Sophie Ryan is online editor for the Business Herald

Vodafone revenue up a notch as Sky merger looms

Vodafone reported a 1.8 per cent growth in revenue for the year ending March 2016. Photo / Bloomberg
Vodafone reported a 1.8 per cent growth in revenue for the year ending March 2016. Photo / Bloomberg

Vodafone has reported a growth in revenue of 1.8 per cent for the year to March 2016.

The telco reported a $18.3 million loss for the year, but chief executive Russell Stanners said the growth in revenue and customer base was cause for celebration.

"In the telco market being back in growth is a big achievement," Stanners said.

Vodafone NZ took on debt to acquire TelstraClear from Australia's Telstra for $840 million in 2012, saying at the time that it expected to reap savings through ending management and back-office double-ups, and by using TelstraClear's backhaul and transmission services.

TelstraClear was now integrated into the company and the acquisition of WorldXChange, which provides unified communications to business and government organisations, was providing new revenue streams, Stanners said.

Chief executive of Vodafone Russell Stanners.
Chief executive of Vodafone Russell Stanners.

In 2015 Vodafone reported a 2.6 per cent decline in service revenue and a loss of $27.9m.

"In 2015 we said we were two thirds of the way through the integration of [TelstaClear]. That's now largely been done and I think that is reflected in the improved profit of the business," Stanners said.

The company's debt facility was renewed at a lower interest rate, reducing the company's financing costs. The accounts show it refinanced $1.5 billion of loans and accumulated interest from Vodafone Group with a $1.15 billion loan from Vodafone Overseas Finance, another member of the group.

Vodafone Group injected $300m of equity into New Zealand operations, and combined with a rise in revenue, the company saw a $72m improvement in profit after tax.

Stanners said the annual result was entirely in line with figures provided to Sky Television when the proposed merger of the two companies was introduced.

The merger with Sky was Vodafone's "primary strategy", Stanners said.

"The secondary strategy is what we do today."

Customer base for fixed line and on account mobile users had grown, Stanners said, and the base of prepay users had held steady.

The Commerce Commission is expected to make a decision on the merger application between Sky and Vodafone by November.

Last month Sky TV reported a 15 per cent fall in tax-paid profit for the year to June 30 of $146.7 million.

Sky attributed part of the drop in profit to the costs associated with the proposed merger. Revenues were flat at $928.2m, a 0.1 per cent increase on the previous year.

The merged companies are expected to generate cost and capital expenditure savings of about $415 million, or 52 cents per share, after integration costs, as they rationalise overlapping functions and use Vodafone NZ's technical and network capabilities to improve the efficiency of sales and marketing.

The combined group may also generate revenue synergies of about $435 million after integration costs and will seek further revenue gains by monetising entertainment content on mobile devices, they have said.

Read the full report here:

- with BusinessDesk

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