Vodafone exits Japan and raises profit forecast

Vodafone said it would focus on markets in India, Europe and Africa.The company also upped its full-year operating profit forecast to £11.8-12.2bn ($19-19.7bn), from £11.2-12bn.Both news items came as the company said profits for the six months to September had risen 43% to £8.2bn.The big jump in profits in its latest financial results was largely down to two exceptional items: a £2.4bn gain on the sale of its stake in China Mobile in September, and a decision not to provision for a disputed £1.6bn tax bill in India.The Indian tax authorities claim that Vodafone owes VAT on the purchase in 2007 of the Indian telephone assets of Hong Kong’s Hutchison Whampoa.The company said that it “continues to take actions to defend itself vigorously” against the claim. A hearing before the Indian supreme court is scheduled for 15 November.
The company also reported stronger-than-expected growth in operating profits, giving it the confidence to raise the lower end of its full-year forecast 5% to £11.8bn from £11.2bn previously.The results were reasonably well received by the stock market, with Vodafone’s share price rising 1.3%, slightly ahead of the 0.7% rise in the FTSE 100 index.Regional focus.The sale of its Japanese business follows the mobile operator’s withdrawal earlier this year from China, with the sale of China Mobile.It will sell its remaining minority interests in its Japanese operations to current owner Softbank, with the first £1.6bn payment scheduled for this December.”Growth will need to come from a leaner, more efficient organisation,” said Emeka Obiodu of telecoms analysts Ovum.

“The new strategic agenda is designed to squeeze out more value from Vodafone’s existing assets.”The company did not include the US in its list of target markets, even though Vodafone reported stronger-than-expected earnings growth at Verizon Wireless, its key US business interest.There was a 4.7% increase in customers at Verizon Wireless, according to the UK mobile operator, but Mr Obiodu thinks Vodafone may be planning to sell its 45% minority stake.Vodafone said revenues in western Europe had fallen in the past six months, down 4.3% from a year earlier, dragged down by Spain in particular. The company also had to write-down assets in recession-struck Greece.

However, revenues in the UK were up 5.2%, as were those in Germany and the Netherlands, and, across Europe as a whole, the company managed to return to growth in the latter half of the six month period.”Vodafone can take credit for getting its European base back to growth,” said Mr Obiodu.”But Europe still remains a challenge for Vodafone. The region accounts for 63% of revenues, making it critical to Vodafone’s overall success.”He says that a £2bn cost reduction plan, heavily tilted to Europe, is of paramount importance to the group.The relatively weak performance in Europe was offset by strong revenue growth in developing markets, which was particularly marked in India and Turkey – Bbc