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Vodafone Group Plc
Annual Report
For the year ended 31 March 2010

Table of contents

  • Page 1
    Vodafone Group Plc Annual Report For the year ended 31 March 2010

  • Page 2
    ... Products and services Value added services Technology and resources People Performance # 24 25 37 38 40 45 Key performance indicators Operating results Guidance Principal risk factors and uncertainties Financial position and resources Corporate responsibility Governance # 48 Board of directors...

  • Page 3
    ...'s largest mobile communications companies by revenue with 341.1 million proportionate mobile customers, up 12.7% during the year. Improved performance in emerging markets with increasing revenue market share in India, Turkey and South Africa during the year. Expanded fixed broadband customer base...

  • Page 4
    ... returns for our shareholders from continued investment in those networks. Innovation Continued innovation in our products and services broadens and enhances our business portfolio. â- The new Vodafone 360 service combines the benefits of mobile communications and the internet to bring your phone...

  • Page 5
    ... those where we do not exercise management control. In Verizon Wireless we have an outstanding asset whose value has increased substantially over recent years, and SFR has secured a strong market position and provided good dividends. The Board reviews these investments regularly and will remain...

  • Page 6
    ...internet based companies and software providers, are also entering the market offering converged communication services. Industry regulators continue to impose lower mobile termination rates (the fees mobile companies charge for calls received from other companies' networks) and lower roaming prices...

  • Page 7
    .... Service revenue (%) 3.8 7.9 9.7 11.5 Voice Messaging Data Fixed line Other Vodafone mobile peak downlink speeds (Mbps) 28 21 14 7 0 67.1 2006 2007 2008 2009 2006 2010 Note: (1) Market data sourced from Wireless intelligence and Strategy Analytics. Vodafone Group Plc Annual Report 2010 5

  • Page 8
    ... of Vodafone to a total communications provider. In particular, mobile data and fixed broadband services continue to grow while we increased the contribution being made by our operations in emerging economies, primarily by gaining market share. We have reduced costs and working capital to manage...

  • Page 9
    ... data services. Vodafone Group Plc Annual Report 2010 7 Strategy Cost reduction targets delivered a year ahead of plan. Strong revenue growth from data and fixed line services. â- Continued strong growth in emerging markets. â- Enhanced shareholder returns - new three year dividend target...

  • Page 10
    ... exchange rates) for the next three financial years ending 31 March 2013 reflecting the successful execution of the Group's strategy and our expectations for improving operating free cash flow from our emerging markets and fixed line investments. The Board is therefore targeting dividend per share...

  • Page 11
    ... Chief Executive 19%(*) data revenue growth; driven by PC connectivity services and mobile internet usage. â- Fixed broadband customer base of 5.6m, up 1m. â- 2%(*) revenue growth in Vodafone Global Enterprise. â- £4.1bn of free cash flow used to pay dividends. â- Total dividends per share of...

  • Page 12
    ... in the United States. Europe Our mobile subsidiaries and joint venture operate under the brand name 'Vodafone'. Our associate in France operates as 'SFR' and 'Neuf Cegetel', and our fixed line communication businesses operate as 'Vodafone', 'Arcor', 'Tele2' and 'TeleTu'. Africa and Central...

  • Page 13
    ... and our joint venture in Australia operates under the brands 'Vodafone' and '3'. Verizon Wireless (United States) Our associate in the US operates under the brand 'Verizon Wireless'. China 17.2m Egypt 24.6m Qatar 0.5m India 100.9m Verizon Wireless 41.8m Fiji 0.4m Australia 3.5m New Zealand 2.5m...

  • Page 14
    ... offer SIM-only tariffs allowing customers to benefit from our network whilst keeping their existing handset. Around a third of our proportionate customer base including consumer and enterprise customers are contract customers and the remainder are prepaid. 12 Vodafone Group Plc Annual Report 2010

  • Page 15
    ... internet is increasingly a key channel to promote and sell our products and services and to provide customers with an easy, user friendly and accessible way to manage their services and access support, whilst reducing costs for the Group. The extent of indirect distribution varies between markets...

  • Page 16
    .... 66 new models released in the 2010 financial year. â- 23 exclusive handsets launched. â- Voice & messaging services We provide value focused pricing through unlimited bundles of voice and text services. Voice services incorporate revenue for national, international and roaming calls. â- SMS...

  • Page 17
    ... use our services on a mobile network when travelling abroad. Fixed Our fixed service incorporates fixed broadband, offered mainly through DSL technology, and fixed line voice, which allows consumer and enterprise customers to make fixed line voice calls using Vodafone as their total communications...

  • Page 18
    ... tariff abroad" offering greater price transparency and certainty. â- 4.5m Applications Our range of total communications solutions provides customers with integrated office and mobile voice and data services, such as Vodafone Always Best Connected, an internet connection management software tool...

  • Page 19
    ...Italy and Spain with our cloud-based office phone solution, Vodafone One Net, the service is expected to be launched in Germany and the UK during the 2011 financial year. The service provides enterprise customers of all sizes with advanced office desk phone functionality integrated with their mobile...

  • Page 20
    ... code division multiple access ('W-CDMA') standard, provide customers with an optimised data access experience. We have continued to expand our service offering on 3G networks, which provide high speed internet and email access, video telephony, full track music downloads, mobile TV and other data...

  • Page 21
    ... communications company our customers can use a broad range of devices to access our products and services. Our access networks provide the means by which our customers can connect to Vodafone. We provide mobile access through a network of base stations and fixed access through consumer digital...

  • Page 22
    ... in reducing the costs of deploying mobile network infrastructure and we are now conducting network sharing in all of our controlled markets as well as securing network sharing agreements on over 75% of the new radio sites we deployed across the Group in the 2010 financial year. Transmission self...

  • Page 23
    ... companies for "buy negotiation" by a study run by the International Association for Contract & Commercial Management. SCM is a major contributor to our cost reduction programme and operates across all local markets, achieving savings that are measured using a unified methodology and are reported...

  • Page 24
    ...flatter structures with wider management accountability. Several of our markets made significant organisation changes in the year: â- â- Employees 85,000 During the 2010 financial year we launched a change programme called "The Vodafone Way". The Vodafone Way is about being an admired company in...

  • Page 25
    ... developed a code of conduct that defines what employees need to do to live up to our business principles. New and existing employees will receive communication and training on the code of conduct during the 2011 financial year. Key performance indicators KPI 2010 2009 2008 Performance, reward...

  • Page 26
    ... services to customers. Measure used by management to monitor performance at a segment level. Measure of customer satisfaction across our controlled markets and jointly controlled market in Italy. Also used in determining management's remuneration. At the end of the 2010 financial year, most markets...

  • Page 27
    ... and direct cost savings. Africa and Central Europe's EBITDA decreased by 5.8%(*) resulting from reduced EBITDA margins across the majority of Central Europe due to challenging economic conditions and investment in Turkey to drive growth in the second half of the financial year. Strong revenue...

  • Page 28
    ... of the agreement of the German write down losses (see note 6 to the consolidated financial statements) and also the ongoing benefits from our internal capital structure. Income tax expense includes a credit of £2,103 million arising from the German tax authorities' decision that â,¬15 billion of...

  • Page 29
    ... in consumer and enterprise segments and the closing contract customer base was up by 14.5%. EBITDA increased by 4.3%(*) and EBITDA margin increased by 1.0 percentage point as a result of increased revenue, continued operational efficiencies and cost control. Spain Full year service revenue declined...

  • Page 30
    ... the foreign exchange benefits upon translation of the results into sterling. Africa and Central Europe(1) Africa and Central Europe £m Vodacom £m Other £m £ % change Organic(2) Year ended 31 March 2010 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin 4,450 3,954...

  • Page 31
    ...a joint venture in June 2009 between Vodafone Australia and Hutchison 3G Australia which is presented under the "M&A activity" column in the table below. On an organic basis service revenue increased by 9.8%(*) reflecting a 42.2% increase in the mobile customer base and continued strong data revenue...

  • Page 32
    ... merger with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison Australia Pty Limited. Since the merger the joint venture has performed well delivering 8% pro-forma service revenue growth in the fourth quarter and cost synergies to date of £65 million, in line with management...

  • Page 33
    ...the growth of lower margin fixed line operations, a brand royalty provision release included in the 2008 financial year in Italy and restructuring charges in a number of markets, which more than offset customer and operating cost savings. The European EBITDA margin, including Common Functions which...

  • Page 34
    ...items Adjusted profit attributable to equity shareholders Weighted average number of shares outstanding Basic Diluted Net financing costs before dividends from investments increased by 79.8% to £1,480 million, primarily due to mark-to-market losses in the 2009 financial year compared with gains in...

  • Page 35
    ... year in Italy and restructuring charges in a number of markets, which more than offset customer and operating cost savings. Germany The 2.5%(*) decline in service revenue was consistent with the 2008 financial year, benefiting from higher penetration of the new SuperFlat tariff portfolio. Data...

  • Page 36
    ... off network usage in messaging services and higher retention costs. The cost of retaining customers increased as a higher proportion of the contract base received upgrades in the 2009 financial year following the expiration of 18 month contracts which were introduced in 2006. Operating expenses...

  • Page 37
    ... decreased, benefiting from economies of scale. Licensing costs increased as discounts received from the regulator in some service areas were terminated. Network expansion continued, with an average of 2,600 base stations constructed per month, primarily in the new circles. Site sharing increased...

  • Page 38
    ... present value, after integration costs, of more than US$9 billion, driven by aggregate capital and operating expense savings. Increased debt in relation to the acquisition of Alltel led to a £150 million interest charge for the quarter ended 31 March 2009. 36 Vodafone Group Plc Annual Report 2010

  • Page 39
    ...financial year with the Group targeting a similar level in the medium-term. The Group continues to seek resolution of the UK Controlled Foreign Company and India tax cases. Guidance - May 2009(1) Guidance - February 2010(1) 2010 actual performance Foreign exchange Alltel restructuring costs(2) 2010...

  • Page 40
    ..., our network quality, capacity and coverage, pricing of services and equipment, quality of customer service, development of new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and distribution channels and capital resources...

  • Page 41
    ... reflect current or anticipated changes in operations or the financial condition of the Group could lead to an impairment in the carrying value of certain Group assets. While impairment does not impact reported cash flows, it does result in a non-cash charge in the consolidated income statement and...

  • Page 42
    .... Dividend payments on ordinary shares will be paid by direct credit into a nominated bank or building society account or, alternatively, into the Company's dividend reinvestment plan. The Company no longer pays dividends in respect of ordinary shares by cheque. 40 Vodafone Group Plc Annual Report...

  • Page 43
    ... Group's US holding company. Following the announcement of Verizon Wireless' acquisition of Alltel, certain additional tax distributions were agreed. Under the terms of the partnership agreement the Verizon Wireless board has no obligation to effect additional Vodafone Group Plc Annual Report 2010...

  • Page 44
    ... share capital raising QAR3.4 billion (£0.6 billion). The shares were listed on the Qatar Exchange on 22 July 2009. Qatar launched full services on its network on 7 July 2009. On 9 June 2009 Vodafone Australia completed its merger with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone...

  • Page 45
    ... received from collateral support agreements mainly reflects the value of our interest rate swap portfolio which is substantially net present value positive. See note 21 to the consolidated financial statements for further details on these agreements. Credit ratings Consistent with the development...

  • Page 46
    ... 2010 and 8 May 2011 to members of the Essar group of companies that, if exercised, would allow the Essar group to sell its 33% shareholding in Vodafone Essar Limited for US$5 billion or to sell up to US$5 billion worth of Vodafone Essar Limited shares at an independently appraised fair market value...

  • Page 47
    ... 2011 financial year. The Executive Committee receives a formal update on CR twice a year and the Board continues to receive an annual presentation on CR. A CR management structure is established in each local operating company and CR performance is closely Vodafone Group Plc Annual Report 2010 45

  • Page 48
    ... is a rich visual address book that provides users with many ways to communicate including aggregating their social networks into one view, showing who's connected to whom 46 Vodafone Group Plc Annual Report 2010 Sustainable products and services The information and communications technology ('ICT...

  • Page 49
    ... or the International Energy Agency and for other energy sources in each operating company. The data excludes India, Ghana, Qatar and Vodacom. Our joint venture in Italy is included in all years. Amounts related to the 2008 financial year exclude Tele2 in Italy and Spain. (2) Australia is excluded...

  • Page 50
    ...Chief Executive until he rejoined Vodafone. He sits on the International Advisory Board of Bocconi University, Italy. 3. Andy Halford, Chief Financial Officer, aged 51, joined the Board in July 2005. He joined Vodafone in 1999 as Financial Director for Vodafone Limited, the UK operating company, and...

  • Page 51
    ... Group since April 2008. Prior to joining the Vodafone Board he was Chief Executive of Hermes Pensions Management Limited, a position he had held since 2002. Previously he was Hermes' Chief Investment Officer having been Managing Director of AMP Asset Management plc and the Chief International...

  • Page 52
    ... on the Group's strategy, financial structure and planning, succession planning, organisational development and Group-wide policies. The Executive Committee membership comprises the executive directors, details of whom are shown on pages 48 and 49 above, and the senior managers who are listed below...

  • Page 53
    ... Group strategy and long-term plans; major capital projects, acquisitions or divestments; annual budget and operating plan; Group financial structure, including tax and treasury; annual and half-year financial results and shareholder communications; system of internal control and risk management...

  • Page 54
    ... Company should support their re-election. The Board will continue to review its procedures, its effectiveness and development in the financial year ahead. Information and professional development Each member of the Board has immediate access to a dedicated online team room and can access monthly...

  • Page 55
    ...preliminary results announcement, half-year results and annual financial statements; monitoring compliance with statutory and listing requirements for any exchange on which our shares and debt instruments are quoted; reviewing the scope, extent and effectiveness of the activity of the Group internal...

  • Page 56
    ... of the annual report on our website at www.vodafone. com/investor. For the 2010 financial year shareholders will receive the notice of meeting and form of proxy in paper through the post unless they have previously opted to receive email communications. Shareholders continue to have the option to...

  • Page 57
    ... depositary shares from the New York stock exchange to the NASDAQ Stock Market LLC ('NASDAQ'). We are subject to the rules of NASDAQ as well as US securities laws and the rules of the SEC. NASDAQ requires US companies listed on the exchange to comply with NASDAQ's corporate governance rules but...

  • Page 58
    ... shareholder approval annually for issuing shares and to dis-apply the pre-emption rights that apply under law in line with limit guidelines issued by investor bodies. Report from the Audit Committee The Audit Committee assists the Board in carrying out its responsibilities in relation to financial...

  • Page 59
    ...to the Company on general human resource and compensation related matters. In addition, PricewaterhouseCoopers LLP also provided a broad range of tax, share scheme and advisory services to the Group during the 2010 financial year. As noted in his biographical details on page 49 of this annual report...

  • Page 60
    ...The performance conditions on the long-term incentive plan are there to underpin shareholder value creation. â- 21.4 22.7 Base Pension allowance Bonus Long-term incentives Base Pension allowance Bonus Long-term incentives 50.8 6.4 47.8 6.8 21.4 22.7 58 Vodafone Group Plc Annual Report 2010

  • Page 61
    ... used to reward the executive directors in the 2010 financial year. Summary Grant policy â- Base salary â- â- Set by the Remuneration Committee as part of the overall benchmarking process (see previous page). Benchmark assumed to be the market level for the role. Base salaries set annually...

  • Page 62
    ... 100% 150% 200% The target free cash flow level is set by reference to the Company's three year plan and market expectations. The Remuneration Committee consider the 2011, 2010 and 2009 targets to be stretching ones. TSR out-performance of a peer group median We have a limited number of appropriate...

  • Page 63
    ... information below explains what the executive directors who were on the Board on 31 March 2010 will actually receive from awards made previously with performance conditions which ended on 31 March 2010 but that will vest in the 2011 financial year. As previously noted there were no salary increases...

  • Page 64
    ... HM Revenue & Customs ('HMRC') approved scheme open to all permanently employed UK staff. Options under the plan are granted at up to a 20% discount to market value. Executive directors' participation is included in the option table on page 65. Share Incentive Plan The Vodafone Share Incentive Plan...

  • Page 65
    ... of the pension schemes in which the executive directors participate are funded to the extent described in note 23 to the consolidated financial statements. In January 2010 Vodafone confirmed it would close its UK defined benefit scheme to future accrual by existing members on 31 March 2010. From...

  • Page 66
    ... conditionally awarded during the year to the Company's senior management is 14,142,323 shares. The performance and vesting conditions on the shares awarded in the year are based on a matrix of free cash flow performance and relative total shareholder return. 64 Vodafone Group Plc Annual Report 2010

  • Page 67
    Governance Share options No options have been granted to directors during the 2010 financial year. The following information summarises the directors' options under the Vodafone Group 1998 Sharesave Scheme, the Vodafone Group 2008 Sharesave Plan, the Vodafone Group 1998 Company Share Option Scheme ...

  • Page 68
    ... is reviewed annually by the Board, excluding the non-executive directors. Our policy is to pay competitively for the role including consideration of the time commitment required. In this regard, the fees are benchmarked against a comparator group of the current FTSE 15 companies. Following the 2010...

  • Page 69
    ... May 2010. 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 subsidiaries was a party during the financial year. Luc Vandevelde On behalf of the Board Vodafone Group Plc Annual Report 2010 67

  • Page 70
    ... of Vodafone Group Plc Notes to the Company financial statements: Basis of preparation Significant accounting policies Fixed assets Debtors Other investments Creditors Share capital Share-based payments Reserves and reconciliation of movements in equity shareholders' funds 10. Equity dividends 11...

  • Page 71
    ... the Group's consolidated financial statements. Their audit report on internal controls over financial reporting is on page 70. By Order of the Board Going concern After reviewing the Group's and Company's budget for the next financial year, and other longer term plans, the directors are satisfied...

  • Page 72
    ... and IFRS as issued by the International Accounting Standards Board. Our report dated 18 May 2010 expressed an unqualified opinion on those financial statements. Deloitte LLP Chartered Accountants and Registered Auditors London United Kingdom 18 May 2010 70 Vodafone Group Plc Annual Report 2010

  • Page 73
    ... are used in the value in use calculations. In certain developing markets the fifth year of the management plan is not indicative of the long-term future performance as operations may not have reached maturity. For these operations, the Group extends the plan data for an additional five year period...

  • Page 74
    ... or its residual value would result in a reduced depreciation charge in the consolidated income statement. The useful lives and residual values of Group assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical...

  • Page 75
    ... Corporate Governance Statement relating to the Company's compliance with the nine provisions of the June 2008 Combined Code specified for our review. â- Other matter We have reported separately on the parent company financial statements of Vodafone Group Plc for the year ended 31 March 2010 and...

  • Page 76
    ...of tax Net actuarial losses on defined benefit pension schemes, net of tax Revaluation gain Foreign exchange gains transferred to the income statement Fair value losses/(gains) transferred to the income statement Other, net of tax Other comprehensive (loss)/income Profit for the financial year Total...

  • Page 77
    ...,670 Current assets Inventory Taxation recoverable Trade and other receivables Other investments Cash and cash equivalents Total assets Equity Called up share capital Additional paid-in capital Treasury shares Retained losses Accumulated other comprehensive income Total equity shareholders' funds...

  • Page 78
    ...Profit OCI - before tax OCI - taxes Transfer to the income statement Dividends Other 31 March 2009 Issue or reissue of shares Share-based payment Acquisition of subsidiaries Comprehensive income Profit/(loss) OCI - before tax OCI - taxes Transfer to the income statement Dividends Other 31 March 2010...

  • Page 79
    ... redemption Equity dividends paid Dividends paid to non-controlling shareholders in subsidiaries Amounts received from non-controlling shareholders Interest paid Net cash flow from financing activities Net cash flow Cash and cash equivalents at beginning of the financial year Exchange (loss)/gain on...

  • Page 80
    ...measured at fair value. â- New accounting pronouncements adopted IFRIC 13 - "Customer Loyalty Programmes" The Group adopted IFRIC 13 on 1 April 2009. The interpretation addresses how companies that grant their customers loyalty award credits when buying goods and services should account for their...

  • Page 81
    ... control. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group's share of the assets, liabilities, income, expenses and cash flows of jointly controlled entities are combined with the equivalent items in the results on a line-by-line basis. Any...

  • Page 82
    ... higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to 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...

  • Page 83
    ... of financial position. Scheme liabilities are assessed using the projected unit funding method and applying the principal actuarial assumptions at the end of reporting period date. Assets are valued at market value. Actuarial gains and losses are taken to the statement of comprehensive income as...

  • Page 84
    ... fair value at each reporting date. The Group designates certain derivatives as either: â- â- Taxation Income tax expense represents the sum of the current tax payable and deferred tax. Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit...

  • Page 85
    ... are discounted to present value where the effect is material. Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of...

  • Page 86
    ...to a country or region based on the location of the Group company reporting the revenue. Inter-segment sales are charged at arm's length prices. During the year ended 31 March 2010 the Group changed how it determines and discloses segmental EBITDA and adjusted operating profit in order to ensure the...

  • Page 87
    ...047 Non-current Capital assets (1) expenditure(2) £m £m Other expenditure on Depreciation intangible and assets amortisation £m £m Impairment losses, net £m 31 March 2010 Germany Italy Spain UK Other Europe Europe Vodacom Other Africa and Central Europe Africa and Central Europe India Other...

  • Page 88
    ...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 55. 86 Vodafone Group Plc Annual Report 2010

  • Page 89
    Financials 5. Investment income and financing costs 2010 £m 2009 £m 2008 £m Investment income: Available-for-sale investments: Dividends received Loans and receivables at amortised cost Fair value through the income statement (held for trading): Derivatives - foreign exchange contracts Other(1)...

  • Page 90
    ...German write down losses(1) Expected income tax expense at UK statutory rate on profit, before impairment losses and taxation of associates Effect of different statutory tax rates of overseas jurisdictions Effect of current year changes in statutory tax rates Deferred tax on overseas earnings Assets...

  • Page 91
    ... tax balance during the year: £m 1 April 2009 Exchange movements Credited to the profit for the financial year Debited to other comprehensive income Credited directly to equity Reclassification from current tax Arising on acquisition Change in consolidation status 31 March 2010 Deferred tax assets...

  • Page 92
    ... that these losses will be utilised. The Group holds provisions in respect of deferred taxation that would arise if temporary differences on investments in subsidiaries, associates and interests in joint ventures were to be realised after the year end reporting date. No deferred tax liability has...

  • Page 93
    ... net book value at 31 March 2010 and expiry dates of the most significant licences are as follows: 2010 £m 2009 £m Expiry date Germany UK Qatar Italy December 2020 December 2021 June 2028 December 2021 4,802 3,914 1,328 1,097 5,452 4,246 1,482 1,240 Vodafone Group Plc Annual Report 2010 91

  • Page 94
    ... £m India Spain Turkey Ghana India Spain Other Africa and Central Europe Other Africa and Central Europe 2,300 - (200) - 2,100 - 3,400 2,250 250 5,900 - - - - - Year ended 31 March 2010 The net impairment losses were based on value in use calculations. The pre-tax adjusted discount rate used...

  • Page 95
    ...and the compound annual growth rate in EBITDA in years eight to ten of the management plan. Pre-tax risk adjusted discount rate The discount rate applied to the cash flows of each of the Group's operations is based on the risk free rate for ten year bonds issued by the government in the respective...

  • Page 96
    ... be equal to its carrying value. Assumptions used in value in use calculation Romania Spain UK % % % India % Turkey % Germany % Ghana % Greece % Ireland % Italy % Portugal % Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA(1) Budgeted capital expenditure(2) 13.8 6.3 17...

  • Page 97
    Financials Change required for carrying value to equal the recoverable amount UK Ireland Romania Germany Italy pps pps pps pps pps Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA(1) Budgeted capital expenditure(2) 0.9 (1.1) (6.9) n/a 0.2 (0.3) (1.6) n/a 2.2 (3.4) (9.0) n/a...

  • Page 98
    ... May 2009 and, accordingly, changed its name from Vodacom Group (Pty) Limited. (5) At 31 March 2010 the Group owned 65.0% of the issued share capital of Vodacom Group Limited ('Vodacom') with the 65.3% ownership interest in the outstanding shares in Vodacom resulting from the acquisition of treasury...

  • Page 99
    ... with Hutchison 3G Australia (see note 26) and results from the 4.8% stake in Polkomtel acquired during the 2009 financial year are included from 18 December 2008. 2010 £m 2009 £m 2008 £m Revenue Cost of sales Gross profit Selling, distribution and administrative expenses Operating income and...

  • Page 100
    ... trades under the name Verizon Wireless. (3) The Group also holds two non-voting shares. (4) At 31 March 2010 the fair value of Safaricom Limited was KES89 billion (£756 million) based on the closing quoted share price on the Nairobi Stock Exchange. The Group's share of the aggregated financial...

  • Page 101
    ... 1,031 132 1,163 965 2,128 16 104 120 2,587 2,707 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 2010 99

  • Page 102
    ...(32) 4,846 Bank balances and money market funds comprise cash held by the Group on a short-term basis with original maturity of three months or less. The carrying amount of these assets approximates their fair value. 19. Called up share capital Number 2010 £m Number 2009 £m Authorised: Ordinary...

  • Page 103
    ...directors or employees under the Company's discretionary share option plans in the year ended 31 March 2010. There are options outstanding under a number of plans: the Vodafone Group 1998 Executive Share Option Scheme and the Vodafone Group 1988 Share Option Scheme, the Vodafone Group 1999 Long-Term...

  • Page 104
    ... Board of directors and Executive Committee have a market based performance condition attached and as a result the assumptions are disclosed separately. Share awards Movements in non-vested shares during the year ended 31 March 2010 are as follows: Global AllShare Plan Weighted average fair value...

  • Page 105
    ... its members receive management information relating to treasury activities on a quarterly basis. The Group accounting function, which does not report to the Group Corporate Finance Director, provides regular update reports of treasury activity to the Board. The Group's internal auditors review the...

  • Page 106
    ... 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 flows, principally in euro, US dollars and sterling, the Group maintains the...

  • Page 107
    ...or to sell up to US$5 billion worth of Vodafone Essar shares at an independently appraised fair market value. Banks loans include a ZAR 4.85 billion loan borrowed by Vodafone Holdings SA Pty Limited ('VHSA'), which directly and indirectly owns the Group's 65% interest in Vodacom Group Limited. VHSA...

  • Page 108
    ...) and AUD 265 million (£161 million) were de-designated. Fair values are calculated using quoted market prices or discounted cash flows with a discount rate based upon forward interest rates available to the Group at the end of reporting period date. 106 Vodafone Group Plc Annual Report 2010

  • Page 109
    ... 9,231 668 609 603 577 5,129 16,817 The currency split of the Group's foreign exchange derivatives, all of which mature in less than one year, is as follows: Payable £m 2010 Receivable £m Payable £m 2009 Receivable £m Sterling Euro US dollar Japanese yen Other - 8,650 1,545 548 1,485 12,228...

  • Page 110
    ... agreement requires Vodafone Finance K.K. to maintain a positive tangible net worth at the end of each financial year. As of 31 March 2010 the Company was the sole guarantor. The terms and conditions of the â,¬400 million loan facility are similar to those of the US dollar bank facilities, with...

  • Page 111
    ... pension schemes are currently provided in Australia, Egypt, Greece, Hungary, Ireland, Italy, Kenya, Malta, the Netherlands, New Zealand, Portugal, South Africa, Spain and the United Kingdom. The expected return on assets assumptions are derived by considering the expected long-term rates of return...

  • Page 112
    ... for the Group's principal defined benefit pension scheme in the UK and for the Group as a whole. UK 2006 £m Group 2006 £m 2010 £m 2009 £m 2008 £m 2007 £m 2010 £m 2009 £m 2008 £m 2007 £m Analysis of net assets/(deficits): Total fair value of scheme assets Present value of funded...

  • Page 113
    ... within current liabilities: Trade payables Amounts owed to associates Other taxes and social security payable Other payables Accruals and deferred income Derivative financial instruments 3,254 17 998 650 9,064 99 14,082 3,160 18 762 1,163 8,258 37 13,398 Vodafone Group Plc Annual Report 2010 111

  • Page 114
    ... to the consolidated financial statements continued The carrying amounts of trade and other payables approximate their fair value. The fair values of the derivative financial instruments are calculated by discounting the future cash flows to net present values using appropriate market interest and...

  • Page 115
    ... to form a 50:50 joint venture. Vodafone Hutchison Australia (Pty) Limited, which, in due course, will market its products and services solely under the Vodafone brand. The results of the combined business have been proportionately consolidated in the Group's results as a joint venture from the date...

  • Page 116
    ...28. The Company has covenanted to provide security in favour of the Trustee of the Vodafone Group UK Pension Scheme in respect of the funding deficit in the scheme. The initial security takes the form of a Japanese law share pledge over 400,000 class 1 preferred shares of ¥200,000 in BB Mobile Corp...

  • Page 117
    ... civil procedure rules and now considers the case to be closed. Vodafone Essar Limited ('VEL') and Vodafone International Holdings B.V. ('VIHBV') each received notices in August 2007 and September 2007 respectively, from the Indian tax authorities alleging potential liability in connection with...

  • Page 118
    ... 67. Key management compensation Aggregate compensation for key management, being the directors and members of the Executive Committee, was as follows: 2010 £m 2009 £m 2008 £m Short-term employee benefits Post-employment benefits: Defined benefit schemes Defined contribution schemes Share-based...

  • Page 119
    ...751 10,925 13,676 6,323 6,051 12,374 2,956 72,375 2010 £m 2009 £m 2008 £m Wages and salaries Social security costs Share-based payments (note 20) Other pension costs (note 23) 3,045 415 150 160 3,770 2,607 379 128 113 3,227 2,175 325 107 91 2,698 Vodafone Group Plc Annual Report 2010 117

  • Page 120
    ... Accounting Practice). We have reported separately on the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2010. This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work...

  • Page 121
    ...,425 6 6 Capital 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 18 May 2010 and were...

  • Page 122
    ... by section 408(3) of the Companies Act 2006, the profit and loss account of the Company is not presented in this annual report. These separate financial statements are not intended to give a true and fair view of the profit or loss or cash flows of the Company. The Company has not published its...

  • Page 123
    ... the Company financial statements in the period in which the related dividends are actually 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...

  • Page 124
    ... to be held in a proprietary account with the Administrator. The Company has treated the transaction to buy back the shares as failed. (3) On 31 July 2006 Vodafone Group Plc undertook a return of capital to shareholders via a B share scheme and associated share consolidation. A total of 66,271,035...

  • Page 125
    ...Company currently uses a number of equity settled share plans to grant options and shares to the directors and employees of its subsidiaries, as listed below. Share option plans Vodafone Group savings related and sharesave plans Vodafone Group executive plans Vodafone Group 1999 Long-Term Stock...

  • Page 126
    ... of the Trustee of the Vodafone Group UK Pension Scheme in respect of the funding deficit in the scheme. Legal proceedings Details regarding certain legal actions which involve the Company are set out in note 29 to the consolidated financial statements. 124 Vodafone Group Plc Annual Report 2010

  • Page 127
    ... to receive dividends in local currency into their bank account directly via our registrars' global payments service. Visit www.investorcentre.co.uk for details and terms and conditions. Further details will be published at www.vodafone.com/investor as they become available. Results announcements...

  • Page 128
    ... and/or download the 2010 annual report; check the current share price; calculate dividend payments; and use interactive tools to calculate the value of shareholdings, look up the historic price on a particular date and chart Vodafone ordinary share price changes against indices. Shareholders and...

  • Page 129
    ...take account of the implementation on 3 August 2009 of the Shareholders' Rights Regulations and the implementation of the remaining parts of the Companies Act 2006. Markets Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange and with effect from 29 October 2009 its listing...

  • Page 130
    ... association 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, compensation...

  • Page 131
    ...affect the export or import of capital, including but not limited to, foreign exchange controls on remittance of dividends on the ordinary shares or on the conduct of the Group's operations except as otherwise set out under "Taxation" on the following page. Vodafone Group Plc Annual Report 2010 129

  • Page 132
    ...of 15% provided the holder has a holding period of more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of losses is subject to limitations. 130 Vodafone Group Plc Annual Report 2010

  • Page 133
    ... gain was allocated. An interest charge in respect of the tax attributable to each such year would also apply. Dividends received from us would not be eligible for the preferential tax rate applicable to qualified dividend income for certain non-corporate holders. Vodafone Group Plc Annual Report...

  • Page 134
    ... capital raising QAR 3.4 billion (£0.6 billion). The shares were listed on the Qatar Exchange on 22 July 2009. Qatar launched full services on its network on 7 July 2009. 9 June 2009 - Australia: Vodafone Australia merged with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison...

  • Page 135
    ...for mobile broadband services and mobile TV. In December 2009 the Commission published a draft decision on the technical harmonisation of the digital dividend 790-862 MHz sub-band. Final adoption is expected in 2010. The decision does not oblige a member state to open the sub-band for new uses other...

  • Page 136
    ... basis). The National Competition Authority ('NCA') issued a statement of objections in the procedure opened for an alleged anti-competitive practice in January 2007, concerning alleged concerted practice by Vodafone and others to establish the same call set-up charges. The NCA has decided to close...

  • Page 137
    ... by July 2010. Europe Germany Italy Spain UK Albania Greece Ireland Malta(5) Netherlands Portugal Africa and Central Europe Vodacom: South Africa Romania(7) Turkey Czech Republic(8) Ghana Hungary Asia Pacific and Middle East India(12) Egypt(13) New Zealand Qatar December 2016 February 2015 July...

  • Page 138
    ...as it includes non-cash changes in working capital and is reviewed by the Chief Executive to assess internal performance in conjunction with EBITDA margin, which is an alternative sales margin figure. We believe it is both useful and necessary to report EBITDA as a performance measure as it enhances...

  • Page 139
    ... exchange pps Reported change % 31 March 2010 Group Data revenue Fixed line revenue Service revenue Europe Enterprise revenue Fixed line revenue Service revenue for the quarter ended 31 March 2010 Germany - service revenue for the quarter ended 31 March 2010 Germany - fixed line revenue Spain...

  • Page 140
    ... financial data Shareholder information - Inflation and foreign currency translation Not applicable Not applicable Principal risk factors and uncertainties History and development Contact details Global presence Customers and distribution Products and services Value added services Operating results...

  • Page 141
    ...other financial information Location in this document Page 9 10 11 12 13 14 15 8B Significant changes The 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...

  • Page 142
    ... in download speeds; expectations regarding the global economy and the Group's operating environment, including future market conditions, growth in the number of worldwide mobile phone users and other trends; revenue and growth expected from the Group's total communications strategy, including data...

  • Page 143
    ...foreign exchange rates. Markets in which the Group has entered into a partner agreement with a local mobile operator enabling a range of Vodafone's global products and services to be marketed in that operator's territory and extending Vodafone's brand reach into such new markets. Number of customers...

  • Page 144
    .../(loss) Profit/(loss) before taxation Profit/(loss) for the financial year from continuing operations Profit/(loss) for the financial year Consolidated statement of financial position data (£m) Total assets Total equity Total equity shareholders' funds Earnings per share(1) Weighted average number...

  • Page 145
    Notes Vodafone Group Plc Annual Report 2010 143

  • Page 146
    Notes 144 Vodafone Group Plc Annual Report 2010

  • Page 147
    Contact details Investor Relations Telephone: +44 (0) 1635 33251 Media Relations Telephone: +44 (0) 1635 664444 Corporate Responsibility Fax: +44 (0) 1635 674478 E-mail: [email protected] Website: www.vodafone.com/responsibility This report has been printed on Revive 75 Special Silk ...

  • Page 148
    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