Verizon Wireless sale hits Vodafone’s full year profits

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Profits fall 9.4 per cent to £7.9bn in the most recent financial year, with Verizon contributing £3.2bn until its sale in September 

Vodafone saw its profits decline 9.4 per cent to £7.9 billion in its most recent financial year, thanks largely to the sale of its 45 per cent stake in Verizon Wireless.

Reporting its full year results for the 12 months to March 31, 2014, the operator said the year-on-year fall largely reflected the decline in EBITDA and included a £3.2 billion profit contribution from Verizon Wireless to September 2, 2013.

That is the date Vodafone sold its 45 per cent stake in the company to US telecoms group Verizon Communications, meaning it only reflects five months contribution, as opposed to 12 month from the previous financial year.

Group revenue was down 3.5 per cent year-on-year to £43.616 billion, with group service revenue also falling 4.3 per cent to £39.53 billion. EBITDA was £12.83 billion, down yearly by 7.4 per cent.

Vodafone said it now has 4.7 million customers in 14 markets, with 4G data usage more than double that experienced on 3G. It’s unlimited RED tariffs are now available in 20 markets, with 12 million customers signed up, with European smartphone penetration up seven per cent yearly to 45 per cent.

It also said it was making “significant progress’ with its unified communications strategy, with the acquisition of Kabel Deutschkand for £6.6 billion in October, announced acquisition of Ono for £6 billion in March and ongoing fibre broadband rollout in Spain and Portugal, with Italy to commence this year.

In the UK, revenue increased by almost £1.3 billion from the previous year to £6.43 billion, but operating profit fell from £303 million to £187 million. EBITDA was up from £1.21 billion to £1.42 billion.

Vodafone added 124,000 customers in the quarter to take its overall base to 19.492 million subscribers, with 40.1 per cent of these prepay customers.

The operator said that since launch in August 2013, there are now 637,000 4G enabled plans, with the service available in 14 cities and over 200 towns. It added it is making “significant progress in network performance, particularly in the London area”.

Vodafone Group CEO Vittorio Colao said: “It has been a year of substantial strategic progress. The sale of our Verizon Wireless stake has rewarded shareholders for their support, and enabled the acceleration of our strategy through the acquisition of KDG, the pending acquisition of Ono and our Project Spring investment programme.

“Our operational performance has been mixed. The Group’s emerging markets businesses have performed strongly throughout the year: we have executed our strategy well and have successfully positioned ourselves for the rapid growth in data we are now witnessing. In Europe, where we continue to face competitive, regulatory and macroeconomic pressures, we have taken steps to improve our commercial performance, particularly in Germany and Italy, and are beginning to see encouraging early signs.

“I am confident about the future of the business given the growth prospects in data, emerging markets, enterprise and unified communications. We have commenced our Project Spring two-year investment programme which will accelerate our plans to establish stronger network and service differentiation for our customers.

“I expect the first signs of this to become evident later this year, with wider 4G coverage in Europe and 3G coverage in emerging markets, improved network performance and increased customer advocacy. While cash flow will be depressed during this investment phase, our intention to continue to grow dividends per share annually demonstrates our confidence in strong future cash flow generation.”

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