For the year ended March 31, the Newbury, UK-based operator posted a reduced net loss of 5.3bn pounds ($10.51bn), after its bottom line was hit by a 3.5bn pound ($6.94bn) charge in Italy. This loss was modest however compared to the net loss of 21.82bn pounds ($43.3bn) the previous year, when Vodafone was hit with a one-time charge of 23.5bn pounds ($44.31bn) associated with its $188bn takeover of Mannesmann in 2000.

Overall, sales for the year rose 4.3% organically (or before acquisitions) to 31.1bn pounds ($61.7bn) from 29.35bn pounds ($58.2bn) a year-ago.

The operator said it expects its core European markets to remain challenging, mostly down to pricing and regulatory pressures. Recent European regulations on mobile roaming charges will see Vodafone losing 250m pounds ($495m) from the 1.8bn pounds ($3.56bn) it generates annually from roaming charges.

We have met or exceeded our stated financial expectations for the year in all areas and made good progress executing the strategy we set out in May 2006, said chief executive Arun Sarin. Our customer franchise was further strengthened through organic growth and acquisition, and now exceeds 206 million proportionate customers.

In the past year, Vodafone has benefited from its reorganization into three units covering Europe, emerging markets, and new technology. The restructuring followed shareholder complaints in 2006 over Vodafone’s non-core assets and slowing markets. Indeed, things got so serious for Sarin at one stage in early 2006 that he narrowly defeated a boardroom attempt by Vodafone’s old guard to oust him. Later in the year he also survived a shareholder revolt at the company’s AGM.

The decision by investors to stick with Sarin was repaid after the operator realized approximately 10bn pounds ($19.8bn) worth of proceeds from the sale of some of its assets in Switzerland, Belgium, and Japan. Sarin had previously sold off its Swedish operation after he deemed that market too small and competitive.

Sarin balanced these asset disposals by spending nearly 8bn pounds ($15.87bn) on acquisitions. These include spending $4.55bn on Turkey’s second largest mobile phone operator, Telsim Mobil, a unit that is growing at an impressive 30% annually.

Sarin also increased Vodafone’s stake in joint ventures in South Africa, India, and Egypt. He topped this off on May 8 when the operator finally completed its purchase of a controlling 67% stake in Hutchison Essar, India’s fourth largest operator.

All these units in emerging markets performed well during the year, and are acting as Vodafone’s principle growth engines instead of the saturated European market.

Sarin spent 4.2bn pounds ($8.32bn) on capital expenditure during the past year, and is looking to invest a billion pounds ($1.98bn) to build up its Indian network, where revenues are growing at more than 50% year-on-year.

Looking forward, Sarin also pleased the markets after he raised the forecast of annual sales for the forthcoming year to between 33.3bn pounds ($65.98bn) to 34.2bn pounds ($67.77bn). This, coupled with a rise of its dividend, pushed shares in the UK operator up 5.68% to 160 pence ($3.17), a five-year high.

Over View

There is little doubt that over the past year, Sarin has continued to make good progress on tidying up Vodafone’s balance sheet. He has also continued to drive growth in under-developed markets, and the 30% to 40% growth in data revenues is very interesting, as Vodafone finally starts to reap some rewards from its 3G investments, as demand for HSDPA data services increases.

Sarin’s strategy of reducing costs in its core European markets, as well as looking to stimulate revenues in these highly saturated markets is also paying off, with 20% of revenues in Europe coming from 3G devices.

In order to reduce network operating costs, he negotiated a network sharing deal with Orange in Spain, and is setting up a similar agreement in the UK. Vodafone has also outsourced its IT application development and maintenance functions to EDS and IBM.

Sarin’s strategy of expanding in emerging markets is highly convincing, and purchases in Turkey and India have been viewed as especially astute deals.

Vodafone generated free cash flow of 6.1bn pounds ($12.09bn) during the year, and Reuters quoted some analyst speculation that US telecoms goliath AT&T could make a bid for Vodafone. Presumably this would include AT&T offloading Vodafone’s minority stake in Verizon Wireless (thought to be worth approximately $60bn to $70bn) to Verizon Communications, to help fund the deal.

Both companies are roughly similar in size. Vodafone is thought to have a market capitalization of anywhere between $150bn to $180bn, while AT&T has a market cap of $250bn.