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Vodafone tightens belt by £1bn

Plans to exploit the less exploitative customer

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Vodafone's half-year results show profits on the slide and any increase in revenue largely attributable to currency fluctuations, prompting a change of strategy and a new round of cuts to shave £1bn off costs by 2011.

Overall revenue for April to September 2008 is up by 17.1 per cent, to £19.9bn, but the company admits that this increase is "substantially due to foreign currency benefits". It said that revenue for the full year could be as low as £38.8bn - a billion quid less than previously forecast - with adjusted operating profit of £11.0 billion to £11.5 billion.

Consolidated operating profit across the group was down to £4.1bn, from £5.2bn during the same period of 2007. Consolidated profit before taxation, which hit £4.5bn during 2007, came in at £3.3bn this year. This isn't as bad as some analysts were predicting, and led to a small rise in the Vodafone share price during early trading.

However, this is the telecoms industry we're talking about, and the company's announcement highlighted "group adjusted operating profit", which was up by 10.5 per cent to £5.8bn

To address these issues Vittorio Colao, who took over the company in July, replacing Arun Sarin, is planning to focus on getting more money out of existing customers rather than trying to acquire more of them, and to achieve that Vodafone will move towards more subscription-based pricing:

"We will shift our approach away from unit pricing and unit-based tariffs to propositions that deliver much more value to our customers in return for greater commitment."

Which should see the company more interested in subscribers who don't actually use the service very much, as opposed to heavy users, who have traditionally been the most attractive customers.

Making more money from the existing customer base might seem a tall order, especially in Europe where Vodafone admits that "ongoing competitive and regulatory pressures" are having a significant impact - a nod to the caps on roaming introduced at an EU level.

But it's India, Turkey and Africa where Vodafone will be focusing the efforts, rather than the more-developed markets, where punters are already being squeezed just about dry. ®

The smart choice: opportunity from uncertainty

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