Vodafone stops buying and focuses on increasing profit

By LIZ VAUGHAN-ADAMS

Vodafone, which was plunged into the red last week as hefty acquisition costs filtered through its accounts, indicated that its buying spree was halting and its focus would shift to increasing profit margins and introducing new services.

Vodafone is thought to be planning a consumer launch of its next-generation mobile phone service GPRS "very soon."

The company is also still planning to launch third-generation (3G) services in the second half of next year.

But it admitted that the 3G presentation could slip back.

Chief executive Chris Gent said: "Following the recent introduction of changes to our commercial policies, the focus in this financial year, as we move to new data services, will be on continued margin improvement and cash-flow growth, rather than customer growth and market share."

Mr Gent said the cost to Vodafone of building 3G infrastructure across Europe would total £8 billion ($27.6 billion) to £10 billion, including a £1 billion to £1.5 billion investment in Britain.

In the year to March 31, Vodafone reported a pretax loss of £8 billion after having to account for an £11.9 billion goodwill charge from acquisitions, mainly from buying Mannesmann.

Last year, the company reported profits of £1.3 billion.

Shares in Vodafone closed down 3.5 per cent at 188.5p.

While Mr Gent did not rule out further acquisitions, he said new purchases were unlikely to match recent scales.

He indicated that Vodafone would not make any short-term moves to increase its 15 per cent stake in Cegetel, the French telecoms business.

That was because the major shareholder, Vivendi, was showing no signs of relinquishing control.

Vodafone was not looking to make a move on Singapore's MobileOne mobile operator either, Mr Gent said.

But it was "keeping its options open" on taking control of Japan Telecom.

Vodafone's underlying profits for the 12 months, or proportionate Ebitda earnings, came in at £7 billion, compared with £5.5 billion last year.

Sales rose to £21.4 billion from £16.6 billion. The figures were in line with analysts' estimates.

Andrew Beale, an analyst at Deutsche Bank, said the story at Vodafone was now one of "trying to leverage the revenue side with new services and increased usage" as well as getting "operating efficiencies."

Vodafone reported this week that non-voice services - including text messaging, data and internet services - now accounted for 8 per cent of the company's service revenues.

- INDEPENDENT