New Vodafone CEO to adopt a Stg 1 billion saving plan
Vittorio Colao, new chief executive of Vodafone, outlined a shift in strategy for the company on Tuesday by signalling a more cautious approach to deals compared with his predecessors.
He indicated that Vodafone’s expansion into developing countries may be close to completion by saying there were few new large markets of interest.
Vodafone’s shares closed up 6.2 per cent at 115p after the world’s largest mobile phone operator confirmed it would stick to its operating profit target of £11bn to £11.5bn for 2008-09, albeit thanks to favourable exchange rate movements.
At Vodafone’s first-half results, Colao also pleased investors by raising its target free cash flow – broadly operating cash flow minus some capital expenditure – for 2008-09 to £5.2bn-£5.7bn by cutting costs. The previous target was £5.1bn-£5.6bn.
Colao said any large acquisition would likely have to be funded through disposals.
Vodafone wants to see consolidation between mobile operators in its existing markets, notably Europe, and Mr Colao said it was willing, for the first time, to buy rivals. However, he also said Vodafone might sell businesses.
Colao’s comments contrasted with the ambitious acquisitions pursued by Christopher Gent and Arun Sarin, his predecessors. The new chief is focused on maximising revenue opportunities in existing markets and cutting costs by £1bn by the 2010-2011 financial year.
He said he wanted to make Vodafone “simpler” and “faster”, to cope with rising economic, competitive and regulatory pressures. “My ambition is to lead Vodafone in an industry I do believe is still attractive, and to fully explore during my tenure Vodafone’s strong advantages in brand, scale and assets,” he said.
Vodafone’s revenue rose 17.1 per cent to £19.9bn in the six months to September 30. Adjusted operating profit rose 10.5 per cent to £5.8bn, fuelled by sterling’s weakness. On an underlying basis, operating profit fell 1 per cent. Pre-tax profits fell 27.3 per cent to £3.3bn, partly because of £1.7bn impairment charge on Vodafone’s troubled Turkish business.
Meanwhile, the financial results showed how in Malta Vodafone lost 1,000 subscribers between 1 April and 30 June this year but gained a staggering 7,000 by end September. The subscriber count in Malta now stands at 206,000 – 86.4 per cent of which on prepaid schemes.
