For the six months ending September 30, Vodafone reported a net loss of GBP3.19 billion ($5.91 billion), down from a net loss of GBP4.25 billion ($7.87 billion). This compares to an underlying pre-tax profit of GBP5.39 billion ($9.97 billion), compared with GBP5.37 billion ($9.94 billion) a year earlier.

Sales declined slightly to GBP16.79 billion ($31.08 billion), from GBP16.89 billion ($31.27 billion) in the year-ago period. While the sales and profits were in line with market expectations, both were affected by the disposal of Vodafone’s Japanese fixed-line phone business Japan Telecom Holdings Co Ltd, which pushed Vodafone’s Japanese revenue down 18%.

Vodafone’s monthly customer revenues or average revenue per user, a key profitability measure, rose over GBP1.5 ($2.78) to GBP26.6 ($49.30) in the UK. In Spain ARPU jumped 11% to E35.4 ($45.96). Elsewhere, the picture was less rosy as competition increased. In Germany, ARPU slipped 3% to E25.7 ($33.36), whereas in Italy it edged 1% lower to E30.3 ($39.34). In the cut-throat Japanese market it tumbled 10% to JPY6,279 ($59.59).

The markets in the UK, Spain and Germany, as well as Verizon Wireless, the firm’s US joint venture, continued to be where Vodafone added the most customers. In the first half of the year, Vodafone added a total of 7.4 million new customers, excluding those acquired from buying into other companies. This pushed its massive subscriber base up to 146.7 million worldwide. Only China Mobile (Hong Kong) Ltd, with about 194.4 million subscribers, has more customers.

The strong growth from Vodafone’s European markets helped offset the weaker performance of Japanese subsidiary Vodafone Holdings KK, which used to be known as J-Phone.

Vodafone has long had a problem in Japan, despite it being a growth market. Vodafone Japan is currently the third ranked mobile operator, and has been losing ground to rivals KDDI Corp NTT DoCoMo Inc, because it lacked a competitive 3G offering.

However, Vodafone’s CEO Arun Sarin has shaken up Vodafone’s structure so that a newly recruited chief of the Japanese business will report directly to him. He has also increased Vodafone’s shareholding in Vodafone Japan by 28.5% to 98.2%.

In addition, the Newbury, UK-based operator earlier this month launched its 3G service in 13 countries around the world, either on Vodafone’s own local networks or through partner relationships. The countries include Austria, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, Sweden, Switzerland, and the UK.

Sarin is clearly hoping the 3G service will push up Vodafone’s vital ARPU figures. Vodafone has thrown its weight behind a 3G assault in order to grab a greater slice of the crucial Christmas market. This is in contrast to other mobile operators which appear to be holding back or embarking on a more limited roll-out.

Sarin said he expects 3G to deliver a material benefit to the business over time. He added: We are targeting more than 10 million ‘Vodafone live! with 3G’ customers in our controlled operations by the end of March 2006.

Vodafone will have its work cut out to recoup the expense of rolling out the 3G network. In the UK alone, it spent roughly GBP7 billion ($12.97 billion) on the license and the network. In Germany the license cost a further GBP6 billion ($11.12 billion), and across the 13 nations where Vodafone is simultaneously launching 3G, the total bill came to a whopping GBP19.7 billion ($36.51 billion). Spending this year will add a further GBP1.6 billion ($2.96 billion).

Yet Vodafone has the new 3G phones in the shops, and in the next couple of months Sarin will find out whether he has got it right. He said that by the end of next year, about 10% of Vodafone’s 140 million customers will be using 3G.

However, he cautioned that people tend to focus too much on new services. Voice is 85% of our revenue and is not going to go away, it is always going to be the single most important thing. With 3G, I now have far more capacity to compete. I can sell phone services more cheaply and still make more money.

Vodafone also announced an extension to its share buy-back program, raising it by about GBP1 billion ($1.85 billion) to GBP4 billion ($7.41 billion) in the year to March 2005.

In addition, Vodafone pleased the market after it revealed a 100% increase in the dividend pay-out to 1.91p ($3.53) a share. Vodafone also said it expects to double its full-year dividend.