Vodafone posts £4bn profit

Pre-tax profits at mobile telecom giant Vodafone have jumped nearly 90% to just over £4bn for the year to March.

Acquisition activity should be less than it has been in the last two or three years

Chris Gent, Vodafone chief executive

The results were slightly better than industry analysts had expected, as the company managed to avoid the slump suffered by many of its competitors.

The key reason for the jump in profits, though, is not a fantastic growth Vodafone's existing business, but the result of last year's purchase of Germany's Mannesmann, and the formation of Verizon Wireless in the US.

However, chief executive Chris Gent said the company was taking a break from its global expansion programme to concentrate on improving profit margins.

More customers

"Acquisition activity should be less than it has been in the last two or three years," Mr Gent said in a statement.

Vodafone's earnings before interest, taxation, depreciation and amortisation were ahead of expectations at £7bn, compared to £5.5bn last year.

However, when exceptional items - like the purchase of Mannesmann - are taken into account, the company made a pre-tax loss of £8.1bn, compared to a profit of £1.3bn last year.

As a result of the expansion programme, Vodafone's registered customers jumped by more than half.

Share slide

However, the company's shares continued their recent slide on Tuesday, following the results announcement.

By 1500GMT they had lost 3.7% of their value, at 188p.

Vodafone said it remained the UK's leading mobile phone operator with a market share of 28%, claiming one million customers more than its nearest rival.

The group said pre-pay products drove the growth in the UK market, with almost eight million customers at the end of March - around 65% of Vodafone's UK customer base.

Last year's results were overshadowed by the triumph of its hostile move on Germany's Mannesmann.

Since then, it has added stakes in mobile phone operations in Spain, Ireland, Switzerland, Romania, Mexico, China and Japan.

Many of these acquisitions were made through the issue of new equity, resulting in a significant proportion of shareholders who are not seen as long-term investors. This creates a constant selling pressure.

Third generation risks

The declining shares are also due to the heavy debts built up through buying third generation licences that will allow mobile phone users to surf the net and send e-mails.

Vodafone is about to launch the stepping stone to third generation phones, General Packet Radio Services (GPRS), with 3G to follow by the end of 2002 or early 2003.

Vodafone said the product - nicknamed "2.5 generation" - would be primarily aimed at the business market.

The company said it plans to spend £10bn over the next five years on rolling out 3G services.

However, there is little concrete proof that the new technology will be popular with customers.