Vodafone 2004 Annual Report Download - page 35

Annual Report 2004 Vodafone Group Plc
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Northern Europe
Local
Years ended 31 March Change currency change
2004 2003
£m £m % %
Turnover
Germany
– Voice services 4,123 3,699 11 3
– Data services 895 728 23 14
– Total service revenue 5,018 4,427 13 5
– Equipment and other 386 219 76 63
5,404 4,646 16 8
Other Northern Europe 1,949 1,531 27
7,353 6,177 19
Operating profit*
Germany 1,741 1,435 21 9
Other Northern Europe 1,451 1,077 35
3,192 2,512 27
* Total Group operating profit before goodwill amortisation and exceptional items
Germany
Vodafone Germany performed well in the year, further improving its operational
performance.
Turnover in Germany increased by 8% when measured in local currency, reflecting the
increase in the customer base offset by marginally lower ARPU. Germany represents
the largest mobile market in Europe in terms of customer numbers and,
notwithstanding a 10% growth in the market for the 2004 financial year, penetration,
at an estimated 80%, is still relatively low. Vodafone Germany’s customer base
increased by 9% in the 2004 financial year. The mix of contract customers increased
from 47% at 31 March 2003 to 49% at 31 March 2004, although new contract
customers have been, in general, lower usage customers than the existing customer
base. As a result, contract ARPU fell from a519 for the 12 months ended 31 March
2003 to 1494 for the 12 months ended 31 March 2004. Prepaid ARPU remained
stable at 1130 during the year after increasing over the course of the prior year. Data
revenues increased by 14% when measured in local currency and represented 17.4%
of service revenues, up from 16.4% in the previous financial year, primarily due to
Vodafone live!™ Increased investment in acquisition and retention has contributed to
the improved churn rate and high customer growth.
Operating profit before goodwill amortisation and exceptional items improved by £306
million to £1,741 million, principally driven by cost efficiencies in the second half of
the year, particularly in network and IT costs. Acquisition costs as a percentage of
turnover were also lower over the Christmas period, in comparison to the same period
in the prior financial year, due to lower handset subsidies and trade commissions.
These benefits were partially offset by higher depreciation and licence amortisation
costs as the 3G network was brought into use in February 2004.
Other Northern Europe
Proportionate customers for the other markets in the Northern Europe region
increased by 11% to 15,575,000 in the period, including the effect of stake increases
in the Netherlands, from 97.2% to 99.9%, and Hungary, from 83.8% to 87.9%.
The increase in turnover was primarily as a result of growth in the Netherlands and
Hungary. In the Netherlands, the increase in revenues was principally driven by an
increased contract customer base and higher data service usage and revenue. In
Hungary, turnover growth followed the increase in the customer base.
Operating profit, before goodwill amortisation and exceptional items, grew principally as a
result of an increase in the profits of the Group’s associated undertaking, SFR. This
business reported a strong financial performance, with revenue increasing as a result of
an 8% increase in the customer base to 14,370,000, and higher data revenue. Blended
ARPU was broadly unchanged from the previous year. The reported results also benefited
from the full year impact of an effective stake increase in the mobile business of SFR
from 31.9% to 43.9% in the second half of the previous financial year.
In the Netherlands, the operating profit before goodwill amortisation and exceptional
items increased following the growth in the customer base, partially offset by higher
acquisition and retention costs. In Sweden, operating expenses increased significantly
as a result of the cost of building out 3G network coverage, which led to a decrease in
operating profit before goodwill amortisation and exceptional items.
Partner Network Agreements were signed in the year with Og Fjarskipti in Iceland, Bite˙
GSM in Lithuania and LuxGSM in Luxembourg.
Southern Europe
Local
Years ended 31 March Change currency change
2004 2003
£m £m % %
Turnover
Italy
– Voice services 4,346 3,656 19 10
– Data services 668 463 44 34
– Total service revenue 5,014 4,119 22 13
– Equipment and other 262 252 4 (3)
5,276 4,371 21 12
Other Southern Europe 4,500 3,680 22
9,776 8,051 21
Operating profit*
Italy 2,143 1,588 35 23
Other Southern Europe 1,156 907 27
3,299 2,495 32
* Total Group operating profit before goodwill amortisation and exceptional items
Italy
Vodafone Italy produced another strong set of results, in spite of the increasingly
competitive and highly penetrated market.
In local currency, turnover increased by 12% driven by a 13% growth in service
revenues, partially offset by a 3% decrease in equipment and other revenues arising
from reduced handset sales. The increase in service revenue was driven by the larger
customer base and increased usage, particularly of data services, partially offset by
the impact of regulatory changes on interconnect rates. Data revenues improved
significantly, to represent 13.3% of service revenues for the year (2003: 11.3%),
mainly due to SMS but also the positive contribution from Vodafone live!™ and Mobile
Connect card. Blended ARPU increased by 4% to 1361 following the rise in prepaid
ARPU from 1298 to 1309 and contract ARPU increased by 10% to 1900.
Vodafone Italy responded to increased competition levels in the Italian market with
continued investment in the Vodafone One loyalty scheme and retail stores, coupled
with a strong focus on business and higher value customers. This contributed to the
increase in ARPU and the reduction in churn.
Operating profit before goodwill amortisation and exceptional items grew significantly,
partially as a result of a reduction in acquisition and retention costs, as a percentage of
revenue, operational efficiencies and no accrual being made for a contribution tax levied