Vodafone 2005 Annual Report Download - page 30

Operating and Financial Review and Prospects
28 |Performance
Contents
Page
Introduction 28
Presentation of Information 28
Critical Accounting Estimates 29
Foreign Currency Translation 32
Inflation 32
Operating Results 33
– Group overview 33
2005 financial year compared to 2004 financial year 33
2004 financial year compared to 2003 financial year 35
– Review of operations 36
2005 financial year compared to 2004 financial year 36
2004 financial year compared to 2003 financial year 41
Summary of Key Performance Indicators for principal markets 44
Balance Sheet 45
Equity Dividends 45
US GAAP Reconciliation 45
Liquidity and Capital Resources 46
– Cash flows 46
– Funding 48
– Financial assets and liabilities 49
– Contractual obligations 49
– Option agreements 49
– Off-balance sheet arrangements 50
Quantitative and Qualitative Disclosures about Market Risk 50
Trend Information and Outlook 50
Introduction
The following discussion is based on the Consolidated Financial Statements included
elsewhere in this Annual Report. Such Consolidated Financial Statements are prepared
in accordance with Generally Accepted Accounting Principles in the United Kingdom,
or UK GAAP, which differ in certain significant respects from US GAAP. Reconciliations
of the material differences in the UK GAAP Consolidated Financial Statements to US
GAAP are disclosed in note 36 to the Consolidated Financial Statements, “US GAAP
information”.
On 19 July 2002, the European Parliament adopted Regulation No. 1606/2002
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 March 2006. Consequently, the Group’s interim results
for the six-month period ending 30 September 2005 will be presented under IFRS
together with restated information for the six months ended 30 September 2004 and
the year ended 31 March 2005. Further information on the effects of the adoption of
IFRS can be found in “Information on International Financial Reporting Standards”on
pages 138 to 140.
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 arrangements extend the
Group’s footprint by a further 14 countries. As the world’s mobile telecommunications
leader, the Group’s vision is to be the world’s mobile communications leader enriching
our customers’ lives through the unique power of mobile communications. See
“Business Overview – Business strategy”.
The Group currently provides a range of voice and data communication services,
including SMS, MMS and other data services. Services are provided to both
consumers and corporate customers, through a variety of both prepaid and contract
tariff arrangements.
In the majority of the Group’s controlled networks, services are offered over a GSM
network, on which a GPRS service is also provided. Where licences have been issued,
the Group has also secured 3G licences in all jurisdictions in which it operates through
its subsidiary undertakings and continues to rollout mobile 3G network infrastructure.
See “Business Overview – Licences and network infrastructure”.
The Group faces a number of significant risks that may impact on its future
performance and activities. Please see “Risk Factors and Legal Proceedings”.
Presentation of Information
In the discussion of the Group’s reported financial position and results, information in
addition to that contained within the Consolidated Financial Statements is presented,
including the following:
Customers
Mobile customer
A mobile customer is defined as a subscriber identity module (“SIM”) or, in territories
where SIMs do not exist, a unique mobile telephone number which has access to the
network for any purpose (including data only usage) except telemetric applications.
Telemetric applications include, but are not limited to, asset and equipment tracking
and mobile payment / billing functionality (for example, vending machines and meter
readings) and include voice enabled customers whose usage is limited to a central
service operation (for example, emergency response applications in vehicles).
Proportionate customers
The proportionate customer number represents the number of mobile customers in
ventures which the Group either controls or invests, based on the Group’s ownership in
such ventures.
Activity level
Active customers are defined as customers who have made or received a chargeable
event in the last three months.
The active customers are expressed as a percentage of the closing customer base.
Contract and prepaid activity is reported separately.
Vodafone live! active device
A handset or device equipped with the Vodafone live! portal which has made or
received a chargeable event in the last month.
3G device
A handset or device capable of accessing 3G data services.
ARPU
ARPU is calculated as service revenue divided by the weighted average number of
customers in the period.
Average monthly ARPU represents total ARPU in an accounting period divided by the
number of months in the period.
This performance indicator is commonly used in the mobile telecommunications
industry and by Vodafone management to compare service revenue to prior periods
and internal forecasts. Management believes that this measure provides useful
information for investors regarding trends in customer revenue derived from mobile
telecommunications services and the extent to which customers change their use of
mobile services and the network from period to period.