Vodafone 2007 Annual Report Download - page 6

It was an honour to become your Chairman at the AGM in July 2006. I joined
Vodafone from the world of banking, whose history and institutions run back over
many centuries. The mobile telephone industry is very much younger and even in
the last twenty years has seen dramatic changes which have transformed the face
of telecommunications and society. When Vodafone first started to operate more
than 20 years ago, the telecommunications industry was dominated by fixed line
companies. A one hour local phone call within the UK cost £4.56; today, the same
call on the Vodafone network could cost as little as 21 pence.
With the unprecedented growth of mobile
communications since the mid 1980s, the effects on
other sectors, the wider economy and society as a
whole have been far reaching. Changes in
communications have underpinned the development
of the whole IT industry, helped economic growth,
particularly in developing markets, and enabled
families, friends and communities to communicate across countries and
time zones.
Mobile telephones have been of enormous benefit to society and, as a market
leader, Vodafone has played a major role. Reaching the 200 million proportionate
customer milestone in this financial year has been a tremendous achievement for
your Company and now we are on the edge of a further revolution as we enter the
era of wireless broadband and internet communications.
There are currently around three billion mobile customers globally. At the moment,
the majority are in the western world. We believe we will see 70% of the growth in
customers in the next five years coming from emerging markets. The challenges we
face in these markets are very different from the challenges we face in our European
and mature markets. We will continue to expand in markets where mobile handsets
are not widely dispersed and where there is rising GNP per capita. This is why we
have acquired the business of Hutchison Essar in India, to deliver a major presence
in a market with penetration of around 14%, which we believe will become larger
than the European Union within a reasonable time frame.
The challenge in Europe, where the markets are mature and penetration is, in many
cases, over 100%, is quite different and we need to find more efficiencies through
initiatives such as network sharing to improve our productivity and developing other
services beyond voice to help us grow new revenue.
Across the world, governments and regulators see our industry in very different
ways, from being a source of tax revenue through to being an important part of
the social and economic infrastructure of the country. The impact of regulation
on our business can be significant, as we have seen during the year with the
government intervention on our tariffs in Italy and at a European level on roaming.
Chairman’s Statement
Reaching the 200 million proportionate customer
milestone has been a tremendous achievement for
your Company and now we are on the edge of a
further revolution as we enter the era of broadband
and internet communications.
The Vodafone brand is enormously well known and highly regarded across the
globe. It was recently rated the most powerful UK brand by the leading research
company Millward Brown, and number 22 in the world.
Your Board takes the management of Vodafone’s reputation very seriously,
together with our commitments in corporate responsibility. We have set out
clearly in a separate report what we have achieved in this area. We are particularly
proud of our global handset recycling initiative and our ongoing programme on
energy efficiency in our networks.
The Board is very conscious of the concerns which are
expressed about possible health issues in relation to mobile
phones. As a responsible company, we fund and support
independent research into this important area and our
policy is to be completely transparent in relation to this
issue, which your Board reviews on a regular basis.
On the Board, there have been a number of changes since the AGM in 2006. We
said farewell to Thomas Geitner as an executive director and we thank him for all
he has done for the business and wish him well in the future. Alec Broers retires
from the Board at this year’s AGM and we are grateful for his significant
contribution, including his chairmanship of the Vodafone Group Foundation, over
his nine years as a non-executive director. We welcomed back Vittorio Colao as
Deputy Chief Executive and Chief Executive of our European region. We have
appointed three new non-executive directors, Alan Jebson, Nick Land and Simon
Murray. We need non-executive directors who are equipped with the skill set to
understand the rapidly changing markets in terms of consumer taste, technology
and the emerging markets in which we operate. Future appointments will ensure
that we have the right balance of skills and experience. During the year we also
completed an independent Board evaluation by MWM Consulting to ensure the
highest standards of corporate governance.
Your Board looks at any acquisition in a disciplined way and our decision to acquire
Hutchison Essar was completed within the financial criteria we have set ourselves.
We also take decisions to sell businesses or minority shareholdings where better
value for shareholders is more likely to arise from reinvestment elsewhere or by
returning the funds through dividends or buybacks. During the year, we sold our
interests in Belgium and Switzerland for this reason.
We are confident about Vodafone’s future and your Board has proposed a final
dividend of 4.41 pence per share, bringing total dividends for the year to 6.76 pence
per share, up 11.4% on last year, and representing a payout ratio of 60% of adjusted
earnings per share. We continue to look for sources of profitable growth within
highly penetrated markets. We have a particularly strong position in the business
sector which we intend to develop further. We also plan to grow services beyond
core voice and messaging and continue to search for new sources of revenue which
are closely related to our customer’s needs.
The mobile phone is an enormously versatile device and one of the features of the
last 20 years has been the new uses to which the phone can be adapted, including
data services, entertainment, advertising, internet portals and, most recently,
financial payments.
In my first months as Chairman, I have spent time in and around the Group
meeting customers, suppliers, business partners, other stakeholders and my new
colleagues in our offices, retail stores, call centres and canteens. I have also visited
seven of our international operations. I have been enormously impressed by the
talented people at all levels within Vodafone and I am fortunate to be involved
with such a young and dynamic business.
Your Board wants to pay tribute to all our 66,000 people and to thank them on
your behalf for all they do to help Vodafone progress in a rapidly changing
business environment. We, as a Board, look forward to your continuing support
as we address the challenges ahead.
April 2006
Key: — Vodafone
+15% vs. FTSE 100
May 2007
Share price vs FTSE 100
pence
160
140
120
100
Sir John Bond
Chairman
Dividend per share
2006 2007
6.07p 6.76p 11.4%