Vodafone NZ 2011 profit surges – but 2012 starts with a bump

Vodafone NZ (12 months to March 31, 2011)
Net profit*: $151.5 million (2010: $121.6 million)
Revenue: $1.69 billion (2010: $1.59 billion)
Dividend paid to Vodafone PLC*: $130 million (2010: $47 million)

* The net profit is before the dividend. Dividends are paid from prior-year retained earning.

Vodafone NZ net profit jumped 20% to $151.5 million for the year ending March 31, a 20% increase over the $121.6 million reported in 2010.

Revenue lifted 6% $1.69 billion, according to accounts recently filed with the Companies Office for the 12 months to March 31, 2011.

The profit increase came despite intensified competition from relative newcomer 2degrees. (In 2008, its last full financial year before 2degrees launched, Vodafone made a record profit of $191 million. 2degrees  lost $76.8 million on $107 million revenue last year. Telecom's mobile revenue fell 0.1% to $825 million for its year ending June 30).

Increased expenses were offset by lower depreciation, and a lower tax bill.

New year starts with a bump
However, the company has already signalled its current financial year is more challenging.

Vodafone NZ’s first quarter of its 2012 financial year coincided with the government regulating down MTR (mobile termination rates, or the fees a phone company pays a rival to connect mobile calls, or txts, to its network).

The new, Commerce Commission-mandated mobile rates kicked in on May 6. As the largest mobile carrier, Vodafone was a net recipient of MTR. 

The company does not break-out quarterly results.

But its UK parent, Vodafone PLC, did include commentary on its fully-owned New Zealand subsidiary in its results published for its June quarter.

Vodafone PLC said service revenue growth had been impacted by the May 6 MTR cut. And while no country-specific financials were published, the company did say it had lost 26,000 customers in New Zealand during the three months to June 30.

$55 million regulatory profit hit
Vodafone NZ has put a dollar value on the full-year impact of mobile price regulation, however.

In its FY 2011 Companies Office filing, Vodafone forecasts MTR regulation will wipe $55 million from its 2012 profit, and $124 million from revenue.

Forsyth Barr analyst Guy Hallwright, who does not cover Vodafone directly, has previously told NBR that the MTR cuts could slice $30 million from the company's profit.

However, Mr Hallwright noted price elasticity would also be a factor. If cheaper rates motivated customers to use their phones more often, revenue generated from the extra calls would help offset the MTR losses.

$50 million for retail chain
Vodafone NZ's 2011 filing also reveals the company paid $50.1 million to acquire 100% of its retail parter First Mobile, which has 77 stores (Vodafone owns 25% of its second major retailer DigiMobile).

Market share by total mobile connections
Vodafone: 2,458,000*
Telecom: 2,079,000**
2degrees: 580,112**

* Source: Vodafone PLC quarterly financial report, three months to June 30, 2011
** Telecom Annual Report 2011; three months to June 30, 2011
*** 2degrees public statement, March 22, 2011; active customers previous 90 days