UPDATE 3-Vodafone returns to growth and signals change ahead

* Organic service revenue returns to growth

* Performance boosted by UK, Germany, India, Turkey

* Says it will set out strategy plans later this year

* Shares up 1.9 pct against lower FTSE 100

(Adds reaction, further details)

By Kate Holton

LONDON, July 23 (BestGrowthStock) – Vodafone (VOD.L: ), the world’s
largest mobile operator by sales, has returned to growth for the
first time since the economic downturn and indicated it could
reconsider its strategy to drive further value later this year.

Vodafone said there was still room for further economic
improvements in many of its markets but said the changes it had
made so far — to focus on the sales of data plans for internet
access and emerging markets — had worked well.

Later this year it will set out how it intends to accelerate
its strategy to drive further shareholder value.

The Ontario Teachers’ Pension Plan, which holds a 0.4
percent stake in the firm, called earlier this week for a
shakeup of the telecom operator’s board in protest at what it
deemed to be “significant structural and strategic weaknesses”.

Chief Executive Vittorio Colao declined to comment on the
OTPP request and said he would rather focus on the strong first
quarter results instead. The company’s AGM is on Tuesday.

“I and we listen to all of the shareholders and in relation
to that I can say that today’s results confirm that our strategy
is delivering,” Colao told reporters.

“My original strategy was set out in November 2008, so two
years down the road it is about time to refresh and update and
inform the financial community. We are working on it.”

Vodafone has faced calls in the past to resolve situations
where it owns minority stakes in assets, such as in the United
States where it owns a 45 percent in Verizon Wireless, and in
France where it owns a 44 percent stake in SFR.

Its 3 percent holding in China Mobile (0941.HK: ) could be
another option for disposal.

Bernstein analyst Robin Bienenstock said she expected a
portfolio review and a clearer commitment to change whether in
the form of disposals or structural change.

For now, the stronger than expected performance in the first
quarter, boosted by improvements in Germany, Britain, Turkey and
India, is likely to buy the group some breathing space.

For a related Breakingviews comment, click on



Vodafone said its key service revenue, which is made up of
revenue related to ongoing services, was 10.6 billion pounds
($16.1 billion), up 1.1 percent organically, compared with an
adjusted 0.6 percent drop in the fourth quarter.

The performance shows a continuing improvement in the
company’s recent trading, as it declined by 1.2 percent in the
third quarter and by 3 percent in the second quarter.

The improvement enabled the group to reiterate its outlook.

In a further boost, Vodafone said it had also finally
settled a long-running deal with British tax authorities and
would pay 1.25 billion pounds to settle all outstanding issues,
which was less than had been expected.

Shares were up 0.8 percent to 150 pence at 0916 GMT, ahead
of the FTSE 100 Index (.FTSE: ), which was down 0.3 percent.

“These are the first quarterly results to show service
revenue growth since the global recession impacted,” Colao said.

The European service revenue was down by 1.7 percent but
this was better than the previous quarter.

Total group revenues for the period were 11.3 billion
pounds. Analysts had been expecting service revenue of 10.5
billion pounds and total revenue of 11.2 billion pounds,
according to a Reuters poll.

“Vodafone’s results beat our estimates and consensus
convincingly for group organic service revenue growth and showed
continued recovery biased to certain markets, notably India, UK,
Germany and Turkey,” Citi analysts said.

“The acceleration in mobile data revenue is particularly

The group also said it had agreed to adjust the payments
that would be made with the Essar Group to have first option on
buying Essar’s stake if Essar were to sell.

Stock Market Today

(Editing by Paul Hoskins and Samia Nakhoul)
($1=.6598 Pound)

UPDATE 3-Vodafone returns to growth and signals change ahead