The Newbury-based group confirmed its full-year guidance and doubled its cost-saving target to help fight sluggish demand during the economic downturn.
Revenue rose 9.3% to £21.76bn from £19.9bn a year ago – ahead of the City consensus of £21.6bn to £21.7bn. The company reported adjusted pre-tax profits of £5.48bn,
Vodafone declared an interim dividend of 2.66p a share, up 3.5% from a year ago – a move that will bring some pre-Christmas cheer to investors.
Chief executive Vittorio Colao said the group’s £1bn cost-reduction programme is expected to be delivered a year ahead of plan, and be extended by an additional £1bn by 2012.
“At the same time, we have maintained our capital investment at £2.6bn in the first half, delivering further improvements in network quality and performance for our customers,” he said.
The company, which has already announced plans to share its network infrastructure in the UK with O2 and merge its under-performing Australian business with 3, reckons it can squeeze more savings out of its networks across the world. Vodafone warned there will also be job losses in coming months. It has already cut more than 500 jobs in the UK.
Vodafone has also continued to develop services for businesses and consumers, such as Vodafone One Net and Vodafone 360, and to expand its fixed line services.
“We will continue our focus on the delivery of our growth strategy, particularly in data services,” Colao added.
Since taking the reins of Vodafone in July 2008, the chief executive has turned his attention to cash generation and shareholder returns by developing the group’s high-growth operations in Asia, Africa and central Europe. He has also halted the company’s expansion in emerging markets such as India and Turkey, a key strategy of former group chief executive Arun Sarin.
Earnings before interest, tax, depreciation and amortisation, the key figure tracked by City analysts, rose 2.9% to £7.46bn for the six months ended September 30, below market forecasts of £7.58bn, lifted by currency gains and cost-cutting. That compares with £7.24bn during the same period a year earlier.
Vodafone generates around 7% of Ebitda in the UK and the rest from its international operations.
On an organic basis, stripping out acquisitions, disposals and currency movements, Ebitda fell 7.9% and revenue was down 3%.
Free cash flow before licence and spectrum payments rose 29% to £4bn from £3.1bn. Vodafone expects full-year adjusted operating profit to come within the range of £11bn to £11.8bn, and free cash flow, excluding licence and spectrum payments, around the upper end of £6bn to £6.5bn range.
Like many of its rivals, Vodafone is grappling with sliding revenues in its mature markets due to heightened competition and new regulation. It is facing similar pressures in emerging markets like India and South Africa, although these remain growth areas.
By reiterating guidance and extending cost cutting, it is taking the same moves undertaken by integrated operators in recent weeks and responding to the economic downturn.
In Europe, Vodafone’s biggest market by revenue, there are a few signs of improvement. Vodafone saw usage growth stabilise in the fiscal second quarter compared with the previous quarter as slightly more handsets were sold. Sales fell by 7.5% in Spain but that was better than the 8.7% fall in the first quarter.
In Turkey, where the company has struggled, revenue declines also slowed. India remains attractive, but “the competitive intensity will remain there until consolidation”, Colao said.
In the UK, service revenues dipped to £1.17bn in the three months to end September from £1.9bn in the previous quarter as the company scrambled to offer better tariffs to lure cash-strapped consumers in the fiercely competitive market. As a result, Vodafone added 147,000 new customers in the three months to end September, taking its base to 18.7 million. However, the company faces several tough months in its home market because Orange has just started offering the iPhone to British customers, bringing to an end O2’s two-year exclusive Apple contract.
Vodafone will not be able to sell the Apple device in the UK until early next year, although it is hoping that in the meantime its short-term exclusive deal to stock the new version of the BlackBerry Storm will help offset some of the allure of the iPhone.
The recently agreed merger of T-Mobile and Orange in the UK will see Vodafone relegated from second to third place in the sector as the duo take top position with an estimated 37% market share.
Most telecoms analysts yesterday were generally positive about Vodafone’s performance to date but broker Collins Stewart highlighted “structural and cyclical issues” in a research note and slapped a “sell” tag on Vodafone shares, which closed 2p, or 1.4%, down at 135.95p in London dealing.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article