Strong Results and 3G Confidence from Vodafone

[A1c]

From 'This Is Money' (15/11/2004):

VODAFONE chief executive Arun Sarin today delivered on his promise to return more cash to shareholders by doubling the mobile phone giant's first-half dividend* and pledging the same increase in the final payout.

He also upped the group's share buyback programme from £3bn to £4bn for the year to next March but added that this did not rule out the possibility of further takeovers.

Sarin had said he would give cash back to Vodafone investors ever since it came second to Cingular in the $41bn (£22.2bn) auction for AT&T Wireless earlier this year. Analysts had suggested he would raise the interim payment by anything from 50% to the 100% revealed today.

He said: 'The board talked about the overall prospects, the launch of 3G and the benefits from One Vodafone and decided that it was feeling very good about our future cashflows. The business is performing very strongly; the UK, Germany and Italy are all doing well, Japan is a turnaround case but is starting to turn and the US did very well.

'Today we have announced a rebasing of our dividend so that we have a new starting point for the future. We will increase the dividend in line with the fundamental underlying growth in the business. I think investors will welcome this and also the rebalancing between dividend payments and share buybacks.'

Standing by the forecasts made at the start of the year, Sarin said: 'For the full year we expect double-digit organic growth in customers and high single-digit organic growth in mobile revenue. We still see broadly stable mobile margins and free cashflow of around £7bn.'

The expected dividend, costing £2.8bn, and the £4bn share buyback will account for the bulk of that cashflow.

Sarin said he had no immediate takeover prospects in his sights, but he hoped something could happen with French business SFR, controlled by Vivendi, in the next two or three years. He is also looking at potential deals in Eastern Europe and Asia.

In the six months to the end of September Vodafone added 7.4m customers worldwide, taking its subscriber base to 146.7m people. Revenues were marginally down from £16.9bn to £16.8bn but this included £818m of discontinued revenues, mainly from Vodafone's sale of its fixed-line phone business in Japan.

Profits before tax, goodwill amortisation* and exceptional items were 1% higher at £5.39bn. The amount of goodwill written off to cover Vodafone's acquisitions and third-generation licence costs fell from £7.65bn to £7.3bn.

The interim dividend is 1.91p and the year's total should be just over 4p.

Pre-tax losses were 5% lower at £1.88bn. Headline earnings per share* rose 10% to 5.28p. After the write-downs, losses per share fell by 24% to 4.77p.

http://www.thisismoney.com/20041116/nm84704.html

[A1c]

Form The Register (16/11/2004):

"Vodafone, the Big Daddy of cellcos, increased revenue by six per cent for the six months ended 30 September 2004. Group turnover was £16.8bn, an organic growth of six per cent. The firm gained 7.4m customers in the period giving it 146.7m customers in total. It has sold 323,000 datacards to date.

Group operating profit for the period, excluding exceptional items, was £5.7bn or five per cent organic growth at constant exchange rates. Including goodwill amortisation and exceptional items Vodafone Group lost £1.6bn. Vodafone is increasing the size of its share buyback programme from £3bn to £4bn. It is doubling the size of its annual dividend to 1.91p per share. Weak performance in Japan continues to drag down results. Vodafone increased its stake in its Japan subsidiary from 28.5 per cent to 98.2 per cent at a cost of £2.4bn.

Vodafone sold 83.7bn minutes of mobile voice time in the period. Non-voice revenues made up 16.4 per cent of total service revenues.

Arun Sarin, Vodafone's chief executive, said: "We have recently launched a compelling set of new services on our 3G platform in 13 markets with a wide range of industry leading new handsets. With new and attractive pricing for both data and voice services, Vodafone is delivering on its promise to delight the customer...

"We expect 3G to deliver a material benefit to our business over time and are targeting more than 10 million Vodafone live! with 3G customers in our controlled operations by the end of March 2006."

Looking forward, Vodafone expects organic growth of around ten per cent in average proportionate mobile customers, giving high single digit growth in mobile revenue compared to last year. Declining interconnect rates and 3G investments mean mobile margins will decline slightly."

[Killahurts]

Thats nice of Vodaphone to be offering to pay more to their shareholders.

Thanks for highlighting that 3GSU at the expense of reduced call costs to customers.

And why havent you highlighted yet that whilst you claim 3 video calls are expensive - Vodaphone CHARGE EVEN MORE!!!

No wonder they can afford to increase their payout to shareholders

But i cant help but feel that 3GSU is again failing to back the small guy here yet again...

[A1c]

"Vodaphone CHARGE EVEN MORE!!"

No they dont! Well not really.... 35p/min to other Voadfone mobiles and 55p/min to other networks for videocalls. Of no interest to me I have to add!

Meanwhile It's nice to see a British company with strong International management growing and prospering and reinvesting in the long term benefits of mobile communications. The reports about customer service follow-up's etc when folks buy their new service appear to suggest they are indeed taking their reponsibilties pretty seriously and I suspect others will follow suit when their launch time arrives. This sort of attention to detail provides confidence and backed by the biggest multi-national mobile telco can't be a bad thing either. 'Hero' Tarriffs seem to be popular and look to be offering more than previous Vodafone GSM bundles with inclusive videocalls and content - special offer of course but with that branding a very worthy contender for the serious 3G consumers.

The BBC did a nice piece about the results today also, see it here: http://news.bbc.co.uk/1/hi/business/4015193.stm

[3glive]

And he failed to mention that customer numbers globally are going down for vodafone..

let me just post the story and link:

http://www.news.com.au/common/story_page/0,4057,11408090%255E15306,00.html

November 17, 2004

VODAFONE, the world's biggest mobile phone operator and No3 in the Australian market, last night reported its first ever fall in sales.

The British group said its net loss in the six months to September 30 narrowed to £3.2 billion ($7.7 billion) from £4.25 billion, with the comparatively small Australian operations contributing an improved profit.

The parent company said first-half sales dropped to £16.8 billion from £16.9 billion, after it sold its Japanese fixed-line unit last year. Analysts had expected revenue of £16.6 billion.

Before yesterday's results, Vodafone had reported an aggregate loss of £45 billion since 2000 because of acquisition-related goodwill costs. Under former chief executive Christopher Gent, Vodafone spent about $US20 billion ($26.1 billion) on licences at the start of the decade to offer the so-called 3G products.

His successor, Arun Sarin, is pinning future growth on services the licences enable, with 3G services due to be available in Australia next year.






Vodafone declined to detail the financial performance of its Australian operations but operating profit for "other" Asia-Pacific operations, a segment which includes Australia, rose from £64 million to £80 million in the half year.

The parent company said Vodafone Australia had "experienced good turnover growth despite intense competitor activity. The profitability of Vodafone Australia improved significantly, due largely to changes in the handset subsidy model and business structure. Vodafone New Zealand's margins also improved due to operational efficiencies".

In Australia, the company said it customer numbers had risen 6 per cent, or 151,000, in the September quarter to 2.65 million.

Bloomberg

[A1c]

And the full Bloomberg Story (rather than a 2nd hand interpretatin of it):

Nov. 16 (Bloomberg) -- Vodafone Group Plc, the world's largest mobile-phone operator, doubled its six-month dividend and extended a stock buyback by 1 billion pounds ($1.9 billion) to boost shareholder returns as sales growth slows.

The company will pay a dividend of 1.91 pence a share, it said in a statement today. The Newbury, England-based company predicted revenue growth from mobile businesses will trail last year's pace in the current and next fiscal years. Sales dropped less than 1 percent to 16.8 billion pounds in the six months ended Sept. 30 after Vodafone sold its Japanese fixed-line unit.

Chief Executive Arun Sarin, who lost the February auction of AT&T Wireless Services Inc. in the U.S., is ***tening payouts after saying in September there were few acquisitions left for him to pursue. Before today, Vodafone stock had risen 3.1 percent this year, lagging behind Bonn-based Deutsche Telekom AG, London- based BT Group Plc and Telecom Italia Mobile SpA.

``The action that's been taken by Vodafone management does address this underperformance,'' said Bob Parker, deputy chairman at Credit Suisse Asset Management in London, which oversees about $312 billion. ``A share that has underperformed will now start to outperform,'' he said in an interview.

Shares in Vodafone rose as much as 3.5 pence, or 2.5 percent, to 146.25 pence, the highest level since January. The stock traded down 1.25 pence at 141.5 pence at 2:49 p.m. in London.

Sales Growth

Under Sarin's predecessor, Chris Gent, Vodafone spent about $20 billion on licenses at the start of the decade to offer phones that make videos and play films. Sarin, 50, is now pinning future growth on those ``3G'' services. Last week he said he planned to sign up 10 percent of his customers to the new offerings by March 2006.

Revenue from continuing businesses climbed 4 percent in the first half, slowing from 15 percent a year earlier.

Vodafone today forecast ``high single-digit'' percentage mobile revenue growth next fiscal year, including units the company doesn't control, for a second consecutive year, as prices fall. That's less than the 10 percent reported by that measure in the fiscal first half, and the 11 percent the company achieved last year.

Increased Dividends

The company also said it expects to double last year's final dividend of 1.08 pence. The first-half payment and revenue both beat analysts' estimates.

``Our confidence in the growth prospects of Vodafone is reflected in the increase in shareholder returns,'' Sarin told reporters on a conference call. ``Our dividend will increase at the underlying growth rate of our earnings.''

Sarin needs customers to fork out more on downloading songs, watching clips of the latest movies or buying one-minute snippets of U.S. television drama ``24'' to accelerate growth at his 20- year-old company.

Vodafone will ``absolutely'' increase revenue with the new services, Sarin said in the interview.

In the three months ended September, Vodafone signed up 7.5 million customers, including those acquired with the buyout of the Japanese wireless division. The figure beat expectations of 6.1 million and brought total subscribers to 146.7 million.

The company increased its subscriber growth forecast for the fiscal year to about 10 percent, higher than its previous ``high single-digit'' estimate.

Sarin, now in the job for 15 months, last year increased the first-half dividend by 20 percent and started the company's first stock buyback. Today he raised the planned repurchase for this fiscal year to 4 billion pounds.

``Now Sarin really does have a handle on the business,'' said Karen Robertson, a fund manager at Standard Life Investments in Edinburgh, which oversees about $160 billion. ``They have beaten expectations across the board.''

Net Loss Narrows

Vodafone's net loss in the period ended Sept. 30 narrowed to 3.20 billion pounds, or 4.77 pence a share, from 4.25 billion pounds, or 6.24 pence. Analysts expected a 4.44 billion-pound loss.

Before today, Vodafone had reported an aggregate loss of 45 billion pounds since 2000 because of acquisition-related goodwill costs. Under new International Financial Reporting Standards next fiscal year, Vodafone will stop the writedowns and become profitable, Sarin said in an interview.

Still, new customers come at a cost, as Vodafone spends more to attract and keep subscribers while rolling out 3G networks and services.

The company's profit margin in the year ending March 2006 -- based on earnings before interest, tax, depreciation and amortization -- will be ``broadly stable'' for a second straight year, Vodafone said. The first-half figure was 39 percent.

Japan

Sarin is relying on new 3G handsets to reverse a profit decline and win market share in Japan, his biggest source of revenue. Operating profit, sales and average spending by each customer all fell in the country. Sarin spent 2.4 billion pounds buying the rest of the unit in the first half.

``It's going to take 12 to 18 months to get the company healthy again,'' Sarin said on the call with reporters. ``Fundamentally we're on track.''

Not everyone's convinced. Vodafone is ranked third in Japan and has 1 percent of the market for high-speed wireless services. Leaders NTT DoCoMo Inc. and KDDI Corp. have lured users with a wider range of handsets and products.

``We reiterate our view that there is no quick fix to the problems in Japan,'' said Mark James at Nomura Securities, who repeated his ``sell'' rating on the stock. ``Handset development continues apace at Vodafone's competitors and the market remains very competitive.''

Acquisitions

Sarin, a graduate of the University of California in Berkeley and of the Indian Institute of Technology, has found it more difficult to close takeovers than Gent, whose purchases included Mannesmann AG.

For more than a year, the new chief executive has said he wants control of SFR, Vivendi Universal SA's French wireless unit. Vivendi has repeatedly said it doesn't want to sell. Sarin would also like more of U.S. operator Verizon Wireless. The owner, Verizon Communications Inc., has said, it, too, desires the rest.

``That's an interesting conundrum that we find ourselves in,'' Sarin said in the interview.

http://www.bloomberg.com/apps/news?pid=10000085&sid=aTMpCe3818c4&refer=europe

** Hardly bad news for Vodafone including their performace in the area where 3glive resides! - Good news that Mr Sarin has made a commitment to 3G**

[Killahurts]

So even more news about Voda's share price and dividend to shareholders and even less about cheaper calls to their customers on the back of their wealth.

Why do you think that their sense of priorities is a good thing for the majority of people that use these boards - ie customers holding no shares in the company?

I cant help but feel that yet again you are siding with the company any not the customers.

Why is that?

Did Voda offer a profit share scheme to employees and you used to greet this news with joy and you used to stand to profit from it?

[simon69c]

Eh? Companies are there to make profit - they are not there to be a charity for their customers. They set their prices and their customers choose to pay those prices - no-one forces them to. Do you think the top-level management would stay in a job for long if they frittered all the company profits away offering reduced call charges? Share-holders don't hold shares in a company just for a laugh - they expect a return on their investment.

Vodafone, like all the other telcos, are trying to maximise profit - this rarely involves reducing prices unless they believe the quantity of sales will increase enough to offset it! 3's pricing is a strategy to increase their customer base in the UK - they see this (rather sensibly) as a key requirement to achieving long term success in the market.

[Killahurts]

Simon - you're jumping ahead of yourself mate

I've never said comoanies arent there to make money what i said was i find it strange that someone posting on a forum for USERS would promote this message looking at it from the side of company directors rather than customers.

And anyway as can be seen from the Independent business setion today - see my new post - brokers are actually urging people to sell their Vodaphone shares and quickly due to "worrying trends" they can see in these results.

[3glive]

And the full Bloomberg Story (rather than a 2nd hand interpretatin of it):

Nov. 16 (Bloomberg) -- Vodafone Group Plc, the world's largest mobile-phone operator, doubled its six-month dividend and extended a stock buyback by 1 billion pounds ($1.9 billion) to boost shareholder returns as sales growth slows.

The company will pay a dividend of 1.91 pence a share, it said in a statement today. The Newbury, England-based company predicted revenue growth from mobile businesses will trail last year's pace in the current and next fiscal years. Sales dropped less than 1 percent to 16.8 billion pounds in the six months ended Sept. 30 after Vodafone sold its Japanese fixed-line unit.

Chief Executive Arun Sarin, who lost the February auction of AT&T Wireless Services Inc. in the U.S., is ***tening payouts after saying in September there were few acquisitions left for him to pursue. Before today, Vodafone stock had risen 3.1 percent this year, lagging behind Bonn-based Deutsche Telekom AG, London- based BT Group Plc and Telecom Italia Mobile SpA.

``The action that's been taken by Vodafone management does address this underperformance,'' said Bob Parker, deputy chairman at Credit Suisse Asset Management in London, which oversees about $312 billion. ``A share that has underperformed will now start to outperform,'' he said in an interview.

Shares in Vodafone rose as much as 3.5 pence, or 2.5 percent, to 146.25 pence, the highest level since January. The stock traded down 1.25 pence at 141.5 pence at 2:49 p.m. in London.

Sales Growth

Under Sarin's predecessor, Chris Gent, Vodafone spent about $20 billion on licenses at the start of the decade to offer phones that make videos and play films. Sarin, 50, is now pinning future growth on those ``3G'' services. Last week he said he planned to sign up 10 percent of his customers to the new offerings by March 2006.

Revenue from continuing businesses climbed 4 percent in the first half, slowing from 15 percent a year earlier.

Vodafone today forecast ``high single-digit'' percentage mobile revenue growth next fiscal year, including units the company doesn't control, for a second consecutive year, as prices fall. That's less than the 10 percent reported by that measure in the fiscal first half, and the 11 percent the company achieved last year.

Increased Dividends

The company also said it expects to double last year's final dividend of 1.08 pence. The first-half payment and revenue both beat analysts' estimates.

``Our confidence in the growth prospects of Vodafone is reflected in the increase in shareholder returns,'' Sarin told reporters on a conference call. ``Our dividend will increase at the underlying growth rate of our earnings.''

Sarin needs customers to fork out more on downloading songs, watching clips of the latest movies or buying one-minute snippets of U.S. television drama ``24'' to accelerate growth at his 20- year-old company.

Vodafone will ``absolutely'' increase revenue with the new services, Sarin said in the interview.

In the three months ended September, Vodafone signed up 7.5 million customers, including those acquired with the buyout of the Japanese wireless division. The figure beat expectations of 6.1 million and brought total subscribers to 146.7 million.

The company increased its subscriber growth forecast for the fiscal year to about 10 percent, higher than its previous ``high single-digit'' estimate.

Sarin, now in the job for 15 months, last year increased the first-half dividend by 20 percent and started the company's first stock buyback. Today he raised the planned repurchase for this fiscal year to 4 billion pounds.

``Now Sarin really does have a handle on the business,'' said Karen Robertson, a fund manager at Standard Life Investments in Edinburgh, which oversees about $160 billion. ``They have beaten expectations across the board.''

Net Loss Narrows

Vodafone's net loss in the period ended Sept. 30 narrowed to 3.20 billion pounds, or 4.77 pence a share, from 4.25 billion pounds, or 6.24 pence. Analysts expected a 4.44 billion-pound loss.

Before today, Vodafone had reported an aggregate loss of 45 billion pounds since 2000 because of acquisition-related goodwill costs. Under new International Financial Reporting Standards next fiscal year, Vodafone will stop the writedowns and become profitable, Sarin said in an interview.

Still, new customers come at a cost, as Vodafone spends more to attract and keep subscribers while rolling out 3G networks and services.

The company's profit margin in the year ending March 2006 -- based on earnings before interest, tax, depreciation and amortization -- will be ``broadly stable'' for a second straight year, Vodafone said. The first-half figure was 39 percent.

Japan

Sarin is relying on new 3G handsets to reverse a profit decline and win market share in Japan, his biggest source of revenue. Operating profit, sales and average spending by each customer all fell in the country. Sarin spent 2.4 billion pounds buying the rest of the unit in the first half.

``It's going to take 12 to 18 months to get the company healthy again,'' Sarin said on the call with reporters. ``Fundamentally we're on track.''

Not everyone's convinced. Vodafone is ranked third in Japan and has 1 percent of the market for high-speed wireless services. Leaders NTT DoCoMo Inc. and KDDI Corp. have lured users with a wider range of handsets and products.

``We reiterate our view that there is no quick fix to the problems in Japan,'' said Mark James at Nomura Securities, who repeated his ``sell'' rating on the stock. ``Handset development continues apace at Vodafone's competitors and the market remains very competitive.''

Acquisitions

Sarin, a graduate of the University of California in Berkeley and of the Indian Institute of Technology, has found it more difficult to close takeovers than Gent, whose purchases included Mannesmann AG.

For more than a year, the new chief executive has said he wants control of SFR, Vivendi Universal SA's French wireless unit. Vivendi has repeatedly said it doesn't want to sell. Sarin would also like more of U.S. operator Verizon Wireless. The owner, Verizon Communications Inc., has said, it, too, desires the rest.

``That's an interesting conundrum that we find ourselves in,'' Sarin said in the interview.

http://www.bloomberg.com/apps/news?pid=10000085&sid=aTMpCe3818c4&refer=europe

** Hardly bad news for Vodafone including their performace in the area where 3glive resides! - Good news that Mr Sarin has made a commitment to 3G**


Yes 3 and Vodafone are taking customers from the two big telco's in Aus..

I seem to remember you saying that 3 were going to pull out of the Uk market at one stage 3GSU.. funny they are still there and in Australia grabbing all the customers...

It will be interesting to see the next 3 results for Uk Italy and Australia.

[A1c]

"It will be interesting to see the next 3 results for Uk Italy and Australia."

I know what they will be already - no surprises at all!

What will be more interesting will be how 3 manage to keep up the momentum now that competition has arrived in the UK and further how they will make any money in the medium to longer term.

PS: I aint the only one saying they'll pull out off the UK....and remember NTT DoCoMo and KPN have pulled the plug and walked off nursing huge losses.... we shall have to wait a while longer than the next set of subscriber statistics to see where 3 UK is heading.

[simon69c]

Ah - now that I read your posts again I can see that is the point you were making - sorry if I came across as condescending.

I haven't had a chance to read any of the other posts yet today so I don't know what these 'worrying trends' are that you mention but I'll reply in the appropriate thread if I have anything to add to that.

[Killahurts]

Thats fine Simon ;-)

[3gtrooper]

Yes 3 and Vodafone are taking customers from the two big telco's in Aus..

I seem to remember you saying that 3 were going to pull out of the Uk market at one stage 3GSU.. funny they are still there and in Australia grabbing all the customers...

It will be interesting to see the next 3 results for Uk Italy and Australia.

Hmmmm well looking at a number of Australian 3g forums 3 may well be taking customers from rip off Telstra, but a huge amount of people are finding the 3 network not so hot and are leaving or are waiting for Vodafone to launch 3G.

As it happens Telstra has upgraded it CDMA network and could arguably be 3G, as usual though Telstra has not taken advantage of what could have been a killer, as their cdma/gsm network is huge compared to 3.