Monday, May 29, 2006

Vodafone Outlines Strategic Objectives

Vodafone reported an annual loss of £21.9 billion (US$41 billion) -- believed to be the largest amongst European operators, and outlined five key strategic objectives to transform the company into a total communications provider more able to handle intensifying price competition and regulatory pressure. Most of the loss was attributed to write-downs for the company's operations in Germany and Italy.

Vodafone also noted a number of key operational milestones:

  • a total customer base of 170.6 million, with organic growth of 15% for the year

  • mobile voice usage increased by 25% to 178.3 billion minutes, with organic growth of 19%.

  • non-messaging data revenue grew by 61% to £0.8 billion

Vodafone's five strategic objectives are:

  • Reduce costs and stimulate revenues in Europe -- Vodafone has taken the decision to outsource its IT Application Development and Maintenance activities with likely savings of approximately 25-30% within 3 to 5 years against current annual costs of £560 million. Further initiatives include the centralization of Network Supply Chain Management activities, with expected savings of 8% within 2 years, against a £3.3 billion annual external spend today. Also, Vodafone's regional consolidation of its data centres is expected to provide savings of 25-30% within 3-5 years, against a £320 million annual cost today.

    Regarding revenue stimulation, Vodafone aims to drive additional usage of voice and data services within its existing, sizable European base of customers. A variety of services are currently being rolled out as part of this effort, with high value customers being migrated from prepaid to contract plans, the introduction of "family plans" designed to stimulate greater usage, greater promotion of its Vodafone Passport roaming plan

  • Deliver strong growth in emerging markets -- Vodafone highlighted the benefits of establishing a dedicated business unit focused on capturing growth in these markets

  • Innovate and deliver on customers' total communications needs -- Vodafone's New Businesses unit will focus initially on three streams of activity, which together will be known as "Mobile Plus". The first stream is focused on extending Vodafone's service offerings in the home and at the office to meet customers' growing voice and broadband data service needs, including the provision of DSL. Vodafone Germany has today announced that it will launch bundled homezone products with DSL access provided by Arcor, in the third quarter of the current financial year. The second stream is focused on the integration of the mobile, PC and the internet at the application level, offering seamless interoperability of services. The third area of focus seeks to introduce advertising based services and business models that customers will view as the most appealing and acceptable.

  • Actively manage the portfolio to maximise returns -- the company will dispose of assets where it believes it cannot earn a superior return or investing in businesses where it believes it can create substantial additional value for shareholders.

  • Align capital structure and shareholder returns policy to strategy -- announced an increased, 60% dividend payout of adjusted earnings per share for FY05/06. Vodafone will continue to target a 60% payout in the future, with increases in dividends linked to the increase in its underlying earnings per share.

See also