Preliminary Results Part 1

Vodafone Group PLC 28 May 2002 PART 1 VODAFONE GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS YEAR ENDED 31 MARCH 2002 * Statutory turnover increased by 52% to Â£22,845 million * Data revenues increased by 87% to Â£2,093 million * Statutory operating profit (note 1) increased by 35% to Â£7,044 million * Earnings per ordinary share (note 1) increased by 45% to 5.15 pence * Proportionate EBITDA (note 2) increased by 44% to Â£10,093 million, with an improvement of 3% in the mobile business EBITDA margin to 36% * Operating cash flow per share increased by 60% to 11.92 pence * Free cash flow of Â£2,365 million, after investing Â£4,145 million of tangible capital expenditure * Dividend increased by 5% to 1.4721 pence per share for the year * Continued growth in customer base with a 22% increase in proportionate registered customers to 101.1 million. Venture customer base over 229 million * Strong financial position. Net debt of Â£12,034 million, representing 14% of market capitalisation at 31 March 2002. Single A credit ratings maintained * No impairment in respect of the Group's controlled mobile businesses. Â£6,000 million impairment of other Group assets (note 3) Note 1 - before goodwill amortisation of Â£13,470 million and exceptional items, which comprise exceptional operating costs of Â£5,408 million and exceptional non-operating items of Â£860 million Note 2 - before exceptional items Note 3 - see page 17, 'Exceptional items' for further details SIR CHRISTOPHER GENT, CHIEF EXECUTIVE, COMMENTED: 'The past year has seen the Group successfully execute its adjusted strategy, delivering very strong operational performance and exceptional financial results, including the generation of substantial free cash flow. In the current year, we envisage net customer growth of just below 10%, allowing for the expected disconnections of non-revenue generating handsets, and a modest but real improvement in ARPU in most of our major European markets. This combination should lead to double-digit revenue growth. In addition, we will continue to focus on improving operational performance and expect to achieve further increases in EBITDA margin, which should result in still better operating cash flow in the year ahead. We have every confidence in the continued growth potential of the business. This year will see many exciting new developments which will sustain the long-term growth of Vodafone in the years to come.' JULIAN HORN-SMITH, GROUP CHIEF OPERATING OFFICER, COMMENTED: 'These results highlight our excellent operational performance during the year. The business has achieved satisfactory customer growth with a better mix of customers in most markets, which has helped contribute to stability in ARPU, ahead of our previous expectations despite reductions in incoming call tariff rates. The continued focus on driving down costs and initiatives led by our Global Products and Services team in achieving cost efficiencies, best practice sharing, global benchmarking and standardisation have contributed to a significant margin improvement and the generation of exceptional free cash flow. Most of our networks have moved to the single Vodafone brand, where sponsorship deals such as Ferrari and the global offering of seamless services are not only contributing to improved ARPU but are also helping to extend our brand recognition and increase customer loyalty.' GROUP FINANCIAL HIGHLIGHTS Robust operational trading performance Statutory Year ended 31 March 2002 2001 Increase (note 2) as restated Â£m Â£m % Turnover 22,845 15,004 52 Total Group operating profit/(loss) - before goodwill amortisation and exceptional items 7,044 5,204 35 - after goodwill amortisation and exceptional items (note 1) (11,834) (6,989) Profit/(loss) on ordinary activities before taxation - before goodwill amortisation and exceptional items 6,199 4,027 54 - after goodwill amortisation and exceptional items (note 1) (13,539) (8,086) Exceptional items include an impairment charge of Â£6.0 billion in respect of the carrying value of Arcor and four other investments. No impairment charge was necessary in respect of the Group's controlled mobile businesses. Proportionate (note 3) Proportionate EBITDA Proportionate (before exceptional turnover items) Year ended 31 March Year ended 31 March 2002 2001 Inc 2002 2001 Inc/ (note 4) (note 4) (dec) Mobile telecommunications Â£m Â£m % Â£m Â£m % Northern Europe 6,516 5,357 22 2,264 1,674 35 Central Europe 4,694 4,323 9 2,068 1,478 40 Southern Europe 5,109 3,521 45 2,131 1,450 47 Americas 5,638 5,008 13 1,907 1,627 17 Asia Pacific 5,373 2,771 94 1,321 587 125 Middle East and Africa 488 448 9 211 227 (7) ------ ------ ------- ------ - 27,818 21,428 30 9,902 7,043 41 Other operations Europe 821 767 7 (8) (32) 75 Asia 1,160 35 199 5 ------ ------ ------- ------ 29,799 22,230 34 10,093 7,016 44 ====== ====== ====== ====== Organic growth at constant exchange rates 9 24 STRONG CASH GENERATION AND CONTINUED GROWTH IN EARNINGS AND DIVIDENDS Per share information Year ended 31 March 2002 2001 Increase (note 2) as restated % Basic earnings/(loss) per share - before goodwill amortisation and exceptional items 5.15p 3.54p 45 - after goodwill amortisation and exceptional items (note 1) (23.77)p (16.09)p Dividend per share 1.4721p 1.4020p 5 Operating cash flow per share 11.92p 7.47p 60 Notes 1. Goodwill amortisation charge of Â£13,470m, compared with Â£11,873m for the year ended 31 March 2001. Exceptional items comprise exceptional operating costs of Â£5,408m, including an impairment charge of Â£5,100m in respect of Arcor, Cegetel, Iusacell and Japan Telecom, and exceptional non-operating items of Â£860m including an impairment charge of Â£900m in respect of the Group's investment in China Mobile (Hong Kong) Limited. For the year ended 31 March 2001, exceptional operating and non-operating items totalled Â£320m and Â£(80)m, respectively. Further details are given in Notes 2, 3 and 4 on pages 27 and 28. 2. Certain prior period comparative information has been restated following the adoption of FRS 19 during the period. Further details are given in Note 1 on page 26. 3. Proportionate information is calculated on the basis described in Note 1 on page 26. 4. Proportionate comparative financial information is presented on a pro forma basis for the acquisition of Mannesmann as described in Note 1 on page 26. GROUP OPERATING HIGHLIGHTS Operational performance * Stable blended ARPU trends maintained in the Group's major European markets, despite continuing reductions in incoming termination rates. * Non-voice service revenues in the Group's controlled mobile businesses of 11.1% of total service revenues for the year ended 31 March 2002, compared with 8.1% for the prior year. Data expected to reach 20% of service revenues in 2004 due to a combination of better voice revenues and the later than expected availability of terminals and applications. * Worldwide customer base of 101.1 million proportionate registered customers at 31 March 2002, representing growth of 22% since 31 March 2001. Venture customer base over 229 million registered customers. * Improved quality of customer base through strategic focus on gaining and retaining high value customers. Active customers represented 92% of total registered customers in the Group's controlled mobile businesses, compared to 90% at 31 March 2001. * An improvement of 3% in proportionate EBITDA margin to 36% in the Group's mobile businesses, with significant increases achieved in the key markets of the UK, Germany and Japan. * Tangible capital expenditure of Â£4,145 million, lower than expected due to better payment terms and prices and a combination of revised network planning and increased efficiencies. The Group expects this number to increase to approximately Â£6,000 million in the 2003 financial year. * Free cash flow of Â£2,365 million in the year, with Â£1,759 million generated in the second half of the financial year. Commercial initiatives Improved service offerings * Commercial GPRS services available in all the Group's major markets, with Vodafone the first mobile operator to offer commercial GPRS roaming across twelve European countries. * Launch of new voice roaming services including Eurocall, Virtual Home Environment, prepaid roaming and assisted roaming, enabling the Group to gain new customers and achieve incremental revenue growth. * Unified messaging now launched in six European countries. * Success of camera-enabled handsets in Japan propelling J- Phone Vodafone into the number two operator position in Japan at 31 March 2002. Initial picture messaging services now available in Germany and Portugal. Picture messaging services will be launched in the Group's other European markets later this year. Global branding * Successful migration of the majority of subsidiaries to the single Vodafone brand. * Launch of the global Vodafone brand through 'How are you?' campaign, with enhanced global awareness of the Vodafone brand through sponsorship of Ferrari from the 2002 Formula One motor racing season. * Innovative partner network agreements signed with Radiolinja and Teledanmark Mobile to promote dual-branded roaming products to international travellers and corporate customers in new territories. Transactions * Acquisition of additional stakes in Japan Telecom and the J-Phone Group during the year, including the successful completion of the Group's tender offer for a further 21.7% stake in Japan Telecom, taking the Group's interests to a controlling 66.7% in Japan Telecom and an economic interest of almost 70% in the J-Phone Group. * Completion during the period of the acquisition of Eircell in Ireland, a 34.5% interest in Grupo Iusacell in Mexico, together with increased stakes in the Group's subsidiaries in Spain and Australia. * Disposal of 11.7% equity stake in Shinsegi Telecom, Inc. in Korea, and Arcor's railway telecommunications business. BUSINESS REVIEW The results for the year ended 31 March 2002 represent an excellent performance in competitive conditions and demonstrate the continued operational strength of the Group in a period in which the Group also successfully implemented its realigned strategy announced in early 2001. Statutory turnover increased by Â£7,841m from Â£15,004m in the comparable period to Â£22,845m in the year ended 31 March 2002. The increase comprised Â£1,105m from Japan Telecom, Â£3,323m from the J-Phone Group (subsequently rebranded J-Phone Vodafone), Â£477m from Eircell (subsequently rebranded Vodafone Ireland) which were all acquired by the Group during the period, an additional Â£1,326m from Airtel Movil S.A. (subsequently rebranded Vodafone) which was acquired by the Group in the second half of the financial year ended 31 March 2001, and Â£1,610m from existing businesses, representing growth of 11% on the prior period. This growth resulted from the larger customer base in controlled businesses, offset by the year on year decline in ARPU, and lower connection revenues due to the lower net customer growth. Service revenues increased by Â£6,134m from Â£12,605m in the year ended 31 March 2001 to Â£18,739m in the year ended 31 March 2002. The total statutory Group operating loss, after goodwill amortisation and exceptional items, increased in the year, primarily as a result of a Â£5.1 billion impairment charge taken in respect of certain of the Company's investments, further details of which are given on pages 17 and 18, and an increase in the annual goodwill amortisation charge which increased from Â£11,873m to Â£13,470m. Mobile proportionate turnover increased by Â£6,390m to Â£27,818m, with the increase largely attributable to J-Phone Vodafone (Â£2,500m), Vodafone Ireland (Â£477m), the increased stake in Vodafone Spain (Â£968m), and Grupo Iusacell (Â£151m). The remainder of the increase, Â£2,294m, arose from existing businesses. Proportionate turnover from other operations increased by Â£1,179m, mainly as a consequence of the additional 59.2% stake acquired in Japan Telecom during the year. The Group's overall mobile proportionate EBITDA margin increased from 33% in the comparable period to 36% for the year ended 31 March 2002. Proportionate EBITDA margins increased in all the Group's major markets due to the Group's strategy of focusing on margin management, including reduced connection costs, and the retention of high value customers. The UK EBITDA margin increased from 31% to 34%. In Germany, proportionate EBITDA margins increased significantly, from 35% to 45%, due primarily to lower customer acquisition costs from the significantly lower gross customer growth and the focus on customer retention initiatives. In Japan, proportionate EBITDA margins improved from 19% to 23%, attributable to customer growth, the success of 'sha-mail' increasing data and SMS revenue, and the initial operational efficiencies achieved through merging the regional operating companies into a new single structure. A review of the Group's principal business, the supply of mobile telecommunications services and products, is described below. A review of the Group's other operations, which primarily comprise fixed line telecommunications businesses and the Vizzavi Europe joint venture, can be found on pages 13 and 14. The appendices to these results also contain a summary of certain key performance indicators for each of the Group's segments, providing details of the registered customer base, including further analysis between prepaid and contract, active and inactive customers, ARPU and non-voice service revenue data. On 1 April 2001, in response to the expansion of the Group, the Company implemented a planned reorganisation of its overall management structure into five main regions: Northern Europe, Middle East and Africa; Central Europe; Southern Europe; Americas and Asia; and Pacific. Subsequent to this, on 18 December 2001, Vodafone announced a further change to its regional structure. With effect from 1 January 2002, the Group's interests in Japan, China and India were formed into a new Asia region. All of the Group's other regions remain unchanged. The geographical segments for the analysis of the Group's operating results for the year ended 31 March 2002 have been modified and comparatives have been restated. Comparative results for the Group have also been restated following the adoption of FRS 19, 'Deferred tax', further details of which can be found on page 26. Mobile Telecommunications The Group's mobile businesses performed strongly in the period. Proportionate turnover increased by 30% to Â£27,818m, with all segments reporting strong growth, and proportionate EBITDA, before exceptional items, increased by 41% to Â£9,902m. In the year ended 31 March 2002, the Group added a further 18.1 million customers to its proportionate registered base, with 8.0 million arising through net stake changes and 10.1 million through organic growth. At the year end the Group had 101.1 million proportionate customers and the total venture base was 229.2 million registered customers. This compares with a proportionate registered base and total venture base of 83.0 million and 188.7 million, respectively, as at 31 March 2001. Northern Europe Financial highlights Year ended 31 March 2002 2001 Increase Â£m Â£m % Statutory turnover - United Kingdom 3,763 3,444 9 - Other Northern Europe 1,669 1,067 56 ------- ------- 5,432 4,511 ------- ------- Statutory total - United Kingdom 941 795 18 Group operating - Other Northern profit (note 1) Europe 744 489 52 ------- ------- 1,685 1,284 ------- ------- Proportionate - United Kingdom 3,763 3,458 9 turnover (note 2) - Other Northern Europe 2,753 1,899 45 ------- ------- 6,516 5,357 ------- ------- Proportionate - United Kingdom 1,294 1,068 21 EBITDA (note 2) (before exceptional - Other Northern items) Europe 970 606 60 ------- ------- 2,264 1,674 ------- ------- Proportionate - United Kingdom 34% 31% EBITDA margin - Other Northern 35% 32% (note 2) Europe (1) - before goodwill amortisation and exceptional items (2) - comparatives are presented on a pro forma basis for the acquisition of Mannesmann United Kingdom Vodafone UK continued to perform well in the year, as benefits from both the realignment of commercial policies to promote the acquisition and retention of high value customers and the steps taken to improve the cost effective running of the business were realised. Statutory turnover increased by 9% to Â£3,763m, and service revenue by 12% to Â£3,525m, compared to 31 March 2001. Data as a percentage of service revenue grew from 7% to 12%, driven by increases in penetration of the customer base and higher usage of SMS text messaging, in addition to the doubling of other data revenues. The rise in SMS has been influenced by new gaming product offers and event driven promotions. Other data revenues have doubled due to the launch of products such as WAP over GPRS, OfficeLive delivering Outlook Services powered by Microsoft Mobile Software, and Vodafone Content Delivery Platform. The growth in Vodafone UK's statutory operating profit, before goodwill amortisation and exceptional items, accelerated during the second half of the year. The annual growth of 18% was achieved through 9% growth in the first half year and 26% in the second. Proportionate EBITDA, before exceptional items, increased by 21% to Â£1,294m, and the proportionate EBITDA margin increased by 3% to 34%. Vodafone UK's share of mobile service revenue in Oftel's quarterly review stands at 33%, increasing its lead to 5.5% points over the second placed UK network. At 31 March 2002, Vodafone UK had 13,186,000 registered customers, which represents an increase of 7% over 31 March 2001. Of total customer growth, 79% arose from contract customer connections, reflecting the emphasis on connecting higher value customers as net contract customers grew from 4,294,000 to 5,014,000, and contract churn which fell from 30% to 26%. This improved performance reflects the increased focus on retention activities and the continuing impact of network and customer care investment. Prepaid churn increased from 22% to 28%, due to specific focus given to disconnecting inactive customers, who represented 11% of the registered customer base at 31 March 2002. Blended churn increased from 25% to 27%. Both contract and prepaid ARPU stabilised during the course of the year. ARPU for the contract customer base for the twelve months to 31 March 2002 increased marginally to Â£555 compared to Â£550 for the year to 31 March 2001. This movement was in part favourably affected by Vodafone UK developing the ability to accurately allocate inbound calls to contract or prepaid customer segments. ARPU for the prepaid customer base for the twelve months to 31 March 2002 declined from Â£156 to Â£118, due, in part, to the allocation of incoming revenues explained above. Both contract and prepaid ARPU also suffered dilution as a result of the migration of higher value prepaid customers to contract tariffs. Compared to 31 March 2001, blended ARPU decreased from Â£306 to Â£276. However, current ARPU trends indicate that blended ARPU is stabilising. The average cost to connect for contract customers rose slightly from Â£114 for the year to 31 March 2001 to Â£116, reflecting the impact of the increased proportion of higher value customers connected in the year. The average cost to connect for prepaid customers fell from Â£53 to Â£26 for the year to 31 March 2002 as a result of the decision to reduce the distribution incentives to improve the profitability of this market segment. Vodafone UK continued its investment in network infrastructure to improve network quality and maintain Vodafone's position as the UK's leading network. Vodafone continues to be recognised in Oftel surveys as the leading UK network, with a level of customer satisfaction of 95%. During the year, Vodafone UK successfully delivered a re-balancing of resources into new product development, product management and customer development activities as well as a reduction in headcount of 10%. Other customer focused developments introduced during the year include demonstration bars throughout the retail chain and the first ever mobile phone contact, information and assistance zone at Heathrow Airport. Other Northern Europe During 2002 the Group successfully rolled out its rebranding programme, as operations in Ireland, the Netherlands and Sweden migrated to the single Vodafone brand (formerly Eircell, Libertel and Europolitan, respectively). In addition, network partnership agreements were signed with Teledanmark Mobile and Radiolinja to deliver dual-branded products in Denmark and Finland. The Group's interests in Northern Europe, excluding the UK, reported continued growth in financial performance. Statutory turnover increased by 56% to Â£1,669m and proportionate EBITDA, before exceptional items, increased by 60% to Â£970m. While the results of Vodafone Ireland (acquired in May 2001) were included in the Group's results for the first time, underlying EBITDA growth, excluding Ireland, remained high at 32%. Proportionate EBITDA margin increased from 32% to 35%, demonstrating the effectiveness of the strategic realignment towards acquisition and retention of high value customers and focus on cost efficiencies. In the Netherlands, Vodafone was particularly successful in implementing these strategies and reported an increase in EBITDA margin from 27% to 33% together with a proportionate revenue increase of 17%. In Belgium, Proximus maintained strong EBITDA margin performance and reported a 46% EBITDA margin for the year at the same time as growing EBITDA by 26% year on year. The registered venture customer base increased by 24% to 22,679,000. Vodafone Sweden, in a competitive market of three operators, increased its customer base by 15% during the year to 1,163,000. Vodafone Sweden's commitment to acquiring and retaining high value customers is demonstrated by a customer market share of 16% and a revenue market share of 25%. Vodafone Ireland confirmed its status as the largest mobile operator in Ireland, maintaining a market share of over 56%, with year end registered customer numbers at 1,704,000, representing growth of 10% since acquisition. In France, SFR customer numbers have also continued to grow strongly with two million net additions, representing a 20% increase in the customer base. Central Europe Financial highlights Year ended 31 March 2002 2001 Increase Â£m Â£m % Statutory turnover - Germany 4,112 4,005 3 - Other Central Europe 65 26 150 ------ ------ 4,177 4,031 ------ ------ Statutory total - Germany 1,429 1,085 32 Group operating profit/(loss) - Other Central (note 1) Europe 114 12 850 ------ ------ 1,543 1,097 ------ ------ Proportionate - Germany 4,101 4,102 - turnover (note 2) - Other Central Europe 593 221 168 ------ ------ 4,694 4,323 ------ ------ Proportionate - Germany 1,837 1,421 29 EBITDA (note 2) (before exceptional - Other Central items) Europe 231 57 305 ------ ------ 2,068 1,478 ------ ------ Proportionate - Germany 45% 35% EBITDA margin (note 2) - Other Central Europe 39% 26% (1) - before goodwill amortisation and exceptional items (2) - comparatives are presented on a pro forma basis for the acquisition of Mannesmann Germany The Group's German operations reported strong profit growth and made good progress with a number of corporate initiatives, including rebranding the business from D2 Vodafone to Vodafone. Statutory turnover increased 3% to Â£4,112m, as a 5% increase in service revenues was partly offset by the reduction in equipment revenues as a result of the lower customer growth, particularly in the prepaid customer segment. Service revenues were boosted by the continued growth in messaging and data revenues, which increased 18% in the period and now represent 14% of total service revenues. Total Group operating profit, before goodwill amortisation and exceptional items, increased 32% to Â£1,429m, principally as a result of the increased service revenues, and reduction in equipment subsidies and lower connection commissions. The proportionate EBITDA margin increased from 35% to 45%, and Vodafone remains the most cost efficient and profitable mobile network operator in Germany. The record customer growth experienced in the year ended 31 March 2001 was not repeated in this financial year as the change in focus towards acquiring high value customers and customer retention initiatives impacted on total growth. Vodafone Germany ended the period with a registered customer base of 21,489,000, an increase of over 2% compared to the previous period, as the contract customer base increased by 9% to represent 43% of the total. This was partially offset by the effect of increased blended churn rates from 11% to 23% as inactive prepaid customers were removed from the customer base. Contract churn moved from 19% to 18%, whilst prepaid churn moved from 4% to 27%. Both contract and prepaid ARPU declined compared to the previous year, falling from Euro 611 to Euro 559 and from Euro 151 to Euro 110, respectively. Blended ARPU decreased from Euro 378 to Euro 298. However, ARPU over the past twelve months has stabilised. Following the reduction in equipment subsidies and reduced commissions, the total average cost to connect reduced to Euro 81, with the cost to connect for prepaid customers reducing to Euro 24. The cost to connect for contract customers decreased to Euro 156. Other Central Europe The Group's other interests within Central Europe also had a successful financial year, with all the Group networks increasing their registered customer bases and making good progress with strategic initiatives. The results also benefited from inclusion of a full year's results from Swisscom Mobile. The operations within Other Central Europe ended the period with a registered customer base of 7,599,000 customers, an increase of 23% since 31 March 2001. In Hungary, the mobile telecommunications market grew significantly in the period, with penetration rates increasing from 34% at March 2001 to 52% at March 2002. Vodafone Hungary benefited from this increase, more than doubling its registered customer base to 556,000 and increasing its market share in the period. Of the closing registered customer base, over 91% are connected to prepaid tariffs. In Poland, Polkomtel consolidated its position as the second largest of three operators in terms of registered customers. Polkomtel has continued to focus on high value customers and remains extremely competitive in the corporate segment. As a result, Polkomtel is the leader in the Polish market in terms of blended ARPU. At 31 March 2002, 55% of the total registered customer base were contract customers. The Polish market continues to offer excellent growth potential as market penetration, at 28%, remains one of the lowest in Europe. Swisscom Mobile retained its leadership position in the highly penetrated Swiss market, with an estimated market share of 67%, and continued its focus on the retention of high value contract customers. During the period, Swisscom Mobile completed a review of its tariff structures and increased its registered customer base by 114,000. In September 2001, Vodafone made the final payment of CHF2.3 billion (Â£1 billion) in respect of the acquisition of its interest in Swisscom Mobile in cash. Southern Europe Financial highlights Year ended 31 March 2002 2001 Increase (note 3) Â£m Â£m % Statutory turnover - Italy 3,711 2,967 25 - Other Southern Europe 3,032 1,512 101 ------ ------ 6,743 4,479 ------ ------ Statutory total - Italy 1,267 1,015 25 Group operating profit - Other Southern (note 1) Europe 805 434 85 ------ ------ 2,072 1,449 ------ ------ Proportionate - Italy 2,838 2,323 22 turnover (note 2) - Other Southern Europe 2,271 1,198 90 ------ ------ 5,109 3,521 ------ ------ Proportionate - Italy 1,295 1,048 24 EBITDA (note 2) (before exceptional - Other Southern items) Europe 836 402 108 ------ ------ 2,131 1,450 ------ ------ Proportionate - Italy 46% 45% EBITDA margin (note 2) - Other Southern Europe 37% 34% (1) - before goodwill amortisation and exceptional items (2) - comparatives are presented on a pro forma basis for the acquisition of Mannesmann (3) - comparatives have not been restated for the effect of a change in the accounting for distributor discounts on prepay top-up cards Italy During the year ended 31 March 2002, Omnitel Vodafone improved its financial performance. Statutory turnover, which in 2002 includes distributor discounts on prepay top-up cards, increased by 25% to Â£3,711m. Service revenues grew 27% to Â£3,547m, principally as a result of the increase in the average customer base. On a comparable basis, statutory turnover and service revenues grew by 20% and 22% respectively. Data revenues increased 83%, and now account for 9% of service revenues, primarily due to the increase in SMS text messaging, reflecting successful promotional activities and the introduction of interconnection charges for SMS traffic. Proportionate EBITDA, before exceptional items, increased by 24% to Â£1,295m. Adjusting the turnover for 2001 onto a comparable basis for distributor discounts on prepay top-up cards, the proportionate EBITDA margin, before exceptional items, increased from 43% to 46%, largely as a result of revenue growth combined with the continued focus on controlling acquisition and retention costs and operating expenses. Omnitel Vodafone has maintained its position as the second largest operator in the 90% penetrated Italian mobile market, increasing its registered customer base by 13% to 17,711,000. The blended churn rate for the year increased from 14% to 19% at 31 March 2002, in line with expectations given the level of customer acquisition experienced over the past few years. However, the implementation of company loyalty programmes, with an enrolled customer base of 6,900,000 subscribers, and which have successfully targeted high value customers, resulted in ARPU stabilising and confirmed Omnitel Vodafone's customer satisfaction leadership position. Blended ARPU, after adjusting the previous period's ARPU to include distributor discounts on prepay top up cards within service revenues, slightly decreased from Euro 352 to Euro 345 for the year. Contract ARPU increased from Euro 756 to Euro 769, while prepaid ARPU remained relatively stable during the year despite the voluntary reduction in fixed-to-mobile rates. The average cost to connect for customers, already very low in Italy, slightly declined from Euro 37 to Euro 35. In June 2002, Omnitel Vodafone will be renamed Vodafone Omnitel and will migrate to the Group's red, SIM-shaped logo, whilst retaining the Omnitel name. Other Southern Europe The Group's rebranding programme was successfully rolled-out across the other operations within Southern Europe, with Airtel, Panafon Vodafone and Telecel Vodafone all migrating to the single Vodafone brand during the period. The Group's other interests within Southern Europe showed good progress and include the effect of stake increases in Airtel, Spain, which increased from 73.8% to 91.6% during the period. Proportionate EBITDA, before exceptional items, more than doubled to Â£836m. Excluding Italy, the Southern Europe Region ended the period with a registered venture customer base of 16,211,000 customers, an increase of 21% since 31 March 2001. In Spain, Vodafone's venture customer base increased by 11% to 7,905,000 and registered strong EBITDA growth due to a combination of increased service revenues, significant decreases in customer acquisition costs and improved operational efficiency. In March 2002, Vodafone Spain lowered its prepaid and contract tariffs as part of its plans to strengthen the business and increase its commercial effectiveness. In Greece, Vodafone continued to achieve satisfactory results despite a reduction in contract tariffs in July 2001, as a result of continued competitive pressures. The 2002 financial year also saw the completion of the acquisition of two service providers by Vodafone Greece, Unifon and NextNet, giving Vodafone an extensive nationwide network of retail outlets in Greece that services over 86% of the registered customer base. Extra GSM spectrum was also acquired during the period allowing Vodafone the opportunity to further improve the quality of service for its customers. In Portugal, Vodafone maintained its position as the second largest operator, increasing its customer base by 15% to 2,838,000 at 31 March 2002. Vodafone Albania achieved a positive EBITDA result after operating for only eight months, making it one of the fastest mobile start-ups to pass a break-even position in Europe. Operations in Malta and Romania achieved satisfactory results both in terms of customer growth and profitability. AMERICAS Financial highlights Year ended 31 March 2002 2001 Increase Â£m Â£m % Statutory turnover - Verizon Wireless - - - Other Americas 12 9 33 ------ ------ 12 9 ------ ------ Statutory total - Verizon Wireless 1,332 1,288 3 Group operating Profit (note 1) - Other Americas (15) (51) /(loss) ------ ------ 1,317 1,237 ------ ------ Proportionate - Verizon Wireless 5,475 4,901 12 turnover - Other Americas 163 107 52 ------ ------ 5,638 5,008 ------ ------ Proportionate - Verizon Wireless 1,889 1,673 13 EBITDA (before - Other Americas 18 (46) exceptional items) ------ ------ 1,907 1,627 ------ ------ Proportionate - Verizon Wireless 35% 34% EBITDA margin - Other Americas 12% (42%) (1) - before goodwill amortisation and exceptional items Verizon Wireless Verizon Wireless is the leading mobile telecommunications provider in the United States, a highly competitive marketplace, which currently consists of six nationwide competitors and a number of regional and smaller rural carriers. During the period, proportionate turnover increased 12%, principally reflecting increases in the customer base and average use, coupled with the effects of continued analogue to digital base migrations. Service revenue increased 19% for the year to 31 March 2002. Due to the economic slowdown in the US, net customer growth has slowed considerably from prior years. However, Verizon Wireless increased its customer base by 9% over the period and ended the year with a registered customer base of 29,585,000, of whom 94% were on contract plans. Verizon Wireless was the first major US carrier to launch CDMA2000 1XRTT technology in major metropolitan markets which, including additional markets activated in April and May 2002, brings total coverage to 130 million people - 60% of the Verizon Wireless national footprint. The service, branded Verizon Wireless Express Network, increases the capacity of the network without the need for additional spectrum and also offers higher data rates. The migration to digital price plans has helped to reduce the effect of competitive pressures on blended ARPU, which increased from $551 to $576 for the twelve months ended 31 March 2002. Also, in August 2001, Verizon Wireless launched a new digital 'Free-Up' prepaid programme. Roaming revenues declined in the second half of the year, principally due to the reduction of travel within and to the United States in the wake of September 11. Successful intercarrier roaming rate renegotiations which reduced both roaming revenues and roaming cost of service year on year also contributed to the decline. The average cost to connect increased from $138 to $150 per gross additional customer as a result of increased equipment subsidies and trade commissions. Annualised blended churn decreased from 31% to 29% due to the company's churn management programmes. Verizon Wireless was the winning bidder for 113 licences in the Federal Communications Commissions (FCC's) spectrum auction. However, these licences were then subject to litigation and whilst negotiations between NextWave, the FCC and winning auction bidders (including Verizon Wireless) did initially produce a settlement, this was not ratified by US Congress. Verizon Wireless subsequently filed a suit against the FCC to argue that the FCC should immediately return the $1.7 billion which Verizon Wireless paid as a deposit towards the full payment of the licences. On 29 April 2002, it was announced that the US Government had repaid $1.5 billion of the deposit to Verizon Wireless. The resolution of the applications for these licences remains a matter to be considered by the US Supreme Court following a petition by the FCC, a ruling for which is not expected until at least Spring 2003. In February 2002, Verizon Wireless announced plans to move to a more streamlined organisational structure including a reduction in the number of its employees. Other Americas Grupo Iusacell currently provides wireless services in seven of Mexico's nine regions, covering a population of 90 million people and representing approximately 90% of the country's total population. Roaming is provided in the two remaining regions. Currently, market penetration in Mexico is 22%. Mexico's cellular market has continued to expand, with customer growth largely driven by prepaid products. At 31 March 2002, Iusacell had 1,995,000 registered customers, an increase of almost 13% since the date of acquisition. Of the total registered customer base, 81% were prepaid customers. During the year the Group restructured its Globalstar service provider operations in North America. As part of an arrangement with Globalstar LP, the Group entered into an agreement for the sale of a portion of the Group's equity stake in Globalstar LP and its Globalstar service provider businesses in the US, Canada, the Caribbean and other miscellaneous undeveloped territories for a nominal consideration. The finalisation of the sale of the US and the Caribbean businesses is awaiting appropriate regulatory approvals. ASIA PACIFIC Financial highlights Year ended 31 March 2002 2001 Increase Â£m Â£m % Statutory turnover - Japan 3,323 - - - Other Asia Pacific 749 713 5 ------ ------ 4,072 713 ------ ------ Statutory total - Japan 523 140 274 Group operating Profit (Note 1) - Other Asia Pacific 66 65 2 ------ ------ 589 205 ------ ------ Proportionate - Japan 4,397 1,897 132 turnover - Other Asia Pacific 976 874 12 ------ ------ 5,373 2,771 ------ ------ Proportionate EBITDA - Japan 991 360 175 (before exceptional - Other Asia items) Pacific 330 227 45 ------ ------ 1,321 587 ------ ------ Proportionate - Japan 23% 19% EBITDA margin - Other Asia Pacific 34% 26% (1) - before goodwill amortisation and exceptional items Japan Proportionate turnover for Japan has substantially increased from the prior year, reflecting the increases in the Group's effective ownership in J-Phone during the last two financial years. The results of J-Phone have been fully consolidated from 12 October 2001. Previously J-Phone had been accounted for as an associated undertaking. Further details of the transactions completed during the year ended 31 March 2002 can be found on page 20. Post tender offer, J-Phone was rebranded and now operates as J-Phone Vodafone. Penetration in the Japanese cellular market reached 54% by the end of March 2002. J-Phone Vodafone consistently captured market share, with 2,219,000 net customer additions recorded in the period. This has resulted in J-Phone Vodafone becoming the second largest operator in Japan at 31 March 2002. One of the key drivers of this growth has been the success of J-Phone Vodafone's 'sha-mail', the popular picture-messaging service for customers with camera-enabled handsets. To ensure such growth continues, further enhancements have been made recently, in particular the launch of the video clip message service 'movie sha-mail'. Customers using sha-mail now account for one-third of J-Phone Vodafone's total customer base. The sha-mail service is part of a sophisticated mobile interactive service, J-Sky. As of March 2002, 82% of J-Phone Vodafone's customer base subscribed to the J-Sky service. The success of sha-mail has also resulted in a further increase in data and SMS revenue as a percentage of total service revenues, which increased from 11% in April 2001 to 20% in March 2002, as it attracted new customers and increased usage amongst existing customers. However, blended ARPU declined in the period from Yen 105,971 to Yen 91,903, mainly attributable to reductions in mobile to mobile connection fees. Total average costs to connect reduced from Yen 39,047 to Yen 34,145 following a reduction in acquisition incentives and equipment subsidies. With control over the J-Phone Group passing to Vodafone on 12 October 2001, and the merger of the J-Phone operating companies to create a single structure completing on 1 November 2001, the Group has taken immediate steps to increase the operating efficiency of the company and implement the Group's standards of internal control. New senior management have been appointed and an in depth review of many aspects of J-Phone Vodafone's operations has commenced. An early benefit of this has been the reduction in capital expenditure for the fiscal year from a budget of Yen 592 billion to actual expenditure of Yen 348 billion by focusing on 3G investment and therefore limiting the need for investment in 2G infrastructure. J-Phone Vodafone has also benefited from an improved purchasing position as a member of the Vodafone Group. Other Asia Pacific Statutory turnover from the operations in the Other Asia Pacific region, which relates to the Group's Australian and New Zealand operating companies, increased by 5% to Â£749m during the year ended 31 March 2002. Proportionate EBITDA, before exceptional items, increased by 45% to Â£330m, including a first full-year contribution from China Mobile (Hong Kong) Limited. The proportionate EBITDA margin improved from 26% to 34%. In Australia, Vodafone faced particularly challenging market conditions, with customer growth slowing from the levels experienced in previous years. To address these challenges, the Australian business was restructured to improve operational efficiency and this has involved significant reductions in both capital and operating expenditure, including a 28% reduction in the workforce. The business also took positive action to churn inactive customers and lead the Australian market in announcing a phasing-out of equipment subsidies, including the introduction of the no plansTM tariff. Notwithstanding these challenges, proportionate EBITDA growth of 15% and net customer growth of 35,000 was achieved as the business continued to focus on active customers and acquiring high-value customers. Blended ARPU did decline over the period from AUS$796 to AUS$688. However, recent monthly trends indicate ARPU stabilisation, with particular increases in SMS and data revenues. In New Zealand, strong growth continued with a 49% increase in EBITDA and a 5% point improvement in EBITDA margin with the business focusing on controlling costs whilst growing revenues by 30%. Registered customer numbers increased 23% to 1,095,000, which was achieved despite the business taking steps to reduce equipment subsidies. Total blended ARPU, although declining from NZ$731 to NZ$636, showed signs of stabilising in recent months with increases in SMS and data revenues. In Fiji, despite poor economic conditions, strong results were achieved, with 69% growth in EBITDA, an 11% point improvement in EBITDA margin, 36% growth in revenue and a 47% increase in customer numbers. China Mobile (Hong Kong) Limited increased its registered customer base by 22,402,000 during the year ended 31 March 2002, with prepaid customers representing 93% of net additions. As a result, China Mobile (Hong Kong) Limited now has more prepaid customers than contract customers. The trend towards prepaid customers resulted in a reduction in monthly ARPU to Rmb 135. However, EBITDA margins were maintained as a result of savings on leased line expenses, interconnect charges and continued improvements in operating efficiency. SMS usage volumes continued to grow strongly with 6.1 billion messages sent in 2001 alone, an almost fourteen fold increase over the previous year. The Group's working relationship with China Mobile (Hong Kong) Limited was further strengthened during the period as both parties established working groups to share and develop best practice. Furthermore, in January 2002, the Group made a $35 million investment to acquire a 9.99% investment in Aspire Holdings, China Mobile (Hong Kong) Limited's subsidiary set up to develop its mobile internet service delivery platform and take responsibility for wireless data research and development. In May 2002, the Group announced that it plans to invest a further $750 million to increase its stake in China Mobile (Hong Kong) Limited to approximately 3.27%, gain the right to appoint a non-executive director to the China Mobile (Hong Kong) Limited board and receive future cash dividends on its investment. MIDDLE EAST AND AFRICA Financial highlights Year ended 31 March Increase/ 2002 2001 (decrease) Â£m Â£m % Statutory turnover 306 308 (1) Statutory total Group 161 213 (24) operating profit (note 1) Proportionate turnover 488 448 9 Proportionate EBITDA 211 227 (7) (before exceptional items) Proportionate EBITDA margin 43% 51% (1) - before goodwill amortisation and exceptional items In Egypt, Vodafone maintained strong customer growth with a 47% increase in customers to 1,718,000. The proportionate EBITDA margin remains high at 39%, despite the challenging conditions created by the Egyptian pound's devaluation. In South Africa, Vodacom achieved further growth, with a 28% increase in customer numbers. Proportionate turnover grew by 7% as underlying turnover growth of 34% was largely offset by a weakening of the South African Rand. Vodacom continued to expand into Africa and in December 2001, formed a joint venture in the Democratic Republic of the Congo. Safaricom continued to perform well in its second year of operation in Kenya. Customer numbers have shown a year on year growth of 368%, giving Safaricom a market share of 58%. Other Operations The Group's other operations mainly comprise interests in fixed line telecommunications businesses, including Arcor in Germany, Japan Telecom, Cegetel in France and Vodafone Information Systems (formerly Vodafone Telecommerce), an IT and data services business based in Germany, as well as the Group's 50% interest in Vizzavi Europe, the Group's joint venture with Vivendi Universal. Statutory turnover for the Group's other operations for the year to 31 March 2002 increased to Â£2,103m, from Â£953m in the comparable period, primarily due to the inclusion of the Group's interest in Japan Telecom, which was acquired on 12 October 2001. Proportionate EBITDA, before exceptional items, increased by Â£218m to Â£191m in the year ended 31 March 2002, primarily as a result of the inclusion of Japan Telecom. Arcor Arcor provides fixed network services in Germany and has retained its position as the leading private operator and the strongest competitor to Deutsche Telekom with a total market share of more than 6%, which equates to 40% of the total alternative German fixed line operator market share. Arcor's statutory turnover for the year increased by Â£23m to Â£953m. During the period, Arcor saw its contract voice customer base increase by 7% to 2.4 million customers. Traffic volumes increased by 30% to over 21 billion minutes. However, the effect of these increases was almost entirely offset by tariff reductions, reflecting the competitive environment. In January 2002, a contract between Arcor and Deutsche Bahn AG to carve out Arcor's railway specific telecommunication and service business into a new company was signed, and the sale completed in April 2002. See page 21 below for further details. Arcor also disposed of its point to multipoint business, Arctel, increased its shareholdings in the three existing city carriers ISIS, Wucom and Netcom and concluded the integration of the o.tel.o business into its operations with a view to realising future cost synergies. Japan Telecom The fixed line operations of Japan Telecom continue to face a very competitive environment, following the lifting of restrictions on market entry. In particular, with the new carrier designation service 'My-Line', which enables customers to pre-select their local or long-distance carrier, having been introduced in May 2001, maintaining market share in the consumer voice segment has been challenging. In response, Japan Telecom has been focusing on high-growth business opportunities and working to deliver innovative data products and services. Sales of IP data related services for corporate customers have been specifically targeted. Promotion of the next-generation IP network 'PRISM' via optical fibres has significantly expanded Japan Telecom's corporate customer base. Following completion of the Group's tender offer in October 2001, which increased the Group's interest in Japan Telecom to 66.7%, management at Japan Telecom began a corporate wide initiative to identify and refocus Japan Telecom on its core businesses and strengths, reallocate disproportionate resources to the core operations, drive costs out of the business and implement the Group's standards of internal control. Furthermore, to enable the company to quickly support change, the organisational structure of the company is being realigned to centre around three customer facing business units and ensure a swifter and more focused decision making process that will better serve customers. Japan Telecom also intends to further strengthen senior and mid-level management. Others Cegetel is the second largest fixed line operator in France. The company offers broadband services in addition to fixed line services. In Germany, Vodafone Information Systems provides a range of services to external customers as well as other Group companies, including billing and IT solutions, m- commerce products and solutions and mobile business services. STRATEGIC DEVELOPMENTS Products and services The Group's global strategy is to provide mobile voice, messaging, business, information and entertainment services to its global customer base. One of the ways in which it achieves its strategic objectives is by developing and enabling others to develop a diverse range of compelling services for customers. A comprehensive product and application roadmap governs the development of new services, and the introduction of new network enabling capabilities, which are designed to converge into a highly integrated customer experience. During the 2002 financial year, a number of significant milestones were achieved which underpin the Group's overall strategy for the development of voice and data-related applications. New voice services, including Eurocall, Virtual Home Environment, assisted roaming and prepaid roaming, were all successfully introduced, enabling the Group to both gain new customers in key market segments and achieve incremental revenue growth from existing customers. The rollout of the single Vodafone brand has been significantly progressed during the year, with fourteen Group subsidiaries now operating as 'Vodafone'. Subsidiaries in Italy and Japan currently running with dual brand names are expected to migrate to the single Vodafone brand within the next year. With most of the Group now operating as 'Vodafone', it is important that the Group generates and enhances global awareness of the single brand and its values. Accordingly, during the year, Vodafone's first ever global advertising campaign, 'How are you?', was successfully launched in most of the single branded markets. This included advertising campaigns designed to support the Group's global product strategy, targeted particularly at high value business roaming customers. To drive global brand awareness further, Vodafone became a principal sponsor of the Ferrari Formula One motor racing team. The Ferrari sponsorship supports our brand positioning and serves as a communications platform for increasing usage of services. It also serves as a strong focal point for internal staff programmes. The strength of the Vodafone brand led to partner agreements with two networks, Radiolinja, the leading private mobile operator in Finland, and Teledanmark, the leading Danish integrated operator. Under the terms of these agreements, the partner networks promote Vodafone roaming services under a dual brand to their international travellers and corporate customers. Vodafone customers will also recognise Radiolinja and Teledanmark as trusted partners and will enjoy from them services with the same look and feel that they already receive from other Vodafone networks across Europe. The agreements also extend the Group's global footprint without equity investment and prove the remarkable strength of the brand as well as the global service set. With GPRS networks (or their equivalent) now open for service in all the Group's major markets, providing an enhanced foundation for a variety of additional services previously unavailable to customers, the Group's focus will continue to be the rolling-out of compelling applications to appeal to its global customer base. In March 2002, the Group became the first mobile operator to offer a commercial GPRS data roaming service across twelve European countries. Products now being offered by the Group include innovations such as location based services which have been developed as a Group-wide standard. In Germany, the location based service allows customers to, amongst other things, access information about nightlife in their current location and has been recognised as being the best new location based service in Germany. In other parts of the Group, location based services are also being marketed as fleet management tools. New SMS- based services are now available, such as 'Mplay' in Italy, offering improved 'chat' and 'games' functionality, with others planned for future launch following the signing of agreements with selected partners to provide premium content services via SMS. Other services also include mobile payment facilities, including credit card authorisation functionality, unified messaging, which has been launched in six European countries to date, and more generic services to allow customers to access the internet either through their handset, PDA or laptop computer. For the corporate customer, the Group offers services that provide mobile access to corporate intranets and office-based applications at speeds typically faster than those available through standard fixed telephone lines. In the UK, Office Live promotes remote PDA based access to corporate e-mail and in America, Verizon Wireless is currently conducting trials of its next generation services which allow more secure and faster access to corporate intranets. Similar services, targeted specifically at business users, are also available in other Group networks. Over the course of the next few months, the Group intends to build upon these new products and services by offering an extended range of applications to customers. This will include picture messaging and the availability of camera- phones in the Group's European markets, building on the success of J-Phone Vodafone's 'sha-mail' service in Japan and camera-phones. Vodafone in Germany and Portugal are already offering initial picture messaging services. In January 2002, a revised business and operational model for the Vizzavi joint venture was agreed, focusing on content services for the mobile customer base with a view to increasing customer usage and revenue. At 31 March 2002, Vizzavi's registered user base was 7.5 million, compared with 0.7 million at 31 March 2001. The creation of new services and applications will also be supported by the Group's global developer programme, 'Via Vodafone', which provides the framework for developers to create mobile applications and market them to the Group's customer base using web-based interfaces providing access to the core network services. The development of the Group's 3G networks is an important element of the Group's strategy to further enhance voice and data revenue. 3G networks offer significantly increased spectrum capacity, allowing the Group to continue to grow both its customer base and also the volume of services and product functionality. 3G networks will also be more capital efficient than GSM networks, which should lead to further improvements in the Group's capital intensity ratio, allowing for increased free cash flow generation. A key objective is to make new services available on an end-to- end basis and implement technologies which give a consistent level of service quality across the Group's global footprint. Accordingly, the Group has developed a technology roadmap which is setting guidelines for the optimum deployment of future network resources, complementing the newly launched GPRS data services with 3G technology. In order to achieve a successful delivery of 3G capability, a global 3G programme management organisation has been put in place. Central to this programme are the close relationships with key infrastructure suppliers. The Group has only four suppliers of 3G infrastructure to give greater focus, reduce complexity and also ensure timely delivery. All of the services to be offered over GPRS will seamlessly function in a 3G environment, making the transition to 3G a straightforward and evolutionary step for customers. The extra capacity that 3G provides will also allow additional services to be offered such as streaming and download for video, film and other services which require the transfer of data at higher speeds, as well as video telephony and interactive gaming. In Japan, for example, J-Phone Vodafone has already extended its popular 'sha-mail' service to offer a video-clip messaging service - 'movie sha-mail'. At 31 March 2002, 3G licences have been secured or, in the case of Vodafone Ireland are expected to be secured, in all the territories in which the Group operates and in which such licences have been offered. Accordingly, over the course of the next 18 months the Group intends to open for service 3G networks in its major markets, with J-Phone Vodafone expected to be the first to open in June 2002. J-Phone Vodafone's 3G network will be compatible with international global standards, opening up seamless international roaming into and out of Japan for the first time. The Group's main European markets are expected to follow suit later in the year. Initially, 3G networks will be opened to conduct a series of 'friendly-user' trials, leading up to full-scale roll-out following completion of user product acceptance testing. The Group's work in relation to the development of products and services, the rollout and management of the Group's brand and other significant commercial initiatives are increasingly managed on a global basis to secure the synergies that can be derived from the Group's scope and scale. The Group's global account management team forms relationships with customers who have a significant requirement for multi- national business. The Group's global account strategy has secured multi-national business with a broad base of customers including KPMG, Deloitte & Touche, Unilever, Chubb and Henkel. The global account strategy is enhanced by Vodafone's commitment to use systems integrators to develop corporate solutions. The globalisation of the Group's network infrastructure purchasing relationships, including more than twenty operating companies in which the Group has an interest, is well advanced. Areas covered include network infrastructure, handsets, IT, interconnect and indirect expenditure. This process is yielding significant purchasing synergy benefits and provides for a co-ordinated approach to the roll-out of 3G networks and associated products and services. Vision and Values In November 2001, the Group announced the launch of a major Vision and Values programme with the aim of developing a single culture based around common values and achieving employee behaviour that reflects a 'one company' attitude and supports the values behind the single global brand. The Group's vision is to be the world's mobile communications leader - enriching customers' lives, helping individuals, businesses and communities be more connected in a mobile world. The creation of the unified culture is being supported through a set of Vodafone values centred on customers, results, our people and the world around us. The Board is committed to this programme and places a high priority on effective employee communications to ensure employees both understand the Company's strategy and are also committed to Vodafone's Vision and Values. Accordingly, during the twelve month period ended 31 March 2002, both the Chief Executive and the Group Chief Operating Officer have personally led the roll-out of this programme which will cover all the Group's operating companies, involving over 67,000 employees. Investing in the Group's employees through learning and development continues to be an important element of the Vision and Values programme, ensuring the future success of the Group. Policies to assist employees in reaching their full potential and a wide variety of learning opportunities are in place. Furthermore, programmes are provided to help employees meet the training requirements of their chosen professional institution, thereby continuing to raise the level of professionalism in the Group. Corporate Social Responsibility The Board places significant importance on environmental and community issues and has already been recognised as taking a leading position on environmental and community issues through its inclusion in both the FTSE4Good and the Dow Jones Sustainability indices. The Group understands concerns about the potential health risks arising from electromagnetic fields emitted by mobile telecommunications masts and handsets and is committed to funding research into the radio frequency emissions from both handsets and network infrastructure alike. Across the Group, radio frequency emission levels from base stations are independently monitored, with information made publicly available through planning processes and, in certain cases, dedicated websites. The Group has also committed funds to country-specific research projects and contributes to the funding of several research projects of the World Health Organisation, as well as contributing to other national organisations. Current scientific research continues to conclude that exposure to the radio frequency emissions from telecommunications masts and handsets does not cause any adverse health consequences. However, research into this area is continuing. During the year the Group has made significant progress with its Corporate Social Responsibility (CSR) initiatives, building on the commitments made in its first ever CSR report, Vodafone future, published in June 2001. The Group's 2000/2001 CSR report can be found on the Group's website www.vodafone.com/about/responsibility.htm. The Group's 2001/2002 CSR report will be available on request or on the Group's website from 13 June 2002. This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW FR IFFILESIDFIF

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