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Vodafone Group Plc
Annual Report
For the year ended 31 March 2005
Building
our future

Table of contents

  • Page 1
    Vodafone Group Plc Annual Report For the year ended 31 March 2005 Building our future

  • Page 2
    Chief Executive's Review Executing our strategy Our vision is to be the world's mobile communications leader enriching our customers' lives through the unique power of mobile communications XX | XX

  • Page 3
    ... Information Governance Board of Directors and Group Management Directors' Report Corporate Governance Board's Report to Shareholders on Directors' Remuneration Employees Corporate Responsibility and Environmental Issues Financials Consolidated Financial Statements Report of Independent Auditors...

  • Page 4
    ...GAAP information". Solely for convenience, amounts represented below in dollars have been translated at $1.8888: £1, the Noon Buying Rate on 31 March 2005. At/year ended 31 March 2005 $m 2005 £m 2004 £m 2003 £m 2002 £m 2001 £m Consolidated Profit and Loss Account Data UK GAAP Group turnover...

  • Page 5
    ... share by ten, the number of ordinary shares per ADS. Dividend per ADS is calculated similarly. (6) The final dividend for the year ended 31 March 2005 was proposed by the directors on 24 May 2005. (7) For the purposes of calculating these ratios, earnings consist of income on ordinary activities...

  • Page 6
    ... announced the full roll-out of our consumer 3G offering across 13 markets. This was an important step in our 3G strategy and followed the success of the Vodafone Mobile Connect 3G/GPRS data card introduced in February last year. The enhancements that 3G brings will enable us to build on the success...

  • Page 7
    ... Deputy Chief Executive on 1 January this year. In this role, Sir Julian leads a new function, Global Business Development, which is responsible for delivering Vodafone's products and services portfolio into the Group's affiliates and Partner Networks. The Global Business Development team has...

  • Page 8
    ... we are half way through a two year plan to turnaround our business. This plan has three main objectives: to improve the attractiveness of 3G handsets and content in that market, to increase the effectiveness of our distribution channels and to improve the coverage of our 3G network. Japan remains...

  • Page 9
    ...they were in the office. We have expanded our push email offerings recently and are also working closely with a number of leading IT industry players to bring historically fixed line internet services to the mobile world. Customer management With rising customer expectations and increasing choice...

  • Page 10
    ... handsets • Focus on customisation and exclusivity • Balance local needs against global scale Service Platforms • Consolidate European service platforms • Establish regional hosting centres in Germany and Italy • Migrate operating companies to hosting centres over next 18 months Roaming...

  • Page 11
    ... share purchases to £4bn in the year March 2005 £2bn £4bn March 2004 £1.3bn Total £1.0bn £2.3bn March 2003 £1.1bn £nil Total £1.1bn Build the Best Global Vodafone Team Be a Responsible Business Provide Superior Shareholder Returns Cash Dividends Cash Share Purchases Strategy...

  • Page 12
    ... of Group mobile telecommunications businesses Licences and network infrastructure - Global services One Vodafone Products and services Marketing and brand Distribution Multinational corporates Research and development - Regulation Non-mobile Telecommunications History and Development of the Company...

  • Page 13
    ... brand. Networks in which the Company does not have a controlling interest operate under the following brands: Belgium - Proximus; France - SFR; Poland - Plus GSM; Switzerland - Swisscom Mobile; Romania - Connex; United States - Verizon Wireless; Fiji - Vodafone; China - China Mobile; South Africa...

  • Page 14
    ... up to seven times faster than a dial-up modem. Vodafone has expanded its service offering on 3G networks with high speed Internet and e-mail access, video telephony, full track music downloads, mobile TV and other data services in addition to existing voice and data services. The Group has secured...

  • Page 15
    ... and Partner Networks which provide this offering. The Group is integrating public access W-LAN services into its Vodafone Mobile Connect family of data devices, software and services in a comprehensive mobile data offering. Roaming services are being introduced among several of the Group companies...

  • Page 16
    ...and company applications with access speeds up to 384 kilobits per second when connected to a 3G network. The Vodafone Mobile Connect 3G/GPRS data card has now been rolled out across 17 markets, including the Group's associated undertakings in France, Belgium and South Africa and the Group's Partner...

  • Page 17
    ...Vodafone jointly developed and launched the Global Phone roaming service to address the needs of US based frequent world travellers across their combined global footprint. The Global Phone service offers a choice of two integrated GSM/CDMA handsets that work both in the USA on Verizon's CDMA network...

  • Page 18
    ...world-class service to Vodafone's Multinational Corporate customers. The new business unit will aim to ensure consistent delivery across Vodafone's markets for product offerings, customer service and pricing, underpinned by first-rate account management. Research and development The Group Research...

  • Page 19
    ... applied in retail markets for international roaming services. To date, the Commission has not published the results of this review. Officials of the Commission conducted unannounced inspections of the offices of mobile network operators in the UK and Germany, including Group subsidiaries, in July...

  • Page 20
    ..., accounting separation and transparency. Vodafone Hungary has appealed this finding. The NRA is developing a LRIC Model to determine cost oriented mobile call termination rates. In its review of the market for wholesale mobile access and call origination, the NRA found that no mobile network...

  • Page 21
    ... and the Polish NRA has commenced its market reviews. The NRA has commenced a process to issue a new 2G licence and a new 3G licence. This process is expected to be concluded in 2005. South Africa In September 2004, the Minister of Communications announced a number of decisions which aim to further...

  • Page 22
    ... of Eircell Limited, a mobile network operator in Ireland, following a public offer for shares which closed in May 2001. • The acquisition of the Group's operations in Japan. The Group's initial investment in Japan resulted from the AirTouch merger and between the date of the merger and October...

  • Page 23
    ... the 2003 financial year, the Group made market purchases of shares which increased the Group's effective interest to 64.0% at 31 March 2003. On 1 December 2003, following the purchase of a 9.433% stake in Vodafone Greece from Intracom S.A., the Group announced a public offer for all remaining...

  • Page 24
    Business Overview continued Portugal During September 2002, the Group increased its effective interest in its then listed subsidiary Vodafone Portugal to 61.4% through market purchases. On 28 February 2003, the Company announced a tender offer to acquire, for cash, all remaining shares not held by...

  • Page 25
    ... (Hong Kong) Limited ("China Mobile") which sets out the principal terms for co-operation between the two parties in mobile services, technology, operations and management. On 18 June 2002, the Group invested $750 million in China Mobile and obtained the right to appoint a non-executive director to...

  • Page 26
    ...of 3G technology and services and Vodafone live! and other new or existing products, services or technologies in new markets; • the ability of the Group to offer new services and secure the timely delivery of highquality, reliable GPRS and 3G handsets, network equipment and other key products from...

  • Page 27
    ... in its mobile networks due to increased usage and the need to offer new services and greater functionality afforded by 3G technology. Accordingly, the rate of the Group's capital expenditures in future years could remain high or exceed that which it has experienced to date. Business | 25

  • Page 28
    ... relates to the tax treatment of profits earned by the holding company for the accounting period ended 31 March 2001. The CFC Regime serves to subject a UK resident company to corporation tax in the UK in respect of the profits of a controlled foreign company in certain circumstances. Vodafone...

  • Page 29
    ... potential UK corporation tax liability and related interest expense that may arise if the Company is not successful in its challenge of the CFC Regime. The provisions relate to the accounting period which is the subject of the proceedings and accounting periods after 31 March 2001 to date. Please...

  • Page 30
    ... Vodafone Group Plc is the world's leading mobile telecommunications company, with equity interests in 26 countries across Europe, the United States and Asia Pacific. The Group had 154.8 million registered proportionate mobile customers based on ownership interests at 31 March 2005. Partner Network...

  • Page 31
    ...non-service revenue, including, but not limited to, equipment and accessory revenue and connection and upgrade fees. Net other revenue This measure is presented in the trading results for the mobile telecommunications business and the Group's key markets. Net other revenue excludes revenue relating...

  • Page 32
    ... lives of Group assets are determined by management at the time the asset is acquired and regularly reviewed for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology...

  • Page 33
    ... in revenue, including those relating to the achievement the Group's strategy on data products and services; • Changes in operating margin; • Timing and quantum of future capital expenditure; • Uncertainty of future technological developments; • Long term growth rates; and • The selection...

  • Page 34
    ... policy with UK GAAP. As contracts entered into before 1 October 2003 are accounted for in accordance with SAB 101, the related deferred connection revenue, and related costs, will continue to be recognised over the remaining life of the customer relationship. For the 2005 financial year, the Group...

  • Page 35
    ...on total Group turnover, which continues to be stated on a net of intercompany turnover basis. In addition, a more detailed analysis of the results of the Group's mobile telecommunications ("mobile") business and certain key markets has been provided, on a basis consistent with internal measures, to...

  • Page 36
    ... Japan Telecom fixed line operations. Net interest payable Years ended 31 March 2005 2004 £m £m Change % Group net interest payable Dividends from investments Potential interest charges arising on settlement of outstanding tax issues Group net interest payable Share of associated undertakings...

  • Page 37
    ... tax levy on Vodafone Italy, net of £123 million of restructuring costs principally in Vodafone UK. Net exceptional operating charges of £576 million were charged in the year ended 31 March 2003, comprising £485 million of impairment charges in relation to the Group's interests in Japan...

  • Page 38
    ...£55 million) relating to potential interest charges arising on settlement of a number of outstanding tax issues, from £457 million for the prior year and was covered 28 times by operating cash ï¬,ow plus dividends received from associated undertakings. The Group's share of the net interest expense...

  • Page 39
    ...000 3G devices on Vodafone's network by the end of the financial year. United Kingdom Years ended 31 March 2005 2004 £m £m Change % Turnover(1) Trading results Voice services Data services Total service revenue Net other revenue(1) Interconnect costs Other direct costs Net acquisition costs Net...

  • Page 40
    ... Review and Prospects continued business segment, there were strong sales of Vodafone Mobile Connect 3G/GPRS data cards. Operational efficiencies and market effectiveness were achieved in the UK from the execution of the structured plan announced in the prior financial year. The key elements...

  • Page 41
    ... 150 million people by the end of 2005. Vodafone and Verizon Wireless are engaged in a number of joint projects to bring global services to their customers. Global Phone, which was launched last year, is the first device to incorporate CDMA and GSM technology and allows Verizon Wireless customers...

  • Page 42
    ...within the Vodafone Group for the last eight years and was formerly President of Japan Telecom. In the year ending 31 March 2006, management will focus on enhancing customer satisfaction, through an improved handset portfolio, targeted new product offerings, improvements in both network coverage and...

  • Page 43
    ... 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. United Kingdom Years ended 31 March 2004 2003 £m £m Change % Turnover Voice services...

  • Page 44
    ... needs of Vodafone UK's customers. In addition, the business reorganised its network and technology organisations and implemented a programme to consolidate switching centres in its network. Other Europe, Middle East and Africa Years ended 31 March 2004 2003 £m £m Change % Turnover Operating pro...

  • Page 45
    ... of customers on higher access price plans. Verizon Wireless continued to expand its product base, with the launch during the period of the first graphics based instant messaging application and a picture messaging service to complement its data products. Additionally, Verizon Wireless began to...

  • Page 46
    ... and exceptional items Germany The Group's other operations in Germany comprise interests in Arcor, a fixed line telecommunications businesses, and Vodafone Information Systems, an IT and data services business. In local currency, Arcor's turnover increased by 4% in the year ended 31 March 2004...

  • Page 47
    ... be paid directly into a bank or building society account in the United Kingdom. In accordance with the Company's Articles of Association, the sterling: euro exchange rate will be determined by the Company shortly before the payment date. The Company will pay the ADS Depositary, The Bank of New York...

  • Page 48
    ... of the Board approved treasury policy. The main forms of liquid investments at 31 March 2005 were collateralised deposits, money market funds, bank deposits and euro commercial paper. Year ended 31 March 2005 £m Year ended 31 March 2004 £m Net cash inï¬,ow from operating activities Net capital...

  • Page 49
    ... of the middle market closing price of the Company's share price on the London Stock Exchange for the five business days immediately preceding the day on which any shares are contracted to be purchased and otherwise in accordance with the rules of the Financial Services Authority. Purchases will be...

  • Page 50
    ...the Group. Committed Bank Facilities Amounts drawn Vodafone Italy share purchase On 19 April 2005, the Board of directors of Vodafone Italy approved a proposal to buy back issued and outstanding shares for approximately â,¬7.9 billion (£5.4 billion). If the proposal is approved by the shareholders...

  • Page 51
    ... initial public offering takes place and the common stock trades in a regular and active market, the market value of the Company's interest will be determined by reference to the trading price of common stock. On 1 July 2002, Vodafone awarded share options to all eligible employees in all countries...

  • Page 52
    ... significant change during the financial year, or since the end of the year, to the types of financial risks faced by the Group or the Group's approach to the management of those risks. Foreign exchange management As Vodafone's primary listing is on the London Stock Exchange, its share price is...

  • Page 53
    ... downloads, the Vodafone Mobile Connect 3G/GPRS data card, and new business focused offerings, the Group expects continued growth in non-voice service revenue and for non-voice revenue to increase as a percentage of total service revenue over time. Benefits of global scale and scope As the world...

  • Page 54
    ... discretionary activities, to strengthen the balance sheet or to provide returns to shareholders in the form of dividends or share purchases; • free cash ï¬,ow facilitates comparability of results with other companies, although the Group's measure of free cash ï¬,ow may not be directly comparable...

  • Page 55
    ... of the trading results of the Group and principal markets on pages 33 to 44 presents the cost of sales related to acquisition and retention costs net of revenue attributable to these activities. The Group believes that this basis of presentation provides useful information for investors for the...

  • Page 56
    ... Information continued Mobile telecommunications £m Germany £m Italy £m UK £m Spain £m Japan £m Year ended 31 March 2005: Net acquisition costs Net retention costs Acquisition and retention revenue Gross acquisition and retention costs Year ended 31 March 2004: Net acquisition costs Net...

  • Page 57
    ... Business Development, which includes delivering Vodafone's product and services portfolio to Vodafone's affiliates and Partner Networks and expanding and consolidating Vodafone's footprint. He is a director of China Mobile (Hong Kong) Limited and several of the Group's overseas operating companies...

  • Page 58
    ...the Board of Vodacom Group Pty Limited, the Group's South African associated company. He was Group Human Resources Director from 1989 to 2005, having previously been Personnel Director of Costain plc. He is a trustee of the Vodafone Group Foundation and a director of the UK pension trustee companies...

  • Page 59
    ...setting operational plans, budgets and forecasts, product and service development, customer segmentation, managing delivery of multi-market propositions and managing shared resources. The Committee comprises the members of the Executive Committee plus: Fritz Joussen, Chief Operating Officer Germany...

  • Page 60
    ...'s separate Corporate Responsibility ("CR") report and in the Vodafone Foundation Yearbook which are available on the Company's website, www.vodafone.com. Future developments The Group is currently involved in the expansion and development of its mobile telecommunications and related businesses as...

  • Page 61
    ... notified to the directors: Shareholder Shareholding The Capital Group Companies, Inc. Fidelity Management & Research Company Legal & General Investment Management Barclays PLC 7.92% 3.52% 3.69% 3.65% Employees Please refer to "Employees" on page 75. Corporate responsibility A summary of the...

  • Page 62
    ... on its website at www.vodafone.com. The Company also has adopted a Group Governance Manual that applies to all directors and employees. The Company considers that its corporate governance guidelines are generally responsive to, but may not address all aspects of, the relevant NYSE rules. Business...

  • Page 63
    ... to it for decision, including: • the approval of Group commercial strategy; • major capital projects; • the adoption of any significant change in accounting policies or practices; and In addition to regular Board meetings, there are a number of other meetings to deal with specific matters...

  • Page 64
    ... Executive Committee and the Board review management reports on the financial results and key operating statistics. Emphasis is placed on the quality and abilities of the Group's employees with continuing education, training and development actively encouraged through a wide variety of schemes and...

  • Page 65
    ... in the UK, the US and Ireland and on the Company's website and announced via the regulatory news service. Financial and other information is made available on the Company's website, www.vodafone.com, which is regularly updated. Monitoring and review activities There are clear processes for...

  • Page 66
    ... Board. Internal Audit The Committee engaged in discussion and review of the Group Audit Department's audit plan for the year, together with its resource requirements. Private meetings were held with the Group Audit Director. Risk Management and Internal Control The Committee reviewed the process...

  • Page 67
    ... be subject to change over time as the business evolves. The total remuneration will be benchmarked against the relevant market. Vodafone is one of the largest companies in Europe and is a global business; Vodafone's policy will be to provide executive directors with remuneration generally at levels...

  • Page 68
    ... incorporate dilution limits as set out in the Guidelines for Share Incentive Schemes published by the Association of British Insurers. The current estimated dilution from subsisting awards, including executive and all-employee share awards, is approximately 2.4% of the Company's share capital at 31...

  • Page 69
    ... will be no lower than the market value of the shares on the day prior to the date of grant of the options. Therefore, scheme participants only benefit if the share price increases and vesting conditions are achieved. The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is the vehicle for the...

  • Page 70
    ...to the Consolidated Financial Statements, "Pensions". New Share Plan Rules The Company proposes to introduce new share plan rules, which will be tabled for shareholder approval at the AGM on 26 July 2005. No changes are proposed to the award policy for Executive directors or other participants. The...

  • Page 71
    ...executive directors. All the UK based executive directors have, whilst in service, entitlement under a long term disability plan from which two-thirds of base salary would be provided until normal retirement date. In the event of disability, Thomas Geitner would receive his normal retirement pension...

  • Page 72
    ...,541 Notes: (1) These figures are the cash equivalent value of the base share awards under the Vodafone Group Short Term Incentive Plan applicable to the year ended 31 March 2005. These awards are in relation to the performance achievements against targets in EBITDA before exceptional items, total...

  • Page 73
    ... awards of ordinary shares made to executive directors under the STIP, and dividends on those shares paid under the terms of the Company's scrip dividend scheme and dividend reinvestment plan, are shown below. STIP shares which vested and were sold or transferred during the year ended 31 March 2005...

  • Page 74
    Board's Report to Shareholders on Directors' Remuneration continued Long Term Incentives Performance shares Conditional awards of ordinary shares made to executive directors under the Vodafone Group Long Term Incentive Plan and Vodafone Group Plc 1999 Long Term Stock Incentive Plan, and dividends ...

  • Page 75
    ... Scheme (Approved) Vodafone Group 1998 Executive Share Option Scheme (Unapproved) Vodafone Group Plc Savings Related Share Option Scheme (1988) Vodafone Group 1998 Sharesave Scheme AirTouch Communications, Inc. 1993 Long Term Incentive Plan(1) Vodafone Group Plc 1999 Long Term Stock Incentive Plan...

  • Page 76
    ... 2005 financial year having been 146.75p and its lowest closing price having been 114p. Beneficial interests The directors' beneficial interests in the ordinary shares of the Company, which includes interests in the Vodafone Group Profit Sharing Scheme and the Vodafone Share Incentive Plan, but...

  • Page 77
    ... function is working with the Group's operating companies to create common global approaches to people and management development. This includes resourcing and assessment standards, consistent performance reviews, formal training structures (including e-learning) and an annual process to review the...

  • Page 78
    ... For example, during the 2005 financial year, meetings relating to CR issues were held with over 20 investors, employees were surveyed (with an 89% response rate) and the Group conducted research with the public which involved over 12,500 interviews across ten markets. This helps to ensure Vodafone...

  • Page 79
    ...29.Analysis of net debt...115 30.Directors ...115 31.Employees ...116 32.Pensions...117 33.Subsequent events...121 34.Principal subsidiary undertakings, associated undertakings and investments ...122 35.Related party transactions ...123 36.US GAAP information...124 37.Changes in accounting standards...

  • Page 80
    ... and associated undertakings Tax on loss on ordinary activities before exceptional tax Exceptional tax credit Loss on ordinary activities after taxation Equity minority interests Non-equity minority interests Loss for the financial year Equity dividends Retained loss for the Group and its share of...

  • Page 81
    ...) 224,898 17 18 21 (23,387) (8,598) 192,913 Capital and reserves Called up share capital Share premium account Merger reserve Capital reserve Own shares held Other reserve Profit and loss account Total equity shareholders' funds Equity minority interests Non-equity minority interests 22 23 23...

  • Page 82
    ... from operating activities Dividends received from joint ventures and associated undertakings Net cash outï¬,ow for returns on investments and servicing of finance Taxation Net cash outï¬,ow for capital expenditure and financial investment Purchase of intangible fixed assets Purchase of tangible...

  • Page 83
    ... translation New share capital subscribed, net of issue costs Purchase of treasury shares Purchase of shares in relation to employee share schemes Own shares released on vesting of share awards Other Net movement in total equity shareholders' funds Opening total equity shareholders' funds Closing...

  • Page 84
    ..., messaging, the provision of other mobile telecommunications services, including data services and information provision, fees for connecting customers to a mobile network, revenue from the sale of equipment, including handsets and revenue arising from agreements entered into with Partner Networks...

  • Page 85
    ... a useful economic life for the acquired business of greater than 20 years is appropriate. During the 2005 financial year, as a result of the acquisition of the minority stakes in Vodafone Japan as described in "Business Overview - History and Development of the Company", the Group reviewed the...

  • Page 86
    ... the Balance Sheet and the Group's share of the turnover of the joint venture is disclosed in the Consolidated Profit and Loss Account. Other investments, held as fixed assets, comprise equity shareholdings and other interests. They are stated at cost less provision for impairment. Dividend income...

  • Page 87
    ...information is provided on the basis of geographic regions, being the basis on which the Group manages its worldwide interests. In October 2004, the Group announced changes in the regional structure of its operations. Germany, Italy and the UK now form their own regions. The Group's remaining mobile...

  • Page 88
    ... Analysis continued Mobile telecommunications Germany £m Italy £m UK £m Other EMEA £m Americas £m Asia Pacific £m Total £m Germany £m Other operations Other EMEA £m Asia Pacific £m Total Group £m Year ended 31 March 2004: Segment turnover Inter-segment turnover Net turnover Turnover...

  • Page 89
    Mobile telecommunications Germany £m Italy £m UK £m Other EMEA £m Americas £m Asia Pacific £m Total £m Germany £m Other operations Other EMEA £m Asia Pacific £m Total Group £m Year ended 31 March 2003: Segment turnover Inter-segment turnover Net turnover Turnover between mobile and ...

  • Page 90
    ... tax levy on Vodafone Italy and reorganisation costs of £123 million primarily relating to the Group's operations in the UK. The impairment charges for 2003 of £485 million relate to the carrying value of goodwill for Grupo Iusacell (£80 million) and tangible fixed assets in Japan Telecom...

  • Page 91
    ...fit and loss account Capitalised or charged to share premium account 9 - 9 2005 £m 10 2 12 2004 £m UK companies Overseas companies 3 6 9 4 8 12 In addition to the above, the Group's associated companies paid fees totalling £5 million to Deloitte & Touche LLP during the year ended 31 March...

  • Page 92
    ...of trade investments by Vodafone Japan. The loss on disposal of businesses for 2005 primarily relates to the loss on disposal incurred by the Group on the sale of a 16.9% stake in Vodafone Egypt reducing the Group's controlling interest to 50.1%. The loss on disposal of businesses for the year ended...

  • Page 93
    ...211 Share of joint ventures and associated undertakings net interest payable 211 Net interest payable and similar items 604 714 752 8. Tax on loss on ordinary activities 2005 £m 2004 £m 2003 £m United Kingdom corporation tax charge at 30% Overseas corporation tax Current tax: Current year...

  • Page 94
    ... asset timing differences Short term timing differences Deferred tax on overseas earnings Losses carried forward utilised/current year losses for which no credit taken Exceptional current tax credit Prior year adjustments Non taxable profits/non deductible losses International corporate tax rate...

  • Page 95
    ...ts, the resolution of open issues, future planning opportunities, corporate acquisitions and disposals, changes in tax legislation and rates, and the use of brought forward tax losses. In particular, the Group's subsidiary, Vodafone 2, is responding to an enquiry by the UK Inland Revenue with regard...

  • Page 96
    ... to the Consolidated Financial Statements continued 10.Loss per share 2005 2004 2003 Weighted average number of shares (millions) in issue during the year and used to calculate basic and diluted loss per share: 66,196 £m 68,096 £m 68,155 £m Loss for basic and diluted loss per share (7,540...

  • Page 97
    ...forecast growth rates for mobile businesses do not exceed nominal GDP, using rates from independent sources, and are below nominal GDP for non-mobile businesses. The discount rates for the major markets reviewed were based on company specific pre-tax weighted average cost of capital percentages and...

  • Page 98
    ... and buildings £m Equipment, fixtures and fittings £m Network infrastructure £m Total £m Cost: 1 April 2004 Exchange movements Additions Disposals 31 March 2005 Accumulated depreciation and impairment: 1 April 2004 Exchange movements Charge for the year Disposals 31 March 2005 Net book value...

  • Page 99
    The cost of assets in the course of construction, which are not subject to depreciation, was: 2005 £m Land and buildings Equipment, fixtures & fittings Network infrastructure Total 16 341 986 1,343 13.Fixed asset investments Associated undertakings Group £m Share of net assets: 1 April 2004 ...

  • Page 100
    ... off during the year 31 March 2005 Net book value: 31 March 2005 31 March 2004 2,079 (112) 20 (184) 1,803 1,030 (81) 2 951 852 1,049 Other fixed asset investments include 3.3% of China Mobile (Hong Kong) Limited which is listed on the New York and Hong Kong Stock Exchanges. The market value of...

  • Page 101
    ... balance at 1 April Exchange adjustments Amounts (credited)/charged to the profit and loss account Assets written off Closing balance at 31 March 193 (4) (51) (15) 123 89 (1) 107 (2) 193 126 2 (27) (12) 89 15.Debtors Group 2005 £m 2004 £m 2005 £m Company 2004 £m Due within one year: Trade...

  • Page 102
    ... and investments in commercial paper. The Company's liquid investments comprise short term foreign exchange deals. 17.Creditors: amounts falling due within one year Group 2005 £m 2004 £m 2005 £m Company 2004 £m Bank overdrafts Bank loans and other loans Finance leases Trade creditors Amounts...

  • Page 103
    ... 4,017 3,464 8,800 - 2,549 6,246 8,795 Other loans falling due after more than one year comprise bond issues by the Company, or its subsidiaries, analysed as follows: Group 2005 £m 2004 £m 2005 £m Company 2004 £m 1.27% Japanese yen bond due 2005 (1) 1.93% Japanese yen bond due 2005 (1) 6.35...

  • Page 104
    ... the year and the term credit facility was drawn down in full on 15 October 2002. Under the terms and conditions of the $5,525 million and $4,853 million bank facilities, lenders have the right, but not the obligation, to cancel their commitment 30 days from the date of notification of a change of...

  • Page 105
    ...- 1.5 - 1.5 Interest on ï¬,oating rate borrowings is based on national London Inter Bank Offered Rate equivalents or government bond rates in the relevant currencies. The figures shown in the tables above take into account interest rate swaps used to manage the interest rate profile of financial...

  • Page 106
    ... or above from at least two of Moody's, Fitch Ratings and Standard & Poor's. These ratings are used in determining the aggregate credit risk with each counterparty. (2) Liquid investments include the net position of the Group's short term foreign exchange deals of £28 million at 31 March 2005. In...

  • Page 107
    ... to their fair values because of the short term maturity of these instruments. Borrowings (excluding foreign exchange contracts) - The fair value of quoted long term borrowings is based on year end mid-market quoted prices. The book values stated above exclude accrued interest on borrowings which...

  • Page 108
    ...Gross deferred tax asset £m Gross deferred tax liability £m Net deferred tax (asset)/ liability £m Less: amounts unprovided £m Net deferred tax (asset)/ liability £m Fixed asset timing differences Deferred tax on overseas earnings Other short term timing differences Unrelieved tax losses (227...

  • Page 109
    ... plans The Company currently uses a number of share plans to grant options and awards to its directors and employees. Sharesave Scheme The Vodafone Group 1998 Sharesave Scheme (the "Sharesave Scheme") enables UK staff to acquire shares in the Company through monthly savings of up to £250 a year...

  • Page 110
    ... to the Consolidated Financial Statements continued 22.Called up share capital continued Restricted Share Plans Under the Vodafone Group Short Term Incentive Plan, introduced in 1998, shares are conditionally awarded to directors based on achievement of one year performance targets. Release of the...

  • Page 111
    ... AirTouch Communications, Inc. 1993 Long Term Stock Incentive Plan options were converted into rights to acquire shares in the Company. No further awards will be granted under this scheme. Weighted average period remaining to full vesting (months) Exercisable ADSs weighted average exercise price...

  • Page 112
    ... shares in the Company are held: Group Employee Share Trust Subsidiary companies Company Treasury shares Total Treasury shares At 1 April 2004 Purchased during the year Dividend shares Distributed during the year At 31 March 2005 Total cost to Group of shares held (£m) Market value of shares...

  • Page 113
    ..."Operating and Financial Review and Prospects - Liquidity and Capital Resources". Details of all shares purchased in the year are shown below: Average price paid per share, inclusive of transaction costs (pence) Total number of shares purchased under publicly announced share (2) repurchase programme...

  • Page 114
    ...subsidiary undertakings During the year ended 31 March 2005, the Company has directly or indirectly increased its interest in its subsidiary undertakings in Japan, Hungary and Greece. These transactions are in line with the Group's strategy of increasing its shareholding in existing operations where...

  • Page 115
    ...%, and 100% of the issued share capital of Oskar Mobil a.s. in the Czech Republic for cash consideration of approximately $3.5 billion (£1.9 billion) to be satisfied from the Group's cash resources. In addition, the Group will be assuming approximately $0.9 billion (£0.5 billion) of net debt. The...

  • Page 116
    ... share capital Issue of shares to minorities Purchase of treasury shares Purchase of own shares in relation to employee share schemes Capital element of finance lease payments Debt due within one year: Decrease in short term debt Debt due after one year: Decrease in long-term debt Issue of new...

  • Page 117
    ... of the directors of the Company were as follows: 2005 £'000 2004 £'000 2003 £'000 Salaries and fees Incentive schemes Benefits 5,806 4,218 582 10,606 6,752 5,418 1,371 13,541 5,457 5,738 709 11,904 The aggregate gross pre-tax gain made on the exercise of share options in the year to 31...

  • Page 118
    ... of employees by category of activity is shown below. 2005 Number 2004 Number 2003 Number By activity: Operations Selling and distribution Administration 13,772 16,140 27,466 57,378 14,096 15,303 30,710 60,109 14,863 16,252 35,552 66,667 By segment: Mobile telecommunications: Germany Italy UK...

  • Page 119
    ... in full, the Group's reported pension costs and balance sheet position will change accordingly. United Kingdom The majority of the UK employees are members of the Vodafone Group Pension Scheme (the "main scheme"). This is a tax approved defined benefit scheme, the assets of which are held...

  • Page 120
    ... of lump sum redundancy benefits payable through a redundancy programme associated with the retirement plan. (2) The charge for Japan for the year ended 31 March 2004 includes the pension costs in relation to companies sold during the year for that part of the year prior to their disposal. 118...

  • Page 121
    ...2004 £m Germany 2005 £m 2004 £m Japan 2005 £m 2004 £m 2005 £m Other 2004 £m 2005 £m Total 2004 £m Operating profit: Current service cost Past service cost Total charge to operating profit Finance costs/(income): Interest cost Expected return on pension scheme assets Total (credit)/charge...

  • Page 122
    Notes to the Consolidated Financial Statements continued 32.Pensions continued History of amounts that would have been recognised in the statement of total recognised gains and losses under FRS 17 2005 £m % £m 2004 % £m 2003 % UK Difference between the expected and actual return on assets (2) ...

  • Page 123
    ... On 13 April 2005, the Group's associated undertaking, Verizon Wireless, completed its purchase of NextWave Telecom Inc. for $3 billion in cash. On 19 April 2005, the Board of directors of Vodafone Italy approved a proposal to buy back issued and outstanding shares for approximately â,¬7.9 billion...

  • Page 124
    ... network operator Mobile network operator Mobile network operator Global products and services provider Germany Sweden Albania USA Germany Egypt Spain Netherlands Germany Spain Japan Hungary Netherlands Luxembourg Ireland Netherlands England Malta Luxembourg Australia New Zealand Netherlands Greece...

  • Page 125
    ... activity (2) Country of incorporation or registration China Mobile (Hong Kong) Limited Mobile network operator 3.3 China Notes: (1) Rounded to nearest tenth of one percent. (2) Listed on the Hong Kong and New York stock exchanges and incorporated under the laws of Hong Kong. 35.Related...

  • Page 126
    ...financial year (UK GAAP) Items (increasing)/decreasing net loss: Investments accounted for under the equity method Connection revenue and costs Goodwill and other intangible assets Capitalised interest Licence fee amortisation Exceptional items Income taxes Cumulative effect of change in accounting...

  • Page 127
    ... ended 31 March Ref. 2005 $m 2005 £m 2004 £m 2003 £m Total recognised losses relating to the year (UK GAAP) Items (increasing)/decreasing total recognised losses: Net difference between loss for the financial year (UK GAAP) and net loss (US GAAP) Additional minimum pension liability, net of tax...

  • Page 128
    ... US GAAP The Consolidated Financial Statements are prepared in accordance with UK GAAP, which differ in certain material respects from US GAAP. The differences that are material to the Group relate to the following: Change in presentation In previous years, the deferred tax liabilities and deferred...

  • Page 129
    ...differs from that under US GAAP. Under UK GAAP, the results and net assets of Vodafone Italy are consolidated in the Group's financial statements. Under US GAAP, as a result of significant participating rights held by minority shareholders, the Group's interest in Vodafone Italy has been accounted...

  • Page 130
    ....US GAAP information continued The following tables reconcile Vodafone Italy's turnover, loss for the financial year and equity shareholders' funds from UK GAAP to their related amounts in US GAAP as used in determining the net loss and shareholder's equity in the Consolidated Financial Statements...

  • Page 131
    ... liabilities Long-term liabilities Minority interests Total equity shareholders' funds 7,030 4,814 854 4,516 17,214 Turnover Operating profit 15,634 3,598 (b) Connection revenue and costs The Group's UK GAAP accounting policy on revenue recognition was amended during the year ended 31 March...

  • Page 132
    ... being allocated to intangible assets with an offsetting entry to deferred tax liabilities. Under UK GAAP and US GAAP, the purchase price of a transaction accounted for as an acquisition is based on the fair value of the consideration. In the case of share consideration, under UK GAAP the fair value...

  • Page 133
    ... a straight line basis from the date that operations commence over their estimated useful economic lives. (f) Exceptional items In the year ended 31 March 2005, the Group recorded an impairment charge under UK GAAP of £315 million in relation to the fixed assets of Vodafone Sweden. Under US GAAP...

  • Page 134
    ... is included, net of the related tax of £5,239 million, in the cumulative effect of change in accounting principle in the reconciliation of net loss. The tax effect comprises the release of £1,220 million representing the Group's share of Verizon Wireless' deferred tax liabilities and £4,019...

  • Page 135
    ...a number of pension plans for the benefit of its employees throughout the world, which vary with conditions and practices in the countries concerned. A description of the Group's major pension plans is provided in note 32. The investment policy and strategy of the UK main scheme in the UK is set by...

  • Page 136
    ... the Consolidated Financial Statements continued 36.US GAAP information continued UK 2005 £m 2004 £m 2003 £m 2005 £m Germany 2004 £m 2003 £m 2005 £m Japan 2004 £m 2003 £m Service cost Interest costs Expected return on assets Actuarial gains and losses Net periodic pension cost Termination...

  • Page 137
    Stock based compensation The Company currently uses a number of share plans to grant options and share awards to its directors and employees described in note 22. Under UK GAAP, options granted over the Company's ordinary shares are accounted for using the intrinsic value method, with the difference...

  • Page 138
    .../2002 requiring listed companies in the Member States of the European Union to prepare their consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") from 2005. IFRS will apply for the first time in the Group's Annual Report for the year ending 31...

  • Page 139
    ...' funds for the three years ended 31 March 2005 and the related notes 1 to 37. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the Board's Report to Shareholders on Directors' Remuneration that is...

  • Page 140
    ... issued by the UK Accounting Standards Board, the full version of IAS 39, as issued by the IASB, will be adopted. Following the SEC's issuance on 12 April 2005 of its final rule, "First-Time Application of International Financial Reporting Standards", the Group's Annual Report for the year ending...

  • Page 141
    ... to manage interest rate and foreign exchange exposures are not held in hedge relationships. However, these tend to be relatively short term in nature, causing limited income statement volatility. Defined benefit pension schemes The Group currently applies the provisions of SSAP 24 under UK GAAP...

  • Page 142
    .... The Group has reviewed the classification of its investments and concluded that the Group's 76.8% interest in Vodafone Italy, currently classified as a subsidiary undertaking under UK GAAP, should be accounted for as a joint venture under IFRS. In addition, the Group's interests in South Africa...

  • Page 143
    ... Global BuyDIRECT Plan for the Company, which is a direct purchase and sale plan for depositary receipts, with a dividend reinvestment facility. For additional information, please call toll-free from within the US on +1 800 233 5601, or write to: The Bank of New York Shareholder Relations Department...

  • Page 144
    ... up the historic price on a particular date and chart Vodafone ordinary share price changes against indices. Shareholders and other interested parties can also receive Company press releases, including London Stock Exchange announcements, by registering for Vodafone News via the Company's website at...

  • Page 145
    ... share prices for May 2004 only reported until 23 May 2005. The current authorised share capital comprises 78,000,000,000 ordinary shares of $0.10 each and 50,000 7% cumulative fixed rate shares of £1.00 each. Markets Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange...

  • Page 146
    ... the Company's Articles, to hold any shares of the Company as a qualification to act as a director, although executive directors participating in long term incentive plans must comply with the Company's share ownership guidelines. In accordance with best practice in the UK for corporate governance...

  • Page 147
    ... foreign persons to hold or vote the Company's shares other than those limitations that would generally apply to all of the shareholders. General meetings and notices Annual general meetings are held at such times and place as determined by the directors of the Company. The directors may also, when...

  • Page 148
    ...shares or ADSs in the Company as capital assets (for US and UK tax purposes). This section does not, however, cover the tax consequences for members of certain classes of holders subject to special rules and holders that, directly or indirectly, hold 10 per cent or more of the Company's voting stock...

  • Page 149
    ... separate instrument of transfer are executed and retained at all times outside the United Kingdom. A transfer of shares in the Company in registered form will attract ad valorem stamp duty generally at the rate of 0.5% of the purchase price of the shares. There is no charge to ad valorem stamp duty...

  • Page 150
    ...Contact Details Registered Office Vodafone House The Connection Newbury Berkshire RG14 2FN England Telephone: Fax: +44 (0) 1635 33251 +44 (0) 1635 45713 Group Corporate Affairs Simon Lewis Telephone: Fax: Group Corporate Affairs Director +44 (0) 1635 673310 +44 (0) 1635 682890 Investor Relations...

  • Page 151
    ... Corporate Governance Board's Report to Shareholders on Directors' Remuneration Note 31 "Employees" Board's Report to Shareholders on Directors' Remuneration - Directors' interests in the shares of the Company Note 22 "Called up share capital" 55 65 60 65 116 71 107 Shareholder information...

  • Page 152
    ...Report of Independent Auditors Risk Factors and Legal Proceedings - Legal Proceedings Operating and Financial Review and Prospects - Equity Dividends Note 33 "Subsequent events" 77 137 26 45 121 Investor Information - Share Price History Not applicable Investor Information - Markets Not applicable...

  • Page 153
    Notes | 151

  • Page 154
    Notes 152 |

  • Page 155
    ... to the production process. The paper used was manufactured in the UK at mills with ISO14001 accreditation. It is 75% recycled from de-inked post consumer waste. This document was printed by Butler and Tanner, a company accredited to ISO14001, using inks which are vegetable based. By undertaking...

  • Page 156
    Vodafone Group Plc Vodafone House The Connection Newbury Berkshire RG14 2FN England Registered in England No. 1833679 Tel: +44 (0) 1635 33251 Fax: +44 (0) 1635 45713 www.vodafone.com Printed in the United Kingdom