[Ben]

http://news.bbc.co.uk/1/hi/business/4437822.stm


Vodafone has reported rising user numbers and half-year revenues, but has warned of slower growth ahead.
The mobile phone giant said revenues rose 9% to £18.3bn for the six months to 30 September, with customer numbers up by 10 million.

Pre-tax profits slipped 9.5% to £4.1bn ($7.1bn), mainly because of a £515m hit from the sale of its Swedish business.

Vodafone warned that growth was set to slow next year, and its comments pushed the firm's shares down nearly 5%.

'Good progress'

The news of Vodafone's caution over future growth overshadowed its announcement that it was to increase its share buyback programme by £2bn to £6.5bn.

Vodafone chief executive Arun Sarin said the firm was doing well in a tough trading environment.

"We have grown our customer base to 171 million and made good progress in our 3G and other global products and services," Mr Sarin said.

"Vodafone Group continues to prosper in a competitive and challenging environment," he added.

"I am very satisfied with progress and believe that the group is uniquely placed to take advantage of the many opportunities to deliver shareholder value in the future."

Cautious outlook

Despite the dip in profits, earnings before interest, tax, depreciation and amortisation (EBITDA) rose 6.2% to £6.7bn - just above analyst forecasts.

However, margins slipped slightly to 37.9% from 39.4%.

The development prompted a more cautious outlook from Vodafone for the comong 2006/07 financial year - with the group warning cashflow, mobile revenue growth and mobile EBITDA margins outside Japan would fall.

In May this year Mr Sarin had warned that profitability could suffer in the face of increasing competition.

In the last six months the firm has agreed to spend £4.26bn on acquisitions, from South Africa to Eastern Europe and India, in an attempt to lift revenues.

Meanwhile, Vodafonealso pulled out of the Swedish market, selling its business to Norwegian telecoms group Telenor at the end of October.

At the time of the deal, Telnor revealed EBITDA at Vodafone Sweden fell to the equivalent of £35m in the first half of 2005, from £51.8m a year earlier.

A mixed bag for Vodafone then, but perhaps not entirely unexpected. They've got some really good deals on the table at the moment and they're definitely trying hard to compete for 3G takeup. Can profits go up while rapidly building out 3G networks and being pushed to a smaller margin on handsets and tariffs?

[Hands0n]

"customer numbers up 10 million" is not a figure to be dismissed. That is a good increase - although I suspect that it is a global tally and not just limited to the UK. But good nonetheless.

I would hope that the investors are taking a longer term look at Vodafone, as that is the nature of the business anyway. Good steady shareholder value should attract the medium-to-longer term speculator. A 5% dip in share price is not terribly significant, and now might be a good time to buy Vodafone if you are into the markets. That 5% could be changed into a much more positive increase during 2006 if their current marketing strategies pay off, which I'm sure they will [at least in the UK] where they are being quite innovative with the likes of Passport and Stop The Clock. Also their bundles are looking quite attractive in the face of the competition.

The way forward may well be to work to a smaller margin, but sell a whole load more of the stuff. Vodafone have the big advantage of being a global brand name, instantly recognised in all four corners of the world. They can capitalise on this with smaller margins. It is the big margins that are putting off or limiting their growth. The sooner Vodafone [at least] get into this the better. How else, for instance, are Vodafone going to cater for the Handset Lifestyle market? A huge untapped marketplace, just waiting for the brilliant white light of reason to hit it! With their buying power they could wipe the floor with the independent SIM-free sellers, and take out the eBay handset market in one fell swoop! Imagine that then :eek:

Be bold, Vodafone. Be very bold :)

[Ben]

Vodafone have details of the results available here: http://www.vodafone.com/section_with_article_teasers/0,3049,CATEGORY_ID%253D400%2526LANGUAGE_ID%253D0%2 526CONTENT_ID%253D230782,00.html?

Results PDF here: http://www.vodafone.com/assets/files/en/interim_results_2005_final.pdf

Apparently there are now 438,000 Vodafone 3G handset customers in the UK - 4.9 million across the group. Non-voice revenues are now at almost 20% in the UK.

[3GScottishUser]

They have acquired over 1 million new Uk users in the last 12 months and churn is slightly up on pre-pay and slightly down on contracts.

All things considered in a market as compeditive as the UK this has to be a pretty respectable result. With new management in place who have stated that they intend to be more aggressive the prospects look quite bright but have to be viewed alongside the rampant growth of 02 and their new owners plans and the investment of £1.5 billion announced by T-Mobile for their UK operation.

Fact is that the Uk is a very mature market now and it appears that the established operators are now going at it hammer and tongs to outdo each other so margins will suffer and the outlook posted by Vodafone can only be viewed as realistic.

If times are becoming tough for the big players, just think how much tougher they must be for recent start-ups.