ACCOUNTING FOR MANAGERS AND ANALYSIS OF VODAFONE TELECOM

Introduction

Vodafone is the universes largest nomadic telecommunications community, using over 65,000 staff and with over 130 million clients. The concern operates in 26 states worldwide. Vodafone is a public limited company with listings on the London and New York stock exchanges.

Global acknowledgment of the Vodafone trade name is turning as the company rolls out its individuality into new markets. However, it retains local names and imagination in markets where this is indispensable to keeping the trust of clients.

To assist advance its image worldwide, Vodafone uses prima athleticss stars from high profile planetary athleticss, including David Beckham and Michael Schumacher. This Case Study dressed ores on how such publicity can assist to maintain a prima trade name at the head of public consciousness

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This is my award to talk here for the merchandise which was like a dream at the beginning and particularly in such a large market of Pakistan, in fact, I should state in such a large and concentrated market of Pakistan. Our one of the chief undertaking was to happen the infinite for such merchandise in the extremely concentrated market of Pakistan.

For that ground our squad decided to work on few stairss which were fundamentally to acquire the feedback from the market as fallow.

Basically our aims were to happen out the behaviours of the consumers or the clients towards the merchandise available in the market that either consumer or the client is after the

Quality of the merchandise.

Or after the monetary value of the merchandise.

Or after the good presentation of the merchandise which includes the service.

Or if the consumer is after or comes for peculiar merchandise and why, either because of effectual advertizement on the media like telecasting or intelligence documents or other agencies of advertizement.

Analysis:

Strength: Vodafone has its trade name image and its ranking is 2nd in universe. So here one thing is conform that Vodafone has good web and outstanding services that ‘s why its users are most after China Mobiles. At gave some particular bundles to the attract clients. It can offer international rolling installation more than any web in Pakistan. Financially Vodafone is strong and is able to put heavy sum in Pakistan.

Failing: It has to take licence from PTA and move harmonizing to regulations of Pakistan due to which it may non give its particular services like 3G, picture naming and name to person by concealing your phone figure.

OPPURTUNITIES: Vodafone can capture Asiatic market if it can turn in Pakistan, 55 % of population of Pakistan is immature and nomadic phones are most normally used by immature 1s. Demo graphs of Pakistan tell us that in this company Vodafone can gain heavy sum of gross. Today Mobil ink is figure 1 cellular company in Pakistan with 28.47 million clients. Entire nomadic users in Pakistan are 89.9 million and the population of the state is 172.8 million. So there is infinite for market incursion. If Vodafone offers some particular bundles for limited clip so client of other webs may exchange. Vodafone have better engineering so it can capture the clients of the other webs as good. With Pakistan Vodafone can capture Asia every bit good because of population or demo graphs of Pakistan.

Menace: The current recession in market is non good for any sort of concern including telecommunication. Five cellular companies are already working in Pakistan. The state of affairs in Pakistan is non good particularly political and peace. There are a batch of uncertainnesss in the state.

RATIO ANALYSIS

Fiscal statement analysis is a judgmental procedure. One of the primary aims is designation of major alterations in tendencies, and relationships and the probe of the grounds underlying those alterations. The judgement procedure can be improved by experience and the usage of analytical tools. Probably the most widely used fiscal analysis technique is ratio analysis, the analysis of relationships between two or more line points on the fiscal statement. Fiscal ratios are normally expressed in per centum or times. Generally, fiscal ratios are calculated for the intent of measuring facets of a company ‘s operations and autumn into the undermentioned classs:

Liquidity ratios step a house ‘s ability to run into its current duties.

Profitability ratios step direction ‘s ability to command disbursals and to gain a return on the resources committed to the concern.

Leverage ratios measure the grade of protection of providers of long-run financess and can besides help in judging a house ‘s ability to raise extra debt and its capacity to pay its liabilities on clip.

Efficiency, activity or turnover ratios provide information about direction ‘s ability to command disbursals and to gain a return on the resources committed to the concern.

LIQUIDITY RATIOS

Working Capital: – Working capital compares current assets to current liabilities, and serves as the liquid modesty available to fulfill eventualities and uncertainnesss. A high on the job capital balance is mandated if the entity is unable to borrow on short notice. The ratio indicates the short-run solvency of a concern and in finding if a house can pay its current liabilities when due.

Formula

Current Assets – Current Liabilitiess

Acid Test or Quick Ratio: – A measuring of the liquidness place of the concern. The speedy ratio compares the hard currency plus hard currency equivalents and histories receivable to the current liabilities. The primary difference between the current ratio and the speedy ratio is the speedy ratio does non include stock list and prepaid disbursals in the computation. Consequently, a concern ‘s speedy ratio will be lower than its current ratio. It is a rigorous trial of liquidness.

Formula

Securities + Cash + Marketable Accounts Receivable Current Liabilitiess

PROFITABILITY RATIOS

Tax return on Capital Employed

This ratio reflects the overall profitableness of the concern. It is calculated by comparing the net income earned and the capital employed to gain it.

Formula

Tax return on Capital Employed = Net income before Interest, Tax and dividend *100

Capital Employed

Tax return on stockholder ‘s financess

This ratio reveals how productively the owner ‘s financess have been utilized by the house.

Net net income after involvement & A ; revenue enhancement /total stockholder ‘s financess

Net net income ratio

This ratio shows the relationship between net net income and gross revenues.

Net Net income Ratio = Net Profit * 100

Net Sale

Net incomes Per Share

This ratio measures the net income available to the equity stockholders on a per portion footing. All net incomes left after payment of revenue enhancement and penchant dividend are available to equity stockholders.

EPS = Net Net income – Dividend on Preference Shares

No of equity portions

Dividend per Share

DPS is the dividend distributed to equity stockholders divided by the no. of equity portions.

DPS = Dividend paid to Equity Shareholder

No. of Equity Shares

SOLVENCY RATIOS

Debt Equity Ratio

This ratio explains the relationship between the long term debts and portion holders ‘ financess.

Debt Equity Ratio = Debt

Equity

Debt to Total Fund Ratio

This ratio is a fluctuation of the Debt Equity Ratio and gives the same indicant as the debt equity ratio. In this ratio, debt is expressed in relation to entire financess.

Debt Entire Fundss Ratio = Debt

Equity + Debt

RATIO OF THE VODAFONE FOR THE Year OF 2007 AND 2008

CURRENT RATIO 2007 2008

0.68 0.39

QUICK RATIO

2007 2008

0.66 0.38

Leverage RATIO

2007 2008

0.21 0.22

DEBT EQUITY RATIO

2007 2008

3.77 3.44

Capital EQUITY RATIO

2007 2008

1.26 1.29

Inventory TURNOVER RATIO

2007 2008

-65.02 -52.49

DEBTOR TURNOVER RATIO

2007 2008

62.96 33.25

ASSETS TURNOVER RATIO

2007 2008

2.31 2.12

Working Capital TURNOVER RATIO

2007 2008

-5.07 -2.68

GROSS MARGIN

2007 2008

0.39 0.38

RETURN ON EQUITY CAPITAL

2007 2008

-0.72 0.09

Comparative fiscal statements

In order to gauge the hereafter conferences of a house it is necessary to look into the past public presentation for this intent, it becomes indispensable to do comparative shady of its fiscal statements for two or more old ages. There statements non merely demo the absolute figures from one twelvemonth to another. In add-on there statements may besides demo the alteration from one twelvemonth to another in per centum house. Such comparative statements are of guest value in organizing the sentiment sing the procedure of the endeavors: –

Make the informations simpler and more apprehensible.

It indicates the survey points and weak points of the concern.

It is besides helpful in bespeaking the fund.

It is helpful in comparing of house ‘s public presentation with mean public presentation of industry.

Fiscal place and resources

Equity dividends

The tabular array below sets out the sums of meantime, concluding and entire hard currency dividends paid or, in the instance of the concluding dividend for the 2009 fiscal twelvemonth, proposed, in regard of each fiscal twelvemonth.

Year ended 31 March Interim Final Sum

2005 1.91 2.16 4.07

2006 2.20 3.87 6.07

2007 2.35 4.41 6.76

2008 2.49 5.02 7.51

2009 2.57 5.20 7.77

The Company provides returns to stockholders through dividends. The Company has historically paid dividends semi-annually, with a regular interim dividend in regard of the first six months of the fiscal twelvemonth payable in February and a concluding dividend payable in August. The managers expect that the Company will go on to pay dividends semi-annually. In November 2008, the managers announced an interim dividend of 2.57 pence per portion, stand foring a 3.2 % addition over last twelvemonth ‘s interim dividend.

In sing the degree of dividends, the Board takes history of the mentality for net incomes growing, runing hard currency flow coevals, capital outgo demands, acquisitions and divestments, together with the sum of debt and portion purchases.

In November 2008, the Board reviewed the old dividend policy in the visible radiation of recent foreign exchange rate volatility, the impact of amortization of acquired intangible assets and the current economic environment, following which it adopted a progressive policy, where dividend growing reflects the implicit in trading and hard currency public presentation of the Group.

Consequently, the managers announced a proposed concluding dividend of 5.20 pence per portion, stand foring a 3.6 % addition over last twelvemonth ‘s concluding dividend.

Liquid and capital resources

The major beginnings of Group liquidness for the 2009 and 2008 fiscal old ages were hard currency generated from operations, dividends from associated projects, and adoptions through short term and long term issues in the capital markets. The Group does non utilize off-balance sheet particular purpose entities as a beginning of liquidness or for other funding intents.

The Group ‘s cardinal beginnings of liquidness for the foreseeable hereafter are likely to be hard currency generated from operations and adoptions through long term and short term issues in the capital markets, every bit good as committed bank installations.

The Group ‘s liquidness and working capital may be affected by a material lessening in hard currency flow due to factors such as decreased operating hard currency flow ensuing from farther possible concern disposals, increased competition, judicial proceeding, timing of revenue enhancement payments and the declaration of outstanding revenue enhancement issues, regulative opinions, holds in the development of new services and webs, license and spectrum payments, inability to have expected gross from the debut of new services, reduced dividends from associates and investings or increased dividend payments to minority stockholders. Please see the subdivision titled “ Chief hazard factors and uncertainnesss ” . In peculiar, the Group continues to anticipate important hard currency revenue enhancement payments and associated involvement payments in relation to hanker standing revenue enhancement issues.

The Group is besides portion to a figure of understandings that may ensue in a hard currency escape in future periods. These understandings are discussed further in “ Option understandings and similar agreements ” at the terminal of this subdivision.

Wherever possible, excess financess in the Group ( except in Egypt and India ) are transferred to the centralized exchequer section through refund of adoptions, sedimentations, investings, portion purchases and dividends. These are so loaned internally or contributed as equity to fund Group operations, used to retire external debt, invested externally or used to pay external dividends.

Cash flows

Free hard currency flow before license and spectrum payments increased by 2.5 % to ?5,722 million, despite a recess of a US $ 250 million gross revenue enhancement distribution from Verizon Wireless to April 2009, as the increased hard currency generated by operations more than countervail higher capital outgo, and revenue enhancement payments were lower than in the anterior twelvemonth. Free hard currency flow was lower ensuing from a ?647 million payment stand foring 60 % of the license in Qatar, of which ?530 million was funded by Vodafone Qatar ‘s other stockholders.

Cash generated by operations increased by ?1,345 million to ?14,634 million, with about 72 % generated in the Europe part. Increased capital outgo in emerging markets is progressively being funded through hard currency generated by operations.

Payments for revenue enhancement decreased by ?394 million, chiefly due to lower colonies, a lower leaden mean statutory revenue enhancement rate and structural benefits following sweetenings to the Group ‘s internal capital construction.

Dividends received from associated projects and investings fell by 20.1 % to ?755 million, in line with outlooks following acquisitions in Verizon Wireless and SFR. Together with Verizon Communications Inc. , the Group agreed to detain a US $ 250 million gross revenue enhancement distribution to April 2009. Both stockholders benefited by enabling Verizon Wireless to understate agreement and continuance fees applicable to the span installation drawn to get Alltel. In add-on, dividends from SFR were lower, in line with outlooks, following the understanding after SFR ‘s acquisition of Neuf Cegetel that SFR would partly fund debt refunds by a decrease in dividends between 2009 and 2011 inclusive.

Net involvement payments increased by 5.5 % to ?1,168 million, chiefly due to unfavorable exchange rate motions impacting the interlingual rendition of involvement payments into sterling. The involvement payments ensuing from the 28.2 % addition in mean net debt at month terminal accounting day of the months was minimised due to alterations in the Group ‘s currency mix of net debt and significantly lower involvement rates for debt denominated in US dollars.

2009 2008 %

?m ?m Cash generated by operations 14,634 13,289 10.1

Purchase of intangible fixed assets ( 1,764 ) ( 846 )

Purchase of belongings, works and equipment ( 5,204 ) ( 3,852 )

Disposal of belongings, works and equipment 317 39

Operating free hard currency flow 7,983 8,630 ( 7.5 )

Taxation ( 2,421 ) ( 2,815 )

Dividends from associated projects and investings 755 945

Dividends paid to minority stockholders in subordinate projects ( 162 ) ( 113 )

Interest received 302 438

Interest paid ( 1,470 ) ( 1,545 )

Free hard currency flow 4,987 5,540 ( 10.0 )

License and spectrum payments 735 40

Free hard currency flow before licence and spectrum payments 5,722 5,580 2.5

Acquisitions and disposals ( 1,330 ) ( 6,541 )

Sums received from minority

Stockholders 618 –

Put option options over minority involvements ( 2,521 )

Equity dividends paid ( 4,013 ) ( 3,658 )

Purchase of exchequer portions ( 963 ) –

Foreign exchange and other ( 8,371 ) ( 2,918 )

Net debt addition ( 9,076 ) ( 10,098 )

Opening net debt ( 25,147 ) ( 15,049 )

Closing net debt ( 34,223 ) ( 25,147 ) 36.1

FINANCIAL POSITION THROUGH BALANCE SHEET

Amalgamate Balance Sheet

2008 2007

?m ?m

Non-current assets

Intangible assets 70,331 56,272

Property, works and equipment 16,735 13,444

Investings in associated projects 22,545 20,227

Other non-current assets 8,935 6,861

Entire 118,546 96,804

Current assets 8,724 12,813

Entire assets 127,270 109,617

Entire equity stockholders financess 78,043 67,067

Entire minority involvements ( 1,572 ) 226

Entire equity 76,471 67,293

Liabilitiess

Borrowings

Long term 22,662 17,798

Short term 4,532 4,817

Tax liabilities

Deferred revenue enhancement liabilities 5,109 4,626

Current revenue enhancement liabilities 5,123 5,088

Other non-current liabilities 1,055 954

Other current liabilities 12,318 9,041

50,799 42,324

Entire equity and liabilities 127,270 109,617

Non-current assets

Intangible assets

At 31 March 2008, the Group ‘s intangible assets were ?70.3 billion, with good will consisting the largest component at ?51.3 billion ( 2007: ?40.6 billion ) . The addition in intangible assets was chiefly as a consequence of ?7.9 billion of favourable exchange rate motions and ?7.6 billion originating on the acquisitions of Vodafone Essar and Tele2, partly offset by amortisation of ?2.5 billion. Mention to observe 28 to the Consolidated Financial Statements for farther information on the concern acquisitions.

Property, works and equipment

Property, works and equipment increased from ?13.4 billion at 31 March 2007 to ?16.7 billion at 31 March 2008, preponderantly as a consequence of ?4.1 billion of add-ons, a ?1.2 billion addition due to acquisitions during the twelvemonth and ?1.6 billion of favourable foreign exchange motions, which more than countervail the ?3.4 billion of depreciation charges and ?0.1 billion decrease due to disposals.

Investings in associated projects

The Group ‘s investings in associated projects increased from ?20.2 billion at 31 March 2007 to ?22.5 billion at 31 March 2008, as a consequence of a ?2.9 billion addition from the Group ‘s portion of the consequences of its associates, after the tax write-offs of involvement, revenue enhancement and minority involvement, chiefly originating from the Group ‘s investing in Verizon Wireless and favourable foreign exchange motions of ?0.3 billion, partly offset by ?0.9 billion of dividends received.

Other non-current assets

Other non-current assets chiefly relates to other investings held by the Group, which totaled ?7.4 billion at 31 March 2008 compared to ?5.9 billion at 31 March 2007. The motion chiefly represents an addition of ?1.8 billion in the investing in China Mobile as a consequence of the addition in the listed portion monetary value, partly offset by the disposal of the Group ‘s 5.60 % interest in Bharti Airtel.

Current assets

Current assets decreased to ?8.7 billion at 31 March 2008 from ?12.8 billion at 31 March 2007, chiefly as a consequence of reduced hard currency retentions following the completion of the Vodafone Essar acquisition.

Entire equity stockholders ‘ financess

Entire equity stockholders ‘ financess increased from ?67.1 billion at 31 March 2007 to ?78.0 billion at 31 March 2008. The addition comprises chiefly of the net income for the twelvemonth of ?6.8 billion less equity dividends of ?3.7 billion, a ?5.8 billion benefit from the impact of favourable exchange rate motions and the unfulfilled retention additions on other investings discussed above.

Borrowings

Long term adoptions and short term adoptions increased to ?27.2 billion at 31 March 2008 from ?22.6 billion at 31 March 2007, chiefly as a consequence of foreign exchange motions and written put option liabilities assumed on the completion of the Vodafone Essar acquisition.

Tax liabilities

The deferred revenue enhancement liability increased from ?4.6 billion at 31 March 2007 to ?5.1 billion at 31 March 2008, which arose chiefly from ?0.5 billion in relation to the acquisition of Vodafone Essar.

Other current liabilities

The addition in other current liabilities from ?9.0 billion to ?12.3 billion is chiefly to due foreign exchange differences originating on interlingual rendition and other current liabilities in the freshly acquired Vodafone Essar.

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