Vodafone 2009 Annual Report Download - page 30

28 Vodafone Group Plc Annual Report 2009
Operating results continued
EBITDA declined by 6.4% on an organic basis and EBITDA margin declined
5.1 percentage points at constant exchange rates, mainly due to a brand royalty
provision release in the prior year. Excluding the impact of the brand royalty provision
release and the impact of the acquisition of Tele2, the EBITDA margin was broadly
stable, with an improvement in the mobile margin offsetting the increased
contribution of lower margin fixed line services.
Spain
Service revenue declined by 4.9% on an organic basis, with an 8.6% decline in the
fourth quarter. Negative trends in the economic environment put strong pressure on
usage in some customer segments and led to increased involuntary churn. Data
revenue growth accelerated during the year, driven primarily by PC connectivity
services and an improvement in media content revenue growth following a
successful campaign in the fourth quarter. Fixed line revenue continued to grow,
supported by the launch of Vodafone Station.
EBITDA decreased by 10.5% on an organic basis, as the decline in service revenue and
the dilutive effect of the increased contribution of lower margin fixed line services
outweighed benefits from cost cutting initiatives in customer and operating costs.
UK
Service revenue declined by 1.1% on an organic basis, primarily due to a decrease in
voice revenue resulting from increased competition in a challenging economic
environment, customer optimisation of out of bundle offers and lower roaming
revenue. Wholesale revenue increased due to the success of the MVNO business,
principally ASDA and Lebara. Data revenue growth was maintained, driven primarily
by increased penetration of mobile PC connectivity and mobile internet services. The
acquisition of Central Telecom, which provides converged enterprise services, was
completed in December 2008.
The 15.3% organic decline in EBITDA, which included the impact of a £30 million VAT
refund in the prior year, was primarily due to higher off network usage in messaging
services and higher retention costs. The cost of retaining customers increased as a
higher proportion of the contract base received upgrades in the current year
following the expiration of 18 month contracts, which were introduced in 2006.
Operating expenses grew, primarily due to the impact of the sterling/euro exchange
rate on euro denominated intercompany charges; otherwise operating expenses
were broadly stable year on year.
Other Europe
On an organic basis, service revenue decreased by 1.2% during the year and 5.0% in
the fourth quarter, as growth in the Netherlands was more than offset by declines in
Greece and Ireland, where the trends have deteriorated throughout the year. The
Netherlands benefited from a rise in the customer base and strong growth in visitor
revenue. Both Greece and Ireland were impacted by deteriorating market
environments, which worsened in the four th quarter, and substantial price reductions
in prepaid tariffs, whilst Greece was also affected by termination rate cuts.
The fall in EBITDA margin of 1.3 percentage points at constant exchange rates was
primarily driven by the service revenue decline and restructuring charges recorded
in the fourth quarter in most countries.
The share of profit in SFR increased, reflecting the acquisition of Neuf Cegetel and
foreign exchange benefits on translation of the results into sterling.
Africa and Central Europe(1)
Africa and
Central
Vodacom Other(2) Europe % change
£m £m £m £ Organic(3)
Year ended 31 March 2009
Revenue 1,778 3,723 5,501 11. 2 3.9
Service revenue 1,548 3,565 5,113 10.7 3.1
EBITDA 606 1,084 1,690 1.3 (2.4)
Adjusted operating profit 373 279 652 (13.3) (12.9)
EBITDA margin 34.1% 29.1% 30 .7 %
Year ended 31 March 2008
Revenue 1,609 3,337 4,946
Service revenue 1,398 3,219 4,617
EBITDA 586 1,083 1,669
Adjusted operating profit 365 387 752
EBITDA margin 36.4% 32.5% 33.7%
Notes:
(1) The Group revised its segment structure during the year. See note 3 to the consolidated
financial statements.
(2) On 1 October 2007, Romania rebased all of its tariffs and changed its functional currency from
US dollars to euros. In calculating all constant exchange r ate and organic metrics w hich include
Romania, previous US dollar amounts have been translated into euros at the 1 October 2007
US$/euro exchange rate.
Revenue increased by 11.2%, including the contribution of favourable exchange rate
movements and the impact of merger and acquisition activity. Organic revenue
growth was 3.9%, as sustained growth in Vodacom was offset by weakening trends
in Turkey and Romania. Service revenue growth was 3.1% on an organic basis,
reflecting the 9.9% increase in the average customer base, partially offset by an
impact from termination rate cuts of around three percentage points.
EBITDA increased by 1.3%, with the contribution of favourable exchange rate
movements partially offset by merger and acquisition activity. EBITDA decreased by
2.4% on an organic basis, with the EBITDA margin decreasing in the majority of
markets, reflecting the continued network expansion, investment in the turnaround
plan in Turkey and increased competition in Romania.
The impact of merger and acquisition activity and foreign exchange movements on
revenue, service revenue, EBITDA and adjusted operating profit are shown below:
Organic M&A Foreign Reported
growth activity exchange growth
% pps pps %
Revenue
Africa and Central Europe 3.9 (0.7) 8.0 11. 2
Service revenue
Vodacom 13.8 2.1 (5.2) 10.7
Other (0.9) (1.5) 13.1 10.7
Africa and Central Europe 3.1 (0.6) 8.2 10.7
EBITDA
Vodacom 7.3 0.5 (4.4) 3.4
Other (7.0) (5.9) 13.0 0.1
Africa and Central Europe (2.4) (4.0) 7.7 1.3
Adjusted operating profit
Vodacom 6.3 0.3 (4.4) 2.2
Other (27.5) (10.5) 10.1 (27.9)
Africa and Central Europe (12.9) (5.6) 5.2 (13.3)
Vodacom
Service revenue grew by 13.8% on an organic basis, as strong growth in Vodacom’s
average customer base continued, increasing by 11.2%, which took the closing
customer base to 39.6 million on a 100% basis. Revenue growth was driven by the
prepaid voice market and data services. Voice usage per customer in the prepaid
market, which represents the majority of the customer base, grew as the higher
usage driven by revised tariffs in South Africa was offset by the dilutive effect of the
increased customer base in both Tanzania and Mozambique, which both have lower