Vodafone Financial Analysis

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Vodafone is one of the world’s largest telecommunication companies, based in the UK. After China Mobile it is the world’s second largest mobile telecommunication provider.

Vodafone offers voice, messaging and data services over mobile and fixed line services. The bulk of its revenue (76%) comes from mobile services which it offers in 24 countries. 20% of its revenues come from fixed line services which it offers in 17 countries. Those include Voice, Broadband and TV for consumers, Cloud & Hosting and IP-VPN for enterprise customers, as well as carrier services.

Vodafone´s main markets are Germany, UK, Italy, India, Spain and sub-Saharan Africa (Vodacom Group, operating in South Africa, Tanzania, Congo DR, Lesotho, Mozambique). Two third of its revenue comes from Europe and almost one third from its exposure to emerging markets.[pic 2][pic 3]

After the sale of its 45% percent stake in Verizon Wireless in 02.2014, Vodafone no longer has a presence in the US-market.

The current 2 Year £19bn investment program “Project spring” aims to bring Vodafone service superiority through network investments both to improve mobile services and to converge mobile and fixed services.

Vodafone’s strategy aims to transform the group to a unified communication provider to be well positioned in a market trending towards bundled services (including mobile, TV and fixed broadband and voice services) and to reduce its reliance on the price competitive European wireless business. Implementing this strategy the group acquired fixed broadband and cable TV operators across Europe to complement its own 3G/4G coverage, including:

• Cable & Wireless Worldwide, 04.2012, UK: the acquisition of the biggest glass fiber provider in UK positioned Vodafone in the UK broadband market
• Kabel Deutschland Holding AG, 09.2013, Germany: Germanys largest cable company
• Groupo Ono, 04.2014, Spain: the Spanish cable operator with integrated fixed line service offerings helped Vodafone to complement its mobile services in Spain
• Hellas Online, 08.2014, Greece: the fixed line operator has an approximate market share of 11% in Greece

Accompanying its acquisitions strategy to obtain fixed line assets Vodafone also most recently started to build wireline infrastructure from scratch by themselves in Italy, Spain and Portugal.

In June 2015 Vodafone announced that it ended talks with Liberty Global, the world’s biggest cable company, about a possible exchange of assets, which could have provided Vodafone with fixed line assets in its major markets.

Environment:

The world Economy is picking up slowly, with the global growth rate expected to be 3.1% in 2015. The growth rate for Europe, Vodafone’s major market, is projected to be 1.5%, which is below the average of the world due to the elusive future of Greece debt crisis among other reasons. The projected growth rate for China is estimated to be 7% in 2015, but a recent official announcement of the oriental country that has been leading global growth for decades came out that it has reset its target annual growth at 6.5% instead of 7% previously. The most recent report for China’s growth rate estimated the growth rate for the third quarter of 2015 at 6.9%, lower than 7% for the first time in decades. This may add to the uncertainty of a global economy that is picking up at a moderate rate. However, this worrying figure will not have a direct impact on the business of Vodafone as China, where the market for telecommunication is dominated by state-owned China Mobile, China Telecom and China Unicom, is not one the major markets of Vodafone. Instead, the other fast-growing market in Asia, India, where Vodafone is seeking to expand its business, is enjoying as high a growth rate as ever before. Its estimated growth rate for 2015 is 7.3% and the figure might be even higher in 2016, estimated at 7.5%. This is without doubt a good piece of news for a company which is seeking more business opportunities in India. Africa is expected to be growing at a rate that is slightly higher than the world average, which is also good news for Vodafone who has a big share of market in Africa.