Vodafone strategy review

Vodafone released its FY06 results. If execution was performing well with an 11% organic rise in operating profit, 12% growth in profit excluding special items, 7% rise in EBITDA to €26bn and 7.5% growth in revenues to almost €43bn, the results were overshadowed by the effect of a €34write-down of the group's assets in . Vodafone increased, however, by 50% the dividend to shareholders to soften the effects of the huge loss. In the wave, it unveiled its new strategy: cut costs and boost profitability, boost revenues in Europe but rely on emerging markets for its growth, meet its customers total communication needs meaning offering bundled fixed and mobile services through its new Mobile Plus initiative, align capital structure and shareholder returns policy to strategy. So now it is clear, Vodafone will enter the fixed broadband market with a DSL offer. But it plans a cautious low-cost entry, just reselling DSL services it will buy wholesale from other carriers. The first fixed/mobile service bundle introduction will be as expected in in 3Q06, where Vodafone can be backed by its affiliate Arcor. It plans to get 2m users in March 2007 with a related turnover of €240m there.

Many analysts were deceived by the announcement and expected a much more ambitious strategy. Investors, however, received very well the plan and sent the share up.