$1bn Vodafone faces big bills

By PETER GRIFFIN IT editor

Vodafone passed the billion-dollar revenue mark in the year to March and added 318,000 customers in continuing growth for the company's New Zealand operation.

But Vodafone now faces a series of challenges in the form of a complex and expensive third generation (3G) network build and a Commerce Commission probe of the mobile termination rates it charges other carriers.

The company will not disclose revenue or profit figures for its New Zealand arm, but its 1.6 million subscribers spend an average of $672 a year, meaning revenue is more than $1 billion before handset sales are included.

Vodafone's capital expenditure is likely to be much heavier over the next few years, partly because it has just signed a 3G network deal with Nokia believed to be worth around $400 million.

"We've got to aggressively fund two lots of spending," said managing director Tim Miles. "We're spending a bloody fortune."

With the bulk of its 3G network sites acquired, Vodafone was nearly ready to begin building its new network, which will boast higher capacity and services such as phone-to-phone videoconferencing.

The company accounted for 76 per cent of new sign-ups overall in the year to March.

New Zealand now has just under three million subscribers - a mobile penetration rate of well over 70 per cent.

Miles said there would be "financial implications" for Vodafone if a Commerce Commission investigation of mobile termination rates found that they had to be lowered.

The mobile termination charge made up about 35 per cent of the cost of a fixed-line to mobile call.

The charge had dropped over the past few years, but Telecom had not passed savings on to customers.

UK-based Vodafone reported a loss of just over £9 billion ($26.5 billion) for the year to March, down 9 per cent on the previous year. Revenue was £33.6 billion, up from £30.4 billion.

Profit on continuing operations before tax, goodwill amortisation and exceptional items was up 19 per cent to £10 billion, the company said.

The goodwill amortisation was again high, reflecting a further tumble in the value of assets Vodafone paid top dollar for during the tech boom.

Miles said the amortisation had no impact on Vodafone's ability to spend on new networks and services.

"It's the writing off of goodwill, it has no cash impact whatsoever."