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Vodafone Group Plc
Annual Report
For the year ended 31 March 2008

Table of contents

  • Page 1
    Vodafone Group Plc Annual Report For the year ended 31 March 2008

  • Page 2
    ... People Brand and Distribution Products and Services Performance* 30 32 51 52 54 59 Key Performance Indicators Operating Results Outlook Principal Risk Factors and Uncertainties Financial Position and Resources Corporate Responsibility Governance* 62 Board of Directors and Group Management...

  • Page 3
    ...per share of 5.02 pence, giving total dividends per share of 7.51 pence • Dividend pay out ratio of 60%, in line with policy, and a total payout of £4.0 billion for the financial year • 1st in UK and 11th globally in the BrandZ most powerful brands ranking Vodafone Group Plc Annual Report 2008...

  • Page 4
    ...building our developing market presence with the acquisition of Vodafone Essar in India last year. Dividends per share +11.1% 7.51p (2007: 6.76p) I am pleased to report that your Company made further progress during the year, with continuing execution of our strategy and delivery of our financial...

  • Page 5
    ... on the government finances is to receive cash in advance but to reduce tax payments later, as the capital cost is amortised against profits over the life of the spectrum. This is a period of unprecedented change in our business. The industry is changing shape as mobile phones, new technology and...

  • Page 6
    ... Align capital structure and shareholder returns policy to strategy prices and continue to drive cost efficiency across the Group. Importantly, we have positioned ourselves to deliver total communications to our customers by investing significantly in our mobile broadband networks, establishing...

  • Page 7
    ...supplier of handsets in that market. Total communications revenue (share of total communications revenue, %) 2008 2007 48 +38% Mobile data Fixed line services Fixed location mobile services Advertising and other 38 44 43 13 12 1 1 Total (£bn) 4.6 3.3 Vodafone Group Plc Annual Report 2008 5

  • Page 8
    .... Align capital structure and shareholder returns policy to strategy The Board remains committed to its policy of distributing 60% of adjusted earnings per share by way of dividend. Our robust financial and operating performance, together with a positive impact from foreign currency exchange rates...

  • Page 9
    ... East, Africa and Asia, in particular in India. We also have a material position in the attractive US market through our stake in Verizon Wireless. By expanding beyond our historic core mobile offerings to deliver data and fixed broadband services through our total communications strategy, this...

  • Page 10
    ... Performance at a Glance Vodafone is the world's leading international mobile communications group, providing a wide range of communications services. Regions • Europe • EMAPA (Eastern Europe, Europe Registered proportionate mobile customers (millions) EMAPA Registered proportionate mobile...

  • Page 11
    Services Voice Vodafone's core service to customers is to provide mobile voice communications Messaging Text, picture and video messaging on mobile devices Data Provides email, mobile connectivity and internet on your mobile Fixed line & other Fixed broadband offerings to meet customers' total ...

  • Page 12
    ... deliver on our customers' total communications needs 3 Deliver strong growth in emerging markets Appropriate return to shareholders 4 5 Actively manage our portfolio to maximise returns Align capital structure and shareholder returns policy to strategy 10 Vodafone Group Plc Annual Report 2008

  • Page 13
    .... Vodafone continues to benefit from strong data revenue growth, particularly due to mobile devices and services that connect business and consumer users to their email and the internet. In addition, through partnerships with leading internet companies, the Group provides products and services that...

  • Page 14
    ... and to reduce its cost base. The Europe region includes the Group's principal mobile subsidiaries located in Germany, Spain and the UK, its principal joint venture in Italy, as well as the Group's principal fixed line telecommunications subsidiary in Germany. Other businesses in the European region...

  • Page 15
    ... - Vodafone; India - Airtel; Kenya - Safaricom; Poland - Plus; South Africa - Vodacom; US - Verizon Wireless. Poland 2,653 US 30,230 Czech Republic 2,698 Romania 8,921 Turkey 16,935 Hungary 2,340 Egypt 7,738 India 29,558 China 12,588 Size of circle number of proportionate mobile customers ('000...

  • Page 16
    ...that customer needs are at the centre of all of the Group's actions Network infrastructure Connects all customers together and enables the Group to provide mobile and fixed voice, messaging and data services Supply chain management Handsets, network equipment, marketing and IT services account for...

  • Page 17
    ... total communications needs Vodafone Mobile Connect Provides simple and secure access to the internet and to business customers' systems such as email, corporate applications and company intranets Other Includes mobile advertising and business managed services Vodafone Group Plc Annual Report 2008...

  • Page 18
    ... and video calls. Its key nodes are switches (which manage the set-up of connections) and user databases, storing the information needed to provide services to each customer, such as location in the network, list of subscribed services and home/visited network. Europe Germany Italy Spain UK Albania...

  • Page 19
    ... and receiving data over an IP based network, enabling wireless access to data networks like the internet. The GPRS data service offering includes internet and email access, allowing the customer to always be connected at download speeds slightly below a dial-up modem. In some markets, Vodafone...

  • Page 20
    ... commercial sense based on local market conditions. Innovation In 3G network deployments, Vodafone is driving the use of new technology enhancements such as "Remote Radio Heads" that are a new type of lower cost base station equipment, which improve coverage and enable improvements to the customer...

  • Page 21
    ... the Group's spectrum strategy. The main themes currently being researched are as follows the next generation of mobile technologies; consumable software for mobile phones; electronic newsmedia; and new GSM based services. There have been several significant advances during the 2008 financial year...

  • Page 22
    ... a key driver for Vodafone. Effective employee communication and the need to create dialogue with its people is championed at Board level. Vodafone continues to use its own products and services to reach out to staff - the use of mobile technologies such as SMS, video clips and mobile intranet sites...

  • Page 23
    ... activities, particularly the Supplier Performance Management processes, and updating, communicating and implementing Vodafone's policy on mobile phones and driving. Improvement of Group wide governance continued with integration of serious incident reporting systems for network service providers...

  • Page 24
    ... among non-users of the brand has increased in the 2008 financial year to 33.5%, 1.8 percentage points above its market share. 1 st In the BrandZ most powerful brands ranking. Ranked 11th globally. Customer Delight Index 73.1 (2007: 70.6, 2006: 69.9) 22 Vodafone Group Plc Annual Report 2008

  • Page 25
    ... relationships with MVNO partners as an additional route to market. During the past year new relationships established include Asda in the UK, Euskaltel in Spain and Carrefour in Italy. Number of directly owned stores 1,150 Number of branded stores 6,500 Vodafone Group Plc Annual Report 2008...

  • Page 26
    ... of Group products and services at 31 March 2008 Europe EMAPA Number of markets available Partner Number of markets customers(1) Vodafone at Home Vodafone Wireless Office Vodafone Passport Vodafone live! - Internet on your mobile Vodafone Mobile Connect data card or Vodafone Mobile Connect USB...

  • Page 27
    ...connection fee per call. Incoming (billions of minutes) 40.8 37.4 35.1 2008 Note: (1) Germany, Italy, Spain and the UK Vodafone Group Plc Annual Report 2008 25 2006 2007 2006 2007 Vodafone Office A series of products and services designed to meet all business customers' communications needs...

  • Page 28
    ... mobile operations. MMS usage experienced a 15.8% growth in the 2008 financial year across the Group through improved service quality, value focused pricing and a broader portfolio of devices. 2008 2007 Note: (1) Germany, Italy, Spain and the UK 26 Vodafone Group Plc Annual Report 2008 2006

  • Page 29
    ... Group offers a number of products and services to enhance customers' access to data services, including Vodafone live! for consumers, as well as a suite of products for business users consisting of Vodafone Mobile Connect data cards, internet based email solutions and Vodafone Office. Vodafone live...

  • Page 30
    ..., New Zealand and Egypt during the 2008 financial year. Business fixed broadband offers have been recently launched in the Czech Republic and in Italy, while a fixed broadband WiMax offer was launched in Malta. Business managed services As part of the total communications strategy, Vodafone is...

  • Page 31
    ... card with 3G broadband and the Vodafone Mobile Connect USB modem. Handsets The Group's operating companies and partner markets benefit from a wide ranging handset portfolio, covering different customer segments, price points and an increasing variety of designs. During the 2008 financial year...

  • Page 32
    ... certain Key Performance Indicators(1) ("KPIs") to measure progress against the Group's strategic objectives. Financial KPIs KPI Purpose of KPI 2008 2007 Year ended 31 March 2006 Group Revenue and related organic growth(2) Adjusted operating profit and related organic growth(2) Free cash...

  • Page 33
    ...base and the related growth is an indicator of the success of the strategy to deliver growth in emerging markets. £9,345m 14.5% £3,729m 20.9% 25.9% 119.1m 21.2% £6,441m 21.1% £3,244m 27.4% 24.7% 61.9m 26.7% £4,554m 19.4% £2,763m 16.0% 25.1% 39.8m 38.3% Vodafone Group Plc Annual Report 2008...

  • Page 34
    ... in data revenue was particularly strong, up 40.6% on an organic basis to £2,180 million, reflecting an increasing penetration of mobile PC connectivity devices and improved service offerings. Operating result Operating profit increased to £10,047 million for the year ended 31 March 2008 from...

  • Page 35
    ... statutory tax rate due to the structural benefit from the ongoing enhancement of the Group's internal capital structure and the resolution of historic issues with tax authorities. The 2008 financial year tax rate benefits from the cessation of provisioning for UK Controlled Foreign Company ("CFC...

  • Page 36
    Vodafone - Performance Operating Results continued Europe Germany £m Italy £m Spain £m UK £m Arcor £m Other Eliminations £m £m Europe £m £ % change Organic Year ended 31 March 2008 Voice revenue(1) Messaging revenue Data revenue Fixed line revenue(1) Other service revenue Service revenue ...

  • Page 37
    ... combined number of registered mobile PC connectivity devices and handheld business devices, particularly in the business segment, as well as increased Vodafone HappyLive! bundle penetration in the consumer segment. Organic growth % Reported growth % Service revenue Germany Italy Spain UK Arcor...

  • Page 38
    ...basis, as the additional charges resulting from the acquisition of Tele2 operations in Italy and Spain and unfavourable exchange rate movements were partially offset by savings from lower capital expenditure and the consolidation and optimisation of data centres. 36 Vodafone Group Plc Annual Report...

  • Page 39
    ...calls and messages to Vodafone customers, while acquisition costs rose by 18.7% on an organic basis due to the investment in the business and higher value consumer contract segments. Spain Spain generated growth of 16.5% in adjusted operating profit, or 14.4% on an organic basis, due to the increase...

  • Page 40
    ... 2008, the Group changed its organisational structure and the Group's associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results are presented in accordance with the new organisational structure. 38 Vodafone Group Plc Annual Report...

  • Page 41
    ...87.9%, respectively, as a result of the 26.2% organic increase in the average customer base, driven primarily by increasing penetration in emerging markets. Strong performances in Turkey, Egypt, Romania and India contributed to the growth in service revenue. Vodafone Group Plc Annual Report 2008 39

  • Page 42
    ... customer base and strong growth in data and fixed line revenue. Adjusted operating profit Adjusted operating profit increased by 15.0% for the year ended 31 March 2008, or 20.9% on an organic basis, due to strong performances in Romania, Vodacom, Egypt and Verizon Wireless. The table below sets...

  • Page 43
    ... tax charge. Investments China Mobile, in which the Group has a 3.21% stake and which is accounted for as an investment, increased its closing customer base by 24.0% in the year to 392.1 million. Dividends of £72 million were received by the Group in the 2008 financial year. Vodafone Group Plc...

  • Page 44
    ... currencies. The acquisitions and stake increases led to the rise in acquired intangible asset amortisation, and these acquisitions, combined with the continued expansion of network infrastructure in the EMAPA region, resulted in higher depreciation charges. 42 Vodafone Group Plc Annual Report 2008

  • Page 45
    ... Vodafone Japan during the 2007 financial year, including an £86 million gain related to the renegotiation of these investments. At 31 March 2007, the provision for potential interest charges arising on settlement of outstanding tax issues was £1,213 million. Vodafone Group Plc Annual Report 2008...

  • Page 46
    Vodafone - Performance Operating Results continued Europe Germany £m Italy £m Spain £m UK £m Arcor £m Other £m Elimination £m Europe £m £ % change Organic Year ended 31 March 2007 Voice revenue(1) Messaging revenue Data revenue Fixed line revenue(1) Other service revenue Service revenue ...

  • Page 47
    ...where new tariffs and Vodafone Mobile Connect data card initiatives proved particularly successful. Germany and Italy reported declines in service revenue at constant exchange rates of 3.9% and 1.5%, respectively, largely as a result of termination rate cuts. Underlying service revenue in Italy grew...

  • Page 48
    ... data services. Growth in Italy, Spain and the UK was assisted by the expansion of HSDPA network coverage and increased penetration of Vodafone Mobile Connect data cards, of which 74%, 64% and 53% were sold during the 2007 financial year as HSDPA enabled devices in each of these markets respectively...

  • Page 49
    ...reductions to planned network rollout, outsourcing and off-shoring of customer services operations, property rationalisation, replacing leased lines with owned transmission, network site sharing and renegotiation of supplier contracts and service agreements. Vodafone Group Plc Annual Report 2008 47

  • Page 50
    ...the Group changed its organisational structure and the Group's associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results for all periods are presented in accordance with the new organisational structure. 48 Vodafone Group Plc Annual...

  • Page 51
    ... Airtel in India in December 2005, offset by an adverse movement in exchange rates. Strong organic growth was achieved in all markets, particularly in Egypt and South Africa, driven by the 40.2% increase in the average mobile customer base compared to the 2006 financial year. Strong customer growth...

  • Page 52
    ... in Egypt ahead of the launch of services by a new operator after 31 March 2007 and in South Africa in response to the introduction of mobile number portability during the 2007 financial year, with the provision of 3G and data enabled device upgrades for contract customers and a loyalty point scheme...

  • Page 53
    ... growth, particularly in respect of its total communications strategy for data and fixed broadband services and in emerging markets. Revenue includes the first full year post acquisition of Vodafone Essar in India and the Tele2 businesses in Italy and Spain. Adjusted operating profit is expected...

  • Page 54
    .... Additionally, decisions by regulators and new legislation, such as those relating to international roaming charges and call termination rates, could affect the pricing for, or adversely affect the revenue from, the services the Group offers. Further details on the regulatory framework in certain...

  • Page 55
    ...support services, from third party suppliers. The withdrawal or removal from the market of one or more of these major third party suppliers would adversely affect the Group's operations and could result in additional capital or operational expenditures by the Group. Vodafone Group Plc Annual Report...

  • Page 56
    ... shareholders' funds increased from £67.1 billion at 31 March 2007 to £78.0 billion at 31 March 2008. The increase comprises primarily of the profit for the year of £6.8 billion less equity dividends of £3.7 billion, a £5.8 billion benefit from the impact of favourable exchange rate movements...

  • Page 57
    ...: US dollar exchange rate for this purpose will be determined by the Company up to ten New York and London business days prior to the payment date. Cash dividends to ADS holders will be paid by the ADS Depositary in US dollars. Cash flows During the 2008 financial year, the Group increased its net...

  • Page 58
    ... condition or prospects of Vodafone Italy including, without limitation, its credit rating. During the 2008 financial year, Vodafone Italy declared and paid a gross dividend of â,¬8.9 billion, of which â,¬2.1 billion was received by Verizon net of withholding tax. The Vodafone Essar shareholders...

  • Page 59
    ... guarantor of borrowings under the term credit facility. Additionally, the facility agreement requires Vodafone Finance K.K. to maintain a positive tangible net worth at the end of each financial year. As of 31 March 2008, the Company was the sole guarantor. Vodafone Group Plc Annual Report 2008 57

  • Page 60
    ... fair market value. Financial assets and liabilities Analyses of financial assets and liabilities, including the maturity profile of debt, currency and interest rate structure, are included in notes 18 and 24 to the Consolidated Financial Statements. Details of the Group's treasury management...

  • Page 61
    ...Group. Key CR strategic objectives Core initiative: Access to communications Safe and responsible internet experience Climate change Sustainable products and services Supported by responsible business practices Underpinned by values, principles and behaviours Vodafone Group Plc Annual Report 2008...

  • Page 62
    .... Vodafone will develop its own social networking guidelines for operating companies based on the industry guidelines to inform the way access is offered to services like Bebo, Facebook, Flickr, MySpace and YouTube. 60 Vodafone Group Plc Annual Report 2008 Sustainable products and services Vodafone...

  • Page 63
    ... for the year ended 31 March 2008 were £44.9 million and included donations of £3.8 million towards foundation operating costs. Key performance indicators(1) KPI 2008(2) 2007(3) 2006(4) Number of mobile operating subsidiaries undertaking independent RF field monitoring Total energy use (GWh...

  • Page 64
    ...The business of the Company is managed by its board of directors ("the Board"). Biographical details of the directors and senior management at the date of this report are as follows: Board of directors Chairman 1. Sir John Bond†, aged 66, became Chairman of Vodafone Group Plc in July 2006, having...

  • Page 65
    ..., as Group Managing Director, he oversaw the development and launch of mobile telecommunications networks in many parts of the world. He remains on the Boards of Cheung Kong Holdings Limited, Compagnie Financière Richemont SA, Macquarie (HK) Limited and Orient Overseas (International) Limited and...

  • Page 66
    ... of the Board, the Audit Committee and the Nominations and Governance Committee until the conclusion of the AGM on 24 July 2007. Alan Harper was Group Strategy and New Business Director and was a member of the Executive Committee until 1 September 2007. 64 Vodafone Group Plc Annual Report 2008

  • Page 67
    ...Group strategy; major capital projects, acquisitions or divestments; annual budget and operating plan; Group financial structure, including tax and treasury; annual and half-yearly financial results and shareholder communications; system of internal control and risk management; and senior management...

  • Page 68
    ... room and can access monthly information including actual financial results, reports from the executive directors in respect of their areas of responsibility and the Chief Executive's report which deals, amongst other things, with investor relations, giving Board members an opportunity to develop an...

  • Page 69
    ...-executive director satisfying the independence requirements of Rule 10A-3 of the US Securities Exchange Act 1934, as its financial expert on the Audit Committee. Further details on Nick Land can be found in "Board of Directors and Group Management" on page 63. Vodafone Group Plc Annual Report 2008...

  • Page 70
    ...-to-day management of the Group's businesses, the overall financial performance of the Group in fulfilment of strategy, plans and budgets and Group capital structure and funding. It also reviews major acquisitions and disposals. The members of the Executive Committee and their biographical details...

  • Page 71
    ...such as shareholder circulars, Group borrowings, regulatory filings and certain business acquisitions and disposals. Other work is awarded on the basis of competitive tender. During the year, Deloitte & Touche LLP and its affiliates charged the Group £7 million (2007: £7 million, 2006: £4 million...

  • Page 72
    ... 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. The Company has also adopted a corporate Code of Ethics for senior executives, financial and accounting officers...

  • Page 73
    ... for the executive directors during the 2008 financial year. The objective was to consider the effectiveness of the reward arrangements in aligning with our strategy and shareholder interests. As a result, the Remuneration Committee has updated the remuneration policy, reward structure and market...

  • Page 74
    ... of executive directors' remuneration has had the following high level impact on the package for the 2009 financial year: • no change to the base salary policy; • no significant change to the annual bonus arrangement; and • long term incentives will be awarded in the form of performance shares...

  • Page 75
    ... to reward the executive directors in the 2008 financial year. Details on performance measures, the link to strategy and grant policy are also included. 2007/08 performance measure(s) Purpose - link to strategy Grant policy Base salary 2007/08 • Not applicable • Reflects competitive market...

  • Page 76
    Vodafone - Governance Directors' Remuneration continued Changes to how the executive directors will be paid in the 2009 financial year The following page sets out the changes made as part of the 2008 review together with further details of the long term incentive plan. 2008/09 performance measure...

  • Page 77
    ... received in the 2008 financial year(1) Annual bonus and share grants made to executive directors in the 2008 financial year (percentages of base salary) Annual Bonus Target award/Maximum award Bonus deferral arrangement Face value of DSB matching shares awarded in June 2007 Long term incentives...

  • Page 78
    ... 3.0% of the Company's share capital at 31 March 2008 (2.9% at 31 March 2007). Funding A mixture of newly issued shares, treasury shares and shares purchased in the market by the employee benefit trust is used to satisfy share-based awards. This policy is kept under review. Non-executive directors...

  • Page 79
    ... financial year Vodafone Group Short Term Incentive Plan applicable to the year ended 31 March 2008. These awards are in relation to the performance against targets in adjusted operating profit, service revenue, free cash flow, total communications revenue and customer delight for the financial year...

  • Page 80
    ... awarded during the year under the Deferred Share Bonus to the Company's senior management, other than executive directors, is 969,346. For a description of the performance and vesting conditions, see "2007 Deferred Share Bonus" in the table on page 73. 78 Vodafone Group Plc Annual Report 2008

  • Page 81
    ... 2010. (5) The value at 31 March 2008 is calculated using the closing middle market price of the Company's ordinary shares at 31 March 2008 of 150.9 pence. The aggregate number of shares conditionally awarded during the year to the Company's senior management is 4,391,443 shares. For a description...

  • Page 82
    ...financial year 31 March 2008 Number Number Option price Pence Vodafone Group 1998 Executive Share Option Scheme (Unapproved) Vodafone Group 1998 Company Share Option Scheme (Approved) Vodafone Group 1998 Sharesave Scheme Vodafone Group Plc 1999 Long Term Stock Incentive Plan(1) Vodafone Group Plc...

  • Page 83
    ... 2008. Directors' interests in contracts None of the current directors had a material interest in any contract of significance to which the Company or any of its subsidiary undertakings was a party during the financial year. Luc Vandevelde On behalf of the Board Vodafone Group Plc Annual Report...

  • Page 84
    ... accounting policies 135 3. Fixed assets 136 4. Debtors 136 5. Creditors 137 6. Share capital 137 7. Share-based payments 138 8. Reserves and reconciliation of movements in equity shareholders' funds 138 9. Equity dividends 139 10. Contingent liabilities 139 82 Vodafone Group Plc Annual Report 2008

  • Page 85
    ... registered public accounting firm, who also audit the Group's Consolidated Financial Statements. Their audit report on internal controls over financial reporting is on page 84. By Order of the Board Going concern After reviewing the Group's and the Company's budget for the next financial year...

  • Page 86
    ...as issued by the International Accounting Standards Board ("IASB"). Our report dated 27 May 2008 expressed an unqualified opinion on those financial statements. Deloitte & Touche LLP Chartered Accountants and Registered Auditors London United Kingdom 27 May 2008 84 Vodafone Group Plc Annual Report...

  • Page 87
    ...accounting policies". Management has discussed its critical accounting estimates and associated disclosures with the Company's Audit Committee. For mobile businesses where the first five years of the ten year management plan are used for the Group's value in use calculations, a long term growth rate...

  • Page 88
    ... useful lives have not resulted in material changes to the Group's amortisation charge. Intangible assets, excluding goodwill Other intangible assets include the Group's aggregate amounts spent on the acquisition of 2G and 3G licences, computer software, customer bases, brands and development costs...

  • Page 89
    ...including data services and information provision, fees for connecting users of other fixed line and mobile networks to the Group's network, revenue from the sale of equipment, including handsets, and revenue arising from the Group's partner network agreements. Vodafone Group Plc Annual Report 2008...

  • Page 90
    ...gains on defined benefit pension schemes, net of tax Revaluation gain Foreign exchange (gains)/losses transferred to the Consolidated Income Statement Fair value gains transferred to the Consolidated Income Statement Other Net gain/(loss) recognised directly in equity Profit/(loss) for the financial...

  • Page 91
    ...Deferred tax assets Post employment benefits Trade and other receivables Current assets Inventory Taxation recoverable Trade and other receivables Cash and cash equivalents Total assets Equity Called up share capital Share premium account Own shares held Additional paid-in capital Capital redemption...

  • Page 92
    ...B share capital redemption B share preference dividends paid Equity dividends paid Dividends paid to minority shareholders in subsidiary undertakings Interest paid Net cash flows from financing activities Net cash flows Cash and cash equivalents at beginning of the financial year Exchange gain/(loss...

  • Page 93
    ... on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Vodafone Group Plc Annual Report 2008 91

  • Page 94
    ... their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The Group prepares and internally approves formal ten year management plans...

  • Page 95
    ... data services and information provision, fees for connecting users of other fixed line and mobile networks to the Group's network, revenue from the sale of equipment, including handsets, and revenue arising from partner market agreements. Access charges and airtime used by contract customers...

  • Page 96
    .... Scheme liabilities are assessed using the projected unit funding method and applying the principal actuarial assumptions as at the balance sheet date. Assets are valued at market value. During the year ended 31 March 2006, the Group early adopted the amendment to IAS 19, "Employee Benefits", and...

  • Page 97
    ... awards have an attached market condition, based on Total Shareholder Return ("TSR"), which is taken into account when calculating the fair value of the share awards. The valuation for the TSR is based on Vodafone's ranking within the same group of companies, where possible, over the past five years...

  • Page 98
    ... basis on which the Group manages its world wide interests. Revenue is attributed to a country or region based on the location of the Group company reporting the revenue. Inter-segment sales are charged at arms length prices. The Group uses adjusted operating profit for internal performance analysis...

  • Page 99
    ...,084) Non-current assets(1) £m Other Capitalised expenditure Depreciation fixed asset on intangible and additions(2) assets amortisation £m £m £m Impairment of goodwill £m 31 March 2008 Germany Italy Spain UK Arcor Other Europe Europe Eastern Europe Middle East, Africa & Asia Pacific EMAPA...

  • Page 100
    ...to pension schemes and charitable foundations associated to the Group. A description of the work performed by the Audit Committee in order to safeguard auditor independence when non-audit services are provided is set out in "Corporate Governance" on page 69. 98 Vodafone Group Plc Annual Report 2008

  • Page 101
    ...: Other loans Interest rate swaps Dividends on redeemable preference shares Fair value hedging instrument Fair value of hedged item Other financial liabilities held at amortised cost: Bank loans and overdrafts Other loans(4) Potential interest charge on settlement of tax issues Equity put rights and...

  • Page 102
    Vodafone - Financials Notes to the Consolidated Financial Statements continued 6. Taxation Income tax expense 2008 £m 2007 £m 2006 £m United Kingdom corporation tax (income)/expense at 30%: Current year Adjustments in respect of prior years Overseas current tax expense/(income): Current year ...

  • Page 103
    ... of open issues, future planning opportunities, corporate acquisitions and disposals, the use of brought forward tax losses and changes in tax legislation and tax rates. For example, in June 2007, the UK Government issued a discussion document about the taxation of companies' foreign profits and...

  • Page 104
    ... balance sheet date and not recognised as a liability: Final dividend for the year ended 31 March 2008: 5.02 pence per share (2007: 4.41 pence per share, 2006: 3.87 pence per share) 2,667 2,331 2,328 8. Earnings/(loss) per share 2008 Millions 2007 Millions 2006 Millions Weighted average number...

  • Page 105
    ...the cost of sales line within the Consolidated Income Statement. The net book value at 31 March 2008 and expiry dates of the most significant purchased licences are as follows: Expiry date 2008 £m 2007 £m Germany UK December 2020 December 2021 5,089 4,579 4,684 4,912 Vodafone Group Plc Annual...

  • Page 106
    ... in long term interest rates. The impairment loss for the year ended 31 March 2006 of £3.6 billion was due to competitive pressures increasing with the mobile network operators competing aggressively on subsidies and, increasingly, on price. The pre-tax risk adjusted discount rate used in the...

  • Page 107
    ... to changes in assumptions". During the year ended 31 March 2008, the most recent value in use calculation for Group's operations in Spain was based on a pre-tax risk adjusted discount rate of 10.6% (2007: 9.7%) and long term growth rate of 1.4% (2007: 3.2%). Vodafone Group Plc Annual Report 2008...

  • Page 108
    ... carrying value in both cases. Assumptions used in value in use calculation Germany Italy % % Change required for carrying value to equal the recoverable amount Germany Italy Percentage points Percentage points Pre-tax adjusted discount rate Long term growth rate Budgeted EBITDA(1) Budgeted capital...

  • Page 109
    ... depreciated, with a cost of £28 million and £1,013 million, respectively (2007: £13 million and £998 million). Property, plant and equipment with a net book value of £1,503 million (2007: £73 million) has been pledged as security against borrowings. Vodafone Group Plc Annual Report 2008 107

  • Page 110
    ... Essar Limited. (5) The entire issued share capital of Vodafone Group Services Limited is held directly by Vodafone Group Plc. (6) 38.6% of the issued share capital of Vodafone Portugal-Comunicações Pessoais, S.A. is held directly by Vodafone Group Plc. 108 Vodafone Group Plc Annual Report 2008

  • Page 111
    ... (3) The Group also holds two non-voting shares. (4) An initial public offering of 25% of Safaricom shares held by the Government of Kenya closed to applicants on 23 April 2008. Share allocations are expected to be announced on, or around, 30 May 2008, following which Safaricom will be accounted for...

  • Page 112
    ... 24 1,352 229 7,367 3,915 634 20 1,046 260 5,875 The fair values of listed securities are based on quoted market prices and include the Group's 3.2% investment in China Mobile Limited, which is listed on the Hong Kong and New York stock exchanges and incorporated under the laws of Hong Kong. China...

  • Page 113
    ... rate swaps 70 42 112 780 892 60 78 138 166 304 The fair values of these financial instruments are calculated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at 31 March. Vodafone Group Plc Annual Report 2008...

  • Page 114
    .... Allotted during the year Number Nominal value £m Net proceeds £m UK share awards and option scheme awards US share awards and option scheme awards Total for share awards and option scheme awards 152,400,497 16,959,930 169,360,427 9 1 10 249 24 273 112 Vodafone Group Plc Annual Report 2008

  • Page 115
    ... "Sharesave Scheme") enables UK staff to acquire shares in the Company through monthly savings of up to £250 over a three or five year period, at the end of which they also receive a tax free bonus. The savings and bonus may then be used to purchase shares at the option price, which is set at the...

  • Page 116
    ... to the Board of directors and Executive Committee have a market based performance condition attached and hence the assumptions are disclosed separately. Share awards Movements in non-vested shares during the year ended 31 March 2008 are as follows: All Shares Weighted average fair value at grant...

  • Page 117
    ... 2006 Issue of new shares Own shares released on vesting of share awards Share consolidation B share capital redemption B share preference dividend Share-based payment charge, inclusive of tax charge of £16 million 31 March 2007 Issue of new shares Own shares released on vesting of share awards...

  • Page 118
    ...with established internal Treasury policies which dictate that an investment's long term credit rating is no lower than single A. Additionally, the Group invests in AAA unsecured money market mutual funds where the investment is limited to 10% of each fund. 116 Vodafone Group Plc Annual Report 2008

  • Page 119
    ... interest on outstanding tax issues. There would be no material impact on equity. Foreign exchange management As Vodafone's primary listing is on the London Stock Exchange, its share price is quoted in sterling. Since the sterling share price represents the value of its future multi-currency cash...

  • Page 120
    ...Essar Group to sell its 33% shareholding in Vodafone Essar to the Group for US$5 billion or to sell between US$1 billion and US$5 billion worth of Vodafone Essar shares at an independently appraised fair market value. Fair values are calculated using discounted cash flows with a discount rate based...

  • Page 121
    ...eight legal entities), which form the operating companies in India. The VEL Group has a number of security arrangements supporting its secured loan obligations comprising its physical assets and certain share pledges of the shares under VEL. The terms and conditions of the security arrangements mean...

  • Page 122
    ...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 liabilities. At 31 March 2008, the Group had entered into foreign exchange contracts to decrease its sterling, US dollar...

  • Page 123
    ... Group operates defined benefit schemes in Germany, Greece, India, Ireland, Italy, Turkey and the United States. Defined contribution pension schemes are currently provided in Australia, Egypt, Greece, Hungary, Ireland, Italy, Kenya, Malta, the Netherlands, New Zealand, Portugal, South Africa, Spain...

  • Page 124
    ... of its defined benefit schemes is as follows: 2008 £m 2007 £m 2006 £m Movement in pension assets: 1 April Reclassification as held for sale Expected return on pension assets Actuarial (losses)/gains Employer cash contributions Member cash contributions Benefits paid Exchange rate movements 31...

  • Page 125
    .... 2008 £m 2007 £m Included within "Derivative financial instruments": Fair value through the income statement (held for trading): Interest rate swaps Foreign exchange swaps Fair value hedges: Interest rate swaps 160 358 518 26 544 68 48 116 103 219 Vodafone Group Plc Annual Report 2008 123

  • Page 126
    ... statement from the date of acquisition. The weighted average life of total intangible assets was two years. From the date of acquisition, the acquired entity contributed a £67 million loss to the profit attributable to equity shareholders of the Group. 124 Vodafone Group Plc Annual Report 2008

  • Page 127
    ...results of operations of the combined companies. 2008 £m Revenue Profit for the financial year Profit attributable to equity shareholders Basic earnings per share Diluted earnings per share 35,931 6,665 6,575 Pence per share 12.40 12.34 Other The Group completed a number of smaller acquisitions...

  • Page 128
    ...Other effects include foreign exchange gains and losses transferred to the income statement and professional fees related to the disposal. (2) Reported in other income and expense in the Consolidated Income Statement. 901 1,343 (1) 441 1,664 1,776 (44) 68 126 Vodafone Group Plc Annual Report 2008

  • Page 129
    ... amount dependent on the success of the public offering. The remainder of the licence cost will be funded by the other shareholders in Vodafone Qatar. Services are expected to be launched under the Vodafone brand by the end of the 2009 financial year. Vodafone Group Plc Annual Report 2008 127

  • Page 130
    ...") to the Group's Turkish subsidiary, which acquired the assets from the SDIF, a public agency of the Turkish state, in a public auction in Turkey pursuant to Turkish law in which a number of mobile telecommunications companies participated. The plaintiffs seek an Order requiring the return of the...

  • Page 131
    ...Key management compensation Aggregate compensation for key management, being the directors and members of the Group Executive Committee, was as follows: 2008 £m 2007 £m 2006 £m Short term employee benefits Post-employment benefits: Defined benefit schemes Defined contribution schemes Share-based...

  • Page 132
    ...privately-owned company based in Denmark, which operates a social networking and online management tool enabling mobile phone users to back-up and share their handsets' contact and calendar information online, for cash consideration of â,¬32 million (£25 million). On 19 May 2008, the Group acquired...

  • Page 133
    ... on the consolidated results or financial position of the Group. IFRIC 13 "Customer Loyalty Programmes" was issued in June 2007 and will be effective for annual periods beginning on or after 1 July 2008. The interpretation addresses how companies that grant their customers loyalty award credits when...

  • Page 134
    ... Accountants and Registered Auditors London United Kingdom 27 May 2008 Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board and with the standards of the Public Company Accounting Oversight Board...

  • Page 135
    ...These parent Company Financial Statements have been prepared under the accounting policies set out therein. We have reported separately on the Consolidated Financial Statements of Vodafone Group Plc for the year ended 31 March 2008 and on the information in the directors' remuneration report that is...

  • Page 136
    ... and reserves Called up share capital Share premium account Capital redemption reserve Capital reserve Other reserves Own shares held Profit and loss account Equity shareholders' funds The Company Financial Statements were approved by the Board of directors on 27 May 2008 and were signed on its...

  • Page 137
    ... received, net of direct issue costs. Derivative financial instruments and hedge accounting The Company's activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The use of financial derivatives is governed by the Group's policies approved by the Board...

  • Page 138
    ... paid or received or, in respect of the Company's final dividend for the year, approved by shareholders. Pensions The Company is the sponsoring employer of the Vodafone Group Pension Scheme, a defined benefit pension scheme. The Company is unable to identify its share of the underlying assets and...

  • Page 139
    ... Allotted during the year Number Nominal value £m Net proceeds £m UK share awards and option scheme awards US share awards and option scheme awards Total for share awards and option scheme awards 152,400,497 16,959,930 169,360,427 9 1 10 249 24 273 Vodafone Group Plc Annual Report 2008 137

  • Page 140
    ... the Company Financial Statements continued 7. Share-based payments The Company currently uses a number of equity settled share plans to grant options and shares to the directors and employees of its subsidiary undertakings, as listed below. Share option schemes Vodafone Group savings related and...

  • Page 141
    ... of £57 million (2007: nil) and a commitment to the Spanish tax authorities of £197 million (2007: nil). Legal proceedings Details regarding certain legal actions which involve the Company are set out in note 32 to the Consolidated Financial Statements. Vodafone Group Plc Annual Report 2008 139

  • Page 142
    ... York, NY 10286 -1258 USA Telephone: 1 800 233 5601 (toll free) or, for calls outside the USA, +1 212 815 3700 (not toll free) and enter company number 2160 140 Vodafone Group Plc Annual Report 2008 (Holders of ordinary shares resident in Ireland): Computershare Investor Services (Ireland) Limited...

  • Page 143
    ....07 26.88 Two year data on a quarterly basis London Stock Exchange Pounds per ordinary share High Low NYSE Dollars per ADS High Low ShareGift The Company supports ShareGift, the charity share donation scheme (registered charity number 1052686). Through ShareGift, shareholders who have only a very...

  • Page 144
    ... listing in The Financial Times Stock Exchange 100 index and the 24th largest company in the world based on market capitalisation at that date. ADSs, each representing ten ordinary shares, are traded on the NYSE under the symbol 'VOD'. The ADSs are evidenced by ADRs issued by The Bank of New York...

  • Page 145
    ... share capital or the voting rights available to its shareholders, (e) relating to the arrangement of any employee benefit in which the director will share equally with other employees and (f) relating to any insurance that the Company purchases or renews for its directors or any group of people...

  • Page 146
    .... Holders 144 Vodafone Group Plc Annual Report 2008 of the Company's ADSs are entitled to receive notices under the terms of the Deposit Agreement relating to the ADSs. Under Section 336 of the Companies Act 2006, the annual general meeting of shareholders must be held each calendar year and within...

  • Page 147
    ...to special rules including officers of the Company, employees and holders that, directly or indirectly, hold 10% or more of the Company's voting stock. The tax consequences of the return of capital and the share consolidation undertaken during the 2007 financial year pursuant to a B share scheme are...

  • Page 148
    ... tax rate applicable to qualified dividend income for certain non-corporate holders. History and Development The Company was incorporated under English law in 1984 as Racal Strategic Radio Limited (registered number 1833679). After various name changes, 20% of Racal Telecom Plc capital was offered...

  • Page 149
    ... range of regulated rates set by NRA's in the EU and by their level relative to its view of cost. The NRAs are required to take utmost account of the Commission's recommendations, but may depart from them in justified circumstances. Vodafone Group Plc Annual Report 2008 147 World Radiocommunication...

  • Page 150
    ... a fourth 3G licence by July 2007. No licence has been awarded to date. The NRA authorised refarming of the 900 MHz and 1800 MHz bands. The French Competition Council has issued a Statement of Objection to SFR concerning on-net pricing in certain tariffs. 148 Vodafone Group Plc Annual Report 2008

  • Page 151
    ... market for access and call origination on mobile public networks, concluding that no operator had SMP. Romania The Government commenced a process to issue a sixth mobile licence in the 410-415 MHz band. Mobile number portability is expected to be implemented in October 2008. Turkey The Government...

  • Page 152
    ... Consolidated Balance Sheet or to provide returns to shareholders in the form of dividends or share purchases; • free cash flow facilitates comparability of results with other companies, although the Group's measure of free cash flow may not be directly comparable to similarly titled measures used...

  • Page 153
    ... 2008, the Group changed its organisational structure and the Group's associated undertaking in France, SFR, is now managed within the Europe region and reported within Other Europe. The results are presented in accordance with the new organisational structure. Vodafone Group Plc Annual Report 2008...

  • Page 154
    ...and Employees 6A Directors and senior management 6B Compensation 6C Board practices 6D Employees 6E Share ownership 7 Major Shareholders and Related Party Transactions 7A Major shareholders 7B Related party transactions 7C Interests of experts and counsel 152 Vodafone Group Plc Annual Report 2008

  • Page 155
    ... Offer and Listing 9A Offer and listing details 9B Plan of distribution 9C Markets 9D Selling shareholders 9E Dilution 9F Expenses of the issue Additional Information 10A Share capital 10B Memorandum and Articles of Association 10C Material contracts 10D Exchange controls 10E Taxation 10F Dividends...

  • Page 156
    ... prices of new mobile handsets; changes in the costs to the Group of or the rates the Group may charge for terminations and roaming minutes; the Group's ability to achieve meaningful cost savings and revenue improvements as a result of its cost reduction programmes; the ability to realise benefits...

  • Page 157
    ... network operator when a customer makes a call to another mobile or fixed line network operator. Termination rate Total communications revenue Comprises all fixed location services revenue, data revenue, fixed line revenue and other service revenue. Vodafone Group Plc Annual Report 2008...

  • Page 158
    .../(loss) before taxation Profit/(loss) for the financial year from continuing operations Profit/(loss) for the financial year Consolidated Balance Sheet data Total assets Total equity Total equity shareholders' funds Earnings Per Share ("EPS")(2) Weighted average number of shares (millions) - Basic...

  • Page 159
    Contact Details Investor Relations Telephone: +44 (0) 1635 664447 Media Relations Telephone: +44 (0) 1635 664444 Corporate Responsibility Fax: +44 (0) 1635 674478 E-mail: [email protected] Website: www.vodafone.com/responsibility We want to keep the environmental impact of the documents...

  • Page 160
    Vodafone Group Plc Registered Office 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