5/29/2007 11:15:00 AM
Voda UK profits down by a quarter
Vodafone UK revealed a 27% drop in operating profits for the year to the end of March 2007, despite a slight increase in overall revenue. The company attributed a 3.7% cut in margins to intense competition across all its European businesses.
Profits in the UK business dipped from £698m to £511m despite a 1.5% increase in revenues.
New bundled tariffs introduced by Vodafone last summer were attributed as one of the major factors in the hefty cut in margins. Vodafone launched the tariffs in response to the domination of T-Mobile’s Flext tariffs for the first half of 2006.
A spokesman said: ‘Usage has gone up but pricing has gone down, but we are seeing some quite good customer additions in the UK. Another factor has been that termination rates have been coming down for a while. There are a number of positive steps our UK team is doing to mitigate the tough market conditions.’
The UK division added 635,000 customers (factoring in the number of customers leaving) between April and December last year, and 472,000 in the first three months of 2007. It takes its UK base to 17.4 million, split 40:60 between contract and prepay.
Despite the difficulties, Vodafone has been a strong performer compared to other networks.
Group chief Arun Sarin, said: ‘We expect market conditions to remain challenging for the year ahead in Europe, notwithstanding continued positive operating trends in data revenue and voice usage.
Profits for the group were down by 4.6% to £9.3bn, with Sarin expecting that figure to remain the same next year despite an expected increase in revenue.
Vodafone is now looking at emerging markets such as India and Turkey, while in Europe it will look to new sources of revenue such as advertising, broadband and possibly mobile internet services geared to consumers similar to 3’s ‘X Series’.