Vodafone says will take a hit of £28 billion this year

Vodafone says will take a hit of £28 billion this year

	Published : Tue, 28 Feb 2006 08:05 By : David Simms Print this Story

LONDON - Mobile giant Vodafone PLC has warned that its assets were overvalued by as much as £28 billion and consequently it is facing a period of slow revenue growth. The world's leading mobile phone operator said that it would be hit by a loss of £23 billion to £28 billion, mainly in the German markets consequent to its takeover of Mannesmann in 2000.

Vodafone said its outlook for the current year remains unchanged, although it's organic growth for the next year was pegged between 5 percent to 6.5 percent. Vodafone had earlier intimated a growth of 6 percent to 9 percent in the year ending March 31, 2006.“This lower growth rate compared to the year ending March 2006 reflects the increasingly intense competitive environment, continuing regulatory reductions in termination rates and the one-off beneficial impact of the introduction of mobile to mobile termination rates in France,” the company said in a statement.

Consequent to this announcement, Vodafone shares dipped 7.5 pence, or 6.4 percent, to 109.5 pence in late trading. Analysts’ say this write down is bound to increase the pressure of Arun Sarin, the company's chief executive. Sarin was however in a defiant mood and said it would not affect him adversely, "I have the support of the board, and they're comfortable with what I am doing," he said But analysts feel otherwise, Robert Grindle at Dresdner Kleinwort Wasserstein (DKW) said, "It's another incremental worsening of management expectations. It will put Sarin under more pressure. The more the share price falls, the more pressure he will be under." Investec analyst Christian Maher felt that consolidation by the way of restructuring was the way forward, "The industry news remains dire and the brief outlook given here for 2007 is worse than we had hoped.

Restructuring feels like the only way to stem the share price decline, but this morning's comments... that Verizon is going nowhere may push hopes out further," he said. He was referring to the company’s statement that there were "no current plans" to sell its 45 percent stake in US operator Verizon.