Vodafone posts $24 billion loss

Vodafone is banking on consumers buying into new products

LONDON, England (CNN) -- Vodafone, Europe's largest mobile phone company, has posted an annual net loss of £16.2 billion ($24 billion) after writing down the value of its fixed line assets.

But its stock, which dived to a four-year low of 96.5 pence earlier this month, soared 7.4 percent to 112.7 pence at the start of trading on Tuesday, as the company delivered stronger-than-expected results. Analysts had forecast a far bigger net loss.

The size of the loss for the year to March 31 was bigger than the £9.9 billion from the previous year. Vodafone slashed the value of investments in Japan Telecom, Germany's Arcor, France's Cegetel and Grupo Iusacell of Mexico by £6 billion.

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Chris Gent, the chief executive of Vodafone (VOD), which has more than 100 million mobile phone subscribers around the world, resisted calls to further reduce the value of its mobile phone businesses to take account of the falling telecom valuations.

Vodafone was expected to take another whack on its balance sheet with a write down of as much as $25 billion associated with the $178 billion acquisition of Germany's Mannesmann in February 2000.

Earnings before interest, tax, depreciation and amortisation (EBITDA) -- a closely watched figure of a company's ability to generate cash -- rose 44 percent to more than £10 billion, at the top end of forecasts by analysts from Reuters. Sales jumped 52 percent to £22.8 billion.

"The write down is a non-cash charge but the underlying EBITDA is showing strong growth," David Staples, managing director of debt rating agency Fitch, told CNN. "The mobile phone story is a positive one but more cynical investors have managed to push the stock lower but the core business is doing well."

Concerns had been mounting that Vodafone may struggle to deliver growth as the mobile phone market stagnates and many consumers delay buying new phones until the roll-out of high-speed mobile phone services.

CEO Gent expects double-digit growth

Gent said the company would await workable handsets before promoting third-generation (3G) services in the second half of 2003.

"Our main focus this year is on applications that work very well on 2.5G. We don't expect there to be decent supplies of handsets to come through until really the second half of 2003. That's when it would be more appropriate to promote."

"We envisage net customer growth of just below 10 percent... a modest but real improvement in ARPU (Average Revenue Per Users) in most of our European markets. This should lead to double-digit revenue growth," Gent said in a statement.

On the acquisitions front, Gent said the group would be interested in buying Vivendi Universal's Cegetel, which owns France's second-largest mobile phone operator SFR, although he did not expect Vivendi CEO Jean-Marie Messier to sell its interest anytime soon.

"This is the best asset that Vivendi Universal have got, they're hardly likely to sell it in the short-term are they? But we are available should that occur," he said.

BT Group (BT-) has gone on the record as saying it wants to sell its 26 percent stake in Cegetel, which owns 80 percent of SFR. SBC Communications (SBC) of the U.S., which owns 15 percent of Cegetel, is also expected to sell.

"Certainly it's not sensible to enter that argument because it would bid up the price at which Vivendi Universal would have to buy them out... that doesn't seem like the actions of a good partner," Gent said.