UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer

 

Pursuant to Rules 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

 

Dated July 24, 2009

 

Commission File Number: 001-10086

 

VODAFONE GROUP

PUBLIC LIMITED COMPANY

(Translation of registrant’s name into English)

 

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

(Address of principal executive offices)

 

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

 

Form 20-F    ü

Form 40-F

 

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

 

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

 

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

 

Yes

No    ü

 

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

 

 

This Report on Form 6-K contains a news release issued by Vodafone Group Plc on July 24, 2009, entitled “INTERIM MANAGEMENT STATEMENT FOR THE QUARTER ENDED 30 JUNE 2009”.

 

 

24 July 2009

 

INTERIM MANAGEMENT STATEMENT FOR THE QUARTER ENDED 30 JUNE 2009

 

 

Key highlights:

 

·      Group: Revenue £10,743 million, up 9.3%

 

–    Organic service revenue down 2.1%

 

–    Group data revenue of £888 million, up 19.4% on an organic basis

 

–    Free cash flow of £1,896 million, up 21.2%; net debt at 30 June 2009 of £31.2 billion

 

–    First quarter EBITDA margin trends consistent  with management’s full year expectations

 

–    Cost reduction programme on track

 

–    Proportionate mobile customer base of 315.3 million; 8.0 million net additions during the quarter

 

·      Europe: Service revenue up 4.4% driven by foreign exchange

 

–    Organic service revenue down 4.4% reflecting economy and mobile termination rates

 

–    Organic data revenue up 17.8%

 

–    Organic fixed line revenue up 5.7%; Spain up 15.4%; Italy up 18.5%

 

·      Africa and Central Europe: Service revenue up 26.3% including Vodacom acquisition

 

–    Organic service revenue down 2.6%

 

–    Vodacom organic growth of 5.2% offset by weakness in Central Europe

 

·      Asia Pacific and Middle East: Service revenue up 21.8%

 

–    Organic service revenue up 14.3%

 

–    India service revenue growth of 23.0%(1)

 

·      Verizon Wireless: Net mobile customer additions of 1.1 million

 

·      Full year outlook: May guidance confirmed(2)

 

 

Vittorio Colao, Chief Executive, commented:

 

“In the first quarter the service revenue trend in Europe was consistent with the previous quarter and we continued to see good growth in India and South Africa. Our total communications strategy is delivering well, with organic data revenue up 19% and organic fixed line revenue 7% ahead of the comparative period. Free cash flow generation was strong at £1.9 billion, up 21%. The Group has reaffirmed its guidance for the full year.”

 

 

Notes:

(1)   At constant exchange rates.

(2)   Includes assumptions of foreign exchange rates for the 2010 financial year of approximately £1:€1.12 and £1:US$1.50.

 

 

OPERATING REVIEW

 

Group

 

		Quarter ended 30 June
		2009(1)		2008					% change
		£m		£m			£		Organic(2)
Europe		7,064		6,768			4.4		(4.4)
Africa and Central Europe		1,573		1,245			26.3		(2.6)
Asia Pacific and Middle East		1,491		1,224			21.8		14.3
Eliminations		(37	)	(35	)
Service revenue		10,091		9,202			9.7		(2.1)
Other revenue		652		626			4.2		(6.3)
Revenue		10,743		9,828			9.3		(2.4)
Capital expenditure		1,177		1,127			4.4
Free cash flow(3)		1,896		1,565			21.2

 

Notes:

(1)          Reflects average exchange rates of £1:€1.14 and £1:US$1.55.

(2)          Organic growth includes India for the first time and Vodacom (except the results of Gateway) at the current level of ownership but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009. See significant transactions on page 7 for further details.

(3)          Before licence and spectrum payments.

 

Group revenue increased by 9.3% including the positive impact of exchange rate movements of 8.6 percentage points and a 3.1 percentage point benefit from merger and acquisition activity, primarily attributable to the additional stake in Vodacom. Group organic service revenue declined by 2.1% due to weakness across most of Europe and Central Europe resulting from recessionary factors although good growth continued in India, South Africa and Italy.

 

In line with its strategy the Group continued to deliver solid growth in mobile data and fixed broadband. Organic data revenue growth was 19.4%, slightly lower than the previous quarter due to the impact of lower data roaming and lower enterprise activity. In fixed broadband the Group generated over 200,000 additions in Europe and fixed line revenue grew at constant exchange rates by 18.5% in Italy and 15.4% in Spain. Europe’s enterprise revenue declined reflecting the economic pressure on business customers.

 

In November 2008 the Group announced a cost reduction programme which targeted a £1 billion reduction in operating costs by the end of the 2011 financial year in order to offset the pressures from inflation and the competitive environment and to enable investment in revenue growth opportunities. Savings of more than 65% of this target are expected to be generated by the end of the current financial year. In conjunction with the half-year results in November 2009 the Group will provide a further update on progress on the cost reduction programme.

 

The Group’s EBITDA margin decline during the quarter was consistent with management’s guidance for the current financial year. After adjusting for foreign exchange, operating costs in Europe plus Common Functions were flat despite a significant increase in overall traffic volumes.

 

Capital expenditure of £1.2 billion was at a similar level to the same quarter last year after adjusting for foreign exchange, reflecting continued investment in Europe to support network quality and data growth and in India to drive revenue through footprint expansion.

 

Free cash flow before licence and spectrum payments increased by 21.2% to £1.9 billion primarily due to foreign exchange and the receipt of a £0.2 billion dividend from Verizon Wireless deferred from the previous quarter.

 

Group net debt decreased to £31.2 billion at 30 June 2009 reflecting free cash flow generated during the period, a £4.1 billion beneficial impact of exchange rate movements on non-sterling denominated debt, the Group’s acquisition of an additional 15.0% stake in Vodacom and the full consolidation of Vodacom’s net debt following the acquisition.

 

2

 

OPERATING REVIEW

 

Outlook

 

The Group is trading in line with management’s outlook issued in May 2009 for the current financial year. In a challenging economic environment free cash flow generation has been strong, enabling continued investment in the Group’s growth areas including mobile data, fixed broadband and India.

 

The Group’s outlook for the current financial year is therefore confirmed.

 

Implicit in the Group’s outlook are the assumptions that in the second quarter service revenue in Europe is expected to be impacted by reduced mobile termination rates in the UK and by lower roaming prices and reduced travel across the region.

 

The outlook ranges for the 2010 financial year set out on page 37 of the Group’s 2009 annual report included full year foreign exchange assumptions of £1:€1.12 and £1:US$1.50. The actual rates experienced during the quarter were £1:€1.14 and £1:US$1.55. On a full year basis the impact on adjusted operating profit of a 1% change in the euro/sterling exchange rate is approximately £60 million and of a 1% move in the US dollar/sterling exchange rate is approximately £40 million. The Group will update its guidance to reflect updated assumptions for foreign exchange in November in conjunction with the release of its half-year results.

 

3

 

OPERATING REVIEW

 

Europe

 

		Quarter ended 30 June
Revenue		2009		2008					% change
		£m		£m			£		Organic
Germany		1,903		1,797			5.9		(4.8)
Italy		1,451		1,268			14.4		3.1
Spain		1,340		1,314			2.0		(8.1)
UK		1,186		1,234			(3.9	)	(4.7)
Other Europe		1,260		1,228			2.6		(7.4)
Eliminations		(76	)	(73	)
Service revenue		7,064		6,768			4.4		(4.4)
Other revenue		392		415			(5.5	)	(11.1)
Revenue		7,456		7,183			3.8		(4.8)

 

Revenue grew by 3.8% including an 8.4 percentage point benefit arising from favourable exchange rate movements. Service revenue fell by 4.4% on an organic basis reflecting declines in most markets, partially offset by growth in Italy and the Netherlands. The declines were primarily driven by reductions in voice revenue resulting from continued pricing pressure and slower usage growth in the current economic climate, as well as lower visitor and roaming revenue as people travelled less. These declines were partially offset by growth in data, fixed line and wholesale revenue. The organic service revenue growth rate was similar to the previous quarter after taking into account mobile termination rate cuts, seasonality and the impact of a new accounting standard for loyalty programmes.

 

Germany

Organic service revenue declined by 4.8% driven by a decrease in voice revenue from the impact of a termination rate cut effective from April 2009, reduced roaming, continued tariff optimisation and a reduction in prepaid ARPU. These were partially offset by continued strong growth in data revenue which benefited from the introduction of netbook and smartphone offerings during the quarter. Fixed line revenue was stable, with Germany’s fixed broadband customer base increasing by 81,000 during the quarter.

 

Italy

Service revenue growth was 3.1% at constant exchange rates due to strong growth in data and fixed line revenue and broadly stable voice revenue. The data revenue growth was driven by higher penetration of PC connectivity devices and smartphone offerings. The continued success of Vodafone and Tele2 branded products led to strong fixed broadband customer additions, with a closing customer base of 1.0 million on a 100% basis. The resilient voice revenue performance was driven by ARPU enhancement initiatives and continued growth in high value contract customers.

 

Spain

Service revenue fell by 8.1% at constant exchange rates primarily as a result of lower voice revenue driven by weak economic conditions, including high unemployment, and termination rate cuts effective from October 2008 and April 2009. The rate of decline was 0.5 percentage points better than the previous quarter. The above factors were partially offset by growth in data and fixed line revenue which benefited from the continued success of mobile internet bundles and Vodafone Station. Service revenue growth included a 0.7 percentage point benefit from a contract settlement which was substantially offset by the impact of a new accounting standard for loyalty programmes.

 

UK

The 4.7% organic decline in service revenue was primarily driven by continued intense competition and economic pressures; the latter resulted in reduced discretionary spend which led to customers optimising bundle usage, higher prepaid inactivity and lower roaming revenue. These were partially offset by good growth in data revenue, primarily from mobile internet services, and higher wholesale revenue derived from existing MVNO agreements. The second quarter will be impacted by a mobile termination rate reduction effective from July 2009.

 

Other Europe

Service revenue decreased by 7.4% at constant exchange rates with declines in all countries except the Netherlands which grew by 0.6% at constant exchange rates. All markets were impacted by the economic downturn. Service revenue in Greece declined by 15.0% at constant exchange rates primarily due to prepaid promotions as well as a termination rate cut effective from January 2009. Service revenue in Ireland declined due to a combination of recessionary and competitive factors, especially in the enterprise segment. In Portugal there were a number of termination rate reductions from August 2008 to April 2009 which also contributed to a fall in service revenue of 7.4% at constant exchange rates.

 

4

 

 

OPERATING REVIEW

 

Africa and Central Europe

 

		Quarter ended 30 June
Revenue		2009		2008					% change
		£m		£m			£		Organic(1)
Vodacom		725		348			100+		5.2
Other Africa and Central Europe		848		897			(5.5	)	(9.6	)
Service revenue		1,573		1,245			26.3		(2.6	)
Other revenue		127		85			49.4		(1.0	)
Revenue		1,700		1,330			27.8		(2.5	)

 

Note:

(1)   Organic growth includes Vodacom (except the results of Gateway) at the current level of ownership. See significant transactions on page 7 for further details.

 

Revenue increased by 27.8% with favourable exchange rates contributing 7.9 percentage points of growth and a 22.4 percentage point benefit from merger and acquisition activity, primarily Vodacom. Organic revenue declined by 2.5% as continued growth in Vodacom was more than offset by revenue decline in Romania and the improved but continued weak performance in Turkey. Service revenue declined by 2.6% on an organic basis as the 2.7 percentage point impact of termination rate cuts and lower prices offset the higher average customer base and good data revenue growth.

 

Vodacom

Service revenue grew by 5.2% on an organic basis driven by good customer net additions and strong growth in data revenue. The quarter’s revenue suffered from the impact of holidays taken in South Africa around national elections in April 2009, with the April organic service revenue growth rate significantly lower than the rate achieved in May and June. The South African market reached penetration of around 100% and experienced weaker economic conditions which particularly impacted contract revenue as customers optimised bundle usage. Service revenue in Tanzania continued to be affected by intense competition and the Democratic Republic of Congo saw a significant reduction in revenue due to the weaker economic climate.

 

On 18 May 2009 Vodacom became a subsidiary undertaking. See significant transactions on page 7 for further details.

 

Other Africa and Central Europe

Service revenue declined by 9.6% on an organic basis mainly as a result of the performances in Turkey and Romania. In Turkey service revenue fell by 11.2% at constant exchange rates driven by a 26.8% decline in outgoing voice revenue reflecting a competitive price environment offset by a 61.6% increase in incoming voice revenue following the introduction to the market of all-inclusive tariffs. Turkey continued to invest in improving network quality, adding 400 new sites in the quarter, and focused investment in increased distribution channels. 3G services will be launched in Turkey during the second quarter. In Romania service revenue declined by 17.3% at constant exchange rates impacted by a 13% year on year decline in local currency against the euro – whilst tariffs are quoted in euros household incomes are earned in local currency – and a termination rate cut effective from January 2009. Competition in the Romanian market remains intense.

 

5

 

OPERATING REVIEW

 

Asia Pacific and Middle East

 

		Quarter ended 30 June
Revenue		2009		2008					% change
		£m		£m			£		Organic(1)
India		755		565			33.6		23.0
Other Asia Pacific and Middle East		737		659			11.8		2.6
Eliminations		(1	)	–
Service revenue		1,491		1,224			21.8		14.3
Other revenue		81		83			(2.4	)	(1.2	)
Revenue		1,572		1,307			20.3		13.7

 

Note:

(1)   Organic growth includes India for the first time but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009. See significant transactions on page 7 for further details.

 

Revenue grew by 20.3% including a 9.7 percentage point benefit from favourable exchange rate movements. Service revenue grew by 14.3% on an organic basis driven by 49.0% growth in the average customer base and continued strong data revenue growth. India contributed substantially all of the region’s organic service revenue growth.

 

India

Service revenue grew by 23.0% at constant exchange rates including a 7.0 percentage point benefit from the revenue stream generated by the network sharing joint venture Indus Towers. The average customer base increased by 56.0% reflecting the launch of services in seven new circles in the previous financial year. Usage per customer slowed as a higher number of customers utilised SIMs from more than one operator, in particular in the new circles. The organic service revenue growth rate slowed when compared to the previous quarter primarily due to a termination rate cut effective from April 2009 which had around a five percentage point impact.

 

Other Asia Pacific and Middle East

Organic service revenue growth of 2.6% was driven primarily by the performance in Egypt which increased by 2.9% at constant exchange rates following an increase in the average customer base and strong data revenue growth resulting from increased penetration of mobile internet devices. These factors were partially offset by aggressive competition, lower visitor revenue, a higher number of customers with SIMs from more than one operator and the impact of a termination rate cut effective from September 2008. Service revenue growth continued in New Zealand driven by strong growth in fixed line revenue and increased penetration of mobile internet and PC connectivity devices partially offset by the impact of a termination rate cut and weaker overall economic trends.

 

6

 

OPERATING REVIEW

 

Verizon Wireless

 

Verizon Wireless achieved 1.1 million net mobile customer additions during the quarter. The Group’s share of the closing customer base reached 39.5 million, up 7.9% year on year on a pro forma basis. Verizon Communications will report its second quarter results including those of Verizon Wireless on 27 July 2009.

 

Significant transactions

 

Since 31 March 2009 the Group has completed or announced the transactions listed below. Sterling equivalents are based on exchange rates on the date of announcement or completion.

 

On 20 April 2009 the Group acquired an additional 15.0% stake in Vodacom for cash consideration of ZAR20.6 billion (£1.6 billion). On 18 May 2009 Vodacom became a subsidiary undertaking following the listing of its shares on the Johannesburg Stock Exchange and concurrent termination of the shareholder agreement with Telkom SA Limited, the seller and previous joint venture partner. During the period from 20 April 2009 to 18 May 2009 the Group continued to account for Vodacom as a joint venture, proportionately consolidating 65.0% of the results of Vodacom. The average percentage of results consolidated during the quarter was approximately 80%.

 

On 10 May 2009 Vodafone Qatar completed a public offering of 40.0% of its authorised share capital, raising QAR 3.4 billion (£0.6 billion). The shares were listed on the Qatar Exchange on 22 July 2009. Vodafone Qatar launched full services on its network on 7 July 2009.

 

On 9 June 2009 Vodafone Australia completed its merger with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison Australia Pty Limited, which, in due course, will market its products and services solely under the Vodafone brand. To equalise the value difference between the respective businesses Vodafone will receive a deferred payment of AUS$500 million. The combined business is being proportionately consolidated as a joint venture.

 

7

 

 

ADDITIONAL INFORMATION

SERVICE REVENUE – QUARTER ENDED 30 JUNE

 

				Group					Europe			Africa and Central Europe					Asia Pacific and Middle East
		2009		2008			2009		2008			2009		2008			2009		2008
		£m		£m			£m		£m			£m		£m			£m		£m
Voice revenue		6,946		6,587			4,538		4,560			1,232		1,035			1,177		992
Messaging revenue		1,144		1,067			903		855			127		110			113		102
Data revenue		888		664			708		552			90		54			90		58
Fixed line revenue		788		613			707		598			64		4			18		11
Other service revenue		325		271			208		203			60		42			93		61
Service revenue		10,091		9,202			7,064		6,768			1,573		1,245			1,491		1,224
									% change
				Group					Europe			Africa and Central Europe					Asia Pacific and Middle East
		£		Organic			£		Organic			£		Organic			£		Organic
Voice revenue		5.5		(5.6)			(0.5)		(8.8)			19.0		(4.6)			18.6		10.7
Messaging revenue		7.2		(1.5)			5.6		(2.1)			15.5		(0.2)			10.8		5.9
Data revenue		33.7		19.4			28.3		17.8			66.7		24.0			55.2		30.8
Fixed line revenue		28.5		6.6			18.2		5.7			100+		5.5			63.6		58.6
Other service revenue		19.9		7.9			2.5		(4.9)			42.9		4.0			52.5		57.1
Service revenue		9.7		(2.1)			4.4		(4.4)			26.3		(2.6)			21.8		14.3
				Germany					Italy					Spain					UK				Vodacom				India
		2009		2008			2009		2008			2009		2008			2009		2008		2009		2008		2009		2008
		£m		£m			£m		£m			£m		£m			£m		£m		£m		£m		£m		£m
Voice revenue		984		981			952		862			983		990			726		822		570		299		632		495
Messaging revenue		193		181			222		189			101		101			236		236		42		21		22		18
Data revenue		227		176			115		88			117		91			137		110		50		21		43		33
Fixed line revenue		462		412			128		97			77		60			7		8		41		–		–		–
Other service revenue		37		47			34		32			62		72			80		58		22		7		58		19
Service revenue		1,903		1,797			1,451		1,268			1,340		1,314			1,186		1,234		725		348		755		565
														% change
				Germany					Italy					Spain					UK				Vodacom				India
		£		Organic			£		Organic			£		Organic			£		Organic		£		Organic		£		Organic
Service revenue		5.9		(4.8)			14.4		3.1			2.0		(8.1)			(3.9)		(4.7)		100+		5.2		33.6		23.0

 

8

 

 

ADDITIONAL INFORMATION

MOBILE CUSTOMERS(1) — QUARTER ENDED 30 JUNE 2009

 

		AT 1 APR		NET		OTHER		AT 30 JUN
COUNTRY (in thousands)		2009		ADDITIONS		MOVEMENTS(2)		2009			PREPAID
Europe
Germany		35,471		(551)		–		34,920			54.1%
Italy		22,914		(301)		–		22,613			87.1%
Spain		16,910		81		–		16,991			40.8%
UK		18,716		(159)		–		18,557			57.4%
		94,011		(930)		–		93,081			62.2%
Other Europe
Albania		1,396		119		–		1,515			93.6%
Greece		5,906		151		–		6,057			71.5%
Ireland		2,175		(46)		–		2,129			69.5%
Malta		201		9		–		210			85.3%
Netherlands		4,618		31		–		4,649			40.7%
Portugal		5,639		33		–		5,672			79.0%
		19,935		297		–		20,232			68.1%
Europe		113,946		(633)		–		113,313			63.2%
Africa and Central Europe
Vodacom(3)		19,807		1,306		20,193		41,306			89.2%
Czech Republic		2,909		26		–		2,935			48.5%
Ghana		1,786		772		–		2,558			99.6%
Hungary		2,562		(58)		–		2,504			55.1%
Poland		3,555		(27)		–		3,528			53.3%
Romania		9,588		(55)		–		9,533			61.6%
Turkey		15,481		(516)		–		14,965			86.4%
		55,688		1,448		20,193		77,329			77.8%
Asia Pacific and Middle East
India		68,769		7,681		–		76,450			93.2%
Australia		3,970		16		(771)		3,215			46.5%
Egypt		18,941		1,429		–		20,370			96.0%
Fiji		339		(5)		–		334			96.2%
New Zealand		2,502		9		–		2,511			71.5%
Qatar		1		14		–		15			–
		94,522		9,144		(771)		102,895			90.4%
Group		264,156		9,959		19,422		293,537			76.5%
Reconciliation to proportionate
Group		264,156		9,959		19,422		293,537
Minority interests in above		(33,910)		(3,818)		(14,781)		(52,509)
Associates and investments:
Verizon Wireless		38,948		514		–		39,462			7.0%
Other		33,417		1,357		–		34,774			97.2%
		72,365		1,871		–		74,236
Proportionate(4)		302,611		8,012		4,641		315,264			83.2%
Europe		122,558		(417)		–		122,141			60.1%
Africa and Central Europe		58,372		1,041		5,412		64,825			80.7%
Asia Pacific and Middle East		82,733		6,874		(771)		88,836			97.7%
Verizon Wireless		38,948		514		–		39,462			7.0%

 

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 an additional stake in Vodacom in May 2009 and the merger of Vodafone Australia with Hutchison 3G Australia to form a joint venture in June 2009.
(3)	Vodacom refers to the Group’s interests in Vodacom Group (Pty) Limited and its subsidiaries including those located outside of South Africa.
(4)	Proportionate customers are based on equity interests at 30 June 2009. The calculation of proportionate customers for Vodafone Essar also assumes the exercise of call options that could increase the Group’s equity interest from 51.58% to 66.98%. These call options can only be exercised in accordance with Indian law prevailing at the time of exercise.

 

9