VODAFONE FINANCIAL ANALYSIS

Financial and Investment Analysis of Vodafone Group Plc



Financial and Investment Analysis of Vodafone Group Plc

Introduction

Vodafone Group Plc is a heavy hitter in the Global Wireless Telecommunications Carriers industry. Vodafone was previously the largest global mobile company but was surpassed by China Mobile in the second quarter of 2009 (Data Monitor, 2012). Nevertheless, Vodafone is still the world's most globalized mobile telecommunications company, with more than 313 million subscribers across 25 markets (John, 2010). Moreover, the company has partner networks in 42 countries throughout Europe, Oceania, Africa and the Middle East, and North America (Data Monitor, 2012).

Germany is Vodafone's biggest single market in terms of both customers and revenue. Other developed economies, such as Italy, Spain and the United Kingdom, are also significant contributors to consolidated mobile revenue (Vodafone Inc, 2012a). However, Vodafone's EMAPA (Eastern Europe, Middle East, Africa, and Asia Pacific and Affiliates) operations have become the primary drivers of company revenue and profit growth (Ibbott, 2007). For 2009, Vodafone's EMAPA operations comprised 31.1% of group revenue but 66.0% of actual revenue growth (Ibis World, 2012a).

The growing importance of the EMAPA markets reflects the wider industry trend where the majority of subscriber gains are being achieved in the emerging markets. It is in these markets that mobile telecommunications is still in the early growth stage of its life cycle, compared with near maturity in most of the developed world (Ibis World, 2012b). In early 2007, Vodafone took steps to expand its presence in one of the fastest growing mobile markets, India, through the acquisition of a direct 52% stake in Hutchison Essar Ltd (Data Monitor, 2012). The Indian mobile market has had explosive growth in subscriber numbers over the past five years, which has resulted in the renamed Vodafone Essar adding more than 1.5 million subscribers per month (Vodafone Inc, 2012a).

Business Description

Vodafone Group Plc provides a range of communications services across the globe. The group provides mobile voice, messaging, data, and fixed broadband services (Ibbott, 2007). The group operates through a single reportable business segment: providing communications services and products. Its operations are organized into three geographic segments: Europe; Asia Pacific, Africa and Central European region; and Middle East region. The Asia Pacific and Middle East segment includes the following: its subsidiaries in New Zealand, India, Egypt, Qatar; joint venture in Australia and Fiji; and investments in China and India (John, 2010).

With subscriber growth driving revenue gains in its EMAPA operations, Vodafone has invested heavily in 3G services to drive margin and revenue growth in the more developed markets of Western Europe (Reuters, 2012). Increasing revenue has come from solid growth in 3G data services, which has offset falling prices of voice services. Moreover, 3G data services have increased the utility of mobile communications in the business market, which has enabled Vodafone to increase its penetration in this market segment (Ibis World, 2012a).

Vodafone's 3G services operate on the W-CDMA standard using HSDPA technology. Vodafone has spectrum licenses in every country that it operates in (Vodafone Inc, ...