Vodafone 2010 Annual Report Download - page 41

Performance
Vodafone Group Plc Annual Report 2010 39
as intensifying competition, pricing pressures, regulatory changes and the timing for
introducing new products or services. Discount rates are in part derived from yields
on government bonds, the level of which may change substantially period to period
and which may be affected by political, economic and legal developments which are
beyond our control. Due to our substantial carrying value of goodwill under
International Financial Reporting Standards, the revision of any of these assumptions
to 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 thus no assurance can be given
that any future impairments would not affect our reported distributable reserves
and therefore our ability to make distributions to our shareholders or repurchase
our shares. See “Critical accounting estimates” on page 71 and note 10 to the
consolidated financial statements.
Our global footprint may present exposure to unpredictable economic,
political, regulatory and legal risks.
Political, regulatory, economic and legal systems in emerging markets may be less
predictable than in countries with more developed institutional structures. Since we
operate in and are exposed to emerging markets, the value of our investments in these
markets may be adversely affected by political, regulatory, economic and legal
developments which are beyond our control and anticipated benefits resulting from
acquisitions and other investments we have made in these markets may not be
achieved in the time expected or at all.
Our strategic objectives may be impeded by the fact that we do not have
a controlling interest in some of our ventures.
Some of our interests in mobile licences are held through entities in which we are a
significant but not a controlling owner. Under the governing documents for some of
these partnerships and corporations, certain key matters such as the approval of
business plans and decisions as to the timing and amount of cash distributions
require the consent of our partners. In others these matters may be approved without
our consent. We may enter into similar arrangements as we participate in ventures
formed to pursue additional opportunities. Although we have not been materially
constrained by the nature of our mobile ownership interests, no assurance can be
given that our partners will not exercise their power of veto or their controlling
influence in any of our ventures in a way that will hinder our corporate objectives
and reduce any anticipated cost savings or revenue enhancement resulting from
these ventures.
Expected benefits from investment in networks, licences and new
technology may not be realised.
We have made substantial investments in the acquisition of licences and in our
mobile networks, including the roll out of 3G networks. We expect to continue to
make significant investments in our mobile networks due to increased usage and
the need to offer new services and greater functionality afforded by new or
evolving telecommunications technologies. Accordingly, the rate of our capital
expenditures in future years could remain high or exceed that which we have
experienced to date.
There can be no assurance that the introduction of new services will proceed
according to anticipated schedules or that the level of demand for new services will
justify the cost of setting up and providing new services. Failure or a delay in the
completion of networks and the launch of new services, or increases in the associated
costs, could have a material adverse effect on our operations.
Our business and our ability to retain customers and attract new
customers may be impaired by actual or perceived health risks
associated with the transmission of radio waves from mobile
telephones, transmitters and associated equipment.
Concerns have been expressed in some countries where we operate that
the electromagnetic signals emitted by mobile telephone handsets and base
stations may pose health risks at exposure levels below existing guideline levels and
may interfere with the operation of electronic equipment. In addition, as described
under the heading “Legal proceedings” in note 29 to the consolidated financial
statements, several mobile industry participants including Verizon Wireless and
ourselves have had lawsuits filed against us alleging various health consequences
as a result of mobile phone usage including brain cancer. While we are not aware
that such health risks have been substantiated, there can be no assurance that the
actual or perceived risks associated with radio wave transmission will not impair
our ability to retain customers and attract new customers, reduce mobile
telecommunications usage or result in further litigation. In such event, because of
our strategic focus on mobile telecommunications, our business and results of
operations may be more adversely affected than those of other companies in the
telecommunications sector.
Our business would be adversely affected by the non-supply
of equipment and support services by a major supplier.
Companies within the Group source network infrastructure and other equipment, as
well as network-related and other significant support services, from third party
suppliers. The withdrawal or removal from the market of one or more of these major
third party suppliers could adversely affect our operations and could require us to
make additional capital or operational expenditures.