Vodafone Group Plc turned in figures better than anyone expected yesterday, as the Newbury, Berkshire mobile phone company set out its plans for to increase its stakes in overseas ventures. Pre-tax profits were up 2% at ú371.1m – most analysts had expected a rise to ú365m – from turnover up 36% at ú1,152.6m. Vodafone maintained its number one position in its home market, increasing its subscriber base by some 91%, or 640,000, to stand at 1.8m by the end of March. Of these, 166,000 are connected to the digital network, 720,000 are on the lower-revenue Low Call tariff. Shares rose five pence to 207.5 pence at the news. Vodafone has two wholly-owned service providers – Vodac Ltd and Vodacom Ltd, and these increased their subscribers by 38%.
Fraud-busting
Fraud-busting measures have been implemented to counteract what is a major problem in the UK. Bad debt and fraud cost Vodafone ú16m during the year. Vodata Ltd and Paknet Ltd, the data network subsidiaries, both had a good year, and the paging companies – Vodapage Ltd and Air Call Communications Ltd – improved their profits in what the company said was a flat market. But it is overseas that Vodafone believes real growth potential lies. Panafon SA in Greece – 45% owned – has attracted 94,000 subscribers to its Groupe Speciale Mobile network, up from 32,000 last time, and Vodacom Pty Ltd, South Africa, where Vodafone has 35%, made a dramatic jump to 220,000 subscribers. The digital network there was only set up in March 1994, and at the six-month stage the figure was half what it was a year later. Vodafone Pty Ltd in Australia has speeded up the roll-out of its network to get the best position possible in the market and the long-established Maltese unit, Telecell Ltd, continued to grow profitably. Vodafone has recently taken stakes in a number of overseas operations. In October, it took 10% of Societe Francaise du Radiotelephone SA, which operates the second French network. December saw its stake increase to 35% in both Pacific Link Communications Ltd and Pacific Telelink Ltd in Hong Kong, and this year a 36.8% stake was acquired in Clovergem Celtel Ltd, which holds a digital licence in Uganda. Most recent of all, Vodafone was part of the MT-2 consortium that succesfully bid for the second Dutch cellular operator’s licence (CI No 2,624). This is not expected to be profitable until 1999. It is these sorts of investments that lead analysts to believe Vodafone to be a good long-term, if not short-term bet. Start-up costs in the overseas ventures, amounted to ú63.1m this time, up from ú35.7m last year, and are likely to continue longer than expected with the recent developments. As subscribers are signed up in the UK, Vodafone is thought to pay dealers an average of ú250 per customer in commission, and their annual bill may not even reach this in the first year. Therefore, when it announces good connection figures, profit warnings often follow, as in February (CI No 2,594). Connection costs rose to ú187.5m in the year, from ú83.8m last time. The company intends to pursue a policy of increasing its stakes in profitable ventures, rather than acquiring any further overseas licences. The final dividend is 1.7 pence per share, making a total of 3.34 pence for the year. This is a 20% rise on last year, and above most analysts’ expectations.
