Vodafone shares rise despite £8.5bn plunge into the red

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The mobile phone giant Vodafone yesterday confirmed it would launch third generation (3G) mobile phone services next October as it unveiled a strong underlying half-year performance. A series of hefty exceptional charges, however, forced the firm deeply into the red.

The company produced an £8.5bn pre-tax loss after accounting for a £6.7bn charge to cover the amortisation of goodwill in respect of its purchases of Germany's Mannesmann and Spain's Airtel. Another £4.5bn charge largely reflected the fall in value of Arcor, the fixed-line telecoms business the company inherited from Mannesmann.

Nevertheless, Vodafone shares closed up 3.3 per cent at 180p after its underlying, or Ebitda, profit of £4.78bn, up from last year's £3.28bn, beat market expectations. Sales for the six months to 30 September were £13.5bn, up from £10.17bn.

Sir Christopher Gent, chief executive, said: "This growth in all respects is better than we expected."

Vodafone, which has so far axed around 1,000 UK jobs this year, said average revenues per user have stabilised. While Sir Christopher said he expected the average revenue would show a "modest improvement" next year, he cautioned that the seasonal Christmas rise in customer growth was not expected to be as strong as in previous years.

"We do not envisage there'll be anything like the peaks we've had in the past three or four years. The market's now at north of 70 per cent [mobile phone] penetration," he said.

The company, whose debt stands at £17bn, also said it was in the process of selling Arcor's traffic-signalling business to Deutsche Bahn. The remainder of Arcor could be floated.

Sir Christopher said he saw "no reason" to write down the £13.1bn cost of its 3G mobile phone licences while confirming that an initial 3G launch had been pencilled in for October. He said he did not believe the 3G technology would have a "major impact" until the end of 2003.

Vodafone also reduced its capital expenditure plans for the year to £4bn from £5bn.