Vodafone 2005 Annual Report Download - page 22

Business Overview continued
20 |Business
Americas
The Federal Communications Commission (“FCC”), the United States’ NRA, has
commenced a Notice of Inquiry into the level of termination rates charged by foreign
mobile network operators to US international operators. The FCC has sought inputs on
the status of foreign mobile termination rates, including actions taken to date by foreign
regulators to address the issue.
Asia Pacific
Japan
The Japanese NRA has concluded the market definition stage of its effective
competition review of the Japanese mobile industry, where it decided not to define a
separate market for termination on individual mobile networks. It has entered the
market assessment stage of the review which is expected to be concluded in 2005.
The NRA has also commenced a review of the existing universal service obligation in
Japan, with a view to reporting by December 2005.
The NRA is expected to award spectrum in the 1.7GHz band in 2006 under an
allocation process to be determined by December 2005.
Australia
The NRA released its final decision on the regulation of mobile termination in June
2004. In its review, it proposed that all mobile network operators “have market power”
with respect to mobile termination and proposed a pricing principle that requires mobile
call termination rates to fall from 21 Australian cents per minute to a price that is at the
upper end of the range of reasonable estimates of the cost of providing the service by
1 January 2007. It has proposed that price to be 12 Australian cents per minute.
Vodafone Australia is appealing the NRA’s decision to the Federal Court of Australia and
it is expected that the hearing will be in the second quarter of 2005. Vodafone
Australia has lodged an “access undertaking”proposing alternative rates on which the
NRA is consulting.
New Zealand
The NRA has released a draft report proposing regulation of mobile termination rates
and held hearings in February 2005. A final report will be prepared by the NRA and is
expected in 2005.
Non-mobile Telecommunications
The Group’s non-mobile telecommunications businesses mainly comprise interests in
Arcor and Cegetel.
Arcor is the second largest fixed line telecommunications provider in Germany. With its
own Germany-wide voice and data network covering more than 40,000 km, Arcor
utilises its network to offer its customers a range of services for voice and data
transfer, including complete ISDN/DSL connection services.
Cegetel is France’s second largest fixed line telephony operator and offers a wide
range of fixed line telephone services to residential and business customers as well as
special corporate services ranging from network and customer relations management
to Internet-intranet hosting services. Cegetel also owns the most extensive private
telecommunications network in France, with 21,000 km of fibre optic cable. On
11 May 2005, it was announced that an agreement had been reached to merge
Cegetel with neuf telecom, subject to competition and regulatory authority and
employee council approvals.
History and Development of the Company
The Company was incorporated under English law on 17 July 1984 as Racal Strategic
Radio Limited (registered number 1833679), as a subsidiary of Racal Electronics Plc
and changed its name to Racal Telecommunications Group Limited in September
1985. In September 1988, it became Racal Telecom Limited then re-registered as
Racal Telecom Plc, a public limited company. In October 1988, approximately 20% of
the Company’s capital was offered to the public. The Company was fully demerged
from Racal Electronics Plc and became an independent company in September 1991,
at which time it changed its name to Vodafone Group Plc.
Between 1991 and 1999, the Group consolidated its position in the United Kingdom
and enhanced its international interests through a series of transactions. At 31 March
1999, the Group had subsidiary mobile network operating companies (“mobile
operating subsidiaries”) in six countries (the UK, the Netherlands, Greece, Malta,
Australia and New Zealand), as well as equity interests in a further seven countries, and
a proportionate mobile customer base of 10.4 million.
The Group completed a number of significant business transactions between 1999 and
31 March 2002, which transformed the Company into the world’s leading international
mobile telecommunications company, namely:
•The merger with AirTouch Communications, Inc. (“AirTouch”), which completed on
30 June 1999. The Company changed its name to Vodafone AirTouch Plc in June
1999. The combined Group had mobile operating subsidiaries in 10 countries,
(adding Sweden, Portugal, Egypt and the US) and equity interests in an additional 12
countries.
•The acquisition of Mannesmann AG (“Mannesmann”), which completed on 12 April
2000. Through this transaction the Group acquired subsidiaries in two of Europe’s
most important markets, Germany and Italy, and increased the Group’s indirect
holding in SFR, a French mobile telecommunications operator. Subsequent to the
acquisition, the Group sold a number of non-core businesses acquired as part of the
Mannesmann transaction. Following approval by its shareholders at the AGM, the
Company reverted to its former name, Vodafone Group Plc, on 28 July 2000.
•The combination of the Group’s US mobile operations with those of Bell Atlantic
Corporation and GTE Corporation to form the Cellco Partnership, which operates
under the name “Verizon Wireless”, on 10 July 2000. The Group owns 45% of
Verizon Wireless and accounts for it as an associated undertaking.
•The acquisition of Airtel Móvil S.A., a mobile network operator in Spain, which
became a subsidiary of the Group in December 2000.
•The acquisition 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 2001, the Group increased its shareholding through a number of
transactions. After an agreed tender offer for shares in Japan Telecom that
completed in October 2001, the Group held, through its wholly owned subsidiary
undertakings, a 39.67% stake in the Japanese mobile telecommunications
company J-Phone Co. Ltd and a 66.7% stake in the fixed line operator Japan
Telecom Co., Ltd. In addition, Japan Telecom Co., Ltd held 45.08% of the issued
share capital in J-Phone Co. Ltd, making the Group’s effective interest in J-Phone
Co. Ltd 69.7%.
By 31 March 2002, the Group controlled mobile operations in 16 countries and held
equity investments in mobile operations in a further 12 countries. The proportionate
mobile customer base was 101.1 million at that date.