By PETER GRIFFIN telecoms writer
Vodafone's dream run has continued, with the mobile network operator reporting a $90 million net profit for the year to March 30, nearly double that of its previous financial year.
But the company is playing down its profitability amid growing concerns from the Telecommunications Users Association (Tuanz) that New Zealanders are facing some of the highest mobile phone rates in the OECD.
According to Vodafone's annual report, just released to the Companies Office, pretax profit rose to $136 million from $77 million in the previous year.
Revenue was up 20 per cent at $841 million. Vodafone finished its 2002 financial year with a $49 million net profit.
But managing director Tim Miles was cautious, more pleased about the strong revenue growth than the bottom line.
He said the profit was not so spectacular when measured against the $1.2 billion Vodafone had invested in its New Zealand business.
"While it's going the right way it's hardly what you'd call a banner year. This year you're looking at 7.4 per cent return on assets."
Vodafone would like to see that figure improve. But as it is likely to increase investment by "hundreds of millions of dollars" to build a third generation (3G) mobile network, increasing the rate of return might be difficult in the short term.
"We spent a huge amount of money with no return for a long time.
We're at the point now where we're profitable. But we're spending a huge amount below the line," Miles said.
In the 2003 period Vodafone paid $46 million in tax, making it one of the larger tax-paying multinationals based in New Zealand.
Very little of the capital expenditure during the period was related to the 3G network build.
In its Topics magazine Tuanz said it was good to see Vodafone profitable, but the organisation had over-riding concerns about NZ's position as the fourth most expensive country in the OECD in terms of high-use mobile pricing.
"That puts us ahead of such illustrious mobile markets as Hungary, Poland and Turkey - but behind Mexico and the Czech and Slovak republics," the magazine said.
Miles said he could produce rival research to show NZ mobile rates compared favourably.
He also said that New Zealand's diverse terrain made mobile coverage more expensive to provide than was the case elsewhere.
"You have to put coverage in many difficult places considering the sort of terrain we have."
Tuanz chairman Graeme Osborne said NZ faced a premium of up to 20 per cent in business mobile pricing over other countries.
The area of concern for Tuanz lay in fixed line to mobile interconnection pricing, which was negotiated between operators such as Vodafone and Telecom.
"Those charges are hidden from people, they're not seen until people get to them on their monthly bill," said Osborne. "That's an area some countries have regulated because they believe there isn't enough change occurring."
Vodafone's NZ returns starting to flow
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