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Analysing the performance of Vodafone Group Plc This essay has been written by a regular student and is *not* an example of our own work. If you would like your own custom essay written just for you by one of our professionals then click here to learn more. Vodafone Group Plc is a UK based mobile network Operator Company and is the worlds largest telecommunications network company by turnover. It owns 45% of Verizon Wireless, the largest

mobile telecommunications company in the United States measured by subscribers. It has a wide scope and a significant global presence, with over 341.1 million customers worldwide. It operates in more than 30 countries and partners with networks in over 40 more and their focus in five regions main regions, Europe, Africa, USA, and Asia. Vodafone expands its business domestically and internationally, through a number of strategies, which include joint ventures, investments, and associated and subsidiary undertakings. Its first primary listing is on London Stock Exchange and in the constituent of FTSE 100 Index. It is fourth largest company on the London Stock Exchange approximately it had a 92 billion of market capitalization and it is also listed in NASDAQ stock exchange America. Primary Business Activities Vodafone operates through three main business divisions. 1 mobile telecommunications

2. Fixed Broadband 3. Other operations. History In 1982 Vodafone was formed as a joint venture between three companies Racal Electronics plc, Millicoma and the Hambros a Technology Trust. In this joint venture Racal owned 80%, Millicoma 15% and Hambros 5%. The network was named as Racal Vodafone, with the Vodafone name being derived from the firm's goal of establishing a voice and data services over cellular telecommunication networks. On 1 January 1985 Vodafone was launched and the first call is made on that day from St Katherines Dock in London to Newbury. Later that year Racala Strategic Radio was renamed Racala Telecommunications Group Limited in 1985. A year later, on 29 December 1986 Racala Electronics bought out the minority shareholders of Vodafone for a GB110 million. In September 1988 the company was again renamed Racal telecommunication and on 26 October 1988 Racal Electronics floated 20% of the company a flotation that valued Racal Telecom at GB1.7 billion. On 16 September 1991 Racal Telecom was demerged from Racal Electronics as Vodafone Group and the mobile telephony giant was born. During the mid 1990s Vodafone began to consolidate itself on the British high street. In July 1996 Vodafone acquired the two thirds of Talkland it did not already own for 30.6 million. On 19 November 1996, in a defensive move, Vodafone purchased Peoples Phone for 77 million, a 181

store chain whose customers were overwhelmingly using Vodafone's network. In a similar move the company acquired the 80% of Astec Communications that it did not own, a service provider with 21 stores. This made Vodafone a very visible presence on the British high street and significantly increased the company's share of UK mobile customers. Vodafone is not only spread in UK it almost spread all part of world. Review on Annual report of Vodafone (appendix 1)

According to annual report 2010 Vodafone generates revenue of 44.5 billion includes 8.4% growth in revenue compare to last year. Operating profit is 11.5 billion includes 2.5% decline. There is 26.5% growth in free cash flow which is 7.2 billion. It is very good for company to attract investors and customers. Proportionate mobile customers are 341.1 million include growth of 12.7%. It announce total dividend per share of 8.31 pence up 7%. The adjusted tax rate percentage is expected to be in the mid 20s for the 2011financial year with the Group targeting a similar level in the medium-term. The Group continues to seek resolution of the UK Controlled Foreign Company and India tax cases. Comparison Annual Report of last three years Company 2010 2009 2008 Revenue 44.5 (billion) 41 (billion) 35.5 (billion) Adjusted operating profit 11.5 (billion) 11.7 (billion) 11.6 (billion)

Free cash flow 7.2 (billion) 5.69 (billion) 4.8 (billion) Proportionate Mobile customers 341.1 (million) 302.6 (million) 260.5 (million) Vodafone Current and future investments Vodafone's future strategy will be focused more on Europe, Africa and India, which are areas in which it has been growing nicely in recent years and which have plenty of expansion possibilities. And to assist that, Vodafone is selling off its interests in Japanese wireless operator Softbank Corp for 3.1bn. As part of the sale of Vodafone Japan in 2006, the company was left with loan notes, stock, and various rights in Softbank, and those are on the chopping block. Vodafone will receive the proceeds in two tranches, 1.6bn in December, with the remaining 1.5bn in April 2012.

The initial 1.6bn will be used to pay down some of Vodafone's debt, which had grown to over 34bn by March 2010. That is more than a third of the company's 91bn market capitalization, and amounts to three quarters of last year's annual turnover. This latest disposal comes after Vodafone sold its 3.2% interest in China Mobile for 4.3bn before tax, of which 2.8bn was committed to a share buyback program, though I can't say I'm too impressed by that idea -- if there's cash to flash, I think more would be achieved by paying off debts. A core part of the new strategy is to focus on expansion on the growing markets of Africa and India, where mobile voice and SMS traffic is a relatively new development, and by exploiting the demand for mobile data services in more developed markets -- and there'll be transitioning, enhancing, differentiating, and all sorts of other buzzwords going on. Vodafone also plans to tackle the poor cash flow it is receiving from its investments in companies it does not control, primarily Verizon Wireless and SFR. Those two account for a sizeable chunk of

Vodafone's assets, with Vodafone owning 45% of Verizon, but apparently between them they only brought in around 1bn in net cash flow in the year ending March 2010. On February 11, 2011, Vodafone Group Plc announced the launch of the Vodafone Web box, the first device of its kind, bringing affordable Internet access to a customers existing television set. On February 7, 2011, Vodafone Group Plc announced that Nexus S will soon be available in Vodafone Group Plc stores around the world. Nexus S will be powered by the Android platform know as Gingerbread. Competitors 1. O2 [appendix 2]

2. Orange [appendix 3] 3. T-mobile [appendix 4] 4. 3G [appendix 5] Comparison of Vodafone with its Competitor year (2009 to 2010) Company Revenue (Billion pound) Growth Free Cash Flow (Billion pound) 1).O2 20.99 2% decrease 1.933 2).Orange 38.7 2% decrease

7.17 3).T-Mobile 53 3.4% decrease 5.6 4). 3G 14 28.4% increase 2 5). Vodafone 44.5 8.6% increase 7.2 From analyzing all competitor annual report we can say Vodafone has very strong position in his market as compare to his competitors Only T-Mobile generate more revenue then Vodafone but there is decline in his growth where as Vodafone has 8.6% growth and low free cash flow then Vodafone. Orange and Vodafone free cash flow almost equalvent but Vodafone generate more revenue and growth where as orange has low revenue and its growth is decline. However there is news that orange is going to merge in T-mobile this may be hurt Vodafone position in market. Conclusion Although telecommunication Industry didnt do well this years but Vodafone perform really well this year and post very good result with a dividend of 8.13 pence this year. As we can see from the annual report the Company generate good revenue as compare to last year there adjusted operation profit is decline but the good thing is company has focus on customers rather than profit to generate more revenue which is good for long term investment point of view. Vodafone increase its free cash flow and decrease its debt this year which is very to attract more investors and customers. Its target for next three year on free cash flow and dividend per share will expected that annual free cash flow will be between 6.0 billion and 7.0 billion, in each of the financial years in the period ending 31 March 2013, underpinning a Dividend per share growth target of at least 7% per annum for each of these financial Years so therefore they expect that total dividends per share will be no less than 10.18p for the 2013 financial year and it has very good current and future investment as we discuss above.

Part 2 Recent Ten Year Research and Analysis of Vodafone Stock Activity (Appendix 5) Vodafone is ranked four in FTSE 100 based on capitalization of 91,359 (Billion). Last ten analysis of VOD (appendix 6) stock activity. In the start of 2001 VOD stock price was at 241 and at the end of year it was at 179.59 almost 25.4% decreases in its value although it total year volume was very good almost 83 billion and it post dividend of 1.402 pence. This year was not good for investors point view because in 2001 FTSE 100 index decline almost 16.2% where as VOD decline 25.4%. In 2002 its stock price was at 179.59 where as at the end of year it was at 113.15 again decline in stock price almost 36.5%. Nine billion increase in total year volume and 5% in dividend. This year was again very disappointed for investor because this year FTSE 100 index decline almost 24.5% where as VOD stock price decline almost 36.5%. . In 2003 its stock price increase almost 22% and increase in divided which is 14.99% where as FTSE 100 index increase 13.6% and bad thing is 16 million decreases in volume due to last two bad years for investors. In 2004 stock price increase almost 2% and 20% increase in dividend. FTSE 100 index increase 7%. 9 million decline in volume. In 2005 almost 11% decrease in VOD stock price where as FTSE 100 index increase almost 16.71%. In this year one million increase in volume and 100% increase in dividend. In 2006 almost 12% increase in stock price where as FTSE 100 index also increase almost 10%.Huge 23 billion increase in volume and 49.9% increase in dividend. 2007 was very good year for investor almost 32.9% increases in VOD stock price and 11.4% increase in dividend although 13 billion decrease in volume. FTSE 100 index increases almost 4.2%. 2008 is not good for London Stock exchange or any stock exchange in world almost 30% declines in FTSE 100 index and 26.5% decline in VOD stock price. Increase in dividend almost 11.4% and 29 billion decreases in VOD volume. In 2009 almost 3.5% increase in VOD stock price and 3.5% growth in dividend. 15 billion decrease in volume and FTSE 100 index increase by 21.91%. In 2010 VOD stock price increase by 15.3% and post a divided of 8.31 pence. 10 billion decrease in volumes and FTSE 100 index increase 9%. Good Thing Increase in dividends and Earning per Share almost every year.

Bad Thing Volumes are decreases almost every year and stock value is not stable. Current Quote Current this year VOD is trading about 171.50 it had a high 185 and low of 165. Four month volume is almost 4 billion which is not good. Part 3 Ratio Analysis of Vodafone Group Plc Financial Ratios Financial ratios relate different figures of financial statements and help the users to kind the financial health of an organization.( McLaney & Artill (2008)). Simply finding the ratios does not give us any meaningful information, by comparing ratios with past performance of the organization, with any other similar organization and with industry average can give us closer image of an organization performance and position. Comparison with industry is also useful from competition point of view i.e. how well we are performing than our competitors. Firms can also compare the actual with planned for accessing their own performance Mclaney & Artill (2008). According to Mclaney & Artill (2008) financial ratios can be divided into five categories as follows: Profitability ratios Efficiency ratios Liquidity ratios Investment ratios Long term solvency Liquidity Liquidity ratio tells you about the ability of an organization in meeting its short term obligations or it deals with a question will the organization is able to pay its current liabilities. From the last three year there is increase in quick and current ratio. However its still lower than industries quick and current ratio. In 2010 Vodafone Group Plc quick ratio was 0.47 where as Industry quick ratio was 1.12. Current ratio of Vodafone Plc was 0.50 whereas industry was 1.01. From past three years,

there was a decrease in working capital and cash flow almost stable which shows company working capital is not being used efficiently. Liquidity ratio shows that Vodafone Group Plc liquidity is low and has more short term borrowing and receivable then cash and account receivable.

Long Term Solvency: Vodafone Group Plc long term solvency position is fluctuate from past three years, its debt ratio in 2008 was 0.39 and in 2009 it was 0.44 whereas 0.42 in 2010. It means Vodafone did not pay debt interest from 2008 to 2009 however they some debt in 2010. Same thing happen for debt to equity. Time interest earned in 2008 was 7.7 million and in 2008 was 3.6 whereas in 2010 was 11.9. It means from 2008 to 2009 Vodafone did not make much profit or pay too much interests on liabilities however in 2010 time interest earned is around 11.9m which shows Vodafone made profit or have low borrowing cash flow increase from last three years. Vodafone Group Plc long term solvency is just not efficient. Management efficiency: On the base of three years we can say that management of Vodafone is very efficient there had an improvement every year. Account receivable turnover decrease every year so its mean their ability to be collect cash from customer is increase. Inventory turnover increases every year. Assets turnover almost remain constant from three years. Inventory days also decrease from three years inventories remain in store for few days. Profitability Vodafone Group Plc profitability ratio is not stable in last three year . Return on sales, return on assets and returns on equity decrease from 2008 to 2009. Return on sales in 2008 was 19.04% it decrease more than 150% it is 7.5% in 2009 whereas it increase more than 150% it was almost 19.35% same case with returns on assets and returns on equity. In 2009 returns on sale was low this might be due to high cost of sale or high interest cost. In 2010 return on sales, return on equity was high because company cost of goods sold may be under control or may be their borrowing interest may be low. In 2010 Vodafone Group Plc gross profit margin was 33.80% whereas industries profitability ratio is 44.47%.Vodafone Group profitability ratio is not because it is also then industries profitability ratio. Investment Price/Earnings ratio of Vodafone Group Plc was less than the industries. Price/Earnings ratio of Vodafone Group Plc was 9.4 whereas industry was12.5. Vodafone Group Plc dividend yield is greater

than industry yield and increase in dividend from last years which is very good for investor. From stock point of view Vodafone Group Plc shares are not stable. In 2008 it move between 96.40 to 193 which shows almost 100% fluctuation whereas in 2009 and 2010 it move between 111.2 to 148 and 126.74 to 179 respectively.

Appendix: Appendix 1: Vodafone 2010 Annual report Link: Annual Report of Vodafone http://www.vodafone.com/content/dam/vodafone/investors/annual_reports/annual_report_accou nts_2010.pdf Appendix 2: Annual report Of O2: O2 is owned by British Telecom named as BT. It is UK base company. Its 2010 Annual report. Link:http://www.btplc.com/Sharesandperformance/Annualreportandreview/pdf/BTGroupAnnualRe port2010.pdf Appendix 3: Annual report Of Orange: Orange is owned by France Telecom. Its 2010 annual report. Link:http://www.orange.com/en_EN/finance/documentation/annualreports/att00014094/FTEL_100 5297_complet_GB.indd_RVB.pdf Appendix 4: T-Mobile is a German wireless services provider, owned by Deutsche Telekom. Its 2010 annual report.Link:http://www.downloadtelekom.de/dt/StaticPage/98/66/44/DTAG_GB10_E_Gesamt_1.3. 11.pdf_986644.pdf Appendix 4: 3G is owned by Hutchison telecom. Hong Kong based company it annual report 2009 to 2010. Link: http://hutchison09.annualreport.com.au/pdfs/Hutchison_Telecoms_Annual_Report_2009.pdf Appendix: 5 Last ten years stock values of Vodafone Group Plc and graph.

Vodafone's returns
The return a company generates on its shareholders' funds is known as return on equity, or ROE. Return on equity can be calculated by dividing a company's annual profits by its equity (ie, the difference between its total assets and its total liabilities) and is expressed as a percentage. Vodafone has outperformed the FTSE 100 over the last five years, delivering an average dividend yield of 5.5% and a share price gain of 26% -- so how has Vodafone's ROE changed during that time? Vodafone 2009 2010 2011 2012 2013 Average 3.7% 9.8% 9.0% 8.5% 0.6% 6.3% ROE