Vodafone Raises Forecast on Emerging Markets, Europe
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Half-Yearly Financial Report for the Six Months Ended 30 September 2007
Key highlights(1):
Group revenue of £17.0 billion, an increase of 9.0%, with organic growth of 4.4%
Europe: 2.0% revenue growth with outgoing usage up 24.0%, messaging revenue up 8.6% and data revenue up 40.8%, all on an organic basis
EMAPA: revenue growth of 39.9%, reflecting acquisitions in
Organic growth of 16.0%
Group data revenue up 48.8% to £1.0 billion, with organic growth of 45.1%
Group adjusted operating profit increased 1.6% to £5.2 billion, with organic growth of 6.1%
Free cash flow from continuing operations of £2.7 billion, reflecting 8.1% mobile capital intensity for
Adjusted basic earnings per share increased by 7.4% to 6.42 pence. Basic earnings per share of 6.22 pence
Proportionate mobile customer base of 241 million at 30 September
Results reflect rigorous execution against the Group's five strategic objectives
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Vodafone Group Plc, the world's biggest provider of mobile-phone services, raised its sales and profit forecasts on accelerating growth in India and Turkey, as well as higher revenue from wireless Internet access in Europe.
Net income in the six months to Sept. 30 was 3.29 billion pounds ($6.8 billion), or 6.19 pence a share, compared with a year-earlier loss of 5.1 billion pounds, or 8.88 pence, Vodafone said today in a statement. Profit beat the median estimate of 3.03 billion pounds in a Bloomberg News survey of analysts.
Vodafone rose the most since March 2006 in London trading. The Newbury, England-based company bought India's Hutchison Essar Ltd. in May to gain access to the world's fastest-growing major wireless market. Chief Executive Officer Arun Sarin also is cutting costs and getting more Web-usage revenue from customers in Europe, where most people already have a mobile phone.
``This totally vindicates Sarin's strategy,'' said Adam Steiner, head of research in London at SVG Capital Plc, which manages 4.5 billion euros ($6.6 billion) and whose biggest holding is Vodafone. ``The good news is data, Turkey and India.''
Sales rose 9 percent to 17 billion pounds, beating the estimate of 16.9 billion pounds in a survey of 11 analysts. Vodafone had 241 million customers at the end of September.
Vodafone shares rose 13.7 pence, or 7.5 percent, to 195.7 pence in London, the highest in more than six years. The shares have risen 38 percent this year, the second-best performance in the 20-member Bloomberg Europe Telecommunication Services Index behind Telefonica SA.
Higher Forecasts
Vodafone raised its revenue, adjusted operating profit and cash flow forecasts for fiscal 2008, which ends in March next year. Sales will be 34.5 billion pounds to 35.1 billion pounds, adjusted operating profit will be 9.5 billion pounds to 9.9 billion pounds and free cash flow will be 4.4 billion pounds to 4.9 billion pounds. The company raised its interim dividend by 6 percent to 2.49 pence a share.
In May, Vodafone said fiscal 2008 sales would be 33.3 billion pounds to 34.2 billion pounds, and forecast adjusted operating profit of 9.3 billion pounds to 9.8 billion pounds.
Earnings before interest, taxes, depreciation and amortization rose 5.2 percent to 6.57 billion pounds. Profit on that basis was forecast to climb to 6.41 billion pounds, the median estimate of 13 analysts.
`Hero'
The results and the forecast may deflect future criticism from some investors. At the annual meeting in July, shareholders backed Sarin and rejected a plan by a money manager to spin off Vodafone's stake in U.S. carrier Verizon Wireless. In 2006, Sarin was opposed by investors holding 9.5 percent of shares voted.
``The talk about Sarin being under pressure'' has ended, said SVG's Steiner. ``A couple more of these results and he can leave a hero.''
Vodafone's sales in Europe rose 2 percent to 12.7 billion pounds in the period. That compares with the median analyst estimate of 12.6 billion pounds.
The gains in data sales are a ``real trend'' and not just a one-time anomaly, Sarin told reporters on a conference call. ``Mobile data is a permanent phenomenon now,'' he said.
Data revenue for the company rose 49 percent to 1 billion pounds. At least eight analysts raised their first-half or full- year Vodafone forecasts in recent weeks. They said consumers are using more BlackBerry phones and Internet cards to access the Web on laptops, boosting data sales.
3G Growth
The gains in data were helped by Vodafone almost doubling the number of users on faster 3G, or third-generation, devices, to 21 million.
Vodafone was also helped by higher sales in new markets. In emerging markets, sales rose 40 percent to 4.3 billion pounds. Analysts forecast 4.27 billion pounds, according to the survey.
Vodafone posted a loss in the year-earlier period as it wrote down the value of its German and Italian units.
Sarin today said Vodafone may sell shares in Vodacom Group Ltd. in an initial public offering as part of a plan to raise its 50 percent stake in South Africa's largest wireless provider.
``The game plan would be that the remainder of the shares would be listed on the stock exchange'' after Vodafone raises its stake, Sarin told reporters. ``There will be more than the minimum amount listed on the stock exchange.''
He reiterated Vodafone's plan to boost its stake in Vodacom. Telkom South Africa Ltd. owns the other 50 percent of Vodacom.
Indian Acquisition
In May, Vodafone completed its $10.7 billion purchase of a stake in Hutchison Essar, India's third-largest mobile company. The unit added on average about 1.6 million net new users a month, or about 8 million users in the half-year period, bringing its total to 35.7 million at the end of September, Vodafone said.
Vodafone, which changed the name to Vodafone Essar Ltd., holds 52 percent of the Indian company. Mumbai-based Essar Group owns 33 percent, and Vodafone Essar Managing Director Asim Ghosh and Indian businessman Analjit Singh own the remaining 15 percent.
Chief Financial Officer Andrew Halford said a tax claim by the Indian government related to the purchase has ``no basis.'' The dispute will go to court in December to decide whether it warrants further inquiry.
``We are absolutely comfortable that there is no basis for us being taxed on the transaction,'' Halford said on the conference call. ``There is not an issue here.''
Vodafone also benefited in the period from Turkey's Telsim Mobil Telekomunikasyon Hizmetleri AS, which it bought in 2006 for $4.55 billion. The unit added 2.34 million users in the period, bringing its total to 15.7 million users.
Sarin told reporters that the company has ``a couple of opportunities'' for acquisitions in Asia, Africa and Central and Eastern Europe. He declined to be more specific.
He said Vodafone will consider ``one or two'' more ``small'' broadband acquisitions, similar to the company's planned purchase of Tele2 AB's Italian and Spanish broadband units.
Sarin, 53, received a 17 percent pay increase in the year ended in March to 6.14 million pounds.
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