Vodafone to cut costs by £1bn

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The Independent Online

The new boss of Vodafone signalled a different strategy for the mobile phone giant today after announcing plans to cut costs by £1bn a year.









Chief executive Vittorio Colao, who took over from Arun Sarin in the summer, said the firm would shift its focus from "revenue stimulation" towards packages that offer more value to customers in return for greater commitment.



He announced a 10 per cent rise in Vodafone's half-year operating profits to £5.8bn but lowered the company's revenues guidance for the financial year.



Efficiency will be a key part of the strategy, Mr Colao said, with the group expected to reduce current operating costs by £1bn a year by 2011.















The company did not provide details of the measures, but said they were necessary to offset cost inflation and the competitive environment, as well as to enable investment in growth opportunities.

Vodafone is under pressure in mature European markets such as the UK, where service revenues fell 1.1 per cent in the half year.



The UK performance slowed in the second quarter compared with the previous three months, which Vodafone said reflected competitive pressures on voice and messaging tariffs. Data revenues continued to show strong growth, helped by higher penetration of consumer mobile broadband and internet bundles.



It said it had put in place "appropriate actions" to improve trading in the UK, where it admitted it had "underperformed recently".



European revenues were down 1.1 per cent on a like-for-like basis amid price pressure on voice and messaging services and continued strong data growth.



The company said in the summer it expected annual revenues to be at the lower end of its range of between £39.8bn and £40.7bn in the year to the end of March. That guidance has now been changed to between £38.8bn and £39.7bn, although Mr Colao said cash generation remained strong.



He said the company's updated strategy reflected the changing economic and market conditions.



Mr Colao added: "We will improve operational performance through customer value enhancement and cost efficiency, supported by a £1bn cost reduction programme."

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