Company of the week

VODAFONE GROUP, the UK's biggest mobile phone company, said first- half net income surged 74 per cent to pounds 332m, fuelled by gains in its overseas operations. These have become an increasingly important source of profit as the company battles with three domestic rivals to maintain its number one position in the UK market. International activities accounted for about one-third of operating profit up from 13 per cent a year ago.

"Their international business is where the excitement is," said Dennis Gross, an analyst at Williams de Broe.

The company's shares, however, slipped to 885p on concerns that price wars and the introduction of pay-as-you- go phone plans in the UK will continue to squeeze margins.

Though Vodafone controls about 38 per cent of the UK market with 3.94 million subscribers, it is facing growing competition from long-standing rival Cellnet, a joint venture between British Telecom and Securico, as well as more recent arrivals Orange and One2One, a 50-50 joint venture between Cable & Wireless and US West Media Group.

The four have cut prices this year in a bid to win new customers ahead of January 1999, when they must allow customers to keep their phone numbers if they switch to another network.

Vodafone added more than 500,000 customers in the first half, though two rounds of price cuts slashed about 12 per cent from sales.

John Tysoe, an analyst at SG Securities, said it was encouraging that average revenue per contract customer slipped only slightly to pounds 421 from pounds 427, although prices fell. Cheaper "pay-as-you-go" packages that do not require a service contract have also hurt average revenues, as these customers spend less than contract subscribers. Pre-paid customers accounted for 35 per cent of new connections. Copyright: IOS and Bloomberg