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Operating results

This section presents the Group’s operating performance, providing commentary on how the revenue and the EBITDA performance of the Group and its operating segments within Europe, Africa and Central Europe, Asia Pacific and Middle East and Verizon Wireless have developed in the last three years.

2009 financial year compared to the 2008 financial year


  Europe Africa
and Central
Pacific and
Middle East
Eliminations 2009 2008   % change
  £m £m £m £m £m £m £m £m   £ Organic
Revenue 29,634 5,501 5,819 216 (153) 41,017 35,478   15.6 (0.4)
Service revenue 27,886 5,113 5,434 (139) 38,294 33,042   15.9 (0.3)
EBITDA(3) 10,422 1,690 1,739 639 14,490 13,178   10.0 (3.5)
Adjusted operating profit(3) 6,631 652 525 3,542 407 11,757 10,075   16.7 2.0
Adjustments for:                      
Impairment losses             (5,900)      
Other income and expense             (28)      
Operating profit             5,857 10,047      
Non-operating income and expense             (44) 254      
Net financing costs             (1,624) (1,300)      
Profit before taxation             4,189 9,001      
Income tax expense             (1,109) (2,245)      
Profit for the financial year             3,080 6,756      


The Group revised its segment structure during the year. See note 3 to the consolidated financial statements.
Common Functions represents the results of the partner markets and the net result of unallocated central Group costs and recharges to the Group’s operations, including royalty fees for use of the Vodafone brand.
See “Non-GAAP information”.


Revenue increased by 15.6%, with favourable exchange rates contributing 13.0 percentage points and the impact of merger and acquisition activity contributing 3.0 percentage points to revenue growth. Pro forma revenue growth, including the acquisition in India and the acquisition of Tele2 in Italy and Spain, was 1.3%.

Revenue in Europe declined by 2.1% on an organic basis, as benefits from new tariffs and promotions and a strong performance in data revenue were more than offset by the impact of the deteriorating European economy on voice and messaging revenue, including from roaming, usage growth, ongoing competitive pricing pressures and lower termination rates.

In Africa and Central Europe, revenue grew by 3.9% on an organic basis, with double digit revenue growth in Vodacom being offset by weakening trends in Turkey and Romania. Benefits from the increase in the average customer base were partially offset by both weaker economic conditions in the more mature markets in Central Europe and the impact of termination rate cuts.

In Asia Pacific and Middle East, revenue grew by 19% on a pro forma basis including India, a result of the rise in the average customer base, although revenue growth has slowed, primarily as a result of stronger competition coupled with maturing market conditions.

Operating profit

EBITDA increased by 10.0% to £14,490 million, with favourable exchange rates contributing 13.4 percentage points and the impact of merger and acquisition activity contributing 0.1 percentage points to EBITDA growth. Including India and Tele2 in Italy and Spain, pro forma EBITDA declined by 3%.

In Europe, EBITDA decreased by 7.0% on an organic basis, with a decline in the EBITDA margin, primarily driven by the downward revenue trend, the growth of lower margin fixed line operations, a brand royalty provision release included in the prior year in Italy and restructuring charges in a number of markets, which more than offset customer and operating cost savings. The European EBITDA margin, including Common Functions, which substantially support our European operations, declined by 1.1 percentage points, driven by an increasing contribution from lower margin fixed broadband.

Africa and Central Europe’s EBITDA decreased by 2.4% on an organic basis, with the EBITDA margin decreasing in the majority of markets due to continued network expansion, investment in the turnaround plan in Turkey and increased competition in Romania.

In Asia Pacific and Middle East, EBITDA increased by 6% on a pro forma basis including India, with a decline in the EBITDA margin as licensing costs increased and network expansion continued, primarily in India, but also through the build out in Qatar.

The increase in Common Functions EBITDA in the current year resulted primarily from the inclusion of a brand royalty payment charge in the prior year and increased brand revenue in the current year following agreement of revised terms with Vodafone Italy.

Operating profit decreased due to the growth in adjusted operating profit being more than offset by impairment losses in relation to operations in Spain (£3,400 million), Turkey (£2,250 million) and Ghana (£250 million). Adverse changes in macro economic assumptions generated the £550 million charge recorded in the second half of the financial year in relation to Turkey and all of the charge in relation to Ghana. Adjusted operating profit increased by 16.7%, or 2.0% on an organic basis, with a 16.5 percentage point contribution from favourable exchange rates, whilst the impact of merger and acquisition activity reduced adjusted operating profit growth by 1.8 percentage points.

The share of results in Verizon Wireless, the Group’s associated undertaking in the US, increased by 21.6% on an organic basis, primarily due to a focus on the high value contract segment and low customer churn. On 9 January 2009, Verizon Wireless completed its acquisition of Alltel Corp. (‘Alltel’), adding 13.2 million customers before required divestitures.

Net financing costs

Investment income 795 714
Financing costs (2,419) (2,014)
Net financing costs (1,624) (1,300)
Analysed as:    
Net financing costs before dividends from investments (1,480) (823)
Potential interest charges arising on settlement of outstanding tax issues(1) 81 (399)
Dividends from investments 110 72
Foreign exchange(2) 235 (7)
Changes in fair value of equity put rights and similar arrangements(3) (570) (143)
  (1,624) (1,300)


Includes release of a £317 million interest accrual relating to a favourable settlement of long standing tax issues. See taxation below.
Comprises foreign exchange differences reflected in the income statement in relation to certain intercompany balances and the foreign exchange differences on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank in April 2006.
Includes the fair value movement in relation to put rights and similar arrangements held by minority interest holders in certain of the Group’s subsidiaries. The valuation of these financial liabilities is inherently unpredictable and changes in the fair value could have a material impact on the future results and financial position of Vodafone. The amount for the year ended 31 March 2008 also includes a charge of £333 million representing the initial fair value of the put options granted over the Essar Group’s interest in Vodafone Essar, which was recorded as an expense. Further details of these options are provided here.

Net financing costs before dividends from investments increased by 79.8% to £1,480 million, primarily due to mark-to-market losses in the current year compared with gains in the prior year and unfavourable exchange rate movements impacting the translation into sterling. The interest charge resulting from the 28.2% increase in average net debt was minimised due to changes in the currency mix of debt and significantly lower interest rates for US dollar and euro denominated debt. At 31 March 2009, the provision for potential interest charges arising on settlement of outstanding tax issues was £1,635 million (31 March 2008: £1,577 million).


The effective tax rate was 26.5% (2008: 24.9%). This rate was lower than the Group’s weighted average statutory tax rate due to the structural benefit from the ongoing enhancement to the Group’s internal capital structure and a benefit of £767 million following the resolution of long standing tax issues related to the Group’s acquisition and subsequent restructuring of the Mannesmann Group. This was offset by an increase in the rate due to the impact of impairment losses for which no tax benefit is recorded.

Earnings per share

Adjusted earnings per share increased by 37.4% to 17.17 pence for the year ended 31 March 2009, resulting primarily from movements in exchange rates and the benefit from a favourable tax settlement, as discussed under Taxation. Excluding these factors, adjusted earnings per share rose by around 3%. Basic earnings per share decreased by 53.5% to 5.84 pence, including the impairment losses of £5.9 billion.

Profit from continuing operations attributable to equity shareholders 3,078 6,660
Impairment losses 5,900
Other income and expense(1) 28
Non-operating income and expense(2) 44 (254)
Investment income and financing costs(3) 335 150
  6,279 (76)
Foreign exchange on tax balances (155)
Tax on the above items (145) 44
Adjusted profit attributable to equity shareholders 9,057 6,628
Weighted average number of shares outstanding Million Million
Basic 52,737 53,019
Diluted 52,969 53,287


The amount for the 2008 financial year represents a pre-tax charge offsetting the tax benefit arising on recognition of a pre-acquisition deferred tax asset.
The amount for the 2009 financial year includes a £39 million adjustment in relation to the broad based black economic empowerment transaction undertaken by Vodacom. The amount for the 2008 financial year includes £250 million representing the profit on disposal of the Group’s 5.60% direct investment in Bharti Airtel Limited (‘Bharti Airtel’).
See notes 2 and 3 in net financing costs.