Vodafone Revenues Rise, Losses Fall

— -- Vodafone Group PLC saw a 6 percent increase in revenue and reduced losses for the year to March 31, but revenue and profitability in some of its core European mobile phone markets is shrinking. The changes are forcing the company to look to new markets for growth.

For its fiscal year, the company reported revenue of £31.1 billion (US$61 billion), up 6 percent on the previous year, while losses fell to £5.3 billion, from £21.8 billion a year earlier. The lower losses were the result of reductions in exceptional charges, which fell from £23.5 billion a year earlier to £11.6 billion, and the sale of some loss-making operations, notably in Japan.

The company's operating loss from continuing operations fell to £1.6 billion from £14.1 billion a year earlier. Excluding the exceptional impairment charges, the company reported operating profit of £9.5 billion, up from £9.4 billion a year earlier.

The impairment charges resulted from Vodafone's decision to reduce the book value of its operations in Germany and Italy, where it described market conditions as challenging. Full-year revenue in Germany dropped 5.4 percent to £5.4 billion in 2007 from £5.8 billion the year before. In Italy, revenue fell 2.7 percent to £4.2 billion from £4.4 billion a year earlier.

In Germany, price competition and an increase in long-term interest rates led to the company making an impairment charge of £6.7 billion, while in Italy the charge of £4.9 billion was a result of legislation affecting prepaid top-up card fees, and an increase in interest rates.

Vodafone warned that a decision by the European Parliament to regulate international roaming fees will hit revenue in 2008. In advance of the decision, the operator has already lowered roaming fees by 40 percent, it said.

For the fiscal year to March 31, 2008, the company forecast revenue of between £33.3 billion and £34.1 billion, and reiterated that growth will come from emerging markets where the company has spent billions of euros growing its market share.

Ovum Ltd. principal analyst John Delaney sees Vodafone's results as solid, but said the company's business is still too heavily concentrated in mature markets in Western Europe.

Vodafone is trying to change that: Earlier this year, it agreed to spend US$11.1 billion to acquire a majority stake in Indian mobile services operator Hutchison Essar Ltd. India offers huge potential for growth, with a population of 1.1 billion and a mobile phone market penetration of only 14 percent, Vodafone said.

In 2007, Vodafone saw revenue rise in several of its emerging markets, including Egypt, Romania and South Africa.