For the first time in its history, the payout to its shareholders has been cut by Vodafone as the telecom service company swung to a full-year loss.
In November last year, a commitment was made by the new chief executive of the company Nick Read to maintain a steady payout. But the company announced that it was reducing its dividend to 9 euro cents a share from 15.07 cents.
This telecom service providing giant pays out the one of the highest dividends in the UK.
A transaction in its India operations was the main cause of the €7.6bn (£6.6bn) full-year loss, the company said. The company had clocked profits of €2.8bn a year ago. The company said that there were a few other factors that caused its loss which included a reduction in the value of its investments made in Spain and Romania.
There was a drop of 6 per cent in revenues generated by the company for the year at €43.7 billion.
The first mobile phone call in the world from London to Newbury was made by Vodafone in 1985 while it was based in Newbury – which is still its headquarters. The company went public in the 1980s as a part of Racal Telecomms.
Since that first cal, the company has gradually diversified into a number of other business areas through acquisition of buying broadband companies in countries such as Germany and Spain. It is now making large investments for the construction of 5G networks in many countries.
Vodafone is also set to acquire a part of the assets of Liberty Global. This acquisition is the biggest for the company in the last almost two decades since it acquired German company Mannesmann in 2000 in a deal which was worth £112 billion back then.
The latest acquisition has however landed the company in huge debts which totaled about €27.0 billion at the end of its financial year. It’s the company had reduced its debt in the last fiscal year from €29.6 billion n a year. The company still needs to make further huge investments for construction of 5G networks.
The group was at a “key point of transformation”, Read said.
The transformation plan for the company includes reducing operational costs and to cross-sell additional products such as broadband. A new division for Vodafone’s European mobile towers is also being set up by the company.
“We are executing our strategy at pace and have achieved our guidance for the year, with good growth in most markets but also increased competition in Spain and Italy and headwinds in South Africa,” Read said. “These challenges weighed on our service revenue growth during the year, and together with high spectrum auction costs have reduced our financial headroom.”
The company was re-basing the dividend so that it can achieve further growth and reduce its debt pile, he said.
“Vodafone is a huge dividend payer and so [it’s] important. The fact they’ve been expanding heavily has meant they need to now cut back on the dividend to pay down all the debt they’ve acquired,” said Chris Beauchamp, chief market analyst at IG.
(Adapted from BBC.com)