Strong Vodafone results hit by 3G costs

Vodafone increased sales to £21.4bn in the twelve months to 31 March, up 29 per cent, but still posted a huge pre-tax loss of £8.1bn thanks to merger and third-generation (3G) costs.

Before tax and one-off charges, the group showed an operating profit of just over £4bn, up 89 per cent.

However, charges relating to the firm's expansion program totalled £11.9bn, compared with £1.7bn in the previous year, and the group spent another £13bn acquiring 3G mobile licences.

The telco now operates in 29 countries, compared with just 10 four years ago. It acquired German giant Mannesmann and US firm AirTouch last year, but will now slow down to focus on providing GPRS from this autumn, and then 3G services.

Chris Gent, chief executive at Vodafone, said: "The focus in this financial year, as we transition to new data services, will be on continued margin improvement and cash flow growth, rather than customer growth and market share." Gent also hinted that the company would move away from pre-paid mobiles to contract services.

Operators such as Vodafone are gambling heavily on the attractiveness of multimedia mobile internet services to consumers, but are not expected to turn a profit on them for many years.

Vodafone said it expected to spend another £10bn over the next five years developing 3G networks. Indeed, telcos across Europe are going heavily into debt to finance the cost of licences and network building.

The debt total has now reached £6.72bn for Vodafone, but this is far less than BT's £26bn and considerably less than the four other largest European telcos.