Operating results
2008 financial year compared to the 2007 financial year
Asia Pacific and Middle East(1)
India |
Other |
Asia Pacific and Middle East |
% change | |||
|---|---|---|---|---|---|---|
| £m | £m | £m | £ | Organic | ||
| Year ended 31 March 2008 | ||||||
| Revenue | 1,822 | 2,577 | 4,399 | 87.4 | 15.9 | |
| Service revenue | 1,753 | 2,348 | 4,101 | 90.4 | 16.2 | |
| EBITDA | 598 | 878 | 1,476 | 78.7 | 14.3 | |
| Adjusted operating profit | 35 | 495 | 530 | 12.3 | 8.1 | |
| EBITDA margin | 32.8% | 34.1% | 33.6% | |||
| Year ended 31 March 2007 | ||||||
| Revenue | – | 2,347 | 2,347 | |||
| Service revenue | – | 2,154 | 2,154 | |||
| EBITDA | – | 826 | 826 | |||
| Adjusted operating profit | – | 472 | 472 | |||
| EBITDA margin | – | 35.2% | 35.2% | |||
Note:
- (1)
- The Group revised its segment structure during the year. See note 3 to the consolidated financial statements.
Vodafone continued to execute on its strategy to deliver strong growth in emerging markets during the 2008 financial year, with the acquisition of Vodafone Essar (formerly Hutchison Essar) in India and with strong performance in Egypt. The Group began to differentiate itself in emerging markets, with initiatives such as the introduction of Vodafone branded handsets.
On 8 May 2007, the Group continued to successfully increase its portfolio in emerging markets by acquiring companies with interests in Vodafone Essar, a leading operator in the fast growing Indian mobile market, following which the Group controls Vodafone Essar. The business was rebranded to Vodafone in September 2007.
In conjunction with the Vodafone Essar acquisition, the Group signed a memorandum of understanding with Bharti Airtel, the Group’s former joint venture in India, on infrastructure sharing and granted an option to a Bharti group company to buy its 5.60% direct interest in Bharti Airtel, which was exercised on 9 May 2007.
Revenue growth for the year ended 31 March 2008 was 87.4% for the region, or 15.9% on an organic basis, with the key driver for organic growth being the increase in service revenue of 90.4%, or 16.2% on an organic basis.
EBITDA increased by 78.7% for the year ended 31 March 2008, or 14.3% on an organic basis, due to performances in Egypt and Australia.
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 | ||||
| Asia Pacific and Middle East | 15.9 | 81.9 | (10.4) | 87.4 |
| Service revenue | ||||
| India | – | – | – | – |
| Other | 16.2 | – | (7.2) | 9.0 |
| Asia Pacific and Middle East | 16.2 | 86.6 | (12.4) | 90.4 |
| EBITDA | ||||
| India | – | – | – | – |
| Other | 14.3 | – | (8.1) | 6.2 |
| Asia Pacific and Middle East | 14.3 | 77.6 | (13.2) | 78.7 |
| Adjusted operating profit | ||||
| India | – | – | – | – |
| Other | 8.1 | – | (3.4) | 4.7 |
| Asia Pacific and Middle East | 8.1 | 7.6 | (3.4) | 12.3 |
India
At constant exchange rates, Vodafone Essar performed well since acquisition, with growth in revenue of 55% assuming the Group owned the business for the whole of both periods. Since acquisition, there were 16.4 million net customer additions, bringing the total customer base to 44.1 million at 31 March 2008. Penetration in mobile telephony increased following falling prices of both handsets and tariffs and network coverage increases. The market remains competitive and prepaid offerings are moving to lifetime validity products, which allow the customer to stay connected to the network without requiring any top ups. Revenue continued to grow as the customer base increased, particularly in outgoing voice as service offerings drove greater usage.
The Indian mobile market continued to grow, with penetration reaching 23% by the end of March 2008. Vodafone Essar, which successfully adopted the Vodafone brand in September 2007, continued to perform well, with EBITDA slightly ahead of expectations held at the time of the completion of the acquisition. This was partially due to the Group’s rapid network expansion in this market together with improvements in operating expense efficiency, particularly in customer care. The outsourcing of the IT function was implemented during January 2008 and is expected to lead to the faster roll out of more varied services to customers, while delivering greater cost efficiencies.
Other Asia Pacific and Middle East
Service revenue increased by 9.0%, by 16.2% on an organic basis, driven by performances in Egypt and Australia.
In Egypt, service revenue growth was 31.2% at constant exchange rates, benefiting from a 52.7% increase in the average customer base and an increase in voice revenue, with the fall in the effective rate per minute being offset by a 60.1% increase in usage. The success of recent prepaid customer offerings, such as the Vodafone Family tariff, contributed to the 45.8% growth in closing customers compared to the 2007 financial year.
In Australia, service revenue grew by 7.5% at constant exchange rates, which was achieved despite the sharp regulatory driven decline in termination rates during the year. Revenue growth in Australia reflected an 8.0% increase in the average customer base and the mix of higher value contract customers. New Zealand also saw strong growth in service revenue, which increased by 20.0%, or by 10.1% at constant exchange rates, driven primarily by a 16.7% increase in the average contract customer base and strong growth in data and fixed line revenue.
EBITDA grew by 6.2%, or by 14.3% on an organic basis, with the main drivers of growth being Egypt and Australia.
In Egypt, EBITDA increased by 20.6% at constant exchange rates. Direct costs grew due to prepaid airtime commission increases and 3G licence costs. Within operating expenses, staff investment programmes, higher publicity costs and leased line costs increased during the year, although operating expenses remained stable as a percentage of service revenue.
The favourable performance in Australia was a result of the higher contract customer base, achieved through expansion of retail distribution, with higher contract revenue offsetting the increase in customer costs.