Vodafone 2003 Annual Report Download - page 34

Vodafone Group Plc Annual Report & Accounts and Form 20-F 2003
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS Continued
Mobile equipment and other turnover increased 36% to £2,719 million for the
year ended 31 March 2003, compared with £2,003 million for the year ended
31 March 2002, largely attributable to the volume of gross customer connections
and upgrades in the year, the effects of the reduction in handset subsidies, in
line with the Group’s strategy, and the full year impact of J-Phone Vodafone.
Northern Europe
The increase in turnover in the Northern Europe Region comprised 7% growth in
revenues in Vodafone UK, from £3,763 million for the year ended 31 March
2002 to £4,026 million for the year ended 31 March 2003, and a 22% increase
in revenues in the other markets in the region.
The revenue increase in Vodafone UK was as a result of a larger customer base
and improved customer mix, activity levels and ARPU. The UK’s customer base
grew by 1% to stand at 13,300,000 customers at 31 March 2003, of which the
proportion of contract customers improved from 38% at 31 March 2002 to 41%
at 31 March 2003 as a result of the Group’s commercial policy to focus on high
value customers. Customer activity levels also improved in the 2003 financial
year, with total active customers increasing to 91% at 31 March 2003,
compared with 89% at 31 March 2002. ARPU grew by 6% to £292 for the year
ended 31 March 2003 reflecting the improved customer mix and increased
usage. Contract ARPU fell from £555 for the year ended 31 March 2002 to
£532 for the year ended 31 March 2003 due to the continued migration of
higher value prepaid customers to contract tariffs. However, this is showing signs
of stabilising, having fallen only £4 since 30 September 2002. Despite this
migration, ARPU for the prepaid customer base for the twelve months to
31 March 2003 increased to £125 from £118 for the twelve months to
31 March 2002, due in part to the disconnection of inactive customers. Churn
increased from 27.3% for the year ended 31 March 2002 to 30.0% for the year
ended 31 March 2003 as a result of prepaid churn increasing to 34.5%.
Contract churn reduced from 26.2% for the year ended 31 March 2002 to
23.1% for the year ended 31 March 2003.
The rest of the Northern Europe Region saw turnover increase from £1,669
million for the 2002 financial year to £2,031 million for the 2003 financial year,
partly due to the increased customer base, but mainly as a result of improved
customer usage, particularly of data services. In Ireland, strong growth in data
revenues resulted in data revenues representing 19.1% of service revenues for
the year ended 31 March 2003 and have exceeded 20% of service revenues
since December 2002. As a result of this growth in data usage, and continued
high levels of voice usage, ARPU in Ireland continues to be amongst the highest
in the Group’s European businesses.
Central Europe
Revenues for the Central Europe Region comprise those in respect of Vodafone
Germany and Vodafone Hungary.
Turnover in Vodafone Germany increased 13% (8% when measured in local
currency) to £4,646 million for the year ended 31 March 2003 from £4,112
million for the year ended 31 March 2002, driven by the improved mix in the
customer base and higher usage of both voice and data services. At 31 March
2003, Vodafone Germany had a customer base of 22,940,000, representing an
increase of 7% compared with 31 March 2002. The proportion of contract
customers rose by 4 percentage points over the 2003 financial year and
represented 47% of the total customer base at 31 March 2003. Customer
activity levels increased to 92% at 31 March 2003 compared to 91% at
31 March 2002, and customer churn decreased from 23.5% for the year ended
31 March 2002 to 21.2% for the year ended 31 March 2003 following a
significantly reduced contract churn rate, which decreased from 18.3% to
16.8%, for 2002 and 2003, respectively, and a decrease in the prepaid churn
rate from 27.1% to 24.8% for 2002 and 2003, respectively. ARPU improved
from 1298 for the year ended 31 March 2002 to 1313 for the year ended
31 March 2003, although contract ARPU decreased from 1559 to 1519 for the
same period as a result of higher contract penetration, including customer
migration from prepaid to contract tariffs. Prepaid ARPU increased from 1110 for
the year ended 31 March 2002 to 1130 for the year ended 31 March 2003,
reflecting higher usage levels.
In Vodafone Hungary, revenues improved 98% from £65 million for the year
ended 31 March 2002 to £129 million for the year ended 31 March 2003, as a
result of a combination of a 72% increase in customer numbers as the
operation continued to invest in the expansion of its digital network, and
increased usage.
Southern Europe
The Southern Europe Region saw turnover growth of 19% for the year ended
31 March 2003, comprising an 18% increase in revenues in Vodafone Italy (13%
increase when measured in local currency) from £3,711 million for the year
ended 31 March 2002 to £4,371 million for the year ended 31 March 2003 and
21% growth from the Group’s other interests in the region.
In Italy, Vodafone Italy’s turnover increased, driven almost entirely by a 16%
growth for the year ended 31 March 2003 in service revenues (11% when
measured in local currency). In addition, equipment sales also increased 36% for
the year ended 31 March 2003 as the benefits from increased handset prices
more than offset the lower gross customer additions. The increase in service
revenues was generated by the continued growth in the customer base,
improved customer retention and increased ARPU, as the effect of higher usage
levels more than offset the voluntary reduction in termination rates. The increase
in blended ARPU from 1345 for the year ended 31 March 2002 to 1347 for the
year ended 31 March 2003 reflects growth in contract ARPU from 1769 to
1818 and growth in prepaid ARPU from 1297 to 1298 for the same period. Data
revenues increased 50% largely as a result of increases in SMS messaging, and
represent 11.3% of service revenues at 31 March 2003.
At 31 March 2003, Vodafone Italy’s customer base stood at 19,412,000,
representing an increase of almost 10% from 31 March 2002. Of the total
customer base at 31 March 2003, 92% were connected to prepaid tariffs and
5% were considered inactive, compared to 91% and 6%, respectively, at
31 March 2002. Churn decreased from 18.9% for the year ended 31 March
2002 to 17.3% for the year ended 31 March 2003, primarily as a result of
commercial offers and incentives focussed on customer loyalty.
Turnover in the Group’s other interests in the Southern Europe Region
increased 21% from £3,032 million at 31 March 2002 to £3,680 million at
31 March 2003, driven by growth in Vodafone Spain and Vodafone Greece,
which saw turnover increase by 21% and 35%, respectively, (16% and 29%,
respectively, when measured in local currency) as a result of growth in the
customer base, with venture customer numbers in controlled operations
increasing by 15% since 31 March 2002, and improved ARPU. The Southern
Europe Region also experienced higher roaming revenues and significant
growth in data revenues from increased SMS activity during the financial year
ended 31 March 2003.
Americas
The Americas Region predominantly comprises the Group’s interests in Verizon
Wireless and Iusacell, both of which are accounted for using equity accounting.
Accordingly, the turnover from these operations are not included in the Group’s
statutory profit and loss account.