Mobile telephone operator Vodafone Group Plc reckons that post-1995, the UK cellular network market will be largely saturated and so is continuing to invest overseas. On top of the joint ventures set up in Germany, Greece and Australia last year, it has now just established another one in South Africa, Vodacom Group Pty Ltd, to […]
Mobile telephone operator Vodafone Group Plc reckons that post-1995, the UK cellular network market will be largely saturated and so is continuing to invest overseas. On top of the joint ventures set up in Germany, Greece and Australia last year, it has now just established another one in South Africa, Vodacom Group Pty Ltd, to operate the first South African Group Speciale Mobile cellular telephone network. Vodacom will submit a formal application for one of two cellular licences in the country by the end of June 1993, and if it gains approval, aims to make its network commercially available by mid-1994. And it intends to provide a national service that will cover 70% of the population within its first five years of operation. Vodafone will hold 35% of the start-up’s equity, Telkom Ltd, 50% and Rembrandt Group Ltd the remaining 15%. But after 1995, chief executive Gerry Whent said the Newbury, Berkshire-based group will need to invest wisely – this means that it will try to buy out overseas partners or at least attempt to increase its shareholding in jointly-held companies.
Funded from internal resources
For the year to March 31, Vodafone saw pre-tax profits rise 18.7% to UKP322.5m, despite operating losses of UKP25m, generated mainly from the start-ups in Greece and Australia. Turnover grew 13.5% to UKP664.1m. The board is recommending a final dividend of 3.53 pence per share, making a total of 6.96 pence for the year – an increase of 20%, excluding the UKP50m special dividend paid to Racal Electronics Plc as a result of demerger. Vodafone also intends to implement a scrip dividend alternative to shareholders, 20% of which are to be found in the US and the rest in the UK, for the first time. In line with its strategy of improving overseas penetration, the group has decided to increase the money it spends abroad. For the year just gone, its capital expenditure was UKP139m, some UKP34m of which went overseas. In the UK, the focus was on building up the digital and GSM networks. While investment in joint ventures totalled UKP52m, UKP49m again went abroad. But Whent anticipates a significant increase in the year ahead funded from internal resources. Total expenditure on capital and investments – including the UKP26m that went on the Hawthorn Leslie Group acquisition – should be approximately UKP300m. While a further UKP100m or so is expected to go on developing the GSM and Mobile Communications Network in the UK, a further UKP130m will be spent overseas. Areas of interest for future start-ups include Italy, Spain and Holland. Vodafone purchased the entire share capital of Hawthorn Leslie in April 1993. The mobile communications company has been renamed VHL Communications Ltd and will run as an independent service provider within the group, retaining its own brand names and identity. As a whole, the group continued to grow during the year. Its largest business, Vodafone Ltd, maintained its 56% share of the UK’s cellular market, but according to managing director, Chris Gent, increased its share of higher margin business customers. This, he said, compensated for the loss of lower revenue users to Cellnet Mobile Communications Ltd. Churn rate – or the number of subscribers leaving the network – was erratic, he stated, but the average monthly drop-off figure was about 20%, compared with 24% at its peak in the previous year. Furthermore, the level of gross connections grew as the economy improved, helped by the LowCall tariff, introduced in October 1992. This is targetted at non-business users, who make a low number of calls – line rental costs are lower, but call charges are higher. Net growth also remained consistent, he said, belying analysts predictions that the cellular telephone market was saturated. Finally, in the wake of British Telecommunications Plc purchase of a 20% stake in Washington-based MCI Communications Corp (CI No 2,181), Whent refuted the idea of any possible friendly take-over by AT&T Co we will never have friendly link-ups, he attested.