Preliminary Results - Part 1

Vodafone Group PLC 29 May 2001 PART 1 VODAFONE GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS - YEAR ENDED 31 MARCH 2001 Year ended Year ended Increase 31 March 31 March / FINANCIAL HIGHLIGHTS 2001 2000 (decrease) % Pro forma proportionate basis - mobile businesses (Note 1 & 2) Proportionate turnover £21,428m £16,590m 29 Proportionate EBITDA - before exceptional items £7,043m £5,504m 28 (Note 3) Proportionate Group operating profit - before goodwill and exceptional £5,019m £3,977m 26 items (Note 3) Proportionate registered 82,997,000 53,327,000 56 customers Statutory basis (Note 1) Total Group operating profit - before goodwill and exceptional items (Note 3) £5,204m £2,538m 105 Profit on ordinary activities before taxation - before goodwill and exceptional items (Note 3) £4,027m £2,154m 87 Basic earnings/(loss) per share - before goodwill and exceptional items (Note 3) 3.75p 4.71p (20) - after goodwill and exceptional items (Note 3) (15.89)p 1.80p Dividend per share 1.402p 1.335p 5 1. Pro forma proportionate customer and financial information is calculated on the basis that the merger with AirTouch Communications, Inc. (now Vodafone Americas Asia, Inc.) and the acquisition of Mannesmann AG took place on 1 April in each period presented, which is further described on page 32. Statutory financial information is calculated on the basis required by accounting standards and includes the results of AirTouch Communications, Inc. from 30 June 1999, the date of closure of the merger, the results of Verizon Wireless from 3 April 2000, the date on which the Group's US wireless assets were contributed to the joint venture partnership, and the results of Mannesmann AG from 12 April 2000, the date that clearance for the acquisition was received from the European Commission. 2. Pro forma proportionate customer and financial information is presented for the Group's mobile telecommunications businesses only, excluding paging customers and businesses sold or held for resale at 31 March 2001. 3. Exceptional items comprise exceptional operating costs totalling £320m, compared with £30m for the year ended 31 March 2000, and an exceptional non-operating profit (net) of £80m, compared with £954m last year. Further details are included in Notes 2 & 3. For further information contact: Tim Brown, Group Corporate Affairs Director Melissa Stimpson, Head of Group Investor Relations Jon Earl, Investor Relations Manager Darren Jones, Investor Relations Manager Tel: +44 (0) 1635 673310 Lulu Bridges/Sarah Landgrebe Tavistock Communications Tel: +44 (0) 20 7600 2288 Group Highlights: * Continued strong progress following the acquisition of Mannesmann and formation of Verizon Wireless in April 2000, reflected in substantial increases in mobile pro forma proportionate turnover (up 29%), EBITDA (up 28%), operating profit (up 26%) and registered customers (up 56%). Pro forma proportionate EBITDA 2001 2000 - Mobile telecommunications* £m £m Continental Europe 3,534 2,906 United Kingdom 1,068 934 United States 1,627 1,145 Asia Pacific 587 377 Middle East and Africa 227 142 ------ ------ * before exceptional items 7,043 5,504 ====== ====== * Underlying growth in mobile pro forma proportionate EBITDA, after making adjustment for businesses acquired during the year, of 25% at constant exchange rates. * Worldwide customer base of almost 83 million proportionate registered customers, with over 188 million registered customers in ventures the Group controls or invests in. * Non-voice services, which include Short Message Service (SMS), data and internet services, in the Group's controlled businesses increased to over 8% of service revenues for the year to 31 March 2001 and 9.3% of service revenues in the month of March 2001. * Group net debt at 31 March 2001 of £6.7 billion represented 5.4% of the Group's market capitalisation, after payment for 3G licences, which have been acquired in virtually all of our markets. 3G infrastructure spend will commence in the current financial year with commercial launches expected in the second half of 2002. * Global footprint extended to six new territories: 100% ownership of Eircell in Ireland; 25% stake in Swisscom Mobile in Switzerland; 34.5% interest in Grupo Iusacell in Mexico; 40% stake in Safaricom in Kenya; 2.18% stake in China Mobile in China; effective 78% interest in a consortium awarded the GSM licence in Albania. * Consolidated ownership in Airtel Movil in Spain increased to 73.8% and increased ownership in J-Phone in Japan through acquisition of a 25% stake in Japan Telecom. Pending acquisition of BT's stakes in these businesses will further increase the Group's ownership interests to 91.6% in Airtel, 45% in Japan Telecom and a 60% economic interest in the J-Phone companies, including indirect ownership interests. * Agreement for the sale of non-core businesses acquired as part of the Mannesmann transaction for an aggregate value of approximately £33.3 billion. Chris Gent, Chief Executive of Vodafone Group Plc, commented: These results show the positive benefits of the effective integration of the recent acquisitions of both Mannesmann and AirTouch and the first year of trading for Verizon Wireless. They also confirm the strong competitive position of the Group, highlighting its diversified global presence, strong funding position and track record of successful execution. The Group's three-pronged growth strategy has delivered strong customer growth, continued geographic expansion and strong data revenue growth from the introduction of new services. Following the recent introduction of changes to our commercial policies 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. Vodafone, with its unrivalled global positioning, is ideally placed to sustain its leadership in the exciting growth opportunity that lies ahead, for the benefit of its customers and shareholders. REGIONAL HIGHLIGHTS: Continental Europe * Pro forma proportionate registered customers increased by 73% during the year to over 49.6 million, including the stake increases in Airtel and the acquisition of Swisscom Mobile. * Mobile pro forma proportionate EBITDA, before exceptional items, increased to over £3.5 billion, growth of 22%. Excluding the results of D2 Vodafone, mobile pro forma proportionate EBITDA increased by over 46%. * D2 Vodafone remained market leader in Germany with almost 21 million venture customers, record customer connections during the year increasing its registered customer base by 89%. EBITDA margin in Germany increased in the second half of the year to 39%, giving an EBITDA margin for the full year of 35%. * Omnitel Vodafone market leader on net connections in Italy with 4.4 million net additions (38% of total market growth) in the year, with 15.6 million venture customers at 31 March 2001. * Vizzavi Europe, Vodafone's and Vivendi Universal's European joint venture multi-access portal company, had more than 0.7 million customers at 31 March 2001, which is projected to increase substantially as service is rolled out to Germany, Italy, Spain, Greece and Portugal by the end of 2001. United Kingdom * Market leader with approximately 12.3 million registered customers, an increase of approximately 40% in the year. * Proportionate EBITDA of almost £1.1 billion, a 14% increase. * Vodafone rated the number one UK network in latest Oftel customer satisfaction survey. United States * Proportionate EBITDA of more than £1.6 billion, before exceptional restructuring costs. * Almost 1 million data customers registered by Verizon Wireless at the end of the year. * Verizon Wireless successful in the FCC's auction of 1.9 GHz spectrum, winning 113 licences at a total cost of $8.8 billion, providing additional capacity for advanced services in key markets in the US. Asia Pacific * J-Phone's total customer base increased by 23% to almost 10 million customers, 62% of which have internet-capable phones. * Non-voice service revenues accounted for almost 13% of J-Phone revenues in the month of March 2001, with over 8% of revenues being internet data. * Proportionate registered customers in Vodafone Pacific increased by over 58% to more than 2.8 million. Proportionate EBITDA increased by 35%. Middle East and Africa * 93% increase in proportionate registered customers during the period to 2.3 million, reflecting continued strong growth of the Group's profitable operations in Egypt and South Africa. CONTINENTAL EUROPE The Continental Europe region made good progress during the year, both in terms of customer growth and financial performance. Pro forma proportionate registered customers increased by 73% in the year to close at over 49.6 million at 31 March 2001. Regional turnover, EBITDA and operating profit (calculated on a pro forma proportionate basis before goodwill and exceptional items) increased by 21%, 22% and 14%, respectively, compared with the pro forma results for the previous financial year. The completion of the Mannesmann acquisition on 12 April 2000 had a major impact on the results from the region, bringing in both D2 Mobilfunk and Omnitel Pronto Italia as controlled subsidiaries in two of Europe's most important markets. The businesses have since been rebranded to D2 Vodafone and Omnitel Vodafone, respectively. In the largest market, Germany, D2 Vodafone recorded unprecedented customer growth and retained market leadership during the year. Omnitel Vodafone has achieved market leadership in net additions, whilst maintaining a high EBITDA margin. Two further significant acquisitions were also completed during the year. In December 2000 the Group increased its stake in Airtel from 21.7% to 73.8% and, during the first quarter of 2001, acquired a 25% shareholding in Swisscom Mobile. Airtel is the second largest network in Spain and Swisscom Mobile is the market leader in Switzerland. Mobile Operations D2 Vodafone - Germany Year to Year to Increase / 31 March 31 March (decrease) Financial highlights 2001 2000 % Pro forma proportionate turnover £4,102m £3,554m 15 Pro forma proportionate £1,421m £1,457m (2) EBITDA - before exceptional items Pro forma proportionate EBITDA margin 35% 41% Operational data Proportionate customers (Note 1) 20,807,000 11,007,000 89 - Registered - Active 18,045,000 ARPU - Blended registered contract & prepay (Note 2) Eur 378 Eur 559 (32) ARPU - Blended active contract & prepay (Note 2) Eur 430 Total non-voice services - % of service revenue 13.4% (Note 2) Messaging - % of service revenue (Note 2) 13.1% Data - % of service 0.3% revenue(2) Note 1 - Comparative data presented on a pro forma basis Note 2 - Calculated for the twelve month periods to 31 March Customer growth in the German cellular market was approximately 95% in the year to 31 March 2001, a rate which exceeded that of previous years and all other European markets. D2 Vodafone had 20,968,000 registered venture customers at 31 March 2001, representing growth of 89% in the year. This explosive growth was attributable principally to prepay product, which represented 60% of the closing customer base, up from 32% at 31 March 2000. Active customers represented 87% of the total registered customer base. D2 Vodafone maintained its market leadership throughout the year in a four operator market, with its closing customer base representing a market share of approximately 39%. The unprecedented customer growth in this highly competitive market resulted in a substantial increase in total customer acquisition costs, although blended cost to connect per customer remained largely unchanged at Eur 116. Primarily as a consequence of these increased costs, EBITDA margin reduced by eleven percentage points to 30% in the first six months of the year, recovering to 39% in the second half to give an EBITDA margin of 35% for the full year. Across the total customer base ARPU decreased from Eur 559 for the year ended 31 March 2000 to Eur 378 this year. The substantial increase in the prepay customer base and reductions in incoming national interconnect were the principal reasons for this decrease. Excluding inactive customers, ARPU for the year would amount to Eur 430, split between an active contract ARPU of Eur 683 and an active prepay ARPU of Eur 178. Customer churn was 11%, a decrease of 4 percentage points from last year. D2 Vodafone leads the Group's European networks in terms of messaging and data revenues, which represented 16.2% of total monthly service revenues in March 2001. Short Message Service (SMS) comprises the largest element of data-related revenues at present, although good growth is anticipated in other data revenues as data speeds and product offerings increase in a 2.5G / 3G environment. Despite the increase in data volumes, the economic model of continuing high customer connection costs to generate lower marginal ARPU is not sustainable. The focus in Germany, along with other key markets in Europe, during the coming year will be to maximise economic returns rather than continuing to increase the size of the customer base, even if this results in some loss of market share. Initial reductions in handset subsidies have been implemented and more actions are envisaged over the coming months to further reduce customer connection costs and improve customer retention. In August 2000, the German government licensed six operators to offer third generation mobile services. D2 Vodafone paid approximately £5.55 billion for a twenty year licence. GPRS commercial service was launched on 28 February 2001. Infrastructure rollout for UMTS services is proceeding according to plan and, subject to handset availability, should be available in 2002. OPI - Italy Year to Year to Increase / 31 March 31 March (decrease) Financial highlights 2001 2000 % Pro forma proportionate turnover £2,323m £1,960m 19 Pro forma proportionate EBITDA £1,048m £818m 28 Pro forma proportionate EBITDA margin 45% 42% Operational data Proportionate customers (Note 1) - Registered 11,937,000 8,533,000 40 - Active 11,100,000 ARPU - Blended registered contract & prepay (Note 2) Eur 338 Eur 380 (11) ARPU - Blended active contract & prepay (Note 2) Eur 364 Total non-voice services - % of service revenue (Note 2) 6.2% Messaging - % of service revenue (Note 2) 6.0% Data - % of service revenue (Note 2) 0.2% Note 1 - Comparative data presented on a pro forma basis Note 2 - Calculated for the twelve month periods to 31 March Omnitel Pronto Italia is the second largest of four operators in Italy and, operating under the brand name Omnitel Vodafone, had a market share at 31 March 2001 of approximately 35%. The Italian market is characterised by a high level of prepay product and relatively low ARPU. However, customer acquisition costs and churn are also low in comparison with other major markets in Europe. Net connection costs stabilised at Eur 37 per customer in the year to 31 March 2001 despite growing competitive pressures in the Italian market, which has four mobile operators. Churn has increased from 13% to 14%. Pro forma proportionate turnover increased 19% despite an 11% decrease in ARPU throughout the period to Eur 338. A reduction in fixed-to-mobile rates in February 2000 contributed significantly to this decrease. Excluding inactive customers, ARPU for the year was Eur 364. EBITDA on a pro forma proportionate basis increased 28% due to increases in cost efficiency. EBITDA margin increased from 42% to 45%. Omnitel Vodafone's registered customer base grew by 40% in the year and totalled 15,680,000 at 31 March 2001, of which 90% were on prepay tariffs. 93% of the closing registered customer base was active. A successful advertising campaign has made Omnitel Vodafone the most recognisable brand of all the mobile operators in Italy. Omnitel Vodafone is amongst the Group's leading European networks in terms of messaging and data revenues, which represented 7.2% of total monthly service revenues in March 2001. Short Message Service (SMS) comprises the largest element of data revenues at present resulting from high levels of SMS penetration in the marketplace. 49.1% of the customer base used the service in March 2001. Following an auction, five operators were licensed to offer third generation mobile services in November 2000. Omnitel Vodafone's fifteen year licence cost approximately £1.6 billion and 3G services are anticipated to be available in the second half of 2002. GPRS service is now being tested with corporate customers and commercial launch, subject to handset availability, is anticipated later in 2001. Mobile operations in the rest of Continental Europe Year to Year to Increase 31 March 31 March % Financial highlights 2001 2000 Pro forma proportionate turnover £3,318m £2,549m 30 Pro forma proportionate EBITDA £1,065m £631m 69 Pro forma proportionate EBITDA margin 32% 25% Operational data Proportionate registered Customers (Note 1) 16,857,000 9,092,000 85 Note 1 - Comparative data presented on a pro forma basis The Group has majority shareholdings in four European subsidiary undertakings listed on public stock exchanges each of which trade under the Vodafone brand; Europolitan Vodafone in Sweden (71.1% ownership interest), Libertel Vodafone in the Netherlands (70.0%), Panafon Vodafone in Greece (55.0%), and Telecel Vodafone in Portugal (50.9%). The Group's other European subsidiary undertakings include Vodafone Hungary (50.1%), Vodafone Malta (80.0%) and Airtel Movil in Spain (73.8%). Additionally, the Group has interests in Proximus in Belgium (25.0%), Societe Francaise du Radiotelephone (SFR) in France (31.9%), Plus GSM in Poland (19.6%), Connex GSM in Romania (20.1%) and Swisscom in Switzerland (25.0%). Pro forma proportionate EBITDA growth of 69% for the rest of Continental Europe includes the increase in the Group's ownership interests in Airtel and the acquisition of Swisscom Mobile during the year. Underlying organic growth (at constant exchange rates and after adjusting for stake increases in the year) in pro forma proportionate EBITDA was 61%. Europolitan Vodafone, the third network operator in Sweden, traded in line with expectations. Its registered customer base increased by 14% during the year to 1,008,000, reflecting the high levels of market penetration in Sweden. Europolitan Vodafone, which has traditionally targeted high value customers through tailored service offerings, began to actively address the prepay market at the end of 2000. By 31 March 2001, 23% of the registered customer base was connected to a prepay service. Europolitan Vodafone was awarded a fifteen year UMTS licence, for no fee, in a 'beauty contest' in November 2000. The infrastructure rollout requirements, which are extensive, are being satisfied primarily through a network build programme being undertaken as a joint venture with Hutchison Investor 3G Access AB, one of the other UMTS licence holders in Sweden. Libertel Vodafone, one of five GSM operators in the Netherlands, traded satisfactorily in a highly competitive market, which continued to demonstrate low tariffs, high customer connection costs and high levels of churn. Despite the difficult trading environment, Libertel Vodafone increased its total registered customer base by 34% to 3,281,000 and recorded year on year EBITDA growth of almost 42%. Registered prepay customers made up 69% of the closing customer base, with the proportion of active customers estimated to be 91%. Libertel Vodafone was successful in winning one of five fifteen year UMTS licences, auctioned in July 2000, at a cost of approximately £467m. Panafon Vodafone performed satisfactorily, increasing its registered customer base by 32% to close at 2,340,000, of which 68% were connected to prepay services. In October 2000 Panafon Vodafone launched CU, a prepay product aimed at the youth market, with low SMS and CU to CU charges. In 2001, CU accounted for approximately 50% of Panafon Vodafone's prepay gross additions generating ARPU which is 60% higher than the existing prepay product, A La Carte. The Greek government is expected to conduct an auction of four UMTS licences in the summer of 2001. Telecel Vodafone traded in line with expectations, increasing its registered customer base by 38% to 2,478,000 at 31 March 2001. Telecel Vodafone is the second largest operator in Portugal in terms of total customers, but has maintained its market leadership in the corporate sector and is the leader in post-paid services in the Portuguese market. Telecel Vodafone was awarded one of four UMTS licences in January 2001 for a fee of approximately £65m. Vodafone Hungary, which is the third operator in Hungary, suffered from the effects of tariff reductions implemented by competing networks following the launch of its service in the final quarter of 1999. Vodafone Hungary connected 176,000 net customers to its network during the year, increasing its registered customer base to 223,000 at the end of the year. Network rollout is progressing satisfactorily and reliance on domestic roaming has now been largely eliminated. Through a number of agreements entered into during January, July and September 2000, and following the receipt of regulatory approvals, the Group increased its shareholding in Airtel Movil from 21.7% to 73.8% on 29 December 2000. Airtel has been consolidated in the Group accounts as a subsidiary undertaking from that date. On 2 May 2001, the Group announced that it had agreed to acquire BT's 17.8% stake in Airtel for a cash consideration of Eur 1.77 billion (approximately £1.1 billion), which will increase the Group's ownership interest to approximately 91.6%. The transaction is conditional upon EU regulatory approval. The two remaining shareholders retain a put option to sell their stakes in Airtel to Vodafone. Airtel had 7,148,000 registered customers at 31 March 2001, representing growth of 27% in the year. 56% of the customer base are connected to its prepay tariffs. A third operator entered the market during the year and the increased competition reduced the market share of both Airtel and the other existing operator. This reduced market share also reflects a revised approach to the less profitable prepay market and increased focus on customer retention, with reduced subsidies being paid to distributors for the acquisition of new prepay customers. The business is expected to be rebranded as Airtel Vodafone in the second half of 2001. The Group has significant minority interests in Proximus in Belgium, SFR in France and the recently acquired Swisscom Mobile in Switzerland. Third generation licences have not yet been awarded in France, although SFR was one of only two applicants for the four licences on offer. Swisscom Mobile is the clear market leader in Switzerland with a market share of approximately 69% and a customer base of over 3.3 million at 31 March 2001. All three businesses traded according to expectations. In February 2001, the Group was successful in winning a licence to operate a GSM network in Albania. The network start up is being managed by Panafon Vodafone and the Group has an effective ownership interest in the new venture of approximately 78%. Other Operations The Group's other operations mainly comprise interests in Mannesmann Arcor, a German fixed line business, Telecommerce, a German IT and data services business, Cegetel of France and Vizzavi Europe, the Group's 50% owned multi-access consumer portal joint venture with Vivendi Universal. These other operations recorded pro forma proportionate EBITDA losses of £27m, and proportionate operating losses of £237m. Mannesmann Arcor is the leading wireline competitor to Deutsche Telekom in Germany. In addition to its wireline activities Arcor provides telecommunication services for Deutsche Bahn AG, the German railway company. An important part of this is a long-term contract under which Arcor has been building a GSM network for railway operations in Germany. By 31 March 2001, Arcor had more than 2.2 million contract voice customers and more than 16.2 billion voice and internet minutes were switched over Arcor's network in the financial year. The revenue of Arcor Group in the year ended 31 March 2001 reached approximately Eur 1.6 billion and the business is EBITDA positive. With the build-up of the point to multi-point joint venture, Arctel, and the recent acquisition of a controlling stake in the city carrier Netcom Kassel, Arcor is successfully pursuing its multi-access strategy. Telecommerce undertakes a range of activities for Group and external customers, from the maintenance of IT facilities to the development of technologies and services supporting cellular networks. The main contribution to revenue is derived from the IT-solutions business. Cegetel, in which the Group has a 15% stake, is the second largest fixed line operator in France. The company also provides internet access services. At 31 December 2000 the company had a share of over 15% of the French telecommunications market with over 2.5 million fixed line customers. Vizzavi, Vodafone's 50:50 joint venture with Vivendi Universal to develop a multi-access portal for the European market, was created in May 2000 and received EU approval in July 2000. UNITED KINGDOM Year to Year to Increase 31 March 31 March / Financial highlights 2001 2000 (decrease) % Proportionate turnover £3,458m £2,945m 17 Proportionate EBITDA £1,068m £934m 14 Proportionate EBITDA margin 31% 32% Operational data Customers - Registered 12,279,000 8,791,000 40 - Active 10,780,000 ARPU - Blended registered contract & prepay (Notes 1 & 2) £306 £380 (19) ARPU - Blended active contract & prepay (Notes 1 & 2) £348 Total non-voice services - % of service revenue (Note 1) 6.6% Messaging - % of service Revenue (Note 1) 5.7% Data - % of service revenue (Note 1) 0.9% Note 1 - Calculated for the twelve month periods to 31 March. Note 2 - UK ARPU has been calculated based on total UK service revenue, consistent with other territories. The calculation was formerly based on UK network service revenue only. The UK mobile phone market grew by 16.3 million net new customers in the year to 31 March 2001, resulting in a total market of 43.4 million registered customers. On this basis, market penetration is 72% compared with 46% at the beginning of the year. Vodafone UK has maintained its clear leadership in this highly competitive market place with a market share of 28.3%, 1.1 million customers ahead of the nearest competitor. Net customer connections during the year were 3,488,000 giving a registered customer base of 12,279,000 at 31 March 2001. There were 10,780,000 active customers, approximately 88% of the registered base. Strong growth in the contract customer base continued throughout the year, resulting in net additions of 582,000 and giving a closing contract customer base of 4,294,000. Continued focus on high value customers ensured that our share of the corporate market was maintained at over 50%. At 31 March 2001, Vodafone UK's service provider companies accounted for 59% of the contract customer base. Prepay products continued to drive the growth in the UK mobile market. The introduction of new tariffs and products stimulated this growth, with the result that 2,906,000 net connections were made in the year ended 31 March 2001. Prepay customers totalled 7,985,000 at 31 March 2001, representing 65% of Vodafone's UK customer base. ARPU for the contract customer base for the twelve months to 31 March 2001 was £550 compared with £562 for the year to 31 March 2000. Excluding inactive customers, contract ARPU was £556. Cost to connect rose to £121 for the year to 31 March 2001 from £94 for the previous year, reflecting the competitive market and the connection of higher value customers in the period. Prepay ARPU has declined from £178 for the year to 31 March 2000 to £156 for this year, due primarily to the impact of lower usage customers being added to the base and the increasing numbers of inactive customers. Excluding inactive customers, prepay ARPU was £191. Prepay cost to connect for the year to 31 March 2001 was £56 compared with £50 in the twelve months to 31 March 2000, reflecting competitive pressures. Vodafone UK has recently announced significant reductions in distribution incentives for prepay products in order to improve the profitability of this market segment. An investment of £610m in network infrastructure improved network quality significantly and enhanced Vodafone's position as the UK's leading network. This, together with improvements to customer service, has helped to reduce network churn in the last twelve months to 25%, compared with 29.8% in the previous twelve months. The network was rated number one in the Oftel customer satisfaction survey in October 2000. Commercial service of GPRS was launched in April 2001 in the corporate market, following successful and extensive trials. Initial feedback from customers has been very encouraging. 3G development is progressing and the first 3G call was made by Vodafone in April 2001, within our initial network in the Thames Valley. Commercial launch of 3G services remains on track for the second half of 2002. UNITED STATES Year to Year to Increase 31 March 31 March / Financial highlights 2001 2000 (decrease) % Proportionate turnover (Note 1) £5,008m £3,650m 37 Proportionate EBITDA (Note 1) - before exceptional items £1,627m £1,145m 42 Proportionate EBITDA margin 32% 31% Operational data Proportionate registered Customers (Note 1) 11,570,000 10,553,000 10 ARPU - Blended registered contract & prepay (Notes 1 &2) $551 $472 17 Total non-voice services - % of service revenue (Note 2) 0.6% Data - % of service revenue(Note 2) 0.6% Note 1 - Proportionate turnover, EBITDA, customer numbers and ARPU for the period to 31 March 2000 are presented on a pro forma basis for the merger with AirTouch and comprise the pro forma proportionate results of AirTouch's US wireless assets Note 2 - Calculated for the twelve month periods to 31 March Verizon Wireless Verizon Wireless was formed at the beginning of the year by the combination of the US cellular operations of Vodafone, Bell Atlantic and GTE. The combination created a nationwide network using CDMA digital technology, covering nearly 90% of the US population and 96 of the top 100 US wireless markets. Verizon Wireless is the leading mobile telecommunications provider in the United States in terms of number of customers, network coverage, revenues and cash flow. Vodafone owns a 45% interest in the venture. Verizon Wireless maintained its market leadership in a highly competitive market place, which currently comprises six nationwide competitors and several regional and small rural carriers. Verizon Wireless ended the year with a customer base of 27,122,000, after elimination at the year end of 900,000 additional inactive accounts, holding a 24% share of the market with over 6.5 million more customers than its nearest competitor. Verizon Wireless has focused on gaining and increasing high value customers through new customer additions and migration of existing analogue customers to digital price plans. At 31 March 2001, digital customers totalled over 60% of the customer base and generated 85% of peak-hour usage. The increase in the company's digital customer base contributed to a strong financial performance for the year. Proportionate turnover for the Group's US operations, including Verizon Wireless, increased to £5,008m for the year to 31 March 2001 and proportionate EBITDA, before exceptional items, was £1,627m, an EBITDA margin of 32%. Annualised churn on the Verizon Wireless network increased to 31% from 29% last year. This was due in part to Verizon Wireless's removal of non-revenue generating customers from its base. During the year, the company launched an innovative churn management programme, 'New Every Two', to increase customer loyalty. Under the programme, digital customers are eligible to receive a free digital handset, or handset credit, after two years of service with a two-year contract renewal. ARPU has increased to $551 from $472 last year due to the growth of the digital customer base, and the impact of bundled minute plans. SingleRate(SM) plans, which eliminate long distance and roaming charges, are the cornerstone of the company's product offerings. Customers can choose from several large bundles of minutes, based on their usage requirements, ranging from 150 minutes to 2,000 minutes per month. At 31 March 2001 Verizon Wireless had almost one million data customers, with the number of data customers having doubled in the second half of the year. During the year, the company launched its Mobile Web service where customers can use their handset or access the 'MyVZW' portal. Verizon Wireless also extended its data offerings during the period to include the first wireless service for the next-generation smart phone in the US, being a Web-ready handset incorporating a personal digital assistant. The company announced plans to deploy the first phase of the first commercial 3G high-speed data mobile network in the US. The company was the winning bidder for 113 licenses in the FCC's auction of 1.9 GHz spectrum. The company added capacity for advanced services in markets including New York, Boston, Los Angeles, Philadelphia, Washington, D.C., Seattle and San Francisco for a total price of $8.8 billion. Verizon Wireless now has spectrum in all of the top 50 Metropolitan Statistical Areas in the United States. An Initial Public Offering of a minority stake in the business may be undertaken. Market conditions will be monitored to assess the optimal timing for such an offering. Other businesses On 4 April 2001 the Group acquired a 34.5% equity interest in Grupo Iusacell in Mexico for $973 million. Iusacell has over 1,700,000 customers. ASIA PACIFIC Japan Year to Year to Increase 31 March 31 March / Financial highlights 2001 2000 (decrease) % Proportionate turnover (Note 1) £1,897m £890m 113 Proportionate EBITDA (Note 1) £360m £239m 51 Proportionate EBITDA margin 19% 27% Operational data Proportionate registered customers (Note 1) - Registered 2,826,000 1,907,000 48 ARPU - Blended registered contract & prepay (Note 2) Yen 105,971 Total non-voice services - % of service revenue (Note 2) 9.6% Messaging - % of service revenue (Note 2) 4.0% Data - % of service revenue (Note 2) 5.6% Note 1 -Proportionate turnover, EBITDA and customer numbers for the period to 31 March 2000 are presented on a pro forma basis for the merger with AirTouch. Note 2 - Calculated for the twelve month period to 31 March Japan Telecom is one of Japan's leading telecommunications companies and the parent company of J-Phone Communications which, together with its three subsidiary operating companies, comprises the J-Phone Group. The fast-growing J-Phone Group, with approximately 10 million customers and a greater than 16% market share, is the third largest operator in the Japanese market. Japan is the second largest mobile telecommunications market in the world. In transactions completed before and after 31 March 2001, Vodafone acquired shareholdings in Japan Telecom through the acquisition of an aggregate 15% equity interest from West Japan Railway Company and Central Japan Railway Company. The total cash consideration was Yen 249.7 billion (£1.4 billion), the transaction being completed in two stages with the acquisition of a 7.5% shareholding on 31 January 2001 and a 7.5% shareholding on 12 April 2001. The Group completed the acquisition of a further 10% shareholding in Japan Telecom from AT&T for a cash consideration of $1.35 billion (£0.9 billion) on 26 April 2001. On 2 May 2001, Vodafone announced that it had agreed to acquire, for a cash consideration of approximately £3.7 billion, BT's ownership interests in Japan Telecom and the J-Phone Group, comprising £3.05 billion for BT's combined shareholdings of 20% in Japan Telecom and 20% in J-Phone Communications, with a further Eur 1.04 billion (£0.65 billion) for BT's aggregate direct interest of approximately 4.9% in the J-Phone operating companies. BT's aggregate interest of 4.9% in the J- Phone operating companies is the subject of a call option and the payment of £0.65 billion is only payable upon delivery of the shares to Vodafone. Completion of these transactions will increase Vodafone's ownership interest in Japan Telecom to 45% and in J-Phone Communications to 46%, excluding the indirect interest held through Japan Telecom. Vodafone's total effective ownership interest in the J-Phone Group is expected to increase to between approximately 58% and 63%. Vodafone has not, however, acquired control of the J-Phone Group through these transactions and accounts for its interests on an equity basis rather than full consolidation. The substantial increase in proportionate turnover and EBITDA is primarily due to increases in Vodafone's effective ownership interest in the J-Phone Group during each of the financial years ended 31 March 2001 and 31 March 2000. At 31 March 2001, the Group's effective ownership interest in the J-Phone Group (including indirect holdings through its 7.5% stake in Japan Telecom) ranged between approximately 27% and 31%. This compares with initial shareholdings of between 4.5% and 15% following the acquisition of AirTouch. Underlying organic growth in proportionate EBITDA was 22% in the year to 31 March 2001. Japan's cellular market remained robust as mobile services continued to expand. The number of mobile phone users increased by 9.8 million, or 19.2%, year-on-year to 60.9 million at 31 March 2001 and market penetration was 48%. A driver of this growth is the ability to access mobile internet services using phones with an 'always-on' capacity, which differentiates the service in Japan from the Group's other main markets. There are now nearly 35 million mobile internet access-enabled handsets in the Japanese market, approximately 57% of the total customer base. J-Phone added 1,859,000 new customers during the year, increasing its customer base by 23% to 9,966,000 at 31 March 2001, representing a market share of approximately 16%. Almost 6,200,000 (62%) of its customers now have internet-capable phones, a higher proportion of its customer base than any other operator. A combination of competitor activity and the Japanese consumers' appetite for internet-access phones resulted in a substantial increase in customer upgrade and connection costs compared with the previous year, the decrease in EBITDA margin from 27% to 19% resulting from the increased competitiveness of the market. Japan's four operators depend largely on independent retail shops and exclusive dealers to attract new customers. J-Phone expects to launch its first commercial Java-compatible handsets by June 2001. The new handset will enable J-Sky customers to customise software in their phones and to run a variety of other applications. It will also enable three dimensional animated graphics, games and advertisements. In July 2000, J-Phone was awarded one of three 3G licences available in Japan; no fee was required by the Japanese government. J-Phone has postponed the planned launch date of its 3G (IMT 2000) service due to major revisions in the international standards for W-CDMA technical specifications, 3GPP, which were announced in December 2000. Revised launch dates of June 2002 are scheduled for the Tokyo area, with planned launches in other regions in October 2002. China On 4 October 2000, Vodafone and China Mobile (Hong Kong) Limited announced that they had entered into a memorandum of understanding setting out the principal terms for a strategic alliance and co- operation between the two parties in mobile services, technology, operations and management. The signing of the strategic alliance agreement was completed on 27 February 2001. Vodafone and China Mobile also intend to explore opportunities for joint ventures and other equity- based strategic alliances in areas such as research and development of wireless data services, international investment opportunities and regional and/or global alliances. Concurrent with the signing of the memorandum of understanding, Vodafone agreed to purchase an equity interest in China Mobile. In an offering that closed on 3 November 2000, Vodafone acquired newly issued shares representing approximately 2.18% of China Mobile's share capital for a cash consideration of US$2.5 billion. At 31 March 2001 China Mobile had approximately 52 million customers. Vodafone Pacific Year to Year to Increase 31 March 31 March / Financial highlights 2001 2000 (decrease) % Proportionate turnover £669m £531m 26 Proportionate EBITDA £162m £120m 35 Proportionate EBITDA margin 24% 23% Operational data Proportionate customers - Registered 2,837,000 1,795,000 58 - Active 2,723,000 The Group's operations in Australia, New Zealand and Fiji have achieved solid operating results during the financial year. The customer base increased by 58% in the year to 31 March 2001 with proportionate EBITDA increasing by 35% to £162m and EBITDA margin improving to 24% in the year. In Australia, which is a highly competitive market with six mobile networks, Vodafone's customer base increased by 47% in the year, attracting 671,000 net new customers. Total customers now number 2,111,000, representing 19% of the market. Customers have been enthusiastic adopters of SMS, data and internet services and more than 5% of average customer revenues come from these services. In New Zealand, strong growth continued with an 88% increase in the customer base to 889,000, an addition of 416,000 net new customers during the year. Vizzavi, the Group's global wireless internet and data platform, was launched in December 2000. In Fiji, Vodafone's strong growth continues with a total of 55,000 customers at 31 March 2001. Australia and New Zealand acquired 3G spectrum for A$254 million (£87m) and NZ$29 million (£8m), respectively, in the recent auctions and both expect to introduce 3G services by 2004. MIDDLE EAST & AFRICA Year to Year to Increase 31 March 31 March % Financial highlights 2001 2000 Proportionate turnover (Note 1) £448m £395m 13 Proportionate EBITDA (Note 1) £227m £142m 60 Proportionate EBITDA margin 51% 36% Operational data Proportionate registered customers (Note 1) 2,349,000 1,218,000 93 Note 1 - Proportionate turnover, EBITDA and customer numbers for the period to 31 March 2000 are presented on a pro forma basis for the merger with AirTouch. At 31 March 2001, the Middle East & Africa region had network operations in three countries; Egypt, South Africa and Kenya. The Group sold its investment in Celtel (Uganda) for a profit during the period and acquired a 40% stake in Safaricom in Kenya. Proportionate customers in the Middle East & Africa region increased to 2,349,000, which represents growth of 1,131,000 (93%) on the closing customer base at 31 March 2000. Growth was particularly strong in Egypt where the Group's 60% subsidiary, Vodafone Egypt, almost trebled its customer base in the period from 405,000 to 1,171,000 customers. In South Africa, Vodacom, in which the Group has a 31.5% shareholding grew its customer base to 5,108,000 from 3,069,000 at the beginning of the period. Safaricom has progressed well and by 31 March 2001 had 93,700 customers. MORE TO FOLLOW

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