Shareholders who had been putting the pressure on ceo Arun Sarin and agitating for a disposal of Vodafone’s interest in Verizon had their guns partially spiked by Vodafone’s fourth quarter results.
Of course, it may be fortuitous coincidence that Vodafone was able to hail its US business as one of the positives in the quarter to 31 December 2005 just as it was coming under pressure to dispose of it. On the other hand, decent performance from Verizon may convince those opposed to a global policy that the operator would be due a decent price for its 45% holding in Verizon.
Vodafone announced that it had added 7.1 million customers (well actually it called them “proportionate organic net additions”), which is 30% more than the same period last year. Total additions were 8.3 million.
The operator also said it had sold 3.1 million 3G phones in the final quarter, and had achieved revenue growth of 8.0% and 7% growth in service revenue year on year. However, “on a statutory basis”, ie. according to external principles, service revenue growth was only 4.3%, which will be a slight worry to Vodafone’s management.
All of this meant Vodafone is sticking to its predictions for the current year, which includes an EBITDA margin of less than 1%.
The dip in the rate of growth of service revenues was blamed on competition and lower termination rates in mature European markets including Germany, Italy and the UK. But Spain and the US performed well to offset this, the operator said.
Vodafone has agreed to acquire Telsim, the number two mobile operator in Turkey, from the Turkish Savings Deposit and Investment Fund (“SDIF”) for $4.55 billion.
Although it has paid slightly over the expected sum, Vodafone has been attracted by the size of the Turkish market (its population will be bigger than Germany’s by 2017) and the relatively low level of penetration (53%) compared to other European markets.
It also considered the Turkish operator to have been under-managed and lacking in investment. Vodafone said that it expects that over the short term Telsim will require approximately
$1 billion of additional funding, and it expects Telsim to make net losses in the short to medium term as it invests in the network.
Vodafone said Telsim had achieved 3% revenue growth in the first seven months of 2005 compared to the same period in 2004, bringing its total customer numbers to approximately 9 million.
Commenting on the transaction, Arun Sarin, Chief Executive of Vodafone, said, “We are delighted to have won the tender for Telsim. With a larger population than every European country except Germany, and a penetration level of approximately 53%, the Turkish market represents a major growth opportunity.
“Our extensive operating experience and unique set of products and services positions us to compete effectively in such a youthful market and deliver a superior mobile experience to Turkish customers.”
The transaction is subject to approval from the SDIF Board and Turkish regulatory, legal and competition authorities. Vodafone expects the transaction to close in the
first quarter of calendar year 2006.
Vodafone has taken on none of the liabilities due to Nokia and Motorola, which have been in dispute with the operator, and have received large settlements as a result of the sale.