Vodafone Group saw a 6% increase in revenue and reduced losses for the year to March 31, but revenue and profitability in some of its core European mobile phone markets is shrinking. The changes are forcing the company to look to new markets for growth.
For its fiscal year, the company reported revenue of £31.1bn, up 6% on the previous year, while losses fell to £5.3bn, from £21.8bn a year earlier. The lower losses were the result of reductions in exceptional charges, which fell from £23.5bn a year earlier to £11.6bn, and the sale of some loss-making operations, notably in Japan.
The company's operating loss from continuing operations fell to £1.6bn from £14.1bn a year earlier. Excluding the exceptional impairment charges, the company reported operating profit of £9.5bn, up from £9.4bn a year earlier.
The impairment charges resulted from Vodafone's decision to reduce the book value of its operations in Germany and Italy, where it described market conditions as challenging. Full-year revenue in Germany dropped 5.4% to £5.4bn in 2007 from £5.8bn the year before. In Italy, revenue fell 2.7% to £4.2bn from £4.4bn a year earlier.
In Germany, price competition and an increase in long-term interest rates led to the company making an impairment charge of £6.7bn , while in Italy the charge of £4.9bn was a result of legislation affecting prepaid top-up card fees, and an increase in interest rates.
Vodafone warned that a decision by the European Parliament to regulate international roaming fees will hit revenue in 2008. In advance of the decision, the operator has already lowered roaming fees by 40%, it said.
For the fiscal year to March 31, 2008, the company forecast revenue of between £33.3bn and £34.1bn, and reiterated that growth will come from emerging markets where the company has spent billions of euros growing its market share.
Ovum principal analyst John Delaney said Vodafone's results were solid, but said the company's business is still too heavily concentrated in mature markets in Western Europe.
Vodafone is trying to change that: Earlier this year, it agreed to spend $11.1bn (£5.5bn) to acquire a majority stake in Indian mobile services operator Hutchison Essar. India offers huge potential for growth, with a population of 1.1bn and a mobile phone market penetration of only 14%, Vodafone said.