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On VODAFONE GROUP Plc
Prof. Uddeepan Chatterjee
Ankit Somani Anshul Khandelwal Anuja Sharma Archita Garg
Table Of Contents
Introduction To The Telecom Sector
The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. The global telecommunication industry is constantly changing. Public and private enterprises have meet ever demanding public needs while providing services at reasonable cost. Policy maker, provider and regulators face the complex challenge of promoting competition while encouraging massive capital investment required to satisfy the ever increasing demand. Despite the global economic slowdown and the difficulties the telecommunication industry has experienced recently, in general, telecommunication sector continue to capture the imagination with its potential for 1 million new subscribers in the coming decade. Broadband internet penetration rate continue to rise the impending introduction of next generation mobile services promises to revitalize a mobile market that has already reached a saturation levels in a number of companies. Globally, the telecommunications industry is about a $3.85 trillion sector, including more than $1.3 trillion in annual revenues in the U.S. Worldwide, there were more than 3 billion cellular phone service subscribers by early 2008, including more than 265 million in the U.S. Global subscribers will grow to nearly 5 billion by the end of 2012, as low-cost providers are making service prices low enough to be affordable for vast numbers of people in Third World nations. Inexpensive cell phones are now indispensable to consumers from Haiti to Africa to New Guinea. Telecommunications remains one of the largest providers of employment in the world, with over 1 million employees in the U.S. alone. Several forces continue to trigger major changes in the telecommunications sector today, including: a) mergers and consolidation have completely changed this industry's landscape, b) competition is heating up and cross-border ownership of telecom businesses is making this an increasingly globalized industry, c) deregulation and privatization will have a continual effect on the telecom sector worldwide and d) rapid advances in Internet and wireless
technologies will continue unabated, quickly changing consumer preferences and disrupting traditional communication methods. No other industry touches as many technology-related business sectors as telecommunications, which, by definition, encompasses not only the traditional areas of local and long-distance telephone service, but also advanced technology-based services including wireless communications, the Internet, fiberoptics and satellites. Telecom is also deeply intertwined with entertainment of all types, including cable TV systems, since cable companies are now aggressively offering local exchange service and high-speed Internet access. The relationship between the telecom and cable sectors has become even more complex as telcos are now selling TV via IP (Internet protocol) services, competing directly against cable for consumers' entertainment dollars. Ingenuity, innovation, cost control and a reasonable approach to spending and investment will help to move the industry ahead. New cellular, cable telephony, VOIP (Voice Over Internet Protocol) and wireless technologies promise continuous rapid evolution of this sector and pose a massive threat to traditional landlines. The cost of a cell phone call continues to drop, and cell phone manufacturers are adding advanced new features to their phones on a regular basis.
Introduction To Vodafone
Vodafone Group Plc is the world's leading mobile telecommunications company, headquartered in Berkshire, England, UK, employing over 65,000 staff and with over 130 million customers. The name Vodafone comes from Voice data fone, chosen by the company to "reflect the provision of voice and data services over mobile phones.The business operates in 26 countries worldwide
with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company's subsidiary undertakings, joint ventures, associated undertakings and investments. Vodafone Group Plc is a public limited company incorporated in England under registered number 1833679. Its registered office is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. The Company's ordinary shares are listed on the London Stock Exchange and the Company's American Depositary Shares ('ADSs') are listed on the New York Stock Exchange. The Company had a total market capitalization of approximately £79 billion at 30 June 2008. The Group's mobile subsidiaries operate under the brand name 'Vodafone'. In the United States the Group's associated undertaking operates as Verizon Wireless. During the last two financial years, the Group has also entered into arrangements with network operators in countries where the Group does not hold an equity stake. Under the terms of these Partner Network Agreements, the Group and its partner networks co-operate in the development and marketing of global services under dual brand logos. Global recognition of the Vodafone brand is growing as the company rolls out its identity into new markets. However, it retains local names and imagery in markets where this is essential to maintaining the trust of customers. To help promote its image worldwide, Vodafone uses leading sports stars from high profile global sports, including David Beckham and Michael Schumacher. Vodafone is the largest mobile telecommunications network company in the world by turnover and has a market value of about £75 billion (August 2008). Vodafone currently has operations in 25 countries and partner networks in a further 42 countries. At 30 June 2008,based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had 269 million customers, excluding paging customers, calculated on a proportionate basis in accordance with the Company's percentage interest in these ventures.
Financial Position of the Company
Revenue 14.1% increase
Adjusted operating profit 5.7% increase
Total dividends per share 11.1% increase
Proportionate mobile customers 26.2% increase At/year ended 31 March Consolidated Income Statement data Revenue Operating profit/(loss) Adjusted operating profit (non-GAAP measure)(1) Profit/(loss) before taxation Profit/(loss) for the financial year from continuing operations Profit/(loss) for the financial year Consolidated Balance Sheet data Total assets Total equity Total equity shareholders’ funds 2008 £m 35,478 10,047 10,075 9,001 6,756 6,756 2007 £m 31,104 (1,564) 9,531 (2,383) 2006 £m 2005 £m
29,350 26,678 (14,084) 7,878 9,399 8,353 (14,853) 7,285
(4,806) (17,233) 5,416 (5,297) (21,821) 6,518
127,270 109,617 126,738 147,197 76,471 67,293 85,312 113,648 78,043 67,067 85,425 113,800
Revenue of the company increased by 14.1% to £35,478 million for the year ended 31 March 2008, with a growth of 4.2%. The impact of acquisitions and disposals was 6.5 percentage points, primarily from acquisitions of subsidiaries in India in May 2007 and Turkey in May 2006 as well as the acquisition of Tele2’s fixed line communication and broadband operations in Italy and Spain in December 2007. Revenue is increased by 3.4 percentage points because of the exchange rates, principally due to the 4.2% change in the average euro/£ exchange rate, as 60% of the Group’s revenue for the 2008 financial year was denominated in euro.
Operating profit of the company increased to £10,047 million for the year ended 31 March 2008 from a loss of £1,564 million for the year ended 31 March 2007. The loss in the 2007 financial year was mainly because of the £11,600 million of impairment charges that occurred in the year, compared with none in the 2008 financial year. Adjusted operating profit increased to £10,075 million, with 5.7% growth.
PROFIT BEFORE TAX/PROFIT The profit before tax was accounted £m 9001 million for the year ended 31 march 2008 while in the previous year the company is having a loss of £m 2383 million and the profit for the financial year2008 was £m 6756 million. The Group’s consolidated net debt position at 31 March was as follows: 2008 £m 1,699 2007 £m 7,481
Cash and cash equivalents (as presented in the Consolidated Balance Sheet) Trade and other receivables(1) Trade and other payables(1) Short term borrowings Long term borrowings
Net debt shown in the Consolidated Balance Sheet Notes: (1) Trade and other receivables and payables included in net debt represent certain derivative financial instruments. (2) The amount for the 2008 financial year includes £2,625 million related to put options over minority interests, including those in Vodafone Essar and Acror, which are reported as financial liabilities.
892 304 (544) (219) (4,532) (4,817) (22,662) (17,798) (26,846) (22,530) (25,147) (15,049)
Past Performance of the company
Vodafone was formed in 1984 as a subsidiary of Racal Electronics Plc. Then known as Racal Telecom Limited, approximately 20% of the company's capital was offered to the public in October 1988. It was fully demerged from Racal Electronics Plc and became an independent company in September 1991, at which time it changed its name to Vodafone Group Plc. Following its merger with AirTouch Communications, the company changed its name to Vodafone AirTouch Plc on 29 June 1999 and, following approval by the shareholders in General Meeting, reverted to its former name, Vodafone Group Plc, on 28 July 2000. Achievements in 2008:
Vodafone acquires a 70% stake in Ghana Telecom for $900 million (July) Vodafone launches the M-Paisa mobile money transfer service on Afghanistan's Roshan. Afghanistan is added to the Vodafone footprint. (February)
Achievements in 2007:
• • • •
A consortium led by Vodafone Group is awarded the second mobile phone license in Qatar. (December) Vodafone announces completion of the acquisition of Hutch Essar from Hutchison Telecommunications International Limited. (May) Vodafone agrees to buy a controlling interest in Hutchison Essar Limited, a leading operator in the fast growing Indian mobile market, (February) Vodafone announces agreements with both Microsoft and Yahoo! to bring seamless Instant Messaging (IM) services to the mobile which can be accessed from both the PC and mobile handsets. (February) Vodafone signs a series of ground-breaking agreements which will lead to the mobilizing of the internet. YouTube agrees to offer Vodafone customers specially rendered YouTube pages on their mobile phones. With Google, Vodafone announces its intention to develop a locationbased version of Google Maps. With eBay, Vodafone announces it is to offer the new eBay mobile service to customers, With MySpace.com Vodafone announces an exclusive partnership to offer Vodafone customers a MySpace experience via their mobile phones. (February).
Achievements in 2006:
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Sale of 25% stake in Switzerland's Swiss COM (December) Sale of 25% stake in Belgium's Proximus. (August) The number of Vodafone live! customers with 3G reached 10 million in March 2006. They acquired Telsim Mobil Telekomunikasyon Hizmetleri (Turkey) in May 2006. Launch of mobile TV capability and Vodafone Radio DJ, which offers a personalised, interactive radio service streamed to 3G phones and PCs. ‘Make the most of now’ global marketing campaign launched.
Achievements in 2005:
• • •
We completed the acquisition of MobiFon S.A. (Romania) and Oskar Mobile a.c. (Czech Republic) (May). Launch of Vodafone Simply, a new easy-to-use service for customers who want to use voice and text services with minimum complexity (May). Introduction of Vodafone Passport, a voice roaming price plan that provides customers with greater price clarity when using mobile voice services abroad (May).
Achievements in 2004:
• • •
We launched our first 3G service in Europe with Vodafone Mobile Connect 3G/GPRS data card. We have 14 Partner Networks with new agreements in Cyprus, Hong Kong and Luxembourg. Vodafone live! with 3G launched in 13 markets (November).
Future Of The Telecom Sector
In recent time telecommunication industry is on a roll. The introduction of new products and services are revolutionizing communication and enriching our daily life and demand is soaring, thanks in part to resurgence in the Asian economy, which is fuelling the growth of the entire industry. Boosted up by the opening up of new markets, both geographically as well as in terms of expansion of product and service offerings, the telecom industry is enjoying an unprecedented boom time. To put it in perspective, the telecom sector has grown, on average, twice the rate for the global economy between 1990 and 2007. At the macro-economic level, the contribution of telecom services to the general economy has grown
rapidly from about 1.8% in 1990 to 6.3% of worldwide GDP till 2007. During this period, the mobile phone has evolved into an indispensable communication, entertainment and productivity tool, and almost surreptitiously, digital technology has pervaded every aspect of life. Expectation is high for the growth of broadband Internet connections and 3G mobile services, considered the two hottest areas in the ICT [information and communication technologies] sector today. According to ITU[international telecommunication union], the median speed of broadband Internet available worldwide was around 256 Kbit/s, but within less than two years, this had improved to over 1.4Mbit/s.today According to sina.com, a research team lead by the University of Tokyo created a new record of the Internet speed ,where the Internet speed reached 9.08 Gbps which could be the fastest practical speed of Internet 2. Network operators are just beginning to reap rewards for the huge investments made in 3G a few years ago. In addition to contributing to increased sales as result of data access from mobile devices, 3G has opened a large market in mobile content - downloading of ringtones, wallpapers and games. In fact the devices themselves with ever-shortening life cycles are getting so rapidly commoditized that it is the content and value-added services that present the more lucrative opportunities. Barriers to entry are broken almost every day by creative content providers in their quest for the next killer application to take the market by storm. Asia, with the rapid growth of economies such as China and India, is playing a pivotal role in shaping the fortunes and future of the telecom industry. Not only are other regions now looking to Asia to replicate controllable factors that drive this growth, but also home-grown technology companies from Asia are beginning to take their place on the global stage with a powerful combination of enticing content services, innovative pricing models and cutting edge technology
Key focus to make the future colourful: Faced with the soaring demand and opportunities in new regions, telecom firms are focusing their attention on two key factors in an effort to increase the 3G subscriber base:
Creating attractive pricing schemes for data access, and Making available "killer" applications that exploit the large bandwidth available.
The future of the telecom industry is also changing because of the changing technology in the mobile market. In the mobile phone market, new models are
being rolled out with features targeted at specific user groups. There are feature phones for business people, with fast email services and document editing capabilities. On the other end of the spectrum are multimedia phones, further sub divided into units with advanced imaging and/or audio capability. In the next few years, there is likely to be further specialization as network providers offer package bundles comprising of a phone, customized content, applications and a unique pricing plan targeted for that user group. For example, one could opt for a package with a multimedia phone with huge storage space for music, Digital Rights Management (DRM) software for sharing music and a usage plan that allows limited free downloads of songs and video.
Future Of Vodafone
The future of Vodafone is getting brighter day by day. Their immense customer based services are adding to the value and goodwill of the company. Their services such as news alerts, art of living alerts etc. are very much capable of gathering interest of their customers and even attracting new customers. Their sense of innovation can be seen in their innovative ads, which takes them distinctly ahead of their competitors. Their partnerships with hardware vendors are a viable and successful way of conducting research into future products and services, at the same time avoiding duplication of work being done elsewhere. Sometimes, it makes sense to share knowledge and to join forces in exploring new technology and services. Vodafone Group R&D has long recognized this, setting up joint research projects with prominent partners to shorten development time, deepen business relationships and to enhance its own technology and implementation competence. They also maximize their contact with creative researchers by leading funded research with key universities worldwide and guiding research programmes like the Wireless World Initiative. They engage innovators all over the world to bring the customers the best communications technologies and products. Innovations in mobile advertising are gaining momentum, along with developing mobile TV services. Further interest for the future is in rich
communications within community and other applications, which will allow their customers to make calls, share pictures and other media all within a single application.
The matter of the above report has been taken from the following resources:
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www.vodafone .com http://en.wikipedia.org/wiki/Vodafone www.topix.com/business/telecom www.efytimes.com/efytimes/fullnews.asp?edid=22593 - 88k http://www.vodafone.com/start/investor_relations/financial_reports.html