Vodafone rings up biggest-ever British loss of £13.5bn

The mobile phone operator Vodafone yesterday posted the biggest loss in UK corporate history, despite refusing to increase the value of write-downs for past acquisitions, as the City had expected.

The £13.5bn loss the company reported for the year included a £6bn write-down although the bulk of that charge had already been announced before Christmas. It also took a £13.5bn goodwill amortisation charge.

"The fact is it is a big loss," Sir Christopher Gent, the chief executive, said. But he stressed the loss related to accounting adjustments after a change in accounting standards and was not an accurate reflection of the company's performance.

He pledged to carry on snapping up more assets and ruled out returning cash to shareholders in the short term or increasing the dividend rate.

"We think there are some good short-term opportunities to buy companies and we'd rather do that for cash," Sir Christopher said, saying it would be "unwise" to give cash to shareholders now and ask them to fund purchases later.

In the year to 31 March, Vodafone recorded a pre-tax loss, after accounting for goodwill amortisation and asset write-downs, of £13.5bn compared with an £8bn loss a year earlier. Of the £6bn write-down, £4.75bn had already been announced last November including a £4bn charge to cover the fall in value of Arcor, the fixed-line telecoms business in Germany.

The write-down, however, was well beneath the expectations of many analysts who had forecast charges of between £15bn and £25bn and expected to see the company write down the value of its mobile assets. Vodafone said simply that a recent review of its assets had indicated that no impairment charge was necessary in respect of its mobile phone operations.

Shares in Vodafone, which had initially rallied after the release of better-than-expected underlying financial figures, ended down 2.1 per cent, or 2.25p, at 102.75p.

On a proportionate underlying, or Ebitda, basis, Vodafone reported a profit of £10.1bn, up from £7bn a year earlier on turnover of £29.8bn, up from £22.2bn.

That performance makes it likely that Sir Christopher will receive the second half of a previously announced performance-related £10m bonus, to be paid in shares.

Free cash flow was £2.4bn in the year with £1.8bn generated in the second half of the year. Debt of £12bn at the end of March was significantly beneath analysts' estimates after the company's £4.1bn capital expenditure came in nearly £1bn beneath estimates.

Sir Christopher called the figures "outstanding" and predicted a "good" performance in the current year with net customer growth of just below 10 per cent. He also said he expected a "modest but real" improvement in ARPU, or average revenues per user, in most major European markets, leading to "double-digit" revenue growth and further increases in margins.

"We have every confidence in the continued growth potential of the business. This year will see many exciting new developments," he said.

Nevertheless, the group expects revenues from non-voice, or data-like text messaging, to account for about 20 per cent of service revenues in 2004, rather than more like 25 per cent. Non-voice revenues were about 11 per cent of total service revenues in the year reported, up from about 8 per cent in the pervious year.

Moreover, Vodafone predicted 3G mobile phone services would not see widespread take-up until 2005. Vodafone yesterday forecast capital expenditure of £6bn this year compared with previous guidance of £6.5bn.