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UPDATE: Vodafone Upgrades Guidance As 1st Half Revenue Rise 9%

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LONDON -(Dow Jones)- Vodafone Group, the world's largest mobile phone operator by sales, Tuesday swung to a first-half net profit and lifted its full fiscal-year guidance, following strong growth in emerging markets and a rise in mobile data usage.

Following recent industry upgrades by rivals Telefonica and France Telecom, Vodafone increased its revenue, adjusted operating profit and free cash flow outlook for the 2008 financial year, ending March 31.

Newbury, England-based Vodafone lifted net profit to GBP3.29 billion for the six months to Sept. 30, from a loss of GBP5.1 billion the previous year, aided by a number of cost reduction and outsourcing programs in Western Europe. Last year, Vodafone also had higher losses after taking impairment charges on its Italian and German operations.

Revenues came in slightly higher than analysts expected, up 9% at GBP16.994 billion from GBP15.6 billion the previous year, driven by a 48.8% rise in more profitable mobile data revenues and a strong performance in its Indian and Turkish operations.

Recent acquisitions, including Vodafone's majority-owned Indian operations which it acquired in May from Hutchison Essar Ltd for $10.7 billion, and Telsim in Turkey which it acquired for $4.55 billion in 2006, lifted revenues. Emerging markets sales grew overall by almost 40%.

Vodafone Essar, India's third largest mobile operator, grew revenues 53% since May, adding 8 million net customers.

Vodafone Chief Executive Arun Sarin said Vodafone Essar's customer base was now 35.7 million, with the company adding 1.6 million new customers a month.

Vodafone's revenues also increased 33% in Egypt, 28% in Turkey, 20% in South Africa and 24% in Romania.

U.S. mobile operator Verizon Wireless added 3 million net customers during the period, posting revenues of $22.1 billion and earnings before interest, tax, depreciation and amortization, or Ebitda, of $8.7 billion. Vodafone owns 45% of Verizon Wireless.

"These results reflect our continuing focus on the execution of our strategy. In Europe, we have performed well in competitive markets by driving strong growth in voice usage and data revenue, whilst improving cost efficiency," said Sarin.

"In EMAPA we are capturing the revenue growth opportunities within emerging markets and benefiting from continuing momentum at Verizon Wireless. The increased interim dividend reflects the Board's confidence in how the business is progressing," he added.

In Europe, where Vodafone is facing increasing price competition and regulatory pressures, the company managed 2% revenue growth, principally resulting from strong mobile data sales. Overall group mobile data revenues increased 48.5% to GBP1 billion.

Service revenues decreased 5.9% in Germany and 2.7% in Italy, but encouraging sales growth of 10.6% in Spain and 6.7% in the U.K. improved revenues.

While voice prices dropped 19.1% in Europe, Vodafone said this was offset by a 24% increase in call usage, and a strong uptake by people using mobile data services to access Internet sites, such as Google, YouTube and eBay via their mobile phone.

Overall, Vodafone increased its mobile user base by 35 million during the period to 241 million proportionate mobile customers. The proportionate figure includes subscribers at joint ventures and minority-owned companies. Excluding joint ventures and minorities, Vodafone added 20 million new customers.

The market was also cheered by Vodafone raising its 2008 revenue outlook to between GBP34.5 billion and GBP35.1 billion, from previous guidance of GBP33.3 billion to 34.1 billion. The adjusted operating profit outlook was lifted to between GBP9.5 billion and GBP9.9 billion, from GBP9.3 billion and GBP9.8 billion, while free cash flow guidance increased to between GBP4.4 billion and GBP4.9 billion, from between GBP4 billion and GBP4.5 billion.

"Good results and guidance continue to offer succor to Vodafone bulls," said Dresdner Kleinwort analyst Robert Grindle, who is maintaining a buy rating on the stock.

At 1524 GMT Vodafone was the highest riser on the U.K.'s FTSE-100, up 12 pence, or 6.8%, at 194 pence. The stock has the European telecoms sector in the past year, rising around 25%.

Vodafone increased its interim dividend per share by 6% to 2.49 pence, after reporting adjusted group operating profit up 1.6% to GBP5.2 billion.

-By Daniel Thomas, Dow Jones Newswires; 44-20-7842-9264; dan.thomas@dowjones.com

­(END) Dow Jones Newswires

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