are to amounts before licence and spectrum payments and for the year ended 31 March 2011 other items in respect of: a tax case settlement, tax relating to the disposal of China Mobile Limited, the SoftBank disposal and the court deposit made in respect of the India tax case, each of which are discussed elsewhere herein.

 

7


 

GUIDANCE

 

 

Please see page 31 for “Use of non-GAAP financial information”, page 36 for “Definitions of terms” and page 37 for “Forward-looking statements”.

 

Performance against 2011 financial year
guidance

 

 

Adjusted operating profit
£bn

 

 

Free cash flow
£bn

 

 

 

 

 

Guidance - November 2010(1)

 

11.8 – 12.2

 

In excess of 6.5

 

 

 

 

 

2011 performance on guidance basis(2)

 

12.2

 

7.2

 

 

 

 

 

Foreign exchange(1)

 

(0.3)

 

(0.2)

 

 

 

 

 

Verizon Wireless(3)

 

(0.1)

 

-

 

 

 

 

 

2011 reported performance(2)

 

11.8

 

7.0

 

 

 

 

 

 

 

2012 financial year guidance

 

 

Adjusted operating profit
£bn

 

 

Free cash flow
£bn

 

 

 

 

 

 

 

11.0 - 11.8

 

6.0 - 6.5

 

 

 

 

 

 

Adjusted operating profit is expected to be in the range of £11.0 billion to £11.8 billion, reflecting the loss of our £0.5 billion share of profits from SFR as a result of the disposal of our 44% stake.

 

Free cash flow is expected to be in the range of £6.0 billion to £6.5 billion, reflecting continued strong cash generation offset by the £0.3 billion reduction in dividends from China Mobile Limited and SFR in the 2012 financial year, and the more limited working capital improvements available going forward. Capital expenditure is expected to be at a similar level to last year on a constant currency basis.

 

Medium-term guidance

 

The execution of the updated strategy is targeted to achieve annual growth in organic service revenue of between 1% and 4% in the period to 31 March 2014. We expect that the Group EBITDA margin will stabilise by the end of this period.

 

As a result of the loss of £0.5 billion of cash dividends from our disposals of stakes in China Mobile Limited and SFR, we expect that annual free cash flow generation will now be in the £5.5 billion to £6.5 billion range in the period to March 2014, underpinning the three year 7% per annum dividend per share growth target issued in May 2010. We continue to expect that total dividends per share will be no less than 10.18 pence for the 2013 financial year.

 

The free cash flow target range excludes any incremental benefit that we derive from our strategy to generate liquidity or incremental cash flow from non-controlled interests of the Group, such as Verizon Wireless and Polkomtel.

 

Assumptions

 

Guidance for the 2012 financial year and the medium-term is based on our current assessment of the global economic outlook and assumes foreign exchange rates of £1:€1.15 and £1:US$1.60. It excludes the impact of licence and spectrum purchases, material one-off tax related payments and restructuring costs and assumes no material change to the current structure of the Group.

 

With respect to the 7% per annum dividend per share growth target, as the Group’s free cash flow is predominantly generated by companies operating within the euro currency zone, we have assumed that the euro to sterling exchange rate remains within 10% of the above guidance exchange rate.

 

Actual exchange rates may vary from the exchange rate assumptions used. A 1% change in the euro to sterling exchange rate would impact adjusted operating profit and free cash flow by approximately £50 million and a 1% change in the dollar to sterling exchange rate would impact adjusted operating profit by approximately £50 million.

 

Notes:

(1)

The Group’s guidance reflected assumptions for average exchange rates for the 2011 financial year of approximately £1:€1.15 and
£1:US$1.50. Actual exchange rates were £1:€1.18 and £1:US$1.56.

(2)

After Verizon Wireless iPhone launch costs.

(3)

The Group’s guidance did not include the impact of the revenue recognition and Alltel related adjustments in Verizon Wireless.

 

8


 

CONTENTS

 

 

 

Page

Financial results

9

Liquidity and capital resources

20

Other significant developments

23

Consolidated financial statements

25

Use of non-GAAP financial information

31

Additional information

32

Other information (including forward-looking statements)

36

 

 

 

FINANCIAL RESULTS

 

Group(1)(2)

 

 

 

 

 

Africa,
Middle East
and Asia

 

Non-
Controlled
Interests and
Common

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

Pacific

 

Functions(3)

 

Eliminations

 

2011

 

2010

 

% change

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

£

 

Organic(4)

 

Voice revenue

 

17,884

 

9,036

 

293

 

 

27,213

 

28,009

 

 

 

 

 

Messaging revenue

 

4,106

 

904

 

72

 

 

5,082

 

4,795

 

 

 

 

 

Data revenue

 

3,871

 

1,216

 

35

 

 

5,122

 

4,051

 

 

 

 

 

Fixed line revenue

 

3,003

 

399

 

 

 

3,402

 

3,289

 

 

 

 

 

Other service revenue

 

1,233

 

737

 

12

 

(63

)

1,919

 

1,575

 

 

 

 

 

Service revenue

 

30,097

 

12,292

 

412

 

(63

)

42,738

 

41,719

 

2.4

 

2.1

 

Other revenue

 

1,918

 

1,012

 

247

 

(31

)

3,146

 

2,753

 

 

 

 

 

Revenue

 

32,015

 

13,304

 

659

 

(94

)

45,884

 

44,472

 

3.2

 

2.8

 

Direct costs

 

(7,771

)

(3,483

)

(131

)

63

 

(11,322

)

(10,805

)

 

 

 

 

Customer costs

 

(9,672

)

(3,224

)

(393

)

 

(13,289

)

(12,249

)

 

 

 

 

Operating expenses

 

(3,749

)

(2,598

)

(287

)

31

 

(6,603

)

(6,683

)

 

 

 

 

EBITDA

 

10,823

 

3,999

 

(152

)

 

14,670

 

14,735

 

(0.4

)

(0.7

)

Depreciation and amortisation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles

 

(128

)

(966

)

(12

)

 

(1,106

)

(1,226

)

 

 

 

 

Purchased licences

 

(1,050

)

(122

)

(5

)

 

(1,177

)

(1,128

)

 

 

 

 

Other

 

(3,919

)

(1,690

)

(75

)

 

(5,684

)

(5,657

)

 

 

 

 

Share of result in associates

 

 

51

 

5,064

 

 

5,115

 

4,742

 

 

 

 

 

Adjusted operating profit

 

5,726

 

1,272

 

4,820

 

 

11,818

 

11,466

 

3.1

 

1.8

 

Impairment loss

 

 

 

 

 

 

 

 

 

(6,150

)

(2,100

)

 

 

 

 

Other income and expense(5)

 

 

 

 

 

 

 

 

 

(72

)

114

 

 

 

 

 

Operating profit

 

 

 

 

 

 

 

 

 

5,596

 

9,480

 

 

 

 

 

Non-operating income and expense(6)

 

 

 

 

 

 

 

 

 

3,022

 

(10

)

 

 

 

 

Net investment income/(financing costs)

 

 

 

 

 

 

 

 

 

880

 

(796

)

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

(1,628

)

(56

)

 

 

 

 

Profit for the year

 

 

 

 

 

 

 

 

 

7,870

 

8,618

 

 

 

 

 

 

Notes:

(1)

The Group revised its segment structure on 1 October 2010. See “Change in segments” on page 29.

(2)

Current period results reflect average exchange rates of £1:€1.18 and £1:US$1.56.

(3)

Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs.

(4)

Organic growth includes Vodacom at the current level of ownership but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.

(5)

Other income and expense for the year ended 31 March 2011 included £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement.

(6)

Non-operating income and expense for the year ended 31 March 2011 includes £3,019 million profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited. For further details see page 24.

 

9


 

FINANCIAL RESULTS

 

 

Revenue

 

Group revenue increased by 3.2% to £45,884 million and Group service revenue increased by 2.4% to £42,738 million. On an organic basis Group service revenue increased by 2.1%(*), with a 0.8 percentage point improvement between the first and second half as both Europe and AMAP delivered improved organic service revenue trends.

 

In Europe service revenue fell by 0.4%(*) with a decline of 0.3%(*) in the second half of the year. Both the UK and Germany performed well delivering full year service revenue growth of 4.7%(*) and 0.8%(*) respectively. Spain continued to experience economic pressures which have intensified competition leading to a 6.9%(*) decline in service revenue. Service revenue also declined by 2.1%(*) in Italy driven by a challenging economic and competitive environment combined with the impact of termination rate cuts. Our improved commercial offers in Turkey have delivered service revenue growth of 28.9%(*), despite a 52% cut in termination rates which was effective from 1 April 2010. Challenging economic and competitive conditions continued in our other central European businesses where service revenue growth was also impacted by mobile termination rate cuts. European enterprise revenue increased by 0.5%(*) with improved roaming activity and important customer wins.

 

In AMAP service revenue grew by 9.5%(*). Vodacom continued to perform well, with strong data revenue growth from mobile broadband offsetting weaker voice revenue which was impacted by two termination rate cuts during the year. In India service revenue increased by 16.2%(*), driven by an increase in the mobile customer base and a more stable pricing environment towards the end of the year. In Qatar the customer base reached 757,000 by the end of the year, with 45% of the population now actively using Vodafone services less than two years after launch. On an organic basis, service revenue in Egypt declined by 0.8%(*) where performance was impacted by the socio-political unrest during the fourth quarter.

 

EBITDA and profit

 

EBITDA decreased by 0.4% to £14,670 million with a 1.1 percentage point decline in both the reported and organic EBITDA margin.

 

In Europe EBITDA decreased by 3.7%(*), with a decline in EBITDA margin of 1.7 percentage points, primarily driven by a reduction in service revenue in most markets and higher investment in acquisition and retention costs, partially offset by operating cost efficiencies.

 

In AMAP EBITDA increased by 7.5%(*), driven primarily by growth in India, together with improvements in Vodacom, Ghana, New Zealand and Qatar, partially offset by a slight decline in Egypt. The EBITDA margin fell 0.6 percentage

points(*), the two main factors behind the decline being higher recurring licence fee costs in India and the change in regional mix from the strong growth in India.

 

Adjusted operating profit grew by 3.1% as a result of an increase in the Group’s share of results of Verizon Wireless partially offset by the decline in Group EBITDA. The Group’s share of results in Verizon Wireless, the Group’s associate in the United States, increased by 8.5%(*) primarily due to the expanding customer base, robust data revenue, efficiencies in operating expenses and lower acquisition costs partially offset by higher customer retention costs reflecting the increased demand for smartphones in the United States.

 

The Group recorded other net income of £5,342 million, primarily in relation to a £2.8 billion net gain on the sale of the Group’s interests in China Mobile Limited, £1.8 billion on the settlement of a tax case and £0.5 billion from the disposal of investments in SoftBank Mobile Corp.

 

Operating profit decreased by 41.0% primarily due to higher impairment losses compared to the prior year. Impairment losses totalling £6,150 million were recorded relating to our businesses in Spain (£2,950 million), Italy (£1,050 million), Ireland (£1,000 million), Greece (£800 million) and Portugal (£350 million), primarily resulting from increased discount rates as a result of increases in government bond rates together with lower cash flows within business plans, reflecting weaker country-level macro economic environments. The impairment loss in the prior year was £2,100 million.

 

Profit for the year decreased by 8.7%.

 

10


 

FINANCIAL RESULTS

 

 

Net investment income/(financing costs)

 

 

 

2011

 

 

2010

 

 

 

£m

 

 

£m

 

 

 

 

 

 

 

 

Investment income

 

1,309

 

 

716

 

Financing costs

 

(429

)

 

(1,512

)

Net investment income/(financing costs)

 

880

 

 

(796

)

 

 

 

 

 

 

 

Analysed as:

 

 

 

 

 

 

Net financing costs before income from investments

 

(852

)

 

(1,024

)

Potential interest charges arising on settlement of outstanding tax issues(1)

 

(46

)

 

(23

)

Income from investments

 

83

 

 

145

 

 

 

(815

)

 

(902

)

Foreign exchange(2)

 

256

 

 

(1

)

Equity put rights and similar arrangements(3)

 

95

 

 

(94

)

Interest related to the settlement of tax cases(4)

 

872

 

 

201

 

Disposal of SoftBank financial instruments(5)

 

472

 

 

– 

 

 

 

880

 

 

(796

)

 

Notes:

(1)

Excluding interest credits related to a tax case settlement.

(2)

Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances and the foreign exchange rate differences on financial instruments received as consideration on the disposal of Vodafone Japan to SoftBank in April 2006.

(3)

Includes foreign exchange rate movements, accretion expense and fair value charges. Further details of these options are provided on page 23.

(4)

The £872 million in the year ended 31 March 2011 relates to the settlement of a tax case and the £201 million in the year ended 31 March 2010 relates to the settlement of the German tax loss claim.

(5)

See “Other significant developments” on page 24.

 

Net financing costs before income from investments decreased from £1,024 million to £852 million primarily due to a reduction in net debt, partially offset by an increase in average interest rates for debt denominated in US dollars. At 31 March 2011 the provision for potential interest charges arising on settlement of outstanding tax issues was £398 million (31 March 2010: £1,312 million), with the reduction primarily reflecting the settlement of a tax case.

 

Taxation

 

 

 

2011

 

 

2010

 

 

 

£m

 

 

£m

 

 

 

 

 

 

 

 

Income tax expense

 

1,628

 

 

56

 

Tax on adjustments to derive adjusted profit before tax

 

(232

)

 

(39

)

Tax benefit related to settlement of tax cases(1)

 

929

 

 

2,103

 

Adjusted income tax expense

 

2,325

 

 

2,120

 

Share of associates’ tax

 

519

 

 

572

 

Adjusted income tax expense for purposes of calculating adjusted tax rate

 

2,844

 

 

2,692

 

 

 

 

 

 

 

 

Profit before tax

 

9,498

 

 

8,674

 

Adjustments to derive adjusted profit before tax(2)

 

1,505

 

 

1,890

 

Adjusted profit before tax

 

11,003

 

 

10,564

 

Add: Share of associates’ tax and non-controlling interest

 

604

 

 

652

 

Adjusted profit before tax for the purpose of calculating adjusted effective tax rate

 

11,607

 

 

11,216

 

 

 

 

 

 

 

 

Adjusted effective tax rate

 

24.5%

 

 

24.0%

 

 

Notes:

(1)

The £929 million in the year ended 31 March 2011 relates to the settlement of a tax case and the £2,103 million in the year ended 31 March 2010 relates to the settlement of the German tax loss claim.

(2)

See “Earnings per share” on page 12.

 

The adjusted effective tax rate for the year ended 31 March 2011 was 24.5%. This is in line with the adjusted effective tax rate for the year ended 31 March 2010 of 24.0%. Tax on adjustments to derive adjusted profit before tax includes tax payable on the gain on the disposal of the Group’s 3.2% interest in China Mobile Limited.

 

Income tax expense includes a credit of £929 million arising as a result of the settlement of a tax case in July 2010. For further details see note 4 to the consolidated financial statements in the half-year financial report for the six months ended 30 September 2010.

 

11


 

FINANCIAL RESULTS

 

 

Earnings per share

 

Adjusted earnings per share increased by 4.0% to 16.75 pence for the year ended 31 March 2011 due to growth in adjusted earnings and a reduction in shares arising from the Group’s share buyback programme. Basic earnings per share decreased to 15.2 pence primarily due to the £6,150 million of impairment charges partially offset by a gain on disposal of the Group’s 3.2% interest in China Mobile Limited and the settlement of a tax case.

 

 

 

2011

 

 

2010

 

 

 

£m

 

 

£m

 

 

 

 

 

 

 

 

Profit attributable to equity shareholders

 

7,968

 

 

8,645

 

 

 

 

 

 

 

 

Pre-tax adjustments:

 

 

 

 

 

 

Impairment loss

 

6,150

 

 

2,100

 

Other income and expense(1)(4)

 

72

 

 

(114

)

Non-operating income and expense(2)(4)

 

(3,022

)

 

10

 

Investment income and financing costs(3)(4)

 

(1,695

)

 

(106

)

 

 

1,505

 

 

1,890

 

 

 

 

 

 

 

 

Taxation(4)

 

(697

)

 

(2,064

)

Adjusted profit attributable to equity shareholders

 

8,776

 

 

8,471

 

 

 

 

 

 

 

 

 

 

Million

 

 

Million

 

Weighted average number of shares outstanding – basic

 

52,408

 

 

52,595

 

Weighted average number of shares outstanding – diluted

 

52,748

 

 

52,849

 

 

Notes:

(1)

The year ended 31 March 2011 includes £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement.

(2)

The year ended 31 March 2011 includes £3,019 million representing the profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited.

(3)

See notes 2, 3, 4 and 5 in “Net investment income/(financing costs)” on page 11.

(4)

These amounts comprise “Other net income” of £5,342 million.

 

12


 

FINANCIAL RESULTS

 

Europe(1)

 

 

 

Germany

 

Italy

 

Spain

 

UK

 

Other

 

Eliminations

 

Europe

 

% change

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

£

 

Organic

 

31 March 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue

 

3,466

 

3,237

 

3,319

 

2,545

 

5,318

 

(1

)

17,884

 

 

 

 

 

Messaging revenue

 

790

 

849

 

345

 

1,148

 

974

 

 

4,106

 

 

 

 

 

Data revenue

 

1,250

 

602

 

537

 

762

 

720

 

 

3,871

 

 

 

 

 

Fixed line revenue

 

1,813

 

574

 

314

 

31

 

271

 

 

3,003

 

 

 

 

 

Other service revenue

 

152

 

170

 

220

 

445

 

504

 

(258

)

1,233

 

 

 

 

 

Service revenue

 

7,471

 

5,432

 

4,735

 

4,931

 

7,787

 

(259

)

30,097

 

(3.4

)

(0.4

)

Other revenue

 

429

 

290

 

398

 

340

 

466

 

(5

)

1,918

 

 

 

 

 

Revenue

 

7,900

 

5,722

 

5,133

 

5,271

 

8,253

 

(264

)

32,015

 

(2.5

)

0.6

 

Direct costs

 

(1,729

)

(1,305

)

(1,050

)

(1,548

)

(2,398

)

259

 

(7,771

)

 

 

 

 

Customer costs

 

(2,399

)

(1,169

)

(1,990

)

(1,928

)

(2,191

)

5

 

(9,672

)

 

 

 

 

Operating expenses

 

(820

)

(605

)

(531

)

(562

)

(1,231

)

 

(3,749

)

 

 

 

 

EBITDA

 

2,952

 

2,643

 

1,562

 

1,233

 

2,433

 

 

10,823

 

(7.1

)

(3.7

)

Depreciation and amortisation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles

 

 

 

(1

)

 

(127

)

 

(128

)

 

 

 

 

Purchased licences

 

(472

)

(102

)

(7

)

(333

)

(136

)

 

(1,050

)

 

 

 

 

Other

 

(932

)

(638

)

(639

)

(552

)

(1,158

)

 

(3,919

)

 

 

 

 

Adjusted operating profit

 

1,548

 

1,903

 

915

 

348

 

1,012

 

 

5,726

 

(9.8

)

(6.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

37.4%

 

46.2%

 

30.4%

 

23.4%

 

29.5%

 

 

 

33.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue

 

3,895

 

3,658

 

3,859

 

2,681

 

5,732

 

(1

)

19,824

 

 

 

 

 

Messaging revenue

 

778

 

894

 

400

 

1,020

 

926

 

 

4,018

 

 

 

 

 

Data revenue

 

1,018

 

516

 

488

 

593

 

630

 

 

3,245

 

 

 

 

 

Fixed line revenue

 

1,900

 

540

 

318

 

31

 

181

 

 

2,970

 

 

 

 

 

Other service revenue

 

131

 

172

 

233

 

386

 

474

 

(294

)

1,102

 

 

 

 

 

Service revenue

 

7,722

 

5,780

 

5,298

 

4,711

 

7,943

 

(295

)

31,159

 

 

 

 

 

Other revenue

 

286

 

247

 

415

 

314

 

414

 

(2

)

1,674

 

 

 

 

 

Revenue

 

8,008

 

6,027

 

5,713

 

5,025

 

8,357

 

(297

)

32,833

 

 

 

 

 

Direct costs

 

(1,728

)

(1,359

)

(1,161

)

(1,521

)

(2,364

)

295

 

(7,838

)

 

 

 

 

Customer costs

 

(2,221

)

(1,150

)

(2,035

)

(1,813

)

(2,136

)

2

 

(9,353

)

 

 

 

 

Operating expenses

 

(937

)

(675

)

(561

)

(550

)

(1,275

)

 

(3,998

)

 

 

 

 

EBITDA

 

3,122

 

2,843

 

1,956

 

1,141

 

2,582

 

 

11,644

 

 

 

 

 

Depreciation and amortisation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles

 

 

(10

)

(2

)

(7

)

(179

)

 

(198

)

 

 

 

 

Purchased licences

 

(446

)

(104

)

(7

)

(333

)

(123

)

 

(1,013

)

 

 

 

 

Other

 

(981

)

(622

)

(637

)

(646

)

(1,196

)

 

(4,082

)

 

 

 

 

Adjusted operating profit

 

1,695

 

2,107

 

1,310

 

155

 

1,084

 

 

6,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

39.0%

 

47.2%

 

34.2%

 

22.7%

 

30.9%

 

 

 

35.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change at constant exchange rates  

 

%

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

 

Voice revenue

 

(7.3

)

(7.8

)

(10.4

)

(5.1

)

(4.5

)

 

 

 

 

 

 

 

 

Messaging revenue

 

5.8

 

(1.0

)

(10.0

)

12.6

 

8.2

 

 

 

 

 

 

 

 

 

Data revenue

 

27.9

 

21.5

 

14.8

 

28.5

 

18.5

 

 

 

 

 

 

 

 

 

Fixed line revenue

 

(0.5

)

10.7

 

2.8

 

1.9

 

55.3

 

 

 

 

 

 

 

 

 

Other service revenue

 

21.1

 

2.6

 

(1.4

)

15.3

 

9.4

 

 

 

 

 

 

 

 

 

Service revenue

 

0.8

 

(2.1

)

(6.9

)

4.7

 

1.0

 

 

 

 

 

 

 

 

 

Other revenue

 

56.2

 

21.8

 

(0.2

)

8.2

 

17.2

 

 

 

 

 

 

 

 

 

Revenue

 

2.8

 

(1.1

)

(6.4

)

4.9

 

1.8

 

 

 

 

 

 

 

 

 

Direct costs

 

4.2

 

 

(5.7

)

1.8

 

4.0

 

 

 

 

 

 

 

 

 

Customer costs

 

12.7

 

6.0

 

1.9

 

6.4

 

5.7

 

 

 

 

 

 

 

 

 

Operating expenses

 

(8.9

)

(6.8

)

(1.6

)

2.1

 

(0.9

)

 

 

 

 

 

 

 

 

EBITDA

 

(1.5

)

(3.1

)

(16.8

)

8.0

 

(2.2

)

 

 

 

 

 

 

 

 

Depreciation and amortisation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles

 

 

(100.0

)

(50.0

)

(100.0

)

(27.0

)

 

 

 

 

 

 

 

 

Purchased licences

 

10.3

 

3.0

 

 

 

14.3

 

 

 

 

 

 

 

 

 

Other

 

0.5

 

6.7

 

4.6

 

(14.6

)

(0.4

)

 

 

 

 

 

 

 

 

Adjusted operating profit

 

(4.9

)

(5.9

)

(27.3

)

125.1

 

(1.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin movement (pps)

 

(1.6

)

(1.0

)

(3.9

)

0.7

 

(1.2

)

 

 

 

 

 

 

 

 

 

Note:

(1)     The Group revised its segment structure on 1 October 2010. See “Change in segments” on page 29.

 

13


 

FINANCIAL RESULTS

 

 

Revenue declined by 2.5% reflecting a 3.2 percentage point impact from unfavourable foreign exchange rate movements. On an organic basis service revenue declined by 0.4%(*) reflecting reductions in most markets offset by growth in Germany, the UK, the Netherlands and Turkey. The decline was primarily driven by lower voice revenue resulting from continued market and regulatory pressure on pricing and the challenging economic climate, partially offset by growth in data and fixed line revenue.

 

EBITDA decreased by 7.1% including a 3.5 percentage point impact from unfavourable exchange rate movements. On an organic basis EBITDA decreased by 3.7%(*), with a 1.7 percentage point decline in EBITDA margin resulting from a reduction in service revenue in most markets and higher customer investment, partially offset by operating cost savings.

 

 

 

Organic

 

M&A

 

Foreign

 

Reported

 

 

 

change

 

activity

 

exchange

 

change

 

 

 

 %

 

pps

 

pps

 

%

 

 

 

 

 

 

 

 

 

 

 

Revenue - Europe

 

0.6

 

0.1

 

(3.2

)

(2.5

)

 

 

 

 

 

 

 

 

 

 

Service revenue

 

 

 

 

 

 

 

 

 

Germany

 

0.8

 

 

(4.1

)

(3.3

)

Italy

 

(2.1

)

 

(3.9

)

(6.0

)

Spain

 

(6.9

)

 

(3.7

)

(10.6

)

UK

 

4.7

 

 

 

4.7

 

Other Europe

 

0.5

 

0.5

 

(3.0

)

(2.0

)

Europe

 

(0.4

)

0.1

 

(3.1

)

(3.4

)

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

 

Germany

 

(1.5

)

 

(3.9

)

(5.4

)

Italy

 

(3.1

)

 

(3.9

)

(7.0

)

Spain

 

(16.8

)

 

(3.3

)

(20.1

)

UK

 

8.0

 

 

 

8.0

 

Other Europe

 

(2.4

)

0.2

 

(3.6

)

(5.8

)

Europe

 

(3.7

)

0.1

 

(3.5

)

(7.1

)

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

 

 

 

 

 

 

 

 

Germany

 

(4.9

)

 

(3.8

)

(8.7

)

Italy

 

(5.9

)

 

(3.8

)

(9.7

)

Spain

 

(27.3

)

 

(2.9

)

(30.2

)

UK

 

125.1

 

 

 

125.1

 

Other Europe

 

(2.0

)

0.3

 

(4.9

)

(6.6

)

Europe

 

(6.1

)

0.1

 

(3.8

)

(9.8

)

 

Germany

 

Service revenue increased by 0.8%(*) driven by strong data and messaging revenue growth. Data revenue grew by 27.9%(*) as a result of increased penetration of smartphones and Superflat Internet tariffs. Mobile revenue remained stable in the fourth quarter despite a termination rate cut effective from 1 December 2010. Enterprise revenue grew by 3.6%(*) driven by strong customer and data revenue growth.

 

EBITDA declined by 1.5%(*), with a 1.6 percentage point reduction in the EBITDA margin. This decline was driven by increased customer acquisition and retention, contributed to by the launch of the iPhone in the third quarter, partially offset by operating cost efficiencies.

 

During the year we acquired LTE spectrum in Germany and launched LTE services towards the end of the year, initially targeting rural areas underserved by fixed broadband.

 

Italy

 

Service revenue declined by 2.1%(*) primarily driven by the challenging economic and competitive environment, the impact of termination rate cuts and customer tariff optimisation. The average contract customer base grew by 12.6% enabling the partial offset of these pressures. Data revenue growth remained strong at 21.5%(*) driven by the high level of customers migrating to smartphones and taking advantage of data plans. There was continued investment to improve quality and coverage of the network. Fixed line revenue continued to grow with the broadband customer base reaching 1.7 million at 31 March 2011 on a 100% basis.

 

14


 

FINANCIAL RESULTS

 

 

EBITDA decreased by 3.1%(*), with a fall in the EBITDA margin of 1.0 percentage point, as a result of the decline in service revenue and higher investment in acquisition and retention costs partially offset by a reduction in operating expenses.

 

Spain

 

Service revenue declined by 6.9%(*) impacted by continued intense competition, general economic weakness and the penetration of lower priced tariffs into the customer base. New integrated plans were introduced in the third quarter in response to the demand for combined voice and data tariffs driven by the increase in smartphones. Data revenue grew by 14.8%(*) driven by mobile broadband and mobile internet. One-off items contributed to a 1.8 percentage point(*) improvement to service revenue growth for the fourth quarter.

 

EBITDA declined 16.8%(*), with a 3.8 percentage point fall in the EBITDA margin, due to lower service revenue and proportionately higher acquisition and retention costs, partially offset by a reduction in operating expenses.

 

UK

 

Service revenue increased by 4.7%(*) driven by data revenue growth due to increasing penetration of smartphones and mobile internet bundles, and strong net contract customer additions, which more than offset continued competitive pressures and weaker prepaid revenue. The termination rate cuts announced in March 2011 are expected to have a significant negative impact on revenue growth during the 2012 financial year.

 

EBITDA increased by 8.0%(*) with the EBITDA margin increasing by 0.7 percentage points, reflecting higher service revenue partially offset by higher customer acquisition and retention costs.

 

Other Europe

 

Service revenue increased by 0.5%(*) with growth in Turkey and the Netherlands being partially offset by declines in  other markets due to the challenging economic environment and intense competitive factors. In Turkey service revenue grew by 28.9%(*) driven by strong growth in both data and voice revenue, despite a 52% cut in termination rates effective from 1 April 2010. In Greece service revenue declined by 19.4%(*) with intense competition driving a reduction in prepaid revenue and economic factors leading to customer tariff optimisation.

 

EBITDA declined by 2.4%(*), with declines in all markets except Turkey and the Netherlands, due primarily to lower service revenue and higher acquisition and retention costs partially offset by operating cost efficiencies.

 

15


 

FINANCIAL RESULTS

 

Africa, Middle East and Asia Pacific(1)

 

 

India

 

Vodacom

 

Other Africa,
Middle East
and

Asia Pacific

 

Eliminations

 

Africa,
Middle East
and

Asia Pacific

 

% change

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£

 

Organic(2)

 

31 March 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue

 

3,041

 

3,528

 

2,467

 

 

9,036

 

 

 

 

 

Messaging revenue

 

171

 

285

 

448

 

 

904

 

 

 

 

 

Data revenue

 

247

 

577

 

392

 

 

1,216

 

 

 

 

 

Fixed line revenue

 

7

 

216

 

176

 

 

399

 

 

 

 

 

Other service revenue

 

338

 

233

 

167

 

(1

)

737

 

 

 

 

 

Service revenue

 

3,804

 

4,839

 

3,650

 

(1

)

12,292

 

20.0

 

9.5

 

Other revenue

 

51

 

640

 

321

 

 

1,012

 

 

 

 

 

Revenue

 

3,855

 

5,479

 

3,971

 

(1

)

13,304

 

20.0

 

9.5

 

Direct costs

 

(1,114

)

(1,168

)

(1,202

)

1

 

(3,483

)

 

 

 

 

Customer costs

 

(534

)

(1,652

)

(1,038

)

 

(3,224

)

 

 

 

 

Operating expenses

 

(1,222

)

(815

)

(561

)

 

(2,598

)

 

 

 

 

EBITDA

 

985

 

1,844

 

1,170

 

 

3,999

 

20.8

 

7.5

 

Depreciation and amortisation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles

 

(357

)

(554

)

(55

)

 

(966

)

 

 

 

 

Purchased licences

 

(5

)

 

(117

)

 

(122

)

 

 

 

 

Other

 

(608

)

(463

)

(619

)

 

(1,690

)

 

 

 

 

Share of result in associates

 

 

 

51

 

 

51

 

 

 

 

 

Adjusted operating profit

 

15

 

827

 

430

 

 

1,272

 

55.5

 

8.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

25.6%

 

33.7%

 

29.5%

 

 

 

30.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue

 

2,547

 

3,043

 

2,268

 

 

7,858

 

 

 

 

 

Messaging revenue

 

108

 

243

 

391

 

 

742

 

 

 

 

 

Data revenue

 

169

 

342

 

268

 

 

779

 

 

 

 

 

Fixed line revenue

 

2

 

172

 

145

 

 

319

 

 

 

 

 

Other service revenue

 

243

 

154

 

152

 

(1

)

548

 

 

 

 

 

Service revenue

 

3,069

 

3,954

 

3,224

 

(1

)

10,246

 

 

 

 

 

Other revenue

 

45

 

496

 

302

 

 

843

 

 

 

 

 

Revenue

 

3,114

 

4,450

 

3,526

 

(1

)

11,089

 

 

 

 

 

Direct costs

 

(880

)

(1,034

)

(1,031

)

1

 

(2,944

)

 

 

 

 

Customer costs

 

(424

)

(1,134

)

(940

)

 

(2,498

)

 

 

 

 

Operating expenses

 

(1,003

)

(754

)

(578

)

 

(2,335

)

 

 

 

 

EBITDA

 

807

 

1,528

 

977

 

 

3,312

 

 

 

 

 

Depreciation and amortisation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles

 

(340

)

(611

)

(61

)

 

(1,012

)

 

 

 

 

Purchased licences

 

 

 

(110

)

 

(110

)

 

 

 

 

Other

 

(504

)

(395

)

(527

)

 

(1,426

)

 

 

 

 

Share of result in associates

 

 

(2

)

56

 

 

54

 

 

 

 

 

Adjusted operating (loss)/profit

 

(37

)

520

 

335

 

 

818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

25.9%

 

34.3%

 

27.7%

 

 

 

29.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change at constant exchange rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

%