Vodafone NZ profit falls

Fairfax Media

PROFIT FALL: Vodafone New Zealand’s annual profit fell 7.2 percent to $178 million for the year to March 31 as it grew its fixed-line business.

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Vodafone New Zealand’s annual profit fell 7.2 percent to $178 million for the year to March 31 as it grew its fixed-line business at significant cost and voice revenue declined.

This is the first time in eight years the telco has suffered a profit decline as it faces a major increase in competition in the market.

Revenue rose from $1.5 billion in 2008 to $1.6 billion in 2009.

Director James Marsh says Vodafone expanded its mobile broadband data business and fixed-line operations at a lower margin than the year before, which impacted the bottom line.

Vodafone boosted land-line and mobile customer numbers by 18 percent, including an extra 136,000 more mobile customers during the 2009 financial year, but this was offset by lower voice prices.

The firm faces an increase in competition this year.

Main rival Telecom launched a third generation mobile phone network, called XT, in May and third-mobile network operator 2degrees launched a 3G network in August.

Black + White, Callplus, Orcon and Compass have also struck mobile virtual network operator deals with Vodafone which means they resell mobile services via its network. TelstraClear and Digital Island have established mobile reseller deals on Telecom's network.

Meanwhile Marsh says the outcome of the Commerce Commission's investigation in mobile termination rates could have a significant impact on its ability to invest in the future.

 The firm stands to lose about $50m a year under the commission's proposed rates.

Vodafone spokesman Paul Brislen says most of British parent Vodafone Group' operations in Europe reinvest about 5 percent to 9 percent annually.

Vodafone's operations in New Zealand have always maintained a 12 percent to 15 percent reinvestment rate because of its larger profit margins compared to its European counterparts.

But regulatory uncertainty means the reinvestment rate from this year will be pared back to between 5 percent and 9 percent, says Brislen.

Vodafone will maintain core investment, but won't be able to introduce new technology and be innovative, he says.

Vodafone didn't return a dividend to its United Kingdom parent in 2009, after returning a "catch-up" dividend of $631m in 2008.

The company introduced an annual dividend policy of between $90 and $100m this financial year.

Vodafone declined to comment about its forecast.

Parent Vodafone Group's operating profit is expected to be between 11b pounds (NZ$24.6 billion) and 11.8b pounds, compared to 11.8b pounds in 2008.

The group is particularly focused on the Asia Pacific region where revenue rose 19 percent reflecting a strong contribution from India.

In India, revenue grew 32.9 percent as it added a staggering 24.4 million to take the customer base to 68.8 million people during the year.

- © Fairfax NZ News