Vodafone Turns To Profit In H1; Plans GBP7 Bln Spending

(RTTNews) - British telecom giant Vodafone Group Plc (VOD.L, VOD) Tuesday reported a profit for the first half of the year, compared to a loss last year, as the current year recognized some additional deferred tax while the prior year included a hefty impairment charge.

The firm said its Project Spring organic investment program announced in September has enhanced investment to boost network and service differentiation in major markets.

Profit attributable to equityholders was 17.95 billion pounds ($28.65 billion) compared to a loss of 1.98 billion pounds in the previous year. The results are on the basis of continuing operations.

Total earnings per share were 36.79 pence compared to a loss of 4.02 pence last year.

Profit before taxation for the latest-period was 1.514 billion pounds, versus a pre-tax loss of 3.881 billion pounds last year.

The latest results benefited from the recognition of additional deferred tax of 14.7 billion pounds, while the prior year included an impairment charge of 5.9 billion pounds.

Revenue rose 2.5 percent to 19.06 billion pounds from 18.6 billion pounds in the previous year, driven by the acquisition of CWW and TelstraClear in the prior year. Organic revenue drop was 1.6 percent.

On a management basis, service revenue dropped 4.2 percent to 20.0 billion pounds

According to the company, its performance reflected strong growth in emerging markets and continued demand for data services, offset by regulatory changes, challenging macroeconomic conditions in Europe and competitive pricing pressures.

Organically, in Northern and Central Europe, service revenue declined 3.9 percent as growth in Turkey was more than offset by declines in other markets, driven by the impact of mobile termination rate or MTR cuts, increased competition and macroeconomic conditions.

In Southern Europe, service revenue on a management basis declined 14.9 percent as revenue declined in all major markets due to severe macroeconomic weakness, intense competition and the impact of MTR cuts.

In AMAP, service revenue on a management basis increased 5.8 percent with good growth in most markets, partially offset by declines in Australia and New Zealand.

The Board recommended an interim dividend per share of 3.53 pence, up 8 percent year-on-year.

Looking ahead, Vodafone said it is on target to deliver adjusted operating profit of around 5 billion pounds and free cash flow in the 4.5 billion pounds to 5.0 billion pounds range.

Vodafone has reached an agreement with Verizon Communications Inc. (VZ) to dispose of its US Group whose principal asset is its 45 percent interest in Verizon Wireless.

Assuming completion of the Verizon Wireless disposal and associated transactions in the first quarter of 2014, the Board plans to increase the final dividend per share by 8 percent.

Along with the 3.53 pence interim dividend per share announced today, total dividends per share for 2014 are thus expected to be 11.0 pence.

Further, Vodafone said its Project Spring organic investment program has increased additional investment to around 7 billion pounds by March 2016, to establish stronger network and service differentiation in major markets.

The plan will invest 7 billion in capex in the next two financial years, including up to 0.5 billion pounds committed in the current financial year. The investments are expected to improve competitive performance and deliver attractive returns.

In Europe, the firm will invest around 3 billion pounds to deliver deeper 3G coverage and capacity, and will accelerate its 4G network build.

In AMAP, around 1.5 billion pounds will be invested to extend 3G coverage across major cities and key regions to provide wider voice coverage.

VOD.L closed down 0.6 percent at 227.35 pence.