NEWS SNAP:Vodafone Slashed Outlook Means GBP23-28 Billion Charge

LONDON -(Dow Jones)- Vodafone Group, Monday slashed its own forecasts for its medium and long-term growth, triggering an impairment charge of at least GBP23 billion and possibly as much as GBP28 billion.

The biggest element will be a write-off on the value of its German operations, which it acquired in a landmark deal to buy Mannesmann in 2000.

Europe's largest mobile operator tried to calm investors by saying that it is sticking to expectations for its current year, which ends March.

However, it warned that for the next year, ending March 2007, mobile revenues excluding acquisitions would rise between 5% and 6.5% - a fall from the 6% to 9% it expects in the current financial year. Competition and tougher regulation were among the causes cited.

Traders said they expected the stock to fall modestly on opening, down between 3% and 4%. Some of the company's gloom is already reflected in analyst forecasts.

Explaining the write-down, Vodafone Chief Executive Arun Sarin said "in many cases, past transactions used stock for stock (exchanges), and high prices at the time were reflected as goodwill in our books."

Goodwill is the difference between the physical value of assets and the excess paid by a company to acquire them.

Vodafone bought Mannesmann in 2000 for the equivalent of about $181 billion, at the time the largest contested takeover in Europe.

Sarin said changes in the "competitive landscape in Germany" were more significant than Vodafone had expected at the time of the Mannesmann acquisition.

By 0916 GMT, Vodafone shares had shed 3.75 pence, or 3.21%, to 113.25 pence.

The impairment charge and disappointing fiscal 2007 guidance follows two profit warnings from Vodafone over the past four months, and resulted in further frustration amongst analysts.

John Karidis, an analyst at Man Securities, said he expects more heartache to come from Vodafone, arguing that although only a small decline in revenue is forecast, visibility is affected.

He noted that the new guidance excludes recent acquisitions and disposals in India, Sweden, South Africa and Turkey, saying "this is unacceptable."

Despite excluding certain assets from its outlook, Vodafone forecast a decline in proportionate mobile EBITDA margins of around 1% on an organic basis in fiscal 2007. However, that guidance excludes its Japanese unit, where it maintained its forecast for an EBITDA margin in the high teens.

"It is disgraceful that Vodafone cannot provide proper guidance," Karidis said, adding that he rates the stock at avoid.

Vodafone will provide full guidance on May 30 when it reports its results for fiscal 2006.

Company Web site: http://www.vodafone.com

-By Gren Manuel, Benoit Faucon and Nic Fildes, Dow Jones Newswires; 44-20-7842-9264; nicolas.fildes@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 27th February 2006