Vodafone 2002 Annual Report Download - page 40

Vodafone Group Plc Annual Report & Accounts and Form 20-F Operating and Financial Review and Prospects38
Operating and Financial Review and Prospects continued
ended 31 March 2002, and an increase in the charge for exceptional items from
0.30p per share for the year ended 31 March 2001 to 9.10p per share for the
year ended 31 March 2002.
2001 financial year compared to 2000 financial year
Turnover
The Group’s turnover increased from £7,873 million for the year ended
31 March 2000 to £15,004 million for the year ended 31 March 2001.
This reflects strong growth in turnover from continuing operations, which
increased from £5,288 million to £6,637 million, after adjusting for the results of
US operations included in prior year turnover. The remaining increase in turnover
includes £8,367 million in respect of acquired businesses. By type of activity,
turnover for the year ended 31 March 2001 is analysed as £14,051 million for
mobile telecommunications businesses (2000: £7,873 million) and £953 million
for other operations (2000: £Nil), mainly fixed line telecommunications operations
acquired as part of the Mannesmann transaction that were not owned by the
Group in the financial year ended 31 March 2000.
Turnover from mobile telecommunications businesses in Europe, including turnover
from acquisitions of £7,414 million, increased from £4,606 million for the year
31 March 2000, to £13,021 million for the year ended 31 March 2001. Included
within acquisitions is turnover relating to D2 Vodafone (Germany) and Omnitel
Vodafone (Italy), which became subsidiary undertakings following the acquisition of
Mannesmann, and turnover for Airtel, which became a subsidiary on 29 December
2000. These businesses had previously been accounted for as associated
undertakings, reflecting the Group’s ownership interests before their respective
acquisitions. In the United Kingdom, turnover increased 19% to £3,444 million in
2001 from £2,901 million in the prior year, reflecting a 40% growth in the
customer base and increased usage of data services, offset by the tariff reductions.
In total, Europe’s venture customer base in controlled businesses increased from
15,786,000 registered customers at 31 March 2000 to 65,512,000 registered
customers at 31 March 2001. In the United Kingdom, Vodafone maintained its
clear leadership with a registered customer base of 12,279,000 at 31 March
2001, representing a market share of over 28%, 1.1 million customers ahead of
the nearest competitor. Included within the registered customer base were
1,499,000 inactive customers, approximately 12% of the registered base, of
which 1,455,000 were prepaid customers. D2 Vodafone ended the period with
a registered customer base of 20,968,000, consolidating its position as the
number two operator in Germany. Of the total registered customer base, 13%
were inactive. In Italy, at 31 March 2001, Omnitel Vodafone had 15,680,000
registered customers, 7% of which were considered inactive. This increase
includes organic growth of 52% during the year in businesses in which the
Group had a controlling interest at 31 March 2001.
Growth in prepaid services has been an important factor in explaining this result,
with approximately 55.7% of Europe’s proportionate customers being connected
to prepaid products at 31 March 2000 increasing to 63.4% as at 31 March
2001, over a much larger customer base. In particular, Germany saw the prepaid
customer base increase significantly from 32% of the total registered customer
base at 31 March 2000 to 60% as at 31 March 2001. In the United Kingdom,
prepaid customers represented 65% of the total registered customer base as at
31 March 2001.
As a result of this trend towards prepaid services, and the general trend of lower
tariffs across the region, average revenue per customer, or ARPU, decreased in
the region’s main markets, Germany and Italy and the United Kingdom. ARPU is
calculated for the twelve month period to the end of the fiscal year and excludes
handset revenues and connection fees.
In D2 Vodafone in Germany, ARPU decreased from 1559 for the year ended
31 March 2000 to 1378 for the year ended 31 March 2001. The substantial
increase in the prepaid customer base and reductions in incoming national
interconnect revenues, were the principal reasons for this decrease. Excluding
inactive customers, ARPU for the year amounted to 1430, split between an
active contract ARPU of 1683 and an active prepaid ARPU of 1178. Active ARPU
has been calculated by adjusting registered ARPU for the proportion of active
customers at 31 March 2001. In Omnitel Vodafone in Italy, an 11% decrease in
ARPU to 1338 was reported for the year to 31 March 2001. A reduction in fixed-
to-mobile rates in February 2000 contributed significantly to this decrease.
Excluding inactive customers, ARPU for the year was 1364.
In the United Kingdom, ARPU for the year ended 31 March 2001 has been
calculated based on total United Kingdom service revenue, consistent with other
territories, whereas the calculation was formerly based on United Kingdom
network service revenue only. ARPU for the contract customer base decreased
from £562 for the year to 31 March 2000 to £550 for the year to 31 March
2001. Prepaid ARPU declined from £178 for the year to 31 March 2000 to
£156 for the year to 31 March 2001, due primarily to the impact of lower usage
customers being added to the base and the increasing numbers of inactive
customers. Excluding inactive customers, contract ARPU was £556 and prepaid
ARPU was £191.
Following the formation of Verizon Wireless, the Group’s US businesses have
been consolidated using equity accounting and their turnover is not included in
the profit and loss account. The Group’s share of the turnover of its joint ventures
and associated undertakings in the United States amounted to £5,098 million in
the year ended 31 March 2001. This compares with consolidated turnover of
£2,585 million, and share of turnover from joint ventures totalling £362 million,
in the nine months to 31 March 2000, following completion of the merger with
AirTouch. The Group’s proportionate share of the customer base of US cellular
operations increased from 10,553,000 as at 31 March 2000 to 11,570,000 at
31 March 2001. Verizon Wireless has focused on increasing the number of high
value customers through new customer additions and migration of existing
analogue customers to digital price plans and, at 31 March 2001, digital
customers totalled over 60% of the customer base and generated 85% of peak-
hour usage. The increase in ARPU in the Group’s US operations from $472 as at
31 March 2000 to $551 as at 31 March 2001 is due to the growth of the digital
customer base and the impact of bundled minute plans. In addition, at 31 March
2001, Verizon Wireless had almost one million data customers, with the number
of data customers having doubled in the second half of the year.
Turnover for the Asia Pacific region, which comprises the turnover of the Group’s
subsidiary operations in Australia and New Zealand, increased by 26% from
£566 million for the year ended 31 March 2000 to £713 million for the year
ended 31 March 2001. The number of venture customers in these operations
increased by 57% from 1,913,000 venture customers at 31 March 2000 to
3,000,000 at 31 March 2001.