NZ$69 billion write-down for Vodafone Group

Analysts and investors pleased with mobile operator's announcement despite record write off

Vodafone's write-down of assets to the tune of £23.5 billion or NZ$69 billion weighed heavily on its group results for the year to March. The mobile operator announced a loss of £21.8 billion or almost NZ$64 billion, the biggest red-ink haemorrhage in European business history.

The write-down reflects the company's revaluation of assets such as Mannesman in Germany, which it bought in 2000 for a record £101 billion (NZ$265 billion), and in Italy. Vodafone is under heavy pressure from internet-based services as well as converged telco operators who are offering products the mobile-only provider can't.

Some 400 staff will be laid off in the UK alone, with 6,500 IT jobs around the world due to be outsourced to save costs, as CEO Arun Sarin tries to slash costs at Vodafone.

Despite the loss, investors and analysts reacted positively to Vodafone's announcement and the share price climbed upwards after months in the doldrums. Sarin's plan to steer Vodafone out of its dire reliance on mobile telephony includes seeking access to unbundled DSL lines so that it too can provide a converged, BT Fusion type service.

IDC telecommunications analyst Chris Loh says Vodafone has been caught on the backfoot with the industry moving to Internet Protocol-centric solutions and fixed-mobile converged products. However, Loh too views the turnaround by Vodafone in a positive light, and says that New Zealand would be the perfect test bed for the group in this strategy. The new regulation with naked DSL lines that don't require access seekers to pay for voice service provides Vodafone with options to come up with competitive offering Loh says.

Should Vodafone's main competitor in New Zealand, Telecom, introduce a fixed-mobile converged service soon, Loh believes that the mobile-only operator will lose customers to its rival. Vodafone has asked Commerce Commission to rule on an application for local calling rates, which Loh believes it's crucial for the mobile operator's chances of success.

According to industry sources, Vodafone is looking to buy a New Zealand ISP and has approached several already.

Vodafone New Zealand doesn't report financials separate from the group, but states in its fourth quarter results that it has 2,068,000 customer now or 44,000 more than for the quarter to December 31 last year. This Vodafone says gives it a market share of 52.5%, down 0.4%, and reflecting a steadily declining trend. However, average revenue per user (ARPU) figures have remained steady for both Vodafone's on-account and pre-pay customers.

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