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Running Head: A financial statement analysis of Vodafone Group and China Mobile           A financial statement analysis o...
Table of ContentsTitle Page…………………………………………………………………………………............ iTable of Contents……………………………………………………………………..........
Abstract   Vodafone Group and China Mobile are similarly the most influential companies in mobiletelecommunications indust...
I. Introduction   Vodafone Group Plc, which was established in 1982, is one of the world‟s largest mobileoperator managing...
development strategy of “Lower ARPU, Lower MOU, and Lower cost” (China Mobile, 2009,p.18) and spent huge amount of money o...
II. Financial Ratio Analysis   The financial statements don‟t provide a complete picture of an entity‟s performance becaus...
III. Profitability Measures3.1 An overview of the profitability ratios   A primary goal of an entity is to earn a profit. ...
Both Vodafone Group and China Mobile have increased sales revenues every year alongwith an increase in the number of their...
Vodafone Group     Account        31 March 2009            31 March 2008        31 March 2007           Strategy          ...
IV. Test of Capital Utilization4.1 An overview of the capital utilization ratios    An entity needs capital to purchase ne...
Current Ratio                       1.37                    1.31                   1.32             0.89   The current rat...
flows from operating activities for the year ended March 31, 2009 have increased by 14.2% incomparison to the previous per...
liabilitiesNoncurrent             RMB 541,563m            RMB 474,868m             RMB 406,450m              N/Aliabilitie...
V. Overall Financial Measures of Performance5.1 An overview of overall performance ratios   The overall performance ratios...
TurnoverTotal Equity                   £84,777m                £76,471m            £67,293m            N/AEquity Multiplie...
entity‟s effectiveness of use of its total asset base. An excessively higher assets turnover than theindustry norm may imp...
China Mobile       Account             31 December        31 December       31 December       Ycharts                     ...
VI. Conclusions    A following table shows the results of the financial statement analysis of Vodafone Groupand China Mobi...
Group has acknowledged its short-term and long-term liquidity risks that are associated with itsinternational expansion st...
Categories       Ratios     The Industry    Vodafone Group              China Mobile                               Norm   ...
VII.   BibliographyBreitner, L. K., & Anthony, R. N. (2009). Core concepts of accounting (10th ed.). New York,NY: Prentice...
Park, C. S. (2010). Contemporary Engineering Economics. New York, NY: Prentice Hall.Strategy Analytics. (2009). Wireless O...
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Vodafone China Mobile Financial Statement Analysis

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Transcript of "Vodafone China Mobile Financial Statement Analysis"

  1. 1. Running Head: A financial statement analysis of Vodafone Group and China Mobile A financial statement analysis of Vodafone Group and China Mobile Toru Sekiguchi May 16th, 2010 i
  2. 2. Table of ContentsTitle Page…………………………………………………………………………………............ iTable of Contents…………………………………………………………………….................. iiAbstract…………………………………………………………………………….................... iiiI. Introduction…………………………………………………………………………………. 1II. Financial Ratio Analysis …………………………………………………………………… 3III. Profitability Measures…………………………………………………................................ 4 3.1 An overview of the profitability ratios ………………...………...……………................ 4 3.2 Profit Margin Ratio.……………………………………………………………............... 4 3.3 EBITDA Margin Ratio………………………………………………………................... 5IV. Tests of Capital Utilization …………………………………...………................................ 7 4.1 An overview of the capital utilization ratios.....……….……………………………….... 7 4.2 Current Ratio……...……………………………………………………………............... 7 4.3 Debt Ratio……………...………………………………………………………............... 9V. Overall Financial Measures of Performance……………………………………………. 11 5.1 An overview of overall performance ratios…………………………………………….. 11 5.2 Return on Common Equity (ROE) Ratio....……..………………………....................... 11 5.3 Earnings per Share Ratio .….…………………………………………………............... 13VI. Conclusions………………………………………………………………………............... 15VII. Bibliography…………………………………………………………………………... 18 ii
  3. 3. Abstract Vodafone Group and China Mobile are similarly the most influential companies in mobiletelecommunications industry and have prominent advantages of economic scale but theirstrategic initiatives are very different. While Vodafone Group has implemented smart growthinitiatives and not offered lower price than other competitors to attract new customers and retainexisting customers around the world, China Mobile has relatively focused on driving growth andcost leadership initiatives in its domestic market. Their financial statements are analyzed by utilizing the profitability (profit margin ratio andEBITDA margin ratio), capital utilization (current ratio and debt ratio), and overall performance(return on common equity ratio and earnings per share ratio) ratios and compared to the industrynorm to ensure how those different strategies have an impact on the different financial positions.Evidently, all these ratios of China Mobile have outperformed the industry norms for the threestraight accounting periods but most of ratios of Vodafone Group have been reported relativelylower than the industry norm for the same accounting period. However, while those financialpositions are very different, both operators have had better understanding of the positions, andformulated and implemented appropriate strategies. iii
  4. 4. I. Introduction Vodafone Group Plc, which was established in 1982, is one of the world‟s largest mobileoperator managing ultra large-scale mobile networks in 25 countries and has a presence throughpartnerships in another 39 countries. “Based on the registered customers of mobiletelecommunications ventures in which it had ownership interests at that date, the Group had 333million customers” (Vodafone, 2010). While Vodafone Group has reinforced strong internationalpresence and brand recognition, and controlled the interest in strong growth market such asRomania, Egypt, Turkey, and India, more than 70% of revenues still have been generated inEuropean market where higher mobile penetration and fierce competition leave little room forgrowth than other regions. China Mobile Limited, which was incorporated in 1997, is the dominant market leader inChina managing the largest domestic mobile network. China Mobile has “a customer base of522.283 million and enjoyed a market shares of approximately 70% in Mainland China” (ChinaMobile, 2009, p. 3). China mobile has continued to expand its business in the tremendouspotential market whose mobile penetration rate is approaching 50% although the rate in someEuropean countries has increased to more than 100%. Vodafone Group and China Mobile are similarly the most influential companies in mobiletelecommunications industry but their strategic initiatives are very different. Vodafone Grouphas implemented smart growth initiatives and not offered lower price than other competitors toattract new customers and retain existing customers. Vodafone Group has established theirentities through the acquisition, joint-venture, and strategic alliance to expand their businessglobally. China Mobile has relatively focused on driving growth and cost leadership initiatives.China Mobile has not been globally diversified but pursued the domestic rural area market 1
  5. 5. development strategy of “Lower ARPU, Lower MOU, and Lower cost” (China Mobile, 2009,p.18) and spent huge amount of money on capital expenditures to construct mobilecommunications networks that enable China Mobile to meet the demands of stable growth incustomer base. Vodafone Group and China Mobile have prominent advantages of economic scale despitedifferent strategies. The objective of this paper is to analyze and compare their financialstatements by utilizing the profitability, capital utilization, and overall performance ratios toensure how those different strategies have an impact on the different financial positions. 2
  6. 6. II. Financial Ratio Analysis The financial statements don‟t provide a complete picture of an entity‟s performance because“they report only past events, do not report market values, and are based on judgments andestimates” (Breitner and Anthony, 2009, p. 156). The statements however provide importantinformation and are usually analyzed by using ratios rather than absolute values which aredirectly derived from the financial statements in order to assess an entity‟s financial strength andweakness. Raito analysis involves comparing an entity‟s performance to that of other entities inthe same industry and an entity with its own performance and trends in an entity‟s financialposition over time. Different stakeholders have different levels of interest in an entity‟sperformance and the ratio analysis is used to assess overall performance, profitability, capitalutilization, and other aspects. For example, a creditor is concerned with an entity‟s short-termliquidity to decide whether to extend a short-term loan. On the other hand, another long-termcreditor focuses on an entity‟s ability to continuously generate revenues and its operationalefficiency. Shareholders are interested in the long-run profitability of an entity to expectappreciation in the market price of stocks and dividends. Managements are interested in everyaspects of the financial analysis since they must identify how an entity is recognized bystakeholders. The financial statements of Vodafone Group and China Mobile are analyzed by using ratiosfrom the viewpoint of profitability, capital utilization, and overall performance, and compared tothe industry norm cited from the Hoover‟s, Strategy Analytics and Ycharts. 3
  7. 7. III. Profitability Measures3.1 An overview of the profitability ratios A primary goal of an entity is to earn a profit. Profitability ratios indicate the results of anumber of operating decisions and financing policies and provide useful clues to improve itsoperational effectiveness. They also show “the combined effects of liquidity, asset management,and debt management policies on operating results” (Park, 2010, p.49)3.2 Profit Margin Ratio The profit margin ratio shows how efficiency an entity is using its resources in its operationalprocess and a high profit margin indicates that an entity can earn a reasonable profit on sales aslong as it maintains overhead costs in control. The profit margin is calculated by dividing netincome by sales revenue. Net incomeProfit Margin = Sales RevenueVodafone Group Account 31 March 2009 31 March 2008 31 March 2007 Hoover’sRevenue £41,017m £35,478m £31,104m N/ANet income £3,080m £6,756m (£5,222m) N/AProfit Margin 7.5% 19.0% -16.7% 15.8%China Mobile Account 31 December 2009 31 December 2008 31 December 2007 Hoover’sRevenue RMB 452,103m RMB 411,810m RMB 356,959m N/ANet income RMB 115,465m RMB 112,395m RMB 87,179m N/AProfit Margin 24.7% 27.3% 24.4% 15.8% 4
  8. 8. Both Vodafone Group and China Mobile have increased sales revenues every year alongwith an increase in the number of their mobile subscribers. The profit margin ratio of ChinaMobile are continuously reported much higher than the industry norm, and China Mobile cansubsequently afford to focus on driving growth and cost leadership initiatives. On the contrary, the profit margin ratio of Vodafone Group is not always reported higherthan the industry norm because the goodwill in relation to Vodafone Group‟s operations andmobile joint-ventures in Spain, Turkey Ghana, Germany, and Italy, is impaired by £5,900m and£11,600m for the year ended March 31, 2009 and 2007 respectively in line with its internationalexpansion strategy to establish their entities through the acquisition, joint-venture, and strategicalliance. No impairment losses are reported for the year ended March 31, 2008 and therefore theprofit margin for the year ended March 31, 2008 are relatively higher than for the years ended2009 and 2007. To improve its bottom-line performance, Vodafone Group has implemented itsstrategic initiative, „One Vodafone‟ program, which transforms 16 operating companies into aunited operation to achieve streamlined cost effective and efficiency group.3.3 EBITDA Margin RatioThe EBITDA, Earnings before Interest, Taxes, Depreciation and Amortization, to sales ratio is ameasure of cash flows from the entity‟s operations. The EBITDA margin is calculated bydividing EBITDA by sales revenue.EBITDA EBITDA =Margin Sales Revenue 5
  9. 9. Vodafone Group Account 31 March 2009 31 March 2008 31 March 2007 Strategy AnalyticsRevenue £41,017m £35,478m £31,104m N/AEBITDA £14,490m £13,178m £11,960m N/AEBITDA Margin 35.5% 37.1% 38.5% 41.0%China Mobile Account 31 December 2009 31 December 2008 31 December 2007 Strategy AnalyticsRevenue RMB 452,103m RMB 411,810m RMB 356,959m N/AEBITDA RMB 229,023m RMB 216,267m RMB 194,003m N/AEBITDA Margin 50.7% 52.5% 54.3% 41.0% A robust network infrastructure is a source of competitive advantages for mobile operatorsbut they generally report large losses due to hugely spending capital expenditures to construct theinfrastructure. EBITDA enables operators to analyze their profitability of core businessoperations while deducting the huge amount of interest, taxes, and capital expenses. TheEBITDA margin ratio of China Mobile is stable at more than 50% and higher than the industrynorm. China Mobile has continuously maintained a relatively high level of profitability due to itssolid capital structure and its solid financial strength is the foundations of cost leadershipinitiatives. The EBITDA margin ratio of Vodafone Group are also stable but lower than the industrynorm due to the impact of acquisitions and disposals and foreign exchange that are associatedwith its international expansion strategy. 6
  10. 10. IV. Test of Capital Utilization4.1 An overview of the capital utilization ratios An entity needs capital to purchase new inventories, reinforce facilities, execute mergers andacquisitions, make major investments, or achieve other business objectives. The capitalutilization ratios indicate how efficiently capital is used to generate revenues.4.2 Current Ratio Current assets normally are comprised of cash, accounts receivable, inventories, andmarketable securities. Current liabilities include accounts payable, short-term notes payable,current portion of long-term debt, accrued taxes, wage, and other accrued expenses. The currentratio indicates “the extent to which current liabilities are covered by those assets expected to beconverted to cash in the near future” (Brigham and Houston, 2009, p. 88). The current ratio iscalculated by dividing current assets by current liabilities. Current assetsCurrent Ratio = Current liabilitiesVodafone Group Account 31 March 2009 31 March 2008 31 March 2007 Hoover’sCurrent assets £13,029m £8,724m £12,813m N/ACurrent liabilities £27,947m £21,973m £18,946m N/ACurrent Ratio 0.47 0.40 0.68 0.89China Mobile Account 31 December 2009 31 December 2008 31 December 2007 Hoover’sCurrent assets RMB 287,355m RMB 240,170m RMB 207,635m N/ACurrent liabilities RMB 209,805m RMB 183,559m RMB 157,719m N/A 7
  11. 11. Current Ratio 1.37 1.31 1.32 0.89 The current ratios of China Mobile are stable and much higher than the industry norm. Atotal of cash and cash equivalents, and deposits with banks for the year ended December 31,2009, 2008 and 2007, are reported at RMB 264,507m, RMB 218,259m, and RMB 188,544, andaccount for 92.0%, 90.9%, and 90.8% of total current assets respectively. Excessively highcurrent ratio indicates that an entity may have used an excessive amount of inventory or accountreceivables but a total of account receivables and inventory have captured only less than 10% ofcurrent assets, relatively lower than a total of cash and cash equivalents and deposits with banks.In addition, 82.5% of accounts receivable for the year ended December 31 are due for paymentwithin 60 days. Consequently, impairment losses on accounts receivable can be expected to berelatively low. The amount of inventories, RMB 3,847m, only captures 1.3% of total currentassets for the year ended December 31, 2009 and potential inventory obsolesce will not have ahuge impact on current assets. China Mobile manages short-term liquidity by maintainingsufficient cash balances and its strong financial position subsequently enables to pursue drivinggrowth and cost leadership initiatives while spending a huge amount of money to constructmobile communications networks which are a source of its competitive advantages. On the other hand, the current ratios of Vodafone Group have been reported much lower thanthe industry norm. Cash and cash equivalents, which are comprised of cash at bank and in hand,money market funds, purchase agreement, and commercial paper, only capture 37.4% and 19.4%of total current assets for the year ended March 31, 2009 and 2008 respectively. Vodafone Groupstated “The Group‟s key sources of liquidity in the foreseeable future are likely to be cashgenerated from operations and borrowing through long term and short term issuances in thecapital markets as well as committed bank facilities” (Vodafone, 2009, p. 38). While net cash 8
  12. 12. flows from operating activities for the year ended March 31, 2009 have increased by 14.2% incomparison to the previous period, short term borrowings have increased by 52.9%. Whilecurrent assets have increased by annually 33%, current liabilities have also increased annually25% for the year ended March 31, 2009. Current assets are rising faster than current liabilitiesand therefore Vodafone Group has slowly improved the short-term liquidity.4.3 Debt RatioThe debt ratio measures the percentage of funds provided by noncurrent liabilities and equity.Non current liabilities are debt capital, and non current liabilities plus equity is the totalpermanent capital. Ehrhardt and Brigham (2009) argued that “creditors prefer low debt ratiosbecause the lower the ratio, the greater the cushion against creditors‟ losses in the event ofliquidation”, and “stockholders, on the other hand, may want more leverage because it magnifiesexpected earnings” (p. 123). Noncurrent liabilitiesDebt Ratio = Noncurrent liabilities + EquityVodafone Group Account 31 March 2009 31 March 2008 31 March 2007 YchartsNoncurrent £39,875m £28,826m £23,378m N/AliabilitiesNoncurrent £124,752m £105,297m £90,671m N/Aliabilities + EquityDebt Ratio 32.0% 27.4% 25.8% 17.2%China Mobile Account 31 December 2009 31 December 2008 31 December 2007 YchartsNoncurrent RMB 33,929m RMB 34,217m RMB 34,301m N/A 9
  13. 13. liabilitiesNoncurrent RMB 541,563m RMB 474,868m RMB 406,450m N/Aliabilities +EquityDebt Ratio 6.2% 7.2% 8.4% 17.2% The debt ratio of China Mobile has decreased gradually due to an increase in total equity,mainly from the retained earnings, while maintaining the amount of noncurrent liabilities. ChinaMobile also manages long-term liquidity and credit risks by maintaining the retained earnings ata high level and its strong financial position helps China Mobile spend a huge amount of moneywhen needed to pursue driving growth and cost leadership initiatives. On the contrary, the debt ratio of Vodafone Group has increased on a year-on-year basis asthe impact of business acquisitions and disposals, and of foreign exchange rates since more than50% of net debt has been denominated in euro that are associated with Vodafone Group‟sinternational expansion strategies and Vodafone‟s statement on its key sources of liquidity in theforeseeable future. Vodafone Group stated “The Group‟s key sources of liquidity in theforeseeable future are likely to be cash generated from operations and borrowing through longterm and short term issuances in the capital markets as well as committed bank facilities”(Vodafone, 2009, p. 38). 10
  14. 14. V. Overall Financial Measures of Performance5.1 An overview of overall performance ratios The overall performance ratios are commonly used to analyze the overall performance andefficiency of the optimal use of the available resources. Return on common equity, earnings pershare, price-earnings ratio, and return on permanent capital are included in the overallperformance ratios that are used widely by investors and an entity‟s management.5.2 Return on Common Equity (ROE) Ratio ROE is the most important bottom-line accounting ratio. Net income is, however, an accrual-based accounting measure of profits during the accounting period and may fundamentally differfrom the actual return earned by stockholders and the net cash flows during the period. DuPontsystem is used to conduct a deeper analysis of the ROE ratios, and highlight the influence of theprofit margin, total assets turnover, and financial leverage called the equity multiplier on anentity‟s overall performance.Return on = Profit Margin X Total Assets Turnover X Equity Multipliercommon equity Net income Sale revenue Total assets = X X Sales revenue Total assets EquityVodafone Group Account 31 March 2009 31 March 2008 31 March 2007 Hoover’sRevenue £41,017m £35,478m £31,104m N/ANet income £3,080m £6,756m (£5,222m) N/AProfit Margin 7.5% 19.0% -16.7% 15.8%Total Assets £152,699m £127,270m £109,617m N/ATotal Assets 0.26 0.27 0.28 0.3 11
  15. 15. TurnoverTotal Equity £84,777m £76,471m £67,293m N/AEquity Multiplier 1.8 1.7 1.6 N/AROE 3.5% 8.7% -7.5% 10.8%China Mobile Account 31 December 2009 31 December 2008 31 December Hoover’s 2007Revenue RMB 452,103m RMB 411,810m RMB 356,959m N/ANet income RMB 115,465m RMB 112,395m RMB 87,179m N/AProfit Margin 24.7% 27.3% 24.4% 15.8%Total Assets RMB 751,368m RMB 658,427m RMB 563,493m N/ATotal Assets 0.60 0.63 0.63 0.3TurnoverTotal Equity RMB 507,634m RMB 440,651m RMB 372,149m N/AEquity Multiplier 1.5 1.5 1.5 N/AROE 22.2% 25.8% 23.0% 10.8% The ROE ratio of Vodafone has been reported slightly lower mainly due to lower profitmargin than the industry norm. The lower profit margin percentages for the year ended March 31,2009 and 2007 have come from the huge amount of the goodwill associated with VodafoneGroup‟s operations and mobile joint-ventures around the globe impaired by £5,900m and£11,600m respectively. While continuously implementing its international expansion strategies,it also has formulated and implemented „One Vodafone‟ program to improve the bottom-lineperformance. The ROE of China Mobile has been relatively reported much higher due to higher profitmargin percentages and total asset turnover than the industry norm. Its higher profit marginreflects its stable growth on significant financial strength. Total assets turnover indicates that an 12
  16. 16. entity‟s effectiveness of use of its total asset base. An excessively higher assets turnover than theindustry norm may imply that an entity has used obsolete or fully depreciated assets that does notgenerate high sales volumes. However, 77.6% and 78.3% of current assets are the property, planand equipment that are depreciated, and the accumulated depreciations for them are reported atRMB 350,192 million and 302,793 million and the net book values are RMB 306,075 millionand 327,783 million at December 31, 2009 and 2008 and consequently those property, plant andequipment are not obsolete and fully depreciated.5.3 Earnings per Share Ratio The earnings per share ratio is one of the most important indicators of an entity‟sperformance for common stockholders to assess the return on investment and risk of an entity.Nikolai, Bazley, and Jones (2009) argued that “the amount of earnings per share, the change inearnings per share from the previous period, and the trend in earnings per share are all importantindicators of a corporation‟s success” (p. 840). The earnings per share ratio is calculated bydividing net income by numbers of shares of common stock outstanding. Net incomeEarnings per share = Number of shares of common stock outstandingVodafone Group Account 31 March 2009 31 March 2008 31 March 2007 YchartsNet income £3,080m £6,756m (£5,222m) N/ANumber of shares of 52,737m 53,019m 55,144m N/Acommon stockoutstandingEarnings per share £0.17 £0.13 £-0.09 £-0.03 13
  17. 17. China Mobile Account 31 December 31 December 31 December Ycharts 2009 2008 2007Net income RMB 115,465m RMB 112,395m RMB 87,179m N/ANumber of shares of 20,057,674,088 20,043,933,958 20,005,123,269 N/Acommon stockoutstandingEarnings per share RMB 5.76 RMB 5.61 RMB 4.36 RMB -0.4 The earnings per share ratio of Vodafone Group has increased by 37.4% to 17.17 pence dueto a favorable foreign exchange environment and a one-off tax benefit. Excluding those factors,adjusted earnings per share ratio has increased around 3%. The trend in earnings per sharereflects that Vodafone Groups has made further progress in implementing the „drive operationalperformance‟ strategy. The main objective of the strategy is value enhancement and costreduction while launching new products in a number of markets, which offer customers morevalue in return for increased commitment and accelerate £1 billion cost reduction program.Dividends per share ratios have also increased by 3.5% to 7.77 pence due to the underlyingearnings and cash performance of Vodafone Group. The earnings per share ratio of China Mobile has been continuously reported much higherthan the industry norm and gradually increased on a year-on-year basis. The amount of netincome for the year ended December 31, 2009 and 2008 has increased by 2.6% and 22.4%respectively while numbers of shares of common stock outstanding slightly increased by 0.06%and 0.19% respectively. The results can help China Mobile collect money from investors whenneeded to focus on driving growth and cost leadership initiatives. 14
  18. 18. VI. Conclusions A following table shows the results of the financial statement analysis of Vodafone Groupand China Mobile by using the financial ratios from the viewpoint of profitability, capitalutilization, and overall performance. Evidently, all six ratios, which are used to analyze theprofitability, capital utilization, and overall performance of China Mobile, have outperformed theindustry norms for the three straight accounting periods. With regard to the profitability, ChinaMobile has been significantly stable and continuously maintained its solid capital structure and ahigh level of the profitability due to a larger market share in the emerging domestic market andtherefore it can afford to make huge investments in a robust network infrastructure to gain andmaintain competitive advantages. China Mobile has also performed well from the viewpoint ofthe capital utilization due to very strong cash position and managed both short-term and long-term liquidity risks effectively. Consequently, the results of financial statements analysis indicateits outstanding overall performance that enables China Mobile to focus on driving growth andcost leadership initiatives. On the contrary, most of financial ratios of Vodafone Group analyzed in this research arelower than the industry norm. Its profitability ratios are reported relatively lower than theindustry norm but the results are derived from the impact of acquisitions and disposals andforeign exchange that are associated with its international expansion strategies. In addition,Vodafone Group has already implemented its strategic initiative, „One Vodafone‟ program toachieve streamlined cost effectiveness and efficiency in order to improve its bottom-lineperformance. An increase in short-term borrowings has been relatively higher than an increase inthe cash flows from operating activities, and its long-term debt ratio has increased on a year-on-year as the impact of business acquisitions and disposal, and foreign exchange rates. Vodafone 15
  19. 19. Group has acknowledged its short-term and long-term liquidity risks that are associated with itsinternational expansion strategies and subsequently implemented „One Vodafone‟ program tosignificantly reduce its costs. Vodafone Group, however, may need further challenges in takinghigher priority in investing in existing businesses to improve the average revenues per users fromexisting customer basis, generating cash from its existing assets, and expanding its business tonew countries where Vodafone Group can expect immediate turnaround rather than huge andlong-term investments in new areas to pursue high returns. Generally, its overall performance isreported relatively lower than the industry norm due to its international expansion strategies. The sizes of business in both Vodafone Group and China Mobile are significantly largeenough to capture prominent advantages of economic scale but China Mobile is in the muchstronger financial position than Vodafone Group. While those financial positions are verydifferent, both operators have had better understanding of the positions, and formulated andimplemented appropriate strategies. 16
  20. 20. Categories Ratios The Industry Vodafone Group China Mobile Norm 2009 2009 Comparison 2009 Comparison with the with the industry norm industry norm Profit 15.8% 7.5% Inferior 24.7% Superior MarginProfitability EBITDA 41.0% 35.5% Inferior 50.7% Superior Margin Current 0.89 0.47 Inferior 1.37 Superior Capital RatioUtilization Debt 17.2% 32% Inferior 6.2% Superior Ratio Return on 10.8% 3.5% Inferior 22.2% Superior common Overall equityPerformance Earnings £-0.03 £0.17 Superior RMB 5.76 Superior per share (RMB -0.4) 17
  21. 21. VII. BibliographyBreitner, L. K., & Anthony, R. N. (2009). Core concepts of accounting (10th ed.). New York,NY: Prentice Hall.Brigham, E. F., & Houston, J. F. (2009). Fundamentals of Finance Management, Concise Edition(with Thomson One – Business School Edition). Florence, KY: South-Western CollegePublishing.China Mobile. (2009). China Mobile Limited: Annual Report 2009. Retrieved May-13, 2010from http://www.chinamobileltd.com/ir.php?menu=3Coffey, D., & Lee, C. (2010). Investing in Telecom for Tomorrow‟s Innovations:Recommendations for Telecommunications Research and Development. Arlington, VA: TIA.Ehrhardt, M. C., & Brigham, E. F. (2009). Corporate Finance: A Focused on Approach. Florence,KY: Cengage Learning.Hoover‟s. (2010). Vodafone Group Plc: Comparison data. Retrieved May-14, 2010 fromhttp://www.hoovers.com/globaluk/sample/co/fin/comparison.xhtml?ID=ffffcksxttxssyjkxyNikolai, L. A., Bazley, J. D., & Jones, J. P. (2009). Intermediate Accounting. Florence, KY:Cengage Learning. 18
  22. 22. Park, C. S. (2010). Contemporary Engineering Economics. New York, NY: Prentice Hall.Strategy Analytics. (2009). Wireless Operator Performance Benchmarking Q3 2009. Santa Fe,NM: Strategy Analytics.Vodafone. (2010). About Vodafone. Retrieved May-13, 2010 fromhttp://www.vodafone.com/start/about_vodafone/who_we_are.htmlVodafone. (2009). Vodafone Group Plc: Annual Report for the year ended 31 March 2009.Bershire, UK: Vodafone Group Plc.Ycharts. (2010). Wireless Communications Industry Stock Charts. Retrieved May-14, 2010 fromhttp://ycharts.com/industries/Wireless%20Communications/charts 19

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