Vodafone doubles annual profits to £8.7bn

Vodafone doubles annual profits to £8.7bn

Vodafone's annual profits more than doubled to £8.7bn with the help of a £1bn cost savings programme, the company reported today.

The operator now has 341 million customers, with 8.5 million net additions in the past three months.

However the UK saw a 4.7% decline in revenues, due to the termination rate reduction introduced last year, intense competition, increased customer use of bundles and lower roaming revenue.

Vodafone said these factors were partially offset by higher messaging revenue, strong growth in data revenue driven by the success of mobile internet bundles and higher wholesale revenue derived from existing MVNO agreements.

The decline in the fourth quarter in the UK slowed to 2.6%, driven by higher data growth and new customers added through new products and expanded indirect distribution channels.

Vodafone said the 17.7% decline in EBITDA was partially offset by a cost cutting drive which included streamlined processes, outsourcing and a cut in publicity and consultancy.

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.'

The company said that a third of its income was now coming from products other than mobile voice, with fixed-line and mobile broadband services continuing to grow strongly.
Vodafone also performed well in emerging markets, with India showing strong revenue growth. However Vodafone will take an impairment charge of £2.3 bn on its Indian division as a result of the introduction of spectrum charges for national mobile licences and an intense price war.

Analysts said the move showed Vodafone emerging strongly from the recession.

Richard Heap, head of telecoms at BDO LLP said Vodafone had 'successfully weathered the downturn' and poised to take advantage of the upturn.

He added: 'It has successfully managed its working capital and reduced its cost base, which has resulted in positive cash flows and a strong balance sheet position. This means that the company is in a good place to invest further in infrastructure and make in-roads in to new territories whilst many other organisations are still taking hits from the recession.

‘Vodafone has also been shrewd to focus on its ambition to be a total communications provider and now generates a third of its revenue from non-voice services such as broadband and mobile data, with the iPhone playing a huge part. As demand for data services increases we may see capacity problems across the sector, but Vodafone's strong cash position means it will be better placed than its competitors to invest in incremental capacity.

'Whilst the merger of T-Mobile and Orange means that Vodafone is no longer the number one mobile provider in the UK, with these results they emerge as a stronger global brand, ready to capitalise on the seemingly limitless smartphone market.’

Written by Mobile Today
Mobile Today

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