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Vodafone ‘s rollercoaster six months
It ‘s been a tough year for Arun Sarin and a nice boring set of results is probably just what he has been praying for.
Last week the embattled Vodafone chief executive revealed half-year earnings that came in at the top end of City analysts ‘ forecasts.
He raised Vodafone ‘s expectations for the full-year  just, while reiterating that Euro mobile markets, like the UK, continue to be a battlefield. Nevertheless, a happier, more relaxed Sarin has not been seen for some time.
Underlying profits for the six months to September 30 rose to £6.24billion, well ahead of forecasts of between £5.98billion and £6.19billion. Sarin also said he expected lower than expected tax charges to generate £4.7billion to £5.2billion of cash this year.
Vodafone shareholders seemed fairly pleased with this. The operating performance looks solid¦& very little to complain about, I would say, Richard Marwood, fund manager at AXA Investments, told Reuters.
With the highly-rated Vittorio Colao now installed as European chief, Sarin may have bought himself some goodwill with shareholders, although some still think he will eventually give way to the Italian.
Sarin is being helped by strong growth of 14 per cent in developing markets such as Eastern Europe, the Middle East, Asia and Africa. In total, Vodafone said it had added 12 million new customers in the half year, taking its total base to 191 million users.
Colao ‘s patch remains mixed, with overall flat growth in Europe and pricing getting worse. Pricing is coming down  I ‘d say 15 per cent in Europe, said Sarin. The fact that we ‘re adding customers helps us maintain our revenue (growth) of about six per cent.
Vodafone hopes fixed broadband will increase its flow of new customers. Last week it announced that its Vodafone at Home service in the UK will be available from January 8, 2007. The new service will enable customers on Vodafone mobile tariffs to add unlimited broadband, a landline and free landline calls, for an additional £25 a month.
Jonathan Coham at industry watchers Ovum said: Vodafone ‘s tariff fares relatively well, especially if customers require broadband without usage limits. Pricing aside, Vodafone has a very strong brand in the UK.
However, Coham warned that Vodafone has no experience in marketing or customer service in broadband: As we have seen from other players, customer service can be a major hurdle and if not dealt with properly can heavily damage an operator ‘s reputation, he said.

Advertising
Another new gambit to squeeze out new growth is in mobile advertising, as announced by the network on the same day as the half-yearly figures came out. Vodafone UK has struck a mobile advertising deal with Yahoo! as part of efforts to boost revenues from advertising on its Vodafone live! platform.
Analysts say the key here will be offering related content that consumers want without the advertising being invasive. City analysts don ‘t seem to be expecting much extra revenue from advertising so Vodafone needs to prove the doubters wrong on this one.
Under Sarin the company has beaten a retreat from Japan and other territories, but the chief executive squashed any hope that it could exit the French or the Swiss markets in a rush. He said he is happy with Vodafone ‘s 44 per cent stake in French mobile operator SFR and the chances of its sale to partner Vivendi were highly unlikely ‘ ‘. If anything, it wants to increase its stake at the right price.
On top of the lack of opportunities to claw back investment in these countries, Vodafone also revealed a surprise £8.1billion reduction in the goodwill value of its German and Italian units. Sarin blamed higher interest rates, along with lowered pricing and continued regulatory pressures in the German market. The fresh impairment charge, significantly boosted by costs from Germany and Italy, dragged it to a loss of £4.55billion. A similar impairment charge led Vodafone to report a £21.8billion loss for the last fiscal year, the biggest in European corporate history.

Share strength
However, shares in the group, already up 26 per cent in the last three months, seemed invulnerable. They shrugged off the headline losses and rose as much as four per cent during the day, taking them to levels last seen just before interim results in November last year.
American investment bank Morgan Stanley raised its price target from £1.45 to £1.55 and pointed to excellent churn figures in Germany and UK in particular.
Sarin has not been alone in feeling the hot breath of shareholders ‘ ire this year.
T-Mobile share stress
Alongside Vodafone, shares in T-Mobile ‘s parent Deutsche Telekom have also bounced a little in recent months, but it was too little too late for investors.
The chief executive Kai-Uwe Ricke has resigned after a serious profits warning earlier this year and a chorus of investor criticism. His replacement is T-Mobile ‘s chief executive René Obermann.
Obermann has gained a lot of respect, within and without the network, for the way he turned T-Mobile ‘s fortunes around. However, as a chief executive he still has a lot to prove and analysts say he will need to win round those investors who might have preferred a higher-profile foreign telecoms executive.
O2 UK ‘s profit dip ܘan investment ‘
Back in the UK, O2 says it is prepared to stomach a cut in profit margins to boost its position as market leader as it prepares for an aggressive Christmas marketing splash.
The company, now controlled by Telefonica, reckons it ‘s ahead of Vodafone with 17.33m British customers, although Vodafone is in the lead on revenue. In the three months to September, another 524,000 joined its network in the UK, where it claims it is getting 40 per cent of all new business.
Finally, it could be a case of ܘI ‘m a Virgin Mobile Employee, Get Me Out of Here ‘ with the company ‘s new owners NTL in talks to buy ITV. A number of Virgin Mobile staff have left after seeing their shares pay out, but those that hold on could be in for a fascinating, if unpredictable ride if NTL manages to bag ITV.

 

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