Vodafone's Sarin looks set to survive after decent Q1 results

Stuart Corner
Monday, 24 July 2006 18:13

IT Industry - Strategy

Vodafone Group has reported a slightly better than expected performance against a number of key indicators for the quarter ended 30 June, leading to expectations that CEO Arun Sarin will secure re-election at the company's' AGM on 25 July.

According to John Delaney, principal analyst at Ovum, "The numbers look good enough to let Sarin fend off the attacks for a little longer yet. Although having said that, those attacks are continuing - several major shareholders are reportedly intending to vote against Sarin's re-election at tomorrow's annual shareholder meeting."

Sarin claimed that the results represented "a robust operating performance in testing markets with revenue for the quarter in line with expectations...Whilst many markets in Europe remain highly competitive, we are on track with our revenue and cost initiatives in this region."

However the company said nothing to flesh out its new strategic direction announced in March when it revealed plans to restructure into two, largely, regional-focussed units and one focussing on new business and innovation, a move which it claimed would "position the company to capture new revenue streams by extending its reach into converged and IP services."

This was followed in June by the publication of a wide ranging manifesto  setting out major strategic shifts, the most radical of which was that Vodafone intended be a "total communications supplier" by, initially reselling DSL services and integrating PC, internet and mobile services to offer "seamless interoperability".

Delaney commented: "Three months on, we're still short on specifics regarding how those goals are to be achieved. Statements of good intent will not be enough, by themselves, for Sarin to keep the shareholders at bay for much longer."

Vodafone reported organic growth of 6.4 percent for the quarter in total proportionate mobile revenue, with 1.3 percent growth in Europe and 13.9 percent in EMAPA. Growth in total revenue was 9.2 percent, with organic mobile service revenue growth of 4.5 percent. The company recorded 4.5 million proportionate organic net additions, with a further 11.7 million from the acquisition of Turkish operator, Telsim. Total proportionate customer base now stands at 186.8 million.

The company added 1.3 million 3G devices during the quarter taking it total 3G device base to9.1 million in its subsidiaries and joint ventures and a further 2.0 million in its associates.

The company's full year guidance remains unchanged. It expects organic growth for this financial year in proportionate mobile revenue in the 5 percent to 6.5 percent range and proportionate mobile EBITDA margin for this financial year to be around one percentage point lower than the previous financial year on an organic basis.

Of particular interest is take up of Vodafone Germany's Vodafone Zuhause service that offers fixed line features via a mobile service in and around a customer's home. Germany was the first country to get the service but it is soon likely to be launched in New Zealand  and elsewhere. Zuhause service added 446,000 customers during the quarter taking the total to 894,000.