Vodafone 2010 Annual Report Download - page 35

Performance
Vodafone Group Plc Annual Report 2010 33
Europe
Germany Italy Spain UK Other Eliminations Europe % change
£m £m £m £m £m £m £m £Organic
Year ended 31 March 2009
Revenue 7,847 5,547 5,812 5,392 5,329 (293) 29,634 13.6 (2.1)
Service revenue 7,535 5,347 5,356 4,912 5,029 (293) 27,886 14.1 (1.7)
EBITDA 3,225 2,565 2,034 1,368 1,957 −11,149 9.7 (5.0)
Adjusted operating profit 1,835 1,839 1,421 328 1,702 −7,125 9.8 (5.4)
EBITDA margin 41.1% 46.2% 35.0% 25.4% 36.7% 37.6%
Year ended 31 March 2008
Revenue 6,866 4,435 5,063 5,424 4,583 (290) 26,081
Service revenue 6,551 4,273 4,646 4,952 4,295 (287) 24,430
EBITDA 2,816 2,148 1,908 1,560 1,735 −10,167
Adjusted operating profit 1,577 1,528 1,362 517 1,504 –6,488
EBITDA margin 41.0% 48.4% 37.7% 28.8% 37.9% 39.0%
Revenue increased by 13.6%, with favourable euro exchange rate movements
contributing 14.3 percentage points of growth and mergers and acquisitions activity,
primarily Tele2, contributing a further 1.4 percentage point benefit. The organic
decline in revenue of 2.1% was a result of a 1.7% decrease in service revenue and a
decline in equipment revenue, reflecting lower volumes.
The impact of merger and acquisition activity and foreign exchange movements on
revenue, service revenue, EBITDA and adjusted operating profit are shown below:
Organic M&A Foreign Reported
growth activity exchange growth
%pps pps %
Revenue – Europe (2.1) 1.4 14.3 13.6
Service revenue
Germany (2.5) (0.1) 17.6 15.0
Italy 1.2 4.7 19.2 25.1
Spain (4.9) 2.5 17.7 15.3
UK (1.1) 0.3 −(0.8)
Other (1.2) 0.4 17.9 17.1
Europe (1.7) 1.4 14.4 14.1
EBITDA
Germany (2.8) (0.2) 17.5 14.5
Italy (0.1) 1.2 18.3 19.4
Spain (9.2) (0.5) 16.3 6.6
UK (12.8) 0.5 −(12.3)
Other (4.3) (0.1) 17.2 12.8
Europe (5.0) 0.2 14.5 9.7
Adjusted operating profit
Germany (0.9) (0.4) 17.7 16.4
Italy 2.4 (0.5) 18.5 20.4
Spain (9.8) (1.9) 16.0 4.3
UK (37.9) 1.3 −(36.6)
Other (4.8) 1.1 16.9 13.2
Europe (5.4) (0.3) 15.5 9.8
Service revenue declined by 1.7%(*), reflecting a gradual deterioration over the year
and a 3.3%(*) decrease in the fourth quarter, with favourable trends in Italy more than
offset by deteriorating trends in other markets, in particular Spain and Greece. The
impact of the economic slowdown in Europe on voice and messaging revenue,
including from roaming, ongoing competitive pricing pressures and lower termination
rates were not fully compensated by increased usage arising from new tariffs and
promotions and strong growth in data revenue.
EBITDA increased by 9.7%, with favourable euro exchange rate movements
contributing 14.5 percentage points of growth and a 0.2 percentage point benefit
from business acquisitions. The EBITDA margin declined 1.4 percentage points
primarily driven by the downward revenue trend, 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.
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 revenue
growth remained strong, reflecting increased penetration of PC connectivity services
in the customer base. Fixed line revenue declined during the year, but grew 2.1%(*) in
the fourth quarter, as the customer base largely migrated to new, lower priced tariffs.
The fixed broadband customer base increased by 15.9% during the year to 3.1 million
at 31 March 2009, with an additional 154,000 wholesale fixed broadband customers.
On 19 May 2008 we acquired a 26.4% interest in Arcor, following which we own 100%
of Arcor. The integration of the mobile business and the fixed line operations has
progressed, with cost savings being realised according to plan.
EBITDA margin remained broadly stable at 41.1%, reflecting an improvement in
the mobile margin which was offset by a decline in the fixed line margin, with
the former due to a reduction in prepaid subsidies and an increase in the number of
SIM-only contracts. Operating expenses were also broadly stable with the 2008
financial year as a restructuring charge of €35 million in the 2009 financial year
(£32 million) was more than offset by non-recurring adjustments, including favourable
legal settlements.
Italy
Ser vice revenue grow th was 1.2%(*) reflecting targeted demand stimulation initiatives,
ARPU enhancing initiatives and strong growth in data revenue due to increased
penetration of mobile PC connectivity devices, email enabled devices and mobile
internet services. Fixed line revenue growth was 3.7%(*). supported by 278,000 fixed
broadband customer net additions during the year as well as the benefit from the
launch of Vodafone Station during the summer of 2008 and the continued good
performance of Tele2.
EBITDA declined by 0.1%(*) and EBITDA margin declined by 2.2 percentage points
mainly due to a brand royalty provision release in the 2008 financial year. Excluding
the impact of the brand royalty provision release and the impact of the acquisition of
Tele2, the EBITDA margin was broadly stable, with an improvement in the mobile
margin offsetting the increased contribution of lower margin fixed line services.
Spain
Service revenue declined by 4.9%(*) with an 8.6%(*) decline in the fourth quarter.
Negative trends in the economic environment put strong pressure on usage in some
customer segments and led to increased involuntary churn. Data revenue growth
accelerated during the year, driven primarily by PC connectivity services and an
improvement in media content revenue growth following a successful campaign in
the fourth quarter. Fixed line revenue continued to grow, supported by the launch of
Vodafone Station.