20-F

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 20-F

	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended:     March 31, 2005
OR
	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from:                   to
Commission file number:                    1-10086

VODAFONE GROUP PUBLIC LIMITED COMPANY
(formerly VODAFONE AIRTOUCH PUBLIC LIMITED COMPANY)
(Exact name of Registrant as specified in its charter)

England
(Jurisdiction of incorporation or organization)

Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Ordinary shares of $0.10 each	New York Stock Exchange*

* Listed, not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

     Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares of $0.10 each
7% Cumulative Fixed Rate Shares of £1 each 64,566,632,941
50,000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes                   No

Indicate by check mark which financial statements item the registrant has elected to follow:

Item 17               Item 18

Vodafone Group Plc
Annual Report
For the year ended 31 March 2005
Building our future

	Our vision is to be the world’s mobile communications leader enriching our customers’ lives through the unique power of mobile communications

Contents
Highlights	Financial Highlights	2
Strategy	Chairman’s Statement	4
	Chief Executive’s Review	6
Business	Business Overview	10
	Cautionary Statement Regarding Forward-Looking Statements	24
	Risk Factors and Legal Proceedings	25
Performance	Operating and Financial Review and Prospects	28
	Non-GAAP Information	52
Governance	Board of Directors and Group Management	55
	Directors’ Report	58
	Corporate Governance	60
	Board’s Report to Shareholders on Directors’ Remuneration	65
	Employees	75
	Corporate Responsibility and Environmental Issues	76
Financials	Consolidated Financial Statements	77
	Report of Independent Auditors	137
Shareholder information	Information on International Financial Reporting Standards	138
	Investor Information	141
	Form 20-F Cross Reference Guide	149

This constitutes the Annual Report on Form 20-F (the “20-F”) of Vodafone Group Plc (the “Company”) in accordance with the requirements of the US Securities and Exchange Commission (the “SEC”) and is dated 8 June 2005. This document contains the information set out within the Company’s Annual Report in accordance with United Kingdom (“UK”) requirements, dated 24 May 2005, as updated or supplemented at the time of filing of the 20-F with the SEC, which may be later amended if necessary. The content of the Group’s website (www.vodafone.com) should not be considered to form part of this 20-F or the Annual Report.

References to the “Group” or “Vodafone” are references to the Company and its subsidiary undertakings and, where the context requires, its interests in joint ventures and associated undertakings.

In the discussion of the Group’s reported financial position and results for the year ended 31 March 2005, information in addition to that contained within the Consolidated Financial Statements is presented on the basis that it provides readers with additional financial information regularly reviewed by management. This information is provided to assist investor assessment of the Group’s performance from period to period. However, the additional information presented is not uniformly defined by all companies in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Definitions of the terms and measures presented are shown on pages 28 and 29.

In presenting and discussing the Group’s reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with UK generally accepted accounting principles (“UK GAAP”), but this information is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation as an alternative to the equivalent GAAP measure. An explanation as to the use of these measures and reconciliations to their nearest equivalent GAAP measure can be found on pages 52 to 54.

This Annual Report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and business management and strategy, plans and objectives for the Group. For further details, please see “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors and Legal Proceedings – Risk Factors” for a discussion of the risks associated with these statements.

Vodafone, Vodafone live!, Vodafone Mobile Connect, Vodafone Wireless Office, Vodafone Simply and Vodafone Passport are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners.

| 1

Financial Highlights

The selected financial data set out on the following pages is derived from the Consolidated Financial Statements of the Company on pages 77 to 136 and as such should be read in conjunction with them. Certain trends within the financial data presented below have been impacted by business acquisitions and disposals, the most significant of which are described in “Business Overview – History and Development of the Company”. The Consolidated Financial Statements are prepared in accordance with UK GAAP, on the basis set out in note 1 to the Consolidated Financial Statements, which differ in certain significant respects from US GAAP. For further details, see note 36 to the Consolidated Financial Statements, “US GAAP information”. Solely for convenience, amounts represented below in dollars have been translated at $1.8888: £1, the Noon Buying Rate on 31 March 2005.

	At/year ended 31 March
	2005		2005		2004		2003		2002		2001
	$m		£m		£m		£m		£m		£m
Consolidated Profit and Loss Account Data
UK GAAP
Group turnover	64,470		34,133		33,559		30,375		22,845		15,004
Of which in respect of: continuing operations	64,470		34,133		32,741		28,547		21,767		15,004
discontinued operations	–		–		818		1,828		1,078		–
Total Group operating (loss)/profit	(7,765	)	(4,111	)	(4,230	)	(5,451	)	(11,834	)	(6,989	)
Of which in respect of: continuing operations	(7,765	)	(4,111	)	(4,296	)	(5,208	)	(11,408	)	(6,989	)
discontinued operations	–		–		66		(243	)	(426	)	–
Loss for the financial year	(14,242	)	(7,540	)	(9,015	)	(9,819	)	(16,155	)	(9,885	)
US GAAP
Group turnover	56,424		29,873		27,653		22,416		16,561		11,103
Loss for the financial year(1)(2)	(26,031	)	(13,782	)	(8,127	)	(9,055	)	(16,688	)	(7,071	)
Consolidated Cash Flow Data
Net cash inflow from operating activities	24,012		12,713		12,317		11,142		8,102		4,587
Net cash outflow for capital expenditure and financial investment	(9,006	)	(4,768	)	(4,267	)	(5,359	)	(4,441	)	(18,988	)
Free cash flow (Non-GAAP measure)(3)	14,821		7,847		8,521		5,171		2,365		(13,278	)
Consolidated Balance Sheet Data
UK GAAP
Equity shareholders’ funds	187,590		99,317		111,924		128,630		130,540		144,979
Net assets	192,913		102,135		114,931		131,493		133,395		147,400
Total assets	252,922		133,906		147,129		163,239		162,867		172,362
US GAAP
Equity shareholders’ funds	202,564		107,245		125,029		140,436		140,887		155,522
Total assets(4)	348,591		184,557		213,527		234,447		205,997		214,380

	Group Turnover Year ended 31 March		Total Group operating loss Year ended 31 March		Net cash inflow from operating activities Year ended 31 March

2 |  Highlights

	At/year ended 31 March
	2005		2005		2004		2003		2002		2001
Earnings Per Share (“EPS”)(5)
Weighted average number of shares (millions)
– Basic and diluted	66,196		66,196		68,096		68,155		67,961		61,439
UK GAAP
Total Group operating loss (per ordinary share)	(11.73	)¢	(6.21	)p	(6.21	)p	(8.00	)p	(17.42	)p	(11.38	)p
Total Group operating loss from continuing operations (per ordinary share)	(11.73	)¢	(6.21	)p	(6.31	)p	(7.64	)p	(16.79	)p	(11.38	)p
Basic and diluted loss per ordinary share	(21.51	)¢	(11.39	)p	(13.24	)p	(14.41	)p	(23.77	)p	(16.09	)p
Basic and diluted loss per ADS	(215.1	)¢	(113.9	)p	(132.4	)p	(144.1	)p	(237.7	)p	(160.9	)p
US GAAP
Basic and diluted loss per ordinary share(1)(2)	(39.32	)¢	(20.82	)p	(11.93	)p	(13.29	)p	(24.56	)p	(11.51	)p
Basic and diluted loss per ADS	(393.2	)¢	(208.2	)p	(119.3	)p	(132.9	)p	(245.6	)p	(115.1	)p
Cash dividends(5)(6)
Amount per ordinary share	7.68	¢	4.07	p	2.0315	p	1.6929	p	1.4721	p	1.4020	p
Amount per ADS	76.8	¢	40.7	p	20.315	p	16.929	p	14.721	p	14.020	p
Other Data
UK GAAP
Ratio of earnings to fixed charges(7)	–		–		–		–		–		–
Deficit	$(7,055	)m	£(3,735	)m	£(3,647	)m	£(4,828	)m	£(11,267	)m	£(6,947	)m
US GAAP
Ratio of earnings to fixed charges(7)	–		–		–		–		–		–
Deficit	$(17,145	)m	£(9,077	)m	£(9,059	)m	£(8,436	)m	£(14,425	)m	£(7,811	)m

Notes:
(1)	2005 net loss includes the cumulative effect of accounting changes related to intangible assets and post employment benefits that increase net loss by £6,372 million or 9.63p per ordinary share. See note 36 of the Consolidated Financial Statements for further details on these changes in accounting policy.
(2)	2002 net loss includes the cumulative effect of accounting change related to derivative financial instruments reducing net loss by £17 million or 0.02p per ordinary share.
(3)	Refer to “Non-GAAP Information” on pages 52 to 54 for a reconciliation of this non-GAAP measure to the most comparable GAAP measure and a discussion of this measure.
(4)	Certain prior year amounts have been reclassified to conform to current year presentation. See note 36 of the Consolidated Financial Statements on page 126 for further details on this change in presentation.
(5)	See note 10 to the Consolidated Financial Statements, “Loss per share”. Earnings per American Depository Share (“ADS”) is calculated by multiplying earnings per ordinary share by ten, the number of ordinary shares per ADS. Dividend per ADS is calculated similarly.
(6)	The final dividend for the year ended 31 March 2005 was proposed by the directors on 24 May 2005.
(7)	For the purposes of calculating these ratios, earnings consist of income on ordinary activities before taxation adjusted for fixed charges, dividend income from associated undertakings, share of profits and losses from associated undertakings and profits and losses on ordinary activities before taxation from discontinued operations. Fixed charges comprise one-third of payments under operating leases, representing the interest element of these payments, interest payable and similar charges and preferred share dividends.

	Free cash flow(3) Year ended 31 March		Dividends per share Year ended 31 March		Basic EPS Year ended 31 March

Highlights  | 3

Chairman’s Statement

	It is my pleasure to report another year of achievement for your company, with robust increases in customer numbers, mobile revenue and operating cash flow, enabling us to substantially increase returns to shareholders.
Lord MacLaurin of Knebworth, DL Chairman

Executing our strategic goals

Last year we outlined six strategic goals, designed then to ensure the delivery of increased value to our customers and shareholders as we move into a new era in mobile telecommunications. I believe we have made significant progress, particularly with the consumer launch of 3G and the ongoing implementation of our One Vodafone programme.

In November, we announced the full roll-out of our consumer 3G offering across 13 markets. This was an important step in our 3G strategy and followed the success of the Vodafone Mobile Connect 3G/GPRS data card introduced in February last year. The enhancements that 3G brings will enable us to build on the success we have achieved with Vodafone live! since the service started in October 2002. We now have almost 31 million active Vodafone live! users and have a total of 2.4 million 3G devices registered on our networks.

Vodafone live! and Vodafone Mobile Connect are prime examples of how we offer services that are focused on specific customer needs. The most recent examples of this approach have been the launch of Vodafone Simply, which caters for those customers who want an uncomplicated and straight-forward mobile experience, and the simplification of our roaming tariffs with the introduction of Vodafone Travel Promise.

Our ability to launch common services across so many markets at the same time is evidence of how Vodafone is beginning to deliver the advantages of scale and scope and, in particular, shows the benefit of creating central marketing and technology functions last year. We are building on these achievements through our One Vodafone programme to drive further benefits from our global footprint.

Extending our global reach

We have continued to pursue selective opportunities to expand our geographic footprint, with a particular focus on Central and Eastern Europe. In March, we announced that we had entered into conditional agreements with TIW of Canada to acquire 79% of the share capital of MobiFon S.A. in Romania, in which we already have a 20% interest, and 100% of the share capital of Oskar Mobil a.s. in the Czech Republic. Both companies are fast growing mobile operators that will benefit further from the global services and scale benefits that Vodafone can deliver. This transaction completed on 31 May 2005.

In October, the merger of Vodafone Holdings K.K. and Vodafone K.K. in Japan was completed following our successful tender offer to increase our shareholdings in both companies. This clearly demonstrates our long-term commitment to the strategically important mobile market in Japan. The merger has created a simplified company structure which has already contributed towards greater operational effectiveness and financial efficiencies and, although the business is currently not performing as well as we would wish, I am confident that, in time, our investment will prove to be very rewarding.

In December, we signed a Partner Network Agreement with SmarTone in Hong Kong, bringing the number of our Partner Networks to fourteen. SmarTone, now fully rebranded SmarTone-Vodafone, is one of Hong Kong’s leading mobile operators in multimedia services.

4 Strategy

Responsible behaviour

Mobile telecommunications brings many positive social, environmental and economic benefits, although for some it also brings concerns about possible health effects. Our approach is to continue to support research aligned with the World Health Organisation’s priorities and to provide customers and local communities everywhere we operate with up to date, reliable information in plain language. We are committed to communicating clearly to ensure people have the information they want to make decisions on mobile telecommunications.

For Vodafone, corporate responsibility is about understanding the expectations of our stakeholders and taking appropriate action to meet those expectations. We are, therefore, integrating corporate responsibility into the business and this is reflected in our strategic goals, our values and our Business Principles.

During the year, Vodafone and its operating companies made charitable contributions of £33 million to The Vodafone Group Foundation, local Vodafone Foundations and social projects. To support the humanitarian rescue operation following the Asia Tsunami disaster, Vodafone, its employees and Foundations committed total funds of £2.5 million, including the provision of free calls to and from the affected region as well as employee matched donations in a number of countries. A summary of our corporate responsibility activity in the year is set out later in this report, with full details available in our Corporate Responsibility report, which I believe you will be pleased to read.

Delivering value to shareholders

Your Board believes that with the continuing financial strength of your Company it is possible to increase returns to shareholders through enhanced dividend payments and share purchases. In November, the interim dividend was increased by 100% and the directors are now recommending that the final dividend is also increased by 100%.

We have also continued with our share purchase programme and in the year to 31 March 2005 purchased approximately 3 billion shares at a cost of £4 billion. We shall be seeking shareholder approval at the Annual General Meeting (“AGM”) for the purchase of up to a further £4.5 billion of shares during the current financial year and I look forward to your support.

Effective leadership

As part of a new organisational structure designed to assist in the delivery of the Group’s strategic goals, Sir Julian Horn-Smith was appointed Deputy Chief Executive on 1 January this year. In this role, Sir Julian leads a new function, Global Business Development, which is responsible for delivering Vodafone’s products and services portfolio into the Group’s affiliates and Partner Networks. The Global Business Development team has also assumed responsibility for expanding and consolidating our footprint through our Partner Network programme and any acquisition activities. It was a great pleasure for us all that the Queen awarded Julian a Knighthood in her last birthday honours list. The honour was very much deserved and is appropriate recognition of the outstanding contribution he has made to the success of your Company.

At the conclusion of the AGM to be held in July, our Financial Director, Ken Hydon, will retire. Ken was one of the first directors of your Company and he has done a superb job in helping to guide the Company from its origins to the world leader it is today. His financial discipline and acumen has enabled Vodafone to invest significantly in customers, infrastructure and acquisitions whilst maintaining financial strength and flexibility at all times. He will be missed by his colleagues and we wish him a very happy and well deserved retirement.

Also retiring at the AGM will be Sir David Scholey, a non-executive director since 1998. David’s wise counsel will also be missed and we thank him for his service and contribution to the Board over many years.

We have announced that Andy Halford, who, until the end of December, was Chief Financial Officer at our US affiliate, Verizon Wireless, will succeed Ken Hydon. Andy Halford joined Vodafone in 1999 as Financial Director, Vodafone UK. In 2001 he was given regional responsibility as Financial Director for the UK, Northern Europe, Middle East and Africa before moving to his position with Verizon Wireless in 2002.

On 1 January, I was delighted to welcome Sir John Bond to the Board as a non-executive director. Sir John, who is Group Chairman of HSBC Holdings plc, one of the world’s largest banks, brings with him many years experience and a track record of success in international markets, particularly in Asia and the Americas. His skills will be of great benefit to the Board.

For the first time, all the directors are retiring and seeking re-election this year. This is a responsible step forward as we seek to maintain the highest standards of corporate governance.

It is only with the support and commitment of all employees, at all levels, that we are able to continue the growth of Vodafone. In thanking them all, I look forward to their ongoing contribution to achieving further progress in the current year.

Lord MacLaurin of Knebworth, DL
Chairman

Strategy | 5

Chief Executive’s Review

	Delivering operating performance
	Delighting our customers
	Implementing One Vodafone
	Increasing shareholder returns
	Executing our strategy
Arun Sarin Chief Executive

This has been another successful year for Vodafone. We closed the year with nearly 155 million proportionate customers, having generated £7.8 billion of free cash flow from £12.7 billion of operating cash flow. Cash shareholder returns increased to £6 billion as we doubled the dividend and purchased £4 billion of our shares. We also launched 3G for consumers and firmly established our One Vodafone plan – key drivers for our future growth.

Delivering operational performance

Our results are built on the base of a strong overall Group operational performance that has delivered on all our key targets.

Organic growth of 12% in proportionate customers was driven by particularly strong performances in the year in Germany, Spain and the US. Customer growth has again been the driver for the increase in revenue but, as average customer spend has reduced, this led to growth in Group mobile revenue of 4%, or 5% on an organic basis.

Group revenue increased by 2% to £34.1 billion. Removing the effect of acquisitions and disposals and adverse foreign exchange movements, organic revenue growth was 6%.

Cash flow generation continues to be robust, reflecting the underlying strength of our operations and financial structure. Operating cash flow increased by £0.4 billion to £12.7 billion, driven by higher revenue. Free cash flow for the year was £7.8 billion, compared to £8.5 billion last year that included one-off items amounting to £0.8 billion. This strong cash flow supports our significant increases in shareholder returns this year.

This past financial year we added a further £5.1 billion of fixed assets, primarily in respect of our mobile network infrastructure. This amount is only slightly higher than the prior year, even though we continue to invest significantly in our 3G networks.

Our operating performance in Europe remains robust. In the US, Verizon Wireless has performed exceptionally well, delivering impressive financial performance across all metrics. We have a productive working relationship with our partner, Verizon Communications, and believe that we will continue to benefit from our investment in Verizon Wireless as we go forward.

We face challenges in Japan, where we are half way through a two year plan to turnaround our business. This plan has three main objectives: to improve the attractiveness of 3G handsets and content in that market, to increase the effectiveness of our distribution channels and to improve the coverage of our 3G network.

Japan remains a strategically important mobile market for us and is a significant profit generator for the Group, contributing £0.8 billion of operating profit before goodwill amortisation in the last year. However, the pace of change and advanced state of 3G there requires additional focus to improve our competitive position. Together with our three main objectives, we have strengthened the management team and remain focused on a successful execution of our recovery plan.

As we look forward, we see both greater opportunities and greater challenges. The potential for growth in voice and data is significant. However, penetration levels in many of our markets are now reaching saturation and competition is intensifying through existing network operators and the introduction of many more low cost operators and resellers. Greater choice in the market place is leading to rising customer demands. We are also seeing continued regulatory led termination rate reductions.

In this environment, we see winners and losers. We believe Vodafone is uniquely positioned to succeed through our scale and scope and the customer focus of all our employees. To achieve this success, we are focused on the execution of the six strategic goals that we outlined last year; delighting our customers, leveraging our scale and scope, expanding market boundaries, building the best global team, being a responsible business and providing superior shareholder returns.

Delighting our customers

Focus on customer needs

A core strategic goal is delighting our customers. Vodafone has nearly 155 million proportionate customers around the world, all with the common need to communicate with friends, family and colleagues wherever they are. Within this common need, our customers have different communication requirements. Some may need constant and real time access to their email. Others may want to download music and games. Others just want to talk. However, all of our customers desire simplicity and transparency. Vodafone aims to deliver increasing value to its customers by creating innovative services that meet these different needs, supported by world class customer service.

6 | Strategy

Proportionate customers	Turnover	Cash flow

One of the key elements in delighting our customers was the launch in November 2004 of our 3G consumer service, Vodafone live! with 3G. This service fundamentally changes mobile telecommunications for our customers and gives Vodafone a platform to deliver a market leading, differentiated proposition. Most importantly, it represents a significant ongoing growth opportunity for the Group through new and enhanced services, additional network capacity and innovative pricing.

Creating new and enhanced services

Customers have been enjoying Vodafone live! services on 2.5G since its launch in October 2002. With the introduction of 3G, these services are enhanced through greater data speed and capacity, providing a better customer experience. Faster network speed, more network capacity and increasingly sophisticated devices also means many new services can be delivered to the mobile. The result is clearer pictures, more exciting games and better music and sound quality. We now offer 3D games, full track music downloads with CD-like quality in addition to real music and polyphonic ringtones and a wider range of video based services, including video calling and higher quality film, music and entertainment clips. We have also significantly increased the range and depth of content as mobile has become a more attractive channel to content providers.

But 3G is not all about consumer services, as it provides a significant enhancement to business offerings as well. This has been most evident with the Vodafone Mobile Connect data card, which enables business customers to connect to their office systems whilst on the move. Greater speed and capacity means much easier access and use of email and other office applications – our customers can now use their laptops as if they were in the office. We have expanded our push email offerings recently and are also working closely with a number of leading IT industry players to bring historically fixed line internet services to the mobile world.

Capturing more minutes

3G provides significantly more capacity in our networks. This gives us the ability to drive voice minutes that are currently carried on fixed lines onto mobile networks, so called fixed to mobile substitution, and therefore generate additional revenue. To put this opportunity into perspective, approximately two thirds of all voice traffic in Europe today is carried on fixed line networks, offering significant market expansion potential for Vodafone in voice minutes.

Offering innovative pricing

Whilst we can now offer a much richer customer experience, the key to generating additional revenue is to encourage customers to use more services and increase their mobile spending, in an environment where people want simplicity and more value at lower cost.

To deliver on this basic customer need, we plan progressively to introduce price plans that bundle voice and data services together within an attractive value proposition for our customers, whilst at the same time encouraging higher usage. The more cost efficient nature of the new technology also enables us to provide these additional services and revenue without incurring a substantial change in underlying costs, thereby creating value for shareholders.

Customer management

With rising customer expectations and increasing choice, effective customer management is increasingly important. We seek regular feedback on customer satisfaction and brand preference and closely monitor network performance. We also offer a wide range of attractive loyalty schemes so as to maximise customer retention. In highly penetrated markets, customer retention is a critical driver of market and financial success.

Driving revenue growth

We aim to delight our customers through tailoring services to what they really want. We believe the combination of new and enhanced services, greater value offerings and effective customer management will drive revenue growth.

Vodafone live! with 3G delivers an end-to-end customer service through the combined effect of being first to market with the widest and best range of handsets and the most exciting services; providing content from leading providers; offering innovative and value driving pricing; and all of this in a common way across our high quality networks.

But we are doing more than just focusing on 3G; we are expanding our business services, offering an uncomplicated mobile experience through Vodafone Simply and have simplified and increased the value to customers of our roaming tariffs. Our focus on customer needs provides the basis for the future.

Strategy | 7

Chief Executive’s Review continued

Implementing One Vodafone

Leverage scale and scope

Another key goal is to deliver fully the benefits of our scale and scope. As the Group has expanded over the past few years, we have been able to achieve some significant scale benefits. For example, as the volumes of network equipment and handsets we have purchased from the same suppliers have increased, we have secured better pricing. We have also harmonised the brand in many of our markets and started offering common products and services. The One Vodafone programme builds on this to further integrate our businesses and create sustainable competitive advantage.

The programme is focused on six major areas of our business, defined as networks, service platforms, IT delivery, terminals, customer management and roaming. We aim to leverage scale and scope through a combination of standardising designs and processes, reducing duplication, centralising certain functions and sharing best practice. The effect will be to improve our time to market with new offerings, create a consistent customer experience across our networks and enable us to achieve a strategic, lowest cost position.

During the year to March 2005, we have established objectives, plans and the supporting organisation to deliver on our programme. Whilst we are in the early stages, some initiatives are more advanced than others.

We are establishing an integrated network planning process to harmonise network specifications across our operations and we have significantly reduced the duplication of research projects across the Group. We have also created operational hosting centres in Germany and Italy for the delivery of common services and our European operations will be migrating to these centres over the next 18 months.

In May 2005, we announced our new roaming proposition that will be available across 14 markets, leveraging our unrivalled footprint. This is a significant step in reducing roaming complexity for our customers. It offers simple pricing that is transparent to customers so that they will know exactly what their charges will be when abroad. The basic principle is that, where available, a customer’s home tariff will apply abroad, with the same call set-up fee being charged for each call made.

The consumer launch of 3G saw us begin to offer converged, global handsets as we introduced ten common handsets across our markets and we will develop this portfolio going forward whilst still catering for specific local market needs.

IT delivery is one of the most complex areas as we aim to consolidate our business-critical billing and customer support systems and will take place over a longer time frame than the other initiatives. This will simplify our systems and lead to a lower cost structure in the future.

For the year ahead, our focus will be on implementing our plans and beginning to deliver improvements. The net benefit to us in the short term will be limited as we will incur costs in centralising certain activities. The first substantial benefits are expected in the year to March 2007, with the programme fully up and running in the year to March 2008.

Financial targets

The One Vodafone programme is targeted to deliver £2.5 billion of incremental pre-tax operating free cash flow improvements in the year ending March 2008. This is an annual benefit and is made up of cost savings of £1.4 billion and revenue enhancements of £1.1 billion.

We expect that, in the year to March 2008, combined mobile operating and capital expenditures will be broadly similar, in absolute terms, to the year to March 2004, even after four years of projected revenue growth and assuming no significant changes in foreign exchange rates and after adjusting for acquisitions and disposals.

Our revenue targets are equivalent to at least 1% additional revenue market share in the year to March 2008 compared to the year to March 2005. We will measure this in our five major controlled markets compared to our principal established competitors.

Build the best global Vodafone team

With effect from the beginning of 2005, we restructured the business to create a flatter organisational structure that is better positioned to respond to the rising expectations of our customers and to deliver on 3G and One Vodafone.

The previous regional structure has been simplified so that major countries and business areas report directly to me. This new structure focuses more attention on customers in Vodafone’s local markets, enhances our ability to deliver seamless services and speeds up execution.

8 |  Strategy

Increasing shareholder returns

Overall, the business is performing well. We are generating strong cash flows and, through our focus on customers and leveraging our scale and scope, we continue to see strong growth prospects for the business.

These factors have enabled us to deliver a substantial increase in shareholder returns in the year. At our interim results we doubled the dividend and indicated we would do the same for the final dividend, which we have now proposed for approval at the AGM. In addition to increasing the dividend, we re-purchased £4 billion of our shares in the year to March 2005. The result was an increase in cash returns to shareholders compared to the previous year from £2.3 billion to £6 billion.

Through our shareholder returns policy, we wish to continue to provide shareholders with a mix of dividends and share purchases, whilst retaining flexibility within our debt capacity to pursue selective acquisition opportunities should they arise. Given our strong financial position, we see no need for the business to reduce absolute levels of debt in the future.

Having increased the dividend by 100% in the year, we currently expect future increases in dividends to be in line with underlying growth in earnings. We also intend to continue to purchase shares on an ongoing basis, although this is subject to gaining shareholder approval each year. For the year to March 2006, we are targeting another £4.5 billion of share purchases. Given our expectations for cash generation in the year ahead, we would expect shareholder returns to represent a pay out ratio of approximately 100%.

Expanding market boundaries

The acquisition of TIW’s mobile interests in Romania and the Czech Republic, which completed on 31 May 2005, is very much in line with our acquisition strategy, focusing on selected opportunities, primarily in Central and Eastern Europe. These businesses are fast growing and we believe they will benefit fully from the global services and scale benefits that our Group can deliver. Retaining financial flexibility to pursue these incremental opportunities enables us to act quickly and decisively when the ability to enhance shareholder value arises.

Executing our strategy

We have made excellent progress in executing against our strategic goals in the year but there is still much to do. We have restructured the business to more closely align ourselves to these goals and have outstanding and passionate leaders and people in the organisation to deliver them. Our commitment to deliver on our goals is underlined by our values, which state that everything we do is driven by our passion for customers, our people, results and the world around us.

Outlook

For the year ahead, we see continued good growth in mobile revenue. We expect to add approximately a further £5 billion of fixed assets as we continue to expand our 3G networks. Free cash flow is anticipated to be in the £6.5 billion to £7 billion range, with a lower level of dividends expected from Verizon Wireless combined with higher cash expenditure on taxation and fixed assets offsetting growth in operating cash flow.

This year Vodafone has taken important steps to deliver ongoing growth and increased shareholder returns. The future for mobile telecommunications is both challenging and exciting. We face increasing competition and differing regulatory environments but the opportunities for us remain significant. We are in a unique position and, through our launch of 3G and the establishment of One Vodafone, we are creating platforms to deliver differentiated services to the benefit of both our customers and shareholders.

Arun Sarin
Chief Executive

Cash returns to shareholders	Executing our strategic goals

Strategy  | 9

Business Overview

Contents

	Page
Overview	10
Mobile Telecommunications	10
– Business strategy	10
– Local operations	10
Competition	10
Summary of Group mobile telecommunications businesses	11
Licences and network infrastructure	12
– Global services	13
One Vodafone	13
Products and services	13
Marketing and brand	15
Distribution	16
Multinational corporates	16
Research and development	16
– Regulation	17
Non-mobile Telecommunications	20
History and Development of the Company	20

Overview

Vodafone Group Plc is the world’s leading mobile telecommunications company, with a significant presence in Europe, the United States and the Asia Pacific region through the Company’s subsidiary undertakings, associated undertakings and investments. The Group also has arrangements to market certain of its services in additional territories, through “Partner Networks”, without the need for equity investment. The Group provides a wide range of mobile telecommunications services, including voice and data telecommunications. The Group also has a controlling interest in a non-mobile telecommunications business in Germany.

The Company’s ordinary shares are listed on the London Stock Exchange and the Company’s ADSs are listed on the New York Stock Exchange (“NYSE”). The Company had a total market capitalisation of approximately £94 billion at 23 May 2005, making it the third largest company in the Financial Times Stock Exchange 100 index, or FTSE 100, and the eleventh largest company in the world based on market capitalisation at that date.

Mobile Telecommunications

Business strategy

Vodafone is at the centre of three enormously valuable markets – telecommunications, infotainment and IT productivity. The Vodafone strategy is to mobilise these markets and, through this process, grow voice and data service revenue. In doing this, Vodafone is particularly seeking to leverage third generation (“3G”) mobile technology to develop new, enhanced service offerings for consumers and business customers.

The Group’s strategic roadmap identifies six key goals:

• delight our customers;

• build the best global Vodafone team;

• leverage our global scale and scope;

• expand our market boundaries;

• be a responsible business; and,

• provide superior returns to shareholders.

Vodafone has built a global footprint of mobile operations and is leveraging this global presence to provide cost and time to market advantages. The One Vodafone

programme is designed to leverage this scale by enabling solutions to be designed once and deployed multiple times. Vodafone’s marketing proposition roadmap delivers an increasingly seamless and unique range of services to targeted customer segments on a multi-market basis, combining the benefits of global scale and scope with the advantages of local market understanding and responsiveness.

Underpinning all aspects of Vodafone’s strategy is a focus on the unique power of mobility. With nearly 155 million proportionate mobile customers at the end of the financial year, and using the benefits of early experience in commercialising the next generation of wireless access technologies, Vodafone is well positioned to continue to lead in mobile service provision in developed and emerging markets.

Local operations

At 31 March 2005, the Company had equity interests in 26 countries, through its subsidiary undertakings, associated undertakings and investments. Partner Network arrangements extend to a further 14 countries.

At 31 March 2005, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had approximately 154.8 million customers, calculated on a proportionate basis in accordance with the Group’s percentage interest in these ventures, and 431.8 million registered venture customers. The table on the next page sets out a summary of the Company’s worldwide mobile operations at 31 March 2005 and venture customer growth in the year then ended (the “2005 financial year”).

Competition

The Group faces a high degree of competition in each of its geographic markets. It is subject to indirect competition from providers of other telecommunications services in the domestic markets in which it operates in addition to direct competition from existing network operators of mobile telecommunications services and mobile virtual network operators (“MVNOs”) who do not operate a mobile telecommunications network. Competitive pressures have led to reductions in tariffs and continued focus on customer acquisition and retention initiatives, both of which have assisted the management of the level of customer churn.

The Group expects that competition will continue from existing operators as well as from a number of new market entrants, including those arising following the award of new 3G licences and MVNOs. The scope of this increased competition, and the impact on the results of operations, is discussed further in “Risk Factors and Legal Proceedings”.

A summary of the Group’s network operator competitors in its markets at 31 March 2005 is also provided in the following table.

10 |  Business

Summary of Group mobile telecommunications businesses at 31 March 2005

							Registered
			Venture		Venture		proportionate
	Percentage		customers	(3)	customer		customers	Registered		Names of competitor
Country by region(1)	ownership	(2)	(’000)		growth (%)	(4)	(’000)	prepaid (%)	(5)	network operators(6)
Germany	100.0		27,223		9		27,223	52		E-Plus, O2 , T-Mobile
Italy	76.8		22,502		6		17,280	92		TIM, Wind, 3
UK	100.0		15,324		9		15,324	61		Orange, O2, T-Mobile, 3
Other EMEA
Spain	100.0		11,472		18		11,472	53		Amena, Telefónica Móviles
Albania	99.9		649		23		648	97		AMC
Egypt	50.1		4,136		44		2,072	85		MobiNil
Greece	99.8		4,004		9		3,996	66		Cosmote, Q-Telecom, TIM
Hungary	100.0		1,735		21		1,735	76		Pannon GSM, T-Mobile
Ireland	100.0		1,952		5		1,952	72		Meteor, O2, 3
Malta	100.0		167		4		167	90		Go Mobile
Netherlands	99.9		3,793		11		3,789	56		KPN Mobile, Orange, T-Mobile, Telfort
Portugal	100.0		3,586		10		3,586	78		Optimus, TMN
Sweden	100.0		1,541		7		1,541	38		SpringMobil, Tele2, Telia, 3
Belgium	25.0		4,293		(1	)	1,073	60		BASE (KPN), Mobistar (Orange)
Kenya	35.0		2,513		64		879	98		Kencell(12)
France(7)	43.9		15,969		11		7,011	45		Bouygues, Orange
Poland	19.6		7,360		28		1,443	53		Centertel, ERA
Romania	20.1		5,023		37		1,010	65		Orange, Cosmorom, Zapp
South Africa(8)	35.0		15,482		59		5,087	87		Cell C, MTN
Switzerland	25.0		3,971		3		993	36		Orange, Sunrise, Tele2
TOTAL			87,646		22		48,454	64
Americas
United States(9)	44.4		45,452		17		20,173	5		National operators(10):
										Cingular Wireless,
										Nextel(11), Sprint PCS (11), T-Mobile
Asia Pacific
Japan	97.7		15,041		1		14,692	11		au, NTT DoCoMo, Tu-ka
Australia	100.0		2,731		10		2,731	69		Optus, Orange, Telstra, 3
New Zealand	100.0		1,891		18		1,891	78		Telecom, TelstraClear
Fiji	49.0		155		36		76	93		–
China(13)	3.3		213,874		42		6,994	72		China Netcom, China Telecom, China Unicom
TOTAL			233,692		38		26,384	68
GROUP TOTAL			431,839		27		154,838	61

Notes:
(1)	All controlled networks operate under the Vodafone brand. Networks in which the Company does not have a controlling interest operate under the following brands: Belgium – Proximus; France – SFR; Poland – Plus GSM; Switzerland – Swisscom Mobile; Romania – Connex; United States – Verizon Wireless; Fiji – Vodafone; China – China Mobile; South Africa – Vodacom; Kenya – Safaricom.
(2)	All ownership percentages are stated as at 31 March 2005 and exclude options, warrants or other rights or obligations of the Group to increase or decrease ownership in any venture as detailed in “Operating and Financial Review and Prospects – Liquidity and Capital Resources – Option agreements” and also exclude the acquisition of controlling stakes in MobiFon and Oskar as detailed in “Business Overview – History and Development of the Company”. Ownership interests have been rounded to the nearest tenth of one percent.
(3)	See page 28 for a definition of a customer.
(4)	Venture customer growth is for the twelve month period to 31 March 2005.
(5)	Prepaid customer percentages are calculated on a venture basis.
(6)	Table excludes MVNOs and other competitors who do not operate a mobile telecommunications network.
(7)	At 31 March 2005, the Group’s associate in France had subsidiaries in La Réunion and La Mayotte. Customers in these subsidiaries have been included in the Group’s customer figures since September 2004. Hence, customer growth in the financial year includes 515,000 venture customers which had previously been excluded from the Group’s customer base. At 31 March 2005, the Group’s proportionate customers included 226,000 customers in respect of these subsidiaries.
(8)	At 31 March 2005, the Group’s associate in South Africa had subsidiaries in the Democratic Republic of the Congo, Lesotho, Mozambique and Tanzania. Customers in these subsidiaries have been included in the Group’s customer figures since September 2004. Hence, customer growth in the financial year includes 2,645,000 venture customers which had previously been excluded from the Group’s customer base. At 31 March 2005, the Group’s proportionate customers included 594,000 customers in respect of these subsidiaries.
(9)	The Group’s ownership interest in Verizon Wireless is 45.0%. However, the Group’s proportionate customer base has been adjusted for Verizon Wireless’s proportionate ownership of its customer base across all its network interests of approximately 98.6% at 31 March 2005. In the absence of acquired interests, this proportionate ownership will vary slightly from period to period depending on the underlying mix of net additions across each of these networks.
(10)	This is not a full list of US network operators. In the United States, in addition to the national operators shown, there are several regional and numerous local operators.
(11)	On 15 December 2004, Sprint PCS and Nextel announced their intention to merge. This merger is subject to US regulatory approval.
(12)	The Kenyan Government has awarded a third licence but the operator had not commenced service at 24 May 2005.
(13)	Customer growth in the financial year in China includes 26,831,000 venture customers from the acquisition of Chinese provincial network operators in the year.

Business  | 11

Business Overview continued

Licences and network infrastructure

Licences

The Group is dependent on the licences it holds to operate mobile telecommunications services. Further detail on the issue and regulation of licences can be found in “Regulation”. The table below summarises the significant licences held by the Group’s subsidiary companies and details of their related network infrastructure:

Country by region	Licence type		Licence expiry date		Network type	Date of commencement of commercial service
Germany	2G		December 2009		GSM/GPRS	June 1992
	3G		December 2020		W-CDMA	February 2004
Italy	2G		January 2015		GSM/GPRS	December 1995
	3G		December 2021		W-CDMA	February 2004
UK	2G		See note	(1)	GSM/GPRS	December 1991
	3G		December 2021		W-CDMA	February 2004
Other EMEA
Spain	2G		July 2023	(2)	GSM/GPRS	October 1995
	3G		April 2020		W-CDMA	February 2004
Albania	2G		June 2016		GSM	August 2001
Egypt	2G		May 2013		GSM/GPRS	November 1998
Greece	2G		September 2012		GSM/GPRS	July 1993
	3G		August 2021		W-CDMA	July 2004
Hungary	2G		July 2014	(3)	GSM/GPRS	November 1999
	3G		December 2019		W-CDMA	–
Ireland	2G		December 2014		GSM/GPRS	March 1993
	3G		October 2022		W-CDMA	May 2003
Malta	2G	(4)	September 2010		GSM/GPRS	July 1997
Netherlands	2G		February 2013	(2)	GSM/GPRS	September 1995
	3G		December 2016		W-CDMA	February 2004
Portugal	2G		October 2006		GSM/GPRS	October 1992
	3G		January 2016		W-CDMA	February 2004
Sweden	2G		December 2010	(2)	GSM/GPRS	September 1995
	3G		March 2015		W-CDMA	February 2004
Asia Pacific
Japan	2G		See note	(5)	PDC	April 1994
	3G		See note	(5)	W-CDMA	December 2002
Australia	2G		June 2017	(6)	GSM/GPRS	September 1993
	3G		October 2017		W-CDMA	–
New Zealand	2G		March 2021		GSM/GPRS	October 2001
	3G		March 2021		W-CDMA	–

Notes:
(1)	Indefinite licence with a one-year notice of revocation.
(2)	Date relates to 1800MHz spectrum licence. Vodafone Netherlands, Vodafone Spain and Vodafone Sweden also have separate 900MHz spectrum licences which expire in March 2010, March 2010 and December 2010, respectively.
(3)	There is an option to extend this licence for seven years.
(4)	Also refers to 3G services.
(5)	Licences are issued for a five year term with a presumption of renewal where there is a continuing commercial need for spectrum.
(6)	Date refers to 900MHz spectrum licence. Various licences are held for 1800MHz licences, which are issued by specific regional regulators. The earliest expires in June 2013 and the latest in March 2015.

Mobile network infrastructure

Network infrastructure is fundamental to the Group being able to provide mobile services. The mobile network enables the Group’s customers to place and receive voice calls and allows the Group to provide other services, such as text messaging.

When a voice call or data transmission is made on a mobile device, voice or data is sent from the device and transmitted by low powered radio signals to the nearest base station, which in turn is connected to the Group’s network. Each base station provides coverage over a given geographic area, often referred to as a cell. Cells can be as small as an individual building or as large as 20 miles across. Each cell is equipped with its own radio transmitter and receiver antenna. This network of cells provides, within certain limitations, coverage over the service area. When a customer using a mobile device approaches the boundary of one cell, the mobile network senses that the signal is becoming weak and automatically hands over the call to the transmission unit in the next cell into which the device is moving.

If the voice call or data transmission is intended for delivery to another device which is not on the Vodafone network, the information is delivered through a public or private fixed line telephone network or the Internet.

In a 2G network, each cell contains a base station using a number of radio frequencies or channels. A group of base stations is connected to a base station controller, which in turn is connected to a mobile switching centre and then via a gateway support node for access to a fixed line network or the Internet.

In a 3G network, voice or data traffic is passed through a Node B, being similar to a base station in a 2G network, to a radio network controller which is then connected to a mobile switching centre, similar to a 2G network.

Base stations and Node Bs form a core element of a mobile network and an insufficient number of base stations can result in loss of service for customers. In addition, the correct deployment of the right base stations is instrumental in achieving the network quality and coverage that are crucial to customer satisfaction.

2G

Vodafone operates 2G networks in all its mobile operating subsidiaries, principally through Global System for Mobile Communications (“GSM”) networks, offering customers services such as voice, text messaging (“SMS”) and basic data services. In addition, the majority of the Group’s controlled networks operate General Packet Radio Service (“GPRS”), often referred to as 2.5G. GPRS allows mobile devices to be used for sending and receiving data over an Internet Protocol based network, enabling wireless access to data networks like the Internet. The 2G PDC network in Japan, although based on a different standard, provides similar features to the Group’s GPRS networks.

The GPRS data service offering includes Internet and e-mail access allowing the customer to be always connected at download speeds slightly below a dial-up modem. Vodafone also offers a great variety of services on its Vodafone live! portal, such as picture and video messaging, download of ringtones, news and many other services.

3G

Vodafone’s 3G networks, operating the wideband code division multiple access (“W-CDMA”) standard, provide customers with mobile broadband data access, allowing data download speeds of up to 384 kilobits per second, which is up to seven times faster than a dial-up modem. Vodafone has expanded its service offering on 3G networks with high speed Internet and e-mail access, video telephony, full track music downloads, mobile TV and other data services in addition to existing voice and data services.

The Group has secured 3G licences in all jurisdictions in which it operates through its subsidiary undertakings and in which such licences have been awarded to date. Vodafone expects to participate in additional 3G licence allocation procedures in other

12 |  Business

jurisdictions in which it operates. No assurances can be given that the Group will be successful in obtaining any 3G licences for which it intends to apply or bid.

Rollout of the 3G network infrastructure has continued throughout the 2005 financial year, with total tangible capital expenditure amounting to approximately £5.1 billion during the financial year, including approximately £1.6 billion incremental expenditure on 3G network infrastructure. The 3G network rollout is focused to deliver high quality indoor coverage to enable the delivery of the new 3G services.

Wireless local area networks (“W-LAN”)

The Group’s subsidiary companies in Greece, Hungary, Malta, the Netherlands and the UK introduced public access W-LAN services during 2004, bringing the total to nine subsidiaries in addition to several affiliates and Partner Networks which provide this offering. The Group is integrating public access W-LAN services into its Vodafone Mobile Connect family of data devices, software and services in a comprehensive mobile data offering. Roaming services are being introduced among several of the Group companies giving customers access to thousands of W-LAN hotspots at home and abroad.

Other initiatives

On 14 February 2005, Vodafone commenced field tests of the High Speed Downlink Packet Access (“HSDPA”) technology in Japan. HSDPA enables data transmission speeds of up to two megabits (“Mbps”) per second, although 14.4 Mbps can theoretically be achieved, which will provide customers with faster access speeds than experienced on existing 3G networks.

Global Services

One Vodafone

The One Vodafone initiatives are targeted at achieving £2.5 billion of annual pre-tax operating free cash flow improvements in the Group’s controlled mobile businesses by the year ending 31 March 2008. The Group also expects mobile capital expenditure in the 2008 financial year to be 10% of mobile revenue as a result of the initiaitives. These targets, and the analysis below, have been prepared on the basis of UK GAAP.

Cost initiatives are anticipated to generate improvements of £1.4 billion, with a further £1.1 billion from revenue initiatives. Of the £1.4 billion of cost savings, £1.1 billion relates to savings in operating expenses, being payroll and other operating expenses, and tangible fixed asset additions. The remaining cost saving, of £0.3 billion, relates to handset procurement activities. The Group expects that, in the 2008 financial year, the combined mobile operating expenses and tangible fixed asset additions will be broadly similar to those for the year ended 31 March 2004, assuming no significant changes in exchange rates and after adjusting for acquisitions and disposals.

Revenue enhancement initiatives are expected to deliver benefits equivalent to at least 1% additional revenue market share for the Group’s controlled mobile businesses in the 2008 financial year compared to the 2005 financial year. The Group will measure the revenue benefits in its five principal controlled markets compared to its established competitors. Incremental pre-tax operating free cash flow of £1.1 billion per annum is anticipated from these benefits, with the majority expected to be derived from enhanced handset offerings in addition to improved customer management and roaming.

The objective for the 2005 financial year has been to establish the internal structure, organisation and detailed plans for each area to deliver the One Vodafone targets. In doing this, the programme focused on the following six key initiatives:

• The Group’s aim for the network and supply chain management initiative is to exploit the benefits of the Group’s scale beyond the current centralised supply chain. Harmonisation of network design and planning along with standardisation of network equipment specifications across suppliers is expected to reduce maintenance costs and increase purchasing options. Sharing of best practice

across operating companies has already led to cost savings from the replacement of leased lines with owned fixed optical fibre capacity and microwave links.

• The service delivery platform initiative is aimed at consolidating European development and operations. Hosting centres in Germany and Italy are already operational and the Group’s European mobile operating subsidiaries are expected to begin migrating their service delivery platforms over the next 18 months.Development activities are to be consolidated into Germany, Italy, the UK and the US.

• The Group has focused its plans for information technology delivery on the development of a roadmap towards the consolidation of billing and customer relationship management systems. This is expected to be a longer term project and is expected to deliver benefits over a number of years. A key theme is the identification of best practice and implementing this across existing systems.

• The development of an end-to-end terminals delivery process from initial design to delivery to customer, incorporating benefits from greater volumes of customised handsets, is intended to reduce time to market, through consolidation of platforms and streamlined testing programmes and to generate cost savings. These savings are expected to arise primarily from standardised handsets and accessories, through better management of volumes across Europe and efficiencies in logistics. The availability of a common portfolio of 3G handsets following the launch of Vodafone live! with 3G in November 2004 is an early example of success.

• The customer management initiative aims to implement consistent segment and value based customer management across the Group to improve customer retention and satisfaction and, therefore, reduce churn.

• Finally, providing Vodafone’s customers with better value when they travel aboard, as well as generating the best value inter-operator tariffs for the Group, are the key goals of the roaming initiative. The Group also expects to centralise certain support activities for roaming. The announcement of the launch of the Vodafone Travel Promise, outlined in “Global Services – Products and services – Roaming Services”, in May 2005 is a key step in delivering better value for our customers when travelling abroad.

The objective for the 2006 financial year is to begin implementation of these plans and deliver benefits in each area, although some initiatives will be more advanced than others. Significant benefits are expected in the 2007 financial year, with the full targets expected to be met in the 2008 financial year.

Products and Services

Voice Services

Revenue from voice services makes up the largest portion of the Group’s turnover and the Group is undertaking a wide range of activities to encourage growth in the usage of these services. In increasingly competitive local markets where value for money is an important consideration, improving use of existing products and developing a range of new offerings for customers has helped the Group to continue to grow its total voice revenue.

Pricing is an important factor for customers choosing a mobile phone network and is also important in encouraging usage of services whilst maximising revenue and margins. Two main pricing models exist in the mobile market – contract and prepaid. Contract customers are usually governed by a written contract and credit facilities are granted to them to enable access to mobile network services. In most cases contracts have a term of 12 to 24 months with monthly payments for services and, in many of the Group’s mobile operating subsidiaries, the option of purchasing a subsidised handset. A prepaid customer pays in advance in order to gain access to voice and other services. The take-up of these models in the markets in which the Group operates varies significantly, from Japan and the US, where the vast majority of customers are on contract plans, to Italy, where the market is predominantly prepaid.

Business  | 13

Business Overview continued

The Group has simplified tariff structures in a number of the Group’s mobile operating subsidiaries. In some cases, these new price structures include large minute bundles that allow customers to talk more freely.

During the year, the Group has continued to build its business voice offerings; for example, the Vodafone Wireless Office proposition – a solution reducing the need for fixed line phones – has been enhanced with an increased handset range, superior call management software and availability across a broader geography.

The Group continues to invest in providing enhanced network coverage for services in response to Group-wide customer feedback. In parallel, the Group is improving network service quality to ensure that customers can use their mobile phone whenever and wherever they want.

In May 2005, the Group announced the launch of Vodafone Simply, a new service designed to provide an easy to use mobile solution for customers who want to use basic voice and text services with minimum complexity to keep in touch with family and friends.

Social Products

Work continued this year on making mobile services more accessible to people with special communication needs. This includes a product that converts text to speech, known in English speaking markets as Vodafone Speaking Phone, which is now available in six markets. This gives users who are blind or visually impaired access to all handset features, including text messaging.

Non-voice Services

Messaging Services

All of the Group’s mobile operating subsidiaries offer a short message service, which allows customers to send and receive text messages using mobile handsets and various other devices. The multimedia messaging services (“MMS”), which offer customers the ability to send and receive multiple media, such as pictures, music, sound, video and text, to other compatible phones, are also available in all Group mobile operating subsidiaries, with the exception of Albania.

Vodafone live!

Vodafone live!, the Group’s integrated communications and multimedia proposition, initially launched in October 2002, has continued to grow strongly. The proposition, targeted primarily at the young adult (“young active fun”) segment, has been launched in six new markets since 31 March 2004, bringing the total number of countries now offering Vodafone live! to 22. New markets added in the 2005 financial year include Malta, Austria, Belgium, Croatia and Slovenia. There were 30.9 million Vodafone live! active devices, including 12.8 million in Japan, on controlled networks at 31 March 2005, with an additional 3.2 million devices connected in the Group’s associated companies.

Vodafone has continued to develop its Vodafone live! proposition by offering a new range of services, content, handsets and tariffs. The design of the Vodafone live! portal, through which customers can access a range of online services – games, ringtones, news, sports and information – has been enhanced and an improved search function has made it easier for customers to find and purchase content.

The important ringtones market has continued to develop with mass market adoption of ‘real-tones’ where customers are able to purchase samples of real music recordings as ringtones from artists signed to labels including EMI, Sony BMG Music Entertainment, Universal Mobile and Warner Music.

Tariff structures have been updated, with a range of messaging and content based bundles now available to customers. These have delivered improved customer value, particularly when offered in conjunction with a handset purchase. In addition, browsing charges for accessing the mobile Internet have been simplified, making it more attractive for customers to browse the web using their mobile phones.

Over 23 new 2.5G phones have been added to the Vodafone live! portfolio in the 2005 financial year, with an increased emphasis on exclusive and customised devices. The

new handsets added have offered improved imaging capability across the range, better connectivity, with a significant proportion of devices now offering ‘Bluetooth’ (a wireless link function), and increased memory card storage to enable customers to save content on their devices.

Throughout the 2005 financial year, Vodafone has continued to develop standards in the areas of terminals, platforms, games, digital rights management and MMS. These initiatives are expected to lead to increased speed to market and better services for customers.

Vodafone live! with 3G

In November 2004, the Group launched Vodafone live! with 3G across 13 markets with an initial portfolio of 10 devices. By 31 March 2005, there were 2.1 million devices on controlled networks capable of accessing the Vodafone live! with 3G portal.

3G has enhanced the mobile experience with up to a ten-fold increase in portal and content download speeds over GPRS, giving Vodafone live! customers access to a unique range of high quality content and communication services. Vodafone live! with 3G customers can now experience news broadcasts, sports highlights, music videos, movie trailers and a host of other video content at a quality approaching that of digital television. With the signing of an exclusive deal with Twentieth Century Fox, Vodafone customers were also the first to experience a new generation of made-for-mobile TV and film content, so called “mobisodes”. Several markets have already launched TV broadcast services and these will be developed further in the coming year. The wide bandwidth of 3G supports access to sophisticated 3D games and Vodafone has introduced a range of branded titles.

The 3G service also supports full track music downloads which allow customers to use their phone to listen to music, choosing from a range that currently includes over 500,000 music tracks. Vodafone has secured music from some of the world’s greatest artists through agreements with Sony BMG Music Entertainment and for music from the catalogues of EMI and Warner Music. Using the 3G service, customers can also download live performance videos and stream clips direct to their mobiles through Vodafone’s agreement with MTV.

Clear and simple pricing, including free/flat rate browsing, service bundles and trial promotions have also been introduced in the majority of markets offering Vodafone live! with 3G. In addition, significant focus has been given to customer service with dedicated 3G experts available in retail stores and call centres. This year has also seen the launch in several markets of video call centres where customers can learn how to use the new video telephony service.

Content Standards

Vodafone has recognised the need to provide leadership in content standards development to protect customers from inappropriate content, contact and commercialism. Specific emphasis is placed on protecting younger mobile phone users. Vodafone is also proactive on a number of content standards issues, including video and audio adult content, and continues to encourage pan-industry collaboration and self regulation for mobile operators.

In July 2004, Vodafone launched the world’s first mobile age-based content control and Internet filtering solution. This is now established in the UK and will be rolled out to all other mobile operating subsidiaries.

Vodafone Mobile Connect data cards

The Vodafone Mobile Connect data card provides working mobility to customers accessing email and company applications with access speeds up to 384 kilobits per second when connected to a 3G network. The Vodafone Mobile Connect 3G/GPRS data card has now been rolled out across 17 markets, including the Group’s associated undertakings in France, Belgium and South Africa and the Group’s Partner Network operators in Austria, Bahrain and Finland. The product portfolio was enhanced in the financial year with the launch of a quad-band data card allowing customers to connect

14 |Business

whilst travelling in the US and a data card supporting both GPRS and EDGE technology which provides high speed connectivity in a number of the Group’s Partner Networks. Vodafone Mobile Connect data cards are available in an increasing number of distribution channels and with a growing range of service and price bundles.

At 31 March 2005, there were 0.5 million registered Vodafone Mobile Connect data cards on the Group’s controlled networks, including 0.3 million 3G/GPRS data cards.

Other Business Services

Beyond the wireless enablement of laptop computers, there is an increasing demand for handheld solutions that allow real time access to email, calendar and other applications. During 2004, Vodafone launched its BlackBerry^® from Vodafone proposition.

On 21 April 2005, the Group announced the roll out of Vodafone push email, a service providing real-time, secure and remote access to email, contacts and calendar direct to a range of business-focused mobile devices. New email, calendar appointment and contact details are automatically ‘pushed’ to the customer’s selected device and updates made on the device are automatically reflected on the customer’s PC. During the launch phase the service will be supported by four devices, with additional devices introduced in the coming months.

Roaming services

Accompanying the multi-market launch of 3G services in 2004, the Group delivered extensive 3G roaming services, demonstrating Vodafone’s ability to build seamless services rapidly across its international footprint. 3G roaming for the Vodafone Mobile Connect data card was rolled out during the spring and, in May 2004, roaming was launched for Vodafone live! with 3G, including the first international video telephony roaming services.

By November, roaming for Vodafone live! with 3G and the Vodafone Mobile Connect 3G/GPRS data card was available across 14 of the Group’s mobile operating subsidiaries, associated undertakings and Partner Networks in Europe and Japan, with 12 of these offering video telephony roaming services. Vodafone’s leading 3G roaming footprint is expected to continue to expand over the coming year.

In summer 2004, the Group launched a pan-European roaming promotion aimed at increasing the uptake and use of voice roaming services by consumer segment customers. Ten markets ran the promotion between July and September, supported by a common communications campaign. Many new roamers were attracted by the offer, which also increased usage and selection of Vodafone networks.

In May 2005, the Group announced the launch of the Vodafone Travel Promise, new roaming campaign, the first element of which is the Vodafone Passport voice roaming price plan. The Vodafone Passport price plan has been created following extensive customer research to offer greater price transparency and certainty to customers when using roaming services abroad.

In May 2004, Verizon Wireless and Vodafone jointly developed and launched the Global Phone roaming service to address the needs of US based frequent world travellers across their combined global footprint. The Global Phone service offers a choice of two integrated GSM/CDMA handsets that work both in the USA on Verizon’s CDMA network and on Vodafone’s and its roaming partners’ GSM networks in 120 countries worldwide. The service offers seamless features like one number, one voicemail box, international SMS and a single bill. The service, initially offered to large corporate customers, was extended to the broader mass business market in September 2004.

Other initiatives

In March 2005, Vodafone Germany launched Vodafone At Home, an alternative to a fixed line network allowing private householders and home office users to replace their existing fixed line connection. The Group also demonstrated new mobile TV technology and a number of new handsets, including two Ferrari branded handsets, jointly developed with Sharp.

Summary of Group Products and Services

The following table summarises the availability of the Group’s most significant products and services:

Country
Subsidiaries
Germany	•	•	•	•	•	•
Italy	•	•	•	•	•	•
UK	•	•	•	•	•	•
Spain	•	•	•	•	•	•
Egypt	•		•		•
Greece	•	•	•	•		•
Hungary	•		•	•	•	•
Ireland	•	•	•	•	•	•
Malta	•		•
Netherlands	•	•	•	•	•	•
Portugal	•	•	•	•	•	•
Sweden	•	•	•	•	•	•
Japan	•	•		•		•
Australia	•		•		•
New Zealand	•		•		•	•
Associates
France	•	•	•	•	•	•
Belgium	•			•	•
Switzerland	•	•
South Africa	*	*		•	•
Partner Networks
Austria	•	•		•	•
Bahrain			•	•
Croatia	•		•
Denmark			•		*
Estonia			•			•
Finland			•	•
Hong Kong					*
Singapore					*
Slovenia	•		•
Total markets	22	14	21	17	19	14

Key:
•	Available throughout the 2005 financial year
•	Launched in the 2005 financial year
*	Launched since 31 March 2005

Marketing and brand

Brand

Brand marketing focuses on consistency, differentiation and preference for the Vodafone brand. A programme has been undertaken to simplify and align the various elements of the brand in order to deliver a more consistent brand experience.

Customer Communications

Communication to drive brand preference and service usage is facilitated through various integrated advertising media including radio, television, print and outdoor sites. This is supported by strong sponsorship relationships, such as those with Ferrari and Manchester United, which have global exposure and allow for benefits to be realised at the local level. Media activity is based on customer insight, and is designed to ensure a consistent and effective brand experience across Vodafone’s footprint.

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Business Overview continued

Customer Strategy and Management

During the year, Vodafone implemented a system for measuring ‘customer delight’ across all the Group’s customers at a local and global level. This will assist in the development of differentiated marketing propositions and programmes that drive revenue growth.

Vodafone has developed strategies to ensure that the outcome of customer interactions, whether via call centres or retail outlets, results in a level of sustainable differentiation delivering ongoing value and customer loyalty to Vodafone.

Distribution

The Group distributes its products and services through a wide variety of direct and indirect channels, with different approaches used in the consumer and business sectors.

Products and services are available directly to both consumer and business customers in the majority of markets. Nearly 1,000 stores are directly owned and managed by Vodafone, with an additional 4,600 Vodafone branded stores making Vodafone one of the largest global retailers. In addition, local websites offer products and services online and local sales forces are in place to discuss terms with business customers.

The extent of indirect distribution varies between markets, but may include using third-party service providers, independent dealers, agencies and mass marketing. Marketing to third-party service providers includes maintaining a competitive tariff structure, providing technical and other training to their staff and providing financial incentives for service providers, their dealers and sales people. It also entails providing assistance on advertising campaigns and supporting the development of both specialist retail outlets and programmes with multiple retailers.

During the year, Vodafone set up a global IT distribution channel by entering into a partnership with two leading global IT distributors. This will be an effective channel for Vodafone to access a wider number of business customers and sell mobile data products and services.

The last few years have seen the growth of MVNOs who buy access to existing networks and re-sell services to customers under a different brand name and proposition. Where such a relationship generates profitable use of network capacity and does not impact the Vodafone brand, a mobile operating subsidiary may consider entering into a partnership with an MVNO.

Multinational corporates

Vodafone currently provides products and services to over 200 of the world’s largest companies on a global basis. The first global Customer Advisory Board, which allows global customers to participate actively in driving Vodafone’s strategy for business, took place in February 2004, with the second meeting in September 2004.

A new “Multinational Corporates” business unit was established on 1 April 2005 to focus on providing end-to-end differentiated propositions and consistent, world-class service to Vodafone’s Multinational Corporate customers. The new business unit will aim to ensure consistent delivery across Vodafone’s markets for product offerings, customer service and pricing, underpinned by first-rate account management.

Research and development

The Group Research and Development (“R&D”) function comprises an international and multicultural team for applied research in mobile telecommunications and its applications. The majority of the Group’s R&D function is undertaken through the Group’s centres of excellence, located in Newbury, Maastricht, Munich, California, Milan, Tokyo and Madrid. In the 2005 financial year, the R&D function in the Group’s associated undertaking in France, SFR, started working with Group R&D as an associate.

Group R&D provides technical leadership, and a programme of research support, into technology that will typically start to be used in the business in three years and beyond.

Governance is provided by the Group R&D Board which is chaired by the Group R&D Director and consists of the chief technology officers from four of the mobile operating subsidiaries, together with the heads of Future Products, Business Strategy and Technology Development.

Group R&D focuses on applied research that is positioned between the basic research undertaken by universities and commercial product development. Since the Group is primarily a user of technology, the emphasis of the Group R&D work programme is on providing technology analysis and vision that can contribute directly to business decisions, enabling new applications of mobile telecommunications, using new technology for new services, and research for improving operational efficiency and quality of the Group’s networks. The work of the function is organised into three clusters: future vision and opportunity, technology research and application research. The first cluster is concerned with expanding business boundaries through advances in technology, science and business practice, providing input to the Group’s strategy. The second cluster is concerned with core radio, network and service enabling technologies. It includes business modelling techniques, application of social science and analysis of disruptive technologies. The third cluster is concerned with developing new business applications of radio based technologies for commercial launch.

The work of Group R&D is delivered through a series of programmes with a substantial portion of trials and demonstrations. All work is set in a business and social context. Group R&D provides leadership for funding research into health and safety aspects of mobile telecommunications, technical leadership for the Group’s spectrum strategy and technical leadership for the protection of intellectual property, including the Vodafone patent portfolio.

The main themes currently being researched are technologies that will follow the evolution of 3G. The basis of the Group’s 3G radio technology is W-CDMA and this is expected to evolve to a higher speed version, usually referred to as HSDPA or HSUPA. New underlying radio technologies, beyond the current generations, are also being evaluated. Evolutions to the core network based on ubiquitous use of Internet protocols and web services complement this, and are likely to lead to a convergence of Internet and mobile technologies. Significant R&D is also being undertaken on mobile TV, including schemes for managing content rights. Applications of mobile telecommunications to health and well being are being researched in collaboration with a chair at the University of Madrid funded through the local Vodafone foundation and for more information on Vodafone’s work in health and well being, see the 2005 report from the Vodafone Group Foundation titled “The Foundations, Investing in communities and the environment”. Applications to transport management are also being researched. Key to much of the research is the need to ensure that when there is a customer proposition that demands new technology, then this can be introduced with the minimum of cost, for example by using existing investment in sites and spectrum.

Much of the work of Group R&D is done in collaboration with others, both within the Group and externally. Joint R&D facilities have been set up with three major infrastructure suppliers. Infrastructure and handset suppliers work with Group R&D on many of its projects, from providing equipment for trials, through co-authoring research reports, to being a partner in some of the R&D programmes. At the more academic end of the spectrum of applied research, Group R&D has developed relationships with a number of universities. These relationships include sponsoring research students, collaboration in European research activities, funding specialised research activities and working with academic chairs and readerships funded through the Vodafone Group Foundation.

The R&D programme provides the Group with long-term technical policy, strategy and leadership, as well as providing technical underpinning for the Group’s public policies and government relations, and is shared with all subsidiaries of the Company and Group functions. They are able to influence the programme through working relationships that are designed to allow delivery of the results of the programme directly into the business units where they are needed.

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The Group spent £219 million in the 2005 financial year on R&D, compared with £171 million in the 2004 financial year and £164 million in 2003. Besides the core R&D outlined above, this expenditure was incurred principally on developing new products and services, billing systems and network development.

Regulation

The Group’s operating companies are generally subject to regulation governing the operation of their business activities. Such regulation typically takes the form of industry-specific law and regulation covering telecommunications services and general competition (anti-trust) law applicable to all activities. Some regulation implements commitments made by Governments under the Basic Telecommunications Accord of the World Trade Organisation to facilitate market entry and establish regulatory frameworks. The following section describes the regulatory framework and the key regulatory developments in the European Union (“EU”) and selected countries in which the Group has significant interests. Many of the regulatory developments reported in the following section involve on-going proceedings or consideration of potential proceedings that have not reached a conclusion. Accordingly, the Group is unable to attach a specific level of financial risk to the Group’s performance from such matters.

European Union

The Member States of the EU (“Member States”) were expected to implement the new EU Regulatory Framework for the communications sector (the “new EU Framework”), which was adopted in 2002, into national law by 24 July 2003 or prior to accession on 1 May 2004 for the ten countries that joined the EU on that date. Belgium, Greece, Luxembourg and the Czech Republic have yet to implement the new EU Framework and there are ongoing infringement proceedings against a number of Member States for late or inadequate implementation.

The new EU Framework consists of four principal Directives outlining matters such as the objectives to be pursued by national regulatory authorities (“NRAs”), the way in which telecommunications operators are to be licensed, measures to be taken to protect consumers and ensure universal provision of certain telecommunications services and the terms and basis upon which operators interconnect and provide access to each other.

The new EU Framework introduces a number of important changes to the previous framework. It is intended to align the techniques for defining where sector specific regulation may be applied and the threshold for when such regulation can be applied with those already employed in EU competition law. It is also intended to ensure greater consistency of approach amongst NRAs within the Member States. All NRAs are required to take utmost account of the list of markets which are specified by the European Commission (the “Commission”) in a Recommendation when deciding which markets to investigate. The first such Recommendation was published by the Commission in February 2003 and includes markets at a wholesale level, for ‘voice call termination on individual mobile networks’ (the “Call Termination Market”), the ‘wholesale national market for international roaming’ and the market for ‘access and call origination’ on public mobile networks (together the “Relevant Markets”). NRAs may, with the Commission’s consent, also propose markets not included in the Recommendation. The Commission will periodically review the Recommendation.

Regulation, under the new EU Framework, can only be applied to undertakings with significant market power (“SMP”) (either individually or collectively) in the relevant markets so identified, subject to the Commission’s consent. SMP under the new EU Framework accords with the concept of “dominance” under existing EU competition law. This generally implies a market share of at least 40%, although other factors may also be taken into consideration. The SMP threshold under the previous framework required only a 25% share of the relevant market. The Commission published SMP Guidelines in July 2002 which set out principles for use by NRAs in the analysis of markets and effective competition to determine if undertakings have SMP under the new EU Framework.

International Roaming

In January 2000, the Competition Directorate of the Commission commenced an investigation into the market for international roaming services pursuant to the competition law of the EU. The Commission published its preliminary findings in December 2000. The Commission stated that excessive pricing and price collusion were likely concerning both the level of wholesale rates and the mark-ups applied in retail markets for international roaming services. To date, the Commission has not published the results of this review.

Officials of the Commission conducted unannounced inspections of the offices of mobile network operators in the UK and Germany, including Group subsidiaries, in July 2001. The Commission said it was seeking evidence of collusion and/or excessive prices, in relation to both retail and wholesale roaming charges, and the Commission has subsequently sought, or been provided with, additional information about roaming charges.

In July 2004, the Commission issued a statement of objections, a document detailing its proposed findings, following its investigation into the UK market for wholesale international roaming. A written response was made by Vodafone in December 2004 and an oral hearing was held in June 2005. In January 2005, the Commission issued a statement of objections following its investigation of the German market and a written response has been submitted. In both cases, the statement of objections was addressed to both the national mobile operating subsidiaries and to the Company.

The Commission’s proposed findings are that Vodafone has monopoly power over its wholesale customers in both the UK and Germany. Vodafone UK and Vodafone Germany are alleged to have engaged in excessive or unfair pricing on the grounds that their wholesale roaming prices were perceived to be high, resulted in high profit margins in comparison with other services and were significantly higher than the tariffs applied to domestic wholesale access services. The Commission alleges that the abuse occurred from 1997 to at least September 2003 in the UK and from 2000 to December 2003 in Germany. If the Commission decides that there had been a breach of competition law, it would be able to impose a fine on any addressee who had committed the breach.

Separately, under the new EU Framework, which requires a forward looking analysis, the wholesale national market for international roaming is one of the Relevant Markets but no NRA has yet proposed any regulation in this market. In December 2004, the European Regulators Group (“ERG”), a body established under the new EU Framework and comprising all EU NRA’s, announced that it had commenced a co-ordinated data collection exercise with a view to analysing this market. The Group’s mobile operating subsidiaries in the EU have since received questionnaires to which they have responded. In June 2005, the ERG issued a draft position paper on the wholesale market for international roaming and is seeking comments by July 2005.

Germany

Germany enacted a law implementing the new EU Framework in June 2004. Vodafone Germany agreed to reduce its mobile call termination rate with Deutsche Telekom for incoming calls from Deutsche Telekom’s network from 14.3 eurocents per minute to 13.2 eurocents in December 2004 and to 11.0 eurocents in December 2005. The NRA is consulting on proposals to find all mobile network operators to have SMP in the Call Termination Market.

In February 2004, the NRA decided to award licences for 450MHz spectrum for the provision of public access mobile radio services. Vodafone Germany is appealing this decision and unsuccessfully sought an injunction against the NRA’s decision. The judgment in the main case is still pending. In December 2004, the NRA awarded two 450MHz licences.

Italy

Italy enacted national law implementing the new EU Framework in September 2003. In January 2005, the NRA published its proposals following a review of the Call

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Business Overview continued

Termination Market. The NRA has concluded that all mobile network operators have SMP and proposes to impose obligations on Vodafone Italy of cost-orientation, non-discrimination, accounting separation and transparency. The NRA has indicated that it expects termination charges of about 8.7 eurocents per minute to apply by 2007. In March 2005, the Italian National Competition Authority (“NCA”) conducted unannounced inspections of the offices of mobile network operators in Italy including Vodafone Italy seeking evidence of collusion following complaints by resellers and potential MVNOs about alleged anti-competitive conduct in the Italian mobile market. If the NCA decides that there had been a breach of competition law, it would be able to impose a fine on any operator who had committed the breach.

United Kingdom

The new Communications Act, implementing the new EU Framework and creating a new NRA for communications, was enacted in July 2003. In December 2003, the Office of Communications replaced the Office of Telecommunications as the NRA.

The NRA conducted and concluded its review of the wholesale mobile access and call origination market and found that no operator had SMP. As a result, the existing SMP obligations on Vodafone UK (including the requirement to offer indirect access) were removed. On 1 June 2004, the NRA found that all mobile network operators have SMP in the Call Termination Market and required Vodafone UK to reduce its termination charge, with effect from September 2004, from approximately 8 pence per minute to a target average charge of 5.6 pence per minute, representing a 30% reduction. In June 2005, the NRA issued proposals to maintain this price control until 31 March 2007.

The NRA has proposed that certain mobile frequencies are to be tradable from 2007. Other non-mobile frequencies become tradable from 2005. This would allow operators to transfer rights of use on commercial terms and to change the use to which frequencies are put, subject to oversight by the NRA. When spectrum becomes tradable the NRA expects to licence frequencies on broadly equivalent terms, including a move to a standard 5 year notice of revocation.

The NRA is considering whether holders of spectrum (including 2G mobile operators) will be able to use their existing spectrum to provide 3G services. The NRA is also planning a programme of spectrum release over the next 3 years.

The NRA investigated Vodafone’s pricing of certain fixed-to-mobile calls to business customers and concluded that Vodafone had not infringed competition law.

Other EMEA

Spain

Legislation implementing the new EU Framework was enacted in November 2003. In October 2004, the Spanish NRA announced a 10.5% reduction in mobile termination rates, which was implemented by Vodafone Spain in November 2004.

In April 2004, the NCA requested Spanish mobile operators to provide data on SMS pricing and in September 2004 decided to open a procedure against Vodafone Spain, Telefónica Móviles and Amena for collusion regarding retail prices applied in providing SMS and MMS services. This procedure was subsequently closed without action.

Vodafone Spain successfully defended a claim before the NCA of alleged price squeezing in relation to its pricing of certain fixed-to-mobile calls to business customers.

Albania

In May 2004, the NRA designated Vodafone Albania as having SMP in the mobile market which may lead to increased regulation. Vodafone Albania has appealed this decision. In addition, the NRA has commenced regulation of mobile termination rates by approving recommended rates for 2004.

Egypt

Egypt enacted a new telecommunications law in 2003 which gave new powers to the NRA and imposed new obligations on licensees, including obligations in relation to

universal service provision. During 2004, Vodafone Egypt finalised an agreement with the NRA that covered most of these new obligations while obtaining additional spectrum in the 1800MHz range to facilitate business expansion. The nature and extent of the universal service obligations are still pending negotiation with the NRA.

Greece

Greece is expected to enact national law implementing the new EU Framework during 2005. Nevertheless, the Greek NRA has conducted a preliminary review of the Call Termination Market, has proposed that all mobile network operators have SMP, and proposed the imposition of obligations of cost-orientation, non-discrimination, accounting separation and transparency. Vodafone Greece agreed to reduce its mobile termination rate from approximately 17 eurocents to 14.5 eurocents per minute on 1 October 2004. The NRA is developing a Long Run Incremental Cost model (“LRIC Model”) to determine cost oriented mobile call termination rates.

In April 2005, the Council of State issued a judgment that base stations erected by mobile operators prior to August 2002 did not meet legal requirements. This judgment may result in a requirement for some masts to be removed. In May 2005, the Greek government proposed legislation, which amongst other things, seeks to address this issue.

Hungary

Hungary implemented the new EU Framework in January 2004 as part of its preparations for joining the EU on 1 May 2004. In its review of the Call Termination Market, the NRA has proposed that all mobile network operators have SMP and has imposed obligations of cost-orientation, non-discrimination, accounting separation and transparency. Vodafone Hungary has appealed this finding. The NRA is developing a LRIC Model to determine cost oriented mobile call termination rates. In its review of the market for wholesale mobile access and call origination, the NRA found that no mobile network operator had SMP.

The NRA has concluded a tender process for the award of 3G licences. Licences were awarded to each of the existing 2G operators, including Vodafone Hungary.

Ireland

Regulations implementing the new EU Framework were adopted in June 2003. In February 2005, the NRA found that Vodafone and O₂ have joint SMP in the wholesale access and call origination market. The NRA has imposed an obligation on both Vodafone and O₂ to negotiate wholesale access agreements on reasonable terms, with powers for the NRA to intervene if necessary. Vodafone and O₂ are appealing the NRA’s findings.

In its review of the Call Termination Market, the NRA has found that all mobile network operators have SMP. The NRA proposes the imposition of obligations of cost-orientation, non-discrimination, accounting separation and transparency. The NRA is also considering the use of price controls. In the interim, the NRA expected Vodafone Ireland and O₂ to fulfil undertakings made to reduce average mobile termination rates by 5% and 8% below inflation respectively, calculated by reference to the Irish consumer prices index. Vodafone Ireland complied with the rate reductions. Further price controls will be considered by the NRA in 2005.

Malta

Legislation implementing the new EU Framework in Malta was enacted during 2004. In the Call Termination Market, the NRA proposes to find all mobile network operators as having SMP and is expected to impose obligations on Vodafone Malta of cost orientation, non-discrimination, accounting separation and transparency.

The NRA has announced a process to offer three 3G licences in the Maltese market during 2005.

The Netherlands

The Netherlands implemented the new EU Framework during 2004. In December 2003, mobile network operators reached agreement with the NRA and the NCA to reduce mobile call termination rates between 1 January 2004 and 1 December 2005.

18 |  Business

Vodafone Netherlands reduced its rates from 20.6 to 15.5 eurocents per minute on 1 January 2004 and to 13 eurocents on 1 December 2004 and will reduce to 11.0 eurocents per minute on 1 December 2005. In addition, the NRA has commenced its review of the Call Termination Market and proposes to find all operators as having SMP, with remedies of cost orientation, non-discrimination and transparency.

Portugal

Portugal enacted national law implementing the new EU Framework in February 2004. The Portuguese NRA has commenced its market reviews. Following its review of the Call Termination Market, it found all three mobile network operators as having SMP and it has imposed obligations on Vodafone Portugal of cost orientation, non-discrimination, accounting separation and transparency. In February 2005, the NRA decided that Vodafone Portugal should reduce its rates from 18.5 eurocents and 18.7 eurocents for fixed to mobile and mobile to mobile calls respectively, to 11.0 eurocents for both by October 2006 while a cost orientation methodology is implemented.

Vodafone Portugal has requested the renewal of its 2G licence, which is due to expire in October 2006.

Sweden

Sweden implemented the new EU Framework in July 2003. In its review of the Call Termination Market, the NRA concluded that all mobile network operators have SMP and imposed obligations of cost-orientation, non-discrimination, accounting separation and transparency. The NRA developed a LRIC Model to determine cost oriented mobile call termination rates and proposed from July 2004, a reduction from the current rate of SEK 1.35 to SEK 0.8 and reducing to SEK 0.54 by July 2007. Vodafone Sweden has appealed various aspects of the decision, including the finding of SMP and the proposed rates and has obtained an injunction suspending the proposals.

In March 2005, the NRA awarded a licence of 450 MHz spectrum for the provision of mobile services. Vodafone Sweden challenged the proposed terms of this award.

The NRA is also reviewing the 3G coverage required to be achieved by the four 3G licensees by 31 December 2003 (such obligations were subsequently extended to 31 December 2004). Discussions between the Government, the NRA and the licensees are being held on these matters. The NRA has powers to fine operators for non-compliance.

Belgium

Belgium is expected to enact national law implementing the new EU Framework during 2005. The NRA has commenced its market reviews and has commenced a process to develop a LRIC model to assess the cost of voice call termination.

France

France implemented the new EU Framework during 2004. In its review of the Call Termination Market, the NRA concluded that all mobile network operators have SMP and imposed obligations of cost-orientation, non-discrimination, accounting separation and transparency. It has set a price cap for SFR’s termination rate of 12.5 eurocents per minute from 1 January 2005 and 9.5 eurocents from 1 January 2006. The NRA will also commence work in 2005 to consider new price controls for the subsequent period.

In December 2003, a French consumers association lodged a complaint with the NCA alleging collusion amongst the three French mobile operators on SMS retail pricing. The NRA has announced that it intends to review the market for SMS termination and may notify this to the Commission as being a further relevant market susceptible to ex-ante regulation.

Following the NRA’s review of the market for wholesale access and call origination on mobile networks, the NRA has found that all three mobile network operators, including SFR, have joint SMP in the market and it proposes access obligations as a remedy. The proposals were subsequently withdrawn by the NRA, which proposes instead to keep the market under review.

SFR appealed a decision by the NCA that it had abused a dominant position by price squeezing in relation to its pricing of certain fixed-to-mobile calls to business customers. The NCA proposed a fine of €2 million. The appeal court overturned the NCA’s decision and the proposed fine, but the appeal court decision is subject to further appeal.

In November 2004, SFR and the other mobile operators received a statement of objections from the NCA relating to allegations that they engaged in practices which restricted competition on the retail market between 2000 and 2002. SFR has responded to the statement of objections and a hearing is expected in 2005. If the NCA decides that there had been a breach of competition law, it would be able to impose a fine on any operator who had committed the breach.

The French Government has agreed to extend SFR’s 2G licence until March 2021. SFR will be required to pay an annual fee of €25 million plus 1% of 2G turnover per annum from March 2006.

Poland

Legislation implementing the new EU Framework in Poland, which joined the EU on 1 May 2004, was enacted during 2004 and the Polish NRA has commenced its market reviews.

The NRA has commenced a process to issue a new 2G licence and a new 3G licence. This process is expected to be concluded in 2005.

South Africa

In September 2004, the Minister of Communications announced a number of decisions which aim to further liberalise the telecommunications sector with effect from February 2005. These decisions include liberalising aspects of leased lines, public pay phones and value added and resale services.

A new Convergence Bill was issued for public comment in March 2005. The Bill makes significant changes to the licensing and regulatory framework for the telecommunications sector. The Bill has been approved by the Government and a consultation process is being conducted by a parliamentary committee. The Bill is expected to be finalised before the end of 2005.

An Information Communication Technologies Black Economic Empowerment Charter (the “Charter”) is being developed by an industry and Government joint working group and is expected to be finalised in the second half of 2005. The Charter, in compliance with the Broad-Based Black Empowerment Act 2003, will set targets to evaluate a company’s contribution to Broad-Based Black Economic Empowerment. Targets will be set in terms of equity ownership, management and control, employment, skills development, procurement, enterprise development, and corporate social investment. In May 2005, the NRA opened a proceeding on termination rates, seeking to determine if Vodacom has market power in the interconnection market. A written response from Vodacom is required by 4 July 2005. Separately, in May 2005, the NCA commenced an investigation into alleged excessive pricing of mobile termination rates.

Romania

In March 2003, the NRA determined MobiFon as having SMP in the national interconnection market under national law. From 31 December 2003 until the development of a LRIC model, MobiFon’s mobile termination rates were reduced from $0.11 to $0.10 per minute. In March 2005, the NRA granted a 3G licence to MobiFon.

Switzerland

In April 2005, the Swiss NCA issued proposals to find that Swisscom Mobile has abused a dominant position in the mobile call termination market and thereby enhanced its position vis a vis its competitors. The NCA may seek to fine Swisscom Mobile. A written response from Swisscom Mobile is required by June 2005.

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Business Overview continued

Americas

The Federal Communications Commission (“FCC”), the United States’ NRA, has commenced a Notice of Inquiry into the level of termination rates charged by foreign mobile network operators to US international operators. The FCC has sought inputs on the status of foreign mobile termination rates, including actions taken to date by foreign regulators to address the issue.

Asia Pacific

Japan

The Japanese NRA has concluded the market definition stage of its effective competition review of the Japanese mobile industry, where it decided not to define a separate market for termination on individual mobile networks. It has entered the market assessment stage of the review which is expected to be concluded in 2005. The NRA has also commenced a review of the existing universal service obligation in Japan, with a view to reporting by December 2005.

The NRA is expected to award spectrum in the 1.7GHz band in 2006 under an allocation process to be determined by December 2005.

Australia

The NRA released its final decision on the regulation of mobile termination in June 2004. In its review, it proposed that all mobile network operators “have market power” with respect to mobile termination and proposed a pricing principle that requires mobile call termination rates to fall from 21 Australian cents per minute to a price that is at the upper end of the range of reasonable estimates of the cost of providing the service by 1 January 2007. It has proposed that price to be 12 Australian cents per minute. Vodafone Australia is appealing the NRA’s decision to the Federal Court of Australia and it is expected that the hearing will be in the second quarter of 2005. Vodafone Australia has lodged an “access undertaking” proposing alternative rates on which the NRA is consulting.

New Zealand

The NRA has released a draft report proposing regulation of mobile termination rates and held hearings in February 2005. A final report will be prepared by the NRA and is expected in 2005.

Non-mobile Telecommunications

The Group’s non-mobile telecommunications businesses mainly comprise interests in Arcor and Cegetel.

Arcor is the second largest fixed line telecommunications provider in Germany. With its own Germany-wide voice and data network covering more than 40,000 km, Arcor utilises its network to offer its customers a range of services for voice and data transfer, including complete ISDN/DSL connection services.

Cegetel is France’s second largest fixed line telephony operator and offers a wide range of fixed line telephone services to residential and business customers as well as special corporate services ranging from network and customer relations management to Internet-intranet hosting services. Cegetel also owns the most extensive private telecommunications network in France, with 21,000 km of fibre optic cable. On 11 May 2005, it was announced that an agreement had been reached to merge Cegetel with neuf telecom, subject to competition and regulatory authority and employee council approvals.

History and Development of the Company

The Company was incorporated under English law on 17 July 1984 as Racal Strategic Radio Limited (registered number 1833679), as a subsidiary of Racal Electronics Plc and changed its name to Racal Telecommunications Group Limited in September 1985. In September 1988, it became Racal Telecom Limited then re-registered as Racal Telecom Plc, a public limited company. In October 1988, approximately 20% of the Company’s capital was offered to the public. The Company was fully demerged from Racal Electronics Plc and became an independent company in September 1991, at which time it changed its name to Vodafone Group Plc.

Between 1991 and 1999, the Group consolidated its position in the United Kingdom and enhanced its international interests through a series of transactions. At 31 March 1999, the Group had subsidiary mobile network operating companies (“mobile operating subsidiaries”) in six countries (the UK, the Netherlands, Greece, Malta, Australia and New Zealand), as well as equity interests in a further seven countries, and a proportionate mobile customer base of 10.4 million.

The Group completed a number of significant business transactions between 1999 and 31 March 2002, which transformed the Company into the world’s leading international mobile telecommunications company, namely:

•   The merger with AirTouch Communications, Inc. (“AirTouch”), which completed on 30 June 1999. The Company changed its name to Vodafone AirTouch Plc in June 1999. The combined Group had mobile operating subsidiaries in 10 countries, (adding Sweden, Portugal, Egypt and the US) and equity interests in an additional 12 countries.

•   The acquisition of Mannesmann AG (“Mannesmann”), which completed on 12 April 2000. Through this transaction the Group acquired subsidiaries in two of Europe’s most important markets, Germany and Italy, and increased the Group’s indirect holding in SFR, a French mobile telecommunications operator. Subsequent to the acquisition, the Group sold a number of non-core businesses acquired as part of the Mannesmann transaction. Following approval by its shareholders at the AGM, the Company reverted to its former name, Vodafone Group Plc, on 28 July 2000.

•   The combination of the Group’s US mobile operations with those of Bell Atlantic Corporation and GTE Corporation to form the Cellco Partnership, which operates under the name “Verizon Wireless”, on 10 July 2000. The Group owns 45% of Verizon Wireless and accounts for it as an associated undertaking.

•   The acquisition of Airtel Móvil S.A., a mobile network operator in Spain, which became a subsidiary of the Group in December 2000.

•   The acquisition of Eircell Limited, a mobile network operator in Ireland, following a public offer for shares which closed in May 2001.

•   The acquisition of the Group’s operations in Japan. The Group’s initial investment in Japan resulted from the AirTouch merger and between the date of the merger and October 2001, the Group increased its shareholding through a number of transactions. After an agreed tender offer for shares in Japan Telecom that completed in October 2001, the Group held, through its wholly owned subsidiary undertakings, a 39.67% stake in the Japanese mobile telecommunications company J-Phone Co. Ltd and a 66.7% stake in the fixed line operator Japan Telecom Co., Ltd. In addition, Japan Telecom Co., Ltd held 45.08% of the issued share capital in J-Phone Co. Ltd, making the Group’s effective interest in J-Phone Co. Ltd 69.7%.

By 31 March 2002, the Group controlled mobile operations in 16 countries and held equity investments in mobile operations in a further 12 countries. The proportionate mobile customer base was 101.1 million at that date.

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Transactions since 31 March 2002

Acquisitions

MobiFon and Oskar

On 31 May 2005, the Company announced that its wholly-owned subsidiary, Vodafone International Holdings B.V., had completed the acquisition of approximately:

•   79% of the share capital of MobiFon S.A. (“MobiFon”) in Romania, increasing the Group’s ownership in MobiFon to approximately 99%; and,

•   100% of the share capital of Oskar Mobil a.s. (“Oskar”) in the Czech Republic

from Telesystem International Wireless Inc. (“TIW”) for cash consideration of approximately $3.5 billion (£1.9 billion) satisfied from the Group’s cash resources. In addition, the Group assumed approximately $0.9 billion of net debt.

Subsidiary undertakings

The Group’s strategy is to increase its shareholding in existing operations where it believes opportunities arise to enhance value for the Company’s shareholders. During the past three financial years, the Group purchased minority stakes in certain of the Group’s subsidiary undertakings in order to be able to align more closely the respective businesses to the Group’s business.

Japan

On 1 August 2002, Japan Telecom Co., Ltd was renamed Japan Telecom Holdings Co., Ltd, and its fixed line business was transferred to a newly established wholly owned subsidiary, Japan Telecom Co., Ltd (“Japan Telecom”). This created a telecommunications service group comprising two core businesses of mobile and fixed line telecommunications, namely J-Phone Co., Ltd and Japan Telecom.

During the 2004 financial year, the Group sold its interest in Japan Telecom, as described under “Disposals”. In addition, J-Phone Co., Ltd was renamed Vodafone K.K. on 1 October 2003 and Japan Telecom Holdings Co., Ltd. was renamed Vodafone Holdings K.K. on 10 December 2003.

On 25 May 2004, the Group’s wholly owned subsidiary, Vodafone International Holdings B.V., announced offers for the shares not held by the Group in Vodafone Holdings K.K. and Vodafone K.K. As a result of these offers, the Group increased its effective shareholding in Vodafone K.K. to 98.2% and its stake in Vodafone Holdings K.K. to 96.1% for a total consideration of £2.4 billion. On 1 October 2004, the merger of Vodafone K.K. and Vodafone Holdings K.K. was completed. At 31 March 2005, the Group held a 97.7% stake in the merged company, Vodafone K.K.

The Group has applied for Vodafone K.K.’s shares to be delisted from the Tokyo Stock Exchange, which is expected to occur in the 2006 financial year.

Spain

On 2 April 2002, the Company acquired a further 2.2% interest in its Spanish mobile operating subsidiary for £0.4 billion, following the exercise of a put option held by Torreal, S.A.

On 27 January 2003, the Company completed the acquisition of the remaining 6.2% interest in its Spanish mobile operating subsidiary for approximately €2.0 billion (£1.4 billion) following the exercise of a put option held by Acciona, S.A. and Tibest Cuatro, S.A. under the terms of an agreement originally made in January 2000.

Greece

On 3 December 2002, the Group completed the acquisition of a 10.85% interest in its then listed Greek operating subsidiary, Vodafone-Panafon Hellenic Telecommunications Company S.A. (“Vodafone Greece”), from France Telecom S.A. for £216 million in cash. The transaction increased the Group’s effective holding in this company from 51.88% to 62.73%. During the 2003 financial year, the Group made market purchases of shares which increased the Group’s effective interest to 64.0% at 31 March 2003.

On 1 December 2003, following the purchase of a 9.433% stake in Vodafone Greece from Intracom S.A., the Group announced a public offer for all remaining shares not held by the Group. As a result of the offer and subsequent market purchases, the Group increased its effective interest in Vodafone Greece to 99.4% at 31 March 2004. The total aggregate cash consideration paid in the 2004 financial year was £815 million.

Vodafone Greece’s shares were delisted from the Athens and London Stock Exchanges on 15 July 2004 and 20 August 2004 respectively.

Between 24 January 2005 and 31 March 2005, the Group acquired a further 0.4% interest in Vodafone Greece through private transactions at a price equal to the price paid in the public offer.

The Netherlands

On 27 November 2002, the Group purchased for cash an additional 7.6% interest in Vodafone Netherlands, increasing the Group’s interest from 70% to 77.6%.

As a result of a cash offer for the remaining shares of Vodafone Netherlands not held by the Group and market purchases, the Company increased its overall effective interest in Vodafone Netherlands to 97.2% at 31 March 2003. The total aggregate cash consideration paid in the 2003 financial year was £486 million, with a further £110 million paid in April 2003. As a result of private transactions, the Group increased its effective interest in Vodafone Netherlands to 99.9% at 31 March 2004. The Group has exercised its rights under Dutch law and initiated compulsory acquisition procedures in order to acquire the remaining shares. Following these procedures, Vodafone Netherlands will become a wholly owned subsidiary of the Group. Vodafone Netherlands’ shares have been de-listed from the Euronext Amsterdam Stock Exchange.

Sweden

During September 2002, the Group increased its effective interest in its then listed subsidiary, Vodafone Sweden, by 3.6% to 74.7% through a series of market purchases.

A recommended cash offer for all remaining shares in Vodafone Sweden not held by the Group was announced on 5 February 2003. As a result of shares bought in the offer and in the market, the Company increased its effective shareholding in Vodafone Sweden to approximately 99.1% at 25 March 2003. The total aggregate cash consideration paid was £391 million.

Under compulsory acquisition procedures, on 15 March 2004 Vodafone Holdings Sweden AB obtained advanced access to an aggregate of 2,377,774 shares in Vodafone Sweden, giving the Group ownership of and title to these shares. An arbitral tribunal in Sweden is currently determining the purchase price for the shares.

On 31 March 2004, the Group increased its effective interest in Vodafone Sweden to 100% by the purchase of 1,320,000 shares which were held in treasury by Vodafone Sweden for a total consideration of SEK62 million (£4 million).

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Business Overview continued

Portugal

During September 2002, the Group increased its effective interest in its then listed subsidiary Vodafone Portugal to 61.4% through market purchases.

On 28 February 2003, the Company announced a tender offer to acquire, for cash, all remaining shares not held by the Group. The Company’s effective interest in Vodafone Portugal increased to approximately 94.4% as a result of shares purchased in the offer and in the market. The total aggregate cash consideration paid in the 2003 financial year was £184 million, with a further £336 million paid in April 2003. Having achieved an effective interest of greater than 90%, the Company implemented compulsory acquisition procedures to acquire the remaining shares, which became effective on 21 May 2003, for a further consideration of £74 million. As a result, Vodafone Portugal became a wholly owned subsidiary of the Group.

Australia

On 3 May 2002, the Group completed the purchase of the 4.5% minority interest in Vodafone Australia Limited (“Vodafone Australia”), formerly Vodafone Pacific Limited, for a cash consideration of £43 million, as a result of which Vodafone Australia became a wholly owned subsidiary.

Hungary

On 23 January 2003, the Group increased its stake in V.R.A.M. Telecommunications Limited, now called Vodafone Hungary Mobile Telecommunications Limited (“Vodafone Hungary”), to 83.8% by purchasing RWE Com GmbH & Co OHG’s 15.565% interest in Vodafone Hungary for an undisclosed cash consideration. Options were granted to Antenna Hungaria RT (“Antenna”) on 23 January 2003 over certain of the shares acquired from RWE on this date, representing a maximum interest of 3.89%. All of these options expired on 9 October 2003, unexercised.

On 10 June 2003, the Group increased its stake in Vodafone Hungary to 87.9% by subscribing for Antenna’s share of an issue of ‘C’ shares. Antenna’s call options over 5,659,500, 5,072,700 and 7,845,855 Vodafone Hungary ‘C’ shares, relating to equity injections in October 2001, April 2002 and June 2003 respectively, expired on 9 October 2003 unexercised.

In the first half of the 2005 financial year, the Group subscribed for HUF 89,301 million (£248 million) shares in Vodafone Hungary, increasing the Group’s stake to 92.8%. On 24 September 2004, the Group entered into a sale and purchase agreement to acquire the remaining 7.2% shareholding in Vodafone Hungary from Antenna. This transaction completed on 12 January 2005 with the effect that Vodafone Hungary became a wholly owned subsidiary of the Group.

Egypt

On 16 May 2003, the Group increased its shareholding in Vodafone Egypt from 60.0% to 67.0%. Subsequently, the Group has reduced its effective interest in Vodafone Egypt to 50.1%.

Malta

On 1 August 2003, the Group announced that it had increased its shareholding in Vodafone Malta Limited (“Vodafone Malta”) from 80% to 100% by purchasing Maltacom Plc’s 20% interest in Vodafone Malta for cash consideration of €30 million.

UK

On 22 September 2003, the Group acquired 100% of Singlepoint (4U) Limited (“Singlepoint”) for a consideration of £417 million. In addition, as a result of a recommended cash offer announced on 5 August 2003, the Group acquired 98.92% of Project Telecom plc, after the offer was declared unconditional on 19 September 2003, and subsequently acquired the remaining 1.08% in November 2003, for a total consideration of £164 million. These businesses have been integrated into the Group’s UK operations.

Vizzavi

On 29 August 2002, the Group acquired Vivendi’s 50% stake in the Vizzavi joint venture, which operated a mobile content business, for a cash consideration of €143 million (£91 million). As a result of this transaction, the Group owns 100% of Vizzavi, with the exception of Vizzavi France, which is now wholly owned by Vivendi. Vizzavi services are now provided under the Vodafone brand.

Associates

SFR and Cegetel

At 1 April 2002, the Group had a 20% direct interest in the French mobile operator SFR and an approximate 15% interest in Cegetel Groupe S.A. (“Cegetel Group”), the French telecommunications group and the remaining 80% shareholder in SFR, making the Group’s effective interest in SFR approximately 31.9%.

On 16 October 2002, the Group announced that it had agreed to acquire BT’s 26% interest in Cegetel Group and SBC Communications, Inc.’s (“SBC’s”) 15% interest in Cegetel Group for €4.0 billion cash and $2.27 billion cash, respectively. Vivendi Universal S.A. (“Vivendi”) had pre-emption rights in connection with the Cegetel Group shares held by SBC and BT. At the same time, the Group announced that it had made a non-binding cash offer of €6.8 billion to Vivendi for its 44% interest in Cegetel Group. On 29 October 2002, the Board of Vivendi announced it had decided not to accept the Group’s offer to purchase its 44% interest in Cegetel Group and, accordingly, the offer lapsed. On 3 December 2002, Vivendi also announced its intention to exercise its pre-emption rights to acquire BT’s 26% interest in Cegetel Group. On 21 January 2003, the Company announced that its subsidiary, Vodafone Holding GmbH, had completed the acquisition of SBC’s 15% interest in Cegetel Group for a cash consideration of $2.27 billion (£1.4 billion), increasing the Group’s effective interest in SFR to approximately 43.9%.

In December 2003, in order to optimise cash flows between Cegetel Group and its shareholders, SFR was merged into Cegetel Group and this company was renamed SFR. The fixed line businesses, Cegetel S.A. and Télécom Développement, previously controlled by SNCF, were merged to form Cegetel S.A.S. (“Cegetel”), a company in which SFR had a 65% stake, giving the Group an effective interest of 28.5% at that date. The Group’s interest in SFR remained at approximately 43.9% as a result of this reorganisation.

On 11 May 2005, SFR announced an agreement to merge its fixed line business, Cegetel, with neuf telecom, subject to competition and regulatory authority and employee council approvals. Under the agreement, SFR will purchase SNCF’s 35% minority interest in Cegetel, according to a pre-existing contract, and then contribute 100% of the capital of Cegetel to neuf telecom. In return, SFR will receive a 28% interest in the combined entity, neuf Cegetel, together with a €380 million bond to be issued by neuf Cegetel.

Vodacom

During December 2002, the Group completed the purchase of an additional 3.5% indirect equity stake in its South African associated undertaking, Vodacom Group (Pty) Limited (“Vodacom”), for the sterling equivalent of £78 million. The transaction increased the Group’s effective interest in Vodacom to 35%.

22 |  Business

Safaricom

On 10 January 2003, under an agreement with Mobitelea Ventures Limited, the Group completed the purchase of a 5% indirect equity stake in the Group’s Kenyan associated undertaking, Safaricom Limited (“Safaricom”), for approximately $10 million (£6 million), increasing the Group’s effective interest in Safaricom to 35%.

Investments

China Mobile

The Company has a strategic alliance with China Mobile (Hong Kong) Limited (“China Mobile”) which sets out the principal terms for co-operation between the two parties in mobile services, technology, operations and management.

On 18 June 2002, the Group invested $750 million in China Mobile and obtained the right to appoint a non-executive director to the China Mobile board. The Group’s stake in China Mobile increased from approximately 2.18% to approximately 3.27% as a result of this transaction.

Disposals

During the three year period ended on 31 March 2005, the Group has disposed of a number of interests in companies that were outside the Company’s core business and were originally acquired as a consequence of certain acquisitions. The Group has used the proceeds from these disposals to reduce its indebtedness.

Mannesmann businesses

Arcor rail business

On 25 January 2002, the Group announced that Arcor, the Group’s German fixed line business, had agreed terms for the sale of its railway-specific business, Arcor DB Telematik GmbH (“Telematik”), to the German rail operator Deutsche Bahn, for €1.15 billion (£709 million), €1 billion of which was received on 26 March 2002. The sale completed in April 2002 following receipt of all necessary approvals and registration in the German commercial register. On completion, Arcor sold 49.9% of Telematik’s equity to Deutsche Bahn and entered into a put / call arrangement governing the remaining 50.1% equity interest, exercisable from 1 July 2002. Deutsche Bahn exercised its option to purchase the remaining 50.1% equity interest for 0.15 billion on 1 July 2002.

Holding in Ruhrgas AG

On 30 October 2001, the Group announced that it had reached agreement with E.ON AG for the sale of the Group’s 23.6% stake in Bergemann GmbH, through which it held an 8.2% stake in Ruhrgas AG. The transaction completed on 8 July 2002, realising cash proceeds of €0.9 billion.

Japan Telecom

On 14 November 2003, Vodafone Holdings K.K. completed the disposal of its 100% interest in Japan Telecom. The Group ceased consolidating the results of Japan Telecom from 1 October 2003. Receipts resulting from this transaction were ¥257.9 billion (£1.4 billion), comprising ¥178.9 billion (£1.0 billion) of cash, ¥32.5 billion (£0.2 billion) of transferable redeemable preferred equity and ¥46.5 billion (£0.2 billion) recoverable withholding tax, which was received during the 2005 financial year. In October 2004, the preferred equity was sold to the original purchaser for ¥33.9 billion (£0.2 billion).

Other disposals

During the 2004 financial year, the Group disposed of its interests in its associated undertakings in Mexico, Grupo Iusacell, and India, RPG Cellular.

On 26 January 2005 the Group completed the disposal of a 16.9% stake in Vodafone Egypt to Telecom Egypt, reducing the Group’s effective interest to 50.1%.

Business  | 23

Cautionary Statement Regarding Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives. In particular, such forward-looking statements include statements with respect to Vodafone’s expectations as to launch and roll-out dates for products, services or technologies offered by Vodafone; intentions regarding the development of products and services introduced by Vodafone or by Vodafone in conjunction with initiatives with third parties; the ability to integrate our operations throughout the Group in the same format and on the same technical platform and the ability to be operationally efficient; the development and impact of new mobile technology; anticipated benefits to the Group of the One Vodafone programme; the results of Vodafone’s brand awareness and brand preference campaigns; growth in customers and usage, including improvements in customer mix; future performance, including turnover, average revenue per user (“ARPU”), cash flows, costs, capital expenditures and margins, non-voice services and their revenue contribution; share purchases; the rate of dividend growth by the Group or its existing investments; expectations regarding the Group’s access to adequate funding for its working capital requirements; expected effective tax rates and expected tax payments; the ability to realise synergies through cost savings, revenue generating services, benchmarking and operational experience; future acquisitions, including increases in ownership in existing investments and pending offers for investments; future disposals; contractual obligations; mobile penetration and coverage rates; the impact of regulatory and legal proceedings involving Vodafone; expectations with respect to long-term shareholder value growth; Vodafone’s ability to be the mobile market leader, overall market trends and other trend projections.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following:

•   changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services;

•   greater than anticipated competitive activity requiring changes in pricing models and/or new product offerings or resulting in higher costs of acquiring new customers or providing new services;

•   the impact on capital spending from investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology;

•   slower customer growth or reduced customer retention;

•   the possibility that technologies, including mobile Internet platforms, and services, including 3G services, will not perform according to expectations or that vendors’ performance will not meet the Group’s requirements;

•   changes in the projected growth rates of the mobile telecommunications industry;

•   the Group’s ability to realise expected synergies and benefits associated with 3G technologies and the integration of our operations and those of acquired companies;

•   future revenue contributions of both voice and non-voice services offered by the Group;

•   lower than expected impact of GPRS, 3G and Vodafone live! and other new or existing products, services or technologies on the Group’s future revenue, cost structure and capital expenditure outlays;

•   the ability of the Group to harmonise mobile platforms and any delays, impediments or other problems associated with the roll-out and scope of 3G technology and services and Vodafone live! and other new or existing products, services or technologies in new markets;

•   the ability of the Group to offer new services and secure the timely delivery of high-quality, reliable GPRS and 3G handsets, network equipment and other key products from suppliers;

•   greater than anticipated prices of new mobile handsets;

•   the ability to realise benefits from entering into partnerships for developing data and Internet services and entering into service franchising and brand licensing;

•   the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on one or more of the measurements of our financial performance and may affect the level of dividends;

•   any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future acquisitions or dispositions;

•   changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the European Commission regulating rates the Group is permitted to charge;

•   the Group’s ability to develop competitive data content and services which will attract new customers and increase average usage;

•   the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry;

•   the possibility that new marketing campaigns or efforts are not an effective expenditure;

•   the possibility that the Group’s integration efforts do not increase the speed to market for new products or improve the Group’s cost position;

•   changes in exchange rates, including particularly the exchange rate of pounds sterling to the euro, US dollar and the Japanese yen;

•   the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or with other negative implications;

•   changes in statutory tax rates and profit mix which would impact the weighted average tax rate;

•   changes in tax legislation in the jurisdictions in which the Group operates;

•   final resolution of open issues which might impact the effective tax rate;

•   timing of tax payments relating to the resolution of open issues; and,

•   loss of suppliers or disruption of supply chains.

Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under “Risk Factors and Legal Proceedings – Risk Factors”. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements.

24 |  Business

Risk Factors and Legal Proceedings

Risk Factors

Regulatory decisions and changes in the regulatory environment could adversely affect the Group’s business.

Because the Group has ventures in a large number of geographic areas, it must comply with an extensive range of requirements that regulate and supervise the licensing, construction and operation of its telecommunications networks and services. In particular, there are agencies which regulate and supervise the allocation of frequency spectrum and which monitor and enforce regulation and competition laws which apply to the mobile telecommunications industry. Decisions by regulators regarding the granting, amendment or renewal of licences, to the Group or to third parties, could adversely affect the Group’s future operations in these geographic areas. The Group cannot provide any assurances that governments in the countries in which it operates will not issue telecommunications licences to new operators whose services will compete with it. In addition, other changes in the regulatory environment concerning the use of mobile phones may lead to a reduction in the usage of mobile phones or otherwise adversely affect the Group. Additionally, decisions by regulators could further adversely affect the pricing for services the Group offers. Further details on the regulatory framework, in certain regions in which the Group operates, and on regulatory proceedings can be found in “Business Overview – Regulation”.

Increased competition may reduce market share or revenue.

The Group faces intensifying competition. Competition could lead to a reduction in the rate at which the Group adds new customers and to a decrease in the size of the Group’s market share as customers choose to receive mobile services, or other competing services, from other providers.

The focus of competition in many of the Company’s markets continues to shift from customer acquisition to customer retention as the market for mobile telecommunications has become increasingly penetrated. Customer deactivations are measured by the Group’s churn rate. There can be no assurance that the Group will not experience increases in churn rates, particularly as competition intensifies. An increase in churn rates could adversely affect profitability because the Group would experience lower revenue and additional selling costs to replace customers, although such costs would have a future revenue stream to mitigate the impact.

Increased competition has also led to declines in the prices the Group charges for its mobile services and is expected to lead to further price declines in the future. Competition could also lead to an increase in the level at which the Group must provide subsidies for handsets. Additionally, the Group could face increased competition should there be an award of additional licences in jurisdictions in which a member of the Group already has a licence, whether 2G or 3G.

Delays in the development of handsets and network compatibility and components may hinder the deployment of new technologies.

The Group’s operations depend in part upon the successful deployment of continuously evolving mobile telecommunications technologies. The Group uses technologies from a number of vendors and makes significant capital expenditures in connection with the deployment of such technologies. There can be no assurance that common standards and specifications will be achieved, that there will be inter-operability across Group and other networks, that technologies will be developed according to anticipated schedules, that they will perform according to expectations or that they will achieve commercial acceptance. Commercially viable 3G handsets may not be available in the timeframe required or in the amounts needed, which may reduce the potential revenue benefits from 3G services. The introduction of software and other network components may also be delayed. The failure of vendor performance or technology performance to meet the Group’s expectations or the failure of a technology to achieve commercial

acceptance could result in additional capital expenditures by the Group or a reduction in profitability.

Expected benefits from the One Vodafone programme may not be realised.

The One Vodafone programme represents the Group’s plan to achieve full integration of its global operations and is designed to maximise the benefits of Vodafone’s scale and scope. The programme is premised on six core initiatives, further details of which can be found on page 13. The Group has previously stated publicly that it expects to realise operational cash flow benefits by the financial year ending 31 March 2008. These expected benefits have been formulated by management on the assumption that all of the core initiatives which comprise the One Vodafone programme generate the results anticipated and that the Group is able to take advantage of its size and exploit the associated economies of scale to their fullest extent. Management still considers these targeted cost savings and revenue enhancements to be achievable. However, no assurance can be given that the full extent of the anticipated benefits of the One Vodafone programme will be realised.

Challenging environment in Japan.

Vodafone continues to encounter difficult market conditions in Japan due to the strength of competitor offerings, specifically in 3G customer propositions. The Group has strengthened Vodafone Japan’s management team and continues with the ongoing transformation plan. However, in a constantly evolving competitive environment, no assurance can be provided with respect to Vodafone’s ability to perform in Japan either operationally or as a management team and secure a local competitive advantage.

The Group’s business would be adversely affected by the non-supply of equipment and support services by a major supplier.

Companies within the Group source their mobile network infrastructure and related support services from third party suppliers. The removal from the market of one or more of these third party suppliers would adversely affect the Group’s operations and could result in additional capital expenditures by the Group.

The Company’s strategic objectives may be impeded by the fact that it does not have a controlling interest in some of its ventures.

Some of the Group’s interests in mobile licences are held through entities in which it is a significant but not controlling owner. Under the governing documents for some of these partnerships and corporations, certain key matters such as the approval of business plans and decisions as to the timing and amount of cash distributions require the consent of the partners. In others, these matters may be approved without the Company’s consent. The Company may enter into similar arrangements as it participates in ventures formed to pursue additional opportunities. Although the Group has not been materially constrained by the nature of its mobile ownership interests, no assurance can be given that its partners will not exercise their power of veto or their controlling influence in any of the Group’s ventures in a way that will hinder the Group’s corporate objectives and reduce any anticipated cost savings or revenue enhancement resulting from these ventures.

Expected benefits from investment in networks, licences and new technology may not be realised.

The Group has made substantial investments in the acquisition of 3G licences and in its mobile networks, including the rollout of 3G networks. The Group expects to continue to make significant investments in its mobile networks due to increased usage and the need to offer new services and greater functionality afforded by 3G technology. Accordingly, the rate of the Group’s capital expenditures in future years could remain high or exceed that which it has experienced to date.

Business  | 25

Risk Factors and Legal Proceedings continued

Please see “Business Overview – Licences and network infrastructure” for more information on expenditures in connection with the acquisition of 3G licences and expected expenditure in connection with the roll-out of 3G services. There can be no assurance that the introduction of 3G services will proceed according to anticipated schedules or that the level of demand for 3G services will justify the cost of setting up and providing 3G services. Failure or a delay in the completion of networks and the launch of new services, or increases in the associated costs, could have a material adverse effect on the Group’s operations.

The Group may experience a decline in revenue per customer notwithstanding its efforts to increase revenue from the introduction of new services.

As part of its strategy to increase usage of its networks, the Group will continue to offer new services to its existing customers, and seek to increase non-voice service revenue as a percentage of total service revenue. However, the Group may not be able to introduce commercially these new services, or may experience significant delays due to problems such as the availability of new mobile handsets or higher than anticipated prices of new handsets. In addition, even if these services are introduced in accordance with expected time schedules, there is no assurance that revenue from such services will increase ARPU.

The Group’s business and its ability to retain customers and attract new customers may be impaired by actual or perceived health risks associated with the transmission of radiowaves from mobile telephones, transmitters and associated equipment.

Concerns have been expressed in some countries where the Group operates that the electromagnetic signals emitted by mobile telephone handsets and base stations may pose health risks at exposure levels below existing guideline levels and may interfere with the operation of electronic equipment. In addition, as described under “Legal Proceedings” below, several mobile industry participants, including the Company and Verizon Wireless, have had lawsuits filed against them alleging various health consequences as a result of mobile phone usage, including brain cancer. While the Company is not aware that such health risks have been substantiated, there can be no assurance that the actual, or perceived, risks associated with radiowave transmission will not impair its ability to retain customers and attract new customers, reduce mobile telecommunications usage or result in further litigation. In such event, because of the Group’s strategic focus on mobile telecommunications, its business and results of operations may be more adversely affected than those of other companies in the telecommunications sector.

Legal Proceedings

The Company and its subsidiaries are currently, and may be from time to time, involved in a number of legal proceedings, including inquiries from or discussions with governmental authorities, that are incidental to their operations. However, save as disclosed below, the Company and its subsidiaries are not involved currently in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which are expected to have, or have had in the twelve months preceding the date of this report, a significant effect on the financial position or profitability of the Company and its subsidiaries.

The Company is a defendant in four actions in the United States alleging personal injury, including brain cancer, from mobile phone use. In each case, various other carriers and mobile phone manufacturers are also named as defendants. These actions are at an early stage and no accurate quantification on any losses which may arise out of the claims can therefore be made as at the date of this report. The Company is not aware that the health risks alleged in such personal injury claims have been substantiated and will be vigorously defending such claims.

Between 18 September and 29 November 2002, nine complaints were filed in the United States District Court for the Southern District of New York against the Company and Lord MacLaurin, the Chairman of the Company, and Sir Christopher Gent, Sir Julian Horn-Smith and Mr. Kenneth Hydon, executive officers of the Company. The actions were brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission. The complaints, which purport to be brought on behalf of all purchasers of ADSs of Vodafone between 7 March 2001 and 28 May 2002, alleged that Vodafone’s financial statements and certain Vodafone financial disclosures were materially false and misleading. More specifically, the complaints alleged that, between 7 March 2001 and 28 May 2002, defendants made various material misrepresentations relating to Vodafone’s investments in fixed-wire operations, goodwill, and prior acquisitions in an effort to inflate artificially the price of Vodafone securities. The complaints sought compensatory damages in an unspecified amount, interest, reasonable costs including attorneys’ fees and experts’ fees, and equitable and/or injunctive relief as permitted by law.

The plaintiffs filed a consolidated class action complaint on 6 June 2003. On 14 October 2003, the Court ordered that the complaint be dismissed, with leave for the plaintiffs to re-plead. On 20 October 2003, the plaintiffs entered into a Stipulation dismissing the complaint against Lord Ian MacLaurin without prejudice. On 10 November 2003 the plaintiffs filed a second consolidated amended class action complaint against Vodafone, Sir Christopher Gent, Sir Julian Horn-Smith and Mr. Kenneth Hydon. On 26 March 2004, the Court dismissed without prejudice the remaining individual defendants from this action. On 7 May 2004, the plaintiffs filed a third consolidated amended class action complaint naming only the Company as a defendant. Thereafter, the parties entered into substantive discussions regarding the possibility of settling the action. Those discussions led to a mediation, following which the parties reached an agreement-in-principle to settle the claims against all defendants in exchange for a settlement payment of $24.5 million to a settlement class (the “Settlement Class”) comprised of all purchasers of Vodafone ADSs during the period from 7 March 2001 to 28 May 2002 (other than those class members that exclude themselves, or automatically are excluded, from the class). Following the mediation, Vodafone and its insurers paid $24.5 million into an escrow account to fund the settlement in the event that (i) the parties reached a definitive settlement agreement and (ii) that agreement received final approval by the Court after issuance of the necessary notices and the conduct of the necessary hearings. On 4 March 2005, the parties entered into definitive settlement documents and, on that date, participated in a conference and hearing before the Court, at which they submitted a motion for preliminary certification of the Settlement Class and preliminary approval of the settlement. On 15 March 2005, the Court entered an Order that, among other things, preliminarily certified the Settlement Class, preliminarily approved the settlement, set 23 May 2005 as the deadline for the submission by class members of objections to the settlement or requests for exclusion from the Settlement Class, and scheduled a Settlement Fairness Hearing for 22 June 2005.

A subsidiary of the Company, Vodafone 2, is responding to an enquiry by the UK Inland Revenue with regard to the UK tax treatment of its Luxembourg holding company, Vodafone Investments Luxembourg SARL (“VIL”), under the Controlled Foreign Companies section of the UK’s Income and Corporation Taxes Act 1988 (“the CFC Regime”). The enquiry by the UK Inland Revenue relates to the tax treatment of profits earned by the holding company for the accounting period ended 31 March 2001. The CFC Regime serves to subject a UK resident company to corporation tax in the UK in respect of the profits of a controlled foreign company in certain circumstances.

Vodafone 2’s position is that it is not liable to corporation tax in the UK under the CFC Regime in respect of VIL on the basis that the CFC Regime is contrary to EU law. An application for closure of the enquiry (inter alia) was made by Vodafone 2 to the Special Commissioners of the UK Inland Revenue on 1 October 2004 on the basis that the enquiry could not reasonably be continued as it is premised on UK legislation (the CFC

26 |  Business

Regime) which is contrary to EU law and thus invalid. In summary, it is argued that imposition of corporation tax under the CFC Regime amounts to unlawful discrimination or an unlawful restriction on the exercise of fundamental freedoms under the EU Treaty (particularly Articles 43 and 56).

On 3 May 2005 the Special Commissioners referred the matter to the European Court of Justice (the “ECJ”) requesting that a number of questions in relation to the invalidity argument be determined as a preliminary matter. Pending resolution of such questions, Vodafone 2’s application for closure of the enquiry (and, effectively, the enquiry itself) has been stayed. It is not expected that the ECJ will deliver a judgment in this matter until, at the earliest, mid 2006. The ECJ does not have jurisdiction to determine the outcome of Vodafone 2’s application rather the Special Commissioners will apply the ECJ’s judgment to the particular facts of Vodafone 2’s application.

If the ECJ decides that the CFC Regime in its entirety is invalid under EU law, then no charge to UK corporation tax can arise to Vodafone 2 with respect to VIL under the CFC Regime and the Special Commissioners will order that the Inland Revenue’s enquiry be closed. If the CFC Regime is held by the ECJ to be valid, either in part or as a whole, then it will be a matter for the Special Commissioners to apply the ECJ’s reasoning to the particular circumstances of Vodafone 2’s case. Although it is not possible to address all possible outcomes under such a scenario, it should be noted that even if the CFC Regime is held by the ECJ to be entirely lawful, Vodafone 2 would continue to resist the imposition of corporation tax liability on other grounds.

The Company has taken provisions, which at 31 March 2005 amounted to £1,757 million, for the potential UK corporation tax liability and related interest expense that may arise if the Company is not successful in its challenge of the CFC Regime. The provisions relate to the accounting period which is the subject of the proceedings and accounting periods after 31 March 2001 to date. Please see note 8 to the Company’s Consolidated Financial Statements. The Company considers these provisions are sufficient to settle any assessments that may arise from the enquiry. However, the amount ultimately paid by the Company (if any) upon resolution of the enquiry may differ materially from the amount accrued and, therefore, could have a significant effect on the profitability or cash flows of the Group in future periods. In the absence of any material unexpected developments, the Company expects to reassess the amount of this provision when the views of the ECJ become known, which is expected to be during 2006.

A number of Vodafone subsidiaries acquired 3G licences through auctions in 2000 and 2001. An appeal was filed by Vodafone UK, along with other UK mobile network operators which were granted a 3G licence, with the VAT and Duties Tribunal on 18 October 2003 for recovery of VAT on the basis that the amount of the licence fee was inclusive of VAT. The amount of this claim is approximately £888 million. In August 2004, these claims were referred, jointly, to the ECJ although no hearing date has yet been listed. A decision from the ECJ is not expected before 2006. The Group has not recognised any amounts in respect of this matter to date. In addition, the Group has made a claim for recovery of VAT in relation to 3G licence fees in Portugal and may pursue similar claims in certain other European jurisdictions.

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Operating and Financial Review and Prospects

Contents
			Page
	Introduction		28
	Presentation of Information		28
	Critical Accounting Estimates		29
	Foreign Currency Translation		32
	Inflation		32
	Operating Results		33
	– Group overview		33
		2005 financial year compared to 2004 financial year	33
		2004 financial year compared to 2003 financial year	35
	– Review of operations		36
		2005 financial year compared to 2004 financial year	36
		2004 financial year compared to 2003 financial year	41
		Summary of Key Performance Indicators for principal markets	44
	Balance Sheet		45
	Equity Dividends		45
	US GAAP Reconciliation		45
	Liquidity and Capital Resources		46
	– Cash flows		46
	– Funding		48
	– Financial assets and liabilities		49
	– Contractual obligations		49
	– Option agreements		49
	– Off-balance sheet arrangements		50
	Quantitative and Qualitative Disclosures about Market Risk		50
	Trend Information and Outlook		50

Introduction

The following discussion is based on the Consolidated Financial Statements included elsewhere in this Annual Report. Such Consolidated Financial Statements are prepared in accordance with Generally Accepted Accounting Principles in the United Kingdom, or UK GAAP, which differ in certain significant respects from US GAAP. Reconciliations of the material differences in the UK GAAP Consolidated Financial Statements to US GAAP are disclosed in note 36 to the Consolidated Financial Statements, “US GAAP information”.

On 19 July 2002, the European Parliament adopted Regulation No. 1606/2002 requiring listed companies in the Member States of the European Union to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) from 2005. IFRS will apply for the first time in the Group’s Annual Report for the year ending 31 March 2006. Consequently, the Group’s interim results for the six-month period ending 30 September 2005 will be presented under IFRS together with restated information for the six months ended 30 September 2004 and the year ended 31 March 2005. Further information on the effects of the adoption of IFRS can be found in “Information on International Financial Reporting Standards” on pages 138 to 140.

Vodafone Group Plc is the world’s leading mobile telecommunications company, with equity interests in 26 countries across Europe, the United States and Asia Pacific at 31 March 2005. The Group had 154.8 million registered proportionate mobile customers based on ownership interests at 31 March 2005. Partner Network arrangements extend the Group’s footprint by a further 14 countries. As the world’s mobile telecommunications leader, the Group’s vision is to be the world’s mobile communications leader enriching our customers’ lives through the unique power of mobile communications. See “Business Overview – Business strategy”.

The Group currently provides a range of voice and data communication services, including SMS, MMS and other data services. Services are provided to both consumers and corporate customers, through a variety of both prepaid and contract tariff arrangements.

In the majority of the Group’s controlled networks, services are offered over a GSM network, on which a GPRS service is also provided. Where licences have been issued, the Group has also secured 3G licences in all jurisdictions in which it operates through its subsidiary undertakings and continues to rollout mobile 3G network infrastructure. See “Business Overview – Licences and network infrastructure”.

The Group faces a number of significant risks that may impact on its future performance and activities. Please see “Risk Factors and Legal Proceedings”.

Presentation of Information

In the discussion of the Group’s reported financial position and results, information in addition to that contained within the Consolidated Financial Statements is presented, including the following:

Customers

Mobile customer

A mobile customer is defined as a subscriber identity module (“SIM”) or, in territories where SIMs do not exist, a unique mobile telephone number which has access to the network for any purpose (including data only usage) except telemetric applications. Telemetric applications include, but are not limited to, asset and equipment tracking and mobile payment / billing functionality (for example, vending machines and meter readings) and include voice enabled customers whose usage is limited to a central service operation (for example, emergency response applications in vehicles).

Proportionate customers

The proportionate customer number represents the number of mobile customers in ventures which the Group either controls or invests, based on the Group’s ownership in such ventures.

Activity level

Active customers are defined as customers who have made or received a chargeable event in the last three months.

The active customers are expressed as a percentage of the closing customer base. Contract and prepaid activity is reported separately.

Vodafone live! active device

A handset or device equipped with the Vodafone live! portal which has made or received a chargeable event in the last month.

3G device

A handset or device capable of accessing 3G data services.

ARPU

ARPU is calculated as service revenue divided by the weighted average number of customers in the period.

Average monthly ARPU represents total ARPU in an accounting period divided by the number of months in the period.

This performance indicator is commonly used in the mobile telecommunications industry and by Vodafone management to compare service revenue to prior periods and internal forecasts. Management believes that this measure provides useful information for investors regarding trends in customer revenue derived from mobile telecommunications services and the extent to which customers change their use of mobile services and the network from period to period.

28 |  Performance

Churn

Churn is calculated as total gross customer disconnections divided by average total customers in the period. Stated churn figures are twelve month average figures.

Organic growth

The percentage movements in organic growth are presented to reflect operating performance on a comparable basis. Where a subsidiary or associated undertaking was newly acquired or disposed of in the current or prior year, the Group adjusts, under organic growth calculations, the results for the current and prior year to remove the amount the Group earned in both periods as a result of the acquisition or disposal of subsidiary or associated undertakings. Where the Group increases, or decreases, its ownership interest in an associated undertaking in the current or prior year, the Group’s share of results for the prior year is restated at the current year’s ownership level. A further adjustment in organic calculations excludes the effect of exchange rate movements by restating the prior period’s results as if they had been generated at the current period’s exchange rates. Management believes that these measures provide useful information to assist investors in assessing the Group’s operating performance from period to period.

Trading results

The following metrics are used in the discussion of trading results.

Service revenue

Service revenue comprises all revenue related to the provision of ongoing services including, but not limited to, monthly access charges, airtime usage, roaming, incoming and outgoing network usage by non-Vodafone customers and interconnect charges for incoming calls.

Voice revenue

Voice revenue is service revenue related to the provision of voice services.

Non-voice service revenue

Non-voice service revenue includes, but is not limited to, all revenue related to the provision of SMS and MMS, downloads, Internet browsing and other data services.

Messaging revenue

Messaging revenue includes all SMS and MMS revenue including wholesale messaging revenue, revenue from the use of messaging services by Vodafone customers roaming away from their home network and customers visiting the local network.

Data revenue

Data revenue includes all non-voice service revenue, excluding messaging revenue.

Other revenue

Other revenue comprises all non-service revenue, including, but not limited to, equipment and accessory revenue and connection and upgrade fees.

Net other revenue

This measure is presented in the trading results for the mobile telecommunications business and the Group’s key markets. Net other revenue excludes revenue relating to acquisition and retention activities as such revenue is deducted from acquisition and retention costs in the trading results. The Group believes that this basis of presentation provides useful information for investors regarding trends in net subsidies with respect to the acquisition and retention of customers and facilitates comparability of results with other companies operating in the mobile telecommunications business.

Net acquisition costs

This measure comprises the total of connection fees, trade commissions and equipment costs, net of related revenue, relating to new customer connections. This performance indicator is commonly used in the mobile telecommunications industry

and by Vodafone management to compare net subsidies provided to acquire customers to prior periods and internal forecasts. Management believes that this measure provides useful information for investors regarding trends in net subsidies to acquire customers for mobile telecommunications services from period to period.

Net retention costs

This measure comprises the total of upgrade fees, trade commissions, costs of loyalty schemes and equipment costs, net of related revenue, relating to customer retention and upgrades. This performance indicator is commonly used in the mobile telecommunications industry and by Vodafone management to compare net subsidies provided to retain customers to prior periods and internal forecasts. Management believes that this measure provides useful information for investors regarding trends in net subsidies to retain customers for mobile telecommunications services from period to period.

Depreciation and amortisation

This measure includes the profit or loss on disposal of fixed assets but excludes goodwill amortisation.

Critical Accounting Estimates

The Group prepares its Consolidated Financial Statements in accordance with UK GAAP, the application of which often requires judgements to be made by management when formulating the Group’s financial position and results. Under UK GAAP, the directors are required to adopt those accounting policies most appropriate to the Group’s circumstances for the purposes of giving a true and fair view and to review them regularly. The Group also prepares a reconciliation of the Group’s revenue, net loss and shareholders’ equity between UK GAAP and US GAAP.

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group should it later be determined that a different choice would be more appropriate.

Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provides an explanation of each below. Where it is considered that the Group’s US GAAP accounting policies differ materially from the UK GAAP accounting policy, a separate explanation is provided.

The discussion below should also be read in conjunction with the Group’s disclosure of material UK GAAP accounting policies, which is provided in note 2 to the Consolidated Financial Statements, “Accounting policies”, on pages 82 to 84, and with the description of the Group’s US GAAP accounting policies and other US GAAP related disclosures provided on pages 126 to 136.

Management has discussed its critical accounting estimates and associated disclosures with the Company’s Audit Committee.

Goodwill and intangible assets

The relative size of the Group’s goodwill and other intangible assets makes a number of judgements surrounding the determination of their carrying value, and related amortisation, critical to the Group’s financial position and performance.

At 31 March 2005, intangible assets, including goodwill attributable to the acquisition of interests in associated undertakings, amounted to £99,718 million (2004: £111,773 million), and represented 82% (2004: 83%) of the Group’s total fixed assets. In addition, a further £1,190 million of goodwill is charged against reserves (2004: £1,190 million).

The charge for goodwill amortisation is included within operating profit as a separate category of administrative expenses. The charge for amortisation of capitalised licence and spectrum fees is included within cost of sales.

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Operating and Financial Review and Prospects continued

Goodwill, including associated charges for amortisation, affects all of the Group’s reported segments. However, given that the majority of the current goodwill asset arose in connection with the Mannesmann acquisition, the Group’s results for Germany and Italy are most affected, individually representing £6,824 million and £3,779 million, respectively, of the £14,700 million total charge for goodwill amortisation.

US GAAP

Under US GAAP, the accounting treatment for goodwill and other intangible assets is different to that required by UK GAAP and represents the most significant adjustment made to the Group’s results and financial position under UK GAAP when reconciling to US GAAP. For acquisitions prior to 29 September 2004, the key difference from UK GAAP is that for the acquisition of mobile network businesses, the residual purchase price is allocated to the licences, as opposed to goodwill under UK GAAP. However, subsequent to this date and due to the SEC prohibition of this residual method of accounting, licences will be valued using a direct valuation approach, with the residual being allocated to goodwill. For other acquisitions, the residual has been and will continue to be allocated to goodwill.

Other principal differences are:

a)	The allocation of the surplus of the residual purchase price, over the fair value attributed to the share of net tangible assets acquired, to identifiable intangible assets including licences in addition to goodwill under US GAAP as opposed to only goodwill under UK GAAP;
b)	The US GAAP deferred tax treatment of intangible assets, which increases acquisition liabilities and consequently the residual purchase price; and
c)	The difference in goodwill arising as a result of the different basis by which the purchase price is derived under US GAAP.

Of these adjustments, the only one to involve significant management judgement and estimation is the allocation of the purchase price. Allocation of the purchase price affects the future results of the Group under US GAAP, as finite-lived intangible assets are amortised whereas indefinite-lived intangible assets are not amortised, and could result in differing amortisation charges based on the allocation to goodwill, indefinite-lived intangible assets and finite-lived intangible assets.

Bases of amortisation

Goodwill

Once capitalised, goodwill is amortised on a straight line basis over its estimated useful economic life.

Other intangible assets

Other intangible assets primarily represent the Group’s aggregate amounts spent on the acquisition of 2G and 3G licences, stated after deduction of related amortisation charges.

Since revenue cannot be generated until a network is available for commercial service, amortisation of capitalised licences begins at this time. As networks are typically brought into service over a period of time, the charge for amortisation is initially calculated by reference to the capacity of the network compared to capacity at network maturity. For this purpose, network maturity is determined as being reached after a maximum period of five years from service launch. Thereafter, amortisation is on a straight line basis over its remaining useful economic life. Management considers this policy is the appropriate method of matching the amortisation with the economic benefit derived from the licences.

If the licences were amortised over their economic life on a straight line basis, the annual amortisation charge would be higher in the period to network maturity and lower thereafter.

US GAAP

Goodwill and other indefinite-lived intangible assets are not amortised but reviewed annually for impairment. Impairment reviews are discussed in more detail below. The majority of the Group’s intangible assets, primarily 2G and 3G licences, are finite-lived and are amortised over their estimated economic life on a straight line basis, which commences when the network is available for commercial service.

Estimation of useful economic life

The economic life used to amortise goodwill and other intangible fixed assets relates to the future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset.

Goodwill

For acquired mobile network operators, the useful economic life of goodwill reflects the useful economic life of the licences acquired with those businesses up to a maximum of twenty-five years. In management’s view, such businesses cannot operate in their respective jurisdiction without a licence, and so the licence term is the most appropriate life for the goodwill. The useful economic lives are reviewed annually and revised if necessary.

For other businesses acquired, the useful economic life principally reflects management’s view of the average economic life of the acquired customer base. The useful economic life is assessed by reference to customer churn rates. An increase in churn rates may lead to a reduction in the useful economic life and an increase in the amortisation expense. Historically, changes in churn rates have been insufficient to impact the useful economic life.

Other intangible assets

For licence and spectrum fees, the estimated useful economic life is, generally, the term of the licence, unless there is a presumption of renewal. Using the licence term reflects the period over which the Group will receive economic benefit. For technology specific licences with a presumption of renewal, the estimated useful economic life reflects the Group’s expectation of the period over which the Group will continue to receive economic benefit from the licence. The economic lives are periodically reviewed, taking into consideration such factors as changes in technology. Historically, any changes to economic lives have not been material following these reviews.

Tangible fixed assets

Tangible fixed assets also represent a significant proportion of the asset base of the Group and hence the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Group’s financial position and performance.

Estimation of useful economic life

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Group’s profit and loss account.

The useful economic lives of Group assets are determined by management at the time the asset is acquired and regularly reviewed for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. Furthermore, network infrastructure cannot be depreciated over a period that extends beyond the expiry of the associated licence under which the operator provides telecommunications services.

Historically, changes in useful economic lives have not resulted in material changes to the Group’s depreciation charge.

30 |  Performance

Cost capitalisation

Cost includes the total purchase price and labour costs associated with the Group’s own employees to the extent that they are directly attributable to construction costs, or where they comprise a proportion of a department directly engaged in the purchase or installation of a fixed asset. Management judgement is involved in determining the appropriate internal costs to capitalise and the amounts involved. For the year ended 31 March 2005, internal costs capitalised represented approximately 6% of expenditure on tangible fixed assets and approximately 4% of total operating expenses, excluding goodwill amortisation.

Impairment reviews

Asset recoverability is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters, as noted below.

UK GAAP requires management to undertake a review for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Group management currently undertakes a review of goodwill, intangible assets and investments in associated undertakings at least annually to consider whether a full impairment review is required.

US GAAP

Under US GAAP, the requirements differ from UK GAAP and the principal differences are:

• For finite-lived intangible assets and tangible assets, the carrying value is compared to undiscounted future cash flows to determine if the asset or asset group is recoverable. If the carrying value exceeds the undiscounted cash flows, the carrying value is not recoverable and the asset or asset group is written down to the net present value of future cash flows derived in a manner similar to UK GAAP.

• For the period to 31 December 2004, the recoverability of indefinite-lived intangible fixed assets was assessed by comparing the carrying value to the fair value. The fair value is determined by deducting the fair value of all other assets within a cash-generating unit from the total fair value of that unit.

• On 1 January 2005, the Group adopted Emerging Issue Task Force (“EITF”) Topic D-108. Under this standard, indefinite-lived intangibles assets other than goodwill are now tested for impairment by comparing the carrying amount with the fair value of the asset determined on a standalone basis. The cumulative effect on net loss of adopting this standard was £6,177 million, net of related taxes of £5,239 million.

Assumptions

There are a number of assumptions and estimates involved in calculating the net present value of future cash flows from the Group’s businesses including:

•   Management’s expectations of growth in revenue, including those relating to the achievement the Group’s strategy on data products and services;

•   Changes in operating margin;

•   Timing and quantum of future capital expenditure;

•   Uncertainty of future technological developments;

•   Long term growth rates; and

•   The selection of discount rates to reflect the risks involved.

The Group prepares and internally approves formal ten-year plans for its businesses and uses these as the basis for its impairment reviews. For periods beyond the ten-year plans, forecast growth rates do not exceed nominal gross domestic product

(“GDP”) for mobile network operators, using forecast nominal GDP rates from external sources, and are below nominal GDP for other businesses.

Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group’s results. The Group’s review includes the key assumptions related to sensitivity in the cash flow projections.

Taxation

The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profit and loss and/or cash flow variances. See “Liquidity and Capital Resources”.

The growth in complexity of the Group’s structure following its rapid expansion geographically over the past few years has made the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Group and it is often dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which the Group operates. Issues can, and often do, take many years to resolve. Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result, there can be substantial differences between the tax charge in the profit and loss account and tax payments.

Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future, against which the reversal of timing differences can be deducted. Recognition, therefore, involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.

Historical differences between forecast and actual taxable profits have not resulted in material adjustments to the recognition of deferred tax assets.

Non-discounting of deferred tax assets and liabilities

UK GAAP permits, and US GAAP prescribes, calculating deferred tax assets or liabilities on an undiscounted basis. It is the Group’s accounting policy to measure deferred tax on an undiscounted basis. If deferred tax liabilities were calculated using discounting techniques, the Group’s UK GAAP net deferred tax liability would be lower.

Revenue recognition and presentation

Turnover from mobile telecommunications comprises amounts charged to customers in respect of monthly access charges, airtime charges, messaging, the provision of other mobile telecommunications services, including data services and information provision, fees for connecting customers to a mobile network, revenue from the sale of equipment, including handsets, and revenue arising from the Group’s Partner Network agreements.

Deferral period

Customer connection fees, when combined with related equipment revenue, in excess of the fair value of the equipment are deferred and recognised over the expected life of the customer relationship. The life is determined by reference to historical customer churn rates. An increase in churn rates would reduce the customer relationship life and accelerate revenue recognition. Historically, changes in churn rates have been insufficient to impact the expected customer relationship life.

Any excess upgrade or tariff migration fees over the fair value of equipment provided are deferred over the average upgrade or tariff migration period as appropriate. This time period is calculated based on historical activity of customers who upgrade or

Performance  | 31

Operating and Financial Review and Prospectscontinued

change tariffs. An increase in the time period would extend the period over which revenue is recognised.

Presentation

When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance of the agreement between the Group and its business partners are reviewed to determine each party’s respective role in the transaction.

Where the Group’s role in a transaction is that of principal, revenue is recognised on a gross basis. This requires turnover to comprise the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as an operating cost.

Where the Group’s role in a transaction is that of a disclosed agent, revenue is recognised on a net basis, with turnover representing the margin earned.

US GAAP

For the period to 30 September 2003, the Group applied US Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, which resulted in the Group’s connection revenue being accounted for in a different way to that prescribed under UK GAAP and described above. SAB 101 specifies that performance is viewed from the perspective of the customer and takes place over the estimated life of the customer relationship.

Deferring connection revenue and associated costs over the estimated life of the customer relationship, using the methodology required under SAB 101, resulted in the Group’s revenue for the 2003 financial year being reduced by £1,760 million. Profits were materially unaffected by this adjustment as a broadly equal amount of costs was also deferred.

For all new contracts entered into from 1 October 2003, the Group has adopted the requirements of EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. The adoption of EITF 00-21 substantially aligned the Group’s US GAAP revenue recognition policy with UK GAAP.

As contracts entered into before 1 October 2003 are accounted for in accordance with SAB 101, the related deferred connection revenue, and related costs, will continue to be recognised over the remaining life of the customer relationship. For the 2005 financial year, the Group’s revenue under US GAAP increased by £1,223 million (2004: £188 million), as a result of following the methodology under SAB 101 to 30 September 2003 and EITF 00-21 thereafter. At 31 March 2005, deferred revenue accounted for in accordance with SAB 101 amounted to £2,344 million (2004: £3,737 million).

Allowance for bad and doubtful debts

The allowance for bad and doubtful debts reflects management’s estimate of losses arising from the failure or inability of the Group’s customers to make required payments. The estimate is based on the ageing of customer accounts, customer credit worthiness and the Group’s historical write-off experience.

Changes to the allowance may be required if the financial condition of the Group’s customers was to improve or deteriorate. An improvement in financial condition may result in lower actual write-offs.

Historically, changes to the estimate of losses have not been material to the Group’s financial position and results.

Foreign Currency Translation

The Company publishes its Consolidated Financial Statements in pounds sterling. However, the majority of the Company’s subsidiary and associated undertakings report their turnover, costs, assets and liabilities in currencies other than pounds sterling and the Company translates the turnover, costs, assets and liabilities of those subsidiary and associated undertakings into pounds sterling when preparing its Consolidated

Financial Statements. Consequently, fluctuations in the value of pounds sterling versus other currencies could materially affect the amount of these items in the Consolidated Financial Statements, even if their value has not changed in their original currency.

The following table sets out the pounds sterling exchange rates of the other principal currencies of the Group, being: “euros”, “€” or “eurocents”, the currency of the EU Member States which have adopted the euro as their currency, “yen” or “¥”, the currency of Japan, and “US dollars”, “$”, “cents” or “¢”, the currency of the United States.

	At / year ended 31 March		Change
Currency (=£1)	2005	2004	%
Average:
Euro	1.47	1.44	2
Yen	198.2	191.5	3
US dollar	1.84	1.69	9
At 31 March:
Euro	1.46	1.50	(3	)
Yen	202.4	191.2	6
US dollar	1.89	1.84	3

Merely for convenience, this Annual Report contains translations of certain pounds sterling amounts into US dollars at specified rates. These translations should not be construed as representations that the pounds sterling amounts actually represent such US dollar amounts or could be converted into US dollars at the rate indicated or at any other rate. Unless otherwise indicated, the translations of pounds sterling into US dollars have been made at $1.8888 per £1.00, the Noon Buying Rate in the City of New York for cable transfers in sterling amounts as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on 31 March 2005. The Noon Buying Rate on 23 May 2005 was $1.8288 per £1.00.

The following table sets out, for the periods and dates indicated, the period end, average, high and low Noon Buying Rates for pounds sterling expressed in US dollars per £1.00, to two decimal places.

Years ended
31 March	Period end	Average	High	Low
2001	1.42	1.47	1.60	1.40
2002	1.42	1.43	1.48	1.37
2003	1.58	1.54	1.65	1.43
2004	1.84	1.69	1.90	1.55
2005	1.89	1.85	1.96	1.75

Month	High	Low
November 2004	1.91	1.83
December 2004	1.95	1.91
January 2005	1.91	1.86
February 2005	1.92	1.85
March 2005	1.93	1.86
April 2005	1.92	1.87
May 2005(1)	1.91	1.82

Note:
(1)	In respect of May 2005, for the period from 1 May to 23 May 2005, inclusive.

Inflation

Inflation has not had a significant effect on the Group’s results of operations and financial condition during the three years ended 31 March 2005.

32 |  Performance

Operating Results

Group overview

The Group has amended its segmental disclosure of turnover to a gross of intercompany turnover basis, rather than a net of intercompany turnover basis as previously disclosed, in order to facilitate analysis of the performance of the Group and as part of the Group’s preparations for the introduction of IFRS. There is no impact on total Group turnover, which continues to be stated on a net of intercompany turnover basis. In addition, a more detailed analysis of the results of the Group’s mobile telecommunications (“mobile”) business and certain key markets has been provided, on a basis consistent with internal measures, to facilitate management’s discussion of the results.

	Years ended 31 March
	2005		2004		2003
	£m		£m		£m
Turnover
Mobile telecommunications	33,184		31,915		27,847
Other operations	1,108		2,128		3,540
Less: turnover between mobile and other operations	(159	)	(484	)	(1,012	)
	34,133		33,559		30,375
Total Group operating loss	(4,111	)	(4,230	)	(5,451	)
Mobile telecommunications(1)	10,875		10,729		9,170
Other operations(1)	29		20		11
	10,904		10,749		9,181
Goodwill amortisation	(14,700	)	(15,207	)	(14,056	)
Exceptional operating items	(315	)	228		(576	)
Exceptional non-operating items	13		(103	)	(5	)
Net interest expense	(604	)	(714	)	(752	)
Taxation	(2,236	)	(3,154	)	(2,956	)
Loss on ordinary activities after taxation	(6,938	)	(8,201	)	(9,164	)
Loss for the financial year	(7,540	)	(9,015	)	(9,819	)

Notes:
(1)	before goodwill amortisation and exceptional operating items

2005 financial year compared to 2004 financial year

Turnover increased by 2% to £34,133 million in the year ended 31 March 2005, comprising organic growth of 6%, offset by unfavourable movements in exchange rates of 2% and the effect of acquisitions and disposals, principally the disposal of Japan Telecom, of 2%. The foreign exchange impact primarily arose due to the relative strength of sterling in the first half of the financial year compared to the prior period, partially offset by a relative weakening in the second half.

After goodwill amortisation and exceptional items, the Group reported a total operating loss of £4,111 million, compared with a loss of £4,230 million for the prior year. The charges for goodwill amortisation, which do not affect the cash flows of the Group or the ability of the Company to pay dividends, fell by 3% to £14,700 million, principally as a result of the impact of foreign exchange movements. Following the Group’s transition to IFRS in the 2006 financial year, no goodwill amortisation charges will be incurred. The exceptional operating items moved from a £228 million net credit in the prior financial year, due principally to expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy, to a £315 million charge in the 2005 financial year due to an impairment of the carrying value of the goodwill relating to Vodafone Sweden.

Before goodwill amortisation and exceptional items, total Group operating profit increased by 1% to £10,904 million, with organic growth of 5%, broadly in line with the growth in turnover. Unfavourable exchange rate movements represented 3% of the difference between reported and organic growth, whilst acquisitions and disposals reduced reported growth by a further 1%.

Mobile telecommunications
	Years ended 31 March
	2005		2004		Change
	£m		£m		%
Total service revenue	29,322		28,249		4
Other revenue(1)	3,862		3,666		5
	33,184		31,915		4
Trading results:
Voice services	24,349		23,708		3
Non-voice services	4,973		4,541		10
Total service revenue	29,322		28,249		4
Net other revenue(1)	557		512		9
Interconnect costs	(4,311	)	(4,137	)	4
Other direct costs	(1,975	)	(2,004	)	(1	)
Net acquisition costs(1)	(2,051	)	(1,897	)	8
Net retention costs(1)	(1,914	)	(1,638	)	17
Payroll(2)	(2,091	)	(2,016	)	4
Other operating expenses(2)	(4,693	)	(4,802	)	(2	)
Depreciation and amortisation(3)	(4,971	)	(4,197	)	18
Share of operating profit in
associated undertakings	3,002		2,659		13
Total Group operating profit(2)(3)	10,875		10,729		1

Notes:
(1)	Turnover for the mobile telecommunications business includes revenue of £3,305 million (2004: £3,154 million) which has been deducted from acquisition and retention costs and excluded from other revenue in the trading results
(2)	Before exceptional items
(3)	Before goodwill amortisation

Performance 33

Operating and Financial Review and Prospects continued

Turnover

Turnover in the mobile business increased by 4%, or 5% on an organic basis, for the year ended 31 March 2005. The increase in turnover was driven principally by organic service revenue growth, at constant exchange rates, of 5%, which improved principally as a result of a 9% increase in the Group’s average controlled customer base and 10% growth in total voice usage compared to the prior year, offset by the effect of regulatory and competitive pressures on pricing and the increase in the proportion of prepaid customers across the Group.

Voice revenue improved by 4% on an organic basis, following an increase in voice usage, partially offset by tariff reductions due to increased competition and lower termination rates.

Non-voice service revenue increased to £4,973 million for the year ended 31 March 2005, or by 11% on an organic basis. Messaging revenue continued to represent the largest component of non-voice revenue at £3,589 million for the financial year, a 7% increase over the previous financial year. Non-messaging data revenue increased by 17% to £1,384 million as the Group continued to drive adoption of consumer services, such as Vodafone live! and Vodafone live! with 3G, and business offerings, including the Vodafone Mobile Connect data card and BlackBerry from Vodafone. Japan generates the highest level of non-messaging data revenue in the Group and, following the loss of higher value customers and an increased proportion of prepaid customers with access to only basic data services, its non-messaging data revenue reduced by 7% to £816 million in the 2005 financial year.

Other revenue increased to £3,862 million, principally due to growth in revenue related to acquisition and retention activities to £3,305 million, being 7% on an organic basis. The increase has arisen principally from higher levels of gross additions and upgrades in the year, partially offset by a reduction in the average handset sales price.

Total Group operating profit before goodwill amortisation and exceptional items

Total Group operating profit, before goodwill amortisation and exceptional items, increased by 1% to £10,875 million, comprising organic growth of 4% offset by unfavourable exchange rate movements, particularly the strengthening of sterling against the euro and the US dollar.

Acquisition and retention costs, net of attributable revenue, increased by 12% to £3,965 million. The increase was primarily driven by higher customer growth in the UK and Spain and increased investment in retention activities in the UK and Japan. Other operating expenses as a percentage of service revenue reduced from 17.0% to 16.0% as the Group continued to realise cost efficiencies, particularly in network and IT costs.

Depreciation and licence amortisation charges increased by 18% following the commencement of 3G services in a number of the Group’s controlled mobile businesses. Licence amortisation amounted to £412 million in the year compared to £98 million in the prior year.

The Group’s share of operating profit, before goodwill amortisation and exceptional items, in associated undertakings grew strongly, primarily due to growth at Verizon Wireless in the US.

Non-mobile telecommunications

Turnover from other operations decreased by 48% to £1,108 million in the year ended 31 March 2005, principally as a result of the deconsolidation of Japan Telecom from 1 October 2003. Group operating profit, before goodwill amortisation and exceptional items, increased by 45% to £29 million, principally as a result of operational efficiencies in Arcor.

Exceptional operating items

The exceptional operating cost of £315 million in the year ended 31 March 2005 is due to an impairment charge in relation to the carrying value of goodwill of Vodafone Sweden. The impairment results from recent fierce price competition in the Swedish

market combined with onerous 3G licence obligations. Net exceptional operating income for the previous financial year of £228 million comprised £351 million of expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy, net of £123 million of restructuring costs, principally in the UK.

In accordance with accounting standards the Group regularly monitors the carrying value of its fixed assets. A review was undertaken as at 31 March 2005 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2015. The results of the review undertaken as at 31 March 2005 indicated that an impairment charge of £315 million was necessary in respect of goodwill held in relation to Vodafone Sweden.

Exceptional non-operating items

The net exceptional non-operating credit for the year ended 31 March 2005 of £13 million (2004: charge of £103 million) principally relates to profits on disposal of fixed asset investments. The prior year charge principally related to a loss on disposal of the Japan Telecom fixed line operations.

Net interest payable
	Years ended 31 March
	2005		2004		Change
	£m		£m		%
Group net interest payable	151		310		(51	)
Dividends from investments	(19	)	(26	)	(27	)
Potential interest charges arising on settlement of outstanding tax issues	261		215		21
Group net interest payable	393		499		(21	)
Share of associated undertakings	211		215		(2	)
Total Group net interest payable	604		714		(15	)

Group net interest payable before dividends from investments has fallen by 51% to £151 million, primarily reflecting a reduction in average net debt. Group net interest payable was covered 37 times by operating cash flow plus dividends received from associated undertakings.

Taxation

The effective rate of taxation for the year ended 31 March 2005 is (47.6)% compared to (62.5)% for the year ended 31 March 2004. This rate includes the impact of goodwill amortisation and exceptional items, which may not be taxable or deductible for tax purposes. Aside from non-tax deductible goodwill, which results in a negative effective tax rate, the Group’s tax charge has benefited from the finalisation of the reorganisation of the Group’s German operations in the current period, which has outweighed the impact of reduced tax incentives in Italy and the absence of last year’s one-off benefit from the restructuring of the Group’s associated undertakings in France.

The Group’s tax charge has also benefited from exceptional current and deferred tax credits of £599 million, which relate to tax losses in Vodafone Holdings K.K. becoming eligible for offset against the profits of Vodafone K.K. following the merger of the two entities on 1 October 2004. The tax credit was recognised following shareholder and regulatory approval of the transaction in the period.

Please refer to note 8 to the Consolidated Financial Statements for a discussion of factors affecting the tax charge in future years.

Basic loss per share

Basic loss per share, after goodwill amortisation and exceptional items, improved from a loss per share of 13.24 pence to a loss per share of 11.39 pence for the year ended 31 March 2005. The loss per share includes a charge of 22.21 pence per share (2004: 22.33 pence per share) in relation to the amortisation of goodwill and a credit of 0.41 pence per share (2004: charge of 0.01 pence per share) in relation to exceptional items.

34 |  Performance

2004 financial year compared to 2003 financial year

Turnover

Turnover increased 10% to £33,559 in the 2004 financial year, resulting from organic growth (10%) and changes in exchange rates (4%), partially offset by the impact of acquisitions and disposals. The foreign exchange impact primarily arose due to a stronger euro. The impact of acquisitions and disposals resulted mainly from the disposal of Japan Telecom.

Mobile telecommunications

	Years ended 31 March
	2004	2003	Change
	£m	£m	%
Service revenue:
– Voice	23,708	21,201	12
– Non-voice	4,541	3,622	25
Subtotal	28,249	24,823	13
Equipment & other	3,666	3,024	21
Total mobile revenue	31,915	27,847	15

The principal component of the increase in turnover from mobile telecommunications arose from service revenue growth of 13%, driven primarily by growth in the Group’s controlled customer base, which increased by 9% over the 2003 financial year.

ARPU for the year ended 31 March 2004 was up 4% in Italy and 8% in the UK, and down 7% and 1% in Japan and Germany, respectively, compared with the year ended 31 March 2003. Total outgoing voice usage in controlled mobile businesses increased by 11% to 154.8 billion minutes for the year ended 31 March 2004, although the effect on ARPU was partially offset by tariff reductions and regulatory intervention. Lower termination rates, resulting from regulatory changes, reduced service revenue by an estimated £0.3 billion in the year.

Another key driver of the growth in service revenue was the continued success of the Group’s data product and service offerings. Revenue from data services increased 25% to £4,541 million for the year ended 31 March 2004 and represented 16.1% of service revenue in the Group’s controlled mobile subsidiaries for the twelve months ended 31 March 2004, compared with 14.5% for the 2003 financial year. SMS revenue continued to represent the largest component of both the level of and growth in data revenue. Non-messaging data revenue increased to 4.2% of service revenue from 3.6% in the prior financial year as a result of the increased focus on providing value-added services, particularly through Vodafone live!, the Group’s business offerings and the increased penetration of data services into the Group’s customer base.

Mobile equipment and other turnover increased 21% to £3,666 million, due to revenue from non-Vodafone customers acquired as a result of the acquisition of service providers in the UK and increased acquisition and retention activity. Excluding this revenue, mobile equipment and other turnover increased slightly as a result of higher gross connections and upgrades.

Non-mobile businesses

Turnover from other operations decreased by 40% to £2,128 million in the year ended 31 March 2004, principally as a result of the deconsolidation of Japan Telecom from 1 October 2003, and the disposal of the Telematik business by Arcor in the previous year.

Operating loss

After goodwill amortisation and exceptional items, the Group reported a total operating loss of £4,230 million for the year ended 31 March 2004, compared with a loss of £5,451 million for the previous year. The £1,221 million reduction in the total operating loss arose as a result of a £228 million credit in respect of exceptional operating items in the year ended 31 March 2004, compared with an expense of £576 million in the prior year, and a £1,568 million increase in operating profit before

goodwill amortisation and exceptional items, partially offset by a £1,151 million increase in the goodwill amortisation charge. The charges for goodwill amortisation, which do not affect the cash flows of the Group or the ability of the Company to pay dividends, increased by 8% to £15,207 million, principally as a result of the impact of foreign exchange movements.

Expenses

	Years ended 31 March
	2004	2003
	% of turnover	% of turnover
Direct costs(1)	39.9	38.9
Operating expenses(1)	22.5	24.1
Depreciation and amortisation(2)	13.6	13.6
Notes:

(1)	Before exceptional items
(2)	Before goodwill amortisation

Direct costs include interconnect costs and gross acquisition and retention costs as well as other direct costs. Operating expenses include payroll costs and other operating expenses.

The increase in direct costs as a percentage of turnover was principally due to an increase in the proportion of acquisition and retention costs, primarily following the acquisition of a number of service providers in the UK. Acquisition and retention costs net of equipment revenue as a percentage of service revenue, for the Group’s controlled mobile businesses, increased to 12.6%, compared with 12.3% for the comparable period. This was partially offset by the disposal of Japan Telecom.

The principal reason for the improvement in operating expenses as a percentage of turnover was the maintenance of network operating costs at a similar level to the previous financial year, despite the growth in customer numbers and usage. Operating expenses as a proportion of turnover also benefited from the disposal of Japan Telecom.

Depreciation and amortisation charges, excluding goodwill amortisation, increased by 10% to £4,549 million from £4,141 million in the comparable period. The launch of 3G services in a number of countries resulted in approximately £0.3 billion of additional depreciation and amortisation in the current year as 3G infrastructure and licences have been brought into use.

Goodwill amortisation

Retranslating the goodwill amortisation charge for the year ended 31 March 2004 at the average exchange rates applicable for the year ended 31 March 2003 would have reduced the charge by £965 million to £14,242 million, with a corresponding reduction in total Group operating loss.

Exceptional operating items

Net exceptional operating income for the year ended 31 March 2004 of £228 million comprises £351 million of recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy, net of £123 million of restructuring costs principally in Vodafone UK. Net exceptional operating charges of £576 million were charged in the year ended 31 March 2003, comprising £485 million of impairment charges in relation to the Group’s interests in Japan Telecom and Grupo Iusacell, and £91 million of reorganisation costs relating to the integration of Vizzavi into the Group and related restructuring.

In accordance with accounting standards the Group regularly monitors the carrying value of its fixed assets. A review was undertaken at 31 March 2004 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2014. The results of the review undertaken at 31 March 2004 indicated that no impairment charge was necessary.

Performance  | 35

Operating and Financial Review and Prospects continued

Exceptional non-operating items

Net exceptional non-operating charges for the year ended 31 March 2004 of £103 million principally relate to a loss on disposal of the Japan Telecom fixed line operations. In the prior year, net exceptional non-operating charges of £5 million mainly represented a profit on disposal of fixed asset investments of £255 million, principally relating to the disposal of the Group’s interest in Bergemann GmbH, through which the Group’s 8.2% stake in Ruhrgas AG was held, offset by an impairment charge in respect of the Group’s investment in China Mobile of £300 million.

Loss on ordinary activities before interest

The Group’s loss on ordinary activities before interest fell by 21% to £4,333 million for the year ended 31 March 2004 due to a reduction in the total operating loss of £1,221 million offset by an increase in charge for exceptional non-operating items of £98 million.

Net interest payable

Net interest payable, including the Group’s share of the net interest expense of joint ventures and associated undertakings, decreased from £752 million for the year ended 31 March 2003 to £714 million for the year ended 31 March 2004.

The Group net interest cost for the year ended 31 March 2004 increased to £499 million, including £215 million (2003: £55 million) relating to potential interest charges arising on settlement of a number of outstanding tax issues, from £457 million for the prior year and was covered 28 times by operating cash flow plus dividends received from associated undertakings. The Group’s share of the net interest expense of associated undertakings and joint ventures decreased from £295 million to £215 million, principally as a result of the sale of the Group’s stake in Grupo Iusacell.

Taxation

The effective rate of taxation for the year ended 31 March 2004 was (62.5)% compared with (47.6)% for the year ended 31 March 2003. The effective rate includes the impact of goodwill amortisation and exceptional items, which may not be deductible for tax purposes. Aside from the negative impact of non-tax deductible goodwill amortisation on the effective tax rate, the Group’s tax charge has benefited further from the restructuring of the Group’s Italian operations in the prior year, from the current year restructuring of the French operations, from a fall in the Group’s weighted average tax rate and from other tax incentives. These benefits outweighed the absence of the one-off benefit arising from the restructuring of the German group in the previous year.

Basic loss per share

Basic loss per share, after goodwill amortisation and exceptional items, improved from a loss per share of 14.41 pence to a loss per share of 13.24 pence for the year ended 31 March 2004. The loss per share includes a charge of 22.33 pence per share (2003: 20.62 pence per share) in relation to the amortisation of goodwill and a charge of 0.01 pence per share (2003: 0.60 pence per share) in relation to exceptional items.

Review of operations

Please refer to the summary of Key Performance Indicators on page 44 and note 3 of the Consolidated Financial Statements.

In October 2004, the Group announced a new organisational structure effective from 1 January 2005. The following results are presented in accordance with the new reporting structure.

2005 financial year compared to 2004 financial year

Mobile businesses

Germany

	Years ended 31 March						Local currency
	2005		2004		Change		change
	£m		£m		%		%
Turnover	5,684		5,536		3		5
Trading results
Voice services	4,358		4,254		2		4
Non-voice services	962		895		7		9
Total service revenue	5,320		5,149		3		5
Net other revenue(1)	122		155		(21	)	(20	)
Interconnect costs	(734	)	(725	)	1		3
Other direct costs	(314	)	(334	)	(6	)	(4	)
Net acquisition costs(1)	(348	)	(367	)	(5	)	(3	)
Net retention costs(1)	(330	)	(321	)	3		5
Payroll	(409	)	(390	)	5		7
Other operating
expenses	(668	)	(675	)	(1	)	1
Depreciation and
amortisation(2)	(976	)	(751	)	30		32
Operating profit(2)	1,663		1,741		(4	)	(3	)
Notes:

(1)	Turnover includes revenue of £242 million (2004: £232 million) which has been excluded from other revenue and deducted from acquisition and retention costs in the trading results.
(2)	Before goodwill amortisation

Vodafone has built on its strong position in the German mobile market following the successful launch of 3G services and consolidated its overall position.

A 9% growth in the average customer base compared to the prior year was the main driver of the 5% increase in service revenue in local currency. Customer growth was strong as a result of successful and competitively priced, but low subsidy, offerings which had a dilutive effect on ARPU. The offerings included partner cards, which offer a second SIM card without a handset to contract customers at a low monthly cost to the customer, and SIM only prepaid promotions, which attracted a substantial proportion of prepaid customers in the second half of the financial year. ARPU, and consequently service revenue growth, in the second half of the financial year was also impacted by a reduction in the mobile call termination rate from 14.3 eurocents to 13.2 eurocents in December 2004. A further cut to 11.0 eurocents in December 2005 has also been agreed with Deutsche Telekom.

Non-voice service revenue increased due to the success of non-messaging data offerings, the revenue from which increased by 85% in local currency to £163 million. In the consumer segment, the number of Vodafone live! active devices increased by 105% over the financial year to 4,845,000 at 31 March 2005 and, in the business segment, there were strong sales of Vodafone Mobile Connect 3G/GPRS data cards. Demonstrating Vodafone’s lead in the 3G market in Germany, there were 358,000 registered 3G devices at 31 March 2005.

36 |  Performance

The commencement of depreciation and amortisation on the 3G network and licence, following launch of services in the second half of the previous financial year, reduced operating profit before goodwill amortisation, with licence amortisation contributing the largest share of this reduction. A higher proportion of prepaid additions, particularly in the second half of the financial year, and lower contract subsidies led to net acquisition costs decreasing by 3% in local currency in spite of an 8% increase in gross customer additions. Lower loyalty scheme costs were offset by higher upgrade costs, particularly in the second half of the financial year following increased activity through indirect channels, and consequently net retention costs increased by 5%. Other operating expenses and direct costs remained relatively stable compared to the prior year.

Italy

	Years ended 31 March						Local currency
	2005		2004		Change		change
	£m		£m		%		%
Turnover(1)	5,565		5,312		5		7
Trading Results
Voice services	4,548		4,380		4		6
Non-voice services	780		669		17		19
Total service revenue	5,328		5,049		6		7
Net other revenue(1)	19		13		46		38
Interconnect costs	(913	)	(874	)	4		6
Other direct costs(3)	(302	)	(306	)	(1	)	–
Net acquisition costs(1)	(93	)	(76	)	22		23
Net retention costs(1)	(97	)	(64	)	52		55
Payroll	(323	)	(301	)	7		10
Other operating
expenses	(659	)	(646	)	2		4
Depreciation and
amortisation(2)	(703	)	(652	)	8		10
Operating profit(2)(3)	2,257		2,143		5		7
Notes:

(1)	Turnover includes revenue of £218 million (2004: £250 million) which has been excluded from other revenue and deducted from acquisition and retention costs in the trading results.
(2)	Before goodwill amortisation
(3)	Before exceptional items

Vodafone continues to perform robustly in Italy despite aggressive competition, through strong market positioning driven by innovative promotions and a focus on high value customers, through targeted retention initiatives. Notwithstanding market penetration levels of over 100%, driven by the effect of customers having more than one SIM and increased competition, Vodafone had good customer growth, with gross additions higher than in the previous year and only a slight increase in churn to 17.2%.

Total turnover grew by 7%, when measured in local currency, reflecting the rise in service revenue that was driven by an 8% increase in the average customer base. ARPU remained stable despite a slight reduction in activity levels. Strong promotional campaigns, such as fixed price phone calls for voice users or unlimited text messaging, after paying for the first text message per day, in return for up front subscription fees, significantly stimulated usage, with minutes of use increasing by 12% and the number of text messages sent increasing by 11%.

Non-voice service revenue grew by 19% with revenue from non-messaging data offerings increasing to £87 million, representing an 85% increase in local currency. Vodafone live! active devices increased by 169% to 2,751,000 at 31 March 2005. In the business segment Vodafone continued to increase its market share, with a 10% growth in the customer base and continuing net inflow of customers through mobile number portability. Strong revenue growth for this segment was supported by a higher proportion of non-voice service revenue, partially driven by sales of Vodafone Mobile Connect data cards.

Following the successful launch of consumer 3G services in November 2004, customers had registered 665,000 3G devices on Vodafone’s network by the end of the financial year.

United Kingdom
	Years ended 31 March
	2005		2004		Change
	£m		£m		%
Turnover(1)	5,065		4,782		6
Trading results
Voice services	3,672		3,522		4
Data services	826		674		23
Total service revenue	4,498		4,196		7
Net other revenue(1)	177		146		21
Interconnect costs	(771	)	(752	)	3
Other direct costs	(367	)	(325	)	13
Net acquisition costs	(388	)	(333	)	17
Net retention costs	(391	)	(321	)	22
Payroll(3)	(389	)	(387	)	1
Other operating
expenses(3)	(657	)	(616	)	7
Depreciation and
amortisation(2)	(737	)	(510	)	45
Operating profit(2)(3)	975		1,098		(11	)
Notes:

(1)	Turnover includes revenue of £390 million (2004: £440 million) which has been excluded from other revenue and deducted from acquisition and retention costs in the trading results.
(2)	Before goodwill amortisation.
(3)	Before exceptional items.

In an intensively competitive market, Vodafone achieved growth in the customer base and revenue whilst maintaining costs through the execution of a structured plan to drive revenue and tighter control of operating expenses.

Turnover increased by 6%, comprising underlying growth of 1% and growth of 5% attributable to the acquisition of a number of service providers in the prior year, including Singlepoint. Service revenue rose by 7%, driven by an 8% increase in the average customer base over the prior financial year. ARPU was broadly stable for the financial year, with increases in non-voice service revenue and the impact of service provider acquisitions being offset by termination rate cuts and reduced activity levels. From 1 September 2004, Vodafone, along with other UK mobile network operators, excluding the third generation operator, reduced termination rates by approximately 30% impacting service revenue in the second half of the financial year. The impact of the termination rate cut was to reduce service revenue for the financial year by 3 percentage points.

Increased acquisition and retention activity and the success of new tariffs and services especially those targeted at corporate and business segments, drove customer growth in the financial year. Contract churn improved from 24.9% for the year ended 31 March 2004 to 22.7% for the year ended 31 March 2005, although blended churn of 29.7% was in line with the previous year. In addition, total customer activity levels fell from 91% at 31 March 2004 to 89% at 31 March 2005, reflecting higher levels of prepaid customer self upgrades, consistent with market trends. In the first half of the financial year, an agreement was reached to provide wholesale services to BT and at 31 March 2005, 119,000 BT customers, reported as one registered customer, were connected to the Vodafone network under this agreement.

Non-voice service revenue grew by 23%, with non-messaging data revenue increasing by 81% to £142 million, mainly due to the success of service offerings such as Vodafone live!, Vodafone Mobile Connect data cards and BlackBerry from Vodafone. At 31 March 2005, the number of Vodafone live! active devices rose to 3,443,000. In the

Performance  | 37

Operating and Financial Review and Prospects continued

business segment, there were strong sales of Vodafone Mobile Connect 3G/GPRS data cards.

Operational efficiencies and market effectiveness were achieved in the UK from the execution of the structured plan announced in the prior financial year. The key elements of this plan are to sustainably differentiate and segment the customer base allowing more effective targeted marketing and to drive lower costs whilst positioning the organisation for the future. Under the drive to lower costs, Vodafone has continued to consolidate call centres, simplify its network and IT platforms and reduce support costs.

Net other revenue and other direct costs both increased as a result of non-Vodafone customers acquired as part of service provider acquisitions in the prior year. Other direct costs increased further due to higher content costs associated with the increased data revenue.

Operating profit before goodwill amortisation and exceptional items was impacted by an increase in both depreciation and licence amortisation charges, primarily due to the commencement of 3G services towards the end of the previous financial year.

Recent independently-audited tests have shown that Vodafone has the best call success rate of all mobile networks in Britain.

Other Europe, Middle East and Africa

	Years ended 31 March						Local currency
	2005		2004		Change		change
	£m		£m		%		%
Turnover
Spain	3,261		2,686		21		24
Other EMEA	5,402		4,983		8
Less: intra-segment
turnover	(49	)	(42	)	17
	8,614		7,627		13
Operating profit(2)(3)
Spain	775		703		10		12
Other EMEA	2,608		2,439		7
	3,383		3,142		8
Spain trading results
Voice services	2,558		2,191		17		19
Data services	405		282		44		46
Total service revenue	2,963		2,473		20		22
Net other revenue	2		3		(33	)	(22	)
Interconnect costs	(540	)	(477	)	13		15
Other direct costs	(263	)	(201	)	31		33
Net acquisition costs	(246	)	(146	)	68		71
Net retention costs	(172	)	(137	)	26		27
Payroll	(138	)	(146	)	(5	)	(3	)
Other operating
expenses(3)	(473	)	(393	)	20		22
Depreciation and
amortisation(2)	(358	)	(273	)	31		33
Operating profit(2)(3)	775		703		10		12

Notes:
(1)	Turnover for Spain includes revenue of £296 million (2004: £210 million) which has been excluded from other revenue and deducted from acquisition and retention costs in the trading results.
(2)	Before goodwill amortisation.
(3)	Before exceptional items.

Spain

In Spain, Vodafone continued to deliver strong growth throughout the year. A focus on acquiring high value customers, targeted promotions encouraging increased usage and

improved customer satisfaction contributed to local currency service revenue growth of over 20%, despite a reduction in termination rates of 10.5% on 1 November 2004 required by the regulator.

In local currency, turnover increased by 24%, due principally to a 22% increase in service revenue. A successful customer acquisition strategy, including a focus on customers transferring from other operators, led to an 11% increase in the average customer base. Loyalty programmes and promotional activity resulted in a reduction in churn levels from 23.6% for the year ended 31 March 2004 to 21.9% for the 2005 financial year. An ongoing marketing campaign encouraging customers to switch from prepaid to contract contributed to the proportion of contract customers rising from 43% at 31 March 2004 to 47% at 31 March 2005. This, along with usage stimulation promotions and initiatives, has resulted in a 10% increase in ARPU.

Non-voice service revenue for the year increased by 46%, with messaging remaining the principal driver of the increase. Text messaging volumes increased 27% year on year, primarily due to promotions stimulating increased messaging per customer. The success of service offerings such as Vodafone live! and Vodafone Mobile Connect data cards led to non-messaging data revenue increasing by 201% in local currency to £65 million. The number of Vodafone live! active devices rose to 2,992,000.

Strong growth in customer additions, principally in the first half of the year relative to the previous financial year, and the increased proportion of new contract customers, led to increased acquisition costs. Interconnect costs increased due to higher usage offset by the impact of the termination rate cut in November and promotions in the second half of the year focusing on calls to other Vodafone and fixed-line numbers, which incur relatively lower interconnect costs. Operating profit before goodwill amortisation was impacted by the increased acquisition costs and the rise in depreciation and amortisation charges mainly due to the commencement of 3G services.

Other EMEA subsidiaries

Controlled venture customers for the Group’s operations in the Other EMEA region, other than Spain, increased by 12% in the year to 31 March 2005.

Turnover increased by 8%, with the primary driver being an 8% increase in service revenue, as a result of the 12% higher average controlled venture customer base, partially offset by cuts in termination rates across the region. Non-voice service revenue grew strongly over the prior financial year to represent 13.2% of service revenue for the year ended 31 March 2005. In Greece, local currency service revenue grew by 14% due to a 4% increase in the average customer base, higher voice usage and a strong rise in non-voice service revenue. Visitor revenue also increased due to a national roaming agreement with Greece’s fourth mobile operator and high usage during the Olympic Games. Service revenue growth in Portugal was 11% in local currency, driven by a 7% increase in the average customer base and good improvements in non-voice revenue and visitor revenue, due in part to the UEFA Euro 2004 football tournament and a particularly strong start in 3G, partially offset by lower termination rates. Service revenue in Ireland increased by 10%, in local currency, primarily as a result of additional voice usage. Intense competition restricted growth in local currency service revenue in the Netherlands to 1% and contributed to a 4% decline in Sweden.

Operating profit before goodwill amortisation increased by 7% over the prior financial year, following increased turnover partially offset by higher depreciation charges, primarily due to the launch of 3G services.

On 12 January 2005, the Group completed the acquisition of the remaining 7.2% shareholding in Vodafone Hungary from Antenna Hungaria Rt. with the effect that Vodafone Hungary became a wholly-owned subsidiary of the Group. On 26 January 2005, Telecom Egypt acquired a 16.9% stake in Vodafone Egypt from the Group, reducing the Group’s controlling stake to 50.1%. The transaction followed the reaching

38 |  Performance

of an agreement with the Egyptian Government for the purchase of additional spectrum.

EMEA associates

Associates in EMEA increased their average customer bases by 20% in the year, with particularly strong growth in markets with relatively low penetration rates such as those in Eastern Europe and Africa. This customer growth generated an increase in operating profit of 6%.

SFR, the Group’s associated undertaking in France, reported strong growth in revenue and operating profit before goodwill amortisation, principally as a result of a 9% increase in average customers compared to the prior year. Usage of both voice and non-voice services grew in the period and SFR had a total of 2.6 million Vodafone live! customers at 31 March 2005. SFR launched the Vodafone Mobile Connect 3G/GPRS data card in May 2004 and Vodafone live! with 3G in November 2004 and it also markets BlackBerry from Vodafone products.

Vodacom continued to grow both in South Africa and internationally through its interests in the Democratic Republic of the Congo, Lesotho, Mozambique and Tanzania. Venture customers at 31 March 2005 totalled 15,482,000, an increase of 5,757,000 over the previous year, including 2,645,000 customers in Vodacom’s international interests which were previously excluded from the Group’s reported customer base. In April 2005, Vodacom launched Vodafone live! with 3G in South Africa building on the successful launch of the Vodafone Mobile Connect 3G/GPRS data card in December 2004.

Americas

	Years ended 31 March				Local currency
	2005	2004		Change	change
	£m	£m		%	%
Operating profit/(loss)(1)
Verizon Wireless	1,647	1,406		17	28
Other Americas	–	(13	)
	1,647	1,393		18

Notes:
(1)	Total Group operating profit before goodwill amortisation

United States

In a highly competitive US market, Verizon Wireless continued to outperform its competitors, ranking first in customer net additions for the year ended 31 March 2005. The total customer base increased by 17% in the financial year to 45,452,000 at 31 March 2005. At 31 December 2004, US market penetration reached approximately 63%, with Verizon Wireless’ market share at approximately 24%.

In local currency, proportionate turnover increased by 23%, driven by the larger customer base and an increase in ARPU. ARPU growth was generated primarily by customers migrating to higher access price plans as well as growth in data products, with data revenue increasing 131% over last year and representing 5.0% of service revenue in the year.

Churn rates are amongst the lowest in the US wireless industry and have continued to improve, falling from 20.5% to 17.2%. The low churn rate is attributable in part to the quality and coverage of Verizon Wireless’ network and the success of retention programmes such as the ‘Worry Free Guarantee^®’, which includes the ‘New Every Two^®’ plan.

In local currency, the Group’s share of Verizon Wireless’ operating profit before goodwill amortisation increased by 28%, which reflects increased ARPU and further cost efficiencies. Verizon Wireless has achieved sustained cost containment, including the reduction of interconnection and leased line rates as well as other operating expense efficiencies.

Verizon Wireless launched V CAST^SM, the first wireless consumer multimedia broadband service in the US, in February 2005 and BroadbandAccess, a data card product providing wide area broadband computer connectivity, in October 2003. Both of these broadband offerings are delivered over Verizon Wireless’ Evolution-Data Optimized wide-area network which reached a population of 75 million people at 31 December 2004 and has been growing steadily, with the intention to cover 150 million people by the end of 2005.

Vodafone and Verizon Wireless are engaged in a number of joint projects to bring global services to their customers. Global Phone, which was launched last year, is the first device to incorporate CDMA and GSM technology and allows Verizon Wireless customers to use their phone in more than 100 countries. An additional joint project enabled Verizon Wireless customers to send text messages internationally to customers of participating GSM carriers. Vodafone and Verizon Wireless have also signed joint contracts with key media companies for their content and have several initiatives underway to further improve their service to multinational corporations.

Verizon Wireless has recently strengthened its spectrum position substantially with the closing of the purchase of several key spectrum licences, including licences from NextWave and Qwest and its participation in the FCC’s Auction 58, which ended in February 2005.

Asia Pacific

	Years ended 31 March						Local currency
	2005		2004		Change		change
	£m		£m		%		%
Turnover
Japan	7,396		7,850		(6	)	(2	)
Other Asia Pacific	1,142		1,052		9
Less: intra-segment
turnover	(7	)	(6	)	17
	8,531		8,896		(4	)
Operating profit(2)(3)
Japan	758		1,045		(27	)	(25	)
Other Asia Pacific	192		167		15
	950		1,212		(22	)
Japan trading results
Voice services	4,404		4,790		(8	)	(4	)
Data services	1,206		1,350		(11	)	(7	)
Total service revenue	5,610		6,140		(9	)	(5	)
Net other revenue	21		20		5		9
Interconnect costs	(482	)	(519	)	(7	)	(4	)
Other direct costs	(251	)	(414	)	(39	)	(37	)
Net acquisition costs	(641	)	(677	)	(5	)	(2	)
Net retention costs	(716	)	(607	)	18		23
Payroll	(186	)	(186	)	–		4
Other operating
expenses	(1,380	)	(1,519	)	(9	)	(5	)
Depreciation and
amortisation(2)	(1,217	)	(1,193	)	2		6
Operating profit(2)	758		1,045		(27	)	(25	)
Notes:

(1)	Turnover for Japan includes revenue of £1,765 million (2004: £1,690 million) which has been excluded from other revenue and deducted from acquisition and retention costs in the trading results.
(2)	Before goodwill amortisation
(3)	Before exceptional items

Performance  | 39

Operating and Financial Review and Prospects continued

Japan

Vodafone continues to encounter difficult market conditions in Japan due to the strength of competitor offerings, specifically in 3G customer propositions. A recent strengthening of the management team and the ongoing transformation plan are intended to improve Vodafone’s competitive position and financial performance over the mid to long term.

Local currency turnover for the year ended 31 March 2005 fell marginally compared to the prior year, with a 5% decrease in service revenue partially offset by an increase in equipment and other revenue. Service revenue declined following a reduction in ARPU, partially offset by an increase in the average customer base.

The ARPU erosion was caused by the loss of higher value customers, through the lack of a competitive 3G offering during the financial year, together with the adverse impact of lower termination charges caused by changes to the regulatory environment from 1 April 2004 and a total ban on using mobile phones whilst driving from 1 November 2004.

The average customer base grew 4% over the financial year, although market share declined from 18.4% at 31 March 2004 to 17.3% at 31 March 2005. Prepaid customers comprised 11% of closing customers, up from 9% at 31 March 2004. By 31 March 2005, Vodafone had 798,000 devices registered to use 3G data services in Japan.

Non-voice service revenue decreased by 7% over the comparative period, primarily due to the loss of higher value customers, who generally use more data services, and the increased proportion of prepaid customers, who can only access basic data services. A new flat rate data tariff for 3G customers was introduced in the winter and is anticipated to improve the competitiveness of the data proposition.

Operating profit fell for the year ended 31 March 2005, principally due to the ARPU dilution, the continued focus on customer retention and the migration of existing customers to 3G service offerings. The impact of these issues has been partially offset by a decrease in other direct costs due to a lower provision for slow moving handset stocks in the year ended 31 March 2005, and other operational efficiencies. The increase in payroll costs was largely due to one-off charges of approximately £25 million associated with a voluntary redundancy programme in the first half of the financial year, which was part of the transformation plan noted below, offset by lower ongoing costs in the second half of the financial year. Operating profit was also impacted by increased depreciation charges following 3G network roll out and the disposal of assets in relation to the integration of regional systems.

During the financial year, Japan completed the majority of the consolidation of its regional structure, with the integration of key business systems now complete. The integration of billing and IT systems is a longer term, and more complex project and is ongoing. Overall, Japan has improved its cost structure through reductions in general overheads and the effective utilisation of dark fibre.

The Group has strengthened its management team in Japan through the appointment of Shiro Tsuda and Bill Morrow during the year. Formerly Senior Executive Vice President at NTT DoCoMo, Inc., Shiro Tsuda brings considerable experience of the mobile telecommunications industry, together with an extensive knowledge of the Japanese business and consumer markets. Bill Morrow has significant experience through various global leadership positions within the Vodafone Group for the last eight years and was formerly President of Japan Telecom.

In the year ending 31 March 2006, management will focus on enhancing customer satisfaction, through an improved handset portfolio, targeted new product offerings, improvements in both network coverage and capacity and a renewed focus on business customers. In addition, cost reductions are expected through leveraging the Group’s global scale and scope. With these measures it is hoped that Vodafone will be

more agile and commercially driven when facing mobile number portability in the Japanese market in the 2006 financial year.

In the first half of the year, the Group increased its effective shareholding in Vodafone K.K. to 98.2% and its stake in Vodafone Holdings K.K. to 96.1% for a total consideration of £2.4 billion. On 1 October 2004, the merger of Vodafone K.K. and Vodafone Holdings K.K. was completed, resulting in the Group holding a 97.7% stake in the merged company, Vodafone K.K.

Other Asia Pacific subsidiaries

In the Australian market, value promotions and strategic changes in the tariff structures led to Vodafone increasing market share, turnover and profitability. ARPU also increased, despite falling prices, due to increased usage. In August 2004, Vodafone announced an agreement with another Australian telecommunications carrier to share 3G network equipment to reduce the total cost of ownership of the 3G network and increase speed to market. This is expected to lead to the launch of 3G services in October 2005.

In New Zealand, turnover and market share improved over the year as a result of enhanced customer propositions. Operating profit also increased as reduced equipment costs offset the effect of increased interconnection costs as the proportion of activity to non-Vodafone networks increased. The launch of a high speed network upgrade by competitors in the second half of the financial year has intensified competition in the market. Vodafone is expected to launch 3G services in July 2005.

Other Asia Pacific

China Mobile, in which the Group has a 3.27% stake, and which is accounted for as an investment, grew its customer base by 42% over the year to 213,874,000 at 31 March 2005, including 26,831,000 from customers added as a result of acquisitions. Dividends totalling £18 million were received from China Mobile during the year.

Changes to the regional structure

From 1 April 2005, Japan will report directly to the Chief Executive whilst the Group’s other operations in Asia Pacific will form part of an extended Other Europe, Middle East and Africa region, which will in future be referred to as Other Mobile Operations.

Other operations

	Years ended 31 March
	2005		2004		Change
	£m		£m		%
Turnover
Germany	1,108		1,002		11
Asia Pacific	–		1,126
	1,108		2,128		(48	)
Operating profit/(loss)(1)
Germany	66		(58	)
Other EMEA	(37	)	(1	)
Asia Pacific	–		79
	29		20		45
Notes:
(1)   before goodwill amortisation and exceptional items

Germany

In local currency, Arcor’s turnover increased by 14%, primarily due to customer and usage growth, partially offset by tariff decreases in a competitive market. Arcor strengthened its position as the main competitor to the incumbent fixed line market leader during the year growing contract ISDN voice (direct access) customers by 83% to 712,000 and contract DSL (broadband Internet) customers by 169% to 455,000 in the twelve months to 31 March 2005. Market share in the fast growing broadband

40 |  Performance

and direct access markets more than doubled in the year to 7% and 6%, respectively. Revenue growth and further cost efficiencies generated a significantly improved operating result and increased cash flow.

Other EMEA

Cegetel focused on increasing its share of the fast growing DSL market, growing its DSL customer base by 566,000 to 841,000 in the year, which has led to higher acquisition costs and adversely impacted operating profit.

Asia Pacific

The Group disposed of its interests in Japan Telecom during the 2004 financial year and ceased consolidating the results of this business from 1 October 2003.

2004 financial year compared to 2003 financial year

Mobile businesses

Germany

	Years ended 31 March			Local currency
	2004	2003	Change	change
	£m	£m	%	%
Turnover
Voice services	4,254	3,699	15	6
Non-voice services	895	728	23	14
Total service revenue	5,149	4,427	16	7
Equipment and other	387	327	18	10
	5,536	4,754	16	8
Operating profit(1)	1,741	1,435	21	9

Notes:
(1)	before goodwill amortisation and exceptional items

Vodafone Germany performed well in the 2004 financial year, further improving its operational performance.

Turnover in Germany increased by 8% when measured in local currency, reflecting the increase in the customer base offset by marginally lower ARPU. Germany represented the largest mobile market in Europe in terms of customer numbers and, notwithstanding a 10% growth in the market for the 2004 financial year, penetration, at an estimated 80%, was still relatively low. Vodafone Germany’s customer base increased by 9% in the 2004 financial year. The mix of contract customers increased from 47% at 31 March 2003 to 49% at 31 March 2004, although new contract customers had been, in general, lower usage customers than the then existing customer base. As a result, contract ARPU fell from €519 for the 12 months ended 31 March 2003 to €494 for the 12 months ended 31 March 2004. Prepaid ARPU remained stable at €130 during the year after increasing over the course of the prior year. Non-voice service revenue increased by 14% when measured in local currency and represented 17.4% of service revenue, up from 16.4% in the previous financial year, primarily due to Vodafone live!. Increased investment in acquisition and retention contributed to the improved churn rate and high customer growth.

Operating profit before goodwill amortisation and exceptional items improved by £306 million to £1,741 million, principally driven by cost efficiencies in the second half of the 2004 financial year, particularly in network and IT costs. Acquisition costs as a percentage of turnover were also lower over the Christmas period, in comparison to the same period in the prior financial year, due to lower handset subsidies and trade commissions. These benefits were partially offset by higher depreciation and licence amortisation costs as the 3G network was brought into use in February 2004.

Italy

	Years ended 31 March				Local currency
	2004	2003	Change		change
	£m	£m	%		%
Turnover
Voice services	4,380	3,656	20		11
Non-voice services	669	463	44		34
Total service revenue	5,049	4,119	23		13
Equipment and other	263	278	(5	)	(13	)
	5,312	4,397	21		12
Operating profit(1)	2,143	1,588	35		23

Notes:
(1)	before goodwill amortisation and exceptional items

Vodafone Italy produced another strong set of results in the 2004 financial year, in spite of the increasingly competitive and highly penetrated market.

In local currency, turnover increased by 12% driven by a 13% growth in service revenue, partially offset by a 13% decrease in equipment and other revenue arising from reduced handset sales. The increase in service revenue was driven by the larger customer base and increased usage, particularly of data services, partially offset by the impact of regulatory changes on interconnect rates. Non-voice service revenue improved significantly, to represent 13.3% of service revenue for the year (2003: 11.3%), mainly due to SMS but also the positive contribution from Vodafone live! and Vodafone Mobile Connect data card. Blended ARPU increased by 4% to €361 following the rise in prepaid ARPU from €298 to €309 and contract ARPU increased by 10% to €900.

Vodafone Italy responded to increased competition levels in the Italian market with continued investment in the Vodafone One loyalty scheme and retail stores, coupled with a strong focus on business and higher value customers. This contributed to the increase in ARPU and the reduction in churn.

Operating profit before goodwill amortisation and exceptional items grew significantly, partially as a result of a reduction in acquisition and retention costs, as a percentage of revenue, operational efficiencies and no accrual being made for a contribution tax levied by the local regulatory authority following a favourable European Court of Justice ruling on its legality. These factors were partially offset by higher interconnect costs, due to higher interconnect volume and increased international roaming traffic, and the commencement of depreciation on the 3G network and the related licence amortisation.

United Kingdom

	Years ended 31 March
	2004	2003	Change
	£m	£m	%
Turnover
Voice services	3,522	3,207	10
Non-voice services	674	541	25
Total service revenue	4,196	3,748	12
Equipment and other	586	307	91
	4,782	4,055	18
Operating profit(1)	1,098	1,120	(2	)

Notes:
(1)	before goodwill amortisation and exceptional items

Vodafone UK successfully maintained its leading market position in the 2004 financial year, based on revenue share, according to the regulator’s last published data for that year, in line with its strategic objectives, despite pricing pressures caused by intensifying competition and regulatory activity.

Performance  | 41

Operating and Financial Review and Prospects continued

Total UK turnover increased by 18% to £4,782 million for the 2004 financial year, driven by organic growth of 12% and the acquisition of a number of service providers, including Singlepoint which contributed growth of 6%. The organic growth resulted from the larger customer base and increased usage of services, partially offset by a regulatory reduction in termination rates and the inclusion of calls to other mobile operators within new bundled price plans. Non-voice service revenue, as a percentage of service revenue, improved over the year to 16.1% for the year ended 31 March 2004 as usage levels of SMS and other data offerings increased. The increased number of Vodafone live! active devices contributed towards the improved non-voice service usage. Equipment and other revenue increased by 91%, principally as a result of revenue from non-Vodafone customers acquired with the service providers and increased customer acquisition and upgrade activity.

Blended ARPU increased in the year, mainly due to growth in prepaid ARPU and the Singlepoint acquisition. Prepaid ARPU improved to £130 for the year ended 31 March 2004 from £125 for the year ended 31 March 2003. Contract ARPU, excluding the impact of the Singlepoint acquisition, increased by £14 to £531 for the year ended 31 March 2004.

Vodafone UK’s share of mobile service revenue in the last quarterly review in the 2004 financial year by OFCOM, the national UK regulator, for the quarter ended 30 September 2003, was 31.8%, representing a lead of 6.5 percentage points over the second placed competitor.

Registered customers increased by 6% to 14,095,000 and the proportion of contract customers and activity levels remained stable throughout the year ended 31 March 2004. The acquisition of the service providers, including Singlepoint, during the year increased the proportion of in-house managed contract customers from 57% to 93%, enabling closer management of the contract customer base.

On 24 July 2003, Vodafone UK reduced its termination charges by RPI minus 15% (on the weighted average charge for the previous year) to comply with its licence requirements. This reduction implemented the decision of the UK Competition Commission in January 2003.

UK operating profit before goodwill amortisation and exceptional items fell by £22 million in the year ended 31 March 2004 to £1,098 million. Contributing factors included: increased investment in the acquisition and retention of the customer base; increased interconnect costs due to changes in the call mix; lower incoming revenue due to the reduction in termination rates; increased depreciation as a result of a general increase in capital expenditure; and amortisation of the 3G licence, which was charged for the first time in this year. As the Singlepoint business had a lower margin, this diluted the margin in the second half of the year. These factors were partially offset by operating efficiencies, including reductions in network operating costs as a percentage of turnover.

Vodafone UK announced a restructuring programme in the second half of the 2004 financial year which resulted in an exceptional charge of £130 million relating to staff costs, property provisions and the write down of other assets. The objective of the restructuring was to consolidate recent business acquisitions and to reorganise the customer management organisation to meet the changing needs of Vodafone UK’s customers. In addition, the business reorganised its network and technology organisations and implemented a programme to consolidate switching centres in its network.

Other Europe, Middle East and Africa

	Years ended 31 March
	2004	2003	Change
	£m	£m	%
Turnover	7,627	6,219	23
Operating profit(1)	3,142	2,387	32

Notes:
(1)	before goodwill amortisation and exceptional items

Proportionate customers for the other markets in the Europe, Middle East and Africa region increased by 17% to 41,336,000 in the 2004 financial year, including the effect of stake increases.

Vodafone Spain’s turnover for the year ended 31 March 2004 increased by 13%, when measured in local currency, as a result of a 7% rise in the customer base and improved voice and data usage, partially offset by reduced prices. Turnover for the region also benefited from growth in the other mobile operating subsidiaries in the region, particularly in Greece and the Netherlands. In Greece, turnover increased by 17%, when measured in local currency, reflecting an increase in the customer base of 9% and increased voice and data usage, partially offset by price reductions. In the Netherlands, the increase in revenue was principally driven by an increased contract customer base and higher data service usage and revenue.

Vodafone Spain’s operating profit before goodwill amortisation improved due to the increased proportion of data revenue and reduced acquisition and retention costs as a percentage of turnover, partially offset by a higher proportion of depreciation and licence amortisation charges, as a result of the commencement of depreciation on the 3G network and related licence amortisation. The regional operating profit, before goodwill amortisation and exceptional items, also grew as a result of an increase in the profits of the Group’s associated undertaking, SFR. This business reported a strong financial performance, with revenue increasing as a result of an 8% increase in the customer base to 14,370,000, and higher data revenue. Blended ARPU was broadly unchanged from the previous year. The reported results also benefited from the full year impact of an effective stake increase in the mobile business of SFR from 31.9% to 43.9% in the second half of the previous financial year.

Americas

	Years ended 31 March						Local currency
	2004		2003		Change		change
	£m		£m		%		%
Turnover
Verizon Wireless	–		–		–		–
Other Americas	–		5		(100	)
	–		5		(100	)
Operating profit/(loss)(1)
Verizon Wireless	1,406		1,270		11		20
Other Americas	(13	)	(51	)	(75	)
	1,393		1,219		14

Notes:
(1)	before goodwill amortisation and exceptional items

United States

The Americas Region predominantly comprises the Group’s interests in Verizon Wireless, which is accounted for using equity accounting. Accordingly, the turnover from this operation is not included in the Group’s statutory profit and loss account.

In a highly competitive US market, Verizon Wireless continued to outperform its competitors and ranked first in customer net additions for the year ended 31 March 2004. The total customer base increased by 17% over the year to 38,909,000. At

42 |  Performance

31 March 2004, US market penetration and Verizon Wireless’ market share were approximately 56% and 24%, respectively.

Churn rates continued to improve and were among the lowest in the US wireless industry despite the introduction of local number portability in the largest 100 metropolitan service areas from 24 November 2003, which allows customers to keep their phone numbers when switching providers. The low churn rate was attributable to the quality of Verizon Wireless’ network and the success of retention programmes such as the Worry Free Guarantee, which includes the New Every Two plan.

In local currency, the Group’s share of Verizon Wireless’ operating profit before goodwill amortisation increased by 20%, reflecting an 18% increase in turnover, increased cost efficiencies being partially offset by increased acquisition and retention costs net of equipment revenue, as a percentage of service revenue resulting from higher gross additions and upgrade activities. Verizon Wireless’ turnover growth was driven by higher service revenue from the larger customer base and an increase in ARPU. Data products, such as picture messaging, positively contributed to an increase in data revenue of 172%, which represented 2.7% of service revenue for the 2004 financial year. The rise in ARPU was primarily due to a higher proportion of customers on higher access price plans.

Verizon Wireless continued to expand its product base, with the launch during the period of the first graphics based instant messaging application and a picture messaging service to complement its data products. Additionally, Verizon Wireless began to expand its BroadbandAccess service nationally.

On 23 May 2003, Verizon Wireless completed a transaction with Northcoast Communications L.L.C., to purchase 50 Personal Communications licences and related network assets for approximately $762 million in cash. The PCS licences cover large portions of the East Coast and Midwest, serving approximately 47 million people.

Other Americas

On 29 July 2003, the Group completed the disposal of its stake in the Mexican mobile operator Grupo Iusacell.

Asia Pacific

	Years ended 31 March						Local currency
	2004		2003		Change		change
	£m		£m		%		%
Turnover
Japan:
Voice services	4,790		4,776		–		2
Non-voice services	1,350		1,216		11		12
Total service revenue	6,140		5,992		2		4
Equipment and other	1,710		1,774		(4	)	(3	)
	7,850		7,766		1		2
Other Asia Pacific	1,052		833		26
Less: intra-segment
turnover	(6	)	(3	)	100
	8,896		8,596		3
Operating profit(1)
Japan	1,045		1,310		(20	)	(20	)
Other Asia Pacific	167		111		50
	1,212		1,421		(15	)

Notes:
(1)	before goodwill amortisation and exceptional items

Japan

The 2004 financial year was challenging for Vodafone Japan due to the strength of competitor offerings.

Turnover increased by 2% in local currency to £7,850 million for the year ended 31 March 2004. The customer base increased by 7% over that year, with the proportion of lower value prepaid customers increasing to 9% from 6%. ARPU reduced by 7%, as a result of higher value contract customers migrating to competitors and the effect of new price plans and the increased prepaid customer base.

Vodafone Japan’s market share, at 31 March 2004, was marginally lower, at 18.4%, than at 31 March 2003. Overall mobile penetration levels in Japan remained low compared with the other markets in which the Group operates, increasing over the year from 64% to 68% at 31 March 2004. 20% of Japanese mobile users were connected to 3G network services at 31 March 2004, compared with 9% at 31 March 2003. The lack of suitable 3G handsets available for the Vodafone Global Standard W-CDMA network, compared with the range available through other operators using different 3G technologies, amongst other factors, limited Vodafone Japan’s ability to compete effectively in the 3G market. Vodafone Japan held less than 1% of the customers in the 3G market at 31 March 2004. To counteract these competitive pressures, Vodafone Japan implemented measures in October 2003 including new price plans, additional investment in the upgrade of existing customers and improved loyalty schemes, and introduced a new range of 2.5G handsets.

Operating profit before goodwill amortisation and exceptional items fell as expected, particularly in the second half of the 2004 financial year, due to higher retention costs reflecting a high volume of upgrades, increased marketing spend, higher network operating costs, an increase in provisions for slow moving handsets and a higher depreciation charge due to launch of the 3G network in December 2002.

Other Asia Pacific

Proportionate customers for the Group’s other operations in the Asia Pacific region increased by 14% during the year ended 31 March 2004, including the Group’s share of China Mobile’s customers, which is accounted for as an investment.

The increase in turnover was driven primarily by Vodafone New Zealand, resulting from a larger customer base and higher equipment revenue. Vodafone Australia also experienced turnover growth despite intense competitor activity. The operating profit of both Vodafone New Zealand and Vodafone Australia improved, due largely to the cost savings from operational efficiencies.

Vodafone Fiji increased its customer base by 25% and its operating profit improved.

China Mobile, in which the Group has a 3.27% stake, increased its customer base by 21% to 150,256,000 in the year ended 31 March 2004. ARPU continued to fall with the increase in low usage customers. Dividends totalling £25 million were received from China Mobile during the year.

The Group disposed of its interest in its Indian associate, RPG Cellular Services Ltd, during the 2004 financial year.

In November 2003, a Partner Network Agreement was announced with M1 in Singapore, the first Vodafone partner in this region.

Performance  | 43

Operating and Financial Review and Prospects continued

Other operations
	Years ended 31 March
	2004		2003		Change
	£m		£m		%
Turnover
Germany	1,002		924		8
Other EMEA	–		–		–
Asia Pacific	1,126		2,616		(57	)
	2,128		3,540		(40	)
Operating profit/(loss)(1)
Germany	(58	)	(89	)	(35	)
Other EMEA	(1	)	(49	)	(98	)
Asia Pacific	79		149		(47	)
	20		11		82

Notes:
(1)	before goodwill amortisation and exceptional items

Germany

The Group’s other operations in Germany comprise interests in Arcor, a fixed line telecommunications businesses, and Vodafone Information Systems, an IT and data services business.

In local currency, Arcor’s turnover increased by 4% in the year ended 31 March 2004. Excluding the results of the Telematik business which was disposed of in June 2002, turnover increased by 16%, primarily due to customer and usage growth, partially offset by tariff decreases caused by the competitive market. The fixed line market leader continued to drive this intensive competition, although Arcor strengthened its position as the main competitor during the 2004 financial year, increasing its contract voice customers by 11%. The number of customers of Arcor’s ISDN service, Direct Access, increased by 98% to 389,000 at 31 March 2004. This revenue growth and further cost control measures resulted in a significantly improved operating loss and positive cash flow.

Other EMEA

In the year ended 31 March 2004, Cegetel had the second largest residential customer base in France. The Group increased its stake in Cegetel from 15% to 30% in the second half of the previous financial year. Following the reorganisation of the Cegetel-SFR group structure in December 2003, the Group’s effective interest in the Cegetel fixed line business, whose business was enlarged through the merger with Télécom Développement, became 28.5%.

Asia Pacific

The Group’s 66.7% controlled entity Vodafone Holdings K.K. (formerly Japan Telecom Holdings Co., Ltd.) completed the disposal of its 100% interest in Japan Telecom in November 2003. Receipts resulting from this transaction were ¥257.9 billion (£1.4 billion), comprising ¥178.9 billion (£1.0 billion) of cash, ¥32.5 billion (£0.2 billion) of transferable redeemable preferred equity and ¥46.5 billion (£0.2 billion) withholding tax. The Group ceased consolidating the results of Japan Telecom from 1 October 2003.

Summary of Key Performance Indicators (“KPIs”) for principal markets

	31 Mar 2005	31 Mar 2004	31 Mar 2003
Germany
Customers (’000s)(1)	27,223	25,012	22,940
Prepaid (%)	52	51	53
Activity level (%)(1)	91	93	92
Churn (%)(1)	18.3	18.7	21.2
Average monthly ARPU (€)(1)
– Prepaid	9.8	10.8	10.8
– Contract	39.9	41.2	43.3
– Blended	24.9	25.9	36.1
	31 Mar 2005	31 Mar 2004	31 Mar 2003
Italy
Customers (’000s)(1)	22,502	21,137	19,412
Prepaid (%)	92	92	92
Activity level (%)(1)	92	93	95
Churn (%)(1)	17.2	16.7	17.3
Average monthly ARPU (€)(1)
– Prepaid	25.4	25.8	24.8
– Contract	76.8	75.0	68.2
– Blended	29.9	30.1	28.9
	31 Mar 2005	31 Mar 2004	31 Mar 2003
United Kingdom
Customers (’000s)(1)	15,324	14,095	13,300
Prepaid (%)	61	60	59
Activity level (%)(1)	89	91	91
Churn (%)(1)	29.7	29.6	30.0
Average monthly ARPU (£)(1)
– Prepaid	10.3	10.8	10.4
– Contract	47.4	45.9	43.2
– Blended	25.5	25.8	23.8
	31 Mar 2005	31 Mar 2004	31 Mar 2003
Spain
Customers (’000s)(1)	11,472	9,705	9,096
Prepaid (%)	53	57	57
Activity level (%)(1)	93	96	96
Churn (%)(1)	21.9	23.6	26.8
Average monthly ARPU (€)(1)
– Prepaid	15.1	13.8	13.2
– Contract	57.4	54.4	52.6
– Blended	34.5	31.4	31.0
	31 Mar 2005	31 Mar 2004	31 Mar 2003
Japan
Customers (’000s)(1)	15,041	14,951	13,912
Prepaid (%)	11	9	6
Activity level (%)(1)	96	97	98
Churn (%)(1)	22.7	23.0	23.3
Average monthly ARPU (¥)
– Prepaid	2,548	N/A	N/A
– Contract	6,520	N/A	N/A
– Blended	6,148	6,724	7,263

Notes:
(1)	See page 28 for definitions.

44 |  Performance

Balance Sheet

Assets

Intangible fixed assets decreased from £93,622 million at 31 March 2004 to £83,464 million at 31 March 2005, as a result of £12,929 million of goodwill amortisation charges and £412 million of other amortisation charges and an impairment charge of £315 million to the profit and loss account in the 2005 financial year, partially offset by £1,651 million of exchange movements and £1,757 million of goodwill arising on acquisitions made in the 2005 financial year. See “Business Overview – History and Development of the Company – Acquisitions of businesses” and note 25 to the Consolidated Financial Statements.

Tangible fixed assets increased from £18,083 million at 31 March 2004 to £18,398 million at 31 March 2005 as a result of £5,066 million of additions during the year, offset by £4,528 million of depreciation charges in the 2005 financial year. Network infrastructure assets of £14,620 million (2004: £14,823 million) represented approximately 79% (2004: 82%) of the total tangible fixed asset base at 31 March 2005. Additions to network infrastructure in the year totalled £3,250 million. The capital expenditure on 3G network infrastructure is discussed in “Business Overview –Local operations – Licences and network infrastructure”.

The Group’s investments in associated undertakings reduced from £21,226 million at 31 March 2004 to £19,398 million at 31 March 2005, mainly as result of £1,771 million of goodwill amortisation charges and £214 million of exchange movements in the 2005 financial year.

Other fixed asset investments at 31 March 2005 totalled £852 million (2004: £1,049 million) and include the Group’s equity interest in China Mobile.

Current assets decreased to £11,794 million from £13,149 million, principally as a result of a reduction in cash and liquid investments, partially offset by an increase in tax assets.

Liabilities

The debt position of the Group is discussed in “Liquidity and Capital Resources”. Other liabilities, including provisions for liabilities and charges, increased by 10% to £19,761 million, mainly as a result of an increase in tax creditors and provisions, and an increase in the proposed dividend.

Equity shareholders’ funds

Total equity shareholders’ funds decreased from £111,924 million at 31 March 2004 to £99,317 million at 31 March 2005. The decrease comprises the loss for the year of £7,540 million (which includes goodwill amortisation of £14,700 million), equity dividends of £2,658 million, purchases of the Company’s own shares (held in treasury) of £3,997 million and £15 million of other movements, partially offset by net currency translation gains of £1,467 million and the issue of new share capital of £136 million.

Equity Dividends

The table below sets out the amounts of interim, final and total cash dividends paid or, in the case of the final dividend for the 2005 financial year, proposed in respect of each financial year indicated both in pence per ordinary share and translated, solely for convenience, into cents per ordinary share at the Noon Buying Rate on each of the respective payment dates for such interim and final dividends.

	Pence per ordinary share				Cents per ordinary share
Year ended 31 March	Interim	Final		Total	Interim	Final		Total
2001	0.6880	0.7140		1.4020	0.9969	1.0191		2.0160
2002	0.7224	0.7497		1.4721	1.0241	1.1422		2.1663
2003	0.7946	0.8983		1.6929	1.2939	1.4445		2.7384
2004	0.9535	1.0780		2.0315	1.7601	1.9899		3.7500
2005	1.91	2.16	(1)	4.07	3.60	4.08	(1)	7.68

Notes:
(1)	The final dividend for the year was proposed on 24 May 2005 and is payable on 5 August 2005 to holders of record as of 3 June 2005. This dividend has been translated at the Noon Buying Rate at 31 March 2005 for ADS holders, but will be payable in US dollars under the terms of the terms of the deposit agreement.

The Company has historically paid dividends semi-annually, with a regular interim dividend in respect of the first six months of the financial year payable in February and a final dividend payable in August. The Board of directors expect that the Company will continue to pay dividends semi-annually.

In considering the level of dividends, the Board of directors takes account of the outlook for earnings growth, operating cash flow generation, capital expenditure requirements, acquisitions and divestments, together with the amount of debt and share purchases. In November 2004, the directors declared an interim dividend of 1.91 pence per share, representing an approximate 100% increase over last year’s interim dividend, with the expectation that the final dividend would also be increased by 100%. Consistent with this, the directors have recommended a final dividend of 2.16 pence per share, representing an approximate 100% increase over last year’s final dividend, and bringing the total dividend per share to 4.07 pence, a doubling of last year’s total. Following this rebasing of the dividend, the Board of directors expects future increases in dividends per share to reflect underlying growth in earnings.

Cash dividends, if any, will be paid by the Company in respect of ordinary shares in pounds sterling or, to holders of ordinary shares with a registered address in a country which has adopted the euro as its national currency, in euro, unless shareholders wish to elect to continue to receive dividends in sterling, are participating in the Company’s Dividend Reinvestment Plan, or have mandated their dividend payment to be paid directly into a bank or building society account in the United Kingdom. In accordance with the Company’s Articles of Association, the sterling: euro exchange rate will be determined by the Company shortly before the payment date.

The Company will pay the ADS Depositary, The Bank of New York, its dividend in US dollars. The sterling: US dollar exchange rate for this purpose will be determined by the Company shortly before the payment date. Cash dividends to ADS holders will be paid by the ADS Depositary in US dollars.

US GAAP Reconciliation

The principal differences between US GAAP and UK GAAP, as they relate to the Consolidated Financial Statements, are the use of equity accounting under US GAAP for a subsidiary undertaking, Vodafone Italy, which is fully consolidated under UK GAAP, methods of accounting for acquisitions completed before 31 March 1998, the determination of the fair value of the share consideration as a component of the purchase price of acquisitions, the accounting for goodwill and intangible assets, the accounting for income taxes, the capitalisation of interest, the timing of recognition of connection revenue and expenses, share options expense and the treatment of dividends declared or proposed after the period end by the Board of directors.

Performance  | 45

Operating and Financial Review and Prospects continued

In the year ended 31 March 2005, revenue from continuing operations under US GAAP was £29,873 million compared with revenue from continuing operations under UK GAAP of £34,133 million for the same period. The difference relates to the non-consolidation of Vodafone Italy as a result of the existence of significant participating rights of a minority shareholder requiring the equity method of accounting to be adopted under US GAAP rather than the full consolidation of results under UK GAAP, offset by the release of connection revenue deferred prior to the adoption of EITF 00-21 on 1 October 2003, which is required to be recognised over the period a customer is expected to remain connected to the network under US GAAP.

Net loss under US GAAP for the year ended 31 March 2005 was £13,782 million, compared with a net loss under UK GAAP of £7,540 million for the same period. The higher net loss under US GAAP was mainly driven by changes in accounting policy and higher amortisation charges, partially offset by income taxes and equity in earnings of equity method investments.

The reconciliation of the differences between UK GAAP and US GAAP is provided in note 36 to the Consolidated Financial Statements.

On 29 September 2004, the Staff of the SEC announced new guidance on the interpretation of US GAAP in relation to accounting for intangible assets. Further details on the guidance and its impact on the Group are provided on page 132.

Liquidity and Capital Resources

Cash flows

The major sources of Group liquidity for the 2005 financial year have been cash generated from operations and dividends from associated undertakings. For the year ended 31 March 2004, sources of Group liquidity also included borrowings through long term issuance in the capital markets and asset disposals. The Group does not use off-balance sheet special purpose entities as a source of liquidity or for other financing purposes.

The Group’s key sources of liquidity for the foreseeable future are likely to be cash generated from operations and borrowings through long term and short term issuances in the capital markets, as well as committed bank facilities. Additionally, the Group has a put option in relation to its interest in Verizon Wireless which, if exercised, could provide a material cash inflow. Please see “Option agreements” at the end of this section.

The Group’s liquidity and working capital may be affected by a material decrease in cash flow due to factors such as increased competition, litigation, timing of tax payments and the resolution of outstanding tax issues, regulatory rulings, delays in development of new services and networks, inability to receive expected revenue from the introduction of new services, reduced dividends from associates and investments or dividend payments to minority shareholders. Please see “Risk Factors”, above. The Group is also party to a number of agreements that may result in a cash outflow in future periods. These agreements are discussed further in “Option agreements” at the end of this section.

Wherever possible, surplus funds in the Group (except in Albania and Egypt) are transferred to the centralised treasury department through repayment of borrowings, deposits and dividends. These are then on-lent or contributed as equity to fund Group operations, used to retire external debt or invested externally.

Increase in cash in the year

During the 2005 financial year, the Group increased its net cash inflow from operating activities by 3% to £12,713 million and generated £7,847 million of free cash flow and £1,405 million of net cash flow, as analysed in the following table.

Free cash flow decreased from the prior financial year principally due to one-off cash receipts in the prior year, including £572 million received from the closure of financial instruments and £198 million from the fixed line business in Japan prior to its disposal.

The Group holds its cash and liquid investments in accordance with the counterparty and settlement risk limits of the Board approved treasury policy. The main forms of liquid investments at 31 March 2005 were collateralised deposits, money market funds, bank deposits and euro commercial paper.

	Year ended		Year ended
	31 March		31 March
	2005		2004
	£m		£m
Net cash inflow from operating activities	12,713		12,317
Net capital expenditure on intangible and
tangible fixed assets	(4,879	)	(4,371	)
Purchase of intangible fixed assets	(59	)	(21	)
Purchase of tangible fixed assets	(4,890	)	(4,508	)
Disposal of tangible fixed assets	70		158
	7,834		7,946
Dividends from joint ventures and associated
undertakings	2,020		1,801
Taxation	(1,616	)	(1,182	)
Net cash outflow for returns on investments and
servicing of finance	(391	)	(44	)
Interest on group debt	(336	)	31
Dividends from investments	19		25
Dividends paid to minority interests	(74	)	(100	)
Free cash flow	7,847		8,521
Other net capital expenditure and financial investment	111		104
Net cash outflow from acquisitions and disposals	(2,017	)	(1,312	)
Equity dividends paid	(1,991	)	(1,258	)
Management of liquid resources	3,563		(4,286	)
Net cash outflow from financing	(6,108	)	(700	)
Increase in cash in the year	1,405		1,069

Capital expenditure and financial investment
The increase in net cash outflow for capital expenditure and financial investment from £4,267 million for the 2004 financial year to £4,768 million for the 2005 financial year was due primarily to the timing of cash payments for tangible fixed assets.

During the 2005 financial year, £59 million was spent on intangible assets, principally in respect of additional spectrum in Egypt and Italy. The Group’s expenditure on tangible fixed assets increased by £382 million to £4,890 million during the 2005 financial year, including approximately £1.6 billion spent on incremental 3G network infrastructure.

46 |  Performance

Dividends from associated undertakings and dividends to minority shareholders

Dividends from the Group’s associated undertakings are generally paid at the discretion of the Board of directors or shareholders of the individual operating companies and Vodafone has no rights to receive dividends, except where specified within certain of the companies’ shareholders’ agreements. Similarly, the Group does not have existing obligations under shareholders’ agreements to pay dividends to minority interest partners of Group subsidiaries, except as specified below.

Included in the dividends received from joint ventures and associated undertakings was an amount of £923 million received from Verizon Wireless. Until April 2005, Verizon Wireless’ distributions were determined by the terms of the partnership agreement distribution policy and comprised income distributions and tax distributions. From April 2005, tax distributions will continue and a new distribution policy is expected to be set in the future by the Board of Representatives of Verizon Wireless. Current projections forecast that tax distributions will not be sufficient to cover the US tax liabilities arising from the Group’s partnership interest in Verizon Wireless until 2015 and, in the absence of additional distributions above the level of tax distributions during this period, this will result in a net cash outflow for the Group. Under the terms of the partnership agreement, the Board has no obligation to provide for additional distributions above the level of the tax distributions. It is the expectation that Verizon Wireless will re-invest free cash flow in the business and reduce indebtedness for the foreseeable future.

During the year ended 31 March 2005, cash dividends totalling £616 million were received from SFR in accordance with the shareholder agreement.

Verizon Communications Inc. has an indirect 23.1% shareholding in Vodafone Italy and, under the shareholders’ agreement, can request dividends to be paid, provided that such dividends would not impair the financial condition or prospects of Vodafone Italy including, without limitation, its credit rating. No dividends were proposed or paid by Vodafone Italy during or since the year ended 31 March 2005.

Acquisitions and disposals

Net cash outflow from acquisitions and disposals of £2,017 million in the 2005 financial year arose primarily in respect of the business acquisitions of additional stakes in Vodafone Japan, partially offset by the part disposal of Vodafone Egypt to Telecom Egypt. The acquisitions are described in more detail under “Business Overview – History and Development of the Company” and “Business Overview – Mobile Telecommunications” above. In addition, a net cash inflow of £3 million arose from the purchase and sale of investments.

An analysis of the main transactions in the 2005 financial year, including the changes in the Group’s effective shareholding, is shown below:

	£m
Acquisitions:
Japan (69.7% to 97.7%)	2,380
Hungary (92.8% to 100%)	55
Other acquisitions including investments	45
Disposals:
Japan Telecom withholding tax recovered	(226	)
Japan Telecom preference shares	(152	)
Egypt (67.0% to 50.1%)	(65	)
Other disposals, including investments	(23	)
	2,014

Share purchase programme

When considering how increased returns to shareholders can be provided in the form of dividends and share purchases, the Board reviews the free cash flow, anticipated cash requirements, dividends, credit profile and gearing of the Group.

On 25 May 2004, the Board of directors allocated £3 billion to the share purchase programme for the year to May 2005. The Board subsequently increased the share purchase programme to £4 billion, completing by March 2005, subject to the maintenance of credit ratings. For the period from 27 May 2004 to 31 March 2005, 2,985 million shares were purchased on market on the London Stock Exchange for a total consideration of £4 billion, including stamp duty and broker commissions. The average share price paid, excluding transaction costs, was 133.30 pence, compared with the average volume weighted price over the same period of 133.62 pence.

Shares purchased are held in treasury in accordance with section 162 of the Companies Act 1985. At 31 March 2005, 3,785 million shares were held in treasury.

By placing irrevocable purchase instructions prior to the start of the period from 17 January 2005 up to and including 25 January 2005, the date the Group issued its Key Performance data for the quarter ended 31 December 2004, the Group purchased 193 million shares at a total consideration of £268 million, including stamp duty and broker commissions during the period. These purchases during this period are included within the £4 billion of share purchases referred to above.

In addition to ordinary market purchases and irrevocable purchase instructions, in the year ended 31 March 2005, put options over 130 million shares were sold for a premium of £3 million with exercise dates falling within the close period of 1 October 2004 up to and including 15 November 2004. As the Company’s share price was higher than the option exercise price on each exercise date, none of the put options was exercised and no additional shares were acquired by the Company.

At the AGM in July 2004, approval was obtained from the shareholders to purchase up to 6.6 billion ordinary shares of the Company. This approval will expire at the conclusion of the Company’s AGM on 26 July 2005. Up to 23 May 2005, 2,661 million shares had been purchased under this approval. The Board of directors has approved a share purchase target for the year to 31 March 2006 of £4.5 billion, including £913 million already spent. Achieving the target purchases will be subject to renewed shareholder approval on 26 July 2005 at the AGM. Shares will be purchased on market on the London Stock Exchange and the maximum share price payable for any share purchase will be no greater than 105% of the average of the middle market closing price of the Company’s share price on the London Stock Exchange for the five business days immediately preceding the day on which any shares are contracted to be purchased and otherwise in accordance with the rules of the Financial Services Authority. Purchases will be made only if accretive to earnings per share, excluding items not reflecting underlying business performance.

Prior to the start of the close period from 1 April 2005 to 23 May 2005, Vodafone placed irrevocable purchase instructions, which has resulted in the purchase of 406 million shares at a total consideration of £565 million, including stamp duty and broker commissions, in the close period. In addition, between 24 May 2005 and 7 June 2005 the Company repurchased 252 million shares at a total consideration of £348 million, including stamp duty and broker commissions.

Further details of shares purchased under the programme are shown in note 23 to the Consolidated Financial Statements.

Treasury shares

The Companies Act 1985 permits companies to purchase their own shares out of distributable reserves and to hold shares with a nominal value not to exceed 10% of the nominal value of their issued share capital in treasury. If shares in excess of this limit are purchased they must be cancelled. Whilst held in treasury, no voting rights or pre-emption rights accrue and no dividends are paid in respect of treasury shares. Treasury shares may be sold for cash, transferred (in certain circumstances) for the purposes of an employee share scheme, or cancelled. If treasury shares are sold, such sales are deemed to be a new issue of shares and will accordingly count towards the 5% of share capital which the Company is permitted to issue on a non pre-emptive basis in any one year as approved by its shareholders at the AGM. The proceeds of any sale of treasury shares up to the amount of the original purchase price, calculated

Performance  | 47

Operating and Financial Review and Prospects continued

on a weighted average price method, is attributed to distributable profits which would not occur for the sale of non-treasury shares. Any excess above the original purchase price must be transferred to the share premium account.

Vodafone Italy share purchase

On 19 April 2005, the Board of directors of Vodafone Italy approved a proposal to buy back issued and outstanding shares for approximately €7.9 billion (£5.4 billion). The proposal was approved by the shareholders of Vodafone Italy on 26 May 2005, and participation will be invited on a pro rata basis. In accordance with Dutch and Italian corporate law the buy back will take place in two tranches, the first in June 2005 and the second expected to be in October 2005. After the transaction is completed the Company and Verizon Communications Inc. will continue to hold approximately 77% and 23%, respectively, of Vodafone Italy indirectly through their wholly owned subsidiaries. It is anticipated that the buy back will be funded from currently available and forecast available cash of Vodafone Italy. At 31 March 2005, Vodafone Italy had net cash on deposit with Group companies of €7.2 billion (£4.9 billion).

Funding

The Group’s consolidated net debt position at 31 March 2005 reduced marginally to £8,339 million, from £8,488 million at 31 March 2004, principally as a result of the cash flow items above, share purchases, equity dividend payments and £143 million of foreign exchange movements. This represented approximately 9% of the Group’s market capitalisation at 31 March 2005 compared with 10% at 31 March 2004. Average net debt at month end accounting dates over the twelve month period ended 31 March 2005 was £8,350 million, and ranged between £7,472 million and £8,994 million during the year.

A further analysis of net debt, including a full maturity analysis, can be found in notes 18 and 19 to the Consolidated Financial Statements.

The Group remains committed to maintaining a solid credit profile, as currently demonstrated by its stable credit ratings of P-1/F1/A-1 short term and A2/A/A long term from Moody’s, Fitch Ratings and Standard & Poor’s, respectively. Credit ratings are not a recommendation to purchase, hold or sell securities, in as much as ratings do not comment on market price or suitability for a particular investor, and are subject to revision or withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently.

The Group’s credit ratings enable it to have access to a wide range of debt finance, including commercial paper, bonds and committed bank facilities.

Commercial paper programmes

The Group currently has US and euro commercial paper programmes of $15 billion and £5 billion, respectively, which are available to be used to meet short term liquidity requirements and which were undrawn at 31 March 2005 and 31 March 2004. The commercial paper facilities are supported by $10.4 billion (£5.5 billion) of committed bank facilities, comprised of a $5.5 billion Revolving Credit Facility that matures on

24 June 2009 and a $4.9 billion Revolving Credit Facility that matures on 26 June 2006. As at 31 March 2005, no amounts had been drawn under either facility.

Bonds

The Group has a €15 billion Medium Term Note programme and a $12 billion US shelf programme, both of which are used to meet medium to long term funding requirements. At 31 March 2005, amounts of €9.2 billion and $nil, respectively, were in issue from these programmes. No bonds were issued under either programme in the 2005 financial year.

On 29 September 2004, the Group filed a Shelf Registration Statement in Japan for a ¥600 billion shelf programme which became effective from 7 October 2004. No bonds have been issued under this programme.

At 31 March 2005, the Group had capital market debt in issue with a nominal value of £10,582 million.

Committed facilities

The following table summarises the committed bank facilities currently available to the Group.

Committed Bank Facilities	Amounts drawn
29 November 2001
¥225 billion term credit facility, maturing 15 January 2007, entered into by Vodafone Finance K.K. and guaranteed by the Company.	The facility was drawn down in full on 15 October 2002. The facility is available for general corporate purposes, although amounts drawn must be on-lent to the Company.
24 June 2004
$5.5 billion Revolving Credit Facility, maturing 24 June 2009.	No drawings have been made against this facility. The facility supports the Group’s commercial paper programmes and may be used for general corporate purposes including acquisitions.
24 June 2004
$4.9 billion Revolving Credit Facility, maturing 26 June 2006.	No drawings have been made against this facility. The facility supports the Group’s commercial paper programmes and may be used for general corporate purposes including acquisitions.

Under the terms and conditions of the $10.4 billion committed bank facilities, lenders have the right, but not the obligation, to cancel their commitments and have outstanding advances repaid no sooner than 30 days after notification of a change of control of the Company. The facility agreements provide for certain structural changes that do not affect the obligations of the Company to be specifically excluded from the definition of a change of control. This is in addition to the rights of lenders to cancel their commitment if the Company has committed an event of default.

Substantially the same terms and conditions apply in the case of Vodafone Finance K.K.’s ¥225 billion term credit facility, although the change of control provision is applicable to any guarantor of borrowings under the term credit facility. As of 31 March 2005, the Company was the sole guarantor.

In addition, Vodafone Japan has a fully drawn bilateral facility totalling ¥8 billion (£40 million) which expires in January 2007.

Furthermore, two of the Group’s subsidiary undertakings are funded by external facilities which are non-recourse to any member of the Group other than the borrower, due to the level of country risk involved. These facilities may only be used to fund their operations. Vodafone Egypt has a partly drawn (EGP550 million (£50 million)) syndicated bank facility of EGP1.2 billion (£110 million) that fully expires in September 2007, and Vodafone Albania has partly drawn (€60 million (£41 million)) syndicated bank facilities of €85 million (£58 million) that expire at various dates up to and including October 2012.

During the 2005 financial year, Vodafone Hungary fully repaid and cancelled its syndicated bank facility of €350 million.

In aggregate, the Group has committed facilities of approximately £6,814million, of which £5,572 million was undrawn at 31 March 2005.

48 |  Performance

The Group believes that it has sufficient funding for its expected working capital requirements. Further details regarding the maturity, currency and interest rates of the Group’s gross borrowings at 31 March 2005 are included in note 19 to the Consolidated Financial Statements.

Financial assets and liabilities

Details of the Group’s treasury management and policies are set out below in “Quantitative and Qualitative Disclosures about Market Risk”. Analyses of financial assets and liabilities, including the maturity profile of debt, currency and interest rate structure, are included in notes 18 and 19 to the Consolidated Financial Statements.

Contractual obligations

A summary of the Group’s principal contractual financial obligations is shown below. Further details on the items included can be found in the notes to the Consolidated Financial Statements.

	Payments due by period £m
Contractual obligations(1)	Total	<1 year	1-3 years	3-5 years	>5 years
Short term debt(2)	392	392	–	–	–
Long term debt(2)	11,613	–	3,620	4,019	3,974
Interest on debt(3)	4,432	444	901	705	2,382
Operating lease
commitments(4)	3,074	630	758	554	1,132
Capital commitments(5)	749	748	1	–	–
Purchase commitments(6)	1,242	1,152	87	1	2
Preference shares
(including dividends)	1,560	45	90	90	1,335
Share purchase
programme(7)	565	565	–	–	–
MobiFon and Oskar
acquisition agreements(8)	1,858	1,858	–	–	–
Total contractual cash
obligations(1)	25,485	5,834	5,457	5,369	8,825

Notes:
(1)	The above table of contractual obligations excludes commitments in respect of options over interests in Group businesses held by minority shareholders (see “Option agreements”) and obligations to pay dividends to minority shareholders (see “Dividends from associated undertakings and dividends to minority interests”). Disclosures required by Financial Accounting Standards Board (“FASB”) Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, are provided in note 27 to the Consolidated Financial Statements. The table also excludes obligations under post employment benefit schemes, details of which are provided in note 32 to the Consolidated Financial Statements.
(2)	See note 19 to the Consolidated Financial Statements.
(3)	Future interest payments on the Group’s gross debt reflects fixed and floating rate interest payments. Floating rate payments are calculated in accordance with market derived forward rates at 31 March 2005. Actual interest payments could vary from the amounts in the table.
(4)	See note 26 to the Consolidated Financial Statements.
(5)	Capital commitments shown in the table above are estimated to represent approximately 15% of the Group’s total capital expenditure in the 2005 financial year and are primarily related to network infrastructure.
(6)	Predominantly commitments for handsets.
(7)	The balance represents the irrevocable purchase instructions as described in “Share purchase programme” above.
(8)	As described in “Business Overview – History and Development of the Company”. In addition, the Group assumed approximately $0.9 billion (£0.5 billion) of net debt on completion of the acquisition.

Option agreements

Potential cash inflows

As part of the agreements entered into upon the formation of Verizon Wireless, the Company entered into an Investment Agreement with Verizon Communications, Inc. (“Verizon Communications”), formerly Bell Atlantic Corporation, and Verizon Wireless. Under this agreement, dated 3 April 2000, the Company has the right to require Verizon Communications or Verizon Wireless to acquire interests in the Verizon Wireless partnership from the Company with an aggregate market value of up to $20 billion during certain periods up to August 2007, dependent on the value of the Company’s 45% stake in Verizon Wireless. This represents a potential source of liquidity to the Group.

Exercise of the option could have occurred in either one or both of two phases. The Phase I option expired in August 2004 without being exercised. The Phase II Option may be exercised during the periods commencing 30 days before and ending 30 days after any one or more of 10 July 2005, 10 July 2006 and 10 July 2007. The Phase II Option also limits the aggregate amount paid to $20 billion and caps the payments under single exercises to $10 billion. Determination of the market value of the Company’s interests will be by mutual agreement of the parties to the transaction or, if no such agreement is reached within 30 days of the valuation date, by appraisal. If an initial public offering takes place and the common stock trades in a regular and active market, the market value of the Company’s interest will be determined by reference to the trading price of common stock.

On 1 July 2002, Vodafone awarded share options to all eligible employees in all countries in which the Group then operated, other than Japan and Sweden, under its 1999 Long Term Stock Incentive Plan. These share options may be exercised from 1 July 2005 until 30 June 2012 at a price of 90 pence per share (92.99 pence per share for participants in Italy). If all share options are exercised, Vodafone would issue approximately 480 million ordinary shares. Vodafone believes that a substantial number of share options will be exercised on 1 July 2005 and in the period immediately following.

Potential cash outflows

In respect of the Group’s interest in the Verizon Wireless partnership, an option granted to Price Communications, Inc. by Verizon Communications is exercisable at any time up to and including 15 August 2006. The option gives Price Communications, Inc. the right to exchange its preferred limited partnership interest in Verizon Wireless of the East LP for either equity of Verizon Wireless (if an initial public offering of such equity occurs), or common stock of Verizon Communications. The option exercise would result in an exchange for shares at a fixed value of $1.113 billion plus a preferred allocation of profits from Verizon Wireless of the East LP on a quarterly basis, but not to exceed 2.915% per annum. If the exercise occurs, Verizon Communications has the right, but not the obligation, to contribute the preferred interest to the Verizon Wireless partnership, diluting the Group’s interest. However, the Group also has the right to contribute further capital to the Verizon Wireless partnership in order to maintain its percentage partnership interest at the level just prior to the exercise of the option. Such amount would not exceed $1.0 billion.

On 27 November 2003, Vodafone Jersey Holdings Ltd was granted a call option over 20% of the issued ordinary share capital of MTC Vodafone (Bahrain) BSCC. The option is exercisable in two tranches. Tranche one is exercisable at par at any time on or after 28 December 2004 but before 28 December 2007. Tranche two is exercisable at par plus 20% at any time on or after 28 December 2007 but before 28 December 2009.

On 31 December 2003, as part of the restructuring described within “History and Development of the Company”, the Group’s associate investment, SFR, granted a put option to SNCF over its 35% shareholding in Cegetel. SNCF may exercise the put option, consisting of 4,982,353 shares, at any time during the period from 1 January 2007 to 31 March 2010 and SNCF has been granted a value floor for the option of an aggregate amount equal to the sum of €183 million less such amount of interest as has accrued at the euro overnight index average rate on the sum of €32 million between 31 December 2003 and the date on which the transfer of the SNCF shareholding to SFR occurs. Furthermore, the option exercise may be accelerated in certain circumstances and the announcement by SFR of a merger between Cegetel and neuf telecom expected to occur later in the 2006 financial year, would constitute such an acceleration event. SNCF also granted SFR a call option over the 35% stake, which may be exercised at any time between 1 April 2010 and 30 June 2013.

During the 2005 financial year, the Group sold 16.9% of Vodafone Egypt to Telecom Egypt, reducing the Group’s effective interest to 50.1%. It was also agreed that the Group and Telecom Egypt would each contribute a 25.5% interest in Vodafone Egypt

Performance  | 49

Operating and Financial Review and Prospects continued

shares to a newly formed 50:50 joint venture. This is expected to complete in the first half of the 2006 financial year. As part of the transaction, Telecom Egypt was granted a put option over its entire 25.5% interest in Vodafone Egypt, giving Telecom Egypt the right to put its shares back to the Group at fair market value. This right remains for as long as the Group owns in excess of 20% of Vodafone Egypt.

On 12 January 2005, the Group completed the acquisition of the remaining 7.2% shareholding in Vodafone Hungary from Antenna Hungaria RT (“Antenna”). Antenna’s contractual put option in respect of its interest in Vodafone Hungary lapsed as a result of the acquisition.

On 29 November 2004, an option granted to France Telecom that gave it the right, but not the obligation, to buy shares in Vodafone Greece, expired, unexercised.

Off-balance sheet arrangements

The Group does not use off-balance sheet arrangements as a source of liquidity, capital resources, market risk support, credit risk support or for other financing purposes or benefits. Please refer to notes 26 and 27 to the Consolidated Financial Statements for a discussion of the Group’s off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

The Group’s treasury function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk management. Treasury operations are conducted within a framework of policies and guidelines authorised and reviewed annually by the Company’s Board of directors, most recently on 18 January 2005. A Treasury Risk Committee, comprising of the Group’s Financial Director, Group General Counsel and Company Secretary, Group Treasurer, Group Financial Controller and Director of Financial Reporting, meets quarterly to review treasury activities and management information relating to treasury activities. In accordance with the Group treasury policy, a quorum for meetings is four members and either the Group Financial Director or Group General Counsel and Company Secretary must be present at each meeting. The Group accounting function, which does not report to the Group Treasurer, provides regular update reports of treasury activity to the Board of directors. The Group uses a number of derivative instruments that are transacted, for risk management purposes only, by specialist treasury personnel. The Group’s internal auditors review the internal control environment regularly. There has been no significant change during the financial year, or since the end of the year, to the types of financial risks faced by the Group or the Group’s approach to the management of those risks.

Funding and liquidity

The Group’s policy is to borrow centrally, using a mixture of long term and short term capital market issues and borrowing facilities, to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are on-lent or contributed as equity to certain subsidiaries. The Board of directors has approved three debt protection ratios, being: net interest to operating cash flow (plus dividends from associated undertakings); retained cash flow (operating cash flow plus dividends from associated undertakings less interest, tax, dividends to minorities and equity dividends) to net debt; and operating cash flow (plus dividends from associates of undertakings) to net debt.

These internal ratios establish levels of debt that the Group should not exceed other than for relatively short periods of time and are shared with the Group’s debt rating agencies, being Moody’s, Fitch Ratings and Standard & Poor’s.

Interest rate management

The Group’s main interest rate exposures are to euro and yen and, to a lesser extent, US dollar and sterling interest rates. Under the Group’s interest rate management

policy, interest rates on monetary assets and liabilities are maintained on a floating rate basis, unless the forecast interest charge for the next eighteen months is material in relation to forecast results, in which case interest rates are fixed. In addition, fixing is required to be undertaken for longer periods when interest rates are statistically low. The amount on which interest rates are fixed is managed within limits approved by the Board, using derivative financial instruments such as swaps, futures, options and forward rate agreements.

At the end of the year, 31% (2004: 20%) of the Group’s gross borrowings were fixed for a period of at least one year. Under UK GAAP, a one hundred basis point rise in market interest rates for all currencies in which the Group had borrowings at 31 March 2005 would adversely affect loss before taxation by approximately £39 million. Under IFRS, the same movement would positively affect profit before taxation by approximately £17 million, as mark to market valuations of interest rate and other derivatives would be included in the determination of profit before taxation. The interest rate management policy has remained unaffected by the acquisitions completed during the financial year. Note 19 to the Consolidated Financial Statements contains analysis of the Group’s currency and interest profile of financial liabilities.

Foreign exchange management

As Vodafone’s primary listing is on the London Stock Exchange, its share price is quoted in sterling. Since the sterling share price represents the value of its future multi-currency cashflows, principally in euro, yen, sterling and US dollars, the Group has a policy to hedge external foreign exchange risks on transactions denominated in other currencies above certain de minimis levels.

The Group also maintains the currency of debt and interest charges in proportion with its expected future principal multi-currency cash flows. As such, at 31 March 2005, 122% of net debt was denominated in currencies other than sterling (72% euro, 47% yen and 3% US dollar), whilst 20% of net debt had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via share purchases and dividends and 2% of net debt had been purchased forward in other currencies. This allows debt to be serviced in proportion to expected future cashflows and, therefore, provides a partial hedge against profit and loss account translation exposure, as interest costs will be denominated in foreign currencies. A relative strengthening in the value of sterling against certain currencies in which the Group maintains debt has resulted in a reduction in net debt of £143 million (2004: £144 million) from currency translation differences.

When the Group’s international net earnings for 2005 are retranslated using a 10% strengthening of sterling against all exchange rates, the 2005 financial year total Group operating loss would be reduced by £413 million (2004: £451 million), and would be increased by £505 million (2004: £564 million) using a 10% weakening of sterling.

Counterparty risk management

Cash deposits and other financial instrument transactions give rise to credit risks on the amounts due from counterparties. The Group regularly monitors these risks and the credit ratings of its counterparties and, by policy, limits the aggregate credit and settlement risk it may have with one counterparty. While these counterparties may expose the Group to credit losses in the event of non-performance, it considers the possibility of material loss to be acceptable because of these control procedures.

Trend Information and Outlook

Trend Information

The growth in the mobile telecommunications industry in terms of customers, turnover and cash flows has been substantial over the past decade. Vodafone believes that the mobile industry will continue to experience growth, although as the markets in which the Group operates mature, the rate of growth will depend on the demand for enhanced voice and data products and services and the amount of voice and data

50 |  Performance

traffic moving from fixed networks to mobile networks. The most significant current trends which are expected to impact the Group are:

Increasing penetration rates and competition between network operators for customers

Customer growth is, and the Group expects it to continue to be, a principal source of revenue growth. Gaining new customers depends on many factors, including network coverage and quality, customer satisfaction, product offerings and handset range but a key factor is often the pricing of handsets and tariffs. In general, as penetration rates rise in a market, competition intensifies as operators invest more in retaining their existing customers whilst offering incentives to potential new customers. These competitive pressures, along with new mobile users who generally spend less than existing users, exert a downward pressure on ARPU and result in increased acquisition and retention costs. The Group anticipates that this trend will continue though it will endeavour to offset the impact by usage stimulation campaigns, new product offerings and leveraging the Group’s scale and scope.

A number of national regulators are considering allocating additional spectrum or offering new licences for the provision of mobile telecommunications services. If the additional spectrum or new licences are acquired by new or existing competitors, the competitive pressures in the local market may increase.

Impact of new virtual competitors

New service providers in a number of markets in which the Group operates are increasing the competitive pressures in certain market segments with low cost offerings. Certain national regulators require, or have stated their intention to require, network operators to provide network access to such service providers.

Downward pressure on termination rates from regulatory action

In recent years, action by a number of national regulators has led to reductions in the income the Group receives for terminating calls from fixed or other mobile networks and, similarly, reductions in the cost charged by other operators for connecting a call on their fixed or mobile network. Vodafone expects such regulatory pressure to persist for the foreseeable future.

Development of and demand for non-voice services

Since the Group’s introduction of non-voice service offerings, turnover from these services has increased each year, although there can be no assurance that this will continue to be the case. With continued growth of messaging, more Vodafone live! customers, the launch of 3G services, including video calling and full track music downloads, the Vodafone Mobile Connect 3G/GPRS data card, and new business focused offerings, the Group expects continued growth in non-voice service revenue and for non-voice revenue to increase as a percentage of total service revenue over time.

Benefits of global scale and scope

As the world’s leading international mobile telecommunications company, the Group is able to benefit from its global scale and scope. The One Vodafone initiatives (see page 13) are targeted at maximising the future value of these benefits.

Impact of convergence and disruptive technologies

The emergence of new technologies, which enable core and radio access networks to be increasingly based on Internet protocols, is likely to provide the Group with opportunities to reduce costs and target the replacement of customers’ fixed line phone services. However, they will also provide opportunities for new competitors to enter the telecommunications services market. Vodafone believes it is well placed to take advantage of these opportunities, as demonstrated by the launch of the Vodafone at Home service in Germany.

Depreciation expense

Depreciation expense is driven largely by capital expenditure on building and upgrading the Group’s networks. Capital expenditure on network equipment has increased in recent years with the construction of 3G networks. As network equipment has an expected useful life of between three and ten years, the resulting depreciation expense is likely to increase in the medium term. The One Vodafone initiatives are expected to reduce capital expenditure, and hence depreciation, relative to turnover in the longer term.

Seasonality

The Group’s financial results and cash flows have not, historically, been subject to significant seasonal trends between the first and second half of the financial year, although there are a number of offsetting trends.

Traditionally, the Christmas period sees a higher volume of customer connections, contributing to higher equipment and connection revenue in the second half of the financial year. Ongoing airtime revenue also demonstrate signs of seasonality, with revenue generally lower during February, which is a shorter than average month, and revenue from roaming charges higher during the summer months as a result of increased travel by customers.

There is no assurance that these trends will continue in the future. For additional considerations related to these trends, please see “Risk Factors and Legal Proceedings – Risk Factors” on pages 25 and 26.

Outlook

For the year ending 31 March 2006⁽¹⁾

These expectations for the 2006 financial year have been prepared on the basis of IFRS and do not include the impact of the acquisition of interests in MobiFon in Romania and Oskar in the Czech Republic. Details of the Group’s principal differences between UK GAAP and IFRS are provided in “Information on International Financial Reporting Standards”.

The Group expects growth in Group turnover in the 2006 financial year compared with the 2005 financial year. Capitalised fixed asset additions⁽²⁾ are anticipated to be similar to the levels for the 2005 financial year at around £5 billion, as the Group continues the roll out of its 3G networks.

Free cash flow is expected to be in the £6.5 billion to £7.0 billion range. This is expected to be lower than that to be reported under IFRS for the 2005 financial year as the benefit of higher operating cash flow is more than offset by:

• the expectation that dividends received from Verizon Wireless will be approximately £0.7 billion lower; and

• higher expenditure on fixed assets and tax payments.

Share purchases are currently targeted to be approximately £4.5 billion in the 2006 financial year. Vodafone Italy shareholders approved the re-purchase of €7.9 billion of shares in that company at a meeting on 26 May 2005.

The Group is not currently aware of any developments to IFRS and related interpretations that would result in the reconciling items between UK GAAP and IFRS to be reported for the years ending 31 March 2005 and 31 March 2006 being significantly different to those previously reported for the six months ended 30 September 2004.

Other

The section entitled “Business Overview – Global Services – One Vodafone” on page 13 provides additional outlook statements in relation to the expected future benefits of One Vodafone initiatives on cash flow, capital expenditure and operating expenditure.

(1)	Comparisons to the 2005 financial year are prepared on the basis of IFRS, and where appropriate using constant exchange rates and after adjusting for business acquisitions and disposals and items not reflecting underlying business performance.
(2)	“Capitalised fixed asset additions” represents the aggregate of capitalised property, plant and equipment additions and capitalised software costs.

Performance  | 51

Non-GAAP Information

Cash flow measures

In presenting and discussing the Group’s reported results, free cash flow and operating free cash flow are calculated and presented on the basis of methodologies other than in accordance with UK GAAP. The Group believes that it is both useful and necessary to communicate free cash flow to investors and other interested parties, for the following reasons:

• free cash flow allows the Company and external parties to evaluate the Group’s liquidity and the cash generated by the Group’s operations. Free cash flow does not include items determined independently of the ongoing business, such as the level of dividends, and items which are deemed discretionary, such as cash flows relating to acquisitions and disposals or financing activities. In addition, it does not necessarily reflect the amounts which the Group has an obligation to incur. However, it does reflect the cash available for such discretionary activities, to strengthen the balance sheet or to provide returns to shareholders in the form of dividends or share purchases;

• free cash flow facilitates comparability of results with other companies, although the Group’s measure of free cash flow may not be directly comparable to similarly titled measures used by other companies;

• it is used by management for planning, reporting and incentive purposes; and

• it is useful in connection with discussion with the investment analyst community and the debt rating agencies.

The Group believes that the presentation of operating free cash flow is useful and necessary for investors and other interested parties as it provides the quantitative basis for the cash flow targets of the One Vodafone initiatives outlined on page 13. This measure may not be directly comparable to similarly titled measures used by other companies.

A reconciliation of net cash inflow from operating activities, the closest equivalent GAAP measure, to free cash flow and operating free cash flow, is shown below:

	Years ended 31 March
	2005		2004		2003		2002		2001
	£m		£m		£m		£m		£m
Net cash inflow from operating activities	12,713		12,317		11,142		8,102		4,587
Purchase of intangible fixed assets	(59	)	(21	)	(99	)	(325	)	(13,163	)
Purchase of tangible fixed assets	(4,890	)	(4,508	)	(5,289	)	(4,145	)	(3,698	)
Disposal of tangible fixed assets	70		158		109		75		275
Operating free cash flow	7,834		7,946		5,863		3,707		(11,999	)
Dividends received from joint ventures and associated undertakings	2,020		1,801		742		139		353
Taxation	(1,616	)	(1,182	)	(883	)	(545	)	(1,585	)
Net cash outflow for returns on investments and servicing of finance	(391	)	(44	)	(551	)	(936	)	(47	)
Free cash flow	7,847		8,521		5,171		2,365		(13,278	)

Organic growth

The Group believes that “organic growth”, which is not intended to be a substitute, or superior to, reported growth, provides useful and necessary information to investors and other interested parties for the following reasons:

• it provides additional information on underlying growth of the business without the effect of factors unrelated to the operating performance of the business;

• it is used by the Group for internal performance analysis; and

• it facilities comparability of underlying growth with other companies, although the term “organic” is not a defined term under UK or US GAAP, and may not, therefore, be comparable with similarly titled measures reported by other companies.

Reconciliation of organic growth to reported growth is shown below:

		Organic	Impact of foreign		Impact of acquisitions		Reported
		growth	exchange		and disposals		growth
		%	%		%		%
Turnover
Mobile telecommunications	Voice revenue	4	(2	)	1		3
	Non-voice revenue	11	(2	)	1		10
	Total service revenue	5	(2	)	1		4
	Acquisition and retention revenue	7	(3	)	1		5
	Total	5	(2	)	1		4
Total		6	(2	)	(2	)	2

52 |  Performance

				Impact of		Reported growth	Impact of goodwill		Reported growth
	Organic	Impact of		acquisitions		in non-GAAP	amortisation and		in equivalent
	growth	foreign exchange		and disposals		measure	exceptional items		GAAP measure(2)
	%	%		%		%	%		%
Total Group operating loss
Mobile telecommunications operating profit(1)	4	(3	)	–		1	(4	)	(3	)
Total Group operating profit(1)	5	(3	)	(1	)	1	(4	)	(3	)

Notes
(1)	Before goodwill amortisation and exceptional items
(2)	Closest equivalent GAAP measure is Total Group operating loss

Presentation of measures before goodwill amortisation and exceptional items

The Group presents operating profit before goodwill amortisation and exceptional operating items for the Group and the Group’s reported business segments, being mobile telecommunications and other operations. The Group believes that it is both useful and necessary to report these measures for the following reasons:

• these measures are used by the Group for internal performance analysis;

• the presentation by the Group’s reported business segments of these measures facilitates comparability with other companies, although the Group’s measures may not be comparable with similarly titled profit measurements reported by other companies; and

• it is useful in connection with discussion with the investment analyst community and debt rating agencies.

Reconciliation of these measures to the closest equivalent GAAP measure, Total Group operating loss, is provided in note 3 to the Consolidated Financial Statements.

Presentation of other revenue in discussion of trading results

The discussion of the trading results of the Group and principal markets on pages 33 to 44 presents the cost of sales related to acquisition and retention costs net of revenue attributable to these activities. The Group believes that this basis of presentation provides useful information for investors for the following reasons:

• it provides trends in net subsidies with respect to the acquisition and retention of customers; and

• it facilitates comparability of results with other companies operating in the mobile telecommunications business. This performance indicator is commonly used in the mobile telecommunications industry and by Vodafone management to compare net subsidies provided to acquire and retain customers to prior periods and internal forecasts. “Net other revenue”, “Net acquisition costs” and “Net retention costs” as used in the trading results are defined on page 29.

Reconciliation of “Net other revenue” to the closest equivalent GAAP measure, turnover, and “Net acquisition costs” and “Net retention costs” to their closest equivalent GAAP measure, gross acquisition and retention costs, are shown below:

	Mobile
	telecommunications	Germany	Italy	UK	Spain	Japan
	£m	£m	£m	£m	£m	£m
Year ended 31 March 2005:
Net other revenue	557	122	19	177	2	21
Acquisition and retention revenue	3,305	242	218	390	296	1,765
Other revenue	3,862	364	237	567	298	1,786
Total service revenue	29,322	5,320	5,328	4,498	2,963	5,610
Turnover	33,184	5,684	5,565	5,065	3,261	7,396
Year ended 31 March 2004:
Net other revenue	512	155	13	146	3	20
Acquisition and retention revenue	3,154	232	250	440	210	1,690
Other revenue	3,666	387	263	586	213	1,710
Total service revenue	28,249	5,149	5,049	4,196	2,473	6,140
Turnover	31,915	5,536	5,312	4,782	2,686	7,850

Performance  | 53

Non-GAAP Information continued

	Mobile
	telecommunications	Germany	Italy	UK	Spain	Japan
	£m	£m	£m	£m	£m	£m
Year ended 31 March 2005:
Net acquisition costs	2,051	348	93	388	246	641
Net retention costs	1,914	330	97	391	172	716
Acquisition and retention revenue	3,305	242	218	390	296	1,765
Gross acquisition and retention costs	7,270	920	408	1,169	714	3,122
Year ended 31 March 2004:
Net acquisition costs	1,897	367	76	333	146	677
Net retention costs	1,638	321	64	321	137	607
Acquisition and retention revenue	3,154	232	250	440	210	1,690
Gross acquisition and retention costs	6,689	920	390	1,094	493	2,974

Other

Certain of the statements within the section titled “Chief Executive’s Review” on pages 6 to 9 and the section titled “One Vodafone”, on page 13, contain forward-looking non-GAAP financial information for which at this time there is no comparable GAAP measure and which at this time cannot be quantitatively reconciled to comparable GAAP financial information.

Certain of the statements within the section titled “Trend Information and Outlook” on pages 50 and 51, contain forward-looking non-GAAP financial information which at this time cannot be quantitatively reconciled to comparable GAAP financial information.

54 |  Performance

Board of Directors and Group Management

Directors and Senior Management

The business of the Company is managed by its Board of directors. Biographical details of the directors and senior management are as follows:

Directors

Chairman

Lord MacLaurin of Knebworth, DL, aged 68, joined the Board in January 1997 and was made Chairman in July 1998. He is Chairman of the Nominations and Governance Committee. Lord MacLaurin was Chairman of Tesco PLC from 1985 to 1997 and has been a director of Enterprise Oil Plc, Guinness Plc, National Westminster Bank Plc and Whitbread PLC. He is also a non-executive director of the investment bank, The Evolution Group Plc.

Deputy Chairman

Paul Hazen, aged 63, has been a member of the Board of directors since June 1999 and became Deputy Chairman and the Board’s nominated senior independent director in May 2000. He is Chairman of the Audit Committee and a member of the Nominations and Governance Committee. In 2001, he retired as Chairman and Chief Executive Officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo Bank, NA. Paul Hazen is Chairman of Accel-KKR and KKR Financial Corp. and is also a director of Safeway, Inc., Willis Group Holdings Limited and Xstrata AG.

Executive directors

Arun Sarin, Chief Executive, aged 50, became a member of the Board in June 1999. He was appointed Chief Executive in July 2003 and he is a member of the Nominations and Governance Committee. Arun Sarin joined Pacific Telesis Group in San Francisco in 1984 and has served in many executive positions in his 20 year career in telecommunications. He was a director of AirTouch from July 1995 and was President and Chief Operating Officer from February 1997 to June 1999. He was Chief Executive Officer for the Vodafone United States and Asia Pacific region until 15 April 2000, when he became a non-executive director. He has served as a director of The Gap, Inc., The Charles Schwab Corporation and Cisco Systems, Inc. and has recently been appointed as a non-executive director of the Court of the Bank of England.

Sir Julian Horn-Smith, Deputy Chief Executive, aged 56, has been a member of the Board of directors since June 1996. Previously the Group Chief Operating Officer, he was appointed Deputy Chief Executive on 1 January 2005. He is responsible for Business Development, which includes delivering Vodafone’s product and services portfolio to Vodafone’s affiliates and Partner Networks and expanding and consolidating Vodafone’s footprint. He is a director of China Mobile (Hong Kong) Limited and several of the Group’s overseas operating companies, including Chairman of the Supervisory Boards of Vodafone Deutschland GmbH and Vodafone D2 GmbH. Sir Julian is also a non-executive director of Lloyds TSB Group plc and Smiths Group plc.

Peter Bamford, Chief Marketing Officer, aged 51, joined the Board in April 1998 and was appointed to his present position in 2003. He is responsible for the full range of marketing and commercial activities including brand, global product development and content management, accountability for serving Vodafone’s global corporate customers and management and procurement of the global handset portfolio. Previously, he was Chief Executive, Northern Europe, Middle East & Africa Region and Managing Director of Vodafone UK. Before joining Vodafone in 1997, Peter Bamford held senior positions with Kingfisher plc and Tesco PLC and was a director of WH Smith PLC.

Thomas Geitner, Chief Technology Officer, aged 50, was appointed to the Board in May 2000 and is responsible for Group Technology. Prior to joining the Group, he was a member of the Management Board of RWE AG. Thomas Geitner is a director of several of the Group’s overseas subsidiaries including Chairman of the Supervisory

Board of Arcor AG & Co.KG, a member of the Supervisory Board of Vodafone D2 GmbH and a member of the Management Boards of Vodafone Holding GmbH and Vodafone Deutschland GmbH. He is also a member of the Supervisory Board of Singulus Technologies AG.

Ken Hydon, Financial Director, aged 60, has been a member of the Board since 1985. He is a Fellow of the Chartered Institute of Management Accountants, the Association of Chartered Certified Accountants and the Association of Corporate Treasurers. He is a director of several subsidiaries of the Company and is a member of the Board of Representatives of the Verizon Wireless partnership in the United States. Ken Hydon is also a non-executive director of Reckitt Benckiser plc and Tesco PLC. He will retire from the Board on conclusion of the AGM on 26 July 2005.

Non-executive directors

Sir John Bond, aged 63, was appointed to the Board on 1 January 2005 and became a member of the Remuneration Committee from 1 April 2005. He is the Group Chairman of HSBC Holdings plc and a non-executive director of Ford Motor Company and The Hong Kong and Shanghai Banking Corporation Limited. He joined HSBC in 1961. Sir John’s previous roles include Chairman of HSBC Bank plc and the Institute of International Finance (Washington) and he has been a non-executive director of the London Stock Exchange, Orange plc, British Steel plc and the Court of the Bank of England.

Dr. Michael Boskin, aged 59, became a member of the Board of directors in June 1999 on completion of the merger with AirTouch Communications Inc. and he is a member of the Remuneration Committee and the Audit Committee. He has been a Professor of Economics at Stanford University since 1971 and was Chairman of the President’s Council of Economic Advisers from February 1989 until January 1993. Dr Boskin is President and CEO of Boskin & Co., an economic consulting company, and is also a director of Exxon Mobil Corporation, Shinsei Bank Limited and Oracle Corporation.

Lord Broers, aged 66, joined the Board in January 1998 and is a member of the Audit Committee and the Nominations and Governance Committee. He is President of the Royal Academy of Engineering and a former Vice-Chancellor of Cambridge University. He spent many years with IBM, in senior roles within the research and development function, and is a Fellow of the Royal Society, the Institute of Electrical Engineers and the Institute of Physics. Lord Broers is also a Foreign Associate of the US National Academy of Engineering, a trustee of the British Museum and Chairman of the House of Lords Science and Technology Select Committee. He chairs the Vodafone Group Foundation and the Company’s UK pension trustee company.

John Buchanan, aged 61, has been a member of the Board of directors since April 2003. He is a member of the Audit Committee and, solely for the purposes of relevant legislation, is the Board’s appointed financial expert on that Committee. He retired from the Board of BP p.l.c. in 2002 after six years as Group Chief Financial Officer and executive director following a wide-ranging career with the company. He was a member of the United Kingdom Accounting Standards Board from 1997 to 2001. He is the Deputy Chairman of Smith & Nephew plc and a non-executive director of AstraZeneca PLC and BHP Billiton.

Penny Hughes, aged 45, has been a member of the Board since September 1998 and is the Chairman of the Remuneration Committee. She has particular expertise in marketing and has developed experience in many human resource areas, including leadership development, motivation and retention. She is President of the Advertising Association, a member of the advisory committee of Bridgepoint Capital Limited and a non-executive director of Reuters Group PLC, Scandinaviska Enskilda Banken AB and

Governance  | 55

Board of Directors and Group Management continued

The Gap, Inc. Penny Hughes was President, Coca-Cola Great Britain and Ireland, and has been a non-executive director of Next Plc, Trinity Mirror Plc and The Body Shop Plc.

Sir David Scholey CBE, aged 69, was appointed to the Board in March 1998. He is a member of the Nominations and Governance Committee and the Audit Committee. He is Chairman of Close Brothers Group plc and the Chubb Corporation, USA and is an adviser to UBS AG, Mitsubishi Corporation and IBCA-Fitch and Chairman of the Trustees of the National Portrait Gallery. Sir David was formerly a non-executive director of the Court of the Bank of England and a Governor of the British Broadcasting Corporation. He will retire from the Board after the AGM on 26 July 2005.

Professor Jürgen Schrempp, aged 60, has been a member of the Board of directors since May 2000 and is a member of the Nominations and Governance Committee and Remuneration Committee. He has been Chairman of the Board of Management of DaimlerChrysler AG since 1998. From 1995 until 1998 he was Chairman of the Board of Management of Daimler-Benz AG. He was one of the principal architects of the successful merger of Daimler-Benz with the Chrysler Corporation – a move that created DaimlerChrysler. He was a member of the Supervisory Board of Mannesmann AG until May 2000. Professor Schrempp is a member of the Board of directors of Compagnie Financière Richemont SA and Sasol Limited. Additional engagements include the Advisory Board of Deutsche Bank AG, the European Advisory Board of Harvard Business School and the German Council of INSEAD.

Luc Vandevelde, aged 54, joined the Board in September 2003 and is a member of the Remuneration Committee. He became Chairman of the Supervisory Board of Carrefour SA in February 2005. He is the Founder and Managing Director of Change Capital Partners LLP, a private equity fund. Luc Vandevelde was formerly Chairman of Marks & Spencer Group Plc and Chief Executive Officer of Promodes, and he has held senior European and international roles with Kraft General Foods.

Senior Management

Members of the Executive Committee who are not also executive directors are regarded as senior managers of the Company. Chaired by Arun Sarin, this committee focuses on the Group’s strategy, financial structure and planning, succession planning, organisational development and Group-wide policies. The Executive Committee comprises the executive directors, details of whom are shown above, and the senior managers listed below:

Brian Clark, Group Human Resources Director, aged 56, was appointed to this position in 2005. He joined Vodafone in 1997 and, before his current position, was Chief Executive, Asia Pacific Region. Prior to joining Vodafone, he was Managing Director and Chief Executive Officer of Telkom SA Limited, South Africa.

Paul Donovan, Chief Executive, Other Vodafone Subsidiaries, aged 46, was appointed to this position in January 2005. He joined Vodafone in 1999 as Managing Director –Commercial, and was appointed Chief Executive of Vodafone Ireland in 2001. He has over fifteen years experience in the telecommunications and IT industries and has held senior roles at BT, One2One and Optus Communications and, prior to that, marketing roles at the Mars Group, Coca Cola and Schweppes Beverages.

Pietro Guindani, Chief Executive Italy, aged 47, was appointed to this position in July 2004. He has been a member of Vodafone Italy’s board of directors since 2002 and held the post of Chief Financial Officer for the Vodafone Group’s Southern Europe and Middle East Region from 2001. He previously held a number of senior financial appointments, including Chief Financial Officer of Omnitel (now Vodafone Italy) since its start-up in 1995, International Finance Director with the Olivetti Group and Relationship Banker with Citibank N.A.

Alan Harper, Group Strategy and Business Integration Director, aged 48, joined Vodafone in 1995 as Group Commercial Director and he subsequently became Managing Director of Vodafone UK. He was appointed to his current position in July 2000. Prior to joining the Group he held the post of Business Strategy Director with Mercury One2One and senior roles with Unitel and STC Telecoms. He is also a member of the Vodafone D2 GmbH Supervisory Board and Chairman of the Vodafone UK Foundation.

Simon Lewis, Group Corporate Affairs Director, aged 46, joined Vodafone in November 2004. He was previously Group Director of Communications and Public Policy for Centrica Plc, Director of Corporate Affairs at NatWest Group and the Head of Public Relations at SG Warburg plc. He was President of the Institute of Public Relations in 1997 and is a Visiting Professor at the Cardiff School of Journalism. In 1998, he was seconded to Buckingham Palace for two years as the first Communications Secretary to The Queen. He is also a trustee of the Vodafone Group Foundation.

Tim Miles, Chief Executive UK, aged 47, was appointed to this position in April 2005. He joined Vodafone in August 2001 as Director of Business Markets for Vodafone New Zealand and became Managing Director of Vodafone New Zealand in January 2002. He has over twenty years experience in the IT and Telecommunications industry. Prior to joining Vodafone, he was Vice President for Global Industries, Unisys Corporation, USA and before that, held executive positions with Data General and IBM.

Bill Morrow, President Vodafone K.K. (Japan), aged 45, was appointed to this position in April 2005 after ten years with the Vodafone Group in various positions, including Chief Executive of Vodafone UK. He has twenty-five years of experience in the telecommunications industry, holding senior leadership roles in the USA, Asia and Europe, including management positions at Pacific Bell, director of AirTouch and Chief Technical Officer and then Executive Vice President and Chief Operating Officer at Proximus (Belgium).

Stephen Scott, Group General Counsel and Company Secretary, aged 51, was appointed to this position in the Group in 1991, prior to which he was employed in the Racal Group legal department, having moved into industry in 1980 from private law practice in London. He is a director of the Company’s UK pension trustee company and is a director and trustee of the Solicitors Pro Bono Group.

Shiro Tsuda, Executive Chairman and Chairman of the board of Vodafone K.K. (Japan), aged 59, was appointed to this position in April 2005, having joined Vodafone in 2004. He joined Nippon Telephone and Telegraph Public Corporation (now NTT) in 1970, helping to establish the mobile phone project that later became NTT DoCoMo. In 1996, he became a board member of NTT DoCoMo.

Jürgen von Kuczkowski, Chief Executive of Vodafone D2 GmbH (Germany), aged 64, was appointed to this position in June 1994. He joined Mannesmann Mobilfunk GmbH (now Vodafone D2 GmbH) in October 1990, initially as Director of Sales and Distribution. He was previously the Chief Executive, Central Europe Region and Chief Executive, Northern Europe Region.

Phil Williams, aged 54, is a director of several Group companies and is the senior Vodafone nominated director on the Board of Vodacom Group Pty Limited, the Group’s South African associated company. He was Group Human Resources Director from 1989 to 2005, having previously been Personnel Director of Costain plc. He is a trustee of the Vodafone Group Foundation and a director of the UK pension trustee companies. He will retire in July 2005.

56 |  Governance

Financial Director Designate

Andy Halford, Financial Director Designate, aged 46, will become the Financial Director of the Company on conclusion of the AGM on 26 July 2005. He joined Vodafone in 1999 as Financial Director for Vodafone Limited, the UK operating company, and in 2001, he became Financial Director for Vodafone’s Northern Europe, Middle East and Africa Region. In 2002, he was appointed Chief Financial Officer of Verizon Wireless in the US. Prior to joining Vodafone he was Group Finance Director at East Midlands Electricity Plc.

Integration and Operations Committee

On 1 January 2005, a new Integration and Operations Committee came into effect. Chaired by Arun Sarin, the Committee is responsible for setting operational plans, budgets and forecasts, product and service development, customer segmentation, managing delivery of multi-market propositions and managing shared resources. The Committee comprises the members of the Executive Committee plus:

Fritz Joussen, Chief Operating Officer Germany, aged 42, was appointed to this position in November 2003. He started his career at Tektronix in the US and went on to join Mannesmann in 1988 and Mannesmann Mobilfunk GmbH (now Vodafone D2 GmbH) in 1990. In 1997, he was appointed Vice President of Marketing and Product Management as a Management Board member of Mannesmann Mobilfunk GmbH. From December 2000 until November 2003, he was Vodafone’s Director of Global Product Management. He is a member of the Management Board of Vodafone D2 GmbH.

Governance  | 57

Directors’ Report

Review of the Group’s Business

The Group is involved principally in the provision of mobile telecommunications services. A review of the development of the business of the Company and its subsidiaries and associated undertakings is contained elsewhere in this Annual Report. Details of the Company’s principal subsidiary undertakings, associated undertakings and investments can be found in note 34 to the Consolidated Financial Statements.

Future developments

The Group is currently involved in the expansion and development of its mobile telecommunications and related businesses as described elsewhere in this Annual Report.

Corporate governance

The directors are committed to business integrity and professionalism. As an essential part of this commitment, the Board of directors supports high standards of corporate governance and its statement on corporate governance is set out on pages 60 to 63 of this Annual Report. The “Board’s Report to Shareholders on Directors’ Remuneration” on pages 65 to 74 of this Annual Report will be proposed for approval at the Company’s AGM to be held on 26 July 2005.

Share capital

A statement of changes in the share capital of the Company is set out in note 22 to the Consolidated Financial Statements.

Purchase by the Company of its own shares

At the AGM of the Company held on 27 July 2004, shareholders gave the Company permission, until the conclusion of the AGM to be held on 26 July 2005, to purchase up to 6,600,000,000 ordinary shares of the Company. A resolution for permission for the Company to renew its authority to purchase its own shares will be proposed at the AGM of the Company to be held on 26 July 2005.

During the period from 1 April 2004 to 31 March 2005, the Company purchased 2,985 million ordinary shares at a weighted average price, excluding transaction costs, of 133.30 pence.

The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (“the Regulations”) allow companies to hold shares acquired by way of market purchase in treasury, rather than having to cancel them. The directors may use the authority to purchase shares and hold them in treasury (and subsequently sell or transfer them out of treasury as permitted in accordance with the Regulations) rather than cancel them, subject to institutional guidelines applicable at the time. The shares purchased by the Company prior to 31 March 2005 are being held in treasury.

No dividends have been paid on shares whilst held in treasury and no voting rights attach to the treasury shares.

Results and dividends

The consolidated profit and loss account is set out on page 78 of this Annual Report.

The directors have proposed a final dividend for the year of 2.16 pence per ordinary share, payable on 5 August 2005 to shareholders on the register of members at close of business on 3 June 2005. An interim dividend of 1.91 pence per ordinary share was paid during the year, producing a total for the year of 4.07 pence per ordinary share, a total of approximately £2,658 million. The Company operates a dividend reinvestment plan, further details of which can be found on page 141 in this Annual Report.

Subsequent events

Details of material subsequent events are included in note 33 to the Consolidated Financial Statements included in this Annual Report.

Charitable contributions

During the year ended 31 March 2005, the Company made cash charitable donations of £26 million to the Vodafone Group Foundation (2004: £14 million), which included a £1 million donation to support the humanitarian rescue operation following the Asian Tsunami disaster. In addition, Group subsidiaries donated a further £4 million (2004: £7 million) to local Vodafone Foundations and a further £3 million (2004: £2 million) directly to a variety of causes, including a £1 million donation to the National Autistic Society by Vodafone UK. These donations total £33 million (2004: £23 million) and include donations of £2 million (2004: £3 million) made as required by the terms of certain network operating licences. More details regarding the activities of the Vodafone Group Foundation and local Vodafone Foundations can be found in the Company’s separate Corporate Responsibility (“CR”) report and in the Vodafone Foundation Yearbook which are available on the Company’s website, www.vodafone.com.

Political donations

At the AGM on 27 July 2004, the Board of directors sought and obtained shareholders’ approval to enable the Group to make donations to EU Political Organisations or incur EU Political Expenditure, under the relevant provisions of the Political Parties, Elections and Referendums Act 2000 (“the Act”). The approval given restricted such expenditure to an aggregate limit of £100,000 in the period of 12 months following the date of the AGM. Although the Group had, and has, no intention of changing its current policy and practice of not making political donations and will not do so without the specific endorsement of shareholders, the Board of directors sought the approval on a precautionary basis, to avoid any possibility of unintentionally breaching the Act.

The Group has made no political donations during the year.

The directors propose, again on a precautionary basis, to seek a renewal of shareholders’ approval at the AGM to be held on 26 July 2005. The amount of the approval will again be restricted to an aggregate amount of £100,000 (£50,000 in respect of donations to EU Political Organisations and £50,000 in respect of EU Political Expenditure) for a period of twelve months following the AGM.

Creditor payment terms

It is the Group’s policy to agree terms of transactions, including payment terms, with suppliers and, provided suppliers perform in accordance with the agreed terms, it is the Group’s normal practice that payment is made accordingly. The number of days outstanding between receipt of invoices and date of payment, calculated by reference to the amount owed to trade creditors at the year end as a proportion of the amounts invoiced by suppliers during the year, was 22 days (2004: 29 days) in aggregate for the Group. The Company did not have any trade creditors at 31 March 2005.

Research and development

The Group continues to pursue an active research and development programme for the enhancement of mobile telecommunications. Full details as to the Group’s research and development programme and activities can be found under “Business Overview –Research and Development”.

Directors’ interests in the shares of the Company

The “Board’s Report to Shareholders on Directors’ Remuneration” details the directors’ interests in the shares of the Company.

Directors’ interests in contracts

None of the current directors had a material interest in any contract of significance to which the Company or any of its subsidiary undertakings was a party during the financial year.

58 |  Governance

Directors’ Indemnities

In accordance with the Company’s Articles of Association, directors are granted an indemnity from the Company to the extent permitted by law in respect of liabilities incurred as a result of their office. The Companies (Audit Investigations and Community Enterprise) Act 2004 came into force on 6 April 2005, and, amongst other things, changed the provisions of Section 310 of the Companies Act 1985 to give companies the power to extend indemnities to directors against liability to third parties (excluding criminal and regulatory penalties) and to pay directors’ legal costs as incurred provided that they are reimbursed to the Company if the individual is convicted or, in an action brought by the Company, judgment is given against the director. The Company will seek shareholder approval at the AGM this year to amend its Memorandum and Articles of Association to give it authority to provide funding for directors’ defence costs. If shareholder approval is obtained, the Company will indemnify directors to the extent permitted by the new legislation.

Employees

Please refer to “Employees” on page 75.

Corporate responsibility

A summary of the Company’s approach is contained on page 76 of this Annual Report. Further details are contained in the Company’s CR report which is available to view on or download from the Company’s website, www.vodafone.com.

Auditors

Following a recommendation by the Audit Committee and, in accordance with section 384 of the Companies Act 1985, a resolution proposing the re-appointment of Deloitte & Touche LLP as auditors to the Company will be put to the AGM.

In their assessment of the independence of the auditors and in accordance with the US Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, the Audit Committee receives in writing details of relationships between Deloitte & Touche LLP and the Group that may have a bearing on their independence and receives confirmation that they are independent of the Company within the meaning of the securities laws administered by the SEC.

In addition, the Audit Committee pre-approves the audit fee after a review of both the level of the audit fee against other comparable companies, including those in the telecommunications industry, and the level and nature of non-audit fees, as part of its review of the adequacy and objectivity of the audit process.

In a further measure to ensure auditor independence is not compromised, policies have been adopted to provide for the pre-approval by the Audit Committee of all permitted non-audit services by Deloitte & Touche LLP. Should there be an immediate requirement for permitted non-audit services to be provided by Deloitte & Touche LLP which have not been pre-approved by the Audit Committee, the policies provide that the Group Audit Director will consult with the Chairman of the Audit Committee for pre-approval.

In addition to their statutory duties, Deloitte & Touche LLP are also employed where, as a result of their position as auditors, they either must, or are best placed to, perform the work in question. This is primarily work in relation to matters such as shareholder circulars, Group borrowings, regulatory filings and business acquisitions and disposals. Other work is awarded on the basis of competitive tender.

During the year Deloitte & Touche LLP charged £5 million (2004: £4 million) for audit services and a further £4 million (2004: £8 million) for non-audit assignments. An analysis of these fees can be found in note 5 to the Consolidated Financial Statements.

Major shareholders

The Bank of New York, as custodian of the Company’s American Depositary Receipt (“ADR”) programme, held approximately 12.5% of the Company’s ordinary shares of $0.10 each at 23 May 2005 as nominee. The total number of ADRs outstanding at 23 May 2005 was 804,689,870. At this date, 1,104 holders of record of ordinary shares had registered addresses in the United States and in total held approximately 0.006% of the ordinary shares of the Company. As at 23 May 2005, the following percentage interests in the ordinary share capital of the Company, disclosable under Part VI of the Companies Act 1985, have been notified to the directors:

Shareholder	Shareholding
The Capital Group Companies, Inc.	7.92	%
Fidelity Management & Research Company	3.52	%
Legal & General Investment Management	3.69	%
Barclays PLC	3.65	%

The rights attaching to the ordinary shares of the Company held by these shareholders are identical in all respects to the rights attaching to all the ordinary shares of the Company. The directors are not aware, as at 23 May 2005, of any other interest of 3% or more in the ordinary share capital of the Company. The Company is not directly or indirectly owned or controlled by any foreign government or any other legal entity. There are no arrangements known to the Company that could result in a change of control of the Company.

Going concern

After reviewing the Group’s and Company’s budget for the next financial year, and other longer term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

Statement of Directors’ Responsibilities

United Kingdom company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:

• select suitable accounting policies and apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for the system of internal control, for safeguarding the assets of the Company and the Group and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

By Order of the Board

Stephen Scott
Secretary
24 May 2005

Governance  | 59

Corporate Governance

Introduction

Statement of Corporate Governance Policy

The Board of directors of the Company is committed to high standards of corporate governance, which it considers are critical to business integrity and to maintaining investors’ trust in the Company. The Group expects all its directors and employees to act with honesty, integrity and fairness. The Group will strive to act in accordance with the laws and customs of the countries in which it operates; adopt proper standards of business practice and procedure; operate with integrity; and observe and respect the culture of every country in which it does business.

The Combined Code

The Company’s ordinary shares are listed in the United Kingdom on the London Stock Exchange. As such, the Company is required to make a disclosure statement concerning its application of the principles of and compliance with the provisions of the revised Combined Code on corporate governance (the “Combined Code”). For the financial year ended 31 March 2005, the directors confirm that, save for the one matter referred to below, the Company has been in compliance with the provisions of section 1 of the Combined Code. The disclosures provided below are nevertheless intended to provide the reader with an explanation of the Company’s corporate governance.

The Combined Code provides that a company’s Remuneration Committee should be composed entirely of independent non-executive directors. Lord MacLaurin, the Chairman of the Board, is not treated as being independent for the purposes of the Combined Code and although the Board concluded that the Chairman provided important contributions to the work of the Remuneration Committee, his offer to step down as a member to ensure the Company’s strict compliance with the Combined Code was accepted. He stepped down in March 2005.

US Listing Requirements

The Company’s ADSs are listed on the NYSE and the Company is, therefore, subject to the rules of the NYSE as well as US securities laws and the rules of the SEC. The NYSE requires US companies listed on the exchange to comply with the NYSE’s corporate governance rules, but foreign private issuers such as the Company are exempt from most of those rules. However, pursuant to NYSE Rule 303A.11, the Company is required to disclose a summary of any significant ways in which the corporate governance practices it follows differ from those required by the NYSE for US companies, as summarised below.

The Sarbanes-Oxley Act of 2002 (US) applies to the Company. The Company has established a Disclosure Committee with responsibility for reviewing and approving controls and procedures over the public disclosure of financial and related information, and other procedures necessary to enable the Chief Executive and Financial Director to provide their Certifications of the Annual Report on Form 20-F that is filed with the SEC. The Company has also adopted a corporate code of ethics for senior financial officers, separate from and additional to its Business Principles, described below. A copy of this code is available on the Group’s website. The Company is making good progress on the work required to ensure compliance with section 404 of the Sarbanes-Oxley Act, which is required for the financial year ending 31 March 2007.

Differences from New York Stock Exchange corporate governance practices

Independence

The NYSE rules require that a majority of the Board must be comprised of independent directors and the rules include detailed tests that US companies must use for determining independence. The Combined Code requires a company’s board to assess and make a determination as to the independence of its directors. While the Company’s Board does not explicitly take into consideration the NYSE’s detailed tests, it

has carried out an assessment and has determined in its judgement that all of the non-executive directors are independent within the requirements of the Combined Code. As at the date of this Annual Report, the Company’s board comprised the Chairman, five executive directors and nine non-executive directors.

Committees

Under NYSE rules, US companies are required to have a nominating/corporate governance committee and a compensation committee, composed entirely of independent directors. The Company’s Nominations and Governance Committee and Remuneration Committee have terms of reference and composition that comply with the Combined Code requirements. The Nominations and Governance Committee is chaired by the Company Chairman, and its other members are non-executive directors of the Company and the Chief Executive. The Remuneration Committee is composed entirely of non-executive directors whom the Board has determined to be independent in the manner described above. The Company’s Audit Committee is composed entirely of non-executive directors whom the Board has determined to be independent in the manner described above and who meet the requirements of Rule 10A-3 of the Securities Exchange Act. The Company considers that the terms of reference of these committees are generally responsive to the relevant NYSE rules but may not address all aspects of these rules.

Corporate Governance Guidelines

Under NYSE rules, US companies must adopt and disclose corporate governance guidelines. Vodafone has posted its statement of compliance with the Combined Code on its website at www.vodafone.com. The Company also has adopted a Group Governance Manual that applies to all directors and employees. The Company considers that its corporate governance guidelines are generally responsive to, but may not address all aspects of, the relevant NYSE rules.

Business Principles

In addition to the formal requirements of the Listing Authorities and Stock Exchanges described above, the Group has developed and implemented its own Business Principles which define its relationships with all of its stakeholders and govern how Vodafone conducts its day-to-day business. These can be found on the Group’s website at www.vodafone.com.

The Business Principles apply to all Vodafone’s mobile operating subsidiaries. Chief Executives are responsible for ensuring application of the Business Principles within their business. Vodafone also promotes the Business Principles to its associated undertakings and business partners.

Every employee is expected to act in accordance with the Business Principles. A confidential email facility has been established for employees to report any concerns.

The Group tracks implementation of its Business Principles through its internal audits.

Directors and Organisation

Board Composition

The Company’s Board of directors consists of fifteen directors, fourteen of whom served throughout the 2005 financial year. A t 31 March 2005, in addition to the Chairman, Lord MacLaurin, there were five executive directors and nine non-executive directors. The Deputy Chairman, Paul Hazen, is the nominated senior independent director and his role includes being available for approach or representation by directors or significant shareholders who may feel inhibited from raising issues with the Chairman. He is also responsible for conducting an annual review of the performance of the Chairman and, in the event it should be necessary, convening an annual meeting of the non-executive directors.

Sir John Bond joined the Board as a non-executive director on 1 January 2005. Ken Hydon and Sir David Scholey will retire on conclusion of the Company’s AGM on

60 |  Governance

26 July 2005. The Company considers all of its present non-executive directors to be fully independent. The executive directors are Arun Sarin (Chief Executive), Sir Julian Horn-Smith, Peter Bamford, Thomas Geitner and Ken Hydon.

The following table shows directors’ attendance at meetings during the 2005 financial year:

				Nominations and
		Audit		Governance		Remuneration
	Board	Committee		Committee		Committee
Number of Meetings
during the year to
31 March 2005	8	4		3		6
Lord MacLaurin	8			3	(1)	6
Paul Hazen	6	4	(1)	3
Arun Sarin	8			3
Sir Julian Horn-Smith	8
Peter Bamford	8
Vittorio Colao(3)	1
Thomas Geitner	8
Ken Hydon(2)	8
Sir John Bond(4)	2
Dr Michael Boskin	6	2				4
Lord Broers	8	4		3
John Buchanan	8	4
Penny Hughes	8					6	(1)
Sir David Scholey(2)	8	4		2
Professor Jürgen Schrempp	7			2		5
Luc Vandevelde	8					5

Notes:
(1)	Committee Chairman.
(2)	Ken Hydon and Sir David Scholey will resign from the Board on conclusion of the AGM on 26 July 2005.
(3)	Vittorio Colao left the Board in July 2004. There was only one meeting held during the year whilst he was a director.
(4)	Sir John Bond joined the Board on 1 January 2005 and from then until 31 March there were three Board meetings.

In addition to regular Board meetings, there are a number of other meetings to deal with specific matters. Directors unable to attend a Board meeting because of another engagement, as was the case for a number of directors in the year, are nevertheless provided with all the papers and information relevant for such meeting and are able to discuss issues arising in the meeting with the Chairman or the Chief Executive.

Re-election of Directors

During the year the Company reviewed its policy regarding the retirement of directors and, although having no obligation to do so, resolved that, in the interests of good corporate governance, all directors should offer themselves for re-election annually. Accordingly, at the AGM, to be held on 26 July 2005, other than Ken Hydon and Sir David Scholey who are retiring at the conclusion of the AGM, all the directors will be retiring and, being eligible and on the recommendation of the Nominations and Governance Committee, will offer themselves for re-election.

Performance Evaluation

Performance evaluation of the Board of directors, its Committees and individual directors takes place on an annual basis and is conducted within the terms of reference of the Nominations and Governance Committee. The Chairman leads the assessment of the Chief Executive and the non-executive directors, the Chief Executive reviews the executive directors and the senior independent director conducts the review of the performance of the Chairman. Each Board Committee undertakes a review of its own work and, in relation to the performance of the Board, each director is required to complete a comprehensive questionnaire, the results of which are analysed and discussed by the Nominations and Governance Committee prior to the presentation

of recommendations to the Board. The evaluation process is designed to cover Board processes, the structure and capability of the Board, strategic alignment, Board dynamics and the skills brought to the Board by each director. A series of questionnaires has also been developed to facilitate the evaluation processes for each Board Committee.

The evaluations found the performance of each director to be effective and concluded that the Board provides the effective leadership and control required for a listed company. The Nominations and Governance Committee confirmed to the Board that the contributions made by the directors offering themselves for re-election at the AGM in July 2005 continued to be effective and the Company should support their re-election.

Information and Training

Actual financial results are presented to each Board meeting, together with reports from the executive directors in respect of their areas of responsibility. The Chief Executive presents his report to each meeting which deals, amongst other things, with investor relations, giving Board members an opportunity to develop an understanding of the views of major investors. From time to time, the Board receives detailed presentations from non-Board members on matters of significance or on new opportunities for the Group. Financial plans, including budgets and forecasts, are regularly discussed at Board meetings. The non-executive directors periodically visit different parts of the Group and are provided with briefings and information to assist them in performing their duties. The non-executive directors and the Chairman regularly meet without executives present.

The Board is confident that all its members have the knowledge, ability and experience to perform the functions required of a director of a listed company. On appointment, all directors are provided with appropriate training and guidance as to their duties, responsibilities and liabilities as a director of a public and listed company and also have the opportunity to discuss organisational, operational and administrative matters with the Chairman, the Chief Executive and the Company Secretary. When considered necessary, more formal training is provided.

Matters for the Board

The Board has a formal schedule of matters specifically referred to it for decision, including:

• the approval of Group commercial strategy;

• major capital projects;

• the adoption of any significant change in accounting policies or practices; and

• material contracts not in the ordinary course of business.

This schedule is reviewed periodically. It was last formally reviewed and updated by the Nominations and Governance Committee in January 2004 and its proposals were subsequently approved by the Board. Its currency and continued validity were assessed as part of the performance evaluations conducted in the 2005 financial year described earlier in this Report. The agenda for Board meetings are initially developed by the Chief Executive and the Company Secretary and are finalised by the Chairman. The directors have access to the advice and services of the Company Secretary and have resolved to ensure the provision, to any director who believes it may be required in the furtherance of his or her duties, of independent professional advice at the cost of the Company.

Executive Management

The executive directors, together with certain other Group functional heads and regional Chief Executives, meet monthly as the Executive Committee and the Integration and Operations Committee, both under the chairmanship of the Chief Executive. The Executive Committee is responsible for the day-to-day management of the Group’s businesses, the overall financial performance of the Group in fulfilment of strategy,

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Corporate Governance continued

plans and budgets and Group capital structure and funding. It also reviews major acquisitions and disposals. The Integration and Operations Committee is responsible for setting operational plans, budgets and forecasts, product and service development, customer segmentation, managing delivery of multi-market propositions and managing shared resources.

Committees of the Board

The standing Board committees are the Audit Committee, the Nominations and Governance Committee and the Remuneration Committee. The composition and terms of reference of these committees are published on the Company’s website at www.vodafone.com. The Secretary to these standing Board Committees is the Company Secretary or his nominee.

The Audit Committee

The Audit Committee is comprised of financially literate members having the necessary ability and experience to understand financial statements. Solely for the purpose of fulfilling the requirements of the Sarbanes-Oxley Act of 2002 and the Combined Code, the Board has designated John Buchanan, who is an independent non-executive director, as its financial expert on the Audit Committee. Further details of John Buchanan can be found in “Directors and Senior Management”.

Under its terms of reference, the Audit Committee is required, amongst other things, to oversee the relationship with the external auditors, to review the Company’s preliminary results announcement, interim results and annual financial statements, to monitor compliance with statutory and listing requirements for any exchange on which the Company’s shares are quoted, to review the scope, extent and effectiveness of the activity of the Group Internal Audit Department, to engage independent advisers as it determines is necessary and to perform investigations. At least twice a year, the Audit Committee meets separately with the external auditors and the Group Audit Director without management being present. Further details on the overseeing of the relationships with the external auditors can be found under “Directors Report – Auditors” and the Report of the Audit Committee is set out on page 64.

The Nominations and Governance Committee

The Nominations and Governance Committee, which provides a formal and transparent procedure for the appointment of new directors to the Board, generally engages external consultants to advise on prospective Board appointees. This year, the Committee oversaw the appointment of a new Financial Director to take over from Ken Hydon upon his retirement and recommended the appointment of a further non-executive director. Detailed role profiles were agreed by the Committee before external search consultants were engaged to prepare a shortlist of potentially suitable candidates. Only after a rigorous interview process were the appointments recommended to the Board.

The Committee also reviewed the Group’s succession plans, directed the performance evaluations described earlier in this Annual Report, discussed matters of corporate governance and assessed the independence of non-executive directors prior to reporting to the Board.

The Remuneration Committee

The Remuneration Committee is responsible to the Board for the assessment and recommendation of policy on executive remuneration and packages for individual executive directors. The Committee has regular private sessions without executives present. Further information on the Committee’s activities are contained in the Board’s Report to Shareholders on Directors’ Remuneration.

Internal Control and Disclosure Controls and Procedures

Introduction

The Board has established procedures that implement in full the Turnbull Guidance, “Internal Control: Guidance for Directors on the Combined Code”, for the year under review and to the date of approval of the Annual Report. These procedures, which are subject to regular review, provide an ongoing process for identifying, evaluating and managing the significant risks faced by the Group.

Responsibility

The Board has overall responsibility for the system of internal control. A sound system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The process of managing the risks associated with social, environmental and ethical impacts is also discussed under “Corporate Responsibility”, below.

Control structure

The Board sets the policy on internal control that is implemented by management. This is achieved through a clearly defined operating structure with lines of responsibility and delegated authority. The Executive Committee, chaired by the Chief Executive, manages this on a day-to-day basis.

Written policies and procedures have been issued which clearly define the limits of delegated authority and provide a framework for management to deal with areas of significant business risk. These policies and procedures are reviewed and, where necessary, updated at Executive Committee meetings.

Control environment

The Group’s operating procedures include a comprehensive system for reporting information to the directors. This system is properly documented and regularly reviewed.

Budgets are prepared by subsidiary management and subject to review by both regional management and the directors. Forecasts are revised on a quarterly basis and compared against budget. When setting budgets and forecasts, management identifies, evaluates and reports on the potential significant business risks.

The Executive Committee and the Board review management reports on the financial results and key operating statistics.

Emphasis is placed on the quality and abilities of the Group’s employees with continuing education, training and development actively encouraged through a wide variety of schemes and programmes. The Group has adopted a set of values to act as a framework for its people to exercise judgement and make decisions on a consistent basis.

Directors are appointed to associated undertakings and joint ventures and attend the Board meetings and review the key financial information of those undertakings. Clear guidance is given to those directors on the preparation that should take place before these Board meetings and their activity at the Board meeting. It is the Group’s policy that its auditors are appointed as auditors of associated companies and joint ventures, where possible.

The acquisition of any business requires a rigorous analysis of the financial implications of the acquisition and key performance figures. A sensitivity analysis takes place of the key assumptions made in the analysis. Post investment appraisals of the Group’s investments are conducted on a periodic and timely basis.

A Treasury Report is distributed electronically on a daily basis that reports on treasury borrowings and investments.

62 | Governance

The Board reviews a half-yearly report detailing any significant legal actions faced by Group companies.

The Executive Committee monitors legal, environmental and regulatory matters and approves appropriate responses or amendments to existing policy.

Monitoring and review activities

There are clear processes for monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective action.

A formal annual confirmation is provided by the chief executive officer and chief financial officer of each Group company detailing the operation of their control systems and highlighting any weaknesses. Regional management, the Audit Committee and the Board review the results of this confirmation.

The Chief Executive and the Financial Director undertake a review of the quality and timeliness of disclosures that includes formal annual meetings with the regional chief executives and the Disclosure Committee.

A Group Internal Audit Department, reporting directly to the Audit Committee, undertakes periodic examination of business processes on a risk basis and reports on controls throughout the Group.

Reports from the external auditors, Deloitte & Touche LLP, on certain internal controls and relevant financial reporting matters, are presented to the Audit Committee and management.

Review of effectiveness

The Directors, the Chief Executive and the Financial Director consider that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. The Group’s management is required to apply judgement in evaluating the risks facing the Group in achieving its objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materialising, in identifying the company’s ability to reduce the incidence and impact on the business of risks that do materialise and in ensuring the costs of operating particular controls are proportionate to the benefit.

The Directors, the Chief Executive and the Financial Director confirm that they have reviewed the effectiveness of the system of internal control and the disclosure controls and procedures through the monitoring process set out above and are not aware of any significant weakness or deficiency in the Group’s system of internal control. The Directors, the Chief Executive and the Financial Director have evaluated the effectiveness of the disclosure controls and procedures and, based on that evaluation, have concluded that the disclosure controls and procedures are effective as of the end of the period covered by this Annual Report.

During the period covered by this Annual Report, there were no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect internal control over financial reporting.

Relations with Shareholders

The Company holds briefing meetings with its major institutional shareholders in the UK, the US and in Continental Europe, usually twice each year after the interim results and preliminary announcement, to ensure that the investing community receives a balanced and complete view of the Group’s performance and the issues faced by the Group. Telecommunications analysts of stockbrokers are also invited to presentations of the financial results. The Company, through its Investor Relations team, responds to enquiries from shareholders. During the year, the Company hosted an analyst and investor day at its headquarters in Newbury, England. The day consisted of a series of presentations by the senior management from Vodafone’s largest mobile operating subsidiaries and from Verizon Wireless, its associated undertaking in the United States. These presentations provided an overview of each of the individual businesses and were broadcast live via a webcast on the Company’s website.

The principal communication with private investors is through the provision of the Annual Review & Summary Financial Statement, the interim results and the AGM, an occasion which is attended by all the Company’s directors and at which all shareholders present are given the opportunity to question the Chairman and the Board of directors as well as the Chairmen of the Audit, Remuneration and Nominations and Governance Committees. The AGM is broadcast live on the Company’s website, www.vodafone.com, and a recording of the webcast can subsequently be viewed on the website. All substantive resolutions at the Company’s AGMs are decided on a poll. The poll is conducted by the Company’s Registrars and scrutinised by Electoral Reform Services. The proxy votes cast in relation to all resolutions are disclosed to those in attendance at the meeting and the results of the poll are published in national newspapers in the UK, the US and Ireland and on the Company’s website and announced via the regulatory news service. Financial and other information is made available on the Company’s website, www.vodafone.com, which is regularly updated.

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Corporate Governance continued

Report from the Audit Committee

The composition of the Audit Committee is shown in the table on page 61 and its terms of reference are discussed under “Commmittees of the Board – The Audit Committee”.

During the year ended 31 March 2005 the principal activities of the Committee were as follows:

Financial Statements

The Committee considered reports from the Financial Director and the Group Financial Controller on the half-year and annual financial statements. It also considered reports from the external auditors, Deloitte & Touche LLP on the scope and outcome of the annual audit.

The financial statements were reviewed in the light of these reports and the results of that review reported to the Board.

Risk Management and Internal Control

The Committee reviewed the process by which the Group evaluated its control environment, its risk assessment process and the way in which significant business risks were managed. It also considered the Group Audit department’s reports on the effectiveness of internal controls, significant frauds and any fraud that involved management or employees with a significant role in internal controls.

The Committee also reviewed and approved arrangements by which staff could, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. This was achieved through using existing reporting procedures and a web site with a dedicated anonymous email feature.

External Auditors

The Committee reviewed the letter from Deloitte & Touche LLP confirming their independence and objectivity. It also reviewed and pre-approved the scope of non-audit services provided by Deloitte & Touche LLP to ensure that there was no impairment of independence.

The Committee pre-approved the scope and fees for audit services provided by Deloitte & Touche LLP and confirmed the wording of the recommendations put by the Board to the shareholders on the appointment and retention of the external auditors.

Private meetings were held with Deloitte & Touche LLP to ensure that there were no restrictions on the scope of their audit and to discuss any items the auditors did not wish to raise with management present.

Internal Audit

The Committee engaged in discussion and review of the Group Audit Department’s audit plan for the year, together with its resource requirements. Private meetings were held with the Group Audit Director.

Audit Committee Effectiveness

The Audit Committee conducts a formal review of its effectiveness annually and concluded this year that it was effective and able to fulfil its terms of reference.

On behalf of the Audit Committee

64 | Governance

Board’s Report to Shareholders on Directors’ Remuneration

Dear Shareholder

Since the introduction of the current Executive Remuneration Policy in 2002 (the “Policy”), the Remuneration Committee has conducted annual reviews to ensure that the Policy continues to serve the Company and shareholders. This year, the Chairman and I have again maintained proactive dialogue on remuneration matters with the Company’s major shareholders and relevant institutions. The objectives of this dialogue are to provide information about the Company and its views on remuneration issues and to listen to shareholders’ opinions on any proposed adjustments to the Policy and remuneration governance generally.

As a result of this year’s review, the Remuneration Committee has concluded that the existing policy remains appropriate. The key principles of the Policy, which have not changed, are:

• the expected value of total remuneration will be benchmarked against the relevant market;

• a high proportion of total remuneration will be delivered through performance-related payments;

•  performance measures will be balanced between absolute financial measures and sector comparative measures to achieve maximum alignment between executive and shareholder objectives;

• the majority of performance-related remuneration will be provided in the form of equity; and

• share ownership requirements will be applied to executive directors.

The Committee has approved three changes within the existing framework. In March 2005, the Chairman stepped down as a member of the Remuneration Committee to address the issue of the Remuneration Committee comprising only independent non-executive directors. Sir John Bond has been appointed a member of the Committee with effect from 1 April 2005. Secondly, the Short Term Incentive Plan has been reviewed to ensure that performance measures continue to align with the Company’s strategy. The current financial year sees a change from EBITDA to Operating Profit (EBIT), greater focus on total service revenue, and a change in the measure of customer satisfaction. Finally, re-testing provisions will be removed from share options granted in 2005.

At the start of this year’s review, I examined how well incentive awards made in previous years had aligned with the Company’s performance. I am pleased to say that the Policy implementation has worked well and forecast rewards are commensurate with actual performance. I am confident that the Policy will continue to align executives’ interests with the interests of shareholders, whilst enabling the Company to engage a high calibre team to successfully lead the Company. During the year, Committee members and I conducted a formal review of the Committee’s effectiveness and concluded that it was effective and able to fulfil its terms of reference. I hope that we receive your support at the AGM on 26 July 2005.

Penny Hughes
Chairman of the Remuneration Committee
24 May 2005

Remuneration Committee

The Remuneration Committee is comprised to exercise independent judgement and consists only of independent non-executive directors. Penny Hughes (Chairman), Dr Michael Boskin, Professor Jürgen Schrempp and Luc Vandevelde all continue as members. Lord MacLaurin stepped down from the Committee in March 2005. He was replaced by Sir John Bond with effect from 1 April 2005. Lord MacLaurin will be invited to attend meetings as an observer and adviser but will not be entitled to vote.

The Chief Executive is invited to attend meetings of the Remuneration Committee, other than when his own remuneration is being discussed.

The Remuneration Committee met on six occasions during the year. The Remuneration Committee appointed and received advice from Towers Perrin (market data and advice on market practice and governance) and Kepler Associates (performance analysis and advice on performance measures and market practice) and received advice from the Group Human Resources Director and the Group Compensation and Benefits Director. The advisers also provided advice to the Company on general human resource and compensation related matters.

Remuneration Policy

The Policy was approved by shareholders in July 2002. The Policy is set out below:

The overriding objective of the Policy on incentives is to ensure that Vodafone is able to attract, retain and motivate executives of the highest calibre essential to the successful leadership and effective management of a global company at the leading edge of the telecommunications industry. To achieve this objective, Vodafone, from the context of its UK domicile, takes into account both the UK regulatory framework, including best practice in corporate governance, shareholder views, political opinion and the appropriate geographic and nationality basis for determining competitive remuneration, recognising that this may be subject to change over time as the business evolves.

The total remuneration will be benchmarked against the relevant market. Vodafone is one of the largest companies in Europe and is a global business; Vodafone’s policy will be to provide executive directors with remuneration generally at levels that are competitive with the largest companies in Europe. A high proportion of the total remuneration will be awarded through performance-related remuneration, with phased delivery over the short, medium and long term. For executive directors, approximately 80% of the total expected remuneration will be performance-related. Performance measures will be balanced between absolute financial measures and sector comparative measures to achieve maximum alignment between executive and shareholder objectives.

All medium and long term incentives are delivered in the form of Vodafone shares and options. Executive directors are required to comply with share ownership guidelines.

The structure of remuneration for executive directors under the Policy (excluding pensions) is illustrated below:

The Policy’s key objective is to ensure that there is a strong linkage between pay and performance. This is achieved by approximately 80% of the total package (excluding pensions) being delivered through performance-linked short and long term incentive plans. Therefore, the only guaranteed payment to executive directors is their base salary.

The Remuneration Committee selects performance measures for incentive plans that provide the greatest degree of alignment with the Company’s strategic goals and that are clear and transparent to both directors and shareholders. The performance measures adopted incentivise both operational performance and share price growth.

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Board’s Report to Shareholders on Directors’ Remuneration continued

Each element of the reward package focuses on supporting different Company objectives, which are illustrated below:

				Performance
		Purpose		Measure(s)
	•	Reflects competitive	•	Individual contribution
Base salary		market level, role and
		individual achievement
	•	Motivates achievement of annual business KPIs	•	EBITDA (to be replaced
				with EBIT from
Annual	•	Provides incentive to co-invest		1 April 2005)
deferred	•	Motivates achievement of	•	Free cash flow
share bonus		medium term KPIs	•	Total service revenue
	•	Aligns with shareholders	•	Customer satisfaction
			•	Adjusted EPS growth
				on share deferral
	•	Incentivise earnings growth	•	Adjusted EPS growth
Share options		and share price growth
	•	Aligns with shareholders
Performance	•	Incentivise share price and	•	Relative Total
shares		dividend growth		Shareholder Return
	•	Aligns with shareholders		(“TSR”)

The principles of the Policy are cascaded, where appropriate, to executives below Board level as set out below:

	Base	Short/Medium	Long Term
	salary	Term Incentive	Incentives
Executive	Set against	Conditional on	Annual awards of
Committee	national	business performance	performance shares
	market	relevant to individual	and share options with
		executive	performance conditions
		Target bonus level
		competitive in local
		market

Report on Executive Directors’ Remuneration for the 2005 Financial Year and Subsequent Periods

Total remuneration levels

In accordance with the Policy, the Company benchmarks total remuneration levels against other large European domiciled companies, using externally provided pay data. Total remuneration for these purposes means the sum of base salary and short, medium and long term incentives. The European focus was selected because Europe continues to be Vodafone’s major market and the Company is one of the top ten companies in Europe by market capitalisation. The competitive data is used as one input to determine the remuneration level of the Chief Executive and Board. The Committee also takes into account other factors including personal and Company performance in determining the target remuneration level.

Components of executive directors’ remuneration

Executive directors receive base salary, short/medium term incentive (annual deferred share bonus), long term incentives (performance shares and share options) and pension benefits. Vesting of all incentives is dependent on the achievement of performance targets that are set by the Remuneration Committee prior to the awards being granted.

Base salary

Salaries are reviewed annually with effect from 1 July and adjustments may be made to reflect competitive national pay levels, the prevailing level of salary reviews of employees within the Group, changes in responsibilities, Group and individual performance. External remuneration consultants provide data about market salary levels and advise the Committee accordingly. Pension entitlements are based only on base salary.

Incentive awards

Short/medium term incentive: Annual deferred share bonus

The purpose of the Vodafone Group Short Term Incentive Plan (“STIP”) is to focus and motivate executive directors to achieve annual business KPIs that will further the Company’s medium term objectives. The STIP awards made in July 2002 vested in July 2004. Details of STIP awards are given in the table on page 71.

The STIP comprises two elements: a base award and an enhancement award. Release of both elements after three years is dependent upon the continued employment of the participant.

Base award

The base award is earned by achievement of one year KPI linked performance targets and is delivered in the form of shares. The target base award level for the 2005 financial year was 100% of salary with a maximum of 200% of salary available for exceptional performance.

The Remuneration Committee reviews and sets the base award performance targets on an annual basis, taking into account business strategy. The performance measures for the 2005 financial year relate to EBITDA, total service revenue, free cash flow and customer satisfaction. Each element is weighted according to the responsibilities of the relevant director. For the Chief Executive, in the 2005 financial year, the EBITDA target was 40% of the total, total service revenue 25%, free cash flow 20% and customer satisfaction 15%, and the payout achieved was 104%. The targets are not disclosed, as they are commercially sensitive. For the 2006 financial year, the EBITDA measure will be replaced with Operating Profit (EBIT) and increased focus will be placed on total service revenue. Free Cash Flow remains a key measure and the customer satisfaction measure is retained and enhanced.

The Group may, at its discretion, pay a cash sum of up to the value of the base award in the event that an executive director declines the share award. In these circumstances, the executive director will not be eligible to receive the enhancement award or any cash alternative.

Enhancement award

An enhancement award of 50% of the number of shares comprised in the base award is earned by achievement of a subsequent two-year EPS performance target following the initial twelve-month period. For awards made in the 2005 financial year, w hich will vest in July 2006, the performance target was that growth in EPS, before goodwill amortisation and exceptional items, must equal or exceed 16% over the two-year performance period.

The Company is reviewing the current STIP and may propose changes to the design of the plan to enhance its effectiveness and enable it to be operated outside the UK for the Company’s international senior executives. Any changes to the plan will be discussed with major shareholders and relevant institutions with a view to applying the changes to bonuses earned in the 2006 financial year.

Long term incentives

Awards of performance shares and share options were made to executive directors following the 2004 AGM on 28 July 2004. The awards for the 2005 financial year will be also be made following the AGM.

Awards are delivered in the form of ordinary shares of the Company. All awards are made under plans that incorporate dilution limits as set out in the Guidelines for Share Incentive Schemes published by the Association of British Insurers. The current estimated dilution from subsisting awards, including executive and all-employee share awards, is approximately 2.4% of the Company’s share capital at 31 March 2005 (2.1% as at 31 March 2004).

66 |  Governance

Performance shares

Performance shares are awarded annually to executive directors. Vesting of the performance shares depends upon the Company’s relative TSR performance. TSR measures the change in value of a share and reinvested dividends over the period of measurement. The Company’s TSR performance is compared to that of other companies in the FTSE Global Telecommunications index over a three-year performance period. The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is the vehicle for the provision of these incentive awards.

In the 2005 financial year, the Chief Executive received an award of Performance shares with a face value of two times base salary; the Deputy Chief Executive and other executive directors one and a half times their base salary.

Performance shares will vest only if the Company ranks in the top half of the ranking table; maximum vesting will only occur if the Company is in the top 20%. Vesting is also conditional on underlying improvement in the performance of the Company. Awards will vest to the extent that the performance condition has been satisfied at the end of the three-year performance period. To the extent that the performance target is not met, the awards will be forfeited. The following chart shows the basis on which the performance shares will vest:

The constituents of the FTSE Global Telecommunications index as at July 2004, (applicable to awards in the 2005 financial year), excluding the Company, were:

Alltel	Portugal Telecom
AT&T	Royal KPN
AT&T Wireless Services Inc	SBC Communications
BCE	Singapore Telecommunications
BellSouth	Sprint Corp-FON Group
BT Group	Sprint Corp-PCS Group
China Mobile Hong Kong	Swisscom
China Unicom	Telecom Italia
Deutsche Telekom	Telefonica
France Telecom	Telenor
KDDI	TeliaSonera
02	Telstra
Nextel Communications	TIM
Nippon Telegraph & Telephone	Verizon Communications
NTT DoCoMo

Previously disclosed performance share awards granted in the 2002 financial year vested in the 2005 financial year. Details are given in the table on page 72.

Share options

Share options are granted annually to executive directors.

The exercise of the options is subject to the achievement of a performance condition set prior to grant. The Remuneration Committee determined that the most appropriate performance measure for 2004/05 awards was absolute growth in EPS, before goodwill amortisation and exceptional items. One quarter of the option award will vest

for achievement of EPS growth of 8% p.a. rising to full vesting for achievement of EPS growth of 18% p.a. over the performance period. In setting this target the Remuneration Committee has taken the internal long range plan and market expectations into account. The Remuneration Committee’s advisers have confirmed that this EPS target is amongst the most demanding of those set by large UK based companies. The Remuneration Committee has decided that for the 2006 financial year grants, the performance range will be 8% – 16% p.a. The following chart illustrates the basis on which share options granted in the 2005 financial year will vest:

Options have a ten-year term and will vest after three years, subject to performance achievement. For options granted in the 2004 financial year, performance may be measured again after year five from a fixed base year. The Remuneration Committee, having considered this matter at length and taking into account the evolving views of institutional investors, has decided to remove the performance re-test for the 2005 financial year option awards.

The price at which shares can be acquired on option exercise will be no lower than the market value of the shares on the day prior to the date of grant of the options. Therefore, scheme participants only benefit if the share price increases and vesting conditions are achieved. The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is the vehicle for the provision of these incentive awards.

In July 2004, the Chief Executive received an award of options with a face value of seven times base salary; the Deputy Chief Executive and the other executive directors five times their base salary.

Illustration

To help shareholders understand the value of the package provided to the Chief Executive, the following chart illustrates the approximate pre-tax long term incentive gains to the Chief Executive that would be delivered based on various Company growth, EPS and TSR performance scenarios. The chart illustrates that in order to gain value from the incentive plans, considerable shareholder value must be created.

Governance  | 67

Board’s Report to Shareholders on Directors’ Remuneration continued

For example, if the Company’s share price increases by over 50% from 140 pence to approximately 210 pence, the Company’s value increases by £46 billion, and there is 50% vesting of long term incentives, the Chief Executive would have a pre-tax gain of just under £4 million, representing less than a tenth of 1% of the total increase in shareholder value.

New Share Plan Rules

The Company proposes to introduce new share plan rules, which will be tabled for shareholder approval at the AGM on 26 July 2005. No changes are proposed to the award policy for Executive directors or other participants. The Company wishes to introduce one consistent set of rules under which all long term incentives may be awarded. The new rules will comply with the latest UK corporate governance guidelines and industry best practice. Full details of the proposed rules can be found in the notice of the 2005 AGM. Any future changes to the award policy for the Board will be discussed with major shareholders and relevant institutions prior to implementation.

Measurement of performance under IFRS

From 1 April 2005, the Company will no longer report its financial statements under UK GAAP, and instead will report under IFRS. The Remuneration Committee has reviewed the impact of the introduction of IFRS for incentive scheme purposes, to ensure that performance achievement can be measured on a consistent basis and that the introduction of the new standard does not advantage or disadvantage participants. Only three past incentive awards are potentially affected by the transition to IFRS: GMR options granted in 2001, 2002 Executive Options and 2003 Executive Options. The 2001 GMR options include the measurement of EBITDA, which will not materially be affected by IFRS, and therefore no adjustment is required to measure performance achievement. The 2002 and 2003 Executive Option grants are subject to achievement of growth in EPS. For these schemes, EPS under IFRS will be adjusted to reflect UK GAAP measurement so that performance may be measured on a consistent basis. In each case, an independent auditor will be requested to review and verify the achievement level.

Share ownership guidelines

Executive directors participating in long term incentive plans must comply with the Company’s share ownership guidelines. These guidelines, which were first introduced in 2000, require the Chief Executive to have a shareholding in the Company of four times base salary and other executive directors to have a shareholding of three times base salary.

It is intended that these ownership levels will be attained within five years from the director first becoming subject to the guidelines and be achieved through the retention of shares awarded under incentive plans.

Pensions

The Chief Executive, Arun Sarin, is provided with a defined contribution pension arrangement to which the Company contributes 30% of his base salary. The contribution is held in a notional fund outside the Company pension scheme.

Sir Julian Horn-Smith, Ken Hydon (until his normal retirement age) and Peter Bamford, being UK based directors, are contributing members of the Vodafone Group Pension Scheme, which is a UK scheme approved by the Inland Revenue.

This Scheme provides a benefit of two-thirds of pensionable salary after a minimum of 20 years’ service, with a contingent spouse’s pension of 50% of the member’s pension. The normal retirement age is 60, but directors may retire from age 55 with a pension proportionately reduced to account for their shorter service but with no actuarial reduction. Pensions increase in payment by the lower of 5% per annum or the maximum amount permitted by the Inland Revenue. Peter Bamford, whose benefits are restricted by Inland Revenue earnings limits, also participates in a defined contribution Vodafone Group Funded Unapproved Retirement Benefit Scheme (“FURBS”) to enable pension benefits to be provided on his base salary above the earnings cap. The Company makes a contribution of 30% of base salary above the earnings cap.

Ken Hydon reached 60 years of age in November 2004 and in accordance with normal pension plan rules received an immediate pension based on his accrued service and final pensionable salary. In recognition of Mr Hydon agreeing to stay with the

Company until the end of the 2005 AGM, the Committee agreed to provide a pension allowance of 30% of base salary for each complete month from his 60th birthday until he steps down from the Board.

Thomas Geitner is entitled to a defined benefit pension of 40% of salary from a normal retirement age of 60. On early retirement, the pension may be reduced if he has accrued less than 10 years of Board service, but will not be subject to actuarial reduction. The pension increases in line with German price inflation and a spouse’s pension of 60% of his pension is payable from his death.

All the plans referred to above provide for benefits on death in service.

Further details of the pension benefits earned by the directors in the year ended 31 March 2005 can be found on page 71. Liabilities in respect of the pension schemes in which the executive directors participate are funded to the extent described in note 32 to the Consolidated Financial Statements, “Pensions”.

A-Day proposals

As a result of the new UK legislation affecting the taxation of pensions, the Company has reviewed the pension arrangements it provides to UK based executives. The Company will permit executives to continue participation in the defined benefit scheme and, from April 2006, intends to permit executives to cease pension accrual in this scheme and elect to receive a non-pensionable cash allowance. Participation in a defined contribution plan will be provided in place of the current FURBS.

All-employee share incentive schemes

Global All Employee Share Plan

As in the year ended 31 March 2004, the Remuneration Committee has approved that an award of shares based on the achievement of performance conditions be made to all employees in the Vodafone Group on 1 July 2005. These awards have a dilutive effect of approximately 0.03%.

Sharesave

The Vodafone Group 1998 Sharesave Scheme is an Inland Revenue approved scheme open to all UK permanent employees.

The maximum that can be saved each month is £250 and savings plus interest may be used to acquire shares by exercising the related option. The options have been granted at up to a 20% discount to market value. UK based executive directors are eligible to participate in the scheme and details of their participation are given in the table on page 73.

Share Incentive Plan

The Vodafone Share Incentive Plan (“SIP”) is an Inland Revenue approved plan open to all UK permanent employees. Eligible employees may contribute up to £125 each month and the trustee of the plan uses the money to buy shares on their behalf. An equivalent number of shares is purchased with contributions from the employing company. UK based executive directors are eligible to participate in the SIP and details of their share interests under these plans are given in the table on page 74.

Non-executive directors’ remuneration

The remuneration of non-executive directors is periodically reviewed by the Board, excluding the non-executive directors. Basic fee levels were increased in April 2005 to reflect directors’ considerably increased workload and the increased complexity of managing an international group. The fees payable are as follows:

	Fees payable from
	1 April 2005
	£’000
Chairman	510
Deputy Chairman and Senior Independent Director	120
Basic Non-Executive Director fee	95
Chairmanship of Audit Committee	20
Chairmanship of Remuneration Committee	15
Chairmanship of Nominations and Governance Committee	10

68 |  Governance

In addition, an allowance of £6,000 is payable each time a non-European based non-executive director is required to travel to attend Board and Committee meetings, to reflect the additional time commitment involved.

Details of each non-executive director’s remuneration are included in the table on page 70.

Non-executive directors do not participate in any incentive or benefit plans. The Company does not provide any contribution to their pension arrangements. The Chairman is entitled to the provision of a fully-expensed car or car allowance.

Service contracts and appointments of directors

Executive directors

The Remuneration Committee has determined that, after an initial term that may be of up to two years’ duration, executive directors’ contracts should thereafter have rolling terms and be terminable on no more than one year’s notice. No payments should normally be payable on termination other than the salary due for the notice period and such entitlements under incentive plans and benefits that are consistent with the terms of such plans.

Details of the contract terms of the executive directors follow:

		Contract start date	Unexpired term	*	Notice period
Arun Sarin		1 April 2003	Indefinite		1 year
Peter Bamford		1 April 1998	Indefinite		1 year
Thomas Geitner		1 June 2005	Indefinite		1 year
Sir Julian Horn-Smith		4 June 1996	Indefinite		1 year
Ken Hydon		1 January 1997	Indefinite		1 year
*	until normal retirement age.

At the time of his appointment to the Board, Thomas Geitner was employed under a fixed term five-year service contract with Mannesmann AG (now Vodafone Holding GmbH), which was the normal contract arrangement for Mannesmann AG board members. Mr Geitner entered into a new contract with the Company in June 2005 which provides similar terms to the other executive directors.

All the UK based executive directors have, whilst in service, entitlement under a long term disability plan from which two-thirds of base salary would be provided until normal retirement date. In the event of disability, Thomas Geitner would receive his normal retirement pension based on his accrued service.

Retirement of Ken Hydon

Ken Hydon, the Company’s Financial Director, will retire from the Company following the AGM on 26 July 2005. As well as his pension entitlement (see Pensions section on page 71), Mr. Hydon will be entitled to subsisting awards, pro-rated for both time and performance, in accordance with the standard rules of each incentive plan in which he participates. The Remuneration Committee agreed that he would be offered the opportunity to purchase his company car on leaving the Company. No severance payment will be payable to him.

Resignation of Vittorio Colao

Vittorio Colao resigned from the Board and left the Company on 11 July 2004. He received no severance payment and his entitlements under the incentive plans in which he participated were determined by the standard rules applicable. All long term incentive awards lapsed upon his resignation.

Fees retained for non-executive directorships in other companies

Some executive directors hold positions in other companies as non-executive directors. The fees received in respect of the 2005 financial year and retained by directors were as follows:

		Fees retained by the
	Company in which non-	individual in the 2005
	executive directorship is held	financial year (£’000)(1)
Thomas Geitner	Singulus Technologies AG	61.8
Vittorio Colao	RAS SpA	11.2
Sir Julian Horn-Smith	Smiths Group plc	45.3
	LloydsTSB Group plc	13.7
Ken Hydon	Reckitt Benckiser plc	50.0
	Tesco PLC	57.2

(1) Fees were retained in accordance with Company policy

Chairman and non-executive directors

After completing an initial three-year term, in March 2003, the Chairman accepted the invitation of the Nominations and Governance Committee and the Board to continue in office. The appointment continues indefinitely and may be terminated by either party on one year’s notice.

Non-executive directors, including the Deputy Chairman, are engaged on letters of 1 year appointment that set out their duties and responsibilities. The appointment of non-executive directors may be terminated without compensation.

The terms and conditions of appointment of non-executive directors are available for inspection by any person at the Company’s registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting).

Sir John Bond was appointed to the Board as a non-executive director with effect from 1 January 2005 and holds office on the same terms as other non-executive directors.

TSR performance

The following chart shows the performance of the Company relative to the FTSE100 index and the FTSE Global Telecommunications index, which are the most relevant indices for the Company.

Graph provided by Towers Perrin and calculated according to a methodology that is compliant with the requirements of the regulations. Data Sources: FTSE and Datastream

N.B. Performance of the Company shown by the graph is not indicative of vesting levels under the Company’s various incentive plans.

Governance  | 69

Audited Information

Remuneration for the Year ended 31 March 2005

The remuneration of the directors for the year ended 31 March 2005 was as follows:

	Salary/fees		Incentive schemes			Benefits			Total
	2005	2004	2005	(1)	2004	2005	(2)	2004	2005	2004
	£’000	£’000	£’000		£’000	£’000		£’000	£’000	£’000
Chairman
Lord MacLaurin	485	473	–		–	32		22	517	495
Deputy Chairman
Paul Hazen	130	124	–		–	–		–	130	124
Chief Executive
Arun Sarin	1,175	1,100	1,148		1,217	183		879	2,506	3,196
Executive directors
Peter Bamford	771	733	663		722	37		34	1,471	1,489
Vittorio Colao	191	531	–		651	3		9	194	1,191
Thomas Geitner	679	644	665		673	37		35	1,381	1,352
Sir Julian Horn-Smith	970	908	966		950	34		39	1,970	1,897
Ken Hydon	779	733	776		776	30		29	1,585	1,538
Non-executive directors
Sir John Bond	21	–	–		–	–		–	21	–
Dr Michael Boskin	85	80	–		–	–		–	85	80
Lord Broers	85	80	–		–	–		–	85	80
John Buchanan	85	80	–		–	–		–	85	80
Penny Hughes	95	90	–		–	–		–	95	90
Sir David Scholey	85	80	–		–	–		–	85	80
Professor Jürgen Schrempp	85	80	–		–	–		–	85	80
Luc Vandevelde	85	50	–		–	–		–	85	50
Former directors(3)	–	966	–		429	226		324	226	1,719
	5,806	6,752	4,218		5,418	582		1,371	10,606	13,541

Notes:
(1)	These figures are the cash equivalent value of the base share awards under the Vodafone Group Short Term Incentive Plan applicable to the year ended 31 March 2005. These awards are in relation to the performance achievements against targets in EBITDA before exceptional items, total service revenue, free cash flow and customer satisfaction for the 2005 financial year.
(2)	Benefits principally comprise cars and private health and disability insurance. For Arun Sarin, the figure includes £133,000 (gross) to cover the costs of relocating from the US to the UK. The relocation expenses paid covered costs including legal expenses, stamp duty, transportation costs and other out-of-pocket costs in accordance with normal Company policy. No further relocation costs are payable.
(3)	Under the terms of an agreement, Sam Ginn, a former director of the Company, provides consultancy services to the Group and is entitled to certain benefits. The estimated value of the benefits received by him in the year to 31 March 2005 was £226,000.

The aggregate compensation paid by the Company to its collective senior management⁽¹⁾ for services for the year ended 31 March 2005, is set out below. The aggregate number of senior management as at 31 March 2005 was 10, compared to 6 as at 31 March 2004.

	2005	2004
	£’000	£’000
Salaries and fees	2,972	2,341
Incentive schemes(2)	2,875	2,415
Benefits	1,066	462
	6,913	5,218
Notes:

(1)	Aggregate compensation for senior management is in respect of those individuals who were members of the Executive Committee as at, and for the year ended, 31 March 2005, other than executive directors.
(2)	Comprises the incentive scheme information for senior management on an equivalent basis to that disclosed for directors in the table at the top of this page. Details of share incentives awarded to directors and senior management are included in footnotes to the Short Term Incentive and Long Term Incentives tables on pages 71 and 72.

70 |  Governance

Pensions

Pension benefits earned by the directors in the year ended 31 March 2005 were:

							Transfer value	Employer
					Change in	Change in	of change in	allocation/
		Change in			transfer value	accrued	accrued	contribution to
	Total accrued	accrued	Transfer	Transfer	over year less	benefit in	benefit net of	defined
	benefit at	benefit over	value at	value at	member	excess of	member	contribution
	31 March 2005(1)	the year(1)	31 March 2004(2)	31 March 2005(2)	contributions	inflation	contributions	Plans
Name of Director	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Arun Sarin	–	–	–	–	–	–	–	330.0
Peter Bamford	27.3	4.3	275.5	348.8	69.7	3.6	42.4	192.4
Vittorio Colao	–	–	–	–	–	–	–	5.3
Thomas Geitner	92.7	28.0	763.1	1,163.2	400.1	25.9	325.1	–
Sir Julian Horn-Smith	548.1	67.8	7,498.8	9,090.3	1,559.2	52.4	836.9	–
Ken Hydon(3)	506.2	29.7	9,129.0	10,241.1	1,097.0	14.4	276.7	98.9

Notes:
(1)	The accrued pension benefits earned by the directors are those which would be paid annually on retirement, based on service to the end of the year, at the normal retirement age. The increase in accrued pension excludes any increase for inflation.
(2)	The transfer values have been calculated on the basis of actuarial advice in accordance with the Faculty and Institute of Actuaries’ Guidance Note GN11. No director elected to pay additional voluntary contributions. The transfer values disclosed above do not represent a sum paid or payable to the individual director. Instead they represent a potential liability of the pension scheme.
(3)	Ken Hydon reached 60 years of age on 3 November 2004 and will retire from the Company following the AGM on 26 July 2005. In accordance with the standard rules of the scheme, he received an immediate pension based on his accrued benefit without actuarial reduction or any enhancement. From 1 December 2004, Ken Hydon accrued a cash allowance equivalent to 30% of his base salary. This will cease when he leaves the Company.

In respect of senior management, the Group has made aggregate contributions of £799,524 into pension schemes. The Company’s proposals in light of the forthcoming changes in pension legislation which are due to take effect on 6 April 2006 are detailed under “Pensions” on page 68.

Directors’ interests in the shares of the Company

Short Term Incentive

Conditional awards of ordinary shares made to executive directors under the STIP, and dividends on those shares paid under the terms of the Company’s scrip dividend scheme and dividend reinvestment plan, are shown below. STIP shares which vested and were sold or transferred during the year ended 31 March 2005 are also shown below.

Shares conditionally

Total

awarded during the

Shares conditionally

Shares added

interest

year as base award in

awarded during the year

during the

Shares sold or transferred during

in STIP

respect of STIP

as enhancement shares

year through

the year in respect of the

on 1 April

awards for the 2004

in respect of STIP awards

dividend

2001, 2002 and 2003 financial

Total interest in STIP as at

2004

financial year

for the 2004 financial year

reinvestment

years(1)

31 March 2005

Number

Number of

Total

Value at date

Value at date

In respect

In respect of

Base

Number of

Total

number of

of award

(2)(3)

of award

(2)

Total number

of base

enhancement

Award

enhancement

value

(4)

shares

£’000

Number

£’000

of shares

awards

shares

shares

shares

£’000

Arun Sarin

–

1,013,733

1,217

506,867

608

–

–

–

1,013,733

506,867

2,136

Peter Bamford

2,130,190

601,320

722

300,661

361

9,733

722,305

361,152

1,305,631

652,816

2,752

Vittorio Colao

942,015

–

–

–

–

–

628,010

–

–

–

–

Thomas Geitner

640,269

–

–

–

–

2,819

209,255

104,628

219,470

109,735

463

Sir Julian Horn-Smith

1,324,070

–

–

–

–

52

34

18

882,713

441,357

1,860

Ken Hydon

1,081,324

–

–

–

–

52

34

18

720,883

360,441

1,519

Notes:
(1)	Shares in respect of the STIP awards for the 2001 and 2002 financial years were transferred on 1 July 2004 and 27 August 2004. In accordance with the terms of the STIP, the enhancement award for the 2003 financial year made to Vittorio Colao was forfeited on his resignation from the Board.
(2)	Previously disclosed within directors’ emoluments for the year ended 31 March 2004.
(3)	Value at date of award is based on the price of the Company’s ordinary shares on 1 July 2004 of 120.0118p.
(4)	The value at 31 March 2005 is calculated using the closing middle market price of the Company’s ordinary shares at 31 March 2005 of 140.50p.

The aggregate number of shares conditionally awarded during the year as base award and enhancement shares to the Company’s senior management, other than executive directors, is 585,536. For a description of the performance and vesting conditions, see “Short/medium term incentive” on page 66.

Governance  | 71

Board’s Report to Shareholders on Directors’ Remuneration continued

Long Term Incentives

Performance shares

Conditional awards of ordinary shares made to executive directors under the Vodafone Group Long Term Incentive Plan and Vodafone Group Plc 1999 Long Term Stock Incentive Plan, and dividends on those shares paid under the terms of the Company’s scrip dividend scheme and dividend reinvestment plan, are shown below. Long Term Incentive shares that vested and were sold or transferred during the year ended 31 March 2005 are also shown below.

									Shares sold or
						Shares added	Shares forfeited		transferred in
	Total					during the	in respect of		respect of
	interest in					2005 financial	awards for the		awards for the
	Long Term					year through	2002, 2003 and		2001, 2002 and
	Incentives at		Shares conditionally awarded during			dividend	2004 financial		2003 financial		Total interest in Long Term
	1 April 2004	(1)	the 2005 financial year			reinvestment	years		years		incentives at 31 March 2005
	Number		Number	Value at date	(2)	Number	Number	(3)	Number	(3)			(4)
				of award							Number	Total value
				£’000							of shares	£’000
Arun Sarin	1,844,863		2,016,806	2,400		–	–		–		3,861,669	5,426
Peter Bamford	2,225,622		983,727	1,170		26,471	190,048		111,142		2,934,630	4,123
Vittorio Colao	1,353,065		–	–		6,383	1,359,448		–		–	–
Thomas Geitner	1,812,851		829,438	987		20,285	147,148		86,049		2,429,377	3,413
Sir Julian Horn-Smith	2,810,569		1,241,754	1,478		34,353	232,713		136,091		3,717,872	5,224
Ken Hydon	2,225,622		997,781	1,187		26,471	190,048		111,142		2,948,684	4,143

Notes:
(1)	Restricted share awards under the Vodafone Group Plc 1999 Long Term Stock Incentive Plan.
(2)	The value of awards under the Vodafone Group Plc 1999 Long Term Incentive Plan is based on the price of the Company’s ordinary shares on 28 July 2004 of 119.00p.
(3)	Shares in respect of awards for the 2002 financial year were sold or transferred on 1 July 2004 and 27 August 2004. In accordance with the Rules of the Long Term Stock Incentive Plan, awards made to Vittorio Colao were forfeited on his resignation from the Board.
(4)	The value at 31 March 2005 is calculated using the closing middle market price of the Company’s ordinary shares at 31 March 2005 of 140.50p.
(5)	All employees, including Executive Directors received an award of 350 shares on 5 July 2004, under the Global All Employee Share Plan. The awards vest after two years and are not subject to performance conditions.

The aggregate number of shares conditionally awarded during the year to the Company’s senior management is 2,912,716 shares. For a description of the performance and vesting conditions see “Long term incentives” on pages 66 to 68. In some cases local performance conditions attach to the awards.

Share options

The following information summarises the directors’ options under the Vodafone Group Plc Savings Related Share Option Scheme, the Vodafone Group 1998 Sharesave Scheme, the Vodafone Group Plc Executive Share Option Scheme and the Vodafone Group 1998 Company Share Option Scheme, all of which are Inland Revenue approved schemes. The table also summarises the directors’ options under the Vodafone Group Plc Share Option Scheme, the Vodafone Group 1998 Executive Share Option Scheme, the AirTouch Communications, Inc. 1993 Long Term Stock Incentive Plan and the Vodafone Group Plc 1999 Long Term Stock Incentive Plan, which are not Inland Revenue approved. No other directors have options under any of these schemes. Only under the Vodafone Group 1998 Sharesave Scheme may shares be offered at a discount in future grants of options. For a description of the performance and vesting conditions see “Long term incentives” on pages 66 to 68.

	Options held at	(1)		Options exercised	Options lapsed
	1 April 2004		Options granted	during the	during the		Weighted average
	or date of		during the 2005	2005 financial	2005 financial	Options held at	exercise price at	Earliest date
	appointment		financial year	year	year	31 March 2005	31 March 2005	from which	Latest expiry
	Number		Number	Number	Number	Number	Pence	exercisable	date
Arun Sarin(2)(3)	18,646,164		7,058,823	5,000,000	–	20,704,987	148.8	Jun 2000	Jul 2014
Peter Bamford	15,944,430		3,279,092	150,500	–	19,073,022	149.6	Jul 2001	Jul 2014
Vittorio Colao(4)	5,762,813		–	–	5,762,813	–	–	–	–
Thomas Geitner	14,570,061		2,764,793	–	–	17,334,854	154.1	Jul 2003	Jul 2014
Sir Julian Horn-Smith	19,193,689		4,139,180	–	–	23,332,869	144.4	Jul 2001	Jul 2014
Ken Hydon	15,391,230		3,325,936	–	–	18,717,166	150.0	Jul 2001	Jul 2014
	89,508,387		20,567,824	5,150,500	5,762,813	99,162,898

Notes:
(1)	The weighted average exercise price of options over shares in the Company granted during the year and listed above is 119.00 pence. The earliest date from which they are exercisable is July 2007 and the latest expiry date is 27 July 2014. For a description of the performance and vesting conditions see “Long term incentives” on pages 66 to 68.
(2)	Some of the options held by Arun Sarin are held in the form of American Depositary Shares, each representing ten ordinary shares of the Company, which are traded on the New York Stock Exchange. The number of ADSs over which Arun Sarin holds options is 625,000.
(3)	The terms of the share options granted over 6,250,000 shares in 1999 to Arun Sarin allow exercise until the earlier of the date on which he ceases to be a director of the Company and the seventh anniversary of the respective dates of grant.
(4)	In accordance with the terms of the share option plans, options granted to Vittorio Colao lapsed on his resignation from the Board.

The aggregate number of options granted during the year to the Company’s senior management, other than executive directors, is 10,918,395. The weighted average exercise price of the options granted to senior management during the year is 119.00 pence. The earliest date from which they are exercisable is July 2007 and the latest expiry date is 27 July 2014.

72 | Governance

Further details of options outstanding at 31 March 2005 are as follows:

	Exercisable			Exercisable
	Market price greater than			Option price greater than
	option price(1)			market price(1)			Not yet exercisable
Weighted	Weighted
average	Latest	Weighted	average
Options	exercise	expiry	Options	average	Latest	Options	exercise	Earliest date
held	price	date	held	exercise price	expiry	held	price	from which
Number	Pence		Number	Pence	date	Number	Pence	exercisable
Arun Sarin(2)	–	–	–	6,250,000	217.6	Jul-06	14,454,987	119.1	Jul-06
Peter Bamford	–	–	–	3,725,712	201.4	Jul-11	15,347,310	137.1	Jul-05
Thomas Geitner	–	–	–	3,259,679	209.3	Jul-11	14,075,175	141.3	Jul-05
Sir Julian Horn-Smith	–	–	–	3,913,990	199.2	Jul-11	19,418,879	133.4	Jul-05
Ken Hydon	–	–	–	3,323,012	210.1	Jul-11	15,394,154	137.0	Jul-05
				20,472,393			78,690,505

Notes:
(1)	Market price is the closing middle market price of the Company’s ordinary shares at 31 March 2005 of 140.50p.
(2)	Some of Arun Sarin’s options are in respect of American Depositary Shares, each representing ten ordinary shares in the Company, which are traded on the New York Stock Exchange. The number and option price have been converted into the equivalent amounts for the Company’s ordinary shares.

The Company’s register of directors’ interests (which is open to inspection at the Company’s registered office) contains full details of directors’ shareholdings and options to subscribe. These options by exercise price were:

		Options held at	Options granted	Options exercised	Options lapsed
		1 April 2004	during the	during the	during the
		or date of	2005 financial	2005 financial	2005 financial	Options held at
	Opion price	appointment	year	year	year	31 March 2005
	Pence	Number	Number	Number	Number	Number
Vodafone Group Plc Executive Share Option Scheme (Approved – 1988)	58.70	150,500	–	150,500	–	–
Vodafone Group Plc Share Option Scheme (Unapproved – 1988)	155.90	855,000	–	–	–	855,000
Vodafone Group 1998 Company Share Option Scheme (Approved)	255.00	377,000	–	–	–	377,000
Vodafone Group 1998 Executive Share Option Scheme (Unapproved)	282.30	1,064,100	–	–	–	1,064,100
Vodafone Group Plc Savings Related Share Option Scheme (1988)	70.92	50,126	–	–	–	50,126
Vodafone Group 1998 Sharesave Scheme	95.30	16,710	–	–	–	16,710
AirTouch Communications, Inc. 1993 Long Term Incentive Plan(1)	95.12	5,000,000	–	5,000,000	–	–
Vodafone Group Plc 1999 Long Term Stock Incentive Plan	97.00	20,846,662	–	–	2,911,465	17,935,197
	119.00	–	20,567,824	–	–	20,567,824
	119.25	25,637,680	–	–	2,751,202	22,886,478
	151.56	1,848,000	–	–	–	1,848,000
	157.50	16,943,043	–	–	–	16,943,043
	164.49	100,146	–	–	100,146	–
	242.43	6,250,000	–	–	–	6,250,000
	291.50	10,369,420	–	–	–	10,369,420
		89,508,387	20,567,824	5,150,500	5,762,813	99,162,898

Notes:
(1)	These share options are in respect of American Depositary Shares, each representing ten ordinary shares in the Company, which are traded on the New York Stock Exchange. The number and option price have been converted into the equivalent amounts for the Company’s ordinary shares.

Governance  | 73

Board’s Report to Shareholders on Directors’ Remuneration continued

Details of the options exercised by directors of the Company in the year ended 31 March 2005, are as follows:

	Options exercised	Option price
	during the		Market price	Gross pre-tax
	year		at date of	gain
	(Number)		exercise	(£’000)
Arun Sarin	2,890,000	$1.6125	$2.76765	1,767.8
	2,110,000	$1.6125	$2.70020	1,215.3
Peter Bamford	150,500	£0.5870	£1.2056	93.1
	5,150,500			3,076.2
Notes:
The aggregate gross pre-tax gain made on the exercise of share options in the 2005 financial year by the Company’s above directors was £3,076,276 (2004: £1,903,983). The closing middle market price of the Company’s shares at 31 March 2005 was 140.5p, its highest closing price in the 2005 financial year having been 146.75p and its lowest closing price having been 114p.

Beneficial interests

The directors’ beneficial interests in the ordinary shares of the Company, which includes interests in the Vodafone Group Profit Sharing Scheme and the Vodafone Share Incentive Plan, but which excludes interests in the Vodafone Group Share Option Schemes, the Vodafone Group Short Term Incentive or in the Vodafone Group Long Term Incentives, are shown below:

			1 April 2004 or date of
	23 May 2005	31 March 2005	appointment
Lord MacLaurin	92,495	92,495	92,495
Paul Hazen	360,900	360,900	360,900
Arun Sarin(1)	4,832,560	4,832,560	4,832,560
Peter Bamford	247,092	246,736	290,518
Thomas Geitner	417,700	417,700	12,350
Sir Julian Horn-Smith	1,818,613	1,818,257	1,734,834
Ken Hydon	2,446,869	2,446,513	2,325,200
Sir John Bond(2)	34,423	34,423	–
Dr Michael Boskin	212,500	212,500	212,500
Lord Broers	19,819	19,819	19,379
John Buchanan	104,318	104,318	102,000
Penny Hughes	22,500	22,500	22,500
Sir David Scholey	50,000	50,000	50,000
Professor Jürgen Schrempp	10,000	10,000	–
Luc Vandevelde	20,000	20,000	20,000

Notes:
(1)	Arun Sarin also has a non-beneficial interest as the trustee of two family trusts, each holding 5,720 shares.
(2)	Sir John Bond was appointed to the Board on 1 January 2005.

Changes to the interests of the directors of the Company in the ordinary shares of the Company during the period from 1 April 2005 to 23 May 2005 relate to shares acquired either through Vodafone Group Personal Equity Plans or the Vodafone Share Incentive Plan. As at 31 March 2005, and during the period from 1 April 2005 to 23 May 2005, no director had any interest in the shares of any subsidiary company.

Other than those individuals included in the table above who were Board members as at 31 March 2005, members of the Group’s Executive Committee, at 31 March 2005, had an aggregate beneficial interest in 2,290,975 ordinary shares of the Company. At 23 May 2005, Executive Committee members at that date, including Tim Miles who was appointed to the Executive Committee in April 2005, had an aggregate beneficial interest in 2,344,266 ordinary shares of the Company, none of whom had an individual beneficial interest amounting to greater than 1% of the Company’s ordinary shares.

Interests in share options of the Company at 23 May 2005

At 23 May 2005, there had been no change to the directors’ interests in share options from 31 March 2005.

Other than those individuals included in the table above, at 23 May 2005, members of the Group’s Executive Committee at that date held options for 49,281,976 ordinary shares at prices ranging from 48.3 pence to 293.7 pence per ordinary share, with a weighted average exercise price of 144.0 pence per ordinary share exercisable at dates ranging from July 1999 to July 2014, and options for 273,254 ADSs at prices ranging from $13.65 to $45.3359 per ADS, with a weighted average exercise price of $23.316 per ADS, exercisable at dates ranging from July 2001 to July 2013.

Lord MacLaurin, Paul Hazen, Sir John Bond, Dr Michael Boskin, Lord Broers, John Buchanan, Penny Hughes, Sir David Scholey, Professor Jürgen Schrempp and Luc Vandevelde held no options at 23 May 2005.

Penny Hughes
On behalf of the Board

74 |  Governance

Employees

Employee involvement

The Board of directors’ aim is to ensure that employees understand the Company’s strategic goals and the mutual obligations of working in a high performing, values-based organisation.

Vodafone’s Vision and Values provide a common way of doing things and the Group remains determined that they continue to flourish throughout the business; implicit in all that the Group does for and with its shareholders, customers and employees. Vodafone has now launched a global induction programme to ensure that all new employees are introduced to the Group’s culture, vision and objectives.

The Board places a high priority on effective employee communications to promote important messages and a wide range of mechanisms is used to achieve this. In addition to the more traditional channels, such as the global team briefing programme, the Group is increasingly using its own products and services such as SMS and audio based messaging to reinforce their efficacy as internal communications media. This will be developed further in the future. This year has also seen the launch of Vodafone TV, the Group’s bespoke television service used to simultaneously disseminate key messages and data worldwide via the Group’s global intranet. All of these initiatives are supported and enhanced by a comprehensive range of award winning in-house publications, for effectively sharing information with employees on key performance indicators for the business.

Within European subsidiaries, employee representatives meet annually with members of the executive management team in the Vodafone European Employee Consultative Council to discuss the performance and prospects of the Group and significant transnational issues.

During 2003, Vodafone conducted its first bi-annual Employee Survey in order to measure the effectiveness of its communications initiatives and its standing as an employer. 84% of employees shared their views with the Company and, as a result, the Board initiated a Group level action plan with three themes. These, and the initiatives put in place during 2003 and 2004 to address them, are summarised below:

•	To communicate and bring the Vodafone strategy to life;
	Chief Executive, Arun Sarin, and other members of the executive management team continue to host the “Talkabout” roadshow programme which aims to visit each mobile operating subsidiary annually. In the “Talkabout” sessions, management discusses the shared vision for Vodafone’s future with as wide an audience of Vodafone people as possible, listening to their views and talking about the issues that matter most to them and exchanging ideas about how Vodafone can serve its customers as a single, global team. This programme provides the perfect opportunity to articulate the “Vodafone Journey”, which is how the Group has chosen to identify its strategic goals and priorities and its progress in achieving them.
•	To ensure the world class development of Vodafone people;
	One of the Group’s key strategic goals is to “Build the best Vodafone Team”. This signifies a long-term investment in building the Group’s organisation capability. The aim is to create a steady stream of talent at every level of the organisation, with a continued emphasis on developing operational excellence. Vodafone’s Global People Development function is working with the Group’s operating companies to create common global approaches to people and management development. This includes resourcing and assessment standards, consistent performance reviews, formal training structures (including e-learning) and an annual process to review the performance and potential of Vodafone’s most senior managers in order to plan succession and development moves.
•	To consider how the Group might anticipate and better respond to the needs of its customers;

The Group has developed and launched a global Customer Delight system which gathers monthly feedback from thousands of customers around the world to see how Vodafone measures up to their expectations.

The second Employee Survey was conducted in February 2005 and over 89% of employees took the opportunity to share their views. The results will be used to measure progress and develop a further programme of action to support the objective of creating a high performance, values based culture with people as a competitive advantage.

Employment policies

The Group’s employment policies are consistent with the principles of the United Nations Universal Declaration of Human Rights and the International Labour Organisation Core Conventions and are developed to reflect local legal, cultural and employment requirements. High standards are maintained wherever the Group operates, as Vodafone aims to ensure that the Group is recognised as an employer of choice. Employees at all levels and in all companies are encouraged to make the greatest possible contribution to the Group’s success. The Group considers its employee relations to be good.

Equal opportunities

Vodafone does not condone unfair treatment of any kind and operates an equal opportunities policy for all aspects of employment and advancement, regardless of race, nationality, sex, marital status, disability or religious or political belief. In practice, this means that the Group is able to select the best people available for positions on the basis of merit and capability, making the most effective use of the talents and experience of people in the business, providing them with the opportunity to develop and realise their potential.

The disabled

The directors are conscious of the special difficulties experienced by people with disabilities. Every effort is made to ensure ready access to the Group’s facilities and services and a range of products has been developed for people with special needs. In addition, disabled people are assured of full and fair consideration for all vacancies for which they offer themselves as suitable candidates and efforts are made to meet their special needs, particularly in relation to access and mobility. Where possible, modifications to workplaces have been made to provide access and, therefore, job opportunities for the disabled. Every effort is made to continue the employment of people who become disabled via the provision of additional facilities, job design and the provision of appropriate training.

Health, safety and wellbeing

The health, safety and wellbeing of the Group’s customers, employees and others who could be affected by its activities, are of paramount importance to Vodafone and the Group applies rigorous standards to all of its operations. Annually, each operating subsidiary is audited against these standards and the results are submitted in a report for discussion by the Board of directors.

The Group’s annual global health and safety audit has shown a consistent rise in scores from the audits in 2002, 2003 and 2004. New standards and policies have been produced and implemented with an increase in consultation, participation and best practice sharing by health and safety professionals from the operating subsidiaries. These include revised standards on radio frequency field exposure, health and safety risk assessment and health and safety planning. Further standards and a comprehensive health and safety management system are in the consultation phase.

Governance  | 75

Corporate Responsibility and Environmental Issues

Corporate Responsibility

Vodafone sees corporate responsibility (“CR”) as the process of understanding the expectations of stakeholders in the Company and taking appropriate action to meet those expectations where they are realistic and legitimate. Stakeholders include customers, investors, employees, suppliers, the communities where the Group operates and where networks are based, governments and regulators and representatives of civil society.

CR is relevant across all aspects of business strategy and is encapsulated in the strategic goal of being a responsible business. The Executive Committee, chaired by the Chief Executive, receives information on CR and the Director of Corporate Responsibility provides a report to the Board. All mobile operating subsidiaries have a representative on their management boards with responsibility for CR. CR is also at the heart of Vodafone’s values and is clearly linked to one of the four passions, Passion for the world around us.

Vodafone’s approach to business is underpinned by the Business Principles. These cover both corporate and individual behaviour and are communicated to employees in a number of ways, including induction processes, web-sites and briefings. Further information on the Business Principles can be found on www.vodafone.com/responsibility. CR matters are included within the Group’s development programme for directors and senior managers.

Vodafone aims to integrate CR into the business and this is being reflected in governance, policy, process and reporting. For example, CR is integrated into Vodafone’s risk management processes such as the formal annual confirmation provided by each mobile operating subsidiary detailing the operation of their controls system as outlined on page 63.

These processes are supported by stakeholder engagement, which seeks to provide a clear understanding of expectations of performance. The Group engages with stakeholders in a variety of different ways. For example, during the 2005 financial year, meetings relating to CR issues were held with over 20 investors, employees were surveyed (with an 89% response rate) and the Group conducted research with the public which involved over 12,500 interviews across ten markets. This helps to ensure Vodafone is aware of the issues relevant to the business and that it is focused on the priority areas. This is covered in more detail in the Company’s CR Report for the 2005 financial year, which can be found at www.vodafone.com/responsibility.

Performance is closely monitored and reports are provided to most subsidiary company boards on a regular basis. This has driven demonstrable performance improvement and is valuable in benchmarking. Progress is being made in responding to our stakeholders’ expectations. Some examples are set out below and further details are provided in the Company’s CR Report for the 2005 financial year:

• A specialist team has been established in Group Marketing to coordinate development of socially beneficial products across Vodafone. Current projects include products and services for the deaf and blind or others with difficulty using conventional handsets;

• Vodafone commissioned an independent assessment of compliance with its standards on age-classified content, chat services, games and Internet browsing. A mobile Internet filtering service has been designed to help parents prevent their children accessing inappropriate content and this is expected to be rolled out across all operations during 2005 and 2006;

• The Vodafone Code of Ethical Purchasing has been integrated into supplier performance management processes. During the year, 25 of the Company’s largest suppliers completed self-assessment questionnaires against the Code and five on-site reviews were conducted at suppliers’ facilities;

• The Vodafone Group Foundation has continued to implement a programme of grant making activity in accordance with its mission statement. The Company, the

Vodafone Group Foundation, mobile operating subsidiaries and their foundations and employees committed total funds of over £2.5 million to the Asian Tsunami relief. This included the provision of free calls to and from the affected region and employee matched donations in a number of countries. Further details of the activities of the foundations are provided in the Foundation Yearbook which can be found at www.vodafonefoundation.org/about; and,

•

In addition to the Company’s CR Report, nine mobile operating subsidiaries have now published their own CR reports.

During the year the Group commissioned and published research into the broader socio-economic impacts of mobile in the developing world and launched the initial results. Further information is available at www.vodafone.com/responsibility.

Vodafone retained its position in both the FTSE4Good and Dow Jones Sustainability Indices.

Vodafone has continued to develop the level of independent assessment and assurance of the CR programme and performance data. The scope of work for the Group’s auditors (Deloitte & Touche LLP) has been extended to allow a conclusion to be expressed on certain performance data procedures across the business, as well as to review reporting against the requirements of the assurance standard AA1000AS. This assures, in all material respects, whether reporting reflects the material CR issues for Vodafone Group and whether processes are in place to ensure completeness, and reporting on responses to concerns on those issues. The assurance statement is published in the CR report.

Environmental Issues

The Group continues to monitor and manage the impact of its activities on the environment and is committed to minimising adverse impacts in an appropriate manner. Over the last twelve months, progress has been made across a series of projects that address environmental issues. These include addressing the concerns related to the perceived link between radio frequencies and health, the use of energy, the reuse and recycling of handsets and accessories, the management of waste and the use of ozone depleting substances. Examples of initiatives include:

• Approving, in April 2005, a new policy relating to Responsible Network Deployment. This is supported by a set of guidelines to help mobile operating subsidiaries achieve leading edge practices relating to community consultation, public concerns relating to health, masts and phones and environmental impact;

• Making available up-to-date information regarding radio frequency field strength values from locations that have been selected by an independent body. Fourteen out of sixteen mobile operating subsidiaries published these values and all measurements demonstrate that RF fields in publicly accessible places close to base stations are substantially below ICNIRP guideline levels. Vodafone Hungary will start to make the information available in July 2005 whilst Vodafone Japan is undertaking a trial;

• Developing an energy modelling tool to help predict the climate change impact of network expansion, and to support target setting. The Group has also carried out an intensive programme of meetings with key equipment vendors to discuss energy efficiency gains to be made through their product development programmes;

• Launching a handset reuse and recycling scheme in Egypt, one of the first such schemes in a developing market. The Group now has schemes operating in all controlled markets except Albania; and

• Sending over 90% of our network equipment waste for reuse and recycling, meeting the commitment from last year’s CR report.

Further details of these initiatives are provided in the Company’s CR Report for the 2005 financial year and on www.vodafone.com/responsibility.

76 |  Governance

Consolidated Financial Statements

Index to the Consolidated Financial Statements
		Page
Consolidated Profit and Loss Accounts for the years ended 31 March		78
Balance Sheets at 31 March		79
Consolidated Cash Flows for the years ended 31 March		80
Consolidated Statements of Total Recognised Gains and Losses for the years ended 31 March		81
Movements in Total Equity Shareholders’ Funds for the years ended 31 March		81
Notes to the Consolidated Financial Statements:
	1. Basis of Consolidated Financial Statements	82
	2. Accounting policies	82
	3. Segmental analysis	85
	4. Exceptional operating items	88
	5. Operating loss	88
	6. Exceptional non-operating items	90
	7. Net interest payable and similar items	91
	8. Tax on loss on ordinary activities	91
	9. Equity dividends	93
	10.Loss per share	94
	11.Intangible fixed assets	95
	12.Tangible fixed assets	96
	13.Fixed asset investments	97
	14.Stocks	99
	15.Debtors	99
	16.Investments	100
	17.Creditors: amounts falling due within one year	100
	18.Creditors: amounts falling due after more than one year	100
	19.Financial liabilities and assets	102
	20.Financial instruments	105
	21.Provisions for liabilities and charges	106
	22.Called up share capital	107
	23.Reserves	110
	24.Non-equity minority interests	111
	25.Acquisitions and disposals	112
	26.Commitments	112
	27.Contingent liabilities	113
	28.Analysis of cash flows	114
	29.Analysis of net debt	115
	30.Directors	115
	31.Employees	116
	32.Pensions	117
	33.Subsequent events	121
	34.Principal subsidiary undertakings, associated undertakings and investments	122
	35.Related party transactions	123
	36.US GAAP information	124
	37.Changes in accounting standards	136

Financials | 77

Consolidated Profit and Loss Accounts for the years ended 31 March

		2005		2005		2004		2003
	Note	$m		£m		£m		£m
Total Group turnover: Group and share of joint ventures and associated undertakings
– Continuing operations		86,471		45,781		42,920		37,324
– Discontinued operations		–		–		818		1,828
		86,471		45,781		43,738		39,152
Less: Share of joint ventures		–		–		–		(8	)
Share of associated undertakings		(22,001	)	(11,648	)	(10,179	)	(8,769	)
Group turnover	3	64,470		34,133		33,559		30,375
Group turnover	3
– Continuing operations		64,470		34,133		32,741		28,547
– Discontinued operations		–		–		818		1,828
		64,470		34,133		33,559		30,375
Operating (loss)/profit	3, 4, 5
– Continuing operations		(10,018	)	(5,304	)	(4,842	)	(5,052	)
– Discontinued operations		–		–		66		(243	)
		(10,018	)	(5,304	)	(4,776	)	(5,295	)
Share of operating profit/(loss) in joint ventures and
associated undertakings		2,253		1,193		546		(156	)
Total Group operating loss
Group and share of joint ventures and associated undertakings	3	(7,765	)	(4,111	)	(4,230	)	(5,451	)
Exceptional non-operating items	6	25		13		(103	)	(5	)
– Continuing operations		25		13		(44	)	20
– Discontinued operations		–		–		(59	)	(25	)
Loss on ordinary activities before interest	3	(7,740	)	(4,098	)	(4,333	)	(5,456	)
Net interest payable and similar items	7	(1,141	)	(604	)	(714	)	(752	)
Group		(742	)	(393	)	(499	)	(457	)
Share of joint ventures and associated undertakings		(399	)	(211	)	(215	)	(295	)
Loss on ordinary activities before taxation		(8,881	)	(4,702	)	(5,047	)	(6,208	)
Tax on loss on ordinary activities	8	(4,224	)	(2,236	)	(3,154	)	(2,956	)
Group tax on loss on ordinary activities before exceptional tax		(4,339	)	(2,297	)	(2,866	)	(2,624	)
Share of joint ventures and associated undertakings		(1,016	)	(538	)	(288	)	(332	)
Tax on loss on ordinary activities before exceptional tax		(5,355	)	(2,835	)	(3,154	)	(2,956	)
Exceptional tax credit		1,131		599		–		–
Loss on ordinary activities after taxation		(13,105	)	(6,938	)	(8,201	)	(9,164	)
Equity minority interests		(1,031	)	(546	)	(753	)	(593	)
Non-equity minority interests		(106	)	(56	)	(61	)	(62	)
Loss for the financial year		(14,242	)	(7,540	)	(9,015	)	(9,819	)
Equity dividends	9	(5,020	)	(2,658	)	(1,378	)	(1,154	)
Retained loss for the Group and its share of joint ventures and
associated undertakings	23	(19,262	)	(10,198	)	(10,393	)	(10,973	)
Basic and diluted loss per share	10	(21.51	)¢	(11.39	)p	(13.24	)p	(14.41	)p

The accompanying notes are an integral part of these Consolidated Financial Statements.
The unaudited US dollar amounts are prepared on the basis set out in note 1.

78 | Financials

Balance Sheets at 31 March

				Group						Company
		2005		2005		2004		2005		2004
	Note	$m		£m		£m		£m		£m
Fixed assets
Intangible assets	11	157,647		83,464		93,622		–		–
Tangible assets	12	34,750		18,398		18,083		–		–
Investments		38,248		20,250		22,275		94,027		106,177
Investments in associated undertakings	13	36,639		19,398		21,226		–		–
Other investments	13	1,609		852		1,049		94,027		106,177
		230,645		122,112		133,980		94,027		106,177
Current assets
Stocks	14	812		430		458		–		–
Debtors: amounts falling due after more than one year	15	3,959		2,096		1,380		83		87
Debtors: amounts falling due within one year	15	10,581		5,602		5,521		76,655		65,540
Investments	16	1,541		816		4,381		28		–
Cash at bank and in hand		5,384		2,850		1,409		–		53
		22,277		11,794		13,149		76,766		65,680
Creditors: amounts falling due within one year	17	(28,024	)	(14,837	)	(15,026	)	(90,425	)	(95,679	)
Net current liabilities		(5,747	)	(3,043	)	(1,877	)	(13,659	)	(29,999	)
Total assets less current liabilities		224,898		119,069		132,103		80,368		76,178
Creditors: amounts falling due after more  than one year	18	(23,387	)	(12,382	)	(12,975	)	(9,174	)	(9,271	)
Provisions for liabilities and charges	21	(8,598	)	(4,552	)	(4,197	)	–		–
		192,913		102,135		114,931		71,194		66,907
Capital and reserves
Called up share capital	22	8,095		4,286		4,280		4,286		4,280
Share premium account	23	98,754		52,284		52,154		52,284		52,154
Merger reserve		186,853		98,927		98,927		–		–
Capital reserve		–		–		–		88		88
Own shares held	23	(9,672	)	(5,121	)	(1,136	)	(5,085	)	(1,088	)
Other reserve	23	1,188		629		713		629		713
Profit and loss account	23	(97,628	)	(51,688	)	(43,014	)	18,992		10,760
Total equity shareholders’ funds		187,590		99,317		111,924		71,194		66,907
Equity minority interests		3,712		1,965		2,132		–		–
Non-equity minority interests	24	1,611		853		875		–		–
		192,913		102,135		114,931		71,194		66,907

The Consolidated Financial Statements were approved by the Board of directors on 24 May 2005 and were signed on its behalf by:

	A Sarin	Chief Executive
	K J Hydon	Financial Director

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

Financials | 79

Consolidated Cash Flows for the years ended 31 March

		2005		2005		2004		2003
	Note	$m		£m		£m		£m
Net cash inflow from operating activities	28	24,012		12,713		12,317		11,142
Dividends received from joint ventures and
associated undertakings		3,815		2,020		1,801		742
Net cash outflow for returns on investments and
servicing of finance	28	(739	)	(391	)	(44	)	(551	)
Taxation		(3,052	)	(1,616	)	(1,182	)	(883	)
Net cash outflow for capital expenditure and
financial investment		(9,006	)	(4,768	)	(4,267	)	(5,359	)
Purchase of intangible fixed assets		(111	)	(59	)	(21	)	(99	)
Purchase of tangible fixed assets		(9,236	)	(4,890	)	(4,508	)	(5,289	)
Purchase of investments		(36	)	(19	)	(43	)	(546	)
Disposal of tangible fixed assets		132		70		158		109
Disposal of investments		41		22		123		575
Loans to joint ventures		–		–		–		(59	)
Loans repaid (to)/by associated undertakings		(4	)	(2	)	24		–
Loans to businesses sold or acquired businesses held for sale		208		110		–		(50	)
Net cash outflow from acquisitions and disposals		(3,809	)	(2,017	)	(1,312	)	(4,880	)
Purchase of interests in subsidiary undertakings		(4,648	)	(2,461	)	(2,064	)	(3,525	)
Net cash acquired with subsidiary undertakings		–		–		10		11
Purchase of interests in associated undertakings		–		–		–		(1,491	)
Disposal of interests in subsidiary undertakings		839		444		995		125
Net cash disposed of with subsidiary undertakings		–		–		(258	)	–
Disposal of interests in associated undertakings		–		–		5		–
Equity dividends paid		(3,760	)	(1,991	)	(1,258	)	(1,052	)
Cash inflow/(outflow) before management of liquid
resources and financing		7,461		3,950		6,055		(841	)
Management of liquid resources	29	6,730		3,563		(4,286	)	1,384
Net cash outflow from financing	28	(11,537	)	(6,108	)	(700	)	(150	)
Increase in cash in the year		2,654		1,405		1,069		393
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year	29	2,654		1,405		1,069		393
Cash outflow/(inflow) from decrease/(increase) in debt	29	4,099		2,170		(280	)	165
Cash (inflow)/outflow from (decrease)/increase in liquid resources	29	(6,730	)	(3,563	)	4,286		(1,384	)
Decrease/(increase) in net debt resulting from cash flows	29	23		12		5,075		(826	)
Net debt acquired on acquisition of subsidiary undertakings		(4	)	(2	)	(7	)	–
Net debt disposed of on disposal of subsidiary undertakings		–		–		194		–
Translation difference		270		143		144		(826	)
Premium on repayment of debt		–		–		(56	)	(157	)
Other movements		(8	)	(4	)	1		4
Decrease/(increase) in net debt in the year		281		149		5,351		(1,805	)
Opening net debt		(16,032	)	(8,488	)	(13,839	)	(12,034	)
Closing net debt	29	(15,751	)	(8,339	)	(8,488	)	(13,839	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

80 |  Financials

Consolidated Statements of Total Recognised Gains and Lossesfor the years ended 31 March

	2005		2005		2004		2003
	$m		£m		£m		£m
(Loss)/profit for the financial year:
Group	(15,005	)	(7,944	)	(8,996	)	(9,049	)
Share of joint ventures	–		–		–		(62	)
Share of associated undertakings	763		404		(19	)	(708	)
	(14,242	)	(7,540	)	(9,015	)	(9,819	)
Currency translation:
Group	3,175		1,681		(2,462	)	10,484
Share of joint ventures	–		–		–		2
Share of associated undertakings	(404	)	(214	)	(2,830	)	(1,447	)
	2,771		1,467		(5,292	)	9,039
Total recognised losses relating to the year	(11,471	)	(6,073	)	(14,307	)	(780	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

Movements in Total Equity Shareholders’ Funds for the years ended 31 March

	2005		2005		2004		2003
	$m		£m		£m		£m
Loss for the financial year	(14,242	)	(7,540	)	(9,015	)	(9,819	)
Equity dividends	(5,020	)	(2,658	)	(1,378	)	(1,154	)
	(19,262	)	(10,198	)	(10,393	)	(10,973	)
Currency translation	2,771		1,467		(5,292	)	9,039
New share capital subscribed, net of issue costs	257		136		86		31
Purchase of treasury shares	(7,550	)	(3,997	)	(1,088	)	–
Purchase of shares in relation to employee share schemes	–		–		(17	)	(14	)
Own shares released on vesting of share awards	22		12		10		6
Other	(50	)	(27	)	(12	)	1
Net movement in total equity shareholders’ funds	(23,812	)	(12,607	)	(16,706	)	(1,910	)
Opening total equity shareholders’ funds	211,402		111,924		128,630		130,540
Closing total equity shareholders’ funds	187,590		99,317		111,924		128,630

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

Financials  | 81

Notes to the Consolidated Financial Statements

1.   Basis of Consolidated Financial Statements

Statutory financial information

The Consolidated Financial Statements are prepared in accordance with applicable accounting standards and in conformity with UK GAAP, which differ in certain material respects from US GAAP – see note 36.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Amounts in the Consolidated Financial Statements are stated in pounds sterling (£), the currency of the country in which the Company is incorporated. The translation into US dollars of the Consolidated Financial Statements as of, and for the financial year ended, 31 March 2005, is for convenience only and has been made at the Noon Buying Rate for cable transfers as announced by the Federal Reserve Bank of New York for customs purposes on 31 March 2005. This rate was $1.8888: £1. This translation should not be construed as a representation that the sterling amounts actually represented have been, or could be, converted into dollars at this or any other rate.

2.   Accounting policies

The Group’s material accounting policies are described below. For a discussion on the Group’s critical accounting estimates see “Operating and Financial Review and Prospects – Critical Accounting Estimates” elsewhere in this Annual Report.

Accounting convention

The Consolidated Financial Statements are prepared under the historical cost convention and in accordance with applicable accounting standards of the United Kingdom Accounting Standards Board and pronouncements of its Urgent Issues Task Force.

Basis of consolidation

The Consolidated Financial Statements include the accounts of the Company, its subsidiary undertakings and its share of the results of associated undertakings for financial statements made up to 31 March 2005. A listing of the Company’s principal subsidiary undertakings and associated undertakings is given in note 34.

Foreign currencies

Transactions in foreign currencies are recorded at the exchange rates ruling on the dates of those transactions, adjusted for the effects of any hedging arrangements. Foreign currency monetary assets and liabilities are translated into sterling at year end rates.

The results of international subsidiary undertakings, joint ventures and associated undertakings are translated into sterling at average rates of exchange. The adjustment to year end rates is taken to reserves. Exchange differences, which arise on the retranslation of international subsidiary undertakings’, joint ventures’ and associated undertakings’ balance sheets at the beginning of the year, and equity additions and withdrawals during the financial year, are dealt with as a movement in reserves.

Other translation differences are dealt with in the profit and loss account.

Turnover

Group turnover comprises turnover of the Company and its subsidiary undertakings and excludes sales taxes, discounts and sales between Group companies. Total Group turnover comprises Group turnover plus the Group’s share of the turnover of its associated undertakings and joint ventures.

Turnover from mobile telecommunications comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, the provision of other mobile telecommunications services, including data services and information provision, fees for connecting customers to a mobile network, revenue from the sale of equipment, including handsets and revenue arising from agreements entered into with Partner Networks.

Access charges and airtime used by contract customers are invoiced and recorded as part of a periodic billing cycle and recognised as turnover over the related access period, with unbilled turnover resulting from services already provided from the billing cycle date to the end of each period accrued and unearned turnover from services provided in periods after each accounting period deferred. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the airtime, or the credit expires.

Other turnover from mobile telecommunications primarily comprises equipment sales, which are recognised upon delivery to customers, and customer connection revenue. Customer connection revenue is recognised together with the related equipment revenue to the extent that the aggregate equipment and connection revenue does not exceed the fair value of the equipment delivered to the customer. Any customer connection revenue not recognised together with related equipment revenue is deferred and recognised over the period in which services are expected to be provided to the customer.

Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service.

Turnover from other businesses primarily comprises amounts charged to customers of the Group’s fixed line businesses, mainly in respect of access charges and line usage, invoiced and recorded as part of a periodic billing cycle.

82 |  Financials

Derivative financial instruments

Transactions in derivative financial instruments are undertaken for risk management purposes only.

The Group uses derivative financial instruments to hedge its exposure to interest rate and foreign currency risk. To the extent that such instruments are matched against an underlying asset or liability, they are accounted for using hedge accounting.

Gains or losses on interest rate instruments are matched against the corresponding interest charge or interest receivable in the profit and loss account over the life of the instrument. For foreign exchange instruments, gains or losses and premiums or discounts are matched to the underlying transactions being hedged.

Termination payments made or received in respect of derivative financial instruments held for hedging purposes are spread over the life of the underlying exposure where the underlying exposure continues to exist. Where the underlying exposure ceases to exist, termination payments are taken to the profit and loss account.

Pensions

Costs relating to defined benefit plans, which are subject to periodic valuations calculated by professionally qualified actuaries, are charged against profits, within staff costs so that the expected costs of providing pensions are recognised during the period in which benefit is derived from the employees’ services.

The costs of the various pension schemes may vary from the funding, dependent upon actuarial advice, with any difference between pension cost and funding being treated as a provision or prepayment.

Defined contribution pension costs charged to the profit and loss account represent contributions payable in respect of the period.

Research and development and advertising costs

Expenditure on research and development and advertising is written off in the year in which it is incurred.

Goodwill

Goodwill is calculated as the surplus of fair value of consideration over fair value attributed to the identifiable net assets and liabilities (excluding goodwill) of subsidiary, joint venture and associated undertakings acquired.

For acquisitions made after the financial year ended 31 March 1998, goodwill is capitalised and held as a foreign currency denominated asset, where applicable. Goodwill is amortised on a straight line basis over its estimated useful economic life. For acquired network businesses, whose operations are governed by fixed term licences, the amortisation period is determined primarily by reference to the unexpired licence period and the conditions for licence renewal. The amortisation periods range between 3 and 20 years, with the exception of the goodwill arising on the formation of Verizon Wireless and the acquisition of interests in Vodafone Japan. The goodwill arising on the formation of Verizon Wireless is amortised over 25 years as the Group has assessed the renewal of Verizon Wireless’ licences as perfunctory and as such believes a useful economic life for the acquired business of greater than 20 years is appropriate. During the 2005 financial year, as a result of the acquisition of the minority stakes in Vodafone Japan as described in “Business Overview – History and Development of the Company”, the Group reviewed the amortisation period for goodwill arising on the acquisition of interests in Vodafone Japan, including acquisitions prior to 31 March 2004. The Group concluded that although licences in Japan are issued for a five year term with a presumption of renewal where there is a continuing need for spectrum, the licence issued is technology dependent. Accordingly, the amortisation period for this goodwill was increased from 16 years to 21 years. The effect of this change on the amortisation charge for the 2005 financial year is not material. For other acquisitions, including customer bases, the amortisation period for goodwill is typically between 3 and 10 years.

For acquisitions made before 1 April 1998, when FRS 10, “Goodwill and Intangible Assets”, was adopted, goodwill was written off directly to reserves. Goodwill written off directly to reserves is included in the profit and loss account when the related business is sold.

Other intangible fixed assets

Purchased intangible fixed assets, including licence fees, are capitalised at cost.

Network licence costs are amortised over the periods of the licences. Amortisation is charged from commencement of service of the network. The annual charge is calculated in proportion to the capacity of the network during the start up period and on a straight line basis thereafter.

Other intangible fixed assets are amortised over their expected useful economic life on a straight line basis.

Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation.

Depreciation is not provided on freehold land. The cost of other tangible fixed assets is written off from the time they are brought into use, by equal instalments over their expected useful lives as follows:

Freehold buildings	25-50 years
Leasehold premises	the term of the lease
Equipment, fixtures and fittings	3-10 years

The cost of tangible fixed assets includes directly attributable incremental costs incurred in their acquisition and installation.

Financials | 83

Notes to the Consolidated Financial Statements continued

2. Accounting policies continued

Investments 

The Consolidated Financial Statements include investments in associated undertakings using the equity method of accounting. An associated undertaking is an entity in which the Group has a participating interest and, in the opinion of the directors, can exercise significant influence over its operational and financial policies. The Consolidated Profit and Loss Account includes the Group’s share of the operating profit or loss, exceptional items, interest income or expense and attributable taxation of those entities. The Balance Sheet shows the Group’s share of the net assets or liabilities of those entities, together with loans advanced and attributed goodwill.

The Consolidated Financial Statements include investments in joint ventures using the gross equity method of accounting. A joint venture is an entity in which the Group has a long-term interest and exercises joint control. Under the gross equity method, a form of the equity method of accounting, the Group’s share of the aggregate gross assets and liabilities underlying the investment in the joint venture is included in the Balance Sheet and the Group’s share of the turnover of the joint venture is disclosed in the Consolidated Profit and Loss Account.

Other investments, held as fixed assets, comprise equity shareholdings and other interests. They are stated at cost less provision for impairment. Dividend income is recognised upon receipt and interest when receivable.

Stocks

Stocks are valued at the lower of cost and estimated net realisable value.

Trade debtors

Trade debtors are accounted for at cost. Allowances are maintained for bad and doubtful debts for estimated losses resulting from the inability of customers to make required payments. Estimates are based on the ageing of the debt balances and historical experience. Debtors are written off when management deems them not to be collectable.

Taxation

Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is provided in full on timing differences that exist at the balance sheet date and that result in an obligation to pay more tax, or a right to pay less tax in the future. The deferred tax is measured at the rate expected to apply in the periods in which the timing differences are expected to reverse, based on the tax rates and laws that are enacted or substantially enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no binding commitment to sell the asset. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Leases

Rental costs under operating leases are charged to the profit and loss account in equal annual amounts over the periods of the leases.

Assets acquired under finance leases, which transfer substantially all the rights and obligations of ownership, are accounted for as though purchased outright. The fair value of the asset at the inception of the lease is included in tangible fixed assets and the capital element of the leasing commitment included in creditors. Finance charges are calculated on an actuarial basis and are allocated over each lease to produce a constant rate of charge on the outstanding balance.

Lease obligations which are satisfied by cash and other assets deposited with third parties are set-off against those assets in the Group’s balance sheet.

84 | Financials

3. Segmental analysis

The Group’s business is principally the supply of mobile telecommunications services and products. Other operations primarily comprise fixed line telecommunications businesses.

Segmental information is provided on the basis of geographic regions, being the basis on which the Group manages its worldwide interests.

In October 2004, the Group announced changes in the regional structure of its operations. Germany, Italy and the UK now form their own regions. The Group’s remaining mobile operations, outside Asia Pacific and the Americas, now form the Other EMEA region. The results below are presented in accordance with the new regional structure.

Turnover is by origin, which is not materially different from turnover by destination.

	Mobile telecommunications														Other operations
							Other				Asia						Other		Total
	Germany		Italy		UK		EMEA		Americas		Pacific		Total		Germany		EMEA		Group
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Year ended 31 March 2005:
Segment turnover	5,684		5,565		5,065		8,614		–		8,531		33,459		1,108		–		34,567
Inter-segment turnover	(51	)	(44	)	(47	)	(129	)	–		(4	)	(275	)	–		–		(275	)
Net turnover	5,633		5,521		5,018		8,485		–		8,527		33,184		1,108		–		34,292
Turnover between mobile and other operations	(110	)	–		–		(3	)	–		(1	)	(114	)	(45	)	–		(159	)
Group turnover	5,523		5,521		5,018		8,482		–		8,526		33,070		1,063		–		34,133
Operating (loss)/profit	(5,161	)	(1,522	)	745		382		(31	)	217		(5,370	)	65		1		(5,304	)
Share of operating profit/(loss) in associated undertakings	–		–		–		337		890		4		1,231		–		(38	)	1,193
Total Group operating (loss)/profit	(5,161	)	(1,522	)	745		719		859		221		(4,139	)	65		(37	)	(4,111	)
Exceptional non-operating items	–		–		–		(10	)	3		20		13		–		–		13
(Loss)/profit on ordinary activities before interest	(5,161	)	(1,522	)	745		709		862		241		(4,126	)	65		(37	)	(4,098	)
Total Group operating (loss)/profit	(5,161	)	(1,522	)	745		719		859		221		(4,139	)	65		(37	)	(4,111	)
Add back:
– Goodwill amortisation	6,824		3,779		230		2,349		788		729		14,699		1		–		14,700
Subsidiaries	6,824		3,779		230		1,369		–		726		12,928		1		–		12,929
Associates	–		–		–		980		788		3		1,771		–		–		1,771
– Exceptional operating items	–		–		–		315		–		–		315		–		–		315
Total Group operating profit/(loss) before goodwill amortisation
and exceptional items(1)	1,663		2,257		975		3,383		1,647		950		10,875		66		(37	)	10,904
Depreciation and amortisation charges,
excluding goodwill amortisation	948		700		733		1,086		–		1,300		4,767		173		–		4,940
Intangible and tangible fixed asset additions	842		721		801		1,548		–		1,150		5,062		128		–		5,190
At 31 March 2005:
Net assets/(liabilities) and attributed goodwill
(before net borrowings):
– subsidiary undertakings	36,674		19,066		4,603		17,058		(2,001	)	15,098		90,498		578		–		91,076
– share of associated undertakings	–		–		–		5,029		14,286		17		19,332		–		66		19,398
	36,674		19,066		4,603		22,087		12,285		15,115		109,830		578		66		110,474
Net debt																			(8,339	)
																			102,135

Note:
(1)	The Group considers its segment result to be Total Group operating profit before goodwill amortisation and exceptional items.

Financials | 85

Notes to the Consolidated Financial Statements continued

3. Segmental Analysiscontinued

	Mobile telecommunications														Other operations
							Other				Asia						Other		Asia		Total
	Germany		Italy		UK		EMEA		Americas		Pacific		Total		Germany		EMEA		Pacific		Group
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Year ended 31 March 2004:
Segment turnover	5,536		5,312		4,782		7,627		–		8,896		32,153		1,002		–		1,126		34,281
Inter-segment turnover	(42	)	(36	)	(38	)	(116	)	–		(6	)	(238	)	–		–		–		(238	)
Net turnover	5,494		5,276		4,744		7,511		–		8,890		31,915		1,002		–		1,126		34,043
Turnover between mobile and other    operations	(90	)	–		–		(5	)	–		(105	)	(200	)	(55	)	–		(229	)	(484	)
Group turnover	5,404		5,276		4,744		7,506		–		8,785		31,715		947		–		897		33,559
Operating (loss)/profit	(5,254	)	(1,343	)	825		473		(21	)	515		(4,805	)	(49	)	–		78		(4,776	)
Share of operating profit/(loss) in joint     ventures andassociated undertakings	–		–		–		257		297		1		555		(9	)	(1	)	1		546
Total Group operating (loss)/profit	(5,254	)	(1,343	)	825		730		276		516		(4,250	)	(58	)	(1	)	79		(4,230	)
Exceptional non-operating items	(59	)	–		–		(3	)	13		2		(47	)	2		1		(59	)	(103	)
(Loss)/profit on ordinary activities     before interest	(5,313	)	(1,343	)	825		727		289		518		(4,297	)	(56	)	–		20		(4,333	)
Total Group operating (loss)/profit	(5,254	)	(1,343	)	825		730		276		516		(4,250	)	(58	)	(1	)	79		(4,230	)
Add back:
– Goodwill amortisation	6,995		3,837		143		2,412		1,119		701		15,207		–		–		–		15,207
Subsidiaries	6,995		3,837		143		1,424		–		696		13,095		–		–		–		13,095
Associates	–		–		–		988		1,119		5		2,112		–		–		–		2,112
– Exceptional operating items	–		(351	)	130		–		(2	)	(5	)	(228	)	–		–		–		(228	)
Total Group operating profit/(loss)    before goodwill amortisation and    exceptional items	1,741		2,143		1,098		3,142		1,393		1,212		10,729		(58	)	(1	)	79		10,749
Depreciation and amortisation charges,    excluding goodwill amortisation	740		651		508		879		4		1,311		4,093		170		–		197		4,460
Intangible and tangible fixed asset    additions	858		700		540		1,141		–		1,366		4,605		115		–		41		4,761
At 31 March 2004:
Net assets/(liabilities) and attributed    goodwill (before net borrowings):
– subsidiary undertakings	42,512		22,041		5,369		18,735		(1,739	)	14,956		101,874		319		–		–		102,193
– share of associated undertakings	–		–		–		5,983		15,047		18		21,048		–		178		–		21,226
	42,512		22,041		5,369		24,718		13,308		14,974		122,922		319		178		–		123,419
Net debt																					(8,488	)
																					114,931

86 |  Financials

	Mobile telecommunications														Other operations
							Other				Asia						Other		Asia		Total
	Germany		Italy		UK		EMEA		Americas		Pacific		Total		Germany		EMEA		Pacific		Group
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Year ended 31 March 2003:
Segment turnover	4,754		4,397		4,055		6,219		18		8,596		28,039		924		–		2,616		31,579
Inter-segment turnover	(32	)	(26	)	(29	)	(88	)	(13	)	(4	)	(192	)	–		–		–		(192	)
Net turnover	4,722		4,371		4,026		6,131		5		8,592		27,847		924		–		2,616		31,387
Turnover between mobile and other    operations	(76	)	–		–		(1	)	–		(228	)	(305	)	(70	)	–		(637	)	(1,012	)
Group turnover	4,646		4,371		4,026		6,130		5		8,364		27,542		854		–		1,979		30,375
Operating (loss)/profit	(5,030	)	(1,955	)	1,090		359		(117	)	702		(4,951	)	(89	)	–		(255	)	(5,295)
Share of operating (loss)/profit in joint ventures and associated undertakings	–		–		–		(13	)	(21	)	2		(32	)	–		(124	)	–		(156	)
Total Group operating (loss)/profit	(5,030	)	(1,955	)	1,090		346		(138	)	704		(4,983	)	(89	)	(124)		(255	)	(5,451	)
Exceptional non-operating items	–		–		–		(6	)	(28	)	(295	)	(329	)	290		58		(24	)	(5)
(Loss)/profit on ordinary activities    before interest	(5,030	)	(1,955	)	1,090		340		(166	)	409		(5,312	)	201		(66)		(279	)	(5,456	)
Total Group operating (loss)/profit	(5,030	)	(1,955	)	1,090		346		(138	)	704		(4,983	)	(89	)	(124)		(255	)	(5,451	)
Add back:
– Goodwill amortisation	6,465		3,543		30		1,991		1,235		717		13,981		–		75		–		14,056
Subsidiaries	6,465		3,543		30		1,127		–		710		11,875		–		–		–		11,875
Associates	–		–		–		864		1,235		7		2,106		–		75		–		2,181
– Exceptional operating items	–		–		–		50		122		–		172		–		–		404		576
Total Group operating profit/(loss)    before goodwill amortisation and    exceptional items	1,435		1,588		1,120		2,387		1,219		1,421		9,170		(89	)	(49)		149		9,181
Depreciation and amortisation charges,    excluding goodwill amortisation	565		570		417		720		15		1,190		3,477		166		–		389		4,032
Intangible and tangible fixed asset    additions	800		732		500		1,188		9		1,393		4,622		135		–		186		4,943

Financials  | 87

Notes to the Consolidated Financial Statements continued

4. Exceptional operating items

	2005		2004		2003
	£m		£m		£m
Impairment of intangible and tangible fixed assets	(315	)	–		(485	)
Contribution tax	–		351		–
Reorganisation costs	–		(123	)	(91	)
	(315	)	228		(576	)

The exceptional operating cost of £315 million in the year ended 31 March 2005 is due to an impairment of the carrying value of goodwill relating to Vodafone Sweden.

The net exceptional operating income for 2004 of £228 million comprises £351 million of expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy and reorganisation costs of £123 million primarily relating to the Group’s operations in the UK.

The impairment charges for 2003 of £485 million relate to the carrying value of goodwill for Grupo Iusacell (£80 million) and tangible fixed assets in Japan Telecom (£405 million). Reorganisation costs of £91 million relate to the integration of Vizzavi and related restructuring of the Group’s internet portal activities.

5. Operating loss

	2005		2004						2003
		(1)	Continuing		Discontinued				Continuing		Discontinued
	Total		operations		operations		Total		operations		operations		Total
	£m		£m		£m		£m		£m		£m		£m
Group turnover	34,133		32,741		818		33,559		28,547		1,828		30,375
Cost of sales	(20,753	)	(18,986	)	(475	)	(19,461	)	(16,910	)	(986	)	(17,896	)
Exceptional operating items	–		351		–		351		–		–		–
Other cost of sales	(20,753	)	(19,337	)	(475	)	(19,812	)	(16,910	)	(986	)	(17,896	)
Gross profit	13,380		13,755		343		14,098		11,637		842		12,479
Selling and distribution costs	(2,031	)	(2,065	)	(14	)	(2,079	)	(1,863	)	(20	)	(1,883	)
Administrative expenses	(16,653	)	(16,532	)	(263	)	(16,795	)	(14,826	)	(1,065	)	(15,891	)
Goodwill amortisation	(12,929	)	(13,095	)	–		(13,095	)	(11,875	)	–		(11,875	)
Exceptional operating items	(315	)	(123	)	–		(123	)	(91	)	(405	)	(496	)
Other administration expenses	(3,409	)	(3,314	)	(263	)	(3,577	)	(2,860	)	(660	)	(3,520	)
Total operating expenses	(18,684	)	(18,597	)	(277	)	(18,874	)	(16,689	)	(1,085	)	(17,774	)
Operating loss	(5,304	)	(4,842	)	66		(4,776	)	(5,052	)	(243	)	(5,295	)

The results of Japan Telecom are analysed as discontinued operations in prior periods’ analyses.

Note:
(1)	The results for the 2005 financial year entirely relate to continuing operations.

88 |  Financials

Operating loss has been arrived at after charging/(crediting):
	2005		2004		2003
	£m		£m		£m
Staff costs (see note 31)	2,293		2,331		2,278
Depreciation of tangible fixed assets:
Owned assets	4,467		4,181		3,783
Leased assets	61		181		196
Goodwill amortisation	12,929		13,095		11,875
Impairment of intangible and tangible fixed assets	315		–		485
Amortisation of other intangible fixed assets	412		98		53
Research and development	219		171		164
Advertising costs (including applicable staff costs)	864		990		902
Bad debt expense	224		209		193
Operating lease rentals:
Plant and machinery	37		98		78
Other assets including fixed line rentals	1,300		1,254		1,269
Own costs capitalised attributable to the construction or acquisition of tangible fixed assets	(301	)	(290	)	(207	)

The total amount charged by Deloitte & Touche LLP is analysed below:
	2005	2004
	£m	£m
Audit fees	5	4
Audit-related fees:
Audit regulatory reporting	–	2
Due diligence reviews	1	1
Tax fees:
Compliance	1	1
Other tax	1	1
All other fees:
IT consultancy	–	2
Other	1	1
	9	12

Analysed as:
	2005	2004
	£m	£m
Charged to profit and loss account	9	10
Capitalised or charged to share premium account	–	2
	9	12
	2005	2004
	£m	£m
UK companies	3	4
Overseas companies	6	8
	9	12
In addition to the above, the Group’s associated companies paid fees totalling £5 million to Deloitte & Touche LLP during the year ended 31 March 2005 (2004: £8 million). The Company audit fee for the year ended 31 March 2005 was £0.5 million (2004: £0.3 million).

Financials | 89

Notes to the Consolidated Financial Statements continued

5.	Operating loss continued
Joint ventures and associated undertakings
The Group’s share of the turnover and operating loss of joint ventures and associated undertakings is further analysed as follows:

	2005	2004	2003
	£m	£m	£m
Share of turnover:
Joint ventures	–	–	8
Associated undertakings	11,648	10,179	8,769
	11,648	10,179	8,777
	2005	2004	2003
	£m	£m	£m
Share of operating profit/(loss):
Joint ventures	–	–	(39	)
Associated undertakings	1,193	546	(117	)
	1,193	546	(156	)

6.  Exceptional non-operating items

	2005		2004		2003
	£m		£m		£m
Profit on disposal of fixed asset investments	19		12		255
Share of associate profit/(loss) on disposal of investment	5		(1	)	55
Amounts written off fixed asset investments	(2	)	(6	)	(340	)
Loss on disposal of businesses	(9	)	(127	)	22
Profit on disposal of tangible fixed assets	–		19		3
	13		(103	)	(5	)
The profit on disposal of fixed assets investments principally relates to the disposal of trade investments by Vodafone Japan. The loss on disposal of businesses for 2005 primarily relates to the loss on disposal incurred by the Group on the sale of a 16.9% stake in Vodafone Egypt reducing the Group’s controlling interest to 50.1%.
The loss on disposal of businesses for the year ended 31 March 2004 primarily relates to the disposal of the Japan Telecom fixed line operations by the Group’s 66.7% owned subsidiary, Vodafone Holdings K.K.
Amounts written off fixed asset investments for the year ended 31 March 2003 primarily relates to the Group’s interest in China Mobile. The profit on disposal of fixed asset investments for 2003 primarily relates to the disposal of the Group’s 23.6% interest in Bergemann GmbH, through which the Group’s stake in Ruhrgas AG was held. The share of associate profit on disposal of investment relates to the completion of the disposal for cash of AOL Europe shares by Cegetel Group S.A.

90 |Financials

7.  Net interest payable and similar items

	2005		2004		2003
	£m		£m		£m
Parent and subsidiary undertakings:
Interest receivable and similar income	(602	)	(592	)	(666	)
Interest payable and similar charges:
Bank loans and overdrafts	49		46		133
Other loans	677		820		921
Tax liabilities	261		215		55
Finance leases	8		10		14
	995		1,091		1,123
Group net interest payable	393		499		457
Share of joint ventures:
Interest payable and similar charges	–		–		8
Share of associated undertakings:
Interest receivable and similar income	(16	)	(7	)	(24	)
Interest payable and similar charges	227		222		311
	211		215		287
Share of joint ventures and associated undertakings net interest payable	211		215		295
Net interest payable and similar items	604		714		752

8.  Tax on loss on ordinary activities

	2005		2004		2003
	£m		£m		£m
United Kingdom corporation tax charge at 30%	271		209		195
Overseas corporation tax
Current tax:
Current year	2,430		2,264		1,971
Prior year	(221	)	(159	)	9
	2,209		2,105		1,980
Total current tax	2,480		2,314		2,175
Deferred tax – origination of and reversal of timing differences	(247	)	736		818
United Kingdom deferred tax	292		426		22
Overseas deferred tax	(539	)	310		796
Tax on exceptional items	3		104		(37	)
Total tax charge	2,236		3,154		2,956
Tax on loss on ordinary activities before exceptional items and exceptional tax credit	2,832		3,050		2,993
Tax on exceptional items	3		104		(37	)
Exceptional tax credit	(599	)	–		–
	2,236		3,154		2,956
Parent and subsidiary undertakings	1,698		2,866		2,624
Share of joint ventures	–		–		17
Share of associated undertakings	538		288		315
	2,236		3,154		2,956

Financials | 91

Notes to the Consolidated Financial Statements continued

8.	Tax on loss on ordinary activities continued
Factors affecting the tax charge for the year

Refer to Operating and Financial Review and Prospects – Operating Results – Group Overview – 2005 financial year compared to 2004 financial year – Taxation.

Reconciliation of expected tax charge using the standard tax rate to the actual current tax charge

The differences between the Group’s expected tax charge, using the Group’s standard corporation tax rate of 36.0% in 2005 (36.4% in 2004 and 37.0% in 2003), comprising the average rates of tax payable across the Group and weighted in proportion to accounting profits, and the Group’s current tax charge for each of those years were as follows:

	2005		2004		2003
	£m		£m		£m
Expected tax credit at standard tax rate on loss on ordinary activities	(1,693	)	(1,837	)	(2,295	)
Goodwill amortisation	5,292		5,535		5,196
Exceptional non-operating items	(5	)	38		2
Exceptional operating items	113		(83	)	213
Expected tax charge at standard tax rate on profit on ordinary activities,
before goodwill amortisation and exceptional items	3,707		3,653		3,116
Permanent differences	93		47		140
Fixed asset timing differences	12		(509	)	(404	)
Short term timing differences	(163	)	(18	)	(64	)
Deferred tax on overseas earnings	(322	)	(418	)	(424	)
Losses carried forward utilised/current year losses for which no credit taken	(171	)	26		278
Exceptional current tax credit	(166	)	–		–
Prior year adjustments	(289	)	(61	)	4
Non taxable profits/non deductible losses	(148	)	(281	)	(239	)
International corporate tax rate differentials and other	(73	)	(125	)	(232	)
Actual current tax charge (excluding tax on exceptional items)	2,480		2,314		2,175

Reconciliation of expected tax charge using the UK statutory tax rate to the actual tax charge

The differences between the Group’s expected tax charge, using the UK corporation tax rate of 30% in 2005, 2004 and 2003 and the Group’s tax charge for each of those years were as follows:

	2005		2004		2003
	£m		£m		£m
Expected tax credit at UK corporation tax rate on loss on ordinary activities	(1,411	)	(1,514	)	(1,863	)
Goodwill amortisation	4,410		4,562		4,217
Exceptional non-operating items	(4	)	31		2
Exceptional operating items	95		(69	)	173
Expected tax charge at UK corporation tax rate, before goodwill amortisation and exceptional items	3,090		3,010		2,529
Permanent differences	118		152		165
Movement in valuation allowances against:
– Fixed asset timing differences	(22	)	(21	)	(40	)
– Short term timing differences	(197	)	(64	)	60
– Losses carried forward utilised/current year losses for which no credit taken	(264	)	(26	)	161
Prior year adjustments	(315	)	(61	)	(9	)
Net (over)/under charge relating to international associated undertakings	23		(186	)	8
Non taxable profits/non deductible losses	(148	)	(281	)	(239	)
International corporate tax rate differentials and other	547		527		358
Actual total tax charge (excluding tax on exceptional items and exceptional tax credit)	2,832		3,050		2,993

92 |  Financials

Factors affecting the tax charge in future years

Factors that may affect the Group’s future tax charge include the absence of one-off restructuring benefits, the resolution of open issues, future planning opportunities, corporate acquisitions and disposals, changes in tax legislation and rates, and the use of brought forward tax losses.

In particular, the Group’s subsidiary, Vodafone 2, is responding to an enquiry by the UK Inland Revenue with regard to the UK tax treatment of one of its Luxembourg holding companies under the controlled foreign companies rules. Further details in relation to this enquiry are included in “Risk Factors and Legal Proceedings”. At 31 March 2005, Vodafone has provided for £1,600 million tax and £157 million interest in respect of the potential UK tax liability that may arise in respect of this enquiry. At 31 March 2004, the respective provisions were £1,335 million and £62 million. Vodafone considers these amounts are sufficient to settle any assessments that may arise from the enquiry. However, the amount ultimately paid may differ materially from the amount accrued and, therefore, could affect the overall profitability of the Group in future periods. In the absence of any material unexpected developments, the provisions are likely to be reassessed when the views of the European Court of Justice become known, which is expected to be during 2006.

At 31 March 2005, the Group had the following trading and non-trading losses available for carry forward. These losses are available for offset against future trading and non-trading profits of certain Group and associated undertakings:

	Expiring within	Expiring within
	5 years	10 years	Unlimited	Total
	£m	£m	£m	£m
UK subsidiaries’ trading and non-trading losses	–	–	2,035	2,035
International subsidiaries’ trading and non-trading losses	92	1,035	34,527	35,654

The losses in respect of UK subsidiaries include an amount of £1,870 million that is only available for offset against future capital gains and since it is uncertain whether these losses will be utilised, no deferred tax asset has been recognised.

The losses in respect of international subsidiaries include amounts of £30,857 million (2004: £30,728 million) that have arisen in overseas holding companies as a result of revaluations of those companies’ investments for local GAAP purposes. Since it is uncertain whether these losses will be utilised, no deferred tax asset has been recognised. See note 21.

In addition to the losses described above, the Group has potential tax losses of £34,674 million (2004: £33,763 million) in respect of a write down in the value of investments in Germany. These losses have to date been denied by the German Tax Authorities. Vodafone is now in discussions with them regarding the availability of the losses, however the outcome of these discussions and the timing of the resolution are not yet known. The Group has not recognised the availability of the losses, nor the benefit arising from them, due to this uncertainty. If upon resolution a benefit is recognised, it may impact both the amount of current income taxes provided since the date of initial deduction and the amount of benefit from tax losses the Group will recognise. The recognition of these benefits could affect the overall profitability of the Group in future periods.

9. Equity dividends

		2005		2004		2003
		Pence per		Pence per		Pence per
	2005	ordinary	2004	ordinary	2003	ordinary
	£m	share	£m	share	£m	share
Interim dividend paid	1,263	1.91	650	0.9535	542	0.7946
Proposed final dividend	1,395	2.16	728	1.0780	612	0.8983
	2,658	4.07	1,378	2.0315	1,154	1.6929

Shares held in treasury do not qualify for dividends. Dividends that would have been paid on these shares would have been £124 million for the year ended 31 March 2005 (2004: £9 million; 2003: £nil) had they qualified.

Financials  | 93

Notes to the Consolidated Financial Statements continued

10.Loss per share

	2005		2004		2003
Weighted average number of shares (millions) in issue during the year and used to
calculate basic and diluted loss per share:	66,196		68,096		68,155
	£m		£m		£m
Loss for basic and diluted loss per share	(7,540	)	(9,015	)	(9,819	)
	Pence		Pence		Pence
	per share		per share		per share
Basic and diluted loss per share	(11.39	)	(13.24	)	(14.41	)
	£m		£m		£m
Basic loss per share is stated inclusive of the following items:
Amortisation of goodwill	14,700		15,207		14,056
Exceptional operating items	315		(228	)	576
Exceptional non-operating items	(13	)	103		5
Exceptional tax credit	(599	)	–		–
Tax on exceptional items	3		104		(37	)
Share of exceptional items attributable to minority interests	26		27		(139	)
	Pence		Pence		Pence
	per share		per share		per share
Amortisation of goodwill	22.21		22.33		20.62
Exceptional operating items	0.48		(0.33	)	0.85
Exceptional non-operating items	(0.02	)	0.15		0.01
Exceptional tax credit	(0.91	)	–		–
Tax on exceptional items	–		0.15		(0.06	)
Share of exceptional items attributable to minority interests	0.04		0.04		(0.20	)

Basic loss per share represents the net loss attributable to ordinary shareholders, being the loss on ordinary activities after taxation and minority interests. Diluted loss per share is the same as basic loss per share as it is considered that there are no dilutive potential ordinary shares.

94 |  Financials

11.Intangible fixed assets

Licence and
spectrum
Goodwill	fees	Total
£m	£m	£m
Cost:
1 April 2004	130,377		15,063	145,440
Exchange movements	2,737		244	2,981
Acquisitions (note 25)	1,757		–	1,757
Additions	–		124	124
Disposals	(52	)	–	(52	)
31 March 2005	134,819		15,431	150,250
Accumulated amortisation and impairment:
1 April 2004	51,597		221	51,818
Exchange movements	1,323		7	1,330
Amortisation charge for the year	12,929		412	13,341
Impairment	315		–	315
Disposals	(18	)	–	(18	)
31 March 2005	66,146		640	66,786
Net book value:
31 March 2005	68,673		14,791	83,464
31 March 2004	78,780		14,842	93,622

For acquisitions prior to 1 April 1998, the cumulative goodwill written off to reserves, net of the goodwill attributed to business disposals, was £723 million at 31 March 2005 (2004: £723 million).

In accordance with accounting standards, the Group regularly monitors the carrying value of its fixed assets. A review was undertaken at 31 March 2005 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2015.

The Group prepares and internally approves formal ten year plans for its businesses and uses these as the basis for its impairment reviews. The plans include cash flow projections for the mobile businesses which reflect continuing investment in network infrastructure to provide enhanced voice and data products and services, which are forecast to be significant drivers of future revenue growth. Capital expenditure is heaviest in the early years of the projections but is forecast to fall to 10% of revenue at Group level by the year ending 31 March 2008. Revenue growth is forecast from a combination of new customers and enhanced customer propositions. Data revenue is forecast to grow strongly throughout the ten year plan period. Voice revenue is forecast to benefit in the longer term from enhanced service offerings and traffic moving from fixed networks to mobile networks following a period of stabilisation reflecting the impact of price declines.

Accordingly, the directors believe that it is appropriate to use projections in excess of five years. For the years beyond 1 April 2015, forecast growth rates for mobile businesses do not exceed nominal GDP, using rates from independent sources, and are below nominal GDP for non-mobile businesses. The discount rates for the major markets reviewed were based on company specific pre-tax weighted average cost of capital percentages and ranged from 8.3% to 11.6%.

The results of the review undertaken at 31 March 2005 indicated that an impairment charge of £315 million was necessary in respect of goodwill held in relation to Vodafone Sweden (see note 4).

Financials  | 95

Notes to the Consolidated Financial Statements continued

12.Tangible fixed assets

	Land and		Equipment, fixtures		Network
	buildings		and fittings		infrastructure		Total
	£m		£m		£m		£m
Cost:
1 April 2004	1,214		5,979		23,371		30,564
Exchange movements	9		57		(37	)	29
Additions	126		1,690		3,250		5,066
Disposals	(23	)	(274	)	(419	)	(716	)
31 March 2005	1,326		7,452		26,165		34,943
Accumulated depreciation and impairment:
1 April 2004	293		3,640		8,548		12,481
Exchange movements	4		27		–		31
Charge for the year	86		1,144		3,298		4,528
Disposals	(10	)	(184	)	(301	)	(495	)
31 March 2005	373		4,627		11,545		16,545
Net book value:
31 March 2005	953		2,825		14,620		18,398
31 March 2004	921		2,339		14,823		18,083
The total net book value of land and buildings held by the Group comprises:
					2005		2004
					£m		£m
Freehold premises included in:
– Land and buildings					597		586
– Network infrastructure					309		284
					906		870
Long-term leasehold premises included in:
– Land and buildings					114		115
Short term leasehold premises included in:
– Land and buildings					242		220
– Network infrastructure					1,537		1,348
					1,779		1,568
Total					2,799		2,553
Network infrastructure and equipment include the following amounts in respect of finance leases:
					2005		2004
					£m		£m
Cost					309		614
Accumulated depreciation					(184	)	(454	)
Net book value					125		160

Liabilities under leases for network infrastructure assets, with an original cost of £104 million and net book value at 31 March 2005 of £20 million, have been unconditionally satisfied by call deposits and other assets, trust deed and set-off arrangements. Accordingly, lease liabilities and the corresponding financial assets in respect of these network infrastructure assets are not included in the Group’s balance sheet.

96 | Financials

The cost of assets in the course of construction, which are not subject to depreciation, was:
	2005 £m
Land and buildings	16
Equipment, fixtures & fittings	341
Network infrastructure	986
Total	1,343

13.Fixed asset investments

Associated undertakings

	Group £m
Share of net assets:
1 April 2004	3,075
Exchange movements	(41	)
Share of retained results excluding goodwill amortisation	152
Share of goodwill amortisation	(42	)
31 March 2005	3,144
Capitalised goodwill:
1 April 2004	18,151
Exchange movements	(173	)
Acquisitions (note 25)	5
Goodwill amortisation	(1,729	)
31 March 2005	16,254
Net book value:
31 March 2005	19,398
31 March 2004	21,226

For acquisitions of associated undertakings prior to 1 April 1998, the cumulative goodwill written off to reserves, net of the goodwill attributed to business disposals, was £467 million at 31 March 2005 (2004: £467 million).

The Group’s share of its associated undertakings comprises:

	2005 £m	2004 £m
Share of turnover of associated undertakings	11,648	10,179
Share of assets:
Fixed assets	8,895	8,139
Current assets	2,651	2,263
	11,546	10,402
Share of liabilities:
Liabilities due within one year	5,398	4,695
Liabilities due after more than one year	2,578	2,197
Minority interests	426	435
	8,402	7,327
Share of net assets	3,144	3,075
Attributed goodwill net of accumulated amortisation and impairment	16,254	18,151
	19,398	21,226

In addition, minority interests disclosed in the Consolidated Profit and Loss account for the year ended 31 March 2005 includes £45 million in respect of joint ventures and associated undertakings (2004: £61 million; 2003: £(20) million).

Financials  | 97

Notes to the Consolidated Financial Statements continued

13.Fixed asset investments continued

The Group’s principal associated undertakings and fixed asset investments are detailed in note 34. A summary of Verizon Wireless’ results is shown within note 36.
Other fixed asset investments
	Group
	£m
Cost:
1 April 2004	2,079
Exchange movements	(112	)
Additions	20
Disposals	(184	)
31 March 2005	1,803
Amounts written off:
1 April 2004	1,030
Exchange movements	(81	)
Amounts written off during the year	2
31 March 2005	951
Net book value:
31 March 2005	852
31 March 2004	1,049

Other fixed asset investments include 3.3% of China Mobile (Hong Kong) Limited which is listed on the New York and Hong Kong Stock Exchanges. The market value of this investment at 31 March 2005 was £1,113 million (2004: £1,047 million).

The Company’s fixed asset investments comprise investments in subsidiary undertakings as follows:

	£m
Cost:
1 April 2004	110,939
Additions	10
Disposals	(12,160	)
31 March 2005	98,789
Amounts written off:
1 April 2004	4,762
31 March 2005	4,762
Net book value:
31 March 2005	94,027
31 March 2004	106,177

98 |  Financials

14.Stocks

			2005		2004
			£m		£m
Goods held for resale			430		458
Stocks are reported net of allowances for obsolescence, an analysis of which is as follows:
	2005		2004		2003
	£m		£m		£m
Opening balance at 1 April	193		89		126
Exchange adjustments	(4	)	(1	)	2
Amounts (credited)/charged to the profit and loss account	(51	)	107		(27	)
Assets written off	(15	)	(2	)	(12	)
Closing balance at 31 March	123		193		89
15.Debtors

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Due within one year:
Trade debtors	2,768	2,593	–	–
Amounts owed by subsidiary undertakings	–	–	76,303	65,098
Amounts owed by associated undertakings	23	17	–	–
Taxation recoverable	268	372	37	–
Group relief receivable	–	–	43	132
Other debtors	413	491	272	310
Prepayments and accrued income	2,130	2,048	–	–
	5,602	5,521	76,655	65,540
Due after more than one year:
Trade debtors	49	37	–	–
Other debtors	122	76	–	–
Prepayments	384	302	–	–
Deferred taxation (note 21)	1,541	965	83	87
	2,096	1,380	83	87
	7,698	6,901	76,738	65,627

The Group’s deferred tax asset of £1,541 million at 31 March 2005 (2004: £965 million) relates to fixed asset timing differences of £206 million (2004: £nil) and short term timing differences and losses of £1,335 million (2004: £965 million). The directors are of the opinion, based on recent and forecast trading, that the level of future taxable profits and deferred tax liabilities will be sufficient to utilise the deferred tax asset being recognised.

The Company’s deferred tax asset of £83 million (2004: £87 million) is in respect of the closure of derivative financial instruments. The movement in the asset recognised has been charged to the Company’s profit and loss account for the year. There are no unrecognised deferred tax assets at 31 March 2005 (2004: £18 million).

Debtors are stated after allowances for bad and doubtful debts, an analysis of which is as follows:

	2005		2004		2003
	£m		£m		£m
Opening balance at 1 April	461		520		526
Exchange adjustments	6		(20	)	17
Amounts charged to the profit and loss account	224		209		193
Acquisitions	–		11		2
Disposals	–		(21	)	–
Debtors written off	(195	)	(238	)	(218	)
Closing balance at 31 March	496		461		520

Financials  | 99

Notes to the Consolidated Financial Statements continued

16.Investments

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Liquid investments	816	4,381	28	–

Group liquid investments principally comprise collateralised deposits and investments in commercial paper. The Company’s liquid investments comprise short term foreign exchange deals.

17.Creditors: amounts falling due within one year

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Bank overdrafts	47	42	–	–
Bank loans and other loans	332	2,000	15	956
Finance leases	13	12	–	–
Trade creditors	2,887	2,842	–	–
Amounts owed to subsidiary undertakings	–	–	88,710	93,553
Amounts owed to associated undertakings	9	8	–	–
Taxation	4,759	4,275	–	–
Other taxes and social security costs	332	367	–	–
Other creditors	444	741	4	71
Accruals and deferred income	4,619	4,011	301	371
Proposed dividend	1,395	728	1,395	728
	14,837	15,026	90,425	95,679

18.Creditors: amounts falling due after more than one year

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Bank loans	1,231	1,504	16	23
Other loans	10,269	10,596	8,800	8,795
Finance leases	113	124	–	–
Other creditors	12	7	–	–
Accruals and deferred income	757	744	358	453
	12,382	12,975	9,174	9,271

Bank loans are repayable as follows:

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Repayable in more than one year but not more than two years	1,182	105	6	6
Repayable in more than two years but not more than five years	28	1,398	10	16
Repayable in more than five years	21	1	–	1
	1,231	1,504	16	23

100 |  Financials

Other loans are repayable as follows:

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Repayable in more than one year but not more than two years	1,561	303	1,319	–
Repayable in more than two years but not more than five years	4,863	3,108	4,017	2,549
Repayable in more than five years	3,845	7,185	3,464	6,246
	10,269	10,596	8,800	8,795

Other loans falling due after more than one year comprise bond issues by the Company, or its subsidiaries, analysed as follows:

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
1.27% Japanese yen bond due 2005(1)	–	134	–	–
1.93% Japanese yen bond due 2005(1)	–	135	–	–
6.35% US dollar bond due 2005(1)	–	34	–	–
0.83% Japanese yen bond due 2006	15	16	15	16
1.78% Japanese yen bond due 2006	126	135	–	–
5.4% Euro bond due 2006	275	267	275	267
5.75% Euro bond due 2006	1,029	1,001	1,029	1,001
7.5% US dollar bond due 2006	116	121	–	–
4.161% US dollar bond due 2007	79	81	79	81
2.575% Japanese yen bond due 2008	127	136	–	–
3.95% US dollar bond due 2008	264	271	264	271
4.625% Euro bond due 2008	517	504	517	504
5.5% Euro bond due 2008	33	32	–	–
6.25% Sterling bond due 2008	249	249	249	249
6.25% Sterling bond due 2008	158	160	158	160
6.65% US dollar bond due 2008	132	135	–	–
4.25% Euro bond due 2009	1,301	1,266	1,301	1,266
4.75% Euro bond due 2009	568	548	–	–
2.0% Japanese yen bond due 2010	128	135	–	–
2.28% Japanese yen bond due 2010	126	133	–	–
2.5% Japanese yen bond due 2010	127	137	–	–
7.75% US dollar bond due 2010	1,435	1,473	1,449	1,487
5.0% US dollar bond due 2013	526	540	526	540
5.125% Euro bond due 2015	342	333	342	333
5.375% US dollar bond due 2015	481	495	481	495
5.0% Euro bond due 2018	513	499	513	499
4.625% US dollar bond due 2018	263	270	263	270
5.625% Sterling bond due 2025	246	246	246	246
7.875% US dollar bond due 2030	390	400	390	400
5.9% Sterling bond due 2032	443	443	443	443
6.25% US dollar bond due 2032	260	267	260	267
	10,269	10,596	8,800	8,795

Finance leases falling due after more than one year are repayable as follows:

	Group		Company
	2005	2004	2005	2004
	£m	£m	£m	£m
Repayable in more than one year but not more than two years	2	11	–	–
Repayable in more than two years but not more than five years	4	30	–	–
Repayable in more than five years	107	83	–	–
	113	124	–	–

Note:
(1)	Balances reclassified to creditors falling due within one year.

Financials  | 101

Notes to the Consolidated Financial Statements continued

19.Financial liabilities and assets

Net debt
	2005		2004
	£m		£m
Liquid investments	(816	)	(4,381	)
Cash at bank and in hand	(2,850	)	(1,409	)
Debt due in one year or less, or on demand	392		2,054
Debt due after one year	11,613		12,224
	8,339		8,488
Maturity of financial liabilities
The maturity profile of the Group’s borrowings at 31 March was as follows:
	2005		2004
	£m		£m
Within one year	392		2,054
Between one and two years	2,745		419
Between two and three years	870		2,837
Between three and four years	711		922
Between four and five years	3,314		776
Between five and six years	390		3,298
Between six and seven years	8		416
Between seven and eight years	5		11
Between eight and nine years	526		12
Between nine and ten years	510		553
Between ten and eleven years	381		509
Between eleven and twelve years	36		345
Between twelve and thirteen years	2		–
Between thirteen and fourteen years	776		–
Between fourteen and fifteen years	–		770
Between twenty and twenty one years	246		–
Between twenty one and twenty two years	–		246
Between twenty four and twenty five years	390		–
Between twenty five and twenty six years	–		400
Between twenty seven and twenty eight years	703		–
Between twenty eight and twenty nine years	–		710
	12,005		14,278
The maturities of the Group’s other financial liabilities at 31 March was as follows:
In more than one year but not more than two years	4		7
In more than five years	8		–
	12		7

Borrowing facilities

At 31 March 2005, the Group’s most significant committed borrowing facilities comprised two bank facilities of $5,525 million (£2,926 million) and $4,853 million (£2,570 million) expiring between two and five years and between one and two years, respectively (2004: two bank facilities of $5,547 million (£3,018 million) and $4,853 million (£2,641 million)), and a ¥225 billion (£1,112 million, 2004: £1,177 million) term credit facility, which expires between one and two years. The bank facilities remained undrawn throughout the year and the term credit facility was drawn down in full on 15 October 2002.

Under the terms and conditions of the $5,525 million and $4,853 million bank facilities, lenders have the right, but not the obligation, to cancel their commitment 30 days from the date of notification of a change of control of the Company and have outstanding advances repaid on the last day of the current interest period. The facility agreement provides for certain structural changes that do not affect the obligations of the Company to be specifically excluded from the definition of a change of control. This is in addition to the rights of lenders to cancel their commitment if the Company has committed an event of default. Substantially the same terms and conditions apply in the case of Vodafone Finance K.K.’s ¥225 billion term credit facility, although the change of control provision is applicable to any guarantor of borrowings under the term credit facility. As of 31 March 2005, the Company was the sole guarantor of the ¥225 billion term credit facility.

In addition to the above, certain of the Group’s subsidiaries had committed facilities at 31 March 2005 of £168 million (2004: £467 million) in aggregate, of which £77 million (2004: £134 million) was undrawn. Of the total committed facilities, £28 million (2004: £69 million) expires in less than one year, £100 million (2004: £398 million) expires between two and five years, and £40 million (2004: £nil) which expires in more than five years.

102 |  Financials

Financial liabilities and assets
The Group uses short term foreign exchange instruments for managing both liquidity and the currency mix of Group net debt. The net position of the Group’s short term foreign exchange deals at 31 March 2005 is an asset, however, for the purpose of this note they are included within the financial liabilities section below as they are primarily used to manage the currency profile of the Group’s gross debt. Foreign exchange instruments hedging items other than borrowings are disclosed in the table. Short term debtors and creditors are not included in the analyses in this note or those in note 20.

Interest rate and currency of financial liabilities

												Non-interest
												bearing
										Fixed rate financial		financial
										liabilities		liabilities
				Financial
				liabilities					Non-		Weighted
				net of		Floating			interest	Weighted	average	Weighted
	Gross	Foreign		foreign		rate		Fixed rate	bearing	average	time for	average
	financial	exchange		exchange		financial		financial	financial	interest	which rate	period until
	liabilities	instruments		instruments		liabilities		liabilities	liabilities	rate	is fixed	maturity
Currency	£m	£m		£m		£m		£m	£m	%	Years	Years
At 31 March 2005:
Sterling	1,104	(570	)	534		534		–	–	–	–	–
Euro	4,811	1,487		6,298		5,314		978	6	5.0	11.6	2.7
US dollar	3,984	(2,703	)	1,281		1,281		–	–	–	–	–
Japanese yen	2,066	1,913		3,979		3,973		–	6	–	–	5.0
Other	52	(155	)	(103	)	(103	)	–	–	–	–	–
Gross financial liabilities	12,017	(28	)	11,989		10,999		978	12	5.0	11.6	3.9
At 31 March 2004:
Sterling	1,110	(2,456	)	(1,346	)	(1,346	)	–	–	–	–	–
Euro	5,670	1,553		7,223		5,282		1,941	–	5.0	6.4	–
US dollar	4,953	(1,487	)	3,466		2,608		858	–	7.6	0.9	–
Japanese yen	2,218	2,618		4,836		4,798		31	7	1.6	0.7	1.5
Other	254	(148	)	106		106		–	–	–	–	–
Gross financial liabilities	14,205	80		14,285		11,448		2,830	7	5.7	4.7	1.5

Interest on floating rate borrowings is based on national London Inter Bank Offered Rate equivalents or government bond rates in the relevant currencies.

The figures shown in the tables above take into account interest rate swaps used to manage the interest rate profile of financial liabilities.

Further protection from euro and Japanese yen interest rate movements on debt is provided by forward starting interest rate swaps (“IRS”). The Group has entered into euro denominated forward starting IRS which cover the period December 2005 to June 2007 for an amount equal to £1,511 million (2004: £1,471 million). The effective rate which has been fixed is equal to 3.54% per annum. The Group has entered into Japanese yen denominated forward starting IRS and interest rate futures which cover the period June 2005 to September 2005, September 2005 to December 2005, December 2005 to March 2006 and March 2006 to March 2007 for amounts equal to £3,075 million (2004: £3,256 million), £988 million (2004: £3,635 million), £988 million (2004: £1,046 million) and £3,755 million (2004: £3,975 million), respectively. The effective rates, which have been fixed, range from 0.329% per annum to 0.362% per annum.

Financials  | 103

Notes to the Consolidated Financial Statements continued

 

19.Financial liabilities and assets continued

Financial assets

			Non-interest bearing assets
Currency	Total £m	Floating rate financial assets(1) £m		Equity investments(2) £m	Other non-interest bearing financial assets £m
At 31 March 2005:
Sterling	2,389	2,385		4	–
Euro	309	242		18	49
US dollar	998	989		1	8
Japanese yen	117	2		10	105
Other	848	52		787	9
Gross financial assets	4,661	3,670		820	171
At 31 March 2004:
Sterling	268	264		4	–
Euro	2,299	2,245		9	45
US dollar	3,231	3,219		3	9
Japanese yen	242	4		144	94
Other	912	95		809	8
Gross financial assets	6,952	5,827		969	156
Financial assets comprise:
				2005 £m	2004 £m
Cash at bank and in hand				2,850	1,409
Liquid investments(2)				816	4,381
Trade and other debtors due after more than one year				171	113
Fixed asset investments (other than associated undertakings)(3)				852	1,049
				4,689	6,952

Notes:
(1)	Floating rate financial assets comprise cash and short term deposits of £3,126 million (2004: £3,802 million) and US dollar denominated commercial paper totalling £512 million (2004: £2,025 million), invested with counterparties having a single-A credit rating or above from at least two of Moody’s, Fitch Ratings and Standard & Poor’s. These ratings are used in determining the aggregate credit risk with each counterparty.
(2)	Liquid investments include the net position of the Group’s short term foreign exchange deals of £28 million at 31 March 2005. In the notes above, they are included within the financial liabilities section as they are primarily used to manage the currency profile of the Group’s gross debt.
(3)	Equity investments include £788 million (2004: £810 million) represented by listed investments. Listed equity investments denominated in currencies other than sterling include £786 million (2004: £809 million) denominated in Hong Kong dollars and £2 million (2004: £1 million) denominated in Japanese yen.

 

104 |  Financials

 

20.Financial instruments

Fair values of financial assets and liabilities

The carrying amounts and estimated fair value of the Group’s outstanding financial instruments are set out below:

	2005 Net carrying amount £m		2005 Estimated fair value £m		2004 Net carrying amount £m		2004 Estimated fair value £m
Fixed asset investments (excluding investments in associated undertakings)	852		1,182		1,049		1,290
Cash at bank and in hand	2,850		2,850		1,409		1,409
Liquid investments	788		788		4,381		4,381
Borrowings:
Short term	(392	)	(390	)	(1,974	)	(2,034	)
Long term	(11,613	)	(12,023	)	(12,224	)	(13,029	)
Derivative financial instruments:
Interest rate	–		120		–		343
Foreign exchange	28		28		(80	)	(80	)

The Group’s exposure to market risk, which is the sensitivity of the value of financial instruments to changes in related currency and interest rates, is minimised because gains and losses on the underlying assets and liabilities offset gains and losses on derivative financial instruments.

The following methods and assumptions were used to estimate the fair values shown above.

Fixed asset investments (excluding investments in joint ventures and associated undertakings) – The net book value of fixed asset investments at 31 March 2005 comprises investments recorded at an original cost of £1,803 million (2004: £2,079 million). Listed investments are stated at fair value based on their quoted share price at 31 March 2005.

Cash at bank and in hand and liquid investments – The carrying values of cash and liquid investments approximate to their fair values because of the short term maturity of these instruments.

Borrowings (excluding foreign exchange contracts) – The fair value of quoted long term borrowings is based on year end mid-market quoted prices. The book values stated above exclude accrued interest on borrowings which is recorded separately on the balance sheet within accruals and deferred income. The fair value of other borrowings is estimated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at the year end.

Foreign exchange contracts, interest rate swaps and futures – The Group enters into foreign exchange contracts, interest rate swaps and futures in order to manage its foreign currency and interest rate exposure. The book values stated above exclude accrued interest which is recorded separately in the balance sheet. The fair value of these financial instruments was estimated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at the year end.

Hedges

The Group’s policy is to use derivative instruments to hedge against exposure to movements in interest rates and exchange rates. Changes in the fair value of instruments used for hedging are not recognised in the financial statements until the hedged exposure is itself recognised. Unrecognised gains and losses on instruments used for hedging are set out below:

	Gains £m		Losses £m		Total net gains/(losses) £m
Unrecognised gains and losses on hedges at 1 April 2004	423		(80	)	343
Less: gains and losses arising in previous years that were recognised in the year	(91	)	23		(68	)
Gains and losses arising before 1 April 2004 that were not recognised at 31 March 2005	332		(57	)	275
Gains and losses arising in the year that were not recognised at 31 March 2005	(96	)	(59	)	(155	)
Unrecognised gains and losses on hedges at 31 March 2005	236		(116	)	120
Of which:
Gains and losses expected to be recognised in the year ending 31 March 2006	64		(28	)	36

In addition to the amounts disclosed above, cumulative aggregate gains of £453 million in respect of terminated interest rate swaps were carried forward in the balance sheet at 31 March 2005 pending their recognition in the profit and loss account (2004: £607 million). Of these carried forward amounts, gains of £91 million are expected to be recognised in the profit and loss account in the 2006 financial year. Aggregate related gains of £154 million from previous years were recognised in the profit and loss account in the 2005 financial year (2004: £90 million).

Currency exposures

Taking into account the effect of forward contracts and other derivative instruments, the Group did not have any material financial exposure to foreign exchange gains or losses on monetary assets and monetary liabilities denominated in foreign currencies at 31 March 2005.

Financials  | 105

Notes to the Consolidated Financial Statements continued

 

21.Provisions for liabilities and charges

	Deferred taxation £m		Post employment benefits £m		Other provisions £m		Total £m
1 April 2004	3,608		68		521		4,197
Exchange movements	(2	)	–		6		4
Profit and loss account	332		54		68		454
Utilised in the year – payments	–		(45	)	(141	)	(186	)
Other	–		26		57		83
31 March 2005	3,938		103		511		4,552

Deferred taxation

The Group’s deferred tax charge of £332 million (2004: £744 million) in respect of deferred tax liabilities excludes a charge to the profit and loss account of £25 million (2004: £47 million) relating to associated undertakings and a credit to the profit and loss account of £604 million (2004: £49 million) relating to deferred tax assets. Therefore the net deferred tax credit is £247 million (2004 charge: £742 million or £736 million before exceptional items).

At 31 March 2005:

	Gross deferred tax asset £m		Gross deferred tax liability £m	Net deferred tax (asset)/ liability £m		Less: amounts unprovided £m		Net deferred tax (asset)/ liability £m
Fixed asset timing differences	(227	)	1,704	1,477		(10	)	1,467
Deferred tax on overseas earnings	–		1,747	1,747		–		1,747
Other short term timing differences	(718	)	745	27		–		27
Unrelieved tax losses	(11,257	)	–	(11,257	)	10,413		(844	)
	(12,202	)	4,196	(8,006	)	10,403		2,397
Analysed, after offset, as:
Deferred tax asset (note 15)								(1,541	)
Deferred tax provision								3,938
								2,397
At 31 March 2004:
	Gross deferred tax asset £m		Gross deferred tax liability £m	Net deferred tax (asset)/ liability £m		Less: amounts unprovided £m		Net deferred tax (asset)/ liability £m
Fixed asset timing differences	(192	)	1,848	1,656		(4	)	1,652
Deferred tax on overseas earnings	–		1,425	1,425		–		1,425
Other short term timing differences	(812	)	662	(150	)	118		(32	)
Unrelieved tax losses	(11,420	)	–	(11,420	)	11,018		(402	)
	(12,424	)	3,935	(8,489	)	11,132		2,643
Analysed, after offset, as:
Deferred tax asset (note 15)								(965	)
Deferred tax provision								3,608
								2,643

A deferred tax asset has not been recognised in respect of unrelieved tax losses of £10,413 million (2004: £11,018 million) as it is regarded as more likely than not that there will not be suitable taxable profits against which the reversal of the underlying timing differences can be deducted.

The potential net tax benefit in respect of all tax losses carried forward at 31 March 2005, including amounts both recognised and unrecognised for deferred tax purposes, was £610 million in UK subsidiaries (2004: £50 million) and £10,647 million in international subsidiaries (2004: £11,370 million). These losses are only available for offset against future profits (or in some circumstances capital gains) arising within these companies subject to the laws of the relevant jurisdiction. The Group’s share of losses of international associated undertakings that are available for offset against future trading profits in these entities is £123 million (2004: £nil).

Details of the Company’s deferred tax asset are included in note 15.

Other provisions

Other provisions primarily comprise amounts provided for legal claims, decommissioning costs and restructuring costs. The associated cash outflows for restructuring costs are substantially short term in nature. For decommissioning costs, the associated cash outflows are generally expected to occur at the dates of exit of the assets to which they relate, which are long term in nature. The timing of cash outflows associated with legal claims cannot be reasonably determined.

106 |  Financials

22.Called up share capital

	2005		2004
	Number	£m	Number	£m
Authorised:
Ordinary shares of $0.10 each	78,000,000,000	4,875	78,000,000,000	4,875
7% cumulative fixed rate shares of £1 each	50,000	–	50,000	–
	78,000,050,000	4,875	78,000,050,000	4,875
Allotted, issued and fully paid:
Ordinary shares of $0.10 each(1):
1 April	68,263,933,048	4,280	68,179,382,971	4,275
During the year	116,933,491	6	84,550,077	5
31 March	68,380,866,539	4,286	68,263,933,048	4,280
7% cumulative fixed rate shares of £1 each:	50,000	–	50,000	–
31 March	68,380,916,539	4,286	68,263,983,048	4,280

Note:
(1)	At 31 March 2005 the Company held 3,785,000,000 (2004: 800,000,000; 2003: nil) treasury shares with a nominal value of £205 million (2004: £44 million; 2003: £nil).

Allotted during the year

		Nominal
	Number	value	Proceeds
		£m	£m
UK share awards and option scheme awards	64,931,201	3	82
US share awards and option scheme awards	52,002,290	3	54
Total for share option scheme awards	116,933,491	6	136

Share plans

The Company currently uses a number of share plans to grant options and awards to its directors and employees.

Sharesave Scheme

The Vodafone Group 1998 Sharesave Scheme (the “Sharesave Scheme”) enables UK staff to acquire shares in the Company through monthly savings of up to £250 a year over a three or five year period, at the end of which they also receive a tax free bonus. The savings and bonus may then be used to purchase shares at the option price, which is set at the beginning of the savings contract and usually at a discount of 20% to the then prevailing market price of the Company’s shares. Invitations to participate in this scheme are usually made annually.

Discretionary share option plans

The Company has two discretionary share option plans, the Vodafone Group 1998 Company Share Option Scheme (which is UK Inland Revenue approved) and the Vodafone Group 1998 Executive Share Option Scheme (which is unapproved). Options under the discretionary schemes are subject to performance conditions. Options are normally exercisable between three and ten years from the date of grant.

Long Term Stock Incentive Plan

The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is a discretionary plan under which both share option grants and share awards may be made. For some grants to US employees, the options have phased vesting over a four year period and are exercisable in respect of ADSs. For all other grants, options are normally exercisable between three and ten years from the date of grant, subject to the satisfaction of predetermined performance conditions, and are exercisable in respect of ordinary shares listed on the London Stock Exchange or ADSs for US employees.

In addition to the above, all permanent employees at 1 April 2004 received an award of 350 shares (known as “AllShares”) in Vodafone Group Plc on 5 July 2004, under the Vodafone Group Plc Global All Employee Share Plan. The awards vest after two years and are not subject to performance conditions.

Share option plans belonging to subsidiaries

Share option schemes are also operated by certain of the Group’s subsidiary and associated undertakings, under which options are only issued to key personnel.

Share Incentive Plan

The Share Incentive Plan enables UK staff to acquire shares in the Company through monthly purchases of up to £125 per month or 5% of salary, whichever is lower. For each share purchased by the employee, the Company provides a free matching share.

Financials | 107

Notes to the Consolidated Financial Statements continued

22.Called up share capital continued

Restricted Share Plans

Under the Vodafone Group Short Term Incentive Plan, introduced in 1998, shares are conditionally awarded to directors⁽¹⁾ based on achievement of one year performance targets. Release of the shares is deferred for a further two years and is subject to continued employment. Additional shares are released at this time if a further performance condition has been satisfied over the two year period.

Under the Vodafone Long Term Incentive Plan and the Vodafone Group Plc 1999 Long Term Stock Incentive Plan referred to above, awards of performance shares are granted to directors⁽¹⁾ and certain employees. The release of these shares is conditional upon achievement of performance targets measured over a three year period.

Under these restricted share plans, the maximum aggregate number of ordinary shares which may be issued in respect of options or awards will not (without shareholder approval) exceed:

• 10% of the ordinary share capital of the Company in issue immediately prior to the date of grant, when aggregated with the total number of ordinary shares which have been allocated in the preceding ten year period under all plans; and

• 5% of the ordinary share capital of the Company in issue immediately prior to the date of grant, when aggregated with the total number of ordinary shares which have been allocated in the preceding ten year period under all plans other than the Sharesave Scheme.

Note:
(1)	The term “directors” here refers to directors of the Company and directors of the Group’s subsidiaries.

Share options

A summary of the options outstanding at 31 March 2005 to subscribe for shares in the Company is provided in the following table.

		Weighted
		average				Exercisable
	Total	period	Weighted			shares
	shares	remaining	average	Weighted	Exercisable	weighted
	under	to full	remaining	average	shares at	average
	option	vesting	contractual life	exercise	31 March 2005	exercise
Range of exercise prices	(millions)	(months)	(months)	price	(millions)	price
Ordinary shares:
Vodafone Group Savings Related and Sharesave Schemes
£0.01 – £1.00	39.9	20	26	£0.79	1.1	£0.76
£1.01 – £2.00	0.8	16	23	£1.27	0.1	£1.27
£2.01 – £3.00	0.2	5	11	£2.25	–	£2.19
	40.9				1.2
Vodafone Group Executive Schemes
£0.01 – £1.00	50.6	3	85	£0.89	8.5	£0.85
£1.01 – £2.00	64.2	–	56	£1.56	64.2	£1.56
£2.01 – £3.00	40.3	–	61	£2.75	40.3	£2.75
	155.1				113.0
Vodafone Group 1999 Long Term Stock Incentive Plan
£0.01 – £1.00	462.3	3	87	£0.91	27.4	£0.90
£1.01 – £2.00	423.2	9	89	£1.38	189.9	£1.55
£2.01 – £3.00	15.8	–	3	£2.92	5.8	£2.92
	901.3				223.1
Vodafone Netherlands options
£0.01 – £1.00	9.5	3	27	£0.73	–	–
£1.01 – £2.00	11.9	–	8	£1.43	11.9	£1.43
£2.01 – £3.00	–	–	–	–	–	–
	21.4				11.9
Vodafone Pacific options (Australia)
AUD 0.01 – AUD 10.00	2.4	–	71	AUD 4.85	2.4	AUD 4.85
Vodafone Pacific options (New Zealand)
NZD 0.01 – NZD 10.00	1.5	–	74	NZD 5.64	1.5	NZD 5.64

108 | Financials

Following the merger with AirTouch, some rights to acquire AirTouch Communications, Inc. 1993 Long Term Stock Incentive Plan options were converted into rights to acquire shares in the Company. No further awards will be granted under this scheme.

		Weighted
		average				Exercisable
	Total	period	Weighted			ADSs
	ADSs	remaining	average	Weighted	Exercisable	weighted
	under	to full	remaining	average	ADSs at	average
	option	vesting	contractual life	exercise	31 March 2004	exercise
Range of exercise prices	(millions)	(months)	(months)	price	(millions)	price
American Depositary Shares:
AirTouch Communications, Inc.1993 Long Term Stock Incentive Plan
$0.01 – $10.00	0.4	–	21	$6.10	0.4	$6.10
$10.01 – $20.00	0.4	–	3	$16.61	0.4	$16.61
$20.01 – $30.00	0.1	–	4	$20.02	0.1	$20.02
$30.01 – $40.00	0.1	–	12	$34.05	0.1	$34.05
	1.0				1.0
Vodafone Group 1999 Long Term Stock Incentive Plan
$10.01 – $20.00	3.5	15	88	$13.98	1.8	$13.70
$20.01 – $30.00	3.6	3	87	$21.66	1.8	$22.35
$30.01 – $40.00	0.1	–	68	$36.12	0.1	$36.12
$40.01 – $50.00	2.9	–	54	$42.18	2.8	$42.18
$50.01 – $60.00	0.1	–	84	$58.60	0.1	$58.60
	10.2				6.6

Share awards

A summary of unvested share awards at 31 March 2005 are provided in the following table.

		Weighted
	Total	average period
	unvested	remaining to
	awards	full vesting
	(millions)(1)	(months)
All Shares	18.5	15
Performance Shares	103.4	21
	121.9

Note:
(1)	Total unvested awards are stated on the basis of ordinary shares. Awards may be issued as ordinary shares or the equivalent number of ADSs.

Financials | 109

Notes to the Consolidated Financial Statements continued

23.Reserves

Group

Company

Share

Own

Profit

Share

Own

Profit

premium

Other

shares

and loss

premium

Other

shares

and loss

account

reserve

held

account

account

reserve

held

account

£m

£m

£m

£m

£m

£m

£m

£m

1 April 2004

52,154

713

(1,136

)

(43,014

)

52,154

713

(1,088

)

10,760

Allotments of shares

130

–

–

–

130

–

–

–

Purchase of treasury shares

–

–

(3,997

)

–

–

–

(3,997

)

–

Own shares released on vesting of share awards

–

–

12

–

–

–

–

–

Retained (loss)/profit for the financial year

–

–

–

(10,198

)

–

–

–

8,148

Currency translation

–

–

–

1,467

–

–

–

–

Transfer to profit and loss account

–

(84

)

–

84

–

(84

)

–

84

Other movements

–

–

–

(27

)

–

–

–

–

31 March 2005

52,284

629

(5,121

)

(51,688

)

52,284

629

(5,085

)

18,992

In accordance with the exemption allowed by section 230 of the Companies Act, no profit and loss account has been presented by the Company. The profit for the financial year dealt with in the accounts of the Company is £10,806 million (2004: £3,684 million). Under English law, the amount available for distribution to shareholders is based upon the profit and loss reserve of the Company and is reduced by the amount of own shares held.

The currency translation movement includes a gain of £143 million (2004: £144 million gain) in respect of foreign currency net borrowings.

For acquisitions prior to 1 April 1998, the cumulative goodwill written off to reserves, net of the goodwill attributed to business disposals, was £1,190 million at 31 March 2005 (2004: £1,190 million).

The following shares in the Company are held:

	Group							Company
	Employee		Subsidiary
	Share Trust		companies		Treasury shares	Total		Treasury shares
At 1 April 2004	29,439,475		7,189,316		800,000,000	836,628,791		800,000,000
Purchased during the year	–		–		2,985,000,000	2,985,000,000		2,985,000,000
Dividend shares	367,717		–		–	367,717		–
Distributed during the year	(7,727,075	)	(35,835	)	–	(7,762,910	)	–
At 31 March 2005	22,080,117		7,153,481		3,785,000,000	3,814,233,598		3,785,000,000
Total cost to Group of shares held (£m)	23		13		5,085	5,121		5,085
Market value of shares held (£m)	31		10		5,318	5,359		5,318

110 |  Financials

The shares held by the Vodafone Group Employee Trust are to satisfy the potential award of shares under the Group’s Long Term Incentive Plan and Short Term Incentive Plan. The shares held by subsidiary companies are in respect of an employee share option plan. Treasury shares are held in relation to the share purchase programme described in “Operating and Financial Review and Prospects – Liquidity and Capital Resources”. Details of all shares purchased in the year are shown below:

			Total number of shares		Maximum value of
		Average price paid per	purchased under publicly		shares that may be
	Total number of shares	share, inclusive of	announced share		purchased under the
Period	purchased	transaction costs (pence)	repurchase programme	(2)	programme (£m)	(1)
27 – 31 May 2004	46,000,000	129.97	46,000,000		2,940
1 – 30 June 2004	515,000,000	125.49	515,000,000		2,294
1 – 31 July 2004	246,000,000	119.75	246,000,000		1,999
1 – 31 August 2004	284,000,000	124.07	284,000,000		1,647
1 – 30 September 2004	305,100,000	130.46	305,100,000		1,249
16 – 30 November 2004	217,900,000	145.35	217,900,000		1,932
1 – 31 December 2004	393,200,000	142.45	393,200,000		1,372
1 – 31 January 2005	427,800,000	140.66	427,800,000		770
1 – 28 February 2005	282,500,000	139.52	282,500,000		376
1 – 31 March 2005	267,500,000	140.58	267,500,000		–
Total for year ended
31 March 2005	2,985,000,000	134.00	2,985,000,000		–
1 – 30 April 2005	321,000,000	139.33	321,000,000		4,053
1 – 12 May 2005	84,500,000	139.00	84,500,000		3,935
Note:

(1)

On 25 May 2004, the Company announced it was allocating £3.0 billion to the share purchase programme to cover the year to May 2005. This superseded the £2.5 billion announced on the set up of the programme in November 2003. On 16 November 2004, the Company announced that it was increasing the allocation to around £4 billion completing by March 2005. On 24 May 2005, the Company announced target purchases of £4.5 billion for the 2006 financial year, including those purchased between 1 April 2005 and 23 May 2005 under irrevocable purchase instructions. Shares have been repurchased in accordance with the approval given by shareholders at the AGM on 30 July 2003 (maximum of 6,800,000,000 shares), which expired on 27 July 2004, and 27 July 2004 (maximum of 6,600,000,000 shares), which expires on 26 July 2005. Shareholder approval will be sought at the AGM on 26 July 2005 for additional shares to be purchased in the 2006 financial year.

(2)

No shares were purchased outside the publicly announced share repurchase programme.

24.Non-equity minority interests

	2005	2004
	£m	£m
Preferred shares	853	875

Non-equity minority interests comprise class D and E preferred shares issued by Vodafone Americas, Inc. An annual dividend of $51.43 per class D and E preferred share is payable quarterly in arrears. The dividend for the year amounted to £46 million (2004: £50 million). The aggregate redemption value of the class D and E preferred shares is $1.65 billion. The holders of the preferred shares are entitled to vote on the election of directors and upon each other matter coming before any meeting of the shareholders on which the holders of ordinary shares are entitled to vote. Holders are entitled to vote on the basis of twelve votes for each share of class D or E preferred stock held. The maturity date of the 825,000 class D preferred shares is 6 April 2020. The 825,000 class E preferred shares have a maturity date of 1 April 2020. The class D and E preferred shares have a redemption price of $1,000 per share plus all accrued and unpaid dividends.

Financials  | 111

Notes to the Consolidated Financial Statements continued

25.Acquisitions and disposals

The Group has undertaken a number of transactions during the year, including the acquisition of additional minority stakes in certain existing subsidiary undertakings. The aggregate consideration and total cash outflow for all acquisitions was £2,461 million.

Under UK GAAP, the total goodwill capitalised in respect of transactions has been assessed as £1,762 million, including £5 million in relation to associated undertakings.

Acquisition of additional minority stakes in certain existing subsidiary undertakings

During the year ended 31 March 2005, the Company has directly or indirectly increased its interest in its subsidiary undertakings in Japan, Hungary and Greece. These transactions are in line with the Group’s strategy of increasing its shareholding in existing operations where opportunities arise for the creation of enhanced value for the Company’s shareholders.

		Fair value net
		assets		Goodwill
	Consideration	acquired	(1)	capitalised
	£m	£m		£m
Vodafone Japan(2)	2,380	690		1,690
Vodafone Hungary(3)(4)	55	12		43
Vodafone Greece(3)	10	3		7
	2,445	705		1,740
Notes:

(1)	No adjustments were made for fair values as compared with book values at acquisition.
(2)	In the first half of the year, the Group increased its effective shareholding in Vodafone K.K. from 69.7% to 98.2% and its stake in Vodafone Holdings K.K. from 66.7% to 96.1% for a total consideration of £2.4 billion. On 1 October 2004, the merger of Vodafone K.K. and Vodafone Holdings K.K. was completed, resulting in the Group holding a 97.7% stake in the merged company, Vodafone K.K.
(3)	As a result of these acquisitions, the Group’s interest in Vodafone Greece and Vodafone Hungary increased from 99.4% to 99.8% and from 87.9% to 100% respectively.
(4)	Additional equity of HUF 89,301 million (£248 million) was subscribed for in Vodafone Hungary prior to this transaction.

As described in note 26 “Commitments”, the Group has entered into an agreement with Telesystem International Wireless Inc. of Canada to acquire approximately 79% of the share capital of MobiFon S.A. in Romania, and 100% of the issued share capital of Oskar Mobil a.s. in the Czech Republic.

Disposals

In January 2005, the Group disposed of a 16.9% stake in Vodafone Egypt for cash consideration of £65 million, reducing the Group’s controlling stake to 50.1%.

26.Commitments

Operating lease commitments

Commitments to non-cancellable operating lease payments are analysed as follows:

	2005			2004
	Land and	Other		Land and	Other
	buildings	assets	Total	buildings	assets	Total
	£m	£m	£m	£m	£m	£m
In respect of leases expiring:
Within one year	99	91	190	79	97	176
Between two and five years	146	91	237	147	85	232
After five years	170	33	203	136	42	178
Payments due:
Within one year	415	215	630	362	224	586
In more than one year but less than two years			406			366
In more than two years but less than three years			352			295
In more than three years but less than four years			299			256
In more than four years but less than five years			255			218
Thereafter (more than five years)			1,132			1,016
			3,074			2,737

Finance lease commitments

Details of commitments under finance leases are included in notes 17 and 18.

112 |  Financials

Capital and other commitments
	2005 £m	2004 £m
Tangible and intangible fixed asset expenditure contracted for but not provided	749	866
Purchase commitments	1,242	957
Share purchase programme	565	–
Purchase of Mobifon and Oskar	1,858	–
	4,414	1,823

On 15 March 2005, the Group announced it had entered into agreements with Telesystem International Wireless Inc. (“TIW”) of Canada to acquire approximately 79% of the share capital of MobiFon S.A. (“MobiFon”) in Romania, increasing the Group’s ownership of MobiFon to approximately 99%, and 100% of the issued share capital of Oskar Mobil a.s. in the Czech Republic for cash consideration of approximately $3.5 billion (£1.9 billion) to be satisfied from the Group’s cash resources. In addition, the Group will be assuming approximately $0.9 billion (£0.5 billion) of net debt. The acquisition is conditional on TIW shareholder approval, the receipt of all necessary unconditional regulatory and Canadian Court approvals and certain customary conditions and is expected to complete by the end of June 2005.

27.Contingent liabilities

	Group		Company
	2005 £m	2004 £m	2005 £m	2004 £m
Performance bonds	382	667	176	200
Credit guarantees – third party indebtedness	67	97	1,424	1,498
Other guarantees and contingent liabilities	18	29	1	17

Performance bonds

Performance bonds require the Company, or certain of its subsidiary undertakings, to make payments to third parties in the event that the Company or subsidiary undertaking does not perform what is expected of it under the terms of any related contracts.

Group performance bonds include £189 million (2004: £434 million) in respect of undertakings to roll out 2G and 3G networks in Germany while the Company and Group performance bonds include £149 million (2004: £145 million) in respect of undertakings to roll out 3G networks in Spain. The majority of the German performance bonds expire by December 2005 and for Spain by November 2009.

Credit guarantees – third party indebtedness

Credit guarantees comprise guarantees and indemnities of bank or other facilities including those in respect of the Group’s associated undertakings and investments.

At 31 March 2005, the Company had guaranteed debt of Vodafone Finance K.K. amounting to £1,111 million (2004: £1,177 million) and issued guarantees in respect of notes issued by Vodafone Americas, Inc. amounting to £311 million (2004: £320 million). The Japanese facility expires by January 2007 and the majority of Vodafone Americas, Inc. bond guarantees by July 2008.

Other guarantees and contingent liabilities

Other guarantees principally comprise commitments to support disposed entities.

In addition to the amounts disclosed above, the Group has guaranteed financial indebtedness and issued performance bonds for £36 million (2004: £53 million) in respect of businesses which have been sold and for which counter indemnities have been received from the purchasers.

The Group also enters into lease arrangements in the normal course of business, which are principally in respect of land, buildings and equipment. Further details on the minimum lease payments due under non-cancellable operating lease arrangements can be found in note 26.

Save as disclosed within “Risk Factors and Legal Proceedings – Legal Proceedings”, the Company and its subsidiaries are not involved in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which are expected to have, or have had in the twelve months preceding the date of this document, a significant effect on the financial position or profitability of the Company and its subsidiaries.

Financials  | 113

Notes to the Consolidated Financial Statements continued

28.Analysis of cash flows

	2005 £m		2004 £m		2003 £m
Net cash inflow from operating activities
Operating loss	(5,304	)	(4,776	)	(5,295	)
Exceptional items	315		(228	)	496
Depreciation	4,528		4,362		3,979
Goodwill amortisation (subsidiary undertakings)	12,929		13,095		11,875
Amortisation of other intangible fixed assets	412		98		53
Loss on disposal of tangible fixed assets	161		89		109
	13,041		12,640		11,217
Decrease/(increase) in stocks	22		(102	)	(17	)
(Increase)/decrease in debtors	(453	)	(293	)	198
Increase/(decrease) in creditors	150		157		(233	)
Payments in respect of exceptional items	(47	)	(85	)	(23	)
	12,713		12,317		11,142
Net cash outflow for returns on investments and servicing of finance
Interest received	746		942		543
Dividends from investments	19		25		15
Interest paid	(1,074	)	(901	)	(1,004	)
Interest element of finance leases	(8	)	(10	)	(14	)
Dividends paid to minority shareholders in subsidiary undertakings	(74	)	(100	)	(91	)
	(391	)	(44	)	(551	)
Net cash outflow from financing
Issue of ordinary share capital	115		69		28
Issue of shares to minorities	–		–		1
Purchase of treasury shares	(4,053	)	(1,032	)	–
Purchase of own shares in relation to employee share schemes	–		(17	)	(14	)
Capital element of finance lease payments	(12	)	(115	)	(97	)
Debt due within one year:
Decrease in short term debt	(1,997	)	(1,791	)	(1,366	)
Debt due after one year:
Decrease in long-term debt	(161	)	(507	)	(1,700	)
Issue of new bonds	–		2,693		2,998
	(6,108	)	(700	)	(150	)

114 | Financials

29.Analysis of net debt

					Other non- cash changes
	1 April		Cash		and exchange		31 March
	2004		flow		movements		2005
	£m		£m		£m		£m
Liquid investments	4,381		(3,563	)	(2	)	816
Cash at bank and in hand	1,409		1,408		33		2,850
Bank overdrafts	(42	)	(3	)	(2	)	(47	)
	1,367		1,405		31		2,803
Debt due within one year	(2,000	)	1,997		(329	)	(332	)
Debt due after one year	(12,100	)	161		439		(11,500	)
Finance leases	(136	)	12		(2	)	(126	)
	(14,236	)	2,170		108		(11,958	)
	(8,488	)	12		137		(8,339	)

Cash flows in respect of the Commercial Paper programme are shown net within debt-related cash flows.

Debt includes secured debt of £90 million (2004: £132 million) in respect of Vodafone Egypt (£50 million, 2004: £132 million) and Vodafone Albania (£40 million, 2004: £nil). Further information on guarantees can be found in note 27.

30.Directors

Aggregate emoluments of the directors of the Company were as follows:

	2005	2004	2003
	£’000	£’000	£’000
Salaries and fees	5,806	6,752	5,457
Incentive schemes	4,218	5,418	5,738
Benefits	582	1,371	709
	10,606	13,541	11,904

The aggregate gross pre-tax gain made on the exercise of share options in the year to 31 March 2005 by serving directors was £3,076,200 (2004: £1,904,000; 2003: £226,873) and by former directors was £2,507,477 (2004: £nil, 2003: £nil).

Further details of directors’ emoluments can be found in “Board’s Report to Shareholders on Directors’ Remuneration – Remuneration for the year to 31 March 2005”.

Financials  | 115

Notes to the Consolidated Financial Statements continued

31.Employees

An analysis of the average number of employees by category of activity is shown below.

	2005	2004	2003
	Number	Number	Number
By activity:
Operations	13,772	14,096	14,863
Selling and distribution	16,140	15,303	16,252
Administration	27,466	30,710	35,552
	57,378	60,109	66,667
By segment:
Mobile telecommunications:
Germany	9,266	9,143	8,532
Italy	8,898	9,047	8,893
UK	11,397	11,304	9,972
Other EMEA	17,681	17,215	16,984
Americas	174	241	391
Asia Pacific	5,610	6,048	7,063
	53,026	52,998	51,835
Non mobile:
Germany	4,352	4,767	6,354
Asia Pacific	–	2,344	8,478
	57,378	60,109	66,667
The cost incurred in respect of these employees (including directors) was:
	2005	2004	2003
	£m	£m	£m
Wages and salaries	1,955	2,018	1,984
Social security costs	243	234	199
Other pension costs	95	79	95
	2,293	2,331	2,278

116 |  Financials

32.Pensions

As at 31 March 2005, the Group operated a number of pension plans for the benefit of its employees throughout the world, which vary with conditions and practices in the countries concerned. The Group’s pension plans are provided through both defined benefit and defined contribution arrangements. Defined benefit schemes provide benefits based on the employees’ length of pensionable service and their final pensionable salary or other criteria. Defined contribution schemes offer employees individual funds that are converted into benefits at the time of retirement.

Further details on the three principal defined benefit pension schemes, in the United Kingdom, Germany and Japan are shown below. In addition to the principal schemes, the Group operates defined benefit schemes in Greece, Ireland, Italy, Sweden and the United States. Defined contribution pension schemes are provided in Australia, Belgium, Egypt, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, the Netherlands, New Zealand, Portugal, Spain, the United Kingdom and the United States. There is a post retirement medical plan in the United States for a small closed group of participants.

The Group accounts for its pension schemes in accordance with SSAP 24, “Accounting for pension costs”. Scheme liabilities are assessed by independent actuaries using the projected unit funding method and applying the principal actuarial assumptions set out in “Pension disclosures required under SSAP 24” below. Assets are shown at market value.

From 2006, the Group will account for its pension schemes in accordance with IFRS principles (which are largely equivalent to the current FRS 17 requirements under UK GAAP). Additional disclosures required under the current transitional provisions of FRS 17 are also set out below. The bases of calculation under FRS 17 are significantly different to SSAP 24. Whilst both require use of formal actuarial valuations, FRS 17 requires the use of a different set of underlying assumptions and also specifies more frequent valuation updates. Accordingly, when IFRS is implemented in full, the Group’s reported pension costs and balance sheet position will change accordingly.

United Kingdom

The majority of the UK employees are members of the Vodafone Group Pension Scheme (the “main scheme”). This is a tax approved defined benefit scheme, the assets of which are held in an external trustee-administered fund. In addition, there is an internally funded unapproved defined benefit plan in place for a small number of senior executives. The pension cost for these defined benefit arrangements are included in the summary information shown below.

The main scheme is subject to quarterly funding updates by independent actuaries and to formal actuarial valuations at least every three years. The most recent formal triennial valuation of this scheme was carried out as at 31 March 2004 and valued scheme assets at £434 million and scheme liabilities at £393 million. This represents a funding ratio of 111% (2004: 116%).

As a result of the triennial actuarial valuation, the Group’s UK subsidiaries agreed to make a special lump sum contribution of £100 million during the financial year and to maintain the ongoing contributions of 13% of pensionable earnings. The updated funding level as at 31 March 2005 has been estimated as approximately 130% using assumptions consistent with the 2004 actuarial valuation. This special contribution brings the funding position on an FRS 17 basis to 101% at 31 March 2005.

The SSAP 24 liabilities are valued using the same assumptions adopted for the triennial valuation. These are outlined further below. As a result of the acceleration of payments, a net prepayment of £299 million (2004: £193 million) is included in debtors due after more than one year, representing the excess of the amounts funded over accumulated pension costs.

Germany

There are a number of separate pension and associated arrangements in Germany, with the majority of these being financed through a funded trust arrangement. The German schemes are subject to annual valuations, with the last formal valuations having been completed at 31 March 2005.

Under SSAP 24 requirements, an amount of £7 million (2004: £14 million) is included in provisions for liabilities and charges, representing the excess of the accumulated pension cost over the funded amounts on some schemes, with an equal amount in prepayments (2004: £nil), representing the excess of the amounts funded over accumulated pension costs for the remaining schemes.

Under the requirements of FRS 17, the total pension liability at 31 March 2005 for benefits funded through the trust arrangement was £191 million. The market value of the trust arrangement assets was £181 million. A contribution of £14 million was made into the trust during the financial year. The total FRS 17 pension liability for additional unfunded arrangements was £22 million.

Japan

There are a number of separate pension schemes operating in Japan. These plans are generally not funded externally. The latest formal actuarial valuation was prepared at 31 March 2005.

Under the requirements of SSAP 24, an amount of £21 million (2004: £26 million) is included in provisions for liabilities and charges, representing the excess of the accumulated pension costs over the amounts funded externally reflecting the internally funded nature of the principal arrangements.

On an FRS 17 basis, liabilities are valued at £30 million at 31 March 2005 while scheme assets are valued at £2 million.

Financials  | 117

Notes to the Consolidated Financial Statementscontinued

32.Pensions continued

Pension disclosures required under SSAP 24

During the year ended 31 March 2005, the total amount charged to the profit and loss account in respect of all the Group’s pensions plans was £95 million (2004: £79 million, 2003: £95 million), as analysed below:

	2005	2004	2003
	£m	£m	£m
Defined benefit schemes:
United Kingdom	31	31	24
Germany	5	7	12
Japan	28	10	32
Other	8	6	5
Net pension charge: Defined benefit schemes	72	54	73
Net pension charge: Defined contribution schemes	23	25	22
Total amount charged to the profit and loss account	95	79	95

Below is a summary of the principal assumptions used in calculating the pension cost for the year to 31 March 2005:

	UK	Germany	Japan
	%	%	%
Rate of inflation	2.5	2.0	–
Rate of increase in salaries	4.5	3.0	–(1	)
Rate of increase in pensions in payment	2.5	2.0	N/A
Rate of increase in deferred pensions	2.5	–	N/A
Rate used to discount liabilities – pre-retirement	6.8	5.5	2.5
Rate used to discount liabilities – post-retirement	5.8	5.5	2.5

Notes:
(1)	Rate of increase in salaries in Japan is calculated in line with company specific experience where benefits are salary related.

The components of the total pension costs of the three principal defined benefit schemes were as follows:

			UK					Germany					Japan(2)
	2005		2004		2003		2005	2004		2003		2005	2004	2003
	£m		£m		£m		£m	£m		£m		£m	£m	£m
Regular cost	27		23		22		3	5		5		5	8	12
Interest (credit)/cost	(13	)	(9	)	(4	)	1	4		9		–	1	2
Variation in regular cost(1)	17		17		6		1	(2	)	(2	)	23	1	18
Total	31		31		24		5	7		12		28	10	32

Notes:
(1)	The variation in regular cost was calculated by amortising the shortfall at the date of the last formal valuation or review over the future working lives of members on a percentage of pensionable salary basis. For the purposes of determining the UK SSAP 24 variation in regular cost, a review was undertaken as at 31 March 2003 to reflect the impact of investment market movements. The charge for Japan in the year ended 31 March 2005 also included £23 million (2004: £nil, 2003: £17 million) in respect of lump sum redundancy benefits payable through a redundancy programme associated with the retirement plan.
(2)	The charge for Japan for the year ended 31 March 2004 includes the pension costs in relation to companies sold during the year for that part of the year prior to their disposal.

118 |  Financials

Additional disclosures in respect of FRS 17

The most recent full formal actuarial valuations for defined benefit schemes have been updated by qualified independent actuaries for the financial year ended 31 March 2005 to derive the FRS 17 disclosures below.

Major assumptions used

	UK			Germany			Japan						Other(2)
	2005	2004	2003	2005	2004	2003	2005		2004		2003		2005	2004	2003
	%	%	%	%	%	%	%		%		%		%	%	%
Rate of inflation	2.8	2.5	2.5	1.9	2.0	1.5	–		–		–		2.0	2.0	1.8
Rate of increase in salaries	4.8	4.5	4.5	2.9	3.0	3.5	–	(1)	–	(1)	–	(1)	2.6	3.0	3.5
Rate of increase in    pensions in payment	2.8	2.5	2.5	1.9	2.0	1.5	N/a		N/a		N/a		2.0	2.0	1.9
Rate of increase in    deferred pensions	2.8	2.5	2.5	1.9	–	–	N/a		N/a		N/a		2.0	2.0	1.9
Discount rate	5.4	5.5	5.4	4.5	5.3	5.3	2.3		2.3		1.5		4.7	4.8	5.3

Notes:
(1)	Rate of increase in salaries in Japan is calculated in line with company specific experience.
(2)	Figures shown for other schemes represent weighted average assumptions of individual schemes.
The expected rates of return at 31 March were:

	UK			Germany			Japan			Other
	2005	2004	2003	2005	2004	2003	2005	2004	2003	2005	2004	2003
	%	%	%	%	%	%	%	%	%	%	%	%
Bonds	4.8	4.8	5.5	4.0	4.5	4.8	1.6	1.0	N/a	4.3	4.6	4.9
Equities	7.7	7.5	8.0	6.6	6.8	7.3	4.3	4.0	N/a	6.8	6.8	7.8
Other assets	4.9	–	–	2.1	2.0	2.8	2.8	–	3.0	4.3	2.0	3.5
Charges that would have been made to the profit and loss account and consolidated statement of total recognised gains and losses on compliance with FRS 17 and on the basis of the assumptions stated above

	UK				Germany				Japan				Other				Total
	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Operating profit:
Current service cost	37		32		6		8		5		10		30		44		78		94
Past service cost	–		–		–		–		–		–		–		1		–		1
Total charge to operating profit	37		32		6		8		5		10		30		45		78		95
Finance costs/(income):
Interest cost	26		22		9		9		1		1		6		6		42		38
Expected return on pension scheme assets	(31	)	(22	)	(8	)	(5	)	–		–		(3	)	(2	)	(42	)	(29	)
Total (credit)/charge to finance (income)/costs	(5	)	–		1		4		1		1		3		4		–		9
Total charge to loss before taxation	32		32		7		12		6		11		33		49		78		104
Consolidated statement of total recognised gains and losses:
Actual return less expected return on pension scheme assets	(23	)	(56	)	1		(3	)	–		–		(2	)	(7	)	(24	)	(66	)
Experience (gains) and losses arising on the scheme liabilities	56		–		3		3		–		(1	)	1		(3	)	60		(1	)
Changes in assumptions underlying the present value of the plan liabilities	39		16		16		11		–		(5	)	11		(2	)	66		20
Actuarial (gains)/losses on assets and liabilities	72		(40	)	20		11		–		(6	)	10		(12	)	102		(47	)
Exchange rate movements	–		–		1		(1	)	(2	)	(3	)	1		(5	)	–		(9	)
Total (gains)/losses recognised in statement of total recognised gains and losses	72		(40	)	21		10		(2	)	(9	)	11		(17	)	102		(56	)

Financials | 119

Notes to the Consolidated Financial Statements continued

32.Pensions continued

History of amounts that would have been recognised in the statement of total recognised gains and losses under FRS 17

		2005				2004				2003
		£m		%		£m		%		£m		%
UK	Difference between the expected and actual return on assets(1)	23		4		56		13		(95	)	(36	)
	Experience gains and (losses) arising on scheme liabilities(2)	(56	)	(9	)	–		–		–		–
	Actuarial gain/(loss)(2)	(72	)	(12	)	40		9		(132	)	(34	)
Germany	Difference between the expected and actual return on assets(1)	(1	)	(1	)	3		2		(1	)	(1	)
	Experience gains and (losses) arising on scheme liabilities(2)	(3	)	(1	)	(3	)	(2	)	7		4
	Actuarial gain/(loss)(2)	(20	)	(9	)	(11	)	(6	)	(5	)	(3	)
Japan	Difference between the expected and actual return on assets(1)	–		–		–		–		–		–
	Experience gains and (losses) arising on scheme liabilities(2)	–		–		1		3		(1	)	(1	)
	Actuarial gain/(loss)(2)	–		–		6		17		(17	)	(13	)
Other	Difference between the expected and actual return on assets(1)	2		3		7		18		(14	)	(37	)
	Experience gains and (losses) arising on scheme liabilities(2)	(1	)	(1	)	3		2		1		1
	Actuarial gain/(loss)(2)	(10	)	(7	)	12		10		(18	)	(14	)
Group	Difference between the expected and actual return on assets(1)	24		3		66		10		(110	)	(27	)
	Experience gains and (losses) arising on scheme liabilities(2)	(60	)	(6	)	1		–		7		1
	Actuarial gain/(loss)(2)	(102	)	(10	)	47		6		(172	)	(21	)

Notes:
(1)	Percentage stated is expressed as a percentage of scheme assets at 31 March.
(2)	Percentage stated is expressed as a percentage of scheme liabilities at 31 March.
Fair value of the assets and liabilities of the schemes

	UK						Germany						Japan						Other						Total
	2005		2004		2003		2005		2004		2003		2005		2004		2003		2005		2004		2003		2005		2004		2003
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Bonds	105		89		56		115		104		–		–		1		–		6		4		7		226		198		63
Equities	418		345		208		54		51		–		–		1		–		52		33		27		524		430		235
Other assets	105		–		–		12		10		107		2		–		1		5		3		4		124		13		112
Total fair value
of scheme
assets	628		434		264		181		165		107		2		2		1		63		40		38		874		641		410
Present value
of scheme
liabilities	(619	)	(457	)	(383	)	(213	)	(192	)	(180	)	(30	)	(35	)	(127	)	(148	)	(122	)	(126	)	(1,010	)	(806	)	(816	)
FRS 17
assets/(deficits)	9		(23	)	(119	)	(32	)	(27	)	(73	)	(28	)	(33	)	(126	)	(85	)	(82	)	(88	)	(136	)	(165	)	(406	)
Related deferred
tax (liabilities)
/assets	(2	)	7		36		13		11		30		12		14		53		32		30		30		55		62		149
Net FRS 17
surplus/(deficit)	7		(16	)	(83	)	(19	)	(16	)	(43	)	(16	)	(19	)	(73	)	(53	)	(52	)	(58	)	(81	)	(103	)	(257	)
Analysed as:
Assets	7		–		–		2		–		–		–		–		–		–		–		–		9		–		–
Liabilities	–		(16	)	(83	)	(21	)	(16	)	(43	)	(16	)	(19	)	(73	)	(53	)	(52	)	(58	)	(90	)	(103	)	(257	)

The funded status of each of the above principal defined benefit schemes is reported at the beginning of this note. The deficits reported under FRS 17 reflect the different assumptions for valuing assets and liabilities compared with SSAP 24.

The funding policy for the German and UK schemes is reviewed on a systematic basis in consultation with the independent scheme actuary in order to ensure that the funding contributions from sponsoring employers are appropriate to meet the liabilities of the schemes over the long term.

The deficit in respect of other schemes at 31 March 2005 primarily relates to internally funded schemes in Italy, Sweden and the United States.

120 |Financials

Movement in deficit during the year
	UK				Germany				Japan				Other				Total
	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Deficit in schemes before deferred tax at 1 April	23		119		27		73		33		126		82		88		165		406
Current service cost	37		32		6		8		5		10		30		44		78		94
Cash contributions	(136	)	(88	)	(23	)	(68	)	(9	)	(22	)	(41	)	(33	)	(209	)	(211	)
Past service cost	–		–		–		–		–		–		–		1		–		1
Financial (income)/costs	(5	)	–		1		4		1		1		3		4		–		9
Actuarial (gains)/losses	72		(40	)	20		11		–		(6	)	10		(12	)	102		(47	)
Exchange rate movements	–		–		1		(1	)	(2	)	(3	)	1		(5	)	–		(9	)
Other movements	–		–		–		–		–		(73	)	–		(5	)	–		(78	)
(Surplus)/deficit in schemes before deferred tax at    31 March	(9	)	23		32		27		28		33		85		82		136		165

Other movements in 2004 principally relate to the disposal of the Japan Telecom fixed line business.

Group net assets and profit and loss account reserves

	Under SSAP 24				Under FRS 17
	(as adopted)				(for information only)
	2005		2004		2005		2004
	£m		£m		£m		£m
Net assets excluding pension scheme assets/(liabilities)	102,000		114,836		102,000		114,836
Net pension scheme assets/(liabilities) (net of deferred tax)	135		95		(81	)	(103	)
Net assets including pension scheme liabilities	102,135		114,931		101,919		114,733
Profit and loss reserve excluding pension scheme assets/(liabilities)	(51,823	)	(43,109	)	(51,823	)	(43,109	)
Net pension scheme assets/(liabilities) (net of deferred tax)	135		95		(81	)	(103	)
Profit and loss reserve including pension scheme assets/(liabilities)	(51,688	)	(43,014	)	(51,904	)	(43,212	)

33.Subsequent events

On 13 April 2005, the Group’s associated undertaking, Verizon Wireless, completed its purchase of NextWave Telecom Inc. for $3 billion in cash.

On 19 April 2005, the Board of directors of Vodafone Italy approved a proposal to buy back issued and outstanding shares for approximately €7.9 billion (£5.4 billion). If the proposal is approved by the shareholders of Vodafone Italy, participation will be invited on a pro rata basis. In accordance with Dutch and Italian corporate law the buy back will take place in two tranches, the first in June 2005 and the second expected to be October 2005. After the transaction is completed the Company and Verizon Communications Inc. will continue to hold approximately 76.8% and 23.1%, respectively, of Vodafone Italy indirectly through their wholly owned subsidiaries. It is anticipated that the buy back will be funded from currently available and forecast available cash of Vodafone Italy. At 31 March 2005, Vodafone Italy had net cash on deposit with Group companies of €7.2 billion (£4.9 billion).

On 11 May 2005, it was announced that an agreement had been reached to merge Cegetel with neuf telecom.

Between 1 April 2005 and 12 May 2005, the Company repurchased 405,500,000 of its own shares, to be held in treasury, under irrevocable purchase orders placed prior to 31 March 2005 for total consideration of £565 million. Further details of these transactions are shown in note 23.

As described in note 26 “Commitments”, the Group has entered into an agreement with Telesystem International Wireless Inc. of Canada to acquire approximately 79% of the share capital of MobiFon S.A. in Romania, and 100% of the issued share capital of Oskar Mobil a.s. in the Czech Republic.

Financials | 121

Notes to the Consolidated Financial Statements continued

34.Principal subsidiary undertakings, associated undertakings and investments

Principal subsidiary undertakings

At 31 March 2005, the Company had the following subsidiary undertakings carrying on businesses which principally affect the profits and assets of the Group. They have the same year end date as the Company, unless otherwise stated, and have been included in the Group consolidation.

Unless otherwise stated the Company’s principal subsidiary undertakings all have share capital consisting solely of ordinary shares and are indirectly held. The country of incorporation or registration of all subsidiary undertakings is also their principal place of operation.

		Country of
		incorporation	Percentage(1)
Name	Principal activity	or registration	shareholding
Arcor AG & Co.	Fixed line operator	Germany	73.7
Europolitan Vodafone AB	Mobile network operator	Sweden	100.0
Vodafone Albania Sh.A.(2)	Mobile network operator	Albania	99.9
Vodafone Americas Inc.(3)	Holding company	USA	100.0
Vodafone D2 GmbH	Mobile network operator	Germany	100.0
Vodafone Egypt Telecommunications S.A.E.	Mobile network operator	Egypt	50.1
Vodafone Espana S.A.	Mobile network operator	Spain	100.0
Vodafone Europe B.V.	Holding company	Netherlands	100.0
Vodafone Holding GmbH(2)	Holding company	Germany	100.0
Vodafone Holdings Europe S.L.	Holding company	Spain	100.0
Vodafone K.K.	Mobile network operator	Japan	97.7
Vodafone Hungary Mobile Telecommunications Limited	Mobile network operator	Hungary	100.0
Vodafone International Holdings B.V.	Holding company	Netherlands	100.0
Vodafone Investments Luxembourg S.a.r.l.	Holding company	Luxembourg	100.0
Vodafone Ireland Limited	Mobile network operator	Ireland	100.0
Vodafone Libertel N.V.	Mobile network operator	Netherlands	99.9
Vodafone Limited	Mobile network operator	England	100.0
Vodafone Malta Limited	Mobile network operator	Malta	100.0
Vodafone Marketing S.a.r.l	Provider of Partner Network services	Luxembourg	100.0
Vodafone Network Pty Limited	Mobile network operator	Australia	100.0
Vodafone New Zealand Limited	Mobile network operator	New Zealand	100.0
Vodafone Omnitel N.V.(4)	Mobile network operator	Netherlands	76.8
Vodafone-Panafon Hellenic Telecommunications Company S.A.	Mobile network operator	Greece	99.8
Vodafone Portugal-Comunicações Pessoais, S.A.	Mobile network operator	Portugal	100.0
Vodafone Group Services Limited	Global products and services provider	England	100.0

Notes:
(1)	Rounded to nearest tenth of one percent.
(2)	Vodafone Albania Sh.A. and Vodafone Holding GmbH have a 31 December year end. Accounts are drawn up to 31 March 2005 for consolidation into the Group’s financial statements.
(3)	Share capital consists of 597,379,729 ordinary shares and 1.65 million class D and E redeemable preference shares of which 100% of the ordinary shares are held by the Group.
(4)	The principal place of operation of Vodafone Omnitel N.V. is Italy.

122 |  Financials

Principal associated undertakings

The Company’s principal associated undertakings all have share capital consisting solely of ordinary shares, unless otherwise stated, and are all indirectly held. The country of incorporation or registration of all associated undertakings is also their principal place of operation.

		Percentage	(1)
		shareholding/		Par value	Latest	Country of
		partnership		of issued	financial	incorporation or
Name	Principal activity	interest		equity	accounts	registration
Belgacom Mobile S.A.	Mobile network operator	25.0		€70.0m	31.12.04(2)	Belgium
Cellco Partnership(3)	Mobile network operator	45.0		—	31.12.04(2)	USA
Mobifon S.A.	Mobile network operator	20.1		ROL 712,923m	31.12.04(2)	Romania
Polkomtel S.A.	Mobile network operator	19.6		PLN 2,050m	31.12.04(2)	Poland
Safaricom Limited(4)	Mobile network operator	35.0		1,020 Kshs	31.03.05	Kenya
Société Française du Radiotéléphone S.A.	Mobile network operator and
	telecommunications company	43.9		€1,348m	31.12.04(2)	France
Swisscom Mobile A.G.	Mobile network operator	25.0		CHF100m	31.12.04(2)	Switzerland
Vodafone Fiji Limited	Mobile network operator	49.0		F$6m	31.03.05	Fiji
Vodacom Group (Pty) Limited	Holding company	35.0		ZAR 100	31.03.05	South Africa

Notes:
(1)	Rounded to nearest tenth of one percent.
(2)	Accounts are drawn up to 31 March 2005 for consolidation in the Group’s financial statements.
(3)	Cellco Partnership trades under the name Verizon Wireless. The registered or principal office of the partnership is 180 Washington Valley Road, Bedminster, New Jersey 07921, USA.
(4)	The Group also holds 2 non-voting shares.

Principal investments

The shareholding in the investment consists solely of ordinary shares and is indirectly held. The principal country of operation is the same as the country of incorporation or registration.

			Country of
		Percentage(1)	incorporation or
Name	Principal activity	shareholding	registration
China Mobile (Hong Kong) Limited(2)	Mobile network operator	3.3	China

Notes:
(1)	Rounded to nearest tenth of one percent.
(2)	Listed on the Hong Kong and New York stock exchanges and incorporated under the laws of Hong Kong.

35.Related party transactions

Transactions with joint ventures and associated undertakings

Group turnover includes sales to joint ventures and associated undertakings of £220 million (2004: £174 million, 2003: £40 million), primarily comprising fees for the use of Vodafone products and services, network airtime and access charges. Total operating costs include charges from joint ventures and associated undertakings of £272 million (2004: £173 million, 2003: £91 million), primarily comprising roaming charges.

Dividends received from joint ventures and associated undertakings are disclosed in Consolidated Cash Flows on page 80. Loans and trade balances owed to or from joint ventures and associated undertakings are disclosed in notes 15 and 17. During the year the Group received £nil (2004: £3 million; 2003: £14 million) in respect of interest on these loans.

Transactions with directors

During the year ended 31 March 2005, and as of 23 May 2005, neither any director nor any other executive officer, nor any associate of any director or any other executive officer, was indebted to the Company.

Since 1 April 2004, the Company has not been, and is not now, a party to any other material transactions, or proposed transactions, in which any member of the key management personnel (including directors, any other executive officer, senior manager, any spouse or relative of any of the foregoing, or any relative of such spouse), had or was to have a direct or indirect material interest.

Financials  | 123

Notes to the Consolidated Financial Statements continued

36.US GAAP information

Reconciliations to US GAAP

The Consolidated Financial Statements are prepared in accordance with UK GAAP, which differ in certain material respects from US GAAP. The following is a summary of the effects of the differences between UK GAAP and US GAAP. The translation of pounds sterling amounts into US dollars is provided solely for convenience based on the Noon Buying Rate on 31 March 2005 of $1.8888: £1.

Net loss for the years ended 31 March

		2005		2005		2004		2003
	Ref.	$m		£m		£m		£m
Revenue from continuing operations (UK GAAP)		64,470		34,133		32,741		28,547
Items (decreasing)/increasing revenue:
Investments accounted for under the equity method	(a)	(10,356	)	(5,483	)	(5,276	)	(4,371	)
Connection revenue	(b)	2,310		1,223		188		(1,760	)
Revenue from continuing operations (US GAAP)		56,424		29,873		27,653		22,416
Loss for the financial year (UK GAAP)		(14,242	)	(7,540	)	(9,015	)	(9,819	)
Items (increasing)/decreasing net loss:
Investments accounted for under the equity method	(a)	(34	)	(18	)	1,306		656
Connection revenue and costs	(b)	30		16		29		16
Goodwill and other intangible assets	(c)	(12,243	)	(6,482	)	(6,520	)	(5,487	)
Capitalised interest	(d)	(162	)	(86	)	406		408
Licence fee amortisation	(e)	(822	)	(435	)	(76	)	(6	)
Exceptional items	(f)	465		246		(351	)	270
Income taxes	(g)	13,235		7,007		6,231		4,953
Cumulative effect of change in accounting principle: EITF Topic D-108	(h)	(11,667	)	(6,177	)	–		–
Cumulative effect of change in accounting principle: Post employment benefits	(h)	(368	)	(195	)	–		–
Other	(j)	(223	)	(118	)	(137	)	(46	)
Net loss (US GAAP)		(26,031	)	(13,782	)	(8,127	)	(9,055	)
Loss from continuing operations		(13,996	)	(7,410	)	(7,734	)	(9,135	)
Loss/(income) from operations and disposal of discontinued operations	(f)	–		–		(393	)	80
Cumulative effect of changes in accounting principles	(h)	(12,035	)	(6,372	)	–		–
Net loss (US GAAP)		(26,031	)	(13,782	)	(8,127	)	(9,055	)
Basic and diluted loss per share (US GAAP):	(k)
– Loss from continuing operations		(21.14	)¢	(11.19	)p	(11.36	)p	(13.40	)p
– Loss/(income) from operations and disposal of discontinued operations		–		–		(0.57	)p	0.11	p
– Cumulative effect of changes in accounting principles		(18.18	)¢	(9.63	)p	–		–
– Net loss		(39.32	)¢	(20.82	)p	(11.93	)p	(13.29	)p

Pro-forma amounts as if the new accounting policy related to post employment benefits was applied retroactively

The following table presents net loss including related per share amounts on a pro forma basis as if the voluntary change in accounting principle related to the accounting for post employment benefits was applied retroactively. The change in accounting principle resulting from the adoption of EITF Topic D-108 has not been adjusted in the following table as this was not a voluntary change in accounting principle. Further details on the changes in accounting principles can be found in section (h) of this note.

	2005		2005		2004		2003
	$m		£m		£m		£m
Pro forma net loss	(26,400	)	(13,977	)	(8,081	)	(9,163	)
Pro forma net loss basic and diluted loss per share	(39.88	)¢	(21.11	)p	(11.87	)p	(13.44	)p

124 |  Financials

Comprehensive (loss)/income for the years ended 31 March

		2005		2005		2004		2003
	Ref.	$m		£m		£m		£m
Total recognised losses relating to the year (UK GAAP)		(11,471	)	(6,073	)	(14,307	)	(780	)
Items (increasing)/decreasing total recognised losses:
Net difference between loss for the financial year (UK GAAP) and
net loss (US GAAP)		(11,789	)	(6,242	)	888		764
Additional minimum pension liability, net of tax	(j)	87		46		144		(191	)
Available for sale securities, net of tax	(j)	166		88		378		(137	)
Derivative financial instruments, net of tax	(j)	2		1		(1	)	1
Currency translation, net of tax		171		91		(353	)	913
Comprehensive (loss)/income (US GAAP)	(l)	(22,834	)	(12,089	)	(13,251	)	570

Shareholders’ equity at 31 March

		2005		2005		2004
	Ref.	$m		£m		£m
Equity shareholders’ funds (UK GAAP)		187,590		99,317		111,924
Items increasing/(decreasing) equity shareholders’ funds:
Investments accounted for under the equity method	(a)	9,525		5,043		15,669
Connection revenue and costs	(b)	(26	)	(14	)	(55	)
Goodwill and other intangible assets	(c)	76,918		40,723		45,320
Capitalised interest	(d)	2,888		1,529		1,615
Licence fee amortisation	(e)	(1,043	)	(552	)	(109	)
Exceptional items	(f)	595		315		–
Income taxes	(g)	(76,563	)	(40,535	)	(50,177	)
Proposed dividends	(i)	2,635		1,395		728
Other	(j)	45		24		114
Shareholders’ equity (US GAAP)		202,564		107,245		125,029

Cash flows for the years ended 31 March

The consolidated statements of cash flows prepared under UK GAAP differ in certain presentational respects from the format required under US GAAP. These differences are reconciled below. Under US GAAP, cash equivalents are defined as short term, highly liquid investments which are readily convertible into known amounts of cash and were within three months of maturity when acquired. At 31 March 2005, cash and cash equivalents under US GAAP included cash equivalents of £816 million (2004: £4,381 million; 2003: £291 million), which are classified as investments under UK GAAP.

Condensed consolidated cash flow information

The movement and composition of cash and cash equivalents is presented in US GAAP format in the following table.

	2005		2005		2004		2003
	$m		£m		£m		£m
Cash and cash equivalents were provided by/(used in):
Operating activities	20,221		10,706		11,091		9,708
Investing activities	(9,000	)	(4,765	)	(3,778	)	(9,497	)
Financing activities	(15,291	)	(8,096	)	(1,915	)	(1,202	)
	(4,070	)	(2,155	)	5,398		(991	)
Exchange movement	59		31		(374	)	(112	)
Cash and cash equivalents at the beginning of year	10,936		5,790		766		1,869
Cash and cash equivalents at the end of year	6,925		3,666		5,790		766

Financials | 125

Notes to the Consolidated Financial Statements continued

36.US GAAP information continued

A reconciliation of the consolidated statements of cash flows presented in accordance with UK GAAP format to a US GAAP format is set out below.

	2005		2005		2004		2003
	$m		£m		£m		£m
Operating activities:
Net cash inflow from operating activities (UK GAAP)	24,012		12,713		12,317		11,142
Taxation	(3,052	)	(1,616	)	(1,182	)	(883	)
Net cash outflow for returns on investments and servicing of finance	(739	)	(391	)	(44	)	(551	)
Net cash provided by operating activities (US GAAP)	20,221		10,706		11,091		9,708
Investing activities:
Net cash outflow from capital expenditure, financial investments and acquisitions and
disposals (UK GAAP)	(12,815	)	(6,785	)	(5,579	)	(10,239	)
Dividends received from joint ventures and associated undertakings	3,815		2,020		1,801		742
Net cash used in investing activities (US GAAP)	(9,000	)	(4,765	)	(3,778	)	(9,497	)
Financing activities:
Net cash outflow from financing activities (UK GAAP)	(11,537	)	(6,108	)	(700	)	(150	)
Increase in bank overdrafts	6		3		43		–
Equity dividends paid	(3,760	)	(1,991	)	(1,258	)	(1,052	)
Net cash used in financing activities (US GAAP)	(15,291	)	(8,096	)	(1,915	)	(1,202	)

Summary of differences between UK GAAP and US GAAP

The Consolidated Financial Statements are prepared in accordance with UK GAAP, which differ in certain material respects from US GAAP. The differences that are material to the Group relate to the following:

Change in presentation

In previous years, the deferred tax liabilities and deferred tax income allocable to partnership entities (as determined for US income tax purposes) resulting from adjustments to US GAAP were included in the line item “Investments accounted for under the equity method”. The Group now shows these deferred tax liabilities and deferred tax income within the line item “Income taxes”. Amounts within the reconciliations of net loss for the years ended 31 March 2004 and 2003 and shareholders’ equity as at 31 March 2004 have been reclassified to provide comparability with the presentation as at 31 March 2005 and for the year then ended. This reclassification does not have an effect on net loss or shareholders’ equity under US GAAP.

(a) Investments accounted for under the equity method

This line item includes the US GAAP adjustments affecting net loss and shareholders’ equity discussed in (b) through (g) and (j) below related to investments accounted for under the equity method. Additional classification and presentational items not affecting net loss or shareholders’ equity are discussed below.

Under UK GAAP, amounts for exceptional non-operating items, interest, taxation and minority interest for joint ventures and associated undertakings are aggregated within the respective total Group amounts shown on the face of the consolidated profit and loss account. Under US GAAP, all of these items are included in the Group’s share in the net income or loss of these entities and is shown as a single line in the profit and loss account.

126 | Financials

Condensed financial information for Vodafone Italy

The basis of consolidation under UK GAAP differs from that under US GAAP. Under UK GAAP, the results and net assets of Vodafone Italy are consolidated in the Group’s financial statements. Under US GAAP, as a result of significant participating rights held by minority shareholders, the Group’s interest in Vodafone Italy has been accounted for under the equity method of accounting.

The following tables present, on a condensed basis, the financial information of Vodafone Italy as it is included in the Consolidated Profit and Loss Account and Consolidated Balance Sheet prepared under UK GAAP.

	2005		2004		2003
	£m		£m		£m
Turnover	5,521		5,276		4,371
Cost of sales	(2,578	)	(2,132	)	(2,201	)
Gross margin	2,943		3,144		2,170
Selling and distribution costs	(213	)	(211	)	(182	)
Administrative expenses	(4,252	)	(4,276	)	(3,943	)
Goodwill amortisation	(3,779	)	(3,837	)	(3,543	)
Other administrative expenses	(473	)	(439	)	(400	)
Operating loss	(1,522	)	(1,343	)	(1,955	)
Other income/ (expense)	1		4		(12	)
Loss on ordinary activities before taxation	(1,521	)	(1,339	)	(1,967	)
Tax on loss on ordinary activities	(660	)	(583	)	(478	)
Equity minority interest	(384	)	(459	)	(264	)
Loss for the financial year	(2,565	)	(2,381	)	(2,709	)

	2005		2004
	£m		£m
Goodwill	16,162		19,443
Other intangible assets	1,690		1,666
Tangible assets	2,006		1,934
Fixed assets	19,858		23,043
Debtors	1,349		1,220
Other current assets	73		82
Current assets	1,422		1,302
Total assets	21,280		24,345
Creditors: amounts falling due within one year	(1,630	)	(1,587	)
Non-current creditors and provisions	(560	)	(518	)
	19,090		22,240
Total equity shareholders’ funds	17,280		20,855
Equity minority interests	1,810		1,385
	19,090		22,240

Financials | 127

Notes to the Consolidated Financial Statements continued

36.US GAAP information continued

The following tables reconcile Vodafone Italy’s turnover, loss for the financial year and equity shareholders’ funds from UK GAAP to their related amounts in US GAAP as used in determining the net loss and shareholder’s equity in the Consolidated Financial Statements.

	2005		2004		2003
	£m		£m		£m
Turnover (UK GAAP)	5,521		5,276		4,371
Item increasing/(decreasing) revenue:
Connection revenue	109		4		(179	)
Turnover (US GAAP)	5,630		5,280		4,192
Loss for the financial year (UK GAAP)	(2,565	)	(2,381	)	(2,709	)
Items (increasing)/decreasing net loss:
Goodwill and other intangible assets	(2,885	)	(2,942	)	(2,702	)
Income taxes	2,440		3,234		2,245
Other	(2	)	(24	)	(8	)
Net loss (US GAAP)	(3,012	)	(2,113	)	(3,174	)

	2005		2004
	£m		£m
Equity shareholders’ funds (UK GAAP)	17,280		20,855
Items increasing/(decreasing) equity shareholders’ funds:
Goodwill and other intangible assets	14,049		16,526
Income taxes	(10,736	)	(12,812	)
Other	(54	)	(31	)
Shareholders’ equity (US GAAP)	20,539		24,538

Vodafone Italy had the following effects on consolidated cash flows from operating, investing and financing activities presented in a US GAAP format:

	2005		2004		2003
	£m		£m		£m
Cash and cash equivalents were provided by/(used in):
Operating activities	2,272		2,588		1,846
Investing activities	(769	)	(585	)	(724	)
Financing activities	–		–		–
	1,503		2,003		1,122

Equity in losses of investments accounted for under the equity method

	2005		2004		2003
	£m		£m		£m
Share of operating profit/(loss) in associated undertakings (UK GAAP)	1,193		546		(156	)
Reclassification of exceptional non-operating items, interest, taxation and minority interests	(789	)	(565	)	(614	)
Share of Vodafone Italy’s loss for the financial year under UK GAAP	(2,565	)	(2,381	)	(2,709	)
US GAAP differences resulting in an effect on net income/(loss)(1)	(18	)	1,306		656
Equity in losses of investments accounted for under the equity method (US GAAP)	(2,179	)	(1,094	)	(2,823	)

Note:
(1)	These differences represent the differences described in (b) through (g) and (j) below as they relate to investments accounted for under the equity method.

Carrying value of investments accounted for under the equity method

	2005	2004
	£m	£m
Investments in associated undertakings (UK GAAP)	19,398	21,226
Carrying value of Vodafone Italy under UK GAAP	22,151	24,028
US GAAP differences affecting the carrying value of the investments(1)	5,043	15,669
Investments accounted for under the equity method (US GAAP)	46,592	60,923

Note:
(1)	These differences represent the differences described in (b) through (g) and (j) below as they relate to investments accounted for under the equity method.

128 |  Financials

Summary aggregated financial information of 50% or less owned entities accounted for under the equity method

Summary aggregated financial information of 50% or less owned entities accounted for under the equity method, extracted on a 100% basis from accounts prepared under UK GAAP as of 31 March and for the years then ended, is set out below.

	2005	2004	2003
	£m	£m	£m
Assets:
Current assets	6,774	6,048	7,033
Non-current assets	21,371	19,619	21,004
	28,145	25,667	28,037
Liabilities and equity shareholders’ funds:
Current liabilities	12,960	11,818	12,978
Long-term liabilities	5,980	5,076	5,310
Minority interests	952	974	963
Total equity shareholders’ funds	8,253	7,799	8,786
	28,145	25,667	28,037
Turnover	29,243	23,418	23,148
Operating profit	7,965	6,759	5,710

Summary financial information for Verizon Wireless as of 31 March and for the years then ended is set out below. The financial information is extracted on a 100% basis from accounts prepared under UK GAAP.

	Verizon Wireless
	2005	2004	2003
	£m	£m	£m
Assets:
Current assets	2,714	2,142	2,257
Non-current assets	14,500	13,033	13,645
	17,214	15,175	15,902
Liabilities and equity shareholders’ funds:
Current liabilities	7,030	6,610	7,809
Long-term liabilities	4,814	3,910	3,605
Minority interests	854	855	962
Total equity shareholders’ funds	4,516	3,800	3,526
	17,214	15,175	15,902
Turnover	15,634	13,886	12,902
Operating profit	3,598	3,035	2,795

(b) Connection revenue and costs

The Group’s UK GAAP accounting policy on revenue recognition was amended during the year ended 31 March 2004 in relation to the deferral of certain equipment, connection, upgrade and tariff migration fees following the issuance of Application Note G to FRS 5 “Reporting the Substance of Transactions”. Following the prospective adoption of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” on 1 October 2003 under US GAAP the Group’s UK and US GAAP accounting policies have been substantially aligned.

For transactions prior to 1 October 2003, connection revenue under US GAAP are recognised over the period that a customer is expected to remain connected to a network. Connection costs directly attributable to the income deferred are recognised over the same period. Where connection costs exceed connection revenue, the excess costs were charged in the profit and loss account immediately upon connection. The balances of deferred revenue and deferred charges as of 30 September 2003 will continue to be recognised over the period that a customer is expected to remain connected to a network.

Financials  | 129

Notes to the Consolidated Financial Statements continued

36.US GAAP information continued

(c) Goodwill and other intangible assets

Under UK GAAP, FRS 10, “Goodwill and Intangible Assets”, requires goodwill to be capitalised and amortised over its estimated useful economic life. Prior to the prospective adoption of FRS 10 on 1 April 1999 the Group offset acquired goodwill against shareholders’ equity in the year of acquisition. Under UK GAAP, licences and customer bases are not recognised separately from goodwill because they do not meet the recognition criteria.

Under US GAAP goodwill and intangible assets with indefinite lives are capitalised and not amortised, but tested for impairment, at least annually, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. Intangible assets with finite lives are capitalised and amortised over their useful economic lives. The Group has assigned amounts to licences and customer bases as they meet the criteria for recognition apart from goodwill. In determining the value of licences purchased in business combinations prior to adoption of EITF Topic D-108, “Use of the Residual Method to Value Acquired Assets Other Than Goodwill”, on 29 September 2004, the Group allocated the surplus of the purchase price, over the fair value attributed to the share of net assets acquired, to licences. This was on the basis the nature of the licences and the related goodwill acquired in business combinations was fundamentally indistinguishable. As a result of the adoption of EITF Topic D-108 as detailed in (h) below, for business combinations subsequent to 28 September 2004, the Group assigns amounts to licences based on a direct valuation of the licence. Any residual purchase price is then assigned to goodwill. When testing the recoverability of licences with indefinite lives, the Group adopted a direct valuation methodology on 1 January 2005. Previously, the Group had used a residual method similar to that used in the initial allocation of amounts to licences in business combinations prior to 29 September 2004.

As discussed in (g) below, deferred tax liabilities are recognized on the difference between the US GAAP carrying value of the intangible assets recognised in business combinations and their respective tax basis. Although this does not affect net assets on the date of acquisition, this results in a significantly larger residual amount being allocated to intangible assets with an offsetting entry to deferred tax liabilities.

Under UK GAAP and US GAAP, the purchase price of a transaction accounted for as an acquisition is based on the fair value of the consideration. In the case of share consideration, under UK GAAP the fair value of such consideration is based on the share price at completion of the acquisition or the date when the transaction becomes unconditional. Under US GAAP, the fair value of the share consideration is based on the average share price over a reasonable period of time before and after the proposed acquisition is agreed to and announced. This has resulted in a difference in the fair value of the consideration for certain acquisitions and consequently in the amount of goodwill capitalised under UK GAAP and US GAAP.

Under UK GAAP, costs incurred in reorganising acquired businesses are charged to the profit and loss account as post-acquisition expenses. Under US GAAP, certain of such costs are considered in the allocation of purchase consideration.

Acquisitions

As described further in note 25, the Group has undertaken a number of transactions in the year ended 31 March 2005, including stake increases in Vodafone Japan and Vodafone Hungary. Under US GAAP, these transactions have resulted in the Group assigning £2,938 million to intangible assets, including £2,260 million to cellular licences, £655 million to customer bases and £23 million to goodwill. A corresponding deferred tax liability of £1,182 million was recognised. All intangible assets acquired other than goodwill are deemed to be of finite life, with a weighted average amortisation period of 17 years, comprising licences of 21 years and customer bases of 5 years.

Goodwill

	Mobile: OEMEA		Mobile: UK			Non-mobile: Germany
	2005	2004	2005	2004		2005	2004
	£m	£m	£m	£m		£m	£m
1 April	–	–	467	117		41	–
Additions	23	–	–	352		–	43
Exchange movements	–	–	–	(2	)	2	(2	)
31 March	23	–	467	467		43	41

Finite-lived intangible assets

	2005				2004
	Licences		Customer bases		Licences		Customer bases
	£m		£m		£m		£m
Gross carrying value	170,039		7,449		164,226		7,417
Accumulated amortisation	(64,468	)	(6,067	)	(48,026	)	(4,939	)
	105,571		1,382		116,200		2,478

130 |  Financials

Further analysis as to how amounts presented within the US GAAP reconciliation for goodwill and other intangibles, net of amortisation, have been determined is provided below.

	2005	2004
	£m	£m
Deferred tax	38,108	42,188
Use of a different measurement date for the purposes of determining purchase consideration	2,241	2,630
Other	374	502
	40,723	45,320

The total amortisation charge for the year ended 31 March 2005, under US GAAP, was £16,530 million (2004: £15,893 million; 2003: £13,873 million). The estimated future amortisation charge on finite-lived intangible assets for each of the next five years is set out in the following table. The estimate is based on finite-lived intangible assets recognised at 31 March 2005 using foreign exchange rates on that date. It is likely that future amortisation charges will vary from the figures below, as the estimate does not include the impact of any future investments, disposals, capital expenditures or fluctuations in foreign exchange rates.

Year ending 31 March	£m
2006	15,991
2007	15,703
2008	15,543
2009	15,422
2010	12,402
(d) Capitalised interest

Under UK GAAP, the Group’s policy is not to capitalise interest costs on borrowings in respect of the acquisition of tangible and intangible fixed assets. Under US GAAP, the interest costs of financing the construction of network assets and other fixed assets is capitalised during the period of construction until the date that the asset is placed in service. Interest costs of financing the acquisition of licences are also capitalised until the date that the related network service is launched. Capitalised interest costs are amortised over the estimated useful lives of the related assets. During the year ended 31 March 2005, £31 million (2004: £429 million; 2003: £408 million) of interest has been capitalised.

(e) Licence fee amortisation

Under UK GAAP, the Group has adopted a policy of amortising licence fees in proportion to the capacity of the network during the start up period and then on a straight line basis. Under US GAAP, licence fees are amortised on a straight line basis from the date that operations commence over their estimated useful economic lives.

(f) Exceptional items

In the year ended 31 March 2005, the Group recorded an impairment charge under UK GAAP of £315 million in relation to the fixed assets of Vodafone Sweden. Under US GAAP, the Group evaluated the recoverability of these assets in accordance with the requirements of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, and determined that the carrying amount of these assets was recoverable. As a result, the UK GAAP impairment charge of £315 million was not recognised under US GAAP. The reversal of this impairment was partially offset by the incremental loss on the disposal of 16.9% of Vodafone Egypt under US GAAP which arose primarily due to the reclassification of currency losses from other comprehensive income to net loss.

The results of operations of Japan Telecom, which was deconsolidated from 1 October 2003, are reported as discontinued operations under US GAAP and are included in the segment “Other operations – Asia Pacific”. The pre-tax loss, including the loss on sale, was £515 million for the year ended 31 March 2004 (2003: income of £133 million). An incremental loss on disposal of £476 million (£351 million net of minority interests) was recognised under US GAAP resulting in a total loss on sale of £555 million (£399 million net of minority interests).

In the year ended 31 March 2003, the Group recorded an impairment charge under UK GAAP of £405 million in relation to the fixed assets of Japan Telecom. Under US GAAP, the Group evaluated the recoverability of these fixed assets in accordance with the requirements of SFAS No. 144 and determined that the carrying amount of these assets was recoverable. As a result, the UK GAAP impairment charge of £405 million (£270 million net of minority interests) was not recognised under US GAAP during the year ended 31 March 2003.

In addition, the exceptional non-operating items recorded under UK GAAP, disclosed in note 6, are reclassified as operating items under US GAAP.

(g) Income taxes

Under UK GAAP, deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Under US GAAP, deferred tax assets and liabilities are provided in full on all temporary differences and a valuation adjustment is established in respect of those deferred tax assets where it is more likely than not that some portion will not be realised. The most significant component of the income tax adjustment is due to the temporary difference between the assigned values and tax values of intangible assets acquired in a business combination, which results in the recognition of deferred tax liabilities under US GAAP. Under UK GAAP, no such deferred tax liabilities are recognised.

Financials  | 131

Notes to the Consolidated Financial Statements continued

36.US GAAP informationcontinued

Under UK GAAP, deferred tax assets are recognised for future deductions and utilisations of tax carry-forwards to the extent that it is more likely than not that suitable taxable profit is expected to be available. While the effects on the net deferred assets are the same, under US GAAP, the deferred tax assets are recognised at their full amounts and reduced by a valuation allowance to the extent it is more likely than not that suitable taxable profits will not be available. The valuation allowance established against deferred tax assets at 31 March 2005 was £10,413 million (2004: £11,150 million), the movement in the year being £737 million (2004: £296 million). The valuation allowance is mainly in respect of tax losses amounting to £10,413 million (2004: £11,018 million) not recognised.

In respect of Verizon Wireless, the line “Investments accounted for under the equity method” includes the Group’s share of pre-tax partnership income and the Group’s share of the post-tax income attributable to corporate entities (as determined for US corporate income tax purposes) held by the partnership. The tax attributable to the Group’s share of allocable partnership income is included as part of “Income taxes” in the reconciliations of net loss and shareholders’ equity. This treatment reflects the fact that tax on allocable partnership income is, for US corporate income tax purposes, a liability of the partners and not the partnership.

The Group has not provided certain deferred tax liabilities related to the outside basis differences of its foreign subsidiaries and foreign joint ventures under Accounting Principles Board Opinion (“APB”) No. 23, “Accounting for Income Taxes – Special Areas”, because it is the Group’s policy to permanently reinvest such earnings giving rise to such basis differences and such differences are permanent in duration. Quantifying the amount of undistributed earnings and deferred tax liabilities associated with those earnings is not practicable.

FASB Staff Position (“FSP”) No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004”, provides guidance under FASB Statement No. 109, “Accounting for Income Taxes,” with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the “JOBS Act”) on a company’s income tax expense and deferred tax liability balances. The JOBS Act was enacted on 22 October 2004. FSP No. 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the JOBS Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying FAS Statement No. 109. Vodafone has determined that the benefits obtained from these provisions are immaterial to the financial statements at 31 March 2005.

(h) Cumulative effect of changes in accounting principles

EITF Topic D-108

On 29 September 2004, the SEC Staff announced new guidance on the interpretation of SFAS No. 142 in relation to the valuation of intangibles assets in business combinations and impairment testing. This guidance has been codified as EITF Topic D-108. Historically, the Group assigned to mobile licences the residual purchase price in business combinations in excess of the fair values of all assets and liabilities acquired other than mobile licences and goodwill. This approach was on the basis that mobile licences were indistinguishable from goodwill. The new SEC guidance requires the Group to distinguish between mobile licences and goodwill. However, the new guidance does not permit the amount historically reported as mobile licences to be subsequently reallocated between mobile licences and goodwill.

The new guidance will affect the allocation of the purchase price in future business combinations involving entities with mobile licences. The Group has applied the guidance relating to the allocation of purchase price to all business combinations consummated subsequent to 29 September 2004. This has resulted in values being assigned to licences using direct valuation method with any remaining residual purchase price allocated to goodwill.

In impairment testing of mobile licences held by Verizon Wireless under SFAS No. 142, the Group has used a similar residual approach to determine the fair value of the licences when testing the asset for recoverability. In their announcement, the SEC Staff stated that the residual method of accounting for intangible assets should no longer be used and that companies should perform an impairment test using a direct method on all assets which were previously tested using a residual method. The Group’s licences in other business are not tested for recoverability using a residual method and are, therefore, not affected by the new guidance.

The Group completed its transitional impairment test of Verizon Wireless’ mobile licences as of 1 January 2005. This resulted in a pre-tax charge of £11,416 million. This impairment is included, net of the related tax of £5,239 million, in the cumulative effect of change in accounting principle in the reconciliation of net loss. The tax effect comprises the release of £1,220 million representing the Group’s share of Verizon Wireless’ deferred tax liabilities and £4,019 million deferred tax liabilities representing taxes recognised by the Group on its investment in Verizon Wireless. Fair value was determined as the present value of estimated future net cash flows allocable to the mobile licences. Verizon Wireless is in the segment “Mobile telecommunications – Americas”.

Accounting for post employment benefits

During the second half of the year ended 31 March 2005, the Group amended its policy for accounting for actuarial gains and losses arising from its pension obligations effective 1 April 2004. Until 31 March 2004, the Group used a corridor approach under SFAS No. 87, “Employers’ Accounting for Pensions” in which actuarial gains and losses were deferred and amortised over the expected remaining service period of the employees. The Group now recognises these gains and losses through the profit and loss in the period in which they arise as the new policy more faithfully represents the Group’s financial position and will more fully align the Group’s US GAAP policy to its IFRS policy of immediate recognition of these items.

The pro forma amounts in the reconciliation of net loss have been adjusted for the effect of retroactive application of the immediate recognition of actuarial gains and losses less related tax effects. Other adjustments, such as to employee/director compensation or interest expense, are not included as these would not have been affected had the new policy been applied in previous years.

The cumulative effect on periods prior to adoption of £288 million has been shown, net of tax of £93 million, as a cumulative effect of a change in accounting principle in the reconciliation of net loss for the year ended 31 March 2005. The effect of the change in the year ended 31 March 2005 was to increase loss from continuing operations by £55 million (or 0.08 pence per share). The effect of the change on the six months ended 30 September 2004 was to increase loss from continuing operations by £31 million (or 0.05 pence per share).

132 |  Financials

(i) Proposed dividends

Under UK GAAP, final dividends are included in the financial statements when recommended by the Board to the shareholders in respect of the results for a financial year. Under US GAAP, dividends are included in the financial statements when declared by the Board.

(j) Other

Marketable securities

Under US GAAP, the Group classifies its marketable equity securities with readily determinable fair values as available for sale and are stated at fair value with the unrealised loss or gain, net of deferred taxes, reported in comprehensive income. Under UK GAAP, such investments are generally carried at cost and reviewed for other than temporary impairment.

The Group’s fixed asset investments, comprising mainly of equity securities, are classified as available for sale. The table below sets out the information of the cost, fair value and unrealised gains and losses.

	UK GAAP net book	Unrealised gains	Unrealised losses	Fair value
	value(1)
	£m	£m	£m	£m
31 March 2005	852	330	–	1,182
31 March 2004	1,049	241	–	1,290
Note:
(1)   Determined using the weighted average cost basis.

Minority interests

Where losses in a subsidiary undertaking attributable to the minority interest result in its interest being one in net liabilities, UK GAAP requires a parent company make provision only to the extent it has a commercial or legal obligation to provide funding that may not be recoverable in respect of the accumulated losses attributable to the minority interest. US GAAP requires all losses allocable to minority interests in excess of their interest in the equity of the respective subsidiary to be charged to the majority shareholder.

Derivative instruments

All the Group’s transactions in derivative financial instruments are undertaken for risk management purposes only and are used to hedge its exposure to interest rate and foreign currency risk. In accordance with UK GAAP, to the extent that such instruments are matched against an underlying asset or liability, they are accounted for as hedging transactions and recorded at appropriate historical amounts, with fair value information disclosed in the notes to the Consolidated Financial Statements. Under US GAAP, in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, the Group’s derivative financial instruments, together with any separately identified embedded derivatives, are reported as assets or liabilities on the Group’s balance sheet at fair value. In a hedge of fair values, changes in the fair value of the derivative are recorded in earnings with a corresponding change in the fair value of the hedged item also being recorded in earnings. For hedges of future cash flows, the changes in fair value of the derivative are recorded in other comprehensive income and reclassified to earnings when the hedged item affects earnings. Under US GAAP, all changes in fair value of derivatives not designated in hedging relationships are accounted for in the consolidated profit and loss account. The Group does not pursue hedge accounting treatment for:

–   interest rate futures, which are typically used to switch floating interest rates to fixed interest rates;

–   derivatives entered into for funding and liquidity purposes, including forwards; or

–   individual contracts where the underlying value of the transactions amounts to less than £10 million.

The net effect recognised in earnings representing hedge ineffectiveness for fair value hedges and cash flow hedges is not material.

Post employment benefits

Under both UK GAAP and US GAAP, pension costs provide for future pension liabilities. There are differences, however, in the prescribed methods of valuation, which give rise to GAAP adjustments to the pension cost and the pension prepayment/liability. As at 31 March 2005, the Group operated a number of pension plans for the benefit of its employees throughout the world, which vary with conditions and practices in the countries concerned. A description of the Group’s major pension plans is provided in note 32.

The investment policy and strategy of the UK main scheme in the UK is set by the Trustees and reflects the liabilities of the plan. The investment policy and strategy of the German plans are set by the Investment Sub-Committee of the Contractual Trust Agreement and similarly reflects the liabilities of the plans, which are more heavily weighted towards pensioners than the UK plan.

The basis used to determine the overall long term return on plan assets is to apply the expected rate of return on bonds based on market interest rates at the relevant date to that proportion of the assets invested in bonds. The bond rate of return is then increased by an allowance for the expected equity risk premium in each market, based on past experience and future expectations of return and this rate is applied to the relevant proportion invested in equities. The measurement date for the Group’s pension assets and obligations is 31 March. The measurement date for the Group’s net periodic pension cost is 1 April. From 1 April 2004, actuarial gains and losses are recognised in the period in which they arise.

Analyses of the net pension cost, plan assets, obligations and funded status for the major defined benefit plans in the UK, Germany and Japan, prepared under US GAAP, are provided in the following table.

Financials  | 133

Notes to the Consolidated Financial Statements continued

36.US GAAP information continued

	UK						Germany						Japan
	2005		2004		2003		2005		2004		2003		2005		2004		2003
	£m		£m		£m		£m		£m		£m		£m		£m		£m
Service cost	37		25		23		6		3		3		5		10		12
Interest costs	26		19		16		9		7		7		1		1		2
Expected return on assets	(31	)	(21	)	(23	)	(8	)	(4	)	(1	)	–		–		–
Actuarial gains and losses	72		16		9		25		2		3		–		1		1
Net periodic pension cost	104		39		25		32		8		12		6		12		15
Termination benefits and
curtailment costs	–		–		–		–		–		–		(1	)	(16	)	24
Accumulated benefit obligation	545		390		279		208		153		141		24		25		106
Change in projected benefit obligation:
Benefit obligation at 1 April	457		327		258		158		145		119		35		127		115
Service cost	37		25		23		6		3		3		5		10		12
Interest cost	26		19		16		9		7		7		1		1		2
Members’ contributions	11		10		9		–		–		–		–		–		–
Amendments	–		–		–		–		–		(3	)	–		–		5
Actuarial loss/(gain)	95		82		28		44		19		13		–		(3	)	4
Curtailment	–		–		–		–		(2	)	–		(1	)	–		2
Settlement	–		–		–		–		–		–		–		(76	)	13
Special termination benefit	–		–		–		–		–		–		–		–		9
Benefits paid (estimated)	(7	)	(6	)	(7	)	(9	)	(9	)	(9	)	(9	)	(22	)	(36	)
Exchange movement	–		–		–		5		(5	)	15		(1	)	(2	)	1
Benefit obligation at 31 March	619		457		327		213		158		145		30		35		127
Change in plans’ assets:
Fair value of assets at 1 April	433		264		229		136		86		1		2		1		1
Actual return/(loss) on plans’ assets	54		77		(73	)	27		7		–		–		1		–
Employer’s contributions	136		88		106		14		57		88		9		22		36
Members’ contributions	12		10		9		–		–		–		–		–		–
Benefits paid (estimated)	(7	)	(6	)	(7	)	–		(9	)	(9	)	(9	)	(22	)	(36	)
Exchange movement	–		–		–		4		(5	)	6		–		–		–
Fair value of assets at 31 March	628		433		264		181		136		86		2		2		1
Funded status	9		(24	)	(63	)	(32	)	(22	)	(59	)	(28	)	(33	)	(126	)
Unrecognised net loss(1)	–		203		195		–		57		46		–		3		24
Prior period service cost	–		1		1		–		–		–		–		5		5
Net amount recognised	9		180		133		(32	)	35		(13	)	(28	)	(25	)	(97	)
Amounts recognised in the statement of financial position:
Prepaid/(accrued) benefit cost	9		180		(15	)	(32	)	(11	)	(55	)	(28	)	(25	)	(105	)
Intangible asset	–		–		1		–		–		–		–		–		5
Other comprehensive income	–		–		147		–		46		42		–		–		3
Net amount recognised	9		180		133		(32	)	35		(13	)	(28	)	(25	)	(97	)
Expected contributions in year ended
31 March 2006	36						–						–
Expected payments in year ended
31 March:
2006	7						11						–
2007	7						11						–
2008	7						12						–
2009	8						12						–
2010	8						13						–
2011-2016	43						71						3
Weighted-average actuarial assumptions used to determine benefit obligations:
Discount rate	5.4%		5.5%		5.9%		4.5%		5.3%		5.3%		2.3%		2.3%		1.5%
Rate of compensation increase	4.8%		4.5%		4.0%		2.9%		3.0%		2.0%		–		–		–
Weighted-average actuarial assumptions used to determine net periodic benefit cost:
Discount rate	5.5%		5.9%		6.5%		5.3%		5.3%		6.0%		2.3%		1.5%		2.5%
Rate of compensation increase	4.5%		4.0%		4.0%		3.0%		2.0%		2.5%		–		–		–
Expected long-term return on plan assets	6.9%		7.5%		8.0%		5.3%		5.3%		6.0%		2.8%		3.0%		4.4%

134 | Financials

Stock based compensation

The Company currently uses a number of share plans to grant options and share awards to its directors and employees described in note 22. Under UK GAAP, options granted over the Company’s ordinary shares are accounted for using the intrinsic value method, with the difference between the fair value of shares and the exercise price charged to the profit and loss over the period until the shares first vest. Grants under the Group’s Sharesave Scheme are exempt from this accounting methodology.

Under US GAAP, the Group accounts for option plans in accordance with the requirements of APB No. 25, “Accounting for Stock Issued to Employees” and applies the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”. Under APB No. 25, such plans are accounted for as variable plans and the cost is calculated by reference to the market price of the shares at the measurement date, which is usually the date the shares vest, and amortised over the period until the shares vest. Where the measurement date has not yet been reached, the cost is calculated by reference to the market price of the relevant shares at the end of each accounting period.

Movements in ordinary share options and ADS options outstanding during the years ended 31 March 2005, 2004 and 2003 are as follows:

	Number of ADS options							Number of ordinary share options
	2005			2004		2003			2005		2004		2003
	(millions)			(millions)		(millions)			(millions)		(millions)		(millions)
At 1 April		17.7		21.0		43.8			1,184.0		1,110.9		488.3
Granted		0.2		2.2		6.5			60.1		192.0		700.9
Exercised		(5.3	)	(4.6	)	(2.7	)		(60.0	)	(36.6	)	(9.7	)
Forfeited		(1.4	)	(0.9	)	(26.6	)		(61.5	)	(82.3	)	(68.6	)
At 31 March		11.2		17.7		21.0			1,122.6		1,184.0		1,110.9
Exercisable at 31 March		7.6		9.2		11.7			353.1		107.0		90.7
Weighted average exercise price:
Granted during year		$20.19		$20.34		$13.71			£1.17		£1.19		£0.99
Exercised during year		$16.75		$15.03		$10.00			£0.94		£1.00		£0.82
Forfeited during year		$38.05		$34.17		$33.61			£1.43		£1.34		£1.46
Outstanding at 31 March		$38.76		$22.97		$22.32			£1.22		£1.16		£1.23
Exercisable at 31 March		$27.74		$28.29		$25.20			£1.65		£2.13		£1.45

The weighted average fair value of ADS options and ordinary share options and the weighted average assumptions used to determine fair value are set out in the following table:

	ADS options							Ordinary share options
		2005		2004		2003			2005		2004		2003
Weighted average fair value		$6.34		$5.92		$4.49			£0.33		£0.37		£0.28
Weighted average assumptions:
Volatility		26.10	%	39.19	%	34.83	%		25.25	%	37.93	%	34.82	%
Expected dividend yield		1.91	%	0.82	%	0.62	%		1.92	%	0.81	%	0.63	%
Risk-free interest rate		5.10	%	3.82	%	5.02	%		5.16	%	3.75	%	4.97	%
Expected option lives (years)		6.3		3.5		3.5			5.47		3.4		3.5

During the year ended 31 March 2005, the Group granted 99.1 million restricted shares with a weighted average fair value at grant of £1.11.

Had compensation cost been determined based upon the fair value of the share options and ADS options at grant date, the Group’s net loss and loss per share would have been restated to the pro forma amounts indicated below (in millions, except per share amounts):

	2005		2004		2003
	£m		£m		£m
Net loss as reported under US GAAP	(13,782	)	(8,127	)	(9,055	)
Share-based employee compensation expense, net of related tax effects, included in the
determination of net income as reported	198		129		48
Share-based employee compensation expense, under fair value based method for all awards,
net of related tax effects	(168	)	(107	)	(65	)
Pro forma net loss	(13,752	)	(8,105	)	(9,072	)
Loss per share
Basic and diluted – as reported under US GAAP	(20.82	)p	(11.93	)p	(13.29	)p
Basic and diluted – pro forma	(20.77	)p	(11.90	)p	(13.31	)p

Financials  | 135

Notes to the Consolidated Financial Statements continued

36.US GAAP information continued
(k)	Loss per share
The share options and share plans described in note 22 were excluded from the calculation of diluted loss per share as the effect of their inclusion in the calculation would be antidilutive due to the Group recognising a loss in all periods presented.

(l) Comprehensive (loss)/income

Total recognised losses under UK GAAP include net loss and currency translation adjustment. Under US GAAP, comprehensive (loss)/income is the change in equity during a period resulting from transactions other than with shareholders. Comprehensive (loss)/income is comprised of net loss, the minimum pension liability adjustment, changes in the fair value of available for sale securities and derivatives used in cash flow hedging relationships, and currency translation adjustment.

During the year ended 31 March 2005, £63 million of foreign currency losses were reclassified from other comprehensive income and included in the determination of net loss as a result of the partial disposal of Vodafone Egypt.

37.Changes in accounting standards

International Financial Reporting Standards

On 19 July 2002, the European Parliament adopted Regulation No. 1606/2002 requiring listed companies in the Member States of the European Union to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) from 2005. IFRS will apply for the first time in the Group’s Annual Report for the year ending 31 March 2006. Consequently, the Group’s interim results for the six month period ending 30 September 2005 will be presented under IFRS together with restated information for the six months ended 30 September 2004 and the year ended 31 March 2005.

US standards

SFAS No. 123 (Revised 2004), “Share-Based Payment”

In December 2004, the FASB issued a revised version of SFAS No. 123 (SFAS No. 123R), which among other changes, eliminates the option to account for share-based payment to employees using the intrinsic value method and requires share-based payment to be recorded using the fair value method. Under the fair value method, compensation cost for employees and directors is determined at the date awards are granted and recognised over the service period. The Group is currently analysing the effects of the new standard including the alternative methods of adoption.

Staff Accounting Bulletin 107

The SEC issued SAB 107 in March 2005. SAB 107 summarizes the views of the SEC staff regarding the interaction between SFAS No. 123R and certain Securities and Exchange Commission rules and regulations and provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. The Group is currently analysing the effects of this SAB and will adopt SAB 107 concurrently with SFAS No. 123.

136 | Financials

Report of Independent Auditors

 

Independent Auditors’ Report to the Members of
Vodafone Group Plc

We have audited the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2005, which comprise the consolidated and Company balance sheets at 31 March 2005 and 2004, the consolidated profit and loss accounts, the consolidated cash flow statements, the consolidated statements of total recognised gains and losses and the movement in total equity shareholders’ funds for the three years ended 31 March 2005 and the related notes 1 to 37. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the Board’s Report to Shareholders on Directors’ Remuneration that is described as having been audited.

Respective Responsibilities of Directors and Auditors

As described in the Statement of Directors’ Responsibilities, the Company’s directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and accounting standards. They are also responsible for the preparation of the other information contained in the Annual Report including the Board’s Report to Shareholders on Directors’ Remuneration. Our responsibility is to audit the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the Company and other members of the Group is not disclosed.

We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the July 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures.

We read the Directors’ Report and the other information contained in the Annual Report for the year ended 31 March 2005 as described in the contents section, including the unaudited part of the Board’s Report to Shareholders on Directors’ Remuneration and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.

Basis of Audit Opinion

We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board and with the standards of the Public Company Accounting Oversight Board (United States). The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the

 

financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited.

Opinions

UK opinion

In our opinion:

•   the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 March 2005 and of the loss of the Group for the year then ended; and

•   the financial statements and that part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited have been properly prepared in accordance with the Companies Act 1985.

US opinion

In our opinion:

•   the financial statements present fairly, in all material respects, the consolidated financial position of the Group at 31 March 2005 and 2004 and the consolidated results of its operations and cash flows for each of the three years in the period ended 31 March 2005 in conformity with accounting principles generally accepted in the United Kingdom.

Accounting principles generally accepted in the United Kingdom vary in significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 36 to the consolidated financial statements.

Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
London, England

24 May 2005

 

Financials  | 137

Information on International Financial Reporting Standards

Introduction

On 19 July 2002, the European Parliament adopted Regulation No. 1606/2002 requiring listed companies in the Member States of the European Union to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) from 2005. IFRS will apply for the first time in the Group’s Annual Report for the year ending 31 March 2006. Consequently, the Group’s interim results for the six month period ending 30 September 2005 will be presented under IFRS together with restated information for the six months ended 30 September 2004 and the year ended 31 March 2005.

The Group provided an update of its adoption of IFRS on 20 January 2005 which included restated financial information for the six months ended 30 September 2004, and additional IFRS segmental information was released on 18 March 2005. The Group currently intends to publish restated IFRS financial information for the year ended 31 March 2005 in July 2005. These updates are available on the Company’s website, www.vodafone.com.

Basis of preparation of IFRS financial information

The Group’s IFRS financial information for the year ending 31 March 2006 will be prepared in accordance with the IFRS, International Accounting Standards (“IAS”) and interpretations issued by the IASB and its committees, and as interpreted by any regulatory bodies applicable to the Group, for those standards that are mandatory for EU listed companies adopting IFRS for the first time. In addition, the Group has elected to adopt early the amendment to IAS 19, “Employee Benefits”, issued on 16 December 2004 which allows actuarial gains and losses to be charged or credited to equity.

On 19 November 2004, the European Commission endorsed an amended version of IAS 39, “Financial Instruments: Recognition and Measurement” rather than the full version as previously published by the IASB. In accordance with guidance issued by the UK Accounting Standards Board, the full version of IAS 39, as issued by the IASB, will be adopted.

Following the SEC’s issuance on 12 April 2005 of its final rule, “First-Time Application of International Financial Reporting Standards”, the Group’s Annual Report for the year ending 31 March 2006 will provide one year of comparative financial information under IFRS and the opening balance sheet date for adoption of IFRS will be 1 April 2004.

IFRS 1 exemptions

IFRS 1, “First-time Adoption of International Financial Reporting Standards” sets out the procedures that the Group must follow when it adopts IFRS for the first time as the basis for preparing its consolidated financial statements. The Group is required to establish its IFRS accounting policies as at 31 March 2006 and, in general, apply these retrospectively to determine the IFRS opening balance sheet at its date of transition, 1 April 2004. This standard provides a number of optional exceptions to this general principle. The most significant of these are set out below, together with a description in each case of the exception to be adopted by the Group.

Business combinations that occurred before the opening IFRS balance sheet date (IFRS 3, “Business Combinations”).

The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before the date of transition. As a result, in the opening balance sheet, goodwill arising from past business combinations remains as stated under UK GAAP at 31 March 2004.

Employee Benefits – actuarial gains and losses (IAS 19, “Employee Benefits”)

The Group has elected to recognise all cumulative actuarial gains and losses in relation to employee benefit schemes at the date of transition.

Share-based Payments (IFRS 2, “Share-based Payment”)

The Group has elected to apply IFRS 2 to all relevant share-based payment transactions granted but not fully vested at 1 April 2004.

Financial Instruments (IAS 39, “Financial Instruments: Recognition and Measurement” and IAS 32, “Financial Instruments: Disclosure and Presentation”)

The Group has applied IAS 32 and IAS 39 for all periods presented and has therefore not taken advantage of the exemption in IFRS 1 that would enable the Group to only apply these standards from 1 April 2005.

Reconciliation of IFRS equity shareholders’ funds at opening balance sheet date

The following is a summary of the effects of the differences between IFRS and UK GAAP on the Group’s total equity shareholders’ funds at the opening balance sheet date. Further significant differences may arise from accounting standards and pronouncements that the IASB could issue in the future and which the Group may elect to early adopt in its first IFRS accounts.

	At 1 April 2004 £m
Total equity shareholders’ funds (UK GAAP)	111,924
Proposed dividends	728
Financial instruments	385
Defined benefit pension schemes	(257	)
Licence fee amortisation	(164	)
Deferred and current taxes	(1,011	)
Share based payments	12
Other	(66	)
Total equity shareholders’ funds (IFRS)	111,551

138 |  Shareholder information

Principal differences between IFRS and UK GAAP

Measurement and Recognition

The Group has identified the principal differences between IFRS and the Group’s UK GAAP accounting policies, which are summarised below.

Proposed dividends

IAS 10, “Events after the Balance Sheet Date” requires that dividends declared after the balance sheet date should not be recognised as a liability at that balance sheet date as the liability does not represent a present obligation as defined by IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”.

The final dividend declared in May 2004 in relation to the financial year ended 31 March 2004 of £728 million has been reversed in the opening balance sheet.

Financial Instruments

IAS 32, “Financial Instruments: Disclosure and Presentation” and IAS 39, “Financial Instruments: Recognition and Measurement” address the accounting for, and reporting of, financial instruments. IAS 39 sets out detailed accounting requirements in relation to financial assets and liabilities.

All derivative financial instruments are accounted for at fair market value whilst other financial instruments are accounted for either at amortised cost or at fair value depending on their classification. Subject to stringent criteria, financial assets and financial liabilities may be designated as forming hedge relationships as a result of which fair value changes are offset in the income statement or charged/credited to equity depending on the nature of the hedge relationship.

Reclassification of non-equity minority interests to liabilities

The primary impact of the implementation of IAS 32 is the reclassification of the $1.65 billion preferred shares issued by the Group’s subsidiary, Vodafone Americas Inc., from non-equity minority interests to liabilities. The reclassification at 1 April 2004 was £875 million. Dividend payments by this subsidiary, which were previously reported in the Group’s income statement as non-equity minority interests, have been reclassified to financing costs.

Fair value of available for sale financial assets

The Group has classified certain of its cost-based investments as ‘available for sale’ financial assets as defined in IAS 39. This classification does not reflect the intentions of management in relation to these investments. These assets are measured at fair value at each reporting date with movements in fair value taken to equity. At 1 April 2004, a cumulative increase of £233 million in the fair value over the carrying value of these investments has been recognised.

Other adjustments

Hedge accounting has been adopted for the majority of the Group’s interest rate swaps and underlying capital market debt, thereby reducing potential volatility in the income statement.

Certain derivative financial instruments used to manage interest rate and foreign exchange exposures are not held in hedge relationships. However, these tend to be relatively short term in nature, causing limited income statement volatility.

Defined benefit pension schemes

The Group currently applies the provisions of SSAP 24 under UK GAAP and provides detailed disclosure under FRS 17 in accounting for pensions and other post-employment benefits.

The Group has elected to adopt early the amendment to IAS 19, “Employee Benefits” issued by the IASB on 16 December 2004 which allows all actuarial gains and losses to be charged or credited to equity.

The Group’s opening IFRS balance sheet at 1 April 2004 reflects the assets and liabilities of the Group’s defined benefit schemes totalling a net liability of £154 million. This amount represents less than 0.2% of the Group’s market capitalisation at 31 March 2004. The transitional adjustment of £257 million to opening reserves comprises the reversal of entries in relation to UK GAAP accounting under SSAP 24 less the recognition of the net liabilities of the Group’s and associated undertakings’ defined benefit schemes.

Goodwill and acquired intangible asset amortisation

IAS 38, “Intangible Assets” requires that goodwill is not amortised. Instead it is subject to an annual impairment review. As the Group has elected not to apply IFRS 3 retrospectively to business combinations prior to the opening balance sheet date under IFRS, the UK GAAP goodwill balance at 31 March 2004 (£96,931 million) has been included in the opening IFRS consolidated balance sheet and is no longer amortised.

Licence fee amortisation

Under IAS 38, capitalised payments for mobile licences are amortised on a straight line basis over their useful economic life. Amortisation is charged from the commencement of service of the network. Under UK GAAP, the Group’s policy is to amortise such costs in proportion to the capacity of the network during the start up period and then on a straight-line basis thereafter.

Shareholder information  | 139

Information on International Financial Reporting Standards continued

Deferred and Current Taxes

The scope of IAS 12, “Income Taxes” is wider than the corresponding UK GAAP standards, and requires deferred tax to be provided on all temporary differences rather than just timing differences under UK GAAP.

As a result, the Group’s IFRS opening balance sheet at 1 April 2004 includes an additional deferred tax liability of £1,801 million in respect of the differences between the carrying value and tax written down value of the Group’s investments in associated undertakings and joint ventures. This comprises £1.3 billion in respect of differences that arose when US investments were acquired and £0.5 billion in respect of undistributed earnings of certain associated undertakings and joint ventures, principally Vodafone Italy. UK GAAP does not permit deferred tax to be provided on the undistributed earnings of the Group’s associated undertakings and joint ventures until there is a binding obligation to distribute those earnings.

IAS 12 also requires deferred tax to be provided in respect of the Group’s liabilities under its post employment benefit arrangements and on other employee benefits such as share and share option schemes.

Share-based Payments

IFRS 2, “Share-based Payment” requires that an expense for equity instruments granted be recognised in the financial statements based on their fair value at the date of grant. This expense, which is primarily in relation to employee option and performance share schemes, is recognised over the vesting period of the scheme.

While IFRS 2 allows the measurement of this expense to be calculated only on options granted after 7 November 2002, the Group has applied IFRS 2 to all instruments granted but not fully vested as at 1 April 2004. The Group has adopted the binomial model for the purposes of computing fair value under IFRS.

Principal presentational differences

Scope of consolidation

IAS 31, “Interests in Joint Ventures” defines a jointly controlled entity as an entity where unanimous consent over the strategic financial and operating decisions is required between the parties sharing control. Control is defined as the power to govern the financial and operating decisions of an entity so as to obtain economic benefit from it.

The Group has reviewed the classification of its investments and concluded that the Group’s 76.8% interest in Vodafone Italy, currently classified as a subsidiary undertaking under UK GAAP, should be accounted for as a joint venture under IFRS. In addition, the Group’s interests in South Africa, Poland, Romania, Kenya and Fiji, which are currently classified as associated undertakings under UK GAAP, have been classified as joint ventures under IFRS as a result of the contractual rights held by the Group. The Group has adopted proportionate consolidation as the method of accounting for these six entities.

Under UK GAAP, the revenue, operating profit, net financing costs and taxation of Vodafone Italy are consolidated in full in the income statement with a corresponding allocation to minority interest. Under proportionate consolidation, the Group recognises its share of all income statement lines with no allocation to minority interest. There is no effect on the result for a financial period from this adjustment.

Under UK GAAP, the Group’s interests in South Africa, Poland, Romania, Kenya and Fiji are accounted for under the equity method, with the Group’s share of operating profit, interest and tax being recognised separately in the consolidated income statement. Under proportionate consolidation, the Group recognises its share of all income statement lines. There is no effect on the result for a financial period from this adjustment.

Under UK GAAP, the Group fully consolidates the cash flows of Vodafone Italy, but does not consolidate the cash flows of its associated undertakings. The IFRS consolidated cash flow statements reflect the Group’s share of cash flows relating to its joint ventures on a line by line basis, with a corresponding recognition of the Group’s share of net debt for each of the proportionately consolidated entities.

Associated undertakings taxation

Under IFRS, in accordance with IAS 1, “Presentation of Financial Statements”, “Tax on (loss)/profit on ordinary activities” on the face of the consolidated income statement comprises the tax charge of the Company, its subsidiaries and its share of the tax charge of joint ventures. The Group’s share of its associated undertakings’ tax charges is shown as part of “Share of result in associated undertakings” rather than being disclosed as part of the tax charge under UK GAAP.

In respect of the Verizon Wireless partnership, the line “Share of result in associated undertakings” includes the Group’s share of pre-tax partnership income and the Group’s share of the post-tax income attributable to corporate entities (as determined for US corporate income tax purposes) held by the partnership. The tax attributable to the Group’s share of allocable partnership income is included as part of “Tax on (loss)/profit on ordinary activities” on the consolidated income statement. This treatment reflects the fact that tax on allocable partnership income is, for US corporate income tax purposes, a liability of the partners and not the partnership.

140 |  Shareholder information

Investor Information

Contents

	Page
Financial Calendar for the 2006 financial year	141
Dividends	141
Telephone share dealing	141
Postal share dealing	141
Registrars and transfer office	141
Online Shareholder Services	142
Annual General Meeting	142
ShareGift	142
The Unclaimed Assets Register	142
Share Price History	142
Markets	143
Memorandum and Articles of Association and Applicable English Law	143
Documents on Display	146
Material Contracts	146
Exchange Controls	146
Taxation	146
Contact Details	148

Financial calendar for the 2006 financial year

Annual General Meeting (see below)	26 July 2005
Interim Results announcement	15 November 2005
Preliminary announcement of full year results	30 May 2006

Dividends

Full details on the dividend amount per share or ADS can be found on page 45. Set out below is information relevant to the final dividend for the year ended 31 March 2005.

Ex-dividend date	1 June 2005
Record date	3 June 2005
DRIP election date	15 July 2005
Dividend payment date	5 August 2005	(1)
(1) Payment date for both ordinary shares and ADSs.

Dividend Payment Methods

Holders of ordinary shares can:

• have cash dividends paid direct to a bank or building society account; or

• have cash dividends paid in the form of a cheque; or

• elect to use the cash dividends to purchase more Vodafone shares under the Dividend Reinvestment Plan (see below).

If a holder of ordinary shares does decide to receive cash dividends, it is recommended that these are paid directly to the shareholder’s bank or building society account via BACS or EFTS. This avoids the risk of cheques being lost in the post and means the dividend will be in the shareholder’s account on the dividend payment date. The shareholder will be sent a tax voucher confirming the amount of dividend and the account into which it has been paid.

Please contact the Company’s Registrars for further details.

Holders of ADSs can:

• have cash dividends paid direct to a bank account; or

• have cash dividends paid by cheque; or

• elect to have the dividends reinvested to purchase additional Vodafone ADSs (see below for contact details).

Dividend reinvestment

The Company offers a Dividend Reinvestment Plan which allows holders of ordinary shares who choose to participate to use their cash dividends to acquire additional shares in the Company. These are purchased on their behalf by the Plan Administrator through a low cost dealing arrangement. Further details can be obtained from the Plan Administrator on +44 (0) 870 702 0198.

For ADS holders, The Bank of New York maintains a Global BuyDIRECT Plan for the Company, which is a direct purchase and sale plan for depositary receipts, with a dividend reinvestment facility. For additional information, please call toll-free from within the US on +1 800 233 5601, or write to:

The Bank of New York
Shareholder Relations Department
Global BuyDIRECT
P.O. Box 1958 Newark
New Jersey 07101-1958 USA

For calls from outside the US, call +1 610 382 7836. Please note that this number is not toll-free.

Telephone share dealing

A telephone share dealing service with the Company’s Registrars is available for holders of ordinary shares. The service is available from 8.00 am to 4.30 pm, Monday to Friday, excluding bank holidays, on telephone number +44 (0) 870 703 0084.

Detailed terms and conditions are available on request by calling the above number.

Postal share dealing

A postal share dealing service is available for holders of ordinary shares with 1,000 shares or fewer who want to either increase their holding or sell their entire holding.

Further information about this service can be obtained from the Company’s Registrars on +44 (0) 870 702 0198.

Registrars and transfer office

The Company’s ordinary share register is maintained by:

	Computershare Investor Services PLC P.O. Box 82 The Pavilions, Bridgwater Road Bristol BS99 7NH England
	Telephone: +44 (0) 870 702 0198 Fax: + 44 (0) 870 703 6101 Email: web.queries@computershare.co.uk
Holders of ordinary shares resident in Ireland should contact:
	Computershare Investor Services (Ireland) Limited P.O. Box 9742 Dublin 18 Ireland
	Telephone: +353 (0) 818 300 999 Fax: +353 (0) 1 216 3151 Email: web.queries@computershare.ie

Shareholder information  | 141

Investor Information continued

Any queries about the administration of holdings of ordinary shares, such as change of address, change of ownership or dividend payments, should be directed to the Company’s Registrars at the relevant address or telephone number immediately above. Holders of ordinary shares may also check details of their shareholding, subject to passing an identity check, on the Registrars’ website at www.computershare.com

The Depositary Bank for the Company’s ADR programme is:

The Bank of New York
Investor Relations Dept, P.O. Box 11258
Church St. Station
New York, NY 10286-1258
USA

Telephone: +1 (800) 233 5601 (Toll free)

ADS holders should address any queries or instructions regarding their holdings to The Bank of New York at the above address or telephone number. ADS holders can also, subject to passing an identity check, view their account balances and transaction history, sell shares and request certificates from their Global BuyDIRECT Plan at www.stockbny.com

Online Shareholder Services

www.vodafone.com/investor

• Register to receive electronic shareholder communications. Benefits to shareholders and the Company include faster receipt of communications such as annual reports, and cost and time savings for Vodafone. Electronic shareholder communications are also more environmentally friendly.

• View a live webcast of the AGM of the Company on 26 July 2005 and a recording will be available to review after that date.

• View and/or download the Annual Report and the Annual Review & Summary Financial Statement 2005.

• Check the current share price.

• Calculate dividend payments.

• Use interactive tools to calculate the value of shareholdings, look up the historic price on a particular date and chart Vodafone ordinary share price changes against indices.

Shareholders and other interested parties can also receive Company press releases, including London Stock Exchange announcements, by registering for Vodafone News via the Company’s website at www.vodafone.com/news.

Registering for Vodafone News will enable users to:

•   be alerted by free SMS as soon as news breaks;

•   access the latest news from their mobile; and

•   have news automatically e-mailed to them.

Annual General Meeting

The twenty first AGM of the Company will be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1 on 26 July 2005 at 11.00 a.m.

The Notice of Meeting, together with details of the business to be conducted at the Meeting, is being circulated to shareholders with this Annual Report or the Annual Review & Summary Financial Statement and can be viewed at the Company’s website – www.vodafone.com/agm.

The AGM will be transmitted via a live webcast and can be viewed at the Company’s website – www.vodafone.com/agm – on the day of the meeting and a recording will be available to review after that date.

To find out more about the AGM and how to view the webcast, visit www.vodafone.com/agm.

ShareGift

The Company supports ShareGift, the charity share donation scheme administered by The Orr Mackintosh Foundation (registered charity number 1052686). Through ShareGift, shareholders who have only a very small number of shares which might be considered uneconomic to sell are able to donate them to charity. Donated shares are aggregated and sold by ShareGift, the proceeds being passed on to a wide range of UK charities. Donating shares to charity gives rise neither to a gain nor a loss for UK Capital Gains purposes and UK taxpayers may also be able to claim income tax relief on the value of the donation.

ShareGift transfer forms specifically for the Company’s shareholders are available from the Company’s Registrars, Computershare Investor Services PLC and, even if the share certificate has been lost or destroyed, the gift can be completed. The service is generally free. However, there may be an indemnity charge for a lost or destroyed share certificate where the value of the shares exceeds £100. Further details about ShareGift can be obtained from its website at www.ShareGift.org or at The Orr Mackintosh Foundation, 46 Grosvenor Street, London W1K 3HN (telephone: +44 (0) 20 7337 0501).

The Unclaimed Assets Register

The Company participates in the Unclaimed Assets Register, which provides a search facility for financial assets which may have been forgotten and which donates a proportion of its public search fees to a group of three UK charities (Age Concern, NSPCC and Scope). For further information, contact The Unclaimed Assets Register, Garden Floor, Bain House, 16 Connaught Place, London W2 2ES (telephone: +44 (0) 870 241 1713), or visit its website at www.uar.co.uk.

Share Price History

Upon flotation of the Company on 11 October 1988, the ordinary shares were valued at 170 pence each. On 16 September 1991, when the Company was finally demerged, for UK taxpayers the base cost of Racal Electronics Plc shares was apportioned between the Company and Racal Electronics Plc for Capital Gains Tax purposes in the ratio of 80.036% and 19.964% respectively. Opening share prices on 16 September 1991 were 332 pence for each Vodafone share and 223 pence for each Racal share.

On 21 July 1994, the Company effected a bonus issue of two new shares for every one then held and, on 30 September 1999, it effected a bonus issue of four new shares for every one held at that date. The flotation and demerger share prices, therefore, may be restated as 11.333 pence and 22.133 pence, respectively.

The share price at 31 March 2005 was 140.50 pence (31 March 2004: 128.75 pence). The share price on 23 May 2005 was 146.50 pence.

The following tables set out, for the periods indicated, (i) the reported high and low middle market quotations of ordinary shares on the London Stock Exchange, (ii) the reported high and low sales prices of ordinary shares on the Frankfurt Stock Exchange, and (iii) the reported high and low sales prices of ADSs on the NYSE.

The Company’s ordinary shares were traded on the Frankfurt Stock Exchange from 3 April 2000 until 23 March 2004 and, therefore, information has not been provided for periods outside these dates.

142 |  Shareholder information

 

Five year data on an annual basis

	London Stock Exchange Pounds per ordinary share		Frankfurt Stock Exchange Euros per ordinary share		NYSE Dollars per ADS
Financial Year	High	Low	High	Low	High	Low
2000/2001	3.56	1.82	5.82	2.87	56.63	26.01
2001/2002	2.29	1.24	3.70	2.00	33.26	17.88
2002/2003	1.31	0.81	2.15	1.26	20.30	12.76
2003/2004	1.50	1.12	2.22	1.59	27.88	18.10
2004/2005	1.49	1.14	–	–	28.54	20.83

Two year data on a quarterly basis

	London Stock Exchange Pounds per ordinary share		Frankfurt Stock Exchange Euros per ordinary share		NYSE Dollars per ADS
Financial Year	High	Low	High	Low	High	Low
2003/2004
First Quarter	1.35	1.13	1.93	1.61	22.16	18.28
Second Quarter	1.28	1.12	1.86	1.59	21.14	18.10
Third Quarter	1.40	1.20	2.03	1.70	25.15	20.26
Fourth Quarter	1.50	1.24	2.22	1.88	27.88	22.81
2004/2005
First Quarter	1.44	1.21	–	–	25.90	21.87
Second Quarter	1.34	1.14	–	–	24.21	20.83
Third Quarter	1.49	1.32	–	–	28.54	24.06
Fourth Quarter	1.46	1.35	–	–	27.53	25.60
2005/2006
First Quarter(1)	1.47	1.35	–	–	26.91	25.43

Note:
(1)	covering period up to 23 May 2005.

Six month data on a monthly basis

	London Stock Exchange Pounds per ordinary share		NYSE Dollars per ADS
Financial Year	High	Low	High	Low
November 2004	1.49	1.37	27.55	25.45
December 2004	1.48	1.37	28.54	26.62
January 2005	1.46	1.37	27.53	25.68
February 2005	1.42	1.35	26.89	25.60
March 2005	1.44	1.36	27.50	26.23
April 2005	1.43	1.35	26.91	25.70
May 2005(1)	1.47	1.37	26.90	25.43

Notes:
(1)	High and low share prices for May 2004 only reported until 23 May 2005.

The current authorised share capital comprises 78,000,000,000 ordinary shares of $0.10 each and 50,000 7% cumulative fixed rate shares of £1.00 each.

Markets

Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange and, in the form of ADSs, on the New York Stock Exchange.

ADSs, each representing ten ordinary shares, are traded on the New York Stock Exchange under the symbol ‘VOD’. The ADSs are evidenced by ADRs issued by The Bank of New York, as Depositary, under a Deposit Agreement, dated as of 12 October 1988, as amended and restated as of 26 December 1989, as further amended and restated as of 16 September 1991 and as further amended and restated as of 30 June 1999, between the Company, the Depositary and the holders from time to time of ADRs issued thereunder.

 

ADS holders are not members of the Company but may instruct The Bank of New York on the exercise of voting rights relative to the number of ordinary shares represented by their ADSs. See “Memorandum and Articles of Association and Applicable English Law – Rights attaching to the Company’s shares – Voting rights” below.

Shareholders at 31 March 2005

Number of ordinary shares held	Number of accounts	% of total issued shares
1 – 1,000	448,502	0.21
1,001 – 5,000	109,635	0.36
5,001– 50,000	30,851	0.64
50,001 – 100,000	1,593	0.17
100,001– 500,000	1,501	0.53
More than 500,000	2,168	98.09
	594,250	100.00

Geographical analysis of shareholders

At 31 March 2005, approximately 51.53% of the Company’s shares were held in the UK, 32.17% in North America, 13.91% in Europe (excluding the UK) and 2.39% in the Rest of the World.

Memorandum and Articles of Association and
Applicable English law

The following description summarises certain provisions of the Company’s Memorandum and Articles of Association and applicable English law. This summary is qualified in its entirety by reference to the Companies Act 1985 of Great Britain (the “Companies Act”), as amended, and the Company’s Memorandum and Articles of Association. Information on where shareholders can obtain copies of the Memorandum and Articles of Association is provided under “Documents on Display”.

All of the Company’s ordinary shares are fully paid. Accordingly, no further contribution of capital may be required by the Company from the holders of such shares.

English law specifies that any alteration to the Articles of Association must be approved by a special resolution of the shareholders.

The Company’s Objects

The Company is a public limited company under the laws of England and Wales. The Company is registered in England and Wales under the name Vodafone Group Public Limited Company, with the registration number 1833679. The Company’s objects are set out in the fourth clause of its Memorandum of Association and cover a wide range of activities, including to carry on the business of a holding company, to carry on business as dealers in, operators, manufacturers, repairers, designers, developers, importers and exporters of electronic, electrical, mechanical and aeronautical equipment of all types as well as to carry on all other businesses necessary to attain the Company’s objectives. The Memorandum of Association grants the Company a broad range of powers to effect its objects.

Directors

The Company’s Articles of Association provide for a board of directors, consisting of not fewer than three directors, who shall manage the business and affairs of the Company.

Under the Company’s Articles of Association, a director cannot vote in respect of any proposal in which the director, or any person connected with the director, has a material interest other than by virtue of the director’s interest in the Company’s shares or other securities. However, this restriction on voting does not apply to resolutions (a) giving the director or a third party any guarantee, security or indemnity in respect of obligations or liabilities incurred at the request of or for the benefit of the Company, (b) giving any guarantee, security or indemnity to the director or a third party in respect

Shareholder information  | 143

Investor Information continued

 

of obligations of the Company for which the director has assumed responsibility under an indemnity or guarantee, (c) relating to an offer of securities of the Company in which the director participates as a holder of shares or other securities or in the underwriting of such shares or securities, (d) concerning any other company in which the director (together with any connected person) is a shareholder or an officer or is otherwise interested, provided that the director (together with any connected person) is not interested in 1% or more of any class of the company’s equity share capital or the voting rights available to its shareholders, (e) relating to the arrangement of any employee benefit in which the director will share equally with other employees and (f) relating to any insurance that the Company purchases or renews for its directors or any group of people, including directors.

The directors are empowered to exercise all the powers of the Company to borrow money, subject to the limitation that the aggregate amount of all liabilities and obligations of the Group outstanding at any time shall not exceed an amount equal to 1.5 times the aggregate of the Group’s share capital and reserves calculated in the manner prescribed in the Articles of Association, unless sanctioned by an ordinary resolution of the Company’s shareholders.

In accordance with the Company’s Articles of Association, a third of all the directors retire at each AGM. The specific retiring directors are those last elected or re-elected at or before the AGM held in the third calendar year before the current year. This year, the Company reviewed its policy regarding the retirement and re-election of directors and, although it is not intended to amend the Company’s Articles in this regard, the Board has decided, in the interests of good corporate governance, that all the directors should offer themselves for re-election annually. Accordingly, all the directors will submit themselves for re-election at the 2005 AGM, except for Ken Hydon and Sir David Scholey, who are retiring.

No person is disqualified from being a director or is required to vacate that office by reason of age. If, at a general meeting, a director who is 70 or more years of age is proposed for election or re-election, that director’s age must be set out in the notice of the meeting.

Directors are not required, under the Company’s Articles, to hold any shares of the Company as a qualification to act as a director, although executive directors participating in long term incentive plans must comply with the Company’s share ownership guidelines. In accordance with best practice in the UK for corporate governance, compensation awarded to executive directors is decided by a remuneration committee consisting exclusively of non-executive directors.

In addition, as required by The Directors’ Remuneration Report Regulations, the Board has, since 2003, prepared a report to shareholders on the directors’ remuneration which complies with the Regulations (see pages 65 to 74). The report is also subject to a shareholder vote.

Rights attaching to the Company’s shares
Dividend rights

Holders of the Company’s ordinary shares may by ordinary resolution declare dividends but may not declare dividends in excess of the amount recommended by the directors. The Board of directors may also pay interim dividends. No dividend may be paid other than out of profits available for distribution. Dividends on ordinary shares will be announced in pounds sterling. Holders of ordinary shares with a registered address in a euro-zone country (defined, for this purpose, as a country that has adopted the euro as its national currency) will receive their dividends in euro, exchanged from pounds sterling at a rate fixed by the Board of directors in accordance with the Articles of Association. Dividends for ADS holders represented by ordinary shares held by the Depositary will be paid to the Depositary in US dollars, exchanged from pounds sterling at a rate fixed by the directors in accordance with the Articles of Association, and the Depositary will distribute them to the ADS holders.

 

If a dividend has not been claimed for one year after the later of the resolution passed at a general meeting declaring that dividend or the resolution of the directors providing for payment of that dividend, the directors may invest the dividend or use it in some other way for the benefit of the Company until the dividend is claimed. If the dividend remains unclaimed for 12 years after the relevant resolution either declaring that dividend or providing for payment of that dividend, it will be forfeited and belong to the Company.

Voting rights

The Company’s Articles of Association provide that voting on Substantive Resolutions (i.e. any resolution which is not a Procedural Resolution) at a general meeting shall be decided on a poll. On a poll, each shareholder who is entitled to vote and is present in person or by proxy has one vote for every share held. Procedural Resolutions (such as a resolution to adjourn a General Meeting or a resolution on the choice of Chairman of a General Meeting) shall be decided on a show of hands, where each shareholder who is present at the meeting has one vote regardless of the number of shares held, unless a poll is demanded. In addition, the Articles of Association allow persons appointed as proxies of shareholders entitled to vote at general meetings to vote on a show of hands, as well as to vote on a poll and attend and speak at general meetings. Holders of the Company’s ordinary shares do not have cumulative voting rights.

Under English law, two shareholders present in person constitute a quorum for purposes of a general meeting, unless a company’s articles of association specify otherwise. The Company’s Articles of Association do not specify otherwise, except that the shareholders do not need to be present in person, and may instead be present by proxy, to constitute a quorum.

Under English law, shareholders of a public company such as the Company are not permitted to pass resolutions by written consent.

Record holders of the Company’s ADSs are entitled to attend, speak and vote on a poll or a show of hands at any general meeting of the Company’s shareholders by the Depositary’s appointment of them as corporate representatives with respect to the underlying ordinary shares represented by their ADSs. Alternatively, holders of ADSs are entitled to vote by supplying their voting instructions to the Depositary or its nominee, who will vote the ordinary shares underlying their ADSs in accordance with their instructions.

Employees are able to vote any shares held under the Vodafone Group Share Incentive Plan, the Vodafone Group Profit Sharing Scheme and “My ShareBank” (a vested share account) through the respective plan’s trustees, Mourant ECS Trustees Limited.

Liquidation rights

In the event of the liquidation of the Company, after payment of all liabilities and deductions in accordance with English law, the holders of the Company’s 7% cumulative fixed rate shares would be entitled to a sum equal to the capital paid up on such shares, together with certain dividend payments, in priority to holders of the Company’s ordinary shares. The holders of the fixed rate shares do not have any other right to share in the Company’s surplus assets.

Pre-emptive rights and new issues of shares

Under Section 80 of the Companies Act, directors are, with certain exceptions, unable to allot relevant securities without the authority of the shareholders in a general meeting. Relevant securities as defined in the Companies Act include the Company’s ordinary shares or securities convertible into the Company’s ordinary shares. In addition, Section 89 of the Companies Act imposes further restrictions on the issue of equity securities (as defined in the Companies Act, which include the Company’s ordinary shares and securities convertible into ordinary shares) which are, or are to be, paid up wholly in cash and not first offered to existing shareholders. The Company’s Articles of Association allow shareholders to authorise directors for a period up to five years to allot (a) relevant securities generally up to an amount fixed by the shareholders and (b) equity securities for cash other than in connection with a rights issue up to an

144 |  Shareholder information

amount specified by the shareholders and free of the restriction in Section 89. In accordance with institutional investor guidelines, the amount of relevant securities to be fixed by shareholders is normally restricted to one third of the existing issued ordinary share capital, and the amount of equity securities to be issued for cash other than in connection with a rights issue is restricted to 5% of the existing issued ordinary share capital.

Variation of rights

If, at any time, the Company’s share capital is divided into different classes of shares, the rights attached to any class may be varied, subject to the provisions of the Companies Act, either with the consent in writing of the holders of three fourths in nominal value of the shares of that class or upon the adoption of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class.

At every such separate meeting, all of the provisions of the Articles of Association relating to proceedings at a general meeting apply, except that (a) the quorum is to be the number of persons (which must be at least two) who hold or represent by proxy not less than one-third in nominal value of the issued shares of the class or, if such quorum is not present on an adjourned meeting, one person who holds shares of the class regardless of the number of shares he holds, (b) any person present in person or by proxy may demand a poll, and (c) each shareholder will have one vote per share held in that particular class in the event a poll is taken.

Class rights are deemed not to have been varied by the creation or issue of new shares ranking equally with or subsequent to that class of shares in sharing in profits or assets of the Company or by a redemption or repurchase of the shares by the Company.

Limitations on voting and shareholding

There are no limitations imposed by English law or the Company’s Articles of Association on the right of non-residents or foreign persons to hold or vote the Company’s shares other than those limitations that would generally apply to all of the shareholders.

Disclosure of interests in the Company’s shares

There are no provisions in the Articles of Association whereby persons acquiring, holding or disposing of a certain percentage of the Company’s shares are required to make disclosure of their ownership percentage, although such requirements exist under the Companies Act.

The basic disclosure requirement under Sections 198 to 211 of the Companies Act imposes upon a person interested in the shares of the Company a statutory obligation to provide written notification to the Company, including certain details as set out in the Companies Act, where:

(a)	he acquires (or becomes aware that he has acquired) or ceases to have (or becomes aware that he has ceased to have) an interest in shares comprising any class of the Company’s issued and voting share capital; and
(b)	as a result, EITHER he obtains, or ceases to have:
	(i)	a “material interest” in 3%, or more; or
	(ii)	an aggregate interest (whether “material” or not) in 10%, or more of the Company’s voting capital; or
	(iii)	the percentage of his interest in the Company’s voting capital remains above the relevant level and changes by a whole percentage point.

A “material interest” means, broadly, any beneficial interest (including those of a spouse or a child or a step-child (under the age of 18), those of a company which is accustomed to act in accordance with the relevant person’s instructions or in which one third or more of the votes are controlled by such person and certain other interests set out in the Companies Act) other than those of an investment manager or an

operator of a unit trust/recognised scheme/collective investment scheme/open-ended investment company.

Sections 204 to 206 of the Companies Act set out particular rules of disclosure where two or more parties (each a “concert party”) have entered into an agreement to acquire interests in shares of a public company, and the agreement imposes obligations/restrictions on any concert party with respect to the use, retention or disposal of the shares in the company and an acquisition of shares by a concert party pursuant to the agreement has taken place.

Under Section 212 of the Companies Act, the Company may by notice in writing require a person that the Company knows or has reasonable cause to believe is or was during the preceding three years interested in the Company’s shares to indicate whether or not that is correct and, if that person does or did hold an interest in the Company’s shares, to provide certain information as set out in the Companies Act.

Sections 324 to 329 of the Companies Act further deal with the disclosure by persons (and certain members of their families) of interests in shares or debentures of the companies of which they are directors and certain associated companies.

There are additional disclosure obligations under Rule 3 of the Substantial Acquisitions Rules where a person acquires 15% or more of the voting rights of a listed company or when an acquisition increases his holding of shares or rights over shares so as to increase his voting rights beyond that level by a whole percentage point. Notification in this case should be to the Company, the Panel on Takeovers and Mergers and the UK Listing Authority through one of its approved regulatory information services no later than 12 noon on the business day following the date of the acquisition.

The City Code on Takeovers and Mergers also contains strict disclosure requirements on all parties to a takeover with regard to dealings in the securities of an offeror or offeree company and also on their respective associates during the course of an offer period.

General meetings and notices

Annual general meetings are held at such times and place as determined by the directors of the Company. The directors may also, when they think fit, convene an extraordinary general meeting of the Company. Extraordinary general meetings may also be convened on requisition as provided by the Companies Act.

An annual general meeting and an extraordinary general meeting called for the passing of a special resolution need to be called by not less than twenty-one days’ notice in writing and all other extraordinary general meetings by not less than fourteen days’ notice in writing. The directors may determine that persons entitled to receive notices of meetings are those persons entered on the register at the close of business on a day determined by the directors but not later than twenty-one days before the date the relevant notice is sent. The notice may also specify the record date, which shall not be more than forty-eight hours before the time fixed for the meeting.

Shareholders must provide the Company with an address or (so far as the Companies Act allows) an electronic address or fax number in the United Kingdom in order to be entitled to receive notices of shareholders’ meetings and other notices and documents. In certain circumstances, the Company may give notices to shareholders by advertisement in newspapers in the United Kingdom. Holders of the Company’s ADSs are entitled to receive notices under the terms of the Deposit Agreement relating to the ADSs.

Under Section 366 of the Companies Act 1985 and the Company’s Articles of Association, the annual general meeting of shareholders must be held each calendar year with no more than fifteen months elapsing since the date of the preceding annual general meeting.

Shareholder information  | 145

Investor Information continued

Documents on Display

The Company is subject to the information requirements of the US Securities and Exchange Act of 1934 applicable to foreign private issuers. In accordance with these requirements, the Company files its Annual Report on Form 20-F and other related documents with the SEC. These documents may be inspected at the SEC’s public reference rooms located at 450 Fifth Street, NW Washington, DC 20549. Information on the operation of the public reference room can be obtained in the US by calling the SEC on +1-800-SEC-0330. In addition, some of the Company’s SEC filings, including all those filed on or after 4 November 2002, are available on the SEC’s website at www.sec.gov. Shareholders can also obtain copies of the Company’s Memorandum and Articles of Association from the Vodafone website at www.vodafone.com or from the Company’s registered office.

Material Contracts

At the date of this Annual Report, the Group is not party to any contracts that are considered material to the Group’s results or operations, except for its $10.4 billion credit facilities which are discussed under “Operating and Financial Review and Prospects – Liquidity and Cash Resources”.

Exchange Controls

There are no UK government laws, decrees or regulations that restrict or affect the export or import of capital, including but not limited to, foreign exchange controls on remittance of dividends on the ordinary shares or on the conduct of the Group’s operations, except as otherwise set out under “Taxation”.

Taxation

As this is a complex area, investors should consult their own tax adviser regarding the US federal, state and local, the UK and other tax consequences of owning and disposing of shares and ADSs in their particular circumstances, and in particular whether they are eligible for the benefits of the Old Treaty and/or the New Treaty.

This section describes for a US holder (as defined below), in general terms, the principal US federal income tax and UK tax consequences of owning shares or ADSs in the Company as capital assets (for US and UK tax purposes). This section does not, however, cover the tax consequences for members of certain classes of holders subject to special rules and holders that, directly or indirectly, hold 10 per cent or more of the Company’s voting stock.

A US holder is a beneficial owner of shares or ADSs that is for US federal income tax purposes:

(i)	a citizen or resident of the United States;
(ii)	US domestic corporation;
(iii)	an estate the income of which is subject to US federal income tax regardless of its source; or
(iv)	a trust if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorised to control all substantial decisions of the trust.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, and on the tax laws of the United Kingdom, all as currently in effect, as well as on the Double Taxation Convention between the United States and the United Kingdom entered into force in 1980 (the “Old Treaty”) and the Double Taxation Convention between the United States and the United Kingdom that entered into force on 31 March 2003 (the “New Treaty”). These laws are subject to change, possibly on a retroactive basis.

The New Treaty has been effective in respect of taxes withheld at source for amounts paid or credited on or after 1 May 2003. Other provisions of the New Treaty, however, including capital gains tax, took effect for UK purposes for individuals on 6 April 2003 (1 April 2003 for UK companies) and took effect for US purposes on 1 January 2004. The rules of the Old Treaty remained applicable until these effective dates. Moreover, a taxpayer can elect to have the Old Treaty apply in its entirety for a period of twelve months after the applicable effective dates of the New Treaty (if such a taxpayer would be entitled to greater benefits under the Old Treaty).

This section is further based in part upon the representations of the Depositary and assumes that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

Based on this assumption, for purposes of the Old Treaty and the New Treaty and the US-UK double taxation convention relating to estate and gift taxes (the “Estate Tax Convention”), and for US federal income tax and UK tax purposes, a holder of ADRs evidencing ADSs will be treated as the owner of the shares in the Company represented by those ADSs. Generally, exchanges of shares for ADRs, and ADRs for shares, will not be subject to US federal income tax or to UK tax, other than stamp duty or stamp duty reserve tax (see the section on these taxes below).

Taxation of dividends
UK Taxation

Under current UK tax law, no withholding tax will be deducted from dividends paid by the Company.

A shareholder that is a company resident for UK tax purposes in the United Kingdom will not be taxable on a dividend it receives from the Company. A shareholder in the Company who is an individual resident for UK tax purposes in the United Kingdom is entitled, in calculating their liability to UK income tax, to a tax credit on cash dividends paid on shares in the Company or ADSs, and the tax credit is equal to one-ninth of the cash dividend.

If applicable, under the Old Treaty, a US holder was entitled to a tax credit from the UK Inland Revenue equal to the amount of the tax credit available to a shareholder resident in the United Kingdom (i.e. one-ninth of the dividend received) but the amount of the dividend plus the amount of the tax credit were then subject to withholding in an amount equal to the amount of the tax credit. A US holder, therefore, did not, in fact, receive any repayment from the UK Inland Revenue in respect of a dividend from the Company, although assuming the US holder was not resident in the United Kingdom for UK tax purposes, there was no further UK tax to pay in respect of that dividend.

Under the New Treaty, a US holder is not entitled to a tax credit from the UK Inland Revenue in the manner described above and dividends received by the US holder from the Company are not subject to any withholding by the United Kingdom under the New Treaty or otherwise.

US Federal Income Taxation

A US holder is subject to US federal income taxation on the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). Dividends paid to a non-corporate US holder in tax years beginning before 1 January 2009 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%, provided that the ordinary shares or ADSs are held for more than 60 days during the 121-day period beginning 60 days before the ex-dividend rate and the holder meets other holding period requirements. Dividends paid by the Company with respect to the shares or ADSs will generally be qualified dividend income.

A US holder that is eligible and elects the benefits of the Old Treaty, for dividends paid prior to 1 May 2004 may include in the gross amount of income the UK tax withheld from the dividend payment pursuant to the Old Treaty as described under

146 |  Shareholder information

“UK Taxation”. Subject to certain limitations, the UK tax withheld in accordance with the Old Treaty and effectively paid over to the UK Inland Revenue will be creditable against the US holder’s US federal income tax liability, provided the US holder is eligible for the benefits of the Old Treaty and has properly filed Internal Revenue Form 8833. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate.

Under the New Treaty, a US holder is not entitled to a UK tax credit payment, but is also not subject to a UK withholding tax. The US holder includes in gross income for US federal income tax purposes only the amount of the dividend actually received from the Company, and the receipt of a dividend does not entitle the US holder to a foreign tax credit.

In either case, dividends must be included in income when the US holder, in the case of shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations. Dividends will be income from sources outside the United States and will generally be “passive income” or “financial services income”, which is treated separately from other types of income for the purposes of computing any allowable foreign tax credit.

In the case of shares, the amount of the dividend distribution to be included in income will be the US dollar value of the pound sterling payments made, determined at the spot pound sterling/US dollar rate on the date of the dividend distribution, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is to be included in income to the date the payment is converted into US dollars will be treated as ordinary income or loss. Generally, the gain or loss will be income or loss from sources within the United States for foreign tax credit limitation purposes.

Taxation of capital gains
UK taxation

A US holder may be liable for both UK and US tax in respect of a gain on the disposal of the Company’s shares or ADSs if the US holder is:

(i)	a citizen of the United States resident or ordinarily resident for UK tax purposes in the United Kingdom;
(ii)	a citizen of the United States who has been resident or ordinarily resident for UK tax purposes in the United Kingdom, ceased to be so resident or ordinarily resident for a period of less than 5 years of assessment and who disposed of the shares or ADSs during that period (a “Temporary Non-Resident”), unless the shares or ADSs were also acquired during that period, such liability arising on that individual’s return to the UK;
(iii)	a US domestic corporation resident in the United Kingdom by reason of being centrally managed and controlled in the United Kingdom; or
(iv)	a citizen of the United States or a corporation that carries on a trade, profession or vocation in the United Kingdom through a branch or agency or, in respect of companies through a permanent establishment and that has used the shares or ADSs for the purposes of such trade, profession or vocation or has used, held or acquired the shares or ADSs for the purposes of such branch or agency or permanent establishment.

However, subject to applicable limitations and eligibility to the provisions of the Old Treaty, such persons may be entitled to a tax credit against their US federal income tax liability for the amount of UK capital gains tax or UK corporation tax on chargeable gains (as the case may be) which is paid in respect of such gain.

Under the New Treaty, capital gains on dispositions of the shares or ADSs are generally subject to tax only in the country of residence of the relevant holder as determined under both the laws of the United Kingdom and the United States and as required by the terms of the New Treaty. However, individuals who are residents of either the

United Kingdom or the United States and who have been residents of the other jurisdiction (the US or the UK, as the case may be) at any time during the six years immediately preceding the relevant disposal of shares or ADSs may be subject to tax with respect to capital gains arising from the dispositions of the shares or ADSs not only in the country of which the holder is resident at the time of the disposition, but also in that other country (although, in respect of UK taxation, generally only to the extent that such an individual comprises a Temporary Non-Resident).

US federal income taxation

A US holder that sells or otherwise disposes of the Company’s shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in the shares or ADSs. Generally, capital gain of a non-corporate US holder that is recognised before 1 January 2009 is taxed at a maximum rate of 15%, provided the holder has a holding period of more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of losses is subject to limitations.

Additional tax considerations
UK inheritance tax

An individual who is domiciled in the United States (for the purposes of the Estate Tax Convention) and is not a UK national will not be subject to UK inheritance tax in respect of the Company’s shares or ADSs on the individual’s death or on a transfer of the shares or ADSs during the individual’s lifetime, provided that any applicable US federal gift or estate tax is paid, unless the shares or ADSs are part of the business property of a UK permanent establishment or pertain to a UK fixed base used for the performance of independent personal services. Where the shares or ADSs have been placed in trust by a settlor, they may be subject to UK inheritance tax unless, when the trust was created, the settlor was domiciled in the United States and was not a UK national. Where the shares or ADSs are subject to both UK inheritance tax and to US federal gift or estate tax, the Estate and Gift Tax Convention generally provides a credit against US federal tax liabilities for UK inheritance tax paid.

UK stamp duty and stamp duty reserve tax

Stamp duty will, subject to certain exceptions, be payable on any instrument transferring shares in the Company to the Custodian of the Depositary at the rate of 1.5% on the amount or value of the consideration if on sale or on the value of such shares if not on sale. Stamp duty reserve tax (SDRT), at the rate of 1.5% of the price or value of the shares, could also be payable in these circumstances, and on issue to such a person, but no SDRT will be payable if stamp duty equal to such SDRT liability is paid. In accordance with the terms of the Deposit Agreement, any tax or duty payable on deposits of shares by the Depositary or the Custodian of the Depositary will be charged to the party to whom ADSs are delivered against such deposits.

No stamp duty will be payable on any transfer of ADSs of the Company, provided that the ADSs and any separate instrument of transfer are executed and retained at all times outside the United Kingdom.

A transfer of shares in the Company in registered form will attract ad valorem stamp duty generally at the rate of 0.5% of the purchase price of the shares. There is no charge to ad valorem stamp duty on gifts. On a transfer from nominee to beneficial owner (the nominee having at all times held the shares on behalf of the transferee) under which no beneficial interest passes and which is neither a sale nor in contemplation of a sale, a fixed £5.00 stamp duty will be payable.

SDRT is generally payable on an unconditional agreement to transfer shares in the Company in registered form at 0.5% of the amount or value of the consideration for the transfer, but is repayable if, within six years of the date of the agreement, an instrument transferring the shares is executed or, if the SDRT has not been paid, the liability to pay the tax (but not necessarily interest and penalties) would be cancelled. However, an agreement to transfer the ADSs of the Company will not give rise to SDRT.

Shareholder information  | 147

Investor Information continued

Contact Details
Registered Office
Vodafone House
The Connection
Newbury
Berkshire RG14 2FN
England
Telephone:	+44 (0) 1635 33251
Fax:	+44 (0) 1635 45713
Group Corporate Affairs
Simon Lewis	Group Corporate Affairs Director
Telephone:	+44 (0) 1635 673310
Fax:	+44 (0) 1635 682890
Investor Relations
Charles Butterworth
Darren Jones
Sarah Moriarty
Telephone:	+44 (0) 1635 673310
Media Relations
Bobby Leach
Ben Padovan
Telephone:	+44 (0) 1635 673310
Corporate Responsibility
Charlotte Grezo	Director of Corporate Responsibility
Telephone:	+44 (0) 1635 33251
Fax:	+44 (0) 1635 674478
E-mail:	responsibility@vodafone.com
Website:	www.vodafone.com/responsibility

148 |  Shareholder information

Form 20-F Cross Reference Guide

This table has been provided as a cross reference from the information included in this Annual Report to the requirements of Form 20-F.

Item	Form 20-F caption	Location in this document	Page
1	Identity of Directors, Senior Management and Advisers	Not applicable	–
2	Offer Statistics and Expected Timetable	Not applicable	–
3	Key Information
	3A Selected Financial Data	Financial Highlights	2
		Operating and Financial Review and Prospects – Foreign currency translation	32
	3B Capitalisation and indebtedness	Not applicable	–
	3C Reasons for the offer and use of proceeds	Not applicable	–
	3D Risk Factors	Risk Factors and Legal Proceedings – Risk Factors	25
4	Information on the Company
	4A History and Development of the Company	Business Overview – History and Development of the Company	20
		Investor Information – Contact Details	148
	4B Business Overview	Business Overview	10
		Operating and Financial Review and Prospects – Operating Results –
		Review of operations	36
		Operating and Financial Review and Prospects – Trend Information and Outlook –
		Trend Information	50
		Investor Information – Material Contracts	146
	4C Organisational Structure	Note 34 “Principal subsidiary undertakings, associated undertakings and investments”	122
	4D Property, Plants and Equipment	Business Overview – Licences and network infrastructure – Mobile network infrastructure	12
		Operating and Financial Review and Prospects – Balance sheet	45
		Corporate Responsibility and Environmental Issues – Environmental Issues	76
5	Operating and Financial Review and Prospects
	5A Operating Results	Operating and Financial Review and Prospects – Operating Results	33
		Operating and Financial Review and Prospects – Inflation	32
	5B Liquidity and Capital Resources	Operating and Financial Review and Prospects – Liquidity and Capital Resources	46
	5C Research and Development, Patents and Licences, etc.	Business Overview – Global Services – Research and Development	16
	5D Trend Information	Operating and Financial Review and Prospects – Trend Information and Outlook –
		Trend Information	50
	5E Off-balance sheet arrangements	Operating and Financial Review and Prospects – Liquidity and Capital Resources –
		Off-balance sheet arrangements	50
		Note 26 “Commitments”	112
		Note 27 “Contingent liabilities”	113
	5F Tabular disclosure of contractual obligations	Operating and Financial Review and Prospects – Liquidity and Capital Resources –
		Contractual Obligations	49
	5G Safe harbor	Cautionary Statement Regarding Forward-Looking Statements	24
6	Directors, Senior Management and Employees
	6A Directors and Senior Management	The Board of Directors and Group Management	55
	6B Compensation	Board’s Report to Shareholders on Directors’ Remuneration	65
	6C Board Practices	Corporate Governance	60
		Board’s Report to Shareholders on Directors’ Remuneration	65
	6D Employees	Note 31 “Employees”	116
	6E Share Ownership	Board’s Report to Shareholders on Directors’ Remuneration – Directors’ interests in the
		shares of the Company	71
		Note 22 “Called up share capital”	107

Shareholder information  | 149

Form 20-F Cross Reference Guide continued

Item	Form 20-F caption	Location in this document	Page
7	Major Shareholders and Related Party Transactions
	7A Major Shareholders	Directors’ Report – Major shareholders	59
	7B Related Party Transactions	Board’s Report to Shareholders on Directors’ Remuneration	65
		Note 35 “Related party transactions”	123
	7C Interests of experts and counsel	Not applicable	–
8	Financial Information
	8A Consolidated Statements and Other Financial Information	Consolidated Financial Statements	77
		Report of Independent Auditors	137
		Risk Factors and Legal Proceedings – Legal Proceedings	26
		Operating and Financial Review and Prospects – Equity Dividends	45
	8B Significant Changes	Note 33 “Subsequent events”	121
9	The Offer and Listing
	9A Offer and listing details	Investor Information – Share Price History	142
	9B Plan of distribution	Not applicable	–
	9C Markets	Investor Information – Markets	143
	9D Selling shareholders	Not applicable	–
	9E Dilution	Not applicable	–
	9F Expenses of the issue	Not applicable	–
10	Additional Information
	10A Share capital	Not applicable	–
	10B Memorandum and articles of association	Investor Information – Memorandum and Articles of Association and Applicable English law	143
	10C Material contracts	Investor Information – Material Contracts	146
	10D Exchange controls	Investor Information – Exchange Controls	146
	10E Taxation	Investor Information – Taxation	146
	10F Dividends and paying agents	Not applicable	–
	10G Statement by experts	Not applicable	–
	10H Documents on Display	Investor Information – Documents on Display	146
	10I Subsidiary information	Not applicable	–
11	Quantitative and Qualitative Disclosures About Market Risk	Operating and Financial Review and Prospects – Quantitative and Qualitative Disclosures    about Market Risk	50
12	Description of Securities Other than Equity Securities	Not applicable	–
13	Defaults, Dividend Arrearages and Delinquencies	Not applicable	–
14	Material Modifications to the Rights of Security Holders and Use of Proceeds	Not applicable	–
15	Controls and Procedures	Corporate Governance	60
16	16A Audit committee financial expert	Corporate Governance – Committees of the Board – The Audit Committee	62
	16B Code of Ethics	Corporate Governance – Introduction – US Listing Requirements	60
	16C Principal Accountant Fees and Services	Note 5 “Operating loss”	89
		Directors’ Report – Auditors	59
	16D Exemptions from the Listing Standards for Audit Committees	Not applicable	–
	16E Purchase of Equity Securities by the Issuer and Affiliated            Purchasers	Note 23 “Reserves”	111
17	Financial Statements	Not applicable	–
18	Financial Statements	Consolidated Financial Statements	77
19	Exhibits	Filed with the SEC	–

150 |  Shareholder information

Designed and produced by Barrett Howe Plc

Vodafone Group Plc
Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN
England Registered in England No. 1833679 Tel: +44 (0) 1635 33251
Fax: +44 (0) 1635 45713
www.vodafone.com

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

VODAFONE GROUP PUBLIC LIMITED COMPANY

                             (Registrant)

/s/ S R Scott

Stephen R. Scott

Company Secretary

Date: June 8, 2005

Index to Exhibits to Form 20-F for year ended 31 March 2005

1. Memorandum, as adopted on June 13, 1984 and including all amendments made on July 28, 2000, and Articles of Association, as adopted on June 30, 1999 and including all amendments made on July 25, 2001, of the Company (incorporated by reference to Exhibit 2.1 to the Company’s Amendment No. 3 to the Registration Statement on Form 8-A/A, dated December 5, 2003). (File No. 001-10086).

2. Indenture, dated as of February 10, 2000, between the Company and Citibank, N.A. as Trustee, including forms of debt securities (incorporated by reference to Exhibit 4(a) of Amendment No. 1 to the Company’s Registration Statement on Form F-3, dated November 24, 2000). (File No. 333-10762)).

4.1. Agreement for US$5,525,000,000 5 year Revolving Credit Facility, dated June 24, 2004, among, inter alia, the Company, ABN Amro Bank N.V.; Banco Bilbao Vizcaya Argentaria S.A. ; Bank of America, N.A.; Barclays Bank PLC; Bayerische Hypo-und Vereinsbank AG; BNP Paribas ; CALYON; Citibank, N.A.; Commerzbank Aktiengesellschaft, London Branch; Deutsche Bank AG; HSBC Bank plc; ING Bank, N.V.; JPMorgan Chase Bank; Lehman Brothers Bankhaus AG; Lloyds TSB Bank plc; Morgan Stanley Dean Witter Bank Limited and Morgan Stanley Bank; Mizuho Corporate Bank, Ltd.; National Australia Bank Limited ABN 12 004 044 937; Sumitomo Mitsui Banking Corporation Europe Limited; The Bank of Tokyo-Mitsubishi, Ltd.; The Royal Bank of Scotland Plc; UBS AG; WestLB AG; Banco Santander Central Hispano, S.A.; William Street Commitment Corporation; Banca Intesa SpA; KBC Bank NV; Standard Chartered Bank; TD Bank Europe Limited; and The Bank of New York with The Royal Bank of Scotland plc as Agent and US Swingline Agent.

4.2. Agreement for US$4,853,333,331 3 year Revolving Credit Facility, dated June 26, 2003 and amended on August 11, 2003 and June 24, 2004, among, inter alia, the Company, ABN Amro Bank N.V.; Banco Bilbao Vizcaya Argentaria S.A.; Bank of America, N.A.; Barclays Bank PLC; Bayerische Hypo-und Vereinsbank AG; Bayerische Landesbank; BNP Paribas; Citibank, N.A.; Commerzbank Aktiengesellschaft; Credit Agricole Indosuez; Deutsche Bank AG; HSBC Bank plc; ING Bank, N.V.; JPMorgan Chase Bank; Lehman Brothers Bankhaus AG; Lloyds TSB Bank plc; Mizuho Corporate Bank, Ltd.; National Australia Bank Limited ABN 12 004 044 937; Sumitomo Mitsui Banking Corporation Europe Limited; The Bank of Tokyo-Mitsubishi, Ltd.; The Royal Bank of Scotland Plc; UBS AG; WestLB AG; William Street Commitment Corporation; Banco Santander Central Hispano, S.A.; Banca Intesa SpA; KBC Bank NV; San Paolo IMI Bank Ireland Plc; Standard Chartered Bank; TD Bank Europe Limited; and The Bank of New York with The Royal Bank of Scotland plc as Agent and US Swingline Agent.

4.3. Vodafone Group Long Term Incentive Plan (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.4. Vodafone Group Short Term Incentive Plan (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.5. Vodafone Group 1999 Long Term Stock Incentive Plan (incorporated by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.6. Vodafone Group 1998 Company Share Option Scheme (incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.7. Vodafone Group 1998 Executive Share Option Scheme (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.8. Agreement for Services with Lord MacLaurin of Knebworth (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.9. Letter of Appointment of Paul Hazen (incorporated by reference to Exhibit 4.15 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).

4.10. Service Contract of Arun Sarin (incorporated by reference to Exhibit 4.20 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).

4.11. Service Contract of Sir Julian Horn-Smith (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.12. Service Contract of Peter Bamford (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.13. Service Contract of Thomas Geitner.

4.14. Service Contract of Kenneth Hydon (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.15. Letter of Appointment of Sir John Bond.

4.16. Letter of Appointment of Dr. Michael Boskin (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).

4.17. Letter of Appointment of Lord Broers (incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003; at a meeting of the Directors of the Company held on September 16, 2003, the term of office of Professor Sir Alec Broers was extended until December 31, 2006).

4.18. Letter of Appointment of Dr. John Buchanan (incorporated by reference to Exhibit 4.11 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).

4.19. Letter of Appointment of Penelope Hughes (incorporated by reference to Exhibit 4.17 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003; at a meeting of the Directors of the Company held on September 16, 2003, the term of office of Penelope Hughes was extended until August 31, 2007).

4.20. Letter of Appointment of Sir David Scholey (incorporated by reference to Exhibit 4.21 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003; at a meeting of the Directors of the Company held on September 16, 2003, the term of office of Sir David Scholey was extended until the Annual General Meeting of the Company in 2005).

4.21. Letter of Appointment of Jurgen Schrempp (incorporated by reference to Exhibit 4.21 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2004).

4.22. Letter of Appointment of Luc Vandevelde (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2004).

7. Computation of ratio of earnings to fixed charges.

8.	The list of the Company’s subsidiaries is incorporated by reference to note 34 to the Consolidated Financial Statements included in the Annual Report.
12.	Rule 13a – 14(a) Certifications.
13.	Rule 13a – 14(b) Certifications.
15.	Consent of Deloitte & Touche LLP.

EX-4

        Prepared and filed by St Ives Burrups

EX-4

Exhibit 4.2

CONFORMED COPY

3 YEAR FACILITY AGREEMENT

DATED 26TH JUNE, 2003

U.S.$4,853,333,331

REVOLVING CREDIT FACILITY

for

VODAFONE GROUP PLC






ALLEN & OVERY LLP

LONDON

CONTENTS

Clause		Page
1.	Interpretation	1
2.	The Facilities	23
3.	Purpose	26
4.	Conditions Precedent	26
5.	Advances	27
6.	Repayment	28
7.	Prepayment and Cancellation	28
8.	Interest	30
9.	Payments	33
10.	Taxes	35
11.	Market Disruption	38
12.	Increased Costs	39
13.	Illegality and Mitigation	40
14.	Guarantee	41
15.	Representations and Warranties	44
16.	Undertakings	47
17.	Financial Covenant	52
18.	Default	53
19.	The Agent and the Arrangers	57
20.	Fees	61
21.	Expenses	62
22.	Stamp Duties	62
23.	Indemnities	63
24.	Evidence and Calculations	64
25.	Amendments and Waivers	64
26.	Changes to the Parties	65
27.	Disclosure of Information	70
28.	Set-off	71
29.	Pro Rata Sharing	71
30.	Severability	72
31.	Counterparts	72
32.	Notices	72
33.	Language	73
34.	Jurisdiction	74
35.	Governing Law	75

Schedule
1.	Lenders and Commitments		76
	Part 1	Lenders and Commitments	76
	Part 2	Mandated Lead Arrangers	78
	Part 3	Co-Arrangers	79
2.	Conditions Precedent Documents		80
	Part 1	To be Delivered Before the First Advance	80
	Part 2	To be Delivered by an Additional Guarantor	81
	Part 3	To be Delivered by an Additional Borrower	83
3.	Mandatory Cost Formulae		84
4.	Form of Request		87
5.	Forms of Accession Documents		88
	Part 1	Novation Certificate	88
	Part 2	Guarantor Accession Agreement	90
	Part 3	Borrower Accession Agreement	91
	Part 4	Lender Accession Agreement	92
6.	Form of Confidentiality Undertaking from New Lender		93
7.	Form of Additional Lender's Fee Letter		96
8.	Fixed Rate Bonds		98
Signatories			99

THIS AGREEMENT is dated 26th June, 2003 and made BETWEEN:
(1)	VODAFONE GROUP PLC (registered number 1833679) as borrower (“Vodafone”);
(2)	THE FINANCIAL INSTITUTIONS listed in Part 2 of Schedule 1 as Mandated Lead Arrangers;
(3)	THE FINANCIAL INSTITUTIONS listed in Part 3 of Schedule 1 as Co-Arrangers;
(4)	THE FINANCIAL INSTITUTIONS listed in Part 1 of Schedule 1 as Lenders; and
(5)	THE ROYAL BANK OF SCOTLAND PLC as agent (in this capacity the “Agent”).
IT IS AGREED as follows:
1.	INTERPRETATION
1.1	Definitions
	In this Agreement:
	“Acquisition”
	means the acquisition of any interest in the share capital (or equivalent) or in the business or undertaking of any company or other person (including, without limitation, any partnership or joint venture).
	“Additional Borrower”
	means any member of the Restricted Group which becomes an additional borrower pursuant to Clause 26.6 (Additional Borrowers) and which has not been released as a borrower in accordance with Clause 26.7 (Removal of Borrowers).
	“Additional Guarantor”
	means any member of the Group which at such time has become a Guarantor in accordance with Clause 26.5 (Additional Guarantors) and has not been released in accordance with Clause 14.9 (Removal of Guarantors).
	“Additional Lender”
	means a financial institution or other entity which becomes an additional lender pursuant to Clause 2.7 (Additional Lenders) or a transferee, successor or permitted assignee of such financial institution or other entity which is for the time being participating in the Facility.
	“Adjusted Group Operating Cash Flow”
	means, without double counting, in relation to any period, a sum equal to the Group's total operating profit or loss for continuing operations, acquisitions (as a component of continuing operations) and discontinued operations before taxation, interest and after:
	(a)	adding depreciation;
	(b)	adding amortisation;

1

(c)	deducting the profit or adding any loss on exceptional items which are included in the foregoing;
(d)	deducting any gain or adding any loss on disposal of tangible or intangible fixed assets;
(e)	adjusting for movements in working capital (being movements in stock, creditors, provision, and debtors);
(f)	adding dividends received from any Associated Company, Joint Venture or any Investee Company; and
(g)	excluding exceptional items,
and for the avoidance of doubt excluding (other than as set out in paragraph (f) above) the results of any Associated Company, Joint Venture or any Investee Company.
“Advance”
means a Revolving Credit Advance.
“Affected Lender”
has the meaning given to it in Clause 2.2(c) (Overall facility limits).
“Affiliate”
means, in relation to a person, a Subsidiary or a Holding Company of that person and any other Subsidiary of that Holding Company.
“Agent's Spot Rate of Exchange”
means the spot rate of exchange as determined by the Agent for the purchase of the relevant Optional Currency in the London foreign exchange market with U.S. Dollars at or about 11.00 a.m. on a particular day.
“Agreed Percentage”
means in relation to a Lender, the amount of its Revolving Credit Commitment expressed as a percentage of the Total Commitments.
“All Quoting Credit Rating Agencies”
has the meaning given to it in Clause 8.5(a).
“Applicable GAAP”
means the generally accepted accounting principles applied in the preparation of the consolidated accounts of Vodafone for the year ended 31st March, 2004 and if Vodafone notifies in writing to the Agent after 1st June 2005 and before 30th September 2005 or such later date as the Agent may agree the consolidated accounts of Vodafone for the year ended 31st March 2005.

2

“Arranger”
means a financial institution or other entity listed in Part 2 or Part 3 of Schedule 1.
“Asset Disposal”
means any sale, transfer, grant, lease or other disposal of an asset (including, but not limited to, a disposal of any interest in any Subsidiary or Affiliate) by any member of the Group to a person outside the Group made after the Signing Date.
“Associated Company”
means any company or body corporate in which any member of the Group holds a participating interest and, in the opinion of the directors of Vodafone (or, following the Hive Up, NewTopco), can exercise a significant influence in such company's or body corporate's management and which is, or would be, treated as such under Applicable GAAP.
“Available Cash”
means:
(a)	cash in hand and cash in deposits repayable on demand with any Qualifying Financial Institution; and
(b)	Liquid Resources,
to the extent denominated in any freely convertible and transferable currencies, beneficially owned by a member of the Group and unencumbered by any Security Interests other than Permitted Security Interests granted in respect of Financial Indebtedness.
“Availability Period”
means the period from the Signing Date up to and including the date which is three years after the Signing Date or, if that day is not a Business Day, the preceding Business Day.
“Back to Back Loan”
means any Financial Indebtedness made available to a member of the Restricted Group to the extent that the economic exposure of the creditor in respect of that Financial Indebtedness (taking any related transactions together) is reduced by reason of that creditor:
(a)	having recourse directly or indirectly to a deposit of cash or cash equivalent investments beneficially owned by any member of the Restricted Group placed, as part of a related transaction, with that creditor (or an Affiliate of that creditor) or a financial institution approved by that creditor; or
(b)	having granted a funded sub-participation or similar arrangement to a member of the Restricted Group.
“Borrower”
means Vodafone or an Additional Borrower.

3

“Borrower Accession Agreement”
means an agreement substantially in the form of Part 3 of Schedule 5 or with such amendments as the Agent may approve (such approval not to be unreasonably withheld or delayed) or may reasonably require.
“Business Day”
means a day (other than a Saturday or Sunday) on which banks and the interbank and foreign exchange markets are open for general business in:
(a)	London; and
(b)	if a payment is required in U.S. Dollars, New York; or if a payment is required in euro, a TARGET Day.
“Change of Control”
has the meaning given to it in Clause 7.4 (Change of Control).
“Combined Commitments”
means the aggregate of the Total Commitments under this Agreement and the Total Commitments under and as defined in the 5 Year Facility.
“Commitment”
means a Revolving Credit Commitment to the extent not transferred, cancelled or reduced under or in accordance with this Agreement.
“Consolidated Subsidiaries”
means those Subsidiaries of Vodafone (or, following the Hive Up, NewTopco) which would be required to be consolidated in the consolidated accounts of Vodafone (or, following the Hive Up, NewTopco) in accordance with Applicable GAAP.
“Contractual Currency”
has the meaning given to it in Clause 23.1(a) (Currency indemnity).
“Controlled Group”
means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any U.S. Obligor, are treated as a single employer under Section 414(b) or (c) of the U.S. Code.
“Core Jurisdictions”
are member states of the European Union as at 31st May 2003 (being Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the UK), Japan, United States, Australia, New Zealand, Canada and Switzerland and any other states which become members of the European Union after 31st May 2003 provided that Vodafone has notified the Agent in writing of its agreement to their inclusion in this definition of Core Jurisdictions.

4

“Credit Rating Agency”
has the meaning given to it in Clause 8.5 (Margin).
“Default”
means (a) an Event of Default or (b) an event which, with the expiry of any grace period or giving of any notice specified in Clause 18.2 (Non-payment), 18.3 (Breach of other obligations), 18.5 (Cross default), 18.6 (Winding up), 18.8 (Enforcement proceedings) or 18.10 (Similar proceedings) would constitute an Event of Default.
“Default Margin”
has the meaning given to it in Clause 8.3 (Default interest).
“Default Rate”
has the meaning given to it in Clause 8.3 (Default interest).
“Designated Term”
has the meaning given to it in Clause 8.3(a)(ii) (Default interest).
“Discharged Obligations”
has the meaning given to it in Clause 26.4(c)(i) (Procedure for novations).
“Discharged Rights”
has the meaning given to it in Clause 26.4(c)(iii) (Procedure for novations).
“Drawdown Date”
means the date for the making of an Advance.
“ERISA”
means the U.S. Employee Retirement Income Security Act of 1974, as amended (or any successor legislation thereto), and any rule or regulation issued thereunder from time to time in effect.
“EURIBOR”
means in relation to any Advance or unpaid sum in euro:
(a)	the percentage rate per annum of the offered quotation for deposits in euro determined by the Banking Federation of the European Union for a period equal or comparable to the Required Period which appears on Telerate Page 248 at or about 11.00 a.m. Brussels time on the applicable Rate Fixing Day; or
(b)	if the rate cannot be determined under paragraph (a) above, the rate expressed as a percentage to be the arithmetic mean (rounded upwards, if necessary, to the nearest five decimal places) of the respective rates notified to the Agent by each of the Reference Banks (provided at least two Reference Banks are quoting) as the rate at which it is offered deposits in euro and for the Required Period by prime banks in the

5

European interbank market at or about 11.00 a.m. Brussels time on the Rate Fixing Day for such period, and for the purposes of this definition:
(i)	“Required Period” means the Term of such Advance or the period in respect of which EURIBOR falls to be determined in relation to any unpaid sum; and
(ii)	“Telerate Page 248” means the display designated as Page 248 on the Telerate Service (or such other pages as may replace Page 248 on that service or such other service as may be nominated by the Banking Federation of the European Union (including the Reuter's Screen) as the information vendor for the purposes of displaying the Banking Federation of the European Union rates for deposits in euro).
“Event of Default”
means an event specified as such in Clause 18 (Default).
“Existing Commitment”
has the meaning given to it in Clause 16.8(a)(i) (Priority borrowing).
“Existing Lender”
has the meaning given to it in Clause 26.2(a) (Transfers by Lenders).
“Existing Parties”
has the meaning given to it in Clause 26.4(c)(i) (Procedure for novations).
“Facility”
means the facility to draw Revolving Credit Advances referred to in Clause 2.1 (Facilities).
“Facility Office”
means the office(s) notified by a Lender to the Agent:
(a)	on or before the date it becomes a Lender; or
(b)	by not less than five Business Days' notice,
as the office(s) through which it will perform all or any of its obligations under this Agreement.
“Fee Letters”
means each letter:
(a)	dated on or about the date of this Agreement between the Agent and Vodafone; and
(b)	dated on or about the date of this Agreement between the Original Lenders as at the Signing Date and Vodafone; and

6

(c)	(if applicable) entered into between an Additional Lender and Vodafone substantially in the form of Schedule 7,
in each case setting out the amount of various fees referred to in Clause 20.2 (Agent's fee) or 20.3 (Front-end fees).
“Final Maturity Date”
means the last day of the Availability Period.
“Finance Document”
means this Agreement, each Fee Letter, Novation Certificate, Borrower Accession Agreement and Guarantor Accession Agreement and any other document agreed in writing as such by the Agent and Vodafone.
“Finance Party”
means an Arranger, a Lender or the Agent.
“Financial Indebtedness”
means any indebtedness in respect of:
(a)	moneys borrowed or raised by way of loan or redeemable preference shares or in the form of any debenture, bond, note, loan stock, commercial paper or similar instrument;
(b)	any acceptance credit, bill-discounting, note purchase or documentary credit facility;
(c)	any finance lease;
(d)	any receivables purchase, factoring or discounting arrangement under which there is recourse in whole or in part to any member of the Group;
(e)	any other transaction having the commercial effect of a borrowing; and
(f)	any guarantees or other legally binding assurance against financial loss in respect of the indebtedness of any person arising under an obligation falling within (a) to (e) above (but, for the avoidance of doubt, excluding any guarantees in respect of indebtedness falling within (i) to (v) below),
but without double counting and excluding (i) preference shares which are not redeemable on or before the Final Maturity Date, (ii) any convertible or exchangeable debt which must or, at the option of the issuer, may be converted or exchanged without condition (other than the availability of sufficient authorised share capital of the issuer), prior to or upon the date any amount of principal would otherwise fall due in respect of that debt, into equity share capital or preference shares, which in each case are not redeemable on or before the Final Maturity Date, (iii) deferred consideration in respect of the cost of Acquisitions, (iv) obligations of any member of the Group arising under any form of exchangeable, convertible, option or other similar instrument issued by that member of the Group in connection with a transaction the commercial effect of which is to effect the disposal by that member of the Group of shares or partnership or other ownership interests in any other person or entity (whether or not having a separate legal identity), provided that any such instrument may not, on or prior to the Final

7

Maturity Date, be converted (whether by acceleration, maturity or otherwise) into cash or any other instrument constituting or evidencing Financial Indebtedness and (v) for the avoidance of doubt, derivatives primarily entered into to manage currency, credit or interest rate risks or to assist in purchasing or selling shares in any member of the Group or Associated Company or investment of the Group.
“Fitch”
means Fitch Investors Services Inc.
“Group”
means Vodafone and its Consolidated Subsidiaries or, following a Hive Up, NewTopco and its Consolidated Subsidiaries (and “Member of the Group” means any of them).
“Guarantor”
means each of:
(a)	Vodafone; and
(b)	each Additional Guarantor.
“Guarantor Accession Agreement”
means a deed substantially in the form of Part 2 of Schedule 5 or with such amendments as the Agent may approve (such approval not to be unreasonably withheld or delayed) or may reasonably require.
“Hive Up”
means a reorganisation of the Group by way of a scheme of arrangement (other than in an insolvency) or otherwise under which Vodafone becomes a Subsidiary of NewTopco, NewTopco controls (directly or indirectly) all of the voting rights in Vodafone (other than any voting rights in Vodafone held by holders of a class of capital issued by Vodafone, where such voting rights relate only to any variation in the rights attaching to that class of capital issued by Vodafone) and NewTopco becomes the listed ultimate Holding Company of the Group.
“Holding Company”
means in relation to a person, an entity of which that person is a Subsidiary.
“Intermediate Holding Company”
means in relation to Vodafone, an entity (other than NewTopco) which is a subsidiary of NewTopco and of which Vodafone is a Subsidiary.
“Investee Company”
means any company in which any member of the Group holds an investment (by way of an equity shareholding) and which is or would be treated as such under Applicable GAAP.

8

“Joint Venture”
means an entity (which is not a member of the Group) in which any member of the Group holds a long term interest and shares control under a contractual arrangement where each venturer has a veto over policy decisions and which is, or would be, treated as such under Applicable GAAP.
“Lender”
means each Original Lender and each Additional Lender (if any).
“Lender Accession Agreement”
means an agreement substantially in the same form of Part 4 of Schedule 5 or with such amendments as the Agent may approve or may reasonably require.
“LIBOR”
means in relation to any Advance or unpaid sum in Sterling or U.S. Dollars:
(a)	the percentage rate per annum of the offered quotation for deposits in the currency of the relevant Advance or unpaid sum for a period equal or comparable to the Required Period which appears on Telerate Page 3750 at or about 11.00 a.m. on the applicable Rate Fixing Day; or
(b)	if the rate cannot be determined under paragraph (a) above, the rate expressed as a percentage determined by the Agent to be the arithmetic mean (rounded upwards, if necessary, to the nearest five decimal places) of the respective rates notified to the Agent by each of the Reference Banks quoting (provided that at least two Reference Banks are quoting) as the rate at which it is offered deposits in the required currency and for the Required Period by prime banks in the London interbank market at or about 11.00 a.m. on the Rate Fixing Day for such period,
and for the purposes of this definition:
(i)	“Required Period” means the Term of such Advance or the period in respect of which LIBOR falls to be determined in relation to any unpaid sum; and
(ii)	“Telerate Page 3750” means the display designated as Page 3750 on the Telerate Service (or such other pages as may replace page 3750 on that service or such other service as may be nominated by the British Bankers’ Association (including the Reuters Screen) as the information vendor for the purposes of displaying British Bankers’ Association Interest Settlement Rates for deposits in the currency concerned).
“Liquid Resources”
	means a current asset investment held as a readily disposable store of value which can be disposed of by a member of the Group without curtailing or disrupting its business and which is either:
(a)	readily convertible into a known amount of cash at or close to its carrying value; or
(b)	traded in an active market.

9

“Long Term Credit Rating Assigned to Vodafone”
has the meaning given to it in Clause 8.5(d) (Margin).
“Majority Lenders”
means, at any time:
(a)	Lenders whose Commitments aggregate more than 60 per cent. of the Total Commitments; or
(b)	if the Total Commitments have been reduced to zero, Lenders whose Commitments aggregated more than 60 per cent. of the Total Commitments immediately before the reduction.
“Mandatory Cost”
means in relation to an Advance, the percentage rate per annum calculated by the Agent in accordance with Schedule 3.
“Margin”
in relation to an Advance at any time, means the percentage rate per annum determined to be the Margin applicable to that Advance in accordance with Clause 8.5 (Margin).
“Maturity Date”
means the last day of the Term of an Advance.
“Member of the Group”
has the meaning given to it in the definition of Group.
“Moody’s”
means Moody’s Investors’ Service, Inc.
“Multiemployer Plan”
means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which any U.S. Obligor or any member of the Controlled Group has an obligation to contribute.
“Net Debt”
means at any time, Total Gross Borrowings less Available Cash, both at that time. Net Debt for any Ratio Period will be calculated as the aggregate of Net Debt outstanding on the last day of each month during the relevant Ratio Period (as shown in Vodafone’s, or following a Hive Up, NewTopco’s, consolidated management accounts prepared at the end of each month during the relevant Ratio Period) divided by the number of months during the relevant Ratio Period.
“NewTopco”
means a company used for the purposes of a Hive Up.

10

“New GAAP”
has the meaning given to it in Clause 17.3(b) (Information sources).
“New Lender”
has the meaning given to it in Clause 26.2(a) (Transfers by Lenders).
“New York Business Day”
means a day (other than a Saturday or Sunday) on which banks are open for business in New York.
“Novation Certificate”
has the meaning given to it in Clause 26.4(a)(i) (Procedure for novations).
“Obligor”
means each Borrower and each Guarantor.
“Operating Cash Flow”
means, without double counting, total operating profit or loss for continuing operations before taxation, interest and after (i) adding depreciation, (ii) adding amortisation, (iii) deducting the profit or adding the loss on exceptional items which are included in the foregoing, (iv) deducting any gain or adding any loss on disposal of tangible or intangible fixed assets, (v) adjusting for movements in working capital (being movements in stock, creditors, provisions and debtors) and (vi) excluding exceptional items.
“Optional Currency”
means, in relation to any Advance or proposed Advance, Sterling or euro.
“Original Dollar Amount”
means:
(a)	the principal amount of an Advance denominated in U.S. Dollars; or
(b)	the principal amount of an Advance denominated in any other currency, translated into U.S. Dollars on the basis of the Agent’s Spot Rate of Exchange on the date of receipt by the Agent of the Request for that Advance.
“Original Lender”
means a financial institution or other entity listed in Part 1 or Part 2 of Schedule 1 or a transferee, successor or permitted assignee of such financial institution or other entity which is for the time being participating in the Facility.
“Overdue Amount”
has the meaning given to it in Clause 8.3(a) (Default interest).

11

“Participating Member State”
means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.
“Party”
means a party to this Agreement.
“PBGC”
means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor.
“Permitted Security Interest”
means:
(a)	any Security Interest arising out of retention of title provisions or created or subsisting over documents of title, insurance policies (including any export credit agencies’ agreements) and sale contracts in relation to commercial goods in each case created or made in the ordinary course of business to secure the purchase price of such goods or loans to finance such purchase price; or
(b)	any Security Interest over any assets acquired by a member of the Restricted Group after 31st May, 2004 (and/or over the assets of any person that becomes a member of the Restricted Group after 31st May, 2004) provided that:
	(i)	any such Security Interest is in existence before such acquisition or before such person becomes a member of the Restricted Group and is not created in contemplation of such acquisition or such person becoming a member of the Restricted Group; and
	(ii)	to the extent that the aggregate principal amount secured by such Security Interest upon such acquisition or such person becoming a member of the Restricted Group thereafter exceeds (measured in the same currency) the amount available to be drawn (assuming all drawdown conditions will be met) under the relevant commitment existing at the time of such acquisition or such person becoming a member of the Restricted Group, such Security Interest shall not fall within this paragraph (b);
	for the purposes of this paragraph (b) Restricted Group shall not include any companies which have become members of the Restricted Group due to the expansion of the definition of Core Jurisdiction to include any other states which become members of the European Union after 31st May 2003; or
(c)	any Security Interest created for the purpose of securing obligations of Vodafone or any member of the Restricted Group under any agreement (including, without limitation, any agreement under Section 106 of the Town and Country Planning Act 1990 or Section 111 of the Local Government Act 1972) entered into with a local or other public authority and related to the development or maintenance of property owned by Vodafone or any member of the Restricted Group; or

12

(d)	any Security Interest created on or subsisting over any asset held in Clearstream Banking, société anonyme or Euroclear Bank S.A/N.V. as operator of the Euroclear System, or any other securities depository or any clearing house pursuant to the standard terms and procedures of the relevant clearing house applicable in the normal course of trading; or
(e)	any Security Interest which arises in connection with any cash management, set-off or netting arrangements made between banks or financial institutions and any member(s) of the Restricted Group in the ordinary course of business; or
(f)	any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as pre-judgment security for costs or expenses where any member of the Restricted Group is prosecuting or defending such action in the bona fide interest of the Group; or
(g)	any Security Interest created pursuant to any order of attachment, distraint, garnishee order, arrestment, adjudication or injunction or interdict restraining disposal of assets or similar legal process arising in connection with pre-judgment court proceedings; or
(h)	any Security Interest which arises by operation of law in the ordinary course of trading and securing an amount not more than 45 days overdue or which is being contested in good faith on the basis of favourable legal advice; or
(i)	any Security Interest over shares in entities which are not members of the Restricted Group which do not secure Financial Indebtedness of the Restricted Group (or over shares and/or other ownership interests in and/or loans to entities which are Project Finance Subsidiaries to secure Project Finance Indebtedness); or
(j)	to the extent they constitute Security Interests (or to the extent that the relevant transaction includes the creation of any Security Interest over the assets which are the subject of the finance lease), finance leases in respect of existing or future assets; or
(k)	any Security Interest comprising a right of set-off which arises by operation of law or by agreement having substantially the same effect; or
(l)	any Security Interest for taxes, assessments or charges not yet due or that are being contested in good faith by appropriate proceedings and (unless the amount thereof is not material to the Group's consolidated financial condition) for which adequate reserves are being maintained (in accordance with generally accepted accounting principles); or
(m)	deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance; or
(n)	any Security Interest created with the prior written consent of the Majority Lenders; or
(o)	any Security Interest over deposits of cash or cash equivalent investments securing (directly or in directly) Financial Indebtedness under (i) finance or structured tax lease arrangements as described in paragraph (b) of Clause 16.8 (Priority borrowing) or (ii) Back to Back Loans; or

13

(p)	any Security Interest securing Project Finance Indebtedness over the assets (or the income, cash flow or other proceeds deriving from the assets) which are the subject of that Project Finance Indebtedness; or
(q)	any Security Interest (a “Substitute Security Interest”) which replaces any other Security Interest permitted under (a) to (p) above inclusive and which secures an amount not exceeding the principal amount secured by such permitted Security Interest (or, in the case of paragraph (b) above, the amount available to be drawn, assuming all drawdown conditions will be met) at the time it is replaced together with any interest accruing on such amounts from the date such Substitute Security Interest is created or arises and any related fees or expenses provided that the existing Security Interest to be replaced is released and all amounts secured thereby are paid or otherwise discharged in full at or prior to the time of such Substitute Security Interest being created or arising; or
(r)	any Security Interest over the shares or other interests as described in paragraph (iv) of the last paragraph of the definition of Financial Indebtedness securing indebtedness of a kind referred to in that paragraph; or
(s)	any Security Interest created (i) between Obligors (including by an Obligor to a member of the Restricted Group which concurrently becomes an Obligor) or (ii) by a member of the Restricted Group which is not an Obligor in favour of an Obligor or to another member of the Restricted Group; or
(t)	any Security Interest over Available Cash created in the ordinary course of business to secure obligations, liabilities or performance criteria in relation to any mobile telecommunications licence where such Security Interest is required to be in compliance with the requirements of the relevant telecommunications regulator or an associated governmental or regulatory body; or
(u)	any Security Interest over Available Cash created to defease (directly or indirectly) Financial Indebtedness in the form of debentures, bonds, notes, loan stock, or other similar instruments issued by a Consolidated Subsidiary where (A) such Financial Indebtedness was either in existence at the Signing Date or (B) if the Subsidiary became a Consolidated Subsidiary after the Signing Date such Financial Indebtedness existed at the time that the Consolidated Subsidiary became a part of the Group and was not created in contemplation of that Consolidated Subsidiary becoming part of the Group; or
(v)	any other Security Interest (in addition to those listed in (a) to (u) above) where the aggregate principal amount secured by all such Security Interests does not exceed £1,500,000,000 or its equivalent.
“Plan”
means an “employee benefit plan” as defined in Section 3(3) of ERISA.
“Principal Subsidiary”
means, from the date that each notice is given by Vodafone to the Agent pursuant to Clause 16.2(c) or, as the case may be, 16.2(d) the four Consolidated Subsidiaries which are members of the Restricted Group whose revenues are primarily generated by operations licensed by telecommunications authorities in Core Jurisdictions (excluding for this purpose any Subsidiaries whose principal activity is to act as a Holding Company of other

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Subsidiaries) that had the largest, if positive or smallest if negative Operating Cash Flow in the previous financial year of Vodafone or, following the Reorganisation Date, NewTopco.

Until the first notice is given by Vodafone to the Agent (in respect of the financial year ended 31st March 2005), the Principal Subsidiaries are Vodafone Limited Vodafone D2 GmbH, Vodafone Omnitel N.V. and Vodafone K.K. being Vodafone's principal subsidiaries operating in UK, Germany, Italy and Japan, respectively.

For the purposes of this definition, until such new notice is given by Vodafone to the Agent pursuant to Clause 16.2(c) or, as the case may be, 16.2(d), if any Principal Subsidiary sells, transfers, merges into or with or otherwise disposes of the majority of its undertakings or assets whether by a single transaction or a number of related transactions (unless such Principal Subsidiary is the surviving entity following such merger) (the “Seller”) to any member of the Restricted Group (the “Purchaser”), then from the date of the relevant sale, transfer, merger or disposal the Purchaser shall be deemed to become a Principal Subsidiary and the Seller shall no longer be deemed to be a Principal Subsidiary.

On the date of each notice given by Vodafone (or as the case may be, NewTopco) to the Agent pursuant to Clause 16.2(c) or, as the case may be, 16.2(d), any Subsidiary which is identified as a Principal Subsidiary in the relevant notice, which was not identified as such in the immediately preceding notice, shall be deemed to immediately replace any Subsidiary which was a Principal Subsidiary immediately prior to the delivery of the notice and which is not named in such notice.

“Project Finance Indebtedness”

means any Financial Indebtedness which finances or otherwise relates to the acquisition, development, ownership and/or operation of an asset or combination of assets whether directly or indirectly, where the Financial Indebtedness is incurred pursuant to facilities available prior to the date the relevant entity becomes a member of the Group (and not created in contemplation of the acquisition):

(a)	which is incurred by a Project Finance Subsidiary; or
(b)	in respect of which the person or persons to whom such borrowing is or may be owed by the relevant debtor (whether or not a member of the Group) has or have no recourse whatsoever to any member of the Group (other than to a Project Finance Subsidiary) for any payment or repayment in respect thereof other than:
	(i)	recourse to such debtor for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from such asset or assets; and/or
	(ii)	recourse to such debtor for the purpose only of enabling amounts to be claimed in respect of such Financial Indebtedness in an enforcement of any Security Interest given by such debtor over such asset or assets or the income, cash flow or other proceeds derivin g from the asset (or given by any shareholder or the like in the debtor over its shares and/or other ownership interest in and/or loans to the debtor) to secure such Financial Indebtedness or any recourse referred to in paragraph (iii) below, provided that:
		(A)	the extent of such recourse to such debtor is limited solely to the amount of any recoveries made on any such enforcement; and

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		(B)	such person or persons are not entitled, by virtue of any right or claim arising out of or in connection with such Financial Indebtedness, to commence proceedings for the winding up or dissolution of the debtor or to appoint or procure the appointment of any receiver, trustee or similar person or officer in respect of the debtor or any of its assets (save only for the assets the subject of that Security Interest); and/or
	(iii)	recourse:
		(A)	to such debtor generally, or directly or indirectly to a member of the Group, under any form of assurance, undertaking or support which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specific way) for breach of an obligation (not being a payment obligation or any obligation to procure payment by another or an indemnity in respect thereof or any obligation to comply or procure compliance by another with any financial ratios or other tests of financial condition) by the person against whom such recourse is available; and/or
		(B)	to shares and/or other ownership interest in and/or loans to and/or the assets of such debtor and/or any Project Finance Subsidiary owned by a member of the Group; or
(c)	which the Majority Lenders have agreed in writing to treat as Project Finance Indebtedness

“Project Finance Subsidiary”
means any member of the Group which becomes a member of the Group after the Signing Date:
(a)	whose principal assets and business are constituted by the ownership, acquisition, development and/or operation of any asset or combination of assets whether directly or indirectly; and
(b)	none of whose Financial Indebtedness in respect of the financing of the ownership, acquisition, development and/or operation of any such asset benefits from any recourse whatsoever (including, without limitation, any obligation to subscribe for equity or provide loans) to any member of the Group (other than such person or another Project Finance Subsidiary) in respect of any payment or repayment in respect thereof, except as expressly referred to in paragraph (b)(iii) of the definit ion of “Project Finance Indebtedness”; and
(c)	which has been designated as such by Vodafone by written notice to the Agent.
“Qualifying Financial Institution”
means any bank or financial institution that as part of its business generally receives deposits or other repayable funds and grants credits for its own account.

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“Qualifying Lender”
means a Lender which is beneficially entitled to interest payable to that Lender in respect of an Advance and is:
(a)	a Lender
	(i)	which is a bank (as defined for the purpose of Section 349 of the Taxes Act) making an Advance under this Agreement; or
	(ii)	in respect of an Advance made under this Agreement by a person that was a bank (as defined for the purpose of Section 349 of the Taxes Act) at the time that that Advance was made,
	and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that Advance at the time payments are made; or
(b)	a Treaty Lender.
“Rate Fixing Day”
means:

(a)	the Drawdown Date for an Advance denominated in Sterling; or
(b)	the second TARGET Day before the Drawdown Date for an Advance denominated in euro; or
(c)	the second Business Day before the Drawdown Date for an Advance denominated in U.S. Dollars,
or such other day as the Agent, after consultation with Vodafone and the Lenders, may designate as market practice in the relevant interbank market for leading banks to give quotations in the relevant currency for delivery on the relevant Drawdown Date.
“Ratio Period”
has the meaning given to it in Clause 17.2 (Calculation times and periods).
“Recovering Finance Party”
has the meaning given to it in Clause 29.1 (Redistribution).
“Recovery”
has the meaning given to it in Clause 29.1 (Redistribution).
“Redistribution”
has the meaning given to it in Clause 29.1(c) (Redistribution).

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“Reference Banks”
means, subject to Clause 26.8 (Reference Banks), the principal London offices of BNP Paribas, Barclays Bank PLC, Citibank, N.A. and The Royal Bank of Scotland Plc.
“Reference Bond”
has the meaning given to it in Clause 8.5(d) (Margin).
“Relevant Tax”
means any tax imposed or levied by or in (or by any political sub-division or taxing authority of any of the following):
(a)	the UK;
(b)	the United States; or
(c)	any other jurisdiction in or through which any payment under the Finance Documents is made.
“Reportable Event”
means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the U.S. Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412 (d) of the U.S. Code.
“Reorganisation Date”
means the date NewTopco or any other Intermediate Holding Company acquires any shares or assets (other than the shares in Vodafone acquired pursuant to the Hive Up) in circumstances where the aggregate market value of the assets of Vodafone on a consolidated basis (as determined by Vodafone (acting reasonably)) immediately following the acquisition is an amount which represents 95 per cent. or less of the aggregate market value of the assets of NewTopco on a consolidated basis (as determined by Vodafone (acting reasonably)) at that time.
“Request”
means a request made by a Borrower to utilise a Facility, substantially in the form of Schedule 4 (or in such other form as may be agreed by the Agent and Vodafone).
“Requested Amount”
means the amount requested in a Request.
“Reserve Asset Costs”
means in relation to any Advance for any period:

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(a)	for any Lender lending from a Facility Office in the United Kingdom, the Mandatory Cost (to the extent notified by any Lender in accordance with Clause 8.1 (Interest rate for all Advances) as applicable to that Advance); or
(b)	for any Lender lending from a Facility Office in a Participating Member State the cost, if any, notified by any Lender to the Agent as the cost (expressed as a percentage of that Lender's participation made in all Advances made from that Facility Office) to it of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.
“Restricted Group“
means Vodafone, NewTopco (following the Reorganisation Date) and any Consolidated Subsidiary (other than a Project Finance Subsidiary) of Vodafone or, following the Reorganisation Date, NewTopco:
(a)	whose principal operations or assets are located in a Core Jurisdiction; and/or
(b)	whose revenues are primarily generated by operations licensed by telecommunications authorities in Core Jurisdictions,
but excludes any Subsidiary whose principal business is satellite telecommunications, cable or fixed line telecommunications.
“Revolving Credit Advance”
means an advance made to a Borrower by the Revolving Credit Lenders under the Revolving Credit Facility.
“Revolving Credit Commitment”
means:
(a)	in respect of an Original Lender, the amount in U.S. Dollars set opposite the name of that Lender in Part 1 of Schedule 1; and
(b)	in respect of an Additional Lender, the amount in U.S. Dollars set out as a Revolving Credit Commitment in the relevant Lender Accession Agreement,
in each case to the extent not transferred, cancelled or reduced under or in accordance with this Agreement.
“Revolving Credit Facility”
means the multicurrency revolving credit facility referred to in a Clause 2.1 (Facilities).
“Revolving Credit Lender”
means, subject to Clause 26.2 (Transfers by Lenders), a Lender listed in Part 1 of Schedule 1 in its capacity as a participant in the Revolving Credit Facility and/or an Additional Lender.
“Rollover Advance”
means any Advance made during the Availability Period which is drawn down to refinance in whole or in part any outstanding Advance where, after making and applying the proceeds of

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that Advance, the aggregate principal amount outstanding under the Revolving Credit Facility is not greater than the aggregate amount outstanding under that Facility immediately prior to that Advance being made
“S&P”
means Standard & Poor's Corporation.
“Security Interest”
means any mortgage, charge, assignment by way of security, pledge, lien or other security interest securing any obligation of any person.
“Signing Date”
means the date of this Agreement.
“Single Employer Plan”
means a Plan which is maintained by any U.S. Obligor or any member of the Controlled Group for employees of Vodafone or any member of the Controlled Group.
“Subsidiary”
means:
(a)	a subsidiary within the meaning of Section 736 of the Companies Act 1985 (as amended by Section 144 of the Companies Act 1989) as in force at the Signing Date; and
(b)	unless the context otherwise requires, a subsidiary undertaking within the meaning of Section 258 of the Companies Act 1985 (as inserted by Section 21 of the Companies Act 1989) as in force at the Signing Date.
“Substitute Security Interest”
has the meaning given to it in the definition of Permitted Security Interest, sub clause (q).
“TARGET Day”
means a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is operating.
“Tax Credit”
has the meaning given to it in Clause 10.6 (Refund of Tax Credits).
“Tax on Overall Net Income”
in relation to a Finance Party, means any tax on the overall net income, profits or gains of that Finance Party or any of its Holding Companies (or the overall net income, profits or gains of a division or branch of that Finance Party or any of its Holding Companies).

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“Tax Payment”

has the meaning given to it in Clause 10.6 (Refund of Tax Credits).

“Taxes Act” means the Income and Corporation Taxes Act 1988.

“Term”

means the period selected by a Borrower in a Request for which the relevant Advance is to be outstanding.

“Total Commitments”

means the aggregate for the time being of the Revolving Credit Commitments, being, at the date of this Agreement, U.S.$4,853,333,331 or as may be increased pursuant to paragraph (b) of Clause 2.7 (Additional Lenders) up to a maximum of U.S.$10,000,000,000.

“Total Gross Borrowings”

means at any time, the aggregate outstanding principal amount of Financial Indebtedness of the Group at that time plus deferred consideration in respect of the cost of Acquisitions.

“Treaty Lender”

means a Lender which is (i) resident (as such term is defined in the appropriate double taxation treaty) in a country with which the United Kingdom has an appropriate double taxation treaty under which residents of that country are entitled to complete exemption from United Kingdom tax on interest and is entitled to apply under the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 to have interest paid to its Facility Office without withholding or deduction for or on account of United Kingdom taxation; and (ii) does not carry on business in the United Kingdom through a permanent establishment with which the investments under this Agreement in respect of which the interest is paid are effectively connected; and for this purpose “double taxation treaty” means any convention or agreement between the government of the United Kin gdom and any other government for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains.

“UK” or “United Kingdom”

means the United Kingdom of Great Britain and Northern Ireland (but excludin g, for the avoidance of doubt, the Channel Islands).

“United States”

means the United States of America.

“U.S. Code”

means the United States Internal Revenue Code of 1986 (as amended).

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	“U.S. Obligor”
	means any Obligor which is incorporated in the United States or any State thereof (including the District of Columbia).
	“U.S. Tax Obligor”
	means any Obligor which makes a payment of interest, the receipt of which would be considered to be U.S. source income under Section 861 of the U.S. Code.
	“2002 Facility”
	has the meaning given to it in Clause 4.1(b) .
	“5 Year Facility”
	means the U.S.$5,525,000,000 multi-currency 5 year revolving credit facility dated 24 June 2004 and made between the Parties to this Agreement, as such facility may be replaced or refinanced from time to time provided that the amount of such replacement facility or refinancing is not less than US$3,000,000,000 and there are at least five lenders under such facility.
1.2	Construction
(a)	In this Agreement, unless the contrary intention appears, a reference to:
	(i)	“agreed form” means, in relation to any document, such document in a form previously agreed in writing by or on behalf of the Agent and Vodafone;
		“assets” of any person includes all or any part of that person's business, operations, undertaking, property, assets, revenues (including any right to receive revenues) and uncalled capital;
		an “authorisation” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration and notarisation;
		“Barclays Capital” means Barclays Capital, the investment banking division of Barclays Bank PLC;
		a “finance lease” has the meaning given to it in SSAP 21 as in effect at the Signing Date;
		“indebtedness” is a reference to any obligation for the payment or repayment of money, whether as principal or surety and whether present or future, actual or contingent;
		a “month” is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that, if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that month;
		a “regulation” includes any regulation, rule, official directive, request or guideline (in each case, whether or not having the force of law, but if not having the force of law, is generally complied with by the persons to whom it is addressed) of any

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		governmental or supranational body, agency, department or regulatory, self-regulatory authority or organisation; and
		a reference to the currency of a country is to the lawful currency of that country for the time being, “£” and “Sterling” is a reference to the lawful currency of the United Kingdom for the time being, “U.S.$” and “U.S. Dollars” is a reference to the lawful currency of the United States for the time being and “euro ” and “€” is a reference to the lawful currency of those member states of the European Communities that adopt or have adopted the euro under the legislation of the European Community for Economic and Monetary Union;
	(ii)	a provision of a law is a reference to that provision as amended or re-enacted;
	(iii)	a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement;
	(iv)	a person includes its successors, transferees and assigns;
	(v)	a Finance Document or another document is a reference to that Finance Document or that other document as novated or, with the approval of Vodafone, amended or supplemented; and
	(vi)	a time of day is a reference to London time.
(b)	Unless the contrary intention appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(c)	The index to and the headings in this Agreement are for convenience only and are to be ignored in construing this Agreement.
(d)	(i)	Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999;
	(ii)	Notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability under) or termination of that Finance Document.
2.	THE FACILITIES
2.1	Facilities
	Subject to the terms of this Agreement, the Lenders grant to the Borrowers a committed multicurrency revolving facility under which the Lenders will, when requested by a Borrower, make cash advances in U.S. Dollars or Optional Currencies to that Borrower on a revolving basis during the Availability Period.
2.2	Overall facility limits
(a)	The aggregate Original Dollar Amount of all outstanding Advances under the Revolving Credit Facility, shall not at any time exceed the Total Commitments at that time.

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(b)	The aggregate Original Dollar Amount of the participations of a Lender in Revolving Credit Advances shall not at any time exceed that Lender’s Revolving Credit Commitment at that time.
(c)	If, in respect of any Revolving Credit Advance, the operation of Clause 5.3 (Amount of each Lender’s participation in an Advance) would otherwise have caused a Lender (the “Affected Lender”) to breach sub-paragraph (b) above then:
	(i)	each Affected Lender will participate in the relevant Revolving Credit Advance only to the extent that the Original Dollar Amount of its participation in that Revolving Credit Advance (when aggregated with the Original Dollar Amount of its participations in other outstanding Revolving Credit Advances) will not exceed its Revolving Credit Commitment; and
	(ii)	each other non-Affected Lender’s participation in that Revolving Credit Advance will be recalculated in accordance with Clause 5.3 (Amount of each Lender’s participation in an Advance), but, for the purpose of the recalculation, the Affected Lenders’ Revolving Credit Commitments will be deducted from the Total Commitments and the amount of the Affected Lenders’ participations in that Revolving Credit Advance (if any) will be deducted from the requested amount of the Revolving Credit Advance.
2.3	Number of Requests and Advances
(a)	Unless the Agent agrees otherwise, no more than one Request may be delivered on any one day but that Request may specify any number and type of Advances from the Revolving Credit Facility.
(b)	Unless the Agent agrees otherwise, no more than 10 Advances may be outstanding at any one time.
2.4	Nature of rights and obligations
(a)	The obligations of a Finance Party and each Obligor under the Finance Documents are several. Failure of a Finance Party or an Obligor to carry out those obligations does not relieve any other Party of its obligations under the Finance Documents. No Finance Party or Obligor is responsible for the obligations of any other Finance Party or Obligor under the Finance Documents save and to the extent that the relevant obligations are guaranteed by another Obligor.
(b)	The rights of a Finance Party under the Finance Documents are divided rights. A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights.
2.5	Vodafone as Obligors’ agent
	Each Obligor:
	(a)	irrevocably authorises and instructs Vodafone to give and receive as agent on its behalf all notices (including Requests) and sign all documents in connection with the Finance Documents on its behalf (including but not limited to amendments and variations and execution of any new Finance Documents) and take such other action as may be necessary or desirable under or in connection with the Finance Documents; and

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	(b)	confirms that it will be bound by any action taken by Vodafone under or in connection with the Finance Documents.
2.6	Actions of Vodafone as Obligors’ agent
	The respective liabilities of each of the Obligors under the Finance Documents shall not be in any way affected by:
	(a)	any irregularity (or purported irregularity) in any act done by or any failure (or purported failure) by Vodafone; or
	(b)	Vodafone acting (or purporting to act) in any respect outside any authority conferred upon it by any Obligor; or
	(c)	the failure (or purported failure) by or inability (or purported inability) of Vodafone to inform any Obligor of receipt by it of any notification under this Agreement.
2.7	Additional Lenders
(a)	Any financial institution or other entity may, subject to the terms of this Agreement, become an Additional Lender. The relevant financial institution or other entity will become an Additional Lender on the date specified in a Lender Accession Agreement which has been delivered to the Agent duly completed and executed by that financial institution or other entity and countersigned by Vodafone on behalf of itself and each other Obligor.
(b)	Upon the relevant financial institution or other entity becoming an Additional Lender, the Total Commitments shall be increased (subject to the Total Commitments being a maximum of  U.S.$10,000,000,000 and the Combined Commitments being a maximum of  U.S.$20,000,000,000) by the amount set out in the relevant Lender Accession Agreement as that Additional Lender’s Revolving Credit Commitment.
(c)	Each Additional Lender will participate only in Advances with a Drawdown Date following the date on which it became an Additional Lender and only then if:
	(i)	it has become an Additional Lender in time to receive sufficient notice of the relevant Advance from the Agent pursuant to Clause 5.4 (Notification of the Lenders); and
	(ii)	immediately before such an Advance is to be made either (A) no Advances are or will be outstanding or (B) all outstanding Advances at that time are or will be immediately repaid or prepaid in full in accordance with the terms of this Agreement.
(d)	On and from the Drawdown Date on which the Additional Lender makes an Advance under paragraph (c) above, the Additional Lender shall participate in each new Revolving Credit Advance in accordance with Clause 5.3 (Amount of each Lender’s participation in an Advance).
(e)	The execution by Vodafone of a Lender Accession Agreement constitutes confirmation by each Guarantor that its obligations under Clause 14 (Guarantee) shall continue unaffected except that those obligations shall extend to the Total Commitments as increased by the addition of the relevant Additional Lender’s Revolving Credit Commitment and shall be owed to each Finance Party including the relevant Additional Lender.

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3.	PURPOSE
3.1	Purpose
	Each Advance will be applied in or towards providing support for the Group’s continuing commercial paper programmes and for general corporate purposes of the Group including, but not limited to, Acquisitions.
3.2	No monitoring
	Without affecting the obligations of any Borrower in any way, no Finance Party is bound to monitor or verify the application of the proceeds of any Advance.
4.	CONDITIONS PRECEDENT
4.1	Initial conditions precedent
	The obligations of each Finance Party to any Borrower under this Agreement are subject to the conditions precedent that:
	(a)	the Agent has notified Vodafone and the Lenders that it has received all of the documents set out in Part 1 of Schedule 2 in the agreed form or such other form and substance satisfactory to the Agent. The Agent will give such notice of receipt within two Business Days after receiving the relevant documents and finding them in form and substance satisfactory to it; and
	(b)	the Agent confirms on or prior to the Signing Date (i) the U.S.$. 10,650,000,000 existing revolving credit facility agreement dated 27th June 2002 and subsequently increased to US$11,025,000,000 on 26 July 2002 (the “2002 Facility”) between, among others, Vodafone Group Plc, the arrangers and lenders identified therein and The Royal Bank of Scotland plc as Agent and U.S. Swingline Agent has been cancelled or the Availability Period (as defined in the 2002 Facility) thereunder has expired and no Request pursuant to clause 6.1(b) (Repayment) of the 2002 Facility for a Term-out Advance (as such capitalised terms are defined in the 2002 Facility) has been made and (ii) all amounts outstanding under the 2002 Facility have been repaid.
4.2	Conditions to all drawdowns and rollovers
	The obligations of each Lender to participate in any Advance (other than a Rollover Advance) are subject to the further conditions precedent that on the date of the Request for the Advance (if applicable) and on the date on which the relevant amount is to be drawn down:
	(a)	the representations and warranties in Clause 15 (Representations and warranties) are correct and will be correct immediately after the relevant Advance or amount is drawn down in each case in all material respects; and
	(b)	no Default has occurred and is continuing or would result from drawdown of the relevant Advance or amount provided that, for the period of 12 months commencing on the Signing Date in relation to a drawdown of any Advance, an event (other than any event specified in Clauses 16.4 (Notification of Default), 16.9 (Disposals) or 16.10 (Restrictions on Acquisitions)) which, with the expiry of any grace period or giving of any notice specified in Clause 18.3(b) (Breach of other obligations) would

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	constitute an Event of Default under Clause 18.3(b) (Breach of other obligations), shall not, for the purposes of this Clause 4.2 (b) constitute a Default.
5.	ADVANCES
5.1	Receipt of Requests
(a)	A Borrower may borrow Advances under the Revolving Credit Facility if the Agent receives, not later than 5.00 p.m. on the third Business Day before the proposed Drawdown Date, or, in the case of an Advance in Sterling, not later than 5.00 p.m. on the Business Day before the proposed Drawdown Date, a duly completed Request.
5.2	Completion of Requests for Revolving Credit Advances
	A Request for a Revolving Credit Advance will not be regarded as having been duly completed unless:
	(a)		the Drawdown Date is a Business Day falling during the Availability Period;
	(b)		only one currency is specified for each separate Advance and the Requested Amount for each separate Advance is in a minimum amount:
		(i)	if in euro, of € 25,000,000;
		(ii)	if in Sterling, of £20,000,000; or
		(iii)	if in U.S. Dollars, of U.S.$25,000,000,
		or, in any such case:
		(A)	if less, is in an amount equal to the unutilised portion of the Total Commitments; or
		(B)	such other amount as Vodafone and the Agent may agree;
	(c)	only one Term for each separate Advance is specified which does not overrun the Final Maturity Date and is a period of 7 days, one month, two, three (or such comparable period as the Borrower may adopt to reflect international futures exchange settlement dates) or six months (or such other period as may be agreed by Vodafone and (if not more than six months) the Agent or (if more than six months) all of the Lenders); and
	(d)	the payment instructions comply with Clause 9.1 (Place of payment).
5.3	Amount of each Lender’s participation in an Advance
	The amount of a Lender’s participation in an Advance will be the proportion of the Requested Amount which its Commitment bears to the Total Commitments on the date of receipt of the relevant Request to reflect the operation of Clause 2.2(c) (Overall facility limits).
5.4	Notification of the Lenders
	The Agent shall promptly notify each Lender of the details of the requested Advance and the amount of its participation in such Advance.

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5.5.	Payment of proceeds
	Subject to the terms of this Agreement, each Lender shall make its participation in an Advance available to the Agent for the Borrower concerned for value on the relevant Drawdown Date.
6.	REPAYMENT
6.1	Repayment of Revolving Credit Advances
	Each Borrower shall repay each Revolving Credit Advance made to it in full on its Maturity Date to the Agent for the Lenders, but since the Revolving Credit Facility is available on a revolving basis during the Availability Period amounts repaid may be reborrowed subject to the terms of this Agreement.
6.2.	Final Maturity Date
	No Revolving Credit Advance may be outstanding after the Final Maturity Date.
7.	PREPAYMENT AND CANCELLATION
7.1.	Automatic cancellation of Total Commitments
(a)	The Revolving Credit Commitments of each Lender shall be automatically cancelled at the close of business in London on the Final Maturity Date.
7.2.	Voluntary cancellation
(a)	Vodafone may by giving not less than one Business Day's prior written notice to the Agent, cancel the unutilised portion of the Total Commitments in whole or in part (but, if in part, in an aggregate minimum amount of U.S.$100,000,000) in such proportions as Vodafone may designate in the notice of cancellation. Any cancellation in part shall be applied against the Revolving Credit Commitment of each Lender pro rata.
7.3	Voluntary prepayment
(a)	Any Borrower may by giving not less than five Business Days' prior written notice to the Agent, prepay the whole or any part of the Revolving Credit Advances (but, if in part, in an aggregate minimum Original Dollar Amount, taking all prepayments made by all the Borrowers on the same day together, of U.S.$100,000,000).
(b)	Any voluntary prepayment in part made under paragraph (a) above will be applied against all the Revolving Advances pro rata (or against such Revolving Credit Advances as Vodafone (or the relevant Borrower) may designate in the notice of prepayment).
7.4.	Change of Control
	If control of Vodafone (other than as a result of a Hive Up) or, following a Hive Up, NewTopco, passes to any person acting either individually or in concert (a “Change of Control”):
	(a)	Vodafone shall, promptly upon becoming aware thereof, notify the Agent who shall inform the Lenders;
	(b)	any Lender may, if it determines that as a result of the Change of Control:

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		(i)	the level of its exposure to Vodafone, NewTopco and/or the entity which acquires control of Vodafone or NewTopco, as the case may be is unacceptably high in each case in the sole opinion of the Lender; or
		(ii)	it no longer wishes (in its sole discretion and acting in good faith) to continue lending to Vodafone or NewTopco, as the case may be (whether for relationship, internal policy or any other reason);
		propose to Vodafone (through the Agent) the revised terms (if any) which it requires in order to continue to participate in the Facilities; and
	(c)	if those revised terms have not been agreed with that Lender (or that Lender is not prepared, for one or more of the reasons set out in paragraph (b)(i) or (ii) above, to continue on any terms) within 30 days of the date of notification in paragraph (a) above (or such longer period as that Lender may agree in writing) then on expiry of 30 days from the date of notification in paragraph (a) above that Lender may by notice to the Agent (which shall promptly inform Vodafone) cancel the whole (but not part only) of such Lender's Commitments and following service of such notice:
		(i)	such Lender's Commitments shall be cancelled on the date of service of the notice or as specified in it; and
		(ii)	all such Lender's outstanding Advances shall be repaid or prepaid on the last day of the then current Term applicable thereto, and no amount may be outstanding to such Lender thereafter.
	For the purposes of this Clause 7.4, “control” has the meaning given to it in relation to a body corporate by Section 840 of the Taxes Act.
7.5	Right of prepayment and cancellation
	If:
	(a)	any Borrower is required to pay or is notified by any Lender in writing that it will be required to pay any amount to a Lender under Clause 10 (Taxes) or Clause 12 (Increased Costs); or
	(b)	if circumstances exist such that a Borrower will be required to pay any amount to a Lender under Clause 10 (Taxes); or
	(c)	any Lender notifies the Agent pursuant to Clause 8.1(c) (Interest Rate for all Advances) that they incur Reserve Asset Costs of the type referred to under paragraph (b) of the definition thereof,
	Vodafone may, whilst (in the case of paragraphs (a) and (b) above) the circumstances giving rise or which will give rise to the requirement continue or, (in the case of paragraph (c) above) such Reserve Asset Costs are greater than zero, serve a notice of prepayment and cancellation on that Lender through the Agent. On the date falling five Business Days after the date of service of the notice:
	(i)	each Borrower will prepay the participations of that Lender in all outstanding Advances made to that Borrower; and

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	(ii)	the Lender's Commitments shall be permanently cancelled on the date of service of the notice.
7.6.	Miscellaneous provisions
(a)	Any notice of prepayment and/or cancellation under this Agreement is irrevocable. The Agent shall notify the Lenders promptly of receipt of any such notice.
(b)	All prepayments under this Agreement shall be made together with accrued interest on the amount prepaid and any other amounts due under this Agreement in respect of that prepayment (including, but not limited to, any amounts payable under Clause 23.2(c) (Other indemnities) if not made on the Maturity Date of the relevant Advance.
(c)	No prepayment or cancellation is permitted except in accordance with the express terms of this Agreement.
(d)	Subject to the provisions of this Agreement, any amount prepaid in respect of the Revolving Credit Facility during the Availability Period may be reborrowed. No amount of the Total Commitments, cancelled under this Agreement may subsequently be reinstated.
8.	INTEREST
8.1.	Interest rate for all Advances
(a)	The rate of interest on each Advance for its Term, is the rate per annum determined by the Agent to be the aggregate of:
	(i)	the applicable Margin;
	(ii)	LIBOR or, in the case of an Advance denominated in euro, EURIBOR; and
	(iii)	Reserve Asset Costs (if any).
(b)	In this Agreement:
	(i)	Reserve Asset Costs for an Advance for any Term will be calculated only on that portion of that Advance owed to Lenders who have notified the Agent that they incur the relevant Reserve Asset Costs in relation to Advances (and, in the case of Mandatory Costs, supplied the information required under paragraph 6 and 7 of Schedule 3);
	(ii)	a Lender will only be entitled to Reserve Asset Costs if it has given a notification to the Agent as contemplated in sub paragraph (i) above; and
	(iii)	any amounts payable pursuant to paragraph (b) of the definition of Reserve Asset Costs shall be expressed as a percentage rate per annum for the relevant Term.
8.2.	Due dates
	Except as otherwise provided in this Agreement, accrued interest on each Advance is payable by the relevant Borrower on its Maturity Date and also, in the case of any Advance with a Term longer than six months, at six monthly intervals after its Drawdown Date for so long as the Term is outstanding.

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8.3.	Default interest
(a)	If a Borrower fails to pay any amount payable by it under this Agreement when due (an “Overdue Amount”), it shall forthwith on demand by the Agent pay interest on the Overdue Amount from the due date up to the date of actual payment, both before and after judgment, at a rate (the “Default Rate”) determined by the Agent to be one per cent. per annum (the “Default Margin”) above the higher of:
	(i)	the rate on the Overdue Amount under Clause 8.1 (Interest rate for all Advances) immediately before the due date (in the case of principal); and
	(ii)	the rate which would have been payable under Clause 8.1 (Interest rate for all Advances) if the Overdue Amount had, during the period of non-payment, constituted a Revolving Credit Advance in the currency of the Overdue Amount for such successive Terms of such duration as the Agent may determine (each a “Designated Term”),
	except that during any grace period specified in Clause 18.2 (Non-payment) the Default Margin portion of the Default Rate will only apply to overdue payments of principal.
(b)	The Default Rate will be determined on each Business Day or the first day of, or two Business Days before the first day of, the relevant Designated Term, as appropriate.
(c)	If the Agent determines that deposits in the currency of the Overdue Amount are not at the relevant time being made available by the Reference Banks to leading banks in the relevant interbank market, the Default Rate will be determined by reference to the cost of funds to the Agent from whatever sources it selects, acting reasonably at all times, after consultation with the Reference Banks.
(d)	Default interest will be compounded at the end of each Designated Term.
(e)	The Agent shall notify Vodafone of the duration of each Designated Term.
8.4.	Notification of rates of interest
	The Agent will promptly notify each relevant Party of the determination of a rate of interest under this Agreement.
8.5.	Margin
(a)	The Margin applicable to each Advance (will be the lowest percentage rate specified in Column 2 below which corresponds to the criteria in relation to the Long Term Credit Rating Assigned to Vodafone in Column 1 below by Moody's, Fitch and/or S&P (as the case may be) (each a “Credit Rating Agency”) at the relevant time.
	Column 1		Column 2
	Moody's/Fitch/S&P ratings		Margin (per cent. per annum)
	Any two are equal to or higher than:		0.35
	A2/A/A
	Otherwise		0.425

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	Column 1		Column 2
	Moody's/Fitch/S&P ratings		Margin (per cent. per annum)
	All Quoting Credit Rating Agencies are lower than:		0.475
	A3/A-/A-
	For the purposes of Clause 8.5(a) “All Quoting Credit Rating Agencies” means at any time each Credit Rating Agency which has a Long Term Credit Rating Assigned to Vodafone at the relevant time.
(b)	For the purposes of paragraph (a) above:
	(i)	the Margin applicable to an Advance throughout the whole of its Term will be determined according to the Long Term Credit Rating Assigned to Vodafone as at the Drawdown Date of the Advance;
	(ii)	if on the Drawdown Date of any Advance only one Credit Rating Agency assigns a long term credit rating to Vodafone, the Margin applicable to that Advance will be determined in accordance with paragraph (i) by reference to such Long Term Credit Rating Assigned to Vodafone, or in the event that no Credit Rating Agency assigns a long term credit rating to Vodafone, the most recent long term credit rating assigned to Vodafone by any of the Credit Rating Agencies.
	In the case of Clause 8.5(b)(ii) above, where the ratings category will be determined by one Credit Rating Agency only, the words “Any two are” and “All Quoting Credit Rating Agencies” in Column 1 of the table above shall be construed as a reference to the rating determined pursuant to Clause 8.5(b)(ii).
(c)	Promptly upon becoming aware of the same, Vodafone shall inform the Agent in writing if any change in the Long Term Credit Rating Assigned to Vodafone occurs or the circumstances contemplated by paragraph 8.5(b)(ii) above arise.
(d)	For the purpose of this Clause 8.5 the “Long Term Credit Rating Assigned to Vodafone” means, at any time, the solicited long term credit rating assigned at that time to Vodafone by the relevant Credit Rating Agency (but, for the avoidance of doubt, disregarding any outlook or review action, including placing Vodafone on creditwatch or any similar or analogous step, taken by such Credit Rating Agency) where the rating is based primarily on the unsecured credit risk (not credit enhanced or collateralised) of Vodafone in a manner comparable to the credit structure of Vodafone's U.S.$2,750,000,000 bond issue due February 2010 (the “Reference Bond”), or if the Reference Bond ceases to be outstanding, such other outstanding series of listed bonds issued or guaranteed by Vodafone with a maturity date following and closest to February 2010. References in this paragraph (d) to Vodafone shall, following the Reorganisation Date, be references to NewTopco, provided that a long term credit rating has been assigned to NewTopco.
8.6.	Notification
	The Agent shall notify the Lenders and the Borrower of Optional Currency amounts (and the applicable Agent's Spot Rate of Exchange) promptly after they are ascertained.

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8.7	Non-Business Days
	If a Term would otherwise end on a day which is not a Business Day, that Term shall instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
9	PAYMENTS
9.1	Place of payment
	All payments by an Obligor or a Lender under this Agreement shall be made to the Agent to its account at such office or bank in the principal financial centre of the country of the currency concerned (or, in the case of euro, in the principal financial centre of a Participating Member State or London) as it may notify to that Obligor or Lender for this purpose.
9.2	Funds
	Payments under this Agreement to the Agent shall be made for value on the due date at such times and in such funds as the Agent may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.
9.3	Distribution
(a)	Each payment received by the Agent under this Agreement for another Party shall, subject to paragraphs (b) and (c) below, be made available by the Agent or, to that Party by payment (on the date of value of receipt and in the currency and funds of receipt) to its account with such bank in the principal financial centre of the country of the relevant currency (or, in the case of euro, in the principal financial centre of a Participating Member State or London) as it may notify to the Agent for this purpose by not less than five Business Days' prior notice.
(b)	The Agent may apply any amount received by it for an Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from an Obligor under this Agreement in the same currency on such date or in or towards the purchase of any amount of any currency to be so applied.
(c)	Where a sum is to be paid under this Agreement to the Agent for the account of another Party, the Agent is not obliged to pay that sum to that Party until it has established that it has actually received that sum. The Agent may, however, assume that the sum has been paid to it in accordance with this Agreement and, in reliance on that assumption, make available to that Party a corresponding amount. If the sum has not been made available but the Agent has paid a corresponding amount to another Party, that Party shall forthwith on demand refund the corresponding amount to the Agent together with interest on that amount from the date of payment to the date of receipt, calculated at a rate reasonably determined by the Agent to reflect its cost of funds.
9.4	Currency
(a)	(i)	A repayment or prepayment of an Advance is payable in the currency in which the Advance is denominated.
	(ii)	Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated.

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	(iii)	Amounts payable in respect of costs, expenses, taxes and the like are payable in the currency in which they are incurred.
	(iv)	Any other amount payable under this Agreement is, except as otherwise provided in this Agreement, payable in U.S. Dollars.
(b)	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
	(i)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (acting reasonably and after consultation with Vodafone); and
	(ii)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of the currency unit into the other, rounded up or down by the Agent (acting reasonably); and
	(iii)	if a change in any currency of a country occurs this Agreement will be amended to the extent the Agent and Vodafone agree (such agreement not to be unreasonably withheld) to be necessary to reflect the change in currency and to put the Lenders and the Obligors in the same position, as far as possible, that they would have been in if no change in currency had occurred.
9.5	Set-off and counterclaim
	All payments made by an Obligor under this Agreement shall be made without set-off or counterclaim.
9.6	Non-Business Days
(a)	If a payment under this Agreement is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)	During any extension of the due date for payment of any principal under this Agreement interest is payable on the principal at the rate payable on the original due date.
9.7	Partial payments
(a)	If the Agent receives a payment insufficient to discharge all the amounts then due and payable by an Obligor under this Agreement, the Agent shall apply that payment towards the obligations of the Obligors under this Agreement in the following order:
	(i)	first, in or towards payment pro rata of any unpaid costs, fees and expenses of the Agent under this Agreement;
	(ii)	secondly, in or towards payment pro rata of any accrued fees due but unpaid under Clause 20 (Fees);
	(iii)	thirdly, in or towards payment pro rata of any interest due but unpaid under this Agreement;

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	(iv)	fourthly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and
	(v)	fifthly, in or towards payment pro rata of any other sum due but unpaid under this Agreement.
(b)	The Agent shall, if so directed by all the Lenders, vary the order set out in sub-paragraphs (a)(ii) to (v) above. The Agent shall notify Vodafone of any such variation.
(c)	Paragraphs (a) and (b) above shall override any appropriation made by any Obligor.
10.	TAXES
10.1	Gross-up
	All payments by an Obligor to a Finance Party under the Finance Documents shall be made free and clear of and without deduction for or on account of any taxes, except to the extent that the Obligor is required by law to make payment subject to any such taxes. Subject to Clause 10.4 (Qualifying Lenders) and Clause 10.5 (U.S. Taxes), if any Relevant Tax or amounts in respect of Relevant Tax are deducted or withheld from any amounts payable or paid by an Obligor to a Finance Party under the Finance Documents, the Obligor shall pay such additional amounts as may be necessary to ensure that the relevant Finance Party receives a net amount equal to the full amount which it would have received had that Relevant Tax or those amounts in respect of Relevant Tax not been so deducted or withheld.
10.2	Indemnity
	Save to the extent that the relevant Finance Party is compensated by an increased payment under Clause 10.1 (Gross-up), but otherwise without prejudice to the provisions of Clause 10.1 (Gross-up), but subject to Clause 10.4 (Qualifying Lenders) and Clause 10.5 (U.S. Taxes), if a Finance Party or the Agent on behalf of that Finance Party is required to make any payment on account of any Relevant Tax on or in relation to any sum received or receivable hereunder by such Finance Party or the Agent on behalf of that Finance Party (including a sum received or receivable under this Clause 10) or any liability in respect of any such payment on account of any Relevant Tax is incurred by such Finance Party or the Agent on behalf of that Finance Party (in all cases other than any Tax on Overall Net Income), the relevant Obligor shall, within five Business Days of demand by the Agent indemnify such Finance Party against such payment or liability in respect of such payment, together with any interest, penalties, reasonable costs and reasonable expenses payable or incurred in connection therewith other than any such interest, penalties, costs or expenses arising as a result of a failure by a Finance Party to make payment of such tax when due.
10.3	Tax receipts
	All taxes required by law to be deducted or withheld by an Obligor from any amounts paid or payable under the Finance Documents shall be paid by the relevant Obligor when due and the Obligor shall, within 15 days of the payment being made, deliver to the Agent for the relevant Lender evidence satisfactory to that Lender acting reasonably (including any relevant tax receipts which have been received) that the payment has been duly remitted to the appropriate authority.

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10.4	Qualifying Lenders
(a)	An Obligor is not required to pay to a Lender any amounts under Clause 10.1 (Gross-up) or Clause 10.2 (Indemnity) in respect of Relevant Tax imposed by the United Kingdom if, on the date on which the payment falls due, the relevant Lender is a Party but is not a Qualifying Lender (other than as a result of the introduction, suspension, withdrawal or cancellation of, or change in, or change in the official interpretation, administration or official application of, any law, regulation having the force of law, tax treaty or any published practice or published concession of any relevant taxing authority in any jurisdiction with which the relevant Lender has a connection, occurring after the Signing Date or, if later, the date on which that Lender becomes a Party).
(b)	A Treaty Lender shall:
	(i)	promptly and, in any event, within seven Business Days after it becomes a Lender, deliver to its local revenue authority for certification such UK Inland Revenue forms (“Claim Forms”) as may be required for any Obligor making a payment to such Treaty Lender to obtain authorisation from the UK Inland Revenue to make such payment without deduction for or on account of any taxes;
	(ii)	in circumstances where the procedure for Treaty relief contemplated in (i) above requires a local revenue authority to return a certified Claim Form to the Treaty Lender for submission by that Treaty Lender to the UK Inland Revenue, (a) take all reasonable follow up action available to the Treaty Lender to facilitate the return in a timely manner to the Treaty Lender of such Claim Form, duly stamped or certified by the relevant revenue authority and (b) submit such Claim Form to the UK Inland Revenue as soon as reasonably practicable (and in any event within seven Business Days) after receipt of that Claim Form from the local revenue authority; and
	(iii)	in all other circumstances relating to the Treaty relief procedure contemplated in (i) above, following the submission of Claim Forms by the Treaty Lender to the relevant local revenue authority, respond promptly to any further requests any Treaty Lender receives from the relevant local revenue authority and, on receipt of written request from Vodafone to do so, take all reasonable follow up action to facilitate the submission by the relevant local revenue authority of duly stamped or certified Claim Forms to the UK Inland Revenue in a timely manner.
	If there is any change in the procedure by which certification is to be made or to be notified to the UK Inland Revenue, the Treaty Lender's obligations shall be modified in such manner as the Treaty Lender may reasonably determine so that such amended obligations shall, as far as possible, have the same or equivalent effect as the original obligations. No Obligor resident in the UK shall be liable to pay any sums to any Treaty Lender under Clause 10.1 (Gross-up) or Clause 10.2 (Indemnity) unless the Treaty Lender has complied with its obligations under this Clause 10.4(b).
(c)	Subject to (d) below, each Lender warrants to Vodafone, on each date upon which it makes an Advance and on the due date for each payment of interest to the Lender:
	(i)	that it is a Qualifying Lender; and
	(ii)	if it is a Treaty Lender, it has delivered (or will deliver within the time limits specified herein) the forms described in paragraph (b).

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(d)	If a Lender or, as the case may be, the Facility Office of a Lender is aware that it is or will become unable to make the warranty set out in paragraph (c) of this Clause 10.4 it will promptly notify the Agent and Vodafone. Notwithstanding such notification to Vodafone, the Agent will promptly notify Vodafone and from the date of the first such notification received by Vodafone the warranty in paragraph (c) above will no longer be made by that Lender.
10.5	U.S. Taxes
(a)	A U.S. Tax Obligor shall not be required to pay any amount pursuant to Clause 10.1 (Gross-up) or any amount pursuant to Clause 10.2 (Indemnity) in respect of United States taxes (including, without limitation, federal, state, local or other income taxes), branch profits or franchise taxes with respect to a sum payable by it pursuant to this Agreement to a Lender if on the date a payment of interest falls due under this Agreement either:
	(i)	in the case of a Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code), such Lender is not entitled to receive interest payable under this Agreement free and clear of any U.S. taxes imposed by way of deduction or withholding at the source under applicable law as in effect on the date such Lender becomes a party to this Agreement or, if such Lender has designated a new Facility Office, the date of such designation; or
	(ii)	such Lender has failed to provide the relevant U.S. Tax Obligor with the appropriate form, certificate or other information with respect to such sum payable that it was required to provide pursuant to paragraphs (b) and (c) below; or
	(iii)	such Lender is subject to such tax by reason of any connection between the jurisdiction imposing such tax on the Lender or its Facility Office other than a connection arising solely from this Agreement or any transaction contemplated hereby.
(b)	At any time after a U.S. Tax Obligor becomes (and while there continues to be a U.S. Tax Obligor) a Party to this Agreement, if a Lender is not a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code) it shall submit, as soon as reasonably practicable after:
	(i)	the date on which the U.S. Tax Obligor becomes a Party to this Agreement (if requested by the relevant U.S. Tax Obligor);
	(ii)	the date on which the relevant Lender becomes a Party to this Agreement or;
	(iii)	the date on which the relevant Lender designates a new Facility Office,
	(but, in each case, no later than the due date for the next interest payment), in duplicate to each U.S. Tax Obligor duly completed and signed copies of either United States Internal Revenue Service Form W-8BEN or Form W-8ECI or applicable successor form relating to such Lender and evidencing such Lender’s complete exemption from withholding on all amounts (to which such withholding would otherwise apply) to be received by such Lender, including fees, pursuant to this Agreement in connection with any borrowing by a U.S. Tax Obligor. Thereafter such Lender shall submit to each U.S. Tax Obligor such additional duly completed and signed copies of one or the other such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxation authorities) or any additional information, in each case as may be required under then current United States law or regulations to claim the inapplicability of or exemption from United States withholding taxes on payments in respect of all amounts (to which such withholding would otherwise

37

	apply) to be received by such Lender, including fees, pursuant to this Agreement in connection with any borrowing by a U.S. Tax Obligor unless such Lender is unable to do so as a result of a change in, the introduction of, suspension, withdrawal or cancellation of, or change in the official interpretation, administration or official application of, the U.S. Code or any regulation promulgated thereunder or of a convention or agreement for the avoidance of double taxation and the prevention of fiscal evasion between the government of the United States of America and the jurisdiction in which the relevant Lender has a connection, occurring after the date the Lender becomes a Party to this Agreement or, if such Lender has designated a new Facility Office, the date of such designation.
(c)	At any time after a U.S. Tax Obligor becomes (and while there continues to be a U.S. Tax Obligor) a Party to this Agreement, if a Lender is a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code) it shall, as soon as practicable after:
	(i)	the date on which the U.S. Tax Obligor becomes a Party to this Agreement (if requested by the relevant U.S. Tax Obligor);
	(ii)	the date on which the relevant Lender becomes a Party to this Agreement; or
	(iii)	the date on which the relevant Lender designates a new Facility Office,
	(but, in each case, no later than the due date for the next interest payment), and thereafter, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form or forms to be delivered, submit in duplicate to each U.S. Tax Obligor a United States Internal Revenue form W-9 evidencing that such Lender is such a United States person and shall submit any additional information that may be necessary to avoid United States withholding taxes on all payments, including fees, (to which such withholding would otherwise apply) to be received pursuant to this Agreement in connection with any borrowing a U.S. Tax Obligor.

10.6	Refund of Tax Credits
	If any Obligor pays any amount to a Finance Party under this Clause 10 (a “Tax Payment”) and that Finance Party obtains a refund of a tax, or a credit against tax by reason of the Tax Payment (a “Tax Credit”) then that Finance Party shall reimburse that Obligor such amount as can be determined to be the proportion of the Tax Credit as will leave that Finance Party (after that reimbursement) in no better or worse position than it would have been in if the Tax Payment had not been paid. Nothing in this Clause 10 shall interfere with the right of each Finance Party to arrange its affairs in whatever manner it thinks fit and no Finance Party is obliged to disclose any information regarding its tax affairs or computations to an Obligor which it reasonably considers confidential.
11.	MARKET DISRUPTION
11.1	Market disturbance
	Notwithstanding anything to the contrary herein contained, if and each time that prior to or on a Drawdown Date relative to an Advance to be made:
	(a)	only one or no Reference Bank supplies a rate for the purposes of determining LIBOR or EURIBOR (as the case may be) in accordance with paragraph (b) of the relevant definition; or

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	(b)	the Agent is notified by Lenders whose participations in that Advance would represent 50 per cent. or more of that Advance that (i) deposits in the currency of that Advance may not in the ordinary course of business be available to them in the relevant interbank market for a period equal to the Term concerned in amounts sufficient to fund their participations in that Advance or (ii) LIBOR or EURIBOR (as the case may be) does not adequately represent their cost of funds; or
	(c)	the Agent (after consultation with the Reference Banks) shall have determined (which determination shall be conclusive and binding upon all Parties) that by reason of circumstances affecting the relevant interbank market generally, adequate and fair means do not exist for ascertaining the LIBOR or EURIBOR (as the case may be) applicable to such Advance during its Term,
	the Agent shall promptly give written notice of such determination or notification to Vodafone and to each of the Lenders.
11.2	Alternative rates
	If the Agent gives a notice under Clause 11.1 (Market disturbance):
	(a)	Vodafone and the Lenders whose participations in the relevant Advance would represent 50 per cent. or more of that Advance may (through the Agent) agree that (except in the case of a Rollover Advance) that Advance shall not be borrowed; or
	(b)	in the absence of such agreement by the Drawdown Date specified in the relevant Request (and in any event in the case of a Rollover Advance):
		(i)	the Term of the relevant Advance shall be one month;
		(ii)	the Advance shall be made in the currency requested or, in the case of Clause 11.1(b)(i) (Market disturbance), in U.S. Dollars (or, if the currency requested for the relevant Advance is U.S. Dollars, euro); and
		(iii)	during the Term of the relevant Advance the rate of interest applicable to such Advance shall be the Margin plus applicable Reserve Asset Costs plus the rate per annum notified by each Lender concerned to the Agent before the last day of such Term to be that which expresses as a percentage rate per annum the cost to such Lender of funding its participation in such Advance from whatever sources it may reasonably select.
12.	INCREASED COSTS
12.1	Increased costs

(a)

Subject to Clause 12.2 (Exceptions), Vodafone will forthwith on demand by a Finance Party pay that Finance Party the amount of any increased cost incurred by it or any of its Holding Companies as a result of any change in or introduction of any law or regulation (including any relating to reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements or any other form of banking or monetary control).

(b)

Promptly following the service of any demand, Vodafone will pay to that Finance Party such amount as that Finance Party certifies in the demand (with sufficient details for the calculations to be verified) will in its reasonable opinion compensate it for the applicable increased cost and in relation to the period expressed to be covered by such demand.

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(c)	When calculating an increased cost, a Finance Party will only apply the costs incurred in relation to the Facilities. Nothing contained in this Clause 12.1 shall oblige the Finance Party to disclose any information (other than information which is readily available in the public domain or which is not in the reasonable opinion of the Finance Party confidential) relating to the way in which it employs its capital or arranges its internal financial affairs.
(d)	In this Agreement “increased cost” means:
	(i)	an additional cost incurred by a Finance Party or any of its Holding Companies as a result of it performing, maintaining or funding its obligations under, this Agreement; or
	(ii)	that portion of an additional cost incurred by a Finance Party or any of its Holding Companies in making, funding or maintaining all or any advances comprised in a class of advances formed by or including its participations in the Advances made or to be made under this Agreement as is attributable to it making, funding or maintaining its participations; or
	(iii)	a reduction in any amount payable to a Finance Party or the effective return to a Finance Party under this Agreement or on its capital (or the capital of any of its Holding Companies); or
	(iv)	the amount of any payment made by a Finance Party, or the amount of interest or other return foregone by a Finance Party, calculated by reference to any amount received or receivable by a Finance Party from any other Party under this Agreement.

12.2	Exceptions
	Clause 12.1 (Increased costs) does not apply to any increased cost:
	(a)	compensated for by the payment of the Reserve Asset Costs; or
	(b)	attributable to any tax or amounts in respect of tax; or
	(c)	occurring as a result of any negligence or default of a Lender or its Holding Company including but not limited to a breach by that Lender or Holding Company of any fiscal, monetary or capital adequacy limit imposed on it by any law or regulation; or
	(d)	to the extent that the increased cost was incurred in respect of any day more than six months before the first date on which it was reasonably practicable to notify Vodafone thereof (except in the case of any retrospective change).
13.	ILLEGALITY AND MITIGATION
13.1	Illegality
	If it becomes unlawful in any jurisdiction for a Lender to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Advance, then the Lender may notify Vodafone through the Agent accordingly and thereupon, but only to the extent necessary to remove the illegality:
	(a)	each Borrower shall, upon request from that Lender within the period allowed or if no period is allowed, forthwith, repay any participation of that Lender in the Advances

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		made to it together with all other amounts payable by it to that Lender under this Agreement; and
	(b)	the Lender's Commitments shall be cancelled immediately.
13.2	Mitigation
	Notwithstanding the provisions of Clauses 8.1 (Interest rate for all Advances), 10 (Taxes), 12 (Increased costs) and 13.1 (Illegality), if in relation to a Finance Party circumstances arise which would result in:
	(a)	a payment pursuant to paragraph (b) of the definition of “Reserve Asset Costs ”; or
	(b)	any deduction, withholding or payment of the nature referred to in Clause 10 (Taxes); or
	(c)	any increased cost of the nature referred to in Clause 12 (Increased costs); or
	(d)	a notification pursuant to Clause 13.1 (Illegality),
	then without in any way limiting, reducing or otherwise qualifying the rights of such Finance Party or the Agent, such Finance Party shall promptly upon becoming aware of the same notify the Agent thereof (whereupon the Agent shall promptly notify Vodafone) and such Finance Party shall use reasonable endeavours to transfer its participation in the Facility and its rights hereunder and under the Finance Documents to another financial institution or Facility Office not affected by circumstances having the results set out in (a), (b), (c), or (d) above and shall otherwise take such reasonable steps as may be open to it to mitigate the effects of such circumstances provided that such Finance Party shall not be under any obligation to take any such action if, in its opinion, to do so would or would be likely to have a material adverse effect upon its business, operations or financial condition or would involve it in any unlawful activity or any activity that is contrary to its policies or any request, guidance or directive of any competent authority (whether or not having the force of law) or (unless indemnified to its satisfaction) would involve it in any significant expense or tax disadvantage.
14.	GUARANTEE
14.1	Guarantee
	Each Guarantor jointly and severally, irrevocably and unconditionally:
	(a)	as principal obligor, guarantees to each Finance Party that if and whenever:
		(i)	an amount is due and payable by a Borrower under or in connection with any Finance Document; and
		(ii)	demand for payment of that amount has been made by the Agent on that Borrower,
		that Guarantor will forthwith on demand by the Agent pay that amount as if that Guarantor instead of that Borrower were expressed to be the principal obligor; and
	(b)	indemnifies each Finance Party on demand against any loss or liability suffered by it if any obligation guaranteed by any Guarantor is or becomes unenforceable, invalid

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		or illegal (the amount of that loss being the amount expressed to be payable by the relevant Borrower in respect of the relevant sum).
14.2	Continuing guarantee
	This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by the Borrowers under the Finance Documents, regardless of any intermediate payment or discharge in part.
14.3	Reinstatement

(a)	Where any discharge (whether in respect of the obligations of any Borrower or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Guarantors under this Clause 14 (Guarantee) shall continue as if the discharge or arrangement had not occurred (but only to the extent that such payment, security or other disposition is avoided or restored).
(b)	Each Finance Party may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.
14.4	Waiver of defences
	The obligations of each Guarantor under this Clause 14 will not be affected by any act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause 14 or prejudice or diminish those obligations in whole or in part, including (whether or not known to it or any Finance Party):
	(a)	any time or waiver granted to, or composition with, any Borrower or other person;
	(b)	the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
	(c)	the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
	(d)	any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of a Borrower or any other person;
	(e)	any variation (however fundamental) or replacement of a Finance Document so that references to that Finance Document in this Clause 14 shall include each variation or replacement;
	(f)	any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document, to the intent that the Guarantors' obligations under this Clause 14 shall remain in full force and its guarantee be construed accordingly, as if there were no unenforceability, illegality or invalidity; and
	(g)	any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of any Borrower under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any

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law, regulation or order so that each such obligation shall, for the purposes of the Guarantors' obligations under this Clause 14, be construed as if there were no such circumstance.

14.5	Immediate recourse
	Except as provided in Clause 14.1(a)(ii) (Guarantee), each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 14.
14.6	Appropriations
	Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
	(a)	refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and
	(b)	hold in a suspense account (bearing interest at a commercial rate) any moneys received from any Guarantor or on account of that Guarantor's liability under this Clause 14, with any interest earned being credited to that account.
14.7	Non-competition
	Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been paid in full, no Guarantor shall, after a claim has been made or by virtue of any payment or performance by it under this Clause 14:
	(a)	be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of that Guarantor's liability under this Clause 14; or
	(b)	claim, rank, prove or vote as a creditor of any Borrower or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or
	(c)	receive, claim or have the benefit of any payment, distribution or security from or on account of any Borrower, or exercise any right of set-off as against any Borrower.
	Each Guarantor shall hold in trust for and forthwith pay or transfer to the Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to this Clause 14.7.
14.8	Additional security
	This guarantee is in addition to and is not in any way prejudiced by any other security now or hereafter held by any Finance Party.

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14.9	Removal of Guarantors
(a)	Any Guarantor (other than, Vodafone (subject to Clause 14.9(b) below) and, following the Reorganisation Date, NewTopco and any Intermediate Holding Company (subject to Clause 14.9(c) below) of Vodafone) which is not a Borrower, may, at the request of Vodafone and if no Default is continuing, cease to be a Guarantor by entering into a supplemental agreement to this Agreement at the cost of Vodafone in such form as the Agent may reasonably require which shall discharge that Guarantor's obligations as a Guarantor under this Agreement.
(b)	If on the Reorganisation Date, NewTopco or any Intermediate Holding Company have acceded as Guarantors in accordance with Clause 26.5 (Additional Guarantors) and no Default is continuing or would result from Vodafone's resignation as a Guarantor, Vodafone may cease to be a Guarantor with effect from the Reorganisation Date by entering into a supplemental agreement to this Agreement at the cost of Vodafone or NewTopco in such form as the Agent may reasonably require which shall discharge Vodafone's obligations as a Guarantor under this Agreement.
(c)	If NewTopco has acceded as a Guarantor in accordance with Clause 26.5 (Additional Guarantors) and no Default is continuing or would result from Intermediate Holding Company's resignation as a Guarantor, Intermediate Holding Company may cease to be a Guarantor by entering into a supplemental agreement to this Agreement at the cost of Vodafone or NewTopco in such form as the Agent may reasonably require which shall discharge Intermediate Holding Company's obligation as a Guarantor under this Agreement.
14.10	Limitation on guarantee of U.S. Guarantors
	Notwithstanding any other provision of this Clause 14, the obligations of each Guarantor incorporated in the United States (other than NewTopco and any Intermediate Holding Company, to the extent incorporated in the United States) (a “U.S. Guarantor”) under this Clause 14 shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Bankruptcy Code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of such U.S. Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such U.S. Guarantor in respect of intercompany indebtedness to the Borrowers or Affiliates of the Borrowers to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such U.S. Guarantor hereunder) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such U.S. Guarantor pursuant to (a) applicable law or (b) any agreement providing for an equitable allocation among such U.S. Guarantor and other Affiliates of the Borrowers of obligations arising under guarantees by such parties.
15.	REPRESENTATIONS AND WARRANTIES
15.1	Representations and warranties
	Each Obligor makes the representations and warranties set out in this Clause 15 to each Finance Party (in respect of itself and where relevant its Consolidated Subsidiaries only).

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15.2	Status
	It is a duly incorporated and validly existing corporation under the laws of the jurisdiction of its incorporation.
15.3	Powers and authority
	It has the power to:
	(a)	enter into and comply with, all obligations expressed on its part under the Finance Documents;
	(b)	(in the case of a Borrower) to borrow under this Agreement; and
	(c)	(in the case of a Guarantor) to give the guarantee in Clause 14 (Guarantee),
	and has taken all necessary actions to authorise the execution, delivery and performance of the Finance Documents.
15.4	Non-violation
	The execution, delivery and performance of the Finance Documents will not violate:
	(a)	any provisions of any existing law or regulation or statute applicable to it; or
	(b)	to any material extent, any provisions of any mortgage, contract or other undertaking to which it or any of its Consolidated Subsidiaries which is a member of the Restricted Group is a party or which is binding upon it or any of its Consolidated Subsidiaries which is a member of the Restricted Group, the consequences of which would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their material obligations under the Finance Documents.
15.5	Borrowing limits
	Borrowings under this Agreement up to and including the maximum amount available under this Agreement, together with borrowings under the 5 Year Facility up to and including the maximum amount available under the 5 Year Facility, will not cause any limit (except to the extent the limit has been waived) on borrowings or, as the case may be, on the giving of guarantees (whether imposed in its Articles of Association or otherwise), or on the powers of its board of directors, applicable to it to be exceeded.
15.6	Authorisations
	All necessary consents or authorisations of any governmental authority or agency required by it in connection with the execution, validity, performance or enforceability of the Finance Documents have been obtained and are validly existing.
15.7	No default
	Neither it nor any of its Consolidated Subsidiaries which is a member of the Restricted Group is in default under any law or agreement by which it is bound the consequences of which would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.

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15.8	Accounts
	The audited consolidated financial statements of Vodafone (or, following a Hive Up, NewTopco) most recently delivered to the Agent (which, at the date of this Agreement are the audited consolidated accounts of Vodafone for the year ended 31 March 2004):
	(a)	give a true and fair view of the consolidated financial position of the Group as at the date to which they were drawn up; and
	(b)	have been prepared in accordance with generally accepted accounting principles applied by Vodafone (or, following a Hive Up, NewTopco), consistently applied except for changes disclosed in such financial statements which are necessary to reflect a change in generally accepted accounting principles or the adoption of international accounting standards.
15.9	No Event of Default
	No Event of Default has occurred and is continuing in respect of it or any of its Consolidated Subsidiaries which is a member of the Restricted Group.
15.10	Investment Company
	Each Borrower which is a U.S. Obligor either (i) is not an investment company as defined under United States Investment Company Act of 1940, as amended, or (ii) is exempt from the registration provisions of the Act pursuant to an exemption under that Act.
15.11	ERISA

(a)	Each member of the Controlled Group has fulfilled its obligations under the minimum funding standards of ERISA and the U.S. Code with respect to each Plan maintained by such member or any member of the Controlled Group where non-fulfilment of such obligations would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
(b)	Each Obligor is in compliance with the applicable provisions of ERISA, the U.S. Code and any other applicable United States Federal or State law with respect to each Plan maintained by such Obligor where non-fulfilment of or non-compliance with such provisions would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
(c)	No Reportable Event has occurred with respect to any Plan maintained by an Obligor or any member of the Controlled Group and no steps have been taken to reorganise or terminate any Single Employer Plan or by that Obligor to effect a complete or partial withdrawal from any Multiemployer Plan where non-compliance or such Reportable Event, reorganisation, termination or withdrawal would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
(d)	No member of the Controlled Group has:
	(i)	sought a waiver of the minimum funding standard under Section 412 of the U.S. Code in respect of any Plan; or
	(ii)	failed to make any contribution or payment to any Single Employer Plan or Multiemployer Plan, or made any amendment to any Plan, and no other event,

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		transaction or condition has occurred which has resulted or would result in the imposition of a lien or the posting of a bond or other security under ERISA or the U.S. Code; or
	(iii)	incurred any material, actual liability under Title I or Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA,
	if such seeking, failure or incurrence would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
15.12	Times for making representations and warranties
(a)	The representations and warranties set out in this Clause 15 (excluding Clause 15.10 (Investment Company) and Clause 15.11 (ERISA)):
	(i)	are made by Vodafone on the Signing Date and, in the case of an Obligor which becomes a Party after the Signing Date, will be deemed to be made by that Obligor on the date it executes a Borrower Accession Agreement or Guarantor Accession Agreement; and
	(ii)	are deemed to be made again by each Obligor on the date of each Request and on each Drawdown Date with reference to the facts and circumstances then existing.
(b)	The representation and warranties set out in Clause 15.10 (Investment Company) and 15.11 (ERISA):
	(i)	are made by Vodafone on the date on which the first U.S. Obligor executes a Borrower Accession Agreement or a Guarantor Accession Agreement as the case may be;
	(ii)	are deemed to be made by each Obligor which becomes a party after the Signing Date on the date it executes a Borrower Accession Agreement or Guarantor Accession Agreement, provided that there is a U.S. Obligor;
	(iii)	are deemed to be made again by each Obligor on the date of each Request and on each Drawdown Date with reference to the facts and circumstances then existing, provided that there is a U.S. Obligor.
16.	UNDERTAKINGS
16.1	Duration
	The undertakings in this Clause 16 will remain in force from the Signing Date for so long as any amount is or may be outstanding under this Agreement or any Commitment is in force.
16.2	Financial information
	Vodafone shall supply to the Agent in sufficient copies for all the Lenders:
	(a)	as soon as the same are publicly available (and in any event within 180 days of the end of each of its financial years):

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	(i)	the audited consolidated financial statements of the Group for that financial year; and
	(ii)	(if published) each other Obligor's audited statutory accounts for that financial year, consolidated if that Obligor has Subsidiaries and consolidated accounts are prepared and published;
(b)	as soon as the same are publicly available (and in any event within 90 days of the end of the first half-year of each of its financial years) the interim unaudited financial statements of the Group for that half-year;
(c)	together with any accounts specified in paragraph (a)(i) or (b) above a certificate signed by Vodafone's financial director (or following a Hive Up, NewTopco's financial director), or in his absence any other director of Vodafone or NewTopco, as the case may be, establishing (in reasonable detail) compliance with Clauses 16.8 (Priority borrowing) and 17 (Financial covenant) as at the date to which those accounts were drawn up and identifying the Principal Subsidiaries; and
(d)	if, after the date of the most recent certificate delivered pursuant to paragraph (c) above and prior to the date that the next certificate is required to be delivered, a Principal Subsidiary ceases to be Principal Subsidiary as a result of (A) a sale or transfer to or a merger into or with an entity which is not a member of the Restricted Group or (B) the acquisition of a new Principal Subsidiary, a certificate signed by Vodafone's financial director (or following a Hive Up, NewTopco's financial director), or in his absence any other director of Vodafone or NewTopco, as the case may be, which identifies the Principal Subsidiary which has ceased to be a Principal Subsidiary and the new Principal Subsidiary.

16.3	Information – miscellaneous
	Vodafone shall supply to the Agent:
	(a)	all documents despatched by the ultimate Holding Company of the Group to its shareholders (or any class of them) or by Vodafone or such ultimate Holding Company to the creditors of the Group generally (or any class of them) at the same time as they are despatched; and
	(b)	as soon as reasonably practicable, such further publicly available information (including that required to comply with “know your customer” or similar identification procedures) in the possession or control of any member of the Group regarding the business, financial or corporate affairs of the Group, as the Agent may reasonably request,
	in sufficient copies for all the Lenders, if the Agent so requests.
16.4	Notification of Default
	Vodafone shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of it.
16.5	Authorisations
	Each Obligor shall promptly:

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	(a)	obtain, maintain and comply in all material respects with the terms of; and
	(b)	if requested, supply certified copies to the Agent of,
	any authorisation required under any law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.
16.6	Pari passu ranking
	Each Obligor will procure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured and unsubordinated obligations (save for those obligations mandatorily preferred by applicable law).
16.7	Negative pledge
	No Obligor will, and each Obligor will procure that none of its Subsidiaries which is a member of the Restricted Group will, create or permit to subsist any Security Interest on or over any of its assets except for any Permitted Security Interest.
16.8	Priority borrowing
	Each Obligor will procure that none of its Subsidiaries (which is a member of the Restricted Group and which is not a Guarantor) will create, assume, incur, guarantee, permit to subsist or otherwise be liable in respect of any Financial Indebtedness owed to persons outside the Restricted Group except for:
	(a)	Financial Indebtedness of any Subsidiary which became a member of the Restricted Group after 31st May, 2004 (unless it became a member of the Restricted Group due to the expansion of the definition of Core Jurisdiction to include members of the European Union after 31st May 2003) provided that:
		(i)	any such Financial Indebtedness is either (A) outstanding before that Subsidiary becomes a member of the Restricted Group and was not created in contemplation of that Subsidiary becoming a member of the Restricted Group and/or (B) drawn at any time under commitments in existence before that Subsidiary becomes a member of the Restricted Group (“Existing Commitment”) and that commitment was not created in contemplation of that Subsidiary becoming a member of the Restricted Group and/or (C) drawn at any time under commitments (“New Commitments”) which have refinanced Existing Commitments in whole or in part, to the extent that any such New Commitments do not exceed the Existing Commitments, and provided that to the extent that any New Commitment is to be guaranteed by an Obligor, the obligors under the New Commitments will have validly and legally acceded as Additional Guarantors in accordance with Clause 26.5(a)(ii) and (b) (Additional Guarantors) prior to any Obligor providing a guarantee of the New Commitments; and
		(ii)	to the extent that the aggregate principal amount of such Financial Indebtedness exceeds the amounts calculated under paragraph 16.8(a)(i) above upon that Subsidiary becoming a member of the Restricted Group (measured in the same currency), the excess amount of such Financial Indebtedness shall not fall within this paragraph (a); or

49

(b)	Financial Indebtedness under finance or structured tax lease arrangements (including, but not limited to qualifying technological equipment leases) to the extent matched as part of those arrangements by deposits of cash or cash equivalent investments (including, but not limited to securities issued by G7 governments) or other securities rated at least A by S&P or A2 by Moody's or A by Fitch which are treated by the creditor concerned as available to reduce its net exposure; or
(c)	Financial Indebtedness which is created with the prior written consent of the Majority Lenders; or
(d)	Financial Indebtedness of members of the Restricted Group to the extent matched by cash balances or cash equivalent investments (including, but not limited to securities issued by G7 governments) or other securities rated at least A by S&P or A2 by Moody's or A by Fitch, held by members of the Restricted Group which are treated as available for netting by the creditors to whom that Financial Indebtedness is owed under cash management or netting arrangements in the ordinary course of business; or
(e)	Financial Indebtedness under any finance lease or structured tax lease arrangements (including, but not limited to qualifying technological equipment leases) entered into in respect of assets which were or are acquired or become part of the Restricted Group after 31st March 2001; or
(f)	Financial Indebtedness under or in connection with any other finance lease entered into in respect of existing assets or future assets (to the extent they are subject to Security Interests contemplated under paragraph (j) of the definition of Permitted Security Interests); or
(g)	Financial Indebtedness under Back to Back Loans; or
(h)	Financial Indebtedness of any member of the Group which operates as a finance company to the extent that any such Financial Indebtedness is on-lent to an Obligor or to a member of the Group outside the Restricted Group; or
(i)	Financial Indebtedness in relation to bonds as set out in Schedule 8 (Fixed Rate Bonds); or
(j)	Financial Indebtedness that has been defeased to the extent that it is subject to Security Interests contemplated under paragraph (u) of Permitted Security Interests; or
(k)	Financial Indebtedness incurred solely in contemplation of an initial public offering or other disposal of the companies or partnerships incurring such Financial Indebtedness, to the extent that (i) the aggregate principal amount of such Financial Indebtedness does not exceed U.S.$5,000,000,000 (or its equivalent in other currencies) whilst such Financial Indebtedness is owed by a member of the Restricted Group; and (ii) the creditors in respect of such Financial Indebtedness have recourse for no more than ninety days to any member of the Group which is or whose assets are not intended to be subject to the initial public offering or disposal; or
(l)	Project Finance Indebtedness; or
(m)	Financial Indebtedness owed to persons outside the Restricted Group under guarantees or other legally binding assurances against financial loss granted by

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		Vodafone Deutschland GmbH or any of its Subsidiaries in respect of any asset, undertaking or business not forming part of the mobile or wireless telecommunications business of the Restricted Group; or
	(n)	Financial Indebtedness under this Agreement; or
	(o)	any liability of a Subsidiary in respect of Financial Indebtedness incurred in connection with the Verizon Wireless partnership provided that:
		(i)	that Subsidiary has no assets other than (1) its interests in or derived from the Verizon Wireless partnership and (2) other assets with an aggregate market value not exceeding U.S.$3,000,000,000 at any time and (3) other assets with an aggregate market value not exceeding U.S.$4,500,000,000 at any time provided that if such assets are lent within the Restricted Group they are only lent to an Obligor; and
		(ii)	the person or persons to whom such Financial Indebtedness is or may be owed has or have no recourse whatsoever to any member of the Group for any payment or repayment in respect of such Financial Indebtedness (other than to that Subsidiary); or
	(p)	other Financial Indebtedness to the extent that the sum of:
		(i)	the aggregate unpaid principal amount of the Financial Indebtedness of all the members of the Restricted Group which are not Guarantors and owed to persons outside the Restricted Group (other than Financial Indebtedness under paragraphs (a) to (o) above inclusive); plus
		(ii)	the aggregate unpaid principal amount of Financial Indebtedness secured by Security Interests referred to in paragraph (v) of the definition of Permitted Security Interest (to the extent not falling within (i) above),
		does not exceed £1,750,000,000 or its equivalent.
	Compliance with this Clause 16.8 will be tested at the end of each financial quarter. For the purposes of paragraph (p) above, Financial Indebtedness of the Restricted Group not denominated in (or which has not been swapped into) Sterling shall be notionally converted (from the currency in which it is denominated or, as the case may be, into which it has been swapped) to Sterling at the rate of exchange used in the management accounts of the relevant Obligor for that relevant financial quarter.
16.9	Disposals
	No Obligor will, and each Obligor will procure that none of its Subsidiaries which is a member of the Restricted Group will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, make any Asset Disposals other than:
	(a)	Asset Disposals:
		(i)	on arm's length terms which are, in the opinion of an Obligor, at fair market value; or

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	(ii)	required by law or any governmental authority or agency (including without limitation any authority or agency of the European Union); or
	(iii)	made in good faith for the purpose of carrying on the business of the Group which it is reasonable to believe will benefit the Group; and
(b)	a transfer of all or any part of the assets of the Group to NewTopco and/or any Intermediate Holding Company of Vodafone.

16.10	Restriction on Acquisitions
	Vodafone will not, and will procure that no member of the Group will, make any Acquisition unless the major part of the Group's business remains telecommunications, data communications and associated businesses.
17.	FINANCIAL COVENANT
17.1	Financial ratio
	Vodafone will procure that for each Ratio Period the ratio of Net Debt to two times Adjusted Group Operating Cash Flow for such Ratio Period will not exceed 3.75:1.
17.2	Calculation times and periods

(a)	The first test date for the financial ratio specified in Clause 17.1 (Financial ratio) will occur on 30th September, 2004.
(b)	Each subsequent test date will be on the last day of each financial half year and year of Vodafone or, following a Hive Up, NewTopco. The financial ratio will be calculated using data for the period (each a “Ratio Period”) ending on each test date and beginning 6 months before the relevant test date.
17.3	Information sources
(a)	All information for calculation of the financial ratio set out in Clause 17.1 (Financial ratio) and Clause 18.5 (Cross default) will be extracted from figures denominated in the base currency (as defined in paragraph (d) below) applying generally accepted accounting principles used in the preparation of and extracted from:

(i)	the unaudited consolidated interim financial statements of Vodafone, or following a Hive Up, NewTopco,
(ii)	the consolidated annual financial statements of Vodafone, or following a Hive Up, NewTopco; or
(iii)	Vodafone's, or following a Hive Up, NewTopco's consolidated management accounts,
as the case may be, which in respect of (i) and (ii) were delivered to the Agent under sub-clauses 16.2(a)(i) and (b) of Clause 16.2 (Financial information).

(b) If Vodafone, or following a Hive Up, NewTopco applies generally accepted accounting principles (“New GAAP”) other than Applicable GAAP in the preparation of any financial

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statements delivered under Clauses 16.2(a)(i) or (b) (Financial information) (or consolidated management accounts, where appropriate) and:

(i)	New GAAP would (compared to Applicable GAAP) have a material effect on the operation of the tests and ratio set out above; and
(ii)	the ratio for each Ratio Period of Net Debt to two times Adjusted Group Operating Cash Flow for such Ratio Period as determined by Clause 17.1 (Financial ratio) is greater than 3:1,
such financial statements will:
(A)	be accompanied by a statement from Vodafone, or following a Hive Up, NewTopco containing or appending a reconciliation demonstrating the effect of New GAAP; and
(B)	for the purpose of calculating the tests and ratio set out above, the relevant financial statements (or consolidated management accounts, where appropriate) will be treated as though adjusted by that reconciliation so as to exclude the effect of New GAAP and the tests and ratio shall be calculated using Applicable GAAP.

(c)	Information from Vodafone's, or following a Hive Up, NewTopco's consolidated management accounts will be disclosed only when the relevant interim or annual financial statements and compliance certificates are delivered to the Agent or as required in connection with Clause 18.5(a)(iii) (Cross Default).
(d)	Any amount outstanding in a currency other than the currency used in the latest consolidated published financial statements (the “base currency”) is to be taken into account at the base currency equivalent of that amount calculated at the rate used in the latest consolidated financial statements delivered to the Agent under Clause 16.2 (Financial information) or the latest consolidated management accounts, as appropriate.
17.4	Know Your Customer
	Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
18.	DEFAULT
18.1	Events of Default
	Each of the events set out in Clauses 18.2 (Non-payment) to 18.15 (5 Year Facility) (inclusive) is an Event of Default (whether or not caused by any reason whatsoever outside the control of any Obligor or any other person).
18.2	Non-payment
	An Obligor does not pay within four Business Days of the due date any amount payable by it under the Finance Documents at the place at, and in the currency in, which it is expressed to be payable.

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18.3	Breach of other obligations
(a)	Vodafone does not comply with Clause 17 (Financial covenant).
(b)	An Obligor does not comply with any provision of the Finance Documents (other than those referred to in paragraph (a) above or in Clause 18.2 (Non-payment)) and such failure (if capable of remedy before the expiry of such period) continues unremedied for a period of 21 days from the earlier of the date on which (i) such Obligor has become aware of the failure to comply or (ii) the Agent gives notice to Vodafone requiring the same to be remedied.

18.4	Misrepresentation
	A representation or warranty made or repeated by any Obligor in any Finance Document is found to be untrue in any respect material in the context of performance of the Finance Documents when made or deemed to have been made.
18.5	Cross default

(a)	(i)	Any Financial Indebtedness of any Obligor is:
		(A)	not paid when due or within any originally applicable grace period; or
		(B)	declared due, or is capable of being declared due, prior to its specified maturity as a result of an event of default (howsoever described) except this paragraph (B) does not apply to:
			(1)	Financial Indebtedness quoted or listed on a stock exchange; or
			(2)	Financial Indebtedness of an Obligor arising solely under paragraph (f) of the definition of Financial Indebtedness in Clause 1.1 (Definitions) save where:
				(X)	such Financial Indebtedness is incurred by an Obligor under the 5 Year Facility; and
				(Y)	the Guarantors under this Agreement are also Guarantors under and as defined in the 5 Year Facility and all of the Borrowers under this Agreement and under (and as defined in) the 5 Year Facility are not the same; or

(ii)	any Financial Indebtedness constituted by debt securities quoted or listed on a stock exchange (excluding convertible debt securities) issued by Vodafone Americas Inc. or Vodafone Finance BV or Vodafone Holdings K.K. (but in each case only for so long as the creditors of those debt securities have recourse to a member of the Group in respect of those debt securities) is:
	(A)	not paid when due or within any originally applicable grace period; or
	(B)	declared due prior to its specified maturity as a result of failure to pay principal or interest thereunder; or
(iii)	any Financial Indebtedness of any Principal Subsidiary excluding any Financial Indebtedness set out in paragraph 18.5(a)(ii) above or any deferred consideration in respect of an Acquisition payable by any Principal Subsidiary is:

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(A)	not paid when due or within any originally applicable grace period; or
(B)	declared due prior to its specified maturity as a result of an event of default (howsoever described) and is not paid within three Business Days of being declared due,
except this paragraph (iii) only applies if the ratio of Net Debt to Adjusted Group Operating Cash Flow is more than 3.25 for the 12 month period ending on the last day of the most recent financial quarter of Vodafone or, following a Hive Up, NewTopco.

(b)	Paragraph (a) above does not apply:
	(i)	to Project Finance Indebtedness; or
	(ii)	to Financial Indebtedness which in aggregate is less than £100,000,000 (or equivalent currency); or
	(iii)	where the payment or occurrence of the event concerned is being contested in good faith; or
	(iv)	where the default is under a bond and is capable of waiver without bondholder consent; or
	(v)	to Financial Indebtedness owed to a member of the Restricted Group.

18.6	Winding up
	An order is made or an effective resolution is passed for winding up any Obligor or any Principal Subsidiary (except for the purposes of a reconstruction or amalgamation on terms previously approved in writing by the Majority Lenders) or a petition is presented (which is not set aside or withdrawn within the earlier of 30 days of its presentation or by not later than the date for the hearing of such petition) for an administration order or for the winding up of any Obligor or any Principal Subsidiary except where demonstrated to the reasonable satisfaction of the Majority Lenders that any such petition is being contested in good faith.
18.7	Insolvency process

(a)	A liquidator, administrator, receiver, trustee, sequestrator or similar officer is appointed in respect of all or any part of the assets of any Obligor or any Principal Subsidiary which generates a material part of the revenues of that Obligor or that Principal Subsidiary; or
(b)	any Obligor or any Principal Subsidiary, by reason of financial difficulties, enters into a composition, assignment or arrangement with any class of its creditors.
18.8	Enforcement proceedings
	A distress, execution, attachment or other legal process is levied, enforced or sued out upon or against all or any part of the assets of any Obligor or any Principal Subsidiary which generates a material part of the revenues of that Obligor or that Principal Subsidiary except where the same is being contested in good faith or is removed, discharged or paid within 30 days.

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18.9	Insolvency
	Any Obligor or any Principal Subsidiary is deemed under Section 123(1)(e) or 123(2) of the Insolvency Act 1986 to be unable to pay its debts.
18.10	Similar proceedings
	Anything having a substantially similar effect to any of the events specified in Clauses 18.6 (Winding up) to 18.9 (Insolvency) inclusive shall occur under the laws of any applicable jurisdiction in relation to any Obligor or any Principal Subsidiary.
18.11	Unlawfulness
	It is or becomes unlawful for any Obligor to perform any of its payment or other material obligations under the Finance Documents.
18.12	Guarantee
	The guarantee of any Guarantor under Clause 14 (Guarantee) is not effective or is alleged by an Obligor to be ineffective for any reason (other than by reason of written release or waiver by the Finance Parties or in accordance with Clause 14.9 (Removal of Guarantors)).
18.13	Cessation of business
	Any Obligor or any Principal Subsidiary ceases to carry on all or substantially all of its business otherwise than:
	(a)	as a result of a transfer of all or any part of its business to a member of the Restricted Group or
	(b)	as a result of a disposal permitted under Clause 16.9 (Disposals); or
	(c)	with the prior written consent of the Majority Lenders.
18.14	Litigation
	Any litigation proceedings are current which are reasonably likely to be adversely determined and which would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
18.15	5 Year Facility

(a)	Any Event of Default (as defined in the 5 Year Facility) has occurred and is continuing.
(b)	Paragraph (a) shall only apply where the Guarantors under this Agreement are not Guarantors (under and as defined in the 5 Year Facility) under the 5 Year Facility.
18.16	Acceleration
	On and at any time after the occurrence of an Event of Default while such event is continuing the Agent may, and if so directed by the Majority Lenders, will by notice to Vodafone, declare that an Event of Default has occurred and:
	(a)	cancel the Total Commitments; and/or

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	(b)	demand that all the Advances, together with accrued interest, and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or
	(c)	demand that all the Advances be payable on demand, whereupon they shall immediately become payable on demand.
19.	THE AGENT AND THE ARRANGERS
19.1	Appointment and duties of the Agent
	Each Finance Party (other than the Agent) irrevocably appoints the Agent to act as its agent under and in connection with the Finance Documents and each Finance Party irrevocably authorises the Agent on its behalf to perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with any other incidental rights, powers and discretions. The Agent or shall have only those duties which are expressly specified in this Agreement. Those duties are solely of a mechanical and administrative nature.
19.2	Role of the Arrangers
	Except as otherwise provided in this Agreement, no Arranger has any obligations of any kind to any other Party under or in connection with any Finance Document.
19.3	Relationship
	The relationship between the Agent and the other Finance Parties is that of agent and principal only. Nothing in this Agreement constitutes the Agent as trustee or fiduciary for any other Party or any other person and the Agent need not hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys.
19.4	Majority Lenders' directions

(a)	The Agent will be fully protected if it acts in accordance with the instructions of the Majority Lenders in connection with the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents. Any such instructions given by the Majority Lenders will be binding on all the Lenders. In the absence of such instructions the Agent may act as it considers to be in the best interests of all the Lenders.
(b)	The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document.
19.5	Delegation
	The Agent may act under the Finance Documents through its personnel and agents.
19.6	Responsibility for documentation
	Neither the Agent nor any Arranger is responsible to any other Party for:
	(a)	the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document by any other Party; or
	(b)	the collectability of amounts payable under any Finance Document; or

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	(c)	the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document by any other Party.
19.7	Default
(a)	The Agent or is not obliged to monitor or enquire as to whether or not a Default has occurred. The Agent will not be deemed to have knowledge of the occurrence of a Default. However, if the Agent receives notice from a Party referring to this Agreement, describing the Default and stating that the event is a Default, it shall promptly notify the Lenders of such notice.
(b)	The Agent may require the receipt of security satisfactory to it whether by way of payment in advance or otherwise, against any liability or loss which it will or may incur in taking any proceedings or action arising out of or in connection with any Finance Document before it commences these proceedings or takes that action.
19.8	Exoneration
(a)	Without limiting paragraph (b) below, the Agent will not be liable to any other Party for any action taken or not taken by it under or in connection with any Finance Document, unless directly caused by its negligence or wilful misconduct or breach of any of its obligations under or in connection with the Finance Documents.
(b)	No Party may take any proceedings against any officer, employee or agent being an individual of the Agent or in respect of any claim it might have against the Agent or in respect of any act or omission of any kind (including negligence or wilful misconduct) by that officer, employee or agent in relation to any Finance Document.
(c)	Any officer, employee or agent being an individual of the Agent may rely on paragraph (b) above and enforce its terms under the Contract (Rights of Third Parties) Act 1999.
(d)	Nothing in this Agreement shall oblige the Agent or an Arranger to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and an Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or an Arranger.
19.9	Reliance
	The Agent may:
	(a)	rely on any notice or document reasonably believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;
	(b)	rely on any statement made by a director or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and
	(c)	engage, pay for and rely on legal or other professional advisers selected by it (including those in the Agent's employment and those representing a Party other than the Agent).

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19.10	Credit approval and appraisal
	Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms that it:
	(a)	has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Agent or the Arrangers in connection with any Finance Document; and
	(b)	will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
19.11	Information
(a)	The Agent shall promptly forward to the person concerned the original or a copy of any document which is delivered to the Agent by a Party for that person.
(b)	The Agent shall promptly supply a Lender with a copy of each document received by the Agent under Clauses 4 (Conditions precedent), 26.5 (Additional Guarantors) or 26.6 (Additional Borrowers) upon the request and at the expense of that Lender.
(c)	Except where this Agreement specifically provides otherwise, the Agent is not obliged to review or check the accuracy or completeness of any document it forwards to another Party.
(d)	Except as provided above, the Agent has no duty:
	(i)	either initially or on a continuing basis to provide any Lender with any credit or other information concerning the financial condition or affairs of any Obligor or any related entity of any Obligor whether coming into its possession or that of any of its related entities before, on or after the Signing Date; or
	(ii)	unless specifically requested to do so by a Lender in accordance with this Agreement, to request any certificates or other documents from any Obligor.
19.12	The Agent and the Arrangers individually
(a)	If it is also a Lender, each of the Agent and the Arrangers has the same rights and powers under this Agreement as any other Lender and may exercise those rights and powers as though it were not the Agent or an Arranger.
(b)	Each of the Agent and the Arrangers may:
	(i)	carry on any business with an Obligor or its related entities;
	(ii)	act as agent or trustee for, or in relation to any financing involving, an Obligor or its related entities; and
	(iii)	retain any profits or remuneration in connection with its activities under the Finance Documents, or in relation to any of the foregoing.

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19.13	Indemnities
(a)	Without limiting the liability of any Obligor under the Finance Documents, each Lender shall forthwith on demand indemnify the Agent for its proportion of any liability or loss incurred by the Agent in any way relating to or arising out of its acting as the Agent, except to the extent that the liability or loss arises directly from the Agent's negligence or wilful misconduct.
(b)	A Lender's proportion of the liability or loss set out in paragraph (a) above is the proportion which its Commitment bears to the Total Commitments at the date of demand or, if the Total Commitments have been cancelled, bore to the Total Commitments immediately before being cancelled.
19.14	Compliance
(a)	The Agent or may refrain from doing anything which might, in its reasonable opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its reasonable opinion, is necessary or desirable to comply with any law or regulation of any jurisdiction.
(b)	Without limiting paragraph (a) above, the Agent need not disclose any information relating to any Obligor or any of its related entities if the disclosure might, in the opinion of the Agent or constitute a breach of any law or regulation or any duty of secrecy or confidentiality or be otherwise actionable at the suit of any person.
19.15	Resignation of the Agent
(a)	Notwithstanding its irrevocable appointment, the Agent may resign by giving notice to the Lenders and Vodafone, in which case the Agent may forthwith appoint one of its Affiliates as successor Agent or, failing that, the Majority Lenders may after consultation with Vodafone appoint a reputable and experienced bank as successor Agent.
(b)	If the appointment of a successor Agent is to be made by the Majority Lenders but they have not, within 30 days after notice of resignation, appointed a successor Agent which accepts the appointment, the retiring Agent may, following consultation with Vodafone, appoint a successor Agent.
(c)	The resignation of the retiring Agent and the appointment of any successor Agent will both become effective only upon the successor Agent notifying all the Parties that it accepts the appointment. On giving the notification and receiving such approval, the successor Agent will succeed to the position of the retiring Agent and the term “Agent” will mean the successor Agent.
(d)	The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as the Agent under this Agreement.
(e)	Upon its resignation becoming effective, this Clause 19 shall continue to benefit the retiring Agent in respect of any action taken or not taken by it under or in connection with the Finance Documents while it was the Agent and, subject to paragraph (d) above, it shall have no further obligation under any Finance Document.

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(f)	The Majority Lenders may by notice to the Agent require it to resign in accordance with paragraph (a) above. In this event, the Agent shall resign in accordance with paragraph (a) above but it shall not be entitled to appoint one of its Affiliates as successor Agent.
19.16	Lenders
	The Agent may treat each Lender as a Lender, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received notice from the Lender to the contrary by not less than five Business Days prior to the relevant payment.
19.17	Chinese wall
	In acting as Agent or Arranger, the agency and syndications division of each of the Agent and each Arranger shall be treated as a separate entity from its other divisions and departments. Any information acquired at any time by the Agent or any Arranger otherwise than in the capacity of Agent or Arranger through its agency and syndications division (whether as financial advisor to any member of the Group or otherwise) may be treated as confidential by the Agent or Arranger and shall not be deemed to be information possessed by the Agent or Arranger in their capacity as such. Each Finance Party acknowledges that the Agent and the Arrangers may, now or in the future, be in possession of, or provided with, information relating to the Obligors which has not or will not be provided to the other Finance Parties. Each Finance Party agrees that, except as expressly provided in this Agreement, none of the Agent or any Arranger will be under any obligation to provide, or under any liability for failure to provide, any such information to the other Finance Parties.
20.	FEES
20.1	Commitment fee
(a)	Vodafone shall pay to the Agent for distribution to each Lender pro rata to the proportion its Revolving Credit Commitment bears to the Total Commitments from time to time a commitment fee at the rate of 0.125 per cent. per annum on any undrawn, uncancelled amount of the Total Commitments on each day.
(b)	Commitment fee is calculated and accrues on a daily basis on and from the Signing Date and is payable quarterly in arrear. Accrued and unpaid commitment fee is also payable to the Agent for the relevant Lender(s) on any amount of its Revolving Credit Commitment, which is cancelled voluntarily by the Borrower at the time the cancellation takes effect (but only in respect of the period up to the date of cancellation).
20.2	Agent's fee
	Vodafone shall pay to the Agent for its own account an agency fee in the amounts and on the dates agreed in the relevant Fee Letter.
20.3	Front-end fees
(a)	Vodafone shall pay to the Agent for the Original Lenders as at the Signing Date a front-end fee in the amount and on the date specified in the relevant Fee Letter.
(b)	If so agreed between Vodafone and an Additional Lender, Vodafone shall pay to such Additional Lender a front-end fee in the amounts and on the dates specified in the relevant Fee Letter.

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20.4	VAT
	Any fee referred to in this Clause 20 is exclusive of any United Kingdom value added tax. If any value added tax is so chargeable, it shall be paid by Vodafone at the same time as it pays the relevant fee.
21.	EXPENSES
21.1	Initial and special costs
	Vodafone shall forthwith on demand pay the Agent and the Arrangers the amount of all out- of-pocket costs and expenses (including but not limited to legal fees up to an amount agreed, in the case of (a)(i) below, with the Arrangers) reasonably incurred by any of them in connection with:
	(a)	the negotiation, preparation, printing and execution of:
		(i)	this Agreement and any other documents referred to in this Agreement; and
		(ii)	any other Finance Document (other than a Novation Certificate) executed after the Signing Date;
	(b)	any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested by or on behalf of an Obligor and relating to a Finance Document or a document referred to in any Finance Document or any amendment to this Agreement to reflect a change in currency of a country pursuant to Clause 9.4(b)(iii) (Currency); and
	(c)	any other agency matter not of an ordinary administrative nature, arising out of or in connection with a Finance Document in the amount agreed between the Agent and Vodafone at the relevant time.
21.2	Enforcement costs
	Vodafone shall within five Business Days of receiving written demand pay to each Finance Party the amount of all costs and expenses (including but not limited to legal fees) incurred (or in the case of (b) below reasonably incurred) by it:
	(a)	in connection with the enforcement of any Finance Document; or
	(b)	in connection with the preservation of any rights under any Finance Document.
22.	STAMP DUTIES
	Vodafone shall pay and within five Business Days of receiving written demand indemnify each Finance Party against any liability it incurs in respect of any stamp, registration or similar tax which is or becomes payable in any jurisdiction in or through which any payment under the Finance Documents is made or any Obligor is incorporated or has any assets in connection with the entry into, performance or enforcement of any Finance Document.

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23.	INDEMNITIES
23.1	Currency indemnity
(a)	If a Finance Party receives an amount in respect of an Obligor's liability under the Finance Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the Contractual Currency) in which the amount is expressed to be payable under the relevant Finance Document:
	(i)	that Obligor shall indemnify that Finance Party as an independent obligation against any loss or liability arising out of or as a result of the conversion;
	(ii)	if the amount received by that Finance Party, when converted into the Contractual Currency at a market rate in the usual course of its business, is less than the amount owed in the Contractual Currency, the Obligor concerned shall forthwith on demand pay to that Finance Party an amount in the Contractual Currency equal to the deficit (provided that if the amount received by the Finance Party following such conversion is greater than the amount owed, the Finance Party shall pay to such Obligor an amount equal to the excess); and
	(iii)	the Obligor shall pay to the Finance Party concerned on demand any exchange costs and taxes payable in connection with any such conversion.
(b)	Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.
23.2	Other indemnities
	Vodafone shall forthwith on demand indemnify each Finance Party against any loss or liability which that Finance Party incurs as a consequence of:
	(a)	the occurrence of any Default; or
	(b)	the operation of Clause 18.16 (Acceleration); or
	(c)	any payment of principal or an Overdue Amount being received from any source otherwise than on its Maturity Date (and, for the purposes of this paragraph (c), the Maturity Date of an Overdue Amount is the last day of each Designated Term); or
	(d)	a Default or an action or omission by an Obligor resulting in an Advance not being disbursed after a Borrower has delivered a Request for that Advance.
	Vodafone's liability in each case includes any loss or expense, (excluding loss of Margin) in respect or on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Advance.
23.3	Breakage costs
	If a Finance Party receives or recovers any payment of principal of an Advance or of an Overdue Amount other than on its Maturity Date or, as the case may be, the last day of the Designated Term for the purposes of calculation of the amount payable by Vodafone under sub-clause (c) of Clause 23.2 (Other indemnities) in respect of the amount so received or recovered, that Finance Party shall calculate:

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	(a)	the additional interest (excluding the Margin) which would have been payable on the principal so received or recovered had it been received or recovered on the relevant Maturity Date or, as the case may be, the last day of the Designated Term; and
	(b)	the amount of interest which would have been payable to that Finance Party on the relevant Maturity Date or, as the case may be, the last day of the Designated Term concerned in respect of a deposit by that Finance Party in the currency of the amount received or recovered placed with a prime bank in London earning interest from (and including) the earliest Business Day for placing deposits in such currency following receipt of that amount up to (but excluding) the relevant Maturity Date or, as the case may be, the last day of the applicable Designated Term,
	and if the amount payable under paragraph (a) above is greater than the amount payable under paragraph (b), Vodafone will, forthwith on receipt of a demand from the relevant Finance Party pursuant to sub-clause (c) of Clause 23.2 (Other indemnities), pay to that Finance Party an amount equal to the difference between the amount payable under (a) and (b) above.
24.	EVIDENCE AND CALCULATIONS
24.1	Accounts
	Accounts maintained by a Finance Party in connection with this Agreement are prima facie evidence of the matters to which they relate (except in a case of manifest error).
24.2	Certificates and determinations
	Any certification or determination by a Finance Party of a rate or amount under this Agreement is, in the absence of manifest error, prima facie evidence of the matters to which it relates.
24.3	Calculations
	Interest and the fees payable under Clause 20.1 (Commitment fee) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days, or, in the case of any interest payable in an amount denominated in Sterling, 365 days.
25.	AMENDMENTS AND WAIVERS
25.1	Procedure
(a)	Subject to Clause 25.2 (Exceptions) and Clause 25.3 (NewTopco), any term of the Finance Documents may be amended or waived with the agreement of Vodafone and the Majority Lenders. The Agent may effect, on behalf of the Lenders, an amendment to which the Majority Lenders have agreed.
(b)	The Agent shall promptly notify the other Parties of any amendment or waiver effected under paragraph (a) above, and any such amendment or waiver shall be binding on all the Parties.
25.2	Exceptions
	An amendment or waiver which relates to:
	(a)	the definition of “Majority Lenders” in Clause 1.1 (Definitions); or

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	(b)	an extension of the date for, or a decrease in an amount or a change in the currency of, any payment under the Finance Documents; or
	(c)	an increase in or extension of a Lender's Commitment or a change to the Margin; or
	(d)	a change in the guarantee under Clause 14 (Guarantee) otherwise than in accordance with Clause 26.5 (Additional Guarantors) or Clause 14.9 (Removal of Guarantors); or
	(e)	a term of a Finance Document which expressly requires the consent of each Lender; or
	(f)	Clause 29 (Pro rata Sharing) or this Clause 25; or
	(g)	any Term exceeding six months,
	may not be effected without the consent of each Lender. Any amendment or waiver which changes, or relates to the rights and/or obligations of the Agent shall also require the Agent's agreement.
25.3	NewTopco
	Any amendment substituting a reference to Vodafone with a reference to NewTopco:
	(a)	to any procedural or administrative provision of this Agreement; or
	(b)	which puts the Parties in substantially the same position as applied prior to the Hive Up,
	may be effected by agreement between NewTopco and the Agent.
25.4	Waivers and remedies cumulative
	The rights of each Party under the Finance Documents:
	(a)	may be exercised as often as necessary;
	(b)	are cumulative and not exclusive of its rights under the general law; and
	(c)	may be waived only in writing and specifically.
	Delay in exercising or non-exercise of any such right is not a waiver of that right.
26.	CHANGES TO THE PARTIES
26.1	Transfers by Obligors
(a)	No Obligor may assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under this Agreement provided that without any further consent from the Lenders or the Agent it may, subject to Clause 26.1(b) below and provided that no Default is continuing or would result from any such transfer, transfer its rights and obligations under this Agreement to NewTopco or any Intermediate Holding Company and NewTopco or the Intermediate Holding Company will execute a document, or documents, in favour of the Lenders in form and substance the same as this Agreement, with references to such Obligor in this Agreement amended to mean NewTopco or such Intermediate Holding Company (as applicable), provided that if such transfer is to an Intermediate Holding Company, the Agent

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	may, within 30 days of receipt of notification of such transfer, require NewTopco to accede as a Guarantor. The Agent shall (and is hereby authorised to) execute on behalf of the Finance Parties any such document or documents executed by NewTopco or the Intermediate Holding Company provided that the conditions set out in this Clause 26.1 are satisfied.
(b)	The transfer of rights and obligations under this Agreement to NewTopco or any Intermediate Holding Company shall not require the consent of the Lenders or the Agent provided that NewTopco or the Intermediate Holding Company, as applicable, is incorporated and tax resident in the United Kingdom or in the United States and prior to such transfer Vodafone provides satisfactory evidence to the Agent that it is tax resident in one of those jurisdictions. The prior written consent of the Majority Lenders shall be required in relation to the transfer of rights and obligations to a NewTopco or an Intermediate Holding Company incorporated elsewhere.
26.2	Transfers by Lenders
(a)	A Lender (the “Existing Lender”) may at any time assign, transfer or novate any of its rights and/or obligations under this Agreement to another person (the “New Lender”) provided that in the case of a partial assignment, transfer or novation of rights and/or obligations, a minimum amount of U.S.$10,000,000 in aggregate and in multiples of U.S.$1,000,000 (unless to an Affiliate or to a Lender or the Agent agrees otherwise) must be assigned, transferred or novated
(b)	A transfer of obligations will be effective only if either:
	(i)	the obligations are novated in accordance with Clause 26.4 (Procedure for novations); or
	(ii)	the New Lender gives prior written notice to Vodafone and confirms to the Agent and Vodafone that it undertakes to be bound by the terms of this Agreement as a Lender in form and substance satisfactory to the Agent. On the transfer becoming effective in this manner the Existing Lender shall be relieved of its obligations under this Agreement to the extent that they are transferred to the New Lender; and
	(iii)	the Agent has performed all “know your customer” or other checks relating to any person that it is required to carry out in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.
(c)	No assignment, transfer or novation requires the consent of any Obligor but the Existing Lender must notify Vodafone (except in relation to an assignment, transfer or novation to an Affiliate) within three Business Days of such an assignment, transfer or novation taking effect of the name of the New Lender, the date it takes effect and the reasons for the transfer.
(d)	Nothing in this Agreement restricts the ability of a Lender to sub-contract an obligation if that Lender remains liable under this Agreement for that obligation.
(e)	On each occasion an Existing Lender assigns, transfers or novates any of its rights and/or obligations under this Agreement (other than to an Affiliate), the New Lender shall, on the date the assignment, transfer and/or novation takes effect, pay to the Agent for its own account a fee of £1,000.
(f)	An Existing Lender is not responsible to a New Lender for:

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	(i)	the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document; or
	(ii)	the collectability of amounts payable under any Finance Document; or
	(iii)	the accuracy of any statements (whether written or oral) made in connection with any Finance Document.
(g)	Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
	(i)	has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and
	(ii)	will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under this Agreement or any Commitment is in force.
(h)	Nothing in any Finance Document obliges an Existing Lender to:
	(i)	accept a re-transfer from a New Lender of any of the rights and/or obligations assigned, transferred or novated under this Clause 26; or
	(ii)	support any losses incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under this Agreement or otherwise.
(i)	Any reference in this Agreement to a Lender includes a New Lender but excludes a Lender if no amount is or may be owed to or by it under this Agreement and its Commitment has been cancelled or reduced to nil.
(j)	If any assignment, transfer or novation results either:
	(i)	at the time of the assignment, transfer or novation; or
	(ii)	at any future time where the additional amount was caused as a result of laws and/or regulations in force at the date of the assignment, transfer or novation,
	in additional amounts becoming due under Clause 10 (Taxes) or amounts becoming due under Clause 12 (Increased costs), the New Lender shall be entitled to receive such additional amounts only to the extent that the Existing Lender would have been so entitled had there been no such assignment, transfer or novation.
26.3	Affiliates of Lenders
(a)	Each Lender may fulfil its obligations in respect of any Advance through an Affiliate if:
	(i)	the relevant Affiliate is specified in this Agreement as a Lender or becomes a Lender by means of a Novation Certificate in accordance with this Agreement and subject to any consent required under Clause 26.2 (Transfers by Lenders); and
	(ii)	the Advances in which that Affiliate will participate are specified in this Agreement or in a notice given by that Lender to the Facility Agent.

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	In this event, the Lender and the Affiliate will participate in Advances in the manner provided for in sub-paragraph (ii) above.
(b)	If paragraph (a) above applies, the Lender and its Affiliate will be treated as having a single Commitment and a single vote, but, for all other purposes, will be treated as separate Lenders.
26.4	Procedure for novations
(a)	A novation is effected if:
	(i)	the Existing Lender and the New Lender deliver to the Agent a duly completed certificate (a “Novation Certificate”), substantially in the form of Part 1 of Schedule 5, with such amendments as the Agent approves to achieve a substantially similar effect (which may be delivered by fax and confirmed by delivery of a hard copy original but the fax will be effective irrespective of whether confirmation is received); and
	(ii)	the Agent executes it (as soon as practicable for it to do so).
(b)	Each Party (other than the Existing Lender and the New Lender) irrevocably authorises the Agent to execute any duly completed Novation Certificate on its behalf.
(c)	To the extent that they are expressed to be the subject of the novation in the Novation Certificate:
	(i)	the Existing Lender and the other Parties (the “Existing Parties”) will be released from their obligations to each other (the “Discharged Obligations”);
	(ii)	the New Lender and the Existing Parties will assume obligations towards each other which differ from the Discharged Obligations only insofar as they are owed to or assumed by the New Lender instead of the Existing Lender;
	(iii)	the rights of the Existing Lender against the Existing Parties and vice versa (the “Discharged Rights”) will be cancelled; and
	(iv)	the New Lender and the Existing Parties will acquire rights against each other which differ from the Discharged Rights only insofar as they are exercisable by or against the New Lender instead of the Existing Lender,
	all on the date of execution of the Novation Certificate by the Agent or, if later, the date specified in the Novation Certificate.
(d)	If the effective date of a novation is after the date a Request is received by the Agent but before the date the requested Advance is disbursed to the relevant Borrower, the Existing Lender shall be obliged to participate in that Advance in respect of its Discharged Obligations notwithstanding that novation, and the New Lender shall reimburse the Existing Lender for its participation in that Advance and all interest and fees thereon up to the date of reimbursement (in each case to the extent attributable to the Discharged Obligations) within three Business Days of the Drawdown Date of that Advance.
(e)	The Agent shall only be obliged to execute a Novation Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.

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26.5	Additional Guarantors
(a)	(i)	Vodafone will procure that NewTopco and any Intermediate Holding Company of Vodafone will become an Additional Guarantor on or before the Reorganisation Date by executing and delivering the documents set out in paragraph (iii) below on or before the Reorganisation Date.
	(ii)	Subject to Vodafone's prior written consent, any other member of the Group may become an Additional Guarantor.
	(iii)	The relevant company will become an Additional Guarantor upon:
		(A)	the delivery to the Agent of a Guarantor Accession Agreement duly executed by that company; and
		(B)	delivery to the Agent of all those other documents listed in Part 2 of Schedule 2, in each case in the agreed form or in such other form and substance satisfactory to the Agent.
(b)	The execution of a Guarantor Accession Agreement constitutes confirmation by the Additional Guarantor concerned that the representations and warranties set out in Clauses 15.1 (Representations and warranties) to 15.6 (Authorisations) to be made by it on the date of the Guarantor Accession Agreement are correct, as if made with reference to the facts and circumstances then existing.
26.6	Additional Borrowers
(a)	(i)	Any member of the Restricted Group, or following a Hive Up (and subject to the proviso below), NewTopco or any Intermediate Holding Company incorporated and tax resident in the United Kingdom or in the United States or, subject to the prior written consent of the Majority Lenders, elsewhere which Vodafone nominates may become an Additional Borrower provided that on or prior to the date on which NewTopco or any Intermediate Holding Company accedes as an Additional Borrower it also accedes as an Additional Guarantor.
	(ii)	The relevant member of the Restricted Group will become an Additional Borrower upon:
		(A)	the delivery to the Agent of a Borrower Accession Agreement duly executed by that member of the Restricted Group; and
		(B)	delivery to the Agent of all those other documents listed in Part III of Schedule 2, in each case in the agreed form or in such other form and substance satisfactory to the Agent.
(b)	The execution of a Borrower Accession Agreement constitutes confirmation by the Additional Borrower concerned that the representations and warranties set out in Clauses 15.1 (Representations and warranties) to 15.6 (Authorisations) to be made by it on the date of the Borrower Accession Agreement are correct, as if made with reference to the facts and circumstances then existing.

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26.7	Removal of Borrowers
(a)	Any Borrower (other than Vodafone (subject to Clause 26.7(b) below) or, if applicable, NewTopco) which has no liabilities to the Finance Parties in respect of outstanding Advances or any other liabilities to the Finance Parties under the Finance Documents (other than as a Guarantor) may, at the request of Vodafone and if no Default is outstanding, cease to be a Borrower by entering into a supplemental agreement to this Agreement at the cost of Vodafone in such form as the Agent may reasonably require which shall discharge that Borrowers' obligations as a Borrower under this Agreement.
(b)	If on the Reorganisation Date:
	(i)	NewTopco and any Intermediate Holding Company has acceded as a Guarantor in accordance with Clause 26.5 (Additional Guarantors);
	(ii)	Vodafone has no liabilities to the Finance Parties in respect of outstanding Advances or any other liabilities to the Finance Parties under the Finance Documents (other than as a Guarantor); and
	(iii)	no Default is continuing,
	Vodafone may cease to be a Borrower with effect from the Reorganisation Date by entering into a supplemental agreement to this Agreement at the cost of Vodafone or NewTopco in such form as the Agent may reasonably require which shall discharge Vodafone's obligations as a Borrower under this Agreement.
26.8	Reference Banks
	If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with Vodafone) appoint another Lender or an Affiliate of a Lender which is not a Reference Bank to replace that Reference Bank.
26.9	Register
	The Agent shall keep a register of all the Parties including in the case of Lenders the details of their Facility Office notified to the Agent from time to time, and shall supply any other Party (at that Party's expense) with a copy of the register on request.
27.	DISCLOSURE OF INFORMATION
(a)	A Lender may disclose to any of its Affiliates or any person with whom it is proposing to enter, or has entered into, any kind of transfer, participation or other agreement in relation to this Agreement:
	(i)	a copy of any Finance Document; and
	(ii)	any information which that Lender has acquired under or in connection with any Finance Document,
	provided that a Lender shall not disclose any such information to a person other than one of its Affiliates unless that person has provided to that Lender a confidentiality undertaking addressed to that Lender and Vodafone substantially in the form of Schedule 6 or such other form as Vodafone may approve.

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(b)	Paragraphs 1(a), 1(c), 2(b), 3, 6, 8, 9 and 12 of Schedule 6 (Form of confidentiality undertaking from new Lender) shall be deemed to be incorporated herein as if set out in full (mutatis mutandis), but as if references therein to “we” were to each Finance Party and references to “you” were to Vodafone.
28.	SET-OFF
28.1	Contractual set-off
	Whilst an Event of Default subsists, each Obligor authorises each Finance Party to apply any credit balance to which that Obligor is entitled on any account of that Obligor with that Finance Party in satisfaction of any sum due and payable from that Obligor to that Finance Party under the Finance Documents but unpaid. For this purpose, each Finance Party is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application.
28.2	Set-off not mandatory
	No Finance Party shall be obliged to exercise any right given to it by Clause 28.1 (Contractual set-off).
28.3	Notice of set-off
	Any Finance Party exercising its rights under Clause 28.1 (Contractual set-off) shall notify Vodafone promptly after set-off is applied.
29.	PRO RATA SHARING
29.1	Redistribution
	If any amount owing by an Obligor under any Finance Document to a Finance Party (the “Recovering Finance Party”) is discharged by payment, set-off or any other manner other than through the Agent in accordance with Clause 9 (Payments) (a “Recovery”), then:
	(a)	the Recovering Finance Party shall, within three Business Days, notify details of the Recovery to the Agent;
	(b)	the Agent shall determine whether the Recovery is in excess of the amount which the Recovering Finance Party would have received had the Recovery been received by the Agent and distributed in accordance with Clause 9 (Payments);
	(c)	subject to Clause 29.3 (Exceptions), the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the “Redistribution”) equal to the excess;
	(d)	the Agent shall treat the Redistribution as if it were a payment by the Obligor concerned under Clause 9 (Payments) and shall pay the Redistribution to the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 9.7 (Partial payments); and
	(e)	after payment of the full Redistribution, the Recovering Finance Party will be subrogated to the portion of the claims paid under paragraph (d) above, and that Obligor will owe the Recovering Finance Party a debt which is equal to the Redistribution, immediately payable and of the type originally discharged.

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29.2	Reversal of redistribution
	If under Clause 29.1 (Redistribution):
	(a)	a Recovering Finance Party must subsequently return a Recovery, or an amount measured by reference to a Recovery, to an Obligor; and
	(b)	the Recovering Finance Party has paid a Redistribution in relation to that Recovery,
	each Finance Party shall, within three Business Days of demand by the Recovering Finance Party through the Agent, reimburse the Recovering Finance Party all or the appropriate portion of the Redistribution paid to that Finance Party. Thereupon the subrogation in Clause 29.1(e) (Redistribution) will operate in reverse to the extent of the reimbursement.
29.3	Exceptions
(a)	A Recovering Finance Party need not pay a Redistribution to the extent that it would not, after the payment, have a valid claim against the Obligor concerned in the amount of the Redistribution pursuant to Clause 29.1(e) (Redistribution).
(b)	A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal proceedings, if the other Finance Party had an opportunity to participate in those legal proceedings but did not do so and did not take separate legal proceedings.
30.	SEVERABILITY
	If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:
	(a)	the legality, validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or
	(b)	the legality, validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents.
31.	COUNTERPARTS
	This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.
32.	NOTICES
32.1	Giving of notices
	(a)	All notices or other communications under or in connection with this Agreement shall be given in writing or by facsimile. Any such notice will be deemed to be given as follows:
	(i)	if in writing, when delivered; and
	(ii)	if by facsimile, when received.

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	However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.
(b)	Any Party may agree with any other Party to give and receive notices by telex in which case the notice will be deemed given when the correct answerback is received.
32.2	Addresses for notices
(a)	The address and facsimile number of each Party (other than the Agent and Vodafone) for all notices under or in connection with this Agreement are:

(i)	that notified by that Party for this purpose to the Agent on or before it becomes a Party; or
(ii)	any other notified by that Party for this purpose to the Agent by not less than five Business Days' notice.

(b)	The address and facsimile numbers of the Agent are:
	The Royal Bank of Scotland Plc
	25 Devonshire Square
	London
	EC2M 4BB
	Contact:	Loans Admin Unit
	Telephone:	020 7672 6284
	Facsimile:	020 7615 7673
	or such other as the Agent may notify to the other Parties by not less than five Business Days' notice.
(c)	The addresses and facsimile numbers of Vodafone are:
	Vodafone Group Plc
	Vodafone House
	The Connection
	Newbury RG14 2FN
	Contact:	Group Treasurer
	Telephone:	07785 771 847
	Facsimile:	01635 676 746
	or such other as Vodafone may notify to the other Parties by not less than five Business Days' notice.

(d) The Agent shall, promptly upon request from any Party, give to that Party the address or facsimile number of any other Party applicable at the time for the purposes of this Clause 32.

33.	LANGUAGE
(a)	Any notice given under or in connection with any Finance Document shall be in English.

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(b)	All other documents provided under or in connection with any Finance Document shall be:
	(i)	in English; or
	(ii)	if not in English, accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document.

34.	JURISDICTION
34.1	Submission
	For the benefit of each Finance Party, each Obligor agrees that the courts of England have jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of the English courts.
34.2	Service of process
	Without prejudice to any other mode of service, each Obligor (other than an Obligor incorporated in England and Wales):
	(a)	irrevocably appoints Vodafone as its agent for service of process relating to any proceedings before the English courts in connection with any Finance Document (and Vodafone accepts this appointment);
	(b)	agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned;
	(c)	consents to the service of process relating to any such proceedings by prepaid posting of a copy of the process to its address for the time being applying under Clause 32.2 (Addresses for notices); and
	(d)	agrees that if the appointment of any person mentioned in paragraph (a) or (b) above ceases to be effective, the relevant Obligor shall immediately appoint a further person in England to accept service of process on its behalf in England and, failing such appointment within 15 days, the Agent is entitled to appoint such a person by notice to Vodafone.
34.3	Forum convenience and enforcement abroad
	Each Obligor:
	(a)	waives objection to the English courts on grounds of inconvenient forum or otherwise as regards proceedings in connection with a Finance Document; and
	(b)	agrees that a judgment or order of an English court in connection with a Finance Document is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.
34.4	Non-exclusivity
	Nothing in this Clause 34 limits the right of a Finance Party to bring proceedings against an Obligor in connection with any Finance Document:
	(a)	in any other court of competent jurisdiction; or

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	(b)	concurrently in more than one jurisdiction.
35.	GOVERNING LAW
	This Agreement is governed by English law.
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1
LENDERS AND COMMITMENTS
PART 1
LENDERS AND COMMITMENTS
Commitments
U.S.$
Original Lender	Commitment
	(U.S.$)
ABN AMRO Bank N.V.	175,000,000
Banco Bilbao Vizcaya Argentaria S.A. (London Branch)	175,000,000
Bank of America, N.A.	175,000,000
Barclays Bank PLC	175,000,000
Bayerische Hypo-und Vereinsbank AG	175,000,000
Bayerische Landesbank, London Branch	175,000,000
BNP Paribas (acting through its London Branch)	175,000,000
Citibank, N.A.	175,000,000
Commerzbank Aktiengesellschaft, London Branch	175,000,000
Credit Agricole Indosuez	175,000,000
Deutsche Bank AG London	175,000,000
HSBC Bank plc	175,000,000
ING Bank, N.V., London Branch	175,000,000
JPMorgan Chase Bank	175,000,000
Lehman Brothers Bankhaus AG, London Branch	175,000,000
Lloyds TSB Bank plc	175,000,000
Mizuho Corporate Bank, Ltd.	175,000,000
National Australia Bank Limited ABN 12 004 044 937	175,000,000
Sumitomo Mitsui Banking Corporation Europe Limited	175,000,000

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Original Lender		Commitment
The Bank of Tokyo-Mitsubishi, Ltd.		175,000,000
The Royal Bank of Scotland Plc		175,000,000
UBS AG, London Branch		175,000,000
WestLB AG, London Branch		175,000,000
William Street Commitment Corporation		175,000,000
Banco Santander Central Hispano, S.A. London Branch		93,333,333
Banca Intesa SpA		93,333,333
KBC Bank NV		93,333,333
San Paolo IMI Bank Ireland Plc		93,333,333
Standard Chartered Bank		93,333,333
TD Bank Europe Limited		93,333,333
The Bank of New York		93,333,333
Total	U.S.$	4,853,333,331

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PART 2

MANDATED LEAD ARRANGERS

ABN AMRO Bank N.V.

Banc of America Securities Limited

Banco Bilbao Vizcaya Argentaria S.A. (London Branch)

Barclays Capital (the Investment Banking Division of Barclays Bank PLC)

Bayerische Hypo-und Vereinsbank AG

Bayerische Landesbank, London Branch

BNP Paribas

Citigroup Capital Markets Limited

Commerzbank Aktiengesellschaft, London Branch

Credit Agricole Indosuez

Deutsche Bank AG London

HSBC Investment Bank plc

ING Bank, N.V., London Branch

JPMorgan Chase Bank

Lehman Brothers Bankhaus AG, London Branch

Lloyds TSB Bank plc

Mizuho Corporate Bank, Ltd.

National Australia Bank Limited ABN 12 004 044 937

Sumitomo Mitsui Banking Corporation Europe Limited

The Bank of Tokyo-Mitsubishi, Ltd.

The Royal Bank of Scotland Plc

UBS Limited

WestLB AG, London Branch

William Street Commitment Corporation

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PART 3

CO - ARRANGERS

Banca Intesa SpA

Banco Santander Central Hispano, S.A. London Branch

KBC Bank NV

San Paolo Imi Bank Ireland Plc

Standard Chartered Bank

TD Bank Europe Limited

The Bank of New York

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SCHEDULE 2

CONDITIONS PRECEDENT DOCUMENTS

PART 1

TO BE DELIVERED BEFORE THE FIRST ADVANCE

1.	Constitutional documents
	A copy of the memorandum and articles of association and certificate of incorporation of Vodafone.
2.	Authorisations

(a)	A copy of a resolution of the board of directors of Vodafone or, if applicable, of a committee of the board of directors (together with a copy of the resolution of the board of directors constituting that committee):
	(i)	approving the terms of, and the transactions contemplated by, this Agreement and the Fee Letters and resolving that it execute and, where applicable, deliver this Agreement and the Fee Letters;
	(ii)	authorising a specified person or persons to execute and, where applicable, deliver this Agreement and the Fee Letters on its behalf; and
	(iii)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including Requests) to be signed and/or despatched by it under or in connection with the Finance Documents;
(b)	a specimen of the signature of each person authorised by the resolution referred to in paragraph (a) above;
(c)	a certificate of a director of Vodafone confirming that as at the first Drawdown Date the borrowing of the Total Commitments in full and the borrowing of the Total Commitments under (and as defined in) the 5 Year Facility in full would not together cause any borrowing limit or limit on the giving of guarantees binding on it to be exceeded (whether as a result of such limit having been waived or otherwise);
(d)	a certificate of an authorised signatory of Vodafone certifying that each copy document specified in this Part 1 of Schedule 2 and supplied by Vodafone is correct, complete and in full force and effect as at a date no earlier than the Signing Date.

3.	Legal opinions
	A legal opinion of Allen & Overy, English law counsel to the Agent, in relation to English law.
4.	Fee Letter
	Duly executed Fee Letters referred to in paragraphs (a) and (b) of the definition of “Fee Letters”.

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PART 2

TO BE DELIVERED BY AN ADDITIONAL GUARANTOR

1.	A Guarantor Accession Agreement, duly executed (if appropriate, under seal) by the Additional Guarantor.
2.	A copy of the memorandum and articles of association and certificate of incorporation (or other equivalent constitutional documents) of the Additional Guarantor.
3.	A copy of a resolution of the board of directors of the Additional Guarantor:
	(a)	approving the terms of, and the transactions contemplated by, the Guarantor Accession Agreement and resolving that it execute the Guarantor Accession Agreement as a deed;
	(b)	authorising a specified person or persons to execute the Guarantor Accession Agreement as a deed; and
	(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents to be signed and/or despatched by it under or in connection with this Agreement.
4.	If the Additional Guarantor is not NewTopco and the lawyers referred to in paragraph 10 below advise it to be necessary or desirable, a copy of a resolution, signed by all the holders of the issued or allotted shares in the Additional Guarantor, approving the terms of, and the transactions contemplated by, the Guarantor Accession Agreement.
5.	If the Additional Guarantor is not NewTopco, a copy of a resolution of the board of directors of each corporate shareholder in the Additional Guarantor:
	(a)	approving the terms of the resolution referred to in paragraph 4 above; and
	(b)	authorising a specified person or persons to sign the resolution on its behalf.
6.	A certificate of a director of the Additional Guarantor certifying that the borrowing of the Total Commitments in full and the borrowing of the Total Commitments under (and as defined in) the 5 Year Facility in full would not together cause any borrowing limit or limit on the giving of guarantees binding on it to be exceeded (whether as a result of such limit being waived or otherwise).
7.	A copy of any other authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Guarantor Accession Agreement or for the validity and enforceability of any Finance Document.
8.	A specimen of the signature of each person authorised by the resolutions referred to in paragraphs 3 and, if applicable, 5 above.
9.	A copy of the latest annual statutory audited accounts of the Additional Guarantor.

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10.	A legal opinion of Allen & Overy, legal advisers to the Agent, and, if applicable, other lawyers approved by the Agent in the place of incorporation of the Additional Guarantor addressed to the Finance Parties.
11.	A certificate of an authorised signatory of the Additional Guarantor certifying that each copy document specified in this Part 2 of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Guarantor Accession Agreement.

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PART 3

TO BE DELIVERED BY AN ADDITIONAL BORROWER

1.	A Borrower Accession Agreement, duly executed (if appropriate, under seal) by the Additional Borrower.
2.	A copy of the memorandum and articles of association and certificate of incorporation (or other equivalent constitutional documents) of the Additional Borrower.
3.	A copy of a resolution of the board of directors of the Additional Borrower:
	(a)	approving the terms of, and the transactions contemplated by, the Borrower Accession Agreement and resolving that it execute the Borrower Accession Agreement;
	(b)	authorising a specified person or persons to execute the Borrower Accession Agreement; and
	(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents to be signed and/or despatched by it under or in connection with this Agreement.
4.	A certificate of a director of the Additional Borrower certifying that the borrowing of the Total Commitments in full and the borrowing of the Total Commitments under (and as defined in) the 5 Year Facility in full would not together cause any borrowing limit or limit on the giving of guarantees binding on it to be exceeded (whether as a result of such limit being waived or otherwise).
5.	A copy of any other authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Borrower Accession Agreement or for the validity and enforceability of any Finance Document.
6.	A specimen of the signature of each person authorised by the resolutions referred to in paragraph 3 above.
7.	A copy of the latest annual statutory audited accounts of the Additional Borrower (if any).
8.	A legal opinion of Allen & Overy, legal advisers to the Agent, and, if applicable, other lawyers approved by the Agent in the place of incorporation of the Additional Borrower addressed to the Finance Parties.
9.	A certificate of an authorised signatory of the Additional Borrower certifying that each copy document specified in this Part 3 of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Borrower Accession Agreement.

83

SCHEDULE 3

MANDATORY COST FORMULAE

1.	The Mandatory Cost for an Advance is an addition to the interest rate to compensate Lenders for the cost of compliance with the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions).
2.	On the first day of each Advance (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the “Mandatory Cost Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Mandatory Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Advance) and will be expressed as a percentage rate per annum.
3.	The Mandatory Cost Rate for any Lender lending from a Facility Office in the UK will be calculated by the Agent as follows:
	(a)	in relation to a sterling Advance:
			AB + C (B – D) + E x 0.01
				per cent. per annum
			100 – (A + C)
	(b)	in relation to an Advance in any currency other than sterling:

E x0.01
	per cent. per annum
300

Where
A	is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.
B	is the percentage rate of interest (excluding the Margin and the Mandatory Cost) payable on the Advance for the relevant Term of the Advance.
C	is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.
D	is the percentage rate per annum payable by the Bank of England to that Lender on interest bearing Special Deposits.
E	is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

84

4.	For the purposes of this Schedule:
	(a)	“Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
	(b)	“Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;
	(c)	“Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and
	(d)	“Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.
5.	In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.
6.	If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.
7.	In addition to any notification required under Clause 8.1(c) (Interest rate for all Advances), each Lender shall supply any information required by the Agent for the purpose of calculating its Mandatory Cost Rate. In particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it becomes a Lender:
	(a)	its jurisdiction of incorporation and the jurisdiction of its Facility Office; and
	(b)	any other information that the Agent may reasonably require for such purpose.
	Each Lender shall promptly notify the Agent in writing of any change to the information provided by it pursuant to this paragraph.
8.	The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 6 and 7 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.
9.	The Agent shall have no liability to any person if such determination results in a Mandatory Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 6 and 7 above is true and correct in all respects.

85

10.	The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Mandatory Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 6 and 7 above.
11.	Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, a Mandatory Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.
12.	The Agent may from time to time, after consultation with Vodafone and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England or the Financial Services Authority (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.
	“Reference Banks” has the meaning set out in Clause 1.1 of this Agreement.

86

SCHEDULE 4

FORM OF REQUEST

To:	THE ROYAL BANK OF SCOTLAND PLC as Agent
From:	[BORROWER]
	Date:  [               ]

Vodafone Group Plc –U.S.$ 4,853,333,331
Revolving Credit Agreement dated 26th June, 2003 (as amended and restated on 24th June,
2004)

1	We wish to utilise the Revolving Credit Facility by way of Advances as follows:
	(a)	Drawdown Date:	Revolving
			Credit Facility:	[	]*
	(b)	Requested Amount (including currency):	Revolving
			Credit Facility:	[	]*
	(c)	Term:	Revolving
			Credit Facility:	[	]*
	(d)	Payment Instructions:	Revolving
			Credit Facility:	[	]*
2	We confirm that each condition specified in [Clause 4.2 (Conditions to all drawdowns and rollovers)]** is satisfied on the date of this Request and this Advance would not cause any borrowing limit binding on us to be exceeded.
[By: [BORROWER] Authorised Signatory]

^** Delete as applicable depending on whether the Advance is a Rollover Advance.

87

SCHEDULE 5 

FORMS OF ACCESSION DOCUMENTS 

PART 1 

NOVATION CERTIFICATE 

To:	THE ROYAL BANK OF SCOTLAND PLC as Agent
From:	[THE EXISTING LENDER] and [THE NEW LENDER]	Date: [      ]

Vodafone Group Plc –U.S.$ 4,853,333,331
Revolving Credit Agreement dated 26th June, 2003 (as amended and restated on 24th June,
2004)

We refer to Clause 26.4 (Procedure for novations).
1.	We [      ] (the “Existing Lender”) and [      ] (the “New Lender”) agree to the Existing Lender and the New Lender novating all the Existing Lender's rights and obligations referred  to in the Schedule in accordance with Clause 26.4 (Procedure for novations).
2.	The specified date for the purposes of [Clause 26.4(c) (Procedure for novations)] is [date of novation].
3.	The Facility Office and address for notices of the New Lender for the purposes of Clause 32.2 (Addresses for notices) are set out in the Schedule.
4.	The Existing Lender confirms that it has given notice to Vodafone of the entry into of this Novation Certificate in accordance with Clause 26.2(c) (Transfers by Lenders).
5.	This Novation Certificate is governed by English law.

88

THE SCHEDULE

Rights and obligations to be novated

[Details of the rights and obligations of the Existing Lender to be novated.] 

[New Lender]
[Facility Office	Address for notices]
[Existing Lender]	[New Lender]	THE ROYAL BANK  OF
		SCOTLAND PLC
By:	By:	By:
Date:	Date:	Date:

89

PART 2

GUARANTOR ACCESSION AGREEMENT

To:	THE ROYAL BANK OF SCOTLAND PLC as Agent
From:	[PROPOSED GUARANTOR]
	Date: [       ]

        Vodafone Group Plc –U.S.$ 4,853,333,331 Revolving Credit Agreement dated 26th June, 2003 (as amended and restated on 24th June, 2004) (the “Credit Agreement”)

Terms used in this Deed which are defined in the Credit Agreement shall have the same meaning in this Deed as in the Credit Agreement.

We refer to Clause 26.5 (Additional Guarantors).

We, [name of company] of [Registered Office] (Registered no. [         ]) agree to become an Additional Guarantor and to be bound by the terms of the Credit Agreement as an Additional Guarantor in accordance with Clause 26.5 (Additional Guarantors). [In addition, we also agree to become bound by all the terms of the Credit Agreement expressed to apply to or be binding on NewTopco]^*

Our address for notices for the purposes of Clause 32.2 (Addresses for notices) is:

[
	]

This Deed is governed by English law.

Executed as a deed by	)	Director
[PROPOSED GUARANTOR]	)
acting by	)	Director/Secretary
and
	)

^*Only in the case of accession by NewTopco.

90

PART 3

BORROWER ACCESSION AGREEMENT

To:	THE ROYAL BANK OF SCOTLAND PLC as Agent
From:	[PROPOSED BORROWER]
	[Date]

        Vodafone Group Plc – U.S.$ 4,853,333,331 Revolving Credit Agreement dated 26th June, 2003 (as amended and restated on 24th June, 2004) (the “Credit Agreement”)

Terms used herein which are defined in the Credit Agreement shall have the same meaning herein as in the Credit Agreement.

We refer to Clause 26.6 (Additional Borrowers).

We, [Name of company] of [Registered Office] (Registered no. [       ] agree to become party to and to be bound by the terms of the Credit Agreement as an Additional Borrower in accordance with Clause 26.6 (Additional Borrowers).

The address for notices of the Additional Borrower for the purposes of Clause 32.2 (Addresses for notices) is:

[
	]

This Agreement is governed by English law.

[ADDITIONAL BORROWER]

By:

THE ROYAL BANK OF SCOTLAND PLC
By

91

PART 4

LENDER ACCESSION AGREEMENT

To:	THE ROYAL BANK OF SCOTLAND PLC as Agent
From:	[PROPOSED ADDITIONAL LENDER]
	[Date]

        Vodafone Group Plc – U.S.$ 4,853,333,331 Revolving Credit Agreement dated 26th June, 2003 (as amended and restated on 24th June, 2004) (the “Credit Agreement”)

Terms used herein which are defined in the Credit Agreement shall have the same meaning herein as in the Credit Agreement.

We refer to Clause 2.7 (Additional Lenders).

We, [Name of Additional Lender] agree to become party to and to be bound by the terms of the Credit Agreement as an Additional Lender in accordance with Clause 2.7 (Additional Lenders) with effect on and from [insert date].

Our Revolving Credit Commitment is U.S.$[         ]. We confirm to each Finance Party that we:

(a)	have made our own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in the Credit Agreement and have not relied exclusively on any information provided to us by a Finance Party in connection with any Finance Document; and
(b)	will continue to make our own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Credit Agreement or any Commitment is in force.
The Facility Office and address for notices of the Additional Lender for the purposes of Clause 32.2 (Addresses for notices) is

[ ]

This Agreement is governed by English law.

[ADDITIONAL LENDER]

By:

THE ROYAL BANK OF SCOTLAND PLC

By:

VODAFONE GROUP PLC

By:

92

SCHEDULE 6

FORM OF CONFIDENTIALITY UNDERTAKING FROM NEW LENDER

To: [Existing Lender];
Vodafone Group Plc;

Dear Sirs,

We refer to the U.S.$4,853,333,331 Revolving Credit Agreement dated 26th June, 2003 (as amended and restated on 24th June, 2004) (the “Credit Agreement”) between, among others, Vodafone Group Plc and The Royal Bank of Scotland (as Agent).

This is a confidentiality undertaking referred to in Clause 27 (Disclosure of information) of the Credit Agreement. A term defined in the Credit Agreement has the same meaning in this undertaking.

We are considering entering into contractual relations with [insert name of Lender] (the “Existing Lender”) andunderstand that it is a condition of our receiving information about Vodafone Group Plc and its related companies and any Finance Document and/or any information under or in connection with any Finance Document that we execute this undertaking.

1.	Confidentiality Undertaking
	We undertake (a) to keep the Confidential Information confidential and not to disclose it to anyone except as provided for by paragraph 2 below and to ensure that the Confidential Information is protected with security measures and a degree of care that would apply to our own confidential information, (b) to use the Confidential Information only for the Permitted Purpose, (c) to use all reasonable endeavours to ensure that any person to whom we pass any Confidential Information (unless disclosed under paragraph (b) below) acknowledges and complies with the provisions of this letter as if that person were also a party to it and (d) not to make enquiries of any member of the Group or any of their officers, directors, employees or professional advisers relating directly or indirectly to the Facilities, other than directly to the Group Treasurer of Vodafone.
2.	Permitted Disclosure
	You agree that we may disclose Confidential Information:
	(a)	to members of the Purchaser Group and their officers, directors, employees and professional advisers to the extent necessary for the Permitted Purpose and to any auditors of members of the Purchaser Group;
	(b)	where requested or required by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body, (ii) where required by the rules of any stock exchange on which the shares or other securities of any member of the Purchaser Group are listed or (iii) where required by the laws or regulations of any country with jurisdiction over the affairs of any member of the Purchaser Group.
3.	Notification of Required or Unauthorised Disclosure
	We agree (to the extent permitted by law) to inform you of the full circumstances of any disclosure under paragraph 2(b) or upon becoming aware that Confidential Information has been disclosed in breach of this letter.

93

4.	Return of Copies
	If you so request in writing, we shall return all Confidential Information supplied by you to us and destroy or permanently erase all copies of Confidential Information made by us and use all reasonable endeavours to ensure that anyone to whom we have supplied any Confidential Information destroys or permanently erases such Confidential Information and any copies made by them, in each case save to the extent that we or the recipients are required to retain any such Confidential Information by any applicable law, rule or regulation or by any competent judicial, governmental, supervisory or regulatory body or in accordance with internal policy, or where the Confidential Information has been disclosed under paragraph 2(b) above.
5.	Continuing Obligations
	The obligations in this letter are continuing and, in particular, shall survive the termination of any discussions or negotiations between you and us. Notwithstanding the previous sentence, the obligations in this letter shall cease (a) if we become a party to the Facilities or (b) twelve months after we have returned all Confidential Information supplied to us by you and destroyed or permanently erased all copies of Confidential Information made by us (other than any such Confidential Information or copies which have been disclosed under paragraph 2 above (other than sub-paragraph 2(a)) or which, pursuant to paragraph 4 above, are not required to be returned or destroyed provided that any such Confidential Information retained in accordance with paragraph 4 shall remain confidential, subject to paragraph 2, for the period during which it is retained).
6.	Consequences of Breach, etc.
	We acknowledge and agree that you or members of the Group (each a “Relevant Person”) may be irreparably harmed by the breach of the terms hereof and damages may not be an adequate remedy; each Relevant Person may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by any member of the Purchaser Group.
7.	No Waiver; Amendments, etc.
	This letter sets out the full extent of our obligations of confidentiality owed to you in relation to the information the subject of this letter. No failure or delay in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privileges hereunder. The terms of this letter and our obligations hereunder may only be amended or modified by written agreement between us.
8.	Inside Information
	We acknowledge that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation relating to insider dealing and we undertake not to use any Confidential Information for any unlawful purpose.
9.	Nature of Undertakings
	The undertakings given by us under this letter are given to you and (without implying any fiduciary obligations on your part) are also given for the benefit of each other member of the Group.

94

10.	Governing Law and Jurisdiction
	This shall be governed by and construed in accordance with the laws of England and the parties submit to the non-exclusive jurisdiction of the English courts.
11.	Third Party Rights

(a)	Subject to paragraph 6 and to paragraph 9 the terms of this letter may be enforced and relied upon only by you and us and the operation of the Contracts (Rights of Third Parties) Act 1999 is excluded.
(b)	Notwithstanding any provisions of this letter, the parties of this letter do not require the consent of any Relevant Person to rescind or vary this letter at any time.
12.	Definitions
	In this letter:
	“Confidential Information” means any information relating to Vodafone, the Group and/or the Facilities provided to us by you or any of your Affiliates or advisers, in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that (a) is or becomes public knowledge other than as a direct or indirect result of any breach of this letter or (b) is known by us before the date the information is disclosed to us by you or any of your affiliates or advisers or is lawfully obtained by us thereafter, other than from a source which is connected with the Group and which, in either case, as far as we are aware, has not been obtained in violation of, and is not otherwise subject to, any obligation of confidentiality;
	“Permitted Purpose” means considering and evaluating whether to enter into the Facilities; and
	“Purchaser Group” means us, each of our holding companies and subsidiaries and each subsidiary of each of our holding companies (as each such term is defined in the Companies Act 1985).
Yours faithfully
For and on behalf of [New Lender]

95

SCHEDULE 7

FORM OF ADDITIONAL LENDER'S FEE LETTER

Vodafone Group Plc (“Vodafone”)
Vodafone House
The Connection
Newbury
Berkshire RG14 2FN

For the attention of Gerry Bacon

[DATE]

Dear Sirs,

Fee Letter

You have asked us to participate in a U.S.$4,853,333,331 credit facility (the “Facility”) to provide support for the Group's continuing commercial paper programmes and for general corporate purposes of the Group including, but not limited to, acquisitions.

Terms defined in the credit agreement dated 26th June, 2003 (as amended and restated on 24th June, 2004) between (inter alia) Vodafone and the financial institutions listed therein (the “Credit Agreement”) have the same meaning in this letter unless otherwise defined in this letter or the context otherwise requires.

This letter sets out the terms upon which you have agreed to pay a fee in relation to our participation in the Facility.

1.	Fee
	You will pay to us for our account a non-refundable up-front fee equal to [       ] per cent. flat calculated on our Revolving Credit Commitment as at the date on which we become an Additional Lender pursuant to Clause 2.7 (Additional Lenders) of the Credit Agreement and payable 5 Business Days after that date;
2.	Finance Document
	This Fee Letter is a Finance Document.
3.	No Set-off
	All payments to be made under this Fee Letter will be calculated and made without (and free and clear of any deduction for) set-off or counterclaim).
4.	Governing Law
	This letter is governed by and construed in accordance with English law.
If you agree to the above please sign and return the enclosed copy of this letter.
This letter may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this letter.

96

Yours faithfully,

[                    ]

For and on behalf of
[ADDITIONAL LENDER]

We agree to the terms set out above.

[                    ]

For and on behalf of
Vodafone Group Plc

[DATE]

97

SCHEDULE 8

FIXED RATE BONDS

1.	US Bonds
	Financial Indebtedness of Vodafone Americas Inc. (previously AirTouch Communications, Inc.) under bonds issued by itself in existence at the Signing Date to the extent the aggregate principal amount does not exceed U.S.$529,763,000 (being $61,905,000 6.35% due June 2005, $217,659,000 7.5% due July 2006 and $250,199,000 6.65% due May 2008) (in respect of its existing bonds denominated in U.S. Dollars) and DM91,640,000 5.5% due July 2008 (in respect of its existing bonds denominated in Deutsche Marks); or
2.	German Bonds
	Financial Indebtedness of Vodafone Finance BV (previously Mannesmann Finance BV) under bonds issued by itself in existence as at the Signing Date to the extent that the aggregate principal amount does not exceed €6,000,000,000 (being, €2.5bn 4.875% due September 2004, DM960,000,000 5.25% due January 2005, and €3bn 4.75% due May 2009); or
3.	Japanese Bonds
	Financial Indebtedness of Vodafone Holdings K.K. (previously Japan Telecom Holdings Co., Ltd.) under bonds issued by itself in existence at the Signing Date to the extent that the aggregate principal amount does not exceed ¥175,000,000,000 (being seven issues each of ¥25bn due between August 2005 and September 2010).

98

SIGNATORIES

Borrower and Guarantor
VODAFONE GROUP PLC
By:	GERRY BACON
Mandated Lead Arrangers
ABN AMRO BANK N.V.
By:	CHRISTOPHER K. SLATER
BANC OF AMERICA SECURITIES LIMITED
By:	DILYS ROBERTSON
BANCO BILBAO VIZCAYA ARGENTARIA S.A. (LONDON BRANCH)
By:	CHRIS METHERELL PAUL GRAHAM
BARCLAYS CAPITAL
By:	NIELS PEDERSEN
BAYERISCHE HYPO-UND VEREINSBANK AG
By:	PAUL HOUSE
BAYERISCHE LANDESBANK, LONDON BRANCH
By:	BRIAN CLARK
BNP PARIBAS
By:	MICHAEL E. MOLLOY
CITIGROUP CAPITAL MARKETS LIMITED
By:	PAUL HOUSE

99

COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH

By:          JOHN GOODINSON MARK F. SMYTH

CREDIT AGRICOLE INDOSUEZ

By:          RUPERT DOUGALL

DEUTSCHE BANK AG LONDON

By:          J. FENNER D. BUGGE

HSBC INVESTMENT BANK PLC

By:          MIKE SERGISON

ING BANK N.V., LONDON BRANCH

By:          F. DEELEN R. WEIJERS

JPMORGAN CHASE BANK

By:          C.S. WILLIAMS

LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH

By:          PAUL HOUSE

LLOYDS TSB BANK PLC

By:          GRAHAM DODD

MIZUHO CORPORATE BANK, LTD.

By:          P.H.C. HOLE

NATIONAL AUSTRALIA BANK LIMITED ABN 12 004 044 937

By:          ANJALI PATEL

SUMITOMO MITSUI BANKING CORPORATION EUROPE LIMITED

By:          STEPHEN G. ODELL

100

THE BANK OF TOKYO-MITSUBISHI, LTD.

By:          I.R. COUTTS-WOOD

THE ROYAL BANK OF SCOTLAND PLC

By:          ELENA DIMANINA

UBS LIMITED

By:          PAUL HOUSE

WESTLB AG, LONDON BRANCH

By:          A.L.R. JOHNSON

WILLIAM STREET COMMITMENT CORPORATION

By:          DAVID WEIL

Co-Arrangers

BANCA INTESA SPA

By:          LAWRENCE WYBRANIEC

BANCO SANTANDER CENTRAL HISPANO, S.A. LONDON BRANCH

By:MARTA SANCHEZ-PALENCIAJIM INCHES

KBC BANK NV

By:PAUL HOUSE

SAN PAOLO IMI BANK IRELAND PLC

By:PAUL HOUSE

STANDARD CHARTERED BANK

By:STEPHEN M. LILLEY GRAHAME K. SMITH

101

TD BANK EUROPE LIMITED

By:          JULIE EVANS

THE BANK OF NEW YORK

By:          GERALD M. DORKIN

Lenders

ABN AMRO BANK N.V.
as Lender

By:          CHRISTOPHER K. SLATER

BANCA INTESA SPA
as Lender

By:          LAWRENCE WYBRANIEC

BANCO BILBAO VIZCAYA ARGENTARIA S.A. (LONDON BRANCH)
as Lender

By:          CHRIS METHERELL PAUL GRAHAM

BANCO SANTANDER CENTRAL HISPANO, S.A. LONDON BRANCH
as Lender

By:MARTA SANCHEZ-PALENCIAJIM INCHES 

BANK OF AMERICA, N.A. 
as Lender 

By:DILYS ROBERTSON 

BARCLAYS BANK PLC
as Lender 

By:NIELS PEDERSEN 

BAYERISCHE HYPO-UND VEREINSBANK AG
as Lender

By:          PAUL HOUSE

102

BAYERISCHE LANDESBANK, LONDON BRANCH
as Lender

By: BRIAN CLARK

BNP PARIBAS (acting through its London Branch)
as Lender

By: MICHAEL E. MOLLOY

CITIBANK, N.A.
as Lender

By: PAUL HOUSE

COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH
as Lender

By: JOHN GOODINSON         MARK F. SMYTH

CREDIT AGRICOLE INDOSUEZ
as Lender

By: RUPERT DOUGALL

DEUTSCHE BANK AG LONDON
as Lender

By: J. FENNER         D. BUGGE

HSBC BANK PLC
as Lender

By: MIKE SERGISON

ING BANK N.V., LONDON BRANCH
as Lender

By: F. DEELEN         R. WEIJERS

JPMORGAN CHASE BANK
as Lender

By: C.S. WILLIAMS

103

KBC BANK NV
as Lender

By: PAUL HOUSE

LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH
as Lender

By: PAUL HOUSE

LLOYDS TSB BANK PLC
as Lender

By: GRAHAM DODD

MIZUHO CORPORATE BANK, LTD.
as Lender

By: P.H.C. HOLE

NATIONAL AUSTRALIA BANK LIMITED ABN 12 004 044 937
as Lender

By: ANJALI PATEL

SAN PAOLO IMI BANK IRELAND PLC
as Lender

By: PAUL HOUSE

STANDARD CHARTERED BANK
as Lender

By: STEPHEN M. LILLEY GRAHAME K. SMITH

SUMITOMO MITSUI BANKING CORPORATION EUROPE LIMITED
as Lender

By: STEPHEN G. ODELL

TD BANK EUROPE LIMITED
as Lender

By: JULIE EVANS

104

THE BANK OF NEW YORK
as Lender

By: GERALD M. DORKIN

THE BANK OF TOKYO-MITSUBISHI, LTD.
as Lender

By: I.R. COUTTS-WOOD

THE ROYAL BANK OF SCOTLAND PLC
as Lender

By: ELENA DIMANINA

UBS AG, LONDON BRANCH
as Lender

By: PAUL HOUSE

WESTLB AG, LONDON BRANCH
as Lender

By: A.L.R. JOHNSON

WILLIAM STREET COMMITMENT CORPORATION
as Lender

By: JENNIFER HILL

Agent

THE ROYAL BANK OF SCOTLAND PLC

By: ELENA DIMANINA

105

CONFORMED COPY

SUPPLEMENTAL AGREEMENT

DATED 24TH June, 2004

BETWEEN

VODAFONE GROUP PLC

AND

THE ROYAL BANK OF SCOTLAND PLC

as Agent

relating to a US$4,853,333,331 Revolving Credit Facility

dated 26th June, 2003

A L L E N & O V E R Y

Allen & Overy LLP

London

CONTENTS
Clause		Page
1.	Interpretation	1
2.	Amendments	1
3.	Representations	2
4.	Miscellaneous	2
5.	Governing law	2
Schedules
9.	Finance Parties	3
10.	Conditions precedent documents	6
11.	Restated Credit Agreement	7
Signatories		8

THIS AGREEMENT is dated 24th June, 2004 between:

(1)	VODAFONE GROUP PLC (registered number 1833679) (Vodafone); and
(2)	THE FINANCIAL INSTITUTIONS listed in Part 1 of Schedule 1 as Mandated Lead Arrangers;
(3)	THE FINANCIAL INSTITUTIONS listed in Part 2 of Schedule 1 as Co-Arrangers;
(4)	THE FINANCIAL INSTITUTIONS listed in Part 3 of Schedule 1 as Lenders;
(5)	THE ROYAL BANK OF SCOTLAND PLC as agent (in this capacity the Agent); and
(6)	THE ROYAL BANK OF SCOTLAND PLC (NEW YORK BRANCH) as U.S. swingline agent (in this capacity the U.S. Swingline Agent).

BACKGROUND

(A)	This Agreement is supplemental to and amends a credit agreement dated 26th June, 2003 between, among others, Vodafone and the Agent (the Credit Agreement).
(B)	The parties to this Agreement have agreed to amend certain terms of the Credit Agreement subject to the terms and conditions set out in this Agreement.

IT IS AGREED as follows:

1.	INTERPRETATION
1.1	Definitions

(a)	Capitalised terms defined in the Credit Agreement have, unless expressly defined in this Agreement, the same meaning in this Agreement.
(b)	Effective Date means 24th June, 2004 or such other date as Vodafone and the Agent may agree.

1.2	Construction
	The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Agreement as though they were set out in full in this Agreement except that references to the Credit Agreement are to be construed as references to this Agreement.
2.	AMENDMENTS

(a)	Subject as set out below, the Credit Agreement will be amended from the Effective Date so that it reads as if it were restated in the form set out in Schedule 3 (Restated Credit Agreement).
(b)	The Credit Agreement will not be amended by this Agreement unless the Agent notifies Vodafone and the Lenders that it has received all of the documents set out in Schedule 2 in form and substance satisfactory to the Agent on or prior to the Effective Date. The Agent must give this notification as soon as reasonably practicable.

1

(c)	If the Agent fails to give the notification under paragraph (b) above by the Effective Date, the Credit Agreement will not be amended in the manner contemplated by this Agreement.
3.	REPRESENTATIONS
3.1	Representations
	The representations set out in Clause 15 (Representations and warranties) of the Credit Agreement (with the exception of Clause 15.10 (Investment Company) and Clause 15.11 (ERISA)) are true as if made on the date of this Agreement with references to the facts and circumstances then existing and as if references to the Credit Agreement are references to the Credit Agreement, as amended by this Agreement and references to the Credit Agreement are to include references to this Agreement.
4.	MISCELLANEOUS

(a)	Each of this Agreement and the Credit Agreement, as amended by this Agreement, is a Finance Document.
(b)	Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and the Credit Agreement and this Agreement will be read and construed as one document.
(c)	Each Obligor agrees that the guarantee and indemnity in Clause 14 (Guarantee) of the Credit Agreement will extend to the ultimate balance of all sums payable by the Borrowers under the Finance Documents as amended by this Agreement.
5.	GOVERNING LAW
	This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the beginning of this Agreement.

2

SCHEDULE 1

FINANCE PARTIES

PART 1

MANDATED LEAD ARRANGLENDERERS

ABN AMRO Bank N.V.
Banc of America Securities Limited
Banco Bilbao Vizcaya Argentaria S.A. (London Branch)
Barclays Capital (the Investment Banking Division of Barclays Bank PLC)
Bayerische Hypo-und Vereinsbank AG
Bayerische Landesbank, London Branch
BNP Paribas
CALYON
Citigroup Global Markets Limited
Commerzbank Aktiengesellschaft, London Branch
Deutsche Bank AG London
HSBC Bank plc
HSH Nordbank AG, Kiel
ING Bank, N.V., London Branch
JPMorgan Chase Bank
Lehman Brothers Bankhaus AG, London Branch
Lloyds TSB Bank plc
Mizuho Corporate Bank, Ltd.
National Australia Bank Limited ABN 12 004 044 937
Sumitomo Mitsui Banking Corporation Europe Limited
The Bank of Tokyo-Mitsubishi, Ltd.
The Royal Bank of Scotland Plc
UBS Limited
WestLB AG, London Branch

3

PART 2

CO-ARRANGERS

Banca Intesa SpA
Banco Santander Central Hispano, S.A. London Branch
KBC Bank NV
San Paolo IMI Bank Ireland Plc
Standard Chartered Bank
TD Bank Europe Limited
The Bank of New York

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PART 3

LENDERS

ABN AMRO Bank N.V.

Banco Bilbao Vizcaya Argentaria S.A. (London Branch)

Bank of America, N.A.

Barclays Bank PLC

Bayerische Hypo-und Vereinsbank AG

Bayerische Landesbank, London Branch

BNP Paribas (acting through its London Branch)

CALYON

Citibank, N.A.

Commerzbank Aktiengesellschaft, London Branch

Deutsche Bank AG London

HSBC Bank plc

HSH Nordbank AG, Kiel

ING Bank, N.V., London Branch

JPMorgan Chase Bank

Lehman Brothers Bankhaus AG, London Branch

Lloyds TSB Bank plc

Mizuho Corporate Bank, Ltd.

National Australia Bank Limited ABN 12 004 044 937

Sumitomo Mitsui Banking Corporation Europe Limited

The Bank of Tokyo-Mitsubishi, Ltd.

The Royal Bank of Scotland Plc

UBS AG, London Branch

WestLB AG, London Branch

Banco Santander Central Hispano, S.A. London Branch

Banca Intesa SpA

KBC Bank NV

San Paolo IMI Bank Ireland PLC

Standard Chartered Bank

TD Bank Europe Limited

The Bank of New York

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SCHEDULE 2

CONDITIONS PRECEDENT DOCUMENTS

1.	A copy of the constitutional documents of Vodafone or, if the Agent already has a copy, a certificate of an authorised signatory of Vodafone confirming that the copy in the Agent's possession is still correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
2.	A copy of a resolution of the board of directors of Vodafone (or a committee of its board of directors) approving the terms of, and the transactions contemplated by, this Agreement.
3.	If applicable, a copy of a resolution of the board of directors of Vodafone establishing the committee referred to in paragraph 2 above.
4.	A specimen of the signature of each person authorised on behalf of Vodafone to sign this Agreement.
5.	A certificate of an authorised signatory of Vodafone certifying that each copy document specified in this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
6.	A legal opinion of Allen & Overy LLP, English legal advisers to the Agent, addressed to the Finance Parties.
7.	Evidence that all fees and expenses then due and payable from the Company in respect of this Agreement have been paid.

6

SCHEDULE 3

RESTATED CREDIT AGREEMENT

7

SIGNATORIES

Borrower and Guarantor
VODAFONE GROUP PLC
By:	PHIL CLARK
Mandated Lead Arrangers
ABN AMRO BANK N.V.
By:	MARTYN TAPLIN
	CHRISTOPHER SLATER
BANC OF AMERICA SECURITIES LIMITED
By:	JONATHAN PEARSON
BANCO BILBAO VIZCAYA ARGENTARIA S.A. (LONDON BRANCH)
By:	PAUL HOUSE
BARCLAYS CAPITAL
By:	CLIFF BAYLISS
BAYERISCHE HYPO-UND VEREINSBANK AG
By:	PAUL HOUSE
BAYERISCHE LANDESBANK, LONDON BRANCH
By:	MATTHEW WILLIAMS
	BRIAN CLARK
BNP PARIBAS
By:	MICHAEL MOLLOY
	TARIQ KAZI
CALYON
By:	PAUL HOUSE

8

CITIGROUP GLOBAL MARKETS LIMITED
By:	PAUL HOUSE
COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH
By:	KEVIN BUCK
	JON NORTON
DEUTSCHE BANK AG LONDON
By:	DAVID BUGGE
HSBC BANK PLC
By:	MICHAEL SERGISON
HSH NORDBANK AG, KIEL
By:	PAUL HOUSE
ING BANK N.V., LONDON BRANCH
By:	PAUL HOUSE
JPMORGAN CHASE BANK
By:	CHRISTOPHER WILLIAMS
LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH
By:	PAUL HOUSE
LLOYDS TSB BANK PLC
By:	GRAHAM DODD
MIZUHO CORPORATE BANK, LTD.
By:	RICHARD ALLEN
NATIONAL AUSTRALIA BANK LIMITED ABN 12 004 044 937
By:	DAVID RAWSON
SUMITOMO MITSUI BANKING CORPORATION EUROPE LIMITED
By:	STEPHEN ODELL

9

THE BANK OF TOKYO-MITSUBISHI, LTD.
By:	IAN COUTTS-WOOD
THE ROYAL BANK OF SCOTLAND PLC
By:	ROBERT OTTEWILL
UBS LIMITED
By:	PAUL HOUSE
WESTLB AG, LONDON BRANCH
By:	T SAI-LOUIE
	JOHN FINN
Co-Arrangers
BANCA INTESA SPA
By:	PAUL HOUSE
BANCO SANTANDER CENTRAL HISPANO, S.A. LONDON BRANCH
By:	MARTA SANCHEZ-PALENCIA
	JIM INCHES
KBC BANK NV
By:	PAUL HOUSE
SAN PAOLO IMI BANK IRELAND PLC
By:	PAUL HOUSE
STANDARD CHARTERED BANK
By:	NILOFER SETHNA
	STEPHEN LILLEY
TD BANK EUROPE LIMITED
By:	PAUL HOUSE

10

THE BANK OF NEW YORK
By:	JASON GARWOOD
Lenders
ABN AMRO BANK N.V.
as Lender
By:	MARTYN TAPLIN
	CHRISTOPHER SLATER
BANCA INTESA SPA
as Lender
By:	PAUL HOUSE
BANCO BILBAO VIZCAYA ARGENTARIA S.A. (LONDON BRANCH)
as Lender
By:	PAUL HOUSE
BANCO SANTANDER CENTRAL HISPANO, S.A. LONDON BRANCH
as Lender
By:	MARTA SANCHEZ-PALENCIA
	JIM INCHES
BANK OF AMERICA, N.A.
as Lender
By:	DILYS ROBERTSON
BARCLAYS BANK PLC
as Lender
By:	CLIFF BAYLISS
BAYERISCHE HYPO-UND VEREINSBANK AG
as Lender
By:	PAUL HOUSE

11

BAYERISCHE LANDESBANK, LONDON BRANCH
as Lender
By:	MATTHEW WILLIAMS
	BRIAN CLARK
BNP PARIBAS (acting through its London Branch)
as Lender
By:	MICHAEL MOLLOY
	TARIQ KAZI
CALYON
as Lender
By:	PAUL HOUSE
CITIBANK, N.A.
as Lender
By:	PAUL HOUSE
COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH
as Lender
By:	KEVIN BUCK
	JON NORTON
DEUTSCHE BANK AG LONDON
as Lender
By:	DAVID BUGGE
HSBC BANK PLC
as Lender
By:	MICHAEL SERGISON
HSH NORDBANK AG, KIEL
as Lender
By:	PAUL HOUSE
ING BANK N.V., LONDON BRANCH
as Lender
By:	PAUL HOUSE

12

JPMORGAN CHASE BANK
as Lender
By:	CHRISTOPHER WILLIAMS
KBC BANK NV
as Lender
By:	PAUL HOUSE
LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH
as Lender
By:	PAUL HOUSE
LLOYDS TSB BANK PLC
as Lender
By:	GRAHAM DODD
MIZUHO CORPORATE BANK, LTD.
as Lender
By:	RICHARD ALLEN
NATIONAL AUSTRALIA BANK LIMITED ABN 12 004 044 937
as Lender
By:	DAVID RAWSON
SANPAOLO IMI BANK IRELAND PLC
as Lender
By:	PAUL HOUSE
STANDARD CHARTERED BANK
as Lender
By:	NILOFER SETHNA
	STEPHEN LILLEY
SUMITOMO MITSUI BANKING CORPORATION EUROPE LIMITED
as Lender
By:	STEPHEN ODELL

13

TD BANK EUROPE LIMITED
as Lender
By:	PAUL HOUSE
THE BANK OF NEW YORK
as Lender
By:	JASON GARWOOD
THE BANK OF TOKYO-MITSUBISHI, LTD.
as Lender
By:	IAN COUTTS-WOOD
THE ROYAL BANK OF SCOTLAND PLC
as Lender
By:	ROBERT OTTEWILL
UBS AG, LONDON BRANCH
as Lender
By:	PAUL HOUSE
WESTLB AG, LONDON BRANCH
as Lender
By:	T SAI-LOUIEJOHN FINN
Agent
THE ROYAL BANK OF SCOTLAND PLC
By:	ROBERT OTTEWILL
U.S. Swingline Agent
THE ROYAL BANK OF SCOTLAND PLC (NEW YORK BRANCH)
By:	PHILIP PENTNEY

14

EX-4

Exhibit 4.15

Lord MacLaurin of Knebworth DL
Chairman

14 September 2004

Sir John Bond
Group Chairman
HSBC Holdings plc
Level 41, 8 Canada Square
London E14 5HQ

Dear Sir John,

NON-EXECUTIVE DIRECTORSHIP OF VODAFONE GROUP PUBLIC LIMITED COMPANY

Further to our discussions, this letter is to confirm the terms of your appointment as a non-executive director of Vodafone Group Public Limited Company (the “Company”), without prejudice to your obligations to the Company under English Law.

1 Role

Your obligations and responsibilities as a non-executive director are to the Company and, like all directors, you should act at all times in the best interests of the Company, exercising your independent judgement on all matters. Non-executive directors have the same general legal responsibilities to the Company as any other director. The Board as a whole is collectively responsible for promoting the success of the Company by directing and supervising the Company's affairs. Your appointment as non-executive director of the Company is subject to the Company’s Articles of Association (the “Articles”) and the latter will prevail in the event of any conflict between them and the terms of this letter. A copy of the current version of the Articles is included in your director information pack.

In my view, the role of the non-executive director has a number of key elements and I look forward to your contribution in these areas:

• Strategy: you should constructively challenge and contribute to the development of strategy;

• Performance: you should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;

• Risk: you should satisfy yourself that financial information is accurate and that financial controls and systems of risk management are robust and defensible; and

Vodafone Group Plc
Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
Telephone: +44 (0)1635 33251, Facsimile: +44(0)1635 580761

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

• People: non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.

2 Appointment and Term

Subject to the terms of this letter, your appointment will commence on 1 January 2005 (the “Effective Date”) and is for an initial term of three years from the Effective Date, unless terminated earlier in accordance with the Articles or the terms of this letter. The Articles require that directors submit themselves for re-election by shareholders periodically. In the event that you submit yourself for re-election and are not elected, your appointment as director will automatically terminate. The appointment will expire on 31 December 2007 without any automatic right of reappointment, although the Board may invite you to serve for an additional period. You will not be entitled to receive any compensation from the Company in respect of the termination of your directorship.

Overall, we anticipate a time commitment from you involving attendance at all Board meetings (the Company currently has eight each year), the Annual General Meeting (usually held in July each year) and at least one Company/site visit per year. You will be expected to devote appropriate preparation time ahead of each meeting. In addition, each of the principal Board Committees meets about four or five times a year (and in some cases more frequently) and you should anticipate being a member of at least one of these Committees.

By accepting this appointment, you have confirmed that you are able to allocate sufficient time to meet the expectations of your role. If you are unable to attend a Board meeting in person, I hope, nevertheless, that you will be able to join those meetings either by videoconference or teleconference facilities. I would be grateful if, before accepting additional commitments that might affect the time you are able to devote to your role as a non-executive director of the Company, you would seek my agreement.

3 Fees

As you will be a non-executive director of the Company, the Board as a whole will determine your remuneration in accordance with the requirements of good corporate governance, the Financial Services Authority’s Combined Code and the Financial Services Authority’s Listing Rules. The fee for your services is £85,000 per annum and it is paid in equal instalments monthly in arrears. You may elect to be paid either in cash or in the Company’s shares. Please let me know if you may prefer to receive shares. You will also be entitled to be repaid all travelling and other expenses properly incurred in performing your duties in accordance with the Articles of Association. If you are invited to serve on one or more of the Committees of the Board (in which case this will be covered in a separate communication setting out the Committee's terms of reference and any specific responsibilities that may be involved) no additional fee will be payable, unless you are invited to Chair a Committee in which case an additional fee of £10,000 per annum will be payable in equal instalments monthly in arrears for so long as you hold that position. Payment of all fees will cease immediately after your appointment as a non-executive director of the Company terminates for any reason.

2

4 Dealing in the Company's shares

You shall (and you shall procure that your wife and dependent children shall) comply with the provisions of the Criminal Justice Act 1993, the Financial Services and Markets Act 2000, the Financial Services Authority’s Model Code for Securities Transactions by Directors of Listed Companies and rules and regulations laid down by the Company from time to time in relation to such matters.

5 Competitive Businesses

In view of the sensitive and confidential nature of the Company’s business you agree that for so long as you are a non-executive director of the Company you will not, without the consent of the Board, which shall not be withheld unreasonably, be engaged or interested in any capacity in any business or with any company which is, in the reasonable opinion of the Board, competitive with the business of any company in the Group. In the event that you become aware of any potential conflicts of interest, these should be disclosed to me and to the Company Secretary as soon as possible.

6 Confidentiality

You agree that you will not make use of, divulge or communicate to any person (except in the proper performance of your duties) any of the trade secrets or other confidential information of or relating to any company in the Group which you have received or obtained from or through the Company. This restriction shall continue to apply after the termination of your appointment without limit in point of time but shall cease to apply to information or knowledge which comes into the public domain otherwise than through your default or which shall have been received by you from a third party entitled to disclose the same to you.

Your attention is also drawn to the requirements under both legislation and regulation as to the disclosure of price sensitive information. Consequently, you should avoid making any statements that might risk a breach of these requirements without prior clearance from me or from the Company Secretary.

7 Illness or Incapacity

If you are prevented by illness or incapacity from carrying out your duties for a period exceeding three consecutive calendar months or at different times for a period exceeding in aggregate three calendar months in any one period of twelve calendar months or if you become prohibited by law or under the Articles of Association of the Company from being a non-executive director of the Company, then the Company may terminate your appointment immediately.

8 Effect of Termination

Upon termination of your appointment howsoever arising, you shall forthwith or upon request of the Company, resign from office as a non-executive director of the Company and all other offices held by you in any other companies in the Group and your membership of any organisation acquired by virtue of your tenure of any such office, and should you fail to do so, the Company is hereby irrevocably authorised to appoint some person in your name

3

	and on your behalf to sign any documents and do anything necessary or requisite to give effect thereto.
9	Return of Company Property

You agree that upon termination of your appointment as a non-executive director, you will immediately deliver to the Company all property belonging to the Company or any member of its Group, including all documents or other records made or compiled or acquired by you during your appointment concerning the business, finances or affairs of the Group.

10 Independent Professional Advice

In accordance with the Financial Services Authority’s Combined Code, the Board has agreed procedures for directors in the furtherance of their duties to take independent professional advice if necessary, at the Company’s expense. A copy of the relevant Board resolution is enclosed in your director information pack. Naturally, if you have any queries or difficulties at any time please feel free to discuss them with me. I am also available at all times to provide you with information and advice you may need.

11 Insurance

The Company has effected a policy of insurance to indemnify directors against personal liability and defence costs which might result from claims against directors for negligence, breach of duty or breach of trust in relation to the Company. For so long as you are a director you will have the benefit of this policy.

12 Review Process

The performance of individual directors and the whole Board and its committees is evaluated annually. If, in the interim, there are any matters which cause you concern about your role, please discuss them with me as soon as is appropriate.

13 Contract for Services

It is agreed that you will not be an employee of the Company or any of its subsidiaries and that this letter shall not constitute a contract of employment.

In this letter:

“Board” means the board of directors of the Company from time to time or any person or committee nominated by the board of directors as its representative or to whom (and to that extent) it has delegated powers for the purposes of this letter.

“Group” means the Company and any other company which is its subsidiary or in which the Company or any subsidiary of the Company controls not less than 25% of the voting shares (where “subsidiary” has the meaning given to it by section 736 of the Companies Act 1985).

4

This letter shall be governed by and construed in accordance with English Law. Both parties submit to the exclusive jurisdiction of the English Courts as regards any claim or matter arising in connection with the terms of this letter.

Please acknowledge receipt and acceptance of the terms of this letter by signing the enclosed copy and returning it to the Company Secretary. I am greatly looking forward to working with you.

Kind regards.

Yours sincerely

/s/ Ian MacLaurin
Ian MacLaurin

I hereby accept that the terms of this letter constitute the terms of my appointment as a non-executive director of the Company.

Signed /s/ John Bond…………………………………….........................................… Date 14 September 2004

5

EX-7

Exhibit 7

Unaudited computation of ratio of earnings to fixed
charges
	Year ended 31 March
Under UK GAAP (unaudited)	2005		2004		2003		2002		2001
	£m		£m		£m		£m		£m
Fixed charges
Interest payable by subsidiaries	995		1,091		1,123		971		1,156
Add: One third of rental expense	446		451		449		308		233
Add: Preference dividends	71		77		85		94		91
	1,512		1,619		1,657		1,373		1,480
Earnings
(Loss)/profit on ordinary activities before taxation	(4,702	)	(5,047	)	(6,208	)	(13,539	)	(8,086	)
Less: Share of profit/(loss) in joint ventures and associated
undertakings	1,193		546		(156	)	(1,457	)	(550	)
Less: Share of net interest payable of joint ventures and
associated undertakings	(211	)	(215	)	(295	)	(342	)	(327	)
Less: Loss on ordinary activities before taxation - discontinued
operations	-		(7	)	(272	)	(428	)	-
	(5,684	)	(5,371	)	(5,485	)	(11,312	)	(7,209	)
Add: Fixed charges	1,512		1,619		1,657		1,373		1,480
Add: Cash received from associated undertakings and joint
ventures	2,020		1,801		742		139		353
Less: Preference dividends	71		77		85		94		91
	(2,223	)	(2,028	)	(3,171	)	(9,894	)	(5,467	)
Ratio of earnings to fixed charges	-		-		-		-		-
Deficiency between fixed charges and earnings	(3,735	)	(3,647	)	(4,828	)	(11,267	)	(6,947	)
	Year ended 31 March
Under US GAAP (unaudited) (a)	2005		2004		2003		2002		2001
	£m		£m		£m		£m		£m
Fixed charges
Fixed charges (UK GAAP)	1,512		1,619		1,657		1,373		1,480
Less: One third of rental expense for Vodafone Italy	71		71		2		2		-
Add: Interest payable to Vodafone Italy	90		51		40		20		12
Fixed charges (US GAAP)	1,531		1,599		1,695		1,391		1,492
Earnings
Earnings (UK GAAP)	(2,223	)	(2,028	)	(3,171	)	(9,894	)	(5,467	)
Adjusted for:
Less: Profit/(loss) on ordinary activities before tax of Vodafone
Italy (a)	(1,522	)	(1,343	)	(1,955	)	(2,135	)	(2,239	)
Add: Interest payable to Vodafone Italy (a)	(91	)	(51	)	(40	)	(20	)	(12	)
Add: Connection income	16		29		16		(15	)	(54	)
Add: Goodwill amortisation charge of subsidiary companies	(6,482	)	(6,520	)	(5,487	)	(5,120	)	(3,034	)
Add: Licence fee amortisation	(436	)	(76	)	(6	)	-		-
Add: Exceptional items - US GAAP	246		-		-		(85	)	-
Add: Reorganisation costs	-		-		-		-		84
Add: Other	(118	)	(137	)	(46	)	(53	)	(87	)
Add: UK GAAP to US GAAP adjustments to fixed charges	19		(20	)	38		18		12
Earnings (US GAAP)	(7,546	)	(7,460	)	(6,741	)	(13,034	)	(6,319	)
Ratio of earnings to fixed charges	-		-		-		-		-
Deficiency between fixed charges and earnings	(9,077	)	(9,059	)	(8,436	)	(14,425	)	(7,811	)

(a)  For discussion of significant differences between UK GAAP and US GAAP and a reconciliation of net income between amounts calculated under UK GAAP and under US GAAP, see Note 36 to the Consolidated Financial Statements.

The US GAAP fixed charges and earnings have been restated for the years ended 31 March 2004, 2003, 2002 and 2001 to exclude the amounts of Vodafone Italy which is an equity investee under US GAAP and to treat Japan Telecom as discontinued operations.

EX-12

Exhibit 12

EX-13

Exhibit 13

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended March 31, 2005 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

June 8, 2005	/s/ Arun Sarin
Date	Arun Sarin
	Chief Executive

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended March 31, 2005 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

June 8, 2005	/s/ Kenneth J. Hydon
Date	Kenneth J. Hydon
	Financial Director

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-15

Exhibit 15

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration Statement No. 333-81825 on Form S-8 of Vodafone Group Plc and in Amendment No. 1 to Registration Statement No. 333-110941 on Form F-3 of Vodafone Group Plc of our report, dated May 24, 2005 appearing in this Annual Report on Form 20-F of Vodafone Group Plc for the year ended March 31, 2005.

DELOITTE & TOUCHE LLP
Chartered Accountants and Registered Auditors
London, England

June 8, 2005