Vodafone Group Plc VOD Half Yearly Report

  Vodafone Group Plc (VOD) - Half Yearly Report

RNS Number : 9472Q
Vodafone Group Plc
13 November 2012




Vodafone announces results for the six months ended 30 September 2012

13 November 2012

                                      





· H1 Group organic service revenue growth -0.4%*; N. Europe +1.5%*, S.
Europe -9.8%*, AMAP +5.2%*

· Q2 Group organic service revenue growth -1.4%*; N. Europe +0.7%*, S.
Europe -11.3%*, AMAP +4.1%*

· H1 EBITDA down -2.9%* to £6.6 billion; EBITDA margin down 1.0*
percentage point

· Adjusted operating profit £6.2 billion, up 8.5%*; expected to be in the
upper half of the guidance range for the full year 

· Impairments totalling £5.9 billion for Spain and Italy as a result of
challenging market conditions and changes to discount rates

· Free cash flow £2.2 billion; expected to be in the lower half of the
guidance range for the full year

· Interim dividend per share of 3.27 pence, up 7.2%

· £2.4 billion  dividend due from  Verizon Wireless by  the end of  2012; 
£1.5 billion buyback to commence after receipt





Financial highlights(1)                  Six months ended Change year-on-year
                                        30 September 2012  Reported Organic
                                                       £m         %       %
Group revenue                                      21,780      (7.4)    +0.2
Group service revenue                              20,157      (7.9)    (0.4)
Northern and Central Europe ('N.
Europe')                                            9,051      (2.0)    +1.5
Southern Europe ('S. Europe')                       4,978     (18.1)    (9.8)
Africa, Middle East and Asia Pacific
('AMAP')                                            6,053      (5.1)    +5.2
Loss for the financial period                      (1,886)
Adjusted operating profit                           6,170      +2.2    +8.5
Free cash flow                                      2,178     (16.7)
Loss per share                                     (4.01p)
Adjusted earnings per share                          7.86p      +1.4



· Continued strong growth in data +13.7%* and emerging markets(2) (India
+11.0%*, Vodacom +4.6%*, Turkey +18.0%*) in Q2

· Smartphone penetration in Europe now 30.7%, with 45.5% of European
mobile service revenue now in-bundle; new tariff plans launched across major
European markets since September

· Enterprise revenue declined -0.4%*; continued strong growth in Vodafone
Global Enterprise, M2M and Vodafone One Net offset by macroeconomic challenges
in country-level enterprise units

· Continued execution of efficiency programme, with £300 million absolute
reduction in European opex targeted in the 2014 financial year



Vittorio Colao, Group Chief Executive, commented:

"We have continued to make progress on our strategic priorities over the  last 
six months, with good  growth in data and  emerging markets in particular.  In 
the short-term, however, our results reflect tougher market conditions, mainly
in Southern Europe.



"We remain very positive about the longer-term opportunities, and our Vodafone
2015 strategy reflects our confidence  in the future. This  is based on a  new 
strategic approach  to our  consumer offer  and pricing  in Europe  now  being 
rolled out, an increasing focus  on unified communications in enterprise,  and 
an attractive and  growing exposure  to emerging markets.  Fundamental to  the 
success of this strategy  will be an ongoing  enhancement of the consumer  and 
enterprise customer  experience through  continuous investment  in high  speed 
data  networks,   and  an   increased   drive  towards   standardisation   and 
simplification across the  Group to  maximise cost  efficiency and  accelerate 
execution."



Notes:

* All amounts in  this document marked  with an "*"  represent organic  growth 
  which presents performance on  a comparable basis, both  in terms of  merger 
  and acquisition activity  and movements  in foreign exchange  rates. From  1 
  October 2011  the  Group revised  its  intra-group roaming  charges.  Whilst 
  neutral to Group revenue and profitability, these changes have had an impact
  on reported service revenue by country and regionally since 1 October  2011. 
  Whilst prior  period  reported revenue  has  not been  restated,  to  ensure 
  comparability in organic growth rates,  country and regional revenue in  the 
  prior financial  period have  been  recalculated based  on the  new  pricing 
  structure to form the basis for our organic calculations.
1 More information on non-GAAP measures can be found on page 41.
2 Emerging markets comprise  India, Vodacom, Egypt,  Turkey, Ghana, Qatar  and 
  Fiji.







CHIEF EXECUTIVE'S STATEMENT



Financial review

Group

Group revenue was up 0.2%* on an organic basis but down -7.4% to £21.8 billion
on a reported basis. Organic service revenue declined -0.4%* in the first half
of the  financial year,  and -1.4%*  in  Q2. Excluding  the impact  of  mobile 
termination rate ('MTR') cuts,  service revenue growth in  the first half  was 
1.4%*. We achieved good growth in our emerging market operations and from  the 
continued  uptake  of  data  across  the   Group,  but  this  was  offset   by 
macroeconomic pressures in southern Europe.



Group EBITDA was  down -2.9%* on  an organic  basis, but down  -11.7% to  £6.6 
billion on  a reported  basis, mainly  due to  adverse foreign  exchange  rate 
movements.  EBITDA  margin  was  down  1.0*  percentage  points   year-on-year 
primarily as a consequence of the  revenue decline in Italy, ongoing  weakness 
in brand perception in  Australia and restructuring  costs in Germany,  partly 
offset by margin improvements in South Africa and India.



Adjusted operating profit  was £6.2  billion (H1  2012: £6.0  billion). On  an 
organic basis, adjusted operating profit was up 8.5%* year-on-year, driven  by 
a strong performance from Verizon Wireless ('VZW').



The Group incurred a  total impairment charge of  £5.9 billion in relation  to 
the carrying value  of goodwill  of its  operations in  Spain and  Italy as  a 
result of  challenging market  conditions and  adverse movements  in  discount 
rates.



Reported loss per share was -4.01 pence, impacted by the impairments  outlined 
above. Adjusted  earnings per  share  of 7.86  pence grew  1.4%  year-on-year, 
reflecting the strong adjusted operating profit performance and the  reduction 
in shares outstanding  resulting from the  share buyback programme,  partially 
offset by a higher effective tax rate.



Free cash flow for the first half of the 2013 financial year was £2.2  billion 
(H1 2012: £2.6 billion). This year-on-year  decline is mainly the result of  a 
weaker euro in the reporting period  and the non-recurrence of a £0.2  billion 
dividend after the disposal of our 44% interest in SFR in June 2011. Capex for
the period was £2.5 billion (H1 2012: £2.6 billion). Net debt at 30  September 
2012 was £26.0  billion (31 March  2012: £24.4 billion).  The movement in  net 
debt since 31 March 2012 has been driven by underlying cash generation and the
receipt of  the £1.5  billion  final tranche  of the  SoftBank  consideration, 
offset by £1.1  billion of share  buybacks, equity dividend  payments of  £3.2 
billion and the £1.3 billion consideration paid for Cable & Wireless Worldwide
plc ('CWW').



The Board has agreed an interim dividend per share of 3.27 pence, an  increase 
of 7.2% year-on-year, in line with our dividend per share growth target of  at 
least 7% per annum until March 2013.



Northern and Central Europe

In Northern  and Central  Europe, service  revenue was  up 1.5%*  in H1,  with 
growth of 0.7%*  in Q2. The  growth drivers  in Q2 were  Germany (+1.8%*)  and 
Turkey (+18.0%*), while the UK and the Netherlands deteriorated by -3.2%*  and 
-2.3%* respectively.



EBITDA for  the region  was -3.3%*  down year-on-year  at £2.8  billion,  with 
reported EBITDA margin down -2.4 percentage points year-on-year. This  decline 
was driven by  Germany and the  UK, as well  as the inclusion  of CWW for  the 
first time. The margin in Turkey continued to improve.



Southern Europe

Service revenue in Southern Europe fell -9.8%* in H1, with service revenue  in 
Q2 down -11.3%*. Italy  worsened significantly in  Q2 (-12.8%*), reflecting  a 
cut in MTRs on 1 July 2012,  as well as ongoing competitive and  macroeconomic 
pressures. Spain also continued to be weak (Q2: -12.0%*).



Southern Europe EBITDA  was down -15.1%*  year-on-year to £1.9  billion, as  a 
result of the weak revenue performance  in all markets, and margin erosion  in 
Italy, Greece and Portugal. Margins in Spain were stable year-on-year.



Africa, Middle East and Asia Pacific ('AMAP')

AMAP service revenue was up 5.2%* in H1, with year-on-year growth of 4.1%*  in 
Q2. In India, service  revenue growth slowed to  11.0%* in Q2, reflecting  the 
impact of regulatory changes, the  recognition of SMS termination revenue  for 
the first time in the  prior financial year and a  less active market for  new 
customer acquisitions.  Growth  at Vodacom  slowed  slightly to  4.6%*  in  Q2 
primarily due  to pricing  pressure.  In Australia,  service revenue  fell  by 
-14.4%* in Q2, as the business continued to focus on network improvements  and 
arresting weakness in brand perception.



AMAP EBITDA was up 10.6%* on  an organic basis, with EBITDA margin  increasing 
by 1.4* percentage  points. Margins  at Vodacom  and in  India made  excellent 
progress as a result  of focused cost control  and increasing scale  benefits, 
although this was partially offset at the regional level by weaker margins  in 
Australia.



Verizon Wireless

VZW, our US associate, achieved organic service revenue growth of 8.0%* in  H1 
and 7.8%* in Q2.  Our share of  profits from VZW was  £3.2 billion, up  27.4%* 
year-on-year. VZW's net debt declined from US$6.4 billion at 31 March 2012  to 
US$1.9 billion at 30 September 2012, despite spending US$3.7 billion (net)  on 
the acquisition of spectrum in H1.



On 12 November 2012 VZW declared a dividend of US$8.5 billion (£5.3  billion), 
of which Vodafone's share is US$3.8  billion (£2.4 billion). The dividend  is 
due by the end  of the 2012  calendar year. The Group  intends to commence  a 
£1.5 billion share buyback programme after receipt of the dividend.



Strategy update



A more valuable Vodafone

In November 2010 we announced our strategy to build a more valuable  Vodafone. 
The key elements were to  focus on the core  growth areas of data,  enterprise 
and emerging  markets; to  deliver value  and efficiency  from scale;  and  to 
generate liquidity or  free cash  flow from non-controlled  interests. At  the 
same time, we reinforced  our commitment to  rigorous capital discipline  with 
regard to investment decisions.



In the last two financial years,  the proportion of our revenue deriving  from 
non-voice services and emerging markets has risen from 56% of service  revenue 
in H1 of the 2011 financial year, to 65% in H1 of the current financial  year, 
thus reducing our dependence on voice revenue in mature markets. Data  revenue 
in the financial year  ended 31 March  2012 was £6.2  billion, an increase  of 
£2.2 billion  over  the financial  year  ended 31  March  2010. 30.7%  of  our 
European customers now use smartphones, compared to 14.5% at September 2010.



In the enterprise  business, we  have consolidated  our position  as a  market 
leader in our core national enterprise operations, whilst also broadening  our 
reach across  a wide  spectrum of  businesses,  from SoHo  up to  the  largest 
multinational  corporations.  Enterprise   revenue  growth  has   consistently 
outstripped consumer revenue growth in Europe over the last two years.



Our emerging  markets  operations have  continued  to grow  strongly,  led  by 
Vodacom, India and Turkey. We have sustained a significant level of investment
in emerging markets, which has translated  into strong market share gains  and 
improving margins in many of these businesses.



At the  same  time, we  have  made  significant progress  in  simplifying  our 
portfolio of assets, allowing management to focus on controlled operations and
free  up  capital  for  reinvestment  in  the  business  and  distribution  to 
shareholders.



Since September  2010, our  disposal programme  has raised  £14.8 billion,  of 
which £6.8 billion has been returned to shareholders by way of share buybacks.
In addition, in January 2012 we received a £2.9 billion dividend from VZW,  of 
which £2.0 billion was immediately  distributed to Vodafone shareholders as  a 
special dividend. Including the interim dividend declared today and the  share 
buyback announced  today,  we  have  returned a  total  of  £21.2  billion  to 
shareholders since  September 2010,  equivalent to  approximately 25%  of  our 
market capitalisation at that time.



Vodafone 2015

While  the  macroeconomic  and  regulatory  environment  in  Europe   presents 
significant short-term challenges, we see  a number of positive  developments. 
We expect smartphone adoption to accelerate in all markets over the next three
years,  with  mobile  applications   and  low  cost  smartphone   availability 
increasing in mature and emerging markets alike. With the broad deployment  of 
high speed data networks, we expect  customers' appetite for data to  increase 
significantly. At the  same time, the  evolution of network  and IT  platforms 
should enable lower cost  and more standardised  approaches as commercial  and 
technology planning are integrated.



As a result, we believe that the long-term prospects for the mobile market are
highly attractive for those that make scale, standardisation and the  customer 
data experience fundamental to how they operate. Our strategy is to be:



Ÿ A scale data company;
Ÿ A strong player in enterprise;
Ÿ A leader in emerging markets;
Ÿ A selective innovator in services; and
Ÿ A cost efficient organisation.



Consumer 2015

We are adopting a new strategic  approach to consumer pricing and bundling  in 
Europe, in order to  offer customers worry-free usage  and, at the same  time, 
stabilise ARPU. We  are launching  new tariffs including  unlimited voice  and 
SMS, and much larger  data allowances than before.  Pricing will be  radically 
simplified as a result, giving clear visibility of the cost of ownership  and, 
thereby, lower complexity for  IT and billing. The  value proposition will  be 
progressively enhanced  through the  introduction of  a number  of  additional 
features, including improved access  to technical support, attractive  roaming 
packages, shared data plans,  early handset upgrades,  storage and back-up  in 
the cloud, and device security, to  increase the breadth of service and,  over 
time, ARPU.



In emerging markets, our goal is to build  on our success to date to become  a 
clear leader,  increasing the  value of  these markets  to the  Group  through 
market growth, improving  margins, share gains  and stronger cash  generation. 
These markets offer very attractive long-term opportunities from sustained GDP
growth, the scope for widespread mobile  data adoption and the fulfillment  of 
unmet needs  such  as basic  financial  services.  We aim  to  maximise  these 
opportunities  through  smart  data  pricing,  the  development  of   low-cost 
smartphones,  and  selective  innovation  in  areas  in  which  we  can  truly 
differentiate.



Enterprise 2015

We plan  to  strengthen our  leading  position in  enterprise,  enhancing  our 
product offering to large and medium-sized businesses and creating a dedicated
enterprise operational  structure, following  the market  success of  Vodafone 
Global Enterprise ('VGE') and the CWW acquisition.



VGE, serving the biggest multi-national accounts, will continue to expand  its 
remit, driven  by  an  increasing  appetite  among  customers  to  consolidate 
telecoms procurement cross-border and bring  mobility into the heart of  their 
business strategies.  In  converged  services, we  will  continue  to  develop 
Vodafone One  Net  for small-  and  medium-sized companies,  and  increasingly 
provide total communications services to our larger customers. In M2M, we will
leverage our new  business unit  organisation, global  technical platform  and 
vertical sector competences  to exploit the  current wave of  adoption of  M2M 
solutions across  many industry  and  service sectors.  In addition,  we  will 
develop our  product offering  in  high growth  segments,  such as  cloud  and 
hosting, thereby leveraging the expertise acquired with CWW.



Network 2015

Our network strategy  continues to focus  on supporting higher  speed data  in 
both mature and emerging markets, and delivering a consistently excellent data
experience to our customers  through the widespread  deployment of HSPA+,  LTE 
and  high  capacity  backhaul.  We  will  continue  our  consistent  level  of 
investment so that Vodafone customers can be assured of a video-standard  data 
service across our footprint in Europe and we can successfully manage the high
growth in data volumes anticipated.



Operations 2015

As a  result of  our new  approach  to consumer  and enterprise  data  product 
catalogues and pricing, over the next three years we will further simplify our
business  model  both   across  and  within   countries,  eliminating   legacy 
structures,  reducing  non  customer-facing  costs  and  moving  towards  more 
standardised offerings. This will  enable us to maximise  the benefits of  our 
scale and share commercial, technical and support functions across geographies
in Europe,  and  to speed  up  and co-ordinate  our  time to  market  for  new 
propositions and  services.  We  see a  significant  opportunity  in  unifying 
network and IT management across multiple markets, in further centralising and
standardising procurement, and in offshoring more business functions to shared
service centres  of  expertise. We  are  targeting an  absolute  reduction  in 
European operating expenses from these and other programmes of £300 million in
the 2014 financial year.



Outlook and guidance(1)



Overall performance in our controlled operations in the first half of the 2013
financial year has been slightly below our expectations, mainly as a result of
a further weakening in the  macroeconomic environment. However, this has  been 
offset by a very strong  performance by VZW. We  expect the environment to  be 
similar in the second half of the 2013 financial year.



We now expect adjusted operating profit for  the full year to be in the  upper 
half of the range of £11.1 billion to £11.9 billion indicated in May 2012  and 
free cash flow to be in  the lower half of the  range of £5.3 billion to  £5.8 
billion indicated in  May 2012. We  expect the Group  EBITDA full year  margin 
decline to continue its improving trend year-on-year, excluding the impact  of 
M&A and restructuring costs.



Note:

1 See 'Guidance' on page 8.





GROUP FINANCIAL HIGHLIGHTS



                                           Six months ended

                                             30 September
                                              2012   2011      % change
                                      Page      £m     £m Reported Organic
Financial information(1)
Revenue                                27  21,780 23,520     (7.4)     0.2
Operating profit                       27     274  8,999    (97.0)
(Loss)/profit before taxation          27    (492)  8,011
(Loss)/profit  for  the  financial 
period                                 27  (1,886)  6,644
Basic  (loss)/earnings  per  share 
(pence)                                27  (4.01p)  13.06p
Capital expenditure                21, 42   2,516  2,618     (3.9)
Cash generated by operations           21   6,192  7,069    (12.4)
Performance reporting(1), (2)
EBITDA                                  9   6,647  7,532    (11.7)    (2.9)
EBITDA margin                                 30.5%   32.0%   (1.5pp)  (1.0pp)
Adjusted operating profit            9, 44   6,170  6,035      2.2     8.5
Adjusted profit before tax          11, 44   5,341  5,142      3.9
Adjusted effective tax rate            11    26.6%   25.2%
Adjusted profit attributable to
equity shareholders                 11, 44   3,877  3,962     (2.1)
Adjusted earnings per share
(pence)                             11, 44    7.86p   7.75p      1.4
Free cash flow                         21   2,178  2,616    (16.7)
Net debt                            21, 22  25,964 26,247     (1.1)



Notes:

1 Amounts presented at 30 September or for the six month period then ended.
2 See page 41  for "Use  of non-GAAP financial  information" and  page 46  for 
  "Definitions of terms".





GUIDANCE



Please see page 41for  "Use of non-GAAP financial  information", page 46  for 
"Definition of terms" and page 47 for "Forward-looking statements".



2013 financial year guidance    Original guidance        Updated guidance

                             2013 financial year    2013 financial year

                                              £bn                     £bn
Adjusted operating profit             11.1 - 11.9 Upper half of the range
Free cash flow                          5.3 - 5.8 Lower half of the range



Assumptions



Guidance for the 2013 financial year is based on our current assessment of the
global macroeconomic outlook  and assumes foreign  exchange rates of  £1:€1.23 
and £1:US$1.62.  It excludes  the impact  of licence  and spectrum  purchases, 
income dividends received from VZW, material one-off tax related payments  and 
restructuring costs, and assumes no  material change to the current  structure 
of the Group.



Actual foreign  exchange  rates  may  vary  from  the  foreign  exchange  rate 
assumptions used. A  1% change  in the euro  to sterling  exchange rate  would 
impact adjusted operating profit  by approximately £40  million and free  cash 
flow by approximately £30 million, and a  1% change in the dollar to  sterling 
exchange rate  would impact  adjusted operating  profit by  approximately  £50 
million.



CONTENTS



                                                         Page
Financial results                                          9
Liquidity and capital resources                           21
Other significant developments                            24
Risk factors                                              25
Responsibility statement                                  26
Unaudited condensed consolidated financial statements     27
Use of non-GAAP financial information                     41
Additional information                                    42
Other information (including forward-looking statements)  46



FINANCIAL RESULTS



Group(1), (2)

                                 Africa,          Non-

                                  Middle    Controlled

              Northern             East     Interests              Six months

                   and              and           and                   ended

               Central Southern    Asia        Common  Elimi-    30 September
                Europe  Europe Pacific Functions(3) nations   2012   2011       % change
                    £m      £m     £m           £m     £m     £m     £m     £ Organic
Voice revenue    4,248   2,943  4,291            -      - 11,482 13,360
Messaging
revenue          1,440     531    416            -      -  2,387  2,672
Data revenue     1,656     800    780            1      -  3,237  3,062
Fixed line
revenue          1,316     466    199            1      -  1,982  1,802
Other service
revenue            391     238    367          146    (73)  1,069    998
Service
revenue          9,051   4,978  6,053          148    (73) 20,157 21,894  (7.9)   (0.4)
Other revenue      606     400    537           80      -  1,623  1,626
Revenue          9,657   5,378  6,590          228    (73) 21,780 23,520  (7.4)    0.2
Direct costs    (2,477)  (1,191) (1,713)         (108)     73 (5,416) (5,700)
Customer
costs           (2,189)  (1,086) (1,045)            3      - (4,317) (4,627)
Operating
expenses        (2,201)  (1,198) (1,836)         (165)      - (5,400) (5,661)
EBITDA           2,790   1,903  1,996          (42)      -  6,647  7,532 (11.7)   (2.9)
Depreciation
and

amortisation:
  Acquired
  intangibles      (46)       -   (288)            -      -   (334)   (464)
  Purchased
  licences        (456)     (66)    (97)            -      -   (619)   (674)
  Other         (1,184)    (733)   (842)           14      - (2,745) (2,880)
Share of
result in

associates           -       1     23        3,197      -  3,221  2,521
Adjusted
operating
profit           1,104   1,105    792        3,169      -  6,170  6,035   2.2    8.5
  Impairment
  loss                                                         (5,900)   (450)
  Other
  income and

  expense(4)                                                        4  3,414
Operating
profit                                                            274  8,999
Non-operating
income and

expense                                                             1   (161)
Net financing
costs                                                            (767)   (827)
Income tax
expense                                                        (1,394) (1,367)
(Loss)/profit
for the

financial
period                                                         (1,886)  6,644



Notes:

1 The Group  revised  its segment  structure  on  1 August  2012.  See  "Group 
  structure" on page 38.
2 Current period results  reflect average foreign  exchange rates of  £1:€1.25 
  and £1:US$1.58.
3 Common Functions primarily represent the results of the partner markets  and 
  the net result of unallocated central Group costs.
4 Other income and expense for the six months ended 30 September 2011 included
  a £3,419 million gain on disposal of the Group's 44% interest in SFR.





FINANCIAL RESULTS



Revenue

Group revenue was down -7.4% to  £21.8 billion, with service revenue of  £20.2 
billion, a decrease of  -0.4%* on an organic  basis. Our performance  reflects 
continued strong  demand for  data  services and  further growth  in  emerging 
markets, offset primarily by challenging macroeconomic conditions in a  number 
of our southern European markets.



AMAP service revenue  was up  by 5.2%*, with  a robust  performance in  India, 
Vodacom, Qatar,  Ghana and  Egypt, offset  by declines  in Australia  and  New 
Zealand.



In Northern and  Central Europe service  revenue was up  by 1.5%*,  reflecting 
growth in Germany and Turkey, partially offset by declines in the majority  of 
other markets.



In  Southern  Europe  service  revenue  was  down  by  -9.8%*  driven  by  the 
challenging macroeconomic  conditions which  continue  to have  a  significant 
impact on the majority of the region's markets, particularly Italy and Spain.



EBITDA and profit

Group EBITDA was  down -11.7%  to £6.6  billion, including  an 8.1  percentage 
point adverse impact from foreign exchange rate movements. On an organic basis
EBITDA was down -2.9%*, driven by a combination of service revenue decline and
higher customer investment due to increased smartphone penetration.



Adjusted operating profit was up 2.2%  to £6.2 billion, driven by an  increase 
in  our  share  of  profits   from  associates  and  lower  depreciation   and 
amortisation charges, partially offset by  the reduction in EBITDA. Our  share 
of profits of VZW grew by 27.4%* to £3.2 billion.



Operating profit was down -97.0% to £0.3 billion, driven by an impairment loss
of £5.9 billion (2011: £0.5  billion) and a £3.4  billion gain on disposal  of 
the Group's 44% interest in SFR in the six months ended 30 September 2011.



An impairment loss of £5.9 billion was recorded in relation to Vodafone  Spain 
and Vodafone Italy,  driven by  a combination  of lower  projected cash  flows 
within business  plans  and an  increase  in discount  rates,  resulting  from 
adverse changes in the macroeconomic environment since March 2012.



Net financing costs

                                                Six months ended 30 September
                                                         2012           2011
                                                           £m             £m
Investment income                                         187            226
Financing costs                                          (954)         (1,053)
Net financing costs                                      (767)           (827)
Analysed as:
 Net financing costs before income from
 investments                                             (863)           (867)
 Interest income/(charges) arising on
 settlement of outstanding tax issues                      32            (36)
 Income from investments                                    2             10
                                                         (829)           (893)
Foreign exchange(1)                                        62             66
                                                         (767)           (827)



Note:

1 Comprises  foreign  exchange  rate  differences  reflected  in  the   income 
  statement in relation to certain intercompany balances.



Net financing  costs  before income  from  investments reduced  due  to  lower 
mark-to-market losses associated with interest  rate fixing and the impact  of 
the Group's lower average net debt.





Taxation

                                                Six months ended 30 September
                                                         2012           2011
                                                           £m             £m
Income tax expense                                      1,394          1,367
Tax on  adjustments to  derive adjusted  profit 
before tax                                                (14)           (170)
Adjusted income tax expense                             1,380          1,197
Share of associates' tax                                   73            145
Adjusted income  tax  expense for  purposes  of 
calculating adjusted tax rate                           1,453          1,342
(Loss)/profit before tax                                (492)          8,011
Adjustments to  derive adjusted  profit  before 
tax(1)                                                  5,833         (2,869)
Adjusted profit before tax                              5,341          5,142
Add:   Share    of    associates'    tax    and 
non-controlling interest                                  120            185
Adjusted profit before tax  for the purpose  of 
calculating adjusted effective tax rate                 5,461          5,327
Adjusted effective tax rate                             26.6%          25.2%



Note:

1 See "(Loss)/earnings per share" below.





The adjusted effective tax rate for the financial year ending 31 March 2013 is
expected to be in the  mid 20's. This is in  line with the adjusted  effective 
tax rate for the financial year ended 31 March 2012.



(Loss)/earnings per share

Adjusted earnings per share was 7.86 pence, an increase of 1.4%  year-on-year, 
reflecting a  reduction  in shares  arising  from the  Group's  share  buyback 
programme partially offset by  a higher tax charge.  Basic loss per share  was 
-4.01 pence (30 September  2011: earnings per share  13.06 pence), due to  the 
£5.9 billion impairment charge recorded in the current financial period,  with 
the prior financial period also benefiting from the profit on disposal of  our 
44% interest in  SFR, both of  which are excluded  from adjusted earnings  per 
share.



                                                Six months ended 30 September
                                                          2012          2011
                                                            £m            £m
(Loss)/profit    attributable     to     equity 
shareholders                                            (1,977)         6,679
Pre-tax adjustments:
         Impairment loss(1)                              5,900           450
         Other income and expense(2)                        (4)        (3,414)
         Non-operating income and expense                   (1)           161
         Investment   income   and    financing 
         costs(3)                                          (62)           (66)
                                                         5,833        (2,869)
Taxation                                                    14           170
Non-controlling interests                                    7           (18)
Adjusted   profit   attributable   to    equity 
shareholders                                             3,877         3,962
                                                       Million       Million
Weighted average number of shares outstanding -
basic                                                   49,310        51,132
Weighted average number of shares outstanding -
diluted                                                 49,310        51,427



Notes:

1 The impairment charges of £5,900 million and £450 million in the six  months 
  ended 30 September  2012 and  2011 respectively did  not result  in any  tax 
  consequences.
2 Other income and expense for the six months ended 30 September 2011 included
  a £3,419 million gain on disposal of the Group's 44% interest in SFR.
3 See note 1 in "Net financing costs" on page 10.





Northern and Central Europe(1)

                                 Other

                              Northern               Northern

                                   and                    and

                               Central                Central

              Germany    UK   Europe Eliminations   Europe    % change
                   £m    £m       £m           £m       £m     £ Organic
30 September
2012
Voice revenue   1,412 1,122    1,714            -    4,248
Messaging
revenue           417   638      385            -    1,440
Data revenue      796   454      406            -    1,656
Fixed line
revenue           848    24      451           (7)    1,316
Other service
revenue           155   173       94          (31)      391
Service
revenue         3,628 2,411    3,050          (38)    9,051  (2.0)     1.5
Other revenue     263   181      162            -      606
Revenue         3,891 2,592    3,212          (38)    9,657  (1.5)     2.0
Direct costs     (837)  (635)   (1,043)           38   (2,477)
Customer
costs            (880)  (812)     (497)            -   (2,189)
Operating
expenses         (804)  (556)     (841)            -   (2,201)
EBITDA          1,370   589      831            -    2,790  (9.0)    (3.3)
Depreciation
and
amortisation:
  Acquired
  intangibles        -    (3)      (43)            -      (46)
  Purchased
  licences       (241)  (166)      (49)            -     (456)
  Other          (429)  (288)     (467)            -   (1,184)
Adjusted
operating
profit            700   132      272            -    1,104 (19.7)    (9.9)
EBITDA margin    35.2%  22.7%     25.9%                   28.9%
30 September
2011
Voice revenue   1,633 1,201    1,938            -    4,772
Messaging
revenue           440   609      435            -    1,484
Data revenue      748   432      330            -    1,510
Fixed line
revenue           932    22      114            -    1,068
Other service
revenue           126   212      133          (65)      406
Service
revenue         3,879 2,476    2,950          (65)    9,240
Other revenue     223   188      154            -      565
Revenue         4,102 2,664    3,104          (65)    9,805
Direct costs     (894)  (753)     (924)           65   (2,506)
Customer
costs            (839)  (760)     (537)            -   (2,136)
Operating
expenses         (817)  (518)     (761)            -   (2,096)
EBITDA          1,552   633      882            -    3,067
Depreciation
and
amortisation:
  Acquired
  intangibles       -     -      (55)            -      (55)
  Purchased
  licences       (274)  (166)      (56)            -     (496)
  Other          (447)  (282)     (414)            -   (1,143)
Share of
result in
associates          -     -        1            -        1
Adjusted
operating
profit            831   185      358            -    1,374
EBITDA margin    37.8%  23.8%     28.4%                   31.3%
Change at
constant
exchange
rates               %     %        %
Voice revenue    (5.0)  (6.6)     (2.9)
Messaging
revenue           4.2   4.8     (2.9)
Data revenue     16.9   5.1     35.1                             
Fixed line
revenue          (0.1)   9.1    331.4
Other service
revenue          35.0 (18.4)    (23.3)
Service
revenue           2.7  (2.6)     13.4
Other revenue    29.2  (3.7)     16.3
Revenue           4.2  (2.7)     13.6
Direct costs     (2.8) (15.7)    (23.6)
Customer
costs           (15.2)   6.8     (1.7)
Operating
expenses         (8.1)   7.3    (21.3)
EBITDA           (3.1)  (7.0)      3.6
Depreciation
and
amortisation:
  Acquired
  intangibles       -     -     15.1
  Purchased
  licences        3.2     -      5.6
  Other          (5.2)   2.1    (24.6)
Share of
result in
associates          -     -    (54.7)
Adjusted
operating
profit           (7.5) (28.6)    (16.5)
EBITDA margin
movement
(pps)            (2.6)  (1.1)     (2.5)



Note:

1 The Group  revised  its segment  structure  on  1 August  2012.  See  "Group 
  structure" on page 38.





Revenue decreased  by  -1.5% including  a  6.9 percentage  point  impact  from 
adverse foreign exchange rate movements.  On an organic basis service  revenue 
increased by 1.5%*, with the growth  rate for Q2 being 1.7* percentage  points 
lower than in Q1 primarily due  to macroeconomic weakness in some markets  and 
competitive pricing pressures,  partially offset  by growth  in data  revenue. 
Growth in Germany and  Turkey was partially offset  by declines in most  other 
markets, in particular, the UK and the Netherlands.



EBITDA declined by -9.0%, including a 7.0percentage point impact from  adverse 
foreign exchange  rate movements.  On  an organic  basis EBITDA  decreased  by 
-3.3%*, resulting from  a reduction  in service  revenue in  most markets  and 
higher customer investment due to the increased penetration of smartphones.



                                      Organic    Other  Foreign Reported
                                       change Activity exchange   change
                                            %     pps      pps        %
Revenue - Northern and Central Europe     2.0     3.4     (6.9)     (1.5)
Service revenue
Germany                                   3.0    (0.3)     (9.2)     (6.5)
UK                                       (2.1)    (0.5)        -     (2.6)
Other Northern and Central Europe         3.0    10.4    (10.0)      3.4
Northern and Central Europe               1.5     3.3     (6.8)     (2.0)
EBITDA
Germany                                  (3.4)     0.3     (8.6)    (11.7)
UK                                       (7.5)     0.5        -     (7.0)
Other Northern and Central Europe         0.4     3.2     (9.4)     (5.8)
Northern and Central Europe              (3.3)     1.3     (7.0)     (9.0)
Adjusted operating profit
Germany                                  (8.1)     0.6     (8.3)    (15.8)
UK                                      (30.5)     1.9        -    (28.6)
Other Northern and Central Europe        (1.6)   (14.9)     (7.5)    (24.0)
Northern and Central Europe              (9.9)    (3.0)     (6.8)    (19.7)



Germany



Service revenue increased by 3.0%* with  strong growth in data, wholesale  and 
enterprise revenue  more  than offsetting  the  competitive pressures  in  the 
market, particularly in consumer prepaid and fixed line. Data revenue grew  by 
16.9%* driven by higher smartphone penetration and an increase in  smartphones 
sold with a data bundle.  Significant customer wins contributed to  enterprise 
revenue growth  of  5.7%*.  Wholesale revenue  grew  significantly  driven  by 
customer acquisitions supported by the launch of new services by our  partners 
during Q1.  New consumer  prepaid tariffs  were introduced  in April  2012  in 
reaction to continued competitive pressures.



The roll  out  of  LTE has  continued  and  we now  have  232,000  fixed  line 
substitution customers and 28,000 LTE enabled mobile devices using the service
in both rural  and urban  areas. Approximately  3,700 base  stations had  been 
upgraded to LTE at 30 September 2012, providing around 46% household coverage.



EBITDA declined  by -3.4%*,  with a  -2.9*percentage point  decline in  EBITDA 
margin, as the higher  revenue and a one-off  benefit from a legal  settlement 
during the second quarter were  offset by restructuring costs, and  investment 
in customer acquisition and retention.



UK



Service revenue  decreased  by -2.1%*  driven  by macroeconomic  weakness  and 
competitive pressures partially offset by an increase in data revenue and  the 
success of  integrated tariffs.  Macroeconomic  pressures continue  to  impact 
consumer confidence adversely and, in  turn, reduce out-of-bundle revenue.  In 
addition, there  has  been  significant pressure  resulting  from  competitors 
introducing a number of new unlimited tariffs during Q4 of the 2012  financial 
year. In response, new 'Vodafone Red' integrated tariffs were launched  during 
the period. Data revenue  grew by 5.0%* due  to higher smartphone  penetration 
and growth in smartphones sold with a data bundle.



EBITDA decreased by -7.5%*, with a -1.4*percentage point decline in the EBITDA
margin, due to higher retention  costs associated with smartphones,  partially 
offset by interconnect cost reductions driven by lower MTRs.



Other Northern and Central Europe



Service revenue  increased by  3.0%*  as growth  in  Turkey more  than  offset 
declines in the rest of Other Northern and Central Europe. Service revenue  in 
Turkey increased by 18.3%* resulting from continuing expansion of the contract
customer base, strong  growth in data  revenue driven by  mobile internet  and 
higher smartphone  penetration,  strong  growth in  incoming  traffic  and  an 
increase in enterprise revenue.In  the Netherlands, service revenue  declined 
by -1.9%*,  mainly  due to  the  impact of  a  network outage  in  April  2012 
following a  fire  in  Rotterdam as  well  as  the impact  of  MTR  cuts.  CWW 
contributed £307 million  of fixed line  revenue since it  was acquired on  27 
July 20121.  We  have aligned  the  accounting  policies of  CWW  to  Vodafone 
policies which has resulted in certain  revenue and costs in relation to  some 
CWW contracts, which were accounted for gross, being reported on a net  basis. 
The impact in the period of this  policy alignment was a reduction in  revenue 
of approximately £15 million.



EBITDA grew by 0.4%*, with strong growth in Turkey being offset by declines in
other markets. The growth in  Turkey was driven by  the increase in scale  and 
cost management.





Note:

1 The results of CWW are included within the reported results from the date of
  acquisition, however, they are excluded from the organic results. See note 4
  on page 46 for further information.





Southern Europe(1)

                               Other

                            Southern               Southern

              Italy Spain   Europe Eliminations   Europe          % change
                 £m    £m       £m           £m       £m     £   Organic
30 September
2012
Voice revenue 1,214 1,132      597            -    2,943
Messaging
revenue         357    99       75            -      531
Data revenue    349   341      110            -      800
Fixed line
revenue         272   160       34            -      466
Other service
revenue          78   126       45          (11)      238
Service
revenue       2,270 1,858      861          (11)    4,978 (18.1)      (9.8)
Other revenue   158   109      134           (1)      400
Revenue       2,428 1,967      995          (12)    5,378 (17.5)      (9.1)
Direct costs   (542)  (429)     (231)           11   (1,191)
Customer
costs          (366)  (555)     (166)            1   (1,086)
Operating
expenses       (487)  (448)     (263)            -   (1,198)
EBITDA        1,033   535      335            -    1,903 (23.0)     (15.1)
Depreciation
and
amortisation:
   Purchased
   licences     (50)    (5)      (11)            -      (66)
   Other       (293)  (283)     (157)            -     (733)
Share of
result in
associates        -     -        1            -        1
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