History and Development of the Company

Vodafone Group Plc provides an extensive range of mobile telecommunications services, including voice and data communications, and is the world’s largest mobile telecommunications company, with a significant presence in Continental Europe, the United Kingdom, the United States and the Far East through the Company’s subsidiary undertakings, associated undertakings and investments. The Group presently operates in 28 countries worldwide. The Group’s mobile subsidiaries operate under the brand name “Vodafone” with the exception of its business in Japan, which currently operates as J-Phone Vodafone. In the United States the Group’s associated undertaking operates as Verizon Wireless. During the last two financial years, the Group has also entered into arrangements with five network operators in countries where the Group does not hold an equity stake. Under the terms of these Partner Network Agreements, the Group and its partner networks co-operate in the development and marketing of global services under dual brand logos. Through these agreements, the Group has extended its brand reach into eight further countries.

At 31 March 2003, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had approximately 119.7 million customers, excluding paging customers, calculated on a proportionate basis in accordance with the Company’s percentage interest in these ventures, and 296.0 million registered venture customers, as described in “Business Overview – Business activities – Mobile telecommunications”.

Following the completion of a number of major business transactions during the last three years, the Group acquired controlling interests in certain non-mobile telecommunications businesses, including Arcor AG & Co KG (“Arcor”), following the acquisition of Mannesmann AG (“Mannesmann”), and Japan Telecom Co., Ltd. (“Japan Telecom”), following a tender offer in October 2001.

The Company was formed in 1984 as a subsidiary of Racal Electronics Plc. Then known as Racal Telecom Limited, approximately 20% of the Company’s capital was offered to the public in October 1988. It 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. Following its merger with AirTouch Communications, Inc. (“AirTouch”), the Company changed its name to Vodafone AirTouch Plc on 29 June 1999 and, following approval by the shareholders in General Meeting, reverted to its former name, Vodafone Group Plc, on 28 July 2000. The Company is a public limited company incorporated in England and Wales. Its registered office is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN England. Its principal telephone number is +44 (0)1635 33251.

The Company’s ordinary shares are listed on the London Stock Exchange and the Frankfurt Stock Exchange and the Company’s American Depositary Shares (“ADSs”) are listed on the New York Stock Exchange. The Company had a total market capitalisation of approximately £86 billion at 23 May 2003, making it the second 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.

Acquisitions of businesses

The Group has completed a number of major business transactions over the past three years, the most significant of which were the acquisition of Mannesmann, the acquisition of further interests in Japan Telecom and the J-Phone Group and the acquisition of Airtel Móvil S.A. (“Vodafone Spain”). In addition, during the year ended 31 March 2003, the Group increased its equity interests in certain

existing Group companies through a series of transactions. These transactions are described in more detail below. When combined with others, most notably the merger with AirTouch (which completed on 30 June 1999 and created one of the world’s largest mobile telecommunications companies), these transactions increased the geographic footprint and substantially increased the customer base of the Group’s mobile operations, and significantly impacted the results of operations.

Acquisition of Mannesmann

On 12 April 2000, the Company received conditional European Commission consent to the acquisition of Mannesmann, following the receipt of valid acceptances representing approximately 98.62% of Mannesmann’s issued share capital and 99.72% of its convertible bonds in issue. The completion of the Mannesmann acquisition had a major impact on the Group’s results, bringing in both Mannesmann Mobilfunk GmbH in Germany and Omnitel Pronto Italia S.p.A in Italy as subsidiaries in two of Europe’s most important markets for mobile telecommunications. The businesses have since been rebranded and now operate as “Vodafone”. Mannesmann has also been renamed Vodafone Holding GmbH.

Subsequently, the Group has increased its ownership interest in Vodafone Holding GmbH to 100% through the buy-out of the remaining minority shareholders in Vodafone Holding GmbH, which was completed on 21 August 2002 for £281 million.

Through the Mannesmann acquisition, the Group also acquired beneficial ownership of Orange plc (“Orange”), then one of four mobile telecommunications operators in the UK, Infostrada S.p.A. (“Infostrada”) a fixed line telecommunications business in Italy, as well as interests in Mannesmann’s non-telecommunications businesses. The Group subsequently sold its interests in Orange, Infostrada and certain other acquired Mannesmann businesses, as described below under “Sales of businesses”.

Mannesmann synergies

Mannesmann has been integrated into the Group and the expected synergies for the year ended 31 March 2003 announced at the time of the acquisition have been achieved, exceeding the target set mainly as a result of higher savings on capital expenditure.

Acquisition of additional interests in the J-Phone Group

The Group’s initial investment in Japan, following the merger with AirTouch, comprised direct shareholdings in nine regional mobile telecommunications companies, with ownership interests ranging from 4.5% to 15%. On 7 October 1999, the Company announced a series of transactions that resulted in the Company increasing its equity interests to more than 20% in each of these companies, and becoming the second largest shareholder in each venture. The total consideration paid for the increased ownership interests in the three Digital Phone and six Digital Tu-Ka companies was £342 million. Subsequently, in an agreement with Japan Telecom and British Telecommunications plc (“BT”), the Group agreed to restructure its interests in Japan. This resulted in J-Phone Communications Co., Ltd. (“J-Phone Communications”), in which the Group had a 26% stake, acquiring a controlling interest of approximately 50% in each of the existing operating companies, becoming collectively known as the J-Phone Group. The Group’s effective ownership interests were largely unchanged by this reorganisation. The nine regional operating companies were subsequently reorganised into three new regional companies, J-Phone East, J-Phone West and J-Phone Central.

On 2 May 2001, the Company announced that it had agreed to acquire, for a cash consideration of approximately £3.7 billion, BT’s ownership interests in the J-Phone Group and Japan Telecom, see “Acquisition of interests in Japan Telecom” below, comprising BT’s combined shareholdings of 20% in Japan Telecom and 20% in J-Phone Communications for £3.1 billion, and BT’s aggregate interest of approximately 4.9% in the J-Phone operating companies for a further £0.6 billion. The transaction completed on 1 June 2001, except for the acquisition of BT’s interests in the operating subsidiaries of J-Phone Communications, which did not complete until 12 July 2001. As a result of these transactions, the Group had a 46% interest in J-Phone Communications, not including its indirect interest through Japan Telecom, and interests of 18.9%, 15.2% and 14.9%, respectively, in J-Phone Communications’ regional mobile companies J-Phone East, J-Phone West and J-Phone Central, excluding the Company’s indirect interests through Japan Telecom’s and J-Phone Communications’ holdings in these companies. On 24 August 2001, the Company announced the proposed merger of J-Phone Communications and the J-Phone operating companies into a new company, J-Phone Co., Ltd.

The merger became effective on 1 November 2001 and, as a result, the Group held a 39.67% ownership interest in the new company. Finally, following completion of the Group’s tender offer for Japan Telecom, described below, the Group’s effective interest in the J-Phone Group, which has since been rebranded and now operates as J-Phone Vodafone, is now approximately 69.7%.

Acquisition of interests in Japan Telecom

During the two year period ended 31 March 2002, as a result of a series of separate transactions, described below, the Group acquired a controlling 66.7% shareholding in the Japanese fixed line operator Japan Telecom.

An initial payment of ¥124.6 billion (£0.7 billion) was made on 31 January 2001 and, following the second payment of ¥125.1 billion (£0.8 billion) on 12 April 2001, the acquisition of a 15% stake in Japan Telecom from West Japan Railway Company and Central Japan Railway Company was completed. On 27 April 2001, the Group completed the acquisition of a further 10% stake in Japan Telecom from AT&T Corporation for a cash consideration of $1.35 billion (£0.9 billion), bringing the Group’s interest in Japan Telecom to 25% at that time.

On 1 June 2001, the Company acquired a further 20% interest in Japan Telecom from BT. The acquisition was part of a transaction that also resulted in the Company acquiring a further interest in the J-Phone Group and Vodafone Spain, as described above and below under their respective headings. On 20 September 2001, the Company announced an agreed tender offer by its subsidiary, Vodafone International Holdings B.V., to acquire up to 693,368 Japan Telecom ordinary shares, representing 21.7% of the ordinary shares of Japan Telecom, for a cash consideration of up to ¥312 billion (£1.8 billion). The offer successfully completed in October 2001, bringing the Group’s total interest to 66.7%.

On 31 July 2002, Japan Telecom announced that it had established a wholly owned subsidiary, Japan Telecom Co., Ltd., and that Japan Telecom was to be renamed Japan Telecom Holdings Co., Ltd. The existing fixed line business was transferred to Japan Telecom Co., Ltd. All of these changes took effect from 1 August 2002. This created a telecommunications service group comprising two core businesses of mobile and fixed telecommunications, namely J-Phone Vodafone and Japan Telecom.

The Group is currently in discussions that may or may not lead to a disposal of the Japan Telecom fixed line operations.

Acquisition of Vodafone Spain

On 29 December 2000, the Company completed its acquisition of a total of 4,061,948 shares in Vodafone Spain, representing approximately 52.1% of the issued share capital of Vodafone Spain. The acquisition increased the Group’s interest in Vodafone Spain to 73.8%. The Company issued 3,097,446,624 new listed ordinary shares to the transferring shareholders, representing a value of approximately £7.9 billion for the acquired shares.

On 2 May 2001, the Company announced that it had agreed to acquire BT’s 17.8% shareholding in Vodafone Spain for a cash consideration of £1.1 billion, increasing its ownership interest in Vodafone Spain to approximately 91.6%. The acquisition was completed on 29 June 2001, following the receipt of regulatory approval.

On 2 April 2002, the Company acquired a further 2.2% interest in Vodafone Spain for £0.4 billion, following the exercise of a put option held by Torreal, S.A., increasing the Group’s interest to 93.8%.

On 21 January 2003, the Company announced that it had acquired the remaining 6.2% interest in Vodafone Spain for approximately €2.0 billion (£1.4 billion) following the deemed 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. The transaction completed on 27 January 2003 at which time Vodafone Spain became a wholly owned subsidiary of the Group.

Acquisition of interests in China Mobile (Hong Kong) Limited (“China Mobile”)

In an offering that closed on 3 November 2000, the Group acquired newly issued shares representing approximately 2.18% of China Mobile’s share capital for a cash consideration of $2.5 billion. On 27 February 2001, the Company and China Mobile signed a strategic alliance agreement, setting out the principal terms for a strategic alliance and co-operation between the two parties in mobile services, technology, operations and management.

On 18 June 2002, the Group invested a further $750 million (£513 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 to approximately 3.27% as a result of this transaction.

Acquisition of interests in Société Française du Radiotéléphone (“SFR”) and Cegetel Groupe S.A. (“Cegetel”)

Prior to the acquisition of Mannesmann, the Group had a 20% interest in SFR. Through the acquisition of Mannesmann, the Group acquired an approximate 15% interest in Cegetel, the French telecommunications group and the remaining 80% shareholder in SFR, taking the Group’s effective interest in SFR to approximately 31.9%.

On 16 October 2002, the Group announced that it had agreed to acquire BT’s 26% interest in Cegetel and SBC Communications Inc.’s (“SBC’s”) 15% interest in Cegetel for €4.0 billion cash and $2.27 billion cash, respectively. Vivendi Universal S.A. (“Vivendi”) had preemption rights in connection with the Cegetel 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.

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 and, accordingly, the offer lapsed. On 3 December 2002, Vivendi also announced its intention to exercise its preemption rights to acquire BT’s 26% interest in Cegetel.

On 21 January 2003, the Company announced that its subsidiary, Vodafone Holding GmbH, completed the acquisition of SBC’s 15% interest in Cegetel for a cash consideration of $2.27 billion (£1.4 billion), increasing the Group’s effective interest in SFR to approximately 43.9%.

Other significant transactions completed in the year ended 31 March 2003

Purchase of additional minority stakes in existing subsidiary undertakings

In line with the Group’s strategy of increasing its shareholding in existing operations where it believes opportunities arise to enhance value for the Company’s shareholders, the Group purchased minority stakes in certain of the Group’s subsidiary undertakings in order to be able to more closely align the respective businesses to the Group’s business.

Europolitan Vodafone AB (“Vodafone Sweden”)

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

In January 2003, the Company entered into discussions with the board of Vodafone Sweden concerning a possible tender offer to acquire, for cash, all remaining shares not held by the Group. A recommended offer 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%. The total aggregate cash consideration paid was £391 million. Compulsory acquisition procedures have commenced to acquire the remaining shares. Completion is expected during the first half of the 2004 financial year, as a result of which Vodafone Sweden will become a wholly owned subsidiary of the Group. Vodafone Sweden’s shares have been de-listed from the O-list, Attract 40, of the Stockholm Exchange. The last day of trading for Vodafone Sweden’s shares was 28 March 2003.

Vodafone Libertel N.V. (“Vodafone Netherlands”)

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

In January 2003, the Company entered into discussions with the boards of Vodafone Netherlands concerning a possible tender offer to acquire, for cash, all remaining shares not held by the Group. An offer was announced on 12 February 2003 and was declared unconditional on 28 March 2003. As a result of the offer at that time and market purchases, the Company increased its effective interest in Vodafone Netherlands to 97.2% as at 31 March 2003. The total aggregate cash consideration paid in the 2003 financial year was £486 million, with a further £110m paid in April 2003. Following a post-closing acceptance period, the Company, as a result of the offer and market purchases, increased its effective interest in Vodafone Netherlands to 98.2%. The Company has further increased its effective interest to 99.7%. The Group intends to initiate squeeze-out procedures in order to acquire the remaining shares following the successful completion of which Vodafone Netherlands will become a wholly owned subsidiary of the Group. Vodafone Netherlands’ shares have been de-listed from the Euronext Amsterdam Stock Exchange.

Vodafone Telecel-Comunicações Pessoais, S.A. (“Vodafone Portugal”)

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

In January 2003, the Company entered into discussions with the board of Vodafone Portugal concerning a possible tender offer to acquire, for cash, all remaining shares not held by the Group. The offer was announced on 28 February 2003. Following completion of the offer, 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. The Company has completed compulsory acquisition procedures to acquire the remaining shares. Vodafone Portugal is now a wholly owned subsidiary of the Group. De-listing of the shares occurred on 22 May 2003.

Vodafone-Panafon Hellenic Telecommunications Company S.A. (“Vodafone Greece”)

On 27 November 2002, the Group announced an agreement to acquire from France Telecom S.A. (“FT”) its 10.85% interest in Vodafone Greece for £216 million cash. The transaction completed on 3 December 2002 and increased the Group’s effective shareholding in Vodafone Greece from 51.88% to 62.73%. In addition, the Company granted FT a cash settled call option to cover certain of FT’s obligations under its 4.125% Exchange Notes due 29 November 2004, which are convertible into Vodafone Greece shares. Exercise of this option will not change the Company’s effective interest. During the period the Group also made additional market purchases which increased the Group’s effective interest in Vodafone Greece to 64.0%.

Other subsidiaries

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.

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. An option over certain of these shares was also granted on this date. See “Operating and Financial Review and Prospects – Liquidity and Capital Resources”.

Acquisition of remaining 50% interest in Vizzavi

On 29 August 2002, the Group acquired Vivendi’s 50% stake in the Vizzavi joint venture, which operates 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. The Group plans to continue focusing Vizzavi’s operations on providing multi-media entertainment-led consumer content aimed at increasing customer usage and to further integrate these operations into the Group. The acquired assets also form an integral part of the Group’s strategy in providing differentiated services to its customers and form part of the Group’s consumer service offering, Vodafone live!. Vizzavi has since been renamed Vodafone Content Services and services are provided under the Vodafone brand.

Acquisition of additional interest in associated companies

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 a sum the sterling equivalent of which was £78 million. The transaction increased the Group’s effective interest in Vodacom to 35%.

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 (£7 million), increasing the Group’s effective interest in Safaricom to 35%.

Sales of businesses

As a consequence of certain of the acquisitions described above, the Group also acquired interests in companies that were either outside the Company’s core business, or in which the Company was prevented from retaining interests due to regulatory restrictions. The Group has also undertaken a series of transactions to facilitate the orderly disposal of such interests, as described below.

Disposal of Mannesmann businesses

Following the acquisition of Mannesmann, the Group has completed the sale of a number of Mannesmann businesses. The Group used the proceeds from these divestments to reduce its indebtedness.

Disposal of interests in Atecs Mannesmann AG (“Atecs”)

In April 2000, Mannesmann reached an agreement with Siemens AG and Robert Bosch GmbH for the sale of a controlling interest in Atecs, its engineering and automotive business. The transaction valued Atecs at approximately €9.6 billion, including pension and non-trading financial liabilities to be assumed on closing. On 29 September 2000, a payment of approximately €3.1 billion (£1.9 billion) plus interest was made to Mannesmann in exchange for the transfer of a 50% plus two shares stake in Atecs, which was completed on 17 April 2001, following approval from the relevant European and US regulatory authorities. Atecs also repaid Group loans of €1.55 billion (£1.0 billion) in March 2001.

On 15 January 2002, Vodafone announced that it had exercised put options to sell its remaining stake in Atecs to Siemens AG. The proceeds from this disposal amounted to €3.66 billion (£2.2 billion), and were received on 4 March 2002.

Disposal of Orange

As a condition to its approval of the Company’s acquisition of Mannesmann, the European Commission required the Group to dispose of its interest in Orange, which Mannesmann acquired in 1999. Orange became a subsidiary of the Company as a result of the Mannesmann acquisition. On 30 May 2000, the Company and Mannesmann announced they had reached an agreement to sell Orange to France Telecom. The transaction was completed on 22 August 2000, following the receipt of conditional approval by the European Commission and approval by the shareholders of France Telecom. The consideration comprised a cash payment of approximately €21.4 billion (£13.2 billion), a €2.2 billion (£1.4 billion) France Telecom loan note and 113,846,211 France Telecom shares, representing 9.87% of the outstanding share capital of France Telecom. France Telecom granted the Company put rights relating to the France Telecom share consideration. In addition, France Telecom assumed Orange’s existing debts, and its financial obligation regarding its UK 3G licence, totalling £4.1 billion. The loan note was redeemed in March 2001 and realised proceeds of £1.4 billion. The Group also renegotiated and exercised its put options over France Telecom shares for a total value of approximately €11.6 billion (£7.2 billion), of which €6.7 billion (£4.2 billion) was received in March 2001. On 19 April 2001, the remaining cash payment of €4.9 billion that was due to be received from France Telecom in March 2002 was monetised for €4.7 billion (£2.9 billion). The Group no longer holds any shares in France Telecom.

Disposal of Mannesmann tubes and watches businesses

On 9 October 2000, Mannesmann completed the sale of its tubes business to Salzgitter for a nominal consideration. In the period prior to completion, Mannesmann made capital contributions to the tubes business totalling €271 million.

Mannesmann also completed the sale of Les Manufactures Horlogères, its luxury watches business, to Richemont S.A. in December 2000, for a cash consideration of approximately €1.8 billion (£1.1 billion).

Disposal of Infostrada

The Group reached an agreement for the sale of its interest in Infostrada, Mannesmann’s fixed line telecommunications operator in Italy, to Enel S.p.A. in October 2000. On 29 March 2001, the Group completed the sale of the entire issued share capital of Infostrada to Enel S.p.A. and received total proceeds of €7.4 billion (approximately £4.7 billion). Enel S.p.A. also assumed Infostrada’s net debt, including €0.8 billion (£0.5 billion) of debt owed to the Group that was repaid on acquisition.

Disposal of 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. Deutsch Bahn exercised its option to purchase the remaining 50.1% equity interest on 1 July 2002.

Disposal of tele.ring Telekom Service GmbH (“tele.ring”)

On 8 May 2001, the Group announced that agreement had been reached to sell its 100% equity stake in the Austrian telecommunications company, tele.ring, to Western Wireless International Corporation. The transaction completed on 29 June 2001, following receipt of regulatory approval. The value of net assets disposed of represented less than 1% of the Group’s net assets at the date of disposal.

Disposal of 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.

Disposal of Shinsegi Telecom, Inc. (“Shinsegi”)

On 24 August 2001, the Group announced that agreement had been reached to sell its 11.7% equity stake in the Korean mobile operator, Shinsegi, for an undisclosed amount to SK Telecom, Ltd. The value of net assets disposed of represented less than 1% of the Group’s net assets at the date of disposal.

Formation of Verizon Wireless

On 3 April 2000, the first stage of the transaction for the combination of the US cellular operations of the Company, Bell Atlantic Corporation (“Bell Atlantic”) and GTE Corporation (“GTE”) was completed. The combined entity, which initially consisted of the US cellular operations of AirTouch and Bell Atlantic, was launched as Verizon Wireless. Following completion of the merger of Bell Atlantic and GTE to form Verizon Communications, the second stage of the transaction was completed by the contribution of the US cellular operations of GTE to Verizon Wireless on 10 July 2000. The Group owns 45% of Verizon Wireless.

The formation of Verizon Wireless resulted in net proceeds to the Group of approximately £2.5 billion relating to the assumption of Group debt agreed with the other parties. Further proceeds of £1.8 billion and £0.2 billion were realised during the 2001 and 2002 financial years, respectively, following the disposal of overlapping properties in the US, such disposals being a condition of the regulatory approval of the transaction. No further proceeds were received during the 2003 financial year.

Business activities – Mobile telecommunications

Geographic operations

The Company has interests in 28 countries across five continents. Based on ownership interests at 31 March 2003, the Company, through its subsidiary undertakings, associated undertakings and investments, had approximately 119.7 million registered customers, excluding paging customers, calculated on a proportionate basis in accordance with the Company’s percentage interest in its ventures. There were approximately 296.0 million registered customers in ventures in which the Company either has control or invests.

On 1 April 2001, in response to the expansion of the Group, the Company implemented a reorganisation of its overall management structure into five main regions: Northern Europe, Middle East and Africa; Central Europe; Southern Europe; Americas and Asia; and Pacific. On 18 December 2001, the Company announced a further change to its regional structure. With effect from 1 January 2002, the Group’s interests in Japan, China and India were formed into a new Asia region. All of the Group’s other regions remained unchanged.

On 25 November 2002, the Company announced that the Group’s Asia region and Pacific region, comprising the Group’s interests in Japan, Australia, New Zealand, China, India and Fiji, were to be merged to form the Asia Pacific region. Brian Clark, previously Chief Executive of the Pacific region, was appointed Chief Executive of the Asia Pacific region with effect from 1 January 2003. Bill Keever, formerly Chief Executive of the Asia region, stood down as Chief Executive of that region and subsequently retired. As a result, the composition of the Group’s Executive Committee changed. The Group’s segmental analysis of its financial results was not changed.

The Company does not believe that these changes to its division of operations will materially affect the way in which it conducts business across geographic lines or the manner in which it manages its world-wide interests. The description of each region’s business activities below is based on the geographical division of the Company’s operations at 31 March 2003.

The table on the next page sets out a summary of the Company’s world-wide cellular operations at 31 March 2003, and venture customer growth in the year then ended.

The reasons for the changes in the year to the Company’s effective percentage ownership interests in the Netherlands, Sweden, Germany, Hungary, Greece, Portugal, Spain and Australia are discussed in the description of each region’s business activities below, or under “Information on the Company – History and Development of the Company”.

Northern Europe

The Group’s interests in Northern Europe comprise subsidiary undertakings in the United Kingdom, Ireland, the Netherlands and Sweden, and associated undertakings in Belgium and France.

Below is a summary of the Group’s business activities in its major mobile telecommunications markets in Northern Europe.

United Kingdom

Vodafone UK Limited (“Vodafone UK”) is one of five cellular network operators in the United Kingdom and, according to the latest quarterly review of the UK telecommunications regulator (“Oftel”), Vodafone UK is the largest in terms of mobile service revenue share for outbound calls, with a lead of seven percentage points over its nearest competitor.

At 31 March 2003, Vodafone UK had 13,300,000 registered customers, an increase of 1% since 31 March 2002. Of the total registered customer base, 9% were inactive customers, the majority of whom were prepaid customers.

Vodafone UK continued to focus on the acquisition of high value customers and increased the contract customer base by 474,000 in the year to 5,488,000 at 31 March 2003, compared with 5,014,000 at 31 March 2002. At 31 March 2003, Vodafone UK’s in-house service provider companies accounted for 57% of the contract customer base, which includes 370,000 customers arising from the acquisition of Cellular Operations Limited during the year.

Vodafone UK continually invests in its network infrastructure to improve network quality and maintain its position as the leading network, in terms of customer satisfaction. Vodafone UK continues to be recognised in Oftel surveys as the leading UK network, with a call success rate of 98.3%.

At 31 March 2003, Vodafone’s UK digital network consisted of 108 mobile switching centres (“MSCs”), 8,524 digital base station controllers (“BSCs”) and 20,817 base transceiver stations (“BTSs”) in service, giving declared population coverage of 99% of the UK.

Vodafone UK has now been operating its nationwide GPRS network for over two years, offering an enhanced range of products and services. GPRS provides a range of services for business customers to enable access to corporate systems such as e-mail and their company intranet. More generic services allowing access to the Internet from either the handset or through a Personal Digital Assistant or PDA, or laptop computer enable all customers to gain access to the Internet at speeds which are typically faster than standard home or office telephone lines. In November 2002, Vodafone UK launched Vodafone live!, part of a Group-wide programme designed to offer the customer an integrated experience of handset and services. Through Vodafone live!, Vodafone UK is now able to offer its customers additional services such as multimedia messaging, allowing users to send and receive graphics and pictures. Further details on Vodafone live! can be found under “Strategic Developments – Global services” elsewhere in this document.

Vodafone UK was awarded one of the five twenty year 3G licences in the auction conducted by the UK government in April 2000 and, following a period of network investment and construction, plans to open its 3G network for service later in 2003. During the 2003 financial year, Vodafone UK invested in excess of £100 million in its 3G infrastructure.

Ireland

Vodafone Ireland Limited (“Vodafone Ireland”) is the leading provider of mobile telecommunications services in Ireland, with 1,740,000 registered customers at 31 March 2003, maintaining its leadership position in a highly penetrated market with an estimated market share of 56%.

Vodafone Ireland offers a range of voice and data services to its prepaid and contract customers and also offers a wide-area paging service through its wholly owned subsidiary, Eirpage.

At 31 March 2003, Vodafone Ireland’s mobile network consisted of a GSM 900/1800 digital network comprising 15 MSCs, 25 BSCs and 1,957 BTSs, providing population coverage of approximately 98.9%. All of Vodafone Ireland’s infrastructure assets are held on a freehold basis.

Vodafone Ireland was awarded one of four 3G licences, with a twenty year duration period, via a “beauty contest” in July 2002. In accordance with the licence commitments, Vodafone Ireland commenced 3G services on 1 May 2003, providing coverage to approximately 33% of the population. In accordance with the licence terms, Vodafone Ireland is required to provide population coverage of 53% and 85% by September 2004 and December 2007, respectively. Accordingly, Vodafone Ireland continues to invest in its 3G network.

The Netherlands

As at 31 March 2003 the Group had a 97.2% shareholding in Vodafone Netherlands, a digital GSM network operator.

During the year ended 31 March 2003, Vodafone Netherlands maintained its position as the second largest mobile network operator by number of registered customers in the Dutch market. One of five GSM operators in the Netherlands, its total registered customer base stood at 3,273,000 at 31 March 2003. Prepaid customers made up 59% of the registered customer base at 31 March 2003, with the proportion of active customers estimated to be 93%.

At 31 March 2003, Vodafone Netherlands’ mobile network consisted of a GSM 900/1800 digital network comprising 24 MSCs, 28 BSCs and 2,241 BTSs providing population coverage of approximately 99%. All of Vodafone Netherlands’ infrastructure assets are held on a freehold basis.

In 2001, Vodafone Netherlands was successful in winning one of five fifteen year 3G licences in the Netherlands. Under the terms of the licence, population coverage must be at least 12% by 1 April 2004.

Sweden

The Group has a 99.1% interest in Vodafone Sweden, Sweden’s third largest mobile network operator. During the year, Vodafone Sweden’s registered customer base increased by 14% to 1,325,000, 70% of which were connected on the more profitable contract tariffs.

At 31 March 2003, Vodafone Sweden’s mobile network consisted of a GSM 900/1800 digital network comprising 10 MSCs, 42 BSCs and 2,400 BTSs, providing population coverage of approximately 96%, despite land mass coverage of only 57%.

During the 2001 financial year, Vodafone Sweden was awarded a fifteen year 3G licence, for no fee, in a “beauty contest”. The extensive infrastructure rollout requirements are being satisfied primarily through a network build programme which Vodafone Sweden has undertaken as a joint venture with Hutchison Investor 3G Access AB and Orange Sverige AB, other 3G licence holders in Sweden. It is expected that the joint venture company will build and operate the infrastructure to provide coverage for up to 70% of the population, with Vodafone Sweden building and operating infrastructure to provide coverage for a further 30% of the population. However, Orange Sverige AB has announced its intention

to withdraw from the Swedish market and the 3G joint venture described above. As a result, Vodafone Sweden may have to invest more in the network in order to achieve the national coverage required under the terms of its licence. Full commercial launch of 3G services is expected on 1 January 2004, at which time the licence terms require population coverage of 99.98%.

France

At 31 March 2003, the Group’s effective ownership interest in SFR was approximately 43.9%, comprising a direct holding of 20% and an indirect holding through the Group’s interest in Cegetel.

SFR has the second largest customer base of the three mobile carriers in the French market, with an estimated market share of 35%. During the 2003 financial year, SFR expanded its customer base by 7% to 13,324,000 registered customers at 31 March 2003. During the 2002 financial year SFR opened its GPRS network for service.

Central Europe

The Group’s interests in Central Europe comprise subsidiary undertakings in Germany and Hungary and associated undertakings in Poland and Switzerland.

Below is a summary of the Group’s business activities in its mobile telecommunications markets in Central Europe.

Germany

Following the buy-out of the remaining minority shareholders in Vodafone Holding GmbH on 21 August 2002, the Group has an effective 100% interest in Vodafone D2 GmbH (“Vodafone Germany”).

Customer growth in the German cellular market was over 5% in the year to 31 December 2002, compared with over 16% growth in the previous calendar year. Germany is the largest mobile market in Europe based on customer numbers and is one of the Group’s leading European networks in terms of messaging and data revenues, which represented 16.4% of total monthly service revenues for the 2003 financial year.

At 31 March 2003, Vodafone Germany had 22,940,000 registered customers, representing growth of over 7% in the year. This growth was principally attributable to contract customers, which increased 15% and now represent 47% of the closing customer base, up from 43% at 31 March 2002. The continued removal of inactive prepaid customers from the total customer base also resulted in active customers representing 92% of the total registered customer base at 31 March 2003, compared with 91% at 31 March 2002.

During the year, Vodafone Germany continued to make significant investments in its network which, at 31 March 2003, consisted of 148 MSCs in service and over 19,000 base stations, giving declared population coverage of over 99%.

Germany participated in the Group’s Vodafone live! launch and became the first network operator in Germany to launch a combined camera phone and online portal. By the end of March 2003, 405,000 Vodafone live! handsets had been activated. In April 2002, Vodafone Germany became the first German operator to launch MMS services. Initially available to contract customers only, in November 2002 the service was made available for prepaid customers.

Following the acquisition of a twenty year 3G licence in Germany, the 3G network infrastructure rollout is proceeding according to plan and in accordance with the licence obligation to provide at least 25% population coverage by the end of 2003. During the 2003 financial year, Vodafone Germany successfully completed voice and data calls on its pilot 3G networks.

Hungary

The Group currently has an effective 83.8% interest in Vodafone Hungary, the smallest operator in Hungary.

At 31 March 2003, Vodafone Hungary’s registered venture customers amounted to 954,000, representing growth of over 71% in the year and increasing its market share from 10.5% at 31 March 2002 to 13.4% at 31 March 2003.

During the 2003 financial year, Vodafone Hungary has also improved its network coverage, despite the cancellation of the National Roaming Agreement by a competitor during December 2002. In an accelerated infrastructure roll-out programme, Vodafone Hungary has constructed a further 297 sites during the year, taking the total at 31 March 2003 to 1,461 sites.

Vodafone Hungary launched GPRS services on 15 July 2002, MMS services on 9 December 2002 and Vodafone live! on 3 February 2003.

Switzerland

The Group has a 25% interest in Swisscom Mobile S.A. (“Swisscom Mobile”), the largest mobile telecommunications company in Switzerland, with an estimated market share of 65%. At 31 March 2003, Swisscom Mobile had 3,635,000 customers compared with 3,428,000 customers at 31 March 2002.

Poland

The Group has a 19.6% interest in Polkomtel S.A. (“Polkomtel”), the second largest operator in Poland with an estimated market share of 33% and a customer base of 4,839,000 at 31 March 2003.

Southern Europe

The Group’s interests in Southern Europe comprise subsidiary undertakings in Italy, Albania, Greece, Malta, Portugal and Spain, and an associated undertaking in Romania. At 31 March 2003, the Group’s subsidiaries in Greece and Portugal were also listed on public stock exchanges. However, Vodafone Portugal’s shares were de-listed from the Euronext Lisbon exchange on 22 May 2003.

Below is a summary of the Group’s business activities in its major mobile telecommunications markets in Southern Europe.

Italy

In November 2002, Vodafone Omnitel S.p.A. and certain other group companies were merged into a single entity, Vodafone Omnitel N.V. (“Vodafone Italy”). The Group has an effective ownership interest of 76.8% in Vodafone Italy, the second largest of three operators in Italy. On 7 October 2002, Vodafone Italy purchased certain assets from the former operator, “Blu”, which exited the market through a break up.

The Italian market is characterised by a high level of prepaid product and one of the highest penetration rates (nearly 97%) in any country in the world. Vodafone Italy’s registered customer base grew by 10% in the year and was 19,412,000 at 31 March 2003, of which 92% was on prepaid tariffs. At 31 March 2003, Vodafone Italy had a market share of approximately 35.6%, in terms of registered customers and 95% of the registered customer base was active.

At 31 March 2003, Vodafone Italy’s network consisted of 123 MSCs and 9,353 base stations, giving population coverage of 99%. During the 2002 financial year Vodafone Italy launched its GPRS service in both the corporate and consumer markets. The services were initially provided free of charge, with services charged from June 2001 for corporate customers and February 2002 for other consumers.

In November 2000, Vodafone Italy was awarded one of five fifteen year licences to offer third generation mobile services. In August 2002, the term was extended to twenty years. The deployment of the UMTS network has currently reached coverage of 14% of the population. Commercial launch is planned for later in 2003, subject to availability of handsets.

Greece

As at 31 March 2003, the Group had a 64.0% interest in Vodafone Greece, the second largest of four cellular operators in Greece in terms of number of customers with an estimated market share at 31 March 2003 of 34.7%. Its shares are listed on the Athens Stock Exchange and its Global Depositary Shares are listed on the London Stock Exchange and quoted on NASDAQ. At 31 March 2003, it had a market capitalisation of approximately £1.9 billion ($3.0 billion).

Vodafone Greece increased its registered customer base by 14% to 3,383,000 during the year to 31 March 2003, of which 71% were connected to prepaid services and 75% were considered active.

As a result of acquisitions of service provider companies completed in prior periods, at 31 March 2003, Vodafone Greece owned an extensive distribution network, providing direct access to 84% of its registered customer base.

The GSM network of Vodafone Greece uses both 900 and 1800 MHz spectrum, providing population coverage of 98.7%. At 31 March 2003, the network comprised 2,062 base stations connected to 32 BSCs, 16 MSCs, 3 transit switching centres and 7 stand alone HLRs. All of Vodafone Greece’s infrastructure assets are held on a freehold basis.

Vodafone Greece launched GPRS service in April 2001, with service now available for both retail and corporate customers. In July 2001, Vodafone Greece was awarded one of three 3G licences. In addition, it acquired extra 2G spectrum, allowing Vodafone Greece to continue to improve the quality of service for its customers. Vodafone Greece plans to launch its 3G network within the 2004 financial year.

Malta

The Group has an 80% shareholding in Vodafone Malta Limited (“Vodafone Malta”), the largest operator in Malta in terms of total customers.

During the 2003 financial year, Vodafone Malta increased its registered customer base by 7% to 163,000 at 31 March 2003 with 92% of the customer base connected to its prepaid tariffs.

GPRS services were launched in October 2001, with the service available to both retail and corporate customers. In September 2000, Vodafone Malta was awarded a 3G licence and is expected to launch 3G services by the end of the 2006 financial year.

Portugal

Vodafone Portugal is the second largest of three operators in Portugal, both in terms of total customers and service revenues. During the 2003 financial year, Vodafone Portugal maintained its market leadership position in the contract and corporate segments and increased its registered customer base by 9% to 3,085,000 at 31 March 2003, of which 88% were active.

Vodafone Portugal operates a nationwide GSM mobile network (currently in the 900 MHz and 1800 MHz bands) covering approximately 100% of the population of mainland Portugal and the Autonomous Regions of Azores and Madeira. At 31 March 2003, the network consisted of around 2,800 base stations.

In December 2000, Vodafone Portugal was granted one of the three 3G licences. However, commercial launch of UMTS services in Portugal has been postponed and is not expected until 31 December 2003.

Spain

Vodafone Spain is the second largest of three operators in Spain. At 31 March 2003, Vodafone Spain had 9,096,000 registered customers, representing growth of 15% in the year, with 57% of the customer base connected to prepaid tariffs and 96% of the customer base considered active.

At 31 March 2003, Vodafone Spain’s network consisted of 57 MSCs, 172 BSCs and 7,063 BTSs, giving population coverage of 98.9%.

In November 2001, Vodafone Spain launched its GPRS service in both the corporate and the consumer markets and, during the 2003 fiscal year, continued the development of the GPRS network, adapting the existing infrastructure to support the growth in data traffic.

In March 2000, Vodafone Spain was awarded one of four 3G licences by the Spanish government. The deployment of the UMTS network is proceeding according to plan, consisting of 850 UMTS base stations at 31 March 2003. Vodafone Spain currently expects to launch 3G services later in the 2004 financial year.

Albania

The Group has an effective 82.4% interest in Vodafone Albania Sh.A. (“Vodafone Albania”), the second largest cellular operator in Albania in terms of number of customers. Vodafone Albania launched GSM services on 3 August 2001 and, as at 31 March 2003, had a registered customer base of 391,000, of which 97% was connected to prepaid services.

Americas

The Group’s interests in the Americas comprise a 45% ownership interest in Verizon Wireless, which was formed at the beginning of the 2001 financial year by the combination of the US cellular operations of the Company, Bell Atlantic and GTE, and a 34.5% interest in Grupo Iusacell (“Iusacell’’).

United States

The Group owns 45% of Verizon Wireless and designates three of the seven members of Verizon Wireless’ board, while Verizon Communications designates the four other members.

The mobile telecommunications market in the United States currently consists of six nationwide competitors and a number of regional and smaller rural carriers. Verizon Wireless has maintained its position as the leading mobile telecommunications provider in the United States in terms of number of customers, network coverage and revenues.

Due to the continued difficult economic conditions and increased market penetration in the US, net customer growth has slowed considerably from prior years. However, Verizon Wireless increased its customer base by 13% over the 2002 financial year and ended the year with a registered customer base of 33,324,000, of which 93% were on contract plans.

During August 2002, Verizon Wireless combined the business operations of Price Communications Wireless Inc. with certain Verizon Wireless assets in a transaction valued at $1.7 billion, including $550 million in net debt that was assumed and subsequently redeemed. Under the agreement, a partnership was formed which Verizon Wireless controls and manages. Price Communications’ partnership interest will be exchangeable into common stock of Verizon Wireless Inc. (if an initial public offering of such stock occurs), subject to specified

conditions. Price Communications Wireless provided 800 MHz wireless service to approximately 411,000 customers in the South East of the United States.

In December 2002, Verizon Wireless signed an agreement with Northcoast Communications LLC, to purchase 50 Personal Communications (“PCS”) (1800MHz – 1900MHz) licences and related network assets, for approximately $750 million in cash. The licences cover portions of the East Coast and Midwest, and serve approximately 47.2 million people. The transaction completed in May 2003.

Verizon Wireless was the first major US carrier to launch CDMA2000 1XRTT technology in major metropolitan markets and during the 2003 financial year Verizon Wireless continued to roll-out its network, extending total coverage to approximately 85% of the Verizon Wireless footprint, with coverage expected to reach nearly 100% later in the year.

During the year ended 31 March 2003, Verizon Wireless continued to focus on gaining and retaining high value customers through new customer additions, the migration of existing analogue customers to digital price plans and churn management programmes. Next generation services are expected to provide business customers with the functionality to use the Verizon Wireless network as an extension of their corporate Local Area Network or intranet, allowing them to work from any location where there is coverage. The services will also allow for a range of multimedia services to be offered, including services such as video and audio streaming and interactive gaming.

In January 2003, Verizon Wireless withdrew its Registration Statement with the SEC relating to a proposed initial public offering of a minority stake in the partnership, stating that it currently has no significant funding needs that would require it to proceed with the offering. On 10 July 2002, the Cellco Partnership, doing business as Verizon Wireless, and Verizon Wireless Capital LLC, a wholly owned subsidiary of the Cellco Partnership, filed a registration statement on Form S-4 to exchange $4 billion privately placed notes for a new issue of notes with identical terms registered under the US Securities Act of 1933. The exchange offer closed on 12 November 2002.

In December 2002, the Federal Communications Commission (“FCC”) refunded the remaining $261 million on deposit, which represented 15% of the initial deposit made in relation to the re-auction of licences for 1.9GHz spectrum and relieved Verizon Wireless of its remaining obligations with respect to the auction.

Mexico

On 4 April 2001, the Group acquired a 34.5% interest in Iusacell. Iusacell currently provides wireless services in seven of Mexico’s nine regions, covering a population of 90 million people and representing approximately 90% of the country’s total population. Roaming is provided in the two remaining regions.

Mexico’s cellular market has continued to expand, with customer growth largely driven by prepaid products. At 31 March 2003, Iusacell had 2,036,000 registered customers, an increase of 2% since 31 March 2002. Of the total registered customer base, 83% were prepaid customers.

Iusacell’s financial performance continued to decline in the year despite a modest increase in its customer base and management’s efforts to restructure the business through substantial headcount reductions and tight cost and cash management.

In order to alleviate certain of the resulting financial pressures, Iusacell began a debt restructuring effort in December 2002 and, in May 2003, secured a temporary waiver related to its $266 million secured bank credit facility. Iusacell will continue to work with its financial advisor to restructure the terms and payment schedules of its various debt agreements and instruments. It is likely

that Iusacell will require additional funding in order to grow its operations. However, there is no assurance that such funding could be obtained at all or, if obtainable, on terms which would be acceptable to Iusacell.

As a result of Iusacell’s deteriorating financial performance, the Group has written off its investment and is currently considering its options with respect to its investment, including disposal.

Globalstar

In August 2002, the sale of two Globalstar service provider companies, Globalstar US and Globalstar Caribbean, was finalised. In November 2002, the Globalstar service provider, Globalstar de Mexico, was sold.

Asia Pacific

The Group’s interests in the Asia Pacific region comprise subsidiary undertakings in Japan, Australia and New Zealand, associated undertakings in Fiji and India, and the Group’s interests in China.

Below is a description of the business developments and activities of the Group’s business activities in the major telecommunications markets in the Asia Pacific region.

Japan

Through a series of transactions undertaken during the last two financial years, the Group has an effective 69.7% interest in J-Phone Vodafone.

Japan’s mobile telecommunications market remained robust as mobile services continued to expand, with market penetration increasing by five percentage points to 59% at 31 March 2003, compared with 54% at 31 March 2002.

At 31 March 2003, J-Phone Vodafone had approximately 13,912,000 registered customers and a market share of over 18%. J-Phone Vodafone continued to capture monthly market share above its cumulative share, with 1,727,000 net customer additions recorded in the year ended 31 March 2003. One of the key drivers of this recent growth has been the increase in J-Sky web usage and content revenue, together with the continued success of J-Phone Vodafone’s other data offerings, “Sha-mail”, the popular photo-messaging service and the video-clip messaging service “movie sha-mail”.

At 31 March 2003, J-Phone Vodafone’s PDC (2G) network comprised 101 MSCs and 13,890 base stations, giving population coverage of 99.7%.

On 30 June 2000, the Ministry of Post and Telecommunications awarded one of three 3G licences to J-Phone Vodafone (then called J-Phone Communications). No fees were required by the Japanese government for the licences. J-Phone Vodafone was the first network operator in the Group to open its 3G network for service, having commenced nationwide service on 20 December 2002. J-Phone Vodafone’s 3G network is compatible with the global W-CDMA standard, providing capability of international W-CDMA and GSM SIM enabled roaming to Japan for the first time. At 31 March 2003, J-Phone Vodafone had concluded 69 roaming agreements in 62 countries and regions.

The use of micro cell technology has allowed the rapid and cost effective deployment of J-Phone Vodafone’s 3G network. As at 31 March 2003, J-Phone Vodafone had 3,644 operational 3G base stations covering over 71% of the population. By the second half of the 2003 calendar year, J-Phone Vodafone aims to have 13,275 operational 3G base stations covering over 95% of the population.

Australia and New Zealand

On 3 May 2002, the Group completed its purchase of the remaining 4.5% minority interest in Vodafone Australia, as a result of which the Group’s effective interest in its Australian operations increased from 95.5% to 100%.

Network operations in Australia and New Zealand, both of which operate under the Vodafone brand name, increased their registered customer base by an aggregate 19% in the 2003 financial year to 3,853,000 registered venture customers at 31 March 2003. In Australia, Vodafone’s customer base increased by 418,000 net new customers, giving a market share of over 18%, compared with 17% at 31 March 2002. In New Zealand, strong growth continued with an 18% increase in the registered customer base to 1,289,000, resulting in a 51% market share.

Australia and New Zealand operate digital networks based on the GSM technical standard, providing coverage to approximately 92% and 97% of the population, respectively. At 31 March 2003, the Australian and New Zealand networks comprised 13 and 4 MSCs and 2,276 and 866 base stations, respectively.

Australia and New Zealand have commenced plans to roll out 3G infrastructure and expect to introduce 3G services by 2005.

India

Since 31 March 2003 the Group has entered into an agreement, subject to conditions, to sell its entire interest in RPG Cellular Services Limited.

China

The Group has a stake in China Mobile of approximately 3.27%. The Group also owns a 9.99% interest in Aspire Holdings Limited, China Mobile’s subsidiary set up to develop its mobile Internet service delivery platform and take responsibility for mobile data research and development.

At 31 March 2003, China Mobile had approximately 123,778,000 registered customers.

Middle East and Africa

The Group’s operations and ownership interests in the Middle East and Africa Region comprise the subsidiary company Vodafone Egypt Telecommunications Company SAE (“Vodafone Egypt”) and two associated undertakings, Safaricom in Kenya and Vodacom in South Africa.

Egypt

Vodafone Egypt is Egypt’s second largest mobile operator, with an estimated market share of 48%, and operates under the brand name Vodafone. Since its launch in November 1998, it has increased the number of customers connected to its network to approximately 2,263,000 by 31 March 2003.

In Egypt, Vodafone offers both contract and prepaid services, with prepaid customers representing approximately 84% of the customer base.

At 31 March 2003, Vodafone Egypt’s mobile network consisted of a GSM 900 digital network comprising 13 MSCs, 19 BSCs and 1,636 BTSs, providing population coverage of approximately 98.5%, although providing land mass coverage of only 12%.

South Africa

The Group has a 35% interest in Vodacom, South Africa’s largest mobile operator with an estimated market share of 58%. Its customer base increased by 20% in the 2003 financial year to 7,874,000 registered customers, of whom approximately 85% are connected to the prepaid service.

Vodacom also has a licence to operate in Tanzania and, in December 2001, formed a joint venture in the Democratic Republic of the Congo.

Mobile data services

Revenue streams from messaging data and other data services (“data revenues”) increased 73% to £3,622 million for the 2003 financial year, and represented over 14.6% of service revenues in the Group’s controlled subsidiaries during the year. For the month of March 2003, data revenues as a percentage of service revenues increased to over 15.6%, compared with 13.5% for the month of March 2002.

Growth in data revenues has been primarily driven by the continued popularity of SMS and benefited from the launch of a number of SMS-based products and services by the Group during the period. The Group is also starting to generate revenues from GPRS services. These results also include a first time contribution from Vodafone live!, which was launched in late November 2002 although many data services were initially offered free of charge to customers.

Further details on the Group’s strategy and plans for the development of data services can be found in “Strategic developments – Global services” below.

Third generation licences and network infrastructure

The Group has secured 3G licences in all jurisdictions in which it operates and in which such licences have been awarded to date. Further details can be found in “Information on the Company – Business Overview – Business activities –Mobile telecommunications”.

Cumulative expenditure on 3G licences was £13.5 billion at 31 March 2003 and was funded from the Group’s existing facilities. Most of this expenditure (£13.1 billion) occurred during the 2001 financial year. During the 2003 financial year, the Group’s cash expenditure on intangible fixed assets was £99 million, which included the acquisition of a 3G licence in Ireland, a further licence in Portugal and additional GSM spectrum in Italy. Vodafone expects to participate in additional 3G licence allocation procedures in other 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.

The construction of 3G network infrastructure has continued throughout the 2003 financial year, with tangible fixed asset additions on 3G network infrastructure amounting to approximately £1.7 billion. The Group presently expects capitalised tangible fixed asset additions to be approximately £5.0 billion in the 2004 financial year, 40% of which is expected to be in respect of 3G network infrastructure. This expenditure is expected to be financed through operating cash flows and existing borrowing facilities. The Group has entered into contracts with four key suppliers for the delivery of 3G network infrastructure.

Further details on the Group’s 3G plans can be found in “Strategic developments – Global services” below.

Strategic developments – Global services

The Group’s vision is to be the world’s mobile communications leader. A major focus of the Group’s strategy is to offer innovative services within Vodafone-branded, end-to-end customer propositions, which utilise the Group’s global footprint and global brand to offer customers a unique mobile experience and seamless international services.

These programmes, such as Vodafone live!, are based on compelling customer propositions and have been packaged together for a specific target market. Vodafone live! is an easy-to-use consumer service, bringing customers a world of colour, sound and pictures, enabling them to use picture messaging, download polyphonic ringtones and colour games, and browse branded infotainment from integrated camera phones through an easy to use icon driven menu.

Vodafone live! and Mobile Office from Vodafone

Vodafone live! was launched on 24 October 2002 and by 31 March 2003 the Group had connected more than one million active live! customers in 10 countries. Of the Vodafone live! customers, Germany had over 405,000, Italy 227,000 and the UK 240,000. Since 31 March 2003, Vodafone live! has also been launched in Australia, Egypt and New Zealand. The service has also attracted critical acclaim from the industry, including recent awards from the GSM Association for best consumer application, advertising and mobile handset.

The acquisition of the remaining 50% stake in Vizzavi and its rapid integration into the Group has supported the creation of Vodafone live!, which is expected to continue to drive a significant part of the Group’s growth in future years. It is intended that the Vodafone live! experience will continue to be updated, integrating the most up to date services and technologies as well as broadening the range of handsets available to cover more market segments. The next release of Vodafone live! will include access to picture messaging libraries and improved download speeds.

Mobile Connect Card, the first of Vodafone’s global business services to be offered under Mobile Office from Vodafone, was launched in twelve countries during the period. Mobile Connect Card, a high speed data card enabling customers to access their normal business applications when out of the office, is aimed at all business users, from large corporate customers to those in the small and medium sized enterprise sector, and is marketed and sold through the Group’s direct sales, retail and e-channels as well as partner channels for leading personal computer brands. Mobile Office from Vodafone will offer a range of global and local mobile business services to customers, with more global services to be introduced later this year.

Vodafone live! and Mobile Office from Vodafone are already demonstrating their importance to the Group’s strategy of deriving increased revenues from data services, with games downloads, picture messaging and other content services proving particularly popular and generating extra revenue.

3G

Together, Vodafone live! and Mobile Office from Vodafone lay the foundations for the Group’s next stage of growth, as it is planned that both will create the demand for new data services against which the Group will construct its 3G networks. Both currently use 2.5G technology and will be upgraded to 3G, enabling faster download speeds, which will enhance customer experience and productivity.

In December 2002, J-Phone Vodafone became the first subsidiary in the Group to launch 3G services commercially. Furthermore, J-Phone Vodafone customers with an enabled handset, can not only use 3G services within Japan, but can also roam internationally on 2G networks with the convenience of being able to use the same telephone number as they do at home.

In Europe, the Group’s 3G programme continues, with networks being rolled out according to plan and technical testing underway. The availability of suitable handsets remains a key issue and supplies of these are expected to be limited until 2004. 3G services are expected to be available to customers before the end of the 2004 financial year, dependent on when networks and handsets are of sufficient quality to offer the Group’s customers a good service.

Brand

The strength of the Vodafone brand continues to improve. For example, in countries where the Group has migrated to the Vodafone brand, brand awareness and preference continues to grow. During the year, the Group continued with its high profile sponsorship of the Manchester United Football

Club and the Ferrari Formula 1 team, backed up with individual sponsorship contracts which, when combined with the continued brand rollout and other marketing communications programmes, has significantly improved awareness and perception of the brand. In Italy, Vodafone Omnitel migrated to the single brand in May 2003 and migration to the single Vodafone brand is also underway in Japan. Having a consistently implemented brand across the Group’s markets greatly assisted the execution of the Vodafone live! campaign and Vodafone live! is already significantly contributing to the brand in terms of brand equity and positioning. The brand is also being rolled out in networks where Vodafone does not have equity stakes, through the partner networks programme, which licenses the global brand and key global services.

Partner Network Agreements

The Group’s partner network strategy is becoming increasingly attractive to operators in which it does not currently hold an equity stake. During the year ended 31 March 2003, the Group signed a further four Partner Network Agreements, with Mobilkom Austria Group, si.mobil in Slovenia, VIPnet in Croatia and Radiolinja Eesti in Estonia. The Group now has eight partner networks following the latest agreement with Islandssimi hf in Iceland announced on 16 April 2003. By partnering with leading mobile operators the Group is able to market its global services in new territories, extend its brand reach into new markets and create additional revenue without the need for equity investment.

Marketing and distribution

Marketing

The Group’s marketing activities can be categorised as brand marketing and local marketing.

Brand marketing

Brand marketing is designed to increase general public awareness of the

Vodafone brand or other local Group brands – its values, products and services – and marketing specifically directed at certain distribution channels. Brand communications include sponsorships and advertising on radio, television, in general circulation newspapers, in magazines and in specialised publications.

Having improved its brand awareness as a result of the Group’s brand rollout programme and the continuing “How are you?” advertising campaign, the Group’s brand marketing is now focused on turning brand awareness into brand preference.

The Group believes that the adoption of a single Vodafone brand in all markets will maximise the return from the Group’s investment in marketing and application development and will increase customer loyalty. During the 2003 financial year the Group has continued to implement its strategy to introduce the Vodafone brand into all businesses where it has control. At 31 March 2003, all subsidiaries other than those in Italy and Japan had migrated to the single Vodafone brand. Omnitel Vodafone was rebranded Vodafone Omnitel in June 2002 and migrated to the single brand in May 2003. In Japan, J-Phone Vodafone is to migrate to the single brand by December 2003.

Further details on how the Group has developed the global brand during the 2003 financial year can be found in “Strategic developments – Global services” above.

Local marketing

In addition to the Group’s initiatives to establish a global Vodafone brand, marketing is also performed on a local market basis. Customer database marketing is widely used to communicate directly and, linked with customer service, provides a strong basis for building customer relationships. Loyalty schemes, such as the OmniOne loyalty programme in Italy, are beginning to be used as a way of increasing customer satisfaction and reducing customer churn. In the UK, the Group, along with other companies from various industries, became a sponsor of the “Nectar card loyalty points scheme” during the 2003 financial year.

Associated companies are generally marketed under their local brands.

Distribution

Distribution is achieved through a wide variety of direct and third party channels, with different approaches used to attract the consumer and business sectors.

Products and services are available directly to both consumer and business customers in the majority of markets. Directly-owned stores are becoming increasingly popular in most markets. The look and feel of these stores, particularly in Italy, Greece and the UK, has become more user-experience orientated during the year, with customers invited to try out service offerings such as Vodafone live!. Local Internet sites offer products and services online and sales forces are in place to discuss terms with business customers.

Indirect distribution includes using third-party service providers, independent dealers, agencies and mass marketing. Service providers are prevalent in some markets, most notably the UK. 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. Service providers receive discounts on the Group’s airtime rates for each tariff. Service providers also receive financial incentives from the Group related to their success in attracting new customers to the network. These comprise gross connection bonuses, airtime growth awards and other specific incentives. Independent dealers are used in the majority of markets, with own-branded stores, business “store-within-stores” and kiosks becoming increasingly popular. Supermarket chains and multiple retailers are also used to achieve mass distribution of prepaid products, with top-up vouchers available in a wide selection of outlets such as petrol stations, newsagents and local stores.

In the United States, Verizon Wireless sells its service directly to customers through its own sales force and stores, telemarketing centres and the Internet, and indirectly through arrangements with independent agents such as consumer electronic stores, specialised cellular stores, automobile dealers, department stores and other retail stores. In certain areas, mobile services are sold through resellers who, pursuant to FCC requirements, are allowed to purchase blocks of mobile telephone numbers and to access mobile services at wholesale rates for resale to the public. In the past twelve months, however, the use of resellers has been reduced.

Seasonality

Traditionally, the Christmas period sees a higher volume of customer connections contributing to higher equipment and connection revenues in the second half of the financial year. Ongoing airtime revenues also demonstrate signs of seasonality, with revenues generally lower during February, which is a shorter than average month, and revenues 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.

Business activities – Non-mobile telecommunications

The Company’s non-mobile telecommunications businesses mainly comprise interests in Arcor, Cegetel and Japan Telecom.

Arcor provides fixed network services in Germany. The German fixed line market remains intensely competitive although Arcor has retained its position as the leading private operator and the strongest competitor to Deutsche Telekom, the market leader. Turnover from voice, data and Internet businesses increased in the period, compensating for the reduction in carrier business caused by the competitive market. During the period the contract voice customer base increased by approximately 10% to 2,600,000 customers. Total traffic volumes increased by 20% compared to the same period in 2002 to 25.3 billion minutes.

As described in more detail under “Information on the Company – History and Development of the Company – Sales of businesses”, in January 2002 a contract with Deutsche Bahn AG was signed to carve out Arcor´s railway specific telecommunication and service business into the company Arcor DB-Telematik GmbH. Following completion of the sale in April 2001, the remaining 50.1% share of Telematik was sold to Deutsche Bahn AG in July 2002.

Cegetel is the second largest fixed line operator in France and the remaining 80% shareholder in SFR. The company offers broadband services in addition to fixed line services. During the 2003 financial year, the Group increased its interest in Cegetel to 30%.

The Group owns an effective 66.7% interest in Japan Telecom, the third largest fixed line telecommunications operator in Japan, offering both voice and data services. Since the Company gained control in October 2001, Japan Telecom’s profitability has improved significantly as the benefits of management’s transformation plan start to be realised.

The fixed line market in Japan remains extremely competitive following the lifting of market entry restrictions and the maintenance of market share continues to be a challenge in the customer voice segment. During the period the main focus of the business has been on high-growth business opportunities and the delivery of innovative data products and services. The corporate customer base continues to expand due to the uptake of Internet Protocol (“IP”) data related services, with the next-generation IP network “PRISM”, using optical fibres, being particularly successful.

Additional functionality, such as new connectivity regarding IP-Virtual Private Network accessibility via the Internet and network expansion for Ethernet services, has been added to the network to enhance data services.

Regulation

The Group’s operating companies are generally subject to regulation governing the operation of their business activities. Such regulation generally 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 (“WTO”) to facilitate market entry and establish regulatory frameworks. The following section describes the regulatory framework and key regulatory developments in the European Union and selected countries in which the Group has significant interests.

European Union

New framework

The European Union (“EU”) has adopted a new regulatory framework for the communications sector which replaces much of the existing EU regulatory framework introduced when the sector was first liberalised in the 1990s. The new framework consists of four principal Directives outlining matters such as the objectives to be pursued by national regulatory authorities (“NRAs”), the way in which undertakings 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 undertakings interconnect and provide access to each other (“the new framework”). Member States must implement the new framework into national law by 24 July 2003.

The new 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 for ‘voice call termination on individual mobile networks’, ‘wholesale national market for international roaming’ and ‘access and call origination’ on mobile networks. NRAs may, with the Commission’s consent, also propose markets not included in the Recommendation. The Commission will periodically review the Recommendation, with the first such review expected in June 2004.

Regulation can only then be applied to undertakings with significant market power (“SMP”) (either individually or collectively) in the markets so identified, subject to the Commission’s consent. SMP under the new 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 existing EU regulatory framework required only a 25% share of the relevant market.

The form of such regulation may vary and is expected to be the subject of further consultation during 2003. Appeal rights for undertakings are also strengthened by the introduction of a right to appeal on the merits of any NRA decision.

However, the practical consequences of the new framework for the Group will depend upon how the Commission seeks to interpret further the application of the relevant Directives, how Member States and NRAs choose to implement such guidance and how the Member States implement the relevant Directives into national law.

Roaming charges

Officials of the Commission conducted unannounced inspections of the offices of

mobile network operators in the United Kingdom and Germany, including Group subsidiaries, in July 2001 in connection with its sectoral enquiry into roaming charges. 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. The Commission has yet to indicate how, when or if it may proceed in these specific matters or in relation to its general enquiries into the roaming market.

Wholesale roaming is a market defined for the purposes of review by NRAs under the new framework but at least one NRA has indicated that they will await the outcome of the Commission’s investigations before undertaking such reviews.

In February 2001, certain Group operating companies notified the Commission of the agreements between them established to support the Eurocall flat rate roaming tariff. During 2002 the Group clarified certain matters concerning the interpretation of the Mannesmann Undertakings (“the Undertakings”) with the Commission. The Undertakings were given by the Group in connection with its acquisition of control over Mannesmann and concerned the Group’s obligations, inter alia, to third parties in the provision of certain wholesale roaming services. As a consequence of such clarifications, the Group launched the Eurocall Platinum flat rate roaming tariff in September 2002. The Commission is seeking clarification of certain aspects of the Platinum arrangements. The Undertakings terminated on 12 April 2003 on the expiry of their three year term.

Northern Europe Region

United Kingdom

The UK Government has announced that the existing NRA, the Office of Telecommunications, (“Oftel”) will be replaced by the Office of Communications (“OFCOM”), a regulatory body which will oversee media and other communications industries as well as telecommunications. A chairman, chief executive and other board members of OFCOM were appointed in late 2002/early 2003 and it is currently anticipated that OFCOM will assume Oftel’s responsibilities in late 2003.

The Communications Bill defines OFCOM’s duties and modes of operation. This received its second reading in the House of Commons in December 2002 and the Government intends that the Bill receives Royal Assent by July 2003.

The Communications Bill is to be used to implement the new framework, although it is anticipated that certain measures which are required to be implemented by 25 July 2003, such as the conduct of ‘market reviews’ to determine whether regulation may be needed, will be taken by secondary legislation in the form of a Statutory Instrument. It will also be used to implement certain aspects of an Independent Spectrum Management Review, which reported in March 2002. The report’s principal recommendations, which the Government has accepted, were that the Government should introduce spectrum trading, which would allow firms to trade spectrum with each other rather than seeking assignments from the Government, at the earliest opportunity and that administrative pricing should be applied to spectrum which was not tradable, particularly that held by public institutions. The Government is now consulting further on certain aspects of spectrum trading.

In September 2001, the Director General of Oftel concluded his review of the mobile market and, in particular, his review of charges for the termination of calls onto the networks of all mobile operators. Amongst other things, the Director General concluded that charges for call termination should be reduced by 12% less than the UK’s Retail Prices Index, i.e. RPI minus 12%, in each year for the period from April 2002 to March 2006. The Director General proposed licence modifications to all four operators pursuant to these proposals. Vodafone UK and

the other mobile operators rejected the Director General’s proposed modifications in November 2001 and, in January 2002, the Director General confirmed that he had referred the matter to the Competition Commission. Oftel published the Competition Commission’s conclusions in January 2003 and its full report was published in February 2003.

The Competition Commission concluded that charges for call termination to all four operators should reduce by 15% by 24 July 2003 and, in findings which it claimed should have ‘persuasive effect’, that charges for call termination to Vodafone UK and O₂ should fall by RPI minus 15% for the period July 2003 to 31 March 2004, the year ending March 2005 and the year ending March 2006. The Competition Commission found that charges for call termination to Orange and T-Mobile should fall by RPI minus 14% during the same periods. The Director General is required to take the utmost account of the Competition Commission’s findings under the Telecommunications Act, which is to apply until July 2003, and the Director General has made licence modifications, which implement the Competition Commission’s findings in respect of the period to July 2003. The Director General is required to comply with the provisions of the new framework in framing measures for the period after July 2003, but he has said that he will take utmost account of the Competition Commission’s findings in doing so. Proposals in respect of the period after July 2003 are subject to the appeals provisions embodied in the new framework, as implemented by the Communications Bill.

The Competition Commission’s findings are themselves subject to Judicial Review and Vodafone UK, Orange and T-Mobile have announced their intention to seek permission to review from the High Court. It is not at this stage clear whether such permission will be granted. The application is to be heard in June 2003.

In August 2002, the Government sought views on the possible introduction of a specific offence to prohibit the use of any hand-held mobile phone or similar device by drivers. The Government also invited comment on whether the proposed offence should include hands-free and whether there should be any exemptions from the proposed offence and indicated that it expected to announce its conclusions in the first half of 2003.

Other countries

A number of NRAs have recently considered or are considering the regulation of charges for the termination of calls to mobile networks. Existing European regulation requires that operators designated as having SMP in the national market for interconnection must offer cost-orientated charges for such services and NRAs may also determine charges pursuant to interconnection disputes. NRAs in Belgium and France have reached decisions during 2001/02 which both resulted in reductions of approximately 15% in call termination charges in 2002 and further proposed reductions in 2003. The NRA in the Netherlands had its decisions seeking to do so dismissed by the Court of Rotterdam, but the Dutch Competition Authority continued to investigate call termination charges.

In addition, the Commission continues to investigate complaints against KPN and Vodafone Netherlands, initiated in 1999. The Commission has issued a Statement of Objections outlining its case against KPN, but not Vodafone Netherlands. Some of the matters detailed in the KPN Statement of Objections are specific to KPN but some, in relation to price squeezing in certain retail markets, may be of more general applicability. A decision on this case is expected in 2003.

In 2002, mobile operators in the Netherlands were investigated by the Dutch competition authority, NMa, for alleged collusion in retail pricing. The operators were found guilty and fined a total of €88 million. Vodafone Netherlands was fined €24 million, which is currently the subject of an appeal.

The Swedish NRA published guidelines in April 2003 which may result in a

re-examination of 3G rollout obligations, but it is unclear at this stage how they will be applied.

Central Europe Region

Germany

Current German telecommunications regulation requires all network operators to allow interconnection of their public telecommunications networks with those of other carriers. Cost orientation of interconnection prices applies only to dominant operators in the relevant market. To date, the German NRA has not considered any mobile operator to be dominant.

Other countries

Poland and Hungary, as EU accession countries, are required to implement EU legislation into national law. To meet accession criteria, these countries are in the process of implementing the current EU regulatory framework. The Commission has advised EU accession countries that they will also be required to implement the new framework.

In Hungary, an investigation into alleged collusion in setting mobile termination rates has been extended. Vodafone Hungary filed their submission to the Hungarian competition authority in January 2003. The final report is expected to be issued by the end of August 2003.

Switzerland, although not part of the EU, is considering implementing parts of the new regulatory framework for the purposes of “European compatibility”. In June 2002, the Swiss NRA removed certain roll out obligations from 3G licences. In October 2002, the Swiss competition authority commenced an investigation of mobile termination charges to assess potential collusion between mobile operators.

Southern Europe Region

Italy

In July and September 2002, respectively, the Italian Competition Authority and Commission approved the division of certain assets held by Blu amongst the remaining mobile operators – Vodafone Italy, TIM and WIND.

TIM and Vodafone Italy have been designated as operators with SMP in both the mobile and interconnection markets since 1999. In December 2001, the Italian NRA directed the mobile operators to prepare a cost accounting model based on fully allocated costs for the years 1999 and 2000 as an intermediate step for the adoption of a long run incremental cost model to set call termination charges. In February 2003 it announced that Vodafone Italy and TIM would each be required to reduce their call termination rates by 12% on 1 June 2003, with further reductions being expected in subsequent years. In August 2002, the Italian authorities extended the term of the 2G and 3G licences held by all operators from fifteen to twenty years.

Other countries

Mobile termination charges are subject to regulatory activity elsewhere in the Southern Europe region. In January 2002, the Portuguese NRA issued a decision, which reduced fixed to mobile termination charges to be applied by mobile operators by 15% in 2002. The Portuguese NRA will reassess call termination rates for 2003 in the light of market conditions. In Spain the NRA required a reduction of 17% in call termination rates from 1 August 2002. Subsequently, in December 2002, the Spanish competition authority conducted unannounced inspections of the offices of Vodafone Spain and Telefonica investigating allegations of price squeezing in the corporate market and excessive call termination charges. The investigation is ongoing. The Greek NRA

in March 2002 outlined three conditions to be applied to Vodafone and Cosmote, designated as having SMP in the mobile market. These included non-discrimination between fixed and mobile operators when terminating traffic, termination rates to be lower than on-network retail prices and discount policies to be transparent and non-discriminatory.

The Portuguese NRA has postponed 3G roll-out obligations and the Spanish Government substantially reduced deposits for 3G licences following commitments that commercial services would be available by 2004.

Romania and Malta, as EU accession countries, are currently implementing EU legislation into national law.

Americas Region

United States

US mobile and Personal Communication Services (“PCS”) licences are issued and regulated by the FCC. In addition, US mobile operations are subject to regulation in the states in which service is provided and to local regulations. States are pre-empted from regulating mobile and PCS prices and market entry but may regulate certain other terms and conditions of service.

In January 2001, the FCC sought to auction 422 PCS licences, covering spectrum that either had not been sold in previous auctions or had been reclaimed from licensees failing to make payments. Verizon Wireless was the winning bidder of 113 licences with bids totalling approximately $8.8 billion, and made a down payment of approximately $1.7 billion for these licences. Thirty-three of these licences have been granted to Verizon Wireless. Eighty of these licences, however, related to spectrum that was reclaimed from NextWave Personal Communications Inc. and related companies (“NextWave”) or from Urban Comm-North Carolina, Inc. (“Urban Comm”), both of which were under Chapter 11 bankruptcy protection at the time of revocation. NextWave challenged the FCC’s revocation of its licences and in January 2003 the U.S. Supreme Court ruled that US bankruptcy law prohibits the FCC from revoking licences. The FCC dismissed Verizon Wireless’s applications for the former NextWave and Urban Comm spectrum and subsequently refunded the remainder of Verizon Wireless’s $1.7 billion down payment. The NextWave and Urban Comm licences now remain part of their respective estates in bankruptcy.

The FCC is currently considering changes to its method of calculating the liability of US carriers for Universal Service Obligation (“USO”) contributions, which may result in an increase in the USO costs of Verizon Wireless.

Mexico

Legislation has been introduced into the Mexican parliament with a view to introducing a new telecommunications-specific regulatory framework. The legislation is intended to redress perceived flaws in the current regulatory environment. It is uncertain whether such legislation will be forthcoming. The US government has also commenced WTO dispute resolution against the Mexican government alleging that Mexico’s current regulatory regime does not comply with its WTO commitments.

Asia Pacific Region

Japan

In 2001, the Japanese government embarked on a two-year programme of economic reform, underpinned by review obligations contained in the Telecommunications Business Law, including fixed line interconnection charges on NTT’s networks, regulation of the mobile sector, competition guidelines, administrative arrangements and universal service.

In November 2002, the Japanese competition authority conducted unannounced

inspections of a number of J-Phone Vodafone offices in Japan in connection with alleged resale price maintenance in breach of the Japanese Anti-Monopoly Act. The Japanese competition authority has not yet issued any findings in respect of the ongoing investigation but is expected to do so during the course of 2003.

The Japanese regulator will require changes to the charging structure and prices for calls from non-dominant fixed line operators to Japanese mobile networks from July 2003. It is possible that these changes will also apply to calls from NTT although the timing of further changes remains uncertain.

China

The Chinese government has announced that it is considering licensing further mobile operators when it allocates 3G spectrum, and has set aside spectrum which could be made available, but has not provided detail as to the nature and timing of the 3G licensing process.

Middle East and Africa Region

South Africa

A new Telecommunications Amendment Act was introduced in South Africa in November 2001. The Government is considering amendments to the method of calculation of universal service contributions and allocation of 1800 MHz spectrum. Mobile termination rates are under review.

Kenya

The Kenyan Communications Commission has announced a tender process for the award of a third mobile licence, which is expected to be awarded in July 2003.

Egypt

The Egyptian government has issued a third mobile licence, including the rights to all currently available 1800Mhz spectrum, to Telecom Egypt, which has been looking for a strategic partner to assist in the deployment and operation of a mobile network. The existing two mobile network operators have entered into negotiations with Telecom Egypt with a view, inter alia, to acquiring this 1800Mhz spectrum and Telecom Egypt taking a stake in one of the two operators. Any such transaction would be subject to Egyptian regulatory approval, operator shareholder approvals, as well as approvals from other authorities.

Property, plants and equipment

The Group’s principal tangible fixed assets comprise properties and equipment in respect of its mobile telecommunications network infrastructure. Network equipment includes base stations and switch equipment, which is connected by fixed microwave transmission links or fixed cable links.

The properties of the Group comprise, amongst other things, computerised mobile telephone exchanges, operator centres and ancillary commercial centres suitable for the operation of its cellular networks and related businesses, together with related accommodation, including retail premises. At 31 March 2003, the Group’s properties were either freehold or held under long term or short term leases with approximately 37% by book value owned and approximately 5% held under leases running for 50 years or longer (31 March 2002: 46% and 4%, respectively). The Group’s corporate head office is in Newbury, United Kingdom. The tangible fixed assets purchased by the Group during the financial year principally relate to network infrastructure additions, including those relating to the Group’s 3G networks. Further information on any environmental issues associated with the use of the Group’s assets can be found under “Corporate Social Responsibility – Environmental Issues” elsewhere in this Annual Report.

Legal proceedings

Save as disclosed below, 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.

The Company is a defendant in four actions in the United States alleging personal injury, including brain cancer, from mobile phone use. In another pre-existing action, based on similar allegations, the plaintiff has filed a motion to amend its complaint to include the Company as a defendant. 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 of any losses which may arise out of the claims can therefore be made at the date of this Annual 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 2002 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, Julian Horn-Smith and Ken Hydon, executive officers of the Company. The complaints, filed as purported class actions, allege, among other things, that certain public statements made by or attributed to the defendants and the timing of the Company’s decision to write down the value of goodwill and certain impaired assets in the financial year ended 31 March 2002 violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaints seek, among other things, unspecified damages on behalf of the purchasers of the Company’s securities during the period between 7 March 2001 and 28 May 2002. The Court has consolidated these actions and designated lead plaintiffs and lead plaintiffs’ counsel. The plaintiffs filed a consolidated amended class action complaint on 6 June 2003, which contains allegations and claims that are substantially similar to the original complaints. The defendants intend to defend the actions vigorously.

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 with respect to these items. In particular, forward-looking statements include statements with respect to Vodafone’s expectations as to launch and roll-out dates for products and services, including, for example, 3G services, Vodafone live! and Mobile Office from Vodafone; the ability to integrate operations throughout the Group in the same format and on the same technical platform; the development and impact of new mobile technology, including the expected benefits of GPRS, 3G and other services and demand for such services; the completion of Vodafone’s brand migration programme and the results of its brand awareness and brand preference campaigns; growth in customers and usage, including improvements in customer mix; future performance, including turnover, ARPU, cash flows, costs, capital expenditures and improvements in margin, non-voice services and their revenue contribution; the rate of dividend growth by the Group or its existing investments; 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; mobile penetration and coverage rates; expectations with respect to long term shareholder value growth; our 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:

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” below. 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.

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 can be found in “Business Overview – Regulation” above.

Increased competition may reduce market share or revenues.

The Group faces intensifying competition. Competition could lead to a decrease 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 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 revenues 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 3G licences in jurisdictions in which a member of the Group already has a 3G licence.

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, which may delay commercial launch of 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.

The Group’s business could 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 a limited number of third party suppliers. The departure from the market of one or more of these third party suppliers could adversely affect the Group’s operations and may 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.

Please see “Business Overview – Third generation licences and network infrastructure” for more information on expenditures in connection with the acquisition of 3G licences and expected expenditure in connection with the rollout of 3G services. There can be no assurance that the commercial launch 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 revenues per customer notwithstanding its efforts to increase revenues 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 to increase non-voice service revenues 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 revenues from such services will increase average revenue per customer.

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, particularly the UK and the US, that the electromagnetic signals emitted by mobile telephone handsets and base stations may pose health risks at exposure levels below existing guideline levels, and interfere with the operation of electronic equipment. In addition, as described under “Legal Proceedings” above, 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 that of other companies in the telecommunications sector.

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 such Consolidated Financial Statements to US GAAP are set forth in note 37 to the Consolidated Financial Statements, “US GAAP information”.

The directors have endeavoured to follow the principles set out in the Accounting Standards Board’s Statement, “Operating and Financial Review”, which was issued in January 2003. The information in this regard is provided in this section or elsewhere in this Annual Report.

Foreign Currency Translation

The Company publishes its Consolidated Financial Statements in pounds sterling. However, many 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 the pound sterling versus other currencies could materially affect the amount of these items in the Company’s Consolidated Financial Statements, even if their value has not changed in their original currency.

In this Annual Report, references to “US dollars”, “$”, “cents” or “¢” are to United States currency and references to “pounds sterling”, “£”, “pence” or “p” are to UK currency. References to “euros” or “€” are to the currency of the European Union, which, prior to 1 January 2002, was used only in “paperless” transactions. Euro banknotes and coins were issued on 1 January 2002. References to “yen” or “¥” are to the currency of Japan. Merely for convenience, this Annual Report contains translations of certain pounds sterling, euro and yen amounts into US dollars at specified rates. These translations should not be construed as representations that the pounds sterling, euro or yen 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 ste rling and euro amounts into US dollars have been made at $1.5790 per £1.00, $1.0900 per €1.00 and ¥118.07 per $1.00, the Noon Buying Rate in the City of New York for cable transfers in pounds sterling, euro and yen amounts as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on 31 March 2003. The Noon Buying Rates on 23 May 2003 were $1.6376 per £1.00, $1.1786 per €1.00 and ¥116.89 per $1.00. See “Exchange rate information” below for information regarding the Noon Buying Rates for the financial years ended 31 March 1999 through 31 March 2003, and for the period from 1 November 2002 to 23 May 2003.

Basis of Segmental Reporting

As described under “Business Overview – Business activities – Mobile telecommunications – Geographic operations”, the Group adopts the following segments for the presentation of its geographical analysis of results: Europe (further sub-analysed between Northern Europe, Central Europe and Southern Europe); Americas; Asia Pacific; and Middle East and Africa. See note 3 to the Consolidated Financial Statements, “Segmental analysis”, for further details.

Critical Accounting Policies

UK GAAP

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. In determining and applying these policies, judgement is often required in respect of items where the choice of specific policy to be followed can materially affect the reported results or net asset position of the Group.

The Company considers the Group’s accounting policies in respect of goodwill and other intangible assets, tangible fixed assets, taxation, revenue recognition and presentation and retirement benefits to be its critical accounting policies and, accordingly, provides an explanation of each below. The discussion below should also be read in conjunction with the Group’s disclosure of material accounting policies, which is provided in note 2 to the Consolidated Financial Statements, “Accounting policies” elsewhere in this Annual Report.

Senior management has discussed the selection of its critical accounting policies and associated disclosures with the Group’s Audit Committee.

Fixed assets

Goodwill and intangible assets

Goodwill

Goodwill is calculated as the surplus of cost over fair value attributed to the net assets (excluding goodwill) of acquired subsidiary undertakings, joint ventures and associated undertakings.

For acquisitions made before the adoption of FRS 10, “Goodwill and Intangible Assets”, on 1 April 1998, goodwill was written off directly to reserves. For acquisitions made after the financial year ended 31 March 1998, goodwill is capitalised and held as a foreign currency denominated asset, where applicable, and is thus subject to exchange rate fluctuations.

In the event of impairment, see “Impairment” below, a charge is made to the profit and loss account in the period in which the impairment occurs, with a corresponding write down in the carrying value of goodwill. Goodwill written off directly to reserves is also reinstated in the profit and loss account when the related business is sold.

At 31 March 2003, goodwill, including that attributable to the acquisition of interests in associated undertakings, amounted to £115,449 million (2002: £116,665 million), and represented 75% (2002: 76%) of the Group’s total fixed assets. In addition, a further £1,190 million of goodwill is carried in reserves (2002: £1,190 million).

Once capitalised, in accordance with UK GAAP, goodwill is amortised on a straight line basis over its estimated useful economic life. However, the size of the Group’s goodwill assets makes the choice of amortisation period critical to the Group’s results. The majority of goodwill relates to the purchase of cellular network businesses and is therefore amortised over the shorter of the unexpired period of the associated licences under which the network operator provides telecommunications services or twenty-five years. In respect of other acquisitions, the amortisation period for goodwill is typically between five and ten years and is determined by management. Applying these lives to the Group’s goodwill asset has resulted in the amortisation charge as stated below.

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 Central Europe and Southern Europe are most affected, representing £6,643 million and £4,334 million, respectively, of the £14,056 million total charge for goodwill amortisation.

The charge for goodwill amortisation is included within operating profit as a separate category of administrative expenses. However, goodwill amortisation represents a non-cash charge and therefore does not affect the Group’s cash flows and ability to pay dividends.

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

Amortisation of capitalised licences begins either when the related network commences commercial service, or earlier under certain circumstances. 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 reached after a maximum period of five years from service launch. Thereafter, amortisation is on a straight line basis over the period remaining until the licence expires.

Tangible fixed assets

Tangible fixed assets are included on the Group’s balance sheet at cost and stated after accumulated depreciation charges. 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. As at 31 March 2003, internal costs capitalised represented approximately 4% of expenditure on tangible fixed assets in the year and less than 4% of total operating expenses, excluding goodwill amortisation.

Finance costs are not capitalised under the Group’s UK GAAP accounting policies but, under US GAAP, the interest cost on borrowings used to finance the construction of network assets is capitalised during the period of construction until the date the asset is placed in service. Interest costs on borrowings to finance the acquisition of the related cellular licences necessary to operate the network are also capitalised until the date the network is commercially launched.

Once capitalised, tangible assets are subject to periodic depreciation which also requires management judgement.

The charge in respect of periodic depreciation, which is reported either as part of cost of sales or administrative expenses, depending on the nature of the underlying fixed asset, is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Results for all segments include charges for depreciation. 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 and regularly reviewed for appropriateness. However, asset lives are often also subject to other criteria, for example network infrastructure cannot be depreciated over a period that extends beyond the expiry of the associated licence under which the operator provides telecommunications services.

Impairment

Asset recoverability is also 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 future cash flows, certain assumptions are required to be made in respect of highly uncertain matters, for example: expected cash flows from the Group’s businesses; management’s expectations for growth in revenues, including those relating to achievement of the Group’s strategy on data products and services; timing and quantum of future capital expenditures; and uncertainty of future technological developments, all of which are discounted at a rate to reflect the risks involved.

UK GAAP, in the form of FRS 11, “Impairment of fixed assets and goodwill”, requires management to undertake regular reviews of the carrying value of its fixed assets, including goodwill. Group management currently undertakes a review of its goodwill and intangible assets at least annually, during which the assumptions underpinning the valuations are subject to detailed review and challenge.

Changing the assumptions selected by management to determine the level if any of impairment including, in particular, the discount rates or growth rate assumptions used in the cash flow projections, could significantly affect the Group’s results. In discussing the results of the Group’s review of the carrying value of its fixed assets with the Audit Committee, particular focus is given to those material assets where growth rates used are in excess of expected relevant country growth in nominal GDP in the short term.

The Group has undertaken a review at 31 March 2003 which assessed whether the carrying value of its assets could be 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 2013. The results of the review indicated that, whilst no impairment charge was necessary in respect of the Group‘s controlled mobile businesses, impairment charges totalling £810 million were necessary in respect of non-controlled mobile and non-mobile businesses. For further details of the results of this impairment review, see “Operating Results – 2003 financial year compared to 2002 financial year – Exceptional operating items” below, and note 14 to the Consolidated Financial Statements, “Impairment”.

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 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 therefore 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.

Under UK GAAP, FRS 19, “Deferred tax”, permits a choice of calculating deferred taxation assets or liabilities on a discounted or undiscounted basis. It is the Group’s accounting policy to measure deferred taxation on an undiscounted basis. If deferred taxation liabilities were calculated using discounting techniques, the Group’s net deferred taxation liability would be lower.

Revenue recognition and presentation

Turnover from mobile telecommunications comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, the provision of other mobile telecommunication services, including data services and information provision, fees for connecting customers to a mobile network and revenues from the sale of equipment, including handsets. Turnover is reported for all segments, including “Other operations” which primarily comprises amounts charged to customers of the Group’s fixed line businesses, principally in respect of access charges and line usage.

When determining the amount of revenue to record in any period, the overriding principle followed is to match revenues with the provision of service. 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 parties’ respective roles 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 an agent, revenue is recognised on a net basis, with turnover representing the margin earned and no entries made to operating costs.

Revenues generated through the provision of voice or messaging services are measured according to the appropriate tariff structure and accounted for gross of any amounts payable to third parties for interconnect fees or other similar charges. Such revenues principally comprise amounts charged to contract customers for monthly access charges, which are invoiced and recorded as part of a periodic billing cycle, and airtime, either from contract customers as part of the invoiced amount, or prepaid customers through the sale of prepaid top up cards. Revenue is recorded in the period in which the customer uses the service. Unbilled turnover resulting from mobile services provided to contract customers from the billing cycle date to the end of each period is accrued. Unearned monthly access charges relating to periods after each accounting period are deferred.

Turnover from a customer for the purchase of a handset or other equipment is recognised upon delivery to the customer. Connection revenues are recognised upon connection of the customer to the network. A customer, whether prepaid or contract, is recognised as such upon activation of the handset or SIM card for use by the end user customer. Costs of connecting a customer to a network are also taken to the profit and loss account at the point when the customer connects to the network.

Retirement benefits

The Group accounts for retirement benefits in accordance with SSAP 24, “Accounting for pension costs”, and provides additional disclosures as required by FRS 17, “Retirement benefits”. Application of SSAP 24 requires the exercise of judgement in relation to assumptions for expected rates of inflation, expected asset returns, salary and pension increases and a suitable rate at which liabilities can be discounted. These assumptions used are derived following discussion with a firm of independent actuaries. Accordingly, they are subject to periodic review and change.

Accounting for pensions under SSAP 24 allows certain gains and losses to be spread over the average service lives of employees, thereby reducing the impact of changes in actuarial assumptions on the period’s reported profit or loss. However, pensions schemes are subject to periodic review by independent actuaries which, typically, also result in assumptions being changed to take into account any economic and demographic changes.

The Group’s total pension charge for the year, which is shown as part of other administrative costs, amounted to £95 million (2002: £64 million, 2001: £47 million). Most countries in which the Group operates have pension schemes and so all segments are affected, albeit to a lesser or greater extent dependent on the relative size and nature of the various schemes.

SSAP 24 is expected to be replaced by FRS 17 (or its international equivalent, IAS 19, “Employee benefits”) and will result in pension scheme assets being accounted for at market values. Liabilities will continue to be subject to discounting. However, any resultant gains or losses will be reported in the profit and loss account or statement of total recognised gains and losses, depending on their nature, as they are identified and will therefore increase volatility in the profit and loss account.

US GAAP

The Group also prepares a reconciliation of the Group’s revenues, net loss, shareholders’ equity and total assets between UK GAAP and US GAAP, involving the application of adjustments in conformity with accounting policies compliant with US GAAP. Of these policies, the policies on revenue recognition and goodwill and other intangibles are considered critical and are discussed below. This discussion should also be read in conjunction with the description of the Group’s US GAAP accounting policies and other US GAAP-related disclosures provided in note 37 to the Consolidated Financial Statements, “US GAAP information”.

Revenue recognition

Under US GAAP, whilst the accounting treatment of revenue follows similar principles to those followed under UK GAAP, US Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, results in the Group’s connection revenues 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 life of the customer relationship.

Deferring connection revenues and associated costs over the estimated life of the customer relationship, using the methodology required under SAB 101, results in the Group’s revenues for the 2003, 2002 and 2001 financial years being reduced by £1,760 million, £1,044 million and £492 million, respectively. Profits are materially unaffected by this adjustment as a broadly equal amount of costs would also be deferred.

Goodwill and other intangibles

Under US GAAP, the accounting treatment for goodwill and other intangible assets is different to that required by UK GAAP and described above and represents the most significant adjustment made to the Group’s results and financial position under UK GAAP when reconciling to US GAAP.

The difference can be attributed to three separate items: a) the difference in goodwill arising as a result of the different basis by which the purchase price is derived under US GAAP; b) the allocation of the resultant purchase price to a series of identifiable intangible assets under US GAAP as opposed to only goodwill under UK GAAP; and c) the US GAAP deferred tax treatment of intangible assets which increases acquisition liabilities. Of these three adjustments, the only one to involve management judgement is b). Allocation of the purchase price affects the future results of the Group under US GAAP as the requirements for separate identification of intangible assets is more prescriptive under US GAAP.

Once capitalised, goodwill and other indefinite-lived intangible assets are not amortised but are reviewed annually for impairment. Other intangible assets are amortised over their estimated useful economic life under the basis described for

UK GAAP, above. Determining the life of an intangible asset, including assessing whether that life is indefinite, involves a degree of management judgement.

Concurrent with the adoption of SFAS No. 142, “Goodwill and Intangible Assets”, the Group reviewed its goodwill and intangible assets and concluded that in a number of the Group’s previous business acquisitions, the primary assets acquired were licences to provide mobile telecommunications services. As a result, as at 1 April 2002, £33,664 million of goodwill was reclassified as licences and a related deferred tax liability and a corresponding increase to licence value of £19,077 million has been recognised. This reclassification, including the related impact on deferred taxes, had no impact on the Group’s previously reported net income or shareholders’ equity under US GAAP.

Basis of Consolidation

The Consolidated Financial Statements consolidate the financial statements of the Company and its subsidiary undertakings and include the Group’s share of the results of its joint ventures and associated undertakings for financial statements made up to 31 March 2003. A listing of the Group’s principal subsidiary undertakings, joint ventures and associated undertakings is provided in note 36 to the Consolidated Financial Statements, “Principal subsidiary undertakings, associated undertakings and investments”.

The Group’s interest in Verizon Wireless, which was formed on 3 April 2000, is accounted for using equity accounting. In the year ended 31 March 2000, turnover of £2,585 million and operating losses of £100 million (after goodwill amortisation) in respect of the Group’s US businesses were fully consolidated.

The results and net assets of Mannesmann have been consolidated in the Company’s financial statements with effect from 12 April 2000, the date the acquisition was completed, following conditional European Commission consent. Businesses sold following the acquisition of Mannesmann, including Atecs, Orange, Mannesmann’s watches and tubes businesses, Infostrada and tele.ring, have not been consolidated in the results for the year ended 31 March 2001. See “Information on the Company – Sales of businesses”. Up until 15 January 2002, the Group’s remaining interest in Atecs was treated as an asset held for resale.

The results and net assets of Vodafone Spain have been fully consolidated with effect from 29 December 2000. Prior to the acquisition of a controlling interest, the Group’s 21.7% interest in Vodafone Spain was accounted for as an associated undertaking within continuing operations under the equity accounting method.

The operating results and net assets of Vodafone Ireland have been consolidated from 14 May 2001. The Group’s interest in Iusacell has been accounted for as an associated undertaking from 4 April 2001.

The Group’s interest in the J-Phone Group has been accounted for as an associated undertaking up to 11 October 2001. The Group’s interest in Japan Telecom has also been accounted for as an associated undertaking from 1 June 2001 to 11 October 2001. Prior to 1 June 2001, the Group’s interest in Japan Telecom was accounted for as a fixed asset investment. The results and net assets of Japan Telecom and the J-Phone Group were fully consolidated in the Group’s financial statements with effect from 12 October 2001.

2003 financial year compared to 2002 financial year

Turnover

Turnover increased 33% in the 2003 financial year. Growth from existing operations was £2,440 million, an increase of 11%, and growth in respect of acquired businesses was £5,090 million, mainly comprising J-Phone Vodafone and Japan Telecom, which both became subsidiaries from October 2001. Changes in exchange rates also beneficially impacted the reported growth in total turnover as a result of a stronger euro partly offset by a weaker yen. Translating the results of overseas companies at exchange rates prevailing in the prior year would reduce reported growth by £171 million.

Mobile telecommunications

The £6,800 million increase in turnover from mobile telecommunications comprises £2,584 million growth from existing operations and £4,216 million from the full year inclusion of J-Phone Vodafone. Mobile service revenue increased 32% to £24,823 million for the 2003 financial year, as a result of greater usage of voice services, increased penetration of data products and services and the benefit of a full year’s service revenues from J-Phone Vodafone. Revenues from voice services for the year ended 31 March 2003 were £21,201 million, representing an increase of 27% over the comparable period. The Group achieved a sustained improvement in ARPU in many key markets in Europe, compared with the year ended 31 March 2002, as benefits from the Group’s continued focus on high value customers led to increased penetration of the contract customer segment and initiatives to stimulate usage, including the launch of new and innovative products, were realised.

Another key driver of the growth in turnover and improved ARPU position was the continued success of the Group’s data product and service offerings. Revenues from data services increased 73% to £3,622 million for the year ended 31 March 2003 from £2,093 million for the year ended 31 March 2002, to represent 14.6% of service revenues in the Group’s controlled mobile subsidiaries, compared with 11.1% for the 2002 financial year. See “Data revenues” below for further discussion.

Mobile service revenue growth was adversely affected both by reductions in interconnect rates in a number of the Group’s markets, mainly in Europe, and the effect of increased competitive activity in certain key European markets by existing competitors looking to attract market share and generate customer loyalty.