Vodafone 2007 Annual Report Download - page 46

44 Vodafone Group Plc Annual Report 2007
Operating Results
continued
Revenue
Total revenue increased by 10.0%, or 7.5% on an organic basis, for the year
to 31 March 2006 due to a 7.9% increase in service revenue on an organic
basis offset by lower growth in other revenue. Service revenue growth
reflected a 15.2% organic increase in the average customer base of the
controlled mobile networks and the Group’s share of jointly controlled
mobile networks, offset by the impact of lower ARPU in a number of the
Group’s markets. Competitive pressures have intensified following a
significant number of new market entrants and greater competition from
incumbents, specifically in the mature markets of the Europe Region. Many
of these markets have penetration rates over 100% which, together with
termination rate cuts and a higher proportion of lower spending prepaid
customers across the Group, have led to the decline in ARPU.
Voice revenue increased by 8.2%, or by 5.4% on an organic basis, due to the
growth in average customers and a successful usage stimulation programme
leading to a 24.6% growth in total minutes, offset by tariff declines from
competition and termination rate cuts. Revenue from outgoing calls was the
primary driver of voice revenue growth, whilst incoming voice revenue
increased marginally as a significant increase in the proportion of incoming
calls from other mobile networks was offset by the impact of termination
rate cuts, particularly in the second half of the 2006 financial year.
Messaging revenue rose by 12.4%, or 9.8% on an organic basis, as an
increase in the average customer base and the number of messages sent
per customer was offset by tariff declines.
The success of 3G, Vodafone live! and offerings in the business segment,
including Vodafone Mobile Connect data cards and BlackBerry from
Vodafone, were the main contributors to a 51.0% increase, or 51.8% on an
organic basis, in data revenue. An additional 6,321,000 3G devices were
registered on the Group’s networks in the 2006 financial year, bringing the
total to 7,721,000 at 31 March 2006, including 660,000 business devices
such as Vodafone Mobile Connect 3G/GPRS data cards. Prior to the
announcement of the disposal of Vodafone Japan in March 2006, the Group
registered its ten millionth consumer 3G device, when including 100% of
the devices in Italy.
Fixed line operators and DSL revenue rose by 23.6%, primarily a result of
Arcor, driven by customer and usage growth, partly offset by tariff decreases
in the competitive market.
Acquisition, retention and other revenue increased to £2,268 million,
principally due to growth in revenue related to acquisition and retention
activities in Spain, partially offset by a reduction in other revenue, resulting
principally from a fall in the number of customers connected to non-
Vodafone networks in the UK. A 32.5% rise in the number of gross mobile
customer additions, partially offset by a fall in the average revenue for
handset sales to new prepaid customers and a 24.3% increase in the
number of upgrades, led to a 5.3% growth in revenue related to acquisition
and retention activities to £1,743 million.
2006 Financial Year Compared to 2005 Financial Year
Group
Common 2006 2005
Europe EMAPA Functions Eliminations Group Group % change
£m £m £m £m £m £m £ Organic
Voice revenue 17,827 3,636 – (58) 21,405 19,782 8.2 5.4
Messaging revenue(1) 2,836 454 – (1) 3,289 2,925 12.4 9.8
Data revenue(1) 1,023 86 – (11) 1,098 727 51.0 51.8
Fixed line operators and DSL revenue 1,271 19 – – 1,290 1,044 23.6 20.5
Total service revenue 22,957 4,195 – (70) 27,082 24,478 10.6 7.9
Acquisition revenue 1,018 277 – – 1,295 1,263
Retention revenue 434 14 – – 448 393
Other revenue 324 68 145 (12) 525 544
Total revenue 24,733 4,554 145 (82) 29,350 26,678 10.0 7.5
Interconnect costs (3,739) (794) – 70 (4,463) (3,991) 11.8 8.3
Other direct costs (1,666) (442) – 12 (2,096) (1,859) 12.7 10.2
Acquisition costs (2,501) (467) – – (2,968) (2,819) 5.3 3.4
Retention costs (1,752) (139) – – (1,891) (1,627) 16.2 15.5
Operating expenses (5,243) (1,053) 130 – (6,166) (5,649) 9.2 6.3
Acquired intangibles amortisation (2) (155) – – (157) –
Purchased licence amortisation (884) (63) – – (947) (918)
Depreciation and other amortisation (3,000) (602) (72) – (3,674) (3,446)
Share of result in associates 5 2,398 8 – 2,411 1,984
Adjusted operating profit 5,951 3,237 211 – 9,399 8,353 12.5 11.8
Adjustments for:
– Impairment losses (23,515) – – – (23,515) (475)
– Other income and expense 3 – 12 – 15 –
– Non-operating income of associates – 17 – – 17 –
Operating loss (17,561) 3,254 223 – (14,084) 7,878
Non-operating income and expense (2) (7)
Investment income 353 294
Financing costs (1,120) (880)
Profit/(loss) before taxation (14,853) 7,285
Income tax expense (2,380) (1,869)
(Loss)/profit for the financial year from
continuing operations (17,233) 5,416
(Loss)/profit for the financial year from
discontinued operations (4,588) 1,102
(Loss)/profit for the financial year (21,821) 6,518
Note:
(1) Certain revenue relating to content delivered by SMS and MMS has been reclassified from messaging revenue to data revenue to provide a fairer presentation of messaging and data revenue.