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Vodafone Group Plc
Annual Report
For the year ended 31 March 2011
Vodafone Group Plc
Registered Office
Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN
England
Registered in England No. 1833679
Telephone: +44 (0) 1635 33251
Fax: +44 (0) 1635 238080
www.vodafone.com
Vodafone Group Plc Annual Report for the year ended 31 March 2011
Investor Relations
Telephone: +44 (0) 7919 990230
Email: [email protected]
Website: www.vodafone.com/investor
Media Relations
Telephone: +44 (0) 1635 664444
Email: groupmediarelations@vodafone.com
Website: www.vodafone.com/media
Sustainability
Email: sust[email protected]
Website: www.vodafone.com/sustainability
Contact details

Table of contents

  • Page 1
    Vodafone Group Plc Annual Report For the year ended 31 March 2011

  • Page 2
    Delivering a more valuable Vodafone Group highlights for the 2011 financial year £45.9bn £11.8bn Revenue 3.2% growth 3.1% growth Adjusted operating profit £7.0bn Free cash flow 2.7% decrease 370.9m Mobile customers 14.5% growth 8.90p 7.1% growth Total dividends

  • Page 3
    ...Chief Executive's review Strategy in action Key market review Sustainable business People Performance# Operating results Guidance Principal risk factors and uncertainties Financial position and resources Governance# Board of directors and Group management Corporate governance Directors' remuneration...

  • Page 4
    2 Vodafone Group Plc Annual Report 2011 About us A business intent on meeting all our customers' communication needs Technologies and resources The latest technologies offering our best customer experience Network infrastructure We have one of the largest mobile footprints in the world with more ...

  • Page 5
    ... review Business Review Vodafone Group Plc Annual Report 2011 3 Distribution A broad range of channels through which customers can access our services and products Direct channels We directly own and manage about 2,200 stores around the world and we also have around 10,300 Vodafone-branded stores...

  • Page 6
    ... world's largest mobile communications companies by revenue Base station We are leaders in data networks with over 66,000 3G sites delivering high speed mobile broadband capability. Vodafone M-Pesa Over 20 million people, mainly in emerging markets, use this service to send and receive money using...

  • Page 7
    Business review Vodafone Group Plc Annual Report 2011 5 Europe Our mobile subsidiaries and joint venture in Europe operate under the brand name 'Vodafone' and our major fixed line businesses operate as 'Vodafone' or in the case of Italy as 'TeleTu' or in Spain as 'Tele2'. Africa, Middle East and ...

  • Page 8
    ... tax cases in the UK and India. Our tax policy is straightforward: we pay taxes that are due in the countries Within this context, the Group has performed well. We achieved where we make profits or record capital gains in line with the organic service revenue growth of 2.1%(*), a significant change...

  • Page 9
    ... the publication in February of the Davies Review on Women on Boards and, in line with its recommendations, it is our aspiration to have a minimum of 25% female representation on the Board by 2015. The Financial Reporting Council is currently consulting on changes to the UK Corporate Governance Code...

  • Page 10
    ... number of mobile customers far exceeds other forms of termination rates (the fees mobile companies charge for electronic communication. Only 1.3 billion people have calls received from other companies' networks) and lower fixed line telephones, 2.1 billion have access to the internet roaming prices...

  • Page 11
    ... opportunity in emerging markets both in terms of mobile broadband and Device innovation is a key feature of our industry. Recent mobile internet services. It is being driven partly by the lack developments include femtocells which enhance customers' of fixed line broadband infrastructure but also...

  • Page 12
    ... launched a CDMA version of the iPhone, ending the exclusivity of its main competitor. Our Verizon Wireless. share of profits from Verizon Wireless amounted to £4.6 billion, We recorded impairment charges of £6.1 billion relating to up 8.5%(*). our businesses in Spain, Greece, Portugal, Italy and...

  • Page 13
    ... lower service revenue growth in the 2012 financial year. and GDP growth higher than in the more mature markets of The Group EBITDA margin is expected to continue to decline, western Europe. albeit at a lower rate than in the 2011 financial year. The main Total communications: we continue to develop...

  • Page 14
    ... communications: continue to develop the adoption of converged fixed and mobile services; and new services: expand into new growth areas including machine-to-machine and financial services. Deliver value and efficiency from scale More on page 25 We will continue to drive benefit from the Group...

  • Page 15
    ...affect our commercial position, financial performance and the market environment in which we operate. The cost of financing investment and hence the return on investment may be influenced by changes in credit markets or our credit ratings. Return to shareholders (£bn) Dividends paid Share buybacks...

  • Page 16
    14 Vodafone Group Plc Annual Report 2011 Mobile data: strategy Our data revenue was up 26.4%(*) year-on-year to £5.1 billion and now represents 12.0% of Group service revenue. Network quality is central to our data strategy and based on third party tests performed in 16 of our main 3G markets, we ...

  • Page 17
    ... commercial initiatives to encourage mobile data use including: â- â- â- â- network technologies to deliver the best network experience; providing a better data experience to our customers through all our customer channels; and providing leading smart connected devices. tiered pricing plans...

  • Page 18
    16 Vodafone Group Plc Annual Report 2011 Mobile data: technology We have collaborated with our main suppliers to pioneer the development of single RAN base station equipment which enables us to replace our existing 2G and 3G base stations with one solution which also supports LTE, providing ...

  • Page 19
    ... March 2011 Vodafone 3G stations other operators in all of our controlled markets, with 70% of were in service in seven of our markets serving almost the new radio sites throughout the Group being shared with other mobile network operators. 400,000 customers. Investing to improve customer experience...

  • Page 20
    18 Vodafone Group Plc Annual Report 2011 Mobile data: customer experience, pricing and connected devices We are enhancing our customer care, retail presence and online service to ensure that customers get the best data experience. We are introducing data centric store formats and we now have 5,000 ...

  • Page 21
    Business review Vodafone Group Plc Annual Report 2011 19 Focus on key areas of growth potential: Mobile data-customer experience, pricing and connected devices Mobile Wi-Fi R201 A mobile Wi-Fi hotspot device that lets customers share their 3G mobile connection with up to five users at the press of ...

  • Page 22
    ... fixed broadband infrastructure in emerging markets. Already in South Africa mobile broadband accounts â- increased revenue market share in India and Turkey; for around 90% of all broadband. The other is mobile internet â- data revenue growth of 43.8%(*) in Vodacom and 37.7%(*) in Egypt; and...

  • Page 23
    ...%) Group revenue from emerging markets(2) 62% (2010: 57%) Group customers from emerging markets(2) Vodafone WebBox A Vodafone innovation bringing internet access to a customer's existing television set just by plugging in a keyboard with a built-in mobile SIM card. It was developed specifically...

  • Page 24
    22 Vodafone Group Plc Annual Report 2011 Machine-to-machine ('M2M') services Machine-to-machine communications, commonly known as M2M or telemetry, enables devices to communicate with one another via built-in mobile SIM cards. This allows key information to be automatically exchanged without human ...

  • Page 25
    ... related services such as Vodafone TV. Enterprise customers in particular have shown an increasing demand for receiving all their communication products from one company. Approach Our European strategy is to obtain long-term access to fast fixed broadband to service high value customers in a capital...

  • Page 26
    ... account ('charge to bill'). We provide a single technical interface to these providers to reach all our European customers and we plan to expand this reach to other parts of the world over the 2012 financial year. Financial services Vodafone M-Pesa is now live in six markets. Further information...

  • Page 27
    Business review Vodafone Group Plc Annual Report 2011 25 Delivering cost efficiency from sharing resources This year we established two shared service centres in India to provide quick, simple and cost effective customer contact points for our technology and business operations and data services ...

  • Page 28
    ... the value of the Group's assets. We aim to maximise the value of these interests either by generating liquidity or increasing free cash flow in order to fund profitable investment and enhance shareholder returns. Proceeds from the sale of all of these interests are being used to reduce net debt and...

  • Page 29
    Business review Vodafone Group Plc Annual Report 2011 27 Creating value for shareholders We aim to increase shareholder returns through regular dividends and one-off returns. In 2009 we established a target to grow total dividends per share by at least 7% per annum until the financial year ending ...

  • Page 30
    ... fixed broadband customers (on a 100% basis), up 29%. 1.2 1.9 2009 2010 (2.1) 2011 Spain Service revenue growth (%)(*) EBITDA margin (%) Operating free cash flow (£m) (6.9) 30.4 885 â- â- â- Extremely challenging economic environment and increasing competitive pressure. New integrated...

  • Page 31
    ... successive year of gaining revenue market share. Commenced 3G services in February 2011 with 1.5 million customers by 31 March. Strong revenue growth led by increasing demand for mobile broadband services. Launched WebBox service for internet access. Continued network investment with over 3,200...

  • Page 32
    ...products and services have been making a "M2M services" see page 22). We have been working with British difference to people's lives around the world and contributing to Gas in the UK and Italgas in Italy to provide M2M connections achieving the United Nations' Millennium Development Goals. in homes...

  • Page 33
    ... publish their own sustainability reports. these materials. The issue of human rights and access to communications has been brought into sharp focus by Key performance indicators(1) 2011 2010 2009 continuing events in the Middle East and North Africa. Vodafone Group Social investment Energy use (GWh...

  • Page 34
    ... Commercial unit, expansion of the role and scope of Group Technology to oversee all operating companies, the consolidation of our regional structure into two distinct regions, plus reporting line changes to align teams more closely with their functions. Employment policies and employee relations...

  • Page 35
    ... to discuss performance, succession Global short-term incentive plans are offered to a large percentage of employees and global long-term incentive plans are offered to our senior managers. Both plans are paid according to individual and company performance. Key performance indicators 2011 2010 2009...

  • Page 36
    ... mobile broadband offsetting United States. weaker voice revenue which was impacted by two termination rate cuts during the year. In India service revenue increased by 16.2%(*), driven by an The Group recorded other net income of £5,342 million, primarily in relation increase in the mobile customer...

  • Page 37
    ... line item "Share of results in associates" in the consolidated income statement. of a tax case. (2) The year ended 31 March 2011 includes £3,019 million representing the profit arising on the sale of the Group's 3.2% interest in China Mobile Limited. (3) See notes 2, 3, 4 and 5 in "Net investment...

  • Page 38
    ... cuts announced in March 2011 are expected to have a significant negative impact on revenue growth during the 2012 financial year. EBITDA increased by 8.0%(*) with the EBITDA margin increasing by 0.7 percentage points, reflecting higher service revenue partially offset by higher customer acquisition...

  • Page 39
    ... Vodafone Group Plc Annual Report 2011 37 Africa, Middle East and Asia Pacific(1) Africa, Middle East and Asia Pacific £m India £m Vodacom £m Other £m Eliminations £m £ % change Organic(2) Year ended 31 March 2011 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin...

  • Page 40
    ... stores is underway. VHA appointed new suppliers for network managed services, core, transmission and IT managed services. In the United States Verizon Wireless reported 2.6 million net mobile customer additions bringing its closing mobile customer base to 88.4 million, a 3.1% increase. Customer...

  • Page 41
    ... line. Turkey returned to growth in the second half of the financial year with service Operating profit increased primarily due to changes in impairment losses. revenue growing 31.3%(*) in the fourth quarter. Romania experienced In the 2010 financial year, the Group recorded net impairment losses...

  • Page 42
    ... the impact 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. Note: (1) See notes 1 and 2 in "Net financing costs" to the left. Europe Germany £m Italy £m Spain £m UK £m Other...

  • Page 43
    ... 0.6 million fixed broadband customers by the end of the financial year. EBITDA declined 9.9%(*) and the EBITDA margin decreased by 0.8 percentage points as the decline in service revenue, the increase in commercial costs and the dilutive effect of lower margin fixed line services more than offset...

  • Page 44
    ...significant benefit from foreign exchange rate movements, offset in part by the impact of the creation of a joint venture in June 2009 between Vodafone Australia and Hutchison 3G Australia. On an organic basis service revenue increased by 7.5%(*) reflecting a 51% increase in the mobile customer base...

  • Page 45
    ... Group's share of the partnership's pre-tax profit is included within the Group tax charge. In the United States Verizon Wireless reported 3.4(3) million net mobile customer additions bringing its closing mobile customer base to 85.7(3) million, up 4.3%(3). Customer growth reflected recent market...

  • Page 46
    ... service revenue of between 1% and 4% in the period to 31 March 2014. We expect that the Group EBITDA margin will stabilise by the end of this period. As a result of the loss of £0.5 billion of cash dividends from our disposals of stakes in China Mobile Limited and SFR, we expect that annual free...

  • Page 47
    ..., 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. Competition could lead...

  • Page 48
    ... supporting carrying values of certain Group assets are based. This includes an assessment of discount rates and longterm growth rates, future technological developments, and timing and quantum of future capital expenditure as well as several factors which may affect revenue and profitability...

  • Page 49
    ... shareholders (see "Dividends from associates and to non-controlling shareholders"). The table excludes current and deferred tax liabilities and obligations under post employment benefit schemes, details of which are provided in notes 6 and 23 to the consolidated financial statements respectively...

  • Page 50
    ...Qatar. (6) Year ended 31 March 2011 includes £4,264 million in relation to the disposal of our 3.2% interest in China Mobile Limited. We are also party to a number of agreements that may result in a cash Dividends from associates and to non-controlling shareholders outflow in future periods. These...

  • Page 51
    ... impair the financial condition or prospects of Vodafone Italy including, without limitation, its credit standing. During the 2011 financial year Vodafone Italy paid dividends net of withholding tax totalling â,¬325 million to Verizon Date of share purchase September 2010 Communications Inc. October...

  • Page 52
    ... counterparty and settlement risk limits of the Board approved treasury policy. The main forms of liquid investments at 31 March 2011 were money market funds, UK 9 March 2011 US$4.2 billion syndicated index linked government bonds and bank deposits. revolving credit facility, Net debt decreased by...

  • Page 53
    ... the consolidated financial statements. Details of our treasury management and policies are included within note 21 to the consolidated financial statements. The facility agreements provide for certain structural changes that do not Potential cash outflows affect the obligations to be specifically...

  • Page 54
    ...aged 61, joined the Board in December 2006. In May 2006 2005. He joined Vodafone in 1999 as Financial Director for Vodafone Limited, he retired from his role as Group Chief Operating Officer of HSBC Holdings the UK operating company, and in 2001 he became Financial Director for plc, a position which...

  • Page 55
    ... on the Advisory Board of Norges Bank Investment Management. He joined the Board of the Shareholder Executive in October 2009, having been a member of its Advisory Group since April 2008. Prior to joining the Vodafone Board he was Chief Executive of Hermes Pensions Management Limited, a position he...

  • Page 56
    54 Vodafone Group Plc Annual Report 2011 Board of directors and Group management continued Chaired by Vittorio Colao, this committee focuses on the Group's strategy, financial structure and planning, succession planning, organisational development and Group-wide policies. The Executive Committee ...

  • Page 57
    ... with the provisions of the Combined Code. The Board meets at least eight times a year and the meetings are structured to allow open discussion. All directors participate in discussing strategy, trading and financial performance and risk management. All substantive agenda items have comprehensive...

  • Page 58
    ... for conducting an annual review of the performance of the Chairman and, in the event it should be necessary, convening a meeting of the non-executive directors. From time to time the Board receives detailed presentations from non-Board members on matters of significance. Financial plans, including...

  • Page 59
    ... 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 audit...

  • Page 60
    ... capital structure and communications. We do not intend to send the notice of meeting and form funding, and key organisational and policy decisions. The members of the of proxy to shareholders in paper through the post for the 2012 financial Executive Committee and their biographical details are set...

  • Page 61
    ... and announced via the Regulatory News Service. Financial and other information is made available on our website (www.vodafone.com/investor) which is regularly updated. A summary of our share and control structures is set out on pages 135 and 136 in the shareholder information section of this report...

  • Page 62
    ... and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. US listing...

  • Page 63
    ... 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 64
    ...Colao company chief executive officers and selected senior leadership Group HR Director Ronald Schellekens individuals below the Board and Executive Committee; Group Reward and Policy Director Adrian Jackson â- a review of the current UK corporate governance environment and the Deputy Group Company...

  • Page 65
    ...five key areas: mobile data, Term Incentive Plan Pay for performance ('GSTIP'). A high proportion of total reward will be awarded through short-term and emerging markets, enterprise, total long-term performance related remuneration. The Remuneration communications and new services. EBITDA, free cash...

  • Page 66
    ...years â- â- â- â- â- â- Global Long-Term Incentive Plan ('GLTI') co-investment matching awards â- â- â- To support and encourage greater shareholder alignment through a high level of personal financial commitment. Individuals may purchase Vodafone shares and hold them in trust for...

  • Page 67
    ... markets. It should be noted that the average increase for the executive directors is 2.8% and for the whole of the Executive Committee it is 3% which is in line with increases in the rest of the Group based in the UK. Details of the GSTIP The short-term incentive plan rewards performance over...

  • Page 68
    ... 19.50 The target free cash flow level is set by reference to the Company's three year plan and market expectations. The Remuneration Committee considers the targets to be critical to the Company's long-term success and its ability to maximise shareholder value, and to be in line with the strategic...

  • Page 69
    ... ―― The information provided in the table below explains what the executive directors who were on the Board on 31 March 2011 will actually receive from base salary and awards made previously with performance conditions which ended on 31 March 2011 but that will vest in the 2012 financial year...

  • Page 70
    ... terms of such plans Salary, pension, and benefits Company car or cash allowance Participation in the GSTIP, GLTI and the employee share schemes During employment and for 12 months thereafter Date of service agreement Length of Board service The executive directors are also eligible to participate...

  • Page 71
    ...(1) for services for the year ended 31 March 2011 is set out below. The aggregate number of Executive Committee members at 31 March 2011 was six, a reduction of two compared to 31 March 2010. 2011 £'000 2010 £'000 Salaries and fees Incentive schemes(2) Cash in lieu of pension Benefits/other Total...

  • Page 72
    ... executive directors under the Vodafone Global Incentive Plan ('GIP') for the relevant financial years are shown below. Long-term incentive shares that vested during the year ended 31 March 2011 are also shown below: Total interest in performance shares at 1 April 2010 or date of appointment Number...

  • Page 73
    ... been granted to directors during the year. The following information summarises the directors' options under the Vodafone Group 2008 Sharesave Plan ('SAYE'), the Vodafone Group 1998 Company Share Option Scheme ('CSOS'), the Vodafone Group Plc 1999 Long-Term Stock Incentive Plan ('LTSIP') and the...

  • Page 74
    ... nine years. The terms and conditions of appointment of non-executive directors are available for inspection at the Company's registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting). Date of letter of appointment Date of election/re...

  • Page 75
    ... beneficial interests of directors and their connected persons in the ordinary shares of the Company, which includes interests in the Vodafone Share Incentive Plan, but which excludes interests in the Vodafone Group share option schemes, and the Vodafone Group short-term or long-term incentives, are...

  • Page 76
    ... up share capital Share-based payments Capital and financial risk management Borrowings Post employment benefits Provisions Trade and other payables Reconciliation of net cash flow from operating activities Commitments Contingent liabilities Directors and key management compensation Related party...

  • Page 77
    Financials Vodafone Group Plc Annual Report 2011 75 Directors' statement of responsibility Financial statements and accounting records Management's report on internal control Company law of England and Wales requires the directors to prepare over financial reporting financial statements for each ...

  • Page 78
    ... of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Group as of and for the year ended 31 March 2011, prepared in conformity with International Financial Reporting Standards ('IFRS'), as adopted by the European Union and IFRS as issued by...

  • Page 79
    ... jurisdictions in which the Group operates. Issues can, and often do, take many developing markets the fifth year of the management plan is not indicative years to resolve. Payments in respect of tax liabilities for an accounting period of the long-term future performance as operations may not...

  • Page 80
    78 Vodafone Group Plc Annual Report 2011 Critical accounting estimates continued Recognition therefore involves judgement regarding the future financial Licences and spectrum fees performance of the particular legal entity or tax group in which the deferred The estimated useful life is generally ...

  • Page 81
    ...UK and Ireland). Those standards require us to Other matter comply with the Auditing Practices Board's Ethical Standards for Auditors. We have reported separately on the parent company financial statements of Vodafone Group Plc for the year ended 31 March 2011 and on the information in the Directors...

  • Page 82
    80 Vodafone Group Plc Annual Report 2011 Consolidated income statement for the years ended 31 March Note 2011 £m 2010 £m 2009 £m Revenue Cost of sales Gross profit Selling and distribution expenses Administrative expenses Share of result in associates Impairment losses Other income and expense ...

  • Page 83
    ... Vodafone Group Plc Annual Report 2011 81 Consolidated statement of financial position at 31 March Note 2011 £m 2010 £m Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in associates Other investments Deferred tax assets Post employment benefits Trade...

  • Page 84
    82 Vodafone Group Plc Annual Report 2011 Consolidated statement of changes in equity for the years ended 31 March Share capital £m Additional paid-in capital(1) £m Other comprehensive income Treasury shares £m Retained losses £m Currency reserve £m Pensions reserve £m Investment reserve £m ...

  • Page 85
    Financials Vodafone Group Plc Annual Report 2011 83 Consolidated statement of cash flows for the years ended 31 March Note 2011 £m 2010 £m 2009 £m Net cash flow from operating activities Cash flows from investing activities Purchase of interests in subsidiaries and joint ventures, net of cash ...

  • Page 86
    ... Amounts in the consolidated financial statements are stated in on or after 1 July 2010. pounds sterling. â- Amendment to IAS 12, "Deferred tax: Recovery of Underlying Assets", effective for annual periods beginning on or after 1 January 2012. This Vodafone Group Plc is registered in England (No...

  • Page 87
    ... annually. Changes in the expected useful life or the The Group reports its interests in jointly controlled entities using expected pattern of consumption of future economic benefits embodied in proportionate consolidation. The Group's share of the assets, liabilities, the asset is accounted for...

  • Page 88
    ... is charged to the income statement on a straight-line basis to their present value using a pre-tax discount rate that reflects current over the estimated useful lives from the date the software is available market assessments of the time value of money and the risks specific to the for use. asset...

  • Page 89
    ... finance leases are recognised as assets of the Group at Revenue for access charges, airtime usage and messaging by contract their fair value at the inception of the lease or, if lower, at the present value customers is recognised as services are performed, with unbilled revenue of the minimum lease...

  • Page 90
    88 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 2. Significant accounting policies continued The carrying amount of deferred tax assets is reviewed at each reporting The net foreign exchange gain recognised in the consolidated income period date and...

  • Page 91
    Financials Vodafone Group Plc Annual Report 2011 89 Capital market and bank borrowings Interest bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception), and are subsequently measured at amortised cost, using the effective interest rate method, except ...

  • Page 92
    ... which the Group manages its worldwide 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 arm's length prices. During the year ended 31 March 2011 the Group changed its organisation structure to...

  • Page 93
    ...Non-current Capital assets (1) expenditure(2) £m £m Other expenditure on Depreciation intangible and assets amortisation £m £m Impairment (reversal)/ loss £m 31 March 2011 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East...

  • Page 94
    ...Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 4. Operating profit Operating profit has been arrived at after charging/(crediting): Net foreign exchange losses/(gains) Depreciation of property, plant and equipment (note 11): Owned assets Leased assets...

  • Page 95
    ... cost: Bank loans and overdrafts(4) Other loans(5) Potential interest on settlement of tax issues(6) Equity put rights and similar arrangements(3) Finance leases Fair value through the income statement (held for trading): Derivatives - forward starting swaps and futures Net (investment income...

  • Page 96
    94 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 6. Taxation Income tax expense 2011 £m 2010 £m 2009 £m United Kingdom corporation tax expense/(income): Current year Adjustments in respect of prior years Overseas current tax expense/(income): ...

  • Page 97
    Financials Vodafone Group Plc Annual Report 2011 95 Deferred tax Analysis of movements in the net deferred tax balance during the year: £m 1 April 2010 Exchange movements Credited to the income statement Credited directly to OCI Credited directly to equity Reclassification to current tax(1) ...

  • Page 98
    ... losses will be used. £856 million of the asset has been recognised as a result of the agreement reached with the UK tax authorities in respect of the CFC tax case (discussed above). The Group holds provisions in respect of deferred taxation that would arise if temporary differences on investments...

  • Page 99
    Financials Vodafone Group Plc Annual Report 2011 97 9. Intangible assets Goodwill £m Licences and spectrum £m Computer software £m Other £m Total £m Cost: 1 April 2009 Exchange movements Arising on acquisition Change in consolidation status Additions Disposals 31 March 2010 Exchange movements...

  • Page 100
    98 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 10. Impairment Impairment losses Cash generating unit The net impairment losses recognised in the consolidated income statement, as a separate line item within operating profit, in respect of goodwill...

  • Page 101
    ... Vodafone Group Plc Annual Report 2011 99 During the year ended 31 March 2010 the goodwill in relation to the Group's operations in India was impaired by £2,300 million primarily due to intense price competition following the entry of a number of new operators into the market. The pre-tax risk...

  • Page 102
    ...required increased return required over and above a risk free rate by an investor who is investing in the market as a whole) and the risk adjustment, beta, applied to reflect the risk of the specific Group operating company relative to the market as a whole. In determining the risk adjusted discount...

  • Page 103
    Financials Vodafone Group Plc Annual Report 2011 101 The table below shows the key assumptions used in the value in use calculations. Assumptions used in value in use calculation Italy % Spain % Greece % Ireland % Portugal % Turkey % India % Ghana % Pre-tax adjusted discount rate Long-term growth ...

  • Page 104
    ... to its carrying value. Turkey pps Germany pps Ghana pps Greece pps Ireland pps Change required for carrying value to equal the recoverable amount Italy Portugal Romania Spain UK pps pps pps pps pps Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA(1) Budgeted capital expenditure...

  • Page 105
    ... by the Essar Group. (9) Share capital consists of 600 ordinary shares and one deferred share, of which 100% of the shares are held indirectly by Vodafone Group Plc. (10) Trades as Vodafone Hungary Mobile Telecommunications Company Limited. (11) 38.6% of the issued share capital of Vodafone Portugal...

  • Page 106
    104 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 13. Investments in joint ventures Principal joint ventures At 31 March 2011 the Company had the following joint ventures carrying on businesses which affect the profits and assets of the Group. Unless...

  • Page 107
    ... Group also holds two non-voting shares. (5) At 31 March 2011 the fair value of Safaricom Limited was KES 61 billion (£456 million) based on the closing quoted share price on the Nairobi Stock Exchange. The Group's share of the aggregated financial information of equity accounted associates is set...

  • Page 108
    ... income statement (held for trading): Interest rate swaps Foreign exchange swaps Fair value hedges: Interest rate swaps 1,292 99 1,391 654 2,045 1,031 132 1,163 965 2,128 The fair values of these financial instruments are calculated by discounting the future cash flows to net present values using...

  • Page 109
    Financials Vodafone Group Plc Annual Report 2011 107 18. Cash and cash equivalents 2011 £m 2010 £m Cash at bank and in hand Money market funds Other Cash and cash equivalents as presented in the statement of financial position Bank overdrafts Cash and cash equivalents as presented in the ...

  • Page 110
    ... plans in the year ended 31 March 2011. There are options outstanding under a number of plans: the Vodafone Group 1998 Executive Share Option Scheme and the Vodafone Group 1988 Company Share Option Scheme, the Vodafone Group 1999 Long-Term Stock Incentive Plan and the Vodafone Global Incentive Plan...

  • Page 111
    ...Vodafone Group savings related and Sharesave Plan: £0.01 - £1.00 £1.01 - £2.00 Vodafone Group executive plans: £1.01 - £2.00 Vodafone Group 1999 Long-Term Stock Incentive Plan: £0.01 - £1.00 £1.01 - £2.00 Other share option plans: £1.01 - greater than £3.01 Vodafone Group 1999 Long-Term...

  • Page 112
    ... Officer, Group General Counsel and Company Secretary, Corporate Finance Director and Director of Financial Reporting meets at least annually to review treasury activities and its members receive management information relating to treasury activities on a quarterly basis. The Group accounting...

  • Page 113
    ... 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...

  • Page 114
    112 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 21. Capital and financial risk management continued Under the Group's foreign exchange management policy foreign exchange transaction exposure in Group companies is generally maintained at the lower ...

  • Page 115
    ... Vodafone Group Plc Annual Report 2011 113 22. Borrowings Carrying value and fair value information Short-term borrowings £m Long-term borrowings £m 2011 Total £m Short-term borrowings £m Long-term borrowings £m 2010 Total £m Financial liabilities measured at amortised cost: Bank loans Bank...

  • Page 116
    114 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 22. Borrowings continued The fair value and carrying value of the Group's long-term borrowings is as follows: Sterling equivalent nominal value 2011 2010 £m £m 2011 £m Fair value 2010 £m 2011 £m ...

  • Page 117
    ... future cash flows including interest in relation to the Group's non-derivative financial liabilities on an undiscounted basis, which, therefore, differs from both the carrying value and fair value, is as follows: Bank loans £m Redeemable preference shares £m Commercial paper £m Loans in fair...

  • Page 118
    ...2010 the Group had entered into foreign exchange contracts to commitment 30 days from the date of notification of a change of control of decrease its sterling currency borrowings above by £8,257 million and to the Company and have outstanding advances repaid on the last day of the increase its euro...

  • Page 119
    ... member currently aged 40 of 27.0/26.6 years (2010: 24.6/27.9 years, 2009: Zealand, Portugal, South Africa, Spain and the United Kingdom. The Group's 23.2/26.0 years). principal defined benefit pension scheme in the United Kingdom was closed to new entrants from 1 January 2006 and closed to future...

  • Page 120
    118 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 23. Post employment benefits continued Fair value of the assets and present value of the liabilities of the schemes The amount included in the statement of financial position arising from the Group's ...

  • Page 121
    Financials Vodafone Group Plc Annual Report 2011 119 History of experience adjustments 2011 £m 2010 £m 2009 £m 2008 £m 2007 £m Experience adjustments on pension liabilities: Amount Percentage of pension liabilities Experience adjustments on pension assets: Amount Percentage of pension assets...

  • Page 122
    120 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 25. Trade and other payables 2011 £m 2010 £m Included within non-current liabilities: Other payables Accruals and deferred income Derivative financial instruments Included within current ...

  • Page 123
    ...: £246 million). Capital commitments Company and subsidiaries 2011 2010 £m £m Share of joint ventures 2011 2010 £m £m 2011 £m Group 2010 £m Contracts placed for future capital expenditure not provided in the financial statements(1) Note: (1) Commitment includes contracts placed for property...

  • Page 124
    122 Vodafone Group Plc Annual Report 2011 Notes to the consolidated financial statements continued 28. Contingent liabilities continued Legal proceedings The Company and its subsidiaries are currently, and may be from time to time, involved in a number of legal proceedings, including inquiries from...

  • Page 125
    ...term employee benefits Post-employment benefits - defined contribution schemes Share-based payments 18 1 22 41 21 1 20 42 17 1 14 32 30. Related party transactions The Group's related parties are its joint ventures (see note 13), associates (see note 14), pension schemes, directors and Executive...

  • Page 126
    ... to the current year presentation. 2011 Employees 2010 Employees 2009 Employees By activity: Operations Selling and distribution Customer care and administration By segment: Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and...

  • Page 127
    ... report to the members of Vodafone Group Plc We have audited the parent company financial statements of Vodafone In our opinion: Group Plc for the year ended 31 March 2011 which comprise the balance sheet and the related notes 1 to 11. The financial reporting framework â- the part of the directors...

  • Page 128
    ... 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 17 May 2011 and were signed on its behalf...

  • Page 129
    ... the Companies Act 2006, the profit and sheet date and that result in an obligation to pay more tax, or a right to pay loss account of the Company is not presented in this annual report. These less tax in the future. The deferred tax is measured at the rate expected to separate financial statements...

  • Page 130
    ... 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. The Company is the sponsoring employer of the Vodafone Group pension scheme, a defined benefit pension...

  • Page 131
    ... capital were approved by shareholders at the 2010 annual general meeting. (3) At 31 March 2011 the Company held 5,233,597,599 (2010: 5,146,112,159) treasury shares with a nominal value of £376 million (2010: £370 million). Allotted during the year Number Nominal value £m Net proceeds £m UK...

  • Page 132
    ...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 133
    ... the trustee of the Vodafone Group UK Pension Scheme in respect of the funding deficit in the scheme. The Company has pledged money market funds (£1,387 million), as collateral for the guarantee issued by Vodafone International Holdings B.V. to the Indian Supreme Court in relation to the contested...

  • Page 134
    ... shareholders have any enquiries about their holding of ordinary shares, such as a change of address, change of ownership or dividend payments, they should contact our registrars at the address or telephone number below. Computershare Investor Services PLC maintain the Company's share register...

  • Page 135
    ... update registered address or dividend bank mandate instructions; On 31 July 2006 the Group returned approximately £9 billion to shareholders â- view and/or download the 2011 annual report; in the form of a B share arrangement. As part of this arrangement, and in â- check the current share price...

  • Page 136
    ...The Financial Times Stock Exchange 100 index The Company is a public limited company under the laws of England and the 28th largest company in the world based on market capitalisation at and Wales. The Company is registered in England and Wales under the that date. name Vodafone Group Public Limited...

  • Page 137
    ...information Vodafone Group Plc Annual Report 2011 135 Directors The Company's articles of association provide for a Board of directors, consisting of not fewer than three directors, who shall manage the business and affairs of the Company. Dividend rights Holders of 7% cumulative fixed rate shares...

  • Page 138
    ... demand a poll and iii) each shareholder will have one vote per share person does or did hold an interest in the Company's shares, to provide held in that particular class in the event a poll is taken. Class rights are certain information as set out in the Companies Act 2006. DTR 3 deals with deemed...

  • Page 139
    ... capital assets (for US and UK tax purposes). This section does not, however, cover the tax consequences for members of certain classes of holders subject to special rules including officers of the Company, employees and holders that, directly or indirectly, hold 10% or more of the Company's voting...

  • Page 140
    138 Vodafone Group Plc Annual Report 2011 Shareholder information continued Taxation of capital gains UK taxation A US holder may be liable for both UK and US tax in respect of a gain on the disposal of our shares or ADSs if the US holder is: â- â- â- â- No stamp duty will be payable on any ...

  • Page 141
    Additional information Vodafone Group Plc Annual Report 2011 139 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 to the public in ...

  • Page 142
    ... Vodafone, to services, all of which would be intended to increase competition in either the jointly develop a plan for the deployment of next generation fixed retail or the wholesale roaming markets. infrastructure in Italy. Our operating companies are generally subject to regulation governing...

  • Page 143
    ... for the reserve price of â,¬200,000. The national competition authority has commenced an investigation into the wholesale origination and termination charges levied by all Spanish In February 2011 the Government announced plans to auction 800 MHz, mobile operators for SMS services. 900 MHz, 1800...

  • Page 144
    ... and our joint venture in Italy at 31 March 2011. We present the licences by frequency band since in many markets, including the majority of Europe, they can be used for a variety of technologies including 2G, 3G and in the future LTE. Mobile licences Country by region 800 MHz expiry date 900 MHz...

  • Page 145
    ... â- â- Group adjusted operating profit and adjusted earnings per share these measures are used for internal performance analysis; these measures are used in setting director and management remuneration; and they are useful in connection with discussion with the investment analyst community and...

  • Page 146
    ... 2011 Vodacom - data revenue(1) South Africa - data revenue Egypt - service revenue Egypt - data revenue Ghana - service revenue Indus Towers - contribution to India service revenue growth Percentage point reduction in EBITDA margin Verizon Wireless Revenue Service revenue(2) EBITDA Group's share...

  • Page 147
    ... EBITDA Group's share of result of Verizon Wireless 31 March 2009 Group Service revenue Data revenue Fixed line revenue Emerging markets service revenue(3) Europe Germany - service revenue Italy - service revenue Spain - service revenue UK - service revenue Africa, Middle East and Asia Pacific India...

  • Page 148
    ... statements Board of directors and Group management Directors' remuneration Corporate governance Directors' remuneration Board of directors and Group management People Note 31 "Employees" Directors' remuneration Note 20 "Share-based payments" Shareholder information - Major shareholders Directors...

  • Page 149
    ... 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 Memorandum and articles of association 10C Material contracts 10D Exchange controls...

  • Page 150
    ... or investments; â- â- expectations regarding the Group's future revenue, operating profit, EBITDA margin, free cash flow, capital intensity, depreciation and amortisation charges, foreign exchange rates, tax rates and capital expenditure; â- â- expectations regarding the Group's access to...

  • Page 151
    ...year ended 31 March 2011 other items in respect of: the UK CFC settlement, tax relating to the disposal of China Mobile Limited, the SoftBank disposal and the court deposit made in respect of the India tax case. Financial Services Authority. High speed downlink packet access is a wireless technology...

  • Page 152
    ... 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 reach into such markets. Number of SIMs in a country...

  • Page 153
    Vodafone Group Plc Annual Report 2011 151 Selected financial data At/for the year ended 31 March 2011 2010 2009 2008 2007 Consolidated income statement data (£m) Revenue Operating profit/(loss) Profit/(loss) before taxation Profit/(loss) for the financial year from continuing operations Profit/(...

  • Page 154
    152 Vodafone Group Plc Annual Report 2011 Notes

  • Page 155
    ...WebBox, M-PESA, Vodafone One Net, Vodafone Sure Signal, Vodafone Mobile Connect and Vodacom are trade marks of the Vodafone Group. World of Difference and Mobiles for Good are trade marks of the Vodafone Foundation. RIM and BlackBerry are registered with the US Patent and Trademark Office and may be...

  • Page 156
    Vodafone Group Plc Registered Office Vodafone House The Connection Newbury Berkshire RG14 2FN England Registered in England No. 1833679 Telephone: +44 (0) 1635 33251 Fax: +44 (0) 1635 238080 www.vodafone.com Contact details Investor Relations Telephone: +44 (0) 7919 990230 Email: [email protected] ...