Vodafone put out its annual results this week, showing that it’s on the road to recovery and that its cost cutting exercises were more than justified ‘ it has already cut £1 billion in costs since 2008 and then went and promised another £1 billion going forwards.
The story was one of growth in new markets and tightening the belt its as older, established European markets shrank slightly, partly due to recession, and the falling away of enterprise revenues, and to lower roaming charges due to less business travel. Results in Africa and India remained robust driven by continued GDP growth and increasing market penetration.
In total revenues were £44.5 billion, up 8.4% from £41 billion last time, but much of this came from new or acquired businesses, and organic revenues actually fell by 2.3%. The company says that during 2011 it expects to begin organic growth once more. Its earnings before interest, taxes, depreciation and amortization was £14.7 billion, just up 1.7%, but again shrinking 7.4% on an organic basis.
Operating profit was largely in line with last year apart from the fact that last year there were £3.8 billion more in impairments which meant that and profit after tax this time finished far higher at £8.6 billion. The company reduced its net debt by almost £1 billion to £33.4 billion, but this was mostly due to currency gains. During the year Vodafone returned £4.1 billion to shareholders as dividends. The company says that it now has 341 million customers globally.
What is interesting is the changing shape of the world’s largest cellular group by revenue. It now generates 33% of all of its services revenues from non-voice. This includes mobile data and fixed broadband services, both of which grew rapidly throughout the year.
Vodafone said that it’s fixed line revenue, an area we are interested in because it give the company any opportunity of entering IPTV markets, grew by 7.9% to £3.3 billion with strong broadband customer growth taking the group’s fixed broadband customer base to 5.6 million, up around 1 million over the year. The profit on these business is far less, at around 14% in EBITDA terms, and this business was broadly free cash flow neutral after capital expenditure of £450 million.
In Germany, where it continues to own Arcor, acquired years ago when it bought Mannesmann, fixed line revenue growth was 1.3% supported by a 400,000 increase in fixed broadband customers to 3.5 million. In Italy it moved to 1.3 million broadband customers and in Spain to 600,000.
There has been no news from the Vodafone Germany operations since it withdrew its IPTV offering there, which was based on older Alcatel middleware, which we understood was being replaced at some stage by Microsoft Mediaroom.
Earlier in May Vodafone said that it would work with FastWeb and Wind Telecomunicazioni on a plan to invest €2.5 billion in an Italy-wide fiber optic network, reaching 10 million people in Italy’s 15 largest cities. So Vodafone figures are set to see this continued drift towards lower margin wireline in it core territories.