VODAFONE

Vodafone

Vodafone

Introduction

Vodafone is a British network operator that is headquartered in Newbury in England. On the basis of revenue, it is the world's largest mobile network company. Vodafone has its operations in about thirty one countries and has also formed partnerships in network in about forty countries. In terms of number of subscribers, it is the second largest operator of mobile phones (Anonymous 2012, p. 01) (Anonymous “Financial and Ratio, 2012,, 01).

It was formed as a subsidiary of Racal Electronics in 1984. About twenty percent of the capital of the company was offered to the public in 1988. The company became independent in 1991 and changed its name from Racal Telecom limited to Vodafone Group Plc. It merged with Air Touch Communications in the late 1999, after becoming independent. In 2000, during the General Meeting of the shareholders it was named as Vodafone Group Plc. The name Vodafone was derived from voice data fone (www.scribd.com) (Anonymous “Financial and Ratio, 2012,, 01).

Discussion

In order to analyze Vodafone, the discounted cash flow method has been used.

Discounted Cash Flow

Discounted cash flow is a type of valuation method that estimates the attractiveness of investment opportunities. This analysis discounts the projections of future cash flows to derive a present value that helps to evaluate the investment's potential (www.investopedia.com).

Free cash flow to equity is calculated by adding the profit of this year to the changes in debt and then subtracting the changes in net assets (Anonymous “Financial and Ratio, 2012,, 01).

ASSUMPTIONS

The sales for the year 2013 and onwards are assumed to increase by 20 percent every year. This assumption is made on the basis of past trend (Anonymous “Financial and Ratio, 2012,, 01).

The earnings before interest and tax is assumed to increase by 30 percent every year from 2013 onwards.

The interest expense of Vodafone ...