Buoyant Vodafone interims help sector stage a recovery

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Robust interim results from Vodafone, the world's biggest mobile operator, yesterday spurred a 10 per cent jump in its stock and helped UK tech shares stage a partial rebound from their recent declines.

Robust interim results from Vodafone, the world's biggest mobile operator, yesterday spurred a 10 per cent jump in its stock and helped UK tech shares stage a partial rebound from their recent declines.

Vodafone hit the top end of analysts' forecasts when it reported a 24 per cent rise to £3.28bn in earnings before interest, taxation, depreciation and amortisation (EBITDA) for the six months to September. Sales climbed 32 per cent to £10.2bn as customer numbers rose by more than half to 65.5 million.

Chris Gent, Vodafone's chief executive, said: "These first half results clearly demonstrate that, even with the better than expected growth in customer numbers, the group continues to report strong increases in profitability in all its operating regions. With the majority of our UMTS licences now purchased, and our disposal programme largely complete, the strength of our balance sheet will enable us both to continue to fund the ongoing needs of the business and at the same time take advantage of opportunities to expand."

The results set off a buying spree in Vodafone stock, which jumped from near 12-month lows to close up 24.25p at 262.5p. The trading of 454 million shares - nearly one quarter of all shares traded yesterday - added £14bn to the company's market value.

However, on the conventional measure of pre-tax earnings Vodafone racked up a huge loss of £3.9bn - among the largest losses ever recorded by a UK company. That was caused by the amortisation of goodwill related to the £100bn acquisition of Germany's Mannesmann in February.

Terence Sinclair, an analyst with Schroder Salomon Smith Barney, said: "This was the first time we saw Mannesmann integrated. We saw both growth and costs well managed across the board. It is a very good set of numbers with a strong story behind it."

Mr Gent signalled that a row with the Government over new tax rules on multi-nationals' overseas earnings has been resolved. "[Britain] is not as good a place for multi-nationals as it was. But we are not moving. The Government has adjusted its position and that's good, though we feel they could do more, but we would say that."

An active Conservative supporter during the Thatcher and Major governments, Mr Gent flatly contradicted the Tory leader William Hague's recent assault on Brussels, which likened the forthcoming meeting of EU leaders to the prelude for creating a European superstate. Mr Gent said: "There will never be a European superstate. That's just propaganda nonsense."

Vodafone has previously made donations to the Conservative Party. Mr Gent said yesterday that no political donations were currently planned.

He denied Vodafone had colluded with rivals in recent mobile auctions in Italy and Switzerland, both of which ended with only limited fees paid to the governments. "We certainly haven't been involved [in collusion]. So much was spent early on, there wasn't the money [for the later auctions]."

Earlier auctions, notably in Britain and Germany, cost Vodafone £11bn for next-generation mobile licences. "This is not good news but it's better than it might have been," Mr Gent said.

Vodafone's debt, which stands at £15bn, is expected to hit around £16bn-£17bn. Mr Gent said it would fall to £10bn by March, although that is conditional on Vodafone realising further funds from its sale of Orange to France Telecom and an initial public offering of Arcor, Mannesmann's fixed-line telecoms business in Germany.

In Germany, which is now Vodafone's largest market, the D2 mobile subsidiary saw its customer base rise 49 per cent over six months to 16.5 million.

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