Vodafone turns to cost-cutting

With developed markets gripped by recession, and price-cutting driving down margins in India, Vodafone has turned once more to cost-cutting.

Announcing the company’s half-year result yesterday, CEO Vittorio Colao unveiled a plan to slash another £1 billion in expenses by 2012. He said the current plan, announced last year, would be completed this financial year, a year ahead of schedule.
 
Despite the widely-foreshadowed cost reductions, Vodafone’s stock price fell 1.78% to 135.50p on the London Stock Exchange yesterday.
 
The company, the world’s largest operator by revenue, increased operating profit by 2.4% to £5.9 billion on 9.3% higher sales of £21.8 billion.
 
The Asia-Pac division grew strongly in customer numbers and increased revenue by 12.3%, thanks almost entirely to its Indian operation, where it clocked up another 14.1 million subs and increased sales by 20.5%. Yet because of the low prices in the Indian market, ebitda across the region rose just 3.1 percentage points.
 
Service revenue fell 4.5% in Europe, although mobile data grew 17.8%, while Verizon Wireless, Vodafone’s North American JV, boosted sales by 7.5% and contributed 34% of adjusted operating profit.
 
Colao said the company was targeting operating costs savings by leveraging its “network, sourcing and infrastructure scale across a wider geographic area, and through further overhead reduction.”
 
He said the group performed in line with expectations, “and we have made strong progress with our strategic priorities, in particular in mobile data and cash generation.”
 
Vodafone confirmed its full-year guidance of adjusted operating profit in the range of between £11 billion to £11.8 billion.

 

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