Vodafone to Unveil Record £20bn Loss

Vodafone chief executive Arun Sarin will this week unveil a record annual loss of about £20bn as investors warn that his job depends on how he presents plans to revitalise the world's largest mobile phone company.

This figure is well above the £13.5bn loss Vodafone recorded in 2002. Central to the massive headline figure is a cut of up to £28bn in the value of Mannesmann, the German conglomerate it bought for £100bn in 2000 in its rush to create a global network.

However, the bad news will be mitigated by improved underlying earnings of around £11bn. Shareholders are also expecting a £6bn payout in the form of either a special dividend or a special share issue following the disposal of Vodafone's Japanese business earlier this year, the first concrete sign that Sarin is reining in his global aspirations.

With the once-dominant operator now beset by slowing growth in mobile revenues and fresh challenges from competitors via the internet, Sarin must present a compelling vision at this week's strategic review to convince shareholders that he is the man to transform Vodafone from a phone operator into a profitable multi-faceted communications business. One key investor said: 'The event is make or break. If he bombs, he is gone.'

Shareholders want Sarin to spell out how he can cut costs in Vodafone's mature core European markets while earmarking growth opportunities around the world without overpaying. There is nervousness that recent deals in Turkey, India and South Africa have been expensive. At the same time, with the price of voice calls set to fall drastically though internet competition, he must indicate how Vodafone will reach beyond its traditional voice and texting services to offer functions such as wireless broadband access and internet TV.

Analysts are expecting him to announce several cost-saving initiatives, including a jobs cull that could stretch into the thousands, and some £300m of savings from outsourcing billing and customer relations. Investors are hoping that he stop making acquisitions in growth markets because prices are too high. They are also hoping for an indication that he is prepared to sell Vodafone's 45 per cent stake in US mobile operator Verizon, a move that would net the group up to $60bn.

Analysts are also expecting details on plans to lease wholesale broadband space, allowing Vodafone subscribers to access the internet at high speed from their handsets. Competitors such as Orange and Carphone Warehouse have recently launched such plans.

Following months of boardroom bloodletting, including an abortive coup, investors are demanding an impressive presentation on Tuesday.

Robert Talbut, chief investment officer of Royal London Investment Management, said: 'This week is crucial in terms of his relationship with shareholders. If it does not go well I think the pressure for change at the top will grow. What we need to know is the basis for deciding which assets need to be owned by the group.'