May 30, 2006

Vodafone Group PLC posted a disastrous $41.1 billion loss for 2005, mainly from impairment charges over assets it acquired during the telecom boom days.

However, Vodafone promised its investors an even larger than expected payout, which sent its stock up slightly in early trading in London and New York.

Excluding the asset impairment charge, the European-based operator’s revenues witnessed 7.5-percent organic growth and Vodafone added 21.5 million proportional customers during the past year.

The company promised to return $17 billion to its shareholders, one-third more than had already been promised.

Still, the operator outlined a strategy to cut its costs including outsourcing its information technology application development and maintenance activities, regional consolidation of its data centers and cutting more than 400 jobs.

In outlining its strategy, Vodafone indicated that it expected to increasingly rely on emerging markets for its growth, since wireless penetration is lower in developing countries than in much of Europe.

The company also said that it will “[dispose] of assets where it believes it cannot earn a superior return” and that it anticipates a “lower level of merger and acquisition activity in the future.”

New acquisitions won’t be considered unless they can provide a return within three to five years and must help Vodafone consolidate its presence in a local or regional market, the operator said.

Vodafone chief executive officer Arun Sarin also reiterated that the operator has no plans to sell its 45 percent stake in Verizon Wireless.

Source: RCR