Vodafone plans £1bn of cost cuts

Mobile phone group Vodafone has announced £1bn ($1.56bn) of cost cuts because of rising raw material prices and increasing competition.

Vodafone also cut its full-year revenue forecast for the second time this year - to between £38.8bn and £39.7bn.

Its revenue for the six months to 30 September rose 17% to £19.9bn, helped by changing currency exchange rates.

However, half-yearly pre-tax profits fell 27% to £3.3bn - because of £1.7bn of write-offs in Turkey.

On an adjusted basis, pre-tax profits for the six months were up 12.5% to £5.2bn. The results were slightly ahead of market expectations.

Emerging markets

Chief executive, Vittorio Colao, who took over from Arun Sarin in the summer, said Vodafone would shift its focus from "revenue stimulation" towards offering more value to customers.

Efficiency would be a key part of the strategy, Mr Colao said, with the group expected to reduce its operating costs by £1bn a year by 2011.

"The first half results reflect a solid overall performance in a challenging operating and a weaker macro-economic environment," he said.

Vodafone, which is the world's largest mobile phone company by income, said it had put in place "appropriate actions" to improve trading in the UK, where it said it had "underperformed recently".

European revenues were down 1.1%, on a like-for-like basis, amid price pressure on its voice and messaging services and continued strong data growth.

However, Vodafone said the outlook outside Europe was healthier.

In a statement, the company said: "We are already represented in most of the key emerging markets, where significant growth is expected in the coming years."

Vodafone said its principal focus would now be in mobile phone markets in India, Turkey and in Africa.

Richard Hunter, of Hargreaves Lansdown stockbrokers, said: "There remain challenges around the wider economic picture, but the company nevertheless remains well-placed to benefit from any up-tick in economic fortunes."