Vodafone profits double to £8.7bn despite write-off in Indian market

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The Independent Online

Vodafone more than doubled its full-year profits after strength in its emerging markets business and a cost-cutting drive helped to offset declines in Europe and Africa. This came despite a £2.3bn write-off in India.

Vittorio Colao, chief executive of Vodafone, said: "We are stronger today" as he unveiled pre-tax profits of £8.7bn for the year to the end of March, up from £4.2bn the previous year. He added that the company would return to revenue growth next year with profits of up to £12bn.

The rise in profits was helped by growth in its data business, boosted by the popularity of smartphones. Vodafone secured the rights for the iPhone in the UK in January, which helped to bring in customers. "The smartphone line-up is complete with the iPhone playing a part," Mr Colao said. He added that it was too early to judge the sales of Google's Nexus One phone in the UK, although it had been slow in the US.

The company said it had completed the £1bn cost-cutting programme, initially announced when Mr Colao took over in 2008. He added that it was well into the second £1bn of savings announced subsequently. The group is to lift its dividend to 8.31p per share and will increase the value by 7 per cent for each of the next three years.

The company was once more asked about its plans over the future of Verizon Wireless, its US mobile joint venture with Verizon Communications. There has been speculation in recent months that the group may merge with Verizon, and Mr Colao said yesterday that it was an option. He said: "There is logic for a merger, but there is also logic for a split, and logic that says we can still work well together. The amount at stake is so big we will keep our minds open," before adding: "It takes two to dance."

There has long been a debate about when the Verizon joint venture will start paying a dividend. Vodafone's chief financial officer, Andy Halford, said it was more likely to be paid next year.

Mr Colao said the company would not be following those firms who had decamped from the UK for tax reasons. He said: "We're here because it is a great place to be based. The tax environment must remain friendly and we hope that will be the case. We can't think of many better places to be."

Mr Halford added that the company wanted to find out the new Government's intent on the tax on overseas profits. "Getting the clarity on that is key," he said after revealing that the company had met Conservative officials in the run-up to the general election.

Service revenues for the UK declined 4.7 per cent on lower voice revenues, it said, driven by intense competition and economic weakness as well as cuts to the mobile termination rate.

The operation was driven by a strong performance in Asia Pacific and the Middle East, but especially India, where service revenue was up 14.7 per cent. Yet Vodafone was forced to take a £2.3bn writedown on its business in India, following charges for spectrum and the strong competition. Mr Colao said: "The impairment is disappointing, but a necessary and inevitable step."

The market that Vodafone entered in 2007 has become increasingly tough, rising from six players when the UK group entered to 12 currently. Mr Colao reaffirmed the group's commitment to India: "All the projections for the next 15 years are very positive. From an industrial point of view you want to be in it."

He added: "The politics are core, and we need to make sure the rules are appropriate. There is a need for political leadership to shape the industry."

The Indian government is currently overseeing an auction for 3G licences, and the fierce bidding has sent the price soaring to as high as $3.5bn this week.

Mr Colao said: "The government should not be seen to squeeze money out of private capital, but instead it should be used to drive growth." He added that the Indians should remove the limits on consolidation.

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