Vodafone boosts payouts in spite of one-off losses

Mobile phone giant Vodafone Group registered a loss before tax of £14.9 billion for the year after impairment charges of £23.5 billion, the company said yesterday. At the same time, the company unveiled plans to return an extra three billion pounds to investors and boosted its dividend, as it posted earnings that beat analysts' average forecast.

The firm, in a much-anticipated strategic review on how it plans to tackle new technologies and slowing growth in Europe, said it would axe 400 headquarters jobs and cut costs, and announced its first broadband internet offering.

Shares in the world's biggest mobile phone operator by revenues rallied more than three per cent in early trade.

"While the fundamentals remain challenged, the clear cost targets and improved payout are likely to provide reassurance," Goldman Sachs analysts wrote in a note.

Vodafone, which had already announced plans to return six billion pounds to shareholders following the sale of its Japanese unit, said it would raise this total to nine billion.

The firm boosted its annual dividend payout to 6.07p, up 49 per cent and smashing analysts' top forecast of 5.5p.

Vodafone said it made adjusted basic earnings per share of 10.11p for the year ended March, up 13 per cent and topping the average forecast of 9.95p in a Reuters poll of 18 analysts.

But including impairment charges of £23.5 billion, the loss before tax was a colossal £14.9 billion. Its net loss for the year was £21.8 billion, or 35.01p per share.

Vodafone Chief Executive offcier Arun Sarin has come under pressure from investors and within his own board to spell out a strategy to cope with slower growth in markets such as Germany and Italy where competition is intense.

The firm said it continued to expect modest revenue growth in Europe, but unveiled a plan to cut costs including 400 job cuts at its corporate centre and outsourcing some IT activities.

Vodafone's "pure-play" mobile operation has also come under fire at a time when separate fixed-line and mobile businesses are converging into a cheaper, single service that works across both networks.

The firm said yesterday it had responded with its recently created "New Businesses" unit, and announced plans to launch a series of products including high-speed internet access in Germany in the third quarter of this financial year.

Vodafone said it would sell businesses where it could not make a strong enough return, but added it remained a happy shareholder in US group Verizon Wireless. Speculation is rife that Vodafone will sell its 45 per cent in Verizon Wireless to its joint venture partner Verizon Communications.

Some investors had feared Vodafone, whose takeover of Germany's Mannesmann in 2000 was the largest in history, might look to offset slower growth in Europe by making acquisitions in emerging markets or buying a fixed-line operator.

But the company said it expected a lower level of merger and acquisition activity in the future.

Vodafone said it was aiming for a low single-A credit rating and had no plans to return more money to investors. Ratings agency Fitch cut its rating on Vodafone to A- from A.