Vodafone signals $2.7b global cuts

DAVID WHITE/Sunday Star Times

THREAT: Vodafone is threatening to pull budget mobile calling and texting packages from the market in a bid to stop the Commerce Commission further regulating the sector.

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Debt-laden Vodafone plans to slice £1 billion (NZ$2.68 billion) off its annual global operating costs by 2011 after its interim profit fell by more than a third.

Chief executive Vittorio Colao signalled the mobile giant would consider selling more of its subsidiaries, saying it saw market consolidation as positive for the industry.

"Our focus is principally on our existing emerging markets rather than expansion, and any significant acquisitions would likely need to be funded through portfolio disposal," he said.

Vodafone New Zealand spokesman Paul Brislen denied speculation in March last year that Singapore Telecom had performed "due diligence" on Vodafone's subsidiaries in New Zealand and Australia, saying the British telco was in the region for the long haul.

Vodafone's revenues for the six months to the end of September rose 17.1 percent to £19.9 billion. Net profit fell 34.8 percent to £2.17 billion and net debt rose 19.2 percent to £27.7 billion.

"Competitive and regulatory pressures continue to be strong, and recently we have not met our expectations in some markets," Mr Colao said. Most revenue growth had resulted from exchange rate movements and expansion into new markets.

Falling prices for mobile calls had not resulted in a corresponding increase in usage.

Vodafone New Zealand remains a stand-out performer, with its share of the mobile market appearing to have edged up above 60 percent. In September, it reported an 18 percent jump in net profit to a record $191 million for the year to March. Its pre-tax profit margin rose to 15 percent of revenue.

The subsidiary agreed to pay $742 million in dividends to its British parent, after an earlier bumper $500 million dividend in 2006.

Mr Brislen said Vodafone New Zealand would play its part in the cost-reduction exercise but there would be no sudden culling of capital projects or staff.

Some savings would be achieved through initiatives such as online billing and providing more self-service options.

Vodafone NZ added 26,000 customers in the three months to the end of September, taking subscriber numbers to 2,427,000. Customers spend an average of two hours and 10 minutes talking on their mobiles each month - up eight minutes a month on the previous quarter - but the average monthly spend edged down 20 cents to $44.60 a month.

Prepay customers, who make up 72.5 percent of Vodafone New Zealand's customers, spent an average of $21.10 a month on their mobiles, which was down 50 cents a month on the previous quarter.

- © Fairfax NZ News