Vodafone eyes acquisitions, payout hike

Vodafone said on Monday it remained interested in acquisitions in France, eastern Europe, Asia and Africa as the cell phone titan detailed cost cuts expected to reach an annual 2.5 billion pounds ($4.5 billion) by March 2008.

Vodafone Group Plc, the world’s largest mobile phone company by revenue, also reiterated that it would unveil plans to raise shareholder returns when it announced half-year results on Nov. 16, as it reiterated financial guidance for this year.

“It is reasonable to think that we will be paying out more and more of our cashflow in the coming years,” Chief Executive Arun Sarin told an analyst and investor day at the company’s headquarters in Newbury, west of London, aimed in part at silencing critics who accuse the group of a lack of visibility.

He did not comment further.

Vodafone, which expects to generate 7 billion pounds ($12.64 billion) this financial year to March 2005, has been under market pressure to return more cash to shareholders, who are concerned it might otherwise keep its powder dry for large acquisitions.

Sarin said Vodafone had an “excellent” geographic footprint. But he said the company continued to be interested in eastern Europe and in SFR, the French mobile phone group controlled by Paris-based Vivendi Universal, in which Vodafone has a 44 percent stake.
He also noted there were many other areas around the world -- such as Asia and Africa -- where there was high growth and low mobile phone penetration where Vodafone could create value for shareholders.

“If these opportunities present themselves, we intend to look at these opportunities,” he said. “But what I want to give you comfort on is that we have strict hurdle rates. The risk in one country is not the same as the risk in another country.”

Vodafone’s shares slipped 0.38 percent to 130.5p by 1040 GMT, broadly in line with other top London shares. The stock has risen about 16 percent since Vodafone’s board, blamed for the falling share price, faced calls for mass resignations during a tumultuous annual meeting in July.

Cost Savings
Vodafone, which has staged a summer of one-to-one meetings with analysts and investors to restore faith in the company, said its seven-year “One Vodafone” savings plan would generate 1.4 billion pounds from cost savings and another 1.1 billion from revenue initiatives in annual pretax operating free cashflow by Mar. 31, 2008.

The group also reiterated its financial guidance for the current year and said it expected to reduce mobile capital expenditure to less than 10 percent of mobile revenue in the year to Mar. 31, 2008.

Some traders said Vodafone’s equipment makers such as Nokia , the Finnish handset giant, might see a fallout from the slightly lower-than-expected capital expenditure forecasts, which some market experts had expected to be above 10 percent.

Vodafone has said it expects to generate 7 billion pounds in free cashflow this fiscal year, has forecast “broadly stable” margins and wants to secure high, single-digit subscriber growth, leading to similar growth in mobile revenue.

Sarin and Vodafone executives from businesses in Britain, Germany, Italy, the United States and Japan -- which account for about 70 percent of group revenues -- are making presentations and fielding questions. Sarin said more details about the group’s Spanish operation would also be available in November.

Subscribe to read this story ad-free

Get unlimited access to ad-free articles and exclusive content.