Monday, November 10, 2008

Vodafone Revises its Growth Strategy

Vodafone reported first-half revenue of £19.9 billion, an increase of 17.1%. In Europe, revenue up 14.3%, with outgoing voice usage up 11.6%, while in emerging markets revenue growth was 25.7%, reflecting the acquisition in India. Meanwhile, group data revenue was up 48.6% to £1.4 billion. Vodafone's first half group adjusted operating profit was up by 10.5% to £5.8 billion and group EBITDA increased by 10.3% to £7.2 billion.

Citing the more difficult macro economic environment., slower growth in mature markets, increased competition and growing regulatory pressure, Vodafone outlined changes to its overall corporate strategy.

In terms of growth prospects, Vodafone said that while prices are likely to continue to decrease in Europe, the scope for usage growth remains significant, as demonstrated in markets such as the US and India. Mobile data is also proving to be in high demand: effective communications drive productivity benefits, meaning businesses and individuals need more, not less, of our services. A greater range of data devices and portable computers, at increasingly lower costs, are enlarging the addressable market.

On the cash cost side, Vodafone said only about a third of its operating costs are fixed, and about a quarter depend on growth in voice minutes and data traffic. Of the remaining component of costs, some 40%, is market driven, providing significant scope for to adapt in the event of greater economic pressures.

Going forward, Vodafone's strategy will now be focused on four key objectives: drive operational performance, pursue growth opportunities in total communications, execute in emerging markets and strengthen capital discipline. The company is less likely to pursue mega-merger to fuel growth.

The Group will seek to trim its current operating costs by approximately £1 billion per annum by the 2011 financial year to offset the pressures from cost inflation and the competitive environment and to enable investment in revenue growth opportunities.