Adds another £1 billion to earmarked £6 billion in Project Spring
Vodafone has announced it is investing an extra £1 billion in its network and services by 2016, taking the total up to £7 billion. The organic investment programme is intended to accelerate and extend Vodafone's 2015 strategy of continued focus on data, enterprise and emerging markets, although the additional investment will help establish stronger network and service differentiation in major markets by March 2016.
In its half year results to the end of 30 September 2013, Vodafone reported that second quarter organic service revenue on a management basis (includes the results of Vodafone Italy, Vodafone Hutchison Australia, Vodafone Fiji and Indus Towers, the Group's joint ventures, on a proportionate consolidation basis, plus five months profit contribution from Verizon Wireless) declined by 4.9% with Northern and Central Europe down 4.9%, Southern Europe down 15.5% and Africa, Middle East and Asia Pacific up by 5.7%.
First half EBITDA on a management basis was down 4.1%* to £6.6 billion, now reported excluding the restructuring and significant one-off items of £228 million in the first half (restructuring costs and the write off of an asset in relation to a regulatory case in Spain of £121 million and £107 million respectively).
Adjusted operating profit on a management basis was £5.7 billion for the period, with free cash flow on a management basis at £2 billion. Full year guidance was confirmed with adjusted operating profit around £5 billion and free cash flow £4.5 to £5 billion.
On Verizon Wireless, it is still some time until Vodafone will receive the $130 billion sale price, which was announced in the last half. Of that figure, $84 billion is expected to return to shareholders. There was also a £3 billion tax charge recognised in relation to the sale of the US Group.
However, Vodafone included additional deferred tax losses of £17.7 billion to its books, which were able to be included following the sale of Verizon Wireless. These deferred tax losses are related to Vodafone's acquisition of German mobile business, Mannesmann, in 2001. The historical tax losses are for Germany (£1,838 million) and Luxembourg (£15,831 million) and the estimated tax liability related to the rationalisation and reorganisation of its non-US assets prior to the disposal of its stake in Verizon Wireless (£3,016 million).
Vittorio Colao, group chief executive, commented: 'Whilst trading conditions in Europe remain very tough at present, we are encouraged by the forecast return to economic growth over the next two years and the potential for a shift in regulatory focus to support greater industry investment and consolidation.
'We have continued to make good progress in delivering our long term strategy. Our emerging markets businesses are performing very well, driven by rapidly increasing smartphone penetration and data usage. In mature markets, our performance reflects more challenging conditions, which we continue to mitigate through ongoing actions to improve our operating model and cost efficiency.
'This rigorous approach, plus our substantial investments in Vodafone Red, 4G and unified communications services – including our recent acquisition of Kabel Deutschland – are laying strong foundations for the future,' noted Colao.
He added: 'Our Project Spring organic investment programme – now increased to £7 billion – will accelerate further our plans to establish stronger network and service differentiation for our customers.'
