Vodafone 2003 Annual Report Download - page 40

Vodafone Group Plc Annual Report & Accounts and Form 20-F 2003
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS Continued
The Group’s main markets of Germany, Italy, the United Kingdom and, since
October 2001, Japan, all experienced increases in mobile data revenues, with SMS
revenues continuing to be the principal component of these revenue streams. In
J-Phone Vodafone, Internet data remains the principal component due to the high
proportion of J-Phone Vodafone’s customer base with Internet-capable phones.
Growth in J-Phone Vodafone’s data revenues were also boosted by the launch
during the period of “sha-mail”. An analysis of data revenues as a percentage of
total service revenues in the Group’s main markets is shown in the tables below.
Year to 31 March 2002
Market Messaging Data Total
The United Kingdom 10.6% 1.2% 11.8%
Germany 13.9% 0.5% 14.4%
Italy 8.5% 0.2% 8.7%
Japan 5.6% 9.5% 15.1%
March 2002 (month only)
Market Messaging Data Total
The United Kingdom 12.3% 1.1% 13.4%
Germany 14.5% 0.7% 15.2%
Italy 9.5% 0.3% 9.8%
Japan 6.6% 13.2% 19.8%
Other operations
Turnover for other operations in the 2002 financial year was £2,103 million
compared with £953 million in the 2001 financial year, primarily as a result of a
£1,105 million contribution from Japan Telecom following completion of the
Group’s acquisition of a controlling stake in October 2001. Turnover from other
operations comprised turnover relating to the Group’s interests in its fixed line
businesses, principally Arcor in Germany and Japan Telecom, and turnover from
Vodafone Information Systems GmbH (formerly Vodafone Telecommerce GmbH) a
German IT and data services business.
Total Group operating profit, before goodwill amortisation and exceptional
items
Before goodwill amortisation and exceptional items, total Group operating profit
increased 35% from £5,204 million for the year ended 31 March 2001 to
£7,044 million for the year ended 31 March 2002 due to a combination of the
first time inclusion of results from businesses acquired in the period, and organic
growth in other businesses.
Mobile businesses
Total Group operating profit, before goodwill amortisation and exceptional items,
for mobile businesses by region was:
Year ended 31 March Increase/
2002 2001 (decrease)
£m £m %
Northern Europe 1,685 1,284 31
Central Europe 1,543 1,097 41
Southern Europe 2,072 1,449 43
Americas 1,317 1,237 6
Asia Pacific 589 205 187
Middle East and Africa 161 213 (24)
7,367 5,485 34
Northern Europe
In Northern Europe the increase in operating profit, before goodwill amortisation
and exceptional items, includes the increase resulting from Vodafone Ireland.
Vodafone UK increased its total Group operating profit, before goodwill
amortisation and exceptional items, from £795 million for the year ended
31 March 2001 to £941 million for the year ended 31 March 2002 as it
delivered a re-balancing of resources into new product development, product
management and customer development activities as well as a 10% reduction in
headcount.
In the UK, the average cost to connect for contract customers rose slightly from
£114 for the year to 31 March 2001 to £116, reflecting the impact of the
increased proportion of higher value customers connected in the year. The
average cost to connect for prepaid customers fell from £53 to £26 for the year
to 31 March 2002, as a result of the decision to reduce distribution incentives to
improve the profitability of this market segment.
Central Europe
The majority of the increase in total Group operating profit, before goodwill
amortisation and exceptional items, in Central Europe arose in Germany,
principally as a result of the increase in service revenues and reduction in
equipment subsidies and lower connection commissions payable due to lower
customer growth. Results for Central Europe also benefited from inclusion of a
full year’s results from Swisscom Mobile.
In Germany, following the reduction in equipment subsidies and reduced
commissions, the total average cost to connect decreased to 181, with the cost
to connect for prepaid customers decreasing to 124. The cost to connect for
contract customers decreased to 1156.
Southern Europe
In Southern Europe, the improvement in total Group operating profit, before
goodwill amortisation and exceptional items, includes the effect of increases
resulting from the Group’s increased ownership interest in Vodafone Spain.
In Italy, total Group operating profit, before goodwill amortisation and exceptional
items, increased 25%, in line with growth in turnover.
In Italy, the average cost to connect for customers, already very low, slightly
declined from 137 to 135.
Americas
The increase in total Group operating profit, before goodwill amortisation and
exceptional items, in the Americas Region reflected the profitable trading of
Verizon Wireless during the period, the first time inclusion of results from
Iusacell, and reduced losses in the Group’s Globalstar service provider operations
in North America.
Asia Pacific
All of the increase in total Group operating profit, before goodwill amortisation and
exceptional items, in the Asia Pacific Region relates to J-Phone Vodafone and is
due to a combination of organic growth in J-Phone Vodafone and as a result of
J-Phone Vodafone becoming a subsidiary undertaking of the Group on 12 October
2001. Prior to 12 October 2001, J-Phone Vodafone was accounted for as an
associated undertaking. Total Group operating profit, before goodwill amortisation
and exceptional items, in the Group’s businesses in Australia, New Zealand and Fiji
remained stable at £66 million. Vodafone Australia faced particularly challenging
market conditions, with customer growth slowing from the levels experienced in
previous years. To address these challenges, the business was restructured to
improve operational efficiency, involving significant reductions in both capital and
operating expenditure, including a 28% reduction in the workforce.