Operating results
2008 financial year compared to the 2007 financial year
Africa and Central Europe(1)
Vodacom |
Other(2) |
Africa and Central Europe |
% change | |||
---|---|---|---|---|---|---|
£m | £m | £m | £ | Organic(2) | ||
Year ended 31 March 2008 | ||||||
Revenue | 1,609 | 3,337 | 4,946 | 20.8 | 13.6 | |
Service revenue | 1,398 | 3,219 | 4,617 | 21.0 | 13.2 | |
EBITDA | 586 | 1,083 | 1,669 | 17.1 | 15.6 | |
Adjusted operating profit | 365 | 387 | 752 | 33.1 | 18.0 | |
EBITDA margin | 36.4% | 32.5% | 33.7% | |||
Year ended 31 March 2007 | ||||||
Revenue | 1,478 | 2,616 | 4,094 | |||
Service revenue | 1,287 | 2,528 | 3,815 | |||
EBITDA | 532 | 893 | 1,425 | |||
Adjusted operating profit | 327 | 238 | 565 | |||
EBITDA margin | 36.0% | 34.1% | 34.8% |
Notes:
- (1)
- The Group revised its segment structure during the year. See note 3 to the consolidated financial statements.
- (2)
- On 1 October 2007, Romania rebased all of its tariffs and changed its functional currency from US dollars to euros. In calculating all constant exchange rate and organic metrics which include Romania, previous US dollar amounts have been translated into euros at the 1 October 2007 US$/euro exchange rate.
Vodafone has continued to execute on its strategy to deliver strong growth in emerging markets during the 2008 financial year, with good performances in Turkey, acquired in May 2006, and Romania. The Group began to differentiate itself in its emerging markets, with initiatives such as the Vodafone
M-PESA/Vodafone Money Transfer service.
Revenue growth for the year ended 31 March 2008 was 20.8% for the region, or 13.6% on an organic basis, with the key driver of organic growth being the increase in service revenue of 21.0%, or 13.2% on an organic basis.
EBITDA increased by 17.1% for the year ended 31 March 2008, or 15.6% on an organic basis, due to strong performances in Vodacom and Romania.
The impact of merger and acquisition activity and foreign exchange movements on revenue, service revenue, EBITDA and adjusted operating profit are shown below:
Organic growth % |
M&A activity pps |
Foreign exchange pps |
Reported growth % |
|
---|---|---|---|---|
Revenue | ||||
Africa and Central Europe | 13.6 | 6.0 | 1.2 | 20.8 |
Service revenue | ||||
Vodacom | 16.5 | – | (7.9) | 8.6 |
Other | 11.2 | 9.5 | 6.6 | 27.3 |
Africa and Central Europe | 13.2 | 6.2 | 1.6 | 21.0 |
EBITDA | ||||
Vodacom | 18.3 | – | (7.9) | 10.4 |
Other | 13.9 | 3.6 | 3.6 | 21.1 |
Africa and Central Europe | 15.6 | 2.1 | (0.6) | 17.1 |
Adjusted operating profit | ||||
Vodacom | 19.1 | – | (7.5) | 11.6 |
Other | 17.0 | 52.7 | (7.1) | 62.6 |
Africa and Central Europe | 18.0 | 22.6 | (7.5) | 33.1 |
On an organic basis, voice revenue grew by 12.0% and messaging revenue and data revenue rose by 6.6% and 103.9%, respectively, as a result of the 22.4% organic increase in the average customer base.
Vodacom
Vodacom’s service revenue increased by 8.6%, or 16.5% at constant exchange rates, which was achieved largely through average customer growth of 23.1%. The customer base was impacted by a change in the prepaid disconnection policy, which resulted in 1.45 million disconnections in September 2007 and a higher ongoing disconnection rate. Vodacom’s data revenue growth remained very strong, driven by a rapid rise in mobile PC connectivity devices.
Vodacom’s EBITDA rose by 10.4%, or 18.3% at constant exchange rates. The main cost drivers were operating expenses, which increased by 19.3% at constant exchange rates, and direct costs which grew by 17.1% at constant exchange rates, primarily as a result of increased prepaid airtime commission following the growth of the business. Growth at constant exchange rates was in excess of reported growth as Vodacom’s reported performance in the 2008 financial year was impacted by the negative effect of exchange rates arising on the translation of its results into sterling.
Other Africa and Central Europe
Service revenue increased by 27.3%, by 11.2% on an organic basis, driven by performances in Turkey and Romania.
At constant exchange rates, Turkey delivered revenue growth of 24%, assuming the Group owned the business for the whole of both periods, with 25.2% growth in the average customer base compared to the 2007 financial year. While growth rates remained high, they slowed in the last quarter of the year, but remained consistent with the overall growth rate for the market. In order to maintain momentum in an increasingly competitive environment, the business concentrated on targeted promotional offers and focused on developing distribution, as well as continued investment in the brand and completing the planned improvements to network coverage. The revenue performance year on year was principally as a result of the increase in voice revenue driven by the rise in average customers, but also benefited from the growth in messaging revenue, resulting from higher volumes.
In Romania, service revenue increased by 15.0%, or 19.6% at constant exchange rates, driven by an 18.3% rise in the average customer base following the impact of initiatives focusing on business and contract customers, as well as growth in roaming revenue and a strong performance in data revenue following successful promotions and a growing base of mobile data customers. However, service revenue growth slowed in the last quarter, when compared to the same quarter in the 2007 financial year, in line with lower average customer growth, which was in turn driven by increased competition in the market, with five mobile operators competing for market share.
EBITDA grew by 21.1%, or by 13.9% on an organic basis, with the main drivers of growth being Turkey and Romania.
Turkey generated strong growth in EBITDA, assuming the Group owned the business for the whole of both periods, driven by the increase in revenue. The closing customer base grew by 21.8% following additional investment in customer acquisition activities, with the new connections in the year driving the higher customer costs. Direct costs were up, mainly due to ongoing regulatory fees, which equate to 15% of revenue. Operating expenses remained constant as a percentage of service revenue but increased following continued investment in the brand and network in line with the acquisition plan.
Romania’s EBITDA grew by 15.8%, or 20.9% at constant exchange rates, with increases in costs being mitigated by service revenue performance. Direct costs grew, reflecting the 18.3% rise in the average customer base. As a percentage of service revenue, customer costs increased as a result of the increased competition for customers. Increases in the number of direct sales and distribution employees, following the market trend towards direct distribution channels, led to a 6.6% increase in operating expenses, or 11.0% at constant exchange rates.