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Vodafone meets forecasts but takes hit on India

Vodafone meets forecasts but takes hit on India
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First Published: Tue, May 18 2010. 11 55 AM IST
Updated: Tue, May 18 2010. 11 55 AM IST
London: Vodafone Group Plc, the world’s second largest mobile operator by revenue, posted full-year earnings in line with forecasts on Tuesday and raised its dividend policy despite taking a hit on its key Indian business.
The UK-based group, which has 341 million subscribers including its share of those from affiliates, said it would take an impairment charge of £2.3 billion ($3.3 billion) on its fast-growing Indian unit after facing new licence costs.
Higher spectrum costs in India and a fierce price war in the market had weighed on Vodafone ahead of the results, but its financial performance for the year was either in line or slightly ahead of forecasts.
Vodafone said its £1 billion cost savings programme was delivered a year ahead of schedule and a new two-year, £1 billion cost savings programme would begin.
It reported revenue and adjusted operating profit slightly ahead of expectations and core earnings in line with forecasts. Group revenue declined 2.3% to £44.5 billion after excluding benefits from foreign exchange and acquisitions.
Full-year core earnings or EBITDA reached £14.7 billion against an average forecast of 14.8 billion.
Dividend Growth
In the more mature European and central European operations, voice and messaging revenue declined and roaming revenue fell due to lower business and leisure travel. Enterprise revenue also declined in Europe as business customers reduced activity and headcount.
However, results in Africa and India remained solid due to continued growth and increasing market penetration.
On the outlook for 2010-11, it said it would target a three-year dividend growth of 7% per year. Its target for 2011 adjusted operating profit was also in line with analyst expectations.
“Vodafone’s financial results exceeded our upgraded guidance on all measures,” chief executive Vittorio Colao said. “We are creating a stronger Vodafone which is positioned to return to revenue growth during the 2011 financial year, as economic recovery should benefit our key markets.”
Vodafone is engaged in a spectrum auction in India which has exceeded most expectations. Bids for one set of nationwide third-generation mobile spectrum licences reached $3.54 billion on Monday, the 32nd day of the auction.
Most analysts had expected all-India spectrum to cost between $1.3 billion to $2 billion.
The third generation, or 3G, spectrum would allow firms to offer high-speed Internet and other premium services in the highly competitive market, which would prove highly attractive to major operators.
But on top of the auction, the Indian telecom regulator has called for mobile operators to pay a one-time fee for the 2G radio spectrum with high bandwidth which they won several years ago, a move that has drawn fierce criticism from all involved.
The combination could put pressure on Vodafone’s cash generation and raises the stakes for operators who will still have to spend billions more on equipment to build 3G networks in a market where call rates are among the cheapest in the world.
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First Published: Tue, May 18 2010. 11 55 AM IST
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