Vodafone doubles profit, but problems remain

Vodafone increased its pre-tax profits to £8.7 billion in its last quarter, more than double for the same period last year. The news surprised the market but failed to hide a decline in U.K. revenues and a costly write-down of £2.3 billion--a quarter of its value--of Vodafone's Indian subsidiary due to intense competition. This embarrassment was reduced slightly with the news that the company had increased the valuation of its Turkish subsidiary--a long-term problem child--by £200 million.

Key to the overall increase in profits was a 9.8 per cent year-on-year jump to £6.1 billion of service revenues from Vodafone's Asia-Pacific and Middle East units. However, European service revenues were down 3.5 per cent to £28.3 billion, and in Africa and central Europe service revenue fell 1.2 per cent to £7.4 billion.

Revenues in the U.K. notably slipped by 4.7 per cent and earnings by 16.6 per cent to £1.14 billion.

The company, with some justification, blamed the Indian authorities for making the country a less attractive and more expensive market to do business. Vodafone CEO Vittorio Colao said that the Indian government was attempting to squeeze operators for cash rather than encourage investment to improve the country's economic prosperity.

Analysts reviewed these results and the performance of Colao during his two-year period as CEO as positive. He has made the idea of 'One Vodafone' work, and rather than running a disparate collection of unconnected country assets, the company's scale is paying off. It pays 4 per cent to 5 per cent less for equipment than its rivals and operates some of the industry's most efficient networks as a result.

For more on this story:
- read The FT & Rethink Wireless

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