Form 6-K

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

Report of Foreign Private Issuer

 

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

 

Dated November 14, 2007

 

VODAFONE GROUP

PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

 

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

(Address of principal executive offices)

 

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

 

Form 20-F

ü

Form 40-F

 

 

 

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

 

 

Yes

 

 

No

ü

 

 

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

 


 

This Report on Form 6-K contains a news release issued by Vodafone Group Plc on, November 13 2007, entitled “HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007”.

 


 

VODAFONE GROUP PLC

 

Embargo:

 

 

Not for publication

HALF-YEARLY FINANCIAL REPORT FOR

 

before 07:00 hours

THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

13 November 2007

 

Key highlights(1):

 

                                     Group revenue of £17.0 billion, an increase of 9.0%, with organic growth of 4.4%

 

                 Europe: 2.0% revenue growth with outgoing usage up 24.0%, messaging revenue up 8.6% and data revenue up 40.8%, all on an organic basis

 

                 EMAPA: revenue growth of 39.9%, reflecting acquisitions in India and Turkey. Organic growth of 16.0%

 

                 Group data revenue up 48.8% to £1.0 billion, with organic growth of 45.1%

 

                                     Group adjusted operating profit increased 1.6% to £5.2 billion, with organic growth of 6.1%

 

                                     Free cash flow from continuing operations of £2.7 billion, reflecting 8.1% mobile capital intensity for Europe(2)

 

                                     Adjusted basic earnings per share increased by 7.4% to 6.42 pence. Basic earnings per share of 6.22 pence

 

                                     Proportionate mobile customer base of 241 million at 30 September

 

                                     Results reflect rigorous execution against the Group’s five strategic objectives

 

Increasing returns to shareholders:

 

                                     Interim dividend per share increased by 6.0% to 2.49 pence, giving a payout of over £1.3 billion

 

Improved outlook:

 

                                     Increased outlook for revenue, adjusted operating profit and free cash flow for the 2008 financial year

 

(1)           See page 4 for Group financial and operational highlights, page 35 for definition of terms and page 37 for use of non-GAAP financial information. See page 5 for the Outlook for the 2008 financial year

(2)           Includes common functions

 

Arun Sarin, Chief Executive, commented:

 

“These results reflect our continuing focus on the execution of our strategy. In Europe, we have performed well in competitive markets by driving strong growth in voice usage and data revenue, whilst improving cost efficiency. In EMAPA, we are capturing the revenue growth opportunities within emerging markets and benefiting from continuing momentum at Verizon Wireless. The increased interim dividend reflects the Board’s confidence in how the business is progressing.”

 


 

CHIEF EXECUTIVE’S STATEMENT

 

Rigorous execution against our strategic objectives has been key to our performance in the first half of the year. We have improved our outlook expectations for the full year and the Board has increased the interim dividend by 6.0% to 2.49 pence per share, enhancing returns to our shareholders.

 

Group revenue increased by 9.0% to £17.0 billion, or 4.4% on an organic basis. In Europe, where competitive and regulatory pressures remain significant, organic revenue growth was 2.0%. Good revenue growth in Spain and the UK was offset by declines in Germany and Italy, where specific competitive and regulatory events have detracted from an otherwise solid business performance. EMAPA delivered another period of continued growth. Revenue grew by 39.9%, or 16.0% on an organic basis, with strong performances across the region. Group adjusted operating profit increased by 1.6% to £5.2 billion, or 6.1% on an organic basis, including an increased contribution from Verizon Wireless which grew by 26.0% on a constant currency basis.

 

Adjusted earnings per share increased by 7.4% to 6.42 pence due to the year on year benefit from the share consolidation in July last year.

 

Our customer franchise increased by 35 million in the period to 241 million proportionate mobile customers, including 20 million net additions.

 

Capital expenditure in the first half was £2.0 billion, including £0.4 billion in India since its acquisition in May. Free cash flow generation remains strong at £2.7 billion, after £0.2 billion payments in respect of long standing tax issues.

 

Revenue stimulation and cost reduction in Europe

 

In Europe, our focus is to drive additional usage and revenue from core voice and messaging services and to reduce our cost base.

 

Central to stimulating revenue have been our initiatives to drive mobile usage through offering innovative tariffs, larger minute bundles and targeted promotions. There has also been a specific focus on migrating prepaid customers to contract, thereby improving customer lifetime value. Overall growth in outgoing voice usage remained strong at 24.0% for the first half, but continued pricing pressure resulted in stable outgoing voice revenue. Notwithstanding our efforts in revenue stimulation, elasticity remains below one. In the business segment, which represents approximately 28% of European service revenue and delivered 5.9% growth in the first half, we are leveraging our market leading position. Earlier this year, we established Vodafone Global Enterprise which is responsible for ensuring that we deliver enhanced service and our total communications offering to our largest multinational customers.

 

16 million customers now enjoy lower roaming pricing through Vodafone Passport. All of our European customers are now benefiting from our commitment to reduce roaming prices and the recently introduced roaming regulation.

 

Messaging revenue remains robust with 8.6% organic growth, including strong performances in Italy and the UK, driven primarily by targeted promotions and tariffs.

 

Cost reduction remains central to our Group and a number of core cost reduction programmes are now well established. They are delivering savings across the Group and have helped to mitigate pressure on EBITDA margins and reduce our European mobile and common functions capital expenditure to revenue ratio to 8.1% in the first half, below our full year target which remains at 10%. Data centre consolidation and network supply chain management centralisation are delivering savings earlier than originally expected.

 

Innovate and deliver on our customers’ total communications needs

 

Our focus is on four key areas which together are expected to represent around 20% of Group revenue by the 2010 financial year. In the first half, these areas contributed about 12% of revenue, up from around 10% in the prior year.

 

Data revenue increased by 45.1% on an organic basis, principally enabled by the rapid growth in 3G devices, which nearly doubled year on year to over 21 million devices. We have also refreshed our consumer mobile internet offering in eight markets, supported by partnerships with leading internet players, and are continuing to develop products and services to integrate the mobile and PC environments.

 

Following completion of the acquisition of Tele2’s fixed broadband businesses in Italy and Spain we will have established our preferred route for delivering fixed broadband services in each of our major European markets through a selective approach of wholesale agreements and owned infrastructure. Including Tele2, fixed broadband services will be provided to 3.1 million customers in 13 markets. Revenue from fixed line services increased by 9.9% on an organic basis, primarily due to 9.6% constant currency growth in Arcor.

 

We continue to drive substitution of fixed line usage for mobile through fixed location pricing plans offering customers fixed prices when they call from within or around their home or office. We now have 3.7 million Vodafone At Home customers and 2.6 million Vodafone Office customers.

 

2


 

We believe mobile advertising is a significant future opportunity for the mobile industry. We have commercial agreements for mobile advertising in eight markets and are trialling numerous forms of banner and content based advertising. Vodafone is in a leading position to benefit from future trends in this market.

 

Deliver strong growth in emerging markets

 

Our focus is to build on our track record of creating value in emerging markets. We have delivered further good performances in our existing operations with revenue growth of 33.1% in Egypt, 24.0% in Romania and 19.6% in Vodacom on a constant currency basis. Turkey continues to perform well with year on year revenue growth of around 28% on the same basis.

 

Our Indian business is delivering very strong growth. Average net customer additions are running at 1.6 million per month, with a customer base of over 35 million at the end of September. Year on year revenue growth was around 53% on a constant currency basis. In September, we successfully rebranded the business to Vodafone, an important integration milestone, ahead of plan.

 

As well as driving customer growth, we are differentiating Vodafone in emerging markets through a number of initiatives. Our ultra low cost handset, which retails for as little as $25, enables us to address a wider population in developing economies. In October, our first month of sales, we sold 400,000 units in India. M-PESA, our innovative money transfer solution was launched in February 2007 and is already benefiting over one million people in Kenya. Efficiency is also vital to success in emerging markets, where low market prices require the lowest possible costs.

 

Actively manage our portfolio to maximise returns

 

We completed the acquisition of Vodafone Essar in India in May 2007 for a cash consideration of £5.5 billion. In July, we received £0.7 billion from the sale of a 4.99% stake in Bharti Airtel and have agreed the sale of a further 0.61% by November 2008. The acquisitions of Tele2 Italy and Tele2 Spain for £0.5 billion will strengthen our total communications offerings in those markets.

 

Align capital structure and shareholder returns policy to strategy

 

We continue to target a low single A rating, consistent with our policy.

 

The Board remains committed to its policy of distributing 60% of adjusted earnings per share by way of dividend. However, as a result of the earnings dilution arising from the India acquisition, the payout ratio is expected to rise above 60% in the near term to better reflect the underlying trends of the business.

 

In growing dividends at 6.0%, ahead of its guidance for modest growth issued in May, the Board has taken into account the Group’s current financial performance and its confidence in the prospects for the business.

 

Prospects for the remainder of the year

 

Notwithstanding 40.8% organic growth in data revenue and our success in stimulating voice usage, we expect market conditions and the pricing environment to remain competitive in Europe. Growth prospects for the EMAPA region remain strong as we actively pursue customer growth in markets where penetration is still increasing.

 

Our success in the first half and continued rigorous execution of our strategy has allowed us to improve our outlook for the current financial year. Group revenue is now expected to be in the increased range of £34.5 billion to £35.1 billion, primarily due to improved operational performance. Adjusted operating profit is also expected to be higher at £9.5 billion to £9.9 billion, reflecting better revenue generation. Capital expenditure on fixed assets is still expected to be in the range of £4.7 billion to £5.1 billion, including in excess of £1.0 billion in India. Free cash flow is now expected to be £4.4 billion to £4.9 billion, better than previously expected due to better business performance and lower payments this year related to long standing tax issues.

 

Summary

 

We are delivering tangible results from our strategy which positions us well to deliver total communications to our customers and to generate attractive returns for our shareholders.

 

Arun Sarin

 

3


 

GROUP FINANCIAL AND OPERATING HIGHLIGHTS

 

 

 

 

 

2007

 

2006

 

Change %

Continuing operations(1)(2)(3)

 

Page

 

£m

 

£m

 

Reported

 

Organic

 

Financial information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

21

 

16,994

 

15,594

 

9.0

 

4.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

21

 

5,208

 

(2,952

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before taxation

 

21

 

4,560

 

(3,330

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

 

21

 

3,327

 

(4,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings/(loss) per share (pence)

 

21

 

6.22p

 

(8.02)p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalised fixed asset additions

 

 

 

1,982

 

1,824

 

8.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flow from operating activities

 

17

 

4,860

 

4,840

 

0.4

 

 

 

 

Performance reporting(1)(2)(3)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group EBITDA

 

6

 

6,565

 

6,242

 

5.2

 

2.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

6, 40

 

5,223

 

5,141

 

1.6

 

6.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted profit before tax

 

8, 40

 

4,701

 

4,724

 

(0.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted effective tax rate

 

8

 

30.1%

 

29.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted profit for the period attributable to equity shareholders

 

8, 40

 

3,397

 

3,441

 

(1.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share (pence)

 

40

 

6.42p

 

5.98p

 

7.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

17

 

2,661

 

2,955

 

(9.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt

 

17

 

23,253

 

20,229

 

14.9

 

 

 

 

 

 

 

 

2007

 

2006

 

Change %

Continuing operations(1)(2)(3)

 

Page

 

Million

 

Million

 

Reported

 

Organic

 

Operational

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data revenue (£)

 

6

 

967

 

650

 

48.8

 

45.1

 

 

 

 

 

 

 

 

 

 

 

 

 

3G registered devices

 

43

 

21.4

 

11.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mobile voice usage (minutes)

 

44

 

198,252

 

115,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proportionate mobile customer net additions

 

42

 

20.5

 

11.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proportionate mobile customers

 

42

 

241.5

 

191.6

 

 

 

 

 

 

 

This half-yearly financial report contains certain information on the Group’s results and cash flows that have been derived from amounts calculated in accordance with IFRS but are not themselves IFRS measures. They should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be read in conjunction with the equivalent IFRS measure. Further disclosures are provided under “Use of non-GAAP financial information” on page 37.

 

 

Notes:

(1)          See page 35 for definition of terms.

(2)          The results for the six months ended 30 September 2006 exclude the results of the discontinued operations in Japan and include the results of the Group’s associated undertaking in Belgium and Switzerland until the announcement of their respective disposal in August 2006 and December 2006.

(3)          Amounts presented as at 30 September or for the six months then ended.

(4)          Where applicable, these measures are stated excluding non-operating income of associates, impairment losses and other income and expense, changes in the fair value of equity put rights and similar arrangements (see note 2 in investing income and financial costs on page 7) and certain foreign exchange differences. See page 37 for use of non-GAAP financial information.

 

4


 

OUTLOOK FOR THE 2008 FINANCIAL YEAR

 

Please see page 35 for definition of terms, page 36 for forward-looking statements and page 37 for use of non-GAAP financial information.

 

 

 

Original
outlook(1)

 

Foreign exchange(2)

 

Acquisitions(3)

 

Upgrade

 

Updated outlook

 

 

£ billion

 

£ billion

 

£ billion

 

£ billion

 

£ billion

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

33.3 to 34.1

 

0.3

 

0.2

 

0.6

 

34.5 to 35.1

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

9.3 to 9.8

 

 

(0.1

)

0.2

 

9.5 to 9.9

 

 

 

 

 

 

 

 

 

 

 

Capitalised fixed asset additions

 

4.7 to 5.1

 

 

 

 

4.7 to 5.1

 

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

4.0 to 4.5

 

0.1

 

 

0.3

 

4.4 to 4.9

 

 

 

 

 

 

 

 

 

 

 

Notes:

(1)               As originally stated on 29 May 2007.

(2)               The Group’s outlook update reflects current expectations for average foreign exchange rates for the 2008 financial year of approximately Euro 1.45:£1 (originally 1.47) and US$2.04:£1 (originally 1.98). A substantial majority of the Group’s revenue, adjusted operating profit, capitalised fixed asset additions and free cash flow is denominated in currencies other than sterling, the Group’s reporting currency.

(3)               Assumes the financial results of Tele2 Italy and Tele2 Spain will be included with effect from 1 December  2007.

 

Operating conditions are expected to continue to be competitive in Europe with ongoing pricing and regulatory pressures but continued positive trends in data revenue and voice usage. Increasing market penetration continues to result in overall strong growth for the EMAPA region.

 

Group revenue is now expected to be in the range of £34.5 billion to £35.1 billion, higher than previously anticipated primarily due to improvements in operational performance but also due to net beneficial movements in foreign exchange rates and revenue for Tele2 Italy and Tele2 Spain from the expected date of acquisition.

 

Adjusted operating profit is now expected to be in the range of £9.5 billion to £9.9 billion, which is greater than previous expectations, driven substantially by better revenue generation. Whilst Group EBITDA margin is still expected to be lower year on year, the Group continues to expect mobile operating expenses to be broadly stable for the total of the Europe region and common functions when compared with the 2006 financial year on an organic basis, excluding the potential impact from developing and delivering new services and from any business restructuring costs.

 

Total depreciation and amortisation charges are now anticipated to be slightly higher at around £5.9 billion to £6.0 billion, including the impact from the Tele2 acquisitions.

 

The outlook range for capitalised fixed asset additions remains unchanged at £4.7 billion to £5.1 billion and continues to include in excess of £1.0 billion in India. Capitalised mobile fixed asset additions for the total of the Europe region and common functions are still expected to be 10% of mobile revenue for the year.

 

Free cash flow is expected to be in the range of £4.4 billion to £4.9 billion, higher than originally expected principally due to improvements in operational performance and lower anticipated tax payments and associated interest this year in respect of the potential settlement of a number of long standing tax issues, which are now expected to be £0.3 billion. The outlook for free cash flow is stated including the impact of known spectrum or licence payments only.

 

The Group still expects that further significant cash payments for tax and associated interest may be made in respect of long standing tax issues. Whilst the timing of such payments remains uncertain, the Group now expects resolution of the most significant issues, principally the application of the UK Controlled Foreign Company legislation to the Group, to be later than previously anticipated.

 

The adjusted effective tax rate percentage is expected to be similar to the 2007 financial year rate of 30.5%, which is slightly lower than previously anticipated. The Group’s longer term expectation for the adjusted tax rate remains in the low 30s.

 

5


 

CONTENTS

 

 

Page

 

Financial results

6

 

Liquidity and capital resources

17

 

Significant transactions

19

 

Risk factors

19

 

Subsequent events

20

 

Responsibility statement

20

 

Condensed consolidated financial statements

21

 

Other information

35

 

Use of non-GAAP financial information

37

 

Additional investor information and key performance indicators

38

 

 

 

 

 

FINANCIAL RESULTS

 

GROUP RESULTS

 

The following results are presented for continuing operations. Europe includes the results of the Group’s operations in Western Europe, while EMAPA includes the results of the Group’s operations in Eastern Europe, the Middle East, Africa, Asia and the Pacific area and the Group’s associate in the US, Verizon Wireless. During the six months ended 30 September 2007, the Group changed its organisation structure and the Group’s associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results for all periods are presented in accordance with the new structure.

 

 

 

Europe

 

EMAPA

 

Common  Functions(2)

 

Eliminations

 

2007

 

2006

 

% change

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

£

 

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

8,704

 

3,499

 

 

 

(43

)

12,160

 

11,317

 

 

 

 

 

Messaging revenue

 

1,575

 

377

 

 

 

(4

)

1,948

 

1,786

 

 

 

 

 

Data revenue

 

843

 

127

 

 

 

(3

)

967

 

650

 

 

 

 

 

Fixed line revenue(1)

 

780

 

22

 

 

 

 

802

 

770

 

 

 

 

 

Other service revenue

 

11

 

 

 

 

(1

)

10

 

 

 

 

 

 

Total service revenue

 

11,913

 

4,025

 

 

 

(51

)

15,887

 

14,523

 

9.4

 

4.6

 

Acquisition revenue

 

463

 

211

 

 

 

 

674

 

642

 

 

 

 

 

Retention revenue

 

165

 

14

 

 

 

 

179

 

182

 

 

 

 

 

Other revenue

 

128

 

51

 

80

 

(5

)

254

 

247

 

 

 

 

 

Total revenue

 

12,669

 

4,301

 

80

 

(56

)

16,994

 

15,594

 

9.0

 

4.4

 

Interconnect costs

 

(1,958

)

(650

)

 

 

51

 

(2,557

)

(2,354

)

 

 

 

 

Other direct costs

 

(975

)

(610

)

58

 

 

(1,527

)

(1,247

)

 

 

 

 

Acquisition costs

 

(1,314

)

(443

)

 

 

 

(1,757

)

(1,556

)

 

 

 

 

Retention costs

 

(824

)

(120

)

 

 

 

(944

)

(854

)

 

 

 

 

Operating expenses

 

(2,764

)

(1,050

)

165

 

5

 

(3,644

)

(3,341

)

 

 

 

 

EBITDA

 

4,834

 

1,428

 

303

 

 

6,565

 

6,242

 

5.2

 

2.4

 

Acquired intangibles amortisation

 

(15

)

(312

)

 

 

 

(327

)

(197

)

 

 

 

 

Purchased licence amortisation

 

(413

)

(36

)

 

 

 

(449

)

(467

)

 

 

 

 

Depreciation and other amortisation

 

(1,398

)

(517

)

(94)

 

 

(2,009

)

(1,844

)

 

 

 

 

Share of result in associates

 

261

 

1,181

 

1

 

 

1,443

 

1,407

 

 

 

 

 

Adjusted operating profit

 

3,269

 

1,744

 

210

 

 

5,223

 

5,141

 

1.6

 

6.1

 

Adjustments for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment losses

 

 

 

 

 

 

(8,100

)

 

 

 

 

Other

 

 

(15

)

 

 

(15

)

1

 

 

 

 

 

Non-operating income of associates

 

 

 

 

 

 

6

 

 

 

 

 

Operating profit/(loss)

 

3,269

 

1,729

 

210

 

 

5,208

 

(2,952

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes:

(1)   Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and DSL. All prior periods have been adjusted accordingly.

(2)   Common functions represents the results of Partner Markets and the net result of unallocated central Group costs and recharges to the Group’s operations, including royalty fees for use of the Vodafone brand.

 

Revenue

 

Revenue increased by 9.0% to £16,994 million for the six months ended 30 September 2007, comprising organic growth of 4.4% and the impact of acquisitions and disposals of 5.4%, primarily from acquisitions of subsidiaries in India in May 2007 and Turkey in May 2006, partially offset by the impact of unfavourable movements in exchange rates of 0.8%.

 

Both the Europe and EMAPA regions increased total revenue on an organic basis, achieving growth of 2.0% and 16.0%, respectively. On a reported basis, Europe achieved growth of 1.5%, while EMAPA achieved growth of 39.9%, of which

 

6


 

26.5% was contributed by the impact of acquisitions and disposals, including the acquisition of subsidiaries in India and Turkey.

 

The organic growth in revenue was driven by a continued increase in the customer base and successful usage stimulation initiatives, despite persisting price pressures. The organic growth in data revenue of 45.1% was particularly strong and can be attributed in part to increasing penetration of Vodafone Mobile Connect 3G/GPRS data cards and handheld business devices.

 

Operating result

 

Operating profit increased to £5,208 million from a loss of £2,952 million in the prior year, mainly as a result of impairment charges not being incurred in the current year. Adjusted operating profit increased by 1.6% to £5,223 million, or by 6.1% on an organic basis. Foreign exchange rate movements, particularly in relation to Verizon Wireless and Vodacom, the Group’s 50% owned joint venture with principal operations in South Africa, and the net impact of acquisitions and disposals reduced reported growth by 2.6% and 1.9% respectively, with the latter primarily being due to the increase in amortisation of acquired intangible assets. Adjusted operating profit is stated after £327 million of acquired intangible asset amortisation, an increase of £130 million from the same period last year.

 

The EMAPA region’s strong growth was partly offset by a slight decline in profitability in the Europe region resulting from the continuing challenges of highly penetrated markets, termination rate cuts and a high level of competition.

 

The EBITDA margin in Europe was 38.2% compared to 39.5% in the same period last year, reflecting higher costs, in particular increased interconnect costs, other direct costs and acquisition costs resulting from the competitive environment in the region.

 

In the EMAPA region, the EBITDA margin declined to 33.2% from 35.8% for the same period last year, in part due to higher growth in the region through investment in customer base growth, and in part due to the inclusion for the whole of the current period of Turkey, which has a lower EBITDA margin than the region’s average. In addition, the EBITDA margin in Turkey decreased due to investment in the rebranding of the business to Vodafone, improving network quality and growing the customer base.

 

The Group’s share of results from associates grew by 2.6%, or by 18.2% on an organic basis, with the impact of the disposals of the Group’s interests in Belgacom Mobile SA and Swisscom Mobile AG during the prior financial year, and unfavourable foreign exchange movements, reducing reported growth by 9.0% and 6.6% respectively. The organic growth was driven by strong growth in Verizon Wireless.

 

Investment income and financing costs

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

Investment income

 

382

 

 

425

 

Financing costs

 

(1,280

)

 

(813

)

 

 

(898

)

 

(388

)

 

 

 

 

 

 

 

Analysed as:

 

 

 

 

 

 

Net financing costs before dividends from investments

 

(394

)

 

(272

)

Potential interest charges arising on settlement of outstanding tax issues

 

(200

)

 

(202

)

Dividends from investments

 

72

 

 

57

 

 

 

(522

)

 

(417

)

Foreign exchange(1)

 

(90

)

 

8

 

Changes in fair value of equity put rights and similar arrangements(2)

 

(286

)

 

21

 

 

 

(898

)

 

(388

)

 

Notes:

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

(2)   Includes a charge of £333 million representing the initial fair value of the put options granted over the Essar group’s interest in Vodafone Essar, which has been recorded as an expense. Further details of these options are provided on page 19.

 

Net financing costs before dividends from investments increased by 44.9% to £394 million following an increase in average net debt of 28.7%, a change in the currency mix and higher interest rates. At 30 September 2007, the provision for potential interest charges arising on settlement of outstanding tax issues was £1,409 million (30 September 2006: £1,047 million).

 

7


 

Taxation

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

 

 

 

 

 

 

Income tax expense

 

1,233

 

 

1,218

 

Recognition of pre-acquisition deferred tax asset

 

15

 

 

-

 

Tax on adjustments to derive adjusted profit before tax

 

19

 

 

2

 

 

 

 

 

 

 

 

Adjusted income tax expense

 

1,267

 

 

1,220

 

Share of associated undertakings’ tax

 

222

 

 

240

 

 

 

 

 

 

 

 

Adjusted income tax expense for purposes of calculating adjusted tax rate

 

1,489

 

 

1,460

 

 

 

 

 

 

 

 

Profit /(loss) before tax

 

4,560

 

 

(3,330

)

Adjustments to derive adjusted profit before tax(1)

 

141

 

 

8,054

 

 

 

 

 

 

 

 

Adjusted profit before tax

 

4,701

 

 

4,724

 

Add: Share of associated undertakings’ tax and minority interest

 

250

 

 

271

 

 

 

 

 

 

 

 

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

 

4,951

 

 

4,995

 

 

 

 

 

 

 

 

Adjusted effective tax rate

 

30.1%

 

 

29.2%

 

 

Note:

(1)          See earnings/(loss) per share below.

 

The adjusted effective tax rate for the six months ended 30 September 2007 was 30.1% compared to 29.2% for the same period last year. The effective rate, excluding impairment losses and other adjustments, for the year ending 31 March 2008 is expected to be similar to the effective rate for the year ended 31 March 2007 of 30.5%.

 

Earnings/(loss) per share

 

Adjusted earnings per share increased by 7.4% from 5.98 pence to 6.42 pence for the six months ended 30 September 2007, with the increase being primarily due to the lower weighted average number of shares following the share consolidation which occurred in July 2006 and which therefore, will not benefit the second half of the financial year. Basic earnings per share from continuing operations was 6.22 pence compared to a basic loss per share from continuing operations of 8.02 pence for the same period last year.

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

 

 

 

 

 

 

Profit/(loss) from continuing operations attributable to equity shareholders

 

3,290

 

 

(4,611

)

Adjustments:

 

 

 

 

 

 

Impairment losses

 

-

 

 

8,100

 

Other income and expense

 

15

 

 

(1

)

Share of associated undertakings’ non-operating income

 

-

 

 

(6

)

Non-operating income and expense(1)

 

(250

)

 

(10

)

Foreign exchange(2)

 

90

 

 

(8

)

Changes in fair value of equity put rights and similar arrangements(3)

 

286

 

 

(21

)

 

 

 

 

 

 

 

 

 

141

 

 

8,054

 

Tax on the above items

 

(19

)

 

(2

)

Recognition of pre-acquisition deferred tax asset

 

(15

)

 

-

 

 

 

 

 

 

 

 

Adjusted profit from continuing operations attributable to equity shareholders

 

3,397

 

 

3,441

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding – basic

 

52,935

 

 

57,515

 

Weighted average number of shares outstanding – diluted(4)

 

53,116

 

 

57,515

 

 

Notes:

(1)          The £250 million adjustment for the six months ended 30 September 2007 represents the profit on disposal of the Group’s 5.60% stake in Bharti Airtel.

(2)          See note 1 in investment income and financing costs on page 7.

(3)          See note 2 in investment income and financing costs on page 7.

(4)          In the six months ended 30 September 2006, 140 million shares have been excluded from the calculation of diluted loss per share as they are not dilutive.

 

8


 

EUROPE RESULTS

 

 

Germany

 

Italy

 

Spain

 

UK

 

Arcor

 

Other

 

 

Eliminations

 

Europe

 

 

% change

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

 

£m

 

£m

 

 

£

 

Organic

 

Six months to 30 September 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

1,888

 

1,570

 

1,867

 

1,855

 

 

1,690

 

 

(166

)

8,704

 

 

 

 

 

 

Messaging revenue

 

354

 

324

 

205

 

444

 

 

265

 

 

(17

)

1,575

 

 

 

 

 

 

Data revenue

 

265

 

119

 

170

 

184

 

 

133

 

 

(28

)

843

 

 

 

 

 

 

Fixed line revenue(1)

 

7

 

10

 

9

 

12

 

758

 

16

 

 

(32

)

780

 

 

 

 

 

 

Other service revenue

 

1

 

2

 

 

8

 

 

 

 

 

11

 

 

 

 

 

 

Total service revenue

 

2,515

 

2,025

 

2,251

 

2,503

 

758

 

2,104

 

 

(243

)

11,913

 

 

1.7

 

2.3

 

Acquisition revenue

 

83

 

58

 

120

 

127

 

10

 

67

 

 

(2

)

463

 

 

 

 

 

 

Retention revenue

 

21

 

12

 

64

 

21

 

 

47

 

 

 

165

 

 

 

 

 

 

Other revenue

 

31

 

2

 

4

 

66

 

 

25

 

 

 

128

 

 

 

 

 

 

Total revenue

 

2,650

 

2,097

 

2,439

 

2,717

 

768

 

2,243

 

 

(245

)

12,669

 

 

1.5

 

2.0

 

Interconnect costs

 

(319

)

(343

)

(350

)

(579

)

(182

)

(428

)

 

243

 

(1,958

)

 

 

 

 

 

Other direct costs

 

(145

)

(99

)

(186

)

(243

)

(164

)

(138

)

 

 

(975

)

 

 

 

 

 

Acquisition costs

 

(290

)

(134

)

(278

)

(368

)

(78

)

(168

)

 

2

 

(1,314

)

 

 

 

 

 

Retention costs

 

(202

)

(52

)

(238

)

(177

)

 

(155

)

 

 

(824

)

 

 

 

 

 

Operating expenses

 

(544

)

(433

)

(438

)

(616

)

(206

)

(527

)

 

 

(2,764

)

 

 

 

 

 

EBITDA

 

1,150

 

1,036

 

949

 

734

 

138

 

827

 

 

 

4,834

 

 

(2.0

)

(1.5

)

Acquired intangibles amortisation

 

 

 

 

(11

)

 

(4

)

 

 

(15

)

 

 

 

 

 

Purchased licence amortisation

 

(170

)

(39

)

(3

)

(166

)

 

(35

)

 

 

(413

)

 

 

 

 

 

Depreciation and other amortisation

 

(336

)

(221

)

(231

)

(314

)

(46

)

(250

)

 

 

(1,398

)

 

 

 

 

 

Share of result in associates

 

 

 

 

 

 

261

 

 

 

261

 

 

 

 

 

 

Adjusted operating profit

 

644

 

776

 

715

 

243

 

92

 

799

 

 

 

3,269

 

 

(2.7

)

(2.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

43.4%

 

49.4%

 

38.9%

 

27.0%

 

18.0%

 

36.9%

 

 

 

 

38.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 30 September 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

2,106

 

1,721

 

1,729

 

1,838

 

 

1,731

 

 

(205

)

8,920

 

 

 

 

 

 

Messaging revenue

 

386

 

275

 

190

 

365

 

 

256

 

 

(14

)

1,458

 

 

 

 

 

 

Data revenue

 

190

 

89

 

122

 

134

 

 

91

 

 

(23

)

603

 

 

 

 

 

 

Fixed line revenue(1)

 

8

 

11

 

9

 

8

 

697

 

12

 

 

(14

)

731

 

 

 

 

 

 

Total service revenue

 

2,690

 

2,096

 

2,050

 

2,345

 

697

 

2,090

 

 

(256

)

11,712

 

 

 

 

 

 

Acquisition revenue

 

71

 

57

 

153

 

120

 

9

 

56

 

 

 

466

 

 

 

 

 

 

Retention revenue

 

17

 

20

 

62

 

29

 

 

46

 

 

 

174

 

 

 

 

 

 

Other revenue

 

49

 

1

 

3

 

55

 

 

24

 

 

 

132

 

 

 

 

 

 

Total revenue

 

2,827

 

2,174

 

2,268

 

2,549

 

706

 

2,216

 

 

(256

)

12,484

 

 

 

 

 

 

Interconnect costs

 

(363

)

(326

)

(349

)

(489

)

(172

)

(437

)

 

256

 

(1,880

)

 

 

 

 

 

Other direct costs

 

(167

)

(111

)

(174

)

(209

)

(119

)

(119

)

 

 

(899

)

 

 

 

 

 

Acquisition costs

 

(274

)

(114

)

(323

)

(292

)

(85

)

(155

)

 

 

(1,243

)

 

 

 

 

 

Retention costs

 

(182

)

(62

)

(183

)

(186

)

 

(150

)

 

 

(763

)

 

 

 

 

 

Operating expenses

 

(578

)

(433

)

(426

)

(588

)

(204

)

(536

)

 

 

(2,765

)

 

 

 

 

 

EBITDA

 

1,263

 

1,128

 

813

 

785

 

126

 

819

 

 

 

4,934

 

 

 

 

 

 

Acquired intangibles amortisation

 

 

 

 

(4

)

 

(4

)

 

 

(8

)

 

 

 

 

 

Purchased licence amortisation

 

(172

)

(37

)

(34

)

(166

)

 

(34

)

 

 

(443

)

 

 

 

 

 

Depreciation and other amortisation

 

(367

)

(252

)

(194

)

(297

)

(43

)

(255

)

 

 

(1,408

)

 

 

 

 

 

Share of result in associates

 

 

 

 

 

 

286

 

 

 

286

 

 

 

 

 

 

Adjusted operating profit

 

724

 

839

 

585

 

318

 

83

 

812

 

 

 

3,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

44.7%

 

51.9%

 

35.8%

 

30.8%

 

17.8%

 

37.0%

 

 

 

 

39.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

%

 

%

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

 

 

 

Change at constant exchange rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

(9.8

)

(8.1

)

8.7

 

0.9

 

 

(1.8

)

 

 

 

 

 

 

 

 

 

 

Messaging revenue

 

(7.7

)

18.4

 

9.0

 

21.6

 

 

4.4

 

 

 

 

 

 

 

 

 

 

 

Data revenue

 

40.1

 

35.7

 

41.2

 

37.3

 

 

49.2

 

 

 

 

 

 

 

 

 

 

 

Fixed line revenue(1)

 

(2.6

)

(5.5

)

(2.2

)

50.0

 

9.6

 

34.5

 

 

 

 

 

 

 

 

 

 

 

Total service revenue

 

(5.9

)

(2.7

)

10.6

 

6.7

 

9.6

 

1.4

 

 

 

 

 

 

 

 

 

 

 

Acquisition revenue

 

18.3

 

3.3

 

(21.4

)

5.8

 

10.0

 

24.4

 

 

 

 

 

 

 

 

 

 

 

Retention revenue

 

23.5

 

(42.8

)

4.6

 

(27.6

)

 

1.8

 

 

 

 

 

 

 

 

 

 

 

Other revenue

 

(36.6

)

171.4

 

25.8

 

20.0

 

 

4.9

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

(5.7

)

(2.9

)

8.3

 

6.6

 

9.6

 

2.0

 

 

 

 

 

 

 

 

 

 

 

Interconnect costs

 

(11.5

)

5.7

 

1.0

 

18.4

 

5.8

 

(1.0

)

 

 

 

 

 

 

 

 

 

 

Other direct costs

 

(12.8

)

(10.1

)

8.3

 

16.3

 

37.0

 

16.6

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

6.5

 

18.5

 

(13.1

)

26.0

 

(5.6

)

9.5

 

 

 

 

 

 

 

 

 

 

 

Retention costs

 

11.6

 

(15.4

)

30.6

 

(4.8

)

 

4.0

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

(5.3

)

0.9

 

3.6

 

4.8

 

1.8

 

(1.3

)

 

 

 

 

 

 

 

 

 

 

EBITDA

 

(8.4

)

(7.5

)

17.5

 

(6.5

)

11.0

 

1.8

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles amortisation

 

 

 

 

175.0

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

Purchased licence amortisation

 

 

5.4

 

(91.2

)

 

 

6.1

 

 

 

 

 

 

 

 

 

 

 

Depreciation and other amortisation

 

(8.2

)

(11.6

)

19.7

 

5.7

 

9.5

 

(1.6

)

 

 

 

 

 

 

 

 

 

 

Share of result in associates

 

 

 

 

 

 

(8.4

)

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

(10.5

)

(6.9

)

23.0

 

(23.6

)

12.1

 

(1.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin movement

 

(1.3

)

(2.5

)

3.0

 

(3.8

)

0.3

 

(0.1

)

 

 

 

 

 

 

 

 

 

 

 

Note:

(1)          Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and DSL. All prior periods have been adjusted accordingly.

 

9


 

 

 

30 September

 

Germany

 

Italy

 

Spain

 

UK

 

Other

 

Europe

 

Mobile telecommunications KPIs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing customers (‘000)

 

- 2007

 

32,541

 

22,407

 

15,473

 

17,959

 

17,684

 

106,064

 

 

 

- 2006

 

29,622

 

19,337

 

14,024

 

16,287

 

16,267

 

95,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing 3G devices (‘000)

 

- 2007

 

4,745

 

4,700

 

4,328

 

3,095

 

2,873

 

19,741

 

 

 

- 2006

 

2,724

 

2,830

 

1,739

 

1,348

 

1,726

 

10,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice usage (millions of minutes)

 

- 2007

 

20,160

 

17,983

 

17,416

 

18,075

 

15,385

 

89,019

 

 

 

- 2006

 

15,593

 

15,737

 

14,511

 

14,786

 

14,120

 

74,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See page 35 for definition of terms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

Revenue growth of 1.5% in the six months ended 30 September 2007 was achieved despite a 0.5% impact from adverse exchange rate movements.

 

Service revenue growth was 1.7% in the six months ended 30 September 2007, with organic growth more than offsetting the adverse exchange rate movements. This growth was achieved predominantly by strong performance in data revenue, following improved service offerings and a significant increase in the number of 3G devices, and also from growth in the total registered mobile customer base which increased by 11.0% and reached 106.1 million at 30 September 2007. The positive impact of these factors on service revenue growth more than offset the negative effects of termination rate cuts, the cancellation of top up fees in Italy resulting from new regulation and the Group’s ongoing reduction of European roaming rates.

 

Voice revenue declined by 2.4%, or by 1.9% on an organic basis, driven by the effect of the termination rate cuts, roaming regulation and pricing reductions, which were mostly offset by total voice usage growth of 19.1%.

 

               Outgoing voice revenue remained broadly stable, with 0.3% organic growth during the period. Strong growth of 24.0% in outgoing call minutes, driven by the increased customer base and a 12.9% increase in outgoing usage per customer, was broadly matched by a reduction in the effective rate per minute, resulting from the cancellation of top up fees in Italy and price competition.

 

               Incoming voice revenue continued to decline, with a 4.4% fall on an organic basis, principally due to the impact of termination rate reductions in Germany, despite a 9.2% increase in incoming mobile voice minutes in the region.

 

               Roaming and international visitor revenue declined 7.4% on an organic basis, as expected, principally from the impact of the Group’s initiatives on retail and wholesale roaming. The overall reduction in revenue was mitigated by an increase of 12.4% in the respective volume of voice minutes used during the period.

 

The region recorded 8.0% growth in messaging revenue, or 8.6% on an organic basis compared with the same period last year, principally as a result of strong growth in messaging usage, particularly in Italy and the UK.

 

Data revenue growth remained strong, increasing by 39.8%, or by 40.8% on an organic basis. Data revenue continues to benefit from growth in connectivity services, demonstrated by the increasing penetration of 3G devices, which have nearly doubled since September 2006 to 19.7 million. Handheld business devices increased by 112.6% since September last year and Vodafone Mobile Connect 3G/GPRS data cards grew by 78.9%.

 

Fixed line revenue increased by 6.7%, or by 7.6% on an organic basis, mainly due to a 9.6% increase in Arcor’s service revenue at constant exchange rates.

 

Germany

 

At constant exchange rates, service revenue declined by 5.9%, mainly resulting from a 9.8% fall in voice revenue. This decline was driven by the impact of termination rate reductions, prior year tariff cuts and wholesale roaming rates. Although the prior year tariff changes resulted in a 30.9% fall in the effective outbound rate per minute, the impact of these changes was partially offset by a strong 38.1% increase in outgoing voice minutes. Messaging revenue also fell 7.7% at constant exchange rates, primarily as a result of higher take up of bundled offers on contract and reductions in messaging per user in the prepaid customer base. Partly offsetting these impacts was strong data revenue growth of 40.1% at constant exchange rates which has been achieved through continued growth in business services and the associated increasing penetration of 3G devices.

 

Italy

 

At constant exchange rates, service revenue declined by 2.7%, including an 8.1% decline in voice revenue primarily resulting from the negative impact of the cancellation of top up fees in March 2007 and termination rate cuts. The decrease in voice revenue was partially mitigated by a 14.3% increase in total voice usage, including a 17.8% increase in outgoing voice usage. Growth was driven by successful commercial initiatives which also resulted in a 23.3% increase in closing contract customers, predominantly within the business customer base. Despite the retail price decline, voice roaming revenue grew by 7.7% at constant exchange rates driven by a 15.7% increase in roaming minutes. Continued

 

10


 

momentum from successful messaging propositions launched earlier in the calendar year helped achieve messaging growth of 18.4% at constant exchange rates. Strong growth in Vodafone Connect USB Modems, Vodafone Mobile Connect Cards with 3G broadband and an increase in handheld business devices drove data revenue growth of 35.7% at constant exchange rates.

 

Spain

 

Service revenue growth in Spain was 10.6% at constant exchange rates.  The rate of service revenue growth slowed during the quarter ended 30 September 2007, compared with the previous quarter, due to a strong summer promotion in the prior year, a more intensified competitive market and a lower growth in the average customer base.  An 8.7% increase in voice revenue at constant exchange rates was achieved, predominantly due to a 10.3% increase in the customer base, although this was partially impacted by a termination rate cut in the period.  3G devices grew by 148.9% to 4.3 million devices, helping to drive data revenue growth of 41.2% at constant exchange rates compared with the same period last year.

 

UK

 

Service revenue in the UK increased by 6.7%, benefiting from a 10.3% increase in the customer base, reflecting an increase in contract customer market share, and from a £30 million VAT refund.  Voice revenue increased by 0.9% with increases in voice usage, partly prompted by the increase in the customer base following the success of the refreshed voice tariffs launched in the previous year, more than offsetting falls in price per minute and reductions in roaming rates.  Messaging and data revenue growth have remained strong at 21.6% and 37.3%, respectively.  Messaging revenue growth reflects the continued success of propositions launched last year.  Similarly, increasing penetration of Vodafone Mobile Connect 3G/GPRS data cards and handheld business devices combined with enhanced connectivity service offerings helped drive strong data revenue growth.

 

Arcor

 

Arcor generated a 9.6% increase in service revenue at constant exchange rates.  In a very competitive market, growth was principally driven by a 39.6% increase in DSL customers to 2.3 million.

 

Other Europe

 

Service revenue in Other Europe remained broadly stable compared with the same period last year, after a 0.7% adverse impact from foreign exchange movements.  At constant exchange rates, service revenue increased by 6.4% and 5.8% in Portugal and the Netherlands respectively, although these increases were mostly offset by a 6.1% decline in Greece.  The decline in Greece arose from the impact of termination rate cuts in January and June of this year and the cessation in April of a national roaming agreement.

 

Adjusted operating profit

 

Adjusted operating profit fell by 2.7%, or by 2.3% on an organic basis, while the EBITDA margin decreased by 1.3%.  Growth in interconnect costs, other direct costs and acquisition costs was the largest driver behind this decline.

 

Interconnect costs increased by 4.1% compared with the same period in the prior year, with the increased call volumes in the region partly offset by the benefit obtained from termination rate cuts.  The main increases in interconnect costs were recorded in the UK and Italy, partially offset by reductions in Germany.

 

Other direct costs rose by 8.5%, mostly resulting from Arcor and the UK.  Within Arcor, an increase in direct access charges resulted from achieving a higher customer base.  The increase in other direct costs in the UK was mainly due to investment in content based data services and, in part, to a portion of commissions being recorded in other direct costs to reflect their ongoing nature following changes to the commercial model.

 

Acquisition costs increased by 5.7% compared with the same period last year, primarily reflecting increases in the UK, as well as smaller increases in Germany and Italy, partly offset by lower costs in Spain.  Acquisition costs in the UK reflected higher contract customer additions and higher costs per addition in a competitive market.

 

Retention costs increased by 8.0%, predominantly an effect of the increased volume of upgrades in Spain resulting from the recent large customer growth and more proactive churn management.  Across the region, costs per upgrade remained similar year on year, except in Italy following increased focus on the retention of high value prepaid customers that began in the summer of the last financial year.

 

Operating expenses were broadly stable as a result of various initiatives implemented to achieve the broadly stable operating expenses target.  Specific actions undertaken included restructuring in Germany, Ireland and in common functions, continued migration from leased lines to owned transmission and further renegotiation of contracts relating to various network operating expenses.  This has been achieved despite increasing call volumes carried on the Group’s networks and customer care from a growing customer base and an increasingly competitive market place.

 

11


 

Germany

 

Adjusted operating profit fell by 10.5% at constant exchange rates as a result of the reduction in voice revenue.  Costs within Germany also fell overall, with the largest reductions experienced in interconnect costs, which fell by 11.5% at constant exchange rates, as a result of the termination rate cut.  Operating expenses fell by 5.3% at constant exchange rates resulting from targeted cost reduction programmes.  Increases in acquisition and retention costs of 6.5% and 11.6% at constant exchange rates arose as a result of higher gross additions and upgrades.  Acquisition costs per customer fell, while retention costs increased 3.2% on a per customer basis.  Depreciation and other amortisation charges fell by 8.2% on a constant currency basis due to the centralisation of the service platform operations that was completed in the last financial year and the ongoing progress on centralisation of data centres.

 

Italy

 

Adjusted operating profit fell by 6.9% at constant exchange rates, driven primarily by the reduction in service revenue.  The main movements in the cost base in Italy were in relation to interconnect costs, which increased by 5.7% at constant exchange rates due to the increased number of outgoing minutes, particularly to other mobile networks, and acquisition costs which increased by 18.5% at constant exchange rates reflecting an increase in volumes, mainly higher value contract customers.  Operating expenses remained flat compared to the prior year due to cost saving initiatives.  Reduced depreciation and other amortisation of 11.6% at constant exchange rates resulted from lower capital expenditure, including the centralisation of data centre operations.

 

Spain

 

Adjusted operating profit increased by 23.0% at constant exchange rates as interconnect costs remained stable, due to the reduction in termination rates and an increase in volume of calls made to other Vodafone customers which do not incur interconnect costs, as well as overall cost control producing a reduction in expenses as a percentage of overall revenue.  Retention costs increased by 30.6% at constant exchange rates resulting from an increased volume of upgrades compared to the prior year, which was largely offset by a decrease in acquisition costs of 13.1% at constant exchange rates reflecting lower additions in the current period.

 

UK

 

Although service revenue grew by 6.7%, adjusted operating profit decreased by 23.6% mainly due to investment in new customers driving a 26.0% increase in acquisition costs.  The higher customer base and new tariffs generated a 27.6% increase in outgoing mobile minutes which in turn increased interconnect costs by 18.4%.  Additionally, other direct costs rose by 16.3% due in part to investment in content based data services and an incentive based commission structure for indirect partners, which has led to improved customer retention.

 

Arcor

 

Adjusted operating profit increased by 12.1% at constant exchange rates, as the 9.6% increase in service revenue outpaced the 9.3% growth in the cost base at constant exchange rates.  The increase in the cost base was primarily driven by other direct costs, which increased by 37.0% at constant exchange rates, as a result of higher direct access charges incurred due to the larger customer base, while other components of the cost base remained relatively stable.

 

Other Europe

 

Adjusted operating profit decreased by 1.6%.  Portugal and the Netherlands contributed adjusted operating profit growth at constant exchange rates of 15.4% and 39.1% respectively, resulting from strong cost control and a fall in costs as a percentage of service revenue.  Growth in these countries was offset by a fall in the share of results in associates, which fell 8.5% at constant exchange rates, and by a decrease in adjusted operating profit at constant exchange rates of 22.3% in Greece, where results were affected by a decline in service revenue, increased retention and marketing costs and a regulatory fine.

 

12


 

EMAPA RESULTS

 

 

Eastern
Europe

 

Middle East
Africa
& Asia

 

Pacific

 

Associates
US

 

Associates
Other

 

EMAPA

 

 

% change

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

 

£

 

Organic

 

Six months to 30 September 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

1,260

 

1,735

 

504

 

 

 

 

 

3,499

 

 

 

 

 

 

Messaging revenue

 

156

 

92

 

129

 

 

 

 

 

377

 

 

 

 

 

 

Data revenue

 

49

 

50

 

28

 

 

 

 

 

127

 

 

 

 

 

 

Fixed line revenue(1)

 

8

 

4

 

10

 

 

 

 

 

22

 

 

 

 

 

 

Total service revenue

 

1,473

 

1,881

 

671

 

 

 

 

 

4,025

 

 

40.9

 

15.6

 

Acquisition revenue

 

26

 

124

 

61

 

 

 

 

 

211

 

 

 

 

 

 

Retention revenue

 

11

 

 

3

 

 

 

 

 

14

 

 

 

 

 

 

Other revenue

 

14

 

14

 

23

 

 

 

 

 

51

 

 

 

 

 

 

Total revenue

 

1,524

 

2,019

 

758

 

 

 

 

 

4,301

 

 

39.9

 

16.0

 

Interconnect costs

 

(252

)

(280

)

(118

)

 

 

 

 

(650

)

 

 

 

 

 

Other direct costs

 

(222

)

(255

)

(133

)

 

 

 

 

(610

)

 

 

 

 

 

Acquisition costs

 

(152

)

(186

)

(105

)

 

 

 

 

(443

)

 

 

 

 

 

Retention costs

 

(41

)

(52

)

(27

)

 

 

 

 

(120

)

 

 

 

 

 

Operating expenses

 

(379

)

(470

)

(201

)

 

 

 

 

(1,050

)

 

 

 

 

 

EBITDA

 

478

 

776

 

174

 

 

 

 

 

1,428

 

 

29.8

 

13.1

 

Acquired intangibles amortisation

 

(104

)

(208

)

 

 

 

 

 

(312

)

 

 

 

 

 

Purchased licence amortisation

 

(12

)

(16

)

(8

)

 

 

 

 

(36

)

 

 

 

 

 

Depreciation and other amortisation

 

(191

)

(223

)

(103

)

 

 

 

 

(517

)

 

 

 

 

 

Share of result in associates

 

 

1

 

 

1,180

 

 

1,181

 

 

 

 

 

 

Adjusted operating profit

 

171

 

330

 

63

 

1,180

 

 

1,744

 

 

6.1

 

20.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

31.4%

 

38.4%

 

23.0%

 

 

 

 

 

33.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 30 September 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

946

 

1,027

 

458

 

 

 

 

 

2,431

 

 

 

 

 

 

Messaging revenue

 

147

 

66

 

118

 

 

 

 

 

331

 

 

 

 

 

 

Data revenue

 

25

 

11

 

20

 

 

 

 

 

56

 

 

 

 

 

 

Fixed line revenue(1)

 

5

 

34

 

 

 

 

 

 

39

 

 

 

 

 

 

Total service revenue

 

1,123

 

1,138

 

596

 

 

 

 

 

2,857

 

 

 

 

 

 

Acquisition revenue

 

23

 

105

 

48

 

 

 

 

 

176

 

 

 

 

 

 

Retention revenue

 

8

 

 

 

 

 

 

 

8

 

 

 

 

 

 

Other revenue

 

8

 

4

 

22

 

 

 

 

 

34

 

 

 

 

 

 

Total revenue

 

1,162

 

1,247

 

666

 

 

 

 

 

3,075

 

 

 

 

 

 

Interconnect costs

 

(217

)

(178

)

(125

)

 

 

 

 

(520

)

 

 

 

 

 

Other direct costs

 

(141

)

(112

)

(100

)

 

 

 

 

(353

)

 

 

 

 

 

Acquisition costs

 

(91

)

(144

)

(78

)

 

 

 

 

(313

)

 

 

 

 

 

Retention costs

 

(31

)

(36

)

(24

)

 

 

 

 

(91

)

 

 

 

 

 

Operating expenses

 

(278

)

(246

)

(174

)

 

 

 

 

(698

)

 

 

 

 

 

EBITDA

 

404

 

531

 

165

 

 

 

 

 

1,100

 

 

 

 

 

 

Acquired intangibles amortisation

 

(127

)

(61

)

(1

)

 

 

 

 

(189

)

 

 

 

 

 

Purchased licence amortisation

 

(8

)

(9

)

(7

)

 

 

 

 

(24

)

 

 

 

 

 

Depreciation and other amortisation

 

(151

)

(122

)

(91

)

 

 

 

 

(364

)

 

 

 

 

 

Share of result in associates

 

 

 

 

1,015

 

106

 

1,121

 

 

 

 

 

 

Adjusted operating profit

 

118

 

339

 

66

 

1,015

 

106

 

1,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

34.8%

 

42.6%

 

24.8%

 

 

 

 

 

35.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

%

 

%

 

%

 

%

 

%

 

 

 

 

 

 

 

 

Change at constant exchange rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

31.5

 

84.4

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Messaging revenue

 

2.0

 

51.0

 

5.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Data revenue

 

99.2

 

395.0

 

32.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed line revenue(1)

 

79.1

 

(89.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total service revenue

 

29.2

 

79.7

 

7.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition revenue

 

13.7

 

32.6

 

21.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Retention revenue

 

39.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other revenue

 

76.5

 

353.3

 

4.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

29.3

 

76.6

 

8.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Interconnect costs

 

13.2

 

70.9

 

(9.7

)

 

 

 

 

 

 

 

 

 

 

 

 

Other direct costs

 

48.9

 

147.1

 

26.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

62.1

 

45.8

 

29.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Retention costs

 

38.0

 

57.5

 

7.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

33.6

 

107.9

 

10.3

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

19.6

 

58.4

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired intangibles amortisation

 

(18.8

)

271.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased licence amortisation

 

50.0

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and other amortisation

 

25.7

 

97.3

 

7.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of result in associates

 

 

 

 

 

26.0

 

(100.0

)

 

 

 

 

 

 

 

 

Adjusted operating profit

 

53.5

 

5.2

 

(8.5

)

 

26.0

 

(100.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin movement

 

(2.6

)

(4.4

)

(1.8

)

 

 

 

 

 

 

 

 

 

 

 

 

Note:

(1)   Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and DSL.  All prior periods have been adjusted accordingly.

 

13


 

 

 

30 September 2007

 

30 September 2006

 

 

 

Eastern Europe

 

Middle East Africa &
Asia

 

Pacific

 

EMAPA

 

Eastern
Europe

 

Middle East Africa &
Asia

 

Pacific

 

EMAPA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mobile telecommunications KPIs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing customers (‘000)

 

31,699

 

66,810

 

5,840

 

104,349

 

25,879

 

25,374

 

5,423

 

56,676

 

Closing 3G devices (‘000)

 

517

 

133

 

1,022

 

1,672

 

224

 

 

534

 

758

 

Voice usage (millions of minutes)

 

24,230

 

78,865

 

6,138

 

109,233

 

17,790

 

17,204

 

5,402

 

40,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See page 35 for definition of terms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

Service revenue increased by 40.9%, or by 15.6% on an organic basis, with the impact of the acquisition of subsidiaries in Turkey and India and the adverse effect of exchange rate movements, particularly in South Africa, accounting for most of the difference.  The impact of acquisitions, disposal and exchange rates on EMAPA’s service revenue growth are shown below. 

 

 

 

Organic
growth
%

 

Impact of
exchange rates
Percentage points

 


Impact of acquisitions
and disposal
(1)
Percentage points

 

Reported
growth
%

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

 

 

 

 

 

 

 

 

Eastern Europe

 

11.0

 

2.0

 

18.2

 

31.2

 

Middle East, Africa and Asia

 

25.1

 

(14.4

)

54.6

 

65.3

 

Pacific

 

7.4

 

5.2

 

-

 

12.6

 

EMAPA

 

15.6

 

(2.3

)

27.6

 

40.9

 

 

Note:

(1)   Impact of acquisitions and disposal includes the impact of the change in consolidation status of Bharti Airtel from a joint venture to an investment in February 2007.

 

The organic service revenue growth was driven predominantly by an organic increase in total voice minutes of 31.8%, a result of a 28.8% organic increase in the average customer base and usage stimulation strategies, which more than offset the impact of pricing pressures in a number of locations.

 

Eastern Europe

 

In Eastern Europe the growth in service revenue benefited from an 18.2 percentage point increase from the prior year acquisition in Turkey, and favourable exchange rate movements of 2.0 percentage points.  Organic growth in service revenue was 11.0%, principally driven by an 18.2% organic increase in the average customer base.

 

Romania continued to be the principal driver of organic growth in Eastern Europe, with service revenue growth of 23.2% at constant exchange rates, mainly as a result of a 19.9% increase in the closing customer base, particularly driven by initiatives focused on business and contract customers which contributed to a 33.9% increase in total voice minutes.

 

Turkey continued to perform well with strong customer growth of 29.0% since 30 September 2006, bringing the closing customer base to 15.7 million.  This led to total revenue growth of around 28%, assuming the Group owned the business for the whole of the same period last year.

 

Middle East, Africa and Asia

 

Service revenue in Middle East, Africa and Asia grew strongly with a 25.1% increase on an organic basis, mainly due to strong growth in Egypt and from Vodacom.

 

Service revenue growth at constant exchange rates in Egypt was 33.9%, predominantly a result of a 64.0% increase in voice usage which was stimulated by the increased customer base of 12.2 million.

 

Vodacom reported service revenue growth at constant exchange rates of 19.1%, reflecting the Group’s share of the 22.6% increase in the closing customer base during the twelve month period to 30 September 2007.  The growth in the customer base in the six months ended 30 September 2007 was impacted by a change in the prepaid customer disconnection policy, which resulted in the disconnection of an additional 1.45 million prepaid customers in September 2007.  Vodacom’s data revenue growth remained very strong, with rapid growth in mobile broadband connectivity devices.

 

The Group’s new business in India reported year on year total revenue growth of around 53%, assuming the Group owned the business for the whole of both periods.  Customer net additions between the completion of the acquisition and the end of the period were 8.0 million, bringing the closing customer base to 35.7 million.

 

14


 

Pacific

 

The Group’s operations in the Pacific segment delivered 12.6% service revenue growth, or 7.4% on an organic basis, with the impact of favourable foreign exchange movements being the difference.  The organic growth was achieved through a 13.6% increase in total voice minute volumes, a result of the 7.7% growth in the closing customer base in the region, with improved contract mix and a focus on higher value prepaid customers in Australia, though this was partially offset by the impact of termination rate reductions in both Australia and New Zealand in the period.

 

Adjusted operating profit

 

The impact of acquisitions, disposals and exchange rates on EMAPA’s EBITDA and adjusted operating profit is shown below:

 

 

 

Organic
growth
%

 

Impact of
exchange rates
Percentage points

 


Impact of acquisitions
and disposal
(1)
Percentage points

 

Reported
growth
%

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

 

Eastern Europe

 

14.0

 

(1.3

)

5.6

 

18.3

 

Middle East, Africa and Asia

 

17.2

 

(12.3

)

41.2

 

46.1

 

Pacific

 

0.5

 

5.0

 

-

 

5.5

 

EMAPA

 

13.1

 

(4.6

)

21.3

 

29.8

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

 

 

 

 

 

 

 

 

Eastern Europe

 

16.2

 

(8.6

)

37.3

 

44.9

 

Middle East, Africa and Asia

 

13.3

 

(7.9

)

(8.1

)

(2.7

)

Pacific

 

(8.5

)

4.0

 

-

 

(4.5

)

EMAPA

 

20.8

 

(7.7

)

(7.0

)

6.1

 

 

Note:

(1)         Impact of acquisitions and disposals includes the impact of the change in consolidation status of Bharti Airtel from a joint venture to an investment in February 2007.

 

Adjusted operating profit increased by 6.1%, or by 20.8% on an organic basis, with the increases in revenue achieved by the region being the main driver.  The acquisitions in Turkey and India led to a rise in acquired intangible amortisation which reduced the growth in adjusted operating profit, whilst the continued investment in network infrastructure in the region also resulted in higher depreciation charges.  The organic growth in adjusted operating profit was driven by strong performances in Romania, Egypt, Vodacom and the Group’s associated undertaking in the US.

 

Eastern Europe

 

Adjusted operating profit increased by 16.2% on an organic basis, principally as a result of the growth in revenue in the region, whilst the main movements in the cost base in the Eastern Europe region included a 7.4% organic increase in interconnect costs, resulting from the 26.9% organic increase in outgoing voice minutes, principally from the increased customer base, and a 7.3% organic increase in operating expenses due to growth in the region’s businesses, but fell slightly as a percentage of service revenue on an organic basis.

 

Romania remained the principal contributor to the organic growth in costs with a 36.7% increase in interconnect costs at constant exchange rates, a result of the larger customer base and higher average usage per customer, and an increased level of operating expenses due to an increased number of direct sales and distribution employees in a growing business.  However, operating expenses decreased as a percentage of service revenue.  Romania also accounted for predominantly all of the increase in the region’s rise in organic acquisition and retention costs due to higher volumes of gross additions and upgrades.

 

The main cost drivers in Turkey were acquisition costs and operating expenses.  Acquisition costs increased in response to a higher level of gross additions, which resulted from better positioning of both contract and prepaid propositions, with a focus on the contract segment.  The increase in operating expenses was mainly due to the expansion of the network and higher marketing expenses, which increased primarily as a result of the increased spending since the rebranding of the business to Vodafone in March 2007.

 

Middle East, Africa and Asia

 

Adjusted operating profit increased by 13.3% on an organic basis, as revenue growth more than offset the increase in costs.  The organic growth was mainly driven by Egypt and Vodacom.

 

At constant exchange rates, the key increases in Egypt’s cost base were interconnect costs which increased by 47.9%, a result of the 77.4% increase in outgoing voice minutes, a 59.8% increase in other direct costs, principally due to prepaid airtime commissions and a 45.7% increase in operating expenses caused by expansion in network infrastructure, and higher marketing and customer care expenses to serve the larger customer base.

 

15


 

Growth in adjusted operating profit in Vodacom was impacted by 12.9 percentage points from adverse exchange rate movements.  At constant exchange rates, interconnect costs increased by 17.2%, in response to the 34.0% increase in outgoing voice minutes, and operating expenses increased by 24.4% as a result of higher publicity spending.

 

The Indian mobile market has continued to grow with penetration reaching 18.2% by the end of September 2007.  Vodafone Essar, which adopted the Vodafone brand in September 2007, has continued to perform well with EBITDA slightly ahead of the expectations held at the time of the completion of the acquisition.  This has been partially due to the Group’s rapid network roll out in this market.

 

Pacific

 

Adjusted operating profit decreased 4.5%, after including the impact of favourable exchange movements of 4.0 percentage points, as the increased revenue generated in the region was offset by an increase in costs.  The principal cost drivers behind the decline were an increase in other direct costs of 26.7% at constant exchange rates, primarily due to Australia reporting higher contract commissions and, in New Zealand, due to the inclusion of DSL costs from ihug following its acquisition in October 2006 combined with an increased provision for its share of the Total Telecom Service Obligation costs, a regulator imposed cost.  There was a 34.4% increase in acquisition costs at constant exchange rates in Australia, a result of increased investment in higher value customers in both the contract and prepaid segments.  Operating expenses in Australia increased due to investment in marketing, sales and customer care, whilst the reported increase in New Zealand was due to adverse foreign exchange movements impacting the translation into sterling, an increase in the share of billing system costs and higher payroll costs resulting from improvements in customer care.

 

Associates

 

 

 

2007

 

 

2006

 

 

Verizon Wireless change

 

 

Verizon Wireless
£m

 

Other(1)
£m

 

Total
 £m

 

 

Verizon
Wireless
 £m

 

Other(1)
£m

 

Total
£m

 

 

£
%

 

Constant Currency
%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of result of associates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

1,366

 

 

1,366

 

 

1,214

 

136

 

1,350

 

 

12.5

 

21.8

 

Interest

 

(65

)

 

(65

)

 

(94

)

2

 

(92

)

 

(30.9

)

(26.5

)

Tax

 

(92

)

 

(92

)

 

(73

)

(32

)

(105

)

 

26.0

 

37.2

 

Minority interest

 

(29

)

 

(29

)

 

(32

)

 

(32

)

 

(9.4

)

(2.7

)

 

 

1,180

 

 

1,180

 

 

1,015

 

106

 

1,121

 

 

16.3

 

26.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Verizon Wireless (100% basis)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue (£m)

 

11,042

 

 

 

 

 

 

10,327

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

39.1%

 

 

 

 

 

 

38.7%

 

 

 

 

 

 

 

 

 

 

Closing customers (‘000)

 

63,699

 

 

 

 

 

 

56,747

 

 

 

 

 

 

 

 

 

 

Average monthly ARPU ($)

 

54.1

 

 

 

 

 

 

52.6

 

 

 

 

 

 

 

 

 

 

Blended churn

 

15.1%

 

 

 

 

 

 

14.2%

 

 

 

 

 

 

 

 

 

 

Messaging and data as a percentage of service revenue

 

18.4%

 

 

 

 

 

 

12.9%

 

 

 

 

 

 

 

 

 

 

 

Note:

(1)   Other associates in 2006 include the results of the Group’s associated undertakings in Belgium and Switzerland until the announcement of their respective disposal in August 2006 and December 2006.

 

Verizon Wireless, the Group’s associated undertaking in the US, produced another period of strong organic customer growth, adding 3.4 million net retail customer additions in a market with penetration reaching an estimated 83.1% at 30 September 2007.  Total net customer additions of 3.0 million, after 0.4 million net reseller disconnections, equate to 1.3 million in proportionate terms and brought the Group’s share of the closing customer base to 28.7 million.  The customer growth was achieved through an increase in new customer additions, particularly in the higher value contract segment, and low customer churn driven by market leading customer loyalty.

 

Service revenue growth was 16.6% at constant exchange rates, driven by the expanding customer base and a 2.9% increase in ARPU.  Data revenue continued to increase strongly, predominantly as a result of growth in data card, wireless email and messaging services.  Verizon Wireless continued to lay the foundations for future data revenue growth through the expansion of CDMA EV-DO Rev A, an enhanced wireless broadband service, which now covers a population of 210 million.

 

Verizon Wireless improved its EBITDA margin mainly due to operating expenditure efficiencies offsetting a higher level of customer acquisition and retention activity during the period.  The Group’s share of the tax attributable to Verizon Wireless relates only to the corporate entities held by the Verizon Wireless partnership.  The tax attributable to the Group’s share of the partnership’s pre-tax profit is included within the Group tax charge.

 

Verizon Wireless has entered into an agreement to acquire Rural Cellular Corporation for approximately $2.67 billion in cash and assumed debt.  The transaction is expected to be completed by the first half of 2008, subject to the receipt of the required regulatory approvals, and will result in an increase in the customer base of Verizon Wireless of more than 0.7 million customers.

 

16


 

LIQUIDITY AND CAPITAL RESOURCES

 

CASH FLOWS AND FUNDING

 

During the six months ended 30 September 2007, net cash inflow from operating activities fell by 2.3% to £4,860 million and the Group generated £2,661 million of free cash flow, as analysed in the following table:

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

%

 

 

 

 

 

 

 

 

 

 

 

Net cash inflow from operating activities

 

4,860

 

 

4,975

 

 

(2.3

)

 

 

 

 

 

 

 

 

 

 

– Continuing operations

 

4,860

 

 

4,840

 

 

0.4

 

– Discontinued operations

 

 

 

135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Taxation

 

1,487

 

 

1,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of intangible fixed assets

 

(320

)

 

(298

)

 

 

 

Purchase of property, plant and equipment

 

(1,902

)

 

(1,892

)

 

 

 

Disposal of property, plant and equipment

 

13

 

 

11

 

 

 

 

Operating free cash flow

 

4,138

 

 

4,013

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

– Continuing operations

 

4,138

 

 

4,021

 

 

2.9

 

– Discontinued operations

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxation

 

(1,487

)

 

(1,217

)

 

 

 

Dividends received from associated undertakings (1)

 

476

 

 

371

 

 

 

 

Dividends paid to minority shareholders in subsidiary undertakings

 

(66

)

 

(34

)

 

 

 

Dividends received from investments

 

72

 

 

57

 

 

 

 

Interest received

 

240

 

 

256

 

 

 

 

Interest paid

 

(712

)

 

(499

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

2,661

 

 

2,947

 

 

(9.7

)

 

 

 

 

 

 

 

 

 

 

– Continuing operations

 

2,661

 

 

2,955

 

 

(9.9

)

– Discontinued operations

 

 

 

(8

)

 

 

 

 

Note:

(1)   Six months ended 30 September 2007 includes £272 million (2006: £240 million) from the Group’s interest in SFR and £199 million (2006: £119 million) from the Group’s interest in Verizon Wireless.

 

Free cash flow decreased primarily as a result of lower cash inflow from operating activities and higher payments for interest and taxation, partially offset by higher dividends received from associates.

 

An analysis of net debt is as follows:

 

 

 

30 September
2007
£m

 

 

31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (as presented in the consolidated cash flow statement)

 

2,873

 

 

7,458

 

 

Bank overdrafts

 

28

 

 

23

 

 

Cash and cash equivalents (as presented in the consolidated balance sheet)

 

2,901

 

 

7,481

 

 

 

 

 

 

 

 

 

 

Trade and other receivables(1)

 

291

 

 

304

 

 

Trade and other payables(1)

 

(465

)

 

(219

)

 

Short term borrowings

 

(5,673

)

 

(4,817

)

 

Long term borrowings(2)

 

(20,307

)

 

(17,798

)

 

 

 

(26,154

)

 

(22,530

)

 

 

 

 

 

 

 

 

 

Net debt as extracted from the consolidated balance sheet

 

(23,253

)

 

(15,049

)

 

 

Notes:

(1)   Represents mark to market adjustments on derivative financial instruments which are included as a component of trade and other receivables and trade and other payables.

(2)   Includes £2,464 million related to put options over minority interests, including those in Vodafone Essar and Arcor, which are required to be reported as a financial liability.

 

The Group targets low single A long term credit ratings, with its current credit ratings being P-2/F2/A-2 short term and Baa1 stable/A- stable/A- stable long term from Moody’s, Fitch Ratings and Standard & Poor’s respectively.  Credit ratings are not a recommendation to purchase, hold or sell securities, inasmuch as ratings do not comment on market price or suitability for a particular investor, and are subject to revision or withdrawal at any time by the assigning rating organisation.  Each rating should be evaluated independently.

 

17


 

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

 

In aggregate, the Group has committed facilities of approximately £8,821 million, of which £5,726 million was undrawn and £3,095 million drawn at 30 September 2007.  The undrawn facilities include a $5.2 billion Revolving Credit Facility that matures in June 2012 and a $6.1 billion Revolving Credit Facility that matures in June 2009.  Both facilities support US and euro commercial paper programmes of up to $15 billion and £5 billion respectively.  At 30 September 2007, no amounts were drawn under the US commercial paper programme and €785 million (£548 million) was drawn under the euro commercial paper programme.  Other undrawn facilities of £175 million are specific to the Group’s subsidiary in Egypt.

 

The Group has a €25 billion Euro Medium Term Note (“EMTN”) programme and a US shelf programme which are used to meet medium to long term funding requirements.  At 31 March 2007, the nominal value of bonds outstanding was £17,101 million.  In the six months to 30 September 2007, bonds with a nominal value of £1,221 million were issued under the EMTN programme.  The bonds issued during the six months to 30 September 2007 were as follows:

 


Date bond issued

Maturity of bond

Currency

Amount  million

 

US shelf programme or EMTN
Programme

 

 

 

 

 

 

6 June 2007

6 June 2014

EUR

1,250

 

EMTN Programme

 

 

 

 

 

 

6 June 2007

6 June 2022

EUR

500

 

EMTN Programme

 

At 30 September 2007, the Group had bonds outstanding with a nominal value of £17,206 million.  On 24 October 2007, $500 million aggregate principal amount of bonds maturing on 27 February 2037 were issued under the US shelf programme.

 

On 8 May 2007, the Group acquired a controlling interest in Vodafone Essar.  Operating companies acquired in this transaction are funded by external facilities which are non-recourse to other Group companies.  At 30 September 2007, a total of INR62.1 billion (£765 million) had been fully drawn from committed bank facilities that mature at various dates up to July 2012.  Other companies are funded by fully drawn external bank facilities of INR16.4 billion (£202 million) that mature at various dates up to February 2010.

 

TOTAL SHAREHOLDER RETURNS

 

Dividends

 

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

 

The Board remains committed to its policy of distributing 60% of adjusted earnings per share by way of dividend. However, as a result of the earnings dilution arising from the Vodafone Essar acquisition, the payout ratio is expected to rise above 60% in the near term to better reflect the underlying trends of the business.

 

The directors have announced an interim dividend of 2.49 pence per share, representing a 6.0% increase over last year’s interim dividend.  In growing dividends at 6.0%, ahead of its guidance for modest growth issued in May, the Board has taken into account the Group’s current financial performance and its confidence in the prospects for the business.

 

The ex-dividend date is 21 November 2007 for ordinary shareholders, the record date for the interim dividend is 23 November 2007 and the dividend is payable on 1 February 2008.

 

Other returns

 

The Group has no current plans for further share purchases or other one-off shareholder returns.  The Board will periodically review the free cash flow, anticipated cash requirements, dividends, credit profile and gearing of the Group and consider additional shareholder returns.

 

18


 

OPTION AGREEMENTS AND SIMILAR ARRANGEMENTS

 

On 8 August 2007 the Group announced that it had decided not to exercise its rights under its agreement with Verizon Communications (“Verizon”) to sell to Verizon up to $10 billion of the Group’s interest in Verizon Wireless.  This was the final such option available to Vodafone.

 

As part of the Vodafone Essar acquisition, the Group acquired less than 50% equity interests in Telecom Investments India Private Limited (“TII”) and in Omega Telecom Holdings Private Limited (“Omega”).  The Group was granted call options to acquire 100% of the shares in two companies which together indirectly own the remaining shares of TII for, if the market equity of Vodafone Essar at the time of exercise is less than US$25 billion, an aggregate price of US$431 million plus interest or, if the market equity value of Vodafone Essar at the time of exercise is greater than US$25 billion, the fair market value of the shares as agreed between the parties.  The Group also has an option to acquire 100% of the shares in a third company which owns the remaining shares in Omega.  In conjunction with the receipt of these options, the Group also granted a put option to each of the shareholders of these companies with identical pricing which, if exercised, would require Vodafone to purchase 100% of the equity in the respective company.  These options can only be exercised in accordance with Indian law prevailing at the time of exercise.

 

The Group granted put options exercisable between 8 May 2010 and 8 May 2011 to members of the Essar group of companies that, if exercised, would allow the Essar group to sell its 33% shareholding in Vodafone Essar to the Group for US$5 billion or to sell between US$1 billion and US$5 billion worth of Vodafone Essar shares to the Group at an independently appraised fair market value.

 

SIGNIFICANT TRANSACTIONS

 

The Group invested a net £4,724 million(1) in acquisition and disposal activities, including the purchase and disposal of investments, in the six months ended 30 September 2007.  An analysis of the significant transactions and the changes to the Group’s effective interest in the entities is shown below.

 

 

 

 

£m

 

 

Acquisitions(1):

 

 

 

 

Acquisition of 100% of CGP Investments (Holdings) Limited (“CGP”), a company with interests in Hutchison Essar Limited (subsequently renamed Vodafone Essar Limited)

 

(5,428

)

 

Disposals(1):

 

 

 

 

Partial disposal of Bharti Airtel Limited (from 9.99% to 5.00%)

 

654

 

 

Other net acquisitions and disposals, including investments(1)

 

50

 

 

 

 

 

 

 

 

 

(4,724

)

 

 

Note:

(1)   Amounts are shown net of cash and cash equivalents acquired or disposed.

 

On 8 May 2007, the Group completed the acquisition of 100% of CGP, a company with interests in Vodafone Essar, from Hutchison Telecommunications International Limited for cash consideration of £5,479 million, gross of £51 million cash and cash equivalents acquired.  Following this transaction, the Group has a controlling financial interest in Vodafone Essar.  As part of this transaction, the Group also assumed gross debt of £1,466 million, including £217 million related to written put options over minority interests, and issued a written put to the Essar Group for which the present value of the redemption price was £2,154 million.

 

In conjunction with the acquisition of Vodafone Essar, the Group entered into a share sale and purchase agreement with a Bharti group company regarding the Group’s 5.60% direct shareholding in Bharti Airtel.  On 9 May 2007, a Bharti group company irrevocably agreed to purchase this shareholding.  The Group received £654 million in cash consideration for 4.99% of such shareholding, with the Group’s remaining 0.61% direct shareholding to be transferred by November 2008.

 

RISK FACTORS

 

There are a number of risk factors and uncertainties that could have a significant effect on the Group’s financial performance including:

                the level of competition in the markets in which it and its interests operate which may affect the Group’s revenue and market share;

                decisions and changes in the Group’s regulatory environment;

                the non achievement of expected benefits from cost reduction initiatives and from business acquisitions;

                expected benefits from investment in networks, licences and new technology may not be realised;

 

19


 

                delays in the development of handsets and network compatibility and components may hinder the deployment of new technologies;

                geographic expansion may increase the Group’s exposure to unpredictable economic, political and legal risks;

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

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

                the Group may experience a decline in revenue or profitability notwithstanding its efforts to increase revenue from the introduction of new services; and

                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 radio waves from mobile telephones, transmitters and associated equipment.

 

In addition to the above, the Group is exposed to financial risks arising from external factors including the movements in foreign exchange rates, interest rates and other factors such as long term economic growth rates, all of which may impact the Group’s financial performance.  Non financial risks that could have a significant effect on the Group’s financial performance for the six months ending 31 March 2008 and which are outside the Group’s control include the willingness and ability of third parties, including regulators, tax raising authorities and commercial partners, to engage and reach agreement on open matters.

 

Any of the above and/or changes in assumptions underlying the carrying value of certain Group assets could result in asset impairments.

 

Further information in relation to these risk factors and uncertainties can be found on pages 58 to 59 of the Group’s Annual Report for the year ended 31 March 2007 which can be found on www.vodafone.com.

 

SUBSEQUENT EVENTS

 

On 6 October 2007, the Group announced that it had agreed to acquire Tele2 Italia SpA (“Tele2 Italy”) and Tele2 Telecommunication Services SLU (“Tele2 Spain”) from Tele2 AB Group for a cash consideration of €775 million (£537 million) on a debt free basis.

 

Tele2 Italy and Tele2 Spain each provide nationwide fixed line telecommunications and broadband services.  Tele2 Italy had over 2.6 million customers as at 30 June 2007, including over 400,000 broadband customers. Tele2 Spain had 550,000 customers as at 30 June 2007, including over 240,000 broadband customers.

 

The transaction is expected to be completed by the end of the calendar year, following receipt of regulatory approval.

 

RESPONSIBILITY STATEMENT

 

We confirm that to the best of our knowledge:

 

     the unaudited Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34; and

     the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

 

Neither the Company nor the directors accept any liability to any person in relation to the half-yearly financial report except to the extent that such liability could arise under English law.  Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.

 

 

By order of the Board

 

 

Stephen Scott

Secretary

13 November 2007

 

20


 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CONSOLIDATED INCOME STATEMENT

 

 

 

 

Note

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

2

 

16,994

 

 

15,594

 

 

31,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

(10,212

)

 

(9,022

)

 

(18,725

)

 

Gross profit

 

 

 

6,782

 

 

6,572

 

 

12,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and distribution expenses

 

 

 

(1,152

)

 

(1,038

)

 

(2,136

)

 

Administrative expenses

 

 

 

(1,850

)

 

(1,800

)

 

(3,437

)

 

Share of result in associated undertakings

 

 

 

1,443

 

 

1,413

 

 

2,728

 

 

Impairment losses

 

 

 

 

 

(8,100

)

 

(11,600

)

 

Other income and expense

 

 

 

(15

)

 

1

 

 

502

 

 

Operating profit/(loss)

 

2

 

5,208

 

 

(2,952

)

 

(1,564

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating income and expense

 

 

 

250

 

 

10

 

 

4

 

 

Investment income

 

 

 

382

 

 

425

 

 

789

 

 

Financing costs

 

 

 

(1,280

)

 

(813

)

 

(1,612

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before taxation

 

 

 

4,560

 

 

(3,330

)

 

(2,383

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

3

 

(1,233

)

 

(1,218

)

 

(2,423

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period from continuing operations

 

 

 

3,327

 

 

(4,548

)

 

(4,806

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

-

 

 

(491

)

 

(491

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

 

 

 

3,327

 

 

(5,039

)

 

(5,297

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

– Equity shareholders

 

 

 

3,290

 

 

(5,105

)

 

(5,426

)

 

– Minority interests

 

 

 

37

 

 

66

 

 

129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings/(loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) from continuing operations

 

4

 

6.22p

 

 

(8.02)p

 

 

(8.94)p

 

 

Loss from discontinued operations

 

4

 

 

 

(0.86)p

 

 

(0.90)p

 

 

Profit/(loss) for the period

 

4

 

6.22p

 

 

(8.88)p

 

 

(9.84)p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings/(loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) from continuing operations

 

4

 

6.19p

 

 

(8.02)p

 

 

(8.94)p

 

 

Loss from discontinued operations

 

4

 

 

 

(0.86)p

 

 

(0.90)p

 

 

Profit/(loss) for the period

 

4

 

6.19p

 

 

(8.88)p

 

 

(9.84)p

 

 

 

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

 

 

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to

30 September

2006

£m

 

 

Year ended

31 March

2007

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains on revaluation of available-for-sale investments

 

 

 

2,568

 

 

641

 

 

2,108

 

 

Exchange differences on translation of foreign operations

 

 

 

705

 

 

(3,293

)

 

(3,804

)

 

Net actuarial gains on defined benefit pension schemes

 

 

 

53

 

 

18

 

 

50

 

 

Foreign exchange gains transferred to the income statement

 

 

 

(7

)

 

794

 

 

838

 

 

Fair value gains transferred to the income statement

 

 

 

(570

)

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain/(loss) recognised directly in equity

 

 

 

2,749

 

 

(1,840

)

 

(808

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

 

 

 

3,327

 

 

(5,039

)

 

(5,297

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total recognised income and expense relating to the period

 

 

 

6,076

 

 

(6,879

)

 

(6,105

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

– Equity shareholders

 

 

 

6,096

 

 

(6,931

)

 

(6,210

)

 

– Minority interests

 

 

 

(20

)

 

52

 

 

105

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

21


 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CONSOLIDATED BALANCE SHEET

 

 

 

 

Note

 

30 September
2007
£m

 

 

30 September
2006
£m

 

 

31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

45,661

 

 

44,330

 

 

40,567

 

 

Other intangible assets

 

 

 

18,382

 

 

16,203

 

 

15,705

 

 

Property, plant and equipment

 

 

 

14,832

 

 

13,248

 

 

13,444

 

 

Investments in associated undertakings

 

 

 

20,615

 

 

21,879

 

 

20,227

 

 

Other investments

 

 

 

7,492

 

 

3,762

 

 

5,875

 

 

Deferred tax assets

 

 

 

482

 

 

450

 

 

410

 

 

Post employment benefits

 

 

 

158

 

 

33

 

 

82

 

 

Trade and other receivables

 

 

 

516

 

 

466

 

 

494

 

 

 

 

 

 

108,138

 

 

100,371

 

 

96,804

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Inventory

 

 

 

405

 

 

356

 

 

288

 

 

Taxation recoverable

 

 

 

27

 

 

2

 

 

21

 

 

Trade and other receivables

 

 

 

5,739

 

 

4,963

 

 

5,023

 

 

Cash and cash equivalents

 

 

 

2,901

 

 

789

 

 

7,481

 

 

 

 

 

 

9,072

 

 

6,110

 

 

12,813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets included in disposal group held for resale

 

 

 

 

 

914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

117,210

 

 

107,395

 

 

109,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

Called up share capital

 

7

 

4,180

 

 

4,166

 

 

4,172

 

 

Share premium account

 

7

 

43,782

 

 

43,443

 

 

43,572

 

 

Own shares held

 

7

 

(7,937)

 

 

(8,153)

 

 

(8,047)

 

 

Additional paid-in capital

 

7

 

100,131

 

 

100,191

 

 

100,185

 

 

Capital redemption reserve

 

7

 

9,136

 

 

9,121

 

 

9,132

 

 

Accumulated other recognised income and expense

 

8

 

6,112

 

 

2,264

 

 

3,306

 

 

Retained losses

 

9

 

(83,999)

 

 

(83,656)

 

 

(85,253)

 

 

Total equity shareholders’ funds

 

 

 

71,405

 

 

67,376

 

 

67,067

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interests

 

 

 

1,148

 

 

197

 

 

226

 

 

Written put options over minority interests

 

 

 

(2,425)

 

 

 

 

 

 

Total minority interests

 

 

 

(1,277)

 

 

197

 

 

226

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

70,128

 

 

67,573

 

 

67,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Long term borrowings

 

 

 

20,307

 

 

17,014

 

 

17,798

 

 

Deferred tax liabilities

 

 

 

5,003

 

 

4,901

 

 

4,626

 

 

Post employment benefits

 

 

 

114

 

 

107

 

 

123

 

 

Provisions

 

 

 

253

 

 

273

 

 

296

 

 

Trade and other payables

 

 

 

615

 

 

567

 

 

535

 

 

 

 

 

 

26,292

 

 

22,862

 

 

23,378

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Short term borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

Third parties

 

 

 

4,652

 

 

3,539

 

 

3,975

 

 

Related parties

 

 

 

1,021

 

 

575

 

 

842

 

 

Current taxation liabilities

 

 

 

4,997

 

 

4,911

 

 

5,088

 

 

Provisions

 

 

 

253

 

 

167

 

 

267

 

 

Trade and other payables

 

 

 

9,867

 

 

7,768

 

 

8,774

 

 

 

 

 

 

20,790

 

 

16,960

 

 

18,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

117,210

 

 

107,395

 

 

109,617

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

22


 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CONSOLIDATED CASH FLOW STATEMENT

 

 

 

Note

 

Six months to
30 September
2007
£m

 

 

Six months to 30
September 2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from operating activities

 

6

 

4,860

 

 

4,975

 

 

10,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of interests in subsidiary undertakings and joint ventures, net of cash acquired

 

10

 

(5,475)

 

 

(2,585)

 

 

(2,805)

 

 

Disposal of interests in subsidiary undertakings, net of cash disposed

 

11

 

 

 

6,799

 

 

6,767

 

 

Disposal of interests in associated undertakings

 

 

 

 

 

 

 

3,119

 

 

Purchase of intangible assets

 

 

 

(320)

 

 

(298)

 

 

(899)

 

 

Purchase of property, plant and equipment

 

 

 

(1,902)

 

 

(1,892)

 

 

(3,633)

 

 

Purchase of investments

 

 

 

(30)

 

 

(154)

 

 

(172)

 

 

Disposal of property, plant and equipment

 

 

 

13

 

 

11

 

 

34

 

 

Disposal of investments

 

11

 

781

 

 

 

 

80

 

 

Dividends received from associated undertakings

 

 

 

476

 

 

371

 

 

791

 

 

Dividends received from investments

 

 

 

72

 

 

57

 

 

57

 

 

Interest received

 

 

 

240

 

 

256

 

 

526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from investing activities

 

 

 

(6,145)

 

 

2,565

 

 

3,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Issue of ordinary share capital and reissue of treasury shares

 

 

 

170

 

 

39

 

 

193

 

 

Net movement in short term borrowings

 

 

 

(104)

 

 

426

 

 

953

 

 

Proceeds from issue of long term borrowings

 

 

 

1,119

 

 

2,451

 

 

5,150

 

 

Repayment of borrowings

 

 

 

(1,271)

 

 

(453)

 

 

(1,961)

 

 

Purchase of treasury shares

 

 

 

 

 

(43)

 

 

(43)

 

 

B share capital redemption

 

 

 

(4)

 

 

(5,707)

 

 

(5,713)

 

 

B share preference dividends paid

 

 

 

 

 

(3,286)

 

 

(3,291)

 

 

Equity dividends paid

 

 

 

(2,334)

 

 

(2,315)

 

 

(3,555)

 

 

Dividends paid to minority shareholders in subsidiary undertakings

 

 

 

(66)

 

 

(34)

 

 

(34)

 

 

Interest paid

 

 

 

(712)

 

 

(499)

 

 

(1,051)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from financing activities

 

 

 

(3,202)

 

 

(9,421)

 

 

(9,352)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows

 

 

 

(4,487)

 

 

(1,881)

 

 

4,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of the period

 

 

 

7,458

 

 

2,932

 

 

2,932

 

 

Exchange losses on cash and cash equivalents

 

 

 

(98)

 

 

(275)

 

 

(315)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of the period

 

 

 

2,873

 

 

776

 

 

7,458

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

23


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

1                 Basis of preparation

 

The unaudited Condensed Consolidated Financial Statements for the six months ended 30 September 2007:

 

                were prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) and thereby International Financial Reporting Standards (“IFRS”), both as issued by the International Accounting Standards Board (“IASB”) and as adopted by the European Union (“EU”);

 

                are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the 2007 Annual Report;

 

                include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented;

 

                do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and were approved by the Board of directors on 13 November 2007.

 

Both IFRS as issued by the IASB and as adopted by the EU differ in certain material respects from US generally accepted accounting principles (“US GAAP”) – see note 14.

 

The information relating to the year ended 31 March 2007 is an extract from the published Annual Report for that year, which has been delivered to the Registrar of Companies, and on which the Auditors’ Report was unqualified and did not contain statements under section 237(2) or 237(3) of the UK Companies Act 1985.

 

The preparation of the Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

24


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

2                      Segmental and other analyses

 

The Group has one business segment, being the supply of communications services and products. The Group’s analysis of revenue and operating profit for discontinued operations are shown in note 11. During the six months ended 30 September 2007, the Group changed its organisation structure and the Group’s associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results for all periods are presented in accordance with the new structure.

 

Revenue

 

Six months to
30 September 2007

 

Segment
revenue
£m

 

Common
functions
£m

(1)

 

Intra-
region
revenue
£m

 

Regional
revenue
£m

 

Inter-
region
revenue
£m

 

Group
revenue
£m

 

Germany

 

2,650

 

 

 

(63

)

2,587

 

(5

)

2,582

 

Italy

 

2,097

 

 

 

(21

)

2,076

 

(3

)

2,073

 

Spain

 

2,439

 

 

 

(62

)

2,377

 

(3

)

2,374

 

UK

 

2,717

 

 

 

(25

)

2,692

 

(5

)

2,687

 

Arcor

 

768

 

 

 

(32

)

736

 

-

 

736

 

Other Europe

 

2,243

 

 

 

(42

)

2,201

 

(3

)

2,198

 

Europe

 

12,914

 

 

 

(245

)

12,669

 

(19

)

12,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

1,524

 

 

 

-

 

1,524

 

(21

)

1,503

 

Middle East, Africa and Asia

 

2,019

 

 

 

-

 

2,019

 

(6

)

2,013

 

Pacific

 

758

 

 

 

-

 

758

 

(5

)

753

 

EMAPA

 

4,301

 

 

 

-

 

4,301

 

(32

)

4,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions(1)

 

-

 

80

 

-

 

80

 

(5

)

75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,215

 

80

 

(245

)

17,050

 

(56

)

16,994

 

 

Six months to
30 September 2006

 

Segment
revenue
£m

 

Common
functions
£m

(1)

 

Intra-
region
revenue
£m

 

Regional
revenue
£m

 

Inter-
region
revenue
£m

 

Group
revenue
£m

 

Germany

 

2,827

 

 

 

(67

)

2,760

 

(4

)

2,756

 

Italy

 

2,174

 

 

 

(27

)

2,147

 

(3

)

2,144

 

Spain

 

2,268

 

 

 

(65

)

2,203

 

(2

)

2,201

 

UK

 

2,549

 

 

 

(29

)

2,520

 

(5

)

2,515

 

Arcor

 

706

 

 

 

(14

)

692

 

 

692

 

Other Europe

 

2,216

 

 

 

(54

)

2,162

 

(2

)

2,160

 

Europe

 

12,740

 

 

 

(256

)

12,484

 

(16

)

12,468

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

1,162

 

 

 

 

1,162

 

(16

)

1,146

 

Middle East, Africa and Asia

 

1,247

 

 

 

 

1,247

 

(5

)

1,242

 

Pacific

 

666

 

 

 

 

666

 

(4

)

662

 

EMAPA

 

3,075

 

 

 

 

3,075

 

(25

)

3,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions(1)

 

 

86

 

 

86

 

(10

)

76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,815

 

86

 

(256

)

15,645

 

(51

)

15,594

 

 

Year ended
31 March 2007

 

Segment
revenue
£m

 

Common
functions
£m

(1)

 

Intra-
region
revenue
£m

 

Regional
revenue
£m

 

Inter-
region
revenue
£m

 

Group
revenue
£m

 

Germany

 

5,443

 

 

 

(123

)

5,320

 

(9

)

5,311

 

Italy

 

4,245

 

 

 

(44

)

4,201

 

(5

)

4,196

 

Spain

 

4,500

 

 

 

(106

)

4,394

 

(3

)

4,391

 

UK

 

5,124

 

 

 

(54

)

5,070

 

(9

)

5,061

 

Arcor

 

1,441

 

 

 

(27

)

1,414

 

 

1,414

 

Other Europe

 

4,275

 

 

 

(82

)

4,193

 

(4

)

4,189

 

Europe

 

25,028

 

 

 

(436

)

24,592

 

(30

)

24,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

2,477

 

 

 

 

2,477

 

(31

)

2,446

 

Middle East, Africa and Asia

 

2,565

 

 

 

 

2,565

 

(9

)

2,556

 

Pacific

 

1,399

 

 

 

 

1,399

 

(11

)

1,388

 

EMAPA

 

6,441

 

 

 

 

6,441

 

(51

)

6,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions(1)

 

 

168

 

 

168

 

(16

)

152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,469

 

168

 

(436

)

31,201

 

(97

)

31,104

 

 

Note:

(1)   Common functions represents results from Partner Markets and unallocated central Group income and expenses.

 

25


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

2                 Segmental and other analyses (continued)

 

Segment result

 

Six months to
30 September 2007

 

 

 

Operating
profit
£m

 

Impairment
losses
£m

 

Other
adjustments
£m

 

Adjusted
operating
profit
£m

 

Germany

 

 

 

644

 

-

 

-

 

644

 

Italy

 

 

 

776

 

-

 

-

 

776

 

Spain

 

 

 

715

 

-

 

-

 

715

 

UK

 

 

 

243

 

-

 

-

 

243

 

Arcor

 

 

 

92

 

-

 

-

 

92

 

Other Europe

 

 

 

799

 

-

 

-

 

799

 

Europe

 

 

 

3,269

 

-

 

-

 

3,269

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

 

 

156

 

-

 

15

 

171

 

Middle East, Africa and Asia

 

 

 

330

 

-

 

-

 

330

 

Pacific

 

 

 

63

 

-

 

-

 

63

 

Associates - US

 

 

 

1,180

 

-

 

-

 

1,180

 

EMAPA

 

 

 

1,729

 

-

 

15

 

1,744

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions

 

 

 

210

 

-

 

-

 

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,208

 

-

 

15

 

5,223

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to
30 September 2006

 

 

 

Operating
(loss)/profit
£m

 

Impairment
losses
£m

 

Other
adjustments
£m

 

Adjusted
operating
profit
£m

 

Germany

 

 

 

(5,976)

 

6,700

 

-

 

724

 

Italy

 

 

 

(561)

 

1,400

 

-

 

839

 

Spain

 

 

 

585

 

-

 

 

585

 

UK

 

 

 

318

 

-

 

 

318

 

Arcor

 

 

 

83

 

-

 

 

83

 

Other Europe

 

 

 

812

 

-

 

 

812

 

Europe

 

 

 

(4,739)

 

8,100

 

-

 

3,361

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

 

 

118

 

-

 

 

118

 

Middle East, Africa and Asia

 

 

 

339

 

-

 

 

339

 

Pacific

 

 

 

66

 

-

 

 

66

 

Associates - US

 

 

 

1,021

 

-

 

(6)

 

1,015

 

Associates - Other

 

 

 

106

 

-

 

 

106

 

EMAPA

 

 

 

1,650

 

-

 

(6)

 

1,644

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions

 

 

 

137

 

-

 

(1)

 

136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,952)

 

8,100

 

(7)

 

5,141

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended
31 March 2007

 

 

 

Operating
(loss)/profit
£m

 

Impairment
losses
£m

 

Other
adjustments
£m

 

Adjusted
operating
profit
£m

 

Germany

 

 

 

(5,345)

 

6,700

 

(1)

 

1,354

 

Italy

 

 

 

(3,325)

 

4,900

 

-

 

1,575

 

Spain

 

 

 

1,100

 

 

 

1,100

 

UK

 

 

 

511

 

 

 

511

 

Arcor

 

 

 

171

 

 

 

171

 

Other Europe

 

 

 

1,448

 

 

 

1,448

 

Europe

 

 

 

(5,440)

 

11,600

 

(1)

 

6,159

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

 

 

184

 

-

 

 

184

 

Middle East, Africa and Asia

 

 

 

694

 

-

 

 

694

 

Pacific

 

 

 

159

 

-

 

 

159

 

Associates - US

 

 

 

2,080

 

-

 

(3)

 

2,077

 

Associates - Other

 

 

 

638

 

-

 

(508)

 

130

 

EMAPA

 

 

 

3,755

 

-

 

(511)

 

3,244

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions

 

 

 

121

 

-

 

7

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,564)

 

11,600

 

(505)

 

9,531

 

 

26


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

3                 Taxation

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

United Kingdom corporation tax benefit at 30% (2006: 30%):

 

 

 

 

 

 

 

 

 

 

Current year

 

 

 

 

 

 

 

Adjustments in respect of prior years

 

(65

)

 

(39

)

 

(30

)

 

 

 

 

 

 

 

 

 

 

 

 

Overseas corporation tax:

 

 

 

 

 

 

 

 

 

 

Current year

 

1,393

 

 

2,084

 

 

2,928

 

 

Adjustments in respect of prior years

 

(3

)

 

(162

)

 

215

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current tax expense

 

1,325

 

 

1,883

 

 

3,113

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax:

 

 

 

 

 

 

 

 

 

 

United Kingdom deferred tax

 

(66

)

 

(50

)

 

(49

)

 

Overseas deferred tax

 

(26

)

 

(615

)

 

(641

)

 

Deferred tax benefit

 

(92

)

 

(665

)

 

(690

)

 

 

 

 

 

 

 

 

 

 

 

 

Total income tax expense

 

1,233

 

 

1,218

 

 

2,423

 

 

 

4                 Earnings/(loss) per share

 

 

 

Six months to
30 September
2007
million

 

 

Six months to
30 September
2006
million

 

 

Year ended
31 March
2007
million

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares for basic earnings/(loss) per share

 

52,935

 

 

57,515

 

 

55,144

 

 

Dilutive potential shares: restricted shares and share options(1)

 

181

 

 

-

 

 

-

 

 

Weighted average number of shares for diluted earnings/(loss) per share

 

53,116

 

 

57,515

 

 

55,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

£m

 

 

£m

 

 

£m

 

 

Earnings/(loss) for basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

3,290

 

 

(4,611

)

 

(4,932)

 

 

Discontinued operations

 

-

 

 

(494

)

 

(494)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

3,290

 

 

(5,105

)

 

(5,426)

 

 

 

Note:

(1)          In the six months ended 30 September 2006 and the year ended 31 March 2007, 140 million shares and 215 million shares, respectively, have been excluded from the calculation of the weighted average number of shares as they are not dilutive.

 

5                 Dividends

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity dividends on ordinary shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Declared during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Final dividend for the year ended 31 March 2007: 4.41 pence per share (2006: 3.87 pence per share)

 

2,331

 

 

2,328

 

 

2,328

 

 

Interim dividend for the year ended 31 March 2007: 2.35 pence per share

 

 

 

 

 

1,238

 

 

 

 

2,331

 

 

2,328

 

 

3,566

 

 

 

 

 

 

 

 

 

 

 

 

 

Proposed after the balance sheet date and not recognised as a liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Final dividend for the year ended 31 March 2007: 4.41 pence per share

 

 

 

 

 

2,331

 

 

Interim dividend for the year ending 31 March 2008: 2.49 pence per share (2007: 2.35 pence per share)

 

1,322

 

 

1,238

 

 

 

 

 

27


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

6                 Cash flow information

 

Reconciliation of net cash flows from operating activities:

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period from continuing operations

 

3,327

 

 

(4,548

)

 

(4,806

)

Loss for the period from discontinued operations

 

 

 

(491

)

 

(491

)

Adjustments(1):

 

 

 

 

 

 

 

 

 

Share-based payment

 

54

 

 

49

 

 

93

 

Depreciation and amortisation

 

2,755

 

 

2,488

 

 

5,111

 

Loss on disposal of property, plant and equipment

 

30

 

 

19

 

 

44

 

Share of result in associated undertakings

 

(1,443

)

 

(1,413

)

 

(2,728

)

Impairment losses

 

 

 

8,100

 

 

11,600

 

Other income and expense

 

15

 

 

(1

)

 

(502

)

Non-operating income and expense

 

(250

)

 

(10

)

 

(4

)

Investment income

 

(382

)

 

(425

)

 

(789

)

Financing costs

 

1,280

 

 

805

 

 

1,604

 

Income tax expense

 

1,233

 

 

1,088

 

 

2,293

 

Loss on disposal of discontinued operations

 

 

 

747

 

 

747

 

Increase in inventory

 

(106

)

 

(92

)

 

(23

)

Increase in trade and other receivables

 

(288

)

 

(868

)

 

(753

)

Increase in trade and other payables

 

122

 

 

744

 

 

1,175

 

 

 

 

 

 

 

 

 

 

 

Cash generated by operations

 

6,347

 

 

6,192

 

 

12,571

 

 

 

 

 

 

 

 

 

 

 

Tax paid

 

(1,487

)

 

(1,217

)

 

(2,243

)

 

 

 

 

 

 

 

 

 

 

Net cash flows from operating activities

 

4,860

 

 

4,975

 

 

10,328

 

 

Note:

(1)   In the six months to 30 September 2006 and the year ended 31 March 2007, adjustments include amounts relating to continuing and discontinued operations.

 

7                 Transactions with equity shareholders

 

 

 

Called up
share
capital
£m

 

 

Share
premium
account
£m

 

 

Own
shares
held
£m

 

 

Additional
paid-in
capital
£m

 

 

Capital
redemption
reserve
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 April 2006

 

4,165

 

 

52,444

 

 

(8,198

)

 

100,152

 

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of new shares

 

1

 

 

25

 

 

 

 

(7

)

 

-

 

Own shares released on vesting of share awards

 

 

 

 

 

45

 

 

 

 

-

 

Share consolidation

 

 

 

(9,026

)

 

 

 

 

 

 

B share capital redemption

 

 

 

 

 

 

 

 

 

5,707

 

B share preference dividend

 

 

 

 

 

 

 

 

 

3,286

 

Share-based payment charge, inclusive of
tax charge of £3 million

 

-

 

 

-

 

 

-

 

 

46

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2006

 

4,166

 

 

43,443

 

 

(8,153

)

 

100,191

 

 

9,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of new shares

 

6

 

 

129

 

 

 

 

(37

)

 

-

 

Own shares released on vesting of share awards

 

 

 

 

 

106

 

 

 

 

-

 

B share capital redemption

 

 

 

 

 

 

 

 

 

6

 

B share preference dividend

 

 

 

 

 

 

 

 

 

5

 

Share-based payment charge, inclusive of
tax charge of £13 million

 

 

 

 

 

 

 

31

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March 2007

 

4,172

 

 

43,572

 

 

(8,047

)

 

100,185

 

 

9,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of new shares

 

8

 

 

206

 

 

 

 

(114

)

 

 

Own shares released on vesting of share awards

 

 

 

4

 

 

110

 

 

(4

)

 

 

B share capital redemption

 

 

 

 

 

 

 

 

 

4

 

Share-based payment charge, inclusive of tax credit of £10 million

 

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2007

 

4,180

 

 

43,782

 

 

(7,937

)

 

100,131

 

 

9,136

 

 

28


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

8                 Movements in accumulated other recognised income and expense

 

 

 

Translation
reserve
£m

 

 

Pensions
reserve
£m

 

 

Available-for-
sale
investments
reserve
£m

 

 

Asset
revaluation
surplus
£m

 

 

Total
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 April 2006

 

3,043

 

 

(109

)

 

1,044

 

 

112

 

 

4,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Losses)/gains arising in the period

 

(3,279

)

 

26

 

 

641

 

 

 

 

(2,612

)

Transfer to the income statement on disposal

 

794

 

 

 

 

 

 

 

 

794

 

Tax effect

 

 

 

(8

)

 

 

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2006

 

558

 

 

(91

)

 

1,685

 

 

112

 

 

2,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Losses)/gains arising in the period

 

(523

)

 

39

 

 

1,467

 

 

 

 

983

 

Transfer to the income statement on disposal

 

44

 

 

 

 

 

 

 

 

 

44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax effect

 

22

 

 

(7

)

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March 2007

 

101

 

 

(59

)

 

3,152

 

 

112

 

 

3,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains arising in the period

 

779

 

 

75

 

 

2,568

 

 

-

 

 

3,422

 

Transfer to the income statement on disposal

 

(7

)

 

-

 

 

(570

)

 

-

 

 

(577

)

Tax effect

 

(17

)

 

(22

)

 

-

 

 

-

 

 

(39

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2007

 

856

 

 

(6

)

 

5,150

 

 

112

 

 

6,112

 

 

9                 Movements in retained losses

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

1 April

 

(85,253

)

 

(67,356

)

 

(67,356

)

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

 

3,290

 

 

(5,105

)

 

(5,426

)

Dividends

 

(2,331

)

 

(2,328

)

 

(3,566

)

Expiration of equity put right

 

-

 

 

142

 

 

142

 

Loss on issue of treasury shares

 

(52

)

 

(16

)

 

(43

)

B share capital redemption

 

(4

)

 

(5,707

)

 

(5,713

)

B share preference dividend

 

-

 

 

(3,286

)

 

(3,291

)

Grant of equity put right

 

333

 

 

-

 

 

-

 

Other movements

 

18

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

30 September / 31 March

 

(83,999

)

 

(83,656

)

 

(85,253

)

 

29


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

10          Acquisitions

 

Hutchison Essar Limited (since renamed Vodafone Essar Limited)

 

On 8 May 2007, the Group completed the acquisition of 100% of CGP Investments (Holdings) Limited (“CGP”), a company with interests in Vodafone Essar Limited (“Vodafone Essar”), from Hutchison Telecommunications International Limited for cash consideration of US$10.9 billion (£5.5bn). Following this transaction, the Group has a controlling financial interest in Vodafone Essar. The initial purchase price allocation has been determined to be provisional pending the completion of the final valuation of the fair value of assets acquired. The transaction has been accounted for using the purchase method of accounting.

 

 

 

Book value
£m

 

 

Fair value
adjustments
£m

 

 

Fair value
£m

 

Net assets acquired:

 

 

 

 

 

 

 

 

 

Identifiable intangible assets

 

121

 

 

3,068

 

 

3,189

(1)

Property, plant and equipment

 

1,215

 

 

(145

)

 

1,070

 

Other investments

 

199

 

 

-

 

 

199

 

Deferred tax assets

 

33

 

 

60

 

 

93

 

Inventory

 

5

 

 

(2

)

 

3

 

Trade and other receivables

 

285

 

 

15

 

 

300

 

Cash and cash equivalents

 

51

 

 

-

 

 

51

 

Deferred tax liabilities

 

-

 

 

(547

)

 

(547

)

Short and long term borrowings(2)

 

(1,466

)

 

-

 

 

(1,466

)

Trade and other payables

 

(546

)

 

(19

)

 

(565

)

 

 

 

 

 

 

 

 

 

 

 

 

(103

)

 

2,430

 

 

2,327

 

 

 

 

 

 

 

 

 

 

 

Minority interests

 

 

 

 

 

 

 

(958

)

Written put options over minority interests(2)

 

 

 

 

 

 

 

217

 

Goodwill

 

 

 

 

 

 

 

3,893

 

 

 

 

 

 

 

 

 

 

 

Total consideration (including £24 million of directly attributable costs)(3)

 

 

 

 

 

 

 

5,479

 

 

Notes:

(1)   Identifiable intangible assets of £3,189 million consist of licences and spectrum fees of £3,045 million and other intangible assets of £144 million.

(2)   Included within short term and long term borrowings are liabilities of £217 million related to written put options over minority interests

(3)   After deducting cash and cash equivalents acquired of £51 million, the net cash outflow on the acquisition was £5,428 million.

 

The goodwill is attributable to the expected profitability of the acquired business and the synergies expected to arise after the Group's acquisition of CGP. The results of CGP have been consolidated in the income statement from the acquisition date, 8 May 2007. The weighted average life of licence and spectrum fees was 10 years, the weighted average life of other intangible assets was two years and the weighted average life of total intangible assets was nine years.

 

The following unaudited pro forma summary presents the Group as if CGP had been acquired on 1 April 2007 or 1 April 2006, respectively. The pro forma amounts include the results of CGP, amortisation of the acquired intangible assets recognised on acquisition and the interest expenses on debt issued as a result of the acquisition. The pro forma amounts do not include any possible synergies from mergers and acquisitions. The pro forma information is provided for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies.

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

17,115

 

 

16,126

 

 

32,274

 

Profit/(loss) for the period

 

3,289

 

 

(5,202

)

 

(5,628

)

Profit/(loss) attributable to equity shareholders

 

3,259

 

 

(5,240

)

 

(5,700

)

Basic earnings/(loss) per share

 

6.16p

 

 

(9.11p

)

 

(10.34p

)

Diluted earnings/(loss) per share

 

6.14p

 

 

(9.11p

)

 

(10.34p

)

 

Other

 

The Group completed a number of smaller acquisitions resulting in a cash outflow, net of cash acquired, of £47 million.

 

11          Disposals

 

Japan – Vodafone K.K.

 

On 17 March 2006, the Group announced an agreement to sell its 97.7% holding in Vodafone K.K. to SoftBank. The transaction completed on 27 April 2006 with the Group receiving cash of approximately ¥1.42 trillion (£6.9 billion) including the repayment of intercompany debt of ¥0.16 trillion (£0.8 billion). In addition, the Group received non-cash consideration with a fair value of approximately ¥0.23 trillion (£1.1 billion), comprised of preferred equity and a subordinated loan. SoftBank also assumed debt of approximately ¥0.13 trillion (£0.6 billion). Vodafone K.K. represented a separate geographical area of operation and, on this basis, Vodafone K.K. was treated as a discontinued operation in Vodafone Group Plc’s Annual Reports for the years ended 31 March 2007 and 2006.

 

30


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

11      Disposals (continued)

 

A loss of £0.7 billion arose on the disposal, being the proceeds less the carrying amount of Vodafone K.K.’s net assets and attributable goodwill together with cumulative exchange differences transferred to the income statement on disposal.

 

Segment information for discontinued operations

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment revenue

 

-

 

 

520

 

 

520

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

-

 

 

118

 

 

118

 

 

 

Cash flows from discontinued operations

 

 

 

Six months to

30 September

2007

£m

 

 

Six months to

30 September

2006

£m

 

 

Year ended

31 March

2007

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from operating activities

 

-

 

 

135

 

 

135

 

 

Net cash flows from investing activities

 

-

 

 

(266

)

 

(266

)

 

Net cash flows from financing activities

 

-

 

 

(29

)

 

(29

)

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows

 

-

 

 

(160

)

 

(160

)

 

Cash and cash equivalents at the beginning of the period

 

-

 

 

161

 

 

161

 

 

Exchange loss on cash and cash equivalents

 

-

 

 

(1

)

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

-

 

 

-

 

 

-

 

 

 

India – Bharti Airtel Limited

 

In conjunction with the acquisition of Vodafone Essar, the Group entered into a share sale and purchase agreement with a Bharti group company regarding the Group’s 5.60% direct shareholding in Bharti Airtel Limited. On 9 May 2007, a Bharti group company irrevocably agreed to purchase this shareholding. During the six months ended 30 September 2007, the Group received £654 million in cash consideration for 4.99% of such shareholding, with the Group’s remaining 0.61% direct shareholding to be transferred by November 2008. The gain on disposal amounted to £250 million.

 

12          Related party transactions

 

Transactions between the Company and its subsidiaries, joint ventures and associates represent related party transactions. Transactions with subsidiaries have been eliminated on consolidation. Transactions between the Company and its joint ventures are not material to the extent that they have not been eliminated through proportionate consolidation. Except as disclosed below, no material related party transactions have been entered into, during the period, which might reasonably affect any decisions made by users of these Condensed Consolidated Financial Statements.

 

 

 

Six months to
30 September
2007
£m

 

 

Six months to
30 September
2006
£m

 

 

Year ended
31 March
2007
£m

 

 

Transactions with associated undertakings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Sales of goods and services

 

113

 

 

160

 

 

245

 

 

 

 

 

 

 

 

 

 

 

 

 

- Purchase of goods and services

 

130

 

 

163

 

 

295

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts owed to joint ventures included within
short term borrowings

 

1,021

 

 

575

 

 

842

 

 

 

In the six months ended 30 September 2007, the Group made contributions to defined benefit pension schemes of £31 million (six months ended 30 September 2006: £30 million, year ended 31 March 2007: £55 million).

 

Compensation paid to the Company’s Board of directors and members of the Executive Committee will be disclosed in the Group’s Annual Report for the year ending 31 March 2008.

 

31


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

13          Other matters

 

Contingent liabilities

 

There have been no material changes to the Group’s contingent liabilities relating to performance bonds and credit guarantees in the six months ended 30 September 2007. There have been no changes to any legal or arbitration proceedings involving the Group in the six months ended 30 September 2007 which are expected to have, or have had, a material effect on the financial position or profitability of the Group.

 

Companies in the Group have received notices from the Indian tax authorities alleging possible liability for failure to deduct withholding tax from consideration paid to Hutchison Telecommunications International Limited (“HTIL”) in respect of HTIL’s gain on its disposal to Vodafone of companies with interests in Vodafone Essar. Initial hearings have been held before the Indian Courts. At this stage no accurate quantification of any cost which may arise can be made but Vodafone believes that neither it nor any other member of the Group is liable for such withholding tax and intends to defend this position vigorously.

 

Secured borrowings

 

The Group has assumed £773 million of secured debt as a result of the acquisition of Vodafone Essar. There are no other material changes to liens or encumbrances on the Group’s assets to those disclosed on page 123 of the Group’s Annual Report for the year ended 31 March 2007.

 

Capital commitments

 

The Group’s capital commitments have increased to £1,672 million at 30 September 2007 (31 March 2007: £1,149 million) primarily due to network infrastructure purchase commitments in India.

 

Purchase commitments

 

The Group’s purchase commitments have increased to £2,332 million at 30 September 2007 (31 March 2007: £1,281 million).

 

Seasonality or cyclicality of interim operations

 

The Group’s financial results have not, historically, been subject to significant seasonal trends.

 

Events after the balance sheet date

 

On 6 October 2007, the Group announced that it had agreed to acquire Tele2 Italia SpA (“Tele2 Italy”) and Tele2 Telecommunication Services SLU (“Tele2 Spain”) from Tele2 AB Group for cash consideration of €775 million (£537 million) on a debt free basis.

 

Tele2 Italy and Tele2 Spain provide nationwide fixed line telecommunications and broadband services. This transaction will enable the Group to benefit from the high growth broadband markets in two of Vodafone’s key European markets.

 

The transaction is expected to be completed by the end of the calendar year, following the receipt of relevant regulatory approval.

 

Issuances and repayment of debt

 

See “Cash flows and funding” on pages 17 to 18 for details of issuances and repayment of debt.

 

14          Summary of differences between IFRS and US GAAP

 

Change in accounting principle – income taxes

 

On 1 April 2007, the Group adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of SFAS 109” (“FIN 48”). FIN 48 has no impact on the IFRS accounting for tax uncertainties, nor on the Group’s expectations for eventual cash settlements, as the latter are not based on accounting principles.

 

FIN 48 provides guidance on the amounts to be reported in financial statements in respect of uncertain tax positions, which may be different from the amounts included in tax returns. Measurement of uncertain tax positions under FIN 48 is based on a cumulative probability that takes into consideration all possible resolutions. Under IFRS, the Group measures its liability for tax uncertainties based on management’s best estimate of the most likely resolution.

 

Upon adoption of FIN 48, the Group recognised a decrease of £324 million in its US Generally Accepted Accounting Principles (“US GAAP”) provisions for uncertain tax positions, including an increase of £4 million in respect of entities accounted for using the equity method and a decrease of £99 million in the associated interest accrual. These have been accounted as adjustments to US GAAP retained earnings.

 

At 1 April 2007, the Group's US GAAP unrecognised tax benefits amounted to £6,291 million in respect of a number of uncertain tax positions, including the ongoing Controlled Foreign Company (“CFC”) enquiry in the UK. Additionally, £13,592 million was unrecognised for the uncertain tax effect of losses in respect of a write down in the value of investments in Germany. These uncertainties are described further on pages 105 to 106 of the Group’s Annual Report for the year ended 31 March 2007. If these benefits were recognised, £4,779 million (plus £13,592 million for the German write down) would have a favourable effect on the US GAAP effective tax rate, while the remaining amounts would impact US GAAP equity or goodwill or are related to temporary differences for which offsetting deductions are available.

 

32


 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

 

14                        Summary of differences between IFRS and US GAAP (continued)

 

The Group is subject to ongoing examination by the tax authorities of the various jurisdictions in which it operates and it is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. At 1 April 2007, it was considered reasonably possible that the Group’s US GAAP balance for uncertain tax positions could decrease by £400 million to £625 million within the current financial year as a result of the potential resolution of historic issues with the relevant tax authorities or expiry of statutes of limitations. Other factors that could be reasonably expected to affect the amount of provisions this year and in future years are the emergence of new uncertain tax positions and new information regarding existing tax positions.

 

Since the date of adoption, the German tax rate has decreased, causing the unrecognised tax benefit of £13,592 million at 1 April 2007 in respect of the German write down to decrease by approximately £3 billion.

 

The following tax years remain open pursuant to the statute of limitations in Vodafone's major jurisdictions. It is not possible to conclude when settlement will be reached on these open years, nor the likely settlement amount:

 

UK

2000 onwards

Germany

1999 onwards

Italy

2002 onwards

Spain

2004 onwards

USA (federal)

2003 onwards

 

It is the Group's policy to recognise interest accrued in respect of unrecognised tax benefits within interest expense and any accrued penalties within the tax expense. As at the date of adoption of FIN 48 the Group held US GAAP accruals for interest of £1,098 million.

 

Reconciliations to US GAAP

 

The Condensed Consolidated Financial Statements have been prepared in accordance with IFRS, which differ in certain significant respects from US GAAP. The following table summarises the effects of the adjustments from IFRS to US GAAP. Further details on the nature of the adjustments can be found on pages 138 to 142 in the Group’s Annual Report for the year ended 31 March 2007.

 

 

 

30 September
2007
£m

 

 

30 September
2006
£m

 

 

31 March
2007
£m

 

 

Revenue (IFRS)

 

16,994

 

 

15,594

 

 

31,104

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to derive US GAAP revenue:

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

-

 

 

(31

)

 

(31

)

 

Basis of consolidation

 

(3,041

)

 

(3,139

)

 

(6,232

)

 

Connection revenue

 

-

 

 

170

 

 

518

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue (US GAAP)

 

13,953

 

 

12,594

 

 

25,359

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period (IFRS)

 

3,327

 

 

(5,039

)

 

(5,297

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to derive US GAAP net loss:

 

 

 

 

 

 

 

 

 

 

Investments accounted for under the equity method

 

(1,980

)

 

(733

)

 

680

 

 

Connection revenue and costs

 

-

 

 

2

 

 

5

 

 

Goodwill and other intangible assets

 

(6,543

)

 

(6,681

)

 

(13,352

)

 

Impairment losses

 

-

 

 

6,700

 

 

6,700

 

 

Amortisation of capitalised interest

 

(56

)

 

(54

)

 

(107

)

 

Interest capitalised during the period

 

28

 

 

23

 

 

52

 

 

Other

 

30

 

 

670

 

 

1,261

 

 

Income taxes

 

4,756

 

 

2,650

 

 

5,862

 

 

Minority interests

 

(37

)

 

(66

)

 

(129

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (US GAAP)

 

(475

)

 

(2,528

)

 

(4,325

)

 

 

 

 

 

 

 

 

 

 

 

 

Total equity (IFRS)

 

70,128

 

 

67,573

 

 

67,293

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to derive US GAAP shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

Investments accounted for under the equity method

 

(3,184

)

 

(2,883

)

 

(1,070

)

 

Connection revenue and costs

 

 

 

(3

)

 

 

 

Goodwill and other intangible assets

 

19,492

 

 

32,232

 

 

25,515

 

 

Capitalised interest

 

1,334

 

 

1,382

 

 

1,342

 

 

Other

 

(1,615

)

 

60

 

 

86

 

 

Income taxes

 

(16,920

)

 

(25,382

)

 

(21,859

)

 

Minority interests

 

1,277

 

 

(197

)

 

(226

)

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity (US GAAP)

 

70,512

 

 

72,782

 

 

71,081

 

 

 

33


 

INDEPENDENT REVIEW REPORT BY DELOITTE & TOUCHE LLP TO VODAFONE GROUP PLC

 

Introduction

 

We have been engaged by the Company to review the Condensed Consolidated Financial Statements in the half-yearly financial report for the six months ended 30 September 2007 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the consolidated cash flow statement and related notes 1 to 14. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed Consolidated Financial Statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority.

 

The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. As disclosed in note 1, the Condensed Consolidated Financial Statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” (“IAS 34”) as adopted by the European Union and as issued by the International Accounting Standards Board.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the Condensed Consolidated Financial Statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

IFRS conclusions

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying Condensed Consolidated Financial Statements are not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union and as issued by the International Accounting Standards Board, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

US GAAP

 

IFRS, both as adopted by the European Union and as issued by the International Accounting Standards Board, vary in significant respects from the accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 14 to the Condensed Consolidated Financial Statements.

 

Deloitte & Touche LLP

 

Chartered Accountants

 

London, United Kingdom

 

13 November 2007

 

34


 

OTHER INFORMATION

 

1)                       Copies of this document are available from the Company’s registered office:

 

Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN

 

2)                       This half-yearly financial report will be available on the Vodafone Group Plc website, www.vodafone.com, from 13 November 2007.

 

 

For further information:

 

Vodafone Group Plc

 

Investor Relations

Media Relations

Telephone: +44 (0) 1635 664447

Telephone: +44 (0) 1635 664444

 

 

High resolution photographs are available to the media free of charge at www.fovea.tv.

 

 

Vodafone, Vodafone Mobile Connect, Vodafone Mobile Connect USB Modem, Vodafone Mobile Connect Card with 3G broadband, Vodafone Mobile Connect 3G/GPRS data card, Vodacom, ihug, Vodafone at Home, Vodafone Office, Vodafone live! and Vodafone Passport are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners.

 

 

DEFINITION OF TERMS

 

 

Term

Definition

 

 

Change at constant exchange rates

Change calculated by restating the prior period’s results as if they had been generated at the current period’s exchange rates.

 

 

For definitions of other terms please refer to page 159 of the Group’s Annual Report for the year ended 31 March 2007.

 

 

 

 

 

 

 

 

Copyright © Vodafone Group 2007

 

35


 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives.

 

In particular, such forward-looking statements include statements with respect to Vodafone’s expectations as to launch and roll out dates for products, services or technologies offered by Vodafone; intentions regarding the development of products and services introduced by Vodafone or by Vodafone in conjunction with initiatives with third parties; the ability to integrate all operations throughout the Group; the development and impact of new mobile technology; anticipated benefits to the Group from core cost reduction programmes, outsourcing, supply chain management and IT operations initiatives; growth in customers and usage, including improvements in customer mix; the Group’s expectations for revenue, operating profit, depreciation and amortisation charges, capitalised fixed asset additions, free cash flow, cash payments for tax and associated interest and effective tax rate contained within the outlook statement on page 5 of this document and under improved outlook on page 1 of this document, and expectations for the Group’s future performance generally, including average revenue per user, costs, capital expenditures, operating expenditures and margins and the contribution to the Group’s revenue of data services, broadband services, fixed location pricing and mobile advertising; the rate of dividend growth by the Group or its existing investments; expectations regarding the Group’s access to adequate funding for its working capital requirements; expected effective tax rates and expected tax payments; the ability to realise synergies through cost savings, revenue generating services, benchmarking and operational experience; future acquisitions, including increases in ownership in existing investments, the timely completion of pending acquisition transactions and pending offers for investments; future disposals; the management of the Group’s portfolio; mobile penetration and coverage rates; the impact of regulatory and legal proceedings involving Vodafone and of scheduled or potential regulatory changes; expectations with respect to long term shareholder value growth; Vodafone’s ability to be the mobile market leader, overall market trends and other trend projections.

 

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, including Mobile Virtual Network Operators, which could require changes to the Group’s pricing models, lead to customer churn and make it more difficult to acquire new customers, and reduce profitability; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers; the possibility that new products and services will not be commercially accepted or perform according to expectations or that vendors’ performance in marketing these technologies will not meet the Group’s requirements; the Group’s ability to win 3G licence allocations; the Group’s ability to realise expected synergies and benefits associated with 3G technologies; a lower than expected impact of new or existing products, services or technologies on the Group’s future revenue, cost structure and capital expenditure outlays; the ability of the Group to harmonise mobile platforms and delays, impediments or other problems associated with the roll out and scope of and other new or existing products, services or technologies in new markets; the ability of the Group to offer new services and secure the timely delivery of high quality, reliable GPRS and 3G handsets, network equipment and other key products from suppliers; the Group’s ability to develop competitive data content and services that will attract new customers and increase average usage; future revenue contributions of both voice and non-voice services; greater than anticipated prices of new mobile handsets; changes in the costs to the Group of or the rates the Group may charge for terminations and roaming minutes; the Group’s ability to achieve meaningful cost savings and revenue improvements as a result of its cost reduction programmes and outsourcing initiatives; the ability to realise benefits from entering into partnerships for developing data and internet services and entering into service franchising and brand licensing; the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on the Group’s financial performance; developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board of Directors takes into account in determining the level of dividends; any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future acquisitions or dispositions and the integration of acquired companies in the Group’s existing operations; the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or with other negative implications; changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the EU regulating rates the Group is permitted to charge; the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; the possibility that new marketing or usage stimulation campaigns or efforts and customer retention schemes are not an effective expenditure; the possibility that the Group’s integration efforts do not reduce the time to market for new products or improve the Group’s cost position; loss of suppliers or disruption of supply chains; the Group’s ability to satisfy working capital requirements through borrowing in capital markets, bank facilities and operations; changes in exchange rates, including particularly the exchange rate of pounds sterling to the euro and the US dollar; changes in statutory tax rates and profit mix which would impact the weighted average tax rate; changes in tax legislation in the jurisdictions in which the Group operates; and final resolution of open issues which might impact the effective tax rate; timing of tax payments relating to the resolution of open issues.

 

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, Seasonality and Outlook – Risk Factors” in Vodafone Group Plc’s Annual Report for the year ended 31 March 2007. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements.

 

36


 

USE OF NON-GAAP FINANCIAL INFORMATION

 

In presenting and discussing the Group’s reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with IFRS but this information is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation as alternatives to the equivalent GAAP measure.

 

A summary of certain non-GAAP measures included in this results announcement, together with details where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below.

 

 

 

 

Non-GAAP measure

 

Equivalent GAAP measure

 

Location in this results announcement of
reconciliation and further information

EBITDA

 

Operating profit/(loss)

 

Group Results on page 6

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

Operating profit/(loss)

 

Group Results on page 6

 

 

 

 

 

Adjusted profit before tax

 

Profit/(loss) before tax

 

Taxation on page 8

 

 

 

 

 

Adjusted profit from continuing operations attributable to equity shareholders

 

Profit/(loss) from continuing operations attributable to equity shareholders

 

Earnings/(loss) per share on page 8

 

 

 

 

 

Adjusted earnings per share

 

Basic earnings/(loss) per share

 

Earnings/(loss) per share on page 8

 

 

 

 

 

Operating free cash flow

 

Net cash flows from operating activities

 

Cash flows and funding beginning on page 17

 

 

 

 

 

Free cash flow

 

Net cash flows from operating activities

 

Cash flows and funding beginning on page 17

 

 

 

 

 

Net debt

 

Borrowings

 

Cash flows and funding beginning on page 17

 

 

 

 

 

Adjusted effective tax rate

 

Income tax expense as a percentage of profit/(loss) before taxation

 

Taxation on page 8

 

37


 

ADDITIONAL INVESTOR INFORMATION AND KEY PERFORMANCE INDICATORS

REGIONAL ANALYSIS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER

 

 

 

Revenue

 

 

EBITDA

 

 

Adjusted operating profit/(loss)

 

 

Capitalised fixed asset additions

 

 

Operating free cash flow

 

 

 

 

2007

 

2006

 

 

2007

 

2006

 

 

2007

 

2006

 

 

2007

 

2006

 

 

2007

 

2006

 

 

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£m

 

£m

 

 

EUROPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

2,650

 

2,827

 

 

1,150

 

1,263

 

 

644

 

724

 

 

167

 

198

 

 

1,100

 

990

 

 

Italy

 

2,097

 

2,174

 

 

1,036

 

1,128

 

 

776

 

839

 

 

145

 

184

 

 

837

 

878

 

 

Spain

 

2,439

 

2,268

 

 

949

 

813

 

 

715

 

585

 

 

194

 

213

 

 

595

 

432

 

 

UK

 

2,717

 

2,549

 

 

734

 

785

 

 

243

 

318

 

 

216

 

305

 

 

430

 

393

 

 

Arcor

 

768

 

706

 

 

138

 

126

 

 

92

 

83

 

 

94

 

76

 

 

1

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greece

 

599

 

636

 

 

210

 

250

 

 

130

 

167

 

 

66

 

74

 

 

159

 

160

 

 

Netherlands

 

628

 

600

 

 

214

 

176

 

 

141

 

102

 

 

41

 

50

 

 

139

 

136

 

 

Portugal

 

502

 

466

 

 

186

 

168

 

 

122

 

107

 

 

42

 

44

 

 

87

 

101

 

 

Other(1)

 

514

 

514

 

 

217

 

225

 

 

406

 

436

 

 

30

 

55

 

 

159

 

146

 

 

 

 

2,243

 

2,216

 

 

827

 

819

 

 

799

 

812

 

 

179

 

223

 

 

544

 

543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intra-region revenue

 

(245

)

(256

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Europe

 

12,669

 

12,484

 

 

4,834

 

4,934

 

 

3,269

 

3,361

 

 

995

 

1,199

 

 

3,507

 

3,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMAPA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Romania

 

405

 

355

 

 

195

 

175

 

 

86

 

68

 

 

57

 

82

 

 

149

 

121

 

 

Turkey(2)

 

558

 

283

 

 

102

 

65

 

 

18

 

(18

)

 

97

 

36

 

 

(73

)

134

 

 

Other

 

561

 

524

 

 

181

 

164

 

 

67

 

68

 

 

70

 

95

 

 

140

 

84

 

 

 

 

1,524

 

1,162

 

 

478

 

404

 

 

171

 

118

 

 

224

 

213

 

 

216

 

339

 

 

Middle East, Africa and Asia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Egypt

 

443

 

355

 

 

223

 

198

 

 

158

 

155

 

 

114

 

66

 

 

146

 

137

 

 

India(3)

 

723

 

 

 

246

 

 

 

(18

)

 

 

389

 

 

 

20

 

 

 

Vodacom

 

768

 

727

 

 

269

 

261

 

 

164

 

152

 

 

62

 

92

 

 

125

 

139

 

 

Other(4)

 

85

 

165

 

 

38

 

72

 

 

26

 

32

 

 

37

 

83

 

 

9

 

15

 

 

 

 

2,019

 

1,247

 

 

776

 

531

 

 

330

 

339

 

 

602

 

241

 

 

300

 

291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pacific

 

758

 

666

 

 

174

 

165

 

 

63

 

66

 

 

91

 

104

 

 

29

 

61

 

 

Associates - US

 

 

 

 

 

 

 

1,180

 

1,015

 

 

 

 

 

 

 

 

Associates - other

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

 

 

Total EMAPA

 

4,301

 

3,075

 

 

1,428

 

1,100

 

 

1,744

 

1,644

 

 

917

 

558

 

 

545

 

691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common functions

 

80

 

86

 

 

303

 

208

 

 

210

 

136

 

 

70

 

67

 

 

86

 

110

 

 

Inter-region revenue

 

(56

)

(51

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Group

 

16,994

 

15,594

 

 

6,565

 

6,242

 

 

5,223

 

5,141

 

 

1,982

 

1,824

 

 

4,138

 

4,021

 

 

 

Notes:

(1)

Includes elimination of £5 million (2006: £5 million) of intercompany revenue between operating companies within the Other Europe segment.

(2)

Presents the results from 24 May 2006, being the acquisition date.

(3)

Presents the results of Vodafone Essar from 8 May 2007, being the acquisition date.

(4)

Includes the results of Bharti Airtel.

 

See page 35 for definition of terms and page 37 for use of non-GAAP financial information.

 

38


 

REGIONAL RESULTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER

 

Group

 

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

 

 

30 June
2007

 

30 September
2007

 

 

30 June
2006

 

30 September
2006

 

 

 

 

30 June
% change

 

 

 

 

30 September
% change

 

 

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£

 

Organic

 

 

£

 

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

8,253

 

8,741

 

 

7,679

 

7,915

 

 

7.5

 

4.0

 

 

10.4

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

5,904

 

6,256

 

 

5,574

 

5,743

 

 

5.9

 

1.1

 

 

8.9

 

1.1

 

 

Messaging revenue

 

950

 

998

 

 

851

 

935

 

 

11.6

 

9.5

 

 

6.7

 

7.5

 

 

Data revenue

 

452

 

515

 

 

334

 

316

 

 

35.3

 

32.2

 

 

63.0

 

58.5

 

 

Fixed line revenue(1)

 

402

 

400

 

 

383

 

387

 

 

5.0

 

11.5

 

 

3.4

 

8.3

 

 

Other service revenue

 

5

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

7,713

 

8,174

 

 

7,142

 

7,381

 

 

8.0

 

4.2

 

 

10.7

 

4.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

 

 

30 June
2007

 

30 September
2007

 

 

30 June
2006

 

30 September
2006

 

 

 

 

30 June
% change

 

 

 

 

30 September
% change

 

 

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£

 

Organic

 

 

£

 

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

6,219

 

6,450

 

 

6,220

 

6,264

 

 

 

1.1

 

 

3.0

 

3.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

4,292

 

4,412

 

 

4,445

 

4,475

 

 

(3.4

)

(2.4

)

 

(1.4

)

(1.4

)

 

Messaging revenue

 

764

 

811

 

 

711

 

747

 

 

7.5

 

8.5

 

 

8.6

 

8.7

 

 

Data revenue

 

398

 

445

 

 

312

 

291

 

 

27.6

 

28.9

 

 

52.9

 

53.0

 

 

Fixed line revenue(1)

 

391

 

389

 

 

364

 

367

 

 

7.4

 

8.7

 

 

6.0

 

6.4

 

 

Other service revenue

 

5

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

5,850

 

6,063

 

 

5,832

 

5,880

 

 

0.3

 

1.4

 

 

3.1

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

 

 

30 June
2007

 

30 September
2007

 

 

30 June
2006

 

30 September
2006

 

 

 

 

30 June
% change

 

 

 

 

30 September
% change

 

 

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£

 

Organic

 

 

£

 

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

1,238

 

1,277

 

 

1,339

 

1,351

 

 

(7.5

)

(6.3

)

 

(5.5

)

(5.5

)

 

Italy

 

1,005

 

1,020

 

 

1,051

 

1,045

 

 

(4.4

)

(3.1

)

 

(2.4

)

(2.3

)

 

Spain

 

1,110

 

1,141

 

 

1,001

 

1,049

 

 

10.9

 

12.5

 

 

8.8

 

8.9

 

 

UK

 

1,209

 

1,294

 

 

1,153

 

1,192

 

 

4.9

 

4.9

 

 

8.6

 

8.5

 

 

Arcor

 

375

 

383

 

 

346

 

351

 

 

8.4

 

9.9

 

 

9.1

 

9.3

 

 

Other

 

1,028

 

1,076

 

 

1,036

 

1,054

 

 

(0.8

)

0.6

 

 

2.1

 

2.1

 

 

Eliminations

 

(115

)

(128

)

 

(94

)

(162

)

 

 

 

 

 

 

 

 

 

 

 

 

 

5,850

 

6,063

 

 

5,832

 

5,880

 

 

0.3

 

1.4

 

 

3.1

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMAPA

 

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

 

 

30 June
2007

 

30 September
2007

 

 

30 June
2006

 

30 September
2006

 

 

 

 

30 June
% change

 

 

 

 

30 September
% change

 

 

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£

 

Organic

 

 

£

 

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

2,021

 

2,280

 

 

1,436

 

1,639

 

 

40.7

 

18.7

 

 

39.1

 

13.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Voice revenue(1)

 

1,631

 

1,868

 

 

1,143

 

1,288

 

 

42.7

 

16.4

 

 

45.0

 

11.7

 

 

Messaging revenue

 

189

 

188

 

 

142

 

189

 

 

33.1

 

15.6

 

 

(0.5

)

1.3

 

 

Data revenue

 

55

 

72

 

 

25

 

31

 

 

120.0

 

64.5

 

 

132.3

 

101.7

 

 

Fixed line revenue(1)

 

11

 

11

 

 

19

 

20

 

 

(42.1

)

740.7

 

 

(45.0

)

232.3

 

 

Service revenue

 

1,886

 

2,139

 

 

1,329

 

1,528

 

 

41.9

 

18.2

 

 

40.0

 

13.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

Quarter ended

 

 

 

 

30 June
2007

 

30 September
2007

 

 

30 June
2006

 

30 September
2006

 

 

 

 

30 June
% change

 

 

 

 

30 September
% change

 

 

 

 

£m

 

£m

 

 

£m

 

£m

 

 

£

 

Organic

 

 

£

 

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

714

 

759

 

 

477

 

646

 

 

49.7

 

12.9

 

 

17.5

 

9.2

 

 

Middle East, Africa & Asia

 

837

 

1,044

 

 

559

 

579

 

 

49.7

 

28.9

 

 

80.3

 

21.6

 

 

Pacific

 

335

 

336

 

 

293

 

303

 

 

14.3

 

9.5

 

 

10.9

 

5.5

 

 

 

 

1,886

 

2,139

 

 

1,329

 

1,528

 

 

41.9

 

18.2

 

 

40.0

 

13.2

 

 

 

Note:

(1)          Revenue relating to fixed line activities provided by mobile operators, previously classified within voice revenue, is now presented as fixed line revenue, together with revenue from fixed line operators and DSL. All prior periods have been adjusted accordingly.

 

39


 

RECONCILIATION OF ADJUSTED EARNINGS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER

 

 

 

Reported
£m

 

Adjustments
£m

 

Adjusted
£m

 

 

30 September 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

5,208

 

15

(1)

5,223

 

 

 

 

 

 

 

 

 

 

 

Non-operating income and expense

 

250

 

(250

)(2)

 

 

Investment income and financing costs

 

(898

)

376

(3)

(522

)

 

Profit before taxation

 

4,560

 

141

 

4,701

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(1,233

)

(34)

(4)

(1,267

)

 

Profit for the period

 

3,327

 

107

 

3,434

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

– Equity shareholders

 

3,290

 

107

 

3,397

 

 

– Minority interests

 

37

 

 

37

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share from continuing operations

 

6.22p

 

 

 

6.42p

 

 

 

Notes:

(1)

Consists of a £15 million adjustment relating to other income and expense.

(2)

Adjustment relates to the profit on disposal of a stake in Bharti Airtel.

(3)

Includes a £286 million adjustment in relation to the change in fair value of equity put rights and similar arrangements (see note 2 in investment income and financing costs on page 7), and a £90 million adjustment in relation to foreign exchange on certain intercompany balances, and on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006.

(4)

Represents a £15 million adjustment relating to the recognition of a pre-acquisition deferred tax asset and a £19 million adjustment relating to tax on the adjustments used to derive adjusted profit before tax.

 

 

 

Reported
£m

 

Adjustments
£m

 

Adjusted
£m

 

 

30 September 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss)/profit

 

(2,952

)

8,093

(1)

5,141

 

 

 

 

 

 

 

 

 

 

 

Non-operating income and expense

 

10

 

(10

)

 

 

Investment income and financing costs

 

(388

)

(29

)(2)

(417

)

 

(Loss)/profit before taxation

 

(3,330

)

8,054

 

4,724

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(1,218

)

(2

)(3)

(1,220

)

 

(Loss)/profit for the period from continuing operations

 

(4,548

)

8,052

 

3,504

 

 

 

 

 

 

 

 

 

 

 

Loss for the period from discontinued operations

 

(491

)

491

(4)

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the period

 

(5,039

)

8,543

 

3,504

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

– Equity shareholders

 

(5,105

)

8,546

 

3,441

 

 

– Minority interests

 

66

 

(3

)

63

 

 

 

 

 

 

 

 

 

 

 

Basic (loss)/earnings per share from continuing operations

 

(8.02

)p

 

 

5.98p

 

 

 

Notes:

(1)

Adjustments relate to impairment losses of £8,100 million (Germany: £6,700 million and Italy £1,400 million), less a £6 million adjustment related to the share of associated undertakings’ non-operating income and less a £1 million adjustment relating to other income and expense.

(2)

Includes a £21 million adjustment in relation to the change in fair value of equity put rights and similar arrangements as well as an £8 million adjustment in relation to foreign exchange on certain intercompany balances and on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank, which completed in April 2006.

(3)

Represents tax on the adjustments used to derive adjusted profit before tax.

(4)

Adjustment relates to the loss for the period attributable to Vodafone Japan which was disposed of in April 2006.

 

40


 

SUPPLEMENTARY CASH FLOW INFORMATION
FOR THE SIX MONTHS ENDED 30 SEPTEMBER

 

Operating free cash flow to net debt reconciliation

 

 

 

 

 

 

Six months to
30 September
2007

£m

 

Six months to
30 September
2006
£m

 

 

 

 

 

 

 

 

 

Operating free cash flow from continuing operations

 

4,138

 

4,021

 

 

Operating free cash flow from discontinued operations

 

-

 

(8

)

 

 

 

 

 

 

 

 

Taxation

 

(1,487

)

(1,217

)

 

Dividends received from associated undertakings

 

476

 

371

 

 

Dividends paid to minority shareholders in subsidiary undertakings

 

(66

)

(34

)

 

Dividends received from investments

 

72

 

57

 

 

Interest received

 

240

 

256

 

 

Interest paid

 

(712

)

(499

)

 

 

 

 

 

 

 

 

Free cash flow

 

2,661

 

2,947

 

 

 

 

 

 

 

 

 

Acquisitions and disposals(1)

 

(5,973

)

4,734

 

 

Written put options over minority interests

 

(2,431

)

523

 

 

Equity dividends paid

 

(2,334

)

(2,315

)

 

Purchase of treasury shares

 

-

 

(43

)

 

B share scheme

 

-

 

(9,027

)

 

Foreign exchange and other

 

(127

)

785

 

 

 

 

 

 

 

 

 

Net debt increase

 

(8,204

)

(2,396

)

 

Opening net debt

 

(15,049

)

(17,833

)

 

 

 

 

 

 

 

 

Closing net debt

 

(23,253

)

(20,229

)

 

 

Note:

(1)          Includes net cash and cash equivalents paid of £4,724 million and assumed debt of £1,249 million, but excludes liabilities related to written put options over minority interests, which are shown separately.

 

41


 

KEY PERFORMANCE INDICATORS - MOBILE TELECOMMUNICATIONS BUSINESSES

 

MOBILE CUSTOMERS(1) – 1 APRIL 2007 TO 30 SEPTEMBER 2007

 

 

QUARTER ENDED 30 JUNE 2007

 

 

QUARTER ENDED 30 SEPTEMBER 2007

 

COUNTRY (in thousands)

 

AT 1 APR
2007

 

NET ADDITIONS

 

OTHER MOVEMENTS(2)

 

AT 30 JUN 2007

 

NET ADDITIONS

 

OTHER MOVEMENTS(2)

 

AT 30 SEP 2007

 

PREPAID(3)

Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

30,818

 

800

 

-

 

31,618

 

923

 

-

 

32,541

 

55.0

%

Italy

 

21,034

 

729

 

-

 

21,763

 

644

 

-

 

22,407

 

91.7

%

Spain

 

14,893

 

286

 

-

 

15,179

 

294

 

-

 

15,473

 

43.4

%

UK

 

 

17,411

 

236

 

-

 

17,647

 

312

 

-

 

17,959

 

 

60.2

%

 

 

 

84,156

 

2,051

 

-

 

86,207

 

2,173

 

-

 

88,380

 

 

65.3

%

Other Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albania

 

 

956

 

48

 

-

 

1,004

 

71

 

-

 

1,075

 

 

96.1

%

Greece

 

 

5,057

 

180

 

-

 

5,237

 

109

 

-

 

5,346

 

 

69.5

%

Ireland

 

 

2,177

 

10

 

-

 

2,187

 

30

 

-

 

2,217

 

 

72.6

%

Malta

 

 

186

 

2

 

-

 

188

 

9

 

-

 

197

 

 

89.9

%

Netherlands

 

 

3,880

 

10

 

-

 

3,890

 

(23

)

25

 

3,892

 

 

42.8

%

Portugal

 

 

4,751

 

24

 

-

 

4,775

 

182

 

-

 

4,957

 

 

79.0

%

 

 

 

17,007

 

274

 

-

 

17,281

 

378

 

25

 

17,684

 

 

68.5

%

Europe

 

 

101,163

 

2,325

 

-

 

103,488

 

2,551

 

25

 

106,064

 

 

65.8

%

EMAPA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Czech Republic

 

 

2,475

 

50

 

-

 

2,525

 

57

 

-

 

2,582

 

 

47.9

%

Romania

 

 

7,954

 

269

 

-

 

8,223

 

356

 

-

 

8,579

 

 

65.9

%

Hungary

 

 

2,163

 

1

 

-

 

2,164

 

48

 

-

 

2,212

 

 

57.5

%

Turkey

 

 

13,900

 

1,025

 

-

 

14,925

 

1,312

 

(528

)

15,709

 

 

90.0

%

Poland

 

 

2,483

 

50

 

-

 

2,533

 

84

 

-

 

2,617

 

 

58.2

%

 

 

 

28,975

 

1,395

 

-

 

30,370

 

1,857

 

(528

)

31,699

 

 

70.9

%

Middle East, Africa & Asia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Egypt

 

 

9,652

 

975

 

356

 

10,983

 

1,203

 

-

 

12,186

 

 

95.1

%

Kenya

 

 

2,433

 

332

 

-

 

2,765

 

418

 

-

 

3,183

 

 

98.7

%

South Africa(4)

 

 

15,075

 

1,129

 

-

 

16,204

 

1,026

 

(1,447

)

15,783

 

 

88.5

%

India

 

 

-

 

3,049

 

27,703

 

30,752

 

4,906

 

-

 

35,658

 

 

89.0

%

 

 

 

27,160

 

5,485

 

28,059

 

60,704

 

7,553

 

(1,447

)

66,810

 

 

90.5

%

Pacific

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Australia

 

 

3,367

 

16

 

-

 

3,383

 

48

 

-

 

3,431

 

 

72.1

%

New Zealand

 

 

2,244

 

24

 

-

 

2,268

 

(13

)

-

 

2,255

 

 

74.2

%

Fiji

 

 

139

 

7

 

-

 

146

 

8

 

-

 

154

 

 

95.4

%

 

 

 

5,750

 

47

 

-

 

5,797

 

43

 

-

 

5,840

 

 

74.1

%

EMAPA

 

 

61,885

 

6,927

 

28,059

 

96,871

 

9,453

 

(1,975

)

104,349

 

 

83.7

%

Group

 

 

163,048

 

9,252

 

28,059

 

200,359

 

12,004

 

(1,950

)

210,413

 

 

75.6

%

Reconciliation to proportionate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interests in above

 

 

(5,904

)

(1,617

)

(9,346

)

(16,867

)

(2,305

)

10

 

(19,162

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Associates and investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

27,322

 

602

 

-

 

27,924

 

739

 

1

 

28,664

 

 

5.2

%

Other

 

 

21,927

 

879

 

(2,185

)

20,621

 

939

 

-

 

21,560

 

 

79.9

%

 

 

 

49,249

 

1,481

 

(2,185

)

48,545

 

1,678

 

1

 

50,224

 

 

 

 

Proportionate(5)

 

 

206,393

 

9,116

 

16,528

 

232,037

 

11,377

 

(1,939

)

241,475

 

 

71.9

%

Europe

 

 

109,032

 

2,356

 

-

 

111,388

 

2,607

 

25

 

114,020

 

 

65.8

%

EMAPA

 

97,361

 

6,760

 

16,528

 

120,649

 

8,770

 

(1,964

)

127,455

 

73.0

%

 

Notes:

(1)   Group customers are presented on a controlled (fully consolidated) and jointly controlled (proportionately consolidated) basis in accordance with the Group’s current segments.

(2)   Other movements relate to the acquisition of Vodafone Essar, the disconnection of inactive SIM cards in Turkey, a share repurchase in Egypt, a change in disconnection policies in Egypt, the Netherlands, Turkey and South Africa as well as the acquisition of a customer base in the United States.

(3)   Prepaid customer percentages are calculated on a venture basis. At 30 September 2007, there were 729.2 million venture customers.

(4)   South Africa refers to the Group’s interests in Vodacom Group (Pty) Limited and its subsidiaries, including those located outside of South Africa.

(5)   Proportionate customers are based on equity interests as at 30 September 2007. The calculation of proportionate customers for Vodafone Essar also assumes the exercise of call options that could increase the Group’s equity interest from 51.95% to 66.98%.  These call options can only be exercised in accordance with Indian law prevailing at the time of exercise.

 

42


 

KEY PERFORMANCE INDICATORS - MOBILE TELECOMMUNICATIONS BUSINESSES

 

MOBILE CUSTOMER CHURN

 

 

 

ANNUALISED CHURN INFORMATION IN THE QUARTER TO

 

COUNTRY

 

 

30 JUN
2006 

 

30 SEP
2006

 

31 DEC
2006

 

31 MAR
2007

 

30 JUN
2007

 

30 SEP
2007

 

Germany(1)

Total

 

 

20.7

%

 

22.1

%

 

20.1

%

 

24.2

%

 

20.7

%

 

20.8

%

 

 

Contract

 

 

14.6

%

 

13.5

%

 

15.7

%

 

14.9

%

 

14.0

%

 

14.7

%

 

 

Prepaid

 

 

26.0

%

 

29.5

%

 

23.9

%

 

31.9

%

 

26.4

%

 

26.0

%

 

Italy

Total

 

 

20.8

%

 

21.7

%

 

19.4

%

 

20.6

%

 

18.1

%

 

25.0

%

 

 

Contract

 

 

17.2

%

 

13.6

%

 

14.8

%

 

14.1

%

 

15.9

%

 

14.7

%

 

 

Prepaid

 

 

21.1

%

 

22.4

%

 

19.8

%

 

21.2

%

 

18.3

%

 

25.9

%

 

Spain(2)

Total

 

 

20.5

%

 

37.0

%

 

23.4

%

 

24.7

%

 

22.4

%

 

24.5

%

 

 

Contract

 

 

12.3

%

 

13.4

%

 

15.3

%

 

16.6

%

 

14.8

%

 

14.6

%

 

 

Prepaid

 

 

28.9

%

 

62.5

%

 

32.8

%

 

34.5

%

 

31.7

%

 

37.2

%

 

UK

Total

 

 

32.8

%

 

37.6

%

 

35.4

%

 

29.8

%

 

34.1

%

 

35.5

%

 

 

Contract

 

 

20.1

%

 

18.8

%

 

17.9

%

 

17.4

%

 

15.9

%

 

15.3

%

 

 

Prepaid

 

 

40.9

%

 

49.9

%

 

47.0

%

 

37.9

%

 

46.0

%

 

48.8

%

 

 

Notes:

(1)          The customer churn for Germany in the quarter ended 31 December 2006 benefited from a regulatory driven change in the prepaid disconnection policy, which reduced disconnections by 291,000 in the quarter. The underlying prepaid customer churn, excluding this change, was 31.1% and total churn was 24.0%.

(2)          The customer churn for Spain in the quarter ended 30 September 2006 includes the effect of 584,000 disconnections following a change in the application of disconnection policies. The underlying customer churn, excluding these disconnections, was 20.1%.

 

3G DEVICES(1)

 

 

 

QUARTER ENDED 30 JUNE 2007

 

 

QUARTER ENDED 30 SEPTEMBER 2007

 

COUNTRY (in thousands)

 

 

AT 31 MAR
2007

 

NET
ADDITIONS

 

AT 30 JUN
2007

 

 

NET
ADDITIONS

 

AT 30 SEP
2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

 

3,720

 

476

 

4,196

 

 

549

 

4,745

 

Italy

 

 

3,762

 

330

 

4,092

 

 

608

 

4,700

 

Spain

 

 

2,890

 

688

 

3,578

 

 

750

 

4,328

 

UK

 

 

1,938

 

685

 

2,623

 

 

472

 

3,095

 

Other Europe

 

 

2,353

 

236

 

2,589

 

 

284

 

2,873

 

Europe

 

 

14,663

 

2,415

 

17,078

 

 

2,663

 

19,741

 

EMAPA

 

 

1,205

 

227

 

1,432

 

 

240

 

1,672

 

Group

 

 

15,868

 

2,642

 

18,510

 

 

2,903

 

21,413

 

Consumer devices

 

 

14,246

 

2,460

 

16,706

 

 

2,444

 

19,150

 

Business devices

 

 

1,622

 

182

 

1,804

 

 

459

 

2,263

 

Group

 

 

15,868

 

2,642

 

18,510

 

 

2,903

 

21,413

 

 

Note:

(1)          3G devices only include those in the Group’s subsidiary and joint venture undertakings. At 30 September 2007, there were an additional 3.2 million (30 June 2007: 3.3 million, 31 March 2007: 3.0 million) registered Vodafone live! with 3G and Vodafone Mobile Connect 3G/GPRS data card venture customers in the Group’s associated undertakings.

 

43


 

KEY PERFORMANCE INDICATORS - MOBILE TELECOMMUNICATIONS BUSINESSES

 

MOBILE VOICE USAGE VOLUMES

 

 

 

TOTAL VOICE MINUTES(1) IN THE QUARTER ENDED

 

COUNTRY (in millions)

 

 

3O JUN
2006

 

30 SEP
2006

 

31 DEC
2006

 

31 MAR
2007

 

30 JUN
2007

 

30 SEP
2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

 

7,614

 

7,979

 

8,650

 

9,230

 

9,897

 

10,263

 

Italy

 

 

7,687

 

8,050

 

8,256

 

8,439

 

8,932

 

9,051

 

Spain

 

 

6,978

 

7,533

 

7,655

 

8,248

 

8,530

 

8,886

 

UK

 

 

7,207

 

7,579

 

8,160

 

8,790

 

8,963

 

9,112

 

Albania

 

 

148

 

166

 

160

 

167

 

196

 

215

 

Greece

 

 

2,075

 

2,216

 

2,113

 

1,985

 

2,168

 

2,282

 

Ireland

 

 

1,380

 

1,422

 

1,462

 

1,420

 

1,490

 

1,517

 

Malta

 

 

49

 

55

 

50

 

48

 

55

 

64

 

Netherlands

 

 

1,820

 

1,711

 

1,868

 

1,900

 

2,006

 

1,899

 

Portugal

 

 

1,472

 

1,606

 

1,586

 

1,612

 

1,657

 

1,836

 

Europe

 

 

36,430

 

38,317

 

39,960

 

41,839

 

43,894

 

45,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMAPA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Czech Republic

 

 

901

 

868

 

919

 

916

 

985

 

998

 

Hungary

 

 

948

 

980

 

1,030

 

1,030

 

1,110

 

1,149

 

Romania(2)

 

 

1,873

 

2,059

 

2,231

 

2,339

 

2,540

 

2,726

 

Turkey(3)

 

 

2,494

 

6,451

 

5,781

 

6,224

 

6,583

 

6,551

 

Joint Venture

 

 

575

 

641

 

717

 

681

 

769

 

819

 

 

 

 

6,791

 

10,999

 

10,678

 

11,190

 

11,987

 

12,243

 

Middle East, Africa & Asia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Egypt

 

 

2,869

 

3,462

 

3,670

 

4,156

 

4,794

 

5,591

 

India(4)

 

 

-

 

-

 

-

 

-

 

26,713

 

33,897

 

Joint Ventures(5)

 

 

5,160

 

5,713

 

6,638

 

5,781

 

3,016

 

4,854

 

 

 

 

8,029

 

9,175

 

10,308

 

9,937

 

34,523

 

44,342

 

Pacific

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Australia

 

 

2,006

 

2,141

 

2,238

 

2,222

 

2,179

 

2,252

 

New Zealand

 

 

597

 

597

 

672

 

771

 

793

 

834

 

Joint Venture

 

 

28

 

33

 

34

 

32

 

38

 

42

 

 

 

 

2,631

 

2,771

 

2,944

 

3,025

 

3,010

 

3,128

 

EMAPA

 

 

17,451

 

22,945

 

23,930

 

24,152

 

49,520

 

59,713

 

Group

 

 

53,881

 

61,262

 

63,890

 

65,991

 

93,414

 

104,838

 

 

Notes:

(1)

The total voice minute information presented in the table above represents network minutes, or the volume of minutes handled by each local network, and includes incoming, outgoing and visitor calls. The voice minute information in respect of Germany and New Zealand reflects billed minutes, under which calls are rounded up to the nearest minute under certain tariffs.

(2)

During the quarter ended 31 December 2006, Vodafone Romania restated usage volumes for all quarters in the prior year. Previous volumes were billed minutes and this has now been restated to network minutes.

(3)

On 24 May 2006, the Group acquired substantially all the assets and business of Telsim Mobil Telekomunikasyon Hizmetleri in Turkey. The quarter ended 30 June 2006 has been restated to include voice minutes from the acquisition date.

(4)

Vodafone Essar is included from 8 May 2007, being the date of acquisition.

(5)

With effect from the quarter ended 30 September 2007, joint venture minutes within the Middle East, Africa & Asia area include the Group’s share of minutes for Vodacom Group (Pty) Limited and its subsidiaries, including those located outside of South Africa.

 

44


 

KEY PERFORMANCE INDICATORS - MOBILE TELECOMMUNICATIONS BUSINESSES

 

MESSAGING AND DATA AS A PERCENTAGE OF SERVICE REVENUE(1)

 

 

 

QUARTER ENDED 30 SEPTEMBER 2007

 

COUNTRY

 

 

MESSAGING  

 

DATA  

 

TOTAL

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

 

14.0

%

 

10.9

%

 

24.9

%

 

Italy

 

 

16.3

%

 

6.2

%

 

22.5

%

 

Spain

 

 

9.4

%

 

7.9

%

 

17.3

%

 

UK

 

 

17.9

%

 

7.4

%

 

25.3

%

 

Europe

 

 

13.4

%

 

7.3

%

 

20.7

%

 

EMAPA

 

 

8.8

%

 

3.4

%

 

12.2

%

 

Group

 

 

12.2

%

 

6.3

%

 

18.5

%

 

 

 

HISTORIC MESSAGING AND DATA INFORMATION

 

 

 

MESSAGING AND DATA AS A PERCENTAGE OF SERVICE REVENUE IN THE QUARTER ENDED(1)

 

COUNTRY

 

 

30 JUN
2006

 

 

30 SEP
2006

 

 

31 DEC
2006

 

 

31 MAR
2007

 

 

30 JUN
2007

 

 

30 SEP
2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

 

21.2%

 

 

21.6%

 

 

22.9%

 

 

24.4%

 

 

24.3%

 

 

24.9%

 

Italy

 

 

17.3%

 

 

17.5%

 

 

18.7%

 

 

20.4%

 

 

21.2%

 

 

22.5%

 

Spain

 

 

15.7%

 

 

14.7%

 

 

15.3%

 

 

16.0%

 

 

16.1%

 

 

17.3%

 

UK

 

 

20.9%

 

 

21.7%

 

 

23.2%

 

 

24.3%

 

 

24.9%

 

 

25.3%

 

Europe

 

 

17.5%

 

 

17.7%

 

 

18.7%

 

 

19.6%

 

 

19.9%

 

 

20.7%

 

EMAPA

 

 

12.6%

 

 

14.4%

 

 

15.0%

 

 

11.8%

 

 

12.9%

 

 

12.2%

 

Group

 

 

16.6%

 

 

16.9%

 

 

17.9%

 

 

18.0%

 

 

18.2%

 

 

18.5%

 

 

Note:

(1)          Messaging and data percentages are calculated using service revenue from all businesses within the Group and includes fixed line revenue. Historical data has been recalculated to provide comparative information. Calculations are based on service revenue rounded to the nearest 0.1 million using local currency for individual countries and sterling for regional and Group numbers.

 

45


 

KEY PERFORMANCE INDICATORS - MOBILE TELECOMMUNICATIONS BUSINESSES

 

AVERAGE MONTHLY MOBILE REVENUE PER USER IN THE QUARTER

 

COUNTRY

 

 

 

30 JUN
2006

 

 

30 SEP
2006

 

 

31 DEC
2006

 

 

31 MAR
2007

 

 

30 JUN
2007

 

 

30 SEP
2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

Total

 

22.1

 

 

22.4

 

 

20.9

 

 

19.3

 

 

19.5

 

 

19.5

 

(EUR)

 

Contract

 

38.4

 

 

39.0

 

 

36.7

 

 

34.7

 

 

34.9

 

 

35.3

 

 

 

Prepaid

 

7.6

 

 

7.6

 

 

7.0

 

 

6.1

 

 

6.2

 

 

6.1

 

Italy

 

Total

 

27.6

 

 

27.1

 

 

25.8

 

 

23.4

 

 

23.2

 

 

22.7

 

(EUR)

 

Contract

 

72.6

 

 

68.0

 

 

71.1

 

 

69.5

 

 

69.8

 

 

65.2

 

 

 

Prepaid

 

23.3

 

 

23.2

 

 

21.5

 

 

19.1

 

 

18.8

 

 

18.6

 

Spain

 

Total

 

35.3

 

 

36.4

 

 

35.3

 

 

33.8

 

 

36.3

 

 

36.5

 

(EUR)

 

Contract

 

54.8

 

 

55.2

 

 

51.3

 

 

48.9

 

 

52.0

 

 

51.7

 

 

 

Prepaid

 

15.0

 

 

15.4

 

 

16.0

 

 

15.0

 

 

16.4

 

 

16.5

 

UK

 

Total

 

23.7

 

 

24.5

 

 

23.6

 

 

22.7

 

 

23.1

 

 

24.1

 

(GBP)

 

Contract

 

45.2

 

 

46.5

 

 

43.7

 

 

43.4

 

 

43.5

 

 

45.8

 

 

 

Prepaid

 

8.9

 

 

9.4

 

 

9.5

 

 

8.6

 

 

8.9

 

 

9.0

 

Albania

 

Total

 

2,122

 

 

2,311

 

 

2,086

 

 

1,868

 

 

1,844

 

 

2,016

 

(ALL)

 

Contract

 

17,240

 

 

17,941

 

 

16,329

 

 

14,612

 

 

14,403

 

 

14,733

 

 

 

Prepaid

 

1,606

 

 

1,782

 

 

1,605

 

 

1,419

 

 

1,366

 

 

1,497

 

Greece

 

Total

 

31.1

 

 

31.0

 

 

27.6

 

 

24.7

 

 

25.5

 

 

26.2

 

(EUR)

 

Contract

 

65.6

 

 

66.8

 

 

61.6

 

 

56.5

 

 

60.0

 

 

62.0

 

 

 

Prepaid

 

13.7

 

 

13.4

 

 

11.4

 

 

10.1

 

 

10.2

 

 

10.4

 

Ireland

 

Total

 

48.8

 

 

46.9

 

 

45.6

 

 

44.6

 

 

45.4

 

 

45.1

 

(EUR)

 

Contract

 

102.8

 

 

99.4

 

 

94.5

 

 

92.5

 

 

94.3

 

 

94.1

 

 

 

Prepaid

 

29.3

 

 

28.0

 

 

27.9

 

 

27.2

 

 

27.1

 

 

26.6

 

Malta(1)

 

Total

 

14.7

 

 

16.6

 

 

12.6

 

 

12.0

 

 

14.0

 

 

15.5

 

(MTL)

 

Contract

 

39.2

 

 

38.2

 

 

36.0

 

 

34.7

 

 

36.3

 

 

37.2

 

 

 

Prepaid

 

11.2

 

 

13.4

 

 

9.2

 

 

8.5

 

 

10.5

 

 

12.0

 

Netherlands

 

Total

 

35.7

 

 

36.9

 

 

31.7

 

 

36.1

 

 

37.9

 

 

38.8

 

(EUR)

 

Contract

 

63.5

 

 

64.6

 

 

52.0

 

 

57.8

 

 

59.7

 

 

59.6

 

 

 

Prepaid

 

10.1

 

 

10.4

 

 

9.8

 

 

9.8

 

 

10.6

 

 

10.8

 

Portugal

 

Total

 

23.5

 

 

24.4

 

 

22.8

 

 

22.1

 

 

22.4

 

 

23.7

 

(EUR)

 

Contract

 

62.2

 

 

62.8

 

 

57.8

 

 

54.2

 

 

54.9

 

 

59.0

 

 

 

Prepaid

 

13.0

 

 

13.9

 

 

13.2

 

 

13.2

 

 

13.2

 

 

14.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMAPA Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Australia

 

Total

 

49.4

 

 

52.4

 

 

54.0

 

 

51.3

 

 

50.5

 

 

49.5

 

(AUD)

 

Contract

 

92.7

 

 

96.4

 

 

98.8

 

 

97.1

 

 

96.2

 

 

93.6

 

 

 

Prepaid

 

33.9

 

 

36.2

 

 

37.2

 

 

34.1

 

 

33.0

 

 

32.0

 

Czech Republic

 

Total

 

674

 

 

670

 

 

658

 

 

613

 

 

635

 

 

619

 

(CZK)

 

Contract

 

978

 

 

966

 

 

946

 

 

897

 

 

916

 

 

889

 

 

 

Prepaid

 

331

 

 

334

 

 

331

 

 

295

 

 

320

 

 

320

 

Egypt

 

Total

 

79.4

 

 

88.1

 

 

79.4

 

 

75.0

 

 

75.6

 

 

71.6

 

(EGP)

 

Contract

 

292.1

 

 

309.7

 

 

289.9

 

 

295.8

 

 

308.8

 

 

304.5

 

 

 

Prepaid

 

57.1

 

 

66.7

 

 

61.4

 

 

59.1

 

 

60.4

 

 

58.2

 

Hungary

 

Total

 

5,066

 

 

5,339

 

 

5,171

 

 

4,749

 

 

4,935

 

 

4,994

 

(HUF)

 

Contract

 

9,129

 

 

9,097

 

 

8,529

 

 

7,847

 

 

8,010

 

 

7,832

 

 

 

Prepaid

 

3,125

 

 

3,359

 

 

3,250

 

 

2,839

 

 

2,873

 

 

2,930

 

India(2)

 

Total

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

361

 

(INR)

 

Contract

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

995

 

 

 

Prepaid

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

277

 

New Zealand

 

Total

 

46.6

 

 

46.6

 

 

50.7

 

 

49.3

 

 

47.1

 

 

48.8

 

(NZD)

 

Contract

 

126.1

 

 

125.3

 

 

128.9

 

 

122.8

 

 

117.2

 

 

118.7

 

 

 

Prepaid

 

23.2

 

 

22.5

 

 

23.7

 

 

23.4

 

 

21.4

 

 

22.0

 

Turkey(2)

 

Total

 

N/A

 

 

16.5

 

 

14.4

 

 

14.4

 

 

15.7

 

 

16.3

 

(TRY)

 

Contract

 

N/A

 

 

31.4

 

 

28.2

 

 

28.7

 

 

29.2

 

 

29.8

 

 

 

Prepaid

 

N/A

 

 

14.8

 

 

12.9

 

 

12.9

 

 

14.1

 

 

14.7

 

Romania

 

Total

 

15.2

 

 

15.9

 

 

15.6

 

 

14.0

 

 

15.7

 

 

15.8

 

(USD)

 

Contract

 

29.5

 

 

30.8

 

 

30.6

 

 

27.1

 

 

31.2

 

 

31.9

 

 

 

Prepaid

 

6.7

 

 

7.3

 

 

7.0

 

 

6.1

 

 

6.6

 

 

6.5

 

 

Notes:

(1)          During the quarter ended 30 June 2007, Vodafone Malta restated previously published prepaid and contract average monthly mobile revenue per user to reflect a revised analysis of historic service revenue.

(2)          For acquired operations, average monthly mobile revenue per user is published with effect from the quarter following each acquisition.

 

46


 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

 

 

 

 

 

VODAFONE GROUP

 

 

 

PUBLIC LIMITED COMPANY

 

 

 

(Registrant)

 

 

 

 

 

 

 

 

 

 

Dated:   November 14, 2007

 

By:

/s/ S R SCOTT

 

 

 

 

Name:  Stephen R. Scott

 

 

 

 

Title:  Group General Counsel and Company Secretary

 

 

 

 

 

 

 

47