Vodafone 2002 Annual Report Download - page 36

Vodafone Group Plc Annual Report & Accounts and Form 20-F Operating and Financial Review and Prospects34
Operating and Financial Review and Prospects continued
grew by 18%. However, the effect of this was largely offset by reduced levels of
equipment and connection revenues as a result of lower customer growth,
particularly in the prepaid customer segment. In Southern Europe, turnover
increased by over 50% from £4,479 million in the year ended 31 March 2001 to
£6,743 million in the year ended 31 March 2002, including increases in respect
of the inclusion of Vodafone Spain as referred to above. In Italy, turnover from
Omnitel Vodafone increased 25% from £2,967 million to £3,711 million,
principally as a result of the enlarged customer base.
Much of the growth in turnover can be attributed to the continued growth in
Europe’s venture customer base in controlled businesses from 65,512,000
customers at 31 March 2001 to 98,875,000 customers at 31 March 2002.
In the United Kingdom, the customer base grew 7% to stand at 13,186,000
customers and includes the effect of the action taken during the period to
disconnect inactive customers, which now represent 11% of the total registered
customer base compared to 12% in the previous period. Active customers are
defined as customers who have made or received a chargeable event in the last
three months or, where information is not available, defined as customers who
have made a chargeable event in the last three months.
In Germany, Vodafone ended the period with a registered customer base of
21,489,000, representing an increase of over 2%, compared to the previous
period. Growth in the customer base was restricted as, similar to the United
Kingdom, steps were taken to disconnect inactive customers. As a result, inactive
customers now represent 9% of the total customer base. In Italy, Omnitel
Vodafone increased its registered customer base by 13% to 17,711,000, 7% of
which were considered inactive at 31 March 2002. A further analysis of
customer numbers can be found on page 12.
Of the total growth in the Group’s European registered customer base in
controlled businesses, the contract customer base increased 14% and now
represents 33% of the total, compared to 31% at 31 March 2001. In particular,
in the United Kingdom, 79% of customer growth was in respect of contract
customer connections. In Germany, contract customers increased 9% and now
represent 43% of total customers.
The growth in the number of customers connected to prepaid tariffs experienced
over the last few years has contributed to overall declines in ARPU for the year
ended 31 March 2002, compared with the year ended 31 March 2001, as
prepaid customers typically spend less than contract customers. However, as a
result of the Group’s strategic realignment, announced in early 2001, through
which the Group increased its focus on gaining and retaining higher-value
customers, ARPU has begun to stabilise in the Group’s major European markets.
In the United Kingdom, both contract and prepaid ARPU stabilised during the
course of the year. ARPU for the contract customer base for the twelve months to
31 March 2002 increased marginally to £555 compared to £550 for the year to
31 March 2001. This movement was in part favourably affected by Vodafone
UK developing the ability to accurately allocate inbound calls to contract or
prepaid customer segments during the year. ARPU for the prepaid customer base
for the twelve months to 31 March 2002 declined from £156 to £118, due, in
part, to the allocation of incoming revenues explained above. Both contract and
prepaid ARPU also suffered dilution as a result of the migration of higher-value
prepaid customers to contract tariffs. Compared to 31 March 2001, blended
ARPU decreased from £306 to £276.
In Germany, both contract and prepaid ARPU declined compared to the previous
year, falling from 1611 to 1559 and from 1151 to 1110, respectively. Blended
ARPU decreased from 1378 to 1298.
In Italy, blended ARPU decreased from 1378 to 1345. Contract ARPU increased
from 1756 to 1769 due to the policy of targeting high value customers, while
prepaid ARPU has remained relatively stable during the year as the effect of the
increased customer base was in part offset by the effect of lower revenues per
minute, influenced by the voluntary reduction in fixed-to-mobile rates.
In the Americas Region, Verizon Wireless is accounted for using equity
accounting and its turnover is not included in the Group’s statutory profit and
loss account. In the year ended 31 March 2002, the Group’s proportionate share
of Verizon Wireless’s turnover amounted to £5,602 million, compared with
£5,098 million in the year ended 31 March 2001, which also included turnover
from two other associated undertakings. The increase in turnover primarily
reflects the increase in the customer base and average use, coupled with the
effects of continued analogue to digital base migrations. Service revenue
increased 19% for the year to 31 March 2002. Due to the economic slowdown
in the US, net customer growth has slowed considerably from prior years.
However, Verizon Wireless increased its customer base by 9% over the period,
and ended the year with a registered customer base of 29,585,000, of whom
94% were on contract plans. At 31 March 2002, the Group’s proportionate share
of the customer base stood at 13,081,000 customers, compared with
11,570,000 at 31 March 2001. ARPU increased from $551 to $576 for the
twelve months ended 31 March 2002 as the migration to digital price plans
helped to reduce the effect of competitive pressures. Roaming revenues declined
in the second half of the year, principally due to the reduction of travel within and
to the United States in the wake of September 11. Successful intercarrier
roaming rate renegotiations have reduced both roaming revenues and roaming
cost of service year on year, also contributing to the decline.
In Asia Pacific, turnover from mobile telecommunications businesses increased
from £713 million for the year ended 31 March 2001 to £4,072 million for the
year ended 31 March 2002. Of the total increase, £3,323 million arises from the
inclusion of turnover from J-Phone Vodafone from 12 October 2001 when it
became a subsidiary undertaking. Previously, J-Phone Vodafone was accounted
for as an associated undertaking. During the 2002 financial year, J-Phone
Vodafone continued to capture additional market share, with 2,219,000 net
customer additions in the period. One of the key drivers of the recent growth,
and the levels of turnover experienced, has been the success of “sha-mail”,
J-Phone Vodafone’s photo-messaging service which has contributed to increases
in data and SMS revenues. As a result, data and SMS revenues increased from
11% of service revenues in April 2001 to 20% for March 2002. Overall, blended
ARPU declined in the period as the increased revenues that resulted from the
enlarged customer base and new products and services such as sha-mail were
offset by reductions in mobile to mobile connection fees.
The remaining increase of £36 million for Asia Pacific arose in the Group’s
businesses in Australia and New Zealand, representing growth of 5%. During the
period, the number of venture customers increased 8% to 3,241,000 as at
31 March 2002. However, blended ARPU declined compared to the previous
period. Recent monthly trends indicate that ARPU is stabilising, as SMS and data
revenues increase.