Evaluating Vodafone's Financial Strategy: A Comprehensive Analysis

This report provides a detailed evaluation of Vodafone's financial strategy. It begins with an overview of Vodafone's history, tracing its evolution and key acquisitions over a decade. The report identifies and analyzes the factors affecting the company's financial strategy, including political, economic, social, and technological influences, as well as debt funding and currency exposure. A SWOT analysis is conducted to assess Vodafone's strengths, weaknesses, opportunities, and threats. The company's performance is evaluated using the seven Rappaport value drivers, and the analysis is placed within the context of its corporate lifecycle. Furthermore, the report examines Vodafone's dividend policy and its impact on shareholder value, concluding with a summary of key findings and recommendations.

financial strategy
Vodafone

Table of Contents
Introduction.................................................................................................................................................3
History of Vodafone....................................................................................................................................5
Factors affecting financial strategy..........................................................................................................8
Financial strategy analysis.........................................................................................................................10
Seven Rappaport value drivers against performance................................................................................11
Evaluation in context of corporate lifecycle..............................................................................................12
Dividend policy & its impact......................................................................................................................15
Conclusion.................................................................................................................................................17
References.................................................................................................................................................18

Introduction
In this present paper, we will make a report on the evaluation of financial strategy of Vodafone
Company. The paper discusses the history of a company over ten years and the key factors which
affect the financial strategy of the company. The analysis of the financial strategy is analyzed
from different aspects. The company’s performance is compared against the seven Rappaport
value drivers. The critical evaluation is done in a context of corporate lifecycle, and the dividend
policy of the company is evaluated with its impact on shareholders value.
The Vodafone is the largest company in the sector of telecom. It is based in the United Kingdom.
The market value of a company is 75 billion until June 2008. The equity interest is widely
available in 25 countries, and the partner network is available in approximately 42 countries. The
name of the company is coming from the voice data phone, the aim of choosing the word is to
reflect the provision of voice and data service which is provided by the mobile phones. The
company agrees to acquire the interest of Hutchison Essar Limited 67% for worth US$11.1
billion. The company retains 4.4% stake in Airtel, and simultaneously the company agrees to sell
back 5.6% Airtel back to the Mittal’s. The company is the world’s leading international mobile
communication company in the world. The operations of the company are network partners of
the company is approximately 30 available in 25 countries across five continents and with the
consumers of 200 million across the world. The company tied up with the I-Phone. The
company's profit has increased by 50% after the expansion of consumer base with an average of
1.5 million net additions monthly after an acquisition. The company launches in India after the
tied up with iPhone 3G version then the rate of the phones goes down by 50%.
The financial strategy of the company is to provide timely, efficiency in cost and the security of
financial resources to the management and it also includes the management of capital structure

with the target of A-grade credit rating. The company’s policy of borrowing includes issues of
long term and short term capital market and to facilities of borrowing to meet the funding
requirements of the company. The management of risk is the main element of financial policies.
The managing of risk is derived from derivative instruments which help to manage the risk and
interest rate and to mitigate the credit risk through collateral support agreements. The long term
of debt facilities is financed through the commercial paper program.

History of Vodafone
The establishment of Vodafone was started in 1982 with the Rascal strategic radio ltd which is a
Rascal electronics (Klauer, 2015). It is the largest maker of military radio technology in the
United Kingdom. It is formulated in a joint venture with Millicom known as "Racal." And it is
currently known as Vodafone.
Racal Telecom brand evaluation
The chairman of Racal Electronics named, Sir Ernest Harrison OBE is agreed on the deal with
the General Electric Company’s owner Lord Weinstock, which includes the access of General
Electric Company's tactical battlefield of radio technology. The head of Racal's was has
explained the concept of commercial mobile radio through Generic When after that he w=visited
to the mobile radio factory General Electric Companies to understand the use of military radio
technology. The head of growing Swedish approached Rascals for jointly bidding in the UK’s
second cellular radio license. Both of them has come up with the deal in which 60% of Racal’s
giving for new company namely, Racal-Millicom ltd and the 40% is named Millicom. The
policies were revised again in the December 1982. The Racal-Millicom was awarded as the
United Kingdom's second mobile phone network license. In the last, the Racal has got 80% of
the ownership, and Millicom holds 15% with the royalties and trust holdings of 5%. The Racal-
Millicom ltd provides the best prospects around the nation by cellular radio.
The new name of Vodafone was given under Racal Vodafone ltd in the year 1985. The Racal
Vodafone ltd the first office was based in the Courtyard in Newbury, Berkshire, and The Racal
Strategic Radio was renamed Racal Telecommunications group limited. The company issued
remaining shares of Minority shareholders with a worth of 110 million pounds. And after that,

the Vodafone has become the fully owned brand of Racal. The Racal Telecom, which was
majorly held by Racal Electronics, is published in London stock exchange in the year 1988 with
20% stock floated. The value of Racal stake in Racal Telecom was more values than the whole
Racal Electronics due to the success floatation.
Vodafone group into Vodafone Airtouch plc.
The company was demerged from the Racal Electronics as a Vodafone Group, and the CEO was
Gerry Whent. The company has acquired 75% of Falkland with the worth of 30.6 million pounds
in the year 1996. The company has purchased Peoples Phone for worth 77 million pounds, and it
was the defensive move, and the 181 chain of store consumers are happy with the Vodafone
networks. The Aztec communication has owned 21 stores which are acquired by the company in
the year 1996. The CEO of the company was retired in the year 1197, and the new CEO was
Christopher Gent. The company has started speechmark logo, and it is comprised of the
quotation mark in a circle with the O in the logo which represents the opening and closing of
quotation marks and it suggests a conversation.
The company completes the purchases of Airtouch communication Inc., and the name replaces
with Vodafone Airtouch plc. After the merger company starts trading on 30 June 1999. The
company sold its 17.2% shares in E-plus Mobil funk so that the company can get the Antitrust
approval for the merger (Nalwaya, 2014). After the acquisition, the company receives 35% of
Mannesmann shares which is the owner of largest German mobile network. The company has
made an unsolicited bid for Mannesmann, but that was rejected in the year 1999. With the
interest in the Mannesmann the company purchases an Orange which is the largest mobile
operator in the United Kingdom. The Mannesmann's move was in the UK has broken the
gentleman agreement for not competing in each other's country. The hostile takeover has

provoked the strong protest in the Germany and which reflects that the Mannesmann resists
efforts of Vodafone. The offers have increased by Mannesmann by 112 million pounds and after
that, it has become the largest corporate merger in the history.
The company reverted to its former name Vodafone group plc. In the year 2000. The Vodafone
has acquired Eircell, which is the largest wireless communication company in Ireland. The
company was rebranded as Vodafone Ireland. The company then acquire the Japan’s third largest
mobile operator who is the first company to introduce camera phones in the Japan, J-Phone. The
company enters into the sponsorship with McLaren formula one team which traded with the
name “Vodafone McLaren Mercedes” till the end of sponsorship in the year 2013.
The Vodafone Essar shares were brought by the Vodafone Group plc. In the year 2011 with
worth $5 billion. The company acquires Bluefish Communications ltd which is reading based
ICCT Consultancy Company. The new unified communication was formed with the operations
formed by acquisition. It focuses on the implementation of strategies and the solutions in cloud
computing and it also strong the professional servings. The new announcement by the Vodafone
is to acquire cable & wireless worldwide for worth 1.04 billion pounds. The acquisition gives
the access of cable & worldwide wireless networks for the businesses, and it also helps to enable
the unified communication solutions to the big organizations of United Kingdom. The also
enables the expansion of networks in the emerging markets. The voting for Vodafone offers was
done among the shareholders of cable & wireless worldwide than the votes were in the favor of
Vodafone offerings. The next announcement of the company was to buy a German cable
company in the year 2013. The company named was Kabel Deutschland and the value of
takeover was 7.7 billion Euro, and it was recommended over the bid of rivalry Liberty Global.
The company y makes the announcement regarding the selling of its 45%stake in Verizon

Communication to vertical communications, and the amount of selling is worth $130 billion. It is
the biggest deal among the history of corporates. The company starts its rollout of 4G to
provincial New Zealand in the year 2013. It is launched around Coromandel. The company
acquired the largest cable operator in Spain in the year 2014 with the amount of 7 billion Euro.
Factors affecting financial strategy
Financial strategy is affected by the number of factors which includes: external and internal
factors. Following are the external factors which affect the financial strategy of the company.
 Political factors
The political factors which affect the financial strategy of the business include EU
roaming regulations which are targeting to reduce the charges of mobile phone usage by
70% and the increment in the consumer rights in the Europe. The decisions are taken by
the European Union Regulatory Framework for the Telecommunication Sector (Hansen,
2015). Any amendments to the legislation are considered as the political factor which
affects the financial strategy.
 Economic factors
The Economic factors which affect the company's financial strategy include the growth of
Gross domestic product and the rate of inflation. It also includes the financial crisis in the
economy.
 Social factors
The social factors which affect the financial strategy include: changing the working
patterns such as increasing in the flexible hour’s pattern of the employees. The factors
also include issues such as going green and which affects the financial strategy directly or
indirectly.

 Technological factor
The technological factors which affect the financial strategy include innovation in the
technology which is the important factor that affects the financial strategy abruptly.
Debt funding
The debentures are a loan which is provided to the company. The debentures have a fixed
interest and a fixed repayment period, so it is different from other loans. It is secured on
the goodwill of the company. There are two types of debenture: Registered and
convertible. The convertible debentures become the stock at the end of the agreed period.
The long-term projects are taken which is mostly wishes by the companies. The shares of
the company are financed through both types of shares namely preferential as well as
ordinary shares. The shareholders of both types of shares got the profit, but the preference
is given to the preferential shareholders.
Currency exposure
The currency exposure of the company is managed by the clear and managing framework
at both the level operational and strategic.
The following figure shows the managing of risk:
Board
Audit & risk
committee
Group risk co-
ordinator

Financial strategy analysis
The financial strategy analysis is done through the SWOT analysis. The SWOT analysis helps to
analyze the financial strategy in-depth. The SWOT analysis make a clear and unbiased view of
the company's strength, weakness, opportunities, and threats.
1. Strengths
 It is the world’s largest mobile service provider in the telecom industry. The consumer
base is approximately 435 million (Daas, 2015). It is the market leader among the three
service provider in the industry.
 The geographical diversification of the company is also acting as a strength. It helps to
delineate the risk from one region to another.
 The strong brand recognition is an aggressive strategy which makes a decent consumer
service with ecofriendly environmental policies.
2. Weaknesses
 The weakness of the company includes the sluggish economic condition in the Europe
region due to which operator suffered weakly.
 The Company is using the same strategy among then developed and the emerging
markets which have cut down the competition everywhere.
 The Vodafone has a less presence in the USA due to which the profit earning from the
US market is absent.
3. Opportunity
 The opportunity of retaining the profit in the business creates an opportunity to earn more
profit margin.

 The emerging market in the India creates new opportunities for Vodafone Such as Africa,
which is an untouched market till now, and it can become a good opportunity for the
company.
 The new opportunity for the company includes fixed telecom and cable services which
help in expanding the business in the market.
4. Threats
 The threat of the company includes market saturation in Europe because new market
penetration is increasing in the telecommunication market and the profit is decreasing
yearly which the threat become for the company.
 The uncertainties in the regulatory climate is another threat for the company which
becomes the major issue in the Europe for falling in the mobile rates of termination.
 Increasing in the menace of over the top services is another threat for the company.
Seven Rappaport value drivers against performance
The breakdown of shareholders value is known as the drivers. Following are the seven
drivers of shareholders value.
 Revenue
The revenue of the Vodafone gives 380,000 shareholders in the public. The performance
of the company is at par till now.
 Operating margin
The operating margin of the company is according to the operating of the company, and it
is in proportion to the shareholders value. The performance of the company's operating
margin is high, but it is adequate in proportion to its share value,