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Vodafone makes £6bn and strikes back on market share

Andrew Murray-Watson
Sunday 12 November 2006 01:00 GMT
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Vodafone will tell the market on Tuesday that earnings for the first half of its financial year have hit the £6bn mark and that the outlook for its core business in the UK is improving.

The mobile phone giant, which has been beset by boardroom wrangling, will also announce that its operations in developing markets and in the US are still growing strongly, as it looks to leave its recent troubles behind.

In a research note last week, Andrew O'Neill, an analyst at Bernstein Research, said: "Rather than immediate earnings, we are more focused on longer-term signs of improving volume growth and falling pricing risk in Europe, as well as signs of a greater cushion for estimates from any other sources of upside."

Arun Sarin, Vodafone's chief executive, may also give indications that the company has an appetite for further acquisitions in Africa, Asia or eastern Europe as it looks to accelerate growth.

It is believed that two-thirds of Vodafone's new contract customers in the UK now buy products direct from the company's stores and on its website. This trend will reduce the cost of acquiring new customers and boost margins at a time of falling tariffs.

In the past year Vodafone has lost market share in the UK in the face of aggressive and innovative pricing from the likes of T-Mobile and O 2. But it is believed that the company now has the lowest rate of contract churn (the rate at which customers defect to other networks) in Britain.

Vodafone recently decided to stop selling contract-based products in Carphone Warehouse stores, in a bid to reduce the level of subsidies that it pays to third-party retailers.

Vodafone's share price has risen steeply in the past few months following the appointment of Sir John Bond as chairman. Sir John is widely credited with quelling recent boardroom unrest and improving the group's relationships with its institutional investors.

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