Vodafone benefits from smart decisions

This morning Vodafone announced third quarter results ahead of forecasts. The group now believes operating profit will be in the range of £11.4bn to £11.8bn for 2010. Nick Raynor, investment adviser at The Share Centre explains what this means for investors.

"Vodafone has started the New Year with a bang. The group said that revenue for the quarter ending 31 December 2009 had increased by 10.3 per cent to £11.5bn. In addition, Vodafone's service revenue rose by 11 per cent to £10.7bn. As a result, Vodafone's share price rose by 5.2 per cent during early morning trading.

"Consumer demand for data-intensive smart phones had a positive impact on Vodafone's mobile Internet revenue, which rose above £1bn for the first time. This strong performance is particularly good given that Vodafone's iPhone did not launch until the New Year, missing out to Orange and O2 on the pre-Christmas spending.

"We continue to list Vodafone as a buy for medium risk investors looking for a balanced return on their investment. The group is still offering a yield of over 5 per cent, which is an attractive offer at present. We also believe the company should continue to deliver steady growth for shareholders as demand for data-intensive smart phones, such as the iPhone continues to grow.

"However, we remain cautious about Vodafone's Turkish operations which have suffered an asset write down. Furthermore, the group's 45 per cent stake in US network, Verizon Wireless has not paid a dividend since 2006. Shareholders will want this resolved. Today's results made no mention of the issue, indicating that yields won't be paid until 2001-2012 at the earliest."