Vodafone to slash costs and boost revenue

Vodafone said today it plans to slash costs by £1.4bn and boost revenue by another £1.1bn - increasing cash flow by £2.5bn by 2008.

Speaking in a webcast to investors and analysts, Vodafone CEO Arun Sarin added the company would also cut expenditure on mobile phones to 10 per cent of mobile revenue. This works out to £300m a year, which the company plans to save by negotiating bulk deals for handsets.

The company will be pulling in its own belt to the tune of £1.4bn a year by hacking back capital expenditure and operating costs. On top of this the Vodafone board promised that the company would generate another £1.1bn a year through "revenue enhancement" measures.

Vodafone CFO Ken Hydon explained these measures would be the result of the previously announced 'One Vodafone' strategy. With its plan to "build once, deploy many times", the company would be quicker to market with new services and its customer service would improve, Hydon said.

This would lead to higher average revenue per user, lower churn, increased market share as well as another £1.1bn coming in per year.

The company is still aiming for £7bn of free cash flow this year. Sarin said Vodafone would increase returns to shareholders but was short on details. The company has been buying back its own shares in bulk but this has had little effect on the share price. Shares are still trading around 130p each, the point to which they fell in May after Sarin presented the company's annual results.

Sarin added the company was still committed to a Christmas 3G rollout but emphasised this would be a gradual affair and not a "big bang". He said that customer growth was in the high single digits and that margins in the UK and Germany were up, while those in Italy were flat.

Vodafone announced a £12.6bn pre-tax profit in May, but this was turned into a £9bn loss through a write-off of goodwill. Shares dropped by six per cent to 128p on the news.