Update: Vodafone records heavy losses for year

Vodafone Group reported a massive loss after one-time charges in the year to March 31 — but the company’s underlying operations continue to do well and are outperforming its competitors, it said Tuesday.

Vodafone reported group revenue for the year of £29.4 billion ($51.1 billion as of March 31, last day of the period reported), up 10 percent from £26.7 a year earlier. Revenue from mobile telecommunications, Vodafone’s primary line of business, reached £28.1 billion, up 9.3 percent from £25.7 billion a year earlier.

Despite the revenue gains, Vodafone reported an operating loss of £14.1 billion for the year, including one-time charges of £23.5 billion. The charges are due to a write-down to reduce the asset value of several of its operations — mainly from Germany, but also relating to Vodafone’s business in Italy and Sweden. The company reported an operating profit of £7.9 billion a year earlier.

During the year, Vodafone added 21.5 million customers, an increase of 15 percent from the 170.6 million users a year earlier.

With mobile data growing increasingly important to operators across the industry, Vodafone reported that nonmessaging data revenue grew by 61 percent, reaching £800 million. Vodafone registered more than 6 million new 3G (third-generation) devices during the year, including 660,000 laptop data cards.

Along with the financial report, Vodafone made a number of announcements and commented on topics that analysts often speculate about.

Vodafone said it is in advanced discussions with major outsourcing firms to consolidate its current 2,500 or so suppliers in IT application development and maintenance down to one or two primary vendors. As part of the outsourcing project, Vodafone also hopes to centralize its IT organization, reducing the number of data centers it operates and consolidating system administration. The project will involve moving many IT functions out of Europe to locations with cheaper labor markets.

Vodafone also announced that it will lay off 400 people from its corporate headquarters, mainly in its marketing organization.

The operator also introduced a plan to begin offering DSL (Digital Subscriber Line) services to its mobile customers through resale agreements. The move allows Vodafone to begin to address demand for converged services, a growing trend in the telecommunications market.

Vodafone believes that reselling is the best option for delivering the service because it only wants to offer DSL, not voice or other capabilities that landline operators also own. “We don’t need to own a country’s full coverage of fixed line infrastructure including the whole switching backbone,” said Thomas Geitner, chief executive officer of new business and innovation for Vodafone.

Ultimately, once the customer base is large enough, it could make sense for Vodafone to consider buying the parts of a landline network required to deliver DSL, he said.

Onlookers expecting news of a change in Vodafone’s ownership stake in U.S. operator Verizon Wireless Inc., another common theme for speculation, will have to wait longer. Arun Sarin, Vodafone’s CEO, said that with Verizon Wireless continuing to outperform expectations and with mobile penetration in the U.S. around 70 percent, Verizon is still a valuable investment.