Europolitan Vodafone AB results for the first half 2002/2003

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Europolitan Vodafone AB reports strongest Half Year* results in its history with pre-tax income of SEK 1 072 million -Net income of SEK 769 million -106 000 net customer additions -Net Sales of SEK 3 137 million -EBITDA of SEK 1 396 million -Application to extend 3G rollout period by 2 years * Accounting year to 31 March Half Year* Results 2002/2003 Customer Growth Vodafone's customer base increased to 1 269 000 at 30 September 2002, of which 381 000 (263 000) were prepaid customers. A total of 106 000 (59 000) customers were added in the first half, of which 47 000 were contract customers (33 000). During the second quarter 47 000 (32 000) customers were added, of which 25 000 (17 000) were contract customers. Of the closing base, 114 000 (23 000) customers were connected through Service Providers, of which 60 000 (21 000) were contract customers. Revenue Vodafone's consolidated first half net sales increased 7% to SEK 3 137 million compared with the same period last year (SEK 2 923 million). Average monthly revenue per customer in the first half for all contract customers was SEK 547 (SEK 569). Average monthly revenue per customer including prepaid customers was SEK 412 (453). As a result of the increased focus on the consumer and prepaid segments in the first half, the customer mix has changed versus last year, contributing to the decline in blended average monthly revenue per customer. Usage in each individual segment continues to grow compared with the same period last year. Cost of Sales, Operating Expenses and Profit Cost of sales and operating expenses increased by 7% to SEK 2 130 million (SEK 1 993 million) in the first half. The increase arose mainly as a result of higher depreciation on 2G/2,5G investments and costs related to the increased volume of customers during the first half year. Note: In this report, unless otherwise stated "Vodafone" refers to the activities of Europolitan Vodafone AB and its subsidiaries in Sweden. After net financial income of SEK 39 million (SEK 18 million), profit after financial items was SEK 1 072 million (SEK 968 million). After tax expense of SEK 304 million (SEK 277 million) and minority interest of SEK 1 million (SEK 4 million), net income was SEK 769 million (SEK 695 million). Capital Expenditures Capital expenditures in the first half amounted to SEK 897 million (SEK 474 million). Almost 70% of these related to 3G investments with the balance being invested in enhancing our existing 2G/2,5G infrastructure and services. Capital expenditures above include Vodafone's one third share of the 3G infrastructure investments made by its joint venture 3GIS AB, which is accounted for using the proportionate consolidation method. Rollout of Vodafone's own 3G network in the major cities of Stockholm, Gothenburg and Malmö continued according to plan during the first half. Progress in the joint venture network has been growing steadily, although issues with planning permits and military frequencies are causing concern. Liquidity and Financing EBITDA amounted to SEK 1 396 million (SEK 1 269 million) during the half year, an increase of 10%. EBITDA margin increased to 45% for the half year. Free cash flow (cash flow after investments) was SEK 517 million (SEK 528 million). Related Party Transactions As previously announced, Vodafone has a number of agreements with other companies within the Vodafone Group. Approximately SEK 56 million has been charged by Vodafone Group companies during the first half. In addition, Vodafone Sverige AB invested its cash funds in Vodafone Group Plc's Commercial Paper programme during the second quarter. At the end of September 2002, 3 tranches totalling MSEK 2 178 million were held with up to 6 months tenor, in order to meet expected future cash flow requirements. These underlying investments are traded in the market, at arm's length rates. Parent Company Results The Group's parent company, Europolitan Vodafone AB, had revenue in the first half of SEK 19 million (SEK 18 million) and income after financial items of SEK 6 million (SEK 2 million). The increase in the parent company's cash was SEK 8 thousand (nil). Net financing was unchanged (unchanged). In 1997, Europolitan Vodafone AB issued three debentures (issue Nos. 1, 2 and 3) each with detachable warrants with a right to subscribe to new shares. Warrants were detached and transferred to senior management of the Group. The exercise period according to the warrants connected to issue No. 3 is 1 June to 1 December 2002. Subscriptions for new shares with exercise of a part of the warrants connected to issue No. 3 have been made which increased share capital by SEK 40,280 to SEK 102,466,383 and increased the number of shares by 161,120 to 408,545,530 since 30 June 2002. Market Overview During September, an advertising campaign for the Wireless Office was launched on both TV and the Internet, based on the "How Are You?" theme, focussing on opportunities for small and medium sized businesses (SME). In addition, Vodafone strengthened its proposition for the SME segment, to make its offering clearer and simpler. Customers The number of customers added during the first half increased by 80% compared with the same period in the previous year. Growth was strong for both the contract and prepaid segments, with an increased contribution from the consumer segment. Growth in customers connected through Service Providers was more modest than in the previous quarter. The proportion of prepaid customers in the customer base increased to 30% at 30 September 2002. During the second quarter, Vodafone announced that its Wireless Office solution will be implemented at Sweco. In addition, Vodafone has signed a number of other new Wireless Office customers, including Ideon, Syngenta and Bröderna Ekstrand. Of its total customer base at 30 September 2002, Vodafone had an active customer base of 95%. The proportion of active contract customers amounted to 95% and prepaid customers 96%. From this quarter, active customers are defined as those who have made or received a chargeable event in the last three months. In previous quarters, active customers included customers who had made a chargeable outgoing event. Services During the second quarter, Vodafone announced that it would launch Multimedia Messaging Services (MMS) in October. From 15 October all its customers are able to send and receive colour pictures, sound and text between MMS-enabled mobile phones. These services are offered free of charge until 31 January 2003. Vodafone, IBM and application developer isMobile have jointly developed a service management product designed to meet the needs of businesses that manage a mobile company workforce. A positioning function to make the work of installation and service organisations conducting field work simpler and more efficient is a key feature of this service. Second Quarter Highlights Vodafone Sweden lands major order from Sweco. (Press Release 2002-07-03). Vodafone Sweden wins case against Tax Authority. (Press Release 2002-07-10). Vodafone Sweden to offer GPRS in more countries. (Press Release 2002-07-22). Vodafone PRE-PAID, Vodafone's prepaid card available in more countries. (Press Release 2002-07-26). Vodafone Sweden to launch multimedia messages in October. (Press Release 2002-08-30). New mobile company service makes field work simpler. (Press Release 2002-09-30). Vodafone Sweden applies for changes to UMTS licence terms. (Press Release 2002-09-30). Regulatory 3G licence conditions On 30 September, Vodafone applied to the Regulator (PTS) to extend the deadline for rolling out its 3G network by 2 years to 31 December 2005. This extension is required as a result of delays caused by the handling of building permits by Swedish municipalities and the processing of frequency issues by the Swedish Armed Forces. It is expected that PTS will respond towards the end of the calendar year. Quarterly Report The Third Quarter and Nine Months' Report will be published on 30 January 2003. Stockholm, 22 October 2002 The Board of Directors - Europolitan Vodafone AB (publ) For further information, please contact: Jon Risfelt, President and CEO, tel: +46 708 33 10 01 Mark Carey, CFO, tel: +46 708 33 18 03 Monica Enderstein, Investor Relations Manager, tel: +46 708 33 18 02 Tel: +46 (0)8 410 160 00 This report has not been audited. The same accounting principles and calculation methods have been applied in this report as in the full year report for the financial year ended 31 March 2002. These are in accordance with the Annual Accounts Act, Swedish Generally Accepted Accounting Principles and Recommendations issued by the Swedish Financial Accounting Standards Council. Europolitan Vodafone AB is listed on Attract 40 on the Stockholm Stock Exchange's O list. The operations are carried out by Europolitan Vodafone AB and its subsidiaries, Vodafone Sverige AB and Vodafone Stores AB. The majority shareholder is Vodafone Group Plc, which owns 73.1 per cent of the shares, while private shareholders, investment companies and pension funds own the remaining 26.9 per cent. The Vodafone Group is the world's largest mobile network and is represented in 28 countries on 5 continents. It has more than 229 million mobile telecom users. 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