Fitch
Fitch IBCA affirms Vodafone ratings
(Press release provided by Fitch IBCA)
NEW YORK, Nov 6 - Fitch IBCA, the international rating agency, has affirmed the ratings of Vodafone Group Plc at 'A' Long-term and 'F1' Short-term.
Vodafone is the largest of the four UK mobile phone operators, with 3.94 million subscribers at the end of September 1998, giving it around 38 percent of the competitive UK market,
International expansion has brought a further 3.4 million subscribers (proportionate to its equity stakes) in 12 countries around the world, the most recent investment being the NZ$750 million purchase of New Zealand's second largest mobile network.
European profitability has improved markedly due to strong growth in demand and the benefit of taking larger stakes in SFR in France and Libertel in the Netherlands.
The German E-Plus network is still in a build-out phase and remains loss making.
Australian operations, which were loss making at the March 1998 year end, have now moved to become profitable and are expected to make a positive contribution in their present financial year.
Mobile telephone traffic is growing worldwide and Vodafone is well placed in markets where penetration is a as yet low, but which offer good future prospects.
Vodafone's growing business has resulted in the worsening of its financial position, its net debt increasing by 436 million pounds (sterling), net fixed charge cover falling from 5.2 times to 3.8 times and the net debt pay-back period slipping slightly to 2.4 years.
Book gearing was adversely affected in fiscal 1998 both by increased debt and by 710 million pounds of goodwill being written off to reserves.
Vodafone does generate large sums of cash from its operations, although these were insufficient to cover capex of 516 million pounds (to rise to 700 million pounds in fiscal 1999) and acquisition expenditure of 608 million pounds (offset by 99 million pounds of disposals).
Investment of some 100 million pounds in associates is expected in fiscal 1999, while the New Zealand purchase is to be funded through raising an additional 330 million pounds of syndicated committed facilities;
The company has stated that further acquisitions will be made if the opportunity arises. Future acquisition funding may be available on a non-recourse basis.
A number of Vodafone's businesses are still in the build-out phase, so that although profitable, the actual cash paid to the company in dividends is very small, with most reinvested in its networks.
In fiscal 1998 Vodafone's share of operating profit from associates was 59.6 million pounds while the cash received was 2.9 million ponds. However, the company has considerable headroom within its committed funds to proceed with its investment plans and its coverages still remain comfortable for an 'A' rated company.
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