Vodafone 2006 Annual Report Download - page 12

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10 Vodafone Group Plc Annual Report 2006
Chief Executive’s Review
continued
Deliver strong growth in emerging markets
A source of growth is through emerging markets. Our focus here is to build on our
strong track record of creating value in emerging markets, having delivered strong
performances over time in markets such as Egypt and South Africa. Our aim is to
outperform not only our competitors but also our acquisition business plans. For
example, since we achieved control in Romania last year, the business has performed
strongly and ahead of our original expectations.
We will seek selective opportunities to increase our emerging markets footprint as well
as taking opportunities to increase our stakes in existing markets, with a view to gaining
control where possible over time.
Delivering our customers’ total communication needs
Customers have access to new technologies, devices and services. As a complement to
mobility, they want Vodafone to provide a number of new services within the home and
the office.
We will extend our reach into the home and the office to deliver richer business
applications and integrated fixed and mobile services, such as higher speed internet
access. We will use technologies such as HSDPA, DSL and WiFi to do this. Later this year,
we will be enhancing our Vodafone Zuhause offering to incorporate DSL.
Developments in technology will also enable us to provide integrated mobile and PC
offerings to give customers a consistent experience whether they are at home or on
the move, with core services such as VOIP and instant messaging. We also aim to extend
our business model to generate revenue from advertising in ways that customers
find attractive.
We will continue to pursue a mobile centric approach, focusing on the core benefits to
customers of mobility and personalisation, and will resell fixed line technologies only
according to customer needs.
Actively managing our portfolio
We seek to invest only where we can generate superior returns for our shareholders in
markets that offer a strong local position, with focus on specific geographic regions. It
is our policy to apply strict investment criteria to ensure that transactions yield a return
above the cost of capital within three to five years and overall create substantial value
for our shareholders. Equally, we will consider exiting businesses which do not meet our
performance requirements or provide an opportunity to create shareholder value.
There has been much speculation about our position in the US. Verizon Wireless is the
market leader on nearly all key metrics and has significant local and regional scale, with
over 50 million customers. We will always consider the most appropriate way to deliver
shareholder value. However, we expect continued strong growth in the US and are
therefore happy to remain with our existing stake.
In order to deliver on these objectives, we have reorganised ourselves into three key
business units.
In our European businesses, where competition is most intense, we will be focused
on leveraging our regional scale to deliver cost reduction and revenue stimulation.
The principal focus in the Eastern Europe, Middle East, Africa, Asia Pacific and Affiliates
(EMAPA) region is to deliver strong growth from our businesses in emerging markets.
The new objective of our third business unit, New Businesses, is to enable us to serve the
total communications needs of our customers by taking advantage of evolving
technology and new opportunities to deliver new services.
Cost reduction
Our primary objective here is to leverage our regional scale and reduce our cost
structure in Europe through several approaches in order to maintain our
competitiveness.
We will outsource further, particularly for IT development of billing and customer
management systems, as a key means to reduce our costs. We will also continue to drive
scale benefits, either at a global level, in areas such as network supply chain management
as we achieve greater standardisation across the Group, or regionally, such as through the
establishment of regional data centres to support our European operations. As the size of
the Group evolves, we need to ensure the appropriate balance between local and group,
particularly in respect of central functions, and this is expected to result in over 400 fewer
group positions.
Revenue stimulation
In Europe, our customers use their mobiles on average for only four minutes a day
and approximately two-thirds of voice traffic continues to travel across fixed lines.
We therefore aim to stimulate additional voice usage and substitute fixed line usage
for mobile in a way that enhances both customer value and revenue.
For our consumers, we will seek to enhance revenues by continuing to deliver innovative
bundles and tariffs to stimulate usage, building on success in areas such as 3G bundles,
targeted promotions, family plans that focus on community groups and roaming
through Vodafone Passport.
We are already targeting fixed to mobile substitution in the home through offerings such
as Vodafone Zuhause in Germany and Vodafone Casa in Italy and aim to target office
communications by building on our success in business with leading edge services,
such as Oficina Vodafone in Spain, and applications through the benefits of broadband.
Key focus
Business units aligned to strategyOur changing environment Our strategic objectives
Thomas
Geitner
Paul
Donovan
Bill
Morrow
New
Businesses
Europe Eastern
Europe,
Middle East,
Africa, Asia
Pacific,
Affiliates
Innovate and
deliver total
communications
solutions
Deliver strong
growth from
emerging
markets
businesses
Leverage
regional scale
to reduce costs
and stimulate
revenues
Business
unit
CEO
•Competition is intensifying from
existing and new players
•Significant price competition
•Continued significant
regulatory pressure
•Customers have far greater
choice in communications
•Growing demand for
broadband services
•Emerging markets delivering
significant growth
•Mobile business model is
changing
•Reduce costs and
stimulate revenue in
Europe
•Deliver strong growth in
emerging markets
•Innovate and deliver on
our customers’ total
communications needs
•Actively manage our
portfolio to maximise
returns
•Align capital structure
and shareholder
returns policy to strategy