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Management of financial resource and performance at Vodafone

Introduction

Being the largest mobile company of the world it is giving job opportunities to more than 65000 people.It is succeed to popularised its name as a new largest communication company of the world.Around 130 million people are being the costumers of this company.It does not see its business and service only but a best and effective communication too provide all over the world.It’s increasing its level of selling power to high status.Vodafone has made its aim to grow its revenue and improve its profit margin by adding value to its products and services i.e.earning more from each product sold and to be the leadingcompany in the communicationsmarket.Vodafone also has a commitment to Corporate Responsibility (CR).

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This is when a business tries to ensure its activities have a positive influence on the people and places where it works. Vodafone is planning to reduce the company’scarbonfootprint by encouraging therecycling and re-use of old phones. The ‘Vodafone live!’ service enables customers to use picture messaging and to download ring tones, colour games, images and information, through an icon-driven menu.This service will soon be further enhanced by picture messaging libraries, video clips and video telephony (seeing the person you’re calling) and improving download speeds. Another service is the Vodafone Mobile Connect Card, which enables customers to access their normal business applications on a laptop when out of the office. Such services add value to the product, and high profile effective promotion will help sell these services to existing and new customers.

The head quarter of this company is in London.It operate more than 30 milllion subscribers by the year 2010and largest company is in United States also. As we go to the history of vodafone ,we find its progressive report since 1982,extending from Racal strategies Limited.The Racal got its name change as Racal telecommunication Group Limited in 1995 and in 1996 Racal Electronics bought out the minority shareholders of Vodafone for GB?110 million.The name Vodafone comes from voice data fone, chosen by the company to “reflect the provision of voice and data services over mobile phones”The name Vodafone comes from voice data fone chosen by the company to “reflect the provision of voice and data services over mobile phones.”(Anderson,T.J.,2006).

Types of communication system and Its Importance

One-way communication involves a company distributing information via brochures, letters, or with an exchange of information and ideas among stakeholders and the company. Information is usually exchanged.

The next type of communication is stakeholder engagement or stakeholder dialogue. The intent of stakeholder engagement is learning stakeholdersi issues and concerns. If well designed, dialogue leads to knowledge being gained by both the company and stakeholders. The company commits itself to considering stakeholder input in making its decisions with an exchange of information and ideas among stakeholders and the company. Information is usually exchanged

The next type of communication is stakeholder engagement or stakeholder dialogue.The intent of stakeholder engagement is learning stakeholders issues and concerns. If well designed, dialogue leads to knowledge being gained by both the company and stakeholders.The company commits itself to considering stakeholder input in making its decisions.

Vodafone operates a global Performance Dialogue process for every employee. The process ensures that employees can make a clear connection between their goals and the business objectives. Each individual’s performance is discussed with their manager and career development goals are set. 93% of managers completed the Performance Dialogue process in the 2007 calendar year and 83% of employees approved development goals with their manager.

Finally, with participatory/interactive decision making, a company collaborates with stakeholders in making decisions. Shared decision making is not appropriate in all situations, but can be effective in helping a company design a plan that, when implemented, will be acceptable to its stakeholders. communication and stakeholderTo be a good corporate citizen, your company should be communicating with and involving its stakeholders to determine their issues concerning a particular facility. There are costs associated with conducting these activities; however, costs to the company can be even greater if stakeholders take action against the company (e.g., hurting the company’s image through a media campaign, holding up permits, suing the company). Being aware of issues and concerns and working to resolve them early before they turn into negative action is time and money well spent. On a positive note, ideas and suggestions from stakeholders can often be insightful and useful in improving a facilities planning and operation. In this light, stakeholders can be seen as consultants to a company. The basic principles of stakeholder involvement are

Voluntary involvement: Everyone involved should be committed to progress and full
participation.
Openness, honesty, trust: Open and honest communication is a requirement for mutual trust.
Inclusiveness: Strive to include all interested parties in some form of dialogue.
Common information base: Participants should have access to the same information.
Mutual learning: All parties, including host and stakeholders, should come to the discussion with a willingness to learn.
Creative options: Have a diverse set of stakeholders as a catalyst for creative thinking.
Collaboration in decision making: Build ownership to increase the likelihood of
implementation, and future collaboration.
Coordination of stakeholder feedback: Communicate how you will use stakeholder feedback.

Even if consensus is not possible, it is important that stakeholders feel their concerns are heard. Communication and stakeholder involvement should be a continuous activity conducted at a facility level and then augmented during periods of change or crisis when major decisions are being considered. This guidebook describes the overall process, which can be tailored to fit the circumstances at your site n resources, history of community interaction, the role of the facility in the community, and decisions being contemplated.”This is a new venture for many if not most cement companies so don’t be discouraged if your communications plan is basic and lacks the involvement of stakeholders”(Barne J,1991).Theenvironmentalandsocialperformanceofcompaniesisincreasinglyunderscrutinyfrominternalstakeholders (e.g. employeesandstockholders) andexternalstakeholders (e.g. localcommunities, activists, regulators). Greaterscientific, economicandsocialknowledgeisfuelingstakeholders demandsforincreasedinformation, clarity, andinvolvementinbusinessoutcomes.

Role of stakeholder

The basic principles of stakeholder involvement are

Voluntary involvement: Everyone involved should be committed to progress and full
participation.
Openness, honesty, trust: Open and honest communication is a requirement for mutual trust.
Inclusiveness: Strive to include all interested parties in some form of dialogue.
Common information base: Participants should have access to the same information.
Mutual learning: All parties, including host and stakeholders, should come to the discussionwith a willingness to learn.
Creative options: Have a diverse set of stakeholders as a catalyst for creative thinking.
Collaboration in decision making: Build ownership to increase the likelihood of
implementation, and future collaboration.
Coordination of stakeholder feedback: Communicate how you will use stakeholder feedback.

Financial Analysis

If we talk aabout financial seector of the company we get that It had amarketcapitalisation of approximately ?93 billion as of 9 March 2011 and it is making itself as the fourth largest company on the London Stock Exchange.Vodafone Group plc is providing its products in Europe, Africa, the Asia Pacific, the Middle East, and the United States. The company offers various handsets; voice and messaging services; data services comprising Internet, email, music, games, and television; and fixed services, including fixed voice and fixed broadband solutions. It also offers value added services, such as Vodafone Email Plus and Windows Mobile. It also offers value added services, such as Vodafone Email Plus and Windows Mobile Email, which provide enterprise customers with real time handheld access to email, calendar, and address book; Vodafone PC Backup and Restore that enable users to remotely store data automatically through their Internet connection.Training and development

Consolidated statement of financial position

2010

?m

2009

?m

Non-current assets
Intangible assets74,258

74,938

Property, plant and equipment20,642

19,250

Investments in associates36,377

34,715

Other non-current assets11,489

10,767

142,766

139,670

Current assets14,219

13,029

Total assets156,985

152,699

Total equity shareholders’ funds90,381

86,162

Total non-controlling interests429

(1,385)

Total equity90,810

84,777

Liabilities
Borrowings
Long-term28,632

31,749

Short-term11,163

9,624

Taxation liabilities
Deferred tax liabilities7,377

6,642

Current taxation liabilities2,874

4,552

Other non-current liabilities1,550

1,584

Other current liabilities14,579

13,771

Total liabilities66,175

67,922

Total equity and liabilities156,985

152,699

Information Systems

Vodafone Information Systems depends on service level agreements (SLAs).according to this system it provides srvice through central reporting system.and brings the different datas from differrent sources.and rpovides them all the time to the employees and costumers.For a long time, Vodafone Information Systems used a combination of two applications for reporting purposes, both of which ran on an IBM mainframe. Training and development

Using SAS, Vodafone Information Systems’ employees are now able to bring together data from a wide range of sources with a few mouse clicks and to create sophisticated reports in a very short period of time. At the heart of the new system is SAS, which allows IT system managers to have a single point of control over all the IT processes. Measurement data from sources. The system also offers completely new ways of presenting the information. Employees and customers can access the reports via the company intranet or the Internet using a Web browser anywhere and at any time. As the SAS solution has been integrated into the V.E.C.T.O.R. reporting system developed by Vodafone Information Systems, the company can guarantee that employees and customers can only display the information that is relevant to their needs. Customers themselves are able to choose the level of detail in the reports and therefore receive only the necessary information that they need to be able to complete their tasks. The simple archiving process means that developments can be tracked over a longer period without any additional work being involved.

IT service providers like Vodafone Information Systems depend on service level agreements (SLAs) as a measure of their success. In order to ensure that the agreed service level is provided at all times, the service provider needs a central reporting system, which brings together measurement data from a wide range of sources. The increasing heterogeneity of the IT environment – which includes a host, UNIX and Windows operating systems – makes central access to the relevant data essential.

For a long time, Vodafone Information Systems used a combination of two applications for reporting purposes, both of which ran on an IBM mainframe. In spite of the capabilities of these applications, they weren’t scalable and were no longer able to keep pace with the most recent requirements..

Strategies

Vodafone’s Partner Network strategy represents an increasingly significant development in the delivery of Vodafone’s mobile services and Og fjarskipti will be an ideal partner for the further development of mobile services. Vodafone is already established in many regions through its operator like Vodafone Sweden, as well as Partner Network Agreements with TDC in Denmark and Radiolinja in Finland, and this new agreement will increase one after another.Vodafone will continue to develop the Partner Network strategy, so the customers and partnerscustomers can use Vodafone services in an increasing number of countries”.Following today’s announcement, Vodafone global services, supported by its global brand communication, will be available in eight Partner Network countries: Austria, Croatia, Denmark, Estonia, Finland, Iceland, Kuwait and Slovenia, in addition to its subsidiary and associate markets.In course of making strategies it has forwarded the following points.

A regionally focused Group: Europe, Africa and India
Mobile data: accelerate exploitation of mobile data growth opportunity
Enterprise: selective expansion in growth segments
Emerging markets: drive penetration and data across attractive footprint
Total Communications in Europe: continued capital efficient approach
New services: growth opportunities including machine-to-machine and financial services
Exploit scale to enhance efficiency and deliver cost benefits
Generate free cash flow or liquidity from non-controlled assets building on the China Mobile and SoftBank disposals
Rigorous application of capital discipline to enhance shareholder returns

Market Strategies

Product

A product with many different features provides customers with opportunities to chat, play games, send and receive pictures, change ring tones, receive information about travel and sporting events, obtain billing information – and soon view video clips and send video messages.

• Vodafone live! provides on-the-move information services.

• Vodafone UK operates over 300 of its own stores.

• It also sells through independent retailers e.g. Carphone Warehouse.

• Customers are able to see and handle products they are considering buying.

• People are on hand to ensure customers’ needs are matched with the right product and to explain the different options available.

Price

• Vodafone wants to make its services accessible to as many people as possible from the young, through apprentices and high powered business executives, to the more mature users.

• It offers various pricing structures to suit different customer groups.

• Monthly price plans are available as well as prepay options. Phone users can top up their phone on line.

• Vodafone UK gives NECTAR reward points for every ?1 spent on calls, text messages, picture messages and ring tones.

Advertisement and offers

• Advertising on TV, on billboards, in magazines and in other media outlets reaches large audiences and spreads the brand image and the message very effectively. This is known as above the line promotion.

• Stores have special offers, promotions and point of sale posters to attract those inside the stores to buy.

• Vodafone’s stores, its products and its staff all project the brand image.

• Vodafone actively develops good public relations by sending press releases to national newspapers and magazines to explain new products and ideas.

There is good balance, 70/30 consumer/enterprise, and good balance, more or less 70/30 mature/emerging.the new strategy is composed of five elements. The first one is clear focus of the companyis in three areas – Europe, Africa and India.The second will be growth; coming from data in different ways. The vodefone Groupl talks a lot about mobile data, and what internally it call ‘Supermobile’, but also enterprise and also some regional differences between Europe and emerging markets, and some investment in new services, which, in the future, will be appealing to the customers. Continuing to leverage on our scale advantage, it can really create a difference for our customers in terms of lower costs. It will deal with the assets below the line in an approach to generate liquidity or cash flow from all of our non-controlled assets, in terms of portfolio strategy. Then it continuing to apply capital discipline, financial objectives and commercial tests to all investments it makes, internal and external.

Financial risk management

The Group’s treasury function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk management.Treasury operations are conducted within a framework of policies and guidelines authorised and reviewed by the Board, most recently on 1 February 2011(Mc,Hee). A treasury risk committee comprising of the Group’s Chief Financial Officer, Group General Counsel and Company Secretary, Corporate Finance Director and Director of Financial Reporting meets at least annually to review treasury activities and its members receive management information relating to treasury activities on a quarterly basis. The Group accounting function, which does not report to the Group Corporate Finance Director, provides regular update reports of treasury activity to the Board. .Risk management purposes only that are transacted by specialist treasury personnel. The Group mitigates banking sector credit risk by the use of collateral support agreements.

Financial risk management:Under the Group’s interest rate management policy, interest rates on monetary assets and liabilities denominated in euros, US dollars and sterling.are maintained on a floating rate basis except for periods up to six years where interest rate fixing has to be undertaken in accordance with treasury policy where assets and liabilities are denominated in other currencies interest ratesmay also be fixed. In addition, fixing is undertaken for longer periods when interest rates are statistically low.

Foreign exchange management

As Vodafone’s primary listing is on the London Stock Exchange.Its share price is quoted in sterling. Since the sterling share price represents the value of its future multi-currency cash flows, principally in euro, US dollars and sterling, the Group maintains the currency of debt and interest charges in proportion to its expected future principal multi-currency cash flows and has a policy to hedge external foreign exchange risks on transactions denominated in other currencies above certain de minimis levels. As the Group’s future cash flows are increasingly likely to be derived from emerging markets it is likely that more debt in emerging market currencies will be drawn. As such, at 31 March 2011 130% of net debt was denominated in currencies other than sterling (55% euro, 47% US dollar and 28% other) while 30% of net debt had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via dividends and share buybacks. This allows euro, US dollar and other debt to be serviced in proportion to expected future cash flows and therefore provides a partial hedge against income statement translation exposure, as interest costs will be denominated in foreign currencies. Yen debt is used as a hedge against the value of yen assets as the Group has minimal yen cash flows

Liquidity risk Management

At 31 March 2011 the Group had ˆ4.2 billion and US$4.2 billion syndicated committed indrawn bank facilities and US$15 billion and ?5 billion commercial paper programmes, supported by the ˆ4.2 billion and US$4.2 billion syndicated committed bank facilities, available to manage its liquidity. The Group uses commercial paper and bank facilities to manage short-term liquidity and manages long-term liquidity by raising funds in the capital markets. ˆ4.2 billion of the syndicated committed facility has a maturity date of 1 July 2015 and US$4.2 billion has a maturity of 9 March 2016 which may be extended by a further year if agreed by those banks who have participated in the facility. Both facilities have remained indrawn throughout the financial year and since year end and provide liquidity support. The Group manages liquidity risk on long-term borrowings by maintaining a varied maturity profile with a cap on the level of debt maturing in any one calendar year, therefore minimising refinancing risk. Long-term borrowings mature between one and 26 years.Liquidity is reviewed daily on at least a 12 month rolling basis and stress tested on the assumption that all commercial paper outstanding matures and is not reissued. The Group maintains substantial cash and cash equivalents which at 31 March 2011 amounted to ?6,252 million (2010).

Vodafone also produces proportionate customer number figures on a similar basis, e.g. if an operator in which it has a 30% stake has 10 million customers that equals 3 million proportionate Vodafone customers. This is a common practice in the mobile telecommunications industry.

Year ended 31 MarchTurnover ?mProfit before tax ?mProfit for the year ?mBasiceps (pence)Proportionate customers (m)
201044,4728,6748,61816.44341.1
200941,0174,1893,0805.81302.6
200835,4789,0016,75612.56260
200731,104(2,383)(5,297)(8.94)206.4
2006*29,350(14,835)(21,821)(35.01)170.6
200534,0737,9516,5189.68154.8
200436,4929,0136,1128.70133.4

Conclusion

Valuation plays a key role in many areas of finance – in corporate finance, in mergers and acquisitions and in portfolio management. The value of the company can be directly related to decisions that it makes – on which projects it takes, on how it finances them, and on its dividend policy. Understanding this relationship is the

key to making value?increasing decisions and to sensible financial restructuring. In the focus of this thesis was the value of Vodafone Group, who is operating the biggest mobile network worldwide with presence in both emerging and mature markets. Drawing from the analyses of Vodafone and its environment, the major influencing risks, that are the most critical in terms of the future profitability and hence the value of the company, were found as following: 3G market take?up, fixed mobile line substitution and level of regulations. The equity value of Vodafone was calculated using the discounted cash flow scenario method (?87,954mln) (Domadaran,2008). Provided that the assumptions on which the forecasts were based and the probability distribution are correct, the Vodafone is currently under priced by almost 11%.The following actions could constitute the strategy that will maintain strong performance and deliver value to both customers and shareholders of Vodafone Group: cost reduction and revenue stimulation in mature markets, development of new products and services, extension to new emerging markets and selling unprofitable businesses. As a concluding remark, one has to keep in mind that although the discounted cash flow framework, along with other valuation models, is a quantitative tool, but the inputs leave plenty of space for subjective judgements. A mixture of financial theory, accounting methodology, industry knowledge and sound assumption was

used to evaluate the equity of the company. As the underling assumptions change, the estimated value of the firm may change as well.

References

Andersen, T. J. (2006). “ Global Derivatives A Strategic Risk Management Perspective”, Pearson Education, Harlow, England.

Andersen, J. (2006). “Perspectives on Strategic Risk Management”, Copenhagen Business School Press N.P.

Barney, J. (1991). “Firm Resources and Sustained Competitive Advantage”, (In Journal of Management, 1991, vol. 17, no. 1, pg. 99?120).

Damodaran, A. (2002). “ Investment valuation: Tools and Techniques forDetermining the Value of Any Asset”, John Wiley & Sons, New York.

Damodaran, A. (2008). “ Strategic Risk Taking”, Wharton School Publishing,New Jersey.

Johnson, G., Scholes, K., Whittington, R. (2005). “ The Environment In Exploring Corporate Strategy”, Earson Education, pp. 64?87).

McGee, J., Thomas, H., and Wilson, D. (2005). “Strategy Analysis & Practice”, McGraw?Hill Maidenhead, UK

Miller, K. D. (1992).”A framework for integrated risk management in international business”,( In: Journal of International Business Studies.vol. 23, no. 2, pg. 311?331)

Wise, D. (1991). “Vodafone’s solo debut could boost share price”,The Guardian (Guardian Newspapers).

Cane, A. (1996). “Companies and Finance: UK: Vodafone acquires Talkland in Pounds 60m deal”,Financial Times. p. 22.

Reguly, E. (1996). “Vodafone pockets Peoples Phone”.The Times (Times Newspapers). “News Digest: Vodafone snaps up Astec”. Investors Chronicle: p. 55.

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