Vodafone 2012 Annual Report Download - page 35

Performance Governance Financials Additional informationBusiness review
33
Vodafone Group Plc
Annual Report 2012
Discipline of regular business reviews
We regularly review the cash needs of
eachofour existing businesses across
theglobe, taking into account their
performance andcompetitive position.
Wemake capital investments, such as
fornewequipment or spectrum, in our
businessesto improve their performance
anddrive organic growth.
Returns to shareholders
We thoroughly review the best ways to
providereturns to our shareholders. We have
atarget of increasing dividends per share
byatleast 7% a year until the nancial year
ending 31 March 2013. When we have
surplusfunds we consider additional returns
toshareholders through special dividends
orshare buyback programmes.
Selective acquisitions
When managing capital we also consider
whether to strengthen the Group by
acquiringother companies to increase
ouroperations in a particular market.
Allpotential acquisitions are judged on strict
nancial and commercial criteria, especially
whether they would provide meaningful
scalein a particular segment, the cost of
theacquisition and the ability to enhance
theGroup’s free cash ow.
£0.9bn
In the last two years we have taken
outsome £0.9billion from the cost base
which hasbeen used in part to offset
inationary pressures orcope with the
volume of extra trafc on ournetworks.
The net saving has been around
£0.3billion, which has been partly
usedto invest in commercial activities.
Deliver value and
efciencyfromscale
Vodafone is one of the world’s largest
mobilecompanies. Our networks support
404 million customers and carry nearly one
trillion minutes of callsand 324 billion texts
each year. Our scale enables usto secure
considerable unit costsavings invarious
ways including purchasing, standardisation
ofprocesses, off-shoring activities to
lowercost locations, outsourcingnon-core
activities to third parties and sharing
common resources withother operators.
Generate liquidity or
free cash owfrom
non-controlled interests
In 2010 we identied six non-controlled
assets in which Vodafone was the
minoritypartner, that would either be
soldorfrom which we extract additional
cash ow in order to fund protable
investment or enhance shareholder returns.
Since 2010 we have made considerable
progress in this strategy by raising a total
of£17.7 billion from the sale of assets
andadditional dividends.
Apply rigorous
capital discipline to
investment decisions
We are focused on enhancing returns to
our shareholders and are therefore careful
how we invest shareholders’ money.
We apply rigorous commercial analysis
and set demanding investment criteria
to ensure that any investment, whether
in existing businesses or acquisitions,
will enhance value for shareholders.
Weremain committed to our target
creditrating of low single A for long-term
debt as this provides us with a low cost of
debt and good access to liquidity.
Purchasing
We use the Vodafone Procurement Company,
the central Group procurement function based
in Luxembourg to leverage our scale and to
achieve better prices and more value.
Standardisation
We have developed one integrated data centre
cloud across Europe and Africa and are well
underway to extending it to Asia this year which
enables us to operate highly resilient services
and to be faster to market with our new services.
Off-shoring
We use shared service centres in Hungary,
Indiaand Egypt to provide nancial,
administrative, IT,customer operations and
human resource services for our operations in
over 30 countries which helps us to standardise
and optimise the way we run our businesses.
Outsourcing
We have outsourced day-to-day network
maintenance in ten countries enabling
signicant scale economies for the chosen
supplier which are passed on to us in the form
oflower costs.
Sharing
Over 70% of the new radio base station sites
deployed this year were built as shared sites
with other operators to reduce costs.
Businesses we have recently sold
In September 2010 we sold our 3.2% stake
inChina Mobile Limited for £4.3 billion.
In November 2010 we agreed to sell our
remaining interest in SoftBank of Japan
for£2.9billion and the transaction was
completedin April 2012.
In June 2011 we sold our 44% holding in
SFRofFrance for £6.8 billion.
In November 2011 we sold our 24.4% share
ofPolkomtel in Poland for £0.8 billion.
Dividends received from our
non-controlled assets
In January 2012 we received a £2.9 billion
income dividend from our 45% interest in
Verizon Wireless in the US. £2.0 billion of this
was paid to Vodafone shareholders in the form
of a special dividend. This was the rst income
dividend received since 2005.
Remaining non-controlled interests
We retain an indirect 4.4% interest in Bharti
inIndia.
The proceeds raised from non-controlled
interests are being used to fund the current
£6.8 billion share buyback programme,
ofwhich £5.7 billion wascompleted at
31March 2012.
2010
2011
2012
5.7
7.6
0.5
0.5
3.0
Dividends and sale proceeds
fromnon-controlled interests
£bn
Income dividend from non-controlled interests
Cash received from the sale of non-controlled interests
4.6Ordinary dividends paid
Share buyback
Special dividend paid
3.6
2.0
Returns to shareholders 2012 £bn