Interim Results - Part 3

Vodafone Group Plc 15 November 2005 VODAFONE GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 ******** PART III ******** NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2005 15 Summary of differences between IFRS and US GAAP The unaudited Interim Consolidated Financial Statements have been prepared in accordance with IFRS, which differ in certain significant respects from US Generally Accepted Accounting Principles ('US GAAP'). The following is a summary of the effects of the adjustments from IFRS to US GAAP: Six months to Six months to 30 September 30 September 2005 2004 Note £m £m Revenue (IFRS) 18,251 16,742 Items (decreasing)/increasing revenue: Basis of consolidation a (2,821) (2,624) Connection revenue b 598 617 ---------- ---------- Revenue (US GAAP) 16,028 14,735 ========== ========== IFRS profit for the period attributable to equity shareholders 2,775 3,615 Items increasing/(decreasing) profit for the period: Investments accounted for under the equity method c (2,426) (2,593) Connection revenue and costs b 6 9 Goodwill and other intangible assets d (7,191) (7,602) Impairment e (368) - Amortisation of capitalised interest f (54) (52) Interest capitalised during the period f 15 20 Other g 43 (1) Income taxes h 2,596 3,273 ---------- ---------- Loss before change in accounting principle (4,604) (3,331) Cumulative effect of change in accounting principle: Post employment benefits i - (195) ---------- ---------- Net loss (US GAAP) (4,604) (3,526) ========== ========== Basic and diluted loss per share (US GAAP): - Loss before change in accounting principle (7.23)p (4.98)p - Cumulative effect of change in accounting principle nil p (0.29)p - Net loss (7.23)p (5.27)p As at As at 30 September 30 September 2005 2004 £m £m IFRS total equity shareholders' funds 113,771 114,913 Items (decreasing)/increasing shareholders' equity: Investments accounted for under the equity method c (3,340) 12,613 Connection revenue and costs b (9) (24) Goodwill and other intangible assets d 23,824 39,188 Capitalised interest f 1,490 1,584 Other g 207 (94) Income taxes h (36,290) (46,717) ---------- ---------- Shareholders' equity in accordance with US GAAP 99,653 121,463 ========== ========== a. Basis of consolidation The basis of consolidation under IFRS differs from that under US GAAP. The Group has interests in several jointly controlled entities, the most significant being Vodafone Italy. Under IFRS, the Group reports its interests in jointly controlled entities using proportionate consolidation. The Group's share of the assets, liabilities, income, expenses and cash flows of jointly controlled entities are combined with the equivalent items in the unaudited Interim Consolidated Financial Statements on a line-by-line basis. Under US GAAP, the results and assets and liabilities of jointly controlled entities are incorporated in the unaudited Interim Consolidated Financial Statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the jointly controlled entity, less any impairment in the value of the investment. b. Connection revenue and costs Under IFRS, customer connection revenue is recognised together with the related equipment revenue to the extent that the aggregate equipment and connection revenue does not exceed the fair value of the equipment delivered to the customer. Any customer connection revenue not recognised together with related equipment revenue is deferred and recognised over the period in which services are expected to be provided to the customer. For transactions prior to 1 October 2003, connection revenue under US GAAP is recognised over the period that a customer is expected to remain connected to a network. Connection costs directly attributable to the income deferred are recognised over the same period. Where connection costs exceed connection revenue, the excess costs were charged in the profit and loss account immediately upon connection. The balances of deferred revenue and deferred charges as of 30 September 2003 continue to be recognised over the period that a customer is expected to remain connected to a network. c. Investments accounted for under the equity method This line item includes the net effect of IFRS to US GAAP adjustments affecting net loss and shareholders' equity discussed below related to investments accounted for under the equity method, primarily goodwill and other intangible assets and income taxes. d. Goodwill and other intangible assets The differences related to goodwill and other intangible assets included in the reconciliations of net loss and shareholders' equity relate to acquisitions prior to the Group's adoption of the SEC guidance issued on 29 September 2004. In determining the value of licences purchased in business combinations prior to 29 September 2004, the Group allocated the portion of the purchase price, in excess of the fair value attributed to the share of net assets acquired, to licences. The Group had previously concluded that the nature of the licences and the related goodwill acquired in business combinations was fundamentally indistinguishable. Following the adoption of the SEC guidance issued on 29 September 2004, the Group's US GAAP accounting policy for initial and subsequent measurement of goodwill and other intangible assets, other than determination of impairment of goodwill and finite lived intangible assets, is substantially aligned to that of IFRS described in note 2. However, there are substantial adjustments arising prior to 29 September 2004 from different methods of transition to current IFRS and US GAAP as discussed below. Goodwill arising before the date of transition to IFRS has been retained under IFRS at the previous UK GAAP amounts for acquisitions prior to 1 April 2004. The Group has assigned amounts to licences and customer bases under US GAAP as they meet the criteria for recognition separately from goodwill, while these were not recognised separately from goodwill under UK GAAP because they did not meet the recognition criteria. Under US GAAP goodwill and intangible assets with indefinite lives are capitalised and not amortised, but tested for impairment, at least annually. Intangible assets with finite lives are capitalised and amortised over their useful economic lives. Under IFRS and US GAAP, the purchase price of a transaction accounted for as an acquisition is based on the fair value of the consideration. In the case of share consideration, under IFRS the fair value of such consideration is based on the share price on the date of exchange. Under US GAAP, the fair value of the share consideration is based on the average share price over a reasonable period of time before and after the proposed acquisition is agreed to and announced. This has resulted in a difference in the fair value of the consideration for certain acquisitions and consequently in the amount of goodwill capitalised under IFRS and US GAAP. The Group's accounting policy for testing goodwill and finite lived intangible assets under IFRS is discussed in note 2. For purposes of goodwill impairment testing under US GAAP, the fair value of a reporting unit including goodwill is compared to its carrying value. If the fair value of a reporting unit is lower than its carrying value, the fair value of the goodwill within that reporting unit is compared with its respective carrying value, with any excess carrying value written off as an impairment. The fair value of the goodwill is the difference between the fair value of the reporting unit and the fair value of the net assets of the reporting unit. Intangible assets with finite lives are subject to periodic impairment tests when circumstances indicate that an impairment may exist. Where an asset's (or asset group's) carrying amount exceeds its sum of undiscounted future cash flows, an impairment loss is recognised in an amount equal to the amount by which the asset's (or asset group's) carrying amount exceeds its fair value, which is generally based on discounted cash flows. Consistent with the Group's IFRS accounting policy, intangible assets with indefinite lives under US GAAP are not subject to amortisation and are tested annually for impairment or more frequently if circumstances indicate that an impairment may exist. The Group's US GAAP indefinite life intangible assets primarily relate to Verizon Wireless FCC licences, the fair value of which is determined using a direct valuation approach. Any excess of the carrying value of these licences over their fair value is recognised as an impairment. e. Impairment As discussed in note 4, during the six months ended 30 September 2005, the Group recorded an impairment charge of £515 million in relation to the intangible assets of Vodafone Sweden. Under US GAAP, the Group recognised an impairment of licences of £883 million. As a result of this impairment, the Group released related deferred tax liabilities of £247 million, which has been included in the adjustment for income taxes. f. Capitalised interest Under IFRS, the Group has adopted the benchmark accounting treatment for borrowing costs and as a result, the Group does not capitalise interest costs on borrowings in respect of the acquisition or construction of tangible and intangible fixed assets. Under US GAAP, the interest costs of financing the acquisition or construction of network assets and other fixed assets is capitalised during the period of construction until the date that the asset is placed in service. Interest costs of financing the acquisition of licences are also capitalised until the date that the related network service is launched. Capitalised interest costs are amortised over the estimated useful lives of the related assets. g. Other Financial instruments Under IFRS, the put option held by Telecom Egypt is classified as a financial liability. The liability is measured as the present value of the estimated exercise price of the option, which is the fair value of the underlying shares on the date of exercise, with any changes in this estimate recognised in the consolidated income statement each period. Under US GAAP, this put option is classified as a derivative instrument. Consequently, this financial liability is reversed for US GAAP purposes and the put option is accounted for at fair value. Pensions Under both IFRS and US GAAP, the Group recognises actuarial gains and losses as they are incurred. Under IFRS, these gains and losses are recognised directly in equity. These gains and losses are included in the determination of net loss under US GAAP. Share-based payments Under IFRS, equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Under US GAAP, equity-settled share-based payments are accounted for as variable plans and the cost is calculated as the difference between the exercise price and the market price of the shares at the measurement date, which is usually the date the shares vest, and amortised over the period until the shares vest. Where the measurement date has not yet been reached, the cost is estimated using the market price of the relevant shares at the end of each accounting period. h. Income taxes The most significant component of the income tax adjustment is due to temporary differences between the book basis and tax basis of intangible assets other than goodwill acquired in business combinations prior to 29 September 2004, resulting in the recognition of deferred tax liabilities under US GAAP. This line item also includes the tax effects of the other pre-tax IFRS to US GAAP adjustments described above. Under IFRS, the Group does not recognise a deferred tax liability on the outside basis differences in its investment in associates to the extent the Group controls the timing of the reversal of the difference and it is probable the difference will not reverse in the foreseeable future. Under US GAAP, the Group recognises deferred tax liabilities on these differences. i. Cumulative effect of change in accounting principle During the second half of the year ended 31 March 2005, the Group amended its policy for accounting for actuarial gains and losses arising from its pension obligations effective 1 April 2004. The financial statements as of 30 September 2004 and for the six months then ended have been restated to reflect this change in accounting principle. Until 31 March 2004, the Group used a corridor approach under SFAS No. 87, 'Employers' Accounting for Pensions' in which actuarial gains and losses were deferred and amortised over the expected remaining service period of the employees. The Group now recognises these gains and losses through the income statement in the period in which they arise as the new policy more faithfully represents the Group's financial position and more closely aligns the Group's US GAAP policy to its IFRS policy of immediate recognition of these items. The cumulative effect on periods prior to adoption of £288 million has been shown, net of tax of £93 million, as a cumulative effect of a change in accounting principle in the reconciliation of net loss for the six months ended 30 September 2004. The effect of the change in the six months ended 30 September 2004 was to increase loss from continuing operations by £31 million (or 0.05 pence per share). 16 Transition to IFRS Basis of preparation of IFRS financial information The Group's Annual Report for the year ending 31 March 2006 will be the first annual Consolidated Financial Statements that comply with IFRS. These interim results have been prepared in accordance with the significant accounting policies described in note 2. The Group has applied IFRS 1, 'First-time Adoption of International Financial Reporting Standards' in preparing these interim results. The Group's Annual Report for the year ending 31 March 2006 will provide one year of comparative financial information and the opening balance sheet date for adoption of IFRS is 1 April 2004. The Annual Report in subsequent years will provide two years of comparative financial information. IFRS 1 exemptions IFRS 1 sets out the procedures that the Group must follow when it adopts IFRS for the first time as the basis for preparing its consolidated financial statements. The Group is required to establish its IFRS accounting policies as at 31 March 2006 and, in general, apply these retrospectively to determine the IFRS opening balance sheet at its date of transition, 1 April 2004. This standard provides a number of optional exemptions to this general principle. These are set out below, together with a description in each case of the exemption adopted by the Group. Business combinations that occurred before the opening IFRS balance sheet date (IFRS 3, 'Business Combinations'). The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before the date of transition. As a result, in the opening balance sheet, goodwill arising from past business combinations remains as stated under UK GAAP at 31 March 2004. Employee Benefits - actuarial gains and losses (IAS 19, 'Employee Benefits') The Group has elected to recognise all cumulative actuarial gains and losses in relation to employee benefit schemes at the date of transition. Share-based Payments (IFRS 2, 'Share-based Payment') The Group has elected to apply IFRS 2 to all relevant share-based payment transactions granted but not fully vested at 1 April 2004. Financial Instruments (IAS 39, 'Financial Instruments: Recognition and Measurement' and IAS 32, 'Financial Instruments: Disclosure and Presentation') The Group has applied IAS 32 and IAS 39 for all periods presented and has therefore not taken advantage of the exemption in IFRS 1 that would enable the Group to only apply these standards from 1 April 2005. Cumulative translation differences (IAS 21, 'The Effects of Changes in Foreign Exchange Rates') The Group has deemed the cumulative translation differences at the date of transition to IFRS to be zero. As a result, the gain or loss of a subsequent disposal of any foreign operation shall exclude the translation differences that arose before the date of transition to IFRS. Fair value or revaluation as deemed cost (IAS 16, 'Property, Plant and Equipment' and IAS 38, 'Intangible Assets') The Group has not elected to measure any item of property, plant and equipment or intangible asset at the date of transition to IFRS at its fair value. Impact of transition to IFRS The following is a summary of the effects of the differences between IFRS and UK GAAP on the Group's total equity shareholders' funds and profit for the financial period for the periods previously reported under UK GAAP following the date of transition to IFRS. Further significant differences may arise from accounting standards and pronouncements that the IASB could issue in the future and which the Group may elect to early adopt in its first IFRS Consolidated Financial Statements. Total equity shareholders' funds 1 April 30 September 31 March 2004 2004 2005 Note £m £m £m Total equity shareholders' funds (UK GAAP) 111,924 107,744 99,317 Measurement and recognition differences: Intangible assets a (164) 7,052 13,986 Proposed dividends b 728 1,263 1,395 Financial instruments c 385 388 350 Share-based payments d 12 34 63 Defined benefit pension schemes e (257) (309) (361) Deferred and current taxes f (1,011) (1,173) (774) Other (66) (86) (176) ---------- ---------- ---------- Total equity shareholders' funds (IFRS) 111,551 114,913 113,800 ========== ========== ========== Profit for the financial period Six months to Year ended 30 September 31 March 2004 2005 Note £m £m Loss on ordinary activities after taxation (UK GAAP) (2,871) (6,938) Measurement and recognition differences: Intangible assets a 7,118 14,263 Financial instruments c (28) (174) Share-based payments d (41) (91) Defined benefit pension schemes e 2 7 Deferred and current taxes f (278) 10 Other 3 (130) Presentation differences: Presentation of equity accounted investments g (26) (45) Presentation of joint ventures h (196) (384) ---------- ---------- Profit for the period (IFRS) 3,683 6,518 ========== ========== Principal differences between IFRS and UK GAAP Measurement and recognition differences: a. Intangible assets IAS 38, 'Intangible Assets' requires that goodwill is not amortised. Instead it is subject to an annual impairment review. As the Group has elected not to apply IFRS 3 retrospectively to business combinations prior to the opening balance sheet date under IFRS, the UK GAAP goodwill balance at 31 March 2004 (£96,931 million) has been included in the opening IFRS consolidated balance sheet and is no longer amortised. Under IAS 38, capitalised payments for licences and spectrum fees are amortised on a straight line basis over their useful economic life. Amortisation is charged from the commencement of service of the network. Under UK GAAP, the Group's policy was to amortise such costs in proportion to the capacity of the network during the start up period and then on a straight-line basis thereafter. b. Proposed dividends IAS 10, 'Events after the Balance Sheet Date' requires that dividends declared after the balance sheet date should not be recognised as a liability at that balance sheet date as the liability does not represent a present obligation as defined by IAS 37, 'Provisions, Contingent Liabilities and Contingent Assets'. c. Financial instruments IAS 32, 'Financial Instruments: Disclosure and Presentation' and IAS 39, 'Financial Instruments: Recognition and Measurement' address the accounting for, and reporting of, financial instruments. IAS 39 sets out detailed accounting requirements in relation to financial assets and liabilities. All derivative financial instruments are accounted for at fair market value whilst other financial instruments are accounted for either at amortised cost or at fair value depending on their classification. Subject to stringent criteria, financial assets and financial liabilities may be designated as forming hedge relationships as a result of which fair value changes are offset in the income statement or charged/credited to equity depending on the nature of the hedge relationship. d. Share-based payments IFRS 2, 'Share-based Payment' requires that an expense for equity instruments granted be recognised in the financial statements based on their fair value at the date of grant. This expense, which is primarily in relation to employee option and performance share schemes, is recognised over the vesting period of the scheme. While IFRS 2 allows the measurement of this expense to be calculated only on options granted after 7 November 2002, the Group has applied IFRS 2 to all instruments granted but not fully vested as at 1 April 2004. The Group has adopted the binomial model for the purposes of calculating fair value under IFRS. e. Defined benefit pension schemes The Group elected to adopt early the amendment to IAS 19, 'Employee Benefits' issued by the IASB on 16 December 2004 which allows all actuarial gains and losses to be charged or credited to equity. The Group's opening IFRS balance sheet at 1 April 2004 reflects the assets and liabilities of the Group's defined benefit schemes totalling a net liability of £154 million. The transitional adjustment of £257 million to opening reserves comprises the reversal of entries in relation to UK GAAP accounting under SSAP 24 less the recognition of the net liabilities of the Group's and associated undertakings' defined benefit schemes. f. Deferred and current taxes The scope of IAS 12, 'Income Taxes' is wider than the corresponding UK GAAP standards, and requires deferred tax to be provided on all temporary differences rather than just timing differences under UK GAAP. As a result, taxes in the Group's IFRS opening balance sheet at 1 April 2004 were adjusted by £1.0 billion. This includes an additional deferred tax liability of £1.8 billion in respect of the differences between the carrying value and tax written down value of the Group's investments in associated undertakings and joint ventures. This comprises £1.3 billion in respect of differences that arose when US investments were acquired and £0.5 billion in respect of undistributed earnings of certain associated undertakings and joint ventures, principally Vodafone Italy. UK GAAP does not permit deferred tax to be provided on the undistributed earnings of the Group's associated undertakings and joint ventures until there is a binding obligation to distribute those earnings. IAS 12 also requires deferred tax to be provided in respect of the Group's liabilities under its post employment benefit arrangements and on other employee benefits such as share and share option schemes. Presentation differences: g. Presentation of equity accounted investments Under IFRS, in accordance with IAS 1, 'Presentation of Financial Statements', 'Tax on profit' on the face of the consolidated income statement comprises the tax charge of the Company, its subsidiaries and its share of the tax charge of joint ventures. The Group's share of its associated undertakings' tax charges is shown as part of 'Share of result in associated undertakings' rather than being disclosed as part of the tax charge under UK GAAP. In respect of the Verizon Wireless partnership, the line 'Share of result in associated undertakings' includes the Group's share of pre-tax partnership income and the Group's share of the post-tax income attributable to corporate entities (as determined for US corporate income tax purposes) held by the partnership. The tax attributable to the Group's share of allocable partnership income is included as part of 'Tax on profit' on the consolidated income statement. This treatment reflects the fact that tax on allocable partnership income is, for US corporate income tax purposes, a liability of the partners and not the partnership. h. Presentation of joint ventures IAS 31, 'Interests in Joint Ventures' defines a jointly controlled entity as an entity where unanimous consent over the strategic financial and operating decisions is required between the parties sharing control. Control is defined as the power to govern the financial and operating decisions of an entity so as to obtain economic benefit from it. The Group has reviewed the classification of its investments and concluded that the Group's 76.9% (30 September 2004 and 31 March 2005: 76.8%) interest in Vodafone Italy, classified as a subsidiary undertaking under UK GAAP, should be accounted for as a joint venture under IFRS. In addition, the Group's interests in South Africa, Poland, Kenya and Fiji, which were classified as associated undertakings under UK GAAP, have been classified as joint ventures under IFRS as a result of the contractual rights held by the Group. The Group's interest in Romania was classified as a joint venture until the acquisition of the controlling stake from Telesystem International Wireless Inc. of Canada completed on 31 May 2005. The Group has adopted proportionate consolidation as the method of accounting for these six entities. Under UK GAAP, the revenue, operating profit, net financing costs and taxation of Vodafone Italy were consolidated in full in the income statement with a corresponding allocation to minority interest. Under proportionate consolidation, the Group recognises its share of all income statement lines with no allocation to minority interest. There is no effect on the result for a financial period from this adjustment. Under UK GAAP, the Group's interests in South Africa, Poland, Romania, Kenya and Fiji were accounted for under the equity method, with the Group's share of operating profit, interest and tax being recognised separately in the consolidated income statement. Under proportionate consolidation, the Group recognises its share of all income statement lines. There is no effect on the result for a financial period from this adjustment. Under UK GAAP, the Group fully consolidated the cash flows of Vodafone Italy, but did not consolidate the cash flows of its associated undertakings. The IFRS consolidated cash flow statement reflects the Group's share of cash flows relating to its joint ventures on a line by line basis, with a corresponding recognition of the Group's share of net debt for each of the proportionately consolidated entities. Other differences Reclassification of non-equity minority interests to liabilities The primary impact of the implementation of IAS 32 is the reclassification of the $1.65 billion preferred shares issued by the Group's subsidiary, Vodafone Americas Inc., from non-equity minority interests to liabilities. The reclassification at 1 April 2004 was £875 million. Dividend payments by this subsidiary, which were previously reported in the Group's income statement as non-equity minority interests, have been reclassified to financing costs. Fair value of available-for-sale financial assets The Group has classified certain of its cost-based investments as 'available-for -sale' financial assets as defined in IAS 39. This classification does not reflect the intentions of management in relation to these investments. These assets are measured at fair value at each reporting date with movements in fair value taken to equity. At 1 April 2004, a cumulative increase of £233 million in the fair value over the carrying value of these investments was recognised. Reconciliation of the UK GAAP consolidated profit and loss account to the IFRS consolidated income statement Six months ended 30 September 2004 Measurement and Presentation Recognition UK GAAP differences differences IFRS UK GAAP Format £m £m £m £m IFRS Format Turnover 16,796 - (54) 16,742 Revenue Cost of sales (10,072) - (338) (10,410) Cost of sales --------------------------------------------------------------- Gross profit 6,724 - (392) 6,332 Gross profit Selling and Selling and distribution costs (1,005) - (8) (1,013) distribution expenses Administrative Administrative expenses (7,964) - 6,326 (1,638) expenses Share of result in associated - 241 837 1,078 undertakings --------------------------------------------------------------- Operating loss (2,245) 241 6,763 4,759 Operating profit Share of result in associated undertakings 630 (630) Exceptional non-operating items 22 (22) Non-operating income and - 16 - 16 expense Net interest payable and similar items (291) 100 (44) (235) Financing costs --------------------------------------------------------------- Loss on ordinary activities before taxation (1,884) (295) 6,719 4,540 Profit before taxation Tax on loss on ordinary activities (987) 269 (139) (857) Tax on profit --------------------------------------------------------------- Loss on ordinary Profit for the activities after taxation (2,871) (26) 6,580 3,683 financial period Minority interest (324) 26 230 (68) Less: Minority interest --------------------------------------------------------------- Profit attributable Loss for the period (3,195) - 6,810 3,615 to equity shareholders =============================================================== Year ended 31 March 2005 Measurement and Presentation Recognition UK GAAP differences differences IFRS UK GAAP Format £m £m £m £m IFRS Format Turnover 34,133 - (60) 34,073 Revenue Cost of sales (20,753) - (711) (21,464) Cost of sales --------------------------------------------------------------- Gross profit 13,380 - (771) 12,609 Gross profit Selling and Selling and distribution costs (2,031) - (15) (2,046) distribution expenses Administrative expenses (16,653) 315 12,812 (3,526) Administrative expenses Share of result in associated - 404 1,576 1,980 undertakings Other income - (315) (160) (475) and expenses --------------------------------------------------------------- Operating loss (5,304) 404 13,442 8,542 Operating profit Share of result in associated undertakings 1,193 (1,193) Exceptional non-operating items 13 (13) Non-operating - 8 (2) 6 income and expense 602 (21) 581 Investment income Net interest payable and similar items (604) (391) (183) (1,178) Financing costs --------------------------------------------------------------- Loss on ordinary activities before taxation (4,702) (583) 13,236 7,951 Profit before taxation Tax on loss on ordinary activities (2,236) 538 265 (1,433) Tax on profit --------------------------------------------------------------- Loss on ordinary Profit for the activities after taxation (6,938) (45) 13,501 6,518 financial period Minority interest (602) 45 449 (108) Less: Minority interest --------------------------------------------------------------- Profit attributable to Loss for the period (7,540) - 13,950 6,410 equity shareholders =============================================================== Reconciliation of the UK GAAP consolidated balance sheet to the IFRS consolidated balance sheet 1 April 2004 Measurement and Presentation Recognition UK GAAP differences differences IFRS UK GAAP Format £m £m £m £m IFRS Format Fixed assets Non current assets Intangible assets 93,622 - 864 94,486 Intangible assets Property, plant Tangible assets 18,083 - (833) 17,250 & equipment Investments in Investments in associated associated undertakings 21,226 - (800) 20,426 undertakings Other investments 1,049 - 233 1,282 Other investments 671 136 807 Deferred tax assets Trade and other 221 (9) 212 receivables --------------------------------------------------------------- 133,980 892 (409) 134,463 --------------------------------------------------------------- Current assets Current assets Stocks 458 - 10 468 Inventory Debtors 6,901 (6,901) 372 (103) 269 Taxation recoverable Trade and other 5,148 305 5,453 receivables Investments 4,381 (4,381) Cash at bank Cash and cash and in hand 1,409 4,381 61 5,851 equivalents --------------------------------------------------------------- 13,149 (1,381) 273 12,041 --------------------------------------------------------------- Total assets 147,129 (489) (136) 146,504 Total assets =============================================================== Capital and reserves Equity Called up share capital 4,280 - - 4,280 Called up share capital Share premium account 52,154 - - 52,154 Share premium account Own shares held (1,136) - - (1,136) Own shares held Other reserve 99,640 - 310 99,950 Additional paid in capital - - 233 233 Other reserves Profit and loss account (43,014) - (916) (43,930) Retained losses --------------------------------------------------------------- Total equity Total equity shareholders' funds 111,924 - (373) 111,551 shareholders' funds Minority interests 3,007 - (2,198) 809 Minority interests --------------------------------------------------------------- 114,931 - (2,571) 112,360 --------------------------------------------------------------- Creditors - amounts falling due after more than one year 12,975 (12,975) Non-current liabilities 12,224 1,859 14,083 Long term borrowings 3,314 1,412 4,735 Deferred tax liabilities (73) 227 154 Post employment benefits Provisions for Provisions for liabilities and charges 4,197 (3,858) 5 344 liabilities and charges 751 (449) 302 Other payables --------------------------------------------------------------- 17,172 (617) 3,063 19,618 --------------------------------------------------------------- Creditors - amounts falling due within one year 15,026 (15,026) Current liabilities 2,054 788 2,842 Short term borrowings 4,275 (356) 3,919 Current tax liabilities Trade payables 8,643 (1,068) 7,575 and other payables Provisions for 182 8 190 liabilities and charges --------------------------------------------------------------- 15,026 128 (628) 14,526 --------------------------------------------------------------- 147,129 (489) (136) 146,504 Total equity and liabilities =============================================================== Reconciliation of the UK GAAP consolidated balance sheet to the IFRS consolidated balance sheet 30 September 2004 Measurement and Presentation Recognition UK GAAP differences differences IFRS UK GAAP Format £m £m £m £m IFRS Format Fixed assets Non current assets Intangible assets 90,399 - 7,559 97,958 Intangible assets Property, plant Tangible assets 18,070 - (840) 17,230 & equipment Investments in Investments in associated undertakings 20,831 - 90 20,921 associated undertakings Other investments 894 - 263 1,157 Other investments 983 212 1,195 Deferred tax assets Trade and other 280 (13) 267 receivables --------------------------------------------------------------- 130,194 1,263 7,217 138,728 --------------------------------------------------------------- Current assets Current assets Stocks 416 - 8 424 Inventory Debtors 6,957 (6,957) Trade and other 5,500 180 5,680 receivables Investments 1,998 (1,998) Cash at bank Cash and and in hand 2,652 1,998 54 4,704 cash equivalents --------------------------------------------------------------- 12,023 (1,457) 242 10,808 --------------------------------------------------------------- Total assets 142,217 (194) 7,513 149,536 Total assets =============================================================== Capital and reserves Equity Called up share capital 4,283 - - 4,283 Called up share capital Share premium account 52,202 - - 52,202 Share premium account Own shares held (2,873) - - (2,873) Own shares held Other reserve 99,605 - 415 100,020 Additional paid in capital - - 2,324 2,324 Other reserves Profit and loss account (45,473) - 4,430 (41,043) Retained losses --------------------------------------------------------------- Total equity Total equity shareholders' funds 107,744 - 7,169 114,913 shareholders' funds Minority interests 2,637 - (2,452) 185 Minority interests --------------------------------------------------------------- 110,381 - 4,717 115,098 --------------------------------------------------------------- Creditors - amounts falling due after more than one year 12,494 (12,494) Non-current liabilities 11,811 1,708 13,519 Long term borrowings 3,445 1,891 5,336 Deferred tax liabilities (64) 274 210 Post employment benefits Provisions for Provisions for liabilities and charges 4,038 (3,687) 7 358 liabilities and charges 683 (402) 281 Other payables --------------------------------------------------------------- 16,532 (306) 3,478 19,704 --------------------------------------------------------------- Creditors - amounts falling due within one year 15,304 (15,304) Current liabilities 1,560 1,110 2,670 Short term borrowings 4,766 (244) 4,522 Current tax liabilities Trade payables 8,954 (1,567) 7,387 and other payables Provisions for 136 19 155 liabilities and charges --------------------------------------------------------------- 15,304 112 (682) 14,734 --------------------------------------------------------------- 142,217 (194) 7,513 149,536 Total equity and liabilities =============================================================== 14 Transition to IFRS Reconciliation of the UK GAAP consolidated balance sheet to the IFRS consolidated balance sheet 31 March 2005 Measurement and Presentation Recognition UK GAAP differences differences IFRS UK GAAP Format £m £m £m £m IFRS Format Fixed assets Non current assets Intangible assets 83,464 - 13,675 97,139 Intangible assets Property, plant Tangible assets 18,398 - (947) 17,451 & equipment Investments in Investments in associated undertakings 19,398 - 836 20,234 associated undertakings Other investments 852 - 329 1,181 Other investments - 1,084 100 1,184 Deferred tax assets Trade and other - 249 (28) 221 receivables --------------------------------------------------------------- 122,112 1,333 13,965 137,410 --------------------------------------------------------------- Current assets Current assets Stocks 430 - 10 440 Inventory Debtors 7,698 (7,698) - - - 268 (230) 38 Taxation recoverable Trade and other - 5,334 115 5,449 receivables Investments 816 (816) - - Cash at bank Cash and and in hand 2,850 816 103 3,769 cash equivalents --------------------------------------------------------------- 11,794 (2,096) (2) 9,696 --------------------------------------------------------------- Total assets 133,906 (763) 13,963 147,106 Total assets =============================================================== Capital and reserves Equity Called up share capital 4,286 - - 4,286 Called up share capital Share premium account 52,284 - - 52,284 Share premium account Own shares held (5,121) - - (5,121) Own shares held Other reserve 99,556 - 525 100,081 Additional paid in capital - - 1,781 1,781 Other reserve Profit and loss account (51,688) - 12,177 (39,511) Retained losses --------------------------------------------------------------- Total equity Total equity shareholders' funds 99,317 - 14,483 113,800 shareholders' funds Minority interests 2,818 - (2,970) (152) Minority interests --------------------------------------------------------------- 102,135 - 11,513 113,648 --------------------------------------------------------------- Creditors - amounts falling due after more than one year 12,382 (12,382) - - Non-current liabilities - 11,613 1,577 13,190 Long term borrowings - 3,481 1,368 4,849 Deferred tax liabilities - (183) 307 124 Post employment benefits Provisions for liabilities Provisions for and charges 4,552 (4,235) 2 319 liabilities and charges 749 (359) 390 Other payables --------------------------------------------------------------- 16,934 (957) 2,895 18,872 --------------------------------------------------------------- Creditors - amounts falling due within one year 14,837 (14,837) - - Current liabilities - 392 1,611 2,003 Short term borrowings - 4,759 (406) 4,353 Current tax liabilities Trade payables - 9,686 (1,684) 8,002 and other payables Provisions for - 194 34 228 liabilities and charges --------------------------------------------------------------- 14,837 194 (445) 14,586 --------------------------------------------------------------- 133,906 (763) 13,963 147,106 Total equity and liabilities =============================================================== INDEPENDENT REVIEW REPORT BY DELOITTE & TOUCHE LLP TO VODAFONE GROUP PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 30 September 2005 which comprises the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 16. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority and the requirements of International Accounting Standard 34, 'Interim Financial Reporting' ('IAS 34') which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual financial statements except where any changes, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the Group will be prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted for use in the European Union ('EU'). Accordingly, the interim report has been prepared in accordance with IAS 34 and the requirements of International Financial Reporting Standard 1, 'First Time Adoption of International Financial Reporting Standards' relevant to interim reports. The accounting policies are consistent with those that the directors intend to use in the annual financial statements. There is, however, a possibility that the directors may determine that some changes to these policies are necessary when preparing the full annual financial statements for the first time in accordance with IFRS as adopted for use in the EU. This is because, as disclosed in note 1, the directors have anticipated that certain revisions to existing IFRS will be issued and formally adopted for use in the EU in time to be applicable to the next annual financial statements. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2005. Deloitte & Touche LLP Chartered Accountants London 15 November 2005 PROPORTIONATE FINANCIAL INFORMATION FOR THE SIX MONTHS TO 30 SEPTEMBER 2005 Proportionate results Group proportionate revenue increased by 13.0% to £23,934 million for the six months ended 30 September 2005 as a result of both organic growth and the effect of increased stakes in a number of the Group's existing businesses. In the mobile business, proportionate revenue grew by 12.6% to £23,415 million, with organic growth of 7.7%. The Group's proportionate EBITDA margin, excluding items not related to underlying business performance, for the mobile business decreased by 1.5 percentage points to 37.9%. Basis of preparation The tables of financial information below are presented on a proportionate basis. Proportionate presentation is not a measure recognised under IFRS and is not intended to replace the interim results prepared in accordance with IFRS. However, since significant entities in which the Group has an interest are not consolidated, proportionate information is provided as supplemental data to facilitate a more detailed understanding and assessment of the interim results prepared in accordance with IFRS. IFRS requires consolidation of entities in relation to which the Group has the power to control and allows either proportionate consolidation or equity accounting for joint ventures. IFRS also requires equity accounting for interests in which the Group has significant influence but not a controlling interest. The proportionate presentation, below, is a pro rata consolidation, which reflects the Group's share of revenue and expenses in entities, both consolidated and unconsolidated, in which the Group has an ownership interest. Proportionate results are calculated by multiplying the Group's ownership interest in each entity by each entity's results. Proportionate presentation of financial information differs in material respects to the proportionate consolidation adopted by the Group under IFRS for its joint ventures. Proportionate information includes results from the Group's equity accounted investments and other investments. The Group may not have control over the revenue, expenses or cash flows of these investments and may only be entitled to cash from dividends received from these entities. Group proportionate revenue is stated net of intercompany revenue. Proportionate EBITDA represents the Group's ownership interests in the respective entities' EBITDA. As such, proportionate EBITDA does not represent EBITDA available to the Group. Reconciliation of proportionate revenue to statutory revenue Six months to Six months to 30 September 30 September 2005 2004 £m £m Proportionate revenue 23,934 21,179 Minority share of revenue in subsidiary undertakings 407 801 Group share of revenue in associated undertakings and trade investments (6,090) (5,238) ---------- ---------- Statutory revenue 18,251 16,742 ========== ========== Reconciliation of proportionate EBITDA to profit for the financial period Six months to Six months to 30 September 30 September 2005 2004 £m £m Proportionate EBITDA 8,942 8,251 Minority share of EBITDA in subsidiary undertakings 119 221 Group's share of EBITDA in associated undertakings and other investments (2,350) (2,152) ---------- ---------- Group EBITDA 6,711 6,320 Charges for depreciation and amortisation (2,871) (2,607) Loss on disposal of property, plant and equipment (35) (32) Share of results in associated undertakings 1,187 1,078 Other income and expense (515) - ---------- ---------- Operating profit 4,477 4,759 Non-operating income 1 16 Investment income 259 321 Financing costs (630) (556) Tax on profit (1,289) (857) ---------- ---------- Profit for the financial period 2,818 3,683 ========== ========== OTHER INFORMATION 1) Copies of this document are available from the Company's registered office: Vodafone House The Connection Newbury Berkshire RG14 2FN 2) These interim results will be available on the Vodafone Group Plc website, www.vodafone.com, from 15 November 2005. For further information: Vodafone Group Investor Relations Media Relations Telephone: +44 (0) 1635 664447 Telephone: +44 (0) 1635 664444 High resolution photographs are available to the media free of charge at www.newscast.co.uk Vodafone, Vodafone live!, Vodafone Mobile Connect, Vodafone Wireless Office, Vodafone Simply and Vodafone Passport are trademarks of the Vodafone Group. The RIM and BlackBerry(R) family of related marks, images and symbols are the exclusive properties and trademarks of Research In Motion Limited - used by permission. Other product and company names mentioned herein may be the trademarks of their respective owners. FORWARD-LOOKING STATEMENTS This document contains 'forward-looking statements' within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group's financial condition, results of operations and businesses and certain of the Group's plans and objectives. In particular, such forward-looking statements include the targeted capital expenditures for the years ending 31 March 2007 and 2008, the targeted 3G coverage by March 2006, the expected net debt as at March 2006, the statements under 'Outlook' regarding Vodafone's expectations for the years ending 31 March 2006 and 2007 as to organic average proportionate, mobile customer growth, full year organic proportionate mobile revenue growth, proportionate mobile EBITDA margins, capitalised tangible and intangible fixed asset additions, free cash flow, share purchases, effective tax rate and cash tax payments, statements under 'Global Services' regarding Vodafone's expectations for the year ending 31 March 2008 as to operating expenses, capitalised fixed asset additions and revenue enhancement initiatives, statements under 'Dividends' regarding the targeted dividend pay-out ratio for the year ending 31 March 2007 and the growth in future dividends, and statements related to the Group's expectations regarding the adoption of certain IFRS standards and the publication of future financial information under IFRS. Certain of these statements are included in the 'Chief Executive's Statement'. These forward-looking statements are made on the basis of certain assumptions which each of Vodafone and the Group businesses, as the case may be, believes to be reasonable in light of Vodafone's operating experience in recent years. The principal assumptions on which these statements are based relate to exchange rates, customer numbers, usage and pricing, take-up of new services, termination and interconnect rates, customer acquisition and retention costs, network opening and operating costs and, availability of handsets and the availability of technology necessary to introduce new products, services and network or other enhancements. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans' or 'targets'. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements particularly the statements under 'Outlook', 'Global Services', 'Dividends' and the statements related to the Group's adoption of IFRS and the publication of future financial information referred to above. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services; greater than anticipated competitive activity, including the entry of new competitors in the markets in which we operate, requiring changes in pricing models and/or new product offerings or resulting in higher costs of acquiring new customers or providing new services; the impact on capital spending from investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; slower customer growth or reduced customer retention; the possibility that technologies, including mobile internet platforms, and services, including 3G services, will not perform according to expectations or that vendors' performance will not meet the Group's requirements; changes in the projected growth rates of the mobile telecommunications industry; the Group's ability to realise expected synergies and benefits associated with 3G technologies and the integration of our operations and those of acquired companies; the Group's ability to identify and complete the acquisition of companies or other transactions intended to grow the customer base; future revenue contributions of both voice and non-voice services offered by the Group; lower than expected impact of 3G, Vodafone live!, and the Group's business offerings and other new or existing products, services or technologies on the Group's future revenue, cost structure and capital expenditure outlays; the ability of the Group to harmonise mobile platforms and any delays, impediments or other problems associated with the roll-out and scope of 3G technology and services and Vodafone live! and the Group's business or service offerings as well as other new or existing products, services or technologies in new markets; the ability of the Group to offer new services and secure the timely delivery of high-quality, reliable 3G handsets, network equipment and other key products from suppliers; greater than anticipated prices of new mobile handsets; the ability to realise benefits from entering into partnerships for developing data and internet services and entering into service franchising and brand licensing; the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on one or more of the measurements of our financial performance or the level of dividends; any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future acquisitions or dispositions; changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the European Commission regulating rates the Group is permitted to charge; the Group's ability to develop competitive data content and services which will attract new customers and increase average usage; the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; the possibility that new marketing campaigns or efforts are not an effective expenditure; the possibility that the Group's integration efforts do not increase the speed to market for new products or improve the Group's cost position; changes in exchange rates, including particularly the exchange rate of pound sterling to the euro, US dollar and the Japanese yen; the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or with other negative implications; changes in statutory tax rates and profit mix which would impact the weighted average tax rate; changes in tax legislation in the jurisdictions in which the Group operates; final resolution of open issues which might impact the effective tax rate; timing of any tax payments relating to the resolution of open issues; and loss of suppliers or disruption of supply chains. Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under 'Risk Factors' contained in our Annual Report with respect to the financial year ended 31 March 2005. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurance can be given that the forward-looking statements in this document will be realised. Neither Vodafone Group nor any of its affiliates intends to update these forward-looking statements. USE OF NON-GAAP FINANCIAL INFORMATION In presenting and discussing the Group's reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with IFRS, but this information is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation as alternatives to the equivalent GAAP measure. A summary of certain non-GAAP measures included in this results announcement, together with details where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below. Location in this results announcement of reconciliation Non-GAAP measure Equivalent GAAP measure and further information --------------------------------------------------------------------------------------------------------------------- Group EBITDA Profit for the period Proportionate financial information on page 58 Mobile EBITDA Operating profit Business review on page 6 Adjusted operating profit Operating profit Business review on page 6 Operating free cash flow Net cash flows from operating Cash flows and funding on page 23 activities Net debt Cash and cash equivalents Cash flows and funding on page 23 Free cash flow Net cash flows from operating Cash flows and funding on page 23 activities Adjusted earnings per share Earnings per share Note 6 on page 39 Proportionate revenue Statutory revenue Proportionate financial information on page 57 Proportionate EBITDA Profit for the period Proportionate financial information on page 58 Adjusted effective tax rate Tax on profit as a percentage of Financial update on page 20 profit before taxation In addition, the trading results of the Group and key markets present certain GAAP financial information, being revenue and cost of sales related to acquisition and retention activity, on a net basis. The Group believes that this basis of presentation provides useful information for investors regarding trends in net subsidies with respect to the acquisition and retention of customers and facilitates comparability of results with other companies operating in the mobile telecommunications business. 'Other revenue', 'Net acquisition costs' and 'Net retention costs', as used in the trading results, are defined on page 62. DEFINITION OF TERMS Term Definition --------------------------------------------------------------------------------------------------------------------- 3G device A handset or device capable of accessing 3G data services. Acquired intangibles Amortisation relating to intangible assets identified and amortisation recognised separately in respect of a business combination in excess of the intangible assets recognised by the acquiree prior to acquisition. Active customer A customer who has made or received a chargeable event in the last three months. ARPU Total revenue excluding handset revenue and connection fees divided by the weighted average number of customers during the period. Average monthly ARPU Total ARPU in an accounting period divided by the number of months in the period. Capitalised fixed asset This measure includes the aggregate of capitalised property, plant additions and equipment additions and capitalised software costs. Churn Total gross customer disconnections in the period divided by the average total customers in the period. Controlled and jointly The networks include the Group's mobile operating subsidiaries and controlled networks joint ventures. Measures for controlled and jointly controlled networks include 100% for subsidiaries and the Group's proportionate share for joint ventures. Customer A customer is defined as a SIM, or in territories where SIMs do not exist, a unique mobile telephone number, which has access to the network for any purpose (including data only usage) except telemetric applications. Telemetric applications include, but are not limited to, asset and equipment tracking, mobile payment/ billing functionality (for example, vending machines and meter readings) and includes voice enabled customers whose usage is limited to a central service operation (for example, emergency response applications in vehicles). Data revenue Data revenue includes all non-voice service revenue excluding messaging. Depreciation and other This measure includes the profit or loss on disposal of property, amortisation plant and equipment. EBITDA EBITDA excludes items not related to underlying business performance. Inter-segment revenue Revenue between operating companies of the same business (mobile or non-mobile) in different reporting segments. Intra-segment revenue Revenue between operating companies of the same business (mobile or non-mobile) within the same reporting segment. Messaging revenue Messaging revenue includes all SMS and MMS revenue including wholesale messaging revenue, revenue from the use of messaging services by Vodafone customers roaming away from their home network and customers visiting the local network. Net acquisition costs The total of connection fees, trade commissions and equipment costs, net of related revenue, relating to new customer connections. Net debt Long term borrowings, short term borrowings and mark to market adjustments on financing instruments less cash and cash equivalents. Net retention costs The total of trade commissions, loyalty scheme and equipment costs, net of related revenue, relating to customer retention and upgrade. Non-voice service Comprises all service revenue that is not related to voice revenue services including, but not limited to, messaging, downloads, Internet browsing and other data services. Organic growth The percentage movements in organic growth are presented to reflect operating performance on a comparable basis. Where an entity, being a subsidiary, joint venture or associated undertaking, was newly acquired or disposed of in the current or prior period, the Group adjusts, under organic growth calculations, the results for the current and prior period to remove the amount the Group earned in both periods as a result of the acquisition or disposal of subsidiary or associated undertakings. Where the Group increases, or decreases, its ownership interest in a joint venture or associated undertaking in the current or prior period, the Group's results for the prior period is restated at the current period's ownership level. Further adjustments in organic calculations exclude the effect of exchange rate movements by restating the prior period's results as if they had been generated at the current period's exchange rates and excludes the amortisation of acquired intangible assets. Organic growth for proportionate results is adjusted to reflect current year and prior year results at constant exchange rates, using like-for-like ownership levels in both years Other revenue Comprises all non-service revenue. In the trading results, presented for the mobile telecommunications business and the Group's key markets, net other revenue excludes revenue relating to acquisition and retention activities as such revenue is deducted from acquisition and retention costs. The Group believes that this basis of presentation provides useful information for investors regarding trends in net subsidies with respect to the acquisition and retention of customers and facilitates comparability of results with other companies operating in the mobile telecommunications business. Partner Markets Markets in which the Group has entered into a Partner Agreement with a local mobile operator enabling a range of Vodafone's global products and services to be marketed in that operator's territory and extending Vodafone's brand reach into such new markets. Purchased licence Amortisation relating to capitalised licence and spectrum fees amortisation purchased directly by the Group, and such fees recognised by an acquiree prior to acquisition. Vodafone live! active A handset or device equipped with the Vodafone live! portal which device has made or received a chargeable event in the last month. This information is provided by RNS The company news service from the London Stock Exchange QKDBBDBADD

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