Vodafone Group 6-K 2013
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rules 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
Dated May 23, 2013
Commission File Number: 001-10086
PUBLIC LIMITED COMPANY
(Translation of registrants name into English)
VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN,
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
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This Report on Form 6-K contains a news release dated 21 May 2013 entitled VODAFONE ANNOUNCES RESULTS FOR THE YEAR ENDED 31 MARCH 2013
Vodafone announces results for the year ended 31 March 2013
21 May 2013
· Group revenue down -4.2% to £44.4 billion; full year organic service revenue decline -1.9%*; Q4 -4.2%*
· EBITDA down -3.1%* at £13.3 billion; organic EBITDA margin down -0.1* percentage points excluding restructuring costs
· Verizon Wireless (VZW) service revenue up 8.1%*; our share of profits up 30.5%* to £6.4 billion
· Adjusted operating profit above guidance, up 9.3%* at £12.0 billion; adjusted EPS +5.0% at 15.65p
· H2 impairment charge of £1.8 billion, giving a full year total of £7.7 billion in Italy and Spain
· Free cash flow towards the higher end of guidance at £5.6 billion after capital additions of £6.3 billion
· Final dividend per share of 6.92 pence, giving total dividends per share of 10.19 pence, up 7.0%
Guidance for the 2014 financial year2
· Adjusted operating profit in the range of £12.0 billion to £12.8 billion.
· Free cash flow of around £7.0 billion, including the £2.1 billion VZW dividend to be received in June 2013.
Vittorio Colao, Group Chief Executive, commented:
Thanks to further strong progress this year in our key areas of strategic focus - data, enterprise and emerging markets3 - and an excellent performance from VZW, we have achieved good growth in adjusted operating profit and adjusted earnings per share. However, we have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment.
I remain very excited about our longer term prospects, as customer appetite for high speed data grows rapidly, and companies look to embed mobility into their corporate strategies. The launch of Vodafone Red has been very successful, providing a solid underpinning for future revenue as customers take advantage of the best of the Vodafone experience. Our new targets for high speed mobile network coverage, announced today, combined with our growing capabilities in next generation fixed line access, strengthen our Vodafone 2015 strategy.
With the announcement of todays 7% increase, the ordinary dividend per share has grown over 22% in the last three years. The Board remains focused on balancing ongoing shareholder remuneration with the long-term investment needs of the business, and going forward aims at least to maintain the ordinary dividend per share at current levels.
* All amounts in this document marked with an * represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates. There have been two one-off items impacting organic growth rates in the year. For details see note 4 on page 38.
1 See page 33 for more information on non-GAAP measures.
2 See Guidance on page 8. For consistency with the basis of presentation of joint ventures in previous years, guidance does not take into account the impact on the Groups financial results of adopting IFRS 11, Joint Arrangements, for the year ending 31 March 2014.
3 Emerging markets comprise India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji.
CHIEF EXECUTIVES STATEMENT
Financial review of the year
Performance was strong in our emerging markets operations, with continued good growth in revenue and improving margins. However, the macroeconomic environment in Southern Europe has been very challenging, and European regulation continues to depress returns in the industry, rather than incentivise investment. VZW, our 45% owned associate in the US, continued to achieve strong growth in revenue, EBITDA, cash flow and market share.
Overall, I am satisfied with the progress we have made with our strategic priorities:
· We have launched Vodafone Red, our new strategic approach to pricing and our customer proposition, in 14 markets, with very positive initial results;
· We remain competitive in all markets, gaining or at least holding market share in most of our operations;
· We have bought new low frequency spectrum in a number of markets, and have laid the technology platform for the rapid deployment of HSPA+ and 4G/LTE services;
· We have accelerated the integration of CWW and TelstraClear, two fixed line businesses acquired during the year, advancing our enterprise and unified communications strategies; and
· We have increased the ordinary dividend per share by 7% for the third year in a row, as well as buying back £1.6 billion of shares.
Group revenue for the year was down -1.4%* to £44.4 billion, with Group organic service revenue down -1.9%*. Data revenue (+13.8%*) and major emerging markets (India +10.7%*, Vodacom +3.0%*, Turkey +17.3%*) continued to perform strongly. Group EBITDA margin fell -0.5* percentage points, or -0.1* percentage points excluding restructuring costs, as the impact of steep revenue declines in Southern Europe offset improving margins in India and Vodacom. Group EBITDA fell -3.1%* to £13.3 billion, after restructuring costs of £310 million.
Adjusted operating profit from controlled and jointly controlled operations, before our share of associates profits, was £5.5 billion, down -7.0%* year-on-year, reflecting the decline in EBITDA and relatively consistent depreciation and amortisation year-on-year. Group adjusted operating profit was up 9.3%* year-on-year at £12.0 billion, above our guidance range of £11.1 billion to £11.9 billion, as a result of the strong VZW contribution, which increased 30.5%* year-on-year. Excluding M&A and restructuring costs, adjusted operating profit was £12.3 billion1.
We recorded an accounting gain of £0.5 billion on the acquisition of CWW and impairment charges of £7.7 billion relating to our businesses in Italy and Spain. These were driven primarily by lower projected cash flows within business plans, resulting from the tougher macroeconomic environment, and partly by an increase in discount rates.
Free cash flow was £5.6 billion, or £5.8 billion1 excluding M&A and restructuring costs, at the top of our guidance range of £5.3 billion to £5.8 billion for the year. The year-on-year decline reflected the relative strength of sterling against the euro, South African rand and Indian rupee over the course of the year, as well as tough trading conditions. In addition to the free cash flow reported above, we received an income dividend of US$3.8 billion (£2.4 billion) from VZW, and will shortly receive a further £2.1 billion which will be retained for general business purposes, including spectrum costs.
Capital additions were stable at £6.3 billion, as we continued to maintain a significant level of investment to extend our high speed mobile data coverage across our existing voice footprint. In addition, we spent £2.5 billion during the year on acquiring and renewing spectrum in a number of markets including the UK, India and the Netherlands.
Adjusted earnings per share was up 5.0% at 15.65 pence, driven by growth in adjusted operating profit and a lower share count. The Board is recommending a final dividend per share of 6.92 pence, to give total ordinary dividends per share for the year of 10.19 pence, up 7.0% year-on-year.
Northern and Central Europe
Organic service revenue in Northern and Central Europe was down -0.2%* year-on-year. Excluding the impact of regulated mobile termination rate (MTR) cuts, service revenue was up 1.6%*. Underlying performance in the major markets of Germany, the UK and the Netherlands, while robust compared with our competitors, weakened in the second half of the year, reflecting increased competition and some macroeconomic pressure. Turkey continued to grow very well through strong execution.
Enterprise revenue grew 0.8%*, with continued growth in Germany (+3.0%*) and Turkey offsetting declines in other markets. The accelerated integration of CWW is proceeding successfully, and we expect it to deliver significant network synergies in the UK and internationally, while also boosting our enterprise business.
CHIEF EXECUTIVES STATEMENT
Data revenue was up 14.4%*, reflecting increased smartphone penetration now 35.4% in the region, up 9.1 percentage points year-on-year and further take-up of integrated voice, SMS and data plans. By the fourth quarter, 69.7% of consumer contract revenue in the major markets came from customers on these integrated plans. During the year we launched 4G/LTE services in Romania.
Organic EBITDA was down -2.4%* and the EBITDA margin fell -0.7* percentage points. Margin improvement in Turkey, the Netherlands and Ireland only partly offset small declines in Germany and the UK, driven by a lower top line, rising commercial costs and higher restructuring costs in Germany.
Organic service revenue in Southern Europe fell -11.6%* year-on-year, as the effects of severe macroeconomic weakness were intensified by strong competition, and steep cuts to MTRs in Italy and Greece. Combined mobile and fixed offers in Spain and Portugal, from incumbents and fixed operators, made increasing inroads into the market in the second half of the year. Excluding MTR cuts, service revenue fell -8.4%*.
Data revenue was up 9.7%*, as demand for data continued to grow despite the economic and competitive pressures. Smartphone penetration increased 7.5 percentage points to 35.5%. During the year we launched 4G/LTE services in Italy, Greece and Portugal, announced a partnership with Orange in Spain to deploy fibre to six million homes over the next four years, and committed to extending our fibre network in Portugal to pass over one million homes.
Organic EBITDA fell -16.4%* and the EBITDA margin fell -2.2* percentage points, mainly as a result of the steep revenue declines across the region and restructuring costs, offset by operating cost savings. Towards the end of the year, we undertook significant redundancy programmes in Spain and Greece to reduce operating expenses.
Organic service revenue growth in AMAP was 3.9%*, with continued growth in all of our markets apart from Australia and New Zealand. Growth in India slowed through the year, mainly as a result of increased consumer protection regulation and a more stringent customer verification process, but the competitive environment improved and we continued to gain market share. In Vodacom, continued strong underlying revenue growth in our other sub-Saharan markets offset a weaker performance in South Africa. Despite competitive pressure and the uncertain political environment, service revenue in Egypt grew 3.7%*. Australia continued to experience steep revenue declines on the back of ongoing service perception issues. During the year we launched 4G/LTE services in South Africa and New Zealand.
Organic EBITDA rose 10.3%* and the EBITDA margin increased 1.7* percentage points, with strong margin improvements in India and Vodacom offsetting a sharp decline in Australia. Ghana and Qatar also made good margin progress on strong revenue growth and market share gains. Egypts margin improved 1.4* percentage points.
VZW continued to trade very well, launching successful new price plans and making further market share gains. Organic service revenue was up 8.1%* and EBITDA was up 13.6%*. Free cash flow amounted to US$13.2 billion (£8.4 billion), and net debt at 31 March 2013 was US$6.2 billion (£4.1 billion). Our share of VZWs profits for the year amounted to £6.4 billion, up 30.5%* year-on-year.
While the macroeconomic and regulatory environment in Europe presents significant short-term challenges, we see a number of positive developments. We expect smartphone adoption to continue to grow in all markets over the next three years, with mobile applications and low cost smartphone availability increasing in mature and emerging markets alike.
With the broad deployment of high speed data networks, both mobile and fixed, we expect customers appetite for data to increase significantly. At the same time, the evolution of network and IT platforms should enable lower cost and more standardised approaches as we further integrate commercial and technology planning.
As a result, we believe that the long-term prospects for the mobile market are highly attractive for those that make scale, standardisation and the customer data experience fundamental to how they operate. Vodafone 2015 is our strategy to maximise this opportunity.
CHIEF EXECUTIVES STATEMENT
We are adopting a new strategic approach to consumer pricing and bundling in Europe, in order to offer customers greater freedom of usage and, at the same time, stabilise ARPU. We have launched new plans across much of our footprint, branded Vodafone Red in most markets, which incorporate unlimited voice and SMS, and generous data allowances.
As a result, we have radically simplified pricing, giving clear visibility of the cost of ownership and enabling simplification of IT and billing. We are progressively enhancing the value proposition through the introduction of a number of additional features, including improved access to technical support, attractive roaming packages, shared data plans, early handset upgrades, storage and back-up in the cloud, and device security, to increase the breadth of service and support ARPU over time.
Already, we have 4.1 million customers on Vodafone Red plans across 14 markets. The customer response has been very positive, with strong net promoter scores. Data usage on Vodafone Red plans is much higher, as is the average return on our commercial investment. As expected, we have seen some ARPU dilution, but at a lower level than planned. We aim to have ten million customers on Vodafone Red plans by March 2014.
We also see an increasing move towards residential unified communications services in some of our European markets. We expect this trend to grow, with cable operators offering MVNO services, and incumbent fixed line providers combining their domestic broadband services with mobile and TV plans. Our goal is to offer unified communications services in our major European markets, accessing next generation fixed line infrastructure through a combination of negotiated wholesale terms, deployment of our own fibre and, potentially, acquisitions. A clear regulatory framework with regard to accessing incumbent fibre infrastructure will be key.
In emerging markets, we aim to build on our success to date to become a clear leader, increasing the value of these markets to the Group through market growth, improving margins, share gains and stronger cash generation. These markets offer very attractive long-term opportunities from sustained GDP growth, the scope for widespread mobile data adoption and the fulfilment of unmet needs such as basic financial services. We aim to maximise these opportunities through superior marketing and distribution, smart data pricing, the development of low-cost smartphones and selective innovation in areas in which we can truly differentiate.
We are strengthening our leading position in enterprise, enhancing our product offering to large and medium-sized businesses and creating a dedicated enterprise operational structure, following the market success of Vodafone Global Enterprise (VGE) and the CWW and TelstraClear acquisitions. Enterprise now represents 27.3% of Group service revenue and we have over 32 million mobile enterprise customers accounting for around 8% of our total customer base.
VGE, serving our biggest multi-national accounts, will continue to expand its remit, driven by an increasing appetite among customers to consolidate telecoms procurement cross-border and bring mobility into the heart of their business strategies. In unified communications, we continue to develop Vodafone One Net for small- and medium-sized companies, and increasingly provide total communications services to our larger customers through the purchase of CWW. This acquisition will also allow us to develop our product offering in high growth segments, such as cloud and hosting.
In machine-to-machine (M2M), we intend to leverage our new business unit organisation, global technical platform and vertical sector competences to exploit the current wave of adoption of M2M solutions across many industry and service sectors.
Our network strategy continues to focus on supporting higher speed data in both mature and emerging markets, and delivering a consistently excellent data experience to our customers through the widespread deployment of HSPA+, LTE and high capacity backhaul. We expect to continue our consistent level of investment so that Vodafone customers can be assured of a video-standard data service across our footprint in Europe and we can successfully manage the high growth in data volumes anticipated. We aim to extend our 3G footprint at 43.2 Mbps and LTE coverage across our five major European markets to 80% and 40% respectively by March 2015.
CHIEF EXECUTIVES STATEMENT
To complement our physical infrastructure investment, we are committed to securing the best portfolio of low frequency spectrum to maintain and improve our strong market positions through the improved customer experience this will offer. During the year, we acquired spectrum in the important 800 MHz band in the UK, the Netherlands, Ireland, Romania and in the 1800 MHz band in India, taking our total spectrum investment to £7.9 billion in the last four years.
Over the next three years we plan to simplify further our business model both across and within countries, eliminating legacy structures, reducing non customer-facing costs and moving towards more standardised offerings.
This will enable us to maximise the benefits of our scale and share commercial, technical and support functions across geographies in Europe, and to speed up and co-ordinate our time to market for new propositions and services. We see a significant opportunity in unifying network and IT management across multiple markets, in further centralising and standardising procurement, and in offshoring more business functions to shared service centres of expertise. We are targeting an absolute reduction in European2 operating expenses from these and other programmes of £0.3 billion in the 2014 financial year.
Prospects for the 2014 financial year3
Entering the new financial year, we continue to face stiff headwinds from regulation, competition and a tough economic environment, particularly in Europe. However, we are well positioned, with broad geographic exposure which includes attractive growth markets in India, Africa and the US, and a differentiated enterprise franchise. We benefit from a strong balance sheet and will continue our major focus on shareholder remuneration, while consistently reinvesting in our network to enhance the customer experience.
Regulation remains a key concern for us and the industry. Again we face the significant hurdle of MTR cuts, which we expect to create a drag of over two percentage points on service revenue. However, this effect should reduce substantially in the 2015 financial year based on current regulatory glide paths. We also await clarity on EU fibre regulation, where we are supportive of the pro-investment stance, subject to equality of access and margin squeeze provisions which are enforceable at the country level.
We expect adjusted operating profit for the 2014 financial year to be in the range of £12.0 billion to £12.8 billion.
We expect free cash flow to be around £7.0 billion, including the £2.1 billion VZW dividend due in June 2013. We expect capital expenditure to remain broadly steady on a constant currency basis.
We expect the Group EBITDA margin, excluding M&A and restructuring costs, to decline slightly year-on-year, reflecting the ongoing weak macroeconomic environment in Europe.
1 Based on 2013 guidance foreign exchange rates.
2 Northern and Central Europe, Southern Europe and Common Functions, excluding restructuring costs.
3 See Guidance on page 8.
GROUP FINANCIAL HIGHLIGHTS
1 Amounts presented at 31 March or for the year then ended.
2 See page 33 for Use of non-GAAP financial information and page 38 for Definitions of terms.
3 All references to free cash flow are to amounts before licence and spectrum payments. For the year ended 31 March 2013, other items excluded included payments in respect of a tax case settlement and the income dividend received from VZW in December 2012. For the year ended 31 March 2012, payments in respect of a tax case settlement, tax relating to the disposal of our 24.4% interest in Polkomtel, the income dividend received from VZW in January 2012 and the return of a court deposit made in respect of the India tax case are also excluded.
Please see page 33 for Use of non-GAAP financial information, page 38 for Definitions of terms and page 39 for Forward-looking statements.
Performance against 2013 financial year guidance
Based on guidance foreign exchange rates1, and excluding M&A and restructuring costs, our adjusted operating profit for the 2013 financial year was £12.3 billion, above the £11.1 billion to £11.9 billion range set in May 2012. On the same basis our free cash flow was £5.8 billion, at the top of the range of £5.3 billion to £5.8 billion.
2014 financial year guidance2
We expect adjusted operating profit to be in the range of £12.0 billion to £12.8 billion. We expect free cash flow to be around £7.0 billion, including the £2.1 billion VZW dividend due in June 2013. We expect capex to remain broadly steady on a constant currency basis.
We expect the Group EBITDA margin, excluding M&A and restructuring costs, to decline slightly year-on-year, reflecting the ongoing weak macroeconomic environment in Europe.
After over 22% growth in the ordinary dividend per share over the last three years, the Board is focused on continuing to balance the long-term needs of the business with ongoing shareholder remuneration, and going forward aims at least to maintain the ordinary dividend per share at current levels.
We have based guidance for the 2014 financial year on our current assessment of the global macroeconomic outlook and assume foreign exchange rates of £1:1.17 and £1:US$1.52. It excludes the impact of licences and spectrum purchases, additional income dividends from VZW, material one-off tax-related payments, restructuring costs and any fundamental structural change to the eurozone. It also assumes no material change to the current structure of the Group.
Actual foreign exchange rates may vary from the foreign exchange rate assumptions used. A 1% change in the euro to sterling exchange rate would impact adjusted operating profit by £30 million and free cash flow by approximately £20 million. A 1% change in the dollar to sterling exchange rate would impact adjusted operating profit by approximately £70 million.
1 Guidance foreign exchange rates for the year ended 31 March 2013 were £1:1.23 and £1:US$1.62.
2 For consistency with the basis of presentation of joint ventures in previous years, guidance does not take into account the impact on the Groups financial results of adopting IFRS 11, Joint Arrangements, for the year ending 31 March 2014.
1 Current year results reflect average foreign exchange rates of £1:1.23 and £1:US$1.58.
2 Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs.
3 Operating expenses for the year ended 31 March 2013 included restructuring charges of £310 million (2012: £144 million).
4 Other income and expense for the year ended 31 March 2013 included a £473 million gain on acquisition of CWW. The year ended 31 March 2012 included a £3,419 million gain on disposal of the Groups 44% interest in SFR and a £296 million gain on disposal of the Groups 24.4% interest in Polkomtel.
Group revenue fell by -4.2% to £44.4 billion, with service revenue of £40.9 billion, a decline of -1.9%* on an organic basis. Our performance reflected continued strong demand for data services and good growth in our major emerging markets, offset by regulatory changes, challenging macroeconomic conditions, particularly in Southern Europe, and continued competitive pressures.
In Northern and Central Europe service revenue declined by -0.2%* as growth in Germany and Turkey was offset by increased competition and some macroeconomic pressure in other markets.
In Southern Europe service revenue declined by -11.6%* reflecting severe macroeconomic weakness in our main markets, intense competition and MTR cuts.
In AMAP service revenue increased by 3.9%* with continued growth in all of our markets apart from Australia and New Zealand.
EBITDA and profit
Group EBITDA decreased by -8.3% to £13.3 billion, primarily driven by lower revenue and higher restructuring costs partially offset by operating cost efficiencies.
Adjusted operating profit grew by 3.7%, driven by 31.9% growth in our share of profits of VZW to £6.4 billion, partially offset by lower EBITDA.
Operating profit decreased by -57.7% to £4.7 billion, primarily due to the gains on the disposal of the Groups interests in SFR and Polkomtel in the prior year and the higher impairment charges in the current year, partially offset by the gain on acquisition of CWW of £0.5 billion.
An impairment loss of £7.7 billion was recorded in relation to Italy and Spain, primarily driven by adverse performance against previous plans and adverse movements in discount rates.
Net financing costs
1 Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances.
Net financing costs before income from investments have decreased by -7.1%, primarily due to lower mark-to-market losses associated with interest rate fixing and the impact of the Groups lower average net debt.
1 See Earnings per share below.
Our adjusted effective tax rate for the year ended 31 March 2013 was 24.5%, in line with our mid-twenties guidance range. This included the positive impact of amounts principally arising from the settlement of long standing tax disputes.
The adjusted effective tax rate is expected to move towards the high-twenties percentage in the future as a result of increasing profits in higher taxed jurisdictions.
The Groups share of associates tax has fallen as a result of a greater share of the VZW profits being taxed at the partnership level.
Earnings per share
Adjusted earnings per share was 15.65 pence, an increase of 5.0% year-on-year, reflecting higher adjusted operating profit and a reduction in shares arising from the Groups share buyback programme. Basic earnings per share was 0.87 pence (2012: 13.74 pence), a decrease of -93.7% year-on-year, driven by the £7.7 billion impairment charge recorded in the current year partially, offset by the gain on acquisition of CWW. The prior year also benefited from the profit on disposal of our 44% interest in SFR and 24.4% interest in Polkomtel. All these amounts are excluded from adjusted earnings per share.
1 Taxation for the year ended 31 March 2012 included a £206 million charge in respect of the disposal of the Groups 24.4% interest in Polkomtel. The gain arising on our acquisition of CWW in the year ended 31 March 2013 and the disposal of our 44% interest in SFR in the 2012 financial year did not give rise to a tax charge. The impairment charges of £7,700 million and £4,050 million in the years ended 31 March 2013 and 2012 respectively did not result in any tax consequences.
2 Other income and expense for the year ended 31 March 2013 included a £473 million gain on acquisition of CWW. The year ended 31 March 2012 included a £3,419 million gain on disposal of the Groups 44% interest in SFR and a £296 million gain on disposal of the Groups 24.4% interest in Polkomtel.
3 See note 1 in Net financing costs on page 10.
Northern and Central Europe
Revenue increased by 2.7% including a -4.1 percentage point negative impact from foreign exchange rate movements and a 6.8 percentage point positive impact from M&A and other activity. On an organic basis service revenue declined by -0.2%*, driven by challenging macroeconomic conditions in some markets, increased competition and the impact of MTR cuts, partially offset by continued growth in data revenue. Organic growth in Germany and Turkey was more than offset by declines in all other markets.
EBITDA declined by -3.7%, including a -4.3 percentage point negative impact from foreign exchange rate movements and a 3.0 percentage point positive impact from M&A and other activity. On an organic basis EBITDA decreased by -2.4%*, resulting from a reduction in service revenue in most markets, the impact of restructuring costs, and higher customer investment due to the increased penetration of smartphones.
1 Other activity includes the impact of M&A activity and the revision to intra-group roaming charges from 1 October 2011. Refer to note 4 on page 38 for more details.
Service revenue increased by 0.5%*, driven by a 1.3%* increase in mobile service revenue. Growth in enterprise and wholesale revenue, despite intense price competition, was offset by lower prepaid revenue. Data revenue increased by 13.6%* driven by higher penetration of smartphones and an increase in those sold with a data bundle. Vodafone Red, introduced in October 2012, performed in line with expectations and had a positive impact on customer perception. Enterprise revenue grew by 3.0%*, despite the competitive environment.
The roll out of LTE services continued and was available in 81 cities, with population coverage of 61% at 31 March 2013.
EBITDA declined by -2.6%*, with a -1.3* percentage point reduction in EBITDA margin, driven by higher customer and restructuring costs, partially offset by operating cost efficiencies and a one-off benefit from a legal settlement during Q2.
Service revenue declined by -4.0%* driven by the impact of MTR cuts effective from April 2012, intense price competition and macroeconomic weakness, which led to lower out-of-bundle usage. Data revenue grew by 4.2%* driven by higher penetration of smartphones. Vodafone Red plans, launched in September 2012, performed well, with over one million customers at 31 March 2013.
Following the purchase of additional spectrum in February 2013, preparation for LTE roll-out is underway.
The network sharing joint venture between Telefónica UK and Vodafone UK, announced in June 2012, is now operational and the integration of the CWW enterprise businesses into Vodafone UK is proceeding successfully.
EBITDA declined by -6.9%*, with a -0.5* percentage point reduction in EBITDA margin, driven by higher retention activity and the impact of restructuring costs.
Other Northern and Central Europe1
Service revenue increased by 2.2%* as growth in Turkey more than offset declines in the rest of the Other Northern and Central Europe region. Service revenue in Turkey grew by 17.3%*, primarily driven by growth in the contract customer base and an increase in data revenue due to mobile internet and higher smartphone penetration. Revenue also benefited from enterprise growth and the success of commercial initiatives. In the Netherlands service revenue declined by -2.7%* due to more challenging macroeconomic conditions and lower out-of-bundle usage. CWW contributed £1,234 million of revenue since it was acquired on 27 July 2012.
EBITDA increased by 1.9%*, with a -0.3* percentage point reduction in the EBITDA margin, as margin improvement in Turkey, driven by the increase in scale and cost management, were partially offset by declines in most other markets primarily resulting from lower revenue. Turkey reported positive operating free cash flow for the first time this year.
1 The results of CWW are included within the reported results from the date of acquisition, however, they are excluded from the organic results. Refer to note 4 on page 38 for more details.