Vodafone eyes Africa and China expansion

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The Independent Online

Vodafone has set its sights on expansion in sub-Saharan Africa and China to offset further price deflation in Europe after shares surged to a five-year high on the mobile phone company's confident outlook for the coming year.

Vodafone has just completed the acquisition of Hutchison Essar, India's fourth-largest operator, and is on the hunt for further exposure to growth markets around the world. Arun Sarin, Vodafone's chief executive, described the company's strategy as "a dual-growth engine" as it looks to expand in regions where mobile phone penetration remains low while offsetting the impact of lower prices and increased regulation in mature European markets by stimulating usage of new services.

Mr Sarin said the company would "certainly" look to acquire the 50 per cent it doesn't own in Vodacom, the African mobile operator, and that the British company has the first right of refusal to buy the company out. Telkom, the South African incumbent operator, owns the other half of Vodacom and is reviewing its strategy regarding the mobile company. It has previously denied wanting to sell its stake in Vodacom, which has over 30 million users. Citigroup has argued that Vodafone could buy out Telkom's stake for £5.2bn.

Mr Sarin also said that Vodafone is interested in increasing its presence in China but that nothing is likely to happen for a year due to restructuring of China's mobile industry and the arrival of 3G licences in the region. Vodafone owns a 3.5 per cent stake in China Mobile, the country's largest mobile operator.

Vodafone shares surged to a five-year high of 159.5p after a 5.5 per cent rise yesterday. Despite further pressure on its revenue in Europe, Vodafone expects its revenue to be as high as £34.1bn in the current year compared to £31.1bn last financial year with adjusted operating profit in a range between £9.3bn and £9.8bn.

Vittorio Collao, head of Vodafone's European operations, said the relaunch of the Vodafone Live! internet portal should lead to a further rise in mobile data revenue, helping to offset a reduction in voice price of up to 20 per cent a year. The company has also invested in sprucing up its retail chain and signed an exclusive deal with Phones4U to sell its contracts. The strategy, which involves shifting commission payments to resellers to push higher-value contracts, may already be paying off with Vodafone adding 472,000 new UK customers during the three months to March, significantly higher than its rivals.

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