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Wednesday, May 31, 2006

Vodafone logs 69.4% profit fall on high sales, customer retention costs


Staff writer

Vodafone K.K., which was purchased in April by Internet investor Softbank Corp., said Tuesday its net profit fell by 69.4 percent to 49.5 billion yen on sales of 1.47 trillion yen in fiscal 2005 due to higher sales promotion costs associated with attracting subscribers to its 3G phone service.

Vodafone, the country's third-largest mobile communications company by revenue, booked a pretax profit of 74.4 billion yen, down 51.5 percent from the previous year, in the reporting year ending March 31.

Vodafone's operating costs totaled 1.39 trillion yen, up 6 percent from the prior year, due to sales and marketing efforts aimed at winning new customers and retaining current ones.

The figures released Tuesday are Vodafone's first since the company was delisted from the Tokyo Stock Exchange last August.

The report was also the first since Softbank bought the company from its British parent in April.

The new Softbank subsidiary said it does not plan to make a financial forecast for fiscal 2006, nor will it do so as a part of Softbank's consolidated financial reports.

The weaker results show that Softbank, which purchased Vodafone for 1.75 trillion yen, has its work cut out for it in trying to catch rivals rivals NTT DoCoMo Inc. and KDDI Corp, operator of the au cell phone service.

Last month, KDDI posted a record net operating profit of 286 billion yen for fiscal 2005, while DoCoMo booked a net operating profit of 832.6 billion yen, up 6 percent from the previous year.

Still, Vodafone executives boasted the company "has been able to move to the offensive," pointing out that subscriber numbers, which had been falling, have been rising for nearly the last year.

Although Vodafone's net subscriber growth -- new subscriptions minus cancellations -- was negative between January 2004 and May 2005, it has been positive since June 2005. Vodafone has about 15 million subscribers, of which 3 million are 3G customers.



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