20-F

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 20-F

	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended:     March 31, 2004
OR
	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from:                   to
Commission file number:                    1-10086

VODAFONE GROUP PUBLIC LIMITED COMPANY
(formerly VODAFONE AIRTOUCH PUBLIC LIMITED COMPANY)
(Exact name of Registrant as specified in its charter)

England
(Jurisdiction of incorporation or organization)

Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Ordinary shares of $0.10 each	New York Stock Exchange*

* Listed, not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

     Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares of $0.10 each
7% Cumulative Fixed Rate Shares of £1 each 67, 427, 304, 257
50,000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes                   No

Indicate by check mark which financial statements item the registrant has elected to follow:

Item 17               Item 18

Vodafone Group Plc
Annual Report

For the year ended 31 March 2004

	Annual Report 2004  Vodafone Group Plc
	1
Contents

Description	Page
Financial Highlights	2
Chairman’s Statement	4
Chief Executive’s Statement	5
Business Overview	7
Cautionary Statement Regarding Forward-Looking Statements	20
Risk Factors and Legal Proceedings	21
Operating and Financial Review and Prospects	23
Non-GAAP Information	45
The Board of Directors and the Group Executive Committee	46
Directors’ Report	48
Corporate Governance	50
Board’s Report to Shareholders on Directors’ Remuneration	54
Employees	64
Corporate Social Responsibility and Environmental Issues	65
Statement of Directors’ Responsibilities	66
Report of Independent Auditors	67
Consolidated Financial Statements	68
Additional Shareholder Information	128
Form 20-F Cross Reference Guide	136

References to the “Group” or “Vodafone” are references to Vodafone Group Plc (the “Company”) and its subsidiary undertakings and, where the context requires, its interests in joint ventures and associated undertakings.

This Annual Report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and business management and strategy, plans and objectives for the Group. For further details, please see “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors and Legal Proceedings – Risk Factors” for a discussion of the risks associated with these statements.

Vodafone Group Plc  Annual Report 2004

2

Financial Highlights

The selected financial data set out on the following pages is derived from the Consolidated Financial Statements on pages 68 to 127 and as such should be read in conjunction with them. Certain trends within the financial data presented below have been impacted by business acquisitions and disposals, the most significant of which are described in “Business Overview – History and Development of Company”. Where appropriate, balances have been restated to reflect the adoption of changes in accounting standards as described in note 37 to the Consolidated Financial Statements. The Consolidated Financial Statements are prepared in accordance with UK GAAP, on the basis set out in note 1 to the Consolidated Financial Statements, which differ in certain significant respects from US GAAP. For further details, see note 36 to the Consolidated Financial Statements, “US GAAP information”. Solely for convenience, amounts represented below in dollars have been translated at $1.8400: £1, the Noon Buying Rate on 31 March 2004.

		At/year ended 31 March
		2004		2004		2003		2002		2001		2000
		$m		£m		£m		£m		£m		£m
Consolidated Profit and Loss Account Data
UK GAAP
Group turnover		61,749		33,559		30,375		22,845		15,004		7,873
Of which in respect of:	continuing operations	60,244		32,741		28,547		21,767		15,004		7,873
	discontinued operations	1,505		818		1,828		1,078		–		–
Total Group operating (loss)/profit		(7,783	)	(4,230	)	(5,451	)	(11,834	)	(6,989	)	798
Of which in respect of:	continuing operations	(7,904	)	(4,296	)	(5,208	)	(11,408	)	(6,989	)	798
	discontinued operations	121		66		(243	)	(426	)	–		–
(Loss)/profit for the financial year		(16,588	)	(9,015	)	(9,819	)	(16,155	)	(9,885	)	542
US GAAP
Group turnover		50,882		27,653		22,416		16,561		11,103		7,873
(Loss)/profit for the financial year		(14,954	)	(8,127	)	(9,055	)	(16,688	)	(7,071	)	553
Consolidated Cash Flow Data
Net cash inflow from operating activities		22,663		12,317		11,142		8,102		4,587		2,510
Net cash outflow for capital expenditure and
financial investment		(7,851	)	(4,267	)	(5,359	)	(4,441	)	(18,988	)	(752	)
Free cash flow (Non-GAAP measure)(1)		15,679		8,521		5,171		2,365		(13,278	)	276
Consolidated Balance Sheet Data
UK GAAP
Equity shareholders’ funds		205,940		111,924		128,630		130,540		144,979		140,589
Net assets		211,473		114,931		131,493		133,395		147,400		142,109
Total assets		270,718		147,129		163,239		162,867		172,362		153,541
US GAAP
Equity shareholders’ funds		230,053		125,029		140,436		140,887		155,522		146,334
Total assets		368,462		200,251		221,412		197,913		206,753		165,323

Annual Report 2004  Vodafone Group Plc

3

	At/year ended 31 March
	2004		2004		2003		2002		2001		2000
Earnings Per Share (“EPS”)
Weighted average number of shares (millions)(2)
– Basic			68,096		68,155		67,961		61,439		27,100
– Diluted			68,096		68,155		67,961		61,439		27,360
UK GAAP
Total Group operating loss (per ordinary share)	(11.43	)¢	(6.21	)p	(8.00	)p	(17.42	)p	(11.38	)p	2.94	p
Total Group operating loss from continuing
operations (per ordinary share)	(11.47	)¢	(6.31	)p	(7.64	)p	(16.79	)p	(11.38	)p	2.94	p
(Loss)/earnings (per ordinary share)
– Basic	(24.36	)¢	(13.24	)p	(14.41	)p	(23.77	)p	(16.09	)p	2.00	p
– Diluted	(24.36	)¢	(13.24	)p	(14.41	)p	(23.77	)p	(16.09	)p	1.98	p
Basic (loss)/earnings (pence per ADS)	(243.6	)¢	(132.4	)p	(144.1	)p	(237.7	)p	(160.9	)p	20.0	p
US GAAP
(Loss)/earnings (per ordinary share)
– Basic	(21.95	)¢	(11.93	)p	(13.29	)p	(24.56	)p	(11.51	)p	2.04	p
– Diluted	(21.95	)¢	(11.93	)p	(13.29	)p	(24.56	)p	(11.51	)p	2.02	p
Basic (loss)/earnings per ADS	(219.5	)¢	(119.3	)p	(132.9	)p	(245.6	)p	(115.1	)p	20.4	p
Cash dividends(3)
Pence per ordinary share	3.7380	¢	2.0315	p	1.6929	p	1.4721	p	1.4020	p	1.3350	p
Pence per ADS	37.380	¢	20.315	p	16.929	p	14.721	p	14.020	p	13.350	p
Other Data
UK GAAP
Ratio of earnings to fixed charges(4)	(1.3	)	(1.3	)	(1.9	)	(7.2	)	(3.7	)	4.0
Deficit	$(6,710	)m	£(3,647	)m	£(4,828	)m	£(11,267	)m	£(6,947	)m	–
US GAAP
Ratio of earnings to fixed charges(4)	(5.7	)	(5.7	)	(5.0	)	(11.0	)	(5.8	)	3.8
Deficit	$(19,922	)m	£(10,827	)m	£(9,946	)m	£(16,540	)m	£(10,038	)m	–

Notes:
(1)	Refer to “Non-GAAP Information” on page 45 for a reconciliation of this non-GAAP measure to the most comparable GAAP measure and a discussion of this measure.
(2)	See note 10 to the Consolidated Financial Statements, “Loss per share”. Earnings per ADS is calculated by multiplying earnings per ordinary share by ten, the number of ordinary shares per ADS. Dividend per ADS is calculated similarly. EPS and dividend information has been restated for the capitalisation (bonus) issue on 30 September 1999.
(3)	The final dividend for the year ended 31 March 2004 was proposed by the directors on 25 May 2004.
(4)	For the purposes of calculating these ratios, earnings consist of income on ordinary activities before taxation, adjusted for fixed charges, dividend income from associated undertakings, share of profits and losses from associated undertakings and profits and losses on ordinary activities before taxation from discontinued operations. Fixed charges comprise one-third of payments under operating leases, representing the interest element of these payments, interest payable and similar charges and preferred share dividends.

Vodafone Group Plc  Annual Report 2004

4

Chairman’s Statement

It is my privilege to report, once again, another highly successful year for your company, with an excellent overall operating performance generating further substantial growth in profits and cash flows. Your company’s total venture mobile customer base has increased to over 340 million people. This is a wonderful achievement for a company that is only 20 years old and provides us with a really strong platform as we transition into the next phase of our development. It is only with the dedication and commitment of all members of staff throughout the world that we have achieved such excellent results to date and on behalf of the Board I thank them all.

For us, the year saw a rapid uptake of Vodafone live!™ across our footprint, following its successful launch last year, with nearly 7 million controlled customers now enjoying the richer mobile telecommunications the service delivers. We also started to introduce 3G to our customers. In February, we launched the Vodafone Mobile Connect 3G/GPRS datacard, which provides fast, secure access to corporate networks from lap top computers, across seven European countries and more recently we announced the launch of consumer services through Vodafone live!™ with 3G in Germany, Portugal, Italy and Spain. I believe that this technological evolution offers us significant growth opportunities and Vodafone is very well positioned to take advantage of these opportunities due to its global footprint and its continued strong financial performance. Although the mobile telecommunications industry remains extremely competitive, with new entrants driving new technologies and many existing operators having recovered from the financial pressures they faced only a short time ago, your company remains the industry leader.

As our international business expands it is essential that, in order to deliver the best possible experience to our customers and to achieve brand preference, we provide similar levels of excellence in all of our markets. To this end we have created two new central functions, Group Marketing and Group Technology & Business Integration. Group Marketing, led by Peter Bamford, provides leadership and coordination across a range of marketing and commercial activities including brand, product development, content management, Partner Networks and global accounts. Group Technology & Business Integration, headed by Thomas Geitner, leads the implementation of a standardised architecture for business process, information technology and network systems, which will support the next generation of products and services and the critical role of introducing and operating 3G capacity.

During the year, we continued our policy of increasing our shareholdings in existing operations, moving to 100% in Vodafone Malta and over 99% in Vodafone Greece. In the UK, we acquired prominent service providers, Singlepoint (4U) Limited and Project Telecom

plc, increasing our direct access to our UK contract customer base to over 90%. We also disposed of interests in mobile businesses in India and Mexico, as well as our fixed line operations in Japan. In addition, we extended our Partner Networks to a total of 13 countries through new agreements with operators in Bahrain, Cyprus, Iceland, Lithuania, Luxembourg and Singapore. We expect to add further countries in the coming year.

In February of this year, we entered into a high profile auction process for the acquisition of AT&T Wireless in the US. One of the many responsibilities that your Board has is its duty to shareholders to explore opportunities where it believes enhanced shareholder value may be achieved. Your Board considered that acquiring AT&T Wireless at the right price would have enhanced the Group’s position in the US and delivered, over time, better returns for shareholders.

In entering the auction process your Board determined a price ceiling which, had it been exceeded, would not have provided the returns we considered necessary to justify such an acquisition. In the event, our ceiling price was exceeded by Cingular Wireless and we retain our 45% investment in the leading mobile operator in the US, Verizon Wireless. Our relationship with Verizon Communications, our partner in Verizon Wireless, remains strong. They supported our participation in the auction and we look forward to continuing to work with them to further strengthen Verizon Wireless.

Corporate governance continues to be at the forefront of your Board’s considerations. During the year we have fully complied with the Combined Code relating to corporate governance, as appended to the Listing Rules of the UK Listing Authority. In addition, we also have to comply with US securities laws. The Sarbanes-Oxley Act of 2002 has introduced a number of changes to corporate governance requirements with which we have complied this year and with which we will comply as new requirements are introduced over the coming years. More details of the corporate governance work of your Board are provided later in this Annual Report.

On 1 September 2003, Luc Vandevelde joined the Board as a non-executive director. He brings with him many years of experience gained in retailing and consumer goods and his financial, management and marketing skills in international business will be of great value to the Board. I would also like to congratulate my colleague Alec Broers who was advised on 1 May 2004 that Her Majesty the Queen intends to make him a Life Peer for his contribution to engineering and higher education.

Vodafone is a vibrant company, dedicated to the creation of shareholder value. This value is achieved through the enhancement of products and services such as Vodafone live!™, the advance in technology – 3G – and the investment in assets where positive returns may be clearly identified. A progressive dividend policy and our share buy back programme are means by which value is returned to shareholders. In light of the excellent results and the confidence with which it views the future, the Board is recommending the payment of a final dividend per share of 1.0780 pence which, together with the interim dividend already paid, makes a total dividend for the year of 2.0315 pence, an increase of 20%. We will also seek your approval to extend the share buy back programme we announced in November, with £3 billion of purchases planned for next year, following the £1.1 billion purchased up to March 2004.

As a global business, we are mindful of our responsibilities to all stakeholders around the world and in particular that the delivery of our services should have as little impact on the environment as possible. As part of this endeavour, I would encourage shareholders to receive communications from us electronically. In doing so, documents are provided more quickly, communications are less costly and importantly it is more environmentally friendly.

As we transition to a new era in mobile telecommunications, I am confident that through our focus on our strategic goals we are well positioned to make further significant progress in the year ahead.

Lord MacLaurin of Knebworth, DL
Chairman

	Annual Report 2004  Vodafone Group Plc
	5
Chief Executive’s Statement

Mobile telecommunications is one of the most dynamic industries today. Its potential is vast. Today wireless technology only reaches one fifth of the world's population. In fact, 2 billion people have never even made a phone call. I'm delighted by the prospect that their first call could very well be made on a mobile phone.

In the coming years, the increasing number of mobile customers will enjoy a very different range of services. With the arrival of 3G and other new technologies and the significant increase in voice capacity and data rates they provide, the opportunity for growth in this industry is tremendous. The wireless future holds even more ways for people to share memorable moments, anywhere, anytime.

During my first year with Vodafone I have visited every part of our organisation, met with customers, employees, business leaders, regulators and stakeholders. I have reviewed our strategies, studied our operational practices and taken stock of the business we are managing on behalf of our customers and our shareholders. I am inspired by what I see.

Across our business we have plans to capitalise on market trends by applying our understanding of customer needs and deploying systems and technology to deliver high quality, great value, wireless services.

Our Position
This past year, Vodafone has delivered another set of solid financial results. We have had excellent customer growth, good revenue growth, continued margin improvement and generated outstanding free cash flow. As a result of this performance we propose to increase the dividend by 20% and expand the share purchase programme we introduced at the end of last year.

Today we operate across 26 markets, including 16 controlled operations. In addition, through our Partner Network programme, we have a further presence in 13 markets where we have a strong brand and service position without financial investment. More than 50,000 Vodafone employees now serve 133 million proportionate customers.

I believe that our company is in an unprecedented position to take full advantage of opportunities in the wireless world. All of us at Vodafone are working hard to grow

revenue, navigate the forces that impact our business and lay claim to the benefits of our global scale and scope.

Opportunities for Growth
At Vodafone we predict significant growth will come from: Telecommunications, Information Technology and Infotainment.

Voice remains at the heart of our business and there continues to be significant demand. Today, only about 20% of voice usage is mobile, so we can expect some portion of the remaining 80% to migrate to our networks. It is interesting to note that the growth of mobile has not significantly eroded the value of the fixed line industry. In effect, mobile has served to increase the value of the entire telecoms industry.

The second growth area is in Information Technology or what we think of as the productivity market. We plan to grow revenues by mobilising office tools and software applications. We have already begun by establishing a number of strategic partnerships with other industry players aimed at unleashing powerful 'made for mobile' applications over our 3G networks.

The third area where we see revenue growth potential is Infotainment – the combination of information and entertainment. We have already seen eagerness for these services through Vodafone live!™. Our customers can take and send pictures, browse branded infotainment, listen to audio files, watch video clips, play games and customise ringtones with their favourite songs, all from an integrated camera phone and an easy to use icon-driven menu.

Whilst we have made a strong start, the real opportunity to unearth more revenue comes with 3G, when capacity and speeds are far better than those we have today.

We can't predict all of the applications that customers will want in the coming years but we can anticipate their needs, build the infrastructure and platforms and collaborate with companies that understand how to grant the freedom to play games, watch television, conduct business and communicate anywhere and anytime.

Best of all, most of these activities are things people are already doing through different media today. Our success doesn't require a big behavioural change. We are simply mobilising those things that people are already accustomed to doing.

Forces on the Business
As we move forward, we must successfully navigate four forces impacting on our business – customers, technology, competitors and regulation – addressing the inherent opportunities and challenges they bring.

Our customers today expect more from us. They want to pay less yet get greater value for their pound, dollar, euro or yen. They expect greater coverage and reliability.

Advances in technology hold the key to delighting our customers and we are fully committed to making 3G deliver on its promises. We are investing significantly every year in 3G and we are investing time and energy to encourage cooperation between vendors so that the mobile environment can operate to global standards – that way our customers get the best from our services wherever they go.

Another significant force impacting our business is competition. We face different competitors across our markets, but we have a tremendous advantage. Vodafone can draw from resources across all our markets and respond competitively in a way that does not impact the performance of the organisation as a whole.

Regulation is also part of our everyday life. Regulators understand that Vodafone is an important company in their respective countries. They are keenly aware of the economic and social impact we have on their citizens and communities. We hope that future decisions will continue to be made in the best interests of our customers and the health of this vital global industry.

Vodafone Group Plc  Annual Report 2004

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Chief Executive’s Statement continued

Our Goals

At Vodafone, everything we do furthers our desire to create mobile connections for individuals, businesses and communities. Our Vision is to be the world's mobile communications leader and we're delighted by the prospects for the future of our industry.

Our commitment to this industry is underlined by our company values, which state that everything we do is driven by our passion for customers, our people, results and the world around us.

The success of our effort requires a commitment to deliver on our six strategic goals:

Provide superior shareholder returns
The continued strength in our financial performance enables us to increase returns to our shareholders on an ongoing basis. During the past year we have done this through increasing our dividends and our share purchase programme. In the next 12 months, we intend to expand this share purchase programme further, buying back shares worth £3 billion and returning, through our dividends and our share purchases, more than 50% of the cash we have generated.

By delivering on our goals and conducting rigorous economic and financial analyses before we make pricing, acquisition and scale decisions, we demonstrate the discipline to always act in the best interests of our shareholders.

Delight our customers
We have rededicated ourselves to delighting our customers because we believe this is the foundation for our continued success.

We recognise that every customer interaction provides another opportunity to win loyalty and that's why we continue to raise standards on the quality of customer care in our call centres and our stores and the quality of our networks.

Key to delighting our customers is our ability to deliver superior voice and data services according to differing customer needs. Vodafone live!™ with 3G has been introduced in four countries in Europe and several more countries will follow in the next few months. For our business customers, the launch of Vodafone Mobile Connect 3G/GPRS datacard in February has been very successful.

Throughout the past few years, Vodafone has done a terrific job of building brand awareness as we have moved towards a single global brand. Beyond brand awareness, we want people to understand that the Vodafone name represents great service, great value and great innovation. When our name becomes synonymous with these attributes we will achieve brand preference and expect to see our market share climb as a result.

Leverage global scale and scope
Another unique advantage for Vodafone is our expansive global footprint. Operating in 26 markets puts us in an enviable position to leverage our global scale and scope. We are using this advantage to deliver exceptional 3G-based services. When we introduce 3G handsets in large volumes later this year we will be well equipped to drive demand and attract even higher market share in the 3G world.

Another competitive advantage is our leadership position on cost and time to market. From network services to sales, and marketing to customer care and billing, we have many varied systems in use across the business. With strong cooperation between our various operating companies we can achieve further savings.

Expand market boundaries
Expanding our market boundaries is another priority for Vodafone. We continue to build productive strategic relationships in the mobile environment. In the productivity areas we are working with Microsoft and other IT companies. In the content areas, we have recently taken a big step forward in the music arena through our agreement with Sony Music.

In our changing industry, opportunities to expand geographically will continue to present themselves and, if they make sense both strategically and financially, we will give them serious consideration.

We have just reinforced our long term commitment to Japan by making a further investment of up to £2.6 billion. Our transactions in Japan will simplify the structure, confirm our commitment to the Japanese marketplace and enable us to deliver on the changes needed to improve our position.

Build the best global Vodafone team
As the business expands and the environment around us evolves, it is crucial for us to develop, recruit and retain the people that will lead us into this new world. We are working hard to make sure our employees have the right skills and knowledge to anticipate our customers' needs. We are identifying new ways to share the best of what we do on a global basis. We continue to reap the benefits of a motivated team with a strong customer service culture, which will help earn a reputation for Vodafone that is second to none.

Be a responsible business
As a large, multinational company we inevitably raise expectations amongst all our stakeholders and hold ourselves up to public scrutiny. Being a responsible business is about the way we manage our impact on society, the environment and the economy. We are committed to the highest standards of business integrity and corporate governance.

Our businesses around the world are important to the infrastructure of the economies and societies we serve and we take our broader corporate responsibilities seriously. Through our actions we will continue to strive to earn the trust and confidence of all our stakeholders worldwide.

Six Goals, One Aim

These six goals are well within our reach. Now it comes down to execution. Country by country, we have assembled a team of the most capable leaders in the wireless industry. They are supported by outstanding people who come to work every day eager and prepared to delight our customers, win market share and produce great results.

We are in an enviable industry position to succeed by virtue of our scale and scope and our operating philosophy. We are passionate and excited about our future and we look forward to sharing our success with you in the years ahead.

Arun Sarin
Chief Executive

	Annual Report 2004  Vodafone Group Plc
	7
Business Overview

Contents

	Page
Overview	7
Mobile Telecommunications	7
– Business strategy	7
– Geographic operations	7
Competition	7
Summary of Group mobile telecommunications businesses	8
Licences and network infrastructure	9
– Global services	10
Business integration	10
Products and services	10
Marketing and distribution	12
Industry initiatives	12
Research and development	12
– Regulation	13
Non-mobile Telecommunications	16
History and Development of the Company	16
– Acquisitions of businesses	16
– Sales of businesses	19
– Formation of Verizon Wireless	19
– Mannesmann synergies	19

Overview

Vodafone Group Plc is the world’s leading mobile telecommunications company, with a significant presence in Europe, the United States and the Asia Pacific region through the Company’s subsidiary undertakings, associated undertakings and investments. The Group also has arrangements to market certain of its services, through its “Partner Networks” scheme, in additional territories, without the need for equity investment. The Group provides a wide range of mobile telecommunications services, including voice and data telecommunications. The Group also has controlling interests in certain non-mobile telecommunications businesses.

The Company’s ordinary shares are listed on the London Stock Exchange and the Company’s American Depositary Shares (“ADSs”) are listed on the New York Stock Exchange (“NYSE”). The Company’s ordinary shares were also listed on the Frankfurt Stock Exchange until 23 March 2004. The Company had a total market capitalisation of approximately £92 billion at 24 May 2004, making it the second largest company in the Financial Times Stock Exchange 100 index, or FTSE 100, and the eleventh largest company in the world based on market capitalisation at that date.

The Company is a public limited company incorporated in England and Wales under registered number 1833679. Its registered office is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN England. Its principal telephone number is +44 (0) 1635 33251.

Mobile Telecommunications

Business strategy
As the world’s mobile telecommunications leader, the Group’s vision is to enrich customers’ lives, helping individuals, businesses and communities to be more connected in a mobile world.

The Group has maintained a strategy of focusing on global mobile telecommunications and providing enhanced network coverage to allow its customers to communicate using mobile products and services.

Whilst the customer base continues to grow, the Group’s strategy is increasingly focused on revenue growth and margin improvement from growing usage and providing enhanced services to the customer base.

Vodafone’s strategic roadmap seeks to achieve six key goals:

• delight our customers;

• build the best global Vodafone team;

• leverage our global scale and scope;

• expand our market boundaries;

• be a responsible business; and,

• provide superior returns to shareholders.

Geographic operations
The Company has equity interests in 26 countries, through its subsidiary undertakings, associated undertakings and investments. Partner network arrangements extend to a further 13 countries.

At 31 March 2004, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had approximately 133.4 million customers, calculated on a proportionate basis in accordance with the Group’s percentage interest in these ventures, and 340.1 million registered venture customers. The table on the next page sets out a summary of the Company’s worldwide mobile operations at 31 March 2004 and venture customer growth in the year then ended (the “2004 financial year”).

Competition
The Group faces a high degree of competition in each of its geographic markets. It is subject to indirect competition from providers of other telecommunications services in the domestic markets in which it operates in addition to direct competition from other current operators of mobile telecommunications services. Competitive pressures have led to reductions in tariffs and other acquisition and retention initiatives and this has helped to manage the level of customer churn.

The Group expects that competition will continue from existing operators as well as from a number of new market entrants, including those arising following the award of new 3G licences. The scope of this increased competition, and the extent of the impact on the results of operations, is discussed further in “Risk Factors and Legal Proceedings”.

A summary of the Company’s direct competitors in its markets at 31 March 2004 is also provided in the following table.

Vodafone Group Plc  Annual Report 2004

8

Business Overview continued

Summary of Group mobile telecommunications businesses at 31 March 2004

							Registered
			Venture		Venture		proportionate
	Percentage		customers	(3)	customer		customers	Registered	Names of competitor
Country by region(1)	ownership	(2)	(thousands	)	growth (%))	(4)	(thousands)	prepaid (%)(5)	network operators(6)
UK & Ireland
UK	100.0		14,095		6		14,095	60	3, Orange, O2, T-Mobile
Ireland	100.0		1,864		7		1,864	72	3, Meteor, O2
TOTAL			15,959		6		15,959	61
Northern Europe
Germany	100.0		25,012		9		25,012	51	E-Plus, O2 , T-Mobile
Hungary	87.9		1,428		50		1,255	82	Pannon GSM, Westel
Netherlands	99.9		3,403		4		3,399	57	KPN Mobile, Orange, T-Mobile, Telfort
Sweden	100.0		1,438		9		1,438	34	3, SpringMobil, Tele2, Telia
Belgium	25.0		4,351		2		1,088	59	BASE (KPN), Mobistar (Orange)
France	43.9		14,370		8		6,309	46	Bouygues, Orange
Poland	19.6		5,740		19		1,126	54	Centertel, ERA
Switzerland	25.0		3,838		6		960	37	Orange, Sunrise, Tele2
TOTAL			59,580		9		40,587	51
Southern Europe
Italy	76.8		21,137		9		16,232	92	TIM, Wind, 3
Albania	99.7		528		35		527	97	AMC
Greece	99.4		3,678		9		3,655	68	Cosmote, Q-Telecom, Telestet
Malta	100.0		161		(1	)	161	91	Go Mobile
Portugal	100.0		3,248		5		3,248	72	Optimus, TMN
Spain	100.0		9,705		7		9,705	57	Amena, Telefónica Móviles
Romania	20.1		3,672		37		738	63	Orange, Cosmorom, Zapp
TOTAL			42,129		10		34,266	78
Americas
United States(7)	44.4		38,909		17		17,257	6	National operators(8):
									AT&T Wireless(9), Cingular Wireless(9),
									Nextel, Sprint PCS, T-Mobile
Asia Pacific
Japan	69.7		14,951		7		10,427	9	au, NTT DoCoMo, Tu-ka
Australia	100.0		2,486		(3	)	2,486	55	3, Optus, Orange, Telstra
New Zealand	100.0		1,607		25		1,607	79	Telecom, TelstraClear
Fiji	49.0		114		25		56	92	–
China	3.3		150,256		21		4,913	66	China Netcom, China Telecom,
									China Unicom
TOTAL			169,414		20		19,489	61
Middle East & Africa
Egypt	67.0		2,872		27		1,924	81	Mobinil
South Africa	35.0		9,725		24		3,404	85	Cell C, MTN
Kenya	35.0		1,529		77		535	99	Kencell(10)
TOTAL			14,126		28		5,863	86
GROUP TOTAL			340,117		15		133,421	56

Notes:
(1)	All controlled networks operate under the Vodafone brand. Networks in which the Company does not have a controlling interest operate under the following brands: Belgium – Proximus; France – SFR; Poland – Plus GSM; Switzerland – Swisscom Mobile; Romania – Mobifon; United States – Verizon Wireless; Fiji – Vodafone; China – China Mobile; South Africa – Vodacom; Kenya – Safaricom.
(2)	All ownership percentages are stated as at 31 March 2004 and exclude options, warrants or other rights or obligations of the Group to increase or decrease ownership in any venture as detailed in “Operating and Financial Review and Prospects – Liquidity and Capital Resources – Option agreements”. Ownership interests have been rounded to the nearest tenth of one percent.
(3)	See page 23 for a definition of a customer.
(4)	Venture customer growth is for the twelve month period to 31 March 2004.
(5)	Prepaid customer percentages are calculated on a venture basis.
(6)	Table excludes mobile virtual network operators (“MVNOs”) and other competitors who do not operate a mobile telecommunications network.
(7)	The Group’ s ownership interest in Verizon Wireless is 45.0%. However, the Group’s proportionate customer base has been adjusted for Verizon Wireless’s proportionate ownership of its customer base across all its network interests of approximately 98.6% at 31 March 2004. In the absence of acquired interests, this proportionate ownership will vary slightly from period to period depending on the underlying mix of net additions across each of these networks.
(8)	This is not a full list of US network operators. In the United States, in addition to the national operators shown, there are several regional and numerous local operators.
(9)	On 17 February 2004, Cingular Wireless announced an agreement to acquire AT&T Wireless. This acquisition is subject to US regulatory approval.
(10)	The Kenyan Government has awarded a third licence but the operator had not commenced service at 25 May 2004.

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Licences and network infrastructure
The Group is dependent on the licences it holds to operate mobile telecommunications services. Further detail on the issue and regulation of licences can be found in “Regulation”. The table below summarises the significant licences held by the Group’s subsidiary companies and details of their related network infrastructure:

						Date of commencement
Country by region	Licence type		Licence expiration date		Network type	of commercial service
UK & Ireland
UK	2G		See note	(1)	GSM/GPRS	December 1991
	3G		December 2021		W-CDMA	February 2004
Ireland	2G		December 2014		GSM/GPRS	March 1993
	3G		October 2022		W-CDMA	May 2003
Northern Europe
Germany	2G		December 2009		GSM/GPRS	June 1992
	3G		December 2020		W-CDMA	February 2004
Hungary	2G		July 2014		GSM/GPRS	November 1999
Netherlands	2G		February 2013	(2)	GSM/GPRS	September 1995
	3G		December 2016		W-CDMA	February 2004
Sweden	2G		December 2010	(2)	GSM/GPRS	September 1995
	3G		March 2015		W-CDMA	February 2004
Southern Europe
Italy	2G		January 2015		GSM/GPRS	December 1995
	3G		December 2021		W-CDMA	February 2004
Albania	2G		June 2016		GSM	August 2001
Greece	2G		September 2012		GSM/GPRS	July 1993
	3G		August 2021		W-CDMA	–
Malta	2G	(3)	September 2010		GSM/GPRS	July 1997
Portugal	2G		October 2006		GSM/GPRS	October 1992
	3G		January 2016		W-CDMA	February 2004
Spain	2G		July 2022	(2)	GSM/GPRS	October 1995
	3G		April 2020		W-CDMA	February 2004
Asia Pacific
Japan	2G		See note	(4)	PDC	April 1994
	3G		See note	(4)	W-CDMA	December 2002
Australia	2G		March 2015		GSM/GPRS	September 1993
	3G		October 2017		W-CDMA	–
New Zealand	2G		March 2021		GSM/GPRS	October 2001
	3G		March 2021		W-CDMA	–
Middle East & Africa
Egypt	2G		May 2013		GSM/GPRS	November 1998

Notes:
(1)	Indefinite licence with a one-year notice of revocation.
(2)	Date relates to 1800MHz spectrum licence. Vodafone Netherlands, Vodafone Spain and Vodafone Sweden also have separate 900MHz spectrum licences which expire in March 2010, March 2010 and December 2010, respectively.
(3)	Also refers to 3G services.
(4)	Licences are issued for a five year term with a presumption of renewal where there is a continuing commercial need for spectrum.

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Business Overview continued

3G

The Group has secured 3G licences in all jurisdictions in which it operates through its subsidiary undertakings and in which such licences have been awarded to date.

Cumulative expenditure on 3G licences was £14.4 billion at 31 March 2004 and was funded from the Group’s existing facilities. Most of this expenditure (£13.1 billion) occurred during the 2001 financial year.

Vodafone expects to participate in additional 3G licence allocation procedures in other jurisdictions in which it operates. No assurances can be given that the Group will be successful in obtaining any 3G licences for which it intends to apply or bid.

The construction of 3G network infrastructure has continued throughout the 2004 financial year, with tangible capital expenditure on 3G network infrastructure amounting to approximately £1.5 billion during the financial year. The Group presently expects capitalised tangible fixed asset additions to be around £5.0 billion in the 2005 financial year, 35% of which is expected to be in respect of 3G network infrastructure. This expenditure is expected to be financed through operating cash flows and existing borrowing facilities. The Group’s 3G network infrastructure supply is managed by agreements for pricing and terms with all key suppliers, including Ericsson, Nokia, Nortel and Siemens.

The launch of the 3G data service in February 2004 was an example of Vodafone leveraging its scale and scope. 3G commercial services in Europe, in the form of the Vodafone Mobile Connect 3G/GPRS datacard, were able to be launched in much reduced timescales in seven countries in early 2004 through working with common suppliers using universal network technology. The commercial launch of the 3G service was the result of a three year global programme of technology selection, development and testing across the Group companies.

In Japan, the 3G network has been rolled out with the goal of national coverage and the eventual replacement of the current Personal Digital Cellular (“PDC”) network. In Europe, the deployment of 3G has been centred on major metropolitan areas, thereby providing a complementary service to the current 2G and 2.5G networks. The introduction of Wideband Code Division Multiple Access (“W-CDMA”) as the third generation standard will, over time, provide roaming capabilities between Japan and other territories that use the W-CDMA standard.

Vodafone live!™ with 3G was introduced to both business and consumer markets in Europe on 4 May 2004.

2G

The majority of the Group’s controlled networks operate on a Global System for Mobile Communications (“GSM”) network on which General Packet Radio Service (“GPRS”) is also provided.

Wireless LAN

Four of the Group’s subsidiary companies, in Germany, Italy, Portugal and Spain, now offer a public access Wireless LAN service. The Group views public access Wireless LAN as important in offering a complete mobile data connectivity solution to its customers, and more of the Group’s operating companies are expected to launch Wireless LAN services, mainly through roaming agreements.

Global services

A major focus of the Group’s strategy is to delight its customers, delivering a superior customer experience and developing customer loyalty at all touchpoints, introducing end to end voice and data propositions to target customer segments, and achieving customer preference for the Vodafone brand.

To achieve this objective requires a highly focused, increasingly integrated and operationally efficient business, providing the best products and services across the greatest number of markets. The Group established two new central functions in July 2003; Group Marketing and Group Technology & Business Integration.

Group Marketing provides leadership and coordination across the Group on a range of marketing and commercial activities, including product, content, brand management and development, Partner Networks and global accounts. These activities include the design and rollout of segmented service propositions to consumer and business customers, such as Vodafone live!™, and the Group’s business offerings.

Group Technology & Business Integration leads in the selection, development and implementation of global technology solutions to support the terminals, service platforms, network and IT requirements of the Group. It drives the benefits of scale and scope to deliver enhanced customer experience, increased speed to market and an improved strategic cost position by applying the principle of ‘design once, deploy many times’ and by working closely with suppliers.

Business integration

A new function, “Business Integration”, has been created within Group Technology to further leverage the scale of the Group’s global footprint. This function is expected to improve the Group’s speed to market for new products at the same time as improving the Group’s strategic cost position. The work of this function was initiated in October 2003 and is intended to lead the Group through a business transformation process spanning up to five years.

The Service Delivery Platform, which in part delivers Vodafone live!™, is one early example of the Group’s “develop once, deploy many times” concept. This concept allows the architecture, design and development of core enabling technologies to be undertaken only once, and rolled out to the Group’s operating companies, thus saving on costs of design and development in each country. The Group continues to build its capability to manage suppliers on a global basis and has delivered synergies through negotiating global contracts, particularly in the areas of terminals, network infrastructure and IT. There has been continued progress in eCommerce activities with the Group taking an industry leading position in the effective use of e-auctions. The Group continues to leverage scale in the handset area, consolidating country requirements and volumes for supplier negotiation. This has provided savings and has supported Vodafone’s ability to shape an enhanced customer experience through the specification of features and functions.

These early business integration programmes provide a model for common development in other Group Technology areas, to enable the Group to take advantage of future opportunities to leverage the Group’s scale and scope. The number of different markets in which the Group now operates provides opportunities for extensive sharing of best practice across operating companies, ensuring reduced time to market, increased customer relevance and greater competitive advantage.

Products and services

Voice services

Revenues from voice services make up the largest portion of the Group’s turnover and, consequently, the Group is undertaking a wide range of activities to encourage growth in the usage of these services.

Pricing is an important factor for customers choosing a mobile phone network and is also important in encouraging usage of services whilst maximising revenues and margins. Two main pricing models exist in the mobile market – contract and prepaid. Relationships with contract customers are usually governed by a formal, written contract and credit facilities are granted to them to enable access. Within a prepaid pricing scheme, a customer pays in advance, or “tops up”, in order to gain access to mobile network services. The take-up of these models in the markets in which the Group operates varies significantly, from Japan and the US, where the vast majority of customers are on contract plans, to Italy, where the market is predominantly prepaid.

The Group has continued to invest in providing enhanced network services and coverage for existing services to endeavour to ensure that customers can use their mobile phone whenever they want to, making it an integral part of their lives. Together

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with enhanced coverage, the Group has also invested in improving the usability of services such as voicemail, to encourage penetration of these services. Increased usage of voicemail has been shown, in turn, to drive volume of voice calls and is a key revenue enabler. Initiatives have also been run to encourage customers to populate their phonebooks, which in turn drives growth in calling circles, and missed call notification services, such as text messages telling customers that they have missed a call when their phone is switched off.

In addition to product and infrastructure development, a significant amount of effort has been directed at educating customers in mobile phone usage and helping customers get the most from their mobile phone. Several markets have also engaged in programmes to redesign their retail outlets into “Experience Stores” where store staff are trained to educate customers in responsible mobile phone usage, in addition to more conventional retail activities.

Data services

Part of the Group’s strategy to expand its market boundaries involves the stimulation of demand in adjacent markets such as infotainment and IT wireless productivity.

Short Messaging Service (“SMS” or “Text Messaging”)

All of the Group’s mobile networks offer this service, which allows customers to send and receive text messages using mobile handsets and various other devices.

Vodafone live!™

Vodafone live!™, the Group’s integrated messaging and multimedia content service, was launched in six countries during the 2004 financial year, including the Group’s associated networks in France (SFR) and Switzerland (Swisscom Mobile), bringing the total number of markets in which the service is available to 16 at 25 May 2004. At 31 March 2004, there were over 6.8 million controlled Vodafone live!™ customers, with a further 0.7 million customers connected to associated company networks. In addition, Vodafone K.K. (“Vodafone Japan”) had 13.0 million Vodafone live!™ customers following the rebranding of its J-Sky service to Vodafone live!™ on 1 October 2003.

The range of services available on Vodafone live!™ has continued to be improved throughout the year, with the integration of services such as real music tones, as well as broadening the range of handsets available. New capabilities have also been introduced such as video messaging, video streaming and Search, a new facility enabling customers to use their mobile handsets to search across an extensive portfolio of content. The scale of the customer base together with the broader reach of Vodafone live!™ has meant that the Group has increasingly been able to attract stronger content partners and recent agreements have involved such established brands as Warner Bros. Online, UEFA Champions League Football, Sony Pictures, Sony Music Entertainment and Disney.

During the year, the range of Vodafone live!™ handsets has increased from three to fifteen. By focusing its handset development resources, the Group aims to offer a wider range of handsets with enhanced functionality. The first GSM-enabled megapixel camera phone launched in the European market, the Sharp GX30, had been introduced into 10 controlled markets by 25 May 2004.

Vodafone live!™ with 3G

Vodafone is the first mobile operator to bring 3G technology to both business and consumer markets across a number of European countries. Vodafone’s 3G consumer service was launched in Europe on 4 May 2004 when Vodafone live!™ with 3G was introduced in Germany and Portugal and from 25 May 2004 in Italy and Spain. In the first phase of Vodafone live!™ with 3G, Vodafone live!™ has been enhanced with video telephony and video downloads as well as improved ringtones and new content. Vodafone live!™ with 3G will be enhanced later in the year, when a wider range of handsets will become available, together with an even more extensive range of content and services. The Group is prioritising efforts to ensure timely availability of handsets and plans for handset deliveries later in 2004 and 2005 are at an advanced stage.

Mobile Connect Card

The Mobile Connect Card, first launched in November 2002 and which enables customers to connect to e-mail and business applications from a range of access devices, has been enhanced to operate across both GPRS and 3G technologies with the introduction in certain markets of the Vodafone Mobile Connect 3G/GPRS datacard in February 2004. By 31 March 2004, Germany, Italy, the Netherlands, Portugal, Spain, Sweden and the UK had all opened their networks for commercial service. The Group’s associated network in Belgium launched the datacard on 13 May 2004. The Vodafone Mobile Connect 3G/GPRS datacard provides customers with data speeds up to seven times faster than GPRS when used on the Group’s 3G networks.

Other business services

During the year the Group continued to build on its business propositions. In November 2003, the Group commenced the roll-out of Vodafone Wireless Office, a mobile handset solution reducing the need for fixed line phones, and Blackberry from Vodafone, which delivers voice, email, SMS, browser and organiser functions in a single mobile device.

On 22 October 2003, the Group announced a joint initiative with Oracle to offer enterprise customers integrated mobility solutions enabling mobile access to business systems.

Roaming services

The Group has introduced new pricing structures in its networks for its roaming services, with a view to encouraging the use of services when travelling abroad.

In November 2003, Vodafone Limited (“Vodafone UK”) launched Vodafone World, a new branded roaming tariff that delivers simple, transparent pricing for roaming all over the world, with preferential rates available for roaming onto all the Group’s networks. Now available in 13 markets, Vodafone World builds on the success of Eurocall, a European roaming service, and replaces it with a concept that is relevant to the Group’s markets and partners worldwide. By making roaming prices worldwide easier to understand, Vodafone World represents an important step in the Group’s strategy to meet the needs of the Group’s roaming customers at an affordable price and encourage change in the roaming market.

Vodafone’s Data Roaming Tariff was launched across 10 networks in October 2003 and provides a new, simple price plan for roaming data services including Vodafone live!™ and the Group’s business services.

On 22 December 2003, the Group and Verizon Wireless announced the introduction of transatlantic text messaging between their respective customers. By 31 March 2004, this service had been launched in 11 of the Group’s networks.

The Group and Verizon Wireless have continued to cooperate in the development of inter-standard roaming products. An agreement for the Group to licence its Mobile Connect dashboard know-how to Verizon Wireless has recently been completed, setting the stage for the launch of inter-standard data card products in Europe and the United States, in due course.

Partner Networks

The Group’s Partner Network strategy has become a more broadly established business concept for the delivery of the Group’s mobile services in the year. By partnering with leading mobile operators around the world, the Group is able to market its portfolio of global services in new territories, extend its brand reach into new markets and derive additional revenue from fees and visitor roaming without buying equity stakes.

The Group has signed a further six Partner Network Agreements during the year with Og Fjarskipti in Iceland, Bite in Lithuania, M1 in Singapore, MTC in Bahrain, LuxGSM in Luxembourg and Cytamobile in Cyprus, bringing the total number of partners to thirteen. With two partners in the Middle East and one in Asia Pacific, the Partner

Vodafone Group Plc  Annual Report 2004

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Business Overview continued

Network strategy is becoming increasingly relevant for mobile operators outside Europe.

Mobilkom-Group, which operates in Austria, Croatia and Slovenia, will become the first Partner Network to introduce Vodafone live!™ and is expected to launch services in June 2004. The Vodafone Mobile Connect 3G/GPRS datacard has been launched in Austria and the Mobile Connect Card has been introduced in Bahrain, Croatia, Denmark, Slovenia, Estonia and Finland.

Content standards

In October 2002, a dedicated Content Standards team was established to provide leadership in mobile content standards in order to protect customers from inappropriate content, contact and commercialism. Specific emphasis is placed on protecting young mobile phone users. The Group recognises that, although acceptable to an older audience, not all content and services are suitable for all ages and it has committed to exercise responsibility in ways that are consistent with its customer and public values.

The Content Standards team has actively supported a number of initiatives, such as the UK mobile operators’ Code of Practice and the Group’s age verification mechanism currently being piloted in Germany. Looking ahead, the Content Standards team will work with the operating companies to implement policies and develop an independent auditing process to ensure they are maintained.

Marketing and distribution

Marketing

Brand

All controlled mobile subsidiary companies operate under the Vodafone brand. Brand marketing is designed to increase general public awareness of the Vodafone brand, or other local Group brands, and its values, products and services and embraces marketing specifically directed at certain distribution channels. Brand communications include sponsorships and advertising on radio, television, in general circulation newspapers, in magazines and in specialised publications.

The Group has focused on driving brand preference and usage of Vodafone live!™ services, as well as core voice and text usage. Advertisements used feature the Group’s key sponsorships: Ferrari, Manchester United, Michael Schumacher, Rubens Barrichello and David Beckham. Communications materials have been adapted for use in Partner Network markets. The Vodafone speechmark icon is achieving increasing recognition as a key visual identity symbol of the brand.

The three year brand migration programme was completed during the year, with Italy and Japan migrating to the Vodafone brand in May and October 2003, respectively. Having established the Vodafone brand in the Group’s controlled markets, the focus is now shifting and more emphasis and resources are aimed at increasing customer satisfaction and brand preference. In order to do this, Vodafone has put in place a framework for measuring and improving its performance on every element of customer experience. In addition, the Group has put in place a segmentation framework that has been arrived at on a basis of extensive research. All marketing plans and activities, both global and local, are now built around seven customer segments identified through the research.

Local marketing

In addition to the Group’s initiatives to establish a global Vodafone brand, funds are also invested in local marketing activities. Customer database marketing is widely used to communicate directly with customers and, when linked with customer service, provides a strong basis for building customer relationships. Loyalty schemes are beginning to be more widely used as a way of increasing customer satisfaction and reducing customer churn.

Associated companies are generally marketed under their local brands.

Distribution

Distribution is achieved through a wide variety of direct and third party channels, with different approaches used in the consumer and business sectors.

Products and services are available directly to both consumer and business customers in the majority of markets. Directly owned stores are becoming increasingly prevalent in most markets. The look and feel of these stores, particularly in Italy, Greece and the UK, has focused more on the user experience during the year, with customers invited to try out service offerings such as Vodafone live!™. Local Internet sites offer products and services online and local sales forces are in place to discuss terms with business customers.

The extent of indirect distribution varies between markets but may include using third-party service providers, independent dealers, agencies and mass marketing.

Marketing to third-party service providers includes maintaining a competitive tariff structure, providing technical and other training to their staff and providing financial incentives for service providers, their dealers and sales people. It also entails providing assistance on advertising campaigns and supporting the development of both specialist retail outlets and programmes with multiple retailers. Service providers receive discounts on the Group’s airtime rates for each tariff. Service providers also receive financial incentives from the Group related to their success in attracting new customers to the network. These incentives comprise gross connection bonuses, airtime growth awards and other specific incentives. Independent dealers are used in the majority of markets, with own-branded stores, business “store-within-stores” and kiosks becoming increasingly frequent as channels to market. Supermarket chains and multiple retailers are also used to achieve broad distribution of prepaid products, with top-up facilities available in a wide selection of outlets such as petrol stations, newsagents and local stores.

The Group’s leading global customers are served by the International Accounts team, with a designated executive link.

In the United States, Verizon Wireless sells its service directly to customers through its own sales force and stores, telemarketing centres and the Internet, and indirectly through arrangements with independent retailers and agents. Additionally, Verizon Wireless also sells wireless capacity to resellers, which allows independent companies to package and resell wireless services to end-users.

Industry initiatives

On 13 October 2003, the Group announced with Microsoft an intention to use mobile SIM based authentication and billing to help create open Web services standards that will enable new business opportunities for application developers and mobile network operators and deliver new integrated services for customers across fixed and mobile networks.

On 10 March 2004, the Group announced that it had signed a memorandum of understanding with other leading companies from the mobile industry to apply for a mobile Top Level Domain (“TLD”) from the Internet Corp. for Assigned Names and Numbers. A mobile TLD would be a key step in bridging the world of mobility and the Internet.

Research and development

The Group Research and Development (“R&D”) function was formed in April 2001 from the Vodafone research and development teams in Newbury, Maastricht, Vodafone Pilotentwicklung in Munich and the Strategic Technology team in Walnut Creek, California. Since then, centres of excellence in Milan, Madrid and Tokyo have been added, thereby creating an international and multicultural team for applied research in mobile telecommunications and its applications.

The work of the Group R&D function is divided broadly into four categories. These categories are technical leadership and research support for the work of the Group

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Strategy department, research into technology that will typically start to be used in Vodafone’s business in three or more years time, leadership for the Group’s work in international standards, and tactical development work largely on behalf of Group Marketing and Group Technology and Business Integration. Governance of Group R&D is provided by the Group R&D Steering Committee. The Group Strategy Director chairs this committee which, along with the Group R&D Director, consists of the chief technology officers from eight of the operating companies, together with the head of products and services in Group Marketing and the heads of three functions within Group Technology and Business Integration.

Group R&D focuses on applied research that is positioned between the basic research undertaken by universities and commercial product development. Since the Group is primarily a user of technology, the emphasis of the Group R&D work programme is on providing technology analysis and vision that can contribute directly to business decisions, enabling new applications of mobile telecommunications, using new technology for new services, and research for improving operational efficiency and quality of the Group’s networks. The work of the function is organised into five main streams: applied research, strategic technology analysis, standards and industry fora, intellectual property development and publicity and communications. The applied research and strategic technology analysis functions are concerned with expanding business boundaries, disruptive technologies, customer behaviour, service enablers, terminals and smart cards, radio technologies, network architectures, performance and optimisation, and security and computing technologies.

The work of Group R&D is delivered through four main programmes concerned with radio, IP networks, service enablement and business support. In addition, Group R&D provides leadership for funding research into health and safety aspects of mobile telecommunications, technical support for the Group’s spectrum strategy and technical support for the protection of intellectual property, including the Vodafone patent portfolio.

Much of the work of Group R&D is done in collaboration with others, both within the Group and external to it. For example, Group R&D provides leadership for the Group’s involvement with international standards, although many delegates and contributions are drawn from the Group’s operating companies. Group R&D provides the means to protect the Group’s intellectual property, many of the innovations that are protected coming from across the operations, and Group functions’ infrastructure and handset suppliers work with Group R&D on many of its projects – from providing equipment for trials, through co-authoring research reports, to being a partner in some of the research and development programmes. At the more academic end of the spectrum of applied research, Group R&D has developed relationships with a number of universities. These include sponsoring research students, collaboration in European research activities, funding specialised research activities and fostering working relationships with academic chairs and readerships funded through the Vodafone Foundation.

The research and development programme provides the Group with long-term technical policy, strategy and leadership, as well as providing technical underpinning for the Group’s public policies and government relations, and is shared with all subsidiaries of the Company and Group functions. They are able to influence the programme through working relationships that are designed to allow delivery of the results of the programme directly into the business units where they are needed.

The Group spent £171 million in the 2004 financial year on research and development, compared with £164 million in 2003 and £110 million in 2002. This expenditure was incurred principally on developing new products and services, billing systems and on network development.

Regulation
The Group’s operating companies are generally subject to regulation governing the operation of their business activities. Such regulation generally takes the form of

industry-specific law and regulation covering telecommunications services and general competition (anti-trust) law applicable to all activities. Some regulation implements commitments made by Governments under the Basic Telecommunications Accord of the World Trade Organisation to facilitate market entry and establish regulatory frameworks. The following section describes the regulatory framework and the key regulatory developments in the European Union (“EU”) and selected countries in which the Group has significant interests. Many of the regulatory developments reported in the following section involve on-going proceedings or consideration of potential regulation which have not reached a conclusion. Accordingly, the Group is unable to attach a specific level of financial risk to the Group’s performance from such matters.

European Union
The Member States of the European Union (“Member States”) were expected to implement the new EU Regulatory Framework for the communications sector (“the new EU Framework”), which was adopted in 2002, into national law by 24 July 2003. Denmark, Finland, Ireland, Norway, Sweden, and the UK had completed implementation by that date. Austria, Italy, Portugal, and Spain have since completed implementation. In April 2004, the European Commission (“the Commission”) issued infringement proceedings against those Member States that had failed to implement the new EU Framework, being Belgium, France, Germany, Greece, Luxembourg and the Netherlands.

Those countries which joined the EU on 1 May 2004, including Hungary, Poland and Malta, were required to implement the new EU Framework before accession. Hungary implemented the new EU Framework in January 2004. However, Malta and Poland have not yet implemented the new EU Framework.

The new EU Framework consists of four principal Directives outlining matters such as the objectives to be pursued by national regulatory authorities (“NRAs”), the way in which telecommunications operators are to be licensed, measures to be taken to protect consumers and ensure universal provision of certain telecommunications services and the terms and basis upon which operators interconnect and provide access to each other.

The new EU Framework introduces a number of important changes to the previous framework. It is intended to align the techniques for defining where sector specific regulation may be applied and the threshold for when such regulation can be applied with those already employed in EU competition law. It is also intended to ensure greater consistency of approach amongst NRAs within the Member States. All NRAs are required to take utmost account of the list of markets which are specified by the Commission in a Recommendation when deciding which markets to investigate. The first such Recommendation was published by the Commission in February 2003 and includes the market for ‘voice call termination on individual mobile networks’, the ‘wholesale national market for international roaming’ and the market for ‘access and call origination’ on mobile networks (“the relevant markets”). NRAs may, with the Commission’s consent, also propose markets not included in the Recommendation. The Commission will periodically review the Recommendation.

Regulation, under the new EU Framework, can only be applied to undertakings with significant market power (“SMP”) (either individually or collectively) in the relevant markets so identified, subject to the Commission’s consent. SMP under the new EU Framework accords with the concept of “dominance” under existing EU competition law. This generally implies a market share of at least 40%, although other factors may also be taken into consideration. The SMP threshold under the previous framework required only a 25% share of the relevant market. The Commission published SMP Guidelines in July 2002. These guidelines set out principles for use by NRAs in the analysis of markets and effective competition to determine if undertakings have SMP in a relevant market under the new EU Framework.

In April 2004, the European Regulators Group (“ERG”), comprising Member State NRAs and the Commission, issued a common position on the application of remedies

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Business Overview continued

by NRAs on those undertakings that are found to have SMP in a relevant market under the new EU Framework.

Appeal rights, under the new EU Framework, are strengthened by the introduction of a right of appeal on the merits of any NRA decision. However, the practical consequences of the new EU Framework for the Group will depend upon how the Commission seeks to further interpret the application of the relevant Directives, how Member States and NRAs choose to implement such guidance and how the Member States implement the relevant Directives into national law.

The UK and Irish NRAs have either concluded or are at an advanced stage with their first reviews, under the new EU Framework, to determine if undertakings have SMP in the relevant markets, and to propose remedies that should be applied to undertakings found to have SMP (“market reviews”). Other Member State NRAs have commenced or are anticipated to commence their market reviews during 2004.

In January 2000, the Commission commenced an investigation into the market for international roaming services. The Commission published its preliminary findings in December 2000. The Commission stated that excessive pricing and price collusion are likely concerning both the level of wholesale rates and the mark-ups applied in retail markets for international roaming services. To date, the Commission has not published the results of this further review.

Officials of the Commission conducted unannounced inspections of the offices of mobile network operators in the UK and Germany, including Group subsidiaries, in July 2001. The Commission said it was seeking evidence of collusion and/or excessive prices, in relation to both retail and wholesale roaming charges, and the Commission has subsequently sought, or been provided with, additional information about roaming charges. The Commission has yet to indicate how, when or if it may proceed in these specific matters or in relation to its general enquiries into the roaming market, but if the Commission decides that there had been a breach of competition law, it would be able to impose a fine on any operator who had committed the breach.

The wholesale national market for international roaming is a market defined for the purposes of review by NRAs under the new EU Framework but at least one NRA has indicated that it will await the outcome of the Commission’s investigations before undertaking such reviews. The ERG has proposed to consider this issue towards the end of 2004.

UK & Ireland

United Kingdom

The new Communications Act, implementing the new EU Framework and creating a new NRA for communications, was enacted in July 2003. In December 2003, the Office of Communications (“OFCOM”) replaced the Office of Telecommunications (“Oftel”).

Oftel conducted and concluded its review of the mobile access and call origination market and found that no operator had SMP. As a result, the existing SMP obligations on Vodafone UK (including the requirement to offer indirect access) were removed. On 1 June 2004 OFCOM published its final decision following its review of the call termination market and has found that all mobile network operators have SMP in the market for wholesale voice call termination on individual mobile networks, and proposes that for Vodafone the 2G voice call termination rate should be subject to a target average charge for 2004/05 and for 2005/06 of 5.63 pence per minute.

OFCOM has published consultancy reports on spectrum fees to be paid by operators and these reports will inform its decision making. It is also currently consulting on

certain aspects of spectrum trading, including proposals that certain mobile frequencies are tradable from 2007, which would enable operators to transfer rights of use on commercial terms, subject to oversight by OFCOM.

A law making it an offence for drivers to use hand-held mobile phones or similar devices whilst driving came into force on 1 December 2003.

Ireland

Regulations implementing the new EU Framework were adopted in June 2003. The Irish NRA is currently consulting on its reviews of the relevant markets. In its review of the mobile access and call origination market, the NRA proposes and is consulting on a finding that Vodafone Ireland Limited (“Vodafone Ireland”) and O2 jointly have SMP, but Meteor and 3 do not. The NRA proposes potential remedies, including a 2G national roaming obligation, and a range of options to impose further obligations to provide network access to third parties. In its market review of voice call termination on individual mobile networks, the NRA has proposed that all mobile network operators have SMP. The NRA proposed the imposition of obligations of cost-orientation, non-discrimination, accounting separation and transparency. The NRA is also considering the use of price controls and stated that it expects Vodafone Ireland and O2 to fulfil undertakings made to reduce average mobile termination rates by 5% and 8% below inflation, calculated by reference to the Irish consumer prices index, respectively in 2004. The NRA is expected to issue its final decisions on its market reviews during 2004.

Mobile Number Portability, which allows customers to switch network provider whilst retaining their existing mobile telephone number, was implemented in July 2003.

Northern Europe

Germany

Germany is expected to enact national law implementing the new EU Framework during 2004. The NRA has commenced its market reviews, which are expected to be completed during 2004. In March 2004, the NRA announced its decision to allocate 450MHz spectrum for the provision of public access mobile radio (“PAMR”) services. Vodafone Germany is seeking leave to appeal this decision.

Hungary

Hungary implemented the new EU framework in January 2004 as part of its preparations for joining the EU on 1 May 2004.

Netherlands

The Netherlands is expected to enact national law implementing the new EU Framework during 2004. The mobile operators have reached agreement with the NRA and the Dutch National Competition Authority (“NCA”) to reduce mobile call termination rates between 1 January 2004 and 1 December 2005. Vodafone Libertel N.V. (“Vodafone Netherlands”) rates were reduced from 20.6 to 15.5 eurocents per minute on 1 January 2004 and are to be reduced to 13.5 and 11.0 eurocents per minute on 1 December 2004 and 1 December 2005 respectively.

Sweden

Sweden enacted national law implementing the new EU Framework in July 2003. The NRA has commenced its market reviews. The NRA has proposed that each of the mobile operators and MVNOs be designated as having SMP on the market for voice call termination on individual mobile networks. The NRA is at an advanced stage of assessing a Long Run Incremental Cost (“LRIC”) model to be used to set mobile call termination rates.

The NRA is also reviewing the 3G coverage achieved by the four 3G licensees by 31 December 2003 in accordance with their licence requirements. To date, none of the 3G licensees have achieved the obligation to provide coverage for at least 8,860,000 people by the end 2003. Discussions between the Government, the NRA,

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and the licensees are being held on the implications of failure to achieve this obligation.

The NRA has requested expressions of interest in the allocation of a 450MHz licence for the provision of PAMR services and is currently considering the nature of the award process.

Belgium

Belgium is expected to enact national law implementing the new EU Framework during 2004. The NRA has commenced its market reviews.

France

France is expected to enact national law implementing the new EU Framework during 2004.

The NRA has commenced work to consider new price controls on mobile call termination charges for the period 2005-2007. In December 2003, a French consumers association lodged a complaint with the national competition authority alleging collusion amongst the three French mobile operators on SMS retail pricing.

The French Government has agreed to extend SFR’s 2G licence until March 2021. SFR will be required to pay an annual fee of €25 million plus 1% of 2G turnover per year from March 2006.

The NRA postponed the obligation to commercially launch 3G services until 31 December 2004.

Poland

Legislation implementing the new EU Framework in Poland, which joined the EU on 1 May 2004, is due for enactment during 2004.

Southern Europe

Italy

Italy enacted national law implementing the new EU Framework in September 2003. The NRA has commenced its market reviews, which are expected to be completed during 2004.

Greece

Greece is expected to enact national law implementing the new EU Framework during 2004. Vodafone-Panafon Hellenic Telecommunications Company S.A. (“Vodafone Greece”) reduced mobile termination rates for fixed to mobile calls on 5 October 2003 from 19 eurocents and a minimum charge of 42 seconds to 17.5 eurocents and a minimum charge of 33 seconds and further reduced its rates on 1 January 2004 to 17 eurocents with a minimum charge of 30 seconds. On 1 October 2003, it reduced the mobile termination rate for mobile to mobile calls from 19 eurocents with a minimum charge of 42 seconds to 18 eurocents with a minimum charge of 30 seconds.

Malta

Legislation implementing the new EU Framework in Malta, which joined the EU on 1 May 2004, is due for enactment during 2004.

Portugal

Portugal enacted national law implementing the new EU Framework in February 2004. The NRA has commenced its market reviews, which are expected to be completed during 2004. In July 2003, Vodafone Portugal-Comunicações Pessoais, S.A, (“Vodafone Portugal”) agreed to reduce its mobile termination rates by 7% per quarter, with the last reduction proposed for 1 April 2004, and did so for the three successive quarters ending January 2004.

Vodafone Portugal has requested the renewal of its 2G licence for a further 15 years, which is due to expire in October 2006.

Spain

Legislation implementing the new EU Framework was enacted in November 2003. Remaining regulations, implementing the new EU Framework, on SMP and universal service are expected to be completed in 2004. The NRA has commenced its market reviews, which are expected to be completed during 2004.

In December 2003, the NRA imposed price caps on average mobile termination rates of all mobile network operators. The mobile termination rate of Vodafone España S.A. (“Vodafone Spain”) was set at 14.62 eurocents from 31 January 2004. The Spanish NCA is conducting an investigation following a complaint of alleged price squeezing against Telefonica, Vodafone Spain and Amena, and has now issued a Statement of Objections which will be considered by the Competition Tribunal during 2004. Vodafone Spain is contesting this Statement of Objections. In April 2004, the NCA requested Spanish mobile operators to provide data on SMS pricing, although it has not yet opened an official proceeding.

Albania

In May 2004, the NRA designated Vodafone Albania as having SMP in the mobile market, this may lead to increased regulation. Vodafone Albania has appealed this decision. In addition, the NRA intends to regulate mobile interconnection rates, Vodafone Albania is preparing to appeal any such regulation.

Romania

In March 2003, the NRA determined Mobifon S.A. as having SMP in the national interconnection market. From 31 December 2003 until the development of a LRIC model, Mobifon’s mobile termination rates were reduced from 0.11 USD to 0.10 USD. The completion of a LRIC model and the calculation of a LRIC-based average mobile termination rate are scheduled for July 2004.

Americas

United States

The Federal Communications Commission (“FCC”), the United States’ NRA, has investigated the level of termination rates charged by foreign mobile operators to fixed operators and has issued an Order in which it committed to undertake a Notice of Inquiry into foreign mobile termination rate impact on US carriers and consumers. The FCC stated that it is “very concerned about the possibility that US consumers might be paying rates that are unreasonably high or discriminatory”. The inquiry is expected to begin within six months from April 2004 and will seek input on the status of foreign mobile termination rates, including actions taken by foreign regulators addressing the issue to date.

From 2 February 2004, the FCC allowed certain spectrum licensees, including mobile operators, to enter various types of leasing arrangements with third parties. Licensees in general may, within the scope and term of their licence, lease any amount of spectrum, in any geographic area, for any time period.

In November 2003, the FCC adopted licensing and flexible service rules for advanced wireless spectrum at 1.7 GHz and 2.1 GHz, which the FCC is expected to license via auction in 2005 at the earliest.

From 24 November 2003, the FCC required US mobile operators to provide mobile number portability for customers switching their mobile operator within the same local service area.

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Business Overview continued

Asia Pacific

Japan

The NRA has introduced transitional measures to allow fixed network operators to set retail prices for fixed to mobile calls using the fixed network operator’s override dial code. Until 31 March 2004, mobile operators set retail prices for fixed-to-mobile calls (Vodafone Japan’s current retail price is ¥120 per three minutes). Fixed line operators then deduct a fixed line interconnection charge and billing and collection costs. Since 1 April 2004, a retail price of ¥60 per three minutes has applied to fixed-to-mobile calls which use a fixed operator’s override dial code, which is a short code which must be inserted before the telephone number being called. Vodafone Japan will receive a mobile termination charge of approximately ¥40 per three minutes in respect of these calls. Vodafone Japan will continue to set the retail price for non-override calls, which are calls where the override dial code has not been inserted. From 1 April 2005, fixed operators set the retail price for override calls and mobile operators set the retail price for non-override calls. Mobile operators will receive a mobile termination charge in respect of override calls at a level yet to be determined.

The NRA is actively considering the introduction of mobile number portability.

Australia

The Australian Consumer and Competition Commission (“ACCC”), the NRA, commenced a review of mobile services in March 2003. The review examines what form of regulation, if any, should be applied to the mobile terminating and originating access services, domestic and international roaming services and 3G mobile services. The ACCC has released a draft decision regarding the regulation of mobile terminating access rates that, if implemented, would see continued regulation of 2G voice termination services and the extension of that regulation to 3G voice services. The proposed regulation would require rate decreases of 3 cents per annum (local currency) each year for the next three years, representing a total reduction of 50% in real terms during the period to 31 December 2006. A final decision is expected by summer 2004.

New Zealand

The NRA made a determination regarding the calculation and allocation of costs of the telecommunications universal service obligation in December 2003. In April 2004, the High Court ruled that, while it would not grant leave to appeal on this occasion, Vodafone New Zealand was free to take up the matter again with the NRA in the context of the 2002/03 telecommunications universal cost obligation cost calculation.

The NRA announced, in April 2004, that it would investigate mobile termination rates and retail prices for fixed to mobile calls. The NRA has yet to announce details of the timeframe or process for the investigation but it is expected to conclude the investigation and make recommendations to the Government in November 2004.

China

At the end of 2003, the Ministry of Information Industry announced that the second phase of 3G external field testing would start in February 2004, with China Mobile testing W-CDMA, China Unicom testing CDMA2000, and China Telecom testing both W-CDMA and CDMA2000. All carriers will also test TD-SCDMA in smaller field trials. There has been no formal announcement of the timing or number of 3G licences to be issued in China.

Middle East and Africa Region

Egypt

In December 2003, Vodafone Egypt and MobiNil agreed each to pay EGP1,240 million over a five year period to the NRA in return for access to 1800 MHz spectrum and other benefits.

South Africa

The Government published draft communications convergence legislation for consultation, with a view to finalising new legislation in 2004. Discussions continue on the permanent allocation of 1800 MHz spectrum to Vodacom. An industry working group is drafting an Information Communication Technologies Black Economic Empowerment Charter (“the Charter”) to comply with Broad-Based Black Empowerment Act 2003 (“BBEE Act”). The Charter, in satisfying the objectives of the BBEE Act, will set BBEE targets related to company ownership, management, employment and skills development, procurement, enterprise development, and residual investment. The Charter is expected to be finalised in June 2004.

Non-mobile Telecommunications

The Group’s non-mobile telecommunications businesses mainly comprise interests in Arcor, Cegetel and Japan Telecom, until its deconsolidation on 1 October 2003.

Arcor is the second largest fixed line telecommunications provider in Germany. With its own Germany-wide voice and data network covering more than 40,000 km, Arcor utilises the latest technologies to offer its customers a full range of services for voice and data transfer, including complete ISDN/DSL connection services.

Cegetel is France’s second largest fixed line telephony operator and offers a wide range of fixed line telephone services to residential and business customers as well as special corporate services ranging from network and customer relations management to Internet-Intranet hosting services. Cegetel also owns the most extensive private telecommunications network in France, with 21,000km of fibre optic cable.

History and Development of the Company

The Company was formed in 1984 as a subsidiary of Racal Electronics Plc. Then known as Racal Telecom Limited, approximately 20% of the Company’s capital was offered to the public in October 1988. It was fully demerged from Racal Electronics Plc and became an independent company in September 1991, at which time it changed its name to Vodafone Group Plc. Following its merger with AirTouch Communications, Inc. (“AirTouch”), the Company changed its name to Vodafone AirTouch Plc in June 1999 and, following approval by the shareholders in General Meeting, reverted to its former name, Vodafone Group Plc, on 28 July 2000.

Acquisitions of businesses

The Group has completed a number of business transactions over the past three years, the most significant of which were the acquisition of further interests in Vodafone Japan and Vodafone Spain. In addition, the Group has increased its equity interests in certain other existing Group companies through a series of transactions. These transactions are described in more detail below and, when combined with others, most notably the merger with AirTouch, which completed on 30 June 1999, and the acquisition of Mannesmann AG (“Mannesmann”) in April 2000, have increased the geographic footprint and substantially increased the customer base of the Group’s mobile operations, particularly in Europe and Asia, and have significantly impacted the results of operations.

Acquisition of additional interests in Vodafone Japan and of Japan Telecom

The Group’s investment in Japan at 1 April 2001, following the merger with AirTouch and subsequent transactions and agreements, comprised a 26% stake in J-Phone Communications Co., Ltd. (“J-Phone Communications”), which had a controlling interest of approximately 50% in each of the three regional mobile telecommunications companies, J-Phone East, J-Phone West and J-Phone Central, collectively known as the J-Phone Group.

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On 12 April 2001, the acquisition of a 15% stake in Japan Telecom, the controlling shareholder of the J-Phone Group, from West Japan Railway Company and Central Japan Railway Company was completed. On 27 April 2001, the Group completed the acquisition of a further 10% stake in Japan Telecom from AT&T Corporation for a cash consideration of $1.35 billion (£0.9 billion), bringing the Group’s interest in Japan Telecom to 25% at that time.

On 2 May 2001, the Company announced that it had agreed to acquire, for a cash consideration of approximately £3.7 billion, BT Group plc’s (“BT’s”) ownership interests in the J-Phone Group and Japan Telecom, comprising BT’s combined shareholdings of 20% in Japan Telecom and 20% in J-Phone Communications for £3.1 billion, and BT’s aggregate interest of approximately 4.9% in the J-Phone operating companies for a further £0.6 billion. The transaction completed on 1 June 2001, except for the acquisition of BT’s interests in the operating subsidiaries of J-Phone Communications, which did not complete until 12 July 2001. As a result of these transactions, the Group had a 46% interest in J-Phone Communications, not including its indirect interest through Japan Telecom, and interests of 18.9%, 15.2% and 14.9%, respectively, in J-Phone Communications’ regional mobile companies J-Phone East, J-Phone West and J-Phone Central, excluding the Company’s indirect interests through Japan Telecom’s and J-Phone Communications’ holdings in these companies.

On 24 August 2001, the Company announced the proposed merger of J-Phone Communications and the J-Phone operating companies into a new company, J-Phone Co., Ltd. The merger became effective on 1 November 2001 and, as a result, the Group held a 39.67% ownership interest in the new company.

On 20 September 2001, the Company announced an agreed tender offer by its subsidiary, Vodafone International Holdings B.V., to acquire up to 693,368 Japan Telecom ordinary shares, representing 21.7% of the ordinary shares of Japan Telecom, for a cash consideration of up to ¥312 billion (£1.8 billion). The offer successfully completed in October 2001.

On 31 July 2002, Japan Telecom announced that it had established a wholly owned subsidiary, Japan Telecom Co., Ltd, and that Japan Telecom was to be renamed Japan Telecom Holdings Co., Ltd. The existing fixed line business was transferred to Japan Telecom Co., Ltd. All of these changes took effect from 1 August 2002. This created a telecommunications service group comprising two core businesses of mobile and fixed telecommunications, namely J-Phone Co., Ltd and Japan Telecom.

The Group has sold its interest in Japan Telecom, as described under “Sales of Businesses”. In addition, J-Phone Co., Ltd was renamed Vodafone K.K. (“Vodafone Japan”) on 1 October 2003 and Japan Telecom Holdings Co., Ltd. was renamed Vodafone Holdings K.K. on 10 December 2003.

At 31 March 2004, the Group held, through its wholly owned subsidiary undertakings, a 66.7% stake in Vodafone Holdings K.K., and a 39.67% stake in Vodafone Japan. In addition Vodafone Holdings K.K. held 45.08% of the issued share capital in Vodafone Japan, making the Group’s effective interest in Vodafone Japan 69.7%.

Acquisition of additional interests in Vodafone Spain

On 2 May 2001, the Company announced that it had agreed to acquire BT’s 17.8% shareholding in Vodafone Spain for a cash consideration of £1.1 billion, increasing its ownership interest in Vodafone Spain to approximately 91.6%. The acquisition was completed on 29 June 2001, following the receipt of regulatory approval.

On 2 April 2002, the Company acquired a further 2.2% interest in Vodafone Spain for £0.4 billion, following the exercise of a put option held by Torreal, S.A, increasing the Group’s interest to 93.8%.

On 21 January 2003, the Company announced that it had acquired the remaining 6.2% interest in Vodafone Spain for approximately €2.0 billion (£1.4 billion) following the exercise of a put option held by Acciona, S.A. and Tibest Cuatro, S.A. under the terms of an agreement originally made in January 2000. The transaction completed

on 27 January 2003, at which time Vodafone Spain became a wholly owned subsidiary of the Group.

Acquisition of interests in China Mobile (Hong Kong) Limited (“China Mobile”)

In an offering that closed on 3 November 2000, the Group acquired newly issued shares representing approximately 2.18% of China Mobile’s share capital for a cash consideration of $2.5 billion. On 27 February 2001, the Company and China Mobile signed a strategic alliance agreement, setting out the principal terms for a strategic alliance and co-operation between the two parties in mobile services, technology, operations and management.

On 18 June 2002, the Group invested a further $750 million in China Mobile and obtained the right to appoint a non-executive director to the China Mobile board. The Group’s stake in China Mobile increased to approximately 3.27% as a result of this transaction.

Acquisition of interests in Société Française du
Radiotéléphone (“SFR”) and Cegetel S.A.S. (“Cegetel”)

As at 1 April 2001, the Group had a 20% direct interest in SFR and an approximate 15% interest in Cegetel Groupe S.A. (“Cegetel Group”), the French telecommunications group and the remaining 80% shareholder in SFR, making the Group’s effective interest in SFR approximately 31.9%.

On 16 October 2002, the Group announced that it had agreed to acquire BT’s 26% interest in Cegetel Group and SBC Communications, Inc.’s (“SBC’s”) 15% interest in Cegetel Group for €4.0 billion cash and $2.27 billion cash, respectively. Vivendi Universal S.A. (“Vivendi”) had pre-emption rights in connection with the Cegetel Group shares held by SBC and BT. At the same time, the Group announced that it had made a non-binding cash offer of €6.8 billion to Vivendi for its 44% interest in Cegetel Group.

On 29 October 2002, the Board of Vivendi announced it had decided not to accept the Group’s offer to purchase its 44% interest in Cegetel Group and, accordingly, the offer lapsed. On 3 December 2002, Vivendi also announced its intention to exercise its preemption rights to acquire BT’s 26% interest in Cegetel Group.

On 21 January 2003, the Company announced that its subsidiary, Vodafone Holding GmbH, completed the acquisition of SBC’s 15% interest in Cegetel Group for a cash consideration of $2.27 billion (£1.4 billion), increasing the Group’s effective interest in SFR to approximately 43.9%.

In December 2003, in order to optimise cash flows between Cegetel Group and its shareholders, SFR was merged into Cegetel Group and this company was renamed SFR. The fixed line businesses Cegetel S.A. and Télécom Développement, previously controlled by SNCF, were merged to form Cegetel S.A.S., a company in which SFR has a 65% stake, giving the Group an effective interest of 28.5%. The Group’s interest in SFR remained at approximately 43.9% as a result of this reorganisation.

Other significant transactions

Purchase of additional minority stakes in existing subsidiary undertakings

In line with the Group’s strategy of increasing its shareholding in existing operations where it believes opportunities arise to enhance value for the Company’s shareholders, the Group purchased minority stakes in certain of the Group’s subsidiary undertakings in order to be able to more closely align the respective businesses to the Group’s business.

Europolitan Vodafone AB (“Vodafone Sweden”)

During September 2002, the Group increased its effective interest in its then listed subsidiary Vodafone Sweden by 3.6% to 74.7% through a series of market purchases.

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Business Overview continued

A recommended cash offer for all remaining shares in Vodafone Sweden not held by the Group was announced on 5 February 2003. As a result of shares bought in the offer and in the market, the Company increased its effective shareholding in Vodafone Sweden to approximately 99.1%. The total aggregate cash consideration paid was £391 million.

Under compulsory acquisition procedures, on 15 March 2004, Vodafone Holdings Sweden AB obtained advanced access to an aggregate of 2,377,774 shares in Vodafone Sweden, giving the Group ownership of and title to these shares. An arbitral tribunal in Sweden is currently determining the purchase price for the shares and a decision is expected in autumn 2004.

On 31 March 2004, the Group increased its effective interest in Vodafone Sweden to 100% by the purchase of 1,320,000 shares which were held in treasury by Vodafone Sweden for a total consideration of SEK62 million (£4 million).

Vodafone Sweden’s shares have been de-listed from the O-list, Attract 40, of the Stockholm Exchange. The last day of trading for Vodafone Sweden’s shares was 28 March 2003.

Vodafone Netherlands

On 27 November 2002, the Group purchased for cash an additional 7.6% interest in Vodafone Netherlands, increasing the Group’s interest from 70% to 77.6%.

In January 2003, the Company entered into discussions with the board of Vodafone Netherlands concerning a possible tender offer to acquire the remaining shares of Vodafone Netherlands not held by the Group. A cash offer for these shares was announced on 12 February 2003 and was declared unconditional on 28 March 2003. Following a post-closing acceptance period, the Company, as a result of the offer and market purchases, increased its overall effective interest in Vodafone Netherlands to 97.2% at 31 March 2003. The total aggregate cash consideration paid in the 2003 financial year was £486 million, with a further £110 million paid in April 2003. As a result of private transactions, the Group has increased its effective interest in Vodafone Netherlands to 99.9% at 31 March 2004. The Group has exercised its rights under Dutch law and initiated compulsory acquisition procedures in order to acquire the remaining shares, completion of which is expected during the first half of the 2005 financial year. Following these procedures Vodafone Netherlands will become a wholly owned subsidiary of the Group. Vodafone Netherlands’ shares have been de-listed from the Euronext Amsterdam Stock Exchange.

Vodafone Portugal

During September 2002, the Group increased its effective interest in its then listed subsidiary Vodafone Portugal to 61.4% through market purchases.

In January 2003, the Company entered into discussions with the board of Vodafone Portugal concerning a possible tender offer to acquire, for cash, all remaining shares not held by the Group. The offer was announced on 28 February 2003. Following completion of the offer, the Company’s effective interest in Vodafone Portugal increased to approximately 94.4% as a result of shares purchased in the offer and in the market. The total aggregate cash consideration paid in the 2003 financial year was £184 million, with a further £336 million paid in April 2003. Having achieved an effective interest of greater than 90%, the Company implemented compulsory acquisition procedures to acquire the remaining shares, which became effective on 21 May 2003 for further consideration of £74 million, as a result of which Vodafone Portugal became a wholly owned subsidiary of the Group. De-listing of the shares occurred on 22 May 2003.

Vodafone Greece

On 27 November 2002, the Group announced an agreement to acquire from France Telecom S.A. (“FT”) its 10.85% interest in Vodafone Greece for £216 million in cash. The transaction completed on 3 December 2002 and increased the Group’s effective shareholding in Vodafone Greece from 51.88% to 62.73%. In addition, the Company

granted FT a cash settled call option to cover certain of FT’s obligations under its 4.125% Exchange Notes due 29 November 2004, which are convertible into Vodafone Greece shares. Exercise of this option will not change the Group’s effective interest in Vodafone Greece. During the 2003 financial year the Group made additional market purchases which increased the Group’s effective interest in Vodafone Greece to 64.0% at 31 March 2003.

On 1 December 2003, following the purchase of a 9.433% stake in Vodafone Greece from Intracom S.A., the Group announced a public offer for all remaining shares not held by the Group. As a result of the offer and subsequent market purchases, the Group increased its effective interest in Vodafone Greece to 99.4% at 31 March 2004. The total aggregate cash consideration paid in the 2004 financial year was £815 million.

Other subsidiaries

On 3 May 2002, the Group completed the purchase of the 4.5% minority interest in Vodafone Australia Limited (“Vodafone Australia”), formerly Vodafone Pacific Limited, for a cash consideration of £43 million, as a result of which Vodafone Australia became a wholly owned subsidiary.

On 23 January 2003, the Group increased its stake in V.R.A.M. Telecommunications Limited, now called Vodafone Hungary Mobile Telecommunications Limited (“Vodafone Hungary”), to 83.8% by purchasing RWE Com GmbH & Co OHG’s 15.565% interest in Vodafone Hungary for an undisclosed cash consideration. Options were granted to Antenna Hungaria RT (“Antenna”) on 23 January 2003 over certain of the shares acquired from RWE on this date, representing a maximum interest of 3.89%. All of these options expired on 9 October 2003, unexercised.

On 10 June 2003, the Group increased its stake in Vodafone Hungary to 87.9% by subscribing for Antenna’s share of an issue of ‘C’ shares. Antenna’s call options over 5,659,500, 5,072,700 and 7,845,855 Vodafone Hungary ‘C’ shares, relating to equity injections in October 2001, April 2002 and June 2003, respectively, expired on 9 October 2003 unexercised.

On 16 May 2003, the Group increased its shareholding in Vodafone Egypt from 60.0% to 67.0% for an undisclosed sum. In December 2003, it was announced that a preliminary understanding had been reached with Telecom Egypt for the proposed disposal of a 16.9% stake in Vodafone Egypt, which would reduce the Group’s effective interest to 50.1%.

On 1 August 2003, the Group announced that it had increased its shareholding in Vodafone Malta Limited (“Vodafone Malta”) from 80% to 100% by purchasing Maltacom Plc’s 20% interest in Vodafone Malta for cash consideration of €30 million.

Acquisition of remaining 50% interest in Vizzavi

On 29 August 2002, the Group acquired Vivendi’s 50% stake in the Vizzavi joint venture, which operated a mobile content business, for a cash consideration of €143 million (£91 million). As a result of this transaction, the Group owns 100% of Vizzavi, with the exception of Vizzavi France, which is now wholly owned by Vivendi. Vizzavi services are now provided under the Vodafone brand.

Acquisition of service providers by Vodafone UK

On 22 September 2003, the Group acquired 100% of Singlepoint (4U) Limited (“Singlepoint”) for consideration of £417 million. In addition, as a result of a recommended cash offer announced on 5 August 2003, the Group acquired 98.92% of Project Telecom plc, after the offer was declared unconditional on 19 September 2003, and subsequently acquired the remaining 1.08% in November 2003, for a total consideration of £164 million.

Acquisition of additional interests in associated companies

During December 2002, the Group completed the purchase of an additional 3.5% indirect equity stake in its South African associated undertaking, Vodacom Group (Pty)

Annual Report 2004  Vodafone Group Plc

19

Limited (“Vodacom”), for the sterling equivalent of £78 million. The transaction increased the Group’s effective interest in Vodacom to 35%.

On 10 January 2003, under an agreement with Mobitelea Ventures Limited, the Group completed the purchase of a 5% indirect equity stake in the Group’s Kenyan associated undertaking Safaricom Limited (“Safaricom”) for approximately $10 million (£6 million), increasing the Group’s effective interest in Safaricom to 35%.

Sales of businesses
As a consequence of certain of the acquisitions described above, the Group also acquired interests in companies that were either outside the Company’s core business, or in which the Company was prevented from retaining interests due to regulatory restrictions. The Group has undertaken a series of transactions to facilitate the orderly disposal of such interests, as described below.

Disposal of Mannesmann businesses

Following the acquisition of Mannesmann, the Group completed the sale of a number of Mannesmann businesses. The Group used the proceeds from these divestments to reduce its indebtedness. Those completed in the three years ended 31 March 2004 are described below.

Disposal of interests in Atecs Mannesmann AG (“Atecs”)

In April 2000, Mannesmann reached an agreement with Siemens AG and Robert Bosch GmbH for the sale of a controlling interest in Atecs, its engineering and automotive business. The transaction valued Atecs at approximately €9.6 billion, including pension and non-trading financial liabilities to be assumed on closing. On 29 September 2000, a payment of approximately €3.1 billion (£1.9 billion) plus interest was made to Mannesmann in exchange for the transfer of a 50% plus two shares stake in Atecs, which was completed on 17 April 2001, following approval from the relevant European and US regulatory authorities. Atecs also repaid Group loans of €1.55 billion (£1.0 billion) in March 2001.

On 15 January 2002, Vodafone announced that it had exercised put options to sell its remaining stake in Atecs to Siemens AG. The proceeds from this disposal amounted to €3.66 billion (£2.2 billion), and were received on 4 March 2002.

Disposal of Orange

As a condition to its approval of the Company’s acquisition of Mannesmann, the European Commission required the Company to dispose of its interest in Orange, which Mannesmann had acquired in 1999. Orange became a subsidiary of the Company as a result of the Mannesmann acquisition. On 19 April 2001, the remaining cash payment of €4.9 billion that was due to be received from France Telecom in March 2002, in respect of the disposal of Orange, was monetised for €4.7 billion (£2.9 billion).

Disposal of Arcor rail business

On 25 January 2002, the Group announced that Arcor, the Group’s German fixed line business, had agreed terms for the sale of its railway-specific business, Arcor DB Telematik GmbH (“Telematik”), to the German rail operator Deutsche Bahn, for €1.15 billion (£709 million), €1 billion of which was received on 26 March 2002. The sale completed in April 2002 following receipt of all necessary approvals and registration in the German commercial register. On completion, Arcor sold 49.9% of Telematik’s equity to Deutsche Bahn and entered into a put / call arrangement governing the remaining 50.1% equity interest, exercisable from 1 July 2002. Deutsche Bahn exercised its option to purchase the remaining 50.1% equity interest for the remaining €0.15 billion on 1 July 2002.

Disposal of tele.ring Telekom Service GmbH (“tele.ring”)

On 8 May 2001, the Group announced that agreement had been reached to sell its 100% equity stake in the Austrian telecommunications company, tele.ring, to Western

Wireless International Corporation. The transaction completed on 29 June 2001, following receipt of regulatory approval.

Disposal of holding in Ruhrgas AG

On 30 October 2001, the Group announced that it had reached agreement with E.ON AG for the sale of the Group’s 23.6% stake in Bergemann GmbH, through which it held an 8.2% stake in Ruhrgas AG. The transaction completed on 8 July 2002, realising cash proceeds of €0.9 billion.

Disposal of Japan Telecom

On 14 November 2003, Vodafone Holdings K.K. (formerly Japan Telecom Holdings Co., Ltd.) completed the disposal of its 100% interest in Japan Telecom. Receipts resulting from this transaction are ¥257.9 billion (£1.4 billion), comprising ¥178.9 billion (£1.0 billion) of cash, ¥32.5 billion (£0.2 billion) of transferable redeemable preferred equity and ¥46.5 billion (£0.2 billion) withholding tax recoverable, which is expected to be received in the 2005 financial year. The Group ceased consolidating the results of Japan Telecom from 1 October 2003.

Other disposals

On 24 August 2001, the Group announced that agreement had been reached to sell its 11.7% equity stake in the Korean mobile operator, Shinsegi, for an undisclosed amount to SK Telecom, Ltd. The value of net assets disposed of represented less than 1% of the Group’s net assets at the date of disposal.

During the 2004 financial year the Group disposed of its interests in its associated undertakings in Mexico, Grupo Iusacell, and India, RPG Cellular.

Formation of Verizon Wireless
The Cellco Partnership, which operates under the name “Verizon Wireless”, was formed from the combinations of the US mobile operations of the Company, Bell Atlantic Corporation and GTE Corporation in 2000. The Group owns 45% of Verizon Wireless and designates four of the nine members of Verizon Wireless’ Board of Representatives, while Verizon Communications, Inc. (“Verizon Communications”) designates the five other members.

Proceeds, in addition to those realised prior to 1 April 2001, of £0.2 billion were realised during the 2002 financial year, following the disposal of overlapping properties in the US, such disposals being a condition of the regulatory approval of the transaction. No further proceeds from the disposal of overlapping properties were received during the 2003 and 2004 financial years.

Mannesmann synergies
Mannesmann has been integrated into the Group and the expected synergies for the year ended 31 March 2004 announced at the time of the acquisition have been achieved, exceeding the target mainly as result of higher savings from capital expenditure, handset procurement and additional revenue opportunities.

Vodafone Group Plc  Annual Report 2004

 20

Cautionary Statement Regarding Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives. In particular, such forward-looking statements include statements with respect to Vodafone’s expectations as to launch and roll-out dates for products and services, including, for example, 3G services, Vodafone live!™ and other new or existing products, services or technologies offered by Vodafone; intentions regarding the development of products and services introduced by Vodafone or by Vodafone in conjunction with initiatives with third parties like Microsoft or Oracle; the ability to integrate our operations throughout the Group in the same format and on the same technical platform and the ability to be operationally efficient; the development and impact of new mobile technology, including the expected benefits of GPRS, 3G and other services and demand for such services; the results of Vodafone’s brand awareness and brand preference campaigns; growth in customers and usage, including improvements in customer mix; future performance, including turnover, average revenue per user (“ARPU”), cash flows, costs, capital expenditures and improvements in margin, non-voice services and their revenue contribution; the rate of dividend growth by the Group or its existing investments; expectations regarding the Group’s access to adequate funding for its working capital requirements; expected effective tax rates and expected tax payments; the ability to realise synergies through cost savings, revenue generating services, benchmarking and operational experience; future acquisitions, including increases in ownership in existing investments and pending offers for investments; future disposals; off-balance sheet arrangements; contractual obligations; mobile penetration and coverage rates; expectations with respect to long-term shareholder value growth; Vodafone’s ability to be the mobile market leader, overall market trends and other trend projections.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following:

• changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services;

• greater than anticipated competitive activity requiring changes in pricing models and/or new product offerings or resulting in higher costs of acquiring new customers or providing new services;

• the impact on capital spending from investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology;

• slower customer growth or reduced customer retention;

• the possibility that technologies, including mobile internet platforms, and services, including 3G services, will not perform according to expectations or that vendors’ performance will not meet the Group’s requirements;

• changes in the projected growth rates of the mobile telecommunications industry;

• the Group’s ability to realise expected synergies and benefits associated with 3G technologies and the integration of our operations and those of recently acquired companies;

• future revenue contributions of both voice and non-voice services offered by the Group;

• lower than expected impact of GPRS, 3G and Vodafone live!™ and other new or existing products, services or technologies on the Group’s future revenues, cost structure and capital expenditure outlays;

• the ability of the Group to harmonise mobile platforms and any delays, impediments or other problems associated with the roll-out and scope of 3G technology and services and Vodafone live!™ and other new or existing products, services or technologies in new markets;

• the ability of the Group to offer new services and secure the timely delivery of high-quality, reliable GPRS and 3G handsets, network equipment and other key products from suppliers;

• greater than anticipated prices of new mobile handsets;

• the ability to realise benefits from entering into partnerships for developing data and internet services and entering into service franchising and brand licensing;

• the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on one or more of the measurements of our financial performance and may affect the level of dividends;

• any unfavourable conditions, regulatory or otherwise, imposed in connection with pending or future acquisitions or dispositions;

• changes in the regulatory framework in which the Group operates, including possible action by European or US NRAs or by the European Commission regulating rates the Group is permitted to charge;

• the Group’s ability to develop competitive data content and services which will attract new customers and increase average usage;

• the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry;

• the possibility that new marketing campaigns or efforts are not an effective expenditure;

• the possibility that the Group’s integration efforts do not increase the speed to market for new products or improve the cost position;

• changes in exchange rates, including particularly the exchange rate of pounds sterling to the euro, US dollar and the Japanese yen;

• the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or with other negative implications;

• changes in statutory tax rates and profit mix which would impact the weighted average tax rate;

• changes in tax legislation in the jurisdictions in which the Group operates;

• final resolution of open issues which might impact the effective tax rate;

• timing of tax payments relating to the resolution of open issues; and,

• loss of suppliers or disruption of supply chains.

Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under “Risk Factors and Legal Proceedings – Risk Factors”. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements.

	Annual Report 2004  Vodafone Group Plc
	21
Risk Factors and Legal Proceedings

Risk Factors

Regulatory decisions and changes in the regulatory environment could adversely affect the Group’s business.
Because the Group has ventures in a large number of geographic areas, it must comply with an extensive range of requirements that regulate and supervise the licensing, construction and operation of its telecommunications networks and services. In particular, there are agencies which regulate and supervise the allocation of frequency spectrum and which monitor and enforce regulation and competition laws which apply to the mobile telecommunications industry. Decisions by regulators regarding the granting, amendment or renewal of licences, to the Group or to third parties, could adversely affect the Group’s future operations in these geographic areas. The Group cannot provide any assurances that governments in the countries in which it operates will not issue telecommunications licences to new operators whose services will compete with it. In addition, other changes in the regulatory environment concerning the use of mobile phones may lead to a reduction in the usage of mobile phones or otherwise adversely affect the Group. Additionally, decisions by regulators could further adversely affect the pricing for services the Group offers. Further details on the regulatory framework in certain regions in which the Group operates can be found in “Business Overview – Regulation”.

Increased competition may reduce market share or revenues.
The Group faces intensifying competition. Competition could lead to a reduction in the rate at which the Group adds new customers and to a decrease in the size of the Group’s market share as customers choose to receive mobile services from other providers.

The focus of competition in many of the Company’s markets continues to shift from customer acquisition to customer retention as the market for mobile telecommunications has become increasingly penetrated. Customer deactivations are measured by the Group’s churn rate. There can be no assurance that the Group will not experience increases in churn rates, particularly as competition intensifies. An increase in churn rates could adversely affect profitability because the Group would experience lower revenues and additional selling costs to replace customers, although such costs would have a future revenue stream to mitigate the impact.

Increased competition has also led to declines in the prices the Group charges for its mobile services and is expected to lead to further price declines in the future. Competition could also lead to an increase in the level at which the Group must provide subsidies for handsets. Additionally, the Group could face increased competition should there be an award of additional licences in jurisdictions in which a member of the Group already has a licence, whether 2G or 3G.

Delays in the development of handsets and network compatibility and components may hinder the deployment of new technologies.
The Group’s operations depend in part upon the successful deployment of continuously evolving mobile telecommunications technologies. The Group uses technologies from a number of vendors and makes significant capital expenditures in connection with the deployment of such technologies. There can be no assurance that common standards and specifications will be achieved, that there will be inter-operability across Group and other networks, that technologies will be developed according to anticipated schedules, that they will perform according to expectations or that they will achieve commercial acceptance. Commercially viable 3G handsets may not be available in the timeframe required or in the amounts needed, which may delay

commercial launch of, or reduce the potential revenue benefits from, 3G services. The introduction of software and other network components may also be delayed. The failure of vendor performance or technology performance to meet the Group’s expectations or the failure of a technology to achieve commercial acceptance could result in additional capital expenditures by the Group or a reduction in profitability.

The Group’s business would be adversely affected by the non-supply of equipment and support services by a major supplier.
Companies within the Group source their mobile network infrastructure and related support services from third party suppliers. The removal from the market of one or more of these third party suppliers would adversely affect the Group’s operations and could result in additional capital expenditures by the Group.

The Company’s strategic objectives may be impeded by the fact that it does not have a controlling interest in some of its ventures.
Some of the Group’s interests in mobile licences are held through entities in which it is a significant but not controlling owner. Under the governing documents for some of these partnerships and corporations, certain key matters such as the approval of business plans and decisions as to the timing and amount of cash distributions require the consent of the partners. In others, these matters may be approved without the Company’s consent. The Company may enter into similar arrangements as it participates in ventures formed to pursue additional opportunities. Although the Group has not been materially constrained by the nature of its mobile ownership interests, no assurance can be given that its partners will not exercise their power of veto or their controlling influence in any of the Group’s ventures in a way that will hinder the Group’s corporate objectives and reduce any anticipated cost savings or revenue enhancement resulting from these ventures.

Expected benefits from investment in networks, licences and new technology may not be realised.
The Group has made substantial investments in the acquisition of 3G licences and in its mobile networks, including the rollout of 3G networks. The Group expects to continue to make significant investments in its mobile networks due to increased usage and the need to offer new services and greater functionality afforded by 3G technology. Accordingly, the rate of the Group’s capital expenditures in future years could remain high or exceed that which it has experienced to date.

Please see “Business Overview – Licences and network infrastructure” for more information on expenditures in connection with the acquisition of 3G licences and expected expenditure in connection with the roll-out of 3G services. There can be no assurance that the commercial launch of 3G services will proceed according to anticipated schedules or that the level of demand for 3G services will justify the cost of setting up and providing 3G services. Failure or a delay in the completion of networks and the launch of new services, or increases in the associated costs, could have a material adverse effect on the Group’s operations.

The Group may experience a decline in revenues per customer notwithstanding its efforts to increase revenues from the introduction of new services.
As part of its strategy to increase usage of its networks, the Group will continue to offer new services to its existing customers, and seek to increase non-voice service revenues as a percentage of total service revenue. However, the Group may not be able to introduce commercially these new services, or may experience significant delays due to problems such as the availability of new mobile handsets or higher than anticipated prices of new handsets. In addition, even if these services are introduced

Vodafone Group Plc  Annual Report 2004

22

Risk Factors and Legal Proceedings continued

in accordance with expected time schedules, there is no assurance that revenues from such services will increase ARPU.

The Group’s business and its ability to retain customers and attract new customers may be impaired by actual or perceived health risks associated with the transmission of radiowaves from mobile telephones, transmitters and associated equipment.
Concerns have been expressed in some countries where the Group operates that the electromagnetic signals emitted by mobile telephone handsets and base stations may pose health risks at exposure levels below existing guideline levels and may interfere with the operation of electronic equipment. In addition, as described under “Legal Proceedings” below, several mobile industry participants, including the Company and Verizon Wireless, have had lawsuits filed against them alleging various health consequences as a result of mobile phone usage, including brain cancer. While the Company is not aware that such health risks have been substantiated, there can be no assurance that the actual, or perceived, risks associated with radiowave transmission will not impair its ability to retain customers and attract new customers, reduce mobile telecommunications usage or result in further litigation. In such event, because of the Group’s strategic focus on mobile telecommunications, its business and results of operations may be more adversely affected than those of other companies in the telecommunications sector.

Legal Proceedings

Save as disclosed below, the Company and its subsidiaries are not involved in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which are expected to have, or have had in the twelve months preceding the date of this report, a significant effect on the financial position or profitability of the Company and its subsidiaries.

The Company is a defendant in four actions in the United States alleging personal injury, including brain cancer, from mobile phone use. In each case, various other carriers and mobile phone manufacturers are also named as defendants. These actions are at an early stage and no accurate quantification on any losses which may arise out of the claims can therefore be made as at the date of this report. The Company is not aware that the health risk alleged in such personal injury claims have been substantiated and will be vigorously defending such claims.

Between 18 September and 29 November 2002, nine complaints were filed in the United States District Court for the Southern District of New York against the Company and Lord MacLaurin, the Chairman of the Company and Sir Christopher Gent, Julian Horn-Smith and Ken Hydon, executive officers of the Company. The Court subsequently consolidated these actions and designated lead plaintiffs and lead plaintiffs’ counsel. The plaintiffs filed a consolidated class action complaint on 6 June 2003 which alleged, among other things, that certain public statements made by or attributed to the defendants and the timing of the Company’s decision to write down the value of goodwill and certain impaired assets in the financial year ended 31 March 2002 violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaints sought, among other things, unspecified damages on behalf of the purchasers of the Company’s securities during the period between 7 March 2001 and 28 May 2002. On 9 October 2003, the Court ordered that the complaint be dismissed, with leave for the plaintiffs to re-plead. On 10 November 2003, the plaintiffs filed a second consolidated amended class action complaint, which contained allegations and claims which were substantially similar to those in the original complaint and it added allegations that certain other statements by one or more of the defendants were materially false or misleading and in violation of the United States Federal Securities laws. That new complaint no longer included Lord MacLaurin as a defendant. On 26 March 2004, the Court struck a number of the allegations in the second consolidated amended complaint and dismissed without prejudice all of the individual defendants from this action. It also gave the plaintiffs a further opportunity to re-plead. On 7 May 2004, the plaintiffs filed a third consolidated amended class action complaint. The new complaint names only the Company as a defendant and contains allegations and claims which are substantially similar to those asserted in the prior complaints. The Company intends to defend the action vigorously.

	Annual Report 2004  Vodafone Group Plc
	23
Operating and Financial Review and Prospects

Contents

			Page
Introduction			23
Presentation of Information			23
Foreign Currency Translation			24
Inflation			24
Critical Accounting Estimates			24
Operating Results			28
–	Group overview		28
		2004 financial year compared to 2003 financial year	28
		2003 financial year compared to 2002 financial year	30
–	Regional review		32
		2004 financial year compared to 2003 financial year	32
		2003 financial year compared to 2002 financial year	36
		Summary of Key Performance Indicators for principal markets	38
Balance Sheet			39
Equity Dividends			39
US GAAP Reconciliation			39
Liquidity and Capital Resources			40
–	Cash flows		40
–	Funding		41
–	Financial assets and liabilities		42
–	Contractual obligations		43
–	Option agreements		43
–	Off-balance sheet arrangements		44
Quantitative and Qualitative Disclosures About Market Risk			44
Trend Information and Outlook			44

Introduction

The following discussion is based on the Consolidated Financial Statements included elsewhere in this Annual Report. Such Consolidated Financial Statements are prepared in accordance with Generally Accepted Accounting Principles in the United Kingdom, or UK GAAP, which differ in certain significant respects from US GAAP. Reconciliations of the material differences in the UK GAAP Consolidated Financial Statements to US GAAP are disclosed in note 36 to the Consolidated Financial Statements, “US GAAP information”.

The directors have endeavoured to follow the principles set out in the Accounting Standards Board’s Statement, “Operating and Financial Review”, which was issued in January 2003. The information in this regard is provided in this section or elsewhere in this Annual Report.

Vodafone Group Plc is the world’s leading mobile telecommunications company, with equity interests in 26 countries across Europe, the United States and Asia Pacific. The Group has over 133 million registered proportionate mobile customers based on ownership interests at 31 March 2004. Partner Network arrangements extend the Group’s footprint by a further 13 countries. As the world’s mobile telecommunications leader, the Group’s vision is to enrich customers’ lives, helping individuals, businesses and communities to be more connected in a mobile world. See “Business Overview – Business strategy”.

The Group currently provides a range of voice and data communication services, including Short Message Services (“SMS”), Multimedia Messaging Services (“MMS”) and other data services. Services are provided to both consumer and corporate customers, through a variety of both prepay and postpay tariff arrangements.

In the majority of the Group’s controlled networks, services are offered over a Global System for Mobile Communications (“GSM”) network, on which a General Packet

Radio Service (“GPRS”) service is also provided. Where licences have been issued, the Group has also secured 3G licences in all jurisdictions in which it operates through its subsidiary undertakings and continues to rollout mobile 3G network infrastructure. See “Business Overview – Licences and network infrastructure”.

The Group faces a number of significant risks that may impact on its future performance and activities. Please see “Risk Factors and Legal Proceedings”.

Presentation of Information

In the discussion of the Group’s reported financial position and results, information in addition to that contained within the Consolidated Financial Statements is presented because it provides readers with access to additional financial information regularly reviewed by management and management believes these measures assist investor assessment of the Group’s performance from period to period. This information is not uniformly defined by all companies in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies.

Mobile customer definition
A mobile customer is defined as a subscriber identity module (“SIM”) or, in territories where SIMs do not exist, a unique mobile telephone number which has access to the network for any purpose (including data only usage) except telemetric applications. Telemetric applications include, but are not limited to, asset and equipment tracking, mobile payment / billing functionality (for example, vending machines and meter readings) and include voice enabled customers whose usage is limited to a central service operation (for example, emergency response applications in vehicles).

Activity level
Active customers are defined as customers who have made or received a chargeable event in the last three months. Where this information is not available, customers who have made a chargeable event in the last three months are used.

The active customers are expressed as a percentage of the closing customer base. Contract and prepaid activity is reported separately.

ARPU
ARPU is calculated as total revenues, excluding handset revenues and connection revenues, divided by the weighted average number of customers in the period. ARPU is reported externally on a twelve month rolling basis and on a month only basis for major subsidiaries only.

This performance indicator is commonly used in the mobile telecommunications industry and by Vodafone management to compare service revenues to prior periods and internal forecasts. Management believes that this measure provides useful information for investors regarding trends in customer revenues derived from mobile telecommunications services and the extent to which customers change their use of mobile services and the network from period to period.

Churn
Churn is calculated as total gross customer disconnections divided by average total customers in the period. Stated churn figures are twelve month average figures.

Organic growth
The percentage movements in organic growth are presented to reflect operating performance on a comparable basis. Where a subsidiary or associated undertaking was newly acquired or disposed of in the current or prior year, the Group would adjust, under organic growth calculations, the results for the current and prior year to remove the amount the Group earned in both periods as a result of the acquisition or disposal of subsidiary or associated undertakings. Where the Group increases, or decreases, its ownership interest in an associated undertaking in the current or prior year, the Group’s share of results for the prior year are restated at the current year’s ownership level. A further adjustment in organic calculations excludes the effect of exchange rate

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24

Operating and Financial Review and Prospects continued

movements by restating the current period’s results as if they had been generated at the prior period’s exchange rates. Management believes that these measures provide useful information to assist investors in assessing the Group’s operating performance from period to period.

Foreign Currency Translation

The Company publishes its Consolidated Financial Statements in pounds sterling. However, many of the Company’s subsidiary and associated undertakings report their turnover, costs, assets and liabilities in currencies other than pounds sterling and the Company translates the turnover, costs, assets and liabilities of those subsidiary and associated undertakings into pounds sterling when preparing its Consolidated Financial Statements. Consequently, fluctuations in the value of pounds sterling versus other currencies could materially affect the amount of these items in the Consolidated Financial Statements, even if their value has not changed in their original currency.

In this Annual Report, references to “US dollars”, “$”, “cents” or “¢” are to United States currency and references to “pounds sterling”, “£”, “pence” or “p” are to UK currency. References to “euros” or “€” are to the currency of the EU Member States which have adopted the euro as their currency. Prior to 1 January 2002, the euro was used only in “paperless” transactions. Euro banknotes and coins were issued on 1 January 2002. References to “yen” or “¥” are to the currency of Japan. Merely for convenience, this Annual Report contains translations of certain pounds sterling, euro and yen amounts into US dollars at specified rates. These translations should not be construed as representations that the pounds sterling, euro or yen amounts actually represent such US dollar amounts or could be converted into US dollars at the rate indicated or at any other rate. Unless otherwise indicated, the translations of pounds sterling and euro amounts into US dollars have been made at $1.8400 per £1.00, $1.2292 per €1.00 and ¥104.18 per $1.00, the Noon Buying Rate in the City of New York for cable transfers in pounds sterling, euro and yen amounts as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on 31 March 2004. The Noon Buying Rates on 24 May 2004 were $1.7908 per £1.00, $1.1978 per €1.00 and ¥112.66 per $1.00.

The following table sets out, for the periods and dates indicated, the period end, average, high and low Noon Buying Rates for pounds sterling expressed in US dollars per £1.00, to two decimal places.

Years ended 31 March	Period end	Average	High	Low
2000	1.59	1.61	1.68	1.55
2001	1.42	1.47	1.60	1.40
2002	1.42	1.43	1.48	1.37
2003	1.58	1.54	1.65	1.43
2004	1.84	1.69	1.90	1.55

Month	High	Low
November 2003	1.72	1.67
December 2003	1.78	1.72
January 2004	1.85	1.79
February 2004	1.90	1.82
March 2004	1.87	1.79
April 2004	1.86	1.77
May 2004(1)	1.79	1.75

Note:
(1)	In respect of May 2004, for the period from 1 May to 24 May 2004, inclusive.

The following table sets out the average exchange rates compared to pounds sterling of other principal currencies of the Group.

	Years to 31 March		Change
Currency	2004	2003	%
Euro	1.44	1.56	(8	)
Yen	191.5	188.2	2

Inflation

Inflation has not had a significant effect on the Group’s results of operations and financial condition during the three years ended 31 March 2004.

Critical Accounting Estimates

The Group prepares its Consolidated Financial Statements in accordance with UK GAAP, the application of which often requires judgements to be made by management when formulating the Group’s financial position and results. Under UK GAAP, the directors are required to adopt those accounting policies most appropriate to the Group’s circumstances for the purposes of giving a true and fair view and to review them regularly. The Group also prepares a reconciliation of the Group’s revenues, net loss, shareholders’ equity and total assets between UK GAAP and US GAAP.

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group should it later be determined that a different choice would be more appropriate.

Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provides an explanation of each below. Where it is considered that the Group’s US GAAP accounting policies differ materially from the UK GAAP accounting policy, a separate explanation is provided.

The discussion below should also be read in conjunction with the Group’s disclosure of material UK GAAP accounting policies, which is provided in note 2 to the Consolidated Financial Statements, “Accounting policies” on pages 73 to 75 and with the description of the Group’s US GAAP accounting policies and other US GAAP related disclosures provided on pages 117 to 119.

Management has discussed its critical accounting estimates and associated disclosures with the Company’s Audit Committee.

Goodwill and intangible assets
The relative size of the Group’s goodwill and other intangible assets makes a number of judgements surrounding the determination of their carrying value, and related amortisation, critical to the Group’s financial position and performance.

At 31 March 2004, intangible assets, including goodwill attributable to the acquisition of interests in associated undertakings, amounted to £93,622 million (2003: £108,085 million), and represented 70% (2003: 70%) of the Group’s total fixed assets. In addition, a further £1,190 million of goodwill is charged against reserves (2003: £1,190 million).

The charge for goodwill amortisation is included within operating profit as a separate category of administrative expenses. The charge for amortisation of capitalised licence and spectrum fees is included within cost of sales.

Goodwill, including associated charges for amortisation, affects all of the Group’s reported segments. However, given that the majority of the current goodwill asset arose in connection with the Mannesmann acquisition, the Group’s results for Northern Europe and Southern Europe are most affected, individually representing £8,147 million and £4,826 million, respectively, of the £15,207 million total charge for goodwill amortisation.

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US GAAP

Under US GAAP, the accounting treatment for goodwill and other intangible assets is different to that required by UK GAAP and represents the most significant adjustment made to the Group’s results and financial position under UK GAAP when reconciling to US GAAP.

The principal differences are:

(a)	The allocation of the surplus of the resultant purchase price, over the fair value attributed to the share of net assets acquired, to a series of identifiable intangible assets under US GAAP as opposed to only goodwill under UK GAAP;
(b)	The US GAAP deferred tax treatment of intangible assets, which increases acquisition liabilities;
(c)	The difference in goodwill arising as a result of the different basis by which the purchase price is derived under US GAAP.

Of these adjustments, the only one to involve significant management judgement and estimation is (a). Allocation of the purchase price affects the future results of the Group under US GAAP, as finite-lived intangibles are amortised whereas indefinite-lived intangible assets are not amortised, and could result in differing amortisation charges based on the allocation to goodwill, indefinite-lived intangible assets and finite-lived intangible assets.

Bases of amortisation

Goodwill

Once capitalised, goodwill is amortised on a straight-line basis over its estimated useful economic life.

Other intangible assets

Other intangible assets primarily represents the Group’s aggregate amounts spent on the acquisition of 2G and 3G licences, stated after deduction of related amortisation charges.

Since revenues cannot be generated until a network is available for commercial service, amortisation of capitalised licences begins at this time. As networks are typically brought into service over a period of time, the charge for amortisation is initially calculated by reference to the capacity of the network compared to capacity at network maturity. For this purpose, network maturity is determined as being reached after a maximum period of five years from service launch. Thereafter, amortisation is on a straight-line basis over its remaining useful economic life. Management considers this policy is the appropriate method of matching the amortisation with the economic benefit derived from the licences.

If the licences were amortised over their economic life on a straight-line basis, the annual amortisation charge would be higher in the period to network maturity and lower thereafter.

US GAAP

Goodwill and other indefinite-lived intangible assets are not amortised but reviewed annually for impairment. Impairment reviews are discussed in more detail below. The majority of the Group’s intangible assets, primarily 2G and 3G licences, are finite-lived and are amortised over their estimated economic life on a straight-line basis, which commences when the network is available for commercial service.

Estimation of useful economic life

The economic life used to amortise goodwill and other intangible fixed assets relates to the future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset.

Goodwill

For acquired mobile network operators, the useful economic life of goodwill reflects the useful economic life of the licences acquired with those businesses up to a maximum of twenty-five years. In management’s view, such businesses cannot operate in their respective jurisdiction without a licence, and so the licence term is the most appropriate life for the goodwill. The useful economic lives are reviewed annually and revised if necessary.

For other businesses acquired, the useful economic life principally reflects management’s view of the average economic life of the acquired customer base. The useful economic life is assessed by reference to customer churn rates. An increase in churn rates may lead to a reduction in the useful economic life and an increase in the amortisation expense. Historically, changes in churn rates have been insufficient to impact the useful economic life.

Other intangible assets

For licence and spectrum fees, the estimated useful economic life is, generally, the term of the licence. Using the licence term reflects the period over which the Group will receive economic benefit. The economic lives are periodically reviewed, taking into consideration such factors as changes in technology. Historically, the economic lives have not been changed following these reviews.

Tangible fixed assets
Tangible fixed assets also represent a significant proportion of the asset base of the Group and hence the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Group’s financial position and performance.

Estimation of useful economic life

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Group’s profit and loss account.

The useful economic lives of Group assets are determined by management at the time the asset is acquired and regularly reviewed for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. Furthermore, network infrastructure cannot be depreciated over a period that extends beyond the expiry of the associated licence under which the operator provides telecommunications services.

Historically, changes in useful economic lives have not resulted in material changes to the Group’s depreciation charge.

Cost capitalisation

Cost includes the total purchase price and labour costs associated with the Group’s own employees to the extent that they are directly attributable to construction costs, or where they comprise a proportion of a department directly engaged in the purchase or installation of a fixed asset. Management judgement is involved in determining the appropriate internal costs to capitalise and the amounts involved. For the year ended 31 March 2004, internal costs capitalised represented approximately 6% of expenditure on tangible fixed assets and approximately 4% of total operating expenses, excluding goodwill amortisation.

Impairment reviews
Asset recoverability is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net

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Operating and Financial Review and Prospects continued

present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters, as noted below.

UK GAAP requires management to undertake a review for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Group management currently undertake a review of goodwill, intangible assets and investments in associated undertakings at least annually to consider whether a full impairment review is required.

US GAAP

Under US GAAP, the requirements differ from UK GAAP and the principal differences are:

• Annual impairment reviews are performed for goodwill and other indefinite-lived intangible assets; and

• For finite-lived intangible assets and tangible assets, whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, the carrying value is compared to undiscounted future cash flows.

Assumptions

There are a number of assumptions and estimates involved in calculating the net present value of future cash flows from the Group’s businesses including:

• Management’s expectations of growth in revenues, including those relating to the achievement the Group’s strategy on data products and services;

• Changes in operating margin;

• Timing and quantum of future capital expenditure;

• Uncertainty of future technological developments;

• Long term growth rates; and

• The selection of discount rates to reflect the risks involved.

Changing the assumptions selected by management, in particular, the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group’s results. The Group’s review includes the key assumptions related to sensitivity in the cash flow projections.

Taxation
The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profit and loss and/or cash flow variances. See “Liquidity and Capital Resources”.

The growth in complexity of the Group’s structure following its rapid expansion geographically over the past few years has made the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Group and it is often dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which the Group operates. Issues can, and therefore often do, take many years to resolve. Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result there can be substantial differences between the tax charge in the profit and loss account and tax payments.

Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future, against which the reversal of timing differences can be deducted. Recognition therefore involves judgement regarding the future financial performance of the particular legal entity or

tax group in which the deferred tax asset has been recognised.

Historical differences between forecast and actual taxable profits have not resulted in material adjustments to the recognition of deferred tax assets.

Non-discounting of deferred tax assets and liabilities

UK GAAP permits, and US GAAP prescribes, calculating deferred taxation assets or liabilities on an undiscounted basis. It is the Group’s accounting policy to measure deferred taxation on an undiscounted basis. If deferred taxation liabilities were calculated using discounting techniques, the Group’s UK GAAP net deferred taxation liability would be lower.

Revenue recognition and presentation
Turnover from mobile telecommunications comprises amounts charged to customers in respect of monthly access charges, airtime charges, airtime usage, messaging, the provision of other mobile telecommunications services, including data services and information provision, fees for connecting customers to a mobile network, revenue from the sale of equipment, including handsets, and revenues arising from the Group’s Partner Network agreements.

Following the issuance of the Application Note to FRS 5, “Reporting the Substance of Transactions”, in November 2003, the Group has amended its accounting policy on revenue recognition in relation to the deferral of certain equipment, connection, upgrade and tariff migration fees. The effect of the revised policy on the Group’s turnover and results is not material in either the current or previous financial years.

Deferral period

Customer connection fees when combined with related equipment revenue, in excess of the fair value of the equipment are deferred and recognised over the expected life of the customer relationship. The life is determined by reference to historical customer churn rates. An increase in churn rates would reduce the customer relationship life and accelerate the revenue recognition. Historically, changes in churn rates have been insufficient to impact the expected customer relationship life.

Any excess upgrade or tariff migration fees over the fair value of equipment provided are deferred over the average upgrade or tariff migration period as appropriate. This time period is calculated based on historical activity of customers who upgrade or change tariffs. An increase in the time period would extend the period over which revenue is recognised.

Presentation

When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance of the agreement between the Group and its business partners are reviewed to determine each party’s respective role in the transaction.

Where the Group’s role in a transaction is that of principal, revenue is recognised on a gross basis. This requires turnover to comprise the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as an operating cost.

Where the Group’s role in a transaction is that of a disclosed agent, revenue is recognised on a net basis, with turnover representing the margin earned.

US GAAP

For the period to 30 September 2003, the Group applied US Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, which resulted in the Group’s connection revenues being accounted for in a different way to that prescribed under UK GAAP and described above. SAB 101 specifies that performance is viewed from the perspective of the customer and takes place over the estimated life of the customer relationship.

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Deferring connection revenues and associated costs over the estimated life of the customer relationship, using the methodology required under SAB 101, resulted in the Group’s revenues for the 2003 and 2002 financial years being reduced by £1,760 million and £1,044 million, respectively. Profits are materially unaffected by this adjustment as a broadly equal amount of costs are also deferred.

For all new contracts entered into from 1 October 2003, the Group has adopted the requirements of Emerging Issue Task Force (“EITF”) Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. The adoption of EITF 00-21 substantially aligns the Group’s US GAAP revenue recognition policy with UK GAAP.

As contracts entered into before 1 October 2003 are accounted for in accordance with SAB 101, the related deferred connection revenues, and related costs, will continue to be recognised over the remaining life of the customer relationship. For the 2004 financial year, the Group’s revenue under US GAAP increased by £188 million as a result of following the methodology under SAB 101 for the first six months and EITF 00-21 for the remainder of the year. At 31 March 2004, deferred revenue accounted for in accordance with SAB 101 amounted to £3,737 million.

Allowance for bad and doubtful debts
The allowance for bad and doubtful debts reflects management’s estimate of losses arising from the failure or inability of the Group’s customers to make required payments. The estimate is based on the ageing of customer accounts, customer credit worthiness and the Group’s historical write-off experience.

Changes to the allowance may be required if the financial condition of the Group’s customers was to improve or deteriorate. An improvement in financial condition may result in lower actual write-offs.

Historically, changes to the estimate of losses have not been material to the Group’s financial position and results.

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Operating and Financial Review and Prospects continued

Operating Results
Group overview
	Years ended 31 March
	2004		2003		2002
	£m		£m		£m
Turnover	33,559		30,375		22,845
Direct costs and operating expenses(1)	(20,919	)	(19,158	)	(14,814	)
Depreciation and amortisation(1)(2)	(4,549	)	(4,141	)	(2,960	)
Share of profit in joint ventures and associated undertakings(1)	2,658		2,105		1,973
	10,749		9,181		7,044
Goodwill amortisation	(15,207	)	(14,056	)	(13,470	)
Exceptional operating items	228		(576	)	(5,408	)
Total Group operating loss	(4,230	)	(5,451	)	(11,834	)
Exceptional non-operating items	(103	)	(5	)	(860	)
Net interest expense	(714	)	(752	)	(845	)
Taxation	(3,154	)	(2,956	)	(2,140	)
Loss on ordinary activities after taxation	(8,201	)	(9,164	)	(15,679	)
Loss for the financial year	(9,015	)	(9,819	)	(16,155	)

Notes:
(1)	before goodwill amortisation and exceptional operating items
(2)	includes loss on disposal of tangible fixed assets

2004 financial year compared to 2003 financial year

Turnover

Turnover increased 10% in the 2004 financial year, as analysed below:

	Mobile	Non-mobile		Group
	%	%		%
Impact of
– Organic growth	10	5		10
– Foreign exchange	4	9		4
– Acquisitions & disposals	1	(49	)	(4	)
Reported growth	15	(35	)	10

The impact of acquisitions and disposals resulted mainly from the disposal of Japan Telecom. The foreign exchange impact primarily arose due to a stronger Euro.

Mobile telecommunications

	Years ended 31 March		Change
	2004	2003
	£m	£m	%
Service revenues:
– Voice	23,618	21,201	11
– Data	4,540	3,622	25
Subtotal	28,158	24,823	13
Equipment & other	3,557	2,719	31
Total mobile revenues	31,715	27,542	15

The principal component of the increase in turnover from mobile telecommunications arose from service revenue growth of 13%, driven primarily by growth in the Group’s controlled customer base, which increased by 9% over the prior year.

ARPU was up 4% in Italy and 8% in the UK and down 7% and 1% in Japan and

Germany, respectively, compared with the year ended 31 March 2003. Total outgoing voice usage in controlled mobile businesses increased by 11% over the year to 154.8 billion minutes for the year ended 31 March 2004, although the effect on ARPU was partially offset by tariff reductions and regulatory intervention. Lower termination rates, resulting from regulatory changes, have reduced service revenue by an estimated £0.3 billion in the year.

Another key driver of the growth in service revenue was the continued success of the Group’s data product and service offerings. Revenues from data services increased 25% to £4,540 million for the year ended 31 March 2004 and represented 16.1% of service revenues in the Group’s controlled mobile subsidiaries for the twelve months ended 31 March 2004, compared with 14.6% for the 2003 financial year. SMS revenues continue to represent the largest component of both the level of and growth in data revenues. Non-messaging data revenues increased to 4.2% of service revenues from 3.6% in the prior financial year as a result of the increased focus on providing value-added services, particularly through Vodafone live!™, the Group’s business offerings and the increased penetration of data services into the Group’s customer base.

Mobile equipment and other turnover increased 31% to £3,557 million, due to revenues from non-Vodafone customers acquired as a result of the acquisition of service providers in the UK and increased acquisition and retention activity. Excluding these revenues, mobile equipment and other turnover increased slightly as a result of higher gross connections and upgrades.

Non-mobile businesses

Turnover from other operations decreased by 35% to £1,844 million in the year, principally as a result of the deconsolidation of Japan Telecom from 1 October 2003, and the disposal of the Telematik business by Arcor in the previous year.

Operating loss

After goodwill amortisation and exceptional items, the Group reported a total operating loss of £4,230 million, compared with a loss of £5,451 million for the previous year. The £1,221 million reduction in the total operating loss arose as a result of a £228 million credit in respect of exceptional operating items in the year ended 31 March

Annual Report 2004  Vodafone Group Plc

29

2004, compared with an expense of £576 million in the prior year, and a £1,568 million increase in operating profit before goodwill amortisation and exceptional items partially offset by a £1,151 million increase in the goodwill amortisation charge. The charges for goodwill amortisation, which do not affect the cash flows of the Group or the ability of the Company to pay dividends, increased by 8% to £15,207 million, principally as a result of the impact of foreign exchange movements.

Expenses

	Years ended 31 March
	2004	2003
	% of turnover	% of turnover
Direct costs	39.9	38.9
Operating expenses	22.5	24.1
Depreciation and amortisation	13.6	13.6

The increase in direct costs as a percentage of turnover is principally due to an increase in the proportion of acquisition and retention costs, primarily following the acquisition of a number of service providers in the UK. Acquisition and retention costs net of equipment revenues as a percentage of service revenues, for the Group’s controlled mobile businesses, increased to 12.6%, compared with 12.3% for the comparable period. This was partially offset by the disposal of Japan Telecom.

The principal reason for the improvement in operating expenses as a percentage of turnover was the maintenance of network operating costs at a similar level to the previous financial year, despite the growth in customer numbers and usage. Operating expenses as a proportion of turnover also benefited from the disposal of Japan Telecom.

Depreciation and amortisation charges, excluding goodwill amortisation, increased by 10% to £4,549 million from £4,141 million in the comparable period. The launch of 3G services in a number of countries resulted in approximately £0.3 billion of additional depreciation and amortisation in the current year as 3G infrastructure and licences have been brought into use.

Goodwill amortisation

Retranslating the goodwill amortisation charge for the year ended 31 March 2004 at the average exchange rates applicable for the year ended 31 March 2003 would have reduced the charge by £965 million to £14,242 million, with a corresponding reduction in total Group operating loss.

Exceptional operating items

Net exceptional operating income for the year ended 31 March 2004 of £228 million comprises £351 million of recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy that is no longer expected to be levied, net of £123 million of restructuring costs principally in Vodafone UK. Net exceptional operating charges of £576 million were charged in the year ended 31 March 2003, comprising £485 million of impairment charges in relation to the Group’s interests in Japan Telecom and Grupo Iusacell, and £91 million of reorganisation costs relating to the integration of Vizzavi into the Group and related restructuring.

In accordance with accounting standards the Group regularly monitors the carrying value of its fixed assets. A review was undertaken at 31 March 2004 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2014. The results of the review undertaken at 31 March 2004 indicated that no impairment charge was necessary.

Exceptional non-operating items

Net exceptional non-operating charges for the year of £103 million principally relate to a loss on disposal of the Japan Telecom fixed line operations. In the prior year, net exceptional non-operating charges of £5 million mainly represented a profit on disposal of fixed asset investments of £255 million, principally relating to the disposal of the Group’s interest in Bergemann GmbH, through which the Group’s 8.2% stake in Ruhrgas AG was held, offset by an impairment charge in respect of the Group’s investment in China Mobile of £300 million.

Loss on ordinary activities before interest

The Group’s loss on ordinary activities before interest fell by 21% to £4,333 million due a reduction in the total operating loss of £1,221 million offset by an increase in charge for exceptional non-operating items of £98 million.

Net interest payable

Net interest payable, including the Group’s share of the net interest expense of joint ventures and associated undertakings, decreased from £752 million for the year ended 31 March 2003 to £714 million for the year ended 31 March 2004.

The Group net interest cost for the current year increased to £499 million, including £215 million (2003: £55 million) relating to potential interest charges arising on settlement of a number of outstanding tax issues, from £457 million for the prior year and was covered 28 times by operating cash flow plus dividends received from associated undertakings. The Group’s share of the net interest expense of associated undertakings and joint ventures decreased from £295 million to £215 million, principally as a result of the sale of the Group’s stake in Grupo Iusacell.

Taxation

The effective rate of taxation for the year ended was (62.5)% compared with (47.6)% for the year ended 31 March 2003. The effective rate includes the impact of goodwill amortisation and exceptional items, which may not be deductible for tax purposes. Aside from the negative impact of non-tax deductible goodwill amortisation on the effective tax rate, the Group’s tax charge has benefited further from the Group’s Italian operations in the prior year, from the current year restructuring of the French operations, from a fall in the Group’s weighted average tax rate and from other tax incentives. These benefits have outweighed the absence of the one-off benefit arising from the restructuring of the German group in the previous year.

Basic loss per share

Basic loss per share, after goodwill amortisation and exceptional items, improved from a loss per share of 14.41 pence to a loss per share of 13.24 pence for the year ended 31 March 2004. The loss per share includes a charge of 22.33 pence per share (2003: 20.62 pence per share) in relation to the amortisation of goodwill and a charge of 0.01 pence per share (2003: 0.60 pence per share) in relation to exceptional items.

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Operating and Financial Review and Prospects continued

2003 financial year compared to 2002 financial year

Turnover

Turnover increased 33% in the 2003 financial year, as analysed below:

	Mobile	Non-mobile	Group
	%	%	%
Impact of
– Organic growth	11	5	11
– Foreign exchange	2	–	2
– Acquisitions & disposals	20	30	20
Reported growth	33	35	33

The impact of acquisitions and disposals mainly comprised Vodafone Japan and Japan Telecom, which both became subsidiaries from October 2001. Changes in exchange rates beneficially impacted the reported growth in total turnover as a result of a stronger euro partly offset by a weaker yen.

Mobile telecommunications

	Years ended 31 March		Change
	2003	2002
	£m	£m	%
Service revenues:
– Voice	21,201	16,646	27
– Data	3,622	2,093	73
Subtotal	24,823	18,739	32
Equipment & other	2,719	2,003	36
Total mobile revenues	27,542	20,742	33

Mobile service revenue increased as a result of greater usage of voice services, increased penetration of data products and services and the benefit of a full year’s service revenues from Vodafone Japan. This was partially offset by both reductions in interconnect rates in a number of the Group’s markets, mainly in Europe, and the effect of increased competitive activity in certain key European markets by existing competitors looking to attract market share and generate customer loyalty.

Voice services increased as the Group achieved a sustained improvement in ARPU in many key markets in Europe, compared with the year ended 31 March 2002, as benefits from the Group’s continued focus on high value customers led to increased penetration of the contract customer segment and initiatives to stimulate usage, including the launch of new and innovative products, were realised.

Another key driver of the growth in turnover and improved ARPU position was the continued success of the Group’s data product and service offerings, in particular, increased SMS usage in the Group’s controlled networks. During the period, Vodafone live!™ and the Mobile Connect Card were launched in most of the Group’s European markets.

The Group’s main markets of Germany, Italy, the UK and Japan, all experienced increases in mobile data revenues, with SMS revenues continuing to be the principal component of these revenue streams, except in Vodafone Japan where internet data remained the principal component due to the high proportion of Vodafone Japan’s customer base with internet-capable phones.

The mobile equipment and other turnover increase was largely attributable to the volume of gross customer connections and upgrades in the 2003 financial year, the effects of the reduction in handset subsidies, in line with the Group’s strategy, and the full year impact of the acquisition of a controlling interest in Vodafone Japan.

Non-mobile businesses

Turnover from other operations, which comprised turnover relating to the Group’s interests in its fixed line businesses in Japan (Japan Telecom) and Germany (Arcor), and turnover from Vodafone Information Systems GmbH, a German IT and data services business, increased from £2,103 million to £2,833 million. The increase was primarily as a result of the full year inclusion of Japan Telecom following completion of the Group’s acquisition of a controlling stake in October 2001.

Operating loss

After goodwill amortisation and exceptional items, the Group reported a total operating loss of £5,451 million, compared with a loss of £11,834 million for the comparable period. This net change of £6,383 million arose as a result of a £4,832 million reduction in respect of exceptional items, and a £2,137 million increase in operating profit, before goodwill amortisation and exceptional items, partly offset by a £586 million increase in the goodwill amortisation charge, which increased primarily as a result of the acquisition of Vodafone Japan and Japan Telecom in the second half of the 2002 financial year.

Expenses

	Years ended 31 March
	2003	2002
	% of turnover	% of turnover
Direct costs and operating expenses	63.1	64.8
Depreciation and amortisation	13.6	13.0

The Group’s direct costs consist primarily of financial incentives to service providers and dealers, payments to landline and mobile operators for delivering calls outside the Group’s networks and for providing landline or microwave links, depreciation of network infrastructure, the cost of customer equipment sold and network operating costs.

Excluding Vodafone Japan, the Group’s equipment costs and cost of providing financial incentives to service providers and dealers for acquiring and retaining customers declined to 13.8% of turnover from mobile telecommunications, compared with 14.7% for the prior year, demonstrating the continued focus on gaining and retaining high-value customers in the most cost-efficient manner. Inclusive of Vodafone Japan, equipment costs and financial incentives amounted to 21.1% of turnover from mobile telecommunications as costs to connect and retain customers, although reducing, remained higher in Japan than in the Group’s other key markets.

Depreciation increased by £1,099 million for the year ended 31 March 2002 to £3,979 million for the year ended 31 March 2003, primarily as a result of the full year inclusion of Vodafone Japan and Japan Telecom. In Japan, depreciation also increased as a result of a charge in respect of its UMTS network, which was opened for commercial service in December 2002, and in Germany, depreciation increased as a result of the prior year expenditure on network infrastructure improvements.

Goodwill amortisation

The charge for goodwill amortisation increased from £13,470 million for the year ended 31 March 2002 to £14,056 million for the year ended 31 March 2003 as a result of a full year’s charge for prior year acquisitions, charges in respect of current year acquisitions and the impact of foreign exchange.

Exceptional operating items

Exceptional operating costs of £576 million for the year ended 31 March 2003 comprised impairment charges of £405 million and £80 million for the Group’s interest in Japan Telecom and Grupo Iusacell, respectively, additional costs incurred as a result of the integration of Vizzavi into the Group, following the acquisition of the remaining 50% interest in August 2002, and related restructuring of the Group’s Global mobile platform business.

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31

For the 2002 financial year, exceptional operating costs of £5,408 million comprised impairment charges of £5,100 million in relation to the carrying value of goodwill for Arcor, Cegetel, Grupo Iusacell and Japan Telecom, and £222 million representing the Group’s share of exceptional items of its associated undertakings and joint ventures, comprising £107 million of, principally, asset write downs in Vodafone Japan and £115 million of reorganisation costs in Verizon Wireless and Vizzavi. A further £86 million of reorganisation costs was also incurred in the 2002 financial year, principally in respect of the Group’s operations in Australia and the UK.

In accordance with applicable accounting standards, the Group regularly monitors the carrying value of its fixed assets. A review was undertaken at 31 March 2003 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2013.

The results of the review indicated that, whilst no impairment charge was necessary in respect of the Group’s controlled mobile businesses, impairment charges totalling £810 million were necessary in respect of non-controlled mobile and non-mobile businesses as detailed below.

Company	Year ended
	31 March 2003
	£m
Japan Telecom	430
Grupo Iusacell	80
China Mobile	300
	810

The charge in respect of China Mobile and £25 million of the charge for Japan Telecom are included within exceptional non-operating items.

Exceptional non-operating items

Net exceptional non-operating items amounted to £5 million for the year ended 31 March 2003. Exceptional non-operating items during the 2003 financial year principally included impairment charges of £300 million in respect of the Group’s interest in China Mobile and £25 million in respect of certain investments held by Japan Telecom, offset by a profit on disposal of fixed asset investments of £255 million, principally relating to the disposal of the Group’s interest in Bergemann GmbH, through which the Group’s 8.2% stake in Ruhrgas AG was held, and £55 million representing the Group’s share of the profit on disposal for cash of AOL Europe shares by Cegetel.

The 2002 financial year exceptional non-operating costs of £860 million principally comprised an impairment charge of £900 million in respect of the Group’s investment in China Mobile, partly offset by an aggregate profit of £60 million on the disposal of fixed assets, businesses and fixed asset investments, principally relating to the reduction in the Group’s interest in Vodafone Greece from 55% to 51.9%, the disposal of the Group’s interest in the Korean mobile operator, Shinsegi, offset by a net loss on disposal of certain other operations.

Loss on ordinary activities before interest

During the year ended 31 March 2003, the Group reported a loss on ordinary activities before interest of £5,456 million, compared with a loss for the year ended 31 March 2002 of £12,694 million. The principal items that resulted in the decreased loss were improved total Group operating profit, before goodwill amortisation and exceptional items, which increased from £7,044 million for the year ended 31 March 2002 to £9,181 million for the year ended 31 March 2003 and the decrease in exceptional operating items and exceptional non-operating items, which decreased from £5,408 million for the year ended 31 March 2002 to £576 million for the year ended 31 March 2003 and £860 million for the year ended 31 March 2002 to £5 million

for the year ended 31 March 2003, respectively. These were partially offset by the increased charge in respect of goodwill amortisation from £13,470 million for the year ended 31 March 2002 to £14,056 million for the year ended 31 March 2003.

Net interest payable

Total Group net interest payable, including the Group’s share of the net interest expense of joint ventures and associated undertakings, decreased from £845 million for the year ended 31 March 2002 to £752 million for the year ended 31 March 2003. Net interest costs in respect of the Group’s net borrowings decreased from £503 million for the year to 31 March 2002 to £457 million for the year ended 31 March 2003, reflecting the reduction in average net debt levels. The Group’s share of the net interest expense of joint ventures and associated undertakings decreased from £342 million for the year ended 31 March 2002 to £295 million for the year ended 31 March 2003 partly as a result of the consolidation of the Group’s former associate undertakings, Japan Telecom and Vodafone Japan, from October 2001, and of Vizzavi from 29 August 2002, and reduced levels of indebtedness in SFR.

Taxation

The effective rate of taxation for the year ended 31 March 2003 was (47.6)% compared with (15.8)% for the year ended 31 March 2002. The effective rate includes the impact of goodwill amortisation and exceptional items, which may not be deductible for tax purposes. Aside from the negative impact of non-tax deductible goodwill amortisation on the effective tax rate, the Group’s tax charge for the year ended 31 March 2003 benefited from the reorganisation of the Group’s Italian operations and a one-off benefit in Germany arising from the reorganisation of the German Group of companies. In the year ended 31 March 2002, the Group’s tax charge included a one-off tax credit received in Germany arising from the distribution of earnings and also the Visco law incentive scheme in Italy. The Visco law was subsequently replaced by a less favourable regime.

Basic loss per share

Basic loss per share, after goodwill amortisation and exceptional items, decreased from a loss of 23.77p for the year ended 31 March 2002 to a loss per share of 14.41p for the year ended 31 March 2003. The loss per share of 14.41p included an increase in the charge for the amortisation of goodwill from 19.82p per share for the year ended 31 March 2002, to a charge of 20.62p per share for the year ended 31 March 2003, offset by a decrease in the charge for exceptional items from 9.10p per share for the year ended 31 March 2002 to 0.60p per share for the year ended 31 March 2003.

Vodafone Group Plc  Annual Report 2004

                    32

Operating and Financial Review and Prospects continued

Regional review

Please refer to the summary of Key Performance Indicators on page 38 and note 3 of the Consolidated Financial Statements.

In June 2003, the Group announced changes in the regional structure of its operations. The former Northern Europe and Central Europe regions were combined into a new Northern Europe region, with the exception of the United Kingdom and Ireland which now form their own region. The following results are presented in accordance with the new regional structure.

2004 financial year compared to 2003 financial year

Mobile telecommunications

UK & Ireland

	Years ended 31 March		Change
	2004	2003
	£m	£m	%
Turnover
United Kingdom
– Voice services	3,487	3,207	9
– Data services	671	541	24
– Total service revenue	4,158	3,748	11
– Equipment and other	586	278	111
	4,744	4,026	18
Ireland	760	629	21
	5,504	4,655	18
Operating profit*
United Kingdom	1,098	1,120	(2	)
Ireland	262	206	27
	1,360	1,326	3

* Total Group operating profit before goodwill amortisation and exceptional items

United Kingdom

Vodafone UK successfully maintained its leading market position, based on revenue share, according to the regulator’s last published data, in line with its strategic objectives, despite pricing pressures caused by intensifying competition and regulatory activity.

Total UK turnover increased by 18% to £4,744 million, driven by organic growth of 12% and the acquisition of a number of service providers, including Singlepoint which contributed growth of 6%. The organic growth resulted from the larger customer base and increased usage of both voice and data services, partially offset by a regulatory reduction in termination rates and the inclusion of calls to other mobile operators within new bundled price plans. Data revenues, as a percentage of service revenues, improved over the year to 16.1% for the year ended 31 March 2004 as usage levels of SMS and other data offerings increased. The increased number of Vodafone live!™ customers contributed towards the improved data usage. Equipment and other revenue increased by 111%, principally as a result of revenues from non-Vodafone customers acquired with the service providers and increased customer acquisition and upgrade activity.

Blended ARPU increased in the year, mainly due to growth in prepaid ARPU and the Singlepoint acquisition. Prepaid ARPU improved to £130 for the year ended 31 March 2004 from £125 for the year ended 31 March 2003. Contract ARPU, excluding the impact of the Singlepoint acquisition, increased by £14 to £531 for the year ended 31 March 2004.

Vodafone UK’s share of mobile service revenue in the latest quarterly review by OFCOM, the new national UK regulator, for the quarter ended 30 September 2003, was 31.8%, representing a lead of 6.5 percentage points over the second placed competitor.

Registered customers increased by 6% to 14,095,000 and the proportion of contract customers and activity levels remained stable throughout the year. The acquisition of the service providers, including Singlepoint, during the year increased the proportion of in-house managed contract customers from 57% to 93%, enabling closer management of the contract customer base.

On 24 July 2003, Vodafone UK reduced its termination charges by RPI minus 15% (on the weighted average charge for the previous year) to comply with its licence requirements. This reduction implemented the decision of the UK Competition Commission in January 2003. OFCOM is required to conduct a market review of call termination under the new EC regulatory framework brought into force on 25 July 2003 and is expected to conclude its review in summer 2004. The previous regulator, Oftel, had proposed further cuts in the current and next financial year.

UK operating profit before goodwill amortisation and exceptional items fell by £22 million to £1,098 million. Contributing factors included: increased investment in the acquisition and retention of the customer base; increased interconnect costs due to changes in the call mix; lower incoming revenues due to the reduction in termination rates; increased depreciation as a result of a general increase in capital expenditure; and amortisation of the 3G licence, which was charged for the first time in this year. As the Singlepoint business has a lower margin, this has diluted the margin in the second half of the year. These factors have been partially offset by operating efficiencies, including reductions in network operating costs as a percentage of turnover.

Vodafone UK announced a restructuring programme in the second half of the year which resulted in an exceptional charge of £130 million relating to staff costs, property provisions and the write down of other assets. The objective of the restructuring is to consolidate recent business acquisitions and to reorganise the customer management organisation to meet the changing needs of Vodafone UK’s customers. In addition, the business reorganised its network and technology organisations and implemented a programme to consolidate switching centres in its network. The benefits of this strategic initiative are expected to be realised through a reduction in operating expenses during the coming financial years.

Ireland

Vodafone Ireland’s turnover increased by 12% when measured in local currency, benefiting from increased voice and data usage. Blended ARPU grew from €553 to €582, in part as a result of strong growth in data revenues, which improved to represent 20.5% of service revenues for the year ended 31 March 2004, from 19.1% for the prior year. Ireland continues to have the highest levels of outgoing voice usage per customer in the Group’s controlled mobile businesses and the highest data usage in the Group’s European mobile businesses, which combine to generate the strong ARPU performance. Operating profit before goodwill amortisation and exceptional items increased by 16% when measured in local currency, principally driven by the increased turnover combined with improvements in operating efficiency.

Vodafone Ireland successfully maintained its leadership with an approximate market share of 54% and a closing customer base of 1,864,000. Phase 1 of its 3G licence obligation was met on 1 May 2003.

Annual Report 2004  Vodafone Group Plc

33

Northern Europe

				Local
	Years ended 31 March		Change	currency change
	2004	2003
	£m	£m	%	%
Turnover
Germany
– Voice services	4,123	3,699	11	3
– Data services	895	728	23	14
– Total service revenue	5,018	4,427	13	5
– Equipment and other	386	219	76	63
	5,404	4,646	16	8
Other Northern Europe	1,949	1,531	27
	7,353	6,177	19
Operating profit*
Germany	1,741	1,435	21	9
Other Northern Europe	1,451	1,077	35
	3,192	2,512	27

* Total Group operating profit before goodwill amortisation and exceptional items

Germany

Vodafone Germany performed well in the year, further improving its operational performance.

Turnover in Germany increased by 8% when measured in local currency, reflecting the increase in the customer base offset by marginally lower ARPU. Germany represents the largest mobile market in Europe in terms of customer numbers and, notwithstanding a 10% growth in the market for the 2004 financial year, penetration, at an estimated 80%, is still relatively low. Vodafone Germany’s customer base increased by 9% in the 2004 financial year. The mix of contract customers increased from 47% at 31 March 2003 to 49% at 31 March 2004, although new contract customers have been, in general, lower usage customers than the existing customer base. As a result, contract ARPU fell from €519 for the 12 months ended 31 March 2003 to €494 for the 12 months ended 31 March 2004. Prepaid ARPU remained stable at €130 during the year after increasing over the course of the prior year. Data revenues increased by 14% when measured in local currency and represented 17.4% of service revenues, up from 16.4% in the previous financial year, primarily due to Vodafone live!™ Increased investment in acquisition and retention has contributed to the improved churn rate and high customer growth.

Operating profit before goodwill amortisation and exceptional items improved by £306 million to £1,741 million, principally driven by cost efficiencies in the second half of the year, particularly in network and IT costs. Acquisition costs as a percentage of turnover were also lower over the Christmas period, in comparison to the same period in the prior financial year, due to lower handset subsidies and trade commissions. These benefits were partially offset by higher depreciation and licence amortisation costs as the 3G network was brought into use in February 2004.

Other Northern Europe

Proportionate customers for the other markets in the Northern Europe region increased by 11% to 15,575,000 in the period, including the effect of stake increases in the Netherlands, from 97.2% to 99.9%, and Hungary, from 83.8% to 87.9%.

The increase in turnover was primarily as a result of growth in the Netherlands and Hungary. In the Netherlands, the increase in revenues was principally driven by an increased contract customer base and higher data service usage and revenue. In Hungary, turnover growth followed the increase in the customer base.

Operating profit, before goodwill amortisation and exceptional items, grew principally as a result of an increase in the profits of the Group’s associated undertaking, SFR. This business reported a strong financial performance, with revenue increasing as a result of an 8% increase in the customer base to 14,370,000, and higher data revenue. Blended ARPU was broadly unchanged from the previous year. The reported results also benefited from the full year impact of an effective stake increase in the mobile business of SFR from 31.9% to 43.9% in the second half of the previous financial year.

In the Netherlands, the operating profit before goodwill amortisation and exceptional items increased following the growth in the customer base, partially offset by higher acquisition and retention costs. In Sweden, operating expenses increased significantly as a result of the cost of building out 3G network coverage, which led to a decrease in operating profit before goodwill amortisation and exceptional items.

Partner Network Agreements were signed in the year with Og Fjarskipti in Iceland, Bite GSM in Lithuania and LuxGSM in Luxembourg.

Southern Europe

				Local
	Years ended 31 March		Change	currency change
	2004	2003
	£m	£m	%	%
Turnover
Italy
– Voice services	4,346	3,656	19	10
– Data services	668	463	44	34
– Total service revenue	5,014	4,119	22	13
– Equipment and other	262	252	4	(3	)
	5,276	4,371	21	12
Other Southern Europe	4,500	3,680	22
	9,776	8,051	21
Operating profit*
Italy	2,143	1,588	35	23
Other Southern Europe	1,156	907	27
	3,299	2,495	32

* Total Group operating profit before goodwill amortisation and exceptional items

Italy

Vodafone Italy produced another strong set of results, in spite of the increasingly competitive and highly penetrated market.

In local currency, turnover increased by 12% driven by a 13% growth in service revenues, partially offset by a 3% decrease in equipment and other revenues arising from reduced handset sales. The increase in service revenue was driven by the larger customer base and increased usage, particularly of data services, partially offset by the impact of regulatory changes on interconnect rates. Data revenues improved significantly, to represent 13.3% of service revenues for the year (2003: 11.3%), mainly due to SMS but also the positive contribution from Vodafone live!™ and Mobile Connect card. Blended ARPU increased by 4% to €361 following the rise in prepaid ARPU from €298 to €309 and contract ARPU increased by 10% to €900.

Vodafone Italy responded to increased competition levels in the Italian market with continued investment in the Vodafone One loyalty scheme and retail stores, coupled with a strong focus on business and higher value customers. This contributed to the increase in ARPU and the reduction in churn.

Operating profit before goodwill amortisation and exceptional items grew significantly, partially as a result of a reduction in acquisition and retention costs, as a percentage of revenue, operational efficiencies and no accrual being made for a contribution tax levied

Vodafone Group Plc  Annual Report 2004

34

Operating and Financial Review and Prospects continued

by the local regulatory authority following a favourable European Court of Justice ruling on its legality. These factors were partially offset by higher interconnect costs, due to higher interconnect volume and increased international roaming traffic and the commencement of depreciation on the 3G network and the related licence amortisation.

Other Southern Europe
Proportionate customers for the Group’s other operations in the Southern Europe region increased by 19% during the year, including 10% arising from stake changes in the Group’s operations in Greece, Portugal, Albania and Malta.

Vodafone Spain’s turnover for the year ended 31 March 2004 increased by 22% to £2,608 million (13% when measured in local currency) as a result of a 7% rise in the customer base and improved voice and data usage, partially offset by reduced prices. Operating profit before goodwill amortisation improved due to the increased proportion of data revenue and reduced acquisition and retention costs as a percentage of turnover, partially offset by a higher proportion of depreciation and licence amortisation charges, as a result of the commencement of depreciation on the 3G network and related licence amortisation.

The results for the remaining markets in the region also improved. In Greece, turnover increased by 17%, when measured in local currency, reflecting an increase in the customer base of 9% and increased voice and data usage, partially offset by price reductions. Vodafone Greece’s operating profit before goodwill amortisation and exceptional items improved due to reduced acquisition costs and operational efficiencies. Vodafone Portugal’s turnover improved by 7%, when measured in local currency, driven by voice and data usage on top of an increase in customer numbers. Similar to Greece, Vodafone Portugal’s operating profit before goodwill amortisation and exceptional items improved due to operational efficiencies.

In February 2004 a Partner Network Agreement was signed with Cytamobile in Cyprus.

Americas

							Local
	Years ended 31 March				Change		currency change
	2004		2003
	£m		£m		%		%
Turnover
Verizon Wireless	–		–		–		–
Other Americas	–		5		(100	)
	–		5		(100	)
Operating profit/(loss)*
Verizon Wireless	1,406		1,270		11		20
Other Americas	(13	)	(51	)	(75	)
	1,393		1,219		14
* Total Group operating profit before goodwill amortisation and exceptional items

United States
The Americas Region predominantly comprises the Group’s interests in Verizon Wireless, which is accounted for using equity accounting. Accordingly, the turnover from this operation is not included in the Group’s statutory profit and loss account.

In a highly competitive US market, Verizon Wireless continues to outperform its competitors and ranked first in customer net additions for the year ended 31 March 2004. The total customer base increased by 17% over the year to 38,909,000. At 31 March 2004, US market penetration and Verizon Wireless’ market share were approximately 56% and 24%, respectively.

Churn rates continued to improve and are among the lowest in the US wireless industry despite the introduction of local number portability in the largest 100 metropolitan service areas from 24 November 2003, which allows customers to keep their phone numbers when switching providers. The low churn rate is attributable to

the quality of Verizon Wireless’ network and the success of retention programmes such as the Worry Free Guarantee^SM, which includes the New Every Two^SM plan.

In local currency, the Group’s share of Verizon Wireless’ operating profit before goodwill amortisation increased by 20%, reflecting an 18% increase in turnover, increased cost efficiencies being partially offset by increased acquisition and retention costs net of equipment revenues, as a percentage of service revenues resulting from higher gross additions and upgrade activities. Verizon Wireless’ turnover growth was driven by higher service revenue from the larger customer base and an increase in ARPU. Data products, such as picture messaging, positively contributed to an increase in data revenue of 172%, which represents 2.7% of service revenue for the current year. The rise in ARPU was primarily due to a higher proportion of customers on higher access price plans.

Verizon Wireless continued to expand its product base, with the launch during the period of the first graphics based instant messaging application and a picture messaging service to complement its data products. Additionally, Verizon Wireless began to expand its BroadbandAccess service nationally. Powered by its Evolution-Data Optimized wide-area network, BroadbandAccess commercial service will be available in many major US cities later this year.

On 23 May 2003, Verizon Wireless completed a transaction with Northcoast Communications L.L.C., to purchase 50 Personal Communications licences and related network assets for approximately $762 million in cash. The PCS licences cover large portions of the East Coast and Midwest, serving approximately 47 million people.

Other Americas
On 29 July 2003, the Group completed the disposal of its stake in the Mexican mobile operator Grupo Iusacell.

Asia Pacific

					Local
	Years ended 31 March		Change		currency change
	2004	2003
	£m	£m	%		%
Turnover
Japan
– Voice services	4,788	4,776	–		2
– Data services	1,350	1,216	11		12
– Total service revenue	6,138	5,992	2		4
– Equipment and other	1,607	1,547	4		5
	7,745	7,539	3		4
Other Asia Pacific	1,040	825	26
	8,785	8,364	5
Operating profit*
Japan	1,045	1,310	(20	)	(20	)
Other Asia Pacific	167	111	50
	1,212	1,421	(15	)
* Total Group operating profit before goodwill amortisation and exceptional items

Japan
This financial year has been challenging for Vodafone Japan due to the strength of competitor offerings.

Turnover increased by 4% in local currency to £7,745 million for the year ended 31 March 2004. The customer base increased by 7% over the year, with the proportion of lower value prepaid customers increasing to 9% from 6%. ARPU reduced by 7%, as a result of higher value contract customers migrating to competitors and the effect of new price plans and the increased prepaid customer base was felt.

Vodafone Japan’s market share, at 31 March 2004, was marginally lower, at 18.4%, than at 31 March 2003. Overall mobile penetration levels in Japan remain low

Annual Report 2004  Vodafone Group Plc

35

compared with the other markets in which the Group operates, increasing over the year from 64% to 68% at 31 March 2004. 20% of Japanese mobile users were connected to 3G network services at 31 March 2004, compared with 9% at 31 March 2003. The lack of suitable 3G handsets available for the Vodafone Global Standard W-CDMA network, compared with the range available through other operators using different 3G technologies amongst other factors, has limited Vodafone Japan’s ability to compete effectively in the 3G market. Vodafone Japan held less than 1% of the customers in the 3G market at 31 March 2004. To counteract these competitive pressures, Vodafone Japan implemented measures in October 2003 including new price plans, additional investment in the upgrade of existing customers and improved loyalty schemes, and introduced a new range of 2.5G handsets.

Operating profit before goodwill amortisation and exceptional items fell as expected, particularly in the second half of the financial year, due to higher retention costs reflecting a high volume of upgrades, increased marketing spend, higher network operating costs, an increase in provisions for slow moving handsets and a higher depreciation charge due to launch of the 3G network in December 2002.

The Group is developing a full range of 3G handsets which are expected to be available in the quarter leading up to Christmas 2004 and are expected to put Vodafone Japan in a better competitive position. However, until these handsets are introduced the necessary focus on retention and upgrades is expected to keep margins depressed. A plan is in place to improve Vodafone Japan’s performance and competitive position, focusing on cost reductions through leveraging the Group’s global scale and scope, improving the efficiency of the distribution structure, enhancing customer propositions, including new product offerings, and focusing on business customers and refining the organisational structure to ensure Vodafone Japan is more agile and commercially driven.

Other Asia Pacific
Proportionate customers for the Group’s other operations in the Asia Pacific region increased by 14% during the year, including the Group’s share of China Mobile’s customers, which is accounted for as an investment.

The increase in turnover was driven primarily by Vodafone New Zealand, resulting from a larger customer base and higher equipment revenues. Vodafone Australia also experienced turnover growth despite intense competitor activity. The operating profit of both Vodafone New Zealand and Vodafone Australia improved, due largely to the cost savings from operational efficiencies.

Vodafone Fiji increased its customer base by 25% and the operating profit improved.

China Mobile, in which the Group has a 3.27% stake, increased its customer base by 21% to 150,256,000 in the year ended 31 March 2004. ARPU continued to fall with the increase in low usage customers. Dividends totalling £25 million were received from China Mobile during the year.

The Group disposed of its interest in its Indian associate, RPG Cellular Services Ltd, during the year.

In November 2003, a Partner Network Agreement was announced with M1 in Singapore, the first Vodafone partner in this region.

Middle East and Africa

	Years ended 31 March		Change
	2004	2003
	£m	£m	%
Turnover	297	290	2
Operating profit*	273	197	39
* Total Group operating profit before goodwill amortisation and exceptional items

The Group’s operations in the Middle East and Africa region comprise Vodafone Egypt and the Group’s associated companies in South Africa (Vodacom) and Kenya (Safaricom). In addition, the Group has two Partner Network Agreements with MTC, covering Kuwait and Bahrain.

Vodafone Egypt experienced turnover growth of 41% when measured in local currency, driven mainly by strong customer growth, improved contract ARPU and increased roaming revenue. Operating profit before goodwill amortisation and exceptional items improved, principally as a result of increased roaming and operational efficiencies. The reported results were, however, affected by the continued weakness of the Egyptian Pound against Sterling.

The Group has reached a preliminary understanding with Telecom Egypt for the proposed disposal of a 16.9% stake in Vodafone Egypt, which would reduce its stake to 50.1%. In December 2003, Vodafone Egypt was listed on the Cairo and Alexandria Stock Exchange.

The Group’s associated undertakings in the region reported improved operating performance in the year, primarily as a result of strong customer growth of 24% in Vodacom and 77% in Safaricom.

Other operations

	Years ended 31 March				Change
	2004		2003
	£m		£m		%
Turnover
Europe	947		854		11
Asia Pacific	897		1,979		(55	)
	1,844		2,833		(35	)
Operating profit/(loss)*
Europe	(59	)	(138	)	(57	)
Asia Pacific	79		149		(47	)
	20		11		82
* Total Group operating profit before goodwill amortisation and exceptional items

Europe
The Group’s other operations in Europe comprise interests in fixed line telecommunications businesses in Germany (Arcor) and France (Cegetel), and Vodafone Information Systems, an IT and data services business based in Germany.

In local currency, Arcor’s turnover increased by 5%. Excluding the results of the Telematik business which was disposed of in June 2002, turnover increased by 16%, primarily due to customer and usage growth, partially offset by tariff decreases caused by the competitive market. The fixed line market leader continues to drive this intensive competition, although Arcor strengthened its position as the main competitor during the year, increasing its contract voice customers by 11%. The number of customers of Arcor’s ISDN service, Direct Access, increased by 98% to 389,000 at 31 March 2004. This revenue growth and further cost control measures resulted in a significantly improved operating loss and positive cash flow.

Cegetel has the second largest residential customer base in France. The Group increased its stake in Cegetel from 15% to 30% in the second half of the previous financial year. Following the reorganisation of the Cegetel-SFR group structure in December 2003, the Group’s effective interest in the Cegetel fixed line business, whose business was enlarged through the merger with Télécom Développement, became 28.5%.

Asia Pacific
The Group’s 66.7% controlled entity Vodafone Holdings K.K. (formerly Japan Telecom Holdings Co., Ltd.) completed the disposal of its 100% interest in Japan Telecom in November 2003. Receipts resulting from this transaction are ¥257.9 billion (£1.4 billion), comprising ¥178.9 billion (£1.0 billion) of cash, ¥32.5 billion (£0.2 billion) of transferable redeemable preferred equity and ¥46.5 billion (£0.2 billion) withholding tax recoverable, which is expected to be received in the 2005 financial year. The Group ceased consolidating the results of Japan Telecom from 1 October 2003.

Vodafone Group Plc  Annual Report 2004

36

Operating and Financial Review and Prospects continued

2003 financial year compared to 2002 financial year

Mobile telecommunications

UK & Ireland

	Years ended 31 March		Change
	2003	2002
	£m	£m	%
Turnover
United Kingdom	4,026	3,763	7
Ireland	629	477	32
	4,655	4,240	10
Operating profit*
United Kingdom	1,120	941	19
Ireland	206	113	82
	1,326	1,054	26
* Total Group operating profit before goodwill amortisation and exceptional items

The UK & Ireland Region benefited from the first full year inclusion of Vodafone Ireland, which became a subsidiary of the Group in May 2001.

United Kingdom
At 31 March 2003, Vodafone UK was, according to a quarterly review by Oftel, the largest mobile network operator in terms of mobile service revenue share for outbound calls, with a lead of seven percentage points over its nearest competitor.

During the period, Vodafone UK continued to focus on the acquisition of high value customers and as such saw increases in its contract customer base. At 31 March 2003, Vodafone UK’s in-house service provider companies accounted for 57% of the contract customer base, which includes 370,000 customers arising from the acquisition of Cellular Operations Limited during the year.

Vodafone UK continued to invest in its network infrastructure to improve network quality and maintain its position as the leading network, in terms of customer satisfaction. Vodafone UK continues to be recognised in Oftel surveys as the leading UK network, with a call success rate of 98.3%.

The revenue increase in Vodafone UK was as a result of a larger customer base and improved customer mix, activity levels and ARPU.

The improvement in the proportion of contract customers was as a result of the Group’s commercial policy to focus on high value customers. Customer activity levels also improved reflecting the improved customer mix and increased usage. Contract ARPU fell due to the continued migration of higher value prepaid customers to contract tariffs. Despite this migration, ARPU for the prepaid customer base increased due in part to the disconnection of inactive customers. Prepaid churn increased partially due to the migration of prepaid customers onto contract tariffs.

Ireland
In Ireland, strong growth in data revenues resulted in data revenues representing 19.1% of service revenues for the year ended 31 March 2003 and have exceeded 20% of service revenues since December 2002. As a result of this growth in data usage, and continued high levels of voice usage, ARPU in Ireland continued to be amongst the highest in the Group’s European businesses.

Northern Europe

				Local
	Years ended 31 March		Change	currency change
	2003	2002
	£m	£m	%	%
Turnover
Germany	4,646	4,112	13	8
Other Northern Europe	1,531	1,257	22
	6,177	5,369	15
Operating profit*
Germany	1,435	1,429	–	(3	)
Other Northern Europe	1,077	745	45
	2,512	2,174	16
* Total Group operating profit before goodwill amortisation and exceptional items

Revenues for the Northern Europe Region comprise those in respect of the Group’s subsidiaries in Germany, the Netherlands, Sweden and Hungary.

Germany
The turnover increase was driven by the improved mix in the customer base and higher usage of both voice and data services.

Contract ARPU decreased as a result of higher contract penetration, including customer migration from prepaid to contract tariffs. Prepaid ARPU increased reflecting higher usage levels.

Total Group operating profit, before goodwill amortisation and exceptional items, remained stable as the effect of the growth in turnover, as describe above, was almost entirely offset by increased costs, predominantly due to higher acquisition costs, and a higher depreciation charge as a consequence of the expenditure on network infrastructure and IT system improvements in the 2002 financial year.

Other Northern Europe
The rest of the Northern Europe Region saw turnover increase due to an increased customer base and an increase in data usage.

Total Group operating profit, before goodwill amortisation and exceptional items benefited from the increase in the Group’s effective stake in SFR from 32.0% to approximately 43.9% in January 2003.

Southern Europe

				Local
	Years ended 31 March		Change	currency change
	2003	2002
	£m	£m	%	%
Turnover
Italy	4,371	3,711	18	13
Other Southern Europe	3,680	3,032	21
	8,051	6,743	19
Operating profit*
Italy	1,588	1,267	25	18
Other Southern Europe	907	805	13
	2,495	2,072	20
* Total Group operating profit before goodwill amortisation and exceptional items

Annual Report 2004  Vodafone Group Plc

37

Italy
Vodafone Italy’s turnover increase was driven almost entirely by a 16% growth in service revenues (11% when measured in local currency). In addition, equipment sales also increased 36% as the benefits from increased handset prices more than offset the lower gross customer additions. The increase in service revenues was generated by the continued growth in the customer base, improved customer retention and increased ARPU, as the effect of higher usage levels more than offset the voluntary reduction in termination rates. The increase in blended ARPU reflected growth in contract ARPU and growth in prepaid ARPU from €297 to €298 for the same period. Data revenues increased 50% largely as a result of increases in SMS messaging.

Churn decreased primarily as a result of commercial offers and incentives focused on customer loyalty.

The improvement in total Group operating profit, before goodwill amortisation and exceptional items, was principally driven by the growth in turnover, as described above, and the continued focus on controlling acquisition and retention costs.

Other Southern Europe
The increase in results in the Group’s other interests was driven by growth in Vodafone Spain and Vodafone Greece, which saw turnover increase by 21% and 35%, respectively, (16% and 29%, respectively, when measured in local currency) as a result of growth in the customer base, with venture customer numbers in controlled operations increasing by 15% since 31 March 2002, and improved ARPU. The Southern Europe Region also experienced higher roaming revenues and significant growth in data revenues from increased SMS activity during the financial year ended 31 March 2003.

Americas

							Local
	Years ended 31 March				Change		currency change
	2003		2002
	£m		£m		%		%
Turnover
Verizon Wireless	–		–		–		–
Other Americas	5		12		(58	)
	5		12		(58	)
Operating profit*
Verizon Wireless	1,270		1,332		(5	)	5
Other Americas	(51	)	(15	)	–
	1,219		1,317		(7	)

* Total Group operating profit before goodwill amortisation and exceptional items

The Americas Region predominantly comprises the Group’s interests in Verizon Wireless and Grupo Iusacell, both of which are accounted for using equity accounting. Accordingly, the turnover from these operations are not included in the Group’s statutory profit and loss account.

The results of the Americas Region, which largely reflect the Group’s interest in Verizon Wireless, were adversely affected by the relative strength of sterling against the US dollar.

Verizon Wireless
In Verizon Wireless, total Group operating profit, before goodwill amortisation and exceptional items, decreased as a result of foreign exchange movements. When measured in local currency, total Group operating profit, before goodwill amortisation and exceptional items, increased 5%, driven by customer growth and improved usage, particularly in data revenues, which increased by 106% over the comparable period to £136 million. ARPU increased due to a focus on selling plans with higher access price points, also reflected in an increase in acquisition and retention costs.

Other AmericasThe total Group operating loss, before goodwill amortisation and exceptional items, for the other interests of the Group in the Americas Region, increased due to the deterioration in the financial performance of Grupo Iusacell.

Asia Pacific

				Local
	Years ended 31 March		Change	currency change
	2003	2002
	£m	£m	%	%
Turnover
Japan	7,539	3,323	127	132
Other Asia Pacific	825	749	10
	8,364	4,072	105
Operating profit*
Japan	1,310	523	150	152
Other Asia Pacific	111	66	68
	1,421	589	141

* Total Group operating profit before goodwill amortisation and exceptional items

The results of the Asia Pacific Region increased mainly from the full year inclusion of Vodafone Japan, which became a subsidiary of the Group on 11 October 2001.

Japan
Vodafone Japan continued to produce the highest ARPU in the Group and, although voice ARPU declined as expected, data and content revenues continued to improve. This increase was largely driven by the increase in J-Sky (now rebranded Vodafone live!™) web usage and content revenue, together with the continued success of Vodafone Japan’s other data offerings, “Sha-mail” and “Movie Sha-mail”.

Vodafone Japan’s total Group operating profit, before goodwill amortisation and exceptional items, increased as a result of the stake changes and the benefits of increased turnover and corporate efficiency initiatives. Average acquisition and retention costs reduced as a result of lower customer acquisition subsidies and more cost efficient purchasing. However, the increase in total Group operating profit, before goodwill amortisation and exceptional items, as a result of these measures was partially offset by an increase in the depreciation charge as a result of the launch of 3G services.

Other Asia PacificThe results of the Group’s other operations in the Asia Pacific Region improved principally as a result of a focus on operational efficiencies in Vodafone Australia and Vodafone New Zealand.

Middle East and Africa

	2003	2002	Change
	£m	£m	%
Turnover	290	306	(5	)
Operating profit*	197	161	22
*   Total Group operating profit before goodwill amortisation and exceptional items

In the Middle East and Africa Region, turnover, which represents the Group’s operations in Egypt, decreased as a result of the continuing devaluation of the Egyptian pound. When measured in local currency, turnover increased 17% for the year ended 31 March 2003, largely attributable to growth in the customer base, which increased over 31% to 2,263,000 at 31 March 2003.

Total Group operating profit, before goodwill amortisation and exceptional items, increased largely as a result of the Group’s Egyptian subsidiary, which focused on cost effectiveness to improve margins. The Group’s South African associate, Vodacom,

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Operating and Financial Review and Prospects continued

reported improved results as its operations in Tanzania, Lesotho and the Democratic Republic of Congo continued to grow. Safaricom also improved its profitability in the year.

Other operations

The Group’s other operations reported a total Group operating profit, before goodwill amortisation and exceptional items, of £11 million for the year ended 31 March 2003, compared with a loss of £323 million for the year ended 31 March 2002. Japan

Telecom, which became a subsidiary of the Group in October 2001, accounted for a total Group operating profit, before goodwill amortisation and exceptional items, of £149 million for the year ended 31 March 2003, compared with a loss of £17 million in the prior year, as the benefits of management’s transformation plan start to be realised. The Group’s European non-mobile businesses, principally Arcor and Cegetel, also reported reduced losses, from £306 million for the year ended 31 March 2002 to £138 million for the year ended 31 March 2003.

Summary of Key Performance Indicators (“KPIs”) for principal markets

	31 Mar 2004	31 Mar 2003	31 Mar 2002
United Kingdom
Customers (’000s)(1)	14,095	13,300	13,186
Prepaid (%)	60	59	62
Activity level (%)(1)	91	91	89
Churn (%)(1)	29.6	30.0	27.3
ARPU (£)(1)
– Prepaid	130	125	118
– Contract	551	518	555
– Blended	309	286	276
Non-voice revenue as a % of
service revenues(2)	16.1	14.4	11.8
Acquisition and retention costs
net of equipment revenues, as
a % of service revenues(3)	15.6	11.9	N/A

	31 Mar 2004	31 Mar 2003	31 Mar 2002
Germany
Customers (’000s)(1)	25,012	22,940	21,434
Prepaid (%)	51	53	57
Activity level (%)(1)	93	92	91
Churn (%)(1)	18.7	21.2	23.5
ARPU (€)(1)
– Prepaid	130	130	110
– Contract	494	519	559
– Blended	310	313	298
Non-voice revenue as a % of
service revenues(2)	17.4	16.4	14.4
Acquisition and retention costs
net of equipment revenues, as
a % of service revenues(3)	13.4	12.6	N/A

	31 Mar 2004	31 Mar 2003	31 Mar 2002
Italy
Customers (’000s)(1)	21,137	19,412	17,711
Prepaid (%)	92	92	91
Activity level (%)(1)	93	95	93
Churn (%)(1)	16.7	17.3	18.9
ARPU (€)(1)
– Prepaid	309	298	297
– Contract	900	818	769
– Blended	361	347	345
Non-voice revenue as a % of
service revenues(2)	13.3	11.3	8.7
Acquisition and retention costs
net of equipment revenues, as
a % of service revenues(3)	2.8	3.4	N/A

	31 Mar 2004	31 Mar 2003	31 Mar 2002
Japan
Customers (’000s)(1)	14,951	13,912	12,185
Prepaid (%)	9	6	4
Activity level (%)(1)	97	98	99
Churn (%)(1)	23.0	23.3	25.6
ARPU (¥)
– Prepaid	N/A	N/A	N/A
– Contract	N/A	N/A	N/A
– Blended	80,695	87,159	91,903
Non-voice revenue as a % of
service revenues(2)	21.9	20.3	15.1
Acquisition and retention costs
net of equipment revenues, as
a % of service revenues(3)	21.0	21.9	N/A

Notes:
(1)	See page 23 for definitions.
(2)	Non-voice services as a percentage of service revenues is calculated before the elimination of intercompany revenue. This performance indicator is used by management to assess the growth in data revenues. Management believes that this performance indicator provides useful information for investors regarding trends in service revenues in mobile telecommunications derived from data products and services and the extent to which customers are increasing or decreasing their use of data products such as SMS and Vodafone live!™.
(3)	Acquisition and retention costs, net of equipment revenues, as a percentage of service revenues is calculated before the elimination of intercompany revenue. This performance indicator is used by management to compare the level of acquisition and retention activity to prior periods and internal forecasts. Management believes that this performance indicator provides useful information for investors regarding trends in the costs of acquiring and retaining customers.

Annual Report 2004  Vodafone Group Plc

39

Balance Sheet

Certain comparative amounts have been restated as a result of changing accounting standards as described in note 37 “Changes in accounting standards”.

Assets
Intangible fixed assets decreased from £108,085 million at 31 March 2003 to £93,622 million at 31 March 2004, as a result of £13,095 million of goodwill amortisation and £98 million of other amortisation charges to the profit and loss account in the 2004 financial year and £2,714 million of exchange movements, partially offset by £1,434 million of goodwill arising on acquisitions made in the 2004 financial year. See “Business Overview – History and Development of the Company – Acquisitions of businesses”.

Tangible fixed assets decreased from £19,574 million at 31 March 2003 to £18,083 million at 31 March 2004 as a result of £4,362 million depreciation charges in the 2004 financial year and assets disposed of with Japan Telecom, offset by £4,751 million of additions during the year. Network infrastructure assets of £14,823 million (2003: £16,230 million) represented approximately 82% (2003: 83%) of the total tangible fixed asset base at 31 March 2004. Additions to network infrastructure in the year totalled £3,299 million. The capital expenditure on 3G network infrastructure is discussed in “Business Overview – Licences and network infrastructure”. The net book value of tangible fixed assets resulting from the disposal of Japan Telecom during the year amounted to £1,309 million.

The Group’s investments in associated undertakings reduced from £25,825 million at 31 March 2003 to £21,226 million at 31 March 2004 mainly as result of £2,830 million of exchange movements and £2,112 million of goodwill amortisation charges in the 2004 financial year.

Other fixed asset investments at 31 March 2004 totalled £1,049 million (2003: £1,164 million) and include the Group’s equity interest in China Mobile.

Current assets increased to £13,149 million from £8,591 million principally as a result of the increase in cash and liquid investments in the 2004 financial year. See “Liquidity and Capital Resources – Cash flows”.

Liabilities
The Group’s total liabilities increased by only 1.4% over the 2004 financial year.

Equity shareholders’ funds
Total equity shareholders’ funds decreased from £128,630 million at 31 March 2003 to £111,924 million at 31 March 2004. The decrease comprises the loss for the year of £9,015 million (which includes goodwill amortisation of £15,207 million and exceptional items, net of tax and minority interests, of £6 million), equity dividends of £1,378 million, net currency translation losses of £5,292 million, purchases of treasury shares of £1,088 million and £19 million of other movements, offset by the issue of new share capital of £86 million.

Equity Dividends

The table below sets out the amounts of interim, final and total cash dividends paid or, in the case of the final dividend for the 2004 financial year, proposed in respect of each financial year indicated both in pence per ordinary share and translated, solely for convenience, into cents per ordinary share at the Noon Buying Rate on each of the respective payment dates for such interim and final dividends.

	Pence per ordinary share				Cents per ordinary share
Year ended 31 March	Interim	Final		Total	Interim	Final		Total
2000	0.6550	0.6800		1.3350	1.0430	1.0227		2.0657
2001	0.6880	0.7140		1.4020	0.9969	1.0191		2.0160
2002	0.7224	0.7497		1.4721	1.0241	1.1422		2.1663
2003	0.7946	0.8983		1.6929	1.2939	1.4445		2.7384
2004	0.9535	1.0780	(1)	2.0315	1.7601	1.9305	(2)	3.6906

Notes:
(1)	The final dividend for the year was proposed on 25 May 2004 and is payable on 6 August 2004 to holders of record as of 4 June 2004.
(2)	The final dividend will be payable in US dollars to ADS holders under the terms of the deposit agreement. The final dividend in sterling has been translated at the Noon Buying Rate at 24 May 2004.

The Company has historically paid dividends semi-annually, with the regular interim dividend payable in February and the regular final dividend payable in August. The directors expect that the Company will continue to pay dividends semi-annually.

In considering the level of dividend to declare and recommend, the Board takes account of the outlook for earnings growth, operating cash flow generation, capital expenditure requirements, acquisitions and divestments together with the possibilities for debt reductions and share purchases. Accordingly, the directors are recommending a final dividend of 1.0780 pence per share, bringing the total for the year to 2.0315 pence per share, representing a 20% increase over last year’s total dividend. The Board expects progressively to increase the payout ratio in the future.

Cash dividends, if any, will be paid by the Company in respect of ordinary shares in pounds sterling or, to holders of ordinary shares with a registered address in a country which has adopted the euro as its national currency, in euro, unless shareholders wish to elect to continue to receive dividends in sterling, are participating in the Company’s Dividend Restatement Plan, or have mandated their dividend payment to be paid directly into a bank or building society account in the United Kingdom. In accordance with the Company’s Articles of Association, the sterling: euro exchange rate will be determined by the Company shortly before the payment date.

The Company will pay the ADS Depositary, The Bank of New York, its dividend in US dollars. The sterling: US dollar exchange rate for this purpose will be determined by the Company shortly before the payment date. Cash dividends to ADS holders will be paid by the ADS Depositary in US dollars.

US GAAP Reconciliation

Net loss under US GAAP for the year ended 31 March 2004 was £8,127 million (2003: £9,055 million). This compares with a net loss of £9,015 million (2003: £9,819 million) under UK GAAP. The principal differences between US GAAP and UK GAAP, as they relate to the determination of net loss, are the methods of accounting for intangible assets, capitalisation of interest and taxation.

In the year to 31 March 2004, revenues from continuing operations under US GAAP were £27,653 million compared with revenues from continuing operations under UK GAAP of £32,741 million. In the year to 31 March 2003, revenues from continuing operations under US GAAP were £22,416 million compared with revenues from continuing operations under UK GAAP of £28,547 million. The difference in both periods relates primarily to the non-consolidation of Vodafone Italy. The existence of significant participating rights of minority shareholders has required the equity method of accounting to be adopted under US GAAP rather than the full consolidation of results under UK GAAP. This has not affected the net income of the Group.

For a further explanation of the differences between UK GAAP and US GAAP, including a summary of the impact of recently issued US accounting standards, see note 36 to the Consolidated Financial Statements, “US GAAP information”.

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Operating and Financial Review and Prospects continued

Liquidity and Capital Resources

Cash flows
The major sources of Group liquidity over the three years ended 31 March 2004 have been cash generated from operations, borrowings through long term and short term issuance in the capital markets, borrowings drawn from committed bank facilities, asset disposals and, for the year ended 31 March 2002 only, the proceeds from a share issuance. The Group does not use off-balance sheet special purpose entities as a source of liquidity or for other financing purposes.

The Group’s key sources of liquidity for the foreseeable future are likely to be cash generated from operations and borrowings through long term and short term issuances in the capital markets, as well as committed bank facilities. Additionally, the Group has a put option in relation to its interest in Verizon Wireless which, if exercised, could provide material cash inflow. Please see “Option agreements”.

The Group’s liquidity and working capital may be affected by a material decrease in cash flow due to factors such as increased competition, litigation, timing of tax payments and the resolution of outstanding tax issues, regulatory rulings, delays in development of new services and networks, inability to receive expected revenues from the introduction of new services, reduced dividends from associates and investments or dividend payments to minority shareholders. See “Risk Factors”, above. The Group is also party to a number of option agreements that may result in a cash outflow if exercised. Option agreements are discussed further in “Option agreements” at the end of this section.

Wherever possible, surplus funds in the Group (except in Albania, Egypt and Hungary) are transferred to the centralised treasury department through repayment of borrowings, deposits and dividends. These are then on-lent or contributed as equity to fund Group operations, used to retire external debt or invested externally.

Increase in cash in the year
During the year ended 31 March 2004, the Group increased its net cash inflow from operating activities by 11% to £12,317 million and generated £1,069 million of net cash flow, as analysed in the following table.

The Group holds its cash and liquid investments in accordance with the counterparty and settlement risk limits of the Board approved treasury policy. The main forms of liquid investments at 31 March 2004 were collateralised deposits, money market funds and euro commercial paper.

	Year ended		Year ended
	31 March		31 March
	2004		2003
	£m		£m
Net cash inflow from operating
activities (Note 28)	12,317		11,142
Purchase of intangible fixed assets	(21	)	(99	)
Purchase of tangible fixed assets	(4,508	)	(5,289	)
Disposal of tangible fixed assets	158		109
Net capital expenditure on intangible
and tangible fixed assets	(4,371	)	(5,279	)
	7,946		5,863
Dividends from joint ventures
and associated undertakings	1,801		742
Taxation	(1,182	)	(883	)
Interest on group debt	31		(475	)
Dividends from investments	25		15
Dividends paid to minority interests	(100	)	(91	)
Net cash outflow for returns on
investments and servicing of finance	(44	)	(551	)
Free cash flow	8,521		5,171
Other net capital expenditure and
financial investment	104		(80	)
Net cash outflow from acquisitions and disposals	(1,312	)	(4,880	)
Equity dividends paid	(1,258	)	(1,052	)
Management of liquid resources	(4,286	)	1,384
Net cash outflow from financing	(700	)	(150	)
Increase in cash in the year	1,069		393

Capital expenditure and financial investment
The decrease in net cash outflow for capital expenditure and financial investment from £5,359 million for the year ended 31 March 2003 to £4,267 million for the year ended 31 March 2004 was due primarily to the timing of cash payments for tangible fixed assets.

During the year ended 31 March 2004, £21 million was spent on intangible assets, principally in respect of additional GSM spectrum in Italy. The Group’s expenditure on tangible fixed assets reduced by £781 million to £4,508 million during the 2004 financial year, including approximately £1.5 billion spent on 3G network infrastructure.

The Group expects capitalised tangible fixed asset additions to be approximately £5 billion in the next financial year. Incremental expenditure on 3G infrastructure in the 2005 financial year is expected to represent approximately 35% of total capital expenditure, and is expected to be financed through operating cash flows and existing borrowing facilities.

Dividends from associated undertakings and dividends to minority shareholders
Dividends from the Group’s associated undertakings are generally paid at the discretion of the Board of directors or shareholders of the individual operating companies and Vodafone has no rights to receive dividends, except where specified within certain of the companies’ shareholders’ agreements. Similarly, the Group does not have existing obligations under shareholders’ agreements to pay dividends to minority interest partners of Group subsidiaries, except as specified below.

Included in the dividends received from joint ventures and associated undertakings was an amount of £671 million received from Verizon Wireless. Until April 2005, Verizon

Annual Report 2004  Vodafone Group Plc

41

Wireless’ distributions are determined by the terms of the partnership agreement distribution policy and comprise income distributions and tax distributions. After the current distribution policy expires, tax distributions will continue and a new distribution policy is expected to be set by the Board of Representatives of Verizon Wireless. In making such policy determinations, the Board shall take into account relevant facts and circumstances including, without limitation, the financial performance and capital requirements of Verizon Wireless. Current projections forecast that tax distributions will not be sufficient to cover the US tax liabilities arising from the Group’s partnership interest until 2015, and in the absence of additional distributions above the level of tax distributions during this period, this will result in a net cash outflow for the Group. Under the terms of the partnership agreement, the Board has no obligation to provide for additional distributions above the level of the tax distributions.

Pursuant to changes in shareholder agreements that were effected in December 2003, from 1 January 2004 SFR commenced making scheduled quarterly dividend payments. During the year ended 31 March 2004, cash dividends totalling £802 million were received in respect of SFR’s earnings during the 2002 and 2003 financial years.

Verizon Communications has an indirect 23.1% shareholding in Vodafone Italy and, under the terms of the shareholders’ agreement, can request dividends to be paid, provided that such dividend would not impair the financial condition or prospects of Vodafone Italy including, without limitation, credit ratings. For the year ended 31 March 2004, Verizon Communications represented that it had no intention of requesting a dividend. Should circumstances change and dividends be paid in later periods, this may result in material cash outflows. At 31 March 2004, Vodafone Italy had cash on deposit with Group companies of £3,201 million.

Acquisitions and disposals
Net cash outflow from acquisitions and disposals of £1,312 million in the 2004 financial year arose primarily in respect of the business acquisitions of additional stakes in certain existing European subsidiary undertakings and the acquisition of three UK independent service providers, partially offset by the disposal of Japan Telecom. The acquisitions are described in more detail under “Business Overview –History and Development of the Company” and “Business Overview – Mobile Telecommunications” above.

An analysis of the main transactions in the year ended 31 March 2004 is shown below.

	£m
Acquisitions:
Vodafone Portugal	(410	)
Vodafone Netherlands	(144	)
Vodafone Greece	(815	)
Singlepoint	(417	)
Other acquisitions	(278	)
Net cash acquired with subsidiary undertakings	10
Disposals:
Japan Telecom	966
Other disposals	34
Net cash disposed of with subsidiary undertakings	(258	)
	(1,312	)

Share purchase programme
When considering how increased returns to shareholders can be provided in the form of dividends and share purchases, the Board reviews the free cash flow, anticipated cash requirements and gearing of the Group.

On 18 November 2003, the directors decided to introduce a share purchase programme and allocated £2.5 billion to this programme. Shares have been

purchased on market on the London Stock Exchange in accordance with shareholder approval obtained at the Annual General Meeting (“AGM”) in July 2003 and which expires at the conclusion of the Company’s AGM on 27 July 2004. The maximum share price payable for any share purchase is no greater than 105% of the average of the middle market closing price of the Company’s share price on the London Stock Exchange for the five business days immediately preceding the day on which any shares were contracted to be purchased. Purchases are made only if accretive to EPS, before goodwill amortisation and exceptional items. In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 issued on 1 December 2003, shares purchased are held in treasury.

For the period from 1 December 2003 to 31 March 2004, 800 million shares for a total consideration of £1.1 billion, including stamp duty and broker commissions, were purchased. The average share price paid, excluding transaction costs, was 135.3 pence, compared with the average volume weighted price over the same period of 137.5 pence.

The Board intends to decide the amount to allocate to the share purchase programme on an annual basis at the end of each financial year. In addition to the £1.1 billion already expended, £3 billion of shares are planned to be purchased during the next year, starting in early June 2004, subject to maintenance of credit ratings, superseding the £2.5 billion announced in November 2003. Because shareholder approval to purchase shares expires on 27 July 2004, this amount is subject to receiving renewed shareholder approval on 27 July 2004 at the AGM. In addition to ordinary market purchases, the Company currently plans to purchase shares over its close periods by selling short dated put options, subject to receiving shareholder approval at the AGM, and by placing irrevocable purchase instructions, both prior to the start of a close period.

Further details of shares purchased under the programme during the 2004 financial year are shown in note 23.

From 1 April 2004 through to 8 June 2004, 189.5 million shares for a total consideration of £242 million, including stamp duty and broker commissions, were purchased.

Funding
As a result of the cash flow items discussed above and £144 million of foreign exchange movements, the Group’s consolidated net debt position at 31 March 2004 decreased to £8,488 million, from £13,839 million at 31 March 2003. This represented approximately 10% of the Group’s market capitalisation at 31 March 2004 compared with 18% at 31 March 2003. Average net debt at month end accounting dates over the twelve month period ended 31 March 2004 was £11,164 million, and ranged between £8,488 million and £13,839 million during the year.

A further analysis of net debt, including a full maturity analysis, can be found in notes 18 and 19 to the Consolidated Financial Statements.

The Group remains committed to maintaining a solid credit profile, as currently demonstrated by its stable credit ratings of P-1/F1/A-1 short term and A2/A/A long term from Moody’s, Fitch Ratings and Standard & Poor’s, respectively. Credit ratings are not a recommendation to purchase, hold or sell securities, in as much as ratings do not comment on market price or suitability for a particular investor, and are subject to revision or withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently.

The Group’s credit ratings enable it to have access to a wide range of debt finance including commercial paper, bonds and committed bank facilities.

Commercial paper programmes
The Group currently has US and euro commercial paper programmes of $15 billion and £5 billion, respectively, which are available to be used to meet short term liquidity requirements and which were undrawn at 31 March 2004 and 31 March 2003. The commercial paper facilities are supported by $10.4 billion (£5.7 billion) of committed bank facilities, comprised of a $5.5 billion Revolving Credit Facility that matures in June 2004, but which can be extended for one year, and a $4.9 billion Revolving Credit Facility that matures in June 2006. As at 31 March 2004, no amounts had been drawn under either facility.

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Operating and Financial Review and Prospects continued

Bonds
The Group has a €15 billion Medium Term Note programme and a $12 billion US shelf programme, both of which are used to meet medium to long term funding requirements. At 31 March 2004, amounts of €9.2 billion and $nil, respectively, were in issue from these programmes.

The following table provides a summary of the Group’s bond issues, each of which have been undertaken since 1 April 2003 for general corporate purposes, including working capital.

Bond issues during 2004 financial year

10 April 2003
$500m 5.375% bond with maturity 30 January 2015€500m 5.125% bond with maturity 10 April 2015€250m 4.625% bond with maturity 31 January 2008

4 June 2003
£150m 6.25% bond with maturity 10 July 2008
€750m 5.0% bond with maturity 4 June 2018

26 June 2003
$500m 4.625% bond with maturity 15 July 2018

22 September 2003
$1,000m 5.0% bond with maturity 16 December 2013

4 December 2003
£250m 5.625% bond with maturity 4 December 2025

On 22 April 2003, Vodafone Americas, Inc. cancelled the following bonds after repurchase by tender:

Bond buy backs in the 2004 financial year

$137.8m of $200m 6.35% bond with maturity 2005
$182.3m of $400m 7.50% bond with maturity 2006
$249.8m of $500m 6.65% bond with maturity 2008
DEM 308.4m of DEM 400m bond with maturity 2008

With respect to the US dollar bonds, a total cash payment of $658 million was made to acquire 68.9%, 45.6% and 50.0% of the 2005, 2006 and 2008 issues respectively. The DEM bond repurchase resulted in a total cash payment of €175 million to acquire 77.1% of the issue.

As at 31 March 2004, the Group had a total of £12,428 million of capital market debt in issue.

Committed facilities
The following table summarises the committed bank facilities currently available to the Group.

Committed Bank Facilities	Amounts drawn
29 November 2001 ¥225 billion term credit facility, maturing 15 January 2007, entered into by Vodafone Finance K.K.	The facility was drawn down in full on 15 October 2002. The facility is available for general corporate purposes, although amounts drawnmust be on-lent to Vodafone Group Plc.
26 June 2003 $5.5 billion 364-day Revolving Credit Facility, maturing 25 June 2004 with an option to extend for one year.	No drawings have been made against this facility. The facility supports the Group’ s commercial paper programmes and may be used to fund working capital requirements.
26 June 2003 $4.9 billion Revolving Credit Facility, maturing 26 June 2006.	No drawings have been made against this facility.The facility supports the Group’ s commercial paper programmes and may be used for general corporate purposes including acquisitions.

Under the terms and conditions of the $10.4 billion bank facilities, lenders have the right, but not the obligation, to cancel their commitments and have outstanding advances repaid no sooner than 30 days after notification of a change of control of the Company. The facility agreements provide for certain structural changes that do not affect the obligations of the Company to be specifically excluded from the definition of a change of control. This is in addition to the rights of lenders to cancel their commitment if the Company has committed an event of default.

Substantially the same terms and conditions apply in the case of Vodafone Finance K.K.’s ¥225 billion term credit facility, although the change of control provision is applicable to any guarantor of borrowings under the term credit facility. As of 31 March 2004, the Company was the sole guarantor.

In addition, Vodafone Japan has fully drawn bilateral facilities totalling ¥12.1 billion (£63 million). These bilateral bank facilities expire at various dates up to January 2007.

Furthermore, certain of the Group’s subsidiary undertakings are funded by external facilities which are non-recourse to any member of the Group other than the borrower, due to the level of country risk involved. These facilities may only be used to fund their operations. Vodafone Egypt has a partly drawn syndicated bank facility of EGP 2.0 billion (£176 million) that fully expires in September 2007, Vodafone Hungary has a partly drawn syndicated bank facility of €350 million (£234 million), drawn in or swapped into Hungarian forints, that fully expires in December 2008 and Vodafone Albania has committed facilities of €85 million (£57 million) that expire at various dates up to and including October 2012.

In aggregate, the Group has committed facilities of approximately £7,366 million, of which £5,793 million was undrawn at 31 March 2004.

The Group believes that it has sufficient funding for its expected working capital requirements. Further details regarding the maturity, currency and interest rates of the Group’s gross borrowings at 31 March 2004 are included in note 19 to the Consolidated Financial Statements.

Financial assets and liabilities
Details of the Group’s treasury management and policies are set out below in “Quantitative and Qualitative Disclosures About Market Risk”. Analyses of financial assets and liabilities, including the maturity profile of debt, currency and interest rate structure, are included in notes 18 and 19 to the Consolidated Financial Statements.

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43

Contractual obligations
A summary of the Group’s principal contractual financial obligations is shown below. Further details on the items included can be found in the notes to the Consolidated Financial Statements.

			Payments due by period £m (years)
Contractual obligations	Total	<1 year	1-3 years	3-5 years	>5 years
Short term debt	2,054	2,054	–	–	–
Long term debt	12,224	–	3,256	1,698	7,270
Operating lease commitments	2,737	586	661	474	1,016
Capital commitments	866	866	–	–	–
Purchase commitments	957	890	39	10	18
Preference shares	875	12	–	–	863
Total contractual cash obligations	19,713	4,408	3,956	2,182	9,167

An analysis of the Group’s commitments under short and long term debt is shown in note 19 and commitments under operating leases in note 26 to the Consolidated Financial Statements.

Capital commitments shown in the table above are estimated to represent approximately 17% of the Group’s total capital expenditure in the 2005 financial year and are primarily related to network infrastructure. Purchase commitments predominantly comprise commitments for handsets.

The above table of contractual obligations excludes potential cash outflows of up to £2.6 billion in relation to additional investments in Japan that were announced on 25 May 2004 (see note 33 to the Consolidated Financial Statements), commitments in respect of options over interests in Group businesses held by minority shareholders (see “Option agreements”) and obligations to pay dividends to minority shareholders (see “Dividends from associated undertakings and dividends to minority interests”). Disclosures required by FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, are provided in note 27 to the Consolidated Financial Statements.

Option agreements
Potential cash inflows
As part of the agreements entered into upon the formation of Verizon Wireless, the Company entered into an Investment Agreement with Verizon Communications, formerly Bell Atlantic Corporation, and Verizon Wireless. Under this agreement, dated 3 April 2000, the Company has the right to require Verizon Communications or Verizon Wireless to acquire interests in the Verizon Wireless partnership from the Company with an aggregate market value of up to $20 billion during certain periods up to August 2007, dependent on the value of the Company’s 45% stake in Verizon Wireless. This represents a further potential source of liquidity to the Group.

Exercise of the option may occur in either one or both of two phases. The Phase I option may be exercised during the period commencing 30 days before and ending 30 days after 10 July 2004 and provides for the aggregate amount paid to not exceed $10 billion. The Phase II Option may be exercised during the periods commencing 30 days before and ending 30 days after any one or more of 10 July 2005, 10 July 2006 and 10 July 2007. The Phase II Option also limits the aggregate amount paid to $20 billion, less any amounts paid under Phase I, and caps the payments under single exercises to $10 billion. Determination of the market value of the Company’s interests will be by mutual agreement of the parties to the transaction or, if no such agreement is reached within 30 days of the valuation date, by appraisal. If an initial public offering takes place and the common stock trades in a regular and active market, the market value of the Company’s interest will be determined by reference to the trading price of common stock.

Potential cash outflows
In respect of the Group’s interest in the Verizon Wireless partnership, an option granted to Price Communications, Inc. by Verizon Communications is exercisable at any time up to and including 15 August 2006. The option gives Price Communications, Inc. the right to exchange its preferred limited partnership interest in Verizon Wireless of the East LP for either equity of Verizon Wireless (if an initial public offering of such equity occurs), or common stock of Verizon Communications. The option exercise would result in an exchange for shares at a fixed value of $1.113 billion plus a preferred allocation of profits from Verizon Wireless of the East LP on a quarterly basis, but not to exceed 2.9151% per annum. If the exercise occurs, Verizon Communications has the right, but not the obligation, to contribute the preferred interest to the Verizon Wireless partnership, diluting the Group’s interest. However, the Group also has the right to contribute further capital to the Verizon Wireless partnership in order to maintain its percentage partnership interest at the level just prior to the exercise of the option. Such amount would not exceed $1 billion.

Pursuant to an August 1999 shareholder agreement concerning the formation of Vodafone Hungary, Antenna was granted a put option in respect of its interest in Vodafone Hungary. On 7 October 2002 this put option was amended. The amended option gives Antenna the right, but not the obligation, to sell its remaining interest to the Group should its total interest be diluted below 10% of the capital of Vodafone Hungary as a result of a capital increase. The option price is the lower of fair market value or contributed capital plus accretion at the lower of inflation or Budapest interbank offered rate plus 1%. Antenna currently holds a 12.1% interest in Vodafone Hungary.

On 26 November 2002, an option was granted to France Telecom that gives it the right, but not the obligation, to buy 43,561,703 shares (representing a 10.85% stake) in Vodafone Greece at a price of €14.29 per share, following the purchase by the Group of 58,948,830 shares in Vodafone Greece from France Telecom. France Telecom may exercise this option (in whole or in part) at any time until maturity on 29 November 2004. Furthermore, the option will expire when none of France Telecom’s exchangeable notes (maturing on 29 November 2004) with regard to Vodafone Greece remain outstanding. On exercise of the option, the Group would pay in cash the excess of the Vodafone Greece share price over €14.29 per share. At 31 March 2004, Vodafone Greece’s share price was €6.00 per share and the Company is in the process of de-listing its shares, following its tender offer and market purchases resulting in an increase of the Group’s consolidated shareholding to 99.4%.

On 27 November 2003, Vodafone Jersey Holdings Ltd was granted a call option over 20% of the issued ordinary share capital of MTC Vodafone (Bahrain) BSCC. The option is exercisable in two tranches. Tranche one is exercisable at par at any time on or after 28 December 2004 but before 28 December 2007. Tranche two is exercisable at par plus 20% at any time on or after 28 December 2007 but before 28 December 2009.

On 31 December 2003, as part of the restructuring described within “History and Development of the Company”, the Group’s associate investment, SFR, granted a put option to SNCF over its 35% shareholding in Cegetel. SNCF may exercise the put option, consisting of 4,982,353 shares, at any time during the period 1 January 2007 to 31 March 2010 and SNCF has been granted a value floor for the option of an aggregate amount equal to the sum of EUR 183 million plus such amount of interest as has accrued at the euro overnight index average rate on the sum of €32 million between 31 December 2003 and the date on which the transfer of the SNCF shareholding to SFR occurs. Furthermore, the option exercise may be accelerated in certain circumstances. Reciprocally, SNCF has granted SFR a call option over the 35% stake, which may be exercised at any time between 1 April 2010 and 30 June 2013.

As part of ongoing discussions and negotiations with Telecom Egypt, in which it would acquire a minority stake in Vodafone Egypt and enter into a Joint Venture with the Vodafone Group, it has been agreed in principle to grant a put option to Telecom Egypt

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44

Operating and Financial Review and Prospects continued

over its direct and indirect stake in Vodafone Egypt. The option will give Telecom Egypt the right to put its shares back to the Group at fair market value. If agreed, this right is expected to remain for as long as the Group owns in excess of 20% of Vodafone Egypt. Telecom Egypt acquired 8.6% of Vodafone Egypt in December 2003 and is expected to acquire a further 16.9% from the Group in 2004, thereby enabling it to contribute 25.5% of Vodafone Egypt shares to a 50:50 joint venture with the Group.

Off-balance sheet arrangements
The Group does not use off-balance sheet special purpose entities as a source of liquidity or for other financing purposes. Please refer to notes 26 and 27 to the Consolidated Financial Statements for a discussion of the Group’s off-balance sheet arrangements.

Quantitative and Qualitative Disclosures About Market Risk
The Group’s treasury function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk management. Treasury operations are conducted within a framework of policies and guidelines authorised and reviewed annually by the Company’s Board of directors, most recently on 20 January 2004. A Treasury Risk Committee, comprising of the Group’s Financial Director, Company Secretary, Treasurer, Financial Controller and Director of Financial Reporting, meets quarterly to review treasury activities and management information relating to treasury activities. In accordance with the Group treasury policy a quorum for meetings is four members and either the Financial Director or Company Secretary must be present at each. The Group accounting function provides regular update reports of treasury activity to the Board of directors. The Group uses a number of derivative instruments that are transacted, for risk management purposes only, by specialist treasury personnel. The Group’s internal auditors review the internal control environment regularly. There has been no significant change during the financial year, or since the end of the year, to the types of financial risks faced by the Group or the Group’s approach to the management of those risks.

Funding and liquidity
The Group’s policy is to borrow centrally, using a mixture of long term and short term capital market issues and borrowing facilities, to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are on-lent or contributed as equity to certain subsidiaries. The Board of directors has approved three debt protection ratios, being: net interest to operating cash flow (plus dividends from associated undertakings); retained cash flow (operating cash flow plus dividends from associated undertakings less interest, tax, dividends to minorities and equity dividends) to net debt; and operating cash flow (plus dividends from associated undertakings) to net debt. For each of these ratios, net debt includes financial guarantees and redeemable preference shares.

These internal ratios establish levels of debt that the Group should not exceed other than for relatively short periods of time and are shared with Moody’s, Fitch Ratings and Standard & Poor’s.

Interest rate management
The Group’s main interest rate exposures are to euro and yen and, to a lesser extent, US dollar and sterling interest rates. Under the Group’s interest rate management policy, interest rates on monetary assets and liabilities are maintained on a floating rate basis, unless the forecast interest charge for the next eighteen months is material in relation to forecast results, in which case interest rates are fixed. In addition, fixing shall be undertaken for longer periods when interest rates are statistically low. The term structure of interest rates is managed within limits approved by the Board, using derivative financial instruments such as swaps, futures, options and forward rate agreements.

At the end of the year, 20% (2003: 9%) of the Group’s gross borrowings were fixed for a period of at least one year. A one hundred basis point rise in market interest

rates for all currencies in which the Group had borrowings at 31 March 2004 would adversely affect profit before taxation by approximately £21 million. The interest rate management policy has remained unaffected by the acquisitions completed during the financial year. Note 19 to the Consolidated Financial Statements contains analysis of the Group’s currency and interest profile of financial liabilities.

Foreign exchange management
Foreign currency exposures arising from known future external transactions above certain de minimis levels are hedged, including those resulting from the repatriation of international dividends and loans. Forward foreign exchange contracts are the derivative instrument most used for this purpose.

Although the Group reports its balance sheet in sterling, which is the principal currency for most transactions undertaken in its shares, it does not hedge its foreign currency balance sheet exposure for three reasons. First, the Group believes its shareholders principally value its shares by discounting its estimated future sterling and foreign currency cash flows and converting to sterling at appropriate rates where necessary. Secondly, the Group manages the currency of its net debt according to banded multiples of those currencies’ operating cash flows, adjusted for dividends and share purchases. As such, at 31 March 2004, 119% of net debt were denominated in currencies other than sterling (59% euro, 57% yen and 3% US dollar) and 19% of net debt had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via share purchases and dividends. This allows debt to be serviced in proportion to anticipated cash flows and therefore provides a partial hedge against profit and loss account translation exposure, as interest costs will be denominated in foreign currencies. Thirdly, certain overseas businesses have foreign currency acquisition goodwill allocated whilst other assets do not, therefore making balance sheet comparisons difficult. A relative weakening in the value of sterling against certain currencies of countries where the Group operates has resulted in a currency translation adjustment charge of £5,292 million to Group reserves in the year ended 31 March 2004 (2003: £9,039 million credit).

When the Group’s international net earnings for 2004 are retranslated using a 10% strengthening/weakening of sterling against all exchange rates, the 2004 total Group operating loss would be reduced/increased by £451 million (2003: £595 million).

Counterparty risk management
Cash deposits and other financial instrument transactions give rise to credit risks on the amounts due from counterparties. The Group regularly monitors these risks and the credit ratings of its counterparties and, by policy, limits the aggregate credit and settlement risk it may have with one counterparty. While these counterparties may expose the Group to credit losses in the event of non-performance, it considers the possibility of material loss to be acceptable because of these control procedures. Additional information is set out in notes 19 and 20 to the Consolidated Financial Statements.

Trend Information and Outlook
Seasonality
The Group’s financial results and cash flows have not, historically, been subject to significant seasonal trends between the first and second half of the financial year, though there are a number of offsetting trends.

Traditionally, the Christmas period sees a higher volume of customer connections, contributing to higher equipment and connection revenues in the second half of the financial year. Ongoing airtime revenues also demonstrate signs of seasonality, with revenues generally lower during February, which is a shorter than average month, and revenues from roaming charges higher during the summer months as a result of increased travel by customers.

There is no assurance that these trends will continue in the future.

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45

Outlook
For the year ending 31 March 2005
In the coming year, on an organic basis, the Group anticipates high single-digit average proportionate mobile customer growth, leading to growth in Group turnover the 2005 financial year compared to the 2004 financial year.

The ongoing impact of the commercial launch of 3G services is expected to increase depreciation and amortisation by around £0.6 billion in the 2005 financial year.

Factors that may affect the Group’s future tax charge include the absence of one-off restructuring benefits, the resolution of open issues, future planning opportunities, corporate acquisitions and disposals, and changes in tax legislation and rates.

For the 2005 financial year, total capitalised fixed asset additions are expected to be around £5 billion, slightly higher than the £4.8 billion for the year ended 31 March 2004, mainly due to deferred investment from that year.

Free cash flow is expected to be around £7 billion, lower than in the 2004 financial year, due to:

–  the inclusion in that year of:
•	£0.6 billion of one-off receipts from hedging instruments; and
•	£0.2 billion of free cash flow from the fixed line business in Japan which has been sold,
–  together with higher cash expenditure expected in the 2005 financial year on:
•	approximately £1 billion of additional capital expenditure, mainly due to the unwinding of capital creditors; and
•	tax payments, which are expected to be under £2 billion.

Non-GAAP Information

In presenting and discussing the Group’s reported results, free cash flow is calculated and presented on the basis of methodologies other than in accordance with UK GAAP.

The Group believes that it is both useful and necessary to communicate this non-GAAP measure to investors and other interested parties, for the following reasons:

–   this statement allows the Company and external parties to evaluate the Group’s liquidity and the cash generated by the Group’s operations. Free cash flow does not include cash flows relating to acquisitions and disposals or financing activities and so reflects the cash available for such activities, to strengthen the balance sheet or to provide returns to shareholders in the form of dividends or share repurchases;

–   it facilitates comparability of results with other companies; and,

–   it is useful in connection with discussion with the investment analyst community and the debt rating agencies.

A reconciliation of net cash flow inflow from operating activities, the closest equivalent GAAP measure, to free cash flow, is shown below:

	Years ended 31 March
	2004		2003		2002		2001		2000
	£m		£m		£m		£m		£m
Net cash inflow from operating activities	12,317		11,142		8,102		4,587		2,510
Purchase of intangible fixed assets	(21	)	(99	)	(325	)	(13,163	)	(185	)
Purchase of tangible fixed assets	(4,508	)	(5,289	)	(4,145	)	(3,698	)	(1,848	)
Disposal of tangible fixed assets	158		109		75		275		294
Dividends received from joint ventures and associated undertakings	1,801		742		139		353		236
Taxation	(1,182	)	(883	)	(545	)	(1,585	)	(325	)
Net cash outflow for returns on investments and servicing of finance	(44	)	(551	)	(936	)	(47	)	(406	)
Free cash flow	8,521		5,171		2,365		(13,278	)	276

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Board of Directors and Group Executive Committee

Directors and Senior Management

The business of the Company is managed by its Board of directors. The Company’s Articles of Association provide that, until otherwise determined by ordinary resolution, the number of directors will not be less than three.

Biographical details of the directors and senior management are as follows:

Directors

Chairman

Lord MacLaurin of Knebworth, DL, aged 67, has been a member of the Board of directors since January 1997. He is Chairman of the Nominations and Governance Committee and a member of the Remuneration Committee. Lord MacLaurin was Chairman of Tesco Plc from 1985 to 1997 and has been a director of Enterprise Oil Plc, Guinness Plc, National Westminster Bank Plc and Whitbread Plc.

Deputy Chairman

Paul Hazen, aged 62, has been a member of the Board of directors since June 1999 and became Deputy Chairman and the Board’s nominated senior non-executive director in May 2000. He is Chairman of the Audit Committee and a member of the Nominations and Governance Committee. He became a director of AirTouch in April 1993. In 2001, he retired as Chairman and Chief Executive Officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo Bank, NA. Paul Hazen is also a director of Safeway, Inc., Willis Group Holdings Limited, Xstrata AG and E.piphany and he is Chairman of Accel-KKR.

Executive directors

Arun Sarin, Chief Executive, aged 49, has been a member of the Board of directors since June 1999 and is a member of the Nominations and Governance Committee. He was a director of AirTouch from July 1995 and was President and Chief Operating Officer from February 1997 to June 1999. He was Chief Executive Officer for the United States and Asia Pacific region until 15 April 2000, when he became a non-executive director. He was appointed Chief Executive after the AGM on 30 July 2003. Arun Sarin joined Pacific Telesis Group in San Francisco in 1984 and has served in many executive positions in his 20 year career in telecommunications. He has also served as a director of The Gap, Inc., The Charles Schwab Corporation and Cisco Systems, Inc.

Julian Horn-Smith, Group Chief Operating Officer, aged 55, has been a member of the Board of directors since June 1996. He was appointed Group Chief Operating Officer on 1 April 2001, having been Chief Executive of Vodafone’s Continental Europe businesses and a director of several of the Group’s overseas operating companies. He is responsible for ensuring the operating performance of Group businesses. Julian Horn-Smith is the Chairman of the Supervisory Board of Vodafone Deutschland GmbH and is a non-executive director of Smiths Group Plc.

Peter Bamford, Chief Marketing Officer, aged 50, has been a member of the Board of directors since April 1998. He is responsible for the full range of marketing and commercial activities including brand, product development, content management, Partner Networks and global accounts. He is also responsible for the Group’s operations in the UK & Ireland. Previously, he was Chief Executive, Northern Europe, Middle East & Africa Region. He was Managing Director of Vodafone UK until April 2001. Before joining Vodafone in 1997, Peter Bamford held senior positions with Kingfisher Plc and Tesco Plc and was a director of WH Smith Plc.

Vittorio Colao, Chief Executive, Southern Europe, Middle East and Africa Region, aged 42, joined the Board of directors on 1 April 2002. He has had responsibility for the Group’s businesses in Southern Europe since April 2001. He spent the early part of his career at McKinsey & Co, where he was a Partner, before joining Omnitel Pronto Italia S.p.A. as its Chief Operating Officer. In 1999, he became the Chief Executive Officer of

Omnitel Pronto Italia S.p.A. (now operating as Vodafone Italy). Vittorio Colao is currently a member of the Aspen Institute and non-executive director of RAS Insurance in Italy.

Thomas Geitner, Chief Technology Officer, aged 49, has been a member of the Board of directors since May 2000. He is responsible for Group Technology & Business Integration and will be leading the implementation of a standardised architecture for business processes, Information Technology and network systems. Prior to joining the Group, he was a member of the Management Board of RWE AG. Thomas Geitner is a member of the Management Board of Vodafone Holding GmbH and Vodafone Deutschland GmbH and a member of the supervisory board of Singulus Technologies AG.

Ken Hydon, Financial Director, aged 59, has been a member of the Board of directors since 1985. He is a Fellow of the Chartered Institute of Management Accountants, the Association of Chartered Certified Accountants and the Association of Corporate Treasurers. He is a director of several subsidiaries of the Company and is a member of the Board of Representatives of the Verizon Wireless partnership in the United States. Ken Hydon has recently been appointed a non-executive director of Reckitt Benckiser Plc and Tesco Plc. He will retire from the Board on conclusion of the AGM in 2005.

Non-executive directors

Dr. Michael Boskin, aged 58, has been a member of the Board of directors since June 1999 and is a member of the Remuneration Committee and the Audit Committee. He was a director of AirTouch from August 1996 to June 1999. He has been a Professor of Economics at Stanford University since 1971 and was Chairman of the President’s Council of Economic Advisers from February 1989 until January 1993. Dr Boskin is President and CEO of Boskin & Co., an economic consulting company, and is also a director of Exxon Mobil Corporation, First Health Group Corp. and Oracle Corporation.

Professor Sir Alec Broers, aged 65, has been a member of the Board of directors since January 1998 and is a member of the Audit Committee and the Nominations and Governance Committee. He is President of the Royal Academy of Engineering and a former Vice-Chancellor of Cambridge University. He spent many years with IBM and is a Fellow of the Royal Society, the Institute of Electrical Engineers and the Institute of Physics. He is also a Foreign Associate of the US National Academy of Engineering. Professor Sir Alec Broers chairs the Vodafone Group Foundation and the Company’s UK pension trustee company. On 1 May 2004, it was announced that Her Majesty the Queen intends to make him a Life Peer in recognition of his contribution to engineering and higher education.

John Buchanan, aged 61, has been a member of the Board of directors since April 2003. He is a member of the Audit Committee and, solely for the purposes of relevant legislation, is the Board’s appointed financial expert on that Committee. He retired from the Board of BP Plc in 2002 after six years as Group Chief Financial Officer and executive director following a wide-ranging career with the company. He was a member of the United Kingdom Accounting Standards Board from 1997 to 2001. He is the senior independent director of BHP Billiton Plc and a non-executive director of AstraZeneca Plc.

Penny Hughes, aged 44, has been a member of the Board of directors since September 1998, and is the Chairman of the Remuneration Committee. She has held posts with The Coca-Cola Company, Next Plc and Body Shop International Plc. She has particular expertise in marketing and has developed experience in many human resource areas, including leadership development, motivation and retention. Penny Hughes is a member of the advisory committee of Bridgepoint Capital Limited and is a non-executive director of Scandinaviska Enskilda Banken AB, Trinity Mirror Plc and The Gap, Inc.

Sir David Scholey CBE, aged 68, has been a member of the Board of directors since March 1998. He is a member of the Nominations and Governance Committee and the Audit Committee. He is Chairman of Close Brothers Group Plc, a non-executive director of Anglo American Plc and Chubb Corporation, USA and is an

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47

adviser to UBS AG, Mitsubishi Corporation and IBCA-Fitch. Sir David was formerly a director of the Bank of England and a Governor of the British Broadcasting Corporation. He will retire from the Board on conclusion of the AGM in 2005.

Professor Jürgen Schrempp, aged 59, has been a member of the Board of directors since May 2000 and is a member of the Nominations and Governance Committee and Remuneration Committee. He has been Chairman of the Board of Management of DaimlerChrysler AG since 1998. From 1995 until 1998 he was Chairman of the Board of Management of Daimler-Benz AG. He was a member of the Supervisory Board of Mannesmann AG until May 2000. Professor Jürgen Schrempp serves on the supervisory board of Allianz AG and is a member of the Board of directors of Richemont SA and Sasol Limited.

Luc Vandevelde, aged 53, was appointed to the Board on 1 September 2003 and is a member of the Remuneration Committee. Chairman of Marks & Spencer Group Plc, one of the UK’s leading retailers of clothing, foods, homeware and financial services, from 2000 to 2004, he was previously Chairman of Promodes, Vice Chairman of Carrefour, and he had held senior European and international roles with Kraft General Foods. Luc Vandevelde is Executive Chairman of Change Capital Partners, a private equity fund, and is a non-executive director of Carrefour SA.

Senior Management

Members of the Group Executive Committee who are not also executive directors are regarded as senior managers of the Company. The Group Executive Committee comprises the executive directors, details of whom are shown above, and the senior managers listed below. Tomas Isaksson was also a member of the Group Executive Committee until 1 April 2004, when he stepped down on taking up his appointment as Chief Executive of Vodafone Netherlands.

Further details of the Group Executive Committee can also be found under “Corporate Governance – Directors and Organisation”.

Brian Clark, Chief Executive, Asia Pacific Region, aged 55, was appointed to this position, based in Japan, on 1 January 2003. He joined Vodafone in 1997. Prior to joining Vodafone he was Managing Director and Chief Executive Officer of Telkom SA Limited, South Africa. He is also a non-executive director of National Australia Bank Limited.

Alan Harper, Group Strategy Director, aged 47, joined Vodafone in 1995 as Group Commercial Director and he subsequently became Managing Director of Vodafone Limited, the UK network operating company. He was appointed Group Strategy Director in July 2000. Prior to joining the Group he held the post of Business Strategy Director with Mercury One2One and senior roles with Unitel and STC Telecoms. He is also a member of the Group Operations Committee and Group Policy Committee, a member of the Vodafone D2 Supervisory Board and Chairman of the Vodafone UK Foundation.

Jürgen von Kuczkowski, Chief Executive, Northern Europe Region, aged 63, was appointed to this position on 1 July 2003. He was previously the Chief Executive, Central Europe Region. He joined Mannesmann Mobilfunk GmbH (now Vodafone D2 GmbH) in October 1990, initially as Director of Sales and Distribution, and he became Chief Executive Officer in 1994.

Stephen Scott, Group General Counsel and Company Secretary, aged 50, was appointed to this position in the Group in 1991, prior to which he was employed in the Racal Group legal department, having moved into industry in 1980 from private law practice in London. He is a director of the Company’s UK pension trustee company and insurance companies and is a member of the Group Policy Committee.

Phil Williams, Group Human Resources Director, aged 53, was appointed to this position in the Group in 1989. In addition to his Human Resources responsibilities, he is the senior Vodafone nominated director on the Board of Vodacom Group (Pty) Limited, the Group’s South African associate company. He is also a director of several Group companies, a director of the Group Foundation and the UK pension trustee company. He is a member of the Group Policy Committee. Prior to joining the Group, he was Personnel Director with Costain and Burmah Castrol.

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Directors’ Report

Review of the Group’s Business

The Group is involved principally in the provision of mobile telecommunications services. A review of the development of the business of the Company and its subsidiary, joint venture and associated undertakings is contained elsewhere in this Annual Report. Details of the Company’s principal subsidiary undertakings, associated undertakings and investments can be found in note 34 to the Consolidated Financial Statements.

Future developments

The Group is currently involved in the expansion and development of its mobile telecommunications and related businesses as described elsewhere in this Annual Report.

Corporate governance

The directors are committed to business integrity and professionalism. As an essential part of this commitment the Board supports high standards of corporate governance and its statement on corporate governance is set out on pages 50 to 53 of this Annual Report. The “Board’s Report to Shareholders on Directors’ Remuneration” on pages 54 to 63 of this Annual Report will be proposed for approval at the Company’s AGM on 27 July 2004.

Share capital

A statement of changes in the share capital of the Company is set out in note 22 to the Consolidated Financial Statements.

Purchase by the Company of its own shares

At the AGM of the Company held on 30 July 2003, shareholders gave the Company permission, until the conclusion of the AGM being held on 27 July 2004, to purchase up to 6,800,000,000 ordinary shares of the Company. A resolution for permission for the Company to renew its authority to purchase its own shares will be proposed at the AGM of the Company to be held on 27 July 2004.

During the period from 1 December 2003 to 31 March 2004, the Company purchased 800 million ordinary shares at a weighted average price, excluding transaction costs, of 135.3p.

The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (“the Regulations”) allow companies to hold shares acquired by way of market purchase in treasury, rather than having to cancel them. The Regulations came into force on 1 December 2003. The directors may use the authority to purchase shares and hold them in treasury (and subsequently sell or transfer them out of treasury as permitted in accordance with the Regulations) rather than cancel them, subject to institutional guidelines applicable at the time. The shares purchased by the Company prior to 31 March 2004 are being held in treasury.

No dividends will be paid on shares whilst held in treasury and no voting rights will attach to the treasury shares.

Results and dividends

The consolidated profit and loss account is set out on page 69 of this Annual Report.

The directors have proposed a final dividend for the year of 1.0780 pence per ordinary share, payable on 6 August 2004 to shareholders on the register of members at close of business on 4 June 2004. An interim dividend of 0.9535 pence per ordinary share was paid during the year, producing a total for the year of 2.0315 pence per ordinary share, a total of approximately £1,378 million. The

Company operates a dividend reinvestment plan, further details on which can be found on page 128 in this Annual Report.

Subsequent events

Details of material subsequent events are included in note 33 to the Consolidated Financial Statements included in this Annual Report.

Charitable contributions

During the year ended 31 March 2004, the Company made cash charitable donations of £13.5 million to the Vodafone Group Foundation (2003: £10.0 million). In addition, operating companies donated a further £7.2 million (2003: £4.2 million) to local Vodafone Foundations and a further £2.0 million (2003: £2.6 million) directly to a variety of causes. These donations total £22.7 million (2003: £16.8 million) and include donations of £3.0 million (2003: £3.2 million) made as required by the terms of certain network operating licences.

More details regarding the activities of the Vodafone Group Foundation and local Vodafone Foundations can be found in the Group’s separate Corporate Social Responsibility (“CSR”) report.

Political donations

At the Annual General Meeting on 30 July 2003, the directors sought and obtained shareholders’ approval to enable the Company to make donations to EU Political Organisations or incur EU Political Expenditure, under the relevant provisions of the Political Parties, Elections and Referendums Act 2000 (“the Act”). The approval given restricted such expenditure to an aggregate limit of £100,000 in the period of 12 months following the date of the Annual General Meeting. Although the Company had, and has, no intention of changing its current policy and practice of not making political donations and will not do so without the specific endorsement of shareholders, the directors sought the approval on a precautionary basis, to avoid any possibility of unintentionally breaching the Act.

The Company has made no political donations during the year.

The directors propose, again on a precautionary basis, to seek a renewal of shareholders’ approval at the AGM to be held on 27 July 2004. The amount of the approval will again be restricted to £100,000 for a period of twelve months following the AGM.

Creditor payment terms

It is the Group’s policy to agree terms of transactions, including payment terms, with suppliers and, provided suppliers perform in accordance with the agreed terms, it is the Group’s normal practice that payment is made accordingly.

The number of days outstanding between receipt of invoices and date of payment, calculated by reference to the amount owed to trade creditors at the year end as a proportion of the amounts invoiced by suppliers during the year, was 29 days (2003: 24 days) in aggregate for the Group. The Company did not have any trade creditors at 31 March 2004.

Research and development

The Group continues to pursue an active research and development programme for the enhancement of mobile telecommunications. Full details as to the Group’s research and development programme and activities can be found under “Business Overview – Research and Development”.

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Directors’ interests in the shares of the Company
The “Board’s Report to Shareholders on Directors’ Remuneration” details the directors’ interests in the shares of the Company.

Directors’ interests in contracts
None of the current directors had a material interest in any contract of significance to which the Company or any of its subsidiary undertakings was a party during the financial year.

Employees
Please refer to “Employees” on page 64.

Corporate social responsibility
A summary of the Company’s CSR approach is contained on pages 20 and 21 of the Annual Review & Summary Financial Statement and on page 65 of this Annual Report. Further details are contained in the Group’s CSR report.

Auditors
On 1 August 2003, Deloitte and Touche, the Company’s auditors, transferred its business to Deloitte and Touche LLP, a limited liability partnership incorporated under the Limited Liability Partnership Act 2000. The Company’s consent has been given to treat the appointment of Deloitte and Touche as extending to Deloitte and Touche LLP with effect from 1 August 2003 under the provisions of section 26(5) of the Companies Act 1989.

Following a recommendation by the Audit Committee, a resolution proposing the appointment of Deloitte and Touche LLP as auditors to the Company will be put to the AGM.

In their assessment of the independence of the auditors and in accordance with the US Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, the Audit Committee receives in writing details of relationships between Deloitte and Touche LLP and the Company that may have a bearing on their independence and receives confirmation that they are independent of the Company within the meaning of the securities laws administered by the US Securities and Exchange Commission (“SEC”).

In addition, the Audit Committee pre-approves the audit fee after a review of both the level of the audit fee against other comparable companies, including those in the telecommunications industry, and the level and nature of non-audit fees, as part of its review of the adequacy and objectivity of the audit process.

In a further measure to ensure auditor independence is not compromised, policies have been adopted to provide for the pre-approval by the Audit Committee of all permitted non-audit services by Deloitte and Touche LLP. Should there be an immediate requirement for permitted non-audit services to be provided by Deloitte and Touche LLP which have not been pre-approved by the Audit Committee, the policies provide that the Group Audit Director will consult with the Chairman of the Audit Committee for pre-approval.

In addition to their statutory duties, Deloitte and Touche LLP are also employed where, as a result of their position as auditors, they either must, or are best placed to, perform the work in question. This is primarily work in relation to matters such as shareholder circulars, Group borrowings, regulatory filings and business acquisitions and disposals. Other work is awarded on the basis of competitive tender.

During the year Deloitte and Touche LLP charged £8 million (2003: £15 million) for non-audit assignments. An analysis of these fees can be found in note 5 to the Consolidated Financial Statements.

Major shareholders
The Bank of New York, as custodian of the Company’s American Depositary Receipt (“ADR”) programme, held approximately 11.6% of the Company’s ordinary shares of $0.10 each at 24 May 2004 as nominee. The total number of ADRs outstanding at 24 May 2004 was 783,776,194. At this date, 1,049 holders of record of ordinary shares had registered addresses in the United States and in total held approximately 0.005% of the ordinary shares of the Company. As at 24 May 2004, the following percentage interests in the ordinary share capital of the Company, disclosable under Part VI of the Companies Act 1985, have been notified to the directors:

•	The Capital Group Companies, Inc.	5.60	%
•	Fidelity Management & Research Company	3.56	%
•	Legal & General Investment Management	3.47	%
•	Barclays PLC	3.28	%

The directors are not aware, as at 24 May 2004, of any other interest of 3% or more in the ordinary share capital of the Company. The Company is not directly or indirectly owned or controlled by any foreign government or any other legal entity. There are no arrangements known to the Company that could result in a change of control of the Company.

Going concern
After reviewing the Group’ s and Company’ s budget for the next financial year, and other longer term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

By Order of the Board

/s/ Stephen Scott
Stephen Scott
Secretary
25 May 2004

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Corporate Governance

Introduction
The directors of the Company support high standards of corporate governance, which are critical to business integrity and to maintaining investors’ trust in the Company. The Company’s Business Principles (the “Principles”) define its relationships with its stakeholders and govern how Vodafone conducts its business. Amongst other things, the Principles state that the Company expects all its employees to act with honesty, integrity and fairness. The Company also promotes the Principles to its associate companies (where Vodafone holds a minority stake) and to its business partners and suppliers.

The Company’s ordinary shares are listed in the United Kingdom on the London Stock Exchange. As such, the Company is required to make a disclosure statement concerning its application of the Principles of and compliance with the provisions of the Combined Code on corporate governance that is appended to the Financial Services Authority’s Listing Rules.

During the year, the Financial Reporting Council, which is responsible for maintaining the Combined Code, approved a revised Combined Code taking into account the recommendations of the Higgs Review of the role and effectiveness of non-executive directors and a separate report by Sir Robert Smith in relation to Audit Committees.

The revised Combined Code became effective for companies’ financial periods beginning on or after 1 November 2003, and therefore, for the Company, will apply from the financial year which began on 1 April 2004.

For the financial year ended 31 March 2004, the directors confirm that the Company has been in compliance with the provisions of the Combined Code effective for that accounting period. The disclosures provided below are nevertheless intended to provide the reader with an explanation of how the Company’s corporate governance practices measure against the revised Combined Code as if it were currently in effect for the Company.

The Company’s American Depositary Shares (“ADSs”) are listed on the NYSE and the Company is therefore subject to the rules of the NYSE as well as US securities laws and the rules of the SEC. Pursuant to recently revised NYSE corporate governance rules, Vodafone, as a foreign private issuer, is required to summarise significant differences between the corporate governance provisions of the NYSE applicable to US companies and the corporate governance principles applicable to it and followed by it in the UK. In compliance with the new rules, the Company will provide an appropriate summary in its Annual Report for the year ending 31 March 2005. In July 2002, the US Congress passed the Sarbanes-Oxley Act which, together with consequent adoption of new rules by the SEC, has introduced a number of changes to the corporate governance requirements on both US domestic companies and non-US registered issuers such as the Company. During 2003, the Company established a Disclosure Committee with responsibility for reviewing and approving controls and procedures over the public disclosure of financial and related information, and other procedures necessary to enable the Chief Executive and Financial Director to provide their Certifications of the Annual Report on Form 20-F that is filed with the SEC. The Company also adopted a corporate code of ethics for senior financial officers, separate from and additional to the Principles. A copy of the code of ethics and the Principles are available on the Company’s website (www.vodafone.com). The Company has already begun the work required to ensure compliance with section 404 of the Sarbanes-Oxley Act, which is required in its financial year ending 31 March 2006.

Directors and Organisation
The Company’s Board of directors presently consists of fifteen directors, fourteen of whom served throughout the year ended 31 March 2004. As at 31 March 2004, in addition to the Chairman, Lord MacLaurin, there were six executive directors and eight non-executive directors. The Deputy Chairman, Paul Hazen, is the nominated senior independent director and his role includes being available for approach or

representation by directors or significant shareholders who may feel inhibited from raising issues with the Chairman. He is also responsible for conducting an annual review of the performance of the Chairman and, in the event it should be necessary, convening an annual meeting of the non-executive directors.

Sir Christopher Gent retired as a director at the conclusion of the AGM on 30 July 2003. Dr John Buchanan and Luc Vandevelde joined the Board as non-executive directors on 1 April 2003 and 1 September 2003, respectively. The Company considers all its present non-executive directors to be fully independent. The executive directors are Arun Sarin (Chief Executive), Julian Horn-Smith, Peter Bamford, Vittorio Colao, Thomas Geitner and Ken Hydon.

The Company’s Articles of Association provide that every director who was elected or last re-elected at or before the AGM held in the third calendar year before the current year shall automatically retire. Accordingly, Peter Bamford, Julian Horn-Smith and Sir David Scholey will be retiring and, being eligible, will offer themselves for reelection at the Company’s AGM to be held on 27 July 2004. The Company’s Articles of Association also provide that every director appointed to the Board since the last AGM shall retire. Therefore, Luc Vandevelde will retire and, being eligible, will offer himself for re-election.

Performance evaluation of the Board, its Committees and individual directors takes place on an annual basis and is conducted within the terms of reference of the Nominations and Governance Committee. The Chairman leads the assessment of the non-executive directors, the Chief Executive reviews the executive directors and the senior independent director conducts the review of the performance of the Chairman. Each Board Committee undertakes a review of its work and in relation to the performance of the Board, the Chairman invites suggestions from all directors as to ways in which the Board and its processes may be improved. A series of questionnaires is being developed to facilitate the evaluation processes for the current and future years, each of which has been, and will in the future be, conducted without the assistance of external consultants.

This year particular attention was paid to the contributions made by directors requiring to offer themselves for re-election at the AGM and the Nominations and Governance Committee confirmed to the Board that the performance of each such director continued to be effective and, therefore, the Company should support their re-election.

The Board met on eight occasions in the financial year to 31 March 2004. Individual directors’ attendance was: Lord MacLaurin (8), Paul Hazen (7), Arun Sarin (8), Julian Horn-Smith (8), Peter Bamford (7), Vittorio Colao (8), Thomas Geitner (8), Ken Hydon (8), Dr Michael Boskin (8), Professor Sir Alec Broers (8), Penny Hughes (8), Sir David Scholey (8), Dr John Buchanan (8) and Professor Jürgen Schrempp (6). Since Mr Vandevelde joined the Board there have been six Board meetings in the financial year and he attended five. In addition to the regular Board meetings, there were a number of other meetings to deal with specific matters. Directors unable to attend a Board meeting because of another engagement, as was the case for four directors in the year, are nevertheless provided with all the papers and information relevant for such meeting and are able to discuss issues arising in the meeting with the Chairman or the Chief Executive.

The Board provides the effective leadership and control required for a listed company. Actual financial results are presented to each meeting, together with reports from the executive directors in respect of their areas of responsibility. The Chief Executive presents his report to each meeting which deals, amongst other things, with investor relations, giving Board members an opportunity to develop an understanding of the views of major investors. From time to time, the Board receives detailed presentations from non-Board members on matters of significance or on new opportunities for the Group. Financial plans, including budgets and forecasts, are regularly discussed at Board meetings. The non-executive directors periodically visit different parts of the Group and are provided with briefings and information to assist them in performing

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their duties. The non-executive directors and the Chairman regularly meet without executives present.

The Board is confident that all its members have the knowledge, talent and experience to perform the functions required of a director of a listed company. On appointment, all directors are provided with appropriate training and guidance as to their duties, responsibilities and liabilities as a director of a public and listed company and also have the opportunity to discuss organisational, operational and administrative matters with the Chairman, the Chief Executive and the Company Secretary. When considered necessary, more formal training is provided.

The Board has a formal schedule of matters specifically referred to it for decision, including the approval of Group commercial strategy, major capital projects, the adoption of any significant change in accounting policies or practices and material contracts not in the ordinary course of business. This schedule is reviewed periodically. It was last reviewed and updated by the Nominations and Governance Committee in March 2004 and its proposals were approved by the Board in May 2004. The directors have access to the advice and services of the Company Secretary and have resolved to ensure the provision, to any director who believes it may be required in the furtherance of his or her duties, of independent professional advice at the cost of the Company.

The executive directors, together with certain other Group functional heads and regional Chief Executives, meet on ten occasions each year as the Group Executive Committee under the chairmanship of the Chief Executive. This Committee is responsible for the day-to-day management of the Group’s businesses, the overall financial performance of the Group in fulfilment of strategy, plans and budgets and Group capital structure and funding. It also reviews major acquisitions and disposals.

Two management committees, the Group Operational Review Committee and the Group Policy Committee, oversee, together with the Group Executive Committee, the execution of the Board’s strategy and policy.

The Group Operational Review Committee, which meets ten times a year under the chairmanship of the Group Chief Operating Officer, comprises other executive directors, certain Group functional heads and regional Chief Executives. This Committee is responsible for the operational performance and achievement of targets of the Group’s business, with a focus on the enhancement of voice services and growth of non-voice services, new global products and services, brand development, technology and other cost and revenue synergies within the Group’s regions.

The Group Policy Committee, which meets six times each year, is chaired by the Chief Executive. The Financial Director and the Group Chief Operating Officer, together with certain other Group functional heads, join him on the Committee, which is responsible for the determination of policy and the monitoring of non-operational areas of activity which are important to the Group overall, including strategy, finance, human resources, legal, regulatory and corporate affairs.

Committees of the Board
The standing Board committees are the Audit Committee, the Nominations and Governance Committee and the Remuneration Committee. The composition and terms of reference of these committees are published on the Company’s website at www.vodafone.com. The Secretary to these standing Board Committees is the Company Secretary or his nominee.

The Audit Committee, which met on five occasions in the year, is comprised of financially literate members having the necessary ability and experience to understand financial statements. The Committee is chaired by Paul Hazen (5) and the other members of the Committee are Michael Boskin (5), Professor Sir Alec Broers*, Dr John Buchanan (4) and Sir David Scholey (4). There have been three meetings of the Committee since Professor Sir Alec Broers joined. Due to other business commitments arranged before he joined the Committee, he attended one of these.

Solely for the purpose of fulfilling the requirements of the Sarbanes-Oxley Act of 2002 and the Combined Code, the Board has designated Dr John Buchanan as its financial expert on the Audit Committee. Further details of Dr Buchanan can be found in “Directors and Senior Management”.

Under its terms of reference the Audit Committee is required, amongst other things, to oversee the relationship with the external auditors, to review the Company’s preliminary results, interim results and annual financial statements, to monitor compliance with statutory and listing requirements for any exchange on which the Company’s shares are quoted, to review the scope, extent and effectiveness of the activity of the Group Audit Department, to engage independent advisers as it determines is necessary and to perform investigations. At least twice a year the Audit Committee meets separately with the external auditors and the Group Audit Director without management being present. Further details on the overseeing of the relationships with the external auditors can be found under “Directors’ Report – Auditors”.

The Nominations and Governance Committee (formerly the Nominations Committee) met three times in the year and is chaired by Lord MacLaurin (3). The other members of the Committee are Professor Sir Alec Broers (3), Arun Sarin, Paul Hazen (3), Sir David Scholey (3) and Professor Jürgen Schrempp (2). Arun Sarin has attended both of the meetings held since he joined the Committee. Sir Christopher Gent was a member of the Committee prior to his retirement and attended the one meeting held prior to that date. The Committee, which provides a formal and transparent procedure for the appointment of new directors to the Board, generally engages external consultants to advise on prospective Board appointees. This year, the Committee recommended the appointment of a further non-executive director. A detailed job profile was agreed by the Committee before external search consultants were engaged to prepare a shortlist of potentially suitable candidates. Only after a rigorous interview process was the appointment recommended to the Board.

The Committee’s name was changed during the financial year to reflect its remit, which over time had come to include oversight and review of general matters of corporate governance.

The Remuneration Committee met five times in the year. The Committee is chaired by Penny Hughes (5). The other members of the Committee are Lord MacLaurin (5), Michael Boskin (4) Professor Jürgen Schrempp (4), and Luc Vandevelde. Sir David Scholey was a member of the Committee until 16 September 2003 and attended both meetings held prior to that date. Mr Vandevelde joined the Committee on 16 September 2003 and attended the three meetings held between that date and 31 March 2004. The “Board’s Report to Shareholders on Directors’ Remuneration” provides further information on this Committee.

Attendance is shown in brackets after each respective Committee member.

Internal Control and Disclosure Controls and Procedures
Introduction
The Board has established procedures that implement in full the Turnbull Guidance, “Internal Control: Guidance for Directors on the Combined Code”, for the year under review and to the date of approval of the Annual Report. These procedures, which are subject to regular review, provide an ongoing process for identifying, evaluating and managing the significant risks faced by the Group.

Responsibility
The Board has overall responsibility for the system of internal control. A sound system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The process of managing the risks

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Corporate Governance continued

associated with social, environmental and ethical impacts is also discussed under “Corporate Social Responsibility and Environmental Issues”.

Control structure

The Board sets the policy on internal control that is implemented by management. This is achieved through a clearly defined operating structure with lines of responsibility and delegated authority. The Group Executive Committee, chaired by the Chief Executive, manages this on a day-to-day basis.

Written policies and procedures have been issued which clearly define the limits of delegated authority and provide a framework for management to deal with areas of significant business risk. These policies and procedures are reviewed and, where necessary, updated at Group Policy Committee meetings, chaired by the Chief Executive.

Control environment

The Group’s operating procedures include a comprehensive system for reporting information to the directors. This system is properly documented and regularly reviewed.

Budgets are prepared by subsidiary management and subject to review by both regional management and the directors. Forecasts are revised on a quarterly basis and compared against budget. When setting budgets and forecasts, management identifies, evaluates and reports on the potential significant business risks.

The Group Operational Review Committee, the Group Executive Committee and the Board review management reports on the financial results and key operating statistics.

Emphasis is placed on the quality and abilities of the Group’s employees with continuing education, training and development actively encouraged through a wide variety of schemes and programmes. The Group has adopted a set of values to act as a framework for its people to exercise judgement and make decisions on a consistent basis.

Directors are appointed to associated undertakings and joint ventures and attend the Board meetings and review the key financial information of those undertakings. Clear guidance is given to those directors on the preparation that should take place before these Board meetings and their activity at the Board meeting. It is the Group’s policy that its auditors are appointed as auditors of associated companies and joint ventures, where possible.

The acquisition of any business requires a rigorous analysis of the financial implications of the acquisition and key performance figures. A sensitivity analysis takes place of the key assumptions made in the analysis. Post investment appraisals of the Group’s investments are conducted on a periodic and timely basis.

A Treasury Report is distributed electronically on a daily basis that reports on treasury borrowings and investments.

The Board reviews a half-yearly report detailing any significant legal actions faced by Group companies.

The Group Policy Committee monitors legal, environmental and regulatory matters and approves appropriate responses or amendments to existing policy.

Monitoring and review activities

There are clear processes for monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective action.

A formal annual confirmation is provided by the chief executive officer and chief financial officer of each Group company detailing the operation of their control systems and highlighting any weaknesses. Regional management, the Audit Committee and the Board review the results of this confirmation.

The Chief Executive and the Financial Director undertake a review of the quality and timeliness of disclosures that includes formal annual meetings with the regional chief executives and the Disclosure Committee.

A Group Audit Department, reporting directly to the Audit Committee, undertakes periodic examination of business processes on a risk basis and reports on controls throughout the Group.

Reports from the external auditors, Deloitte & Touche LLP, on certain internal controls and relevant financial reporting matters, are presented to the Audit Committee and management.

Review of effectiveness

The directors, the Chief Executive and the Financial Director consider that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. The Group’s management is required to apply judgement in evaluating the risks facing the Group in achieving its objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materialising, in identifying the Company’s ability to reduce the incidence and impact on the business of risks that do materialise and in ensuring the costs of operating particular controls are proportionate to the benefit.

The directors, the Chief Executive and the Financial Director confirm that they have reviewed the effectiveness of the system of internal control and the disclosure controls and procedures through the monitoring process set out above. The Chief Executive and the Financial Director have evaluated the disclosure controls and procedures as of the end of the period covered by this Annual Report. They are not aware of any significant weakness or deficiency in the Group’s system of internal control. The directors, the Chief Executive and the Financial Director have concluded that the disclosure controls and procedures are effective for the year under review and to the date of approval of the Annual Report.

During the period covered by this Annual Report, there were no changes in the Company’s internal controls over financial reporting or in other factors that have materially affected or are reasonably likely to materially affect internal controls over financial reporting.

Relations with Shareholders

The Company holds briefing meetings with its major institutional shareholders in the UK, the US and in Continental Europe, usually twice each year after the interim results and preliminary announcement, to ensure that the investing community receives a balanced and complete view of the Group’s performance and the issues faced by the Group. Telecommunications analysts of stockbrokers are also invited to presentations of the financial results. The Company, through its Investor Relations team, responds to enquiries from shareholders.

The principal communication with private investors is through the provision of the Annual Review & Summary Financial Statement, the interim results and the AGM, an occasion which is attended by all the Company’s directors and at which all shareholders present are given the opportunity to question the Chairman and the Board as well as the Chairmen of the Audit, Remuneration and Nominations and Governance Committees. All substantive resolutions at the Company’s AGMs are decided on a poll. The poll is conducted by the Company’s Registrars and scrutinised by Electoral Reform Services. The proxy votes cast in relation to all resolutions are disclosed to those in attendance at the meeting and the results of the poll are published in national newspapers in the UK, the US and Ireland, on the Company’s website and announced via the regulatory news service. Financial and other information is made available on the Company’s website, www.vodafone.com, which is regularly updated.

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Report from the Audit Committee

The composition and terms of reference of the Audit Committee is discussed under “Committees of the Board”.

During the year ended 31 March 2004 the principal activities of the Committee were as follows:

Financial Statements

The Committee considered reports from the Financial Director and the Group Financial Controller on the interim results, preliminary announcement and Annual Report. It also considered reports from the external auditors, Deloitte & Touche LLP, on the scope and outcome of the review of interim results and annual audit.

The financial statements were reviewed in the light of these reports and the results of that review reported to the Board.

Risk Management and Internal Control

The Committee reviewed the process by which the Group evaluated its control environment and its risk assessment process, and the way in which significant business risks were managed. It also considered the Group Audit department’s reports on the effectiveness of internal controls, significant frauds and any fraud that involved management or employees with a significant role in internal controls.

The Committee also reviewed and approved arrangements by which staff could in confidence raise concerns about possible improprieties in matters of financial reporting or other matters. This was achieved through using existing reporting procedures and introducing a website with a dedicated anonymous email feature.

External Auditors

The Committee reviewed the letter from Deloitte & Touche LLP confirming their independence and objectivity. It also reviewed and pre-approved the scope of non-audit services provided by Deloitte & Touche LLP to ensure that there was no impairment of independence.

The Committee pre-approved the scope and fees for audit services provided by Deloitte & Touche LLP and confirmed the wording of the recommendations put by the Board to the shareholders on the appointment and retention of the external auditors.

Private meetings were held with Deloitte & Touche LLP to ensure that there were no restrictions on the scope of their audit and to discuss any items the auditors did not wish to raise with management present.

Internal Audit

The Committee engaged in discussion and review of the Group Audit department’s audit plan for the year, together with its resource requirements. Private meetings were held with the Group Audit Director.

Audit Committee Effectiveness

The Audit Committee conducts a formal review of its effectiveness annually and concluded this year that it was effective and able to fulfil its terms of reference.

/s/ Paul Hazen

Paul Hazen	On behalf of the Audit Committee
25 May 2004

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Board’s Report to Shareholders on Directors’ Remuneration

Introduction

The Board has delegated to the Remuneration Committee the assessment and recommendation of policy on remuneration for executive directors.

At the 2002 AGM, shareholders approved a new remuneration policy (“the Policy”) the key principles of which are as follows:

•   the expected value of total remuneration must be benchmarked against the relevant market;

•   a high proportion of total remuneration is to be delivered through performance-related payments;

•   performance measures must be balanced between absolute financial measures and sector comparative measures to achieve maximum alignment between executive and shareholder objectives;

•   the majority of performance-related remuneration is to be provided in the form of equity; and

•   share ownership requirements are to be applied to executive directors.

The current Policy was produced following extensive consultation with shareholders and institutional bodies in 2001 and 2002. In the two years since the Policy was introduced, the Chairman and the Chairman of the Remuneration Committee have maintained proactive annual dialogue on remuneration matters with the Company’s major shareholders and relevant institutions. Extensive consultations with shareholders were held again in 2003 and 2004. The objective of this dialogue is to provide information about the Company and its views on remuneration issues and to listen to shareholders’ opinions on any proposed adjustments to policy implementation.

The Remuneration Committee strives to ensure that the Policy provides a strong and demonstrable link between incentives and the Company’s strategy and sets a framework for remuneration that is consistent with the Company’s scale and scope. As a result of this year’s review, the Remuneration Committee has concluded that the existing policy continues to serve the Company and shareholders well and will remain in place for the 2005 financial year. The Committee has also reviewed the effectiveness of the current policy and is satisfied that the incentive plans have delivered, or are forecast to deliver, rewards that are consistent with the Company’s performance achievement.

At the 2004 AGM, shareholders will be invited to vote on the Board’s report to shareholders on directors’ remuneration. The chart that follows shows the performance of the Company relative to the FTSE100 index and the FTSE Global Telecommunications index, which are the most relevant indices for the Company.

It should be noted that the performance of the Company shown by the graph is not indicative of vesting levels under the Company’s various incentive plans.

Remuneration Committee

The Remuneration Committee consists of independent non-executive directors and the Company Chairman. Penny Hughes (Chairman), Dr Michael Boskin, Lord MacLaurin, and Professor Jürgen Schrempp all continue as members. Sir David Scholey stepped down from the Committee in September 2003. He was replaced by Luc Vandevelde who joined the Company as a non-executive director on 1 September 2003.

The Board has considered whether or not it remains appropriate for the Company Chairman to continue to be a member of the Remuneration Committee. The conclusion is that the Chairman provides important contributions to the work of the Committee, for example in his contact with shareholders and management, and therefore his membership remains appropriate.

The Chief Executive attends meetings of the Remuneration Committee, other than when his own remuneration is being discussed. The Remuneration Committee met on five occasions during the year.

The Remuneration Committee appointed and received advice from Towers Perrin (market data and advice on market practice and governance) and Kepler Associates (performance analysis and advice on performance measures and market practice) and received advice from the Group Human Resources Director and the Group Compensation and Benefits Director. The advisers also provided advice to the Company on general human resource and compensation related matters.

Remuneration Policy

The Policy was approved by shareholders in July 2002. The Policy is set out below:

The overriding objective of the Policy on incentives is to ensure that Vodafone is able to attract, retain and motivate executives of the highest calibre essential to the successful leadership and effective management of a global company at the leading edge of the telecommunications industry.

To achieve this objective, Vodafone, from the context of its UK domicile, takes into account both the UK regulatory framework, including best practice in corporate governance, shareholder views, political opinion and the appropriate geographic and nationality basis for determining competitive remuneration, recognising that this may be subject to change over time as the business evolves.

The total remuneration will be benchmarked against the relevant market. Vodafone is one of the largest companies in Europe and is a global business; Vodafone’s policy will be to provide executive directors with remuneration generally at levels that are competitive with the largest companies in Europe. A high proportion of the total remuneration will be awarded through performance-related remuneration, with phased delivery over the short, medium and long term. For executive directors, approximately 80% of the total expected remuneration will be performance-related. Performance measures will be balanced between absolute financial measures and sector comparative measures to achieve maximum alignment between executive and shareholder objectives.

All medium and long term incentives are delivered in the form of Vodafone shares and options. Executive directors are required to comply with share ownership guidelines.

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The structure of remuneration for executive directors under the Policy (excluding pensions) and the performance elements on which they are based is illustrated below:

The Policy’s key objective is to ensure that there is a strong linkage between pay and performance. This is achieved by approximately 80% of the total package (excluding pensions) being delivered by performance linked short and long term incentive plans. Therefore, the only guaranteed payment to executive directors is their base salary.

The Remuneration Committee selects performance measures for incentive plans that provide the greatest degree of alignment with the Company’s strategic goals and that are clear and transparent to both directors and shareholders. The performance measures adopted incentivise both operational performance and share price growth.

Each element of the reward package focuses on supporting different Company objectives, which are illustrated below:

Element	Purpose	Performance Measure
Base salary	Reflects competitive market salary level, role and individual achievement	Individual contribution
Annual deferred share bonus	Motivates achievement of annual business KPIs, Provides incentive to co-invest and achieve medium term KPIs Aligns with Shareholders	EBITDA, Free cash flow, ARPU, Data % of Total Service Revenues, Customer Satisfaction Adjusted EPS growth on share deferral
Share Options	Incentivise earnings growth and creation of share price growth Aligns with Shareholders	Adjusted EPS growth
Performance shares	Incentivise share price and dividend growth Aligns with Shareholders	Relative Total Shareholder Return (TSR)

The Policy principles are cascaded, where appropriate, to employees in all subsidiary companies. Base salaries and short-term incentives are benchmarked against relevant peer companies in each market and are targeted to deliver total cash that is at the upper quartile position in the relevant market. Incentive payments conditional on business performance are provided to employees at levels that are competitive in each local market.

Report on 2003/04 Executive Directors’
Remuneration and Subsequent Periods

Total remuneration levels

In accordance with the Policy, the Company benchmarks total remuneration levels against other large European domiciled companies, using externally provided pay data. Total remuneration for these purposes means the sum of base salary and short, medium and long term incentives. The European focus was selected because Europe continues to be Vodafone’s major market and the Company is one of the top ten companies in Europe by market capitalisation.

In 2003, award levels for the Chief Executive were set to deliver target total remuneration between the top 25% and the top 10% of the remuneration levels of other chief executives of large European companies. The market position selected reflects Vodafone’s relative size in this region but recognises that Vodafone also has significant interests outside of the European region. However, awards of performance-linked incentives were determined so that this positioning would only be attained if the Company meets exceptionally demanding performance. A similar approach has been taken for the 2005 financial year.

The total remuneration levels of other executive directors were set at approximately two-thirds of the Chief Executive level for the Group Chief Operating Officer and at approximately half of the Chief Executive level for the other executive directors.

Components of executive directors’ remuneration

Overview

Executive directors receive base salary, annual deferred share bonus, long term incentives and pension benefits.

Vesting of all short, medium and long term incentives is dependent on the achievement of performance targets that are set by the Remuneration Committee prior to the awards being granted.

Base Salary

Salaries are reviewed annually with effect from 1 July and adjustments may be made to reflect competitive national pay levels, the prevailing level of salary reviews of employees within the Group, changes in responsibilities and Group performance. External remuneration consultants provide data about market salary levels and advise the Committee accordingly. Pension entitlements are based only on base salary.

Incentive awards

Short/medium term incentive

Annual deferred share bonus

The purpose of the Vodafone Group Short Term Incentive Plan (“STIP”) is to focus and motivate executive directors to achieve annual business KPIs that will further the Company’s medium term objectives.

The STIP comprises two elements: a base award and an enhancement award. The base award is earned by achievement of one year KPI linked performance targets and is delivered in the form of shares. The enhancement award of 50% of the number of shares comprised in the base award is earned by achievement of a subsequent two-year performance target following the initial twelve-month period. Release of both elements of the award after the three-year period is dependent upon the continued employment of the participant.

The target base award level for the 2004 financial year was 100% of salary with a maximum of 200% of salary available for exceptional performance. Payments earned for the year total on average 109.75% of salary. The bonus achievement for the year reflects strong Group performance as described in “Operating and Financial Review and Prospects”.

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Board’s Report to Shareholders on Directors’ Remuneration continued

The Remuneration Committee reviews and sets the base award performance targets on an annual basis, taking into account business strategy. The performance measures for the 2004 financial year relate to EBITDA, free cash flow, ARPU, data as a percentage of total service revenues, and customer satisfaction. The targets are not disclosed, as they would give clear indication of the Company’s business targets, which are commercially sensitive. For the 2005 financial year, the targets for data as a percentage of service revenues and ARPU will be replaced with a total service revenues target in order to provide clearer focus on total revenue growth.

The vesting of the enhancement award shares is dependent upon the achievement of an EPS performance target. For the awards made in 2003, which will vest in July 2005, the performance target was that annual compound growth in EPS, before goodwill amortisation and exceptional items, must exceed UK RPI growth by 5% per annum over the performance period.

The STIP awards made in July 2001 vested in July 2003. Details of STIP awards are given in the table on page 60.

The Group may, at its discretion, pay a cash sum of up to the value of the base award in the event that an executive director declines the share award. In these circumstances, the executive director will not be eligible to receive the enhancement award or any cash alternative.

Long term incentives

Performance shares

Performance shares are awarded annually to executive directors. Vesting of the performance shares depends upon the Company’s relative TSR performance. TSR measures the change in value of a share and reinvested dividends over the period of measurement. The Company’s TSR performance is compared to that of other companies in the FTSE Global Telecommunications index over a three-year performance period. The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is the vehicle for the provision of these incentive awards.

In 2003/04, the Chief Executive received an award of Performance shares with a face value of two times base salary; the Chief Operating Officer and other executive directors one and a half times their base salary.

Performance shares will vest only if the Company ranks in the top half of the ranking table; maximum vesting will only occur if the Company is in the top 20%. Vesting is also conditional on underlying improvement in the performance of the Company. Awards will only vest to the extent that the performance condition has been satisfied at the end of the three-year performance period. To the extent that the performance target is not met, the awards will be forfeit. The following chart shows the basis on which the performance shares will vest:

The constituents of the FTSE Global Telecommunications index as at July 2003, (applicable to 2003 awards), excluding the Company, were:

Alltel	Olivetti
AT&T	Orange
AT&T Wireless Services	Portugal Telecom
BCE	Royal KPN
BellSouth	SBC Communications
BT Group	Singapore Telecommunications
China Mobile (Hong Kong)	Sprint Corp-FON Group
China Unicom	Swisscom
Deutsche Telekom	Telecom Italia
France Telecom	Telefonica
Japan Telecom	Telia Sonera
KDDI	Telstra Corp
Nextel Communications	TIM
Nippon Telegraph & Telephone	Verizon Communications
NTT DoCoMo

Previously disclosed performance share awards granted in 2000 vested in 2003. Details are given in the table on page 61.

Share options

Share options are granted annually to executive directors.

The exercise of the options is subject to the achievement of a performance condition set prior to grant. The Remuneration Committee determined that the most appropriate performance measure for 2003/04 awards was real (in excess of UK RPI) growth in EPS, before goodwill amortisation and exceptional items. One quarter of the option award will vest for achievement of EPS growth of UK RPI + 5% p.a. rising to full vesting for achievement of EPS growth of RPI + 15% p.a. over the performance period. In setting this target the Remuneration Committee has taken the internal long range plan and market expectations into account. The Committee’s advisers have confirmed that this EPS target is amongst the most demanding of those set by large UK based companies. The Remuneration Committee has decided that for 2004/05 grants, real EPS growth of 5-15% p.a. (over UK RPI) will be replaced with absolute EPS growth of 8-18% p.a. The following chart illustrates the basis on which share options granted in 2003/04 will vest:

Options have a ten-year term and vesting will be after three years. For 2003 options performance may be measured again after years four and five from a fixed base year. The Committee, having considered this matter at length and taking into account the evolving views of institutional investors, has decided to remove the performance re-test at year four, but to retain the performance re-test at year five, for 2004/05 grants. The Committee believes that for this existing scheme, retaining the re-test with a stretching performance target compounding from a fixed base year will continue to incentivise performance over the longer term and this is in shareholders’ interests. The re-test will be reviewed again in 2005.

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The price at which shares can be acquired on option exercise will be no lower than the market value of the shares on the day prior to the date of grant of the options (or than the average of the market values for the immediately preceding month in respect of Vittorio Colao, who is domiciled in Italy). Therefore, scheme participants only benefit if the share price increases and vesting conditions are achieved. The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is the vehicle for the provision of these incentive awards.

In July 2003, the Chief Executive received an award of options with a face value of eight times base salary; the Chief Operating Officer and the other executive directors six times their base salary.

Illustration

To help shareholders understand the value of the package provided to the Chief Executive, the following chart illustrates the approximate pre-tax long term incentive gains to the Chief Executive that would be delivered based on various Company growth, EPS and TSR performance scenarios. The chart illustrates that in order to gain value from the incentive plans, considerable shareholder value must be created.

For example, if the Company’s share price increases by over 50% from 145 pence to approximately 219 pence, the Company’s value increases by £50 billion, and there is 50% vesting of long term incentives, the Chief Executive would have a pre-tax gain of just under £5 million, representing less than a tenth of 1% of the total increase in shareholder value.

The awards of performance shares and share options were made to executive directors following the 2003 Annual General Meeting on 30 July 2003. 2004 awards will be also be made following the AGM.

Awards are delivered in the form of ordinary shares of the Company. All awards are made under plans that incorporate dilution limits as set out in the Guidelines for Share Incentive Schemes published by the Association of British Insurers. The current estimated dilution from subsisting awards, including executive and all-employee share awards, is approximately 2.1% of the Company’s share capital at 31 March 2004 (2.0% as at 31 March 2003).

Share ownership guidelines

Executive directors participating in long term incentive plans must comply with the Company’s share ownership guidelines. These guidelines, which were first introduced in 2000, require the Chief Executive to have a shareholding in the Company of four times base salary and other executive directors to have a shareholding of three times base salary.

It is intended that these ownership levels will be attained within five years from the director first becoming subject to the guidelines and be achieved through the retention of shares awarded under incentive plans.

Pensions

Arun Sarin is provided with a defined contribution pension arrangement to which the Company contributes 30% of his base salary. The contribution is held in a notional fund outside of the Company pension scheme.

Sir Christopher Gent (until his retirement), Julian Horn-Smith, Ken Hydon and Peter Bamford, being UK-based directors, are contributing members of the Vodafone Group Pension Scheme, which is a UK scheme approved by the Inland Revenue.

This Scheme provides a benefit of two-thirds of pensionable salary after a minimum of 20 years’ service, with a contingent spouse’s pension of 50% of the member’s pension. The normal retirement age is 60, but employees may retire from age 55 with a pension proportionately reduced to account for their shorter service but with no actuarial reduction. Pensions increase in payment by the lower of 5% per annum or the maximum amount permitted by the Inland Revenue. Peter Bamford, whose benefits are restricted by Inland Revenue earnings limits, also participates in a defined contribution Vodafone Group Funded Unapproved Retirement Benefit Scheme (FURBS) to enable pension benefits to be provided on his base salary above the earnings cap. The Company makes a contribution of 30% of base salary above the earnings cap.

In respect of Vittorio Colao, a contribution is made to a defined contribution plan for dirigenti in Italy, which includes the supplementary dirigenti contribution required under the national collective agreements. Thomas Geitner is entitled to a defined benefit pension of 40% of salary from a normal retirement age of 60. On early retirement the pension may be reduced if he has accrued less than 10 years of board service, but will not be subject to actuarial reduction. The pension increases in line with inflation and a spouse’s pension of 60% of his pension is payable.

All the plans referred to above provide for benefits on death in service.

Further details of the pension benefits earned by the directors in the year to 31 March 2004 can be found on page 60. Liabilities in respect of the pension schemes in which the executive directors participate are funded to the extent described in note 32 to the Consolidated Financial Statements, “Pensions”.

Other remuneration matters

All-employee share incentive schemes

All Employee Share Plan

The Remuneration Committee has approved that an award of shares based on the achievement of performance conditions will be made to all employees in the Vodafone Group on 5 July 2004. This replaces previous practice of granting share options to all Group employees. These awards have a dilutive effect of approximately 0.03%.

Sharesave Options

The Vodafone Group 1998 Sharesave Scheme is an Inland Revenue approved scheme open to all UK permanent employees.

The maximum that can be saved each month is £250 and savings plus interest may be used to acquire shares by exercising the related option. The options have been granted at up to a 20% discount to market value. UK based executive directors are eligible to participate in the scheme and details of their participation are given in the table on page 62.

Share Incentive Plan

The Vodafone Share Incentive Plan (“SIP”) is an Inland Revenue approved plan open to all UK permanent employees. Eligible employees may contribute up to £125 each month and the trustee of the plan uses the money to buy shares on their behalf. An equivalent number of shares is purchased with contributions from the employing company. UK based executive directors are eligible to participate in the SIP and details of their share interests under these plans are given in the table on page 63.

Non-executive directors’ remuneration

The remuneration of non-executive directors is periodically reviewed by the Board, excluding the non-executive directors. Basic fee levels were increased in July 2003, the previous increase having been made in 2000. An additional annual fee of £10,000 is payable for the responsibility of chairing a principal Board Committee (Audit,

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Board’s Report to Shareholders on Directors’ Remuneration continued

Remuneration or Nominations and Governance). No increases are planned in 2004. Details of each non-executive director’s remuneration are included in the table on page 59.

Non-executive directors do not participate in any incentive or benefit plans. The Company does not provide any contribution to their pension arrangements. The Chairman is entitled to the provision of a fully-expensed car or car allowance.

Service contracts and appointments of directors

Executive directors

The Remuneration Committee has determined that, after an initial term that may be of up to two years duration, executive directors’ contracts should thereafter have rolling terms and be terminable on no more than one year’s notice. No payments should normally be payable on termination other than the salary due for the notice period and such entitlements under incentive plans and benefits that are consistent with the terms of such plans.

Details of the contract terms of the executive directors follow:

	Contract start date	Unexpired term*	Notice period
Arun Sarin	1 April 2003	Indefinite	One year from
			1 April 2004
Peter Bamford	1 April 1998	Indefinite	One year
Vittorio Colao	22 July 1996	Indefinite	Up to one year
Thomas Geitner	5 June 2000	To 31 May 2005	Contract expires
			31 May 2005
Julian Horn-Smith	4 June 1996	Indefinite	One year
Ken Hydon	1 January 1997	Indefinite	One year

* until normal retirement age

At the time of his appointment to the Board, Thomas Geitner was employed under a fixed term five-year service contract with Mannesmann AG (now Vodafone Holding GmbH), which was the normal contract arrangement for Mannesmann AG board members. Mr Geitner agreed in 2001, without recompense, to accept amended terms which provided that following the expiry of the current contract on 31 May 2005 the new contract would have a one year term.

Executive directors’ service contracts do not provide for termination payments that extend entitlements beyond payments due for the remainder of the contract term.

In accordance with the National Collective Labour Agreement for dirigenti for industrial companies in Italy, Vittorio Colao is entitled to receive an end of service indemnity.

All the UK-based executive directors have, whilst in service, entitlement under a long term disability plan from which two-thirds of base salary would be provided until normal retirement date. In the event of disability, Vittorio Colao is entitled to a lump sum payment of €207,000, whilst Thomas Geitner would receive his normal retirement pension based on his accrued service.

Some executive directors hold positions in other companies as non-executive directors. The fees received in respect of the 2004 financial year and retained by directors were as follows:

	Company in which non-executive	Fees Retained by the individual
	directorship is held	in 2003/04 (£’000)
Arun Sarin	Cisco Systems, Inc	18.8
Vittorio Colao	RAS SpA	19.2
Thomas Geitner	Singulus Technologies AG	33.5
Julian Horn-Smith	Smiths Group Plc	36.6
Ken Hydon	Reckitt Benckiser Plc	13.3
	Tesco Plc	6.3

* Fees were retained in accordance with Company policy

Chairman and non-executive directors

After completing an initial three-year term, in March 2003, the Chairman accepted the invitation of the Nominations and Governance Committee and the Board to continue in office. The appointment continues indefinitely and may be terminated by either party on one year’s notice.

Non-executive directors including the Deputy Chairman, are engaged on letters of appointment that set out their duties and responsibilities. The appointment of non-executive directors may be terminated without compensation.

The terms and conditions of appointment of non-executive directors are available for inspection by any person at the Company’s registered office during normal business hours and at the Annual General Meeting (for 15 minutes prior to the meeting and during the meeting).

John Buchanan and Luc Vandevelde were appointed to the Board as non-executive directors with effect from 1 April 2003 and 1 September 2003 respectively. Both hold office on the same terms as other non-executive directors.

Appointment of new Chief Executive and retirement of previous Chief Executive

Sir Christopher Gent formally stepped down as Chief Executive at the end of the AGM on 30 July 2003. To enable a smooth transition, he continued as an adviser until he retired from the Company on 31 December 2003. Sir Christopher received no severance payment and his entitlements under the incentive and retirement plans in which he participated were determined by the standard rules applicable to retirement. All long term incentive awards under the current remuneration policy and the previous global market-related policy provide for awards to be pro-rated for both time and performance in the event of retirement. Sir Christopher received no salary increase in the 2004 financial year, nor did he participate in the short term incentive plan after 30 July 2003. No long term incentive awards were made to him during 2003/04. In accordance with the standard Rules of the Scheme he received an immediate pension based on his accrued benefit with no actuarial penalty or any enhancement.

The Remuneration Committee agreed that ownership of Sir Christopher Gent’s company car would transfer to him on retirement. The taxable value of the car is included in the benefits column of the Remuneration table.

Arun Sarin commenced employment as Chief Executive Designate on 1 April 2003. He became Chief Executive on 30 July 2003.

Arun Sarin was employed with a basic salary of £1.1 million. The incentives and benefits that formed the remainder of his remuneration package are consistent with the existing executive director remuneration policy described previously and comparable in quantum to those received by Sir Christopher Gent for the year ended 31 March 2003. In accordance with the Company’s normal policy it was agreed to meet the costs of Arun Sarin relocating to the UK and these costs are included in the benefits column of the Remuneration table.

Arun Sarin has entered into a service contract that can be terminated by the Company at the end of an initial term of two years or at any time thereafter on one year’s notice. Arun Sarin is required to give the Company one year’s notice if he wishes to terminate the contract. There are no specific provisions for termination payments under the terms of the service contract.

Annual Report 2004  Vodafone Group Plc

59

Audited Information

Remuneration for the Year to 31 March 2004

The remuneration of the directors for the year to 31 March 2004 was as follows:

	Salary/fees		Incentive schemes		Benefits		Total
	2004	2003	2004(1)	2003	2004(2)	2003	2004	2003
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Chairman
Lord MacLaurin	473	432	–	–	22	31	495	463
Deputy Chairman
Paul Hazen	124	105	–	–	–	–	124	105
Chief Executive
Sir Christopher Gent	425	1,270	429	1,586	11	40	865	2,896
Arun Sarin	1,100	65	1,217	–	879	–	3,196	65
Executive directors
Peter Bamford	733	691	722	843	34	31	1,489	1,565
Vittorio Colao(3)	531	469	651	695	9	9	1,191	1,173
Thomas Geitner(3)	644	556	673	694	35	23	1,352	1,273
Julian Horn-Smith	908	846	950	1,057	39	37	1,897	1,940
Ken Hydon	733	691	776	863	29	28	1,538	1,582
Non-executive directors
Dr Michael Boskin	80	65	–	–	–	–	80	65
Professor Sir Alec Broers	80	65	–	–	–	–	80	65
John Buchanan	80	–	–	–	–	–	80	–
Penny Hughes	90	72	–	–	–	–	90	72
Sir David Scholey	80	65	–	–	–	–	80	65
Professor Jürgen Schrempp	80	65	–	–	–	–	80	65
Luc Vandevelde	50	–	–	–	–	–	50	–
Former directors(4)	541	–	–	–	313	510	854	510
	6,752	5,457	5,418	5,738	1,371	709	13,541	11,904

Notes:
(1)	These figures are the cash equivalent value of the base share awards under the Vodafone Group Short Term Incentive Plan applicable to the year ended 31 March 2004. These awards are in relation to the performance achievements above targets in EBITDA, before exceptional items, ARPU, free cash flow, data as a percentage of service revenues and customer satisfaction for the 2003/04 financial year.
(2)	Benefits principally comprise cars and private health and disability insurance. For Arun Sarin, the figure includes £835,000 (gross) to cover the costs of relocating from the US to the UK. The relocation expenses paid covered costs including legal expenses, stamp duty, transportation costs and other out-of-pocket costs in accordance with normal Company policy.
(3)	Salary and benefits for Vittorio Colao and Thomas Geitner have been translated at the average exchange rate for the year of €1.4442: £1 (2003: €1.5570: £1).
(4)	Under the terms of an agreement, Sam Ginn, a former director of the Company, provides consultancy services to the Group and is entitled to certain benefits. The estimated value of the benefits received by him in the year to31 March 2004 was £183,000, translated at the average exchange rate for the year of $1.6953: £1. From 31 July to 31 December 2003 Sir Christopher Gent provided consultancy services to the Company and was entitled to certain benefits. On his retirement on 31 December 2003, his company car was transferred to him and the benefit value is included in the benefits column above. The total value of benefits provided, including the value of the car, was £130,000.
The aggregate compensation paid by the Company to its senior management(1) as a group for services in all capacities for the year ended 31 March 2004, is set out below. The aggregate number of senior management in the year ended 31 March 2004 was 6, compared to 7 in the year ended 31 March 2003.

	2004	2003
	£’000	£’000
Salaries and fees	2,341	2,502
Incentive schemes(2)	2,415	5,430
Benefits	462	213
	5,218	8,145

Notes:
(1)	Aggregate compensation for senior management is in respect of those individuals who were members of the Executive Committee as at, and for the year ended, 31 March 2004, other than executive directors.
(2)	Comprises the incentive scheme information for senior management on an equivalent basis as that disclosed for directors in the table at the top of this page. Details of share incentives awarded to directors and senior management are included in footnotes to the Short Term Incentive, Long Term Incentives and Share Options tables on pages 60 and 61.

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Board’s Report to Shareholders on Directors’ Remuneration continued

Pensions

Pension benefits earned by the directors in the year to 31 March 2004 were:

											Transfer value	Employer
									Change in	Change in	of change in	Allocation/
	Total accrued		Change in						transfer value	accrued	accrued	Contribution to
	benefit at		accrued		Transfer value		Transfer value		over year less	benefit in	benefit net of	Defined
	31 March		benefit over		at 31 March		at 31 March		member	excess of	member	Contribution
	2004	(1)	the year	(1)	2003	(2)	2004	(2)	contributions	inflation	contributions	Plans
Name of Director	£’000		£’000		£’000		£’000		£’000	£’000	£’000	£’000
Arun Sarin	–		–		–		–		–	–	–	330.0
Sir Christopher Gent(3)	701.9		39.9		10,388.9		15,519.8		5,097.1	22.6	466.6	–
Peter Bamford	23.0		4.0		217.4		275.5		54.7	3.5	38.3	151.0
Vittorio Colao(4)	–		–		–		–		–	–	–	5.5
Thomas Geitner(4)	64.7		19.2		510.7		763.1		252.4	18.1	212.9	–
Julian Horn-Smith	480.3		83.2		5,962.4		7,498.8		1,506.3	72.8	1,106.9	–
Ken Hydon	476.6		52.0		7,864.1		9,129.0		1,240.3	40.9	758.9	–

Notes:
(1)	The pension benefits earned by the directors are those, which would be paid annually on retirement, on service to the end of the year, at the normal retirement age. Salaries have been averaged over three years where necessary in order to compare with Inland Revenue regulations. The increase in accrued pension excludes any increase for inflation.
(2)	The transfer values have been calculated on the basis of actuarial advice in accordance with the Faculty and Institute of Actuaries’ Guidance Note GN11. No director elected to pay additional voluntary contributions. The transfer values disclosed above do not represent a sum paid or payable to the individual director. Instead they represent a potential liability of the pension scheme.
(3)	Sir Christopher Gent retired from the Board on 30 July 2003 and from the Company on 31 December 2003. In accordance with the standard Rules of the Scheme he received an immediate pension based on his accrued benefit without actuarial reduction or any enhancement. The figures for 2003 and 2004 are not directly comparable due to different bases of calculation. The 2003 figure is based on service to date and payment at normal retirement age (60). The 2004 figure reflects an additional year of service, an updated pensionable salary, changes in annuity values and immediate payment.
(4)	In respect of Thomas Geitner the amounts as at 31 March 2003 have been translated at the exchange rate at that date of €1.4486: £1. Other amounts in respect of Vittorio Colao and Thomas Geitner have been translated at the 31 March 2004 exchange rate of €1.4955: £1.

In respect of senior management, the Group has made aggregate contributions of £484,808 into pension schemes.

Directors’ interests in the shares of the Company

Short Term Incentive

Conditional awards of ordinary shares made to executive directors under the STIP, and dividends on those shares paid under the terms of the Company’s scrip dividend scheme and dividend reinvestment plan, are shown below. STIP shares which vested and were sold or transferred during the year ended 31 March 2004 are also shown below.

				Shares conditionally
		Shares conditionally		awarded during the		Shares added
		awarded during the		year as enhancement		during the	Shares sold or
	Total interest	year as base award in		shares in respect		year through	transferred during the
	in STIP at	respect of 2002/2003		of 2002/2003		dividend	year in respect of
	1 April 2003	STIP awards		STIP awards		reinvestment	2000/2001 STIP awards(1)		Total interest in STIP as at 31 March 2004
			Value at		Value at		In	In
	Total		date of		date of	Total	respect	respect of	Number of	Number of	Total
	number of		award(2)(3)		award(3)	number of	of base	enhancement	Base Award	enhancement	value(4)
	shares	Number	£’000	Number	£’000	shares	awards	shares	shares	shares	£’000
Sir Christopher Gent	793,202	–	–	–	–	5,950	532,768	266,384	–	–	–
Arun Sarin	–	–	–	–	–	–	–	–	–	–	–
Peter Bamford	1,058,209	704,311	843	352,155	422	15,515	–	–	1,420,127	710,063	2,743
Vittorio Colao	–	628,010	752	314,005	376	–	–	–	628,010	314,005	1,213
Thomas Geitner	306,570	219,470	263	109,735	131	4,494	–	–	426,846	213,423	824
Julian Horn-Smith	431,852	882,713	1,057	441,357	529	3,239	290,060	145,031	882,713	441,357	1,705
Ken Hydon	431,852	720,883	863	360,441	432	3,239	290,060	145,031	720,883	360,441	1,392

Notes:
(1)	Shares in respect of 2000/2001 STIP awards were transferred on 1 July 2003 and 21 November 2003.
(2)	Previously disclosed within directors’ emoluments for the year ended 31 March 2003.
(3)	Value at date of award is based on the purchase price of the Company’s ordinary shares on 30 June 2003 of 119.75p.
(4)	The value at 31 March 2004 is calculated using the closing middle market price of the Company’s ordinary shares at 31 March 2004 of 128.75p.

The aggregate number of shares conditionally awarded during the year as base award and enhancement shares to the Company‘s senior management, other than executive directors, is 1,634,000. For a description of the performance and vesting conditions, see “Short/medium term incentive” on page 55.

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Long Term Incentives
Conditional awards of ordinary shares made to executive directors under the Vodafone Group Long Term Incentive Plan and Vodafone Group Plc 1999 Long Term Stock Incentive Plan, and dividends on those shares paid under the terms of the Company’s scrip dividend scheme and dividend reinvestment plan, are shown below. Long Term Incentive shares that vested and were sold or transferred during the year ended 31 March 2004 are also shown below.

				Shares added	Shares	Shares sold or
				during the	forfeited	transferred
Total interest in				year through	in respect of	in respect of
Long Term incentives		Shares conditionally awarded		dividend	2000/2001 and	2000/20001 and	Total interest in Long Term
at 1 April 2003(1)		during the year		reinvestment	2002/03 awards	2002/03 awards	Incentives at 31 March 2004
			Value at
			date of					Total
			award(2)				Number of	value(4)
	Number	Number	£’000	Number	Number	Number(3)	shares	£’ 000
Sir Christopher Gent	2,963,018	–	–	41,899	2,031,684	422,571	550,662	709
Arun Sarin	–	1,844,863	2,200	–	–	–	1,844,863	2,375
Peter Bamford	1,441,524	882,000	1,052	20,294	74,582	43,614	2,225,622	2,865
Vittorio Colao	694,022	648,868	774	10,175	–	–	1,353,065	1,742
Thomas Geitner	1,016,319	781,633	932	14,899	–	–	1,812,851	2,334
Julian Horn-Smith	1,822,879	1,080,000	1,288	25,886	74,583	43,613	2,810,569	3,619
Ken Hydon	1,441,524	882,000	1,052	20,294	74,582	43,614	2,225,622	2,865

Notes:
(1)	Restricted share awards under the Vodafone Group Long Term Incentive Plan and the Vodafone Group Plc 1999 Long Term Stock Incentive Plan.
(2)	The value of awards under the Vodafone Group Plc 1999 Long Term Incentive Plan is based on the purchase price of the Company’s ordinary shares on 30 July 2003 of 119.25p.
(3)	Shares in respect of 2000/2001 awards were sold or transferred on 1 July 2003 and 13 November 2003. The balance of Sir Christopher Gent’s 2002/03 share awards, following application of performance conditions and pro-ration in respect of service to retirement, were sold or transferred on 14 January 2004 and 8 April 2004.
(4)	The value at 31 March 2004 is calculated using the closing middle market price of the Company’s ordinary shares at 31 March 2004 of 128.75p.
The aggregate number of shares conditionally awarded during the year to the Company‘s senior management is 2,373,014 shares. For a description of the performance and vesting conditions see “Long term incentives” on pages 56 and 57.

Share options
The following information summarises the directors’ options under the Vodafone Group Plc Savings Related Share Option Scheme, the Vodafone Group 1998 Sharesave Scheme, the Vodafone Group Plc Executive Share Option Scheme and the Vodafone Group 1998 Company Share Option Scheme, which are all Inland Revenue approved schemes. The table also summarises the directors’ options under the Vodafone Group Plc Share Option Scheme, the Vodafone Group 1998 Executive Share Option Scheme, the AirTouch Communications, Inc. 1993 Long Term Stock Incentive Plan and the Vodafone Group Plc 1999 Long Term Stock Incentive Plan, which are not Inland Revenue approved. No other directors have options under any of these schemes. Only under the Vodafone Group 1998 Sharesave Scheme may shares be offered at a discount in future grants of options. For a description of the performance and vesting conditions see “Long term incentives” on pages 56 and 57.

	Options held at	Options	Options			Weighted
	1 April 2003	granted	exercised	Options	Options	average	Earliest
	or date of	during	during	lapsed during	held at	exercise price at	date	Latest
	appointment(1)	the year(1)	the year	the year	31 March 2004	31 March 2004	from which	expiry
	Number	Number	Number	Number	Number	Pence	exercisable	date
Sir Christopher Gent	25,365,387	–	178,000	–	25,187,387	167.6	Jul 2001	Dec 2004
Arun Sarin(2)(3)	11,250,000	7,396,164	–	–	18,646,164	154.0	Jun 1999	Jul 2013
Peter Bamford	12,204,753	3,739,677	–	–	15,944,430	155.1	Jul 2000	Jul 2013
Vittorio Colao	3,011,611	2,751,202	–	–	5,762,813	108.8	Jul 2004	Jul 2013
Thomas Geitner	11,196,479	3,373,582	–	–	14,570,061	160.7	Jul 2003	Jul 2013
Julian Horn-Smith	15,794,101	4,654,088	1,254,500	–	19,193,689	149.9	Jul 2001	Jul 2013
Ken Hydon	12,695,553	3,739,677	1,044,000	–	15,391,230	156.7	Jul 2001	Jul 2013
	91,517,884	25,654,390	2,476,500	–	114,695,774

Notes:
(1)	The weighted average exercise price of options over shares in the Company granted during the year and listed above is 119.25 pence. The earliest date from which they are exercisable is July 2006 and the latest expiry date is 29 July 2013. For a description of the performance and vesting conditions see “Long term incentives” on pages 56 and 57.
(2)	Some of the options held by Arun Sarin are held in the form of ADSs, each representing ten ordinary shares of the Company, which are traded on the New York Stock Exchange. The number of ADSs over which Arun Sarin holds options is 1,125,000.
(3)	The terms of the share options granted over 11,250,000 shares in 1999 to Arun Sarin allow exercise until the earlier of the date on which he ceases to be a director of the Company and the seventh anniversary of the respective dates of grant.

Vodafone Group Plc  Annual Report 2004

62

Board’s Report to Shareholders on Directors’ Remuneration continued

The aggregate number of options granted during the year to the Company’s senior management, other than executive directors, is 11,058,407. The weighted average exercise price of the options granted to senior management during the year is 119.25 pence. The earliest date from which they are exercisable is July 2006 and the latest expiry date is 29 July 2013. The weighted average exercise price of options granted to US-based senior management has been translated at the average exchange rate for the year of $1.6953: £1.

Further details of options outstanding at 31 March 2004 are as follows:

	Exercisable Market price			Exercisable Option price
	greater than option price(1)			greater than market price(1)			Not yet exercisable
		Weighted			Weighted			Weighted
		average	Latest		average	Latest		average	Earliest date
		exercisable	expiry	Options	exercise	expiry	Options	exercise	from which
	Options held	price	date	held	price	date	held	price	exercisable
	Number	Pence		Number	Pence		Number	Pence
Sir Christopher Gent	9,294,123	97.0	Dec 04	15,893,264	208.9	Dec 04	–	–	–
Arun Sarin	5,000,000	95.1	Jun 06	6,250,000	242.4	Jul 06	7,396,164	119.2	Jul 06
Peter Bamford	150,500	58.7	Jul 04	3,360,755	272.5	Jul 10	12,433,175	124.5	Jul 04
Vittorio Colao	–	–	–	–	–	–	5,762,813	108.8	Jul 04
Thomas Geitner	–	–	–	2,933,055	290.4	Jul 10	11,637,006	128.0	Jul 04
Julian Horn-Smith	–	–	–	3,136,455	280.4	Jul 10	16,057,234	124.4	Jul 04
Ken Hydon	–	–	–	3,235,255	279.8	Jul 10	12,155,975	123.9	Jul 04
	14,444,623			34,808,784			65,442,367

Notes:
(1)	Market price is the closing middle market price of the Company’s ordinary shares at 31 March 2004 of 128.75p.
(2)	Some of Arun Sarin’s options are in respect of American Depositary Shares, each representing ten ordinary shares in the Company, which are traded on the New York Stock Exchange. The number and option price have been converted into the equivalent amounts for the Company’s ordinary shares, with the option price being translated at the average exchange rate for the year of $1.6953: £1.

The Company’s register of directors’ interests (which is open to inspection) contains full details of directors’ shareholdings and options to subscribe. These options by exercise price were:

		Options held at
		1 April 2003	Options	Options	Options lapsed	Options
	Option	or date of	granted during	exercised during	during	held at
	price	appointment	the year	the year	the year	31 March 2004
	Pence	Number	Number	Number	Number	Number
Vodafone Group Plc Executive Share Option Scheme (Approved – 1988)
Vodafone Group Plc Share Option Scheme (Unapproved – 1988)
Vodafone Group 1998 Company Share Option Scheme (Approved)
Vodafone Group 1998 Executive Share Option Scheme (Unapproved)
	58.70	2,627,000	–	2,476,500	–	150,500
	155.90	1,520,500	–	–	–	1,520,500
	255.00	764,000	–	–	–	764,000
	282.30	1,522,500	–	–	–	1,522,500
Vodafone Group Plc Savings Related Share Option Scheme (1988)
Vodafone Group 1998 Sharesave Scheme
	70.92	50,126	–	–	–	50,126
	95.30	–	16,710	–	–	16,710
AirTouch Communications, Inc. 1993 Long Term Incentive Plan(1)
	95.12	5,000,000	–	–	–	5,000,000
Vodafone Group Plc 1999 Long Term Stock Incentive Plan
	97.00	30,140,785	–	–	–	30,140,785
	119.25	–	25,637,680	–	–	25,637,680
	151.56	2,796,100	–	–	–	2,796,100
	157.50	24,943,043	–	–	–	24,943,043
	164.49	100,146	–	–	–	100,146
	242.43	6,250,000	–	–	–	6,250,000
	291.50	15,803,684	–	–	–	15,803,684
		91,517,884	25,654,390	2,476,500	–	114,695,774

Note:
(1)	These share options are in respect of American Depositary Shares, each representing ten ordinary shares in the Company, which are traded on the New York Stock Exchange. The number and option price have been converted into the equivalent amounts for the Company’s ordinary shares, with the option price being translated at the average exchange rate for the year of $1.6953: £1.

Annual Report 2004  Vodafone Group Plc

63

Details of the options exercised by directors of the Company in the year to 31 March 2004, are as follows:

			Market price
	Options exercised		at date	Gross
	during the year	Option price	of exercise	pre-tax gain
	(Number)	(Pence)	(Pence)	(£’ 000)
Sir Christopher Gent	178,000	58.7	118.75	106.9
Julian Horn-Smith	1,254,500	58.7	135.75	966.6
Ken Hydon	522,000	58.7	131.75	381.3
	522,000	58.7	144.75	449.2
	2,476,500			1,904.0

Note:

The aggregate gross pre-tax gain made on the exercise of share options in the year by the above Company’s directors was £1,903,983 (2003: £226,873). The closing middle market price of the Company’s shares at the year end was 128.75p, its highest closing price in the year having been 149.5p and its lowest closing price having been 112.5p.

Beneficial interests
The directors’ beneficial interests in the ordinary shares of the Company, which includes interests in the Vodafone Group Profit Sharing Scheme and the Vodafone Share Incentive Plan, but which excludes interests in the Vodafone Group Share Option Schemes, the Vodafone Group Short Term Incentive or in the Vodafone Group Long Term Incentives, are shown below:

			1 April 2003 or date of
	24 May 2004	31 March 2004	appointment
Lord MacLaurin	92,495	92,495	94,495
Arun Sarin(1)	4,832,560	4,832,560	4,832,560
Peter Bamford	290,894	290,518	258,336
Vittorio Colao(2)	643,848	643,848	643,848
Thomas Geitner	12,350	12,350	12,350
Julian Horn-Smith	1,735,210	1,734,834	1,448,427
Ken Hydon	2,325,576	2,325,200	1,835,818
Paul Hazen	360,900	360,900	360,900
Dr Michael Boskin	212,500	212,500	212,500
Professor Sir Alec Broers	19,379	19,379	19,099
Dr John Buchanan(3)	102,000	102,000	–
Penny Hughes	22,500	22,500	22,500
Sir David Scholey	50,000	50,000	50,000
Professor Jürgen Schrempp	–	–	–
Luc Vandevelde(4)	20,000	20,000	–

Notes:
(1)	Arun Sarin also has a non-beneficial interest as the trustee of two family trusts, each holding 5,720 shares.
(2)	These shares were held in escrow and were released on 30 June 2003.
(3)	John Buchanan was appointed to the Board on 1 April 2003.
(4)	Luc Vandevelde was appointed to the Board on 1 September 2003.

Changes to the interests of the directors of the Company in the ordinary shares of the Company during the period 1 April 2004 to 24 May 2004 relate to shares acquired either through Vodafone Group Personal Equity Plans or the Vodafone Share Incentive Plan. As at 31 March 2004, and during the period 1 April 2004 to 24 May 2004, no director had any interest in the shares of any subsidiary company.

Other than those individuals included in the table above who were Board members as at 31 March 2004, members of the Group’s Executive Committee, including Tomas Isaksson who was an Executive Committee member until 1 April 2004, as at 31 March 2004, had an aggregate beneficial interest in 1,717,284 ordinary shares of the Company. As at 24 May 2004, Executive Committee members at that date had an aggregate beneficial interest in 1,717,994 ordinary shares of the Company, none of whom had an individual beneficial interest amounting to greater than 1% of the Company’s ordinary shares.

Interests in share options of the Company at 24 May 2004
At 24 May 2004, there had been no change to the directors’ interests in share options from 31 March 2004.

Other than those individuals included in the table above, as at 24 May 2004 members of the Group’s Executive Committee at that date held options for 35,509,322 ordinary shares at prices ranging from 48.3 pence to 291.5 pence per ordinary share, with a weighted average exercise price of 152.74 pence per ordinary share exercisable at dates ranging from July 1999 to July 2013, and options for 1,008,381 ADSs at prices ranging from $13.65 to $58.6875 per ADS, with a weighted average exercise price of $25.33 per ADS, exercisable at dates ranging from March 2001 to July 2013.

Lord MacLaurin, Paul Hazen, Dr Michael Boskin, Professor Sir Alec Broers, Dr John Buchanan, Penny Hughes, Sir David Scholey, Professor Jürgen Schrempp and Luc Vandevelde held no options at 24 May 2004.

/s/ Penny Hughes

Penny Hughes	On behalf of the Board
25 May 2004

Vodafone Group Plc  Annual Report 2004

   64

Employees

Vodafone is committed to investing in world class people development to build a unified global team working efficiently across boundaries.

Employee involvement
The Board of director’s aim is that employees understand the Company’s strategy and are committed to the Vodafone Vision and Values.

The Values are:

• Passion for customers. Vodafone’s customers have chosen to trust the Group. In return, the Group must strive to anticipate and understand their needs and delight them with the Group’s service.

• Passion for Vodafone people. Outstanding people working together make Vodafone exceptionally successful.

• Passion for results. The Group is action-oriented and driven by a desire to be the best.

• Passion for the world around us. Vodafone will help the people of the world to have fuller lives – both through the services Vodafone provides and through the impact the Group has on the world around us.

Together, the Vision and Values provide a common understanding of where the Group is going and a common way of doing things. The Company is determined that they will flourish across every operating company, challenging everyone to understand them, own them and contribute to their delivery and a range of initiatives have been introduced to ensure this.

The Board of directors places a high priority on effective employee communications to promote the Values and other important messages and a wide range of mechanisms is used to achieve this. These include roadshows, management presentations, in-house publications, team briefings, e-mail, Intranet sites, employee focus groups and conferences.

During 2003, Vodafone conducted its first Group wide Employee Survey in order to measure the effectiveness of its communications initiatives and its standing as an employer. 84% of employees shared their views with the Company and, as a result, the Board has initiated a Group level action plan with the following themes:

• to communicate and bring the Vodafone strategy to life;

• to ensure the world class development of Vodafone people; and

• to consider how the Group might anticipate and better respond to the needs of its customers.

The survey will be conducted every two years to measure the Group’s progress.

Chief Executive, Arun Sarin, and Group Chief Operating Officer, Julian Horn-Smith, continued to host “Your Call” sessions at operating companies throughout the Group. These sessions were designed to demonstrate how the Vodafone Values are being lived across the business. Building on the success of “Your Call”, the next stage of the global roadshow programme is known as “Talkabout” and will visit every operating company during 2004. “Talkabout” will directly address two of the priorities for action identified by the Employee Survey. In “Talkabout Vodafone” Mr Sarin will discuss the shared vision for Vodafone’s future, meeting as wide an audience of Vodafone people as possible, listening to their views and talking about the issues that matter most to them. In the second strand, “Talkabout Business”, Mr Horn-Smith will address the business issues affecting each company with a smaller audience drawn from the senior management team. The “Talkabout” programme provides the perfect opportunity to communicate strategic goals and priorities, discuss progress and exchange ideas about how Vodafone can serve its customers as a single, global team.

The Group has implemented a global team briefing process for effectively sharing information with employees on key performance indicators for the business and progress towards achieving its strategic objectives. Within European subsidiaries,

employee representatives meet annually with representatives of the central management team in the Vodafone European Employee Consultative Council to discuss the progress of the Group and transnational issues.

Employee education, training and development
Employee development has been established as one of Vodafone’s key business goals. The Vodafone Global Campus provides the focus for employee learning and development by supporting operating companies around the world to share best practice, collaborate and develop world-class development opportunities.

Employment policies
The Group’s employment policies are consistent with the principles of the United Nations Universal Declaration of Human Rights and the International Labour Organisation Core Conventions and are developed to reflect local legal, cultural and employment requirements. High standards are maintained wherever the Group operates as Vodafone aims to ensure that the Group is recognised as an employer of choice. Employees at all levels and in all companies are encouraged to make the greatest possible contribution to the Group’s success.

The Group considers its relations with its employees to be good.

Equal opportunities
Vodafone does not condone unfair treatment of any kind and operates an equal opportunities policy for all aspects of employment and advancement, regardless of race, nationality, sex, marital status, disability or religious or political belief. In practice, this means that the Group will select the best people available for positions on the basis of merit and capability, making the most effective use of the talents and experience of people in the business, providing them with the opportunity to develop and realise their potential.

The disabled
The directors are conscious of the special difficulties experienced by the disabled and a range of products has been developed for people with special needs. In addition, disabled people are assured of full and fair consideration for all vacancies for which they offer themselves as suitable candidates and efforts are made to meet their special needs, particularly in relation to access and mobility. Where possible, modifications to workplaces have been made to provide access and, therefore, job opportunities for the disabled. Every effort is made to continue the employment of people who become disabled, not only by the provision of additional facilities but also training where appropriate.

Health, safety and wellbeing
The directors remain committed to ensuring the health, safety and wellbeing of employees at work and apply high standards throughout the organisation in the management and control of operations. These standards are designed to ensure that the Group properly safeguards those who work for it and those who may be affected by the Group’s business including customers, contractors and local communities. Annually, each operating company reports health and safety performance to the Board.

A Group Health and Safety Council has been inaugurated under the leadership of the Group Health and Safety Director, and this is steering a coordinated, global strategy. The team of Health and Safety professionals working within the Group has been further strengthened and better coordinated, sharing knowledge more efficiently.

A Group-wide health and safety audit in December 2003 showed improved scores overall compared with 2002, and particularly with reference to Operating Company emergency planning procedures and their regimes for working safely at height. The results reflect implementation of the Group’s new global standards and the increase in best practice sharing around the Group.

	Annual Report 2004  Vodafone Group Plc
	65
Corporate Social Responsibility and Environmental Issues

Corporate Social Responsibility
Vodafone believes that mobile telecommunications has the potential to deliver wide social, economic and environmental benefits. It also recognises that there are some sensitive issues that need to be managed. Addressing these risks and opportunities is at the heart of the Group’s CSR programme and fundamental to achieving Vodafone’s strategic goal of being a responsible business. A key focus of the last year has been the continued integration of CSR into core business processes.

The Executive Committee, chaired by the Chief Executive, receives reports on progress against the goal. Priority environmental and CSR-related initiatives are sponsored by an operating company chief executive officer or senior Group executive and the Group Operational Review Committee monitors progress on these initiatives on a regular basis. CSR has also been included in the global development programme for directors and senior managers.

Understanding and responding to stakeholder views on relevant social and environmental issues is central to the Group’s CSR programme. The Group engages on this subject directly with key stakeholders, including investors. This year, quantitative research on public and customer views as well as those of NGOs was completed across approximately 75% of the customer base, helping to ensure the focus remains on priority issues and providing a basis for tracking perceptions of our performance over time.

Progress continues to be made on key initiatives. For example:

•   Operating company performance across the full range of CSR related activities, from management integration to specific progress on managing issues, is now reported quarterly alongside other business performance metrics to the Group Operational Review Committee. This ensures that progress is reviewed at the highest level and it also facilitates benchmarking and exchange of good practice across the operating companies.

•   A CSR section has been built into the Group’s long range planning process. Key CSR risks are considered alongside other business risks.

•   Two important initiatives that have moved forward significantly this year relate to the development of ‘products and services’ that deliver specific social/environmental benefit and the ‘responsible marketing’ of products and services. Both initiatives have moved through pilot stages and are now being progressed across the business.

•   Vodafone aims to help its customers make informed choices about their access to content and services and to support them in accessing the service environments they wish to have. This includes supporting parents in defining appropriate access for younger users. A dedicated Content Standards team has developed policies and guidelines on adult content, instant messenger, video and audio messaging, games and ‘chat rooms’.

•   This year, the Group Policy Committee approved Vodafone’s Code of Ethical Purchasing. The Code is being integrated into the commercial arrangements with the Group’s major global suppliers by the Supply Chain Management function.

•   Unfortunately, the Group did not fully meet its commitment to develop CSR Guidelines for Network Deployment by March 2004. The wide range of planning and regulatory requirements across all of the Group’s markets has made this a particularly complex task. However, this remains an important subject and will continue to be developed at the Group and operating company level.

•   The Vodafone Group Foundation has implemented a programme of grant making activity in accordance with its mission statement. This year, seven new local foundations have been set up across the Group, including associate companies, making a total of 19 foundations, supporting local communities at country level. An increased emphasis by the Foundation on partnerships with major NGOs and charities has resulted in more than 26 projects that address global issues. Further

	details of the Vodafone Group Foundations’ activities are available in the CSR Report and on www.vodafonefoundation.org
•	The Company has retained its position in both the FTSE4Good and Dow Jones Sustainability Indices.

This year has seen an increase in the level of independent assessment and assurance of the CSR programme and performance data. The scope of work for Deloitte & Touche LLP has been extended to cover certain performance data procedures at selected operating companies. The assurance statement is published in the stand-alone CSR report. An independent review and benchmark of the CSR management system and processes for stakeholder engagement has also been completed and is reported in the CSR report.

In addition to the Group report, operating companies in Italy, Greece, the Netherlands and Ireland have produced their own CSR publications tailored to specific audiences in those markets.

Environmental Issues
The Group continues to monitor and manage the impact of its activities on the environment and is committed to minimising these impacts in an appropriate manner. Over the last twelve months, progress has been made across a series of projects that address significant environmental issues. These include addressing the concerns related to the perceived link between radio frequencies and health, the use of energy, the reuse and recycling of handsets and accessories, the management of waste and the use of ozone depleting substances.

Progress includes:

•   Over the last 12 months, Vodafone has continued to promote best practice in relation to communication about radio frequency levels and all operating companies provide information on request. The focus for this year has been on a review and restructure of the governance regime for this issue. A greater level of representation from across the Group helps deliver consistency in approach.

•   There has been an increase in the number of handset recycling schemes in place. These now cover 97% of the customer base.

•   Operating companies serving more than 90% of the Group’s customer base have developed formal energy efficiency strategies.

•   An assessment of waste management practices in 12 operating companies is well advanced and is due for completion by June 2004.

The Group continues to monitor any scientific developments on radio frequency issues and supports independent research in this area at both international and national levels.

The Group commits to disclosing any information that comes to its knowledge that clearly demonstrates that any of its products and services breach internationally accepted safety standards or guidelines.

Further details of these initiatives, and progress against environment-related commitments made last year, are provided in the Company’s 2003/04 CSR Report and on www.vodafone.com/responsiblity.

Vodafone Group Plc  Annual Report 2004

66

Statement of Directors’ Responsibilities

United Kingdom company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:

• select suitable accounting policies and apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for the system of internal control, for safeguarding the assets of the Company and the Group and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

	Annual Report 2004  Vodafone Group Plc
	67
Report of Independent Auditors

Independent Auditors’ Report to the Members of the Company

We have audited the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2004, which comprise the consolidated and Company balance sheets at 31 March 2004 and 2003, the consolidated profit and loss accounts, the consolidated cash flow statements, the consolidated statements of total recognised gains and losses and the movement in total equity shareholders’ funds for the three years ended 31 March 2004 and the related notes 1 to 37. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the Board’s Report to Shareholders on Directors’ Remuneration that is described as having been audited.

Respective Responsibilities of Directors and Auditors

As described in the Statement of Directors’ Responsibilities, the Company’s directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and accounting standards. They are also responsible for the preparation of the other information contained in the Annual Report including the Board’s Report to Shareholders on Directors’ Remuneration. Our responsibility is to audit the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the Company and other members of the Group is not disclosed.

We review whether the Corporate Governance statement reflects the Company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s Corporate Governance procedures or its risk and control procedures.

We read the Directors’ Report and the other information contained in the Annual Report for the year ended 31 March 2004 as described in the contents section, including the unaudited part of the Board’s Report to Shareholders on Directors’ Remuneration and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.

Basis of Audit Opinion

We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board and with the standards of the Public Company Accounting Oversight Board in the United States of America. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited.

Opinions

UK opinion
In our opinion:

• the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 March 2004 and of the loss of the Group for the year then ended; and,

• the financial statements and that part of the Board’s Report to Shareholders on Directors’ Remuneration described as having been audited have been properly prepared in accordance with the Companies Act 1985.

US opinion
In our opinion:

• the financial statements present fairly, in all material respects, the consolidated financial position of the Group at 31 March 2004 and 2003 and the consolidated results of its operations and cash flows for each of the three years in the period ended 31 March 2004 in conformity with accounting principles generally accepted in the United Kingdom.

Accounting principles generally accepted in the United Kingdom vary in significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net loss for each of the three years ended 31 March 2004 and the determination of shareholders’ equity at 31 March 2004 and 2003, to the extent summarised in note 36 to the financial statements.

Deloitte and Touche LLP
Chartered Accountants and Registered Auditors
London, England

25 May 2004

Vodafone Group Plc  Annual Report 2004

68

Consolidated Financial Statements

Index to the Consolidated Financial Statements
			Page
Consolidated Profit and Loss Accounts for the years ended 31 March			69
Balance Sheets at 31 March			70
Consolidated Cash Flows for the years ended 31 March			71
Consolidated Statements of Total Recognised Gains and Losses for the years ended 31 March			72
Movements in Total Equity Shareholders’ Funds for the years ended 31 March			72
Notes to the Consolidated Financial Statements:
1	.	Basis of Consolidated Financial Statements	73
2	.	Accounting policies	73
3	.	Segmental analysis	76
4	.	Exceptional operating items	78
5	.	Operating loss	78
6	.	Exceptional non-operating items	80
7	.	Net interest payable and similar items	80
8	.	Tax on loss on ordinary activities	81
9	.	Equity dividends	82
10	.	Loss per share	83
11	.	Intangible fixed assets	84
12	.	Tangible fixed assets	85
13	.	Fixed asset investments	86
14	.	Stocks	88
15	.	Debtors	88
16	.	Investments	89
17	.	Creditors: amounts falling due within one year	89
18	.	Creditors: amounts falling due after more than one year	89
19	.	Financial liabilities and assets	91
20	.	Financial instruments	94
21	.	Provisions for liabilities and charges	95
22	.	Called up share capital	96
23	.	Reserves	98
24	.	Non-equity minority interests	99
25	.	Acquisitions and disposals	99
26	.	Commitments	101
27	.	Contingent liabilities	102
28	.	Analysis of cash flows	103
29	.	Analysis of net debt	104
30	.	Directors	104
31	.	Employees	105
32	.	Pensions	106
33	.	Subsequent events	110
34	.	Principal subsidiary undertakings, associated undertakings and investments	111
35	.	Related party transactions	113
36	.	US GAAP information	114
37	.	Changes in accounting standards	125

	Annual Report 2004  Vodafone Group Plc
	69
Consolidated Profit and Loss Accounts

For the years ended 31 March

			2004		2004		2003		2002
		Note	$m		£m		£m		£m
Total Group turnover: Group and share of joint ventures and associated undertakings
– Continuing operations			78,973		42,920		37,324		32,125
– Discontinued operations			1,505		818		1,828		1,416
			80,478		43,738		39,152		33,541
Less:	Share of joint ventures		–		–		(8	)	(3	)
	Share of associated undertakings		(18,729	)	(10,179	)	(8,769	)	(10,693	)
Group turnover		3	61,749		33,559		30,375		22,845
Group turnover		3
– Continuing operations			60,244		32,741		28,547		21,767
– Discontinued operations			1,505		818		1,828		1,078
			61,749		33,559		30,375		22,845
Operating (loss)/profit		3, 4, 5
– Continuing operations			(8,909	)	(4,842	)	(5,052	)	(9,966	)
– Discontinued operations			121		66		(243	)	(411	)
			(8,788	)	(4,776	)	(5,295	)	(10,377	)
Share of operating profit/(loss) in joint ventures and associated undertakings			1,005		546		(156	)	(1,457	)
Total Group operating loss
Group and share of joint ventures and associated undertakings		3	(7,783	)	(4,230	)	(5,451	)	(11,834	)
Exceptional non-operating items		6	(190	)	(103	)	(5	)	(860	)
– Continuing operations			(81	)	(44	)	20		(860	)
– Discontinued operations			(109	)	(59	)	(25	)	–
Loss on ordinary activities before interest		3	(7,973	)	(4,333	)	(5,456	)	(12,694	)
Net interest payable and similar items		7	(1,314	)	(714	)	(752	)	(845	)
Group			(918	)	(499	)	(457	)	(503	)
Share of joint ventures and associated undertakings			(396	)	(215	)	(295	)	(342	)
Loss on ordinary activities before taxation			(9,287	)	(5,047	)	(6,208	)	(13,539	)
Tax on loss on ordinary activities		8	(5,803	)	(3,154	)	(2,956	)	(2,140	)
Group			(5,273	)	(2,866	)	(2,624	)	(1,925	)
Share of joint ventures and associated undertakings			(530	)	(288	)	(332	)	(215	)
Loss on ordinary activities after taxation			(15,090	)	(8,201	)	(9,164	)	(15,679	)
Equity minority interests			(1,386	)	(753	)	(593	)	(415	)
Non-equity minority interests			(112	)	(61	)	(62	)	(61	)
Loss for the financial year			(16,588	)	(9,015	)	(9,819	)	(16,155	)
Equity dividends		9	(2,535	)	(1,378	)	(1,154	)	(1,025	)
Retained loss for the Group and its share of joint ventures and associated undertakings		23	(19,123	)	(10,393	)	(10,973	)	(17,180	)
Basic and diluted loss per share		10	(24.36	)¢	(13.24	)p	(14.41	)p	(23.77	)p

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

Vodafone Group Plc  Annual Report 2004

70

Balance Sheets

At 31 March

		Group						Company
						2003
		2004		2004		as restated		2004		2003
	Note	$m		£m		£m		£m		£m
Fixed assets
Intangible assets	11	172,264		93,622		108,085		–		–
Tangible assets	12	33,273		18,083		19,574		–		–
Investments		40,986		22,275		26,989		106,177		104,655
Investments in associated undertakings	13	39,056		21,226		25,825		–		–
Other investments	13	1,930		1,049		1,164		106,177		104,655
		246,523		133,980		154,648		106,177		104,655
Current assets
Stocks	14	843		458		365		–		–
Debtors	15	12,698		6,901		7,460		65,627		44,699
Investments	16	8,061		4,381		291		–		287
Cash at bank and in hand		2,593		1,409		475		53		215
		24,195		13,149		8,591		65,680		45,201
Creditors: amounts falling due within one year	17	(27,648	)	(15,026	)	(14,293	)	(95,679	)	(76,087	)
Net current liabilities		(3,453	)	(1,877	)	(5,702	)	(29,999	)	(30,886	)
Total assets less current liabilities		243,070		132,103		148,946		76,178		73,769
Creditors: amounts falling due after more than one year	18	(23,874	)	(12,975	)	(13,757	)	(9,271	)	(8,171	)
Provisions for liabilities and charges	21	(7,723	)	(4,197	)	(3,696	)	–		–
		211,473		114,931		131,493		66,907		65,598
Capital and reserves
Called up share capital	22	7,875		4,280		4,275		4,280		4,275
Share premium account	23	95,963		52,154		52,073		52,154		52,073
Merger reserve		182,026		98,927		98,927		–		–
Capital reserve		–		–		–		88		88
Own shares held	23	(2,090	)	(1,136	)	(41	)	(1,088	)	–
Other reserve	23	1,312		713		843		713		843
Profit and loss account	23	(79,146	)	(43,014	)	(27,447	)	10,760		8,319
Total equity shareholders’ funds		205,940		111,924		128,630		66,907		65,598
Equity minority interests		3,923		2,132		1,848		–		–
Non-equity minority interests	24	1,610		875		1,015		–		–
		211,473		114,931		131,493		66,907		65,598

The Consolidated Financial Statements were approved by the Board of directors on 25 May 2004 and were signed on its behalf by:
A SARIN	Chief Executive
K J HYDON	Financial Director
The accompanying notes are an integral part of these Consolidated Financial Statements.
The unaudited US dollar amounts are prepared on the basis set out in note 1.

	Annual Report 2004  Vodafone Group Plc
	71
Consolidated Cash Flows

For the years ended 31 March

						2003		2002
		2004		2004		as restated		as restated
	Note	$m		£m		£m		£m
Net cash inflow from operating activities	28	22,663		12,317		11,142		8,102
Dividends received from joint ventures and associated undertakings		3,314		1,801		742		139
Net cash outflow for returns on investments and servicing of finance	28	(81	)	(44	)	(551	)	(936	)
Taxation		(2,175	)	(1,182	)	(883	)	(545	)
Net cash outflow for capital expenditure and financial investment		(7,851	)	(4,267	)	(5,359	)	(4,441	)
Purchase of intangible fixed assets		(39	)	(21	)	(99	)	(325	)
Purchase of tangible fixed assets		(8,294	)	(4,508	)	(5,289	)	(4,145	)
Purchase of investments		(79	)	(43	)	(546	)	(38	)
Disposal of tangible fixed assets		291		158		109		75
Disposal of investments		226		123		575		319
Loans to joint ventures		–		–		(59	)	(233	)
Loans repaid by/(to) associated undertakings		44		24		–		(523	)
Loans to businesses sold or acquired businesses held for sale		–		–		(50	)	(116	)
Loans repaid by acquired businesses held for sale		–		–		–		545
Net cash outflow from acquisitions and disposals		(2,414	)	(1,312	)	(4,880	)	(7,691	)
Purchase of interests in subsidiary undertakings		(3,797	)	(2,064	)	(3,519	)	(3,078	)
Net cash/(overdrafts) acquired with subsidiary undertakings		18		10		11		(2,514	)
Purchase of interests in associated undertakings		–		–		(1,491	)	(7,159	)
Purchase of customer bases		–		–		(6	)	(11	)
Disposal of interests in subsidiary undertakings		1,831		995		125		–
Net cash disposed of with subsidiary undertakings		(475	)	(258	)	–		–
Disposal of interests in joint ventures and associated undertakings		9		5		–		–
Disposal of acquired businesses held for sale		–		–		–		5,071
Equity dividends paid		(2,315	)	(1,258	)	(1,052	)	(978	)
Cash inflow/(outflow) before management of liquid resources and financing		11,141		6,055		(841	)	(6,350	)
Management of liquid resources	29	(7,886	)	(4,286	)	1,384		7,042
Net cash outflow from financing	28	(1,288	)	(700	)	(150	)	(681	)
Issue of ordinary share capital		127		69		28		3,581
Increase/(decrease) in debt		515		280		(165	)	(4,268	)
Issue of shares to minorities		–		–		1		12
Purchase of treasury shares		(1,899	)	(1,032	)	–		–
Purchase of own shares in relation to employee share schemes		(31	)	(17	)	(14	)	(6	)
Increase in cash in the year		1,967		1,069		393		11
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year	29	1,967		1,069		393		11
Cash (inflow)/outflow from (increase)/decrease in debt	29	(515	)	(280	)	165		4,268
Cash outflow/(inflow) from increase/(decrease) in liquid resources	29	7,886		4,286		(1,384	)	(7,042	)
Decrease/(increase) in net debt resulting from cash flows	29	9,338		5,075		(826	)	(2,763	)
Net debt acquired on acquisition of subsidiary undertakings		(13	)	(7	)	–		(3,116	)
Net debt disposed of on disposal of subsidiary undertakings		357		194		–		–
Translation difference		265		144		(826	)	517
Premium on repayment of debt		(103	)	(56	)	(157	)	–
Other movements		2		1		4		50
Decrease/(increase) in net debt in the year		9,846		5,351		(1,805	)	(5,312	)
Opening net debt		(25,464	)	(13,839	)	(12,034	)	(6,722	)
Closing net debt	29	(15,618	)	(8,488	)	(13,839	)	(12,034	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

Vodafone Group Plc  Annual Report 2004

72

Consolidated Statements of Total Recognised Gains and Losses

For the years ended 31 March

	2004		2004		2003		2002
	$m		£m		£m		£m
Loss for the financial year
Group	(16,553	)	(8,996	)	(9,049	)	(14,131	)
Share of joint ventures	–		–		(62	)	(211	)
Share of associated undertakings	(35	)	(19	)	(708	)	(1,813	)
	(16,588	)	(9,015	)	(9,819	)	(16,155	)
Currency translation
Group	(4,530	)	(2,462	)	10,484		(1,980	)
Share of joint ventures	–		–		2		4
Share of associated undertakings	(5,207	)	(2,830	)	(1,447	)	(287	)
	(9,737	)	(5,292	)	9,039		(2,263	)
Total recognised losses relating to the year	(26,325	)	(14,307	)	(780	)	(18,418	)

The accompanying notes are an integral part of these Consolidated Financial Statements.
The unaudited US dollar amounts are prepared on the basis set out in note 1.

Movements in Total Equity Shareholders’ Funds

For the years ended 31 March

					2003		2002
	2004		2004		as restated		as restated
	$m		£m		£m		£m
Loss for the financial year	(16,588	)	(9,015	)	(9,819	)	(16,155	)
Equity dividends	(2,535	)	(1,378	)	(1,154	)	(1,025	)
	(19,123	)	(10,393	)	(10,973	)	(17,180	)
Currency translation	(9,737	)	(5,292	)	9,039		(2,263	)
New share capital subscribed, net of issue costs	158		86		31		5,984
Goodwill transferred to the profit and loss account in respect of business disposals	–		–		–		3
Shares to be issued	–		–		–		(978	)
Purchase of treasury shares	(2,002	)	(1,088	)	–		–
Purchase of shares in relation to employee share schemes	(31	)	(17	)	(14	)	(6	)
Own shares released on vesting of share awards	18		10		6		1
Other	(22	)	(12	)	1		–
Net movement in total equity shareholders’ funds	(30,739	)	(16,706	)	(1,910	)	(14,439	)
Opening total equity shareholders’ funds
(originally £128,671 million before prior year adjustment of £41 million)	236,679		128,630		130,540		144,979
Closing total equity shareholders’ funds	205,940		111,924		128,630		130,540

The accompanying notes are an integral part of these Consolidated Financial Statements.

The unaudited US dollar amounts are prepared on the basis set out in note 1.

	Annual Report 2004  Vodafone Group Plc
	73
Notes to the Consolidated Financial Statements

1. Basis of Consolidated Financial Statements

Statutory financial information
The Consolidated Financial Statements are prepared in accordance with applicable accounting standards and in conformity with UK GAAP, which differ in certain material respects from US GAAP – see note 36.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Amounts in the Consolidated Financial Statements are stated in pounds sterling (£), the currency of the country in which the Company is incorporated. The translation into US dollars of the Consolidated Financial Statements as of, and for the financial year ended, 31 March 2004, is for convenience only and has been made at the Noon Buying Rate for cable transfers as announced by the Federal Reserve Bank of New York for customs purposes on 31 March 2004. This rate was $1.8400: £1. This translation should not be construed as a representation that the sterling amounts actually represented have been, or could be, converted into dollars at this or any other rate.

The effect of changes in accounting policies as a result of changing accounting standards during the period, including the restatement of the balance sheets at 31 March 2003 and 31 March 2002 and the consolidated cash flows for the years ended 31 March 2003 and 31 March 2002 as a result of the application of UITF 38, is described in note 37 “Changes in accounting standards”.

2. Accounting policies

The Group’s material accounting policies are described below. For a discussion on the Group’s critical accounting estimates see “Operating and Financial Review and Prospects – Critical Accounting Estimates” elsewhere in this Annual Report.

Accounting convention
The Consolidated Financial Statements are prepared under the historical cost convention and in accordance with applicable accounting standards of the United Kingdom Accounting Standards Board and pronouncements of its Urgent Issues Task Force.

Basis of consolidation
The Consolidated Financial Statements include the accounts of the Company, its subsidiary undertakings and its share of the results of associated undertakings for financial statements made up to 31 March 2004. A listing of the Company’s principal subsidiary undertakings and associated undertakings is given in note 34.

Foreign currencies
Transactions in foreign currencies are recorded at the exchange rates ruling on the dates of those transactions, adjusted for the effects of any hedging arrangements. Foreign currency monetary assets and liabilities are translated into sterling at year end rates.

The results of international subsidiary undertakings, joint ventures and associated undertakings are translated into sterling at average rates of exchange. The adjustment to year end rates is taken to reserves. Exchange differences, which arise on the retranslation of international subsidiary undertakings’, joint ventures’ and associated undertakings’ balance sheets at the beginning of the year, and equity additions and withdrawals during the financial year, are dealt with as a movement in reserves.

Other translation differences are dealt with in the profit and loss account.

Turnover
Group turnover comprises turnover of the Company and its subsidiary undertakings and excludes sales taxes, discounts and sales between Group companies. Total Group turnover comprises Group turnover plus the Group’s share of the turnover of its associated undertakings and joint ventures.

Turnover from mobile telecommunications comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, the provision of other mobile telecommunications services, including data services and information provision, fees for connecting customers to a mobile network, revenues from the sale of equipment, including handsets and revenues arising from agreements entered into with partner networks.

Access charges and airtime used by contract customers are invoiced and recorded as part of a periodic billing cycle and recognised as turnover over the related access period, with unbilled turnover resulting from services already provided from the billing cycle date to the end of each period accrued and unearned turnover from services provided in periods after each accounting period deferred. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the airtime, or the credit expires.

Other turnover from mobile telecommunications primarily comprises equipment sales, which are recognised upon delivery to customers, and customer connection revenues. Customer connection revenues are recognised together with the related equipment revenue to the extent that the aggregate equipment and connection revenues do not exceed the fair value of the equipment delivered to the customer. Any customer connection revenues not recognised together with related equipment revenues are deferred and recognised over the period in which services are expected to be provided to the customer.

Revenue from data services and information provision is recognised when the Group has performed the related service and depending on the nature of the service is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service.

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Notes to the Consolidated Financial Statements continued

2.Accounting policies continued

Turnover from other businesses primarily comprises amounts charged to customers of the Group’s fixed line businesses, mainly in respect of access charges and line usage, invoiced and recorded as part of a periodic billing cycle.

Derivative financial instruments
Transactions in derivative financial instruments are undertaken for risk management purposes only.

The Group uses derivative financial instruments to hedge its exposure to interest rate and foreign currency risk. To the extent that such instruments are matched against an underlying asset or liability, they are accounted for using hedge accounting.

Gains or losses on interest rate instruments are matched against the corresponding interest charge or interest receivable in the profit and loss account over the life of the instrument. For foreign exchange instruments, gains or losses and premiums or discounts are matched to the underlying transactions being hedged.

Termination payments made or received in respect of derivative financial instruments held for hedging purposes are spread over the life of the underlying exposure where the underlying exposure continues to exist. Where the underlying exposure ceases to exist, termination payments are taken to the profit and loss account.

Pensions
Costs relating to defined benefit plans, which are subject to periodic valuations calculated by professionally qualified actuaries, are charged against profits, within staff costs so that the expected costs of providing pensions are recognised during the period in which benefit is derived from the employees’ services.

The costs of the various pension schemes may vary from the funding, dependent upon actuarial advice, with any difference between pension cost and funding being treated as a provision or prepayment.

Defined contribution pension costs charged to the profit and loss account represent contributions payable in respect of the period.

Research and development
Expenditure on research and development is written off in the year in which it is incurred.

Goodwill
Goodwill is calculated as the surplus of fair value of consideration over fair value attributed to the identifiable net assets and liabilities (excluding goodwill) of subsidiary, joint venture and associated undertakings acquired.

For acquisitions made after the financial year ended 31 March 1998, goodwill is capitalised and held as a foreign currency denominated asset, where applicable. Goodwill is amortised on a straight line basis over its estimated useful economic life. For acquired network businesses, whose operations are governed by fixed term licences, the amortisation period is determined primarily by reference to the unexpired licence period and the conditions for licence renewal. The amortisation periods range between 3 and 20 years, with the exception of the goodwill arising on the formation of Verizon Wireless, which is amortised over 25 years. The Group has assessed the renewal of Verizon Wireless’ licences as perfunctory and as such believes a useful economic life for the acquired business of greater than 20 years is appropriate. For other acquisitions, including customer bases, the amortisation period for goodwill is typically between 3 and 10 years.

For acquisitions made before 1 April 1998, when FRS 10, “Goodwill and Intangible Assets”, was adopted, goodwill was written off directly to reserves. Goodwill written off directly to reserves is included in the profit and loss account when the related business is sold.

Other intangible fixed assets
Purchased intangible fixed assets, including licence fees, are capitalised at cost.

Network licence costs are amortised over the periods of the licences. Amortisation is charged from commencement of service of the network. The annual charge is calculated in proportion to the capacity of the network during the start up period and on a straight line basis thereafter.

Other intangible fixed assets are amortised over their expected useful economic life on a straight line basis.

Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.

Depreciation is not provided on freehold land. The cost of other tangible fixed assets is written off, from the time they are brought into use, by equal instalments over their expected useful lives as follows:

Freehold buildings	25-50 years
Leasehold premises	the term of the lease
Equipment, fixtures and fittings	3-10 years

The cost of tangible fixed assets includes directly attributable incremental costs incurred in their acquisition and installation.

Annual Report 2004  Vodafone Group Plc

75

Investments
The Consolidated Financial Statements include investments in associated undertakings using the equity method of accounting. An associated undertaking is an entity in which the Group has a participating interest and, in the opinion of the directors, can exercise significant influence over its operational and financial policies. The profit and loss account includes the Group’s share of the operating profit or loss, exceptional items, interest income or expense and attributable taxation of those entities. The balance sheet shows the Group’s share of the net assets or liabilities of those entities, together with loans advanced and attributed goodwill.

The Consolidated Financial Statements include investments in joint ventures using the gross equity method of accounting. A joint venture is an entity in which the Group has a long-term interest and exercises joint control. Under the gross equity method, a form of the equity method of accounting, the Group’s share of the aggregate gross assets and liabilities underlying the investment in the joint venture is included in the balance sheet and the Group’s share of the turnover of the joint venture is disclosed in the profit and loss account.

Other investments, held as fixed assets, comprise equity shareholdings and other interests. They are stated at cost less provision for any impairment. Dividend income is recognised upon receipt and interest when receivable.

Stocks
Stocks are valued at the lower of cost and estimated net realisable value.

Allowance for bad and doubtful debts
Allowances are maintained for bad and doubtful debts for estimated losses resulting from the inability of customers to make required payments. Estimates are based on the ageing of the debt balances and historical experience.

Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full on timing differences that exist at the balance sheet date and that result in an obligation to pay more tax, or a right to pay less tax in the future. The deferred tax is measured at the rate expected to apply in the periods in which the timing differences are expected to reverse, based on the tax rates and laws that are enacted or substantially enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no binding commitment to sell the asset. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Leases
Rental costs under operating leases are charged to the profit and loss account in equal annual amounts over the periods of the leases.

Assets acquired under finance leases, which transfer substantially all the rights and obligations of ownership, are accounted for as though purchased outright. The fair value of the asset at the inception of the lease is included in tangible fixed assets and the capital element of the leasing commitment included in creditors. Finance charges are calculated on an actuarial basis and are allocated over each lease to produce a constant rate of charge on the outstanding balance.

Lease obligations which are satisfied by cash and other assets deposited with third parties are set-off against those assets in the Group’s balance sheet.

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76

Notes to the Consolidated Financial Statements continued

3. Segmental analysis

The Group’s business is principally the supply of mobile telecommunications services and products. Other operations primarily comprise fixed line telecommunications businesses and the Vizzavi joint venture, until 29 August 2002.

Segmental information is provided on the basis of geographic regions, being the basis on which the Group manages its worldwide interests.

In June 2003, the Group announced changes in the regional structure of its operations. The former Northern Europe and Central Europe regions were combined into a new Northern Europe region, with the exception of the United Kingdom and Ireland that now form their own region. The results below are presented in accordance with the new regional structure.

Turnover is by origin, which is not materially different from turnover by destination.

	Mobile telecommunications												Other operations
										Middle
	UK &	Northern		Southern				Asia		East &					Asia		Total
	Ireland	Europe		Europe		Americas		Pacific		Africa	Total		Europe		Pacific		Group
	£m	£m		£m		£m		£m		£m	£m		£m		£m		£m
Year ended 31 March 2004
Group turnover	5,504	7,353		9,776		–		8,785		297	31,715		947		897		33,559
Operating profit/(loss)	842	(5,041	)	(1,185	)	(21	)	515		85	(4,805	)	(49	)	78		(4,776	)
Share of operating profit/(loss) in associated undertakings	4	86		9		297		1		158	555		(10	)	1		546
Total Group operating loss	846	(4,955	)	(1,176	)	276		516		243	(4,250	)	(59	)	79		(4,230	)
Exceptional non-operating items	–	(60	)	(2	)	13		2		–	(47	)	3		(59	)	(103	)
Loss on ordinary activities before interest	846	(5,015	)	(1,178	)	289		518		243	(4,297	)	(56	)	20		(4,333	)
Total Group operating loss	846	(4,955	)	(1,176	)	276		516		243	(4,250	)	(59	)	79		(4,230	)
Add back:
– Goodwill amortisation	384	8,147		4,826		1,119		701		30	15,207		–		–		15,207
– Exceptional operating items	130	–		(351	)	(2	)	(5	)	–	(228	)	–		–		(228	)
Total Group operating profit before goodwill
amortisation and exceptional items	1,360	3,192		3,299		1,393		1,212		273	10,729		(59	)	79		10,749
Depreciation and amortisation charges, excluding
goodwill amortisation	593	962		1,169		4		1,311		54	4,093		170		197		4,460
Intangible and tangible fixed asset additions	682	1,178		1,308		–		1,366		71	4,605		115		41		4,761
At 31 March 2004
Net assets/(liabilities) and attributed goodwill (before
net borrowings):
– subsidiary undertakings	7,348	43,867		37,010		(1,739	)	14,956		432	101,874		319		–		102,193
– share of associated undertakings	4	5,500		76		15,047		18		403	21,048		178		–		21,226
	7,352	49,367		37,086		13,308		14,974		835	122,922		497		–		123,419
Net debt																	(8,488	)
																	114,931

Annual Report 2004  Vodafone Group Plc

77

	Mobile telecommunications													Other operations
											Middle
	UK &		Northern		Southern				Asia		East &					Asia		Total
	Ireland		Europe		Europe		Americas		Pacific		Africa	Total		Europe		Pacific		Group
	£m		£m		£m		£m		£m		£m	£m		£m		£m		£m
Year ended 31 March 2003
Group turnover	4,655		6,177		8,051		5		8,364		290	27,542		854		1,979		30,375
Operating profit/(loss)	1,073		(4,827	)	(1,842	)	(117	)	702		60	(4,951	)	(89	)	(255	)	(5,295	)
Share of operating profit/(loss) in joint ventures
and associated undertakings	–		(126	)	3		(21	)	2		110	(32	)	(124	)	–		(156	)
Total Group operating loss	1,073		(4,953	)	(1,839	)	(138	)	704		170	(4,983	)	(213	)	(255	)	(5,451	)
Exceptional non-operating items	–		(1	)	(6	)	(28	)	(295	)	1	(329	)	348		(24	)	(5	)
Loss on ordinary activities before interest	1,073		(4,954	)	(1,845	)	(166	)	409		171	(5,312	)	135		(279	)	(5,456	)
Total Group operating loss	1,073		(4,953	)	(1,839	)	(138	)	704		170	(4,983	)	(213	)	(255	)	(5,451	)
Add back:
– Goodwill amortisation	253		7,415		4,334		1,235		717		27	13,981		75		–		14,056
– Exceptional operating items	–		50		–		122		–		–	172		–		404		576
Total Group operating profit before goodwill
amortisation and exceptional items	1,326		2,512		2,495		1,219		1,421		197	9,170		(138	)	149		9,181
Depreciation and amortisation charges, excluding
goodwill amortisation	485		772		959		15		1,190		56	3,477		166		389		4,032
Intangible and tangible fixed asset additions	618		1,276		1,270		9		1,393		56	4,622		135		186		4,943
At 31 March 2003
Net assets/(liabilities) and attributed goodwill
(before net borrowings) as restated:
– subsidiary undertakings	7,840		52,974		42,661		(1,771	)	14,880		568	117,152		419		1,936		119,507
– share of associated undertakings	5		7,169		100		18,236		32		337	25,879		(64	)	10		25,825
	7,845		60,143		42,761		16,465		14,912		905	143,031		355		1,946		145,332
Net debt																		(13,839	)
																		131,493
Year ended 31 March 2002
Group turnover	4,240		5,369		6,743		12		4,072		306	20,742		998		1,105		22,845
Operating profit/(loss)	813		(4,632	)	(1,877	)	(68	)	15		34	(5,715	)	(4,252	)	(410	)	(10,377	)
Share of operating profit/(loss) in joint ventures and
associated undertakings	(2	)	(255	)	(94	)	(487	)	(213	)	97	(954	)	(481	)	(22	)	(1,457	)
Total Group operating loss	811		(4,887	)	(1,971	)	(555	)	(198	)	131	(6,669	)	(4,733	)	(432	)	(11,834	)
Exceptional non-operating items	–		(20	)	52		–		(881	)	–	(849	)	(11	)	–		(860	)
Loss on ordinary activities before interest	811		(4,907	)	(1,919	)	(555	)	(1,079	)	131	(7,518	)	(4,744	)	(432	)	(12,694	)
Total Group operating loss	811		(4,887	)	(1,971	)	(555	)	(198	)	131	(6,669	)	(4,733	)	(432	)	(11,834	)
Add back:
– Goodwill amortisation	216		7,061		4,043		1,343		617		30	13,310		145		15		13,470
– Exceptional operating items	27		–		–		529		170		–	726		4,282		400		5,408
Total Group operating profit before goodwill
amortisation and exceptional items	1,054		2,174		2,072		1,317		589		161	7,367		(306	)	(17	)	7,044
Depreciation and amortisation charges, excluding
goodwill amortisation	410		614		759		19		586		57	2,445		264		205		2,914
Intangible and tangible fixed asset additions	683		1,270		1,695		23		826		152	4,649		214		255		5,118

Vodafone Group Plc  Annual Report 2004

78

Notes to the Consolidated Financial Statements continued

4. Exceptional operating items

	2004		2003		2002
	£m		£m		£m
Contribution tax	351		–		–
Reorganisation costs	(123	)	(91	)	(86	)
Impairment of intangible and tangible fixed assets	–		(485	)	(5,100	)
Share of exceptional operating items of associated undertakings and joint ventures	–		–		(222	)
	228		(576	)	(5,408	)

The net exceptional operating income for 2004 of £228 million comprises £351 million of expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy that is no longer expected to be payable and reorganisation costs of £123 million primarily relating to the Group’s operations in the UK.

The impairment charges for 2003 of £485 million relate to the carrying value of goodwill for Grupo Iusacell (£80 million) and tangible fixed assets in Japan Telecom (£405 million). Reorganisation costs of £91 million relate to the integration of Vizzavi and related restructuring of the Group’s internet portal activities.

Exceptional operating items for 2002 of £5,408 million primarily relate to impairment charges of £5,100 million in relation to the carrying value of goodwill for Arcor, Cegetel Group, Grupo Iusacell and Japan Telecom, £86 million reorganisation costs which relate to the Group’s operations in Australia and the UK and £222 million for the Group’s share of exceptional items of its associated undertakings and joint ventures, which principally comprise £102 million of, principally, asset write-downs in Vodafone Japan and £115 million of reorganisation costs in Verizon Wireless and Vizzavi.

5. Operating loss

	2004						2003						2002
	Continuing		Discontinued				Continuing		Discontinued				Continuing		Discontinued
	operations		operations		Total		operations		operations		Total		operations		operations		Total
	£m		£m		£m		£m		£m		£m		£m		£m		£m
Group turnover	32,741		818		33,559		28,547		1,828		30,375		21,767		1,078		22,845
Cost of sales	(18,986	)	(475	)	(19,461	)	(16,910	)	(986	)	(17,896	)	(12,795	)	(651	)	(13,446	)
Exceptional operating items	351		–		351		–		–		–		–		–		–
Other cost of sales	(19,337	)	(475	)	(19,812	)	(16,910	)	(986	)	(17,896	)	(12,795	)	(651	)	(13,446	)
Gross profit	13,755		343		14,098		11,637		842		12,479		8,972		427		9,399
Selling and distribution costs	(2,065	)	(14	)	(2,079	)	(1,863	)	(20	)	(1,883	)	(1,445	)	(12	)	(1,457	)
Administrative expenses	(16,532	)	(263	)	(16,795	)	(14,826	)	(1,065	)	(15,891	)	(17,493	)	(826	)	(18,319	)
Goodwill amortisation	(13,095	)	–		(13,095	)	(11,875	)	–		(11,875	)	(10,949	)	(13	)	(10,962	)
Exceptional operating items	(123	)	–		(123	)	(91	)	(405	)	(496	)	(4,086	)	(400	)	(4,486	)
Other administration expenses	(3,314	)	(263	)	(3,577	)	(2,860	)	(660	)	(3,520	)	(2,458	)	(413	)	(2,871	)
Total operating expenses	(18,597	)	(277	)	(18,874	)	(16,689	)	(1,085	)	(17,774	)	(18,938	)	(838	)	(19,776	)
Operating loss	(4,842	)	66		(4,776	)	(5,052	)	(243	)	(5,295	)	(9,966	)	(411	)	(10,377	)

The results of Japan Telecom, which has been disposed of, are analysed as discontinued operations and prior periods’ analyses are restated to reflect this business as discontinued.

Annual Report 2004  Vodafone Group Plc

79

Operating loss has been arrived at after charging/(crediting):
	2004		2003		2002
	£m		£m		£m
Depreciation of tangible fixed assets:
Owned assets	4,181		3,783		2,702
Leased assets	181		196		178
Goodwill amortisation	13,095		11,875		10,962
Amortisation of other intangible fixed assets	98		53		34
Research and development	171		164		110
Advertising costs	990		902		780
Bad debt expense	209		193		196
Payments under operating leases:
Plant and machinery	98		78		38
Other assets including fixed line rentals	1,254		1,269		886
Own costs capitalised attributable to the construction or acquisition of tangible fixed assets	(290	)	(207	)	(163	)

The total amount charged by Deloitte and Touche LLP is analysed below:
	2004	2003
	£m	£m
Audit fees	4	5
Audit-related fees:
Audit regulatory reporting	2	–
Due diligence reviews	1	–
Tax fees:
Compliance	1	1
Other tax	1	2
All other fees:
IT consultancy	2	10
Other	1	2
	12	20
Analysed as:
	2004	2003
	£m	£m
Charged to profit and loss account	10	13
Capitalised or charged to share premium account	2	7
	12	20
	2004	2003
	£m	£m
UK companies	4	4
Overseas companies	8	16
	12	20

In addition to the above, the Group’s associated companies paid fees totalling £8 million to Deloitte and Touche LLP during the year ended 31 March 2004 (2003: £4 million). The Company audit fee for the year ended 31 March 2004 was £0.3 million (2003: £0.3 million).

Joint ventures and associated undertakings
The Group’s share of the turnover and operating loss of joint ventures and associated undertakings is further analysed as follows:

	2004	2003		2002
	£m	£m		£m
Share of turnover:
Joint ventures	–	8		3
Associated undertakings	10,179	8,769		10,693
	10,179	8,777		10,696
	2004	2003		2002
	£m	£m		£m
Share of operating profit/(loss):
Joint ventures	–	(39	)	(231	)
Associated undertakings	546	(117	)	(1,226	)
	546	(156	)	(1,457	)

Vodafone Group Plc  Annual Report 2004

80

Notes to the Consolidated Financial Statements continued

6. Exceptional non-operating items

	2004		2003		2002
	£m		£m		£m
(Loss)/profit on disposal of businesses	(127	)	22		41
Amounts written off fixed asset investments	(6	)	(340	)	(920	)
Profit on disposal of fixed asset investments	12		255		9
Profit on disposal of tangible fixed assets	19		3		10
Share of associated undertakings (loss)/profit on disposal of investment	(1	)	55		–
	(103	)	(5	)	(860	)

The loss on disposal of businesses for the year ended 31 March 2004 primarily relates to the disposal of the Japan Telecom fixed line operations by the Group’s 66.7% owned subsidiary, Vodafone Holdings K.K.

Amounts written off fixed asset investments for the years ended 31 March 2003 and 31 March 2002 primarily relate to the Group’s interest in China Mobile. The profit on disposal of fixed asset investments for 2003 primarily relates to the disposal of the Group’s 23.6% interest in Bergemann GmbH, through which the Group’s 8.2% stake in Ruhrgas AG was held. The share of associate profit on disposal of investment relates to the completion of the disposal for cash of AOL Europe shares by Cegetel Group S.A.

The profit on disposal of fixed asset investments for the year ended 31 March 2002 relates to a profit on disposal of the Group’s 11.7% interest in the Korean mobile operator, Shinsegi. The profit on disposal of businesses for the year ended 31 March 2002 principally relates to a gain arising on the reduction in the Group’s interest in Vodafone Greece, from 55% to 51.9%.

7. Net interest payable and similar items

	2004		2003		2002
	£m		£m		£m
Parent and subsidiary undertakings:
Interest receivable and similar income	(566	)	(647	)	(468	)
Interest payable and similar charges:
Bank loans and overdrafts	46		133		360
Other loans	820		921		494
Tax liabilities	215		55		108
Finance leases	10		14		9
	1,091		1,123		971
Group net interest payable	525		476		503
Share of joint ventures:
Interest payable and similar charges	–		8		12
Share of associated undertakings:
Interest receivable and similar income	(7	)	(24	)	(23	)
Interest payable and similar charges	222		311		353
	215		287		330
Share of joint ventures and associated undertakings net interest payable	215		295		342
Other similar items	(26	)	(19	)	–
Net interest payable and similar items	714		752		845

Annual Report 2004  Vodafone Group Plc

81

8. Tax on loss on ordinary activities

	2004		2003		2002
	£m		£m		£m
United Kingdom corporation tax charge at 30%	209		195		187
Overseas corporation tax
Current tax:
Current year	2,264		1,971		857
Prior year	(159	)	9		(322	)
	2,105		1,980		535
Total current tax	2,314		2,175		722
Deferred tax – origination of and reversal of timing differences	736		818		1,489
Tax on profit on ordinary activities, before exceptional items	3,050		2,993		2,211
Tax on exceptional items	104		(37	)	(71	)
Total tax charge on ordinary activities	3,154		2,956		2,140
Parent and subsidiary undertakings	2,866		2,624		1,925
Share of joint ventures	–		17		(23	)
Share of associated undertakings	288		315		238
	3,154		2,956		2,140

Factors affecting the tax charge for the year
The effective rate of taxation for the year ended 31 March 2004 is (62.5)% (2003: (47.6)%; 2002: (15.8%)). The effective rate includes the impact of goodwill amortisation and exceptional items, which may not be deductible for tax purposes. Aside from the negative impact of non-tax deductible goodwill amortisation on the effective tax rate, the Group’s tax charge has benefited further from the restructuring of Italian operations in the prior year, from restructuring of the French operations in the current year, from a fall in the Group’s weighted average tax rate, calculated by reference to local statutory tax rates and accounting profits, and from other tax incentives. These benefits have outweighed the absence of the one-off benefit arising from the restructuring of the German group in the previous year.

The tax charge on exceptional items of £104 million (2003: £(37) million; 2002: £(71) million) is mainly in respect of expected recoveries and provision releases in relation to a contribution tax levy on Vodafone Italy that is no longer expected to be payable.

Reconciliation of expected tax charge using the standard tax rate to the actual current tax charge
The differences between the Group’s expected tax charge, using the Group’s standard corporation tax rate of 36.4% in 2004 (37.0% in 2003 and 37.2% in 2002), comprising the average rates of tax payable across the Group and weighted in proportion to accounting profits, and the Group’s current tax charge for each of those years were as follows:

	2004		2003		2002
	£m		£m		£m
Expected tax credit at standard tax rate on loss on ordinary activities	(1,837	)	(2,295	)	(5,037	)
Goodwill amortisation	5,535		5,196		5,011
Exceptional non-operating items	38		2		320
Exceptional operating items	(83	)	213		2,012
Expected tax charge at standard tax rate on profit on ordinary activities, before goodwill
amortisation and exceptional items	3,653		3,116		2,306
Permanent differences	47		140		111
Excess tax depreciation over book depreciation	(509	)	(404	)	(423	)
Short term timing differences	(18	)	(64	)	(559	)
Deferred tax on overseas earnings	(418	)	(424	)	(491	)
Losses carried forward utilised/current year losses for which no credit taken	26		278		415
Prior year adjustments	(61	)	4		(92	)
Non taxable profits/non deductible losses	(281	)	(239	)	(392	)
International corporate tax rate differentials and other	(125	)	(232	)	(153	)
Actual current tax charge (excluding tax on exceptional items)	2,314		2,175		722

Vodafone Group Plc  Annual Report 2004

82

Notes to the Consolidated Financial Statements continued

8. Tax on loss on ordinary activities continued

Reconciliation of expected tax charge using the UK statutory tax rate to the actual tax charge

The differences between the Group’s expected tax charge, using the UK corporation tax rate of 30% in 2004, 2003 and 2002 and the Group’s tax charge for each of those years were as follows:

	2004		2003		2002
	£m		£m		£m
Expected tax credit at UK corporation tax rate on loss on ordinary activities	(1,514	)	(1,863	)	(4,062	)
Goodwill amortisation	4,562		4,217		4,041
Exceptional non-operating items	31		2		258
Exceptional operating items	(69	)	173		1,622
Expected tax charge at UK corporation tax rate, before goodwill amortisation and exceptional items	3,010		2,529		1,859
Permanent differences	152		165		126
Excess tax depreciation over book depreciation	(21	)	(40	)	6
Short term timing differences	(64	)	60		12
Losses carried forward utilised/current year losses for which no credit taken	(26	)	161		385
Prior year adjustments	(61	)	(9	)	(79	)
Net (over)/under charge relating to international associated undertakings	(186	)	8		–
Non taxable profits/non deductible losses	(281	)	(239	)	(392	)
International corporate tax rate differentials and other	527		358		294
Actual total tax charge (excluding tax on exceptional items)	3,050		2,993		2,211

Factors affecting the tax charge in future years

Factors that may affect the Group’s future tax charge include the absence of one-off restructuring benefits, the resolution of open issues, future planning opportunities, corporate acquisitions and disposals, changes in tax legislation and rates, and the use of brought forward tax losses.

At 31 March 2004, the Group had the following trading and non-trading losses available for carry forward. These losses are available for offset against future trading and non-trading profits of certain Group and associated undertakings:

	£m
UK subsidiaries’ trading and non-trading losses	166
International subsidiaries’ trading and non-trading losses	37,932

The losses in respect of international subsidiaries include amounts of £30,728 million (2003: £34,142 million) that have arisen in overseas holding companies as a result of revaluations of those companies’ investments for local GAAP purposes. Since it is uncertain whether or not these losses will be utilised, no deferred tax asset has been recognised. See Note 21.

9. Equity dividends

		2004		2003		2002
		Pence per		Pence per		Pence per
	2004	ordinary	2003	ordinary	2002	ordinary
	£m	share	£m	share	£m	share
Interim dividend paid	650	0.9535	542	0.7946	492	0.7224
Proposed final dividend	728	1.0780	612	0.8983	511	0.7497
Additional final dividend payable in respect of the year ended 31 March 2001	–	–	–	–	22	–
	1,378	2.0315	1,154	1.6929	1,025	1.4721

Annual Report 2004  Vodafone Group Plc

83

10. Loss per share

	2004		2003		2002
Weighted average number of shares outstanding during the year and used to calculate basic and diluted loss per share (millions):	68,096		68,155		67,961
	£m		£m		£m
Loss for basic and diluted loss per share	(9,015	)	(9,819	)	(16,155	)
	Pence per share		Pence per share		Pence per share
Basic and diluted loss per share	(13.24	)	(14.41	)	(23.77	)
Basic loss per share is stated inclusive of the following items:	£m		£m		£m
Amortisation of goodwill	15,207		14,056		13,470
Exceptional operating items	(228	)	576		5,408
Exceptional non-operating items	103		5		860
Tax on exceptional items	104		(37	)	(71	)
Share of exceptional items attributable to minority interests	27		(139	)	(14	)
	Pence per share		Pence per share		Pence per share
Amortisation of goodwill	22.33		20.62		19.82
Exceptional operating items	(0.33	)	0.85		7.96
Exceptional non-operating items	0.15		0.01		1.26
Tax on exceptional items	0.15		(0.06	)	(0.10	)
Share of exceptional items attributable to minority interest	0.04		(0.20	)	(0.02	)

Basic loss per share represents the net loss attributable to ordinary shareholders, being the loss on ordinary activities after taxation and minority interests. Diluted loss per share is the same as basic loss per share as it is considered that there are no dilutive potential ordinary shares.

Vodafone Group Plc  Annual Report 2004

84

Notes to the Consolidated Financial Statements continued

11. Intangible fixed assets

			Licence and
	Goodwill		spectrum fees		Total
	£m		£m		£m
Cost:
1 April 2003	133,451		15,379		148,830
Exchange movements	(4,101	)	(326	)	(4,427	)
Acquisitions (note 25)	1,434		–		1,434
Additions	–		10		10
Disposals	(407	)	–		(407	)
31 March 2004	130,377		15,063		145,440
Accumulated amortisation and impairment:
1 April 2003	40,618		127		40,745
Exchange movements	(1,709	)	(4	)	(1,713	)
Charge for the year	13,095		98		13,193
Disposals	(407	)	–		(407	)
31 March 2004	51,597		221		51,818
Net book value
31 March 2004	78,780		14,842		93,622
31 March 2003	92,833		15,252		108,085

For acquisitions prior to 1 April 1998, the cumulative goodwill written off to reserves, net of the goodwill attributed to business disposals, was £723 million at 31 March 2004 (2003: £723 million).

In accordance with accounting standards the Group regularly monitors the carrying value of its fixed assets. A review was undertaken at 31 March 2004 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2014.

Cash flow projections for the mobile businesses reflect investment in network infrastructure to provide enhanced voice services and a platform for new data products and services, enabled by GPRS and 3G technologies, which are forecast to be significant drivers of future revenue growth. Capital expenditure is heaviest in the early years of the projections, but in most countries is expected to fall to below 10% of revenues by the year ended 31 March 2008. Revenue growth is forecast from a combination of new customers and enhanced customer propositions. Data revenue is expected to increase significantly to 2009 but grow at more modest rates to 2014. Voice ARPU is forecast to benefit in the longer term from new services and traffic moving from fixed networks to mobile networks following a period of stabilisation reflecting the impact of price declines.

Accordingly, the directors believe that it is appropriate to use projections in excess of five years as growth in cash flows for the period to 31 March 2014 is expected to exceed relevant country growth in nominal gross domestic product (“GDP”). For the years beyond 1 April 2014, forecast growth rates at nominal GDP, using rates from independent sources, have been assumed for mobile businesses and below nominal GDP for non-mobile businesses. The discount rates for the major markets reviewed were based on company specific pre-tax weighted average cost of capital percentages and ranged from 8.1% to 10.3%.

The results of the review undertaken at 31 March 2004 indicated that no impairment charge was necessary.

Annual Report 2004  Vodafone Group Plc

85

12. Tangible fixed assets

			Equipment,
	Land and		fixtures		Network
	buildings		and fittings		infrastructure		Total
	£m		£m		£m		£m
Cost:
1 April 2003	1,170		3,746		24,082		28,998
Exchange movements	(30	)	(266	)	(389	)	(685	)
Acquisitions	9		31		63		103
Additions	104		1,348		3,299		4,751
Disposals	(47	)	(202	)	(302	)	(551	)
Japan Telecom disposal	(90	)	(178	)	(1,784	)	(2,052	)
Reclassifications	98		1,500		(1,598	)	–
31 March 2004	1,214		5,979		23,371		30,564
Accumulated depreciation and impairment:
1 April 2003	222		1,350		7,852		9,424
Exchange movements	(9	)	(88	)	(181	)	(278	)
Charge for the year	68		1,117		3,177		4,362
Disposals	(10	)	(143	)	(131	)	(284	)
Japan Telecom disposal	(2	)	(96	)	(645	)	(743	)
Reclassifications	24		1,500		(1,524	)	–
31 March 2004	293		3,640		8,548		12,481
Net book value
31 March 2004	921		2,339		14,823		18,083
31 March 2003	948		2,396		16,230		19,574

The total net book value of land and buildings held by the Group comprises:

	2004	2003
	£m	£m
Freehold premises included in:
– Land & buildings	586	666
– Network infrastructure	284	326
	870	992
Long-term leasehold premises included in:
– Land & buildings	115	129
	115	129
Short-term leasehold premises included in:
– Land & buildings	220	153
– Network infrastructure	1,348	1,385
	1,568	1,538
Total	2,553	2,659

The net book value of equipment, fixtures and fittings and network infrastructure includes £160 million (2003: £378 million) in respect of assets held under finance leases (see note 26).

Vodafone Group Plc  Annual Report 2004

   86

Notes to the Consolidated Financial Statements continued

13. Fixed asset investments

Associated undertakings

	Group
	£m
Share of net assets:
1 April 2003	3,209
Exchange movements	(331	)
Acquisitions	(110	)
Disposals	5
Share of retained results excluding goodwill amortisation	349
Share of goodwill amortisation	(47	)
31 March 2004	3,075
Capitalised goodwill:
1 April 2003	22,616
Exchange movements	(2,499	)
Acquisitions (note 25)	110
Disposals	(11	)
Goodwill amortisation	(2,065	)
31 March 2004	18,151
Net book value
31 March 2004	21,226
31 March 2003	25,825

For acquisitions of associated undertakings prior to 1 April 1998, the cumulative goodwill written off to reserves, net of the goodwill attributed to business disposals, was £467 million at 31 March 2004 (2003: £467 million).

The Group’s share of its associated undertakings comprises:

	2004	2003
	£m	£m
Share of turnover of associated undertakings	10,179	8,769
Share of assets:
Fixed assets	8,139	8,390
Current assets	2,263	2,640
	10,402	11,030
Share of liabilities:
Liabilities due within one year	4,695	5,261
Liabilities due after more than one year	2,197	2,127
Minority interests	435	433
	7,327	7,821
Share of net assets	3,075	3,209
Attributed goodwill net of accumulated amortisation and impairment	18,151	22,616
	21,226	25,825

The Group’s principal associated undertakings and fixed asset investments are detailed in note 34. A summary of Verizon Wireless’ results is shown within note 36.

Annual Report 2004  Vodafone Group Plc

87

Other fixed asset investments

	Group
	£m
Cost:
1 April 2003 as restated	2,527
Exchange movements	(295	)
Additions	220
Disposals	(373	)
31 March 2004	2,079
	£m
Amounts written off:
1 April 2003	1,363
Exchange movements	(156	)
Disposals	(183	)
Amounts written off during the year	6
31 March 2004	1,030
Net book value
31 March 2004	1,049
31 March 2003 as restated	1,164

Prior to the adoption by the Group of UITF 38, “Accounting for ESOP Trusts”, 18,950,434 shares in the Company held by the Vodafone Group Employee Trust, to satisfy the potential award of shares under the Group’s Long Term Incentive Plan and Short Term Incentive Plan, and 7,189,316 shares in the Company, held by the Group’s Australian and New Zealand businesses, in respect of an employee share option plan were held as fixed asset investments. In accordance with the adoption of UITF 38, these shares have been reclassified as a deduction from shareholders’ funds. The cost to the Group of these shares was £41 million. In addition, the 2,068,946 shares in the Company held by a Qualifying Employee Share Ownership Trust, which had £nil cost to the Group, have also been reclassified.

Other fixed asset investments include 3.3% of China Mobile (Hong Kong) Limited of which is listed on the New York and Hong Kong Stock Exchanges. The market value of this investment at 31 March 2004 was £1,047 million (2003: £806 million).

The Company’s fixed asset investments comprises investments in subsidiary undertakings as follows:

	£m
Cost
1 April 2003	109,417
Additions	6,937
Disposals	(5,415	)
31 March 2004	110,939
	£m
Amounts written off
1 April 2003	4,762
31 March 2004	4,762
Net book value
31 March 2004	106,177
31 March 2003	104,655

Vodafone Group Plc  Annual Report 2004

88

Notes to the Consolidated Financial Statements continued

14. Stocks

			Group
			2004		2003
			£m		£m
Goods held for resale			458		365
Stocks are reported net of allowances for obsolescence, an analysis of which is as follows:
	2004		2003		2002
	£m		£m		£m
Opening balance at 1 April	89		126		32
Exchange adjustments	(1	)	2		(7	)
Amounts charged/(credited) to the profit and loss account	107		(27	)	(5	)
Acquisitions	–		–		106
Assets written off	(2	)	(12	)	–
Closing balance at 31 March	193		89		126

15. Debtors

	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Due within one year:
Trade debtors	2,593	2,832	–	–
Amounts owed by subsidiary undertakings	–	–	65,098	43,282
Amounts owed by associated undertakings	17	45	–	10
Taxation recoverable	372	693	–	–
Group relief receivable	–	–	132	920
Other debtors	491	424	310	383
Prepayments and accrued income	2,048	2,214	–	–
	5,521	6,208	65,540	44,595
Due after more than one year:
Trade debtors	37	26	–	–
Other debtors	76	57	–	–
Prepayments	302	145	–	–
Deferred taxation (note 21)	965	1,024	87	104
	1,380	1,252	87	104
	6,901	7,460	65,627	44,699

A deferred tax asset of £965 million has been recognised as at 31 March 2004 (2003: £1,024 million). This asset relates to the closure of certain derivative financial instruments of £13 million (2003: £48 million) and short term timing differences and losses of £952 million (2003: £976 million). The directors are of the opinion, based on recent and forecast trading, that the level of future taxable profits and deferred tax liabilities will be sufficient to utilise the deferred tax assets being recognised.

The Company’s deferred tax asset of £87 million (2003: £104 million) is in respect of the closure of derivative financial instruments. The movement in the asset recognised has been charged to the Company’s profit and loss account for the year. Deferred tax assets not recognised amounted to £18 million at March 2004 (2003: £34 million) and arose from other timing differences.

Debtors are stated after allowances for bad and doubtful debts, an analysis of which is as follows:

	2004		2003		2002
	£m		£m		£m
Opening balance at 1 April	520		526		293
Exchange adjustments	(20	)	17		29
Amounts charged to the profit and loss account	209		193		196
Acquisitions	11		2		108
Disposals	(21	)	–		–
Debtors written off	(238	)	(218	)	(100	)
Closing balance at 31 March	461		520		526

Annual Report 2004  Vodafone Group Plc

89

16. Investments

	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Liquid investments	4,381	291	–	287

Liquid investments principally comprise collateralised deposits and investments in commercial paper.

Included within liquid investments of the Group and Company, at 31 March 2003, was a restricted deposit account of £287 million for the deferred purchase of 48,935,625 shares in Vodafone Portugal. This was released for payment on 4 April 2003.

17. Creditors: amounts falling due within one year

	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Bank overdrafts	42	–	–	–
Bank loans and other loans	2,000	1,078	956	351
Commercial paper	–	245	–	245
Finance leases	12	107	–	–
Trade creditors	2,842	2,497	–	–
Amounts owed to subsidiary undertakings	–	–	93,553	74,242
Amounts owed to associated undertakings	8	13	–	–
Taxation	4,275	4,137	–	–
Other taxes and social security costs	367	855	–	–
Other creditors	741	1,342	71	460
Accruals and deferred income	4,011	3,407	371	177
Proposed dividend	728	612	728	612
	15,026	14,293	95,679	76,087

18. Creditors: amounts falling due after more than one year

	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Bank loans	1,504	1,803	23	–
Other loans	10,596	11,191	8,795	7,807
Finance leases	124	181	–	–
Other creditors	7	19	–	–
Accruals and deferred income	744	563	453	364
	12,975	13,757	9,271	8,171
Bank loans are repayable as follows:
	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Repayable in more than one year but not more than two years	105	128	6	–
Repayable in more than two years but not more than five years	1,398	1,602	16	–
Repayable in more than five years	1	73	1	–
	1,504	1,803	23	–
Other loans are repayable as follows:
	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Repayable in more than one year but not more than two years	303	1,994	–	–
Repayable in more than two years but not more than five years	3,108	2,878	2,549	3,072
Repayable in more than five years	7,185	6,319	6,246	4,735
	10,596	11,191	8,795	7,807

Vodafone Group Plc  Annual Report 2004

90

Notes to the Consolidated Financial Statements continued

18. Creditors: amounts falling due after more than one year continued
Other loans falling due after more than one year primarily comprise bond issues by the Company, or its subsidiaries, analysed as follows:

	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
4.875% Euro bond due 2004	–	859	–	–
1.27% Japanese yen bond due 2005	134	139	–	–
1.93% Japanese yen bond due 2005	135	140	–	–
5.25% Euro bond due 2005	–	139	–	–
6.35% US dollar bond due 2005	34	125	–	–
7.625% US dollar bond due 2005	–	995	–	995
0.83% Japanese yen bond due 2006	16	16	16	16
1.78% Japanese yen bond due 2006	135	139	–	–
5.4% Euro bond due 2006	267	276	267	276
5.75% Euro bond due 2006	1,001	1,032	1,001	1,032
7.5% US dollar bond due 2006	121	258	–	–
4.161% US dollar bond due 2007	81	95	81	95
2.575% Japanese yen bond due 2008	136	140	–	–
3.95% US dollar bond due 2008	271	315	271	315
4.625% Euro bond due 2008	504	344	504	344
5.5% Euro bond due 2008	32	146	–	–
6.25% Sterling bond due 2008	249	248	249	248
6.25% Sterling bond due 2008	160	–	160	–
6.65% US dollar bond due 2008	135	316	–	–
4.25% Euro bond due 2009	1,266	1,306	1,266	1,306
4.75% Euro bond due 2009	548	567	–	–
2.0% Japanese yen bond due 2010	135	139	–	–
2.28% Japanese yen bond due 2010	133	136	–	–
2.5% Japanese yen bond due 2010	137	141	–	–
7.75% US dollar bond due 2010	1,473	1,711	1,487	1,711
5.0% US dollar bond due 2013	540	–	540	–
5.125% Euro bond due 2015	333	–	333	–
5.375% US dollar bond due 2015	495	251	495	251
5.0% Euro bond due 2018	499	–	499	–
4.625% US dollar bond due 2018	270	–	270	–
5.625% Sterling bond due 2025	246	–	246	–
7.875% US dollar bond due 2030	400	465	400	465
5.9% Sterling bond due 2032	443	443	443	443
6.25% US dollar bond due 2032	267	310	267	310
	10,596	11,191	8,795	7,807
Finance leases are repayable as follows:
Repayable in more than one year but not more than two years	11	47	–	–
Repayable in more than two years but not more than five years	30	39	–	–
Repayable in more than five years	83	95	–	–
	124	181	–	–

Annual Report 2004  Vodafone Group Plc

91

19. Financial liabilities and assets

Net debt

	2004		2003
	£m		£m
Liquid investments	(4,381	)	(291	)
Cash at bank and in hand	(1,409	)	(475	)
Debt due in one year or less, or on demand	2,054		1,430
Debt due after one year	12,224		13,175
	8,488		13,839

Maturity of financial liabilities
The maturity profile of the Group’s borrowings at 31 March was as follows:

	2004	2003
	£m	£m
Within one year	2,054	1,430
Between one to two years	419	2,169
Between two to three years	2,837	1,919
Between three to four years	922	1,795
Between four to five years	776	805
Between five to six years	3,298	1,019
Between six to seven years	416	3,584
Between seven to eight years	11	415
Between eight to nine years	12	–
Between nine to ten years	553	–
Between ten to eleven years	509	–
Between eleven to twelve years	345	251
Between fourteen to fifteen years	770	–
Between twenty one to twenty two years	246	–
Between twenty five to twenty six years	400	–
Between twenty six to twenty seven years	–	465
Between twenty eight to twenty nine years	710	–
Between twenty nine to thirty years	–	753
	14,278	14,605
The maturities of the Group’s other financial liabilities at 31 March was as follows:
In more than one year but not more than two years	7	4
In more than two years but not more than five years	–	1
In more than five years	–	14
	7	19

Borrowing facilities
At 31 March 2004, the Group’s most significant committed borrowing facilities comprised two bank facilities of $5,547 million (£3,018 million) and $4,853 million (£2,641 million) expiring in less than one year and two to five years respectively (2003: one bank facility of $11,025 million (£6,975 million)), and a ¥225 billion (£1,177 million, 2003: £1,200 million) term credit facility, which expires in more than two years but not more than five years. The bank facilities remained undrawn throughout the year and the term credit facility was drawn down in full on 15 October 2002.

Under the terms and conditions of the $5,547 million and $4,853 million bank facilities, lenders would have the right, but not the obligation, to cancel their commitment 30 days from the date of notification of a change of control of the Company and have outstanding advances repaid on the last day of the current interest period. The facility agreement provides for certain structural changes that do not affect the obligations of the Company to be specifically excluded from the definition of a change of control. This is in addition to the rights of lenders to cancel their commitment if the Company has committed an event of default. Substantially the same terms and conditions apply in the case of Vodafone Finance K.K.’s ¥225 billion term credit facility, although the change of control provision is applicable to any guarantor of borrowings under the term credit facility. As of 31 March 2004, the Company was the sole guarantor of the ¥225 billion term credit facility.

In addition to the above, certain of the Group’s subsidiaries had committed facilities at 31 March 2004 of £467 million (2003: £1,086 million) in aggregate, of which £134 million (2003: £91 million) was undrawn. Of the total committed facilities, £69 million (2003: £415 million) expires in less than one year, £398 million (2003: £598 million) expires between two and five years, and £nil (2003: £73 million) expires in more than five years.

Vodafone Group Plc  Annual Report 2004

92

Notes to the Consolidated Financial Statements continued

19. Financial liabilities and assets continued

Financial liabilities and assets
The Group uses short term foreign exchange instruments for managing both liquidity and the currency mix of Group net debt. The following table shows the impact of current foreign exchange instruments on the currency profile of the Group’s net debt. Certain of the foreign exchange instruments disclosed in the table hedge items other than borrowings. Short term debtors and creditors are not included in the analysis in notes 19 and 20.

Interest rate and currency of financial liabilities

												Non-interest
												bearing
										Fixed rate financial		financial
										liabilities		liabilities
				Financial
				liabilities net					Non-interest		Weighted	Weighted
	Gross	Foreign		of foreign		Floating rate		Fixed rate	bearing	Weighted	average time	average
	financial	exchange		exchange		financial		financial	financial	average	for which	period until
	liabilities	instruments		instruments		liabilities		liabilities	liabilities	interest rate	rate is fixed	maturity
Currency	£m	£m		£m		£m		£m	£m	%	Years	Years
At 31 March 2004:
Sterling	1,110	(2,456	)	(1,346	)	(1,346	)	–	–	–	–	–
Euro	5,670	1,553		7,223		5,282		1,941	–	5.0	6.4	–
US dollar	4,953	(1,487	)	3,466		2,608		858	–	7.6	0.9	–
Japanese yen	2,218	2,618		4,836		4,798		31	7	1.6	0.7	1.5
Other	254	(148	)	106		106		–	–	–	–	–
Gross financial liabilities	14,205	80		14,285		11,448		2,830	7	5.7	4.7	1.5
At 31 March 2003:
Sterling	954	(255	)	699		249		450	–	5.9	29.7	–
Euro	4,331	3,020		7,351		7,351		–	–	–	–	–
US dollar	6,115	(4,952	)	1,163		997		166	–	4.3	1.6	–
Japanese yen	2,745	2,320		5,065		4,368		678	19	2.5	1.1	4.9
Other	405	(59	)	346		346		–	–	–	–	–
Gross financial liabilities	14,550	74		14,624		13,311		1,294	19	3.9	11.1	4.9

Interest on floating rate borrowings is based on national LIBOR equivalents or government bond rates in the relevant currencies.

The figures shown in the tables above take into account interest rate swaps used to manage the interest rate profile of financial liabilities.

Further protection from euro and Japanese yen interest rate movements on debt is provided by forward starting interest rate swaps (“IRS”). The Group has entered into euro denominated forward starting IRS and interest rate futures which cover the period June 2005 to June 2007 for an amount equal to £1,471 million (2003: £nil). The effective rate which has been fixed is equal to 3.35% per annum. The Group has entered into Japanese yen denominated forward starting IRS and interest rate futures which cover the period June 2005 to September 2005, September 2005 to December 2005, December 2005 to March 2006 and March 2006 to March 2007 for amounts equal to £3,256 million (2003: £1,067 million), £3,635 million (2003: £1,067 million), £1,046 million (2003: £1,067 million) and £3,975 million (2003: £4,005 million), respectively. The effective rates which have been fixed range from 0.329% per annum to 0.364% per annum.

Annual Report 2004  Vodafone Group Plc

93

Financial assets

					Non-interest bearing assets
							Other
		Floating		Fixed			non-interest
		rate		rate			bearing
		financial		financial	Equity		financial
	Total	assets	(1)	assets	investments	(2)	assets
Currency	£m	£m		£m	£m		£m
At 31 March 2004:
Sterling	268	264		–	4		–
Euro	2,299	2,245		–	9		45
US dollar	3,231	3,219		–	3		9
Japanese yen	242	4		–	144		94
Other	912	95		–	809		8
Gross financial assets	6,952	5,827		–	969		156
At 31 March 2003 as restated:
Sterling	19	17		–	2		–
Euro	636	528		–	49		59
US dollar	50	29		–	3		18
Japanese yen	240	71		–	134		35
Other	1,068	121		–	940		7
Gross financial assets	2,013	766		–	1,128		119

Financial assets comprise

	2004	2003
	£m	£m
Cash at bank and in hand	1,409	475
Liquid investments	4,381	291
Current asset investments	–	–
Trade and other debtors due after more than one year	113	83
Fixed asset investments (other than joint ventures and associated undertakings)(2) (3)	1,049	1,164
	6,952	2,013

Notes:
(1)	Floating rate financial assets comprise cash and short-term deposits of £3,802 million (2003: £761 million) and US dollar denominated commercial paper totalling £2,025 million (2003: euro denominated commercial paper totalling £5 million), invested with counterparties having a single-A credit rating or above from at least two of Moody’s, Fitch Ratings and Standard & Poor’s. These ratings are used in determining the daily settlement and aggregate credit risk with each counterparty.
(2)	Equity investments include £810 million (2003: £1,100 million) represented by listed investments. Listed equity investments denominated in currencies other than sterling include £809 million (2003: £939 million) denominated in Hong Kong dollars and £1 million (2003: £86 million) denominated in Japanese yen.
(3)	Restated as a result of the adoption of UITF 38 “Accounting for ESOP Trusts”.

Vodafone Group Plc  Annual Report 2004

94

Notes to the Consolidated Financial Statements continued

20. Financial instruments

Fair values of financial assets and liabilities
The carrying amounts and estimated fair value of the Group’s outstanding financial instruments are set out below:

	2004		2004		2003		2003
	Net carrying		Estimated		Net carrying		Estimated
	amount		fair value		amount		fair value
	£m		£m		£m		£m
Fixed asset investments (excluding investments in joint ventures and
associated undertakings)(1)	1,049		1,290		1,164		1,027
Cash at bank and in hand	1,409		1,409		475		475
Liquid investments	4,381		4,381		291		291
Borrowings:
Short term	1,974		2,034		1,356		1,371
Long term	12,224		13,029		13,175		14,173
Derivative financial instruments:
Interest rate	–		343		–		683
Foreign exchange	(80	)	(80	)	(74	)	(74	)

Note:
(1)	Restated as a result of the adoption of UITF 38 “Accounting for ESOP Trusts”.

The Group’s exposure to market risk, which is the sensitivity of the value of financial instruments to changes in related currency and interest rates, is minimised because gains and losses on the underlying assets and liabilities offset gains and losses on derivative financial instruments. The following methods and assumptions were used to estimate the fair values shown above.

Fixed asset investments (excluding investments in joint ventures and associated undertakings) – The net book value of fixed asset investments at 31 March 2004 comprises investments recorded at an original cost of £2,079 million (2003: £2,568 million). Listed investments are stated at fair value based on their quoted share price at 31 March 2004.

Cash at bank and in hand and liquid investments – The carrying values of cash and liquid investments approximate to their fair values because of the short term maturity of these instruments.

Borrowings (excluding foreign exchange contracts) – The fair value of quoted long term borrowings is based on year end mid-market quoted prices. The book values stated above excludes accrued interest on borrowings which is recorded separately on the balance sheet within accruals and deferred income. The fair value of other borrowings is estimated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at the year end.

Foreign exchange contracts, interest rate swaps and futures – The Group enters into foreign exchange contracts, interest rate swaps and futures in order to manage its foreign currency and interest rate exposure. The book values stated above exclude accrued interest which is recorded separately in the balance sheet. The fair value of these financial instruments was estimated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at the year end.

Hedges
The Group’s policy is to use derivative instruments to hedge against exposure to movements in interest rates and exchange rates. Changes in the fair value of instruments used for hedging are not recognised in the financial statements until the hedged exposure is itself recognised. Unrecognised gains and losses on instruments used for hedging are set out below:

					Total net
	Gains		Losses		gains/(losses)
	£m		£m		£m
Unrecognised gains and losses on hedges at 1 April 2003	721		(39	)	682
Less: gains and losses arising in previous years that were recognised in the year	(211	)	18		(193	)
Gains and losses arising before 1 April 2003 that were not recognised at 31 March 2004	510		(21	)	489
Gains and losses arising in the year that were not recognised at 31 March 2004	(87	)	(59	)	(146	)
Unrecognised gains and losses on hedges at 31 March 2004	423		(80	)	343
Of which:
Gains and losses expected to be recognised in the year ending 31 March 2005	91		(23	)	68

In addition to the amounts disclosed above, cumulative aggregate gains of £607 million in respect of terminated interest rate swaps were carried forward in the balance sheet as at 31 March 2004 pending their recognition in the profit and loss account (2003: £415 million). Of these carried forward amounts, gains of £155 million are expected to be recognised in the profit and loss account in the 2005 financial year. Aggregate related gains of £90 million from previous years were recognised in the profit and loss account in the 2004 financial year (2003: £53 million).

Currency exposures
Taking into account the effect of forward contracts and other derivative instruments, the Group did not have any material financial exposure to foreign exchange gains or losses on monetary assets and monetary liabilities denominated in foreign currencies at 31 March 2004.

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21. Provisions for liabilities and charges

			Post
	Deferred		employment
	taxation		benefits		Other provisions		Total
	£m		£m		£m		£m
1 April 2003	3,032		217		447		3,696
Exchange movements	(157	)	(3	)	(17	)	(177	)
Disposals	–		(60	)	(6	)	(66	)
Profit and loss account	744		41		180		965
Utilised in the year – payments	–		(123	)	(149	)	(272	)
Other	(11	)	(4	)	66		51
31 March 2004	3,608		68		521		4,197

Deferred taxation
The deferred tax charge of £744 million (2003: £905 million) in respect of deferred tax liabilities excludes a charge to the profit and loss account of £47 million (2003: £36 million) relating to associated undertakings and a credit to the profit and loss account of £49 million (2003: £129 million) relating to deferred tax assets. Therefore the net deferred tax charge is £742 million (2003: £812 million), or £736 million (2003: £818 million) before exceptional items.

The net deferred tax liability/(asset) is analysed as follows:

	2004		2003
	£m		£m
Accelerated capital allowances	1,652		1,383
Deferred tax on closure of derivative financial instruments	(13	)	(48	)
Deferred tax on overseas earnings	1,425		1,007
Other short term timing differences	(19	)	(28	)
Unrelieved tax losses	(402	)	(306	)
	2,643		2,008
Analysed as:
Deferred tax asset (note 15)	(965	)	(1,024	)
Deferred tax provision	3,608		3,032
	2,643		2,008
The amounts unprovided for deferred taxation are:
	2004		2003
	£m		£m
Accelerated capital allowances	(6	)	(170	)
Gains subject to rollover relief	10		10
Other short term timing differences	(118	)	(165	)
Unrelieved tax losses	(11,018	)	(11,226	)
	(11,132	)	(11,551	)

A deferred tax asset has not been recognised in respect of unrelieved tax losses of £11,018 million (2003: £11,226 million), accelerated capital allowances of £6 million (2003: £170 million) and short term timing differences of £118 million (2003: £165 million) as it is not anticipated that sufficient taxable profits will arise within the foreseeable future.

The potential net tax benefit in respect of all tax losses carried forward at 31 March 2004, including amounts both recognised and unrecognised for deferred tax purposes, was £50 million in United Kingdom subsidiaries (2003: £52 million) and £11,370 million in international subsidiaries (2003: £11,480 million). These losses are only available for offset against future profits arising within these companies subject to the laws of the relevant jurisdiction. The Group’s share of losses of international associated undertakings that are available for offset against future trading profits in these entities is £nil (2003: £225 million).

Other provisions
Other provisions primarily comprise amounts provided for legal claims, decommissioning costs and restructuring costs. The associated cash outflows for restructuring costs are substantially short term in nature. For decommissioning costs, the associated cash outflows are generally expected to occur at the dates of exit of the assets to which they relate, which are long term in nature. The timing of cash outflows associated with legal claims cannot be reasonably determined.

Vodafone Group Plc  Annual Report 2004

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Notes to the Consolidated Financial Statements continued

22. Called up share capital

	2004		2003
	Number	£m	Number	£m
Authorised:
Ordinary shares of US$0.10 each	78,000,000,000	4,875	78,000,000,000	4,875
7% cumulative fixed rate shares of £1 each	50,000	–	50,000	–
	78,000,050,000	4,875	78,000,050,000	4,875
Ordinary shares allotted, issued and fully paid:
1 April	68,179,382,971	4,275	68,140,847,520	4,273
During the year	84,550,077	5	38,535,451	2
31 March	68,263,933,048	4,280	68,179,382,971	4,275

Allotted during the year

		Nominal
	Number	value	Proceeds
		£m	£m
UK share option schemes	38,712,947	2	46
US share option scheme awards	45,837,130	3	40
Total for share option scheme awards	84,550,077	5	86

Options
The Company currently uses a number of share plans to grant options and share awards to its directors and employees.

Sharesave Scheme
The Vodafone Group 1998 Sharesave Scheme (the “Sharesave Scheme”) enables UK staff to acquire shares in the Company through monthly savings of up to £250 over a three or five year period, at the end of which they also receive a tax free bonus. The savings and bonus may then be used to purchase shares at the option price, which is set at the beginning of the savings contract and usually at a discount of 20% to the then prevailing market price of the Company’s shares. Invitations to participate in this scheme are normally made annually.

Discretionary share option plans
The Company has two discretionary share option plans, the Vodafone Group 1998 Company Share Option Scheme (which is UK Inland Revenue approved) and the Vodafone Group 1998 Executive Share Option Scheme (which is unapproved). Options under the discretionary schemes are subject to performance conditions. Options are normally exercisable between three and ten years from the date of grant.

Long Term Stock Incentive Plan
The Vodafone Group Plc 1999 Long Term Stock Incentive Plan is a discretionary plan under which both share option grants and share awards may be made. For some grants to US employees, the options have phased vesting over a four year period and are exercisable in respect of American Depositary Shares (“ADSs”). For all other grants, options are normally exercisable between three and ten years from the date of grant, subject to the satisfaction of predetermined performance conditions and are exercisable in respect of ordinary shares listed on the London Stock Exchange, or ADSs for US employees.

Share option plans belonging to subsidiaries
Share option schemes are also operated by certain of the Group’s subsidiary and associated undertakings, under which options are only issued to key personnel.

Share Plans
Share Incentive Plan
The Share Incentive Plan enables UK staff to acquire shares in the Company through monthly purchases of up to £125 per month or 5% of salary, whichever is lower. For each share purchased by the employee, the Company provides a free matching share.

Restricted Share Plans
Under the Vodafone Group Short Term Incentive Plan, introduced in 1998, shares are conditionally awarded to directors based on achievement of one-year performance targets. Release of the shares is deferred for a further two years and is subject to continued employment. Additional shares are released at this time if a further performance condition has been satisfied over the two year period.

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Awards of performance shares are granted to directors. The release of these shares is conditional upon achievement of performance targets measured over a three year period. The awards are granted under the Vodafone Group Long Term Incentive Plan and under the Vodafone Group Plc 1999 Long Term Stock Incentive Plan referred to above.

Under these plans, the maximum aggregate number of ordinary shares which may be issued in respect of options or awards will not (without shareholder approval) exceed:

a.	10% of the ordinary share capital of the Company in issue immediately prior to the date of grant, when aggregated with the total number of ordinary shares which have been allocated in the preceding ten year period under all plans; and
b.	5% of the ordinary share capital of the Company in issue immediately prior to the date of grant, when aggregated with the total number of ordinary shares which have been allocated in the preceding ten year period under all plans other than the Sharesave Scheme

A summary of the options outstanding at 31 March 2004 to subscribe for shares in the Company is provided in the following table.

		Weighted average
	Total shares	period remaining		Exercisable shares	Exercisable shares
	under option	to full vesting	Weighted average	at 31 March 2004	weighted average
Range of exercise prices	(millions)	(months)	exercise price	(millions)	exercise price
Ordinary shares:
Vodafone Group Savings Related and Sharesave Schemes
£0.01 – £1.00	38.5	27	£0.78	1.0	£0.63
£1.01 – £2.00	2.6	9	£1.27	0.1	£1.27
£2.01 – £3.00	0.5	6	£2.21	–	–
	41.6			1.1
Vodafone Group Executive Schemes
£0.01 – £1.00	66.9	11	£0.86	7.7	£0.56
£1.01 – £2.00	72.5	2	£1.57	39.9	£1.57
£2.01 – £3.00	49.8	–	£2.74	49.8	£2.74
	189.2			97.4
Vodafone Group 1999 Long Term Stock Incentive Plan
£0.01 – £1.00	518.9	15	£0.91	0.5	£0.90
£1.01 – £2.00	413.1	4	£1.40	–	–
£2.01 – £3.00	21.2	4	£2.92	7.8	£2.92
	953.2			8.3

American Depositary Shares, each representing ten ordinary shares in the Company, are listed on the New York Stock Exchange. Following the merger with AirTouch, some rights to acquire AirTouch Communications, Inc. 1993 Long Term Stock Incentive Plan options were converted into rights to acquire shares in the Company. No further awards will be granted under this scheme.

		Weighted average
	Total ADSs	period remaining		Exercisable ADSs	Exercisable ADSs
	under option	to full vesting	Weighted average	at 31 March 2004	weighted average
Range of exercise prices	(millions)	(months)	exercise price	(millions)	exercise price
American Depositary Shares:
AirTouch Communications, Inc.1993 Long Term Stock Incentive Plan
$0.01 – $10.00	0.4	–	$6.16	0.4	$6.16
$10.01 – $20.00	3.1	–	$16.30	3.1	$16.30
$20.01 – $30.00	0.1	–	$20.02	0.1	$20.02
$30.01 – $40.00	0.1	–	$34.05	0.1	$34.05
	3.7			3.7
Vodafone Group 1999 Long Term Stock Incentive Plan
$10.01 – $20.00	5.0	11	$13.90	0.2	$13.65
$20.01 – $30.00	4.8	6	$21.83	1.3	$22.70
$30.01 – $40.00	0.1	–	$36.12	0.1	$36.12
$40.01 – $50.00	4.0	–	$41.33	3.8	$41.94
$50.01 – $60.00	0.1	–	$58.60	0.1	$58.60
	14.0			5.5

Vodafone Group Plc  Annual Report 2004

98

Notes to the Consolidated Financial Statements continued

23. Reserves

	Group								Company
	Share				Own		Profit		Own		Profit
	premium		Other		shares		and loss		shares		and loss
	account	(1)	reserve	(1)	held		account		held		account
	£m		£m		£m		£m		£m		£m
1 April 2003 as previously reported	52,073		843		–		(27,447	)	–		8,319
Prior year adjustment – UITF 38	–		–		(41	)	–		–		–
1 April 2003 as restated	52,073		843		(41	)	(27,447	)	–		8,319
Allotments of shares	81		–		–		–		–		–
Purchase of own shares by Employee Share Trust	–		–		(17	)	–		–		–
Purchase of treasury shares	–		–		(1,088	)	–		(1,088	)	–
Own shares released on vesting of share awards	–		–		10		–		–		–
(Loss)/profit for the financial year	–		–		–		(10,393	)	–		2,306
Currency translation	–		–		–		(5,292	)	–		–
Transfer to profit and loss account	–		(135	)	–		135		–		135
Other movements	–		5		–		(17	)	–		–
31 March 2004	52,154		713		(1,136	)	(43,014	)	(1,088	)	10,760

Note:
(1)	These reserves also form part of the Company’s reserves.

The currency translation movement includes a gain of £144 million (2003: £826 million loss) in respect of foreign currency net borrowings.

For acquisitions prior to 1 April 1998, the cumulative goodwill written off to reserves, net of the goodwill attributed to business disposals, was £1,190 million at 31 March 2004 (2003: £1,190 million).

In accordance with the exemption allowed by section 230 of the Companies Act, no profit and loss account has been presented by the Company. The profit for the financial year dealt with in the accounts of the Company is £3,684 million (2003: £6,030 million).

The following shares in the Company are held:

	Group								Company
	Qualifying Employee
	Share Ownership		Employee		Subsidiary
	Trust		Share Trust		companies	Treasury shares	Total		Treasury shares
At 1 April 2003	2,068,946		18,950,434		7,189,316	–	28,208,696		–
Purchased during the year	–		14,450,000		–	800,000,000	814,450,000		800,000,000
Dividend shares	–		352,839		–	–	352,839		–
Distributed during the year	(2,068,946	)	(4,313,798	)	–	–	(6,382,744	)	–
At 31 March 2004	–		29,439,475		7,189,316	800,000,000	836,628,791		800,000,000
Total cost to Group of shares held (£m)	–		35		13	1,088	1,136		1,088
Market value of shares held (£m)	–		38		9	1,030	1,077		1,030

The shares held by the Vodafone Group Employee Trust are to satisfy the potential award of shares under the Group’s Long Term Incentive Plan and Short Term Incentive Plan. The shares held by subsidiary companies are in respect of an employee share option plan. Treasury shares are held in relation to the share purchase programme described in “Operating and Financial Review and Prospects – Liquidity and Capital Resources”. Details of all shares purchased in the year are shown below:

		Average price paid		Maximum value of	(1)
		per share, inclusive	Total number of shares	shares that may yet
	Total number of	of transaction costs	purchased under share	be purchased under
Period	shares purchased	(pence)	repurchase programme	the programme (£m)
June 2003	8,950,000	120.59	–	–
August 2003	5,500,000	116.42	–	–
December 2003	175,000,000	137.00	175,000,000	2,260
January 2004	91,000,000	146.97	91,000,000	2,127
February 2004	145,550,000	139.09	145,550,000	1,924
March 2004	388,450,000	131.84	388,450,000	1,412
Total	814,450,000	135.71	800,000,000	1,412

Note:
(1)	Refers to programme announced on 18 November 2004. Shareholder approval will be sought for additional shares to be purchased in the 2005 financial year.

Annual Report 2004  Vodafone Group Plc

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24. Non-equity minority interests

	2004	2003
	£m	£m
Preferred shares	875	1,015

Non-equity minority interests comprise class D and E preferred shares issued by Vodafone Americas, Inc. An annual dividend of $51.43 per class D & E preferred share is payable quarterly in arrears. The dividend for the year amounted to £50 million (2003: £55 million). The aggregate redemption value of the class D & E preferred shares is $1.65 billion. The holders of the preferred shares are entitled to vote on the election of directors and upon each other matter coming before any meeting of the shareholders on which the holders of ordinary shares are entitled to vote. Holders are entitled to vote on the basis of twelve votes for each share of class D or E preferred stock held. The maturity date of the 825,000 class D preferred shares is 6 April 2020. The 825,000 class E preferred shares have a maturity date of 1 April 2020. The class D & E preferred shares have a redemption price of $1,000 per share plus all accrued and unpaid dividends.

25. Acquisitions and disposals

The Group has undertaken a number of transactions during the year including the acquisition of certain UK service providers, additional minority stakes in certain existing subsidiary undertakings and additional stakes in associated undertakings. The aggregate consideration for these acquisitions was £1,659 million and comprised entirely of cash. The total cash outflow for the purchase of interests in subsidiary undertakings in the 2004 financial year of £2,064 million includes deferred consideration from acquisitions made in the 2003 financial year, principally relating to the Group’s stake increases in Vodafone Portugal and Vodafone Netherlands.

Under UK GAAP, the total goodwill capitalised in respect of transactions has been provisionally assessed as £1,544 million of which £1,434 million is in respect of subsidiary undertakings and £110 million is in respect of associated undertakings.

These transactions are described in more detail in “Information on the Company – History and Development of the Company – Acquisitions of businesses”, elsewhere in this Annual Report.

Acquisition of UK service providers
On 22 September 2003, the Group’s wholly owned subsidiary, Vodafone Limited, completed the acquisition of Singlepoint (4U) Limited, and on 19 September 2003, the Company’s offer for the UK service provider, Project Telecom plc, was declared unconditional. These acquisitions allowed the UK business to consolidate its market position. Details of the share of net assets acquired in this transaction are given in the table below:

	Singlepoint		Project Telecom		Other		Total
	£m		£m		£m		£m
Local book value at acquisition	6		36		(2	)	40
Accounting policy conformity and revaluations(1)	(124	)	(23	)	–		(147	)
Fair value net (liabilities)/assets acquired(2)	(118	)	13		(2	)	(107	)
Goodwill	535		151		5		691
Consideration	417		164		3		584

Notes:
(1)	Primarily relates to the write off of capitalised customer acquisition costs to bring into line with Group accounting policy, offset by the recognition of related deferred tax assets.
(2)	All fair values are provisional and may be subject to adjustment in the year ending 31 March 2005.

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Notes to the Consolidated Financial Statements continued

25. Acquisitions and disposals continued
Acquisition of additional minority stakes in certain existing subsidiary undertakings
During the year ended 31 March 2004 the Company has directly or indirectly increased its interest in its subsidiary undertakings in Egypt, Greece, Hungary, Malta, the Netherlands, Portugal and Sweden.

These transactions are in line with the Group’s strategy of increasing its shareholding in existing operations where opportunities arise for the creation of enhanced value for the Company’s shareholders. In respect of Malta, the Netherlands, Portugal and Sweden, management also believe that by obtaining 100% ownership in these companies, it can more closely align their respective businesses to the Group’s businesses.

		Fair value net
	Consideration	assets acquired	(1)	Goodwill capitalised
	£m	£m		£m
Vodafone Egypt	28	18		10
Vodafone Greece	815	230		585
Vodafone Hungary	12	5		7
Vodafone Malta	21	7		14
Vodafone Netherlands	64	9		55
Vodafone Portugal	74	23		51
Vodafone Sweden	14	4		10
Other	47	36		11
	1,075	332		743

Note:
(1)	No adjustments were made for fair values as compared with book values at acquisition. All fair values are provisional and may be subject to adjustment in the year ending 31 March 2005.

Acquisition of additional stakes in associated undertakings
In December 2003, Cegetel Groupe completed a series of transactions including the simplification of the legal structure of Cegetel and the merger of Cegetel’s fixed line business with Télécom Développement. These transactions resulted in the indirect acquisition by the Group of an additional interest in the net liabilities of certain entities within the Cegetel Groupe with a provisional fair value of £110 million. No adjustments were made for fair values as compared with book values at acquisition. As no consideration was paid by the Group, the goodwill resulting was £110 million. All fair values are provisional and may be subject to adjustment in the year ending 31 March 2005.

Disposal of Japan Telecom fixed line business
On 21 August 2003 the Group announced that its 66.7% indirectly owned subsidiary Vodafone Holdings K.K. (formerly Japan Telecom Holdings Co., Ltd) had reached agreement to dispose of its wholly-owned fixed line business. The Group ceased to consolidate the results of Japan Telecom from 1 October 2003. The transaction completed on 14 November 2003.

Receipts resulting from this transaction are ¥257.9 billion (£1,392 million), comprising ¥178.9 billion (£966 million) of cash received, ¥32.5 billion (£175 million) of transferable redeemable preferred equity and ¥46.5 billion (£251 million) of withholding tax recoverable, which is expected to be received in the 2005 financial year.

At 1 October 2003, Japan Telecom represented £1,976 million of assets and £505 million of liabilities, of which £1,309 million represented tangible fixed assets and £478 million current liabilities, resulting in a loss on disposal of £79 million which includes a pre-disposal dividend of £1,254 million.

In the six month period up to 1 October 2003, Japan Telecom contributed £818 million to Group turnover, £66 million profit to Group operating loss and £238 million to Group net cash inflow from operating activities.

Disposal of interests in Grupo Iusacell and RPG Cellular
During the year the Group disposed of its interests in Grupo Iusacell, S.A. de C.V. and RPG Cellular Services Limited, receiving aggregate cash proceeds of £5 million resulting in a profit on disposal of £9 million.

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26. Commitments

Operating lease commitments
Commitments to non-cancellable operating lease payments are analysed as follows:

	2004			2003
	Land and	Other		Land and	Other
	buildings	assets	Total	buildings	assets	Total
	£m	£m	£m	£m	£m	£m
In respect of leases expiring:
Within one year	79	97	176	77	36	113
Between two and five years	147	85	232	93	158	251
After five years	136	42	178	150	17	167
Payments due:
Within one year	362	224	586	320	211	531
In more than one year but less than two years			366			398
In more than two years but less than three years			295			321
In more than three years but less than four years			256			250
In more than four years but less than five years			218			217
Thereafter (more than five years)			1,016			989
			2,737			2,706

Finance lease commitments
Tangible fixed assets at 31 March 2004 include the following amounts in respect of finance leases:

	Network infrastructure
	and equipment
	£m
Cost	614
Accumulated depreciation	(454	)
Net book value	160
31 March 2003
Net book value	378

Liabilities under leases for network infrastructure assets, with an original cost of £163 million and net book value at 31 March 2004 of £41 million, have been unconditionally satisfied by call deposits and other assets, trust deed and set-off arrangements. Accordingly, lease liabilities and the corresponding financial assets in respect of these network infrastructure assets are not included in the Group’s balance sheet.

Capital and other commitments

	2004	2003
	£m	£m
Tangible and intangible fixed asset expenditure contracted for but not provided	866	1,014

In addition to the commitments above, the Group has a number of further commitments at 31 March 2004. These are disclosed in “Operating and Financial Review and Prospects – Liquidity and capital resources – Contractual obligations” on page 43.

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Notes to the Consolidated Financial Statements continued

27. Contingent liabilities

	Group		Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Performance bonds	667	1,921	200	1,137
Credit guarantees – third party indebtedness	97	72	1,498	2,462
Other guarantees and contingent liabilities	29	31	17	17

Performance bonds
Performance bonds require the Company, or certain of its subsidiary undertakings, to make payments to third parties in the event that the Company or subsidiary undertaking does not perform what is expected of it under the terms of any related contracts.

Group performance bonds include £434 million (2003: £710 million) in respect of undertakings to roll out second and third generation networks in Germany while the Company and Group performance bonds include £145 million (2003: £1,085 million) in respect of undertakings to roll out third generation networks in Spain. The majority of the German performance bonds expire by December 2005 and for Spain by June 2005.

Credit guarantees – third party indebtedness
Credit guarantees comprise guarantees and indemnities of bank or other facilities including those in respect of the Group’s associated undertakings and investments.

At 31 March 2004, the Company had guaranteed debt of Vodafone K.K. and Vodafone Finance K.K. amounting to £nil (2003: £267 million) and £1,177 million (2003: £1,200 million), respectively, and issued guarantees in respect of notes issued by Vodafone Americas, Inc. amounting to £320 million (2003: £995 million). The Japanese facility expires by January 2007 and the majority of Vodafone Americas, Inc. bond guarantees by July 2008.

Other guarantees and contingent liabilities
Other guarantees principally comprise commitments to support disposed entities.

In addition to the amounts disclosed above, the Group has guaranteed financial indebtedness and issued performance bonds for £53 million (2003: £125 million) in respect of businesses which have been sold and for which counter indemnities have been received from the purchasers.

The Group also enters into lease arrangements in the normal course of business, which are principally in respect of land, buildings and equipment. Further details on the minimum lease payments due under non-cancellable operating lease arrangements can be found in note 26.

Save as disclosed within “Risk Factors and Legal Proceedings – Legal proceedings”, the Company and its subsidiaries are not involved in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which are expected to have, or have had in the twelve months preceding the date of this document, a significant effect on the financial position or profitability of the Company and its subsidiaries.

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28. Analysis of cash flows

			2003		2002
	2004		as restated	(1)	as restated	(1)
	£m		£m		£m
Net cash inflow from operating activities
Operating loss	(4,776	)	(5,295	)	(10,377	)
Exceptional items	(228	)	496		4,486
Depreciation	4,362		3,979		2,880
Amortisation of goodwill	13,095		11,875		10,962
Amortisation of other intangible fixed assets	98		53		34
Loss on disposal of tangible fixed assets	89		109		46
	12,640		11,217		8,031
(Increase)/decrease in stocks	(102	)	(17	)	125
(Increase)/decrease in debtors	(293	)	198		(242	)
Increase/(decrease) in creditors	157		(233	)	215
Payments in respect of exceptional items	(85	)	(23	)	(27	)
	12,317		11,142		8,102
Net cash outflow for returns on investments and servicing of finance
Interest received	942		543		259
Dividends from investments	25		15		2
Interest paid	(901	)	(1,004	)	(1,104	)
Interest element of finance leases	(10	)	(14	)	(9	)
Dividends paid to minority shareholders in subsidiary undertakings	(100	)	(91	)	(84	)
	(44	)	(551	)	(936	)
Net cash outflow from financing(1)
Issue of ordinary share capital	69		28		3,581
Issue of shares to minorities	–		1		12
Purchase of treasury shares	(1,032	)	–		–
Purchase of own shares in relation to employee share schemes	(17	)	(14	)	(6	)
Capital element of finance lease payments	(115	)	(97	)	(46	)
Debt due within one year:
Decrease in short-term debt	(1,791	)	(1,366	)	(2,486	)
Repayment of debt acquired	–		–		(1,256	)
Debt due after one year:
(Decrease)/increase in long-term debt	(507	)	(1,700	)	6
Repayment of debt acquired	–		–		(991	)
Issue of new bonds	2,693		2,998		505
	(700	)	(150	)	(681	)

Note:
(1)	Restated as a result of the adoption of UITF 38 “Accounting for ESOP Trusts”.

Vodafone Group Plc  Annual Report 2004

104

Notes to the Consolidated Financial Statements continued

29. Analysis of net debt

					Acquisitions and	Other non-cash
					disposals	changes and
	1 April				(excluding cash	exchange		31 March
	2003		Cash flow		and overdrafts)	movements		2004
	£m		£m		£m	£m		£m
Liquid investments	291		4,286		–	(196	)	4,381
Cash at bank and in hand	475		1,112		–	(178	)	1,409
Bank overdrafts	–		(43	)	–	1		(42	)
	475		1,069		–	(177	)	1,367
Debt due within one year	(1,323	)	1,791		148	(2,616	)	(2,000	)
Debt due after one year	(12,994	)	(2,186	)	–	3,080		(12,100	)
Finance leases	(288	)	115		39	(2	)	(136	)
	(14,605	)	(280	)	187	462		(14,236	)
	(13,839	)	5,075		187	89		(8,488	)

Cash flows in respect of the Commercial Paper programme are shown net within debt-related cash flows.

Debt includes secured debt of £132 million (2003: £364 million) in respect of Vodafone Egypt (£132 million, 2003: £192 million) and Japan Telecom (£nil, 2003: £172 million). Further information on guarantees can be found in note 27.

30. Directors

Aggregate emoluments of the directors of the Company were as follows:

	2004	2003	2002
	£’000	£’000	£’000
Salaries and fees	6,752	5,457	4,777
Incentive schemes	5,418	5,738	3,760
Benefits	1,371	709	749
	13,541	11,904	9,286

The aggregate gross pre-tax gain made on the exercise of share options in the year to 31 March 2004 by serving directors were £1,904,000 (2003: £226,873, 2002: £129,328) and by former directors were £nil (2003: £nil, 2002: £nil).

Further details of directors’ emoluments can be found in “Board’s Report to Shareholders on Directors’ Remuneration – Remuneration for the year to 31 March 2004”.

Annual Report 2004  Vodafone Group Plc

105

31. Employees

An analysis of the average number of employees by category of activity is shown below.

Of total average employees, 17% were based in the United Kingdom (2003: 15%, 2002: 16%).

	2004	2003	2002
	Number	Number	Number
By activity:
Operations	14,096	14,863	17,658
Selling and distribution	15,303	16,252	14,068
Administration	30,710	35,552	35,452
	60,109	66,667	67,178
By segment:
Mobile Telecommunications:
UK & Ireland	12,636	11,323	10,829
Northern Europe	14,742	13,988	15,848
Southern Europe	17,573	17,251	16,986
Americas	241	391	471
Asia Pacific	6,048	7,063	6,007
Middle East and Africa	1,758	1,819	1,771
	52,998	51,835	51,912
Other operations:
Europe	4,767	6,354	9,136
Asia Pacific	2,344	8,478	6,130
	60,109	66,667	67,178
The cost incurred in respect of these employees (including directors) was:
	2004	2003	2002
	£m	£m	£m
Wages and salaries	2,018	1,984	1,740
Social security costs	234	199	192
Other pension costs	79	95	64
	2,331	2,278	1,996

Vodafone Group Plc  Annual Report 2004

106

Notes to the Consolidated Financial Statements continued

32. Pensions

As at 31 March 2004, the Group operated a number of pension plans for the benefit of its employees throughout the world, which vary with conditions and practices in the countries concerned. All the Group’s pension plans are provided either through defined benefit or defined contribution arrangements. Defined benefit schemes provide benefits based on the employees’ length of pensionable service and their final pensionable salary or other criteria. Defined contribution schemes offer employees individual funds that are converted into benefits at the time of retirement.

Further details on the three principal defined benefit pension schemes, in the United Kingdom, Germany and Japan are shown below. In addition to the principal schemes, the Group operates defined benefit schemes in Greece, Ireland, Italy, Sweden and the United States. Defined contribution pension schemes are provided in Australia, Egypt, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, New Zealand, Portugal, Spain, the United Kingdom and the United States. There is a post retirement medical plan in the United States for a small closed group of participants.

The Group accounts for its pension schemes in accordance with SSAP 24, “Accounting for pension costs”. Scheme liabilities are assessed by independent actuaries using the projected unit funding method using the principal actuarial assumptions as set out in “Pension disclosures required under SSAP 24” below. Assets are shown at market value. Additional disclosures required under the transitional provisions of FRS 17, “Retirement benefits” are also set out below.

The bases of calculation under FRS 17 are significantly different to SSAP 24. Whilst both require use of formal actuarial valuations, FRS 17 requires the use of a different set of underlying assumptions and also specifies more frequent valuation updates. Accordingly, if FRS 17 is implemented in full, the Group’s reported pension costs and balance sheet position are likely to change.

United Kingdom
The majority of the UK employees are members of the Vodafone Group Pension Scheme (the “main scheme”). This is a tax approved scheme, the assets of which are held in a separate trustee-administered fund. In addition there is an internally funded unapproved defined benefit plan in place for a small number of senior executives. The Group also operates a funded unapproved defined contribution scheme for certain senior executives. The pension cost for all three arrangements is included in the summary information shown below.

The main scheme is subject to quarterly funding updates by independent actuaries and to formal actuarial valuations at least every three years. The most recent formal valuation of this scheme was carried out as at 31 March 2001.

At 31 March 2001, the market valuation of the main scheme assets of £177 million was sufficient to cover 84% of the benefits accrued to members using the assumptions set out within “Pension disclosures required under SSAP 24”. The funding level as at 31 March 2003 was reviewed and as a result the UK companies made special lump sum contributions of £50 million during the 2004 financial year, in addition to ongoing contributions of 13% of pensionable earnings. The variation in regular cost under SSAP 24 was also changed as a result of the review. The contributions payable over the coming year will be determined by the results of the formal valuation of the main scheme as at 31 March 2004 which is currently underway. The updated funding level as at 31 March 2004 has been estimated as 116%, using financial assumptions consistent with those of the last formal valuation. An accurate figure for this funding level, including the impact of any changes in demographic assumptions, will be obtained once the next valuation is completed.

As a result of the acceleration of payments, a net prepayment of £193 million (2003: £136 million) is included in debtors due after more than one year, representing the excess of the amounts funded over accumulated pension costs.

Germany
There are a number of separate pension and associated arrangements in Germany, one of which is fully externally financed and a number of which are funded through a trust arrangement. The German schemes are subject to annual valuations, with the last formal valuations having been completed as at 31 March 2004.

At 31 March 2004, the total pension liability for benefits funded through the trust arrangement was £171 million, using the assumptions as set out within “Additional disclosures in respect of FRS 17”, and the market value of the trust arrangement was £155 million representing a funding level of 91%. The total pension liability for the externally funded benefits was £10 million and the market value of the scheme’s assets for the externally funded benefits also amounted to £10 million representing a funding level of 100%. A contribution of £54 million was made into the trust arrangement and £2 million was made into the externally funded arrangement during the 2004 financial year.

An amount of £14 million (2003: £64 million) is included in provisions for liabilities and charges, representing the excess of the accumulated pension costs over the amounts funded externally and reflects the internally funded nature of part of the principal arrangements.

Japan
There are a number of separate pension schemes in relation to employees in Japan and these are not generally funded, with any shortfall in external funding being accrued within provisions.

The Japanese schemes are subject to valuations at intervals of between one and two years, with the last formal valuations being prepared at 31 March 2002. At 31 March 2002, the total pension liability for the internally funded benefits was £110 million using the assumptions set out within “Pension disclosures required under SSAP 24”. The total pension liability for the externally funded benefits was £5 million and the market value of the scheme’s assets for the externally funded benefits amounted to £1 million representing a percentage cover of accrued benefits for members of 20%.

An amount of £26 million (2003: £88 million) is included in provisions for liabilities and charges, representing the excess of the accumulated pension costs over the amounts funded externally and reflects the internally funded nature of the principal arrangements.

Annual Report 2004  Vodafone Group Plc

107

Pension disclosures required under SSAP 24
During the year ended 31 March 2004, the total amount charged to the profit and loss account in respect of all the Group’s pensions plans was £79 million (2003: £95 million, 2002: £64 million), as analysed below:

	2004	2003	2002
	£m	£m	£m
Defined benefit schemes:
United Kingdom	31	24	24
Germany	7	12	14
Japan	10	32	6
Other Countries	6	5	4
Net pension charge: Defined benefit schemes	54	73	48
Net pension charge: Defined contribution schemes	25	22	16
Total amount charged to the profit and loss account	79	95	64

Below is a summary of the principal assumptions used in calculating the pension cost for the year to 31 March 2004:

	UK	Germany	Japan
	%	%	%
Rate of inflation	2.5	1.5	–
Rate of increase in salaries	4.5	3.5	–	(1)
Rate of increase in pensions in payment	2.5	1.5	N/A
Rate of increase in deferred pensions	2.5	–	N/A
Rate used to discount liabilities – pre-retirement	7.0	6.0	1.8
Rate used to discount liabilities – post-retirement	6.0	6.0	1.8

Notes:
(1)	Rate of increase in salaries in Japan is calculated in line with company specific experience where benefits are salary related.

The components of the total pension costs of the three principal defined benefit schemes were as follows:

	UK				Germany				Japan(2)
	2004		2003		2004		2003		2004	2003
	£m		£m		£m		£m		£m	£m
Regular cost	23		22		5		5		8	12
Interest (credit)/cost	(9	)	(4	)	4		9		1	2
Variation in regular cost(1)	17		6		(2	)	(2	)	1	18
Total	31		24		7		12		10	32

Notes:
(1)	The variation in regular cost was calculated by amortising the shortfall at the date of the last formal valuation or review over the future working lives of members on a percentage of pensionable salary basis. For the purposes of determining the UK SSAP 24 variation in regular cost, a review was undertaken as at 31 March 2003 to reflect the impact of investment market movements. The charge for Japan in the year ended 31 March 2003 also included £17 million in respect of lump sum redundancy benefits payable through a redundancy programme associated with the retirement plan.
(2)	The charge for Japan includes the pension costs in relation to companies sold during the year for that part of the year prior to their disposal.

Vodafone Group Plc  Annual Report 2004

108

Notes to the Consolidated Financial Statements continued

32. Pensions continued

Additional disclosures in respect of FRS 17
The most recent full formal actuarial valuations for defined benefit schemes have been updated by qualified independent actuaries for the financial year ended 31 March 2004 to derive the FRS 17 disclosures below.

Major assumptions used

	UK			Germany			Japan						Other(2)
	2004	2003	2002	2004	2003	2002	2004		2003		2002		2004	2003	2002
	%	%	%	%	%	%	%		%		%		%	%	%
Rate of inflation	2.5	2.5	2.5	2.0	1.5	2.0	–		–		–		2.0	1.8	2.0
Rate of increase in salaries	4.5	4.5	4.5	3.0	3.5	4.0	–	(1)	–	(1)	–	(1)	3.0	3.5	4.2
Rate of increase in pensions
in payment	2.5	2.5	2.5	2.0	1.5	2.0	N/a		N/a		N/a		2.0	1.9	2.2
Rate of increase in deferred
pensions	2.5	2.5	2.5	–	–	–	N/a		N/a		N/a		2.0	1.9	2.2
Discount rate	5.5	5.4	6.0	5.3	5.3	6.3	2.3		1.5		2.5		4.8	5.3	6.2

Notes:
(1)	Rate of increase in salaries in Japan is calculated in line with company specific experience.
(2)	Figures shown for other schemes represent weighted average assumptions of individual schemes.

The expected rates of return at 31 March were:

	UK			Germany			Japan			Other
	2004	2003	2002	2004	2003	2002	2004	2003	2002	2004	2003	2002
	%	%	%	%	%	%	%	%	%	%	%	%
Bonds	4.8	5.5	6.0	4.5	4.8	N/a	1.0	N/a	N/a	4.6	4.9	5.5
Equities	7.5	8.0	8.0	6.8	7.3	N/a	4.0	N/a	N/a	6.8	7.8	8.5
Other assets	4.0	4.5	6.0	2.0	2.8	6.0	–	3.0	4.4	2.0	3.5	5.3

Charges that would have been made to the profit and loss account and consolidated statement of total recognised gains and losses on compliance with FRS 17 and on the basis of the assumptions stated above

	UK				Germany				Japan			Other				Total
	2004		2003		2004		2003		2004		2003	2004		2003		2004		2003
	£m		£m		£m		£m		£m		£m	£m		£m		£m		£m
Operating profit:
Current service cost	32		24		8		21		10		12	44		40		94		97
Past service cost	–		–		–		–		–		5	1		1		1		6
Gains and losses on curtailments	–		–		–		–		–		10	–		1		–		11
Total charge to operating profit	32		24		8		21		10		27	45		42		95		114
Finance costs/(income):
Interest cost	22		19		9		10		1		2	6		6		38		37
Expected return on pension scheme assets	(22	)	(22	)	(5	)	(1	)	–		–	(2	)	(3	)	(29	)	(26	)
Total (credit)/charge to finance (income)/costs	–		(3	)	4		9		1		2	4		3		9		11
Total charge to loss before taxation	32		21		12		30		11		29	49		45		104		125
Consolidated statement of total recognised gains and losses:
Actual return less expected return on pension
scheme assets	(56	)	95		(3	)	1		–		–	(7	)	14		(66	)	110
Experience (gains) and losses arising on the
scheme liabilities	–		–		3		(7	)	(1	)	1	(3	)	(1	)	(1	)	(7	)
Changes in assumptions underlying the present
value of the plan liabilities	16		37		11		11		(5	)	16	(2	)	5		20		69
Actuarial (gains)/losses on assets and liabilities	(40	)	132		11		5		(6	)	17	(12	)	18		(47	)	172
Exchange rate movements	–		–		(1	)	11		(3	)	1	(5	)	4		(9	)	16
Total (gains)/losses recognised in statement of
total recognised gains and losses	(40	)	132		10		16		(9	)	18	(17	)	22		(56	)	188

Annual Report 2004  Vodafone Group Plc

109

History of amounts that would have been recognised in the statement of total recognised gains and losses under FRS 17

		2004				2003
		£m		%		£m		%
UK	Difference between the expected and actual return on assets(1)	56		13		(95	)	(36	)
	Experience gains and (losses) arising on scheme liabilities(2)	–		–		–		–
	Actuarial gain/(loss)(2)	40		9		(132	)	(34	)
Germany	Difference between the expected and actual return on assets(1)	3		2		(1	)	(1	)
	Experience gains and (losses) arising on scheme liabilities(2)	(3	)	(2	)	7		4
	Actuarial gain/(loss)(2)	(11	)	(6	)	(5	)	(3	)
Japan	Difference between the expected and actual return on assets(1)	–		–		–		–
	Experience gains and (losses) arising on scheme liabilities(2)	1		3		(1	)	(1	)
	Actuarial gain/(loss)(2)	6		17		(17	)	(13	)
Other	Difference between the expected and actual return on assets(1)	7		18		(14	)	(37	)
	Experience gains and (losses) arising on scheme liabilities(2)	3		2		1		1
	Actuarial gain/(loss)(2)	12		10		(18	)	(14	)

Notes:
(1)	Percentage stated is expressed as a percentage of scheme assets at 31 March.
(2)	Percentage stated is expressed as a percentage of scheme liabilities at 31 March.

Fair value of the assets and liabilities of the schemes

	UK						Germany						Japan						Other						Total
	2004		2003		2002		2004		2003		2002		2004		2003		2002		2004		2003		2002		2004		2003		2002
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Bonds	89		56		23		104		–		–		1		–		–		4		7		12		198		63		35
Equities	345		208		206		51		–		–		1		–		–		33		27		26		430		235		232
Other assets	–		–		–		10		107		8		–		1		1		3		4		5		13		112		14
Total fair value of
scheme assets	434		264		229		165		107		8		2		1		1		40		38		43		641		410		281
Present value of
scheme liabilities	(457	)	(383	)	(301	)	(192	)	(180	)	(139	)	(35	)	(127	)	(116	)	(122	)	(126	)	(95	)	(806	)	(816	)	(651	)
FRS 17 deficits	(23	)	(119	)	(72	)	(27	)	(73	)	(131	)	(33	)	(126	)	(115	)	(82	)	(88	)	(52	)	(165	)	(406	)	(370	)
Related deferred
tax assets	7		36		22		11		30		52		14		53		48		30		30		20		62		149		142
Net FRS 17 deficits	(16	)	(83	)	(50	)	(16	)	(43	)	(79	)	(19	)	(73	)	(67	)	(52	)	(58	)	(32	)	(103	)	(257	)	(228	)

The funded status of each of the above principal defined benefit schemes is reported at the beginning of this note. The deficits reported under FRS 17 reflect the different assumptions for valuing assets and liabilities compared with SSAP 24.

The funding policy for the German and UK schemes is reviewed on a systematic basis in consultation with the independent scheme actuary in order to ensure that the funding contributions from sponsoring employers are appropriate to meet the liabilities of the schemes over the long term.

The deficit in respect of other schemes at 31 March 2004 primarily relates to internally funded schemes in Italy, Sweden and the United States and the externally funded scheme in Ireland.

Vodafone Group Plc  Annual Report 2004

110

Notes to the Consolidated Financial Statements continued

32. Pensions continued
Movement in deficit during the year

	UK				Germany				Japan				Other				Total
	2004		2003		2004		2003		2004		2003		2004		2003		2004		2003
	£m		£m		£m		£m		£m		£m		£m		£m		£m		£m
Deficit in schemes before deferred tax at 1 April	119		72		73		131		126		115		88		52		406		370
Current service cost	32		24		8		21		10		12		44		40		94		97
Cash contributions	(88	)	(106	)	(68	)	(100	)	(22	)	(36	)	(33	)	(31	)	(211	)	(273	)
Past service cost	–		–		–		–		–		5		1		1		1		6
Losses on curtailments	–		–		–		–		–		10		–		1		–		11
Financial (income)/costs	–		(3	)	4		9		1		2		4		3		9		11
Actuarial (gains)/losses	(40	)	132		11		5		(6	)	17		(12	)	18		(47	)	172
Exchange rate movements	–		–		(1	)	11		(3	)	1		(5	)	4		(9	)	16
Other movements	–		–		–		(4	)	(73	)	–		(5	)	–		(78	)	(4	)
Deficit in schemes before deferred tax at 31 March	23		119		27		73		33		126		82		88		165		406

Other movements in 2004 principally relate to the disposal of the Japan Telecom fixed line business.

Group net assets and profit and loss account reserves

	Under SSAP 24				Under FRS 17
	(as adopted)				(for information only)
	2004		2003		2004		2003
			(as restated)	(1)			(as restated)	(1)
	£m		£m		£m		£m
Net assets excluding pension scheme assets/(liabilities)	114,836		131,528		114,836		131,528
Net pension scheme assets/(liabilities) (net of deferred tax)	95		(35	)	(103	)	(257	)
Net assets including pension scheme assets/(liabilities)	114,931		131,493		114,733		131,271
Profit and loss reserve excluding pension scheme assets/(liabilities)	(43,109	)	(27,412	)	(43,109	)	(27,412	)
Net pension scheme assets/(liabilities) (net of deferred tax)	95		(35	)	(103	)	(257	)
Profit and loss reserve including pension scheme assets/(liabilities)	(43,014	)	(27,447	)	(43,212	)	(27,669	)

Note:
(1)	Restated as a result of the adoption of UITF 38 “Accounting for ESOP Trusts”.

33. Subsequent events
On 25 May 2004, the Group announced potential additional investments in Japan which could result in cash outflows of up to £2.6 billion. These investments are consistent with the Group’s overall strategy.

Annual Report 2004  Vodafone Group Plc

111

34. Principal subsidiary undertakings, associated undertakings and investments

Principal subsidiary undertakings
At 31 March 2004, the Company had the following subsidiary undertakings carrying on businesses which principally affect the profits and assets of the Group. They all have the same year end date as the Company, unless otherwise stated, and have been included in the Group consolidation.

Unless otherwise stated the Company’s principal subsidiary undertakings all have share capital consisting solely of ordinary shares and are indirectly held. The country of incorporation or registration of all subsidiary undertakings is also their principal place of operation.

		Country of incorporation	Percentage	(1)
Name	Principal activity	or registration	shareholdings
Arcor AG & Co.	Fixed line operator	Germany	73.7
Europolitan Vodafone AB	Mobile network operator	Sweden	100.0
Vodafone Albania Sh.A.	Mobile network operator	Albania	99.7
Vodafone Americas, Inc.(2)	Holding company	USA	100.0
Vodafone D2 GmbH	Mobile network operator	Germany	100.0
Vodafone Egypt Telecommunications S.A.E	Mobile network operator	Egypt	67.0
Vodafone España S.A.	Mobile network operator	Spain	100.0
Vodafone Europe B.V.	Holding company	Netherlands	100.0
Vodafone Holding GmbH(3)	Holding company	Germany	100.0
Vodafone Holdings Europe S.L.	Holding company	Spain	100.0
Vodafone Holdings K.K.	Holding company	Japan	66.7
Vodafone Hungary Mobile Telecommunications Limited(4)	Mobile network operator	Hungary	87.9
Vodafone International Holdings B.V.	Holding company	Netherlands	100.0
Vodafone Investments Luxembourg S.a r.l.	Holding company	Luxembourg	100.0
Vodafone Ireland Limited	Mobile network operator	Ireland	100.0
Vodafone K.K.	Mobile network operator	Japan	69.7
Vodafone Libertel N.V.	Mobile network operator	Netherlands	99.9
Vodafone Limited	Mobile network operator	England	100.0
Vodafone Malta Limited	Mobile network operator	Malta	100.0
Vodafone Network Pty Limited	Mobile network operator	Australia	100.0
Vodafone New Zealand Limited	Mobile network operator	New Zealand	100.0
Vodafone Omnitel N.V.(5)	Mobile network operator	Netherlands	76.8
Vodafone-Panafon Hellenic Telecommunications Company S.A.	Mobile network operator	Greece	99.4
Vodafone Portugal-Comunicações Pessoais, S.A.	Mobile network operator	Portugal	100.0
Vodafone Group Services Limited	Global products and services provider	England	100.0

Notes:
Japan Telecom Co.,Ltd, the fixed line operator in Japan, was sold during the year. The results of this business were included in the Group results up to 30 September 2003.
(1)	Rounded to nearest tenth of one percent.
(2)	Share capital consists of 597,379,729 ordinary shares and 1.65 million class D and E redeemable preference shares of which 100% of the ordinary shares are held by the Group.
(3)	Vodafone Holding GmbH has a 31 December year end. Accounts are drawn up to 31 March 2004 for consolidation into the Group’s financial statements.
(4)	There is also one preference share in issue, but it is not held by the Group.
(5)	The principal place of operation of Vodafone Omnitel N.V. is Italy.

Vodafone Group Plc  Annual Report 2004

112

Notes to the Consolidated Financial Statements continued

34. Principal subsidiary undertakings, associated undertakings and investments continued
Principal associated undertakings
The Company’s principal associated undertakings all have share capital consisting solely of ordinary shares, unless otherwise stated, and are all indirectly held. The country of incorporation or registration of all associated undertakings is also their principal place of operation.

		Percentage	(1)
		shareholding/			Latest		Country of
		partnership		Par value of	financial		incorporation
Name	Principal activity	interest		issued equity	accounts		or registration
Belgacom Mobile S.A.	Mobile network operator	25.0		€70.0m	31.12.03	(2)	Belgium
Cellco Partnership(3)	Mobile network operator	45.0		–	31.12.03	(2)	USA
Mobifon S.A.	Mobile network operator	20.1		ROL 712,923m	31.12.03	(2)	Romania
Polkomtel S.A.	Mobile network operator	19.6		PLN 2,050m	31.12.03	(2)	Poland
Safaricom Limited(4)	Mobile network operator	35.0		1,020 Kshs	31.03.04		Kenya
Société Française du	Mobile network operator and
Radiotéléphone S.A.	telecommunications company	43.9		€1,348m	31.12.03	(2)	France
Swisscom Mobile A.G.	Mobile network operator	25.0		CHF100m	31.12.03	(2)	Switzerland
Vodafone Fiji Limited	Mobile network operator	49.0		F$ 6m	31.03.04		Fiji
Vodacom Group (Pty) Limited	Holding company	35.0		ZAR 100	31.03.04		South Africa

Notes:
(1)	Rounded to nearest tenth of one percent.
(2)	Accounts are drawn up to 31 March 2004 for consolidation in the Group’s financial statements.
(3)	Cellco Partnership trades under the name Verizon Wireless. The registered or principal office of the partnership is 180 Washington Valley Road, Bedminster, New Jersey 07921, USA.
(4)	The Group also holds 2 non-voting shares.

Principal investments
The shareholding in the investment consists solely of ordinary shares and is indirectly held. The principal country of operation is the same as the country of incorporation or registration.

		Percentage		Country of
Name	Principal activity	shareholding	(1)	registration
China Mobile (Hong Kong) Limited(2)	Mobile network operator	3.3		China

Notes:
(1)	Rounded to nearest tenth of one percent.
(2)	Listed on the Hong Kong and New York stock exchanges and incorporated under the laws of Hong Kong.

Annual Report 2004  Vodafone Group Plc

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35. Related party transactions

Transactions with joint ventures and associated undertakings
Group turnover includes sales to joint ventures and associated undertakings of £174 million (2003: £40 million, 2002: £27 million), primarily comprising fees for the use of Vodafone products and services (including Vodafone live!™), network airtime and access charges. Total operating costs include charges from joint ventures and associated undertakings of £173 million (2003: £91 million, 2002: £42 million), primarily comprising roaming charges.

Dividends received from joint ventures and associated undertakings are disclosed in “Consolidated Cash Flows”. Loans and trade balances owed to or from joint ventures and associated undertakings are disclosed in notes 15 and 17. During the year the Group received £3 million (2003: £14 million; 2002: £28 million) in respect of interest on these loans.

Transactions with acquired and disposed companies
Prior to the acquisition of the UK service providers described in note 25, the Group conducted transactions in the normal course of business with these companies. Sales to these companies totalling £272 million and purchases totalling £58 million were made with these companies from 1 April 2003 to the date of acquisition.

Subsequent to the deconsolidation of Japan Telecom, the Group continued to transact with the companies disposed of in the normal course of business. The Group made sales of £25 million and trading purchases of £122 million with these companies from 1 October 2003 to 31 March 2004. At 31 March 2004, net balances owed by the Group to these companies totalled £17 million.

Transactions with directors
During the year ended 31 March 2004, and as of 24 May 2004, neither any director nor any other executive officer, nor any associate of any director or any other executive officer, was indebted to the Company.

On 3 February 2004, as part of the public offer described in “Business Overview – History and Development of the Company”, the Group purchased Julian Horn-Smith’s 18,000 shares in Vodafone Greece for total consideration of €111,240.

Since 1 April 2003, the Company has not been, and is not now, a party to any other material transactions, or proposed transactions, in which any member of the key management personnel (including directors, any other executive officer, senior manager, any spouse or relative of any of the foregoing, or any relative of such spouse), had or was to have a direct or indirect material interest.

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Notes to the Consolidated Financial Statements continued

36. US GAAP information

Index

	Page		Page
Reconciliations to US GAAP	114	Summary of differences between UK GAAP and US GAAP	117
Net loss for the years ended 31 March	114	Market risk and financial instruments	120
Shareholders’ equity at 31 March	115	Goodwill and other intangible assets	120
Total assets at 31 March	115	Associated undertakings	122
Comprehensive (loss)/income for the years ended 31 March	116	Fixed asset investments	123
Cash flows for the years ended 31 March	116	Stock based compensation	123
		Pensions and other post retirement benefits	124

Reconciliations to US GAAP
The following is a summary of the effects of the differences between US GAAP and UK GAAP. The translation of pounds sterling amounts into US dollars is provided solely for convenience based on the Noon Buying Rate on 31 March 2004 of $1.8400: £1.

Net loss for the years ended 31 March

		2004		2004		2003		2002
	Reference	$m		£m		£m		£m
Revenues from continuing operations in accordance with UK GAAP(1)		60,244		32,741		28,547		21,767
Items (decreasing)/increasing revenues:
Non-consolidated entities	(a)	(9,708	)	(5,276	)	(4,371	)	(4,162	)
Connection revenues	(b)	346		188		(1,760	)	(1,044	)
Revenues from continuing operations in accordance with US GAAP(1)		50,882		27,653		22,416		16,561
Net loss as reported in accordance with UK GAAP		(16,588	)	(9,015	)	(9,819	)	(16,155	)
Items (increasing)/decreasing net loss:
Investments accounted for under the equity method	(a)	2,491		1,354		289		(537	)
Connection revenues and costs	(b)	53		29		16		(15	)
Goodwill and other intangible assets	(c)	(11,997	)	(6,520	)	(5,487	)	(5,120	)
Licence fee amortisation	(d)	(140	)	(76	)	(6	)	–
Exceptional items	(e)	(646	)	(351	)	270		(85	)
Capitalised interest	(f)	747		406		408		387
Income taxes	(g)	11,377		6,183		5,320		4,873
Other	(i)	(251	)	(137	)	(46	)	(53	)
Net loss before change in accounting principle, in accordance with US GAAP		(14,954	)	(8,127	)	(9,055	)	(16,705	)
Effect of change in accounting principle(2)		–		–		–		17
Net loss after change in accounting principle, in accordance with US GAAP		(14,954	)	(8,127	)	(9,055	)	(16,688	)
US GAAP basic and diluted loss per share:	(k)
– from continuing operations(1)		(20.90	)¢	(11.36	)p	(13.40	)p	(24.20	)p
– net loss		(21.95	)¢	(11.93	)p	(13.29	)p	(24.56	)p

Annual Report 2004  Vodafone Group Plc

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Shareholders’ equity at 31 March

		2004		2004		2003
	Reference	$m		£m		£m
Equity shareholders’ funds in accordance with UK GAAP(2)		205,940		111,924		128,630
Items increasing/(decreasing) equity shareholders’ funds:
Investments accounted for under the equity method	(a)	10,241		5,566		4,630
Connection revenues and costs	(b)	(101	)	(55	)	(84	)
Goodwill and other intangible assets	(c)	83,389		45,320		51,144
Licence fee amortisation	(d)	(201	)	(109	)	(43	)
Exceptional items	(e)	–		–		270
Capitalised interest	(f)	2,972		1,615		1,073
Income taxes	(g)	(73,736	)	(40,074	)	(45,446	)
Proposed dividends	(h)	1,340		728		612
Other	(i)	209		114		(350	)
Shareholders’ equity in accordance with US GAAP		230,053		125,029		140,436

Total assets at 31 March

		2004		2004		2003
	Reference	$m		£m		£m
Total assets in accordance with UK GAAP(2)		270,718		147,129		163,239
Items (decreasing)/increasing total assets:
Investments accounted for under the equity method	(a)	3,733		2,029		1,849
Connection costs	(b)	6,775		3,682		4,179
Goodwill and other intangible assets	(c)	83,389		45,320		51,144
Licence fee amortisation	(d)	(201	)	(109	)	(43	)
Exceptional items	(e)	–		–		270
Capitalised interest	(f)	2,972		1,615		1,073
Income taxes	(g)	–		–		45
Other	(i)	1,076		585		(344	)
Total assets in accordance with US GAAP		368,462		200,251		221,412

Notes:
The reconciliations of net loss for the years ended 31 March 2003 and 2002 and shareholders’ equity and total assets as at 31 March 2003 include reclassifications to provide comparability with the presentation as at 31 March 2004 and for the year then ended. The Group now shows amounts previously reported as “other” related to licence fee amortisation as a separate line item in the reconciliation. In addition, the Group now reflects only the Group’s interest in each adjustment. These reclassifications had no impact on the Group’s previously reported net loss or shareholders’ equity under US GAAP.
(1)	The results of operations of Japan Telecom are reported as discontinued operations under US GAAP and are included in the segment “Other operations – Asia Pacific”. The pre-tax loss, including the loss on sale, was £515 million for the year ended 31 March 2004 (2003: income of £133 million; 2002: loss of £428 million).
(2)	Change in accounting principle for 2002 relates to the Group’s transitional adjustment in respect of the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, on 1 April 2001.
	The Group’s retrospective adoption of UITF 38 “Accounting for ESOP Trusts” resulted in the UK GAAP equity shareholders’ funds and total assets for prior years being restated (see note 37). The reconciliations of shareholders’ equity and total assets have been restated to reflect this change in UK GAAP reporting which had no effect on previously reported US GAAP net income, shareholders’ equity or total assets.

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Notes to the Consolidated Financial Statements continued

36. US GAAP information continued

Comprehensive (loss)/income for the years ended 31 March

		2004		2004		2003		2002
	Reference	$m		£m		£m		£m
Total recognised losses relating to the year in accordance with UK GAAP		(26,325	)	(14,307	)	(780	)	(18,418	)
Items (increasing)/decreasing total recognised losses:
Net loss		1,634		888		764		(550	)
Additional minimum pension liability, net of tax	(i)	265		144		(191	)	–
Available for sale securities, net of tax	(i)	696		378		(137	)	808
Derivative financial instruments, net of tax	(i)	(2	)	(1	)	1		–
Currency translation, net of tax		(650	)	(353	)	913		680
Comprehensive (loss)/income in accordance with US GAAP	(j)	(24,382	)	(13,251	)	570		(17,480	)

Cash flows for the years ended 31 March

The consolidated statements of cash flows prepared under UK GAAP differ in certain presentational respects from the format required under SFAS No. 95, “Statement of Cash Flows”. Under US GAAP, cash equivalents are defined as short term, highly liquid investments which are readily convertible into known amounts of cash and were within three months of maturity when acquired. At 31 March 2004, cash and cash equivalents under US GAAP included cash equivalents of £4,381 million (2003: £291 million), which are classified as investments under UK GAAP.

The following table summarises the movement and composition of cash and cash equivalents under US GAAP.

Summary consolidated cash flow information as presented in accordance with US GAAP:

	2004		2004		2003		2002
	$m		£m		£m		£m
Cash and cash equivalents were provided by/(used in):
Operating activities	20,407		11,091		9,708		6,621
Investing activities	(6,951	)	(3,778	)	(9,497	)	(10,684	)
Financing activities	(3,524	)	(1,915	)	(1,202	)	(1,653	)
Net increase/(decrease) in cash and cash equivalents	9,932		5,398		(991	)	(5,716	)
Exchange movement	(688	)	(374	)	(112	)	(76	)
Cash and cash equivalents at the beginning of year	1,410		766		1,869		7,661
Cash and cash equivalents at the end of year	10,654		5,790		766		1,869

A reconciliation between the consolidated statements of cash flows presented in accordance with UK GAAP and US GAAP is set out below.

	2004		2004		2003		2002
	$m		£m		£m		£m
Operating activities:
Net cash inflow from operating activities (UK GAAP)	22,663		12,317		11,142		8,102
Taxation	(2,175	)	(1,182	)	(883	)	(545	)
Net cash outflow for returns on investments and servicing of finance	(81	)	(44	)	(551	)	(936	)
Net cash provided by operating activities (US GAAP)	20,407		11,091		9,708		6,621
Investing activities:
Net cash outflow from capital expenditure, financial investments and
acquisitions and disposals (UK GAAP)	(10,265	)	(5,579	)	(10,239	)	(12,132	)
Acquisition of liquid investments	–		–		–		1,309
Dividends received from joint ventures and associated undertakings	3,314		1,801		742		139
Net cash used in investing activities (US GAAP)	(6,951	)	(3,778	)	(9,497	)	(10,684	)
Financing activities:
Net cash outflow from financing activities (UK GAAP)	(1,288	)	(700	)	(150	)	(681	)
Increase in bank overdrafts	79		43		–		6
Equity dividends paid	(2,315	)	(1,258	)	(1,052	)	(978	)
Net cash used in financing activities (US GAAP)	(3,524	)	(1,915	)	(1,202	)	(1,653	)
Note:
Certain prior year amounts have been reclassified to conform with the Group’s current year presentation.

Annual Report 2004  Vodafone Group Plc

117

Summary of differences between UK GAAP and US GAAP
The Consolidated Financial Statements are prepared in accordance with UK GAAP, which differ in certain material respects from US GAAP. The differences that are material to the Group relate to the following items.

(a) Non-consolidated entities and investments accounted for under the equity method
Under UK GAAP, the results and assets of Vodafone Italy have been consolidated in the Group’s financial statements from 12 April 2000. Under US GAAP, as a result of significant participating rights held by minority shareholders, the Group’s interest in Vodafone Italy has been accounted for as an associated undertaking under the equity method of accounting. Under UK GAAP, Vodafone Spain has been consolidated in the Group’s financial statements from 29 December 2000. Under US GAAP, the Group’s interests in Vodafone Spain, have been accounted for as an associated undertaking under the equity method of accounting up to 29 June 2001 and consolidated thereafter, following the completion of the acquisition of a further 17.8% shareholding.

Under UK GAAP, charges for interest and taxation for associated undertakings are aggregated within the Group interest and taxation amounts shown on the face of the consolidated profit and loss account. The Group’s share of the turnover of associated undertakings is also permitted to be disclosed on the face of the consolidated profit and loss account. US GAAP does not permit the Group’s share of turnover of associated undertakings to be disclosed on the face of the consolidated income statement.

Equity accounting for Vodafone Italy and Vodafone Spain under US GAAP results in the Group operating loss, Group net interest payable, Group taxation payable and equity minority interests being less than/(more than) the equivalent UK GAAP amount by £1,325 million, £(55) million, £583 million and £459 million (2003: £1,955 million, £(45) million, £478 million and £264 million; 2002: £2,060 million, £(9) million, £402 million and £249 million), respectively. Equity accounting for Vodafone Italy and Vodafone Spain results in the Group’s share of the operating loss, interest payable and taxation payable of associated undertakings being greater/(lower) under US GAAP than UK GAAP by £1,907 million, £(42) million and £448 million (2003: £2,305 million, £(34) million and £367 million; 2002: £2,402 million, £(7) million and £307 million), respectively. The Group’s investment in the entity consolidated under UK GAAP but equity accounted under US GAAP at 31 March 2004 was £24,028 million (2003: £21,512 million).

(b) Connection revenues and costs
The Group’s UK GAAP accounting policy on revenue recognition was amended during the year in relation to the deferral of certain equipment, connection, upgrade and tariff migration fees following the issuance of Application Note G to FRS 5 “Reporting the Substance of Transactions”. Following the prospective adoption of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” on 1 October 2003 under US GAAP the Group’s UK and US GAAP accounting policies have been substantially aligned.

For transactions prior to 1 October 2003, connection revenues under US GAAP are recognised over the period that a customer is expected to remain connected to a network. Connection costs directly attributable to the income deferred are recognised over the same period. Where connection costs exceed connection revenues, the excess costs were charged in the profit and loss account immediately upon connection. The balances of deferred revenue and deferred charges as of 30 September 2003 will continue to be recognised over the period that a customer is expected to remain connected to a network.

(c) Goodwill and other intangible assets
Under UK GAAP, the policy followed prior to the introduction of FRS 10, “Goodwill and Intangible Assets”, which is effective for accounting periods ended on or after 23 December 1998 and was adopted on a prospective basis, was to write off goodwill against shareholders’ equity in the year of acquisition. FRS 10 requires goodwill to be capitalised and amortised over its estimated useful economic life. Under US GAAP, following the introduction of SFAS No. 142, “Goodwill and Other Intangible Assets”, which was effective for accounting periods starting after 15 December 2001 and, transitionally, for acquisitions completed after 30 June 2001, goodwill and intangible assets with indefinite lives are capitalised and not amortised, but tested for impairment, at least annually, in accordance with SFAS No. 142. Intangible assets with finite lives continue to be capitalised and amortised over their useful economic lives.

The Group believes that the nature of the licences and the related goodwill acquired in business combinations is substantially indistinguishable. In acquisitions where the primary asset is a licence, the Group, therefore, allocates the surplus of the purchase price over the fair value attributed to the share of net assets acquired to licences. In a number of the Group’s previous acquisitions, the primary assets acquired were licences to provide mobile telecommunications services. As a result of the adoption of SFAS 142 and these considerations, on 1 April 2002, £33,664 million of goodwill was reclassified as licences. In accordance with the provision of SFAS No. 109, “Accounting for Income Taxes”, a related deferred tax liability and a corresponding increase to licence value of £19,077 million has also been recognised related to the resulting difference in the tax basis versus the book basis of the licences.

Under UK GAAP and US GAAP the purchase price of a transaction accounted for as an acquisition is based on the fair value of the consideration. In the case of share consideration, under UK GAAP the fair value of such consideration is based on the share price at completion of the acquisition or the date when the transaction becomes unconditional. Under US GAAP the fair value of the share consideration is based on the average share price over a reasonable period of time before and after the proposed acquisition is agreed to and announced. This has resulted in a difference in the fair value of the consideration for certain acquisitions and consequently in the amount of goodwill capitalised under UK GAAP and US GAAP.

Under UK GAAP, costs incurred in reorganising acquired businesses are charged to the profit and loss account as post-acquisition expenses. Under US GAAP, certain of such costs are considered in the allocation of purchase consideration.

(d) Licence fee amortisation
Under UK GAAP, the Group has adopted a policy of amortising licence fees in proportion to the capacity of the network during the start up period and then on a straight line basis. Under US GAAP, licence fees are amortised on a straight line basis from the date that operations commence to the date the licence expires.

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Notes to the Consolidated Financial Statements continued

36. US GAAP information continued

(e) Exceptional items
In the year ended 31 March 2003, the Group recorded an impairment charge under UK GAAP of £405 million in relation to the fixed assets of Japan Telecom. Under US GAAP, the Group evaluated the recoverability of these fixed assets in accordance with the requirements of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, and determined that the carrying amount of these assets was recoverable. As a result, the UK GAAP impairment charge of £405 million (£270 million net of minority interests) was not recognised under US GAAP during the year ended 31 March 2003. On disposal of Japan Telecom in the year ended 31 March 2004, an incremental loss on sale of £476 million (£351 million net of minority interests) was recognised under US GAAP resulting in a total loss on sale of £555 million (£399 million net of minority interests).

The reconciling item arising in the year ended 31 March 2002 represented the loss on sale of a business, which was sold fifteen months after the date of acquisition. Under UK GAAP, the fair value of an acquired business can be amended up until the end of the financial year after acquisition. Under US GAAP, the fair value can only be adjusted for one year following acquisition.

In addition, the exceptional non-operating items recorded under UK GAAP, disclosed in note 6, are reclassified as operating items under US GAAP and reduce operating profit accordingly.

(f) Capitalised interest
Under UK GAAP, the Group’s policy is not to capitalise interest costs on borrowings in respect of the acquisition of tangible and intangible fixed assets. Under US GAAP, the interest cost on borrowings used to finance the construction of network assets is capitalised during the period of construction until the date that the asset is placed in service. Interest costs on borrowings to finance the acquisition of licences are also capitalised until the date that the related network service is launched. Capitalised interest costs are amortised over the estimated useful lives of the related assets.

(g) Income taxes
Under UK GAAP, deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Under US GAAP, deferred tax assets and liabilities are provided in full on all temporary differences and a valuation adjustment is established in respect of those deferred tax assets where it is more likely than not that some portion will not be realised. The most significant component of the income tax adjustment is due to the temporary difference between the assigned values and tax values of intangible assets acquired in a business combination, which results in the recognition of a deferred tax liability under US GAAP. Under UK GAAP, no deferred tax liability is recognised.

Under UK GAAP, the tax benefit received on the exercise of share options by employees, being the tax on the difference between the market value on the date of exercise and the exercise price, is shown as a component of the tax charge for the period. Under US GAAP, the tax benefit for deductions not exceeding the US GAAP accounting charge is recognised in earnings. Any incremental tax benefit from tax deductions in excess of the US GAAP accounting charge is shown as a component of paid-in capital on issue of shares.

In addition, deferred tax assets are recognised for future deductions and utilisation of tax carry-forwards, subject to a valuation allowance. The valuation allowance established against deferred tax assets as at 31 March 2004 was £11,150 million (2003: £11,446 million), the movement in the year being £296 million. The valuation allowance is mainly in respect of tax losses amounting to £11,018 million (2003: £11,226 million) not recognised.

(h) Proposed dividends
Under UK GAAP, final dividends are included in the financial statements when recommended by the Board to the shareholders in respect of the results for a financial year. Under US GAAP, dividends are included in the financial statements when declared by the Board.

(i) Other
Pension costs – Under both UK GAAP and US GAAP pension costs provide for future pension liabilities. There are differences, however, in the prescribed methods of valuation, which give rise to GAAP adjustments to the pension cost and the pension prepayment/liability. In addition, in certain circumstances an additional minimum liability must also be recognised with changes therein reported net of tax in other comprehensive income.

Capitalisation of computer software costs – Under UK GAAP, costs that are directly attributable to the development of computer software for continuing use in the business, whether purchased from external sources or developed internally, are capitalised. Under US GAAP, data conversion costs and costs incurred during the research stage of software projects are not capitalised.

Marketable securities – Under US GAAP, SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, the Group classifies its marketable equity securities with readily determinable fair values as available for sale and are stated at fair value with the unrealised loss or gain, net of deferred taxes, reported in comprehensive income. Under UK GAAP such investments are generally carried at cost and reviewed for other than temporary impairment.

Minority interests – Where losses in a subsidiary undertaking attributable to the minority interest result in its interest being one in net liabilities, UK GAAP requires a parent company make provision only to the extent it has a commercial or legal obligation to provide funding that may not be recoverable in respect of the accumulated losses attributable to the minority interest. US GAAP requires all losses allocable to minority interests in excess of their interest in the equity of the respective subsidiary to be charged to the majority shareholder.

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Stock based compensation – Under UK GAAP, options granted over the Company’s ordinary shares are accounted for using the intrinsic value method, with the difference between the fair value of shares at grant date and the exercise price charged to the profit and loss over the period until the shares first vest. Grants under the Company’s SAYE schemes are exempt from this accounting methodology.

Under US GAAP, the Group accounts for option plans in accordance with the requirements of Accounting Principles Board (“APB”) 25, “Accounting for Stock Issued to Employees” and applies the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”. Under APB 25, such plans are accounted for as variable and the cost is calculated by reference to the market price of the shares at the measurement date and amortised over the period until the shares first vest. Where the measurement period has not yet been completed, the cost is calculated by reference to the market price of the relevant shares at the end of each accounting period.

Derivative instruments – All the Group’s transactions in derivative financial instruments are undertaken for risk management purposes only and are used to hedge its exposure to interest rate and foreign currency risk. In accordance with UK GAAP, to the extent that such instruments are matched against an underlying asset or liability, they are accounted for as hedging transactions and recorded at appropriate historical amounts, with fair value information disclosed in the notes to the consolidated financial statements. Under US GAAP, in accordance with SFAS No. 133, the Group’s derivative financial instruments, together with any separately identified embedded derivatives, are reported as assets or liabilities on the Group’s balance sheet at fair value. In a hedge of fair values, changes in the fair value of the derivative are recorded in earnings with a corresponding change in the fair value of the hedged item also being recorded in earnings. For hedges of future cash flows, the changes in fair value of the derivative are recorded in other comprehensive income and reclassified to earnings when the hedged item affects earnings. Under US GAAP, all changes in fair value of derivatives not designated in hedging relationships are accounted for in the consolidated profit and loss account. The Group does not pursue hedge accounting treatment for:

– interest rate futures, which are typically used to switch floating interest rates to fixed interest rates; or

– derivatives entered into for funding and liquidity purposes, including forwards; or

– individual contracts where the underlying value of the transactions amounts to less than £10 million.

Upon first adopting SFAS No. 133, on 1 April 2002, a cumulative transition adjustment was made which increased US GAAP net income and other comprehensive income by £17 million and £nil, respectively.

(j) Comprehensive (loss)/income
Total recognised losses under UK GAAP include net loss and currency translation adjustment. Under US GAAP, comprehensive loss/(income) is the change in equity during a period resulting from transactions other than with shareholders. Comprehensive (loss)/income is comprised of net loss, the minimum pension liability adjustment, changes in the fair value of available for sale securities and derivatives used in cash flow hedging relationships, and currency translation adjustment.

(k) Loss per share
Loss per share information is calculated based on:

	2004		2004		2003		2002
	$		£		£		£
	(in millions, except per share amounts)
Loss from continuing operations	(14,231	)	(7,734	)	(9,135	)	(16,444	)
(Loss)/income on operations and disposal of discontinued operations	(723	)	(393	)	80		(261	)
Cumulative effect of change in accounting principle	–		–		–		17
Net loss	(14,954	)	(8,127	)	(9,055	)	(16,688	)
Weighted average number of ordinary shares outstanding	68,096		68,096		68,155		67,961
Basic and diluted loss per share:
Loss from continuing operations	(20.90	)¢	(11.36	)p	(13.40	)p	(24.20	)p
(Loss)/income on operations and disposal of discontinued operations	(1.05	)¢	(0.57	)p	0.11	p	(0.38	)p
Cumulative effect of change in accounting principle	–		–		–		0.02	p
Net loss	(21.95	)¢	(11.93	)p	(13.29	)p	(24.56	)p

There were no securities with a dilutive effect for the year ended 31 March 2004. The Group has not included 382 million shares (2002: 246 million) in the computation of diluted loss per share for the year ended 31 March 2003 as their inclusion would be antidilutive.

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Notes to the Consolidated Financial Statements continued

36. US GAAP information continued

Market risk and financial instruments

The principal financial risks arising from the Group’s activities are funding risk, interest rate risk, currency risk and counterparty risk. The Group manages these risks by a variety of methods, including the use of a number of financial instruments. All transactions in derivative financial instruments are undertaken for risk management purposes only, by specialist treasury personnel. No instruments are held by the Group for trading purposes. The Group’s treasury function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk management, with operations, including transactions in derivative financial instruments, conducted within a policy framework approved by the Board.

Interest rate risk

The Group’s main interest rate exposures are to euro and yen, and, to a lesser extent US dollar and sterling interest rates. Under the Group’s interest rate management policy, interest rates on monetary assets and liabilities are maintained on a floating rate basis, unless the forecast interest charge for the next eighteen months is material in relation to forecast results, in which the interest rates are fixed. In addition, fixing may be undertaken for longer periods when interest rates are statistically low. The term structure of interest rates is managed within limits approved by the Board, using derivative financial instruments such as swaps, futures, options and forward rate agreements. At the end of the year, 20% (2003: 9%) of the Group’s gross borrowings were fixed for a period of at least one year.

Foreign exchange rate risk

The Group’s geographical spread exposes it to fluctuations in foreign exchange rates. The Group manages its exposure to foreign currency movements by hedging known future transactions, including those resulting from the repatriation of international dividends and loans. Foreign exchange forward contracts are the derivative instrument most used for this purpose.

Investments in foreign entities

Although the Group reports its balance sheet in sterling, which is the principal currency for most transactions undertaken in its shares, it does not hedge its foreign currency balance sheet exposure for three reasons. Firstly, the Group believes its shareholders principally value its shares by discounting its estimated future sterling and foreign currency cash flows and converting to sterling at appropriate rates where necessary. Secondly, the Group manages the currency of its net debt according to banded multiples of its operating cash flow, adjusted for dividends and share purchases, for those currencies. As such at 31 March 2004, 117% of net borrowings were denominated in currencies other than sterling (52% euro, 51% yen, 12% US dollar and 2% others) and 17% of net borrowings had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via share purchases and dividends. This allows debt to be serviced in proportion to anticipated cash flows and therefore provides a partial hedge against profit and loss account translation exposure, as interest costs will be denominated in foreign currencies. Thirdly, certain overseas businesses have foreign currency denominated goodwill allocated whilst other assets do not, therefore making comparisons in the balance sheet difficult.

Goodwill and other intangible assets

As described further in note 25, the Group has undertaken a number of transactions during the year, including the acquisition of Singlepoint, Project Telecom Plc and additional minority stakes in certain existing subsidiary undertakings. Under US GAAP, these transactions have resulted in the Group assigning £395 million to goodwill and £1,578 million to other intangible assets, of which £996 million was assigned to mobile licences and £582 million to customer bases. A corresponding deferred tax liability of £534 million was recognised. With the exception of goodwill, all intangible assets acquired are deemed to be of finite life, with a weighted average amortisation period of 12 years, comprising mobile licences 18 years and customer bases 4 years.

Had the acquisitions of Singlepoint, Project Telecom Plc and the additional minority stake increases been consummated on 1 April of the year preceding the year of acquisition, the results of these acquired operations would not have had a significant impact on the Group’s consolidated results of operations for each of the financial years presented.

Goodwill

	Mobile telecommunications – Northern Europe			Mobile telecommunications – UK & Ireland
	2004		2003	2004		2003
	£m		£m	£m		£m
1 April	–		–	117		–
Additions	43		–	352		108
Exchange movements	(2	)	–	(2	)	9
31 March	41		–	467		117

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Finite-lived intangible assets

	2004		2003
	Gross carrying	Accumulated	Gross carrying	Accumulated
	amount	amortisation	amount	amortisation
	£m	£m	£m	£m
Licences	159,482	48,012	164,873	34,717
Customer bases	7,417	4,939	6,942	3,634
	166,899	52,951	171,815	38,351

Further analysis as to how amounts presented within the US GAAP reconciliation for goodwill and other intangibles, net of amortisation have been determined is provided below.

	2004	2003
	£m	£m
Use of a different measurement date for the purposes of determining purchase consideration	2,630	3,542
Deferred tax	42,188	46,960
Other	502	642
	45,320	51,144

The total amortisation charge for the year ended 31 March 2004, under US GAAP, was £15,893 million (2003: £13,873 million). The estimated future amortisation charge on finite-lived intangible assets for each of the next five years is set out in the following table. The estimate is based on finite-lived intangible assets recognised at 31 March 2004 using foreign exchange rates on that date. It is likely that future amortisation charges will vary from the figures below, as the estimate does not include the impact of any future investments, disposals, capital expenditures or fluctuations in foreign exchange rates.

Year ending 31 March	£m
2005	16,054
2006	15,194
2007	14,918
2008	14,794
2009	14,708

The following pro forma information presents the impact of results under US GAAP, had the Group accounted for its goodwill and identifiable intangible assets under SFAS No. 142 for all years presented after giving effect to such reclassifications for all years presented.

	2004		2003		2002
	£m		£m		£m
Reported net loss	(8,127	)	(9,055	)	(16,688	)
Amortisation of licences with indefinite lives, net of income taxes	–		–		704
Pro forma net loss	(8,127	)	(9,055	)	(15,984	)
Reported basic and diluted loss per share	(11.93	)p	(13.29	)p	(24.56	)p
Amortisation of licences with indefinite lives, net of income taxes	–		–		1.04	p
Pro forma basic and diluted net loss per share	(11.93	)p	(13.29	)p	(23.52	)p

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Notes to the Consolidated Financial Statements continued

36. US GAAP information continued
Associated undertakings
Summary aggregated financial information of the Group’s associated undertakings, extracted on a 100% basis from accounts prepared under UK GAAP to 31 March 2004, is set out below.

	2004	2004	2004	2003
	Equity-accounted	Non-consolidated	Equity-accounted	Equity-accounted
	entities as	entity as	entities as	entities as
	defined under	defined under	defined under	defined under
	UK GAAP	US GAAP	US GAAP	US GAAP
	£m	£m	£m	£m
Assets
Current assets	6,048	4,522	10,570	9,370
Non-current assets	19,619	3,600	23,219	24,676
	25,667	8,122	33,789	34,046
Liabilities and equity shareholders’ funds
Current liabilities	11,818	1,818	13,636	14,788
Long-term liabilities	5,076	–	5,076	5,310
Total equity shareholders’ funds	8,773	6,304	15,077	13,948
	25,667	8,122	33,789	34,046
Turnover	23,418	5,276	28,694	27,519
Operating profit	6,759	2,494	9,253	7,298

Non-consolidated entity as defined under US GAAP comprise Vodafone Italy throughout the year, which has been consolidated under UK GAAP – see “Summary of differences between UK GAAP and US GAAP – (a) Non-consolidated entities and investments accounted for under the equity method” on page 117.

Included in current liabilities and long-term liabilities are amounts owed to the Group, other shareholders of the associated companies and third parties. The Group’s share of all associated companies’ net debt amounted to £3,714 million at 31 March 2004 (2003: £4,276 million).

Summary financial information for Verizon Wireless and Vodafone Italy for the three years ended 31 March 2004 is set out below. The financial information is extracted on a 100% basis from accounts prepared under UK GAAP.

	Verizon Wireless			Vodafone Italy
	2004	2003	2002	2004	2003	2002
	£m	£m	£m	£m	£m	£m
Assets
Current assets	2,142	2,257	3,728	4,522	2,337	1,805
Non-current assets	13,033	13,645	12,838	3,600	3,672	3,112
	15,175	15,902	16,566	8,122	6,009	4,917
Liabilities and equity shareholders’ funds
Current liabilities	6,610	7,809	8,405	1,818	1,810	1,483
Long-term liabilities	3,910	3,605	4,772	–	–	–
Total equity shareholders’ funds	4,655	4,488	3,389	6,304	4,199	3,434
	15,175	15,902	16,566	8,122	6,009	4,917
Turnover	13,886	12,902	12,449	5,276	4,371	3,732
Operating profit	3,035	2,795	3,029	2,494	1,588	1,344

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Fixed asset investments
Under US GAAP, SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, requires certain disclosures to be made of the Group’s fixed asset investments, all of which are classified as available for sale.

	UK GAAP net book
	value	(1)	Unrealised gains	Unrealised losses	Fair value
	£m		£m	£m	£m
31 March 2004	1,049		241	–	1,290
31 March 2003	1,127		7	(144)	990

Note:
(1)	Determined using the weighted average cost basis.

During the year, the Group realised proceeds of £123 million (2003: £575 million; 2002: £319 million), realising gross gains on sale of £4 million and gross losses on sale of £34 million (2003: £3 million; 2002: £9 million).

Stock based compensation
For the purposes of US GAAP reporting, the Group accounts for stock based compensation in accordance with APB 25. The Group also adopts the disclosure only provisions of SFAS No. 148.

The Company currently uses a number of share plans to grant options and share awards to its directors and employees described in Note 22.

Movements in ordinary share options and ADS options outstanding during the years ended 31 March 2004, 2003 and 2002 are summarised as follows:

	Number of ADS options							Number of ordinary share options
		2004		2003		2002			2004		2003		2002
		(millions)		(millions)		(millions)			(millions)		(millions)		(millions)
At 1 April		21.0		43.8		55.1			1,110.9		488.3		211.0
Granted		2.2		6.5		4.1			192.0		700.9		332.8
Exercised		(4.6	)	(2.7	)	(7.4	)		(36.6	)	(9.7	)	(13.2	)
Forfeited		(0.9	)	(26.6	)	(8.0	)		(82.3	)	(68.6	)	(42.3	)
At 31 March		17.7		21.0		43.8			1,184.0		1,110.9		488.3
Exercisable at 31 March		9.2		11.7		39.7			107.0		90.7		82.1
Weighted average exercise price:
Granted during year		$20.34		$13.71		$29.31			£1.19		£0.99		£1.56
Exercised during year		$15.03		$10.00		$14.14			£1.00		£0.82		£0.77
Forfeited during year		$34.17		$33.61		$41.00			£1.34		£1.46		£1.79
Outstanding at 31 March		$22.97		$22.32		$29.74			£1.16		£1.23		£1.71
Exercisable at 31 March		$28.29		$25.20		$29.64			£2.13		£1.45		£1.33

SFAS No.148 establishes a fair value based method of accounting for stock based compensation plans and encourages the recognition of the compensation cost on this basis in the income statement. Where the cost is not recognised on the basis of fair value, the pro forma effect of the valuation method on net loss must be disclosed. The disclosure only provisions of SFAS No.148 have been adopted, as follows:

	ADS options						Ordinary share options
		2004		2003		2002		2004	2003	2002
Weighted average fair value		$5.92		$4.49		$8.24		£0.37	£0.28	£0.56
Weighted average assumptions:
Volatility	39.19%		34.83%		36.02%			37.93%	34.82%	36.07%
Expected dividend yield	0.82%		0.62%		0.58%			0.81%	0.63%	0.57%
Risk-free interest rate	3.82%		5.02%		5.37%			3.75%	4.97%	5.45%
Expected option lives (years)		3.5		3.5		3.5		3.4	3.5	3.5

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Notes to the Consolidated Financial Statements continued

36. US GAAP information continued
Had compensation cost been determined based upon the fair value of the share options and ADS options at grant date, the Group’s net loss and loss per share would have been restated to the pro forma amounts indicated below (in millions, except per share amounts):

	2004		2003		2002
	£m		£m		£m
Net loss as reported under US GAAP	(8,127	)	(9,055	)	(16,688	)
Share-based employee compensation expense net of related tax effects, included in the
determination of net income as reported	129		48		–
Share-based employee compensation expense, under fair value based method
for all awards, net of related tax effects	(107	)	(65	)	(81	)
Pro forma net loss	(8,105	)	(9,072	)	(16,769	)
Loss per share
Basic and diluted – as reported under US GAAP	(11.93	)p	(13.29	)p	(24.56	)p
Basic and diluted – pro forma	(11.90	)p	(13.31	)p	(24.67	)p

Pensions and other post retirement benefits
As at 31 March 2004, the Group operated a number of pension plans for the benefit of its employees throughout the world, which vary with conditions and practices in the countries concerned. A description of the major pension plans provided is given in note 32.

Analyses of the net pension cost, plan assets, obligations and funded status for the major defined benefit plans in the UK, Germany and Japan, prepared under US GAAP, are provided below.

The investment policy and strategy of the main scheme in the UK is set by the Trustees and reflects the liabilities of the plan. As at 31 March 2004, 79% (2003: 79%; 2002: 90%) of the assets are invested in equities and the remainder in bonds. The investment policy and strategy of the German plans are set by the Investment Sub-Committee of the Contractual Trust Agreement and similarly reflects the liabilities of the plans, which are more heavily weighted towards pensioners than the UK plan. 70% of the assets are invested in bonds and the remainder in equities.

The basis used to determine the overall long term return on plan assets is to apply the expected rate of return on bonds based on market interest rates at the relevant date to that proportion of the assets invested in bonds. The bond rate of return is then increased by an allowance for the expected equity risk premium in each market, based on past experience and future expectations of return and this rate is applied to the relevant proportion invested in equities. The measurement date for the Group’s pension assets and obligations is 31 March. The measurement date for the Group’s net periodic pension cost is 1 April. The cash contributions for the UK plan for the year ending 31 March 2005 are currently estimated to be £36 million.

	UK						Germany						Japan
	2004		2003		2002		2004		2003		2002		2004		2003		2002
	£m		£m		£m		£m		£m		£m		£m		£m		£m
Service cost	25		23		27		3		3		2		10		12		5
Interest costs	19		16		11		7		7		7		1		2		1
Expected return on assets	(21	)	(23	)	(16	)	(4	)	(1	)	–		–		–		–
Amortisation of prior service cost	–		–		1		–		–		–		–		–		–
Amortisation of gains and losses	16		9		3		2		3		1		1		1		–
Net periodic pension cost	39		25		26		8		12		10		12		15		6
Termination benefits and curtailment costs	–		–		–		–		–		–		(16	)	24		1
Accumulated benefit obligation	390		279		218		153		141		113		25		106		101
Change in projected benefit obligation
Benefit obligation at 1 April	327		258		184		145		119		114		127		115		97
Service cost	25		23		27		3		3		2		10		12		4
Interest cost	19		16		11		7		7		7		1		2		1
Members’ contributions	10		9		9		–		–		–		–		–		–
Amendments	–		–		–		–		(3	)	5		–		5		23
Actuarial loss/(gain)	82		28		33		19		13		–		(3	)	4		–
Curtailment	–		–		–		(2	)	–		–		–		2		–
Settlement	–		–		–		–		–		–		(76	)	13		–
Special termination benefit	–		–		–		–		–		–		–		9		–
Benefits paid (estimated)	(6	)	(7	)	(6	)	(9	)	(9	)	(8	)	(22	)	(36	)	(10	)
Exchange movement	–		–		–		(5	)	15		(1	)	(2	)	1		–
Benefit obligation at 31 March	457		327		258		158		145		119		35		127		115

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	UK						Germany						Japan
	2004		2003		2002		2004		2003		2002		2004		2003		2002
	£m		£m		£m		£m		£m		£m		£m		£m		£m
Change in plans’ assets
Fair value of assets at 1 April	264		229		178		86		1		2		1		1		1
Actual return/(loss) on plans’ assets	77		(73	)	(7	)	7		–		(1	)	1		–		–
Employer’s contributions	88		106		55		57		88		8		22		36		10
Members’ contributions	10		9		9		–		–		–		–		–		–
Benefits paid (estimated)	(6	)	(7	)	(6	)	(9	)	(9	)	(8	)	(22	)	(36	)	(10	)
Exchange movement	–		–		–		(5	)	6		–		–		–		–
Fair value of assets at 31 March	433		264		229		136		86		1		2		1		1
Funded status	(24	)	(63	)	(29	)	(22	)	(59	)	(118	)	(33	)	(126	)	(114	)
Unrecognised net loss	203		195		80		57		46		31		3		24		21
Prior period service cost	1		1		1		–		–		–		5		5		–
Net amount recognised	180		133		52		35		(13	)	(87	)	(25	)	(97	)	(93	)
Amounts recognised in the statement of
financial position
Prepaid/(accrued) benefit cost	180		(15	)	11		(11	)	(55	)	(112	)	(25	)	(105	)	(99	)
Intangible asset	–		1		1		–		–		–		–		5		–
Other comprehensive income	–		147		40		46		42		25		–		3		6
Net amount recognised	180		133		52		35		(13	)	(87	)	(25	)	(97	)	(93	)
Weighted average actuarial assumptions
used to determine benefit obligations
Discount rate	5.5	%	5.9	%	6.5	%	5.3	%	5.3	%	6.0	%	2.3	%	1.5	%	2.5	%
Rate of compensation increase	4.5	%	4.0	%	4.0	%	3.0	%	2.0	%	2.5	%	–		–		–
Weighted average actuarial assumptions used
to determine net periodic benefit cost
Discount rate	5.9	%	6.5	%	5.9	%	5.3	%	6.0	%	6.5	%	1.5	%	2.5	%	3.0	%
Rate of compensation increase	4.0	%	4.0	%	4.0	%	2.0	%	2.5	%	2.5	%	–		–		–
Expected long-term return on plan assets	7.5	%	8.0	%	6.5	%	5.3	%	6.0	%	6.0	%	3.0	%	4.4	%	4.4	%

37. Changes in accounting standards

UK standards
UITF 38, “Accounting for ESOP Trusts”
During the financial year, the UK Accounting Standards Board (“ASB”) issued UITF 38 “Accounting for ESOP Trusts” which supersedes UITF 13 and requires presentation of an entity’s own shares held in an ESOP trust to be deducted in arriving at shareholders’ funds as opposed to being recognised as assets. The Group has early adopted this Abstract in the preparation of its Consolidated Financial Statements for the year ended 31 March 2004, and has restated its balance sheets at 31 March 2003 and 31 March 2002 accordingly.

The impact of adopting UITF 38 was to reduce investments and shareholders’ funds by £41 million as at 31 March 2003. In addition, the cash outflow on purchasing own shares in relation to employee share schemes has been reclassified from “Purchase of investments” within “Net cash outflow for capital expenditure and financial investment” to its own line within financing activities in the Statement of Consolidated Cash Flows.

Loss on ordinary activities before taxation in the 2002, 2003 and 2004 financial years has not been impacted by the adoption of UITF 38, however, the reported value of fixed asset investments, net assets and equity shareholders’ funds would be £48 million higher at 31 March 2004 had the Group not adopted UITF 38.

Application Note G to FRS 5, “Reporting the Substance of Transactions”
In November 2003, the ASB issued this application note setting out principles of revenue recognition. It specifically addresses five types of arrangement, which give rise to turnover and have been subject to differing interpretations in practice. Following the issuance of the Application Note, the Group has amended its accounting policy on revenue recognition in relation to the deferral of certain equipment, connection, upgrade and tariff migration fees. The effect of the revised policy on the Group’s turnover is not material in either the current or previous financial years.

FRS 20 (IFRS 2) “Share-based Payment”
In April 2004, the ASB issued FRS 20 (IFRS 2) “Share-based Payment”, which is applicable for accounting periods beginning on or after 1 January 2005. Current UK GAAP requires that a charge for employee share schemes should be made based on the intrinsic value at grant date and as such no expense is recognised for a number of share based payment transactions, such as the grant of share options to employees at market value. The new standard requires the

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Notes to the Consolidated Financial Statements continued

37. Changes in accounting standards continued

Group to recognise a charge for certain share-based transactions granted after 7 November 2002, equal to the fair value of the share or share option at the date of the grant over the vesting period.

FRS 21 (IAS 10) “Events after the Balance Sheet Date”
In May 2004, the ASB issued FRS 21 (IAS 10) “Events after the Balance Sheet Date”, which is applicable for accounting periods beginning on or after 1 January 2005. The adoption of this standard will result in equity dividends, which are currently declared after the balance sheet date but recognised in the Consolidated Financial Statements at the balance sheet date, being derecognised at the balance sheet date. This would reduce the Group’s retained loss under UK GAAP for the 2002, 2003 and 2004 financial years by £47 million, £101 million and £116 million, respectively, and increase the Group’s net assets and equity shareholders’ funds under UK GAAP at 31 March 2004 by £728 million (2003: £612 million).

US Standards
SFAS No. 143, “Accounting for Asset Retirement Obligations”
In June 2001, the FASB issued SFAS No. 143. SFAS No. 143 is effective for financial years beginning after 15 June 2002 and requires that the fair value of a liability for an asset retirement obligation be recognised in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalised as part of the carrying amount of the long-lived asset. The Group adopted this statement effective 1 April 2003.

The Group is subject to asset retirement obligations in relation to certain operating lease agreements relating to sites on which the Group’s network infrastructure is positioned. These leases can include legal obligations to restore the leased site at the end of the lease term. Based on the Group’s historical experience it is expected that a high majority of current sites will continue to be of importance to the network and that, where possible, the Group will continue to renew leases on these sites. The adoption of SFAS No. 143 did not have a material impact on the Group’s reported financial position and results under US GAAP.

SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”
In May 2003, the FASB issued SFAS No. 150. The adoption of SFAS No. 150 on 1 April 2004 resulted in the Group’s class D & E preferred shares issued by Vodafone Americas, Inc. with a carrying value of £875 million, currently classified as non-equity minority interests, being classified as long term liabilities. The measurement provisions of SFAS No. 150 related to these preferred shares have, however, been indefinitely deferred. Applying the measurement provisions of SFAS No. 150 would increase the carrying value as of 1 April 2004 by £23 million.

SFAS No. 132R, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”
In December 2003, the FASB issued SFAS No. 132R (revised 2003), to improve financial statement disclosures for defined benefit plans. This standard requires that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. The provisions of SFAS 132R are effective for periods ending after 15 December 2003 and have been adopted for domestic plans. However, certain provisions related to non-UK defined benefit plans are not effective until periods ended after 15 June 2004.

FASB Interpretation No. 46 (revised December 2003) (“FIN 46”), “Consolidation of Variable Interest Entities”
In January 2003, the FASB issued FIN 46. FIN 46 expands upon existing US accounting guidance that prescribes when an entity should consolidate the assets, liabilities and results of a variable interest entity (“VIE”). A VIE is an entity whose equity is not sufficient to supports its activities without additional subordinated financial support or its equity investors lack certain characteristics of a controlling financial interest. Under FIN 46 an enterprise shall consolidate a VIE if the enterprise has a variable interest that will absorb a majority of the VIE’s expected losses or receive the majority of the VIE’s expected residual returns, or both. In December 2003, the FASB issued a revised FIN 46 to modify some provisions and exempt certain entities. Adoption of FIN 46 and its revision has not impacted the Group’s reported financial position and results under US GAAP.

EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”
In November 2002, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on EITF 00-21. EITF 00-21 provides guidance on how to account for arrangements that may involve multiple revenue-generating activities, for example, the delivery of products or performance of services, and/or rights to use other assets. The requirements of EITF 00-21 will be applicable to agreements entered into for periods beginning after 15 June 2003. The prospective adoption of EITF 00-21 on 1 October 2003 has not impacted the Group’s reported financial position and results under US GAAP. However, as contracts entered into before 1 October 2003 are accounted for in accordance with SAB 101, the related deferred connection revenues, and related costs, will continue to be recognised over the remaining life of the customer relationship. At 31 March 2004, deferred revenue accounted for in accordance with SAB 101 amounted to £3,737 million.

International Financial Reporting Standards
Introduction
The Group is preparing for the adoption of International Financial Reporting Standards (“IFRS”) as its primary accounting basis, following the adoption of Regulation No. 1606/2002 by the European Parliament on 19 July 2002. IFRS will apply for the first time in the Group’s Annual Report for the year ending 31 March 2006.

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Subject to the finalisation of a proposed SEC rule on first time adoption of IFRS, it is currently expected that one year of IFRS comparative information for the year ending 31 March 2005 will be provided in the year of first adoption. Interim results for the six-month period ending 30 September 2005 will be presented under IFRS together with restated information for the six months ending 30 September 2004.

The Group has established a project team to evaluate and monitor developments in IFRS and to manage and co-ordinate the implementation of IFRS across the Group.

Current principal differences between IFRS and UK GAAP
On 31 March 2004, the International Accounting Standards Board (“IASB”) completed the set of standards that are mandatory for EU listed companies adopting IFRS for the first time. Following the completion of this process, the Group has provisionally identified the major differences between IFRS and the Group’s UK GAAP accounting policies, which are summarised below.

While the following disclosure is intended to highlight those differences expected to result in significant changes to the results and financial position reported under UK GAAP, this summary is not intended to be a complete list of differences between the two accounting bases applicable to the Group. In addition, further significant differences may arise from accounting standards and pronouncements that the IASB could issue in the future and which the Group may elect to early adopt in the its first IFRS accounts. As noted below, the Group is also still considering the impact of the IASB’s recently issued standards on business combinations, intangible assets and impairment. Finally, the Group is considering which, if any, of the optional transitional provisions within IFRS 1 “First-time adoption of International Financial Reporting Standards” to adopt which may impact substantially the Group’s reported results.

Scope of Consolidation
Under UK GAAP, the Group currently accounts for its 76.8% interest in Vodafone Italy as a subsidiary undertaking. As a result of the significant participating rights held by the largest minority shareholder, it is currently anticipated that the adoption of IAS 27, “Consolidated and Separate Financial Statements”, and IAS 28, “Accounting for Investments in Associates”, will result in Vodafone Italy being accounted for as an associated undertaking.

Financial Instruments
Under UK GAAP, financial instruments are generally measured at cost with gains and losses being deferred until the underlying transaction occurs. IAS 39 “Financial Instruments: Recognition and Measurement” requires certain financial instruments to be measured at fair value and is expected to introduce certain additional volatility into the Group’s profit and loss account.

The primary impact of the implementation of IAS 32, “Financial Instruments: Disclosure and Presentation”, is anticipated to be the reclassification of the Group’s non-equity minority interests to liabilities. As discussed in “Quantitative and Qualitative Disclosures About Market Risk – Funding and liquidity”, the Group’s internal debt protection ratios define net debt to include redeemable preference shares and financial guarantees.

Share based payments
UK GAAP requires that the charge for employee share schemes should be based on the intrinsic value at grant date. As a result, no expense is recognised for a number of share based payment transactions such as the grant of share options to employees at market value. IFRS 2, “Share-based Payment”, will require the Group to recognise an expense for certain share based transactions granted after 7 November 2002, equal to the fair value of the share or share option at the date of the grant over the vesting period.

Pensions and other retirement benefits
For defined benefit pension schemes, the requirements of IAS 19, “Employee Benefits”, are similar to those of FRS 17 under UK GAAP, though IAS 19 permits the deferral of actuarial gains and losses in certain circumstances which is not permitted under FRS 17. The IASB is currently considering revisions to IAS 19, which would substantially align the accounting for defined benefit schemes to the requirements of FRS 17. The Group currently applies the provisions of SSAP 24.

Deferred taxes
IAS 12, “Income Taxes”, requires accounting for deferred tax on temporary differences, which is wider in scope than existing UK GAAP accounting principles in relation to deferred taxation. The Group is currently considering IAS 12 together with the tax accounting impact of a number of other recently introduced international accounting standards.

Other matters

Business combinations and intangible assets
IFRS 3: “Business Combinations”, IAS 36: “Impairment of Assets” and IAS 38: “Intangible Assets” were issued by the IASB on 31 March 2004. These standards are of particular significance to the Group given both the nature of its operations and the nature and scale of the intangible assets currently recognised under UK GAAP. While the Group is currently considering the impact of these standards, the most significant impact is likely to be the requirement for goodwill not to be amortised.

Revenue recognition
The Group does not currently anticipate any significant difference between the Group’s current UK GAAP revenue recognition policies and those required to be adopted to comply with IAS 18: “Revenue”.

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Additional Shareholder Information

Financial calendar 2004/05

Annual General Meeting (see below)	27 July 2004
Interim Results announcement	16 November 2004
Preliminary announcement of full year results	24 May 2005

Dividends
Full details on the dividend amount per share or ADS can be found on page 39. Set out below is information relevant to the final dividend for the financial year ended 31 March 2004.

Ex-dividend date	2 June 2004
Record date	4 June 2004
DRIP election date	16 July 2004
Dividend payment date	6 August 2004*
* Payment date for both ordinary shares and ADSs.

Dividend Payment Methods Holders of ordinary shares can:
•	have cash dividends paid direct to a bank or building society account; or
•	have cash dividends paid in the form of a cheque; or
•	elect to use the cash dividends to purchase more Vodafone shares under the Dividend Reinvestment Plan (see below).

If a holder of ordinary shares does decide to receive cash dividends, it is recommended that this is paid directly to the shareholder’s bank or building society account via BACS or EFTS. This avoids the risk of cheques being lost in the post and means the dividend will be in the shareholder’s account on the dividend payment date. The shareholder will be sent a tax voucher confirming the amount of dividend and the account into which it has been paid.

Please contact the Company’s Registrars for further details.

Holders of ADSs can:
•	have cash dividends paid direct to a bank account; or
•	have cash dividends paid by cheque; or
•	elect to have the dividends reinvested to purchase additional Vodafone ADSs (see below for contact details).

Dividend reinvestment
The Company offers a Dividend Reinvestment Plan which allows holders of ordinary shares who choose to participate to use their cash dividends to acquire additional shares in the Company. These are purchased on their behalf by the Plan Administrator through a low cost dealing arrangement. Further details can be obtained from the Plan Administrator on +44 (0) 870 702 0198.

For ADS holders, The Bank of New York maintains a Global BuyDIRECT Plan for the Company, which is a direct purchase and sale plan for depositary receipts, with a dividend reinvestment facility. For additional information, please call toll-free on +1 (800) 233 5601, or write to:

The Bank of New York
Shareholder Relations Department
Global BuyDIRECT
P.O. Box 1958
Newark
New Jersey 07101-1958
USA

For calls from outside the US, call +1 (610) 312 5315.
Please note that this number is not toll-free.

Telephone share dealing
A telephone share dealing service with the Company’s Registrars is available for holders of ordinary shares. The service is available from 8.00 am to 4.30 pm, Monday to Friday, excluding bank holidays, on telephone number +44 (0) 870 703 0084.

Detailed terms and conditions are available on request by calling +44 (0) 870 702 0198.

Postal share dealing
A postal share dealing service is available for holders of ordinary shares with 1,000 shares or less who want to either increase their holding or sell their entire holding.

Further information about this service can be obtained from the Company’s Registrars on +44 (0) 870 702 0198.

Registrars and transfer office
The Company’s ordinary share register is maintained by:

Computershare Investor Services PLC
P.O. Box 82
The Pavilions, Bridgwater Road
Bristol BS99 7NH
England

Telephone: +44 (0) 870 702 0198

Holders of ordinary shares resident in Ireland should contact:

Computershare Investor Services (Ireland) Limited
P.O. Box 9742
Dublin 18
Ireland

Telephone: 0818 300 999

Any queries about the administration of holdings of ordinary shares, such as change of address, change of ownership or dividend payments, should be directed to the Company’s Registrars at the relevant address or telephone number immediately above. Holders of ordinary shares may also check details of their shareholding, subject to passing an identity check, on the Registrar’s website at www.computershare.com

The Depositary Bank for the Company’s ADR programme is:

The Bank of New York
Investor Relations Dept, P.O. Box 11258
Church St. Station
New York, NY 10286-1258
USA

Telephone: +1 (800) 233 5601 (Toll free)

ADS holders should address any queries or instructions regarding their holdings to The Bank of New York at the above address or telephone number. ADS holders can also, subject to passing an identity check, view their account balances and transaction history, sell shares and request certificates from their Global BuyDIRECT Plan at www.stockbny.com

Online Shareholder Services
www.vodafone.com/investor/

• Register to receive electronic shareholder communications. Benefits to shareholders and the Company include faster receipt of communications such as annual reports, and cost and time savings for Vodafone. Electronic shareholder communications are also more environmentally friendly.

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• View a webcast of the AGM of the Company on 27 July 2004 and up to one month after this date.

• View and/or download the Annual Report and the Annual Review & Summary Financial Statement 2004.

• Check the current share price.

• Calculate the value of your holding and look up the historic share price on a particular date.

• Calculate dividend payments.

• Use interactive tools to value your holding and chart Vodafone ordinary share price changes against indices.

Shareholders and other interested parties can also receive Company press releases, including London Stock Exchange announcements, by registering for Vodafone News via the Company’s website at www.vodafone.com/news

Registering for Vodafone News will enable you to:

• be alerted by free SMS as soon as news breaks;

• download the latest news direct to your mobile;

• have news automatically e-mailed to you; and

• receive Vodafone View. Vodafone View is part of Vodafone News. The Company uses this service to provide further clarification on any issue that arises in respect of which a London Stock Exchange announcement or press release is not required but on which the Company has a view.

Annual General Meeting
The twentieth Annual General Meeting of the Company will be held at the Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1 on 27 July 2004 at 10.45 a.m.

The Notice of Meeting, together with details of the business to be conducted at the Meeting, is being circulated to shareholders with this Annual Report or the Annual Review & Summary Financial Statement.

The AGM will be transmitted via a live webcast and can be viewed at the Company’s website – www.vodafone.com/agm – on the day of the meeting and for one month after the end of the meeting.

To find out more about the AGM and how to view the webcast, visit www.vodafone.com/agm

ShareGift
The Company supports ShareGift, the charity share donation scheme administered by The Orr Mackintosh Foundation (registered charity number 1052686). Through ShareGift, shareholders who have only a very small number of shares which might be considered uneconomic to sell are able to donate them to charity. Donated shares are aggregated and sold by ShareGift, the proceeds being passed on to a wide range of UK charities. Donating shares to charity gives rise neither to a gain nor loss for UK Capital Gains purposes and UK taxpayers may also be able to claim income tax relief on such gifts of shares.

ShareGift transfer forms specifically for the Company’s shareholders are available from the Company’s Registrars, Computershare Investor Services PLC and, even if the share certificate has been lost or destroyed, the gift can be completed. The service is generally free. However, there may be an indemnity charge for a lost or destroyed share certificate where the value of the shares exceeds £100. Further details about ShareGift can be obtained from its website at www.ShareGift.org or at The Orr

Mackintosh Foundation, 46 Grosvenor Street, London W1K 3HN (telephone: +44 (0) 20 7337 0501).

The Unclaimed Assets Register
The Company participates in the Unclaimed Assets Register, which provides a search facility for financial assets which may have been forgotten and which donates a proportion of its public search fees to a group of three UK charities (Age Concern, NSPCC and Scope). For further information, contact The Unclaimed Assets Register, Leconfield House, Curzon Street, London W1J 5JA (telephone: +44 (0) 870 241 1713), or visit its website at www.uar.co.uk

Share Price History
Upon flotation of the Company on 11 October 1988, the ordinary shares were valued at 170p each. On 16 September 1991, when the Company was finally demerged, for UK taxpayers the base cost of Racal Electronics Plc shares was apportioned between the Company and Racal Electronics Plc for Capital Gains Tax purposes in the ratio of 80.036% and 19.964% respectively. Opening share prices on 16 September 1991 were 332p for each Vodafone share and 223p for each Racal share.

On 21 July 1994, the Company effected a bonus issue of two new shares for every one then held and on 30 September 1999 it effected a bonus issue of four new shares for every one held at that date. The flotation and demerger share prices, therefore, may be restated as 11.333p and 22.133p, respectively.

The share price at 31 March 2004 was 128.75 pence (31 March 2003: 113.0 pence). The share price on 24 May 2004 was 135.50 pence.

The following tables set out, for the periods indicated, (i) the reported high and low middle market quotations of ordinary shares on the London Stock Exchange, (ii) the reported high and low sales prices of ordinary shares on the Frankfurt Stock Exchange, and (iii) the reported high and low sales prices of ADSs on the NYSE.

The Company’s ordinary shares were traded on the Frankfurt Stock Exchange from 3 April 2000 until 23 March 2004 and, therefore, information has not been provided for periods outside these dates.

Five year data on an annual basis

	London Stock Exchange Pounds per ordinary share		Frankfurt Stock Exchange Euros per ordinary share		NYSE Dollars per ADS
Financial Year	High	Low	High	Low	High	Low
1999/2000	3.99	2.13	–	–	63.06	34.11
2000/2001	3.56	1.82	5.82	2.87	56.63	26.01
2001/2002	2.29	1.24	3.70	2.00	33.26	17.88
2002/2003	1.31	0.81	2.15	1.26	20.30	12.76
2003/2004	1.50	1.12	2.22	1.59	27.88	18.10

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Additional Shareholder Information continued

Two year data on a quarterly basis

	London Stock		Frankfurt Stock
	Exchange		Exchange		NYSE
	Pounds per		Euros per		Dollars
	ordinary share		ordinary share		per ADS
Financial Year	High	Low	High	Low	High	Low
2002/2003
First Quarter	1.31	0.87	2.15	1.34	18.80	13.13
Second Quarter	1.10	0.81	1.73	1.26	16.87	12.76
Third Quarter	1.27	0.84	2.00	1.36	20.19	13.35
Fourth Quarter	1.26	1.01	1.90	1.50	20.30	16.80
2003/2004
First Quarter	1.35	1.13	1.93	1.61	22.16	18.28
Second Quarter	1.28	1.12	1.86	1.59	21.14	18.10
Third Quarter	1.40	1.20	2.03	1.70	25.15	20.26
Fourth Quarter	1.50	1.24	2.22	1.88	27.88	22.81
2004/2005
First Quarter(1)	1.42	1.29	–	–	25.68	23.38

Note:
(1)	covering period up to 24 May 2004.

Six month data on a monthly basis

	London Stock		Frankfurt Stock
	Exchange		Exchange		NYSE
	Pounds per		Euros per		Dollars
	ordinary share		ordinary share		per ADS
Financial Year	High	Low	High	Low	High	Low
November 2003	1.39	1.21	2.02	1.78	23.79	20.55
December 2003	1.40	1.32	2.03	1.84	25.15	23.41
January 2004	1.50	1.36	2.22	1.96	27.88	25.04
February 2004	1.43	1.28	2.12	1.92	27.02	24.25
March 2004(1)	1.38	1.24	2.11	1.88	25.86	22.81
April 2004	1.42	1.29	–	–	25.56	23.38
May 2004(2)	1.41	1.32	–	–	25.68	23.92

Note:
(1)	High and low share prices for the Frankfurt Stock Exchange only reported to 23 March 2004, the date of delisting from this exchange.
(2)	High and low share prices for May 2004 only reported until 24 May 2004.

The current authorised share capital comprises 78,000,000,000 ordinary shares of $0.10 each and 50,000 7% cumulative fixed rate shares of £1.00 each.

Markets

Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange and, in the form of ADSs, on the New York Stock Exchange. In addition, the Company’s ordinary shares were listed on the Frankfurt Stock Exchange until 23 March 2004.

ADSs, each representing ten ordinary shares, are traded on the New York Stock Exchange under the symbol ‘VOD’. The ADSs are evidenced by ADRs issued by The Bank of New York, as Depositary, under a Deposit Agreement, dated as of 12 October 1988, as amended and restated as of 26 December 1989, as further amended and restated as of 16 September 1991 and as further amended and restated as of 30 June 1999, between the Company, the Depositary and the holders from time to time of ADRs issued thereunder.

ADS holders are not members of the Company but may instruct The Bank of New York on the exercise of voting rights relative to the number of ordinary shares represented by their ADRs. See “Memorandum and Articles of Association and Applicable English Law – Rights attaching to the Company’s shares – Voting rights” below.

Shareholders at 31 March 2004

Number of		% of total
ordinary shares	Number of	issued
held	accounts	shares
1 – 1,000	461,540	0.21
1,001 – 5,000	117,560	0.37
5,001 – 50,000	34,072	0.67
50,001 – 100,000	1,863	0.19
100,001 – 500,000	1,746	0.58
More than 500,000	2,432	97.98
	619,213	100.00

Geographical analysis of shareholders
At 31 March 2004, approximately 53.25% of the Company’s shares were held in the UK, 28.37% in North America, 14.89% in Europe (excluding the UK) and 3.49% in the Rest of the World.

Memorandum and Articles of Association and Applicable English law

The following description summarises certain provisions of the Company’s Memorandum and Articles of Association and applicable English law. This summary is qualified in its entirety by reference to the Companies Act 1985 of Great Britain (the “Companies Act”), as amended, and the Company’s Memorandum and Articles of Association. Information on where shareholders can obtain copies of the Memorandum and Articles of Association is provided under “Documents on Display”.

All of the Company’s ordinary shares are fully paid. Accordingly, no further contribution of capital may be required by the Company from the holders of such shares.

The Company’s Objects
The Company is a public limited company under the laws of England and Wales. The Company is registered in England & Wales under the name Vodafone Group Public Limited Company, with the registration number 1833679. The Company’s objects are set out in the fourth clause of its Memorandum of Association and cover a wide range of activities, including to carry on the business of a holding company, to carry on business as dealers in, operators, manufacturers, repairers, designers, developers, importers and exporters of electronic, electrical, mechanical and aeronautical equipment of all types as well as to carry on all other businesses necessary to attain the Company’s objectives. The Memorandum of Association grants the Company a broad range of powers to effect its objects.

Directors
The Company’s Articles of Association provide for a board of directors, consisting of not fewer than three directors, who shall manage the business and affairs of the Company.

Under the Company’s Articles of Association, a director cannot vote in respect of any proposal in which the director, or any person connected with the director, has a material interest other than by virtue of the director’s interest in the Company’s shares or other securities. However, this restriction on voting does not apply to resolutions (a) giving the director or a third party any guarantee, security or indemnity in respect of obligations or liabilities incurred at the request of or for the benefit of the Company, (b) giving any guarantee, security or indemnity to the director or a third party in respect of obligations of the Company for which the director has assumed responsibility under an indemnity or guarantee, (c) relating to an offer of securities of the Company in which the director participates as a holder of shares or other securities or in the underwriting of such shares or securities, (d) concerning any other company in which the director

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(together with any connected person) is a shareholder or an officer or is otherwise interested, provided that the director (together with any connected person) is not interested in 1% or more of any class of the company’s equity share capital or the voting rights available to its shareholders, (e) relating to the arrangement of any employee benefit in which the director will share equally with other employees and (f) relating to any insurance that the Company purchases or renews for its directors or any group of people, including directors.

The directors are empowered to exercise all the powers of the Company to borrow money, subject to the limitation that the aggregate amount of all liabilities and obligations of the Group outstanding at any time shall not exceed an amount equal to 1.5 times the aggregate of the Group’s share capital and reserves calculated in the manner prescribed in the Articles of Association, unless sanctioned by an ordinary resolution of the Company’s shareholders.

In accordance with the Company’s Articles of Association and best practice in UK corporate governance, a third of all the directors retire at each Annual General Meeting. The specific retiring directors are those last elected or re-elected at or before the Annual General Meeting held in the third calendar year before the current year.

No person is disqualified from being a director or is required to vacate that office by reason of age. If at a general meeting a director who is 70 or more years of age is proposed for election or re-election, that director’s age must be set out in the notice of the meeting.

Directors are not required to hold any shares of the Company as a qualification to act as a director.

Finally, and in accordance with best practice in the UK for corporate governance, compensation awarded to executive directors is decided by a remuneration committee consisting exclusively of non-executive directors.

In addition, as required by The Directors’ Remuneration Report Regulations, the Board has, since 2003, prepared a report to shareholders on the directors’ remuneration which complies with the Regulations (see pages 54 to 63). The report is also subject to a shareholder vote.

Rights attaching to the Company’s shares

Dividends rights

Holders of the Company’s ordinary shares may by ordinary resolution declare dividends but may not declare dividends in excess of the amount recommended by the directors. The directors may also pay interim dividends. No dividend may be paid other than out of profits available for distribution. Dividends on ordinary shares will be announced in pounds sterling. Holders of ordinary shares with a registered address in a Euro-zone country (defined, for this purpose, as a country that has adopted the Euro as its national currency) will receive their dividends in Euro, exchanged from pounds sterling at a rate fixed by the directors in accordance with the Articles of Association. Dividends for ADS holders represented by ordinary shares held by the Depositary will be paid to the Depositary in US dollars, exchanged from pounds sterling at a rate fixed by the directors in accordance with the Articles of Association, and the Depositary will distribute them to the ADS holders.

If a dividend has not been claimed for one year after the later of the resolution passed at a general meeting declaring that dividend or the resolution of the directors providing for payment of that dividend, the directors may invest the dividend or use it in some other way for the benefit of the Company until the dividend is claimed. If the dividend remains unclaimed for 12 years after the relevant resolution either declaring that dividend or providing for payment of that dividend, it will be forfeited and belong to the Company.

Voting rights

The Company’s Articles of Association provide that voting on Substantive Resolutions (i.e. any resolution which is not a Procedural Resolution) at a general meeting shall be decided on a poll. On a poll, each shareholder who is entitled to vote and is present in person or by proxy has one vote for every share held. Procedural Resolutions (such as a resolution to adjourn a General Meeting or a resolution on the choice of Chairman of a General Meeting) shall be decided on a show of hands, where each shareholder who is present at the meeting has one vote regardless of the number of shares held, unless a poll is demanded. In addition, the Articles of Association allow persons appointed as proxies of shareholders entitled to vote at general meetings to vote on a show of hands, as well as to vote on a poll and attend and speak at general meetings. Holders of the Company’s ordinary shares do not have cumulative voting rights.

Under English law, two shareholders present in person constitute a quorum for purposes of a general meeting, unless a company’s articles of association specify otherwise. The Company’s Articles of Association do not specify otherwise, except that the shareholders do not need to be present in person, and may instead be present by proxy, to constitute a quorum.

Under English law, shareholders of a public company such as the Company are not permitted to pass resolutions by written consent.

Record holders of the Company’s ADSs are entitled to attend, speak and vote on a poll or a show of hands at any general meeting of the Company’s shareholders by the Depositary’s appointment of them as corporate representatives with respect to the underlying ordinary shares represented by their ADSs. Alternatively, holders of ADSs are entitled to vote by supplying their voting instructions to the Depositary or its nominee, who will vote the ordinary shares underlying their ADSs in accordance with their instructions.

Liquidation rights

In the event of the liquidation of the Company, after payment of all liabilities and deductions in accordance with English law, the holders of the Company’s 7% cumulative fixed rate shares would be entitled to a sum equal to the capital paid up on such shares, together with certain dividend payments, in priority to holders of the Company’s ordinary shares. The holders of the fixed rate shares do not have any other right to share in the Company’s surplus assets.

Pre-emptive rights and new issues of shares
Under Section 80 of the Companies Act, directors are, with certain exceptions, unable to allot relevant securities without the authority of the shareholders in a general meeting. Relevant securities as defined in the Companies Act include the Company’s ordinary shares or securities convertible into the Company’s ordinary shares. In addition, Section 89 of the Companies Act imposes further restrictions on the issue of equity securities (as defined in the Companies Act, which include the Company’s ordinary shares and securities convertible into ordinary shares) which are, or are to be, paid up wholly in cash and not first offered to existing shareholders. The Company’s Articles of Association allow shareholders to authorise directors for a period up to five years to allot (a) relevant securities generally up to an amount fixed by the shareholders and (b) equity securities for cash other than in connection with a rights issue up to an amount specified by the shareholders and free of the restriction in Section 89. In accordance with institutional investor guidelines, the amount of relevant securities to be fixed by shareholders is normally restricted to one third of the existing issued ordinary share capital, and the amount of equity securities to be issued for cash other than in connection with a rights issue is restricted to 5% of the existing issued ordinary share capital.

Disclosure of interests in the Company’s shares
There are no provisions in the Articles whereby persons acquiring, holding or disposing of a certain percentage of the Company’s shares are required to make

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Additional Shareholder Information continued

disclosure of their ownership percentage, although such requirements exist under the Companies Act.

The basic disclosure requirement under Sections 198 to 211 of the Companies Act imposes upon a person interested in the shares of the Company a statutory obligation to provide written notification to the Company, including certain details as set out in the Companies Act, where:

(a)	he acquires (or becomes aware that he has acquired) or ceases to have (or becomes aware that he has ceased to have) an interest in shares comprising any class of the Company’s issued and voting share capital; and
(b)	as a result, EITHER he obtains, or ceases to have:
	(i)	a “material interest” in 3%, or more; or
	(ii)	an aggregate interest (whether “material” or not) in 10%, or more of the Company’s voting capital; or
	(iii)	the percentage of his interest in the Company’s voting capital remains above the relevant level and changes by a whole percentage point.

A “material interest” means, broadly, any beneficial interest (including those of a spouse or a child or a step-child (under the age of 18), those of a company which is accustomed to act in accordance with the relevant person’s instructions or in which one third or more of the votes are controlled by such person and certain other interests set out in the Companies Act) other than those of an investment manager or an operator of a unit trust/recognised scheme/collective investment scheme/open-ended investment company.

Sections 204 to 206 of the Companies Act set out particular rules of disclosure where two or more parties (each a “concert party”) have entered into an agreement to acquire interests in shares of a public company, and the agreement imposes obligations/restrictions on any concert party with respect to the use, retention or disposal of the shares in the company and an acquisition of shares by a concert party pursuant to the agreement has taken place.

Under Section 212 of the Companies Act, the Company may by notice in writing require a person that the Company knows or has reasonable cause to believe is or was during the preceding three years interested in the Company’s shares to indicate whether or not that is correct and, if that person does or did hold an interest in the Company’s shares, to provide certain information as set out in the Companies Act.

Sections 324 to 329 of the Companies Act further deal with the disclosure by persons (and certain members of their families) of interests in shares or debentures of the companies of which they are directors and certain associated companies.

There are additional disclosure obligations under Rule 3 of the Substantial Acquisitions Rules where a person acquires 15% or more of the voting rights of a listed company or when an acquisition increases his holding of shares or rights over shares so as to increase his voting rights beyond that level by a whole percentage point. Notification in this case should be to the Company, the Panel on Takeovers and Mergers and the UK Listing Authority through one of its approved regulatory information services no later than 12 noon on the business day following the date of the acquisition.

The City Code on Takeovers and Mergers also contains strict disclosure requirements on all parties to a takeover with regard to dealings in the securities of an offeror or offeree company and also on their respective associates during the course of an offer period.

General meetings and notices
Annual general meetings are held at such times and place as determined by the directors of the Company. The directors may also, when they think fit, convene an extraordinary general meeting of the Company. Extraordinary general meetings may also be convened on requisition as provided by the Companies Act.

An annual general meeting and an extraordinary general meeting called for the passing of a special resolution need to be called by not less than twenty-one days’ notice in writing and all other extraordinary general meetings by not less than fourteen days’ notice in writing. The directors may determine that persons entitled to receive notices of meetings are those persons entered on the register at the close of business on a day determined by the directors but not later than twenty-one days before the date the relevant notice is sent. The notice may also specify the record date, which shall not be more than forty-eight hours before the time fixed for the meeting.

Shareholders must provide the Company with an address or (so far as the Companies Act allows) an electronic address or fax number in the United Kingdom in order to be entitled to receive notices of shareholders’ meetings and other notices and documents. In certain circumstances, the Company may give notices to shareholders by advertisement in newspapers in the United Kingdom. Holders of the Company’s ADSs are entitled to receive notices under the terms of the Deposit Agreement relating to the ADSs.

Under the Company’s Articles of Association, the annual general meeting of shareholders must be held within fifteen months of the preceding annual general meeting.

Variation of rights
If, at any time, the Company’s share capital is divided into different classes of shares, the rights attached to any class may be varied, subject to the provisions of the Companies Act, either with the consent in writing of the holders of three fourths in nominal value of the shares of that class or upon the adoption of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class.

At every such separate meeting, all of the provisions of the Articles of Association relating to proceedings at a general meeting apply, except that (a) the quorum is to be the number of persons (which must be at least two) who hold or represent by proxy not less than one-third in nominal value of the issued shares of the class or, if such quorum is not present on an adjourned meeting, one person who holds shares of the class regardless of the number of shares he holds, (b) any person present in person or by proxy may demand a poll, and (c) each shareholder will have one vote per share held in that particular class in the event a poll is taken.

Class rights are deemed not to have been varied by the creation or issue of new shares ranking equally with or subsequent to that class of shares in sharing in profits or assets of the Company or by a redemption or repurchase of the shares by the Company.

Limitations on voting and shareholding
There are no limitations imposed by English law or the Company’s Articles of Association on the right of non-residents or foreign persons to hold or vote the Company’s shares other than those limitations that would generally apply to all of the shareholders.

Documents on Display

The Company is subject to the information requirements of the US Securities and Exchange Act of 1934 applicable to foreign private issuers. In accordance with these requirements, the Company files its Annual Report on Form 20-F and other related documents with the SEC. These documents may be inspected at the SEC’s public reference rooms located at 450 Fifth Street, NW Washington, DC 20549. Information on the operation of the public reference room can be obtained in the US by calling the SEC on 1-800-SEC-0330. In addition, some of the Company’s SEC filings, including all those filed on or after 4 November 2002, are available on the SEC’s website at www.sec.gov. Shareholders can also obtain copies of the Company’s Memorandum and Articles of Association from the Company’s registered office.

Annual Report 2004  Vodafone Group Plc

133

Material Contracts
At the date of this Annual Report, the Group is not party to any contracts that are considered material to the Group’s results or operations, except for its $10.4 billion credit facilities which are discussed under “Operating and Financial Review and Prospects – Liquidity and Cash Resources”.

Exchange Controls
There are no UK government laws, decrees or regulations that restrict or affect the export or import of capital, including but not limited to, foreign exchange controls on remittance of dividends on the ordinary shares or on the conduct of the Group’s operations, except as otherwise set out under “Taxation”.

Taxation
As this is a complex area, investors should consult their own tax adviser regarding the US federal, state and local, the UK and other tax consequences of owning and disposing of shares and ADSs in their particular circumstances, and in particular whether they are eligible for the benefits of the Old Treaty and/or the New Treaty.

This section describes for a US holder (as defined below), in general terms, the principal US federal income tax and UK tax consequences of owning shares or ADSs in the Company as capital assets (for US and UK tax purposes). This section does not, however, cover the tax consequences for members of certain classes of holders subject to special rules and holders that, directly or indirectly, hold 10 per cent or more of the Company’s voting stock.

A US holder is a beneficial owner of shares or ADSs that is for US federal income tax purposes:

(i)	a citizen or resident of the United States,
(ii)	a US domestic corporation,
(iii)	an estate the income of which is subject to US federal income tax regardless of its source, or
(iv)	a trust if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorised to control all substantial decisions of the trust.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, and on the tax laws of the United Kingdom, all as currently in effect, as well as on the Double Taxation Convention between the United States and the United Kingdom entered into force in 1980 (the “Old Treaty”) and the Double Taxation Convention between the United States and the United Kingdom that entered into force in March 2003 (the “New Treaty”). These laws are subject to change, possibly on a retroactive basis.

Generally, the New Treaty is effective in respect of taxes withheld at source if an amount is paid or credited on or after 1 May 2003. Other provisions of the New Treaty, however, took effect for UK purposes for individuals on 6 April 2003 (1 April 2003 for UK companies) and took effect for US purposes on 1 January 2004. The rules of the Old Treaty remained applicable until these effective dates. However, a taxpayer may elect to have the Old Treaty apply in its entirety for a period of twelve months after the applicable effective dates of the New Treaty.

This section is further based in part upon the representations of the Depositary and assumes that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

For purposes of the Old Treaty and the New Treaty and the US-UK double taxation convention relating to estate and gift taxes (the “Estate Tax Convention”), and for US

federal income tax and UK tax purposes, a holder of ADRs evidencing ADSs will be treated as the owner of the shares in the Company represented by those ADSs. Generally, exchanges of shares for ADRs, and ADRs for shares, will not be subject to US federal income tax or to UK tax, other than stamp duty or stamp duty reserve tax (see the section on these taxes below).

Taxation of dividends
UK Taxation
Under current UK tax law, no withholding tax will be deducted from dividends paid by the Company.

A shareholder that is a company resident for UK tax purposes in the United Kingdom will not be taxable on a dividend it receives from the Company. A shareholder in the Company who is an individual resident for UK tax purposes in the United Kingdom is entitled, in calculating their liability to UK income tax, to a tax credit on cash dividends paid on shares in the Company or ADSs, and the tax credit is equal to one-ninth of the cash dividend.

Under the Old Treaty, a US holder was entitled to a tax credit from the UK Inland Revenue equal to the amount of the tax credit available to a shareholder resident in the United Kingdom (i.e. one-ninth of the dividend received) but the amount of the dividend plus the amount of the tax credit were then subject to withholding in an amount equal to the amount of the tax credit. A US holder, therefore, did not, in fact, receive any repayment from the UK Inland Revenue in respect of a dividend from the Company, although assuming the US holder was not resident in the United Kingdom for UK tax purposes, there was no further UK tax to pay in respect of that dividend.

Under the New Treaty, a US holder is not entitled to a tax credit from the UK Inland Revenue in the manner described above and dividends received by the US holder from the Company are not subject to any withholding by the United Kingdom under the New Treaty or otherwise.

US Federal Income Taxation
A US holder is subject to US federal income taxation on the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). Dividends paid to a non-corporate US holder in tax years beginning after 31 December 2002 and before 1 January 2009 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%, provided that the holder meets certain holding period requirements. Dividends paid by the Company with respect to the shares or ADSs will generally be qualified dividend income.

A US holder that is eligible and elects for the benefits of the Old Treaty may include in the gross amount of income the UK tax withheld from the dividend payment pursuant to the Old Treaty as described in “UK Taxation”. Subject to certain limitations, the UK tax withheld in accordance with the Old Treaty and effectively paid over to the UK Inland Revenue will be creditable against the US holder’s US federal income tax liability, provided the US holder is eligible for the benefits of the Old Treaty and has properly filed Internal Revenue Form 8833. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate.

Under the New Treaty, a US holder is not entitled to a UK tax credit payment, but is also not subject to a UK withholding tax. The US holder includes in gross income for US federal income tax purposes only the amount of the dividend actually received from the Company, and the receipt of a dividend does not entitle the US holder to a foreign tax credit.

In either case, dividends must be included in income when the US holder, in the case of shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US

Vodafone Group Plc  Annual Report 2004

134

Additional Shareholder Information continued

corporations. Dividends will be income from sources outside the United States and will generally be “passive income” or “financial services income”, which is treated separately from other types of income for the purposes of computing any allowable foreign tax credit.

In the case of shares, the amount of the dividend distribution to be included in income will be the US dollar value of the pound sterling payments made, determined at the spot pound sterling/US dollar rate on the date of the dividend distribution, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is to be included in income to the date the payment is converted into US dollars will be treated as ordinary income or loss. Generally, the gain or loss will be income or loss from sources within the United States for foreign tax credit limitation purposes.

Taxation of capital gains
UK taxation
A US holder may be liable for both UK and US tax in respect of a gain on the disposal of the Company’s shares or ADSs if the US holder is:

(i)	a citizen of the United States resident or ordinarily resident for UK tax purposes in the United Kingdom,
(ii)	a US domestic corporation resident in the United Kingdom by reason of being centrally managed and controlled in the United Kingdom, or
(iii)	a citizen of the United States or a corporation that carries on a trade, profession or vocation in the United Kingdom through a branch or agency or, in respect of companies for accounting periods beginning on or after1 January 2003, through a permanent establishment and that has used the shares or ADSs for the purposes of such trade, profession or vocation or has used, held or acquired the shares or ADSs for the purposes of such branch or agency or permanent establishment.

However, subject to applicable limitations and eligibility to the provisions of the Old Treaty, such persons may be entitled to a tax credit against their US federal income tax liability for the amount of UK capital gains tax or UK corporation tax on chargeable gains (as the case may be) which is paid in respect of such gain.

Under the New Treaty, capital gains on dispositions of the shares or ADSs are generally subject to tax only in the country of residence of the relevant holder as determined under both the laws of the United Kingdom and the United States and as required by the terms of the New Treaty. However, individuals who are residents of either the United Kingdom or the United States and who have been residents of the other jurisdiction (the US or the UK, as the case may be) at any time during the six years immediately preceding the relevant disposal of shares or ADSs may be subject to tax with respect to capital gains arising from the dispositions of the shares or ADSs not only in the country of which the holder is resident at the time of the disposition, but also in that other country.

US federal income taxation
A US holder that sells or otherwise disposes of the Company’s shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in the shares or ADSs. Generally, a capital gain of a non-corporate US holder that is recognised on or after 6 May 2003 and before 1 January 2009 is taxed at a maximum rate of 15%, provided the holder has a holding period of more than one year (previously the maximum rate was 20%). The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of losses is subject to limitations.

Additional tax considerations
UK inheritance tax
An individual who is domiciled in the United States (for the purposes of the Estate Tax Convention) and is not a UK national will not be subject to UK inheritance tax in respect of the Company’s shares or ADSs on the individual’s death or on a transfer of the shares or ADSs during the individual’s lifetime, provided that any applicable US federal gift or estate tax is paid, unless the shares or ADSs are part of the business property of a UK permanent establishment or pertain to a UK fixed base used for the performance of independent personal services. Where the shares or ADSs have been placed in trust by a settlor, they may be subject to UK inheritance tax unless, when the trust was created, the settlor was domiciled in the United States and was not a UK national. Where the shares or ADSs are subject to both UK inheritance tax and to US federal gift or estate tax, the Estate and Gift Tax Convention generally provides a credit against US federal tax liabilities for UK inheritance tax paid.

UK stamp duty and stamp duty reserve tax
Stamp duty will, subject to certain exceptions, be payable on any instrument transferring shares in the Company to the Custodian of the Depositary at the rate of 1.5% on the amount or value of the consideration if on sale or on the value of such shares if not on sale. Stamp duty reserve tax (SDRT), at the rate of 1.5% of the price or value of the shares, could also be payable in these circumstances, and on issue to such a person, but no SDRT will be payable if stamp duty equal to such SDRT liability is paid. In accordance with the terms of the Deposit Agreement, any tax or duty payable on deposits of shares by the Depositary or the Custodian of the Depositary will be charged to the party to whom ADSs are delivered against such deposits.

No stamp duty will be payable on any transfer of ADSs of the Company, provided that the ADSs and any separate instrument of transfer are executed and retained at all times outside the United Kingdom.

A transfer of shares in the Company in registered form will attract ad valorem stamp duty generally at the rate of 0.5% of the purchase price of the shares. There is no charge to ad valorem stamp duty on gifts. On a transfer from nominee to beneficial owner (the nominee having at all times held the shares on behalf of the transferee) under which no beneficial interest passes and which is neither a sale nor in contemplation of a sale, a fixed £5.00 stamp duty will be payable.

SDRT is generally payable on an unconditional agreement to transfer shares in the Company in registered form at 0.5% of the amount or value of the consideration for the transfer, but is repayable if, within six years of the date of the agreement, an instrument transferring the shares is executed or, if the SDRT has not been paid, the liability to pay the tax (but not necessarily interest and penalties) would be cancelled. However, an agreement to transfer the ADSs of the Company will not give rise to SDRT.

Annual Report 2004  Vodafone Group Plc

135

Contact Details

Registered Office
Vodafone House
The Connection
Newbury
Berkshire RG14 2FN
England
Telephone:	+44 (0) 1635 33251
Fax:	+44 (0) 1635 45713

Group Corporate Affairs
Tim Brown	Group Corporate Affairs Director
Telephone:	+44 (0) 1635 673310
Fax:	+44 (0) 1635 682890
Investor Relations
Melissa Stimpson
Darren Jones
Telephone:	+44 (0) 1635 673310
Media Relations
Bobby Leach
Ben Padovan
Telephone:	+44 (0) 1635 673310
Corporate Social Responsibility
Charlotte Grezo	Director of Corporate Responsibility
Telephone:	+44 (0) 1635 33251
Fax:	+44 (0) 1635 674478
E-mail:	responsibility@vodafone.com
Website:	www.vodafone.com/responsibility

Vodafone Group Plc  Annual Report 2004

136

Form 20-F Cross Reference Guide

Certain of the information in this document that is referenced in the following table is included in the Company’s Annual Report on Form 20-F for 2004 filed with the SEC (the “2004 Form 20-F”). No other information in this document is included in the 2004 Form 20-F or incorporated by reference into any filings by the Company under the US Securities Act of 1933, as amended. Please see “Documents on Display” for information on how to access the 2004 Form 20-F as filed with the SEC. The 2004 Form 20-F has not been approved or disapproved by the SEC nor has the SEC passed judgement upon the adequacy or accuracy of the 2004 Form 20-F.

Item	Form 20-F caption	Location in this document	Page
1	Identity of Directors, Senior Management and Advisers	Not applicable	–
2	Offer Statistics and Expected Timetable	Not applicable	–
3	Key Information
	3A Selected Financial Data	Financial Highlights	2
		Operating and Financial Review and Prospects – Foreign currency translation	24
	3B Capitalisation and indebtedness	Not applicable	–
	3C Reasons for the offer and use of proceeds	Not applicable	–
	3D Risk Factors	Risk Factors and Legal Proceedings – Risk Factors	21
4	Information on the Company
	4A History and Development of the Company	Business Overview – History and Development of the Company	16
	4B Business Overview	Business Overview	7
	4C Organisational Structure	Note 34 “Principal subsidiary undertakings, associated undertakings
		and investments”	111
	4D Property, Plants and Equipment	Business Overview – Licences and network infrastructure	9
		Operating and Financial Review and Prospects – Balance sheet	39
		Corporate Social Responsibility and Environmental Issues – Environmental Issues	65
5	Operating and Financial Review and Prospects
	5A Operating Results	Operating and Financial Review and Prospects – Operating Results	28
	5B Liquidity and Capital Resources	Operating and Financial Review and Prospects – Liquidity and Capital Resources	40
	5C Research and Development, Patents and Licences, etc.	Business Overview – Global Services – Research and Development	12
	5D Trend Information	Operating and Financial Review and Prospects – Trend Information and Outlook	44
	5E Off-balance sheet arrangements	Note 26 “Commitments”	101
		Note 27 “Contingent liabilities”	102
	5F Tabular disclosure of contractual obligations	Operating and Financial Review and Prospects – Liquidity and Capital Resources
		– Contractural Obligations	43
	5G Safe harbor	Cautionary Statement Regarding Forward-Looking Statements	20
6	Directors, Senior Management and Employees
	6A Directors and Senior Management	The Board of Directors and the Group Executive Committee	46
	6B Compensation	Board’ s Report to Shareholders on Directors’ Remuneration	54
	6C Board Practices	Corporate Governance	50
		Board’ s Report to Shareholders on Directors’ Remuneration	54
	6D Employees	Note 31 “Employees”	105
	6E Share Ownership	Board’ s Report to Shareholders on Directors’ Remuneration –
		Directors’ interests in the shares of the Company	60
		Note 22 “Called up share capital”	96
7	Major Shareholders and Related Party Transactions
	7A Major Shareholders	Directors’ Report – Major shareholders	49
	7B Related Party Transactions	Note 35 “Related party transactions”	113
	7C Interests of experts and counsel	Not applicable	–
8	Financial Information
	8A Consolidated Statements and Other Financial Information	Report of Independent Auditors	67
		Consolidated Financial Statements	68
		Risk Factors and Legal Proceedings – Legal Proceedings	22
		Operating and Financial Review and Prospects – Equity Dividends	39
	8B Significant Changes	Note 33 “Subsequent events”	110
9	The Offer and Listing
	9A Offer and listing details	Additional Shareholder Information – Share Price History	129
	9B Plan of distribution	Not applicable	–
	9C Markets	Additional Shareholder Information – Markets	130
	9D Selling shareholders	Not applicable	–
	9E Dilution	Not applicable	–
	9F Expenses of the issue	Not applicable	–

Annual Report 2004  Vodafone Group Plc

137

Item	Form 20-F caption	Location in this document	Page
10	Additional Information
	10A Share capital	Not applicable	–
	10B Memorandum and articles of association	Additional Information for Shareholders – Memorandum and
		Articles of Association and Applicable English law	130
	10C Material contracts	Additional Information for Shareholders – Material Contracts	133
	10D Exchange controls	Additional Information for Shareholders – Exchange Controls	133
	10E Taxation	Additional Information for Shareholders – Taxation	133
	10F Dividends and paying agents	Not applicable	–
	10G Statement by experts	Not applicable	–
	10H Documents on Display	Additional Information for Shareholders – Documents on Display	132
	10I Subsidiary information	Not applicable	–
11	Quantitative and Qualitative Disclosures About Market Risk	Operating and Financial Review and Prospects – Quantitative and
	About Market Risk	Qualitative Disclosures About Market Risk	44
12	Description of Securities Other than Equity Securities	Not applicable	–
13	Defaults, Dividend Arrearages and Delinquencies	Not applicable	–
14	Material Modifications to the Rights of Security Holders
	and Use of Proceeds	Not applicable	–
15	Controls and Procedures	Corporate Governance	50
16	16A Audit committee financial expert	Corporate Governance – Committees of the Board	51
	16B Code of Ethics	Corporate Governance – Introduction	50
	16C Principal Accountant Fees and Services	Note 5 “Operating loss”	79
	16D Exemptions from the Listing Standards for Audit Committees	Not applicable	–
	16E Purchase of Equity Securities by the Issuer and Affiliated Purchasers	Note 23 “Reserves”	98
17	Financial Statements	Not applicable	–
18	Financial Statements	Consolidated Financial Statements	68
19	Exhibits	Index to Exhibits	–

Vodafone Group Plc
Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN
England
Registered in England No. 1833679
Tel: +44 (0) 1635 33251
Fax: +44 (0) 1635 45713
www.vodafone.com
Printed in the United Kingdom

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

VODAFONE GROUP PUBLIC LIMITED COMPANY

                             (Registrant)

/s/ ARUN SARIN

Arun Sarin

Chief Executive

Date: June 9, 2004

Index to Exhibits

1.	Memorandum, as adopted on June 13, 1984 and including all amendments made on July 28, 2000, and Articles of Association, as adopted on June 30, 1999 and including all amendments made on July 25, 2001, of the Company (incorporated by reference to Exhibit 2.1 to the Company’s Amendment No. 3 to the Registration Statement on Form 8-A/A, dated December 5, 2003). (File No. 001-10086).
2.	Indenture, dated as of February 10, 2000, between the Company and Citibank, N.A. as Trustee, including forms of debt securities (incorporated by reference to Exhibit 4(a) of Amendment No. 1 to the Company’s Registration Statement on Form F-3, dated November 24, 2000). (File No. 333-10762).
4.1.	Agreement for US $5,546,666,669 364 day Revolving Credit Facility, dated June 26, 2003 and amended on August 11, 2003, among the Company, ABN Amro Bank N.V.; Banco Bilbao Vizcaya Argentaria S.A.; Bank of America, N.A.; Barclays Bank PLC; Bayerische Hypo-und Vereinsbank AG; Bayerische Landesbank, London Branch; BNP Paribas; Citibank, N.A.; Commerzbank Aktiengesellschaft, London Branch; Credit Agricole Indosuez; Deutsche Bank AG; HSBC Bank plc; HSH Nordbank AG Kiel; ING Bank, N.V.; JPMorgan Chase Bank; Lehman Brothers Bankhaus AG; Lloyds TSB Bank plc; Mizuho Corporate Bank, Ltd.; National Australia Bank Limited ABN 12 004 044 937; Sumitomo Mitsui Banking Corporation Europe Limited; The Bank of Tokyo-Mitsubishi, Ltd.; The Royal Bank of Scotland plc; UBS AG; WestLB AG; Banco Santander Central Hispano, S.A.; Banca Intesa SpA; KBC Bank NV; SANPAOLO IMI BANK IRELAND PLC; Standard Chartered Bank; TD Bank Europe Limited; and The Bank of New York with The Royal Bank of Scotland plc as Agent and US Swingline Agent.
4.2.	Agreement for US$4,853,333,331 3 year Revolving Credit Facility, dated June 26, 2003 and amended on August 11, 2003, among the Company, ABN Amro Bank N.V.; Banco Bilbao Vizcaya Argentaria S.A.; Bank of America, N.A.; Barclays Bank PLC; Bayerische Hypo-und Vereinsbank AG; Bayerische Landesbank; BNP Paribas; Citibank, N.A.; Commerzbank Aktiengesellschaft; Credit Agricole Indosuez; Deutsche Bank AG; HSBC Bank plc; ING Bank, N.V.; JPMorgan Chase Bank; Lehman Brothers Bankhaus AG; Lloyds TSB Bank plc; Mizuho Corporate Bank, Ltd.; National Australia Bank Limited ABN 12 004 044 937; Sumitomo Mitsui Banking Corporation Europe Limited; The Bank of Tokyo-Mitsubishi, Ltd.; The Royal Bank of Scotland plc; UBS AG; WestLB AG; William Street Commitment Corporation; Banco Santander Central Hispano, S.A.; Banca Intesa SpA; KBC Bank NV; SANPAOLO IMI BANK IRELAND PLC; Standard Chartered Bank; TD Bank Europe Limited; and The Bank of New York with The Royal Bank of Scotland plc as Agent and US Swingline Agent.
4.3.	Vodafone Group Long Term Incentive Plan (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.4.	Vodafone Group Short Term Incentive Plan (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.5.	Vodafone Group 1999 Long Term Stock Incentive Plan (incorporated by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.6.	Vodafone Group 1998 Company Share Option Scheme (incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.7.	Vodafone Group 1998 Executive Share Option Scheme (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.8.	Agreement for Services with Lord MacLaurin of Knebworth (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.9.	Letter of Appointment of Paul Hazen (incorporated by reference to Exhibit 4.15 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).
4.10.	Service Contract of Arun Sarin (incorporated by reference to Exhibit 4.20 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).
4.11.	Service Contract of Julian Horn-Smith (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.12.	Service Contract of Peter Bamford (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.13.	Service Contract of Vittorio Colao (incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2002).
4.14.	Service Contract of Thomas Geitner (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.15.	Service Contract of Kenneth Hydon (included in and incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).
4.16.	Letter of Appointment of Dr. Michael Boskin (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).
4.17.	Letter of Appointment of Professor Sir Alec Broers (incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003; at a meeting of the Directors of the Company held on September 16, 2003, the term of office of Professor Sir Alec Broers was extended until December 31, 2006).
4.18.	Letter of Appointment of Dr. John Buchanan (incorporated by reference to Exhibit 4.11 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).
4.19.	Letter of Appointment of Penelope Hughes (incorporated by reference to Exhibit 4.17 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003; at a meeting of the Directors of the Company held on September 16, 2003, the term of office of Penelope Hughes was extended until August 31, 2007).
4.20.	Letter of Appointment of Sir David Scholey (incorporated by reference to Exhibit 4.21 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003; at a meeting of the Directors of the Company held on September 16, 2003, the term of office of Sir David Scholey was extended until the Annual General Meeting of the Company in 2005).
4.21.	Letter of Appointment of Jürgen Schrempp.
4.22.	Letter of Appointment of Luc Vandevelde.
7.	Unaudited computation of ratio of earnings to fixed charges.
8.	The list of the Company’s subsidiaries is incorporated by reference to note 34 to the Consolidated Financial Statements included in the Annual Report.
12.	Rule 13a – 14(a) Certifications.
13.	Rule 13a – 14(b) Certifications.
15.	Consent of Deloitte & Touche LLP.

EX-4

Prepared and filed by St Ives Burrups







 

EX-4

Exhibit 4.2

CONFORMED COPY

3 YEAR FACILITY AGREEMENT

Dated 26th June, 2003
As amended by a Supplemental Agreement dated 11^th August, 2003

U.S.$4,853,333,331

REVOLVING CREDIT FACILITY

for

VODAFONE GROUP PLC

ALLEN & OVERY
London
BK:1054971.16

INDEX

Clause		Page
1.	Interpretation	1
2.	The Facilities	22
3.	Purpose	25
4.	Conditions Precedent	25
5.	Advances	26
6.	Repayment	28
7.	Prepayment and Cancellation	29
8.	Interest	31
9.	Payments	34
10.	Taxes	36
11.	Market Disruption	40
12.	Increased Costs	41
13.	Illegality and Mitigation	42
14.	Guarantee	43
15.	Representations and Warranties	46
16.	Undertakings	49
17.	Financial Covenant	53
18.	Default	57
19.	The Agents and The Arrangers	60
20.	Fees	65
21.	Expenses	66
22.	Stamp Duties	66
23.	Indemnities	67
24.	Evidence and Calculations	68
25.	Amendments and Waivers	68
26.	Changes to The Parties	70
27.	Disclosure of Information	75
28.	Set-off	75
29.	Pro Rata Sharing	75
30.	Severability	76
31.	Counterparts	77
32.	Notices	77
33.	Language	78
34.	Jurisdiction	78
35.	Governing Law	79

Schedule		Page
1.	Part I – Lenders and Commitments	80
	Part II – Swingline Lenders and Swingline Commitments	82
	Part III – Mandated Lead Arrangers	83
	Part IV – Co-Arrangers	84
2.	Conditions Precedent Documents	85
	Part I – To be Delivered before the First Advance	85
	Part II – To be Delivered by an Additional Guarantor	86
	Part III – To be Delivered by an Additional Borrower	88
3.	Mandatory Cost Formulae	89
4.	Form of Request	92
5.	Forms of Accession Documents	93
	Part I – Novation Certificate	93
	Part II – Guarantor Accession Agreement	95
	Part III – Borrower Accession Agreement	96
	Part IV – Lender Accession Agreement	97
6.	Form of Confidentiality Undertaking from New Lender	98
7.	Form of Additional Lender's Fee Letter	101
8.	Fixed Rate Bonds	103
Signatories		104

THIS AGREEMENT is dated 26th June, 2003, as amended by a Supplemental Agreement dated 11^th August, 2003, and made BETWEEN:

(1) VODAFONE GROUP PLC (Registered number 1833679) as borrower (“Vodafone”);

(2) THE FINANCIAL INSTITUTIONS listed in Part III of Schedule 1 as Mandated Lead Arrangers;

(3) THE FINANCIAL INSTITUTIONS listed in Part IV of Schedule 1 as Co-Arrangers;

(4) THE FINANCIAL INSTITUTIONS listed in Part I of Schedule 1 as Lenders;

(5) THE ROYAL BANK OF SCOTLAND PLC as agent (in this capacity the “Agent”); and

(6) THE ROYAL BANK OF SCOTLAND PLC (NEW YORK BRANCH) as U.S. swingline agent (in this capacity the “U.S. Swingline Agent”).

IT IS AGREED as follows:

1. INTERPRETATION

1.1     Definitions

In this Agreement:

“Acquisition”

means the acquisition of any interest in the share capital (or equivalent) or in the business or undertaking of any company or other person (including, without limitation, any partnership or joint venture).

“Additional Borrower”

means any member of the Restricted Group which becomes an additional borrower pursuant to Clause 26.6 (Additional Borrowers) and which has not been released as a borrower in accordance with Clause 26.7 (Removal of Borrowers).

“Additional Guarantor”

means any member of the Group if such member of the Group at such time has become a Guarantor in accordance with Clause 26.5 (Additional Guarantors) and has not been released in accordance with Clause 14.9 (Removal of Guarantors).

“Additional Lender”

means a financial institution or other entity which becomes an additional lender pursuant to Clause 2.7 (Additional Lenders) or a transferee, successor or permitted assignee of such financial institution or other entity which is for the time being participating in the Facility.

“Advance”

means a Revolving Credit Advance or a Swingline Advance.

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“Affiliate”

means, in relation to a person, a Subsidiary or a Holding Company of that person and any other Subsidiary of that Holding Company.

“Agent’s Spot Rate of Exchange”

means the spot rate of exchange as determined by the Agent for the purchase of the relevant Optional Currency in the London foreign exchange market with U.S. Dollars at or about 11.00 a.m. on a particular day.

“Agreed Percentage”

means in relation to a Lender and a Swingline Advance, the amount of its Revolving Credit Commitment expressed as a percentage of the Total Commitments.

“AirTouch”

means Vodafone Americas Inc. (previously AirTouch Communications, Inc.).

“AirTouch Group”

means AirTouch and its Subsidiaries (and “member of the AirTouch Group” means any of them).

“Anniversary”

means an anniversary of the Signing Date.

“Arranger”

means a financial institution or other entity listed in Part III or Part IV of Schedule 1.

“Asset Disposal”

means any sale, transfer, grant, lease or other disposal of an asset (including, but not limited to, a disposal of any interest in any Subsidiary or Affiliate) by any member of the Group to a person outside the Group made after the Signing Date.

“Availability Period”

means the period from the Signing Date up to and including the Final Maturity Date.

“Back to Back Loan”

means any Financial Indebtedness made available to a member of the Restricted Group to the extent that the economic exposure of the creditor in respect of that Financial Indebtedness (taking any related transactions together) is reduced by reason of that creditor:

(a) having recourse directly or indirectly to a deposit of cash or cash equivalent investments beneficially owned by any member of the Restricted Group placed, as part of a related transaction, with that creditor (or an Affiliate of that creditor) or a financial institution approved by that creditor; or

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(b) having granted a funded sub-participation or similar arrangement to a member of the Restricted Group.

“Borrower”

means Vodafone or an Additional Borrower.

“Borrower Accession Agreement”

means an agreement substantially in the form of Part III of Schedule 5 or with such amendments as the Agent may approve (such approval not to be unreasonably withheld or delayed) or may reasonably require.

“Business Day”

means a day (other than a Saturday or Sunday) on which banks and the interbank and foreign exchange markets are open for general business in:

(a) London;

(b)      if a payment is required in U.S. Dollars, New York; and

(c)      if a payment is required in euro, a TARGET Day.

“Combined Commitments”

means the aggregate of the Total Commitments under this Agreement and the Total Commitments under and as defined in the 364 Day Facility.

“Combined Swingline Commitments”

means the aggregate of the Swingline Total Commitments under this Agreement and the Swingline Total Commitments under and as defined in the 364 Day Facility.

“Commitment”

means a Revolving Credit Commitment or a Swingline Commitment, in each case to the extent not transferred, cancelled or reduced under or in accordance with this Agreement.

“Consolidated Group”

means Vodafone (or, following the Hive Up, NewTopco) and its Subsidiaries which would be required to be consolidated in the consolidated accounts of Vodafone (or, following the Hive Up, NewTopco) in accordance with Applicable GAAP (as defined in Clause 17 (Financial Covenant)).

“Consolidated Subsidiaries”

means those Subsidiaries of Vodafone (or, following the Hive Up, NewTopco) which would be required to be consolidated in the consolidated accounts of Vodafone (or, following the Hive Up, NewTopco) in accordance with Applicable GAAP(as defined in Clause 17 (Financial Covenant)).

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“Controlled Group”

means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any U.S. Obligor, are treated as a single employer under Section 414(b) or (c) of the U.S. Code.

“Core Jurisdictions”

are member states of the European Union as at 31^st May 2003 (being Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the UK), Japan, United States, Australia, New Zealand, Canada and Switzerland and any other states which become members of the European Union after 31^st May 2003 provided that Vodafone agrees, in writing to the Agent to their inclusion herein.

“Default”

means (a) an Event of Default or (b) an event which, with the expiry of any grace period or giving of any notice specified in Clause 18.2 (Non-payment), 18.3 (Breach of other obligations), 18.5 (Cross default), 18.6 (Winding up), 18.8 (Enforcement proceedings) or 18.10 (Similar proceedings) would constitute an Event of Default.

“Drawdown Date”

means the date for the making of an Advance.

“ERISA”

means the U.S. Employee Retirement Income Security Act of 1974, as amended (or any successor legislation thereto), and any rule or regulation issued thereunder from time to time in effect.

“EURIBOR”

means in relation to any Advance or unpaid sum in euro:

(a) the percentage rate per annum of the offered quotation for deposits in euro determined by the Banking Federation of the European Union for a period equal or comparable to the required period which appears on Telerate Page 248 at or about 11.00 a.m. Brussels time on the applicable Rate Fixing Day; or

(b) if the rate cannot be determined under paragraph (a) above, the rate expressed as a percentage to be the arithmetic mean (rounded upwards, if necessary, to the nearest five decimal places) of the respective rates notified to the Agent by each of the Reference Banks (provided at least two Reference Banks are quoting) as the rate at which it is offered deposits in euro and for the required period by prime banks in the European interbank market at or about 11.00 a.m. Brussels time on the Rate Fixing Day for such period,

and for the purposes of this definition:

(i) “required period” means the Term of such Advance or the period in respect of which EURIBOR falls to be determined in relation to any unpaid sum; and

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(ii) “Telerate Page 248” means the display designated as Page 248 on the Telerate Service (or such other pages as may replace Page 248 on that service or such other service as may be nominated by the Banking Federation of the European Union (including the Reuter’s Screen) as the information vendor for the purposes of displaying the Banking Federation of the European Union rates for deposits in euro).

“Event of Default”

means an event specified as such in Clause 18 (Default).

“Facility”

means either of the facilities to draw Revolving Credit Advances, or Swingline Advances referred to in Clause 2.1 (Facilities).

“Facility Office”

means the office(s) notified by a Lender to the Agent:

(a) on or before the date it becomes a Lender; or

(b) by not less than five Business Days' notice,

as the office(s) through which it will perform all or any of its obligations under this Agreement.

“Federal Funds Rate”

means, on any day:

(a) the rate per annum determined by the U.S. Swingline Agent to be the Federal Funds Rate (as published by the Federal Reserve Bank of New York) at or about 1.00 p.m. (New York City time) on that day; or

(b) if such rate is not published at such time, the rate for such day will be the arithmetic mean as determined by the U.S. Swingline Agent of the rates for the last transaction in overnight Federal funds arranged prior to noon (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the U.S. Swingline Agent.

“Fee Letters”

means each letter:

(a) dated on or about the date of this Agreement between the Agent and Vodafone; and

(b) dated on or about the date of this Agreement between the Original Lenders as at the Signing Date and Vodafone; and

(c) (if applicable) entered into between an Additional Lender and Vodafone substantially in the form of Schedule 7,

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in each case setting out the amount of various fees referred to in Clause 20.2 (Agent’s fee) or 20.3 (Front-end fees).

“Final Maturity Date”

means the third Anniversary of the Signing Date.

“Finance Document”

means this Agreement, each Fee Letter, Novation Certificate, Borrower Accession Agreement and Guarantor Accession Agreement and any other document agreed in writing as such by the Agent and Vodafone.

“Finance Party”

means an Arranger, a Lender, the Agent or the U.S. Swingline Agent.

“Financial Indebtedness”

means any indebtedness in respect of:

(a) moneys borrowed or raised by way of loan or redeemable preference shares or in the form of any debenture, bond, note, loan stock, commercial paper or similar instrument;

(b) any acceptance credit, bill-discounting, note purchase or documentary credit facility;

(c) any finance lease;

(d) any receivables purchase, factoring or discounting arrangement under which there is recourse in whole or in part to any member of the Group;

(e)      any other transaction having the commercial effect of a borrowing; and

(f) any guarantees or other legally binding assurance against financial loss in respect of the indebtedness of any person arising under an obligation falling within (a) to (e) above (but, for the avoidance of doubt, excluding any guarantees in respect of indebtedness falling within (i) to (v) below),

but without double counting and excluding (i) preference shares which are not redeemable on or before the Final Maturity Date, (ii) any convertible or exchangeable debt which must or, at the option of the issuer, may be converted or exchanged without condition (other than the availability of sufficient authorised share capital of the issuer), prior to or upon the date any amount of principal would otherwise fall due in respect of that debt, into equity share capital or preference shares, which in each case are not redeemable on or before the Final Maturity Date, (iii) deferred consideration in respect of the cost of Acquisitions, (iv) obligations of any member of the Group arising under any form of exchangeable, convertible, option or other similar instrument issued by that member of the Group in connection with a transaction the commercial effect of which is to effect the disposal by that member of the Group of shares or partnership or other ownership interests in any other person or entity (whether or not having a separate legal identity), provided that any such instrument may not, on or prior to the Final Maturity Date, be converted (whether by acceleration, maturity or otherwise) into cash or any other instrument constituting or evidencing Financial Indebtedness and (v) for the avoidance

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of doubt, derivatives primarily entered into to manage currency, credit or interest rate risks or to assist in purchasing shares in any member of the Group or Associated Company as defined in Clause 17.1 (Financial definitions) or investment of the Group.

“Fitch”

means Fitch Investors Services Inc.

“Group”

means Vodafone and its Consolidated Subsidiaries or, following a Hive Up, NewTopco and its Consolidated Subsidiaries (and “member of the Group” means any of them).

“Guarantor”

means each of:

(a) Vodafone; and

(b) each Additional Guarantor.

“Guarantor Accession Agreement”

means a deed substantially in the form of Part II of Schedule 5 or with such amendments as the Agent may approve (such approval not to be unreasonably withheld or delayed) or may reasonably require.

“Hive Up”

means a reorganisation of the Group by way of a scheme of arrangement (other than in an insolvency) or otherwise under which Vodafone becomes a Subsidiary of NewTopco, NewTopco controls (directly or indirectly) all of the voting rights in Vodafone (other than any voting rights in Vodafone held by holders of a class of capital issued by Vodafone, where such voting rights relate only to any variation in the rights attaching to that class of capital issued by Vodafone) and NewTopco becomes the listed ultimate Holding Company of the Group.

“Holding Company”

means in relation to a person, an entity of which that person is a Subsidiary.

“Intermediate Holding Company”

means in relation to Vodafone, an entity (other than NewTopco) which is a subsidiary of NewTopCo and of which Vodafone is a Subsidiary.

“Japan Telecom”

means Japan Telecom Holdings Co., Ltd. ( formerly known as Japan Telecom Co., Ltd.) 7-1 Hatcho-bori 4-chome, Chuo-ku, Tokyo which at the Signing Date owns 45.081% of J Phone Co., Ltd.

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“Lender”

means each Original Lender and each Additional Lender (if any).

“Lender Accession Agreement”

means an agreement substantially in the same form of Part IV of Schedule 5 or with such amendments as the Agent may approve or may reasonably require.

“LIBOR”

means in relation to any Advance or unpaid sum in Sterling or U.S. Dollars:

(a) the percentage rate per annum of the offered quotation for deposits in the currency of the relevant Advance or unpaid sum for a period equal or comparable to the required period which appears on Telerate Page 3750 at or about 11.00 a.m. on the applicable Rate Fixing Day; or

(b) if the rate cannot be determined under paragraph (a) above, the rate expressed as a percentage determined by the Agent to be the arithmetic mean (rounded upwards, if necessary, to the nearest five decimal places) of the respective rates notified to the Agent by each of the Reference Banks quoting (provided that at least two Reference Banks are quoting) as the rate at which it is offered deposits in the required currency and for the required period by prime banks in the London interbank market at or about 11.00 a.m. on the Rate Fixing Day for such period,

and for the purposes of this definition:

(i) “required period” means the Term of such Advance or the period in respect of which LIBOR falls to be determined in relation to any unpaid sum; and

(ii) “Telerate Page 3750” means the display designated as Page 3750 on the Telerate Service (or such other pages as may replace page 3750 on that service or such other service as may be nominated by the British Bankers' Association (including the Reuters Screen) as the information vendor for the purposes of displaying British Bankers' Association Interest Settlement Rates for deposits in the currency concerned).

“Majority Lenders”

means, at any time:

(a) Lenders whose Commitments aggregate more than 60 per cent. of the Total Commitments; or

(b) if the Total Commitments have been reduced to zero, Lenders whose Commitments aggregated more than 60 per cent. of the Total Commitments immediately before the reduction.

“Mandatory Cost”

means in relation to an Advance (other than a Swingline Advance), the percentage rate per annum calculated by the Agent in accordance with Schedule 3.

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“Mannesmann Group”

means Vodafone Holding GmbH (previously Mannesmann AG) and its Subsidiaries (and “member of the Mannesmann Group” means any of them).

“Margin”

in relation to an Advance at any time, means the percentage rate per annum determined to be the Margin applicable to that Advance in accordance with Clause 8.5 (Margin).

“Maturity Date”

means the last day of the Term of an Advance.

“Moody’s”

means Moody’s Investors' Service, Inc.

“Multiemployer Plan”

means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which any U.S. Obligor or any member of the Controlled Group has an obligation to contribute.

“NewTopco”

means a company used for the purposes of a Hive Up.

“New York Business Day”

means a day (other than a Saturday or Sunday) on which banks are open for business in New York.

“Novation Certificate”

has the meaning given to it in Clause 26.4(a)(i) (Procedure for novations).

“Obligor”

means each Borrower and each Guarantor.

“Operating Cash Flow”

means, without double counting, total operating profit or loss for continuing operations before taxation, interest and after (i) adding depreciation, (ii) adding amortisation, (iii) deducting the profit or adding the loss on exceptional items which are included in the foregoing, (iv) deducting any gain or adding any loss on disposal of tangible or intangible fixed assets, (v) adjusting for movements in working capital (being movements in stock, creditors, provisions and debtors) and (vi) excluding exceptional items.

“Optional Currency”

means, in relation to any Advance or proposed Advance, Sterling or euro.

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“Original Dollar Amount”

means:

(a) the principal amount of an Advance denominated in U.S. Dollars; or

(b) the principal amount of an Advance denominated in any other currency, translated into U.S. Dollars on the basis of the Agent's Spot Rate of Exchange on the date of receipt by the Agent of the Request for that Advance.

“Original Group Accounts”

means the audited consolidated accounts of the Group for the year ended 31st March, 2003.

“Original Lender”

means a financial institution or other entity listed in Part I or Part II of Schedule 1 or a transferee, successor or permitted assignee of such financial institution or other entity which is for the time being participating in the Facility.

“Participating Member State”

means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

“Party”

means a party to this Agreement.

“PBGC”

means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor.

“Permitted Security Interest”

means:

(a) any Security Interest arising out of retention of title provisions or created or subsisting over documents of title, insurance policies (including any export credit agencies' agreements) and sale contracts in relation to commercial goods in each case created or made in the ordinary course of business to secure the purchase price of such goods or loans to finance such purchase price; or

(b) any Security Interest over any assets acquired by a member of the Restricted Group after 31 May, 2003 (and/or over the assets of any person that becomes a member of the Restricted Group after 31 May, 2003) provided that:

(i) any such Security Interest is in existence before such acquisition or before such person becomes a member of the Restricted Group and is not created in contemplation of such acquisition or such person becoming a member of the Restricted Group; and

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(ii) to the extent that the aggregate principal amount secured by such Security Interest upon such acquisition or such person becoming a member of the Restricted Group thereafter exceeds (measured in the same currency) the amount available to be drawn (assuming all drawdown conditions will be met) under the relevant commitment existing at the time of such acquisition or such person becoming a member of the Restricted Group, such Security Interest shall not fall within this paragraph (b); or

(c) any Security Interest created for the purpose of securing obligations of Vodafone or any member of the Restricted Group under any agreement (including, without limitation, any agreement under Section 106 of the Town and Country Planning Act 1990 or Section 111 of the Local Government Act 1972) entered into with a local or other public authority and related to the development or maintenance of property owned by Vodafone or any member of the Restricted Group; or

(d) any Security Interest created on or subsisting over any asset held in Clearstream Banking, société anonyme or the Euro-Clear System, or any other securities depository or any clearing house pursuant to the standard terms and procedures of the relevant clearing house applicable in the normal course of trading; or

(e) any Security Interest which arises in connection with any cash management, set-off or netting arrangements made between banks or financial institutions and any member(s) of the Restricted Group in the ordinary course of business; or

(f) any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as pre-judgement security for costs or expenses where any member of the Restricted Group is prosecuting or defending such action in the bona fide interest of the Group; or

(g) any Security Interest created pursuant to any order of attachment, distraint, garnishee order, arrestment, adjudication or injunction or interdict restraining disposal of assets or similar legal process arising in connection with pre-judgement court proceedings; or

(h) any Security Interest which arises by operation of law in the ordinary course of trading and securing an amount not more than 45 days overdue or which is being contested in good faith on the basis of favourable legal advice; or

(i) any Security Interest over shares in entities which are not members of the Restricted Group which do not secure Financial Indebtedness of the Restricted Group (or over shares and/or other ownership interests in and/or loans to entities which are Project Finance Subsidiaries to secure Project Finance Indebtedness); or

(j) to the extent they constitute Security Interests (or to the extent that the relevant transaction includes the creation of any Security Interest over the assets which are the subject of the finance lease), finance leases in respect of existing or future assets as contemplated by paragraph (f) of Clause 16.8 (Priority borrowing); or

(k) any Security Interest comprising a right of set-off which arises by operation of law or by agreement having substantially the same effect; or

(l) any Security Interest for taxes, assessments or charges not yet due or that are being contested in good faith by appropriate proceedings and (unless the amount thereof is not material to the Group's consolidated financial condition) for which adequate reserves are being maintained (in accordance with generally accepted accounting principles); or

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(m) deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance; or

(n) any Security Interest created with the prior written consent of the Majority Lenders; or

(o) any Security Interest over deposits of cash or cash equivalent investments securing (directly or indirectly) Financial Indebtedness under (i) finance or structured tax lease arrangements as described in paragraph (b) of Clause 16.8 (Priority borrowing) or (ii) Back to Back Loans; or

(p) any Security Interest securing Project Finance Indebtedness over the assets (or the income, cash flow or other proceeds deriving from the assets) which are the subject of that Project Finance Indebtedness; or

(q) any Security Interest (a “substitute Security Interest”) which replaces any other Security Interest permitted under (a) to (p) above inclusive and which secures an amount not exceeding the principal amount secured by such permitted Security Interest (or, in the case of paragraph (b) above, the amount available to be drawn, assuming all drawdown conditions will be met) at the time it is replaced together with any interest accruing on such amounts from the date such substitute Security Interest is created or arises and any related fees or expenses provided that the existing Security Interest to be replaced is released and all amounts secured thereby are paid or otherwise discharged in full at or prior to the time of such substitute Security Interest being created or arising; or

(r) any Security Interest over the shares or other interests as described in paragraph (iv) of the last paragraph of the definition of Financial Indebtedness securing indebtedness of a kind referred to in that paragraph; or

(s) any Security Interest created (i) between Obligors (including by an Obligor to a member of the Restricted Group which concurrently becomes an Obligor) or (ii) by a member of the Restricted Group which is not an Obligor in favour of an Obligor or to another member of the Restricted Group; or

(t) any Security Interest over Available Cash created in the ordinary course of business to secure obligations, liabilities or performance criteria in relation to any mobile telecommunications licence where such Security Interest is required to be in compliance with the requirements of the relevant telecommunications regulator or an associated governmental or regulatory body; or

(u) any Security Interest over Available Cash created to defease (directly or indirectly) Financial Indebtedness in the form of debentures, bonds, notes, loan stock, or other similar instruments issued by a Consolidated Subsidiary where (A) such Financial Indebtedness was either in existence at the Signing Date or (B) if the Subsidiary became a Consolidated Subsidiary after the Signing Date such Financial Indebtedness existed at the time that the Consolidated Subsidiary became a part of the Consolidated Group and was not created in contemplation of that Consolidated Subsidiary becoming part of the Consolidated Group; or

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(v) any other Security Interest (in addition to those listed in (a) to (u) above) where the aggregate principal amount secured by all such Security Interests does not exceed £1,500,000,000 or its equivalent.

“Plan”

means an "employee benefit plan" as defined in Section 3(3) of ERISA.

“Prime Rate”

means the prime commercial lending rate for U.S. Dollars from time to time announced by the U.S. Swingline Agent. Each change in the interest rate on a Swingline Advance which results from a change in the Prime Rate becomes effective on the day on which the change in the Prime Rate becomes effective.

“Principal Subsidiary”

means, from the date that each notice is given by Vodafone to the Agent pursuant to Clause 16.2(c) or, as the case may be, 16.2(d) the four Consolidated Subsidiaries which are members of the Restricted Group whose revenues are primarily generated by operations licensed by telecommunications authorities in Core Jurisdictions (excluding for this purpose any Subsidiaries whose principal activity is to act as a Holding Company of other Subsidiaries) that had the largest, if positive or smallest if negative Operating Cash Flow in the previous financial year of Vodafone or, following the Reorganisation Date, NewTopco.

Until the first notice is given by Vodafone to the Agent (in respect of the financial year ended 31 March 2004), the Principal Subsidiaries are Vodafone Limited (Registered number 1471587), Vodafone D2 GmbH, Vodafone Omnitel N.V and J Phone Co., Ltd. being Vodafone's principal subsidiaries operating in UK, Germany, Italy and Japan, respectively.

For the purposes of this definition, until such new notice is given by Vodafone to the Agent pursuant to Clause 16.2(c) or, as the case may be, 16.2(d), if any Principal Subsidiary sells, transfers, merges into or with or otherwise disposes of the majority of its undertakings or assets whether by a single transaction or a number of related transactions (unless such Principal Subsidiary is the surviving entity following such merger) (the "Seller") to any member of the Restricted Group (the "Purchaser"), then from the date of the relevant sale, transfer, merger or disposal the Purchaser shall be deemed to become a Principal Subsidiary and the Seller shall no longer be deemed to be a Principal Subsidiary.

On the date of each notice given by Vodafone (or as the case may be, NewTopco) to the Agent pursuant to Clause 16.2(c) or, as the case may be, 16.2(d), any Subsidiary which is identified as a Principal Subsidiary in the relevant notice, which was not identified as such in the immediately preceding notice, shall be deemed to immediately replace any Subsidiary which was a Principal Subsidiary immediately prior to the delivery of the notice and which is not named in such notice.

“Project Finance Indebtedness”

means any Financial Indebtedness which finances or otherwise relates to the acquisition, development, ownership and/or operation of an asset or combination of assets whether directly or indirectly, where the Financial Indebtedness is incurred pursuant to facilities

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available prior to the date the relevant entity becomes a member of the Group (and not created in contemplation of the acquisition):

(a) which is incurred by a Project Finance Subsidiary; or

(b) in respect of which the person or persons to whom such borrowing is or may be owed by the relevant debtor (whether or not a member of the Group) has or have no recourse whatsoever to any member of the Group (other than to a Project Finance Subsidiary) for any payment or repayment in respect thereof other than:

(i) recourse to such debtor for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from such asset or assets; and/or

(ii) recourse to such debtor for the purpose only of enabling amounts to be claimed in respect of such Financial Indebtedness in an enforcement of any Security Interest given by such debtor over such asset or assets or the income, cash flow or other proceeds deriving from the asset (or given by any shareholder or the like in the debtor over its shares and/or other ownership interest in and/or loans to the debtor) to secure such Financial Indebtedness or any recourse referred to in paragraph (iii) below, provided that:

(A) the extent of such recourse to such debtor is limited solely to the amount of any recoveries made on any such enforcement; and

(B) such person or persons are not entitled, by virtue of any right or claim arising out of or in connection with such Financial Indebtedness, to commence proceedings for the winding up or dissolution of the debtor or to appoint or procure the appointment of any receiver, trustee or similar person or officer in respect of the debtor or any of its assets (save only for the assets the subject of that Security Interest); and/or

(iii) recourse:

(A) to such debtor generally, or directly or indirectly to a member of the Group, under any form of assurance, undertaking or support which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specific way) for breach of an obligation (not being a payment obligation or any obligation to procure payment by another or an indemnity in respect thereof or any obligation to comply or procure compliance by another with any financial ratios or other tests of financial condition) by the person against whom such recourse is available; and/or

(B) to shares and/or other ownership interest in and/or loans to and/or the assets of such debtor and/or any Project Finance Subsidiary owned by a member of the Group; or

(c) which the Majority Lenders have agreed in writing to treat as Project Finance Indebtedness.

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“Project Finance Subsidiary”

means any member of the Group which becomes a member of the Group after the Signing Date:

(a) whose principal assets and business are constituted by the ownership, acquisition, development and/or operation of any asset or combination of assets whether directly or indirectly;

(b) none of whose Financial Indebtedness in respect of the financing of the ownership, acquisition, development and/or operation of any such asset benefits from any recourse whatsoever (including, without limitation, any obligation to subscribe for equity or provide loans) to any member of the Group (other than such person or another Project Finance Subsidiary) in respect of any payment or repayment in respect thereof, except as expressly referred to in paragraph (b) (iii) of the definition of "Project Finance Indebtedness"; and

(c) which has been designated as such by Vodafone by written notice to the Agent.

“Qualifying Lender”

means a Lender which is beneficially entitled to interest payable to that Lender in respect of an Advance and is:

(a) a Lender

(i) which is a bank (as defined for the purpose of Section 349 of the Taxes Act) making an Advance under this Agreement; or

(ii) in respect of an Advance made under this Agreement by a person that was a bank (as defined for the purpose of Section 349 of the Taxes Act) at the time that that Advance was made,

and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that Advance; or

(b) a Treaty Lender.

“Rate Fixing Day”

means:

(a) the Drawdown Date for an Advance denominated in Sterling; or

(b) the second TARGET Day before the Drawdown Date for an Advance denominated in euro; or

(c) the second Business Day before the Drawdown Date for an Advance denominated in U.S. Dollars,

or such other day as the Agent, after consultation with Vodafone and the Lenders, may designate as market practice in the relevant interbank market for leading banks to give quotations in the relevant currency for delivery on the relevant Drawdown Date.

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“Reference Banks”

means, subject to Clause 26.8 (Reference Banks), the principal London offices of BNP Paribas, Barclays Bank PLC, Citibank, N.A. and The Royal Bank of Scotland Plc.

“Relevant Tax”

means any tax imposed or levied by or in (or by any political sub-division or taxing authority of any of the following):

(a) the UK;

(b) the United States; or

(c) any other jurisdiction in or through which any payment under the Finance Documents is made.

“Reportable Event”

means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the U.S. Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412 (d) of the U.S. Code.

“Reorganisation Date”

means the date NewTopco or any other Holding Company of Vodafone acquires any shares or assets (other than the shares in Vodafone acquired pursuant to the Hive Up) in circumstances where the aggregate market value of the assets of Vodafone on a consolidated basis (as determined by Vodafone (acting reasonably)) immediately following the acquisition is an amount which represents 95 per cent. or less of the aggregate market value of the assets of NewTopco on a consolidated basis (as determined by Vodafone (acting reasonably)) at that time.

“Request”

means a request made by a Borrower to utilise a Facility, substantially in the form of Schedule 4 (or in such other form as may be agreed by the Agent and Vodafone).

“Requested Amount”

means the amount requested in a Request.

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“Reserve Asset Costs”

means in relation to any Advance for any period:

(a) for any Lender lending from a Facility Office in the United Kingdom, the Mandatory Cost (to the extent notified by any Lender in accordance with Clause 8.1(c) (Interest rate for all Advances) as applicable to that Advance); or

(b) for any Lender lending from a Facility Office in a Participating Member State the cost, if any, notified by any Lender to the Agent as the cost (expressed as a percentage of that Lender's participation made in all Advances made from that Facility Office) to it of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

“Restricted Group”

means Vodafone, NewTopco (following the Reorganisation Date) and any Consolidated Subsidiary (other than a Project Finance Subsidiary) of Vodafone or, following the Reorganisation Date, NewTopco:

(a) whose principal operations or assets are located in a Core Jurisdiction; and/or

(b) whose revenues are primarily generated by operations licensed by telecommunications authorities in Core Jurisdictions,

but excludes any Subsidiary whose principal business is satellite telecommunications or fixed line telecommunications.

“Revolving Credit Advance”

means an advance (other than a Swingline Advance) made to a Borrower by the Revolving Credit Lenders under the Revolving Credit Facility.

“Revolving Credit Commitment”

means:

(a) in respect of an Original Lender, the amount in U.S. Dollars set opposite the name of that Lender in Part I of Schedule 1; and

(b) in respect of an Additional Lender, the amount in U.S. Dollars set out as a Revolving Credit Commitment in the relevant Lender Accession Agreement,

in each case to the extent not transferred, cancelled or reduced under or in accordance with this Agreement.

“Revolving Credit Facility”

means the multicurrency revolving credit facility referred to in a Clause 2.1(a) (Facilities).

“Revolving Credit Lender”

means, subject to Clause 26.2 (Transfers by Lenders), a Lender listed in Part I of Schedule 1 in its capacity as a participant in the Revolving Credit Facility and/or an Additional Lender.

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“Rollover Advance”

means any Advance (other than a Swingline Advance) made during the Availability Period which is drawn down to refinance in whole or in part any outstanding Advance (other than a Swingline Advance) where, after making and applying the proceeds of that Advance, the aggregate principal amount outstanding under the Revolving Credit Facility is not greater than the aggregate amount outstanding under that Facility immediately prior to that Advance being made.

“S&P”

means Standard & Poor's Corporation.

“Security Interest”

means any mortgage, charge, assignment by way of security, pledge, lien or other security interest securing any obligation of any person.

“Signing Date”

means the date of this Agreement.

“Single Employer Plan”

means a Plan which is maintained by any U.S. Obligor or any member of the Controlled Group for employees of Vodafone or any member of the Controlled Group.

“Subsidiary”

means:

(a) a subsidiary within the meaning of Section 736 of the Companies Act 1985, as amended by Section 144 of the Companies Act 1989 as in force at the Signing Date; and

(b) unless the context otherwise requires, a subsidiary undertaking within the meaning of Section 258 of the Companies Act 1985 (as inserted by Section 21 of the Companies Act 1989) as in force at the Signing Date.

“Swingline Advance”

means an advance made to a Borrower by the Swingline Lenders under the Swingline Facility.

“Swingline Affiliate”

means, in relation to a Lender, any Swingline Lender that is an Affiliate of that Lender and which is notified to the Agent and the U.S. Swingline Agent by that Lender in writing to be its Swingline Affiliate.

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“Swingline Commitment”

means:

(a) in respect of a Swingline Lender which is an Original Lender, the amount in U.S. Dollars set opposite its name in Part II of Schedule 1; and

(b) in respect of a Swingline Lender which is an Additional Lender, the amount in US Dollars set out as a Swingline Commitment in the relevant Lender Accession Agreement,

in each case to the extent not transferred, cancelled or reduced under or in accordance with this Agreement.

“Swingline Facility”

means the committed U.S. Dollar swingline facility referred to in Clause 2.1(b) (Facilities).

“Swingline Lender”

means, subject to Clause 26.2 (Transfers by Lenders), an Original Lender listed in Part II of Schedule 1 or an Additional Lender in respect of which a Swingline Commitment is specified in the relevant Lender Accession Agreement.

“Swingline Rate”

means, on any day, the higher of:

(a) the Prime Rate; and

(b) the aggregate of the Federal Funds Rate and 0.50 per cent. per annum,

on that day.

“Swingline Total Commitments”

means the aggregate for the time being of the Swingline Commitments, being U.S.$2,100,000,000 at the date of this Agreement or as may be increased pursuant to paragraph (b) of Clause 2.7 (Additional Lenders) up to a maximum of U.S.$5,000,000,000.

“TARGET Day”

means a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) is operating.

“Tax on Overall Net Income”

in relation to a Finance Party, means any tax on the overall net income, profits or gains of that Finance Party or any of its Holding Companies (or the overall net income, profits or gains of a division or branch of that Finance Party or any of its Holding Companies).

“Taxes Act”

means the Income and Corporation Taxes Act 1988.

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“Term”

means the period selected by a Borrower in a Request for which the relevant Advance is to be outstanding.

“Term Date”

means the last day of the Availability Period or, if that day is not a Business Day, the preceding Business Day.

“Total Commitments”

means the aggregate for the time being of the Revolving Credit Commitments, being, at the date of this Agreement, U.S.$4,853,333,331 (including the Swingline Total Commitments but without double counting) or as may be increased pursuant to paragraph (b) of Clause 2.7 (Additional Lenders) up to a maximum of U.S.$10,000,000,000 (including the Swingline Total Commitments but without double counting).

“Treaty Lender”

means a Lender which is (i) resident (as such term is defined in the appropriate double taxation treaty) in a country with which the United Kingdom has an appropriate double taxation treaty under which residents of that country are entitled to complete exemption from United Kingdom tax on interest and is entitled to apply under the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 to have interest paid to its Facility Office without withholding or deduction for or on account of United Kingdom taxation; and (ii) does not carry on business in the United Kingdom through a permanent establishment with which the investments under this Agreement in respect of which the interest is paid are effectively connected; and for this purpose “double taxation treaty” means any convention or agreement between the government of the United Kingdom and any other government for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains.

“UK” or “United Kingdom”

means the United Kingdom of Great Britain and Northern Ireland (but excluding, for the avoidance of doubt, the Channel Islands).

“United States”

means the United States of America.

“U.S. Code”

means the United States Internal Revenue Code of 1986 (as amended).

“U.S. Obligor”

means any Obligor which is incorporated in the United States or any State thereof (including the District of Columbia).

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“U.S. Tax Obligor”

means any Obligor which makes a payment of interest, the receipt of which would be considered to be U.S. source income under Section 861 of the U.S. Code.

“Vodafone Holding GmbH”

means Vodafone Holding GmbH (previously Mannesmann AG) (Registered with Düsseldorf Local Court under number HR B 44880).

“364 Day Facility”

means the U.S.$5,546,666,669 multi-currency 364 day revolving credit facility dated on or about the date of this Agreement and made between the Parties to this Agreement, as such facility may be replaced or refinanced from time to time provided that the amount of such replacement facility or refinancing is not less than US$3,000,000,000 and there are at least five lenders under such facility.

1.2     Construction

(a) In this Agreement, unless the contrary intention appears, a reference to:

(i) “agreed form” means, in relation to any document, such document in a form previously agreed in writing by or on behalf of the Agent and Vodafone;

“assets” of any person includes all or any part of that person’s business, operations, undertaking, property, assets, revenues (including any right to receive revenues) and uncalled capital;

an “authorisation” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration and notarisation;

“Barclays Capital” means Barclays Capital, the investment banking division of Barclays Bank PLC;

a “finance lease” has the meaning given to it in SSAP 21 as in effect at the Signing Date;

“indebtedness” is a reference to any obligation for the payment or repayment of money, whether as principal or surety and whether present or future, actual or contingent;

a “month” is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that, if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that month;

a “regulation” includes any regulation, rule, official directive, request or guideline (in each case, whether or not having the force of law, but if not having the force of law, is generally complied with by the persons to whom it is addressed) of any governmental or supranational body, agency, department or regulatory, self-regulatory authority or organisation; and

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a reference to the currency of a country is to the lawful currency of that country for the time being, “£” and “Sterling” is a reference to the lawful currency of the United Kingdom for the time being, “U.S.$” and “U.S. Dollars” is a reference to the lawful currency of the United States for the time being and “euro” and “€” is a reference to the lawful currency of those member states of the European Communities that adopt or have adopted the euro under the legislation of the European Community for Economic and Monetary Union;

(ii) a provision of a law is a reference to that provision as amended or re-enacted;

(iii) a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement;

(iv) a person includes its successors, transferees and assigns;

(v) a Finance Document or another document is a reference to that Finance Document or that other document as novated or, with the approval of Vodafone, amended or supplemented; and

(vi) a time of day is a reference to London time.

(b) Unless the contrary intention appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(c) The index to and the headings in this Agreement are for convenience only and are to be ignored in construing this Agreement.

(d) (i) Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999;

(ii) Notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability under) or termination of that Finance Document.

2.       THE FACILITIES

2.1     Facilities

Subject to the terms of this Agreement, the Lenders grant to the Borrowers:

(a) a committed multicurrency revolving facility under which the Lenders will, when requested by a Borrower, make cash advances in U.S. Dollars or Optional Currencies to that Borrower on a revolving basis during the Availability Period; and

(b) a committed U.S. Dollar swingline advance facility (which is a sub-division of the Revolving Credit Facility) under which the Swingline Lenders will, when requested by a Borrower, make to that Borrower Swingline Advances during the Availability Period.

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2.2     Overall facility limits

(a) The Swingline Facility is not independent of the Revolving Credit Facility. The aggregate Original Dollar Amount of all outstanding Advances (including Swingline Advances) under:

(i) the Revolving Credit Facility, shall not at any time exceed the Total Commitments at that time; and

(ii) the Swingline Facility, shall not at any time exceed the Swingline Total Commitments at that time.

(b) The aggregate Original Dollar Amount of:.

(i) the participations of a Lender in Revolving Credit Advances plus that Lender’s and, if applicable, that Lender’s Swingline Affiliate’s (if any), participations in outstanding Swingline Advances shall not at any time exceed that Lender’s Revolving Credit Commitment at that time; and

(ii) the participations of a Swingline Lender in Swingline Advances shall not at any time exceed that Swingline Lender’s Swingline Commitment at that time.

(c) If, in respect of any Revolving Credit Advance, the operation of Clause 5.4 (Amount of each Lender’s participation in an Advance) would otherwise have caused a Lender (the “affected Lender”) to breach sub-paragraph (b)(i) above then:

(i) each affected Lender will participate in the relevant Revolving Credit Advance only to the extent that the Original Dollar Amount of its participation in that Revolving Credit Advance (when aggregated with the Original Dollar Amount of its and, if applicable, that Lender’s Swingline Affiliate’s (if any), participations in other outstanding Revolving Credit Advances and Swingline Advances) will not exceed its Revolving Credit Commitment; and

(ii) each other non-affected Lender’s participation in that Revolving Credit Advance will be recalculated in accordance with Clause 5.4 (Amount of each Lender’s participation in an Advance), but, for the purpose of the recalculation, the affected Lenders' Revolving Credit Commitments will be deducted from the Total Commitments and the amount of the affected Lenders' participations in that Revolving Credit Advance (if any) will be deducted from the requested amount of the Revolving Credit Advance.

2.3     Number of Requests and Advances

(a) Unless the Agent agrees otherwise, no more than one Request (other than Requests for Swingline Advances only) may be delivered on any one day but that Request may specify any number and type of Advances from the Revolving Credit Facility or the Swingline Facility or either of them.

(b) Unless the Agent agrees otherwise, no more than 10 Advances (not including Swingline Advances) may be outstanding at any one time.

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2.4     Nature of rights and obligations

(a) The obligations of a Finance Party and each Obligor under the Finance Documents are several. Failure of a Finance Party or an Obligor to carry out those obligations does not relieve any other Party of its obligations under the Finance Documents. No Finance Party or Obligor is responsible for the obligations of any other Finance Party or Obligor under the Finance Documents save and to the extent that the relevant obligations are guaranteed by another Obligor.

(b) The rights of a Finance Party under the Finance Documents are divided rights. A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights.

2.5     Vodafone as Obligors' agent

Each Obligor:

(a) irrevocably authorises and instructs Vodafone to give and receive as agent on its behalf all notices (including Requests) and sign all documents in connection with the Finance Documents on its behalf (including but not limited to amendments and variations and execution of any new Finance Documents) and take such other action as may be necessary or desirable under or in connection with the Finance Documents; and

(b) confirms that it will be bound by any action taken by Vodafone under or in connection with the Finance Documents.

2.6     Actions of Vodafone as Obligors' agent

The respective liabilities of each of the Obligors under the Finance Documents shall not be in any way affected by:

(a) any irregularity (or purported irregularity) in any act done by or any failure (or purported failure) by Vodafone; or

(b) Vodafone acting (or purporting to act) in any respect outside any authority conferred upon it by any Obligor; or

(c) the failure (or purported failure) by or inability (or purported inability) of Vodafone to inform any Obligor of receipt by it of any notification under this Agreement.

2.7     Additional Lenders

(a) Any financial institution or other entity may, subject to the terms of this Agreement, become an Additional Lender.The relevant financial institution or other entity will become an Additional Lender on the date specified in a Lender Accession Agreement which has been delivered to the Agent duly completed and executed by that financial institution or other entity and countersigned by Vodafone on behalf of itself and each other Obligor.

(b) Upon the relevant financial institution or other entity becoming an Additional Lender, the Total Commitments shall be increased (subject to the Total Commitments being a maximum of U.S.$10,000,000,000 and the Combined Commitments being a maximum of U.S.$20,000,000,000) by the amount set out in the relevant Lender Accession Agreement as

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that Additional Lender’s Revolving Credit Commitment. If such Additional Lender so provides in the relevant Lender Accession Agreement, the Swingline Total Commitments shall be increased (subject to the Swingline Total Commitments being a maximum of U.S.$5,000,000,000 and the Combined Swingline Commitments being a maximum of U.S.$10,000,000,000) by the amount set out in the relevant Lender Accession Agreement as that Additional Lender’s Swingline Commitment.

(c) Each Additional Lender will participate only in Advances with a Drawdown Date following the date on which it became an Additional Lender and only then if:

(i) it has become an Additional Lender in time to receive sufficient notice of the relevant Advance from the Agent pursuant to Clause 5.5 (Notification of the Lenders); and

(ii) immediately before such an Advance is to be made either (A) no Advances are or will be outstanding or (B) all outstanding Advances at that time are or will be immediately repaid or prepaid in full in accordance with the terms of this Agreement.

(d) On and from the Drawdown Date on which the Additional Lender makes an Advance under paragraph (c) above, the Additional Lender shall participate in each new Revolving Credit Advance or, as the case may be, Swingline Advance in accordance with Clause 5.4 (Amount of each Lender’s participation in an Advance).

(e) The execution by Vodafone of a Lender Accession Agreement constitutes confirmation by each Guarantor that its obligations under Clause 14 (Guarantee) shall continue unaffected except that those obligations shall extend to the Total Commitments as increased by the addition of the relevant Additional Lender’s Revolving Credit Commitment (including such Additional Lender’s Swingline Commitment but without double counting) and shall be owed to each Finance Party including the relevant Additional Lender.

3.       PURPOSE

3.1     Purpose

Each Advance will be applied in or towards providing support for the Group’s continuing commercial paper programmes and for general corporate purposes of the Group including, but not limited to, acquisitions (provided that a Swingline Advance may not be applied in or towards refinancing another Swingline Advance).

3.2     No monitoring

Without affecting the obligations of any Borrower in any way, no Finance Party is bound to monitor or verify the application of the proceeds of any Advance.

4.       CONDITIONS PRECEDENT

4.1     Initial conditions precedent

The obligations of each Finance Party to any Borrower under this Agreement are subject to the conditions precedent that:

(a) the Agent has notified Vodafone and the Lenders that it has received all of the documents set out in Part I of Schedule 2 in the agreed form or such other form and substance satisfactory to the Agent. The Agent will give such notice of receipt within two Business Days after receiving the relevant documents and finding them in form and substance satisfactory to it; and

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(b) the Agent confirms on or prior to the Signing Date (i) the U.S.$. 10,650,000,000 existing revolving credit facility agreement dated 27^th June 2002 and subsequently increased to US$11,025,000,000 on 26 July 2002 (the “2002 Facility”) between, among others, Vodafone Group Plc, the arrangers and lenders identified therein and The Royal Bank of Scotland plc as Agent and U.S. Swingline Agent has been cancelled or the Availability Period (as defined in the 2002 Facility) thereunder has expired and no Request pursuant to clause 6.1(b) (Repayment) of the 2002 Facility for a Term-out Advance (as such capitalised terms are defined in the 2002 Facility) has been made and (ii) all amounts outstanding under the 2002 Facility have been repaid.

4.2     Conditions to all drawdowns and rollovers

The obligations of each Lender to participate in any Advance (other than a Rollover Advance) are subject to the further conditions precedent that on the date of the Request for the Advance (if applicable) and on the date on which the relevant amount is to be drawn down:

(a) the representations and warranties in Clause 15 (Representations and warranties) are correct and will be correct immediately after the relevant Advance or amount is drawn down in each case in all material respects; and

(b) no Default has occurred and is continuing or would result from drawdown of the relevant Advance or amount provided that, for the period of 12 months commencing on the Signing Date in relation to a drawdown of any Advance, an event (other than any event specified in Clauses 16.4 (Notification of Default), 16.9 (Disposals) or 16.10 (Restrictions on Acquisitions)) which, with the expiry of any grace period or giving of any notice specified in Clause 18.3(b) (Breach of other obligations) would constitute an Event of Default under Clause 18.3(b) (Breach of other obligations), shall not, for the purposes of this Clause 4.2 (b) constitute a Default.

5.       ADVANCES

5.1     Receipt of Requests

(a) A Borrower may borrow Advances under the Revolving Credit Facility (other than Swingline Advances) if the Agent receives, not later than 5.00 p.m. on the third Business Day before the proposed Drawdown Date, or, in the case of an Advance in Sterling, not later than 5.00 p.m. on the Business Day before the proposed Drawdown Date, a duly completed Request, copied, to the U.S. Swingline Agent.

(b) A Borrower may borrow Swingline Advances if the U.S. Swingline Agent receives, not later than noon (New York City time) on the proposed Drawdown Date, a duly completed Request, copied to the Agent.

5.2 Completion of Requests for Revolving Credit Advances

A Request for a Revolving Credit Advance will not be regarded as having been duly completed unless:

(a) the Drawdown Date is a Business Day falling during the Availability Period;

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(b) only one currency is specified for each separate Advance and the Requested Amount for each separate Advance is in a minimum amount:

(i) if in euro, of €25,000,000;

(ii) if in Sterling, of £20,000,000; or

(iii) if in U.S. Dollars, of U.S.$25,000,000,

or, in any such case:

(A) if less, is in an amount equal to the unutilised portion of the Total Commitments; or

(B)     such other amount as Vodafone and the Agent may agree;

(c) only one Term for each separate Advance is specified which does not overrun the Term Date and is a period of 7 days, one month, two, three (or such comparable period as the Borrower may adopt to reflect international futures exchange settlement dates) or six months (or such other period as may be agreed by Vodafone and (if not more than six months) the Agent or (if more than six months) all of the Lenders); and

(d)      the payment instructions comply with Clause 9.1 (Place of payment).

5.3     Completion of Requests for Swingline Advances

A Request for a Swingline Advance will not be regarded as having been duly completed unless:

(a) the Drawdown Date is a New York Business Day falling during the Availability Period;

(b) it is specified that the Swingline Advance is to be made in U.S. Dollars under the Swingline Facility;

(c) the Requested Amount is a minimum of U.S.$20,000,000 or such other amount as the U.S. Swingline Agent and Vodafone may agree;

(d) only one Term is specified, which:

(i) does not overrun the Term Date; and

	(ii)	is a period not exceeding five Business Days; and
(e)	the payment instructions comply with Clause 9.1 (Place of payment).

5.4     Amount of each Lender’s participation in an Advance

The amount of a Lender’s participation in an Advance will be the proportion of the Requested Amount which:

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(a) in the case of a Revolving Credit Advance, its Revolving Credit Commitment bears to the Total Commitments; and

(b) in the case of a Swingline Advance, its Swingline Commitment bears to the Swingline Total Commitments,

in each case on the date of receipt of the relevant Request, adjusted in the case of paragraph (a) (if necessary) to reflect the operation of Clause 2.2(c) (Overall facility limits).

5.5     Notification of the Lenders

The Agent (or, in the case of Swingline Advances, the U.S. Swingline Agent) shall promptly notify each Lender (or, as the case may be, Swingline Lender) of the details of the requested Advance and the amount of its participation in such Advance.

5.6     Payment of proceeds

Subject to the terms of this Agreement, each Lender (or, as the case may be, Swingline Lender) shall make its participation in an Advance available to the Agent (or, in the case of a participation in a Swingline Advance, the U.S. Swingline Agent) for the Borrower concerned for value on the relevant Drawdown Date.

6.       REPAYMENT

6.1     Repayment of Revolving Credit Advances

Each Borrower shall repay each Revolving Credit Advance made to it in full on its Maturity Date to the Agent for the Lenders, but since the Revolving Credit Facility is available on a revolving basis during the Availability Period amounts repaid may be reborrowed subject to the terms of this Agreement.

6.2     Term Date

No Revolving Credit Advance may be outstanding after the Term Date.

6.3     Repayment of Swingline Advances

(a) Each Borrower shall repay each Swingline Advance made to it in full on its Maturity Date to the U.S. Swingline Agent for the Swingline Lenders. No Swingline Advance may be outstanding after the Term Date.

(b) Each Swingline Advance shall be repaid on its Maturity Date in accordance with paragraph (a) above. In the event and to the extent that a Swingline Advance is not so repaid, each Lender will, within four Business Days of a demand to that effect from the U.S. Swingline Agent, pay to the U.S. Swingline Agent on behalf of the Swingline Lenders (which shall be deemed to be a drawing of that Lender’s Commitment) an amount equal to its Agreed Percentage (without set-off, counterclaim, withholding or other deduction) of the principal amount outstanding of such Swingline Advance and accrued interest (including default interest) thereon to the date of actual payment by such Lender (provided that no Lender shall be obliged to exceed its Commitment as a result of any such payment). The relevant Borrower shall forthwith reimburse the Lenders (through the Agent) in full for each payment made by the Lenders under this paragraph (b). Each amount the relevant Borrower is required to reimburse to the Lenders under this paragraph (b) shall be deemed to be an overdue amount (as defined in Clause 8.3(a) (Default interest)) which fell due for payment by the relevant

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Borrower on the day on which the payment by the Lenders giving rise to the reimbursement obligation was made and shall accrue default interest under Clause 8.3 (Default interest) accordingly. The obligations of each Lender under this paragraph (b) are unconditional and shall not be affected by the occurrence or continuance of a Default.

7.       PREPAYMENT AND CANCELLATION

7.1     Automatic cancellation of Total Commitments

(a) The Revolving Credit Commitments of each Lender shall be automatically cancelled at the close of business in London on the Term Date.

(b) The Swingline Commitment of each Swingline Lender shall be automatically cancelled at the close of business in New York on the Term Date.

7.2     Voluntary cancellation

(a) Vodafone may by giving not less than one Business Day’s prior written notice to the Agent, cancel the unutilised portion of the Total Commitments in whole or in part (but, if in part, in an aggregate minimum amount of U.S.$100,000,000) in such proportions as Vodafone may designate in the notice of cancellation. Any cancellation in part shall be applied against the Revolving Credit Commitment of each Lender pro rata.

(b) Whenever part of the Total Commitments is cancelled, the Swingline Commitments will not be cancelled unless (i) the amount of the Swingline Total Commitments would exceed the Total Commitments after such cancellation or (ii) the Swingline Commitment of any Swingline Lender would exceed its Commitment after such cancellation. In any such case, the Swingline Total Commitments shall, at the same time as the cancellation of the Total Commitments takes effect, be cancelled by such amount as is necessary to ensure that after the relevant cancellation of the Total Commitments the Swingline Total Commitments do not exceed the Total Commitments and the Swingline Commitment of each Swingline Lender does not exceed its Commitment.

7.3     Voluntary prepayment

(a) Any Borrower may by giving not less than five Business Days' prior written notice to the Agent, prepay the whole or any part of the Revolving Credit Advances (but, if in part, in an aggregate minimum Original Dollar Amount, taking all prepayments made by all the Borrowers on the same day together, of U.S.$100,000,000).

(b) Any voluntary prepayment in part made under paragraph (a) above will be applied against all the Revolving Advances pro rata (or against such Revolving Credit Advances as Vodafone (or the relevant Borrower) may designate in the notice of prepayment).

7.4 Change of Control

If control of Vodafone (other than as a result of a Hive Up) or, following a Hive Up, NewTopco, passes to any person acting either individually or in concert (a “Change of Control”):

(a) Vodafone shall, promptly upon becoming aware thereof, notify the Agent which shall inform the Lenders;

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	(b)	any Lender may, if it determines that as a result of the Change of Control:
		(i)	the level of its exposure to Vodafone, NewTopco and/or the entity which acquires control of Vodafone or NewTopco, as the case may be (the “acquiring entity”) is unacceptably high in each case in the sole opinion of the Lender; or
		(ii)	it no longer wishes (in its sole discretion and acting in good faith) to continue lending to Vodafone or NewTopco, as the case may be (whether for relationship, internal policy or any other reason);
		propose to Vodafone (through the Agent) the revised terms (if any) which it requires in order to continue to participate in the Facilities; and
	(c)	if those revised terms have not been agreed with that Lender (or that Lender is not prepared, for one or more of the reasons set out in paragraph (b)(i)or (ii) above, to continue on any terms) within 30 days of the date of notification in paragraph (a) above (or such longer period as that Lender may agree in writing) then on expiry of 30 days from the date of notification in paragraph (a) above that Lender may by notice to the Agent (which shall promptly inform Vodafone) cancel the whole (but not part only) of such Lender's Commitments and following service of such notice:
		(i)	such Lender's Commitments shall be cancelled on the date of service of the notice or as specified in it; and
		(ii)	all such Lender's outstanding Advances shall be repaid or prepaid on the last day of the then current Term applicable thereto, and no amount may be outstanding to such Lender thereafter.
	For the purposes of this Clause 7.4, “control” has the meaning given to it in relation to a body corporate by Section 840 of the Taxes Act.
7.5	Right of prepayment and cancellation
	If:
	(a)	any Borrower is required to pay or is notified by any Lender in writing that it will be required to pay any amount to a Lender under Clause 10 (Taxes) or Clause 12 (Increased Costs); or
	(b)	if circumstances exist such that a Borrower will be required to pay any amount to a Lender under Clause 10 (Taxes); or
	(c)	any Lender notifies the Agent pursuant to Clause 8.1(c) (Interest Rate for all Advances) that they incur Reserve Asset Costs of the type referred to under paragraph (b) of the definition thereof,
	Vodafone may, whilst (in the case of paragraphs (a) and (b) above) the circumstances giving rise or which will give rise to the requirement continue or, (in the case of paragraph (c) above) such Reserve Asset Costs are greater than zero, serve a notice of prepayment and cancellation on that Lender through the Agent. On the date falling five Business Days after the date of service of the notice:

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	(i)	each Borrower will prepay the participations of that Lender in all outstanding Advances made to that Borrower; and
	(ii)	the Lender's Commitments shall be permanently cancelled on the date of service of the notice.
7.6	Miscellaneous provisions
(a)	Any notice of prepayment and/or cancellation under this Agreement is irrevocable. The Agent shall notify the Lenders promptly of receipt of any such notice.
(b)	All prepayments under this Agreement shall be made together with accrued interest on the amount prepaid and any other amounts due under this Agreement in respect of that prepayment (including, but not limited to, any amounts payable under Clause 23.2(c) (Other indemnities) if not made on the Maturity Date of the relevant Advance.
(c)	No prepayment or cancellation is permitted except in accordance with the express terms of this Agreement.
(d)	Subject to the provisions of this Agreement, any amount prepaid in respect of the Revolving Credit Facility during the Availability Period may be reborrowed. No amount of the Total Commitments, (including the Swingline Total Commitments) cancelled under this Agreement may subsequently be reinstated.
8.	INTEREST
8.1	Interest rate for all Advances
(a)	The rate of interest on each Advance (other than any Swingline Advance) for its Term, is the rate per annum determined by the Agent to be the aggregate of:
	(i)	the applicable Margin;
	(ii)	LIBOR or, in the case of an Advance denominated in euro, EURIBOR; and
	(iii)	Reserve Asset Costs (if any).
(b)	The rate of interest on each Swingline Advance for each day during its Term is the rate per annum determined by the U.S. Swingline Agent to be the Swingline Rate for that day plus any applicable Reserve Asset Costs.
(c)	In this Agreement:
	(i)	Reserve Asset Costs for an Advance for any Term will be calculated only on that portion of that Advance owed to Lenders who have notified the Agent that they incur the relevant Reserve Asset Costs in relation to Advances (and, in the case of Mandatory Costs, supplied the information required under paragraph 6 and 7 of Schedule 3);
	(ii)	a Lender will only be entitled to Reserve Asset Costs if it has given a notification to the Agent as contemplated in sub paragraph (i) above; and

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	(iii)	any amounts payable pursuant to paragraph (b) of the definition of Reserve Asset Costs shall be expressed as a percentage rate per annum for the relevant Term.
8.2	Due dates
	Except as otherwise provided in this Agreement, accrued interest on each Advance is payable by the relevant Borrower on its Maturity Date and also, in the case of any Advance with a Term longer than six months, at six monthly intervals after its Drawdown Date for so long as the Term is outstanding.
8.3	Default interest
(a)	If a Borrower fails to pay any amount payable by it under this Agreement when due (an “overdue amount”), it shall forthwith on demand by the Agent or, as the case may be, the U.S. Swingline Agent, pay interest on the overdue amount from the due date up to the date of actual payment, both before and after judgment, at a rate (the “default rate”) determined by the Agent or, as the case may be, the U.S. Swingline Agent to be one per cent. per annum (the “Default Margin”) above the higher of:
	(i)	the rate on the overdue amount under Clause 8.1 (Interest rate for all Advances) immediately before the due date (in the case of principal); and
	(ii)	the rate which would have been payable under Clause 8.1 (Interest rate for all Advances) if the overdue amount had, during the period of non-payment, constituted a Revolving Credit Advance in the currency of the overdue amount for such successive Terms of such duration as the Agent may determine (each a “Designated Term”),
	except that during any grace period specified in Clause 18.2 (Non-payment) the Default Margin portion of the default rate will only apply to overdue payments of principal.
(b)	The default rate will be determined on each Business Day or the first day of, or two Business Days before the first day of, the relevant Designated Term, as appropriate.
(c)	If the Agent or, as the case may be, the U.S. Swingline Agent, determines that deposits in the currency of the overdue amount are not at the relevant time being made available by the Reference Banks to leading banks in the relevant interbank market, the default rate will be determined by reference to the cost of funds to the Agent or, as the case may be, the U.S. Swingline Agent, from whatever sources it selects, acting reasonably at all times, after consultation with the Reference Banks.
(d)	Default interest will be compounded at the end of each Designated Term.
(e)	The Agent shall notify Vodafone of the duration of each Designated Term.
8.4	Notification of rates of interest
	The Agent or, as the case may be, the U.S. Swingline Agent will promptly notify each relevant Party of the determination of a rate of interest under this Agreement.

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8.5	Margin
(a)	The Margin applicable to each Advance (other than any Swingline Advance) will be the lowest percentage rate specified in Column 2 below which corresponds to the criteria in relation to the long term credit rating assigned to Vodafone in Column 1 below by Moody's, Fitch and/or S&P (as the case may be) (each a “Credit Rating Agency”) at the relevant time.

Column 1	Column 2
Moody's/Fitch/S&P ratings	Margin (per cent. per annum)
Any two are equal to or higher than:	0.35
A2/A/A
Otherwise	0.425
All quoting Credit Rating Agencies are lower than:	0.475
A3/A-/A-

	For the purposes of Clause 8.5(a) “All quoting Credit Rating Agencies” includes at any time each Credit Rating Agency which has a long term credit rating assigned to Vodafone at the relevant time.
(b)	For the purposes of paragraph (a) above:
	(i)	the Margin applicable to an Advance throughout the whole of its Term will be determined according to the long term credit rating assigned to Vodafone as at the Drawdown Date of the Advance;
	(ii)	if on the Drawdown Date of any Advance only one Credit Rating Agency assigns a long term credit rating to Vodafone, the Margin applicable to that Advance will be determined in accordance with paragraph (b)(i) by reference to such long term credit rating, or in the event that no Credit Rating Agency assigns a long term credit rating to Vodafone, the most recent long term credit rating assigned to Vodafone by any of the Credit Rating Agencies.
	In the case of Clause 8.5(b)((ii) above where the ratings category will be determined by one Credit Rating Agency only, the words “Any two are” and “All quoting Credit Rating Agencies” in Column 1 of the table above shall be construed as a reference to the rating determined pursuant to Clause 8.5(b)(ii).
(c)	Promptly upon becoming aware of the same, Vodafone shall inform the Agent in writing if any change in the long term credit rating assigned to Vodafone occurs or the circumstances contemplated by paragraph (b)(ii) above arise.
(d)	For the purpose of this Clause 8.5 the “long term credit rating assigned to Vodafone” means, at any time, the solicited long term credit rating assigned at that time to Vodafone by the relevant Credit Rating Agency (but, for the avoidance of doubt, disregarding any outlook or review action, including placing Vodafone on creditwatch or any similar or analogous step, taken by such Credit Rating Agency) where the rating is based primarily on the unsecured credit risk (not credit enhanced or collateralised) of Vodafone in a manner comparable to the credit structure of Vodafone's U.S.$2,750,000,000 bond issue due February 2010 (the “Reference Bond”), or if the Reference Bond ceases to be outstanding, such other series of

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	listed bonds issued or guaranteed by Vodafone with a maturity date closest to February 2010. References in this paragraph (d) to “Vodafone” shall, following the Reorganisation Date, be references to NewTopco, provided that a long term credit rating has been assigned to NewTopco.
8.6	Notification
	The Agent shall notify the Lenders and the Borrower of Optional Currency amounts (and the applicable Agent's Spot Rate of Exchange) promptly after they are ascertained.
8.7	Non-Business Days
	If a Term would otherwise end on a day which is not a Business Day, that Term shall instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
9.	PAYMENTS
9.1	Place of payment
	All payments by an Obligor or a Lender under this Agreement shall be made to the Agent or (if the payment relates to the Swingline Facility) the U.S. Swingline Agent to its account at such office or bank in the principal financial centre of the country of the currency concerned (or, in the case of euro, in the principal financial centre of a Participating Member State or London) as it may notify to that Obligor or Lender for this purpose.
9.2	Funds
	Payments under this Agreement to the Agent or, as the case may be, the U.S. Swingline Agent shall be made for value on the due date at such times and in such funds as the Agent or, as the case may be, the U.S. Swingline Agent may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.
9.3	Distribution
(a)	Each payment received by the Agent or, as the case may be, the U.S. Swingline Agent under this Agreement for another Party shall, subject to paragraphs (b) and (c) below, be made available by the Agent or, as the case may be, the U.S. Swingline Agent to that Party by payment (on the date of value of receipt and in the currency and funds of receipt) to its account with such bank in the principal financial centre of the country of the relevant currency (or, in the case of euro, in the principal financial centre of a Participating Member State or London) as it may notify to the Agent or, as the case may be, the U.S. Swingline Agent for this purpose by not less than five Business Days' prior notice.
(b)	The Agent or, as the case may be, the U.S. Swingline Agent may apply any amount received by it for an Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from an Obligor under this Agreement in the same currency on such date or in or towards the purchase of any amount of any currency to be so applied.
(c)	Where a sum is to be paid under this Agreement to the Agent or, as the case may be, the U.S. Swingline Agent for the account of another Party, the Agent or, as the case may be, the U.S. Swingline Agent is not obliged to pay that sum to that Party until it has established that it has actually received that sum. The Agent or, as the case may be, the U.S. Swingline Agent may,

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	however, assume that the sum has been paid to it in accordance with this Agreement and, in reliance on that assumption, make available to that Party a corresponding amount. If the sum has not been made available but the Agent or, as the case may be, the U.S. Swingline Agent has paid a corresponding amount to another Party, that Party shall forthwith on demand refund the corresponding amount to the Agent or, as the case may be, the U.S. Swingline Agent together with interest on that amount from the date of payment to the date of receipt, calculated at a rate reasonably determined by the Agent or, as the case may be, the U.S. Swingline Agent to reflect its cost of funds.
9.4	Currency
(a)	(i)	A repayment or prepayment of an Advance is payable in the currency in which the Advance is denominated.
	(ii)	Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated.
	(iii)	Amounts payable in respect of costs, expenses, taxes and the like are payable in the currency in which they are incurred.
	(iv)	Any other amount payable under this Agreement is, except as otherwise provided in this Agreement, payable in U.S. Dollars.
(b)	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
	(i)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (acting reasonably and after consultation with Vodafone); and
	(ii)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of the currency unit into the other, rounded up or down by the Agent (acting reasonably); and
	(iii)	If a change in any currency of a country occurs this Agreement will be amended to the extent the Agent and Vodafone agree (such agreement not to be unreasonably withheld) to be necessary to reflect the change in currency and to put the Lenders and the Obligors in the same position, as far as possible, that they would have been in if no change in currency had occurred.
9.5	Set-off and counterclaim
	All payments made by an Obligor under this Agreement shall be made without set-off or counterclaim.
9.6	Non-Business Days
(a)	If a payment under this Agreement is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

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(b)	During any extension of the due date for payment of any principal under this Agreement interest is payable on the principal at the rate payable on the original due date.
9.7	Partial payments
(a)	If the Agent or, as the case may be, the U.S. Swingline Agent receives a payment insufficient to discharge all the amounts then due and payable by an Obligor under this Agreement, the Agent or, as the case may be, the U.S. Swingline Agent shall apply that payment towards the obligations of the Obligors under this Agreement in the following order:
	(i)	first, in or towards payment pro rata of any unpaid costs, fees and expenses of the Agent and the U.S. Swingline Agent under this Agreement;
	(ii)	secondly, in or towards payment pro rata of any accrued fees due but unpaid under Clause 20 (Fees);
	(iii)	thirdly, in or towards payment pro rata of any interest due but unpaid under this Agreement;
	(iv)	fourthly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and
	(v)	fifthly, in or towards payment pro rata of any other sum due but unpaid under this Agreement.
(b)	The Agent or, as the case may be, the U.S. Swingline Agent, shall, if so directed by all the Lenders, vary the order set out in sub-paragraphs (a)(ii) to (v) above. The Agent or, as the case may be, the U.S. Swingline Agent, shall notify Vodafone of any such variation.
(c)	Paragraphs (a) and (b) above shall override any appropriation made by any Obligor.
10.	TAXES
10.1	Gross-up
	All payments by an Obligor to a Finance Party under the Finance Documents shall be made free and clear of and without deduction for or on account of any taxes, except to the extent that the Obligor is required by law to make payment subject to any such taxes. Subject to Clause 10.4 (Qualifying Lenders) and Clause 10.5 (U.S. Taxes), if any Relevant Tax or amounts in respect of Relevant Tax are deducted or withheld from any amounts payable or paid by an Obligor, or paid or payable by the Agent or, as the case may be, the U.S. Swingline Agent, to a Finance Party under the Finance Documents, the Obligor shall pay such additional amounts as may be necessary to ensure that the relevant Finance Party receives a net amount equal to the full amount which it would have received had that Relevant Tax or those amounts in respect of Relevant Tax not been so deducted or withheld.
10.2	Indemnity
	Without prejudice to the provisions of Clause 10.1 (Gross-up), but subject to Clause 10.4 (Qualifying Lenders) and Clause 10.5 (U.S. Taxes), if a Finance Party or the Agent (or, as the case may be, the U.S. Swingline Agent) on behalf of that Finance Party is required to make any payment on account of any Relevant Tax on or in relation to any sum received or receivable hereunder by such Finance Party or the Agent (or, as the case may be, the U.S.

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	Swingline Agent) on behalf of that Finance Party (including a sum received or receivable under this Clause 10) or any liability in respect of any such payment is incurred by such Finance Party or the Agent (or, as the case may be, the U.S. Swingline Agent) on behalf of that Finance Party (other than any Tax on Overall Net Income), the relevant Obligor shall, within five Business Days of demand by the Agent (or, as the case may be, the U.S. Swingline Agent) indemnify such Finance Party against such payment or liability, together with any interest, penalties, reasonable costs and reasonable expenses payable or incurred in connection therewith other than any such interest, penalties, costs or expenses arising as a result of a failure by a Finance Party to make payment of such tax when due.
10.3	Tax receipts
	All taxes required by law to be deducted or withheld by an Obligor from any amounts paid or payable under the Finance Documents shall be paid by the relevant Obligor when due and the Obligor shall, within 15 days of the payment being made, deliver to the Agent for the relevant Lender evidence satisfactory to that Lender acting reasonably (including any relevant tax receipts which have been received) that the payment has been duly remitted to the appropriate authority.
10.4	Qualifying Lenders
(a)	An Obligor is not required to pay any amounts under Clause 10.1 (Gross-up) or Clause 10.2 (Indemnity) in respect of Relevant Tax imposed by the United Kingdom if, on the date on which the payment falls due, any Lender is a Party but is not a Qualifying Lender (other than as a result of the introduction, suspension, withdrawal or cancellation of, or change in, or change in the official interpretation, administration or official application of, any law, regulation having the force of law, tax treaty or any published practice or published concession of any relevant taxing authority in any jurisdiction with which the relevant Lender has a connection, occurring after the Signing Date or, if later, the date on which that Lender becomes a Party).
(b)	A Treaty Lender shall:
	(i)	promptly and, in any event, within seven Business Days after it becomes a Lender, deliver to its local revenue authority for certification such UK Inland Revenue forms (“Claim Forms”) as may be required for that Treaty Lender to claim that payment to it by any Obligor resident in the UK under the Finance Documents shall be exempt from tax by the UK;
	(ii)	in circumstances where the procedure for Treaty relief contemplated in (i) above requires a local revenue authority to return a certified Claim Form to the Treaty Lender for submission by that Treaty Lender to the UK Inland Revenue, (a) take all reasonable follow up action available to the Treaty Lender to facilitate the return in a timely manner to the Treaty Lender of such Claim Form, duly stamped or certified by the relevant revenue authority and (b) submit such Claim Form to the UK Inland Revenue as soon as reasonably practicable (an in any event within 7 Business Days) after receipt of that Claim Form from the local revenue authority; and
	(iii)	in all other circumstances relating to the Treaty relief procedure contemplated in (i) above, on receipt of written request from Vodafone to do so, take all reasonable follow up action (following the submission of Claim Forms by the Treaty Lender to the relevant local revenue authority) to facilitate the submission by the relevant local

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		revenue authority of duly stamped or certified Claim Forms to the UK Inland Revenue in a timely manner.
	If there is any change in the procedure by which certification is to be made or to be notified to the UK Inland Revenue, the Treaty Lender's obligations shall be modified in such manner as the Treaty Lender may reasonably determine so that such amended obligations shall, as far as possible, have the same or equivalent effect as the original obligations. No Obligor resident in the UK shall be liable to pay any sums to any Treaty Lender under Clause 10.1 (Gross-up) or Clause 10.2 (Indemnity) unless the Treaty Lender has complied with its obligations under this Clause 10.4(b).
(c)	Subject to (d) below, each Lender warrants to Vodafone, on each date upon which it makes an Advance and on the due date for each payment of interest to the Lender:
	(i)	that it is a Qualifying Lender; and
	(ii)	if it is a Treaty Lender, it has delivered (or will deliver within the time limits specified herein) the forms described in paragraph (b).
(d)	If a Lender or, as the case may be, the Facility Office of a Lender is aware that it is or will become unable to make the warranty set out in paragraph  (c) of this Clause 10.4 it will promptly notify the Agent which will notify Vodafone, in which case the warranty in paragraph (c) above will no longer be made by that Lender from the date of such notice to the Agent.
10.5	U.S. Taxes
(a)	A U.S. Tax Obligor shall not be required to pay any amount pursuant to Clause 10.1 (Gross-up) or any amount pursuant to Clause 10.2 (Indemnity) in respect of United States taxes (including, without limitation, federal, state, local or other income taxes), branch profits or franchise taxes with respect to a sum payable by it pursuant to this Agreement to a Lender if on the date a payment of interest falls due under this Agreement either:
	(i)	in the case of a Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code), such Lender is not entitled to receive interest payable under this Agreement free and clear of any U.S. taxes imposed by way of deduction or withholding at the source under applicable law as in effect on the date such Lender becomes a party to this Agreement or, if such Lender has designated a new Facility Office, the date of such designation; or
	(ii)	such Lender has failed to provide the relevant U.S. Tax Obligor with the appropriate form, certificate or other information with respect to such sum payable that it was required to provide pursuant to paragraphs (b) and (c) below; or
	(iii)	such Lender is subject to such tax by reason of any connection between the jurisdiction imposing such tax on the Lender or its Facility Office other than a connection arising solely from this Agreement or any transaction contemplated hereby.
(b)	At any time after a U.S. Tax Obligor becomes (and while there continues to be a U.S. Tax Obligor) a Party to this Agreement, if a Lender is not a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code) it shall submit, as soon as reasonably practicable after:

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	(i)	the date on which the U.S. Tax Obligor becomes a Party to this Agreement (if requested by the relevant U.S. Tax Obligor);
	(ii)	the date on which the relevant Lender becomes a Party to this Agreement or;
	(iii)	the date on which the relevant Lender designates a new Facility Office,
	(but, in each case, no later than the due date for the next interest payment), in duplicate to each U.S. Tax Obligor duly completed and signed copies of either United States Internal Revenue Service Form W-8BEN or Form W-8ECI or applicable successor form relating to such Lender and evidencing such Lender’s complete exemption from withholding on all amounts (to which such withholding would otherwise apply) to be received by such Lender, including fees, pursuant to this Agreement in connection with any borrowing by a U.S. Tax Obligor. Thereafter such Lender shall submit to each U.S. Tax Obligor such additional duly completed and signed copies of one or the other such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxation authorities) or any additional information, in each case as may be required under then current United States law or regulations to claim the inapplicability of or exemption from United States withholding taxes on payments in respect of all amounts (to which such withholding would otherwise apply) to be received by such Lender, including fees, pursuant to this Agreement in connection with any borrowing by a U.S. Tax Obligor unless such Lender is unable to do so as a result of a change in, the introduction of, suspension, withdrawal or cancellation of, or change in the official interpretation, administration or official application of, any law, regulation having the force of law, tax treaty or any published practice or published concession of the United States Internal Revenue Service or any other relevant taxing or fiscal authority in any jurisdiction with which the relevant Lender has a connection, occurring after the date the Lender becomes a Party to this Agreement or, if such Lender has designated a new Facility Office, the date of such designation.
(c)	At any time after a U.S. Tax Obligor becomes (and while there continues to be a U.S. Tax Obligor) a Party to this Agreement, if a Lender is a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code) it shall, as soon as practicable after:
	(i)	the date on which the U.S. Tax Obligor becomes a Party to this Agreement (if requested by the relevant U.S. Tax Obligor);
	(ii)	the date on which the relevant Lender becomes a Party to this Agreement; or
	(iii)	the date on which the relevant Lender designates a new Facility Office,
	(but, in each case, no later than the due date for the next interest payment), and thereafter, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form or forms to be delivered, submit in duplicate to each U.S. Tax Obligor a United States Internal Revenue form W-9 evidencing that such Lender is such a United States person and shall submit any additional information that may be necessary to avoid United States withholding taxes on all payments, including fees, (to which such withholding would otherwise apply) to be received pursuant to this Agreement in connection with any borrowing a U.S. Tax Obligor.

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10.6	Refund of Tax Credits
	If any Obligor pays any additional amount to a Finance Party under this Clause 10 (a “Tax Payment”) and that Finance Party obtains a refund of a tax, or a credit against tax by reason of the Tax Payment (a “Tax Credit”) then that Finance Party shall reimburse that Obligor such amount as can be determined to be the proportion of the Tax Credit as will leave that Finance Party (after that reimbursement) in no better or worse position than it would have been in if the Tax Payment had not been paid. Nothing in this Clause 10 shall interfere with the right of each Finance Party to arrange its affairs in whatever manner it thinks fit and no Finance Party is obliged to disclose any information regarding its tax affairs or computations to an Obligor which it reasonably considers confidential.
11.	MARKET DISRUPTION
11.1	Market disturbance
	Notwithstanding anything to the contrary herein contained, if and each time that prior to or on a Drawdown Date relative to an Advance (other than, in the case of paragraphs (a), (b)(ii) or (c) below, a Swingline Advance) to be made:
	(a)	only one or no Reference Bank supplies a rate for the purposes of determining LIBOR or EURIBOR (as the case may be) in accordance with paragraph (b) of the relevant definition; or
	(b)	the Agent is notified by Lenders whose participations in that Advance would represent 50 per cent. or more of that Advance that (i) deposits in the currency of that Advance may not in the ordinary course of business be available to them in the relevant interbank market for a period equal to the Term concerned in amounts sufficient to fund their participations in that Advance or (ii) LIBOR or EURIBOR (as the case may be) does not adequately represent their cost of funds; or
	(c)	the Agent (after consultation with the Reference Banks) shall have determined (which determination shall be conclusive and binding upon all Parties) that by reason of circumstances affecting the relevant interbank market generally, adequate and fair means do not exist for ascertaining the LIBOR or EURIBOR (as the case may be) applicable to such Advance during its Term,
	the Agent shall promptly give written notice of such determination or notification to Vodafone and to each of the Lenders.
11.2	Alternative rates
	If the Agent gives a notice under Clause 11.1 (Market disturbance):
	(a)	Vodafone and the Lenders whose participations in the relevant Advance would represent 50 per cent. or more of that Advance may (through the Agent) agree that (except in the case of a Rollover Advance) that Advance shall not be borrowed; or
	(b)	in the absence of such agreement (and in any event in the case of a Rollover Advance):

(i) the Term of the relevant Advance shall be one month;

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		(ii)	the Advance shall be made in the currency requested or, in the case of Clause 11.1(b)(i) (Market disturbance), in U.S. Dollars (or, if the currency requested for the relevant Advance is U.S. Dollars, euro); and
		(iii)	during the Term of the relevant Advance the rate of interest applicable to such Advance shall be the Margin plus applicable Reserve Asset Costs plus the rate per annum notified by each Lender concerned to the Agent before the last day of such Term to be that which expresses as a percentage rate per annum the cost to such Lender of funding its participation in such Advance from whatever sources it may reasonably select.
12.	INCREASED COSTS
12.1	Increased costs
(a)	Subject to Clause 12.2 (Exceptions), Vodafone will forthwith on demand by a Finance Party pay that Finance Party the amount of any increased cost incurred by it or any of its Holding Companies as a result of any change in or introduction of any law or regulation (including any relating to reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements or any other form of banking or monetary control).
(b)	Promptly following the service of any demand, Vodafone will pay to that Finance Party such amount as that Finance Party certifies in the demand (with sufficient details for the calculations to be verified) will in its reasonable opinion compensate it for the applicable increased cost and in relation to the period expressed to be covered by such demand.
(c)	When calculating an increased cost, a Finance Party will only apply the costs incurred in relation to the Facilities. Nothing contained in this Clause 12.1 shall oblige the Finance Party to disclose any information (other than information which is readily available in the public domain or which is not in the reasonable opinion of the Finance Party confidential) relating to the way in which it employs its capital or arranges its internal financial affairs.
(d)	In this Agreement “increased cost” means:
	(i)	an additional cost incurred by a Finance Party or any of its Holding Companies as a result of it performing, maintaining or funding its obligations under, this Agreement; or
	(ii)	that portion of an additional cost incurred by a Finance Party or any of its Holding Companies in making, funding or maintaining all or any advances comprised in a class of advances formed by or including its participations in the Advances made or to be made under this Agreement as is attributable to it making, funding or maintaining its participations; or
	(iii)	a reduction in any amount payable to a Finance Party or the effective return to a Finance Party under this Agreement or on its capital (or the capital of any of its Holding Companies); or
	(iv)	the amount of any payment made by a Finance Party, or the amount of interest or other return foregone by a Finance Party, calculated by reference to any amount received or receivable by a Finance Party from any other Party under this Agreement.

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12.2	Exceptions
	Clause 12.1 (Increased costs) does not apply to any increased cost:
	(a)	compensated for by the payment of the Reserve Asset Costs; or
	(b)	attributable to any tax or amounts in respect of tax; or
	(c)	occurring as a result of any negligence or default of a Lender or its Holding Company including but not limited to a breach by that Lender or Holding Company of any fiscal, monetary or capital adequacy limit imposed on it by any law or regulation; or
	(d)	to the extent that the increased cost was incurred in respect of any day more than six months before the first date on which it was reasonably practicable to notify Vodafone thereof (except in the case of any retrospective change).
13.	ILLEGALITY AND MITIGATION
13.1	Illegality
	If it becomes unlawful in any jurisdiction for a Lender to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Advance, then the Lender may notify Vodafone through the Agent accordingly and thereupon, but only to the extent necessary to remove the illegality:
	(a)	each Borrower shall, upon request from that Lender within the period allowed or if no period is allowed, forthwith, repay any participation of that Lender in the Advances made to it together with all other amounts payable by it to that Lender under this Agreement; and
	(b)	the Lender's Commitments shall be cancelled immediately.
13.2	Mitigation
	Notwithstanding the provisions of Clauses 8.1 (Interest rate for all Advances), 10 (Taxes), 12 (Increased costs) and 13.1 (Illegality), if in relation to a Finance Party circumstances arise which would result in:
	(a)	a payment pursuant to paragraph (b) of the definition of "Reserve Asset Costs"; or
	(b)	any deduction, withholding or payment of the nature referred to in Clause 10 (Taxes); or
	(c)	any increased cost of the nature referred to in Clause 12 (Increased costs); or
	(d)	a notification pursuant to Clause 13.1 (Illegality),
	then without in any way limiting, reducing or otherwise qualifying the rights of such Finance Party or the Agent, such Finance Party shall promptly upon becoming aware of the same notify the Agent thereof (whereupon the Agent shall promptly notify Vodafone) and such Finance Party shall use reasonable endeavours to transfer its participation in the Facility and its rights hereunder and under the Finance Documents to another financial institution or Facility Office not affected by circumstances having the results set out in (a), (b), (c), or (d)

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above and shall otherwise take such reasonable steps as may be open to it to mitigate the effects of such circumstances provided that such Finance Party shall not be under any obligation to take any such action if, in its opinion, to do so would or would be likely to have a material adverse effect upon its business, operations or financial condition or would involve it in any unlawful activity or any activity that is contrary to its policies or any request, guidance or directive of any competent authority (whether or not having the force of law) or (unless indemnified to its satisfaction) would involve it in any significant expense or tax disadvantage.

14.	GUARANTEE
14.1	Guarantee
	Each Guarantor jointly and severally, irrevocably and unconditionally:
	(a)	as principal obligor, guarantees to each Finance Party that if and whenever:
		(i)	an amount is due and payable by a Borrower under or in connection with any Finance Document; and
		(ii)	demand for payment of that amount has been made by the Agent on that Borrower,
		that Guarantor will forthwith on demand by the Agent pay that amount as if that Guarantor instead of that Borrower were expressed to be the principal obligor; and
	(b)	indemnifies each Finance Party on demand against any loss or liability suffered by it if any obligation guaranteed by any Guarantor is or becomes unenforceable, invalid or illegal (the amount of that loss being the amount expressed to be payable by the relevant Borrower in respect of the relevant sum).
14.2	Continuing guarantee
	This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by the Borrowers under the Finance Documents, regardless of any intermediate payment or discharge in part.
14.3	Reinstatement
(a)	Where any discharge (whether in respect of the obligations of any Borrower or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Guarantors under this Clause 14 (Guarantee) shall continue as if the discharge or arrangement had not occurred (but only to the extent that such payment, security or other disposition is avoided or restored).
(b)	Each Finance Party may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.
14.4	Waiver of defences
	The obligations of each Guarantor under this Clause 14 will not be affected by any act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any

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	of its obligations under this Clause 14 or prejudice or diminish those obligations in whole or in part, including (whether or not known to it or any Finance Party):
	(a)	any time or waiver granted to, or composition with, any Borrower or other person;
	(b)	the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
	(c)	the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
	(d)	any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of a Borrower or any other person;
	(e)	any variation (however fundamental) or replacement of a Finance Document so that references to that Finance Document in this Clause 14 shall include each variation or replacement;
	(f)	any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document, to the intent that the Guarantors' obligations under this Clause 14 shall remain in full force and its guarantee be construed accordingly, as if there were no unenforceability, illegality or invalidity; and
	(g)	any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of any Borrower under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any law, regulation or order so that each such obligation shall, for the purposes of the Guarantors' obligations under this Clause 14, be construed as if there were no such circumstance.
14.5	Immediate recourse
	Except as provided in Clause 14.1(a)(ii) (Guarantee), each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 14.
14.6	Appropriations
	Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
	(a)	refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

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	(b)	hold in a suspense account (bearing interest at a commercial rate) any moneys received from any Guarantor or on account of that Guarantor's liability under this Clause 14, with any interest earned being credited to that account.
14.7	Non-competition
	Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been paid in full, no Guarantor shall, after a claim has been made or by virtue of any payment or performance by it under this Clause 14:
	(a)	be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of that Guarantor's liability under this Clause 14; or
	(b)	claim, rank, prove or vote as a creditor of any Borrower or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or
	(c)	receive, claim or have the benefit of any payment, distribution or security from or on account of any Borrower, or exercise any right of set-off as against any Borrower.
	Each Guarantor shall hold in trust for and forthwith pay or transfer to the Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to this Clause 14.7.
14.8	Additional security
	This guarantee is in addition to and is not in any way prejudiced by any other security now or hereafter held by any Finance Party.
14.9	Removal of Guarantors
(a)	Any Guarantor (other than, Vodafone (subject to Clause 14.9(b) below) and, following the Reorganisation Date, NewTopco and any Intermediate Holding Company of Vodafone) which is not a Borrower, may, at the request of Vodafone and if no Default is continuing, cease to be a Guarantor by entering into a supplemental agreement to this Agreement at the cost of Vodafone in such form as the Agent may reasonably require which shall discharge that Guarantor's obligations as a Guarantor under this Agreement.
(b)	If on the Reorganisation Date, NewTopco and any Intermediate Holding Company have acceded as Guarantors in accordance with Clause 26.5 (Additional Guarantors) and no Default is continuing or would result from Vodafone's resignation as a Guarantor, Vodafone may cease to be a Guarantor with effect from the Reorganisation Date by entering into a supplemental agreement to this Agreement at the cost of Vodafone or NewTopco in such form as the Agent may reasonably require which shall discharge Vodafone's obligations as a Guarantor under this Agreement.
14.10	Limitation on guarantee of U.S. Guarantors
	Notwithstanding any other provision of this Clause 14, the obligations of each Guarantor incorporated in the United States (other than NewTopco and any Intermediate Holding Company, to the extent incorporated in the United States) (a “U.S. Guarantor”) under this Clause 14 shall be limited to a maximum aggregate amount equal to the largest amount that

46

	would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Bankruptcy code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of such U.S. Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such U.S. Guarantor in respect of intercompany indebtedness to the Borrowers or Affiliates of the Borrowers to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such U.S. Guarantor hereunder) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such U.S. Guarantor pursuant to (a) applicable law or (b) any agreement providing for an equitable allocation among such U.S. Guarantor and other Affiliates of the Borrowers of obligations arising under guarantees by such parties.
15.	REPRESENTATIONS AND WARRANTIES
15.1	Representations and warranties
	Each Obligor makes the representations and warranties set out in this Clause 15 to each Finance Party (in respect of itself and where relevant its Consolidated Subsidiaries only).
15.2	Status
	It is a duly incorporated and validly existing corporation under the laws of the jurisdiction of its incorporation.
15.3	Powers and authority
	It has the power to:
	(a)	enter into and comply with, all obligations expressed on its part under the Finance Documents;
	(b)	(in the case of a Borrower) to borrow under this Agreement; and
	(c)	(in the case of a Guarantor) to give the guarantee in Clause 14 (Guarantee),
	and has taken all necessary actions to authorise the execution, delivery and performance of the Finance Documents.
15.4	Non-violation
	The execution, delivery and performance of the Finance Documents will not violate:
	(a)	any provisions of any existing law or regulation or statute applicable to it; or
	(b)	to any material extent, any provisions of any mortgage, contract or other undertaking to which it or any of its Consolidated Subsidiaries which is a member of the Restricted Group is a party or which is binding upon it or any of its Consolidated Subsidiaries which is a member of the Restricted Group.

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15.5	Borrowing limits
	Borrowings under this Agreement up to and including the maximum amount available under this Agreement, together with borrowings under the 364 Day Facility up to and including the maximum amount available under the 364 Day Facility, will not cause any limit (except to the extent the limit has been waived) on borrowings or, as the case may be, on the giving of guarantees (whether imposed in its Articles of Association or otherwise), or on the powers of its board of directors, applicable to it to be exceeded.
15.6	Authorisations
	All necessary consents or authorisations of any governmental authority or agency required by it in connection with the execution, validity, performance or enforceability of the Finance Documents have been obtained and are validly existing.
15.7	No default
	Neither it nor any of its Consolidated Subsidiaries which is a member of the Restricted Group is in default under any law or agreement by which it is bound the consequences of which would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
15.8	Accounts
	The audited consolidated financial statements of Vodafone (or, following a Hive Up, NewTopco) most recently delivered to the Agent (which, at the date of this Agreement are the Original Group Accounts):
	(a)	give a true and fair view of the consolidated financial position of the Group as at the date to which they were drawn up; and
	(b)	have been prepared in accordance with generally accepted accounting principles applied by Vodafone (or, following a Hive Up, NewTopco), consistently applied except for changes disclosed in such financial statements which are necessary to reflect a change in generally accepted accounting principles or the adoption of international accounting standards.
15.9	No Event of Default
	No Event of Default has occurred and is continuing in respect of it or any of its Consolidated Subsidiaries which is a member of the Restricted Group.
15.10	Investment Company
	Each Borrower which is a U.S. Obligor either (i) is not an investment company as defined under United States Investment Company Act of 1940, as amended, or (ii) is exempt from the registration provisions of the Act pursuant to an exemption under that Act.
15.11	ERISA
(a)	Each member of the Controlled Group has fulfilled its obligations under the minimum funding standards of ERISA and the U.S. Code with respect to each Plan maintained by such member or any member of the Controlled Group where non-fulfilment of such obligations

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	would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
(b)	Each Obligor is in compliance with the applicable provisions of ERISA, the U.S. Code and any other applicable United States Federal or State law with respect to each Plan maintained by such Obligor where non-fulfilment of or non-compliance with such provisions would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
(c)	No Reportable Event has occurred with respect to any Plan maintained by an Obligor or any member of the Controlled Group and no steps have been taken to reorganise or terminate any Single Employer Plan or by that Obligor to effect a complete or partial withdrawal from any Multiemployer Plan where non-compliance or such Reportable Event, reorganisation, termination or withdrawal would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
(d)	No member of the Controlled Group has:
	(i)	sought a waiver of the minimum funding standard under Section 412 of the U.S. Code in respect of any Plan; or
	(ii)	failed to make any contribution or payment to any Single Employer Plan or Multiemployer Plan, or made any amendment to any Plan, and no other event, transaction or condition has occurred which has resulted or would result in the imposition of a lien or the posting of a bond or other security under ERISA or the U.S. Code; or
	(iii)	incurred any material, actual liability under Title I or Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA,
	if such seeking, failure or incurrence would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.
15.12	Times for making representations and warranties
(a)	The representations and warranties set out in this Clause 15 (excluding Clause 15.10 (Investment Company) and Clause 15.11 (ERISA)):
	(i)	are made by Vodafone on the Signing Date and, in the case of an Obligor which becomes a Party after the Signing Date, will be deemed to be made by that Obligor on the date it executes a Borrower Accession Agreement or Guarantor Accession Agreement; and
	(ii)	are deemed to be made again by each Obligor on the date of each Request, on each Drawdown Date with reference to the facts and circumstances then existing.
(b)	The representation and warranties set out in Clause 15.10 (Investment Company) and 15.11 (ERISA):
	(i)	are made by Vodafone on the date on which the first U.S. Obligor executes a Borrower Accession Agreement or a Guarantor Accession Agreement as the case may be;

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	(ii)	are deemed to be made by each Obligor which becomes a party after the Signing Date on the date it executes a Borrower Accession Agreement or Guarantor Accession Agreement, provided that there is a U.S. Obligor;
	(iii)	are deemed to be made again by each Obligor on the date of each Request, on each Drawdown Date with reference to the facts and circumstances then existing, provided that there is a U.S. Obligor.
16.	UNDERTAKINGS
16.1	Duration
	The undertakings in this Clause 16 will remain in force from the Signing Date for so long as any amount is or may be outstanding under this Agreement or any Commitment is in force.
16.2	Financial information
	Vodafone shall supply to the Agent in sufficient copies for all the Lenders:
	(a)	as soon as the same are publicly available (and in any event within 180 days of the end of each of its financial years):
		(i)	the audited consolidated financial statements of the Group for that financial year; and
		(ii)	(if published) each other Obligor's audited statutory accounts for that financial year, consolidated if that Obligor has Subsidiaries and consolidated accounts are prepared and published;
	(b)	as soon as the same are publicly available (and in any event within 90 days of the end of the first half-year of each of its financial years) the interim unaudited financial statements of the Group for that half-year;
	(c)	together with any accounts specified in paragraph (a)(i) or (b) above a certificate signed by the Group financial director, or in his absence any other director, of Vodafone establishing (in reasonable detail) compliance with Clauses 16.8 (Priority borrowing) and 17 (Financial covenant) as at the date to which those accounts were drawn up and identifying the Principal Subsidiaries; and
	(d)	if, after the date of the most recent certificate delivered pursuant to paragraph (c) above and prior to the date that the next certificate is required to be delivered, a Principal Subsidiary ceases to be Principal Subsidiary as a result of (A) a sale or transfer to or a merger into or with an entity which is not a member of the Restricted Group or (B) the acquisition of a new Principal Subsidiary, a certificate signed by the Group financial director, or in his absence any other director of Vodafone which identifies the Principal Subsidiary which has ceased to be a Principal Subsidiary and the new Principal Subsidiary.

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16.3	Information – miscellaneous
	Vodafone shall supply to the Agent:
	(a)	all documents despatched by the ultimate Holding Company of the Group to its shareholders (or any class of them) or by Vodafone or such ultimate Holding Company to the creditors of the Group generally (or any class of them) at the same time as they are despatched; and
	(b)	as soon as reasonably practicable, such further publicly available information in the possession or control of any member of the Group regarding the business, financial or corporate affairs of the Group, as the Agent may reasonably request,
	in sufficient copies for all the Lenders, if the Agent so requests.
16.4	Notification of Default
	Vodafone shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of it.
16.5	Authorisations
	Each Obligor shall promptly:
	(a)	obtain, maintain and comply in all material respects with the terms of; and
	(b)	if requested, supply certified copies to the Agent of,
	any authorisation required under any law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.
16.6	Pari passu ranking
	Each Obligor will procure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured and unsubordinated obligations (save for those obligations mandatorily preferred by applicable law).
16.7	Negative pledge
	No Obligor will, and each Obligor will procure that none of its Subsidiaries which is a member of the Restricted Group will, create or permit to subsist any Security Interest on or over any of its assets except for any Permitted Security Interest.
16.8	Priority borrowing
	Each Obligor will procure that none of its Subsidiaries (which is a member of the Restricted Group and which is not a Guarantor) will create, assume, incur, guarantee, permit to subsist or otherwise be liable in respect of any Financial Indebtedness owed to persons outside the Restricted Group except for:
	(a)	Financial Indebtedness of any Subsidiary which became a member of the Restricted Group after 31st May, 2003 provided that:

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	(i)	any such Financial Indebtedness is either (A) outstanding before that Subsidiary becomes a member of the Restricted Group and was not created in contemplation of that Subsidiary becoming a member of the Restricted Group and/or (B) drawn at any time under commitments in existence before that Subsidiary becomes a member of the Restricted Group (“existing commitment”) and that commitment was not created in contemplation of that Subsidiary becoming a member of the Restricted Group and/or (C) drawn at any time under commitments (“new commitments”) which have refinanced existing commitments in whole or in part, to the extent that any such new commitments do not exceed the existing commitments, and provided that to the extent that any new commitment is to be guaranteed by an Obligor, the obligors under the new commitments will have validly and legally acceded as Additional Guarantors in accordance with Clause 26.5(a)(ii) and (b) (Additional Guarantors) prior to any Obligor providing a guarantee of the new commitments; and
	(ii)	to the extent that the aggregate principal amount of such Financial Indebtedness exceeds the amount of outstandings and commitments calculated under paragraph (a)(i) above upon that Subsidiary becoming a member of the Restricted Group (measured in the same currency), the excess amount of such Financial Indebtedness shall not fall within this paragraph (a); or
(b)	Financial Indebtedness under finance or structured tax lease arrangements (including, but not limited to qualifying technological equipment leases) to the extent matched as part of those arrangements by deposits of cash or cash equivalent investments (including, but not limited to securities issued by G7 governments) or other securities rated at least A by S&P or A2 by Moody's or A by Fitch which are treated by the creditor concerned as available to reduce its net exposure; or
(c)	Financial Indebtedness which is created with the prior written consent of the Majority Lenders; or
(d)	Financial Indebtedness of members of the Restricted Group to the extent matched by cash balances or cash equivalent investments (including, but not limited to securities issued by G7 governments) or other securities rated at least A by S&P or A2 by Moody's or A by Fitch, held by members of the Restricted Group which are treated as available for netting by the creditors to whom that Financial Indebtedness is owed under cash management or netting arrangements in the ordinary course of business; or
(e)	Financial Indebtedness under any finance lease or structured tax lease arrangements (including, but not limited to qualifying technological equipment leases) entered into in respect of assets which were or are acquired or become part of the Restricted Group after 31st March, 2001; or
(f)	Financial Indebtedness under or in connection with any other finance lease entered into in respect of existing assets or future assets (to the extent they are subject to Security Interests contemplated under paragraph (j) of the definition of Permitted Security Interests); or
(g)	Financial Indebtedness under Back to Back Loans; or

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(h)	Financial Indebtedness of any member of the Group which operates as a finance company to the extent that any proceeds are on-lent to a Guarantor or to a member of the Group outside the Restricted Group; or
(i)	Financial Indebtedness in relation to bonds as set out in Schedule 8 (Fixed Rate Bonds); or
(j)	Financial Indebtedness that has been defeased to the extent that it is subject to Security Interests contemplated under paragraph (u) of Permitted Security Interests; or
(k)	Financial Indebtedness incurred solely in contemplation of an initial public offering or other disposal of the companies or partnerships incurring such Financial Indebtedness, to the extent that (i) the aggregate principal amount of such Financial Indebtedness does not exceed U.S.$5,000,000,000 (or its equivalent in other currencies) whilst such Financial Indebtedness is owed by a member of the Restricted Group; (ii) the creditors in respect of such Financial Indebtedness have recourse for no more than thirty days to any member of the Group which is or whose assets are not intended to be subject to the initial public offering or disposal; and (iii) the proceeds of which (if any) are applied in permanent reduction of other Financial Indebtedness of a member of the Group owed to persons outside the Group; or
(l)	Project Finance Indebtedness; or
(m)	Financial Indebtedness owed to persons outside the Restricted Group under guarantees or other legally binding assurances against financial loss granted by any member of the Mannesmann Group in respect of any asset, undertaking or business not forming part of the mobile or wireless telecommunications business of the Restricted Group; or
(n)	Financial Indebtedness under this Agreement; or
(o)	any liability of a Subsidiary in respect of Financial Indebtedness incurred in connection with the Verizon Wireless partnership provided that:.
	(i)	that Subsidiary has no assets other than (1) its interests in or derived from the Verizon Wireless partnership and (2) other assets with an aggregate market value not exceeding U.S.$3,000,000,000 at any time; and
	(ii)	the person or persons to whom such Financial Indebtedness is or may be owed has or have no recourse whatsoever to any member of the Group for any payment or repayment in respect of such Financial Indebtedness (other than to that Subsidiary); or
(p)	other Financial Indebtedness to the extent that the sum of:
	(i)	the aggregate unpaid principal amount of the Financial Indebtedness of all the members of the Restricted Group which are not Guarantors and owed to persons outside the Restricted Group (other than Financial Indebtedness under paragraphs (a) to (o) above inclusive); plus

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		(ii)	the aggregate unpaid principal amount of Financial Indebtedness secured by Security Interests referred to in paragraph (v) of the definition of Permitted Security Interest (to the extent not falling within (p)(i) above),
		does not exceed £1,750,000,000 or its equivalent.
	Compliance with this Clause 16.8 will be tested at the end of each financial quarter. For the purposes of paragraph (p) above, Financial Indebtedness of the Restricted Group not denominated in (or which has not been swapped into) Sterling shall be notionally converted (from the currency in which it is denominated or, as the case may be, into which it has been swapped) to Sterling at the rate of exchange used in the management accounts of the relevant Obligor for that relevant financial quarter.
16.9	Disposals
	No Obligor will, and each Obligor will procure that none of its Subsidiaries which is a member of the Restricted Group will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, make any Asset Disposals other than:
	(a)	Asset Disposals:
		(i)	on arm's length terms which are, in the opinion of an Obligor, at fair market value;
		(ii)	required by law or any governmental authority or agency (including without limitation any authority or agency of the European Union); or
		(iii)	made in good faith for the purpose of carrying on the business of the Group which it is reasonable to believe will benefit the Group; and
	(b)	a transfer of all or any part of the assets of the Group to NewTopco and/or any Intermediate Holding Company of Vodafone.
16.10	Restriction on Acquisitions
	Vodafone will not, and will procure that no member of the Group will, make any Acquisition unless the major part of the Group's business remains telecommunications and associated business.
17.	FINANCIAL COVENANT
17.1	Financial definitions
	In this Agreement:
	“Adjusted Group Operating Cash Flow”
	means, without double counting, in relation to any period, a sum equal to the Consolidated Group's total operating profit or loss for continuing operations, acquisitions (as a component of continuing operations) and discontinued operations before taxation, interest and after:
	(a)	adding depreciation;

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(b)	adding amortisation;
(c)	deducting the profit or adding the loss on exceptional items which are included in the foregoing;
(d)	deducting any gain or adding the loss on disposal of tangible or intangible fixed assets;
(e)	adjusting for movements in working capital (being movements in stock, creditors, provisions, debtors);
(f)	adding dividends received from any Associated Company, Joint Venture or any Investee Company; and
(g)	excluding exceptional items,
and for the avoidance of doubt excluding (other than as set out in paragraph (f) above) the results of any Associated Company, Joint Venture or any Investee Company.
“Applicable GAAP”
means the generally accepted accounting principles applied in the preparation of the consolidated accounts of Vodafone for the year ended 31st March, 2003.
“Associated Company”
means any company or body corporate in which any member of the Consolidated Group holds a participating interest and, in the opinion of the directors of Vodafone (or, following the Hive Up, NewTopco), can exercise a significant influence in such company's or body corporate's management and which is, or would be, treated as such under Applicable GAAP.
“Available Cash”
means:
(a)	cash in hand and cash in deposits repayable on demand with any Qualifying Financial Institution; and
(b)	Liquid Resources,
to the extent denominated in any freely convertible and transferable currencies, beneficially owned by a member of the Group and unencumbered by any Security Interests other than Permitted Security Interests granted in respect of Financial Indebtedness.
“Investee Company”
means any company in which any member of the Consolidated Group holds an investment (by way of an equity shareholding) and which is or would be treated as such under Applicable GAAP.

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	“Joint Venture”
	means an entity (which is not a member of the Consolidated Group) in which any member of the Consolidated Group holds a long term interest and shares control under a contractual arrangement where each venturer has a veto over policy decisions and which is, or would be, treated as such under Applicable GAAP.
	“Liquid Resources”
	means a current asset investment held as a readily disposable store of value which can be disposed of by a member of the Group without curtailing or disrupting its business and which is either:
	(a)	readily convertible into a known amount of cash at or close to its carrying value; or
	(b)	traded in an active market.
	“Net Debt”
	means at any time, Total Gross Borrowings less Available Cash, both at that time, Net Debt for any Ratio Period will be calculated as the aggregate of Net Debt outstanding on the last day of each month during the relevant Ratio Period (as shown in Vodafone's, or following a Hive Up, NewTopco's, consolidated management accounts prepared at the end of each month during the relevant Ratio Period) divided by the number of months during the relevant Ratio Period.
	“Qualifying Financial Institution”
	means any bank or financial institution that as part of its business generally receives deposits or other repayable funds and grants credits for its own account.
	“Ratio Period”
	has the meaning given in Clause 17.3(b) (Calculation times and periods).
	“Total Gross Borrowings”
	means at any time, the aggregate outstanding principal amount of Financial Indebtedness of the Consolidated Group at that time plus deferred consideration in respect of the cost of Acquisitions.
17.2	Financial ratio
	Vodafone will procure that the ratio of Net Debt for each Ratio Period to two times Adjusted Group Operating Cash Flow for such Ratio Period will not exceed 3.75:1.
17.3	Calculation times and periods
(a)	The first test date for the financial ratio specified in Clause 17.2 (Financial ratio) will occur on 30th September, 2003.
(b)	Each subsequent test date will be on the last day of each financial half year and year of Vodafone or, following a Hive Up, NewTopco. The financial ratio will be calculated using

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	data for the period (each a “Ratio Period”) ending on each test date and beginning 6 months before the relevant test date.
17.4	Information sources
(a)	All information for calculation of the financial ratio set out in Clause 17.2 (Financial ratio) and Clause 18.5 (Cross default) will be extracted from figures denominated in the base currency (as defined in paragraph (c) below) applying generally accepted accounting principles used in the preparation of and extracted from:
	(i)	the unaudited consolidated interim financial statements of Vodafone, or following a Hive Up, NewTopco;
	(ii)	the consolidated annual financial statements of Vodafone, or following a Hive Up, NewTopco; or
	(iii)	Vodafone's, or following a Hive Up, NewTopco's consolidated management accounts,
	as the case may be, which in respect of (i) and (ii) were delivered to the Agent under sub-clauses (a)(i) and (b) of Clause 16.2 (Financial information).
(b)	If Vodafone, or following a Hive Up, NewTopco applies accounting principles (“New GAAP”) other than Applicable GAAP in the preparation of any financial statements delivered under Clauses 16.2(a)(i) or (b) (Financial information) (or consolidated management accounts, where appropriate) and:
	(i)	New GAAP would (compared to Applicable GAAP) have a material effect on the operation of the tests and ratio set out above; and
	(ii)	the ratio of Net Debt to Adjusted Group Operating Cash Flow for the relevant Ratio Period as determined by Clause 17.2 (Financial ratio) is greater than 3:1,
	such financial statements will:
		(A)	be accompanied by a statement from Vodafone, or following a Hive Up, NewTopco containing or appending a reconciliation demonstrating the effect of New GAAP; and
		(B)	for the purpose of calculating the tests and ratio set out above, the relevant financial statements (or consolidated management accounts, where appropriate) will be treated as though adjusted by that reconciliation so as to exclude the effect of New GAAP and the tests and ratio shall be calculated using Applicable GAAP.
(c)	Information from Vodafone's, or following a Hive Up, NewTopco's consolidated management accounts will be disclosed only when the relevant interim or annual financial statements and compliance certificates are delivered to the Agent or as required in connection with Clause 18.5(a)(iii) (Cross Default)
(d)	Any amount outstanding in a currency other than the currency used in the latest consolidated published financial statements (the “base currency”) is to be taken into account at the base currency equivalent of that amount calculated at the rate used in the latest consolidated

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	financial statements delivered to the Agent under Clause 16.2 (Financial information) or the latest consolidated management accounts, as appropriate.
18.	DEFAULT
18.1	Events of Default
	Each of the events set out in Clauses 18.2 (Non-payment) to 18.14 (Litigation) (inclusive) is an Event of Default (whether or not caused by any reason whatsoever outside the control of any Obligor or any other person).
18.2	Non-payment
	An Obligor does not pay within four Business Days of the due date any amount payable by it under the Finance Documents at the place at, and in the currency in, which it is expressed to be payable.
18.3	Breach of other obligations
(a)	Vodafone does not comply with Clause 17 (Financial covenant).
(b)	An Obligor does not comply with any provision of the Finance Documents (other than those referred to in paragraph (a) above or in Clause 18.2 (Non-payment)) and such failure (if capable of remedy before the expiry of such period) continues unremedied for a period of 21 days from the earlier of the date on which (i) such Obligor has become aware of the failure to comply or (ii) the Agent gives notice to Vodafone requiring the same to be remedied.
18.4	Misrepresentation
	A representation or warranty made or repeated by any Obligor in any Finance Document is found to be untrue in any respect material in the context of the Finance Documents when made or deemed to have been made.
18.5	Cross default
(a)	(i)	Any Financial Indebtedness of any Obligor is:
		(A)	not paid when due or within any originally applicable grace period; or
		(B)	declared due, or is capable of being declared due, prior to its specified maturity as a result of an event of default (howsoever described) except this paragraph (i)(B) does not apply to:
			(1)	Financial Indebtedness quoted or listed on a stock exchange; or
			(2)	Financial Indebtedness of an Obligor arising solely under paragraph (f) of the definition of Financial Indebtedness in Clause 1.1 (Definitions) save where:
				(X)	such Financial Indebtedness is incurred under the 364 Day Facility; and
				(Y)	the Guarantors under this Agreement are also Guarantors under and as defined in the 364 Day Facility and all of the

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				Borrowers under this Agreement and under (and as defined in) the 364 Day Facility are not the same; or
	(ii)	any Financial Indebtedness constituted by debt securities quoted or listed on a stock exchange (excluding convertible debt securities) issued by AirTouch or Vodafone Finance BV or Japan Telecom (but in each case only for so long as the creditors of those debt securities have recourse to a member of the Group in respect of those debt securities) is:
		(A)	not paid when due or within any originally applicable grace period; or
		(B)	declared due prior to its specified maturity as a result of failure to pay principal or interest thereunder; or
	(iii)	any Financial Indebtedness of any Principal Subsidiary or any deferred consideration in respect of an Acquisition payable by any Principal Subsidiary is:
		(A)	not paid when due or within any originally applicable grace period; or
		(B)	declared due prior to its specified maturity as a result of an event of default (howsoever described) and is not paid within three Business Days of being declared due,
		except this paragraph (iii) only applies if the ratio of Net Debt (as defined in Clause 17.1) to Adjusted Group Operating Cash Flow (as defined in Clause 17.1) is more than 3.25 for the 12 month period ending on the last day of the most recent financial quarter of Vodafone or, following a Hive Up, NewTopco.
(b)	Paragraph (a) above does not apply:
	(i)	to Project Finance Indebtedness; or
	(ii)	to Financial Indebtedness which in aggregate is less than £100,000,000 (or equivalent currency); or
	(iii)	where the payment or occurrence of the event concerned is being contested in good faith; or
	(iv)	where the default is under a bond and is capable of waiver without bondholder consent; or
	(v)	to Financial Indebtedness owed to a member of the Restricted Group.
18.6	Winding up
	An order is made or an effective resolution is passed for winding up any Obligor or any Principal Subsidiary (except for the purposes of a reconstruction or amalgamation on terms previously approved in writing by the Majority Lenders) or a petition is presented (which is not set aside or withdrawn within the earlier of 30 days of its presentation or by not later than the date for the hearing of such petition) for an administration order or for the winding up of any Obligor or any Principal Subsidiary except where demonstrated to the reasonable satisfaction of the Majority Lenders that any such petition is being contested in good faith.

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18.7	Insolvency process
(a)	A liquidator, administrator, receiver, trustee, sequestrator or similar officer is appointed in respect of all or any part of the assets of any Obligor or any Principal Subsidiary which generates a material part of the revenues of that Obligor or that Principal Subsidiary; or
(b)	any Obligor or any Principal Subsidiary, by reason of financial difficulties, enters into a composition, assignment or arrangement with any class of its creditors.
18.8	Enforcement proceedings
	A distress, execution, attachment or other legal process is levied, enforced or sued out upon or against all or any part of the assets of any Obligor or any Principal Subsidiary which generates a material part of the revenues of that Obligor or that Principal Subsidiary except where the same is being contested in good faith or is removed, discharged or paid within 30 days.
18.9	Insolvency
	Any Obligor or any Principal Subsidiary is deemed under Section 123(1)(e) or 123(2) of the Insolvency Act 1986 to be unable to pay its debts.
18.10	Similar proceedings
	Anything having a substantially similar effect to any of the events specified in Clauses 18.6 (Winding up) to 18.9 (Insolvency) inclusive shall occur under the laws of any applicable jurisdiction in relation to any Obligor or any Principal Subsidiary.
18.11	Unlawfulness
	It is or becomes unlawful for any Obligor to perform any of its payment or other material obligations under the Finance Documents.
18.12	Guarantee
	The guarantee of any Guarantor under Clause 14 (Guarantee) is not effective or is alleged by an Obligor to be ineffective for any reason (other than by reason of written release or waiver by the Finance Parties or in accordance with Clause 14.9 (Removal of Guarantors)).
18.13	Cessation of business
	Any Obligor or any Principal Subsidiary ceases to carry on all or substantially all of its business otherwise than:
	(a)	as a result of a transfer of all or any part of its business to a member of the Restricted Group or
	(b)	as a result of a disposal permitted under Clause 16.9 (Disposals); or
	(c)	with the prior written consent of the Majority Lenders.

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18.14	Litigation
	Any litigation proceedings are current which are reasonably likely to be adversely determined and which would have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their payment obligations under the Finance Documents.

18.15	364 Day Facility
(a)	Any Event of Default (as defined in the 364 Day Facility) has occurred and is continuing.

(b) Paragraph (a) shall only apply where the Guarantors under this Agreement are not Guarantors under and as defined in the 364 Day Facility.

18.16	Acceleration
	On and at any time after the occurrence of an Event of Default while such event is continuing the Agent may, and if so directed by the Majority Lenders, will by notice to Vodafone, declare that an Event of Default has occurred and:

(a) cancel the Total Commitments; and/or

(b) demand that all the Advances, together with accrued interest, and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(c) demand that all the Advances be payable on demand, whereupon they shall immediately become payable on demand.

19.	THE AGENTS AND THE ARRANGERS
19.1	Appointment and duties of the Agents
	Each Finance Party (other than the Agent) irrevocably appoints the Agent to act as its agent under and in connection with the Finance Documents and each Swingline Lender appoints the U.S. Swingline Agent to act as its agent in relation to the Swingline Facility, and each Finance Party irrevocably authorises the Agent or, as the case may be, the U.S. Swingline Agent on its behalf to perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with any other incidental rights, powers and discretions. The Agent or, as the case may be, the U.S. Swingline Agent shall have only those duties which are expressly specified in this Agreement. Those duties are solely of a mechanical and administrative nature.

19.2	Role of the Arrangers
	Except as otherwise provided in this Agreement, no Arranger has any obligations of any kind to any other Party under or in connection with any Finance Document.

19.3	Relationship
	The relationship between the Agent or, as the case may be, the U.S. Swingline Agent and the other Finance Parties is that of agent and principal only. Nothing in this Agreement constitutes the Agent or, as the case may be, the U.S. Swingline Agent as trustee or fiduciary for any other Party or any other person and the Agent or, as the case may be, the U.S.

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	Swingline Agent need not hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys.
19.4	Majority Lenders' directions
(a)	The Agent or, as the case may be, the U.S. Swingline Agent will be fully protected if it acts in accordance with the instructions of the Majority Lenders in connection with the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents. Any such instructions given by the Majority Lenders will be binding on all the Lenders. In the absence of such instructions the Agent or, as the case may be, the U.S. Swingline Agent may act as it considers to be in the best interests of all the Lenders.

(b) Neither the Agent nor the U.S. Swingline Agent is authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document.

19.5	Delegation
	The Agent or, as the case may be, the U.S. Swingline Agent may act under the Finance Documents through its personnel and agents.

19.6	Responsibility for documentation
	Neither the Agent, the U.S. Swingline Agent nor any Arranger is responsible to any other Party for:

(a) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document by any other Party; or

(b) the collectability of amounts payable under any Finance Document; or

(c) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document by any other Party.

19.7

Default

(a)

The Agent or, as the case may be, the U.S. Swingline Agent is not obliged to monitor or enquire as to whether or not a Default has occurred. Neither the Agent nor the U.S. Swingline Agent will be deemed to have knowledge of the occurrence of a Default. However, if the Agent or, as the case may be, the U.S. Swingline Agent receives notice from a Party referring to this Agreement, describing the Default and stating that the event is a Default, it shall promptly notify the Lenders of such notice.

(b) The Agent or, as the case may be, the U.S. Swingline Agent may require the receipt of security satisfactory to it whether by way of payment in advance or otherwise, against any liability or loss which it will or may incur in taking any proceedings or action arising out of or in connection with any Finance Document before it commences these proceedings or takes that action.

19.8	Exoneration
(a)	Without limiting paragraph (b) below, the Agent or, as the case may be, the U.S. Swingline Agent will not be liable to any other Party for any action taken or not taken by it under or in

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connection with any Finance Document, unless directly caused by its negligence or wilful misconduct or breach of any of its obligations under or in connection with the Finance Documents.

(b)

No Party may take any proceedings against any officer, employee or agent being an individual of the Agent or, as the case may be, the U.S. Swingline Agent in respect of any claim it might have against the Agent or, as the case may be, the U.S. Swingline Agent or in respect of any act or omission of any kind (including negligence or wilful misconduct) by that officer, employee or agent in relation to any Finance Document.

(c) Any officer, employee or agent being an individual of the Agent, or as the case may be, the U.S. Swingline Agent may rely on paragraph (b) above and enforce its terms under the Contract (Rights of Third Parties) Act 1999.

19.9	Reliance
	The Agent or, as the case may be, the U.S. Swingline Agent may:

(a) rely on any notice or document reasonably believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;

(b) rely on any statement made by a director or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and

(c) engage, pay for and rely on legal or other professional advisers selected by it (including those in the Agent's or, as the case may be, the U.S. Swingline Agent's employment and those representing a Party other than the Agent or, as the case may be, the U.S. Swingline Agent).

19.10	Credit approval and appraisal
	Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms that it:

(a) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Agent, the U.S. Swingline Agent or the Arrangers in connection with any Finance Document; and

(b) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

19.11	Information
(a)	The Agent or, as the case may be, the U.S. Swingline Agent shall promptly forward to the person concerned the original or a copy of any document which is delivered to the Agent or, as the case may be, the U.S. Swingline Agent by a Party for that person.

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(b) The Agent shall promptly supply a Lender with a copy of each document received by the Agent under Clauses 4 (Conditions precedent), 26.4 (Additional Guarantors) or 26.5 (Additional Borrowers) upon the request and at the expense of that Lender.

(c) Except where this Agreement specifically provides otherwise, the Agent or, as the case may be, the U.S. Swingline Agent is not obliged to review or check the accuracy or completeness of any document it forwards to another Party.

(d) Except as provided above, the Agent or, as the case may be, the U.S. Swingline Agent has no duty:

(i) either initially or on a continuing basis to provide any Lender with any credit or other information concerning the financial condition or affairs of any Obligor or any related entity of any Obligor whether coming into its possession or that of any of its related entities before, on or after the Signing Date; or

(ii) unless specifically requested to do so by a Lender in accordance with this Agreement, to request any certificates or other documents from any Obligor.

19.12	The Agent, the U.S. Swingline Agent and the Arrangers individually
(a)	If it is also a Lender, each of the Agent, the U.S. Swingline Agent and the Arrangers has the same rights and powers under this Agreement as any other Lender and may exercise those rights and powers as though it were not the Agent, the U.S. Swingline Agent or an Arranger.

(b) Each of the Agent, the U.S. Swingline Agent and the Arrangers may:

(i) carry on any business with an Obligor or its related entities;

(ii) act as agent or trustee for, or in relation to any financing involving, an Obligor or its related entities; and

(iii) retain any profits or remuneration in connection with its activities under the Finance Documents, or in relation to any of the foregoing.

19.13

Indemnities

(a)

Without limiting the liability of any Obligor under the Finance Documents, each Lender shall forthwith on demand indemnify the Agent or, as the case may be, the U.S. Swingline Agent for its proportion of any liability or loss incurred by the Agent or, as the case may be, the U.S. Swingline Agent in any way relating to or arising out of its acting as the Agent or, as the case may be, the U.S. Swingline Agent, except to the extent that the liability or loss arises directly from the Agent's or, as the case may be, the U.S. Swingline Agent's negligence or wilful misconduct.

(b) A Lender's proportion of the liability or loss set out in paragraph (a) above is the proportion which its Commitment bears to the Total Commitments at the date of demand or, if the Total Commitments have been cancelled, bore to the Total Commitments immediately before being cancelled.

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19.14	Compliance
(a)	The Agent or, as the case may be, the U.S. Swingline Agent, may refrain from doing anything which might, in its reasonable opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its reasonable opinion, is necessary or desirable to comply with any law or regulation of any jurisdiction.

(b) Without limiting paragraph (a) above, the Agent or, as the case may be, the U.S. Swingline Agent, need not disclose any information relating to any Obligor or any of its related entities if the disclosure might, in the opinion of the Agent or, as the case may be, the U.S. Swingline Agent, constitute a breach of any law or regulation or any duty of secrecy or confidentiality or be otherwise actionable at the suit of any person.

19.15

Resignation of the Agent or the U.S. Swingline Agent

(a)

Notwithstanding its irrevocable appointment, the Agent or, as the case may be, the U.S. Swingline Agent, may resign by giving notice to the Lenders and Vodafone, in which case the Agent or, as the case may be, the U.S. Swingline Agent, may forthwith appoint one of its Affiliates as successor Agent or, failing that, the Majority Lenders may after consultation with Vodafone appoint a reputable and experienced bank as successor Agent or, as the case may be, successor U.S. Swingline Agent.

(b) If the appointment of a successor Agent or, as the case may be, successor U.S. Swingline Agent is to be made by the Majority Lenders but they have not, within 30 days after notice of resignation, appointed a successor Agent or, as the case may be, successor U.S. Swingline Agent which accepts the appointment, the retiring Agent or, as the case may be, the retiring U.S. Swingline Agent may, following consultation with Vodafone, appoint a successor Agent or, as the case may be, successor U.S. Swingline Agent.

(c) The resignation of the retiring Agent or, as the case may be, retiring U.S. Swingline Agent and the appointment of any successor Agent or, as the case may be, successor U.S. Swingline Agent will both become effective only upon the successor Agent or, as the case may be, successor U.S. Swingline Agent notifying all the Parties that it accepts the appointment. On giving the notification and receiving such approval, the successor Agent or, as the case may be, successor U.S. Swingline Agent will succeed to the position of the retiring Agent or, as the case may be, retiring U.S. Swingline Agent and the term “Agent” or, as the case may be, “U.S. Swingline Agent” will mean the successor Agent or, as the case may be, successor U.S. Swingline Agent.

(d) The retiring Agent or, as the case may be, retiring U.S. Swingline Agent shall, at its own cost, make available to the successor Agent or, as the case may be, successor U.S. Swingline Agent such documents and records and provide such assistance as the successor Agent or, as the case may be, successor U.S. Swingline Agent may reasonably request for the purposes of performing its functions as the Agent or, as the case may be, the U.S. Swingline Agent under this Agreement.

(e) Upon its resignation becoming effective, this Clause 19 shall continue to benefit the retiring Agent or, as the case may be, retiring U.S. Swingline Agent in respect of any action taken or not taken by it under or in connection with the Finance Documents while it was the Agent or, as the case may be, the U.S. Swingline Agent, and, subject to paragraph (d) above, it shall have no further obligation under any Finance Document.

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(f)

The Majority Lenders may by notice to the Agent or, as the case may be, the U.S. Swingline Agent, require it to resign in accordance with paragraph (a) above. In this event, the Agent or, as the case may be, the U.S. Swingline Agent shall resign in accordance with paragraph (a) above but it shall not be entitled to appoint one of its Affiliates as successor Agent or successor U.S. Swingline Agent.

19.16

Lenders

	The Agent or, as the case may be, the U.S. Swingline Agent may treat each Lender as a Lender, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received notice from the Lender to the contrary by not less than five Business Days prior to the relevant payment.
19.17	Chinese wall

	In acting as Agent, U.S. Swingline Agent or Arranger, the agency and syndications division of each of the Agent, the U.S. Swingline Agent and each Arranger shall be treated as a separate entity from its other divisions and departments. Any information acquired at any time by the Agent, the U.S. Swingline Agent or any Arranger otherwise than in the capacity of Agent, U.S. Swingline Agent or Arranger through its agency and syndications division (whether as financial advisor to any member of the Group or otherwise) may be treated as confidential by the Agent, U.S. Swingline Agent or Arranger and shall not be deemed to be information possessed by the Agent, U.S. Swingline Agent or Arranger in their capacity as such. Each Finance Party acknowledges that the Agent, the U.S. Swingline Agent and the Arrangers may, now or in the future, be in possession of, or provided with, information relating to the Obligors which has not or will not be provided to the other Finance Parties. Each Finance Party agrees that, except as expressly provided in this Agreement, none of the Agent, U.S. Swingline Agent or any Arranger will be under any obligation to provide, or under any liability for failure to provide, any such information to the other Finance Parties.
20.	FEES
20.1	Commitment fee

(a) Vodafone shall pay to the Agent for distribution to each Lender pro rata to the proportion its Revolving Credit Commitment bears to the Total Commitments from time to time a commitment fee at the rate of 0.125 per cent. per annum on any undrawn, uncancelled amount of the Total Commitments on each day.

(b)

Commitment fee is calculated and accrues on a daily basis on and from the Signing Date and is payable quarterly in arrear. Accrued and unpaid commitment fee is also payable to the Agent for the relevant Lender(s) on any amount of its Revolving Credit Commitment, which is cancelled voluntarily by the Borrower at the time the cancellation takes effect (but only in respect of the period up to the date of cancellation).

20.2

Agent's fee

	Vodafone shall pay to the Agent for its own account an agency fee in the amounts and on the dates agreed in the relevant Fee Letter.
20.3	Front-end fees

(a) Vodafone shall pay to the Agent for the Original Lenders as at the Signing Date a front-end fee in the amount and on the date specified in the relevant Fee Letter.

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(b)	If so agreed between Vodafone and an Additional Lender, Vodafone shall pay to such Additional Lender a front-end fee in the amounts and on the dates specified in the relevant Fee Letter.
20.4	VAT

	Any fee referred to in this Clause 20 is exclusive of any United Kingdom value added tax. If any value added tax is so chargeable, it shall be paid by Vodafone at the same time as it pays the relevant fee.
21.	EXPENSES
21.1	Initial and special costs

Vodafone shall forthwith on demand pay the Agent, the U.S. Swingline Agent and the Arrangers the amount of all out-of-pocket costs and expenses (including but not limited to legal fees up to an amount agreed, in the case of (a)(i) below, with the Arrangers) reasonably incurred by any of them in connection with:

(a) the negotiation, preparation, printing and execution of:

(i) this Agreement and any other documents referred to in this Agreement; and

(ii) any other Finance Document (other than a Novation Certificate) executed after the Signing Date;

(b) any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested by or on behalf of an Obligor and relating to a Finance Document or a document referred to in any Finance Document or any amendment to this Agreement to reflect a change in currency of a country pursuant to Clause 9.4(d) (Currency); and

	(c)	any other agency matter not of an ordinary administrative nature, arising out of or in connection with a Finance Document in the amount agreed between the Agent and Vodafone at the relevant time.
21.2	Enforcement costs

Vodafone shall within five Business Days of receiving written demand pay to each Finance Party the amount of all costs and expenses (including but not limited to legal fees) incurred (or in the case of (b) below reasonably incurred) by it:

	(a)	in connection with the enforcement of any Finance Document; or
	(b)	in connection with the preservation of any rights under any Finance Document.
22.	STAMP DUTIES

Vodafone shall pay and within five Business Days of receiving written demand indemnify each Finance Party against any liability it incurs in respect of any stamp, registration or similar tax which is or becomes payable in any jurisdiction in or through which any payment

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	under the Finance Documents is made or any Obligor is incorporated or has any assets in connection with the entry into, performance or enforcement of any Finance Document.
23.	INDEMNITIES
23.1	Currency indemnity
(a)	If a Finance Party receives an amount in respect of an Obligor's liability under the Finance Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the “contractual currency”) in which the amount is expressed to be payable under the relevant Finance Document:

(i) that Obligor shall indemnify that Finance Party as an independent obligation against any loss or liability arising out of or as a result of the conversion;

(ii) if the amount received by that Finance Party, when converted into the contractual currency at a market rate in the usual course of its business, is less than the amount owed in the contractual currency, the Obligor concerned shall forthwith on demand pay to that Finance Party an amount in the contractual currency equal to the deficit (provided that if the amount received by the Finance Party following such conversion is greater than the amount owed, the Finance Party shall pay to such Obligor an amount equal to the excess); and

(iii) the Obligor shall pay to the Finance Party concerned on demand any exchange costs and taxes payable in connection with any such conversion.

(b)	Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.
23.2	Other indemnities

Vodafone shall forthwith on demand indemnify each Finance Party against any loss or liability which that Finance Party incurs as a consequence of:

(a) the occurrence of any Default; or

(b) the operation of Clause 18.15 (Acceleration); or

(c) any payment of principal or an overdue amount being received from any source otherwise than on its Maturity Date (and, for the purposes of this paragraph (c), the Maturity Date of an overdue amount is the last day of each Designated Term (as defined in Clause 8.3 (Default interest))); or

(d) a Default or an action or omission by an Obligor resulting in an Advance not being disbursed after a Borrower has delivered a Request for that Advance.

Vodafone's liability in each case includes any loss or expense, (excluding loss of Margin) in respect or on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Advance.

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23.3	Breakage costs
	If a Finance Party receives or recovers any payment of principal of an Advance or of an overdue amount other than on its Maturity Date or Designated Term for the purposes of calculation of the amount payable by Vodafone under sub-clause (c) of Clause 23.2 (Other indemnities) in respect of the amount so received or recovered, that Finance Party shall calculate:

(a) the additional interest (excluding the Margin) which would have been payable on the principal so received or recovered had it been received or recovered on the relevant Maturity Date or Designated Term; and

(b) the amount of interest which would have been payable to that Finance Party on the relevant Maturity Date or Designated Term concerned in respect of a deposit by that Finance Party in the currency of the amount received or recovered placed with a prime bank in London earning interest from (and including) the earliest Business Day for placing deposits in such currency following receipt of that amount up to (but excluding) the relevant Maturity Date or Designated Term,

	and if the amount payable under paragraph (a) above is greater than the amount payable under paragraph (b), Vodafone will, forthwith on receipt of a demand from the relevant Finance Party pursuant to sub-clause (c) of Clause 23.2 (Other indemnities), pay to that Finance Party an amount equal to the difference between the amount payable under (a) and (b) above.
24.	EVIDENCE AND CALCULATIONS
24.1	Accounts

Accounts maintained by a Finance Party in connection with this Agreement are prima facie evidence of the matters to which they relate (except in a case of manifest error).

24.2	Certificates and determinations
	Any certification or determination by a Finance Party of a rate or amount under this Agreement is, in the absence of manifest error, prima facie evidence of the matters to which it relates.
24.3	Calculations
`

	Interest and the fees payable under Clauses 20.1 (Commitment fee) and 20.2 (Utilisation fee) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days, or, in the case of interest at the Swingline Rate or any interest payable in an amount denominated in Sterling, 365 days.
25.	AMENDMENTS AND WAIVERS
25.1	Procedure

(a) Subject to Clause 25.2 (Exceptions and Clause 25.3 (NewTopco), any term of the Finance Documents may be amended or waived with the agreement of Vodafone and the Majority Lenders. The Agent may effect, on behalf of the Lenders, an amendment to which the Majority Lenders have agreed.

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(b)	The Agent shall promptly notify the other Parties of any amendment or waiver effected under paragraph (a) above, and any such amendment or waiver shall be binding on all the Parties.
25.2	Exceptions

An amendment or waiver which relates to:

(a) the definition of "Majority Lenders" in Clause 1.1 (Definitions); or

(b) an extension of the date for, or a decrease in an amount or a change in the currency of, any payment under the Finance Documents; or

(c) an increase in or extension of a Lender's Commitment or a change to the Margin; or

(d) a change in the guarantee under Clause 14 (Guarantee) otherwise than in accordance with Clause 26.4 (Additional Guarantors) or Clause 14.9 (Removal of Guarantors); or

(e) a term of a Finance Document which expressly requires the consent of each Lender; or

(f)      Clause 29 (Pro rata Sharing) or this Clause 25; or

(g)      any Term exceeding six months,

	may not be effected without the consent of each Lender. Any amendment or waiver which changes, or relates to the rights and/or obligations of the Agent or U.S. Swingline Agent shall also require the Agent's or the U.S. Swingline Agent's (as applicable) agreement.
25.3	NewTopco

Any amendment substituting a reference to Vodafone with a reference to NewTopco:

(a)      to any procedural or administrative provision of this Agreement; or

(b) which puts the Parties in substantially the same position as applied prior to the Hive Up,

	may be effected by agreement between NewTopco and the Agent.
25.4	Waivers and remedies cumulative

The rights of each Party under the Finance Documents:

(a)      may be exercised as often as necessary;

(b)      are cumulative and not exclusive of its rights under the general law; and

(c)      may be waived only in writing and specifically.

Delay in exercising or non-exercise of any such right is not a waiver of that right.

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26.	CHANGES TO THE PARTIES
26.1	Transfers by Obligors
(a)	No Obligor may assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under this Agreement provided that without any further consent from the Lenders or the Agent it may, subject to Clause 26.1(b) below and provided that no Default is continuing or would result from any such transfer, transfer its rights and obligations under this Agreement to NewTopco or any Intermediate Holding Company and NewTopco or the Intermediate Holding Company will execute a document, or documents, in favour of the Lenders in form and substance the same as this Agreement, with references to such Obligor in this Agreement amended to mean NewTopco or such Intermediate Holding Company (as applicable), provided that if such transfer is to an Intermediate Holding Company, the Agent may, within 30 days of receipt of notification of such transfer, require NewTopco to accede as a Guarantor.
(b)	The transfer of rights and obligations under this Agreement to NewTopco or any Intermediate Holding Company shall not require the consent of the Lenders or the Agent provided that NewTopco or the Intermediate Holding Company, as applicable, is incorporated and tax resident in the United Kingdom or in the United States and prior to such transfer Vodafone provides satisfactory evidence to the Agent that it is tax resident in one of those jurisdictions. The prior written consent of the Majority Lenders shall be required in relation to the transfer of rights and obligations to a NewTopco or an Intermediate Holding Company incorporated elsewhere.
26.2	Transfers by Lenders
(a)	A Lender (the “Existing Lender”) may at any time assign, transfer or novate any of its rights and/or obligations under this Agreement to another person (the “New Lender”) provided that:
	(i)	in the case of a partial assignment, transfer or novation of rights and/or obligations, a minimum amount of U.S.$10,000,000 in aggregate and in multiples of U.S.$1,000,000 (unless to an Affiliate or to a Lender or the Agent agrees otherwise) must be assigned, transferred or novated; and
	(ii)	in the case of an assignment, transfer or novation by a Swingline Lender, a portion of that Swingline Lender's Swingline Commitment must also be assigned, transferred or novated to the extent necessary (if at all) to ensure that the Swingline Lender's Swingline Commitment does not exceed its Commitment after the assignment, transfer or novation.
(b)	A transfer of obligations will be effective only if either:
	(i)	the obligations are novated in accordance with Clause 26.4 (Procedure for novations); or
	(ii)	the New Lender gives prior written notice to Vodafone and confirms to the Agent and Vodafone that it undertakes to be bound by the terms of this Agreement as a Lender in form and substance satisfactory to the Agent. On the transfer becoming effective in this manner the Existing Lender shall be relieved of its obligations under this Agreement to the extent that they are transferred to the New Lender.

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(c)	No assignment, transfer or novation requires the consent of any Obligor but the Existing Lender must notify Vodafone (except in relation to an assignment, transfer or novation to an Affiliate) within three Business Days of such an assignment, transfer or novation taking effect of the name of the New Lender, the date it takes effect and the reasons for the transfer.
(d)	Nothing in this Agreement restricts the ability of a Lender to sub-contract an obligation if that Lender remains liable under this Agreement for that obligation.
(e)	On each occasion an Existing Lender assigns, transfers or novates any of its rights and/or obligations under this Agreement (other than to an Affiliate), the New Lender shall, on the date the assignment, transfer and/or novation takes effect, pay to the Agent for its own account a fee of £1,000.
(f)	An Existing Lender is not responsible to a New Lender for:
	(i)	the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document; or
	(ii)	the collectability of amounts payable under any Finance Document; or
	(iii)	the accuracy of any statements (whether written or oral) made in connection with any Finance Document.
(g)	Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
	(i)	has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and
	(ii)	will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under this Agreement or any Commitment is in force.
(h)	Nothing in any Finance Document obliges an Existing Lender to:
	(i)	accept a re-transfer from a New Lender of any of the rights and/or obligations assigned, transferred or novated under this Clause 26; or
	(ii)	support any losses incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under this Agreement or otherwise.
(i)	Any reference in this Agreement to a Lender includes a New Lender but excludes a Lender if no amount is or may be owed to or by it under this Agreement and its Commitment has been cancelled or reduced to nil.
(j)	If any assignment, transfer or novation results either:
	(i)	at the time of the assignment, transfer or novation; or
	(ii)	at any future time where the additional amount was caused as a result of laws and/or regulations in force at the date of the assignment, transfer or novation,

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	in additional amounts becoming due under Clause 10 (Taxes) or amounts becoming due under Clause 12 (Increased costs), the New Lender shall be entitled to receive such additional amounts only to the extent that the Existing Lender would have been so entitled had there been no such assignment, transfer or novation.
26.3	Affiliates of Lenders
(a)	Each Lender may fulfil its obligations in respect of any Advance through an Affiliate if:
	(i)	the relevant Affiliate is specified in this Agreement as a Lender or becomes a Lender by means of a Novation Certificate in accordance with this Agreement and subject to any consent required under Clause 26.2 (Transfers by Lenders); and
	(ii)	the Advances in which that Affiliate will participate are specified in this Agreement or in a notice given by that Lender to the Facility Agent.
	In this event, the Lender and the Affiliate will participate in Advances in the manner provided for in sub-paragraph (ii) above.
(b)	If paragraph (a) above applies, the Lender and its Affiliate will be treated as having a single Commitment and a single vote, but, for all other purposes, will be treated as separate Lenders.
26.4	Procedure for novations
(a)	A novation is effected if:
	(i)	the Existing Lender and the New Lender deliver to the Agent a duly completed certificate (a “Novation Certificate”), substantially in the form of Part I of Schedule 5, with such amendments as the Agent approves to achieve a substantially similar effect (which may be delivered by fax and confirmed by delivery of a hard copy original but the fax will be effective irrespective of whether confirmation is received); and
	(ii)	the Agent executes it (as soon as practicable for it to do so).
(b)	Each Party (other than the Existing Lender and the New Lender) irrevocably authorises the Agent to execute any duly completed Novation Certificate on its behalf.
(c)	To the extent that they are expressed to be the subject of the novation in the Novation Certificate:
	(i)	the Existing Lender and the other Parties (the “existing Parties”) will be released from their obligations to each other (the “discharged obligations”);
	(ii)	the New Lender and the existing Parties will assume obligations towards each other which differ from the discharged obligations only insofar as they are owed to or assumed by the New Lender instead of the Existing Lender;
	(iii)	the rights of the Existing Lender against the existing Parties and vice versa (the “discharged rights”) will be cancelled; and

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	(iv)	the New Lender and the existing Parties will acquire rights against each other which differ from the discharged rights only insofar as they are exercisable by or against the New Lender instead of the Existing Lender,
	all on the date of execution of the Novation Certificate by the Agent or, if later, the date specified in the Novation Certificate.
(d)	If the effective date of a novation is after the date a Request is received by the Agent but before the date the requested Advance is disbursed to the relevant Borrower, the Existing Lender shall be obliged to participate in that Advance in respect of its discharged obligations notwithstanding that novation, and the New Lender shall reimburse the Existing Lender for its participation in that Advance and all interest and fees thereon up to the date of reimbursement (in each case to the extent attributable to the discharged obligations) within three Business Days of the Drawdown Date of that Advance.
26.5	Additional Guarantors
(a)	(i)	Vodafone will procure that NewTopco and any Intermediate Holding Company of Vodafone will become an Additional Guarantor on or before the Reorganisation Date by executing and delivering the documents set out in paragraph (iii) below on or before the Reorganisation Date.
	(ii)	Subject to Vodafone's prior written consent, any other member of the Group may become an Additional Guarantor.
	(iii)	The relevant company will become an Additional Guarantor upon:
		(A)	the delivery to the Agent of a Guarantor Accession Agreement duly executed by that company; and
		(B)	delivery to the Agent of all those other documents listed in Part II of Schedule 2, in each case in the agreed form or in such other form and substance satisfactory to the Agent.
(b)	The execution of a Guarantor Accession Agreement constitutes confirmation by the Additional Guarantor concerned that the representations and warranties set out in Clauses 15.1 (Representations and warranties) to 15.6 (Authorisations) to be made by it on the date of the Guarantor Accession Agreement are correct, as if made with reference to the facts and circumstances then existing.
26.6	Additional Borrowers
(a)	(i)	Any member of the Restricted Group, or following a Hive Up (and subject to the proviso below), NewTopco or any Intermediate Holding Company incorporated and tax resident in the United Kingdom or in the United States or, subject to the prior written consent of the Majority Lenders, elsewhere which Vodafone nominates may become an Additional Borrower provided that on or prior to the date on which NewTopco or any Intermediate Holding Company accedes as an Additional Borrower it also accedes as an Additional Guarantor.
	(ii)	The relevant member of the Restricted Group will become an Additional Borrower upon:

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		(A)	the delivery to the Agent of a Borrower Accession Agreement duly executed by that member of the Restricted Group; and
		(B)	delivery to the Agent of all those other documents listed in Part III of Schedule 2, in each case in the agreed form or in such other form and substance satisfactory to the Agent.
(b)	The execution of a Borrower Accession Agreement constitutes confirmation by the Additional Borrower concerned that the representations and warranties set out in Clauses 15.1 (Representations and warranties) to 15.6 (Authorisations) to be made by it on the date of the Borrower Accession Agreement are correct, as if made with reference to the facts and circumstances then existing.
26.7	Removal of Borrowers
(a)	Any Borrower (other than Vodafone (subject to Clause 26.7(b) below) or, if applicable, NewTopco) which has no liabilities to the Finance Parties in respect of outstanding Advances or any other liabilities to the Finance Parties under the Finance Documents (other than as a Guarantor) may, at the request of Vodafone and if no Default is outstanding, cease to be a Borrower by entering into a supplemental agreement to this Agreement at the cost of Vodafone in such form as the Agent may reasonably require which shall discharge that Borrowers' obligations as a Borrower under this Agreement.
(b)	If on the Reorganisation Date:
	(i)	NewTopco and any Intermediate Holding Company has acceded as a Guarantor in accordance with Clause 26.5 (Additional Guarantors);
	(ii)	Vodafone has no liabilities to the Finance Parties in respect of outstanding Advances or any other liabilities to the Finance Parties under the Finance Documents (other than as a Guarantor); and
	(iii)	no Default is continuing,
	Vodafone may cease to be a Borrower with effect from the Reorganisation Date by entering into a supplemental agreement to this Agreement at the cost of Vodafone or NewTopco in such form as the Agent may reasonably require which shall discharge Vodafone's obligations as a Borrower under this Agreement.
26.8	Reference Banks
	If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with Vodafone) appoint another Lender or an Affiliate of a Lender which is not a Reference Bank to replace that Reference Bank.
26.9	Register
	The Agent shall keep a register of all the Parties including in the case of Lenders the details of their Facility Office notified to the Agent from time to time, and shall supply any other Party (at that Party's expense) with a copy of the register on request.

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27.	DISCLOSURE OF INFORMATION
(a)	A Lender may disclose to any of its Affiliates or any person with whom it is proposing to enter, or has entered into, any kind of transfer, participation or other agreement in relation to this Agreement:
	(i)	a copy of any Finance Document; and
	(ii)	any information which that Lender has acquired under or in connection with any Finance Document,
	provided that a Lender shall not disclose any such information to a person other than one of its Affiliates unless that person has provided to that Lender a confidentiality undertaking addressed to that Lender and Vodafone substantially in the form of Schedule 6 or such other form as Vodafone may approve.
(b)	Paragraphs 1(a), 1(c), 2(b), 3, 6, 8, 9 and 12 of Schedule 6 (Form of confidentiality undertaking from new Lender) shall be deemed to be incorporated herein as if set out in full (mutatis mutandis), but as if references therein to "we" were to each Finance Party and references to "you" were to Vodafone.
28.	SET-OFF
28.1	Contractual set-off
	Whilst an Event of Default subsists, each Obligor authorises each Finance Party to apply any credit balance to which that Obligor is entitled on any account of that Obligor with that Finance Party in satisfaction of any sum due and payable from that Obligor to that Finance Party under the Finance Documents but unpaid. For this purpose, each Finance Party is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application.
28.2	Set-off not mandatory
	No Finance Party shall be obliged to exercise any right given to it by Clause 28.1 (Contractual set-off).
28.3	Notice of set-off
	Any Finance Party exercising its rights under Clause 28.1 (Contractual set-off) shall notify Vodafone promptly after set-off is applied.
29.	PRO RATA SHARING
29.1	Redistribution
	If any amount owing by an Obligor under any Finance Document to a Finance Party (the “recovering Finance Party”) is discharged by payment, set-off or any other manner other than through the Agent in accordance with Clause 9 (Payments) (a “recovery”), then:
	(a)	the recovering Finance Party shall, within three Business Days, notify details of the recovery to the Agent;

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	(b)	the Agent shall determine whether the recovery is in excess of the amount which the recovering Finance Party would have received had the recovery been received by the Agent and distributed in accordance with Clause 9 (Payments);
	(c)	subject to Clause 29.3 (Exceptions), the recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the “redistribution”) equal to the excess;
	(d)	the Agent shall treat the redistribution as if it were a payment by the Obligor concerned under Clause 9 (Payments) and shall pay the redistribution to the Finance Parties (other than the recovering Finance Party) in accordance with Clause 9.7 (Partial payments); and
	(e)	after payment of the full redistribution, the recovering Finance Party will be subrogated to the portion of the claims paid under paragraph (d) above, and that Obligor will owe the recovering Finance Party a debt which is equal to the redistribution, immediately payable and of the type originally discharged.
29.2	Reversal of redistribution
	If under Clause 29.1 (Redistribution):
	(a)	a recovering Finance Party must subsequently return a recovery, or an amount measured by reference to a recovery, to an Obligor; and
	(b)	the recovering Finance Party has paid a redistribution in relation to that recovery,
	each Finance Party shall, within three Business Days of demand by the recovering Finance Party through the Agent, reimburse the recovering Finance Party all or the appropriate portion of the redistribution paid to that Finance Party. Thereupon the subrogation in Clause 29.1(e) (Redistribution) will operate in reverse to the extent of the reimbursement.
29.3	Exceptions
(a)	A recovering Finance Party need not pay a redistribution to the extent that it would not, after the payment, have a valid claim against the Obligor concerned in the amount of the redistribution pursuant to Clause 29.1(e) (Redistribution).
(b)	A recovering Finance Party is not obliged to share with any other Finance Party any amount which the recovering Finance Party has received or recovered as a result of taking legal proceedings, if the other Finance Party had an opportunity to participate in those legal proceedings but did not do so and did not take separate legal proceedings.
30.	SEVERABILITY
	If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:
	(a)	the legality, validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or
	(b)	the legality, validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents.

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31.	COUNTERPARTS
	This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.
32.	NOTICES
32.1	Giving of notices
(a)	All notices or other communications under or in connection with this Agreement shall be given in writing or by facsimile. Any such notice will be deemed to be given as follows:
	(i)	if in writing, when delivered; and
	(ii)	if by facsimile, when received.
	However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.
(b)	Any Party may agree with any other Party to give and receive notices by telex in which case the notice will be deemed given when the correct answerback is received.
32.2	Addresses for notices
(a)	The address and facsimile number of each Party (other than the Agent, the U.S. Swingline Agent and Vodafone) for all notices under or in connection with this Agreement are:
	(i)	that notified by that Party for this purpose to the Agent on or before it becomes a Party; or
	(ii)	any other notified by that Party for this purpose to the Agent by not less than five Business Days' notice.
(b)	The address and facsimile numbers of the Agent are:
	The Royal Bank of Scotland Plc
	2.5 Devonshire Square
	London
	EC2M 4BB

Contact:	Loans Admin Unit
Telephone:	020 7672 6284
Facsimile:	020 7615 7673
or such other as the Agent may notify to the other Parties by not less than five Business Days' notice.

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(c)	The address and facsimile numbers of the U.S. Swingline Agent are:
	The Royal Bank of Scotland Plc
	10th Floor, 101 Park Avenue
	New York, USA
	10178

	Contact:	Loans Admin Unit, Sheila Shaw
	Telephone:	001 212 401 1406
	Facsimile:	001 212 401 1494
	or such other as the U.S. Swingline Agent may notify to the other Parties by not less than five Business Days' notice.
(d)	The addresses and facsimile numbers of Vodafone are:
	Vodafone Group Plc
	Vodafone House
	The Connection
	Newbury RG14 2FN
	Contact:	Group Treasurer
	Telephone:	01635 676 107
	Facsimile:	01635 676 746
	or such other as Vodafone may notify to the other Parties by not less than five Business Days' notice.
(e)	The Agent shall, promptly upon request from any Party, give to that Party the address or facsimile number of any other Party applicable at the time for the purposes of this Clause 32.
33.	LANGUAGE
(a)	Any notice given under or in connection with any Finance Document shall be in English.
(b)	All other documents provided under or in connection with any Finance Document shall be:

	(i)	in English; or
	(ii)	if not in English, accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document.
34.	JURISDICTION
34.1	Submission
	For the benefit of each Finance Party, each Obligor agrees that the courts of England have jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of the English courts.

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34.2	Service of process
	Without prejudice to any other mode of service, each Obligor (other than an Obligor incorporated in England and Wales):
	(a)	irrevocably appoints Vodafone as its agent for service of process relating to any proceedings before the English courts in connection with any Finance Document (and Vodafone accepts this appointment);
	(b)	agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned;
	(c)	consents to the service of process relating to any such proceedings by prepaid posting of a copy of the process to its address for the time being applying under Clause 32.2 (Addresses for notices); and
	(d)	agrees that if the appointment of any person mentioned in paragraph (a) or (b) above ceases to be effective, the relevant Obligor shall immediately appoint a further person in England to accept service of process on its behalf in England and, failing such appointment within 15 days, the Agent is entitled to appoint such a person by notice to Vodafone.
34.3	Forum convenience and enforcement abroad
	Each Obligor:
	(a)	waives objection to the English courts on grounds of inconvenient forum or otherwise as regards proceedings in connection with a Finance Document; and
	(b)	agrees that a judgment or order of an English court in connection with a Finance Document is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.
34.4	Non-exclusivity
	Nothing in this Clause 34 limits the right of a Finance Party to bring proceedings against an Obligor in connection with any Finance Document:
	(a)	in any other court of competent jurisdiction; or
	(b)	concurrently in more than one jurisdiction.
35.	GOVERNING LAW
	This Agreement is governed by English law.
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1

PART I

LENDERS AND COMMITMENTS

Commitments
U.S.$

Original Lender	Commitment (U.S.$)
ABN Amro Bank N.V	175,000,000
Banco Bilbao Vizcaya Argentaria S.A. (London Branch)	175,000,000
Bank of America, N.A.	175,000,000
Barclays Bank PLC	175,000,000
Bayerische Hypo-und Vereinsbank AG	175,000,000
Bayerische Landesbank, London Branch	175,000,000
BNP Paribas (acting through its London Branch)	175,000,000
Citibank, N.A.	175,000,000
Commerzbank Aktiengesellschaft, London Branch	175,000,000
Credit Agricole Indosuez	175,000,000
Deutsche Bank AG London	175,000,000
HSBC Bank plc	175,000,000
ING Bank, N.V., London Branch	175,000,000
JPMorgan Chase Bank	175,000,000
Lehman Brothers Bankhaus AG, London Branch	175,000,000
Lloyds TSB Bank plc	175,000,000
Mizuho Corporate Bank, Ltd.	175,000,000
National Australia Bank Limited ABN 12 004 044 937	175,000,000
Sumitomo Mitsui Banking Corporation Europe Limited	175,000,000
The Bank of Tokyo-Mitsubishi, Ltd.	175,000,000
The Royal Bank of Scotland Plc	175,000,000
UBS AG, London Branch	175,000,000
WestLB AG, London Branch	175,000,000
William Street Commitment Corporation	175,000,000
Banco Santander Central Hispano, S.A. London Branch	93,333,333
Banca Intesa SpA	93,333,333
KBC Bank NV	93,333,333

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Original Lender	Commitment
SANPAOLO IMI BANK IRELAND PLC	93,333,333
Standard Chartered Bank	93,333,333
TD Bank Europe Limited	93,333,333
The Bank of New York	93,333,333
Total	U.S.$ 4,853,333,331

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PART II

SWINGLINE LENDERS AND SWINGLINE COMMITMENTS

Swingline Lender	Swingline Commitments U.S.$
ABN Amro Bank N.V	175,000,000
Bank of America, N.A.	175,000,000
Barclays Bank PLC	175,000,000
BNP Paribas, New York Branch	175,000,000
Citibank, N.A.	175,000,000
Deutsche Bank AG New York	175,000,000
HSBC Bank plc	175,000,000
JPMorgan Chase Bank New York International Facility (IBF)	175,000,000
Lloyds TSB Bank plc	175,000,000
The Royal Bank of Scotland Plc (New York Branch)	175,000,000
UBS AG, Grand Cayman Branch	175,000,000
WestLB AG, New York Branch	175,000,000
Total	U.S.$2,100,000,000

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PART III

MANDATED LEAD ARRANGERS

ABN Amro Bank N.V.
Banc of America Securities Limited
Banco Bilbao Vizcaya Argentaria S.A. (London Branch)
Barclays Capital (the Investment Banking Division of Barclays Bank PLC)
Bayerische Hypo-und Vereinsbank AG
Bayerische Landesbank, London Branch
BNP Paribas
Citigroup Capital Markets Limited
Commerzbank Aktiengesellschaft, London Branch
Credit Agricole Indosuez
Deutsche Bank AG London
HSBC Investment Bank plc
ING Bank, N.V., London Branch
JPMorgan Chase Bank
Lehman Brothers Bankhaus AG, London Branch
Lloyds TSB Bank plc
Mizuho Corporate Bank, Ltd.
National Australia Bank Limited ABN 12 004 044 937
Sumitomo Mitsui Banking Corporation Europe Limited
The Bank of Tokyo-Mitsubishi, Ltd.
The Royal Bank of Scotland Plc
UBS Limited
WestLB AG, London Branch
William Street Commitment Corporation

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PART IV

CO-ARRANGERS

Banca Intesa SpA
Banco Santander Central Hispano, S.A. London Branch

KBC Bank NV
SANPAOLO IMI BANK IRELAND PLC
Standard Chartered Bank
TD Bank Europe Limited
The Bank of New York

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SCHEDULE 2

CONDITIONS PRECEDENT DOCUMENTS

PART I

TO BE DELIVERED BEFORE THE FIRST ADVANCE

1.	Constitutional documents
	A copy of the memorandum and articles of association and certificate of incorporation of Vodafone.
2.	Authorisations
(a)	A copy of a resolution of the board of directors of Vodafone or, if applicable, of a committee of the board of directors (together with a copy of the resolution of the board of directors constituting that committee):
	(i)	approving the terms of, and the transactions contemplated by, this Agreement and the Fee Letters and resolving that it execute and, where applicable, deliver this Agreement and the Fee Letters;
	(ii)	authorising a specified person or persons to execute and, where applicable, deliver this Agreement and the Fee Letters on its behalf; and
	(iii)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including Requests) to be signed and/or despatched by it under or in connection with the Finance Documents;
(b)	a specimen of the signature of each person authorised by the resolution referred to in paragraph (a) above;
(c)	a certificate of a director of Vodafone confirming that as at the first Drawdown Date the borrowing of the Total Commitments in full and the borrowing of the Total Commitments under (and as defined in) the 364 Day Facility in full would not together cause any borrowing limit or limit on the giving of guarantees binding on it to be exceeded (whether as a result of such limit having been waived or otherwise);
(d)	a certificate of an authorised signatory of Vodafone certifying that each copy document specified in this Part I of Schedule 2 and supplied by Vodafone is correct, complete and in full force and effect as at a date no earlier than the Signing Date.
3.	Legal opinions
	A legal opinion of Allen & Overy, English law counsel to the Agent, in relation to English law.
4.	Fee Letter
	Duly executed Fee Letters referred to in paragraphs (a) and (b) of the definition of “Fee Letters”

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PART II

TO BE DELIVERED BY AN ADDITIONAL GUARANTOR

1.	A Guarantor Accession Agreement, duly executed (if appropriate, under seal) by the Additional Guarantor.
2.	A copy of the memorandum and articles of association and certificate of incorporation (or other equivalent constitutional documents) of the Additional Guarantor.
3.	A copy of a resolution of the board of directors of the Additional Guarantor:
	(a)	approving the terms of, and the transactions contemplated by, the Guarantor Accession Agreement and resolving that it execute the Guarantor Accession Agreement as a deed;
	(b)	authorising a specified person or persons to execute the Guarantor Accession Agreement as a deed; and
	(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents to be signed and/or despatched by it under or in connection with this Agreement.
4.	If the Additional Guarantor is not NewTopco and the lawyers referred to in paragraph 10 below advise it to be necessary or desirable, a copy of a resolution, signed by all the holders of the issued or allotted shares in the Additional Guarantor, approving the terms of, and the transactions contemplated by, the Guarantor Accession Agreement.
5.	If the Additional Guarantor is not NewTopco, a copy of a resolution of the board of directors of each corporate shareholder in the Additional Guarantor:
	(a)	approving the terms of the resolution referred to in paragraph 4 above; and
	(b)	authorising a specified person or persons to sign the resolution on its behalf.
6.	A certificate of a director of the Additional Guarantor certifying that the borrowing of the Total Commitments in full and the borrowing of the Total Commitments under (and as defined in) the 364 Day Facility in full would not together cause any borrowing limit or limit on the giving of guarantees binding on it to be exceeded (whether as a result of such limit having been waived or otherwise).
7.	A copy of any other authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Guarantor Accession Agreement or for the validity and enforceability of any Finance Document.
8.	A specimen of the signature of each person authorised by the resolutions referred to in paragraphs 3 and, if applicable, 5 above.
9.	A copy of the latest annual statutory audited accounts of the Additional Guarantor.

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10.	A legal opinion of Allen & Overy, legal advisers to the Agent, and, if applicable, other lawyers approved by the Agent in the place of incorporation of the Additional Guarantor addressed to the Finance Parties.
11.	A certificate of an authorised signatory of the Additional Guarantor certifying that each copy document specified in this Part II of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Guarantor Accession Agreement.

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PART III

TO BE DELIVERED BY AN ADDITIONAL BORROWER

1.	A Borrower Accession Agreement, duly executed (if appropriate, under seal) by the Additional Borrower.
2.	A copy of the memorandum and articles of association and certificate of incorporation (or other equivalent constitutional documents) of the Additional Borrower.
3.	A copy of a resolution of the board of directors of the Additional Borrower:
	(a)	approving the terms of, and the transactions contemplated by, the Borrower Accession Agreement and resolving that it execute the Borrower Accession Agreement;
	(b)	authorising a specified person or persons to execute the Borrower Accession Agreement; and
	(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents to be signed and/or despatched by it under or in connection with this Agreement.
4.	A certificate of a director of the Additional Borrower certifying that the borrowing of the Total Commitments in full and the borrowing of the Total Commitments under (and as defined in) the 364 Day Facility in full would not together cause any borrowing limit binding on it to be exceeded (whether as a result of such limit having been waived or otherwise).
5.	A copy of any other authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Borrower Accession Agreement or for the validity and enforceability of any Finance Document.
6.	A specimen of the signature of each person authorised by the resolutions referred to in paragraph 3 above.
7.	A copy of the latest annual statutory audited accounts of the Additional Borrower (if any).
8.	A legal opinion of Allen & Overy, legal advisers to the Agent, and, if applicable, other lawyers approved by the Agent in the place of incorporation of the Additional Borrower addressed to the Finance Parties.
9.	A certificate of an authorised signatory of the Additional Borrower certifying that each copy document specified in this Part III of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Borrower Accession Agreement.

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SCHEDULE 3

MANDATORY COST FORMULAE

1.	The Mandatory Cost for an Advance (other than a Swingline Advance) is an addition to the interest rate to compensate Lenders for the cost of compliance with the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions).
2.	On the first day of each Advance (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the “Mandatory Cost Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Mandatory Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Advance) and will be expressed as a percentage rate per annum.
3.	The Mandatory Cost Rate for any Lender lending from a Facility Office in the UK will be calculated by the Agent as follows:
	(a)	in relation to a sterling Advance:
			AB + C(B - D) + E x 0.01 ——————————   per cent. per annum              100 – (A + C):
	(b)	in relation to an Advance in any currency other than sterling:
			E x 0.01 ———–  per cent. per annum      300
	Where:
	A	is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.
	B	is the percentage rate of interest (excluding the Margin and the Mandatory Cost) payable on the Advance for the relevant Term of the Advance.
	C	is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.
	D	is the percentage rate per annum payable by the Bank of England to that Lender on interest bearing Special Deposits.
	E	is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

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4.	For the purposes of this Schedule:
	(a)	“Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
	(b)	“Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;
	(c)	“Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and
	(d)	“Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.
5.	In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.
6.	If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.
7.	In addition to any notification required under Clause 8.1(c) (Interest rate for all Advances), each Lender shall supply any information required by the Agent for the purpose of calculating its Mandatory Cost Rate. In particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it becomes a Lender:
	(a)	its jurisdiction of incorporation and the jurisdiction of its Facility Office; and
	(b)	any other information that the Agent may reasonably require for such purpose.
	Each Lender shall promptly notify the Agent in writing of any change to the information provided by it pursuant to this paragraph.
8.	The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 6 and 7 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.
9.	The Agent shall have no liability to any person if such determination results in a Mandatory Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 6 and 7 above is true and correct in all respects.

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10. The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Mandatory Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 6 and 7 above.

11. Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, a Mandatory Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

12. The Agent may from time to time, after consultation with Vodafone and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England or the Financial Services Authority (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

“Reference Banks” has the meaning set out in Clause 1.1 of this Agreement.

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SCHEDULE 4

FORM OF REQUEST

To:   THE ROYAL BANK OF SCOTLAND PLC as [Agent/U.S. Swingline Agent^*]

From:   [BORROWER]

Date:      [             ]

Vodafone Group Plc –U.S.$[                ]
Credit Agreement dated [          ] June, 2003

1. We wish to utilise the Revolving Credit Facility^* and/or the Swingline Facility^* by way of Advances^*/Swingline Advances^* as follows:

(a)	Drawdown Date:	Revolving
		Credit Facility:	[               ]*
		Swingline Facility:	[               ]*

(b)	Requested Amount (including currency):	Revolving
		Credit Facility:	[               ]*
		Swingline Facility:	[               ]*

(c)	Term:	Revolving
		Credit Facility:	[               ]*
		Swingline Facility:	[               ]*

(d)	Payment Instructions:	Revolving
		Credit Facility:	[               ]*
		Swingline Facility:	[               ]*

2. We confirm that each condition specified in [Clause 4.2 (Conditions to all drawdowns and rollovers)]^** is satisfied on the date of this Request and this Advance would not cause any borrowing limit binding on us to be exceeded.

[By:
[BORROWER]
Authorised Signatory]

** Delete as applicable depending on whether the Advance is a Rollover Advance.

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SCHEDULE 5

FORMS OF ACCESSION DOCUMENTS

PART I

NOVATION CERTIFICATE

To:    THE ROYAL BANK OF SCOTLAND PLC as Agent

From:    [THE EXISTING LENDER] and [THE NEW LENDER]          Date: [         ]

Vodafone Group Plc –U.S.$[                ]
Credit Agreement dated [          ] June, 2003

We refer to Clause 26.4 (Procedure for novations).

1. We [           ] (the “Existing Lender”) and [           ] (the “New Lender”) agree to the Existing Lender and the New Lender novating all the Existing Lender’s rights and obligations referred to in the Schedule in accordance with Clause 26.4 (Procedure for novations).

2. The specified date for the purposes of [Clause 26.4(c) (Procedure for novations)] is [date of novation].

3. The Facility Office and address for notices of the New Lender for the purposes of Clause 32.2 (Addresses for notices) are set out in the Schedule.

4. The Existing Lender confirms that it has given notice to Vodafone of the entry into of this Novation Certificate in accordance with Clause 26.2(c) (Transfers by Lenders).

5. This Novation Certificate is governed by English law.

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THE SCHEDULE

Rights and obligations to be novated

[Details of the rights and obligations of the Existing Lender to be novated.]

[New Lender]
[Facility Office	Address for notices]
[Existing Lender]	[New Lender]	THE ROYAL BANK OF SCOTLAND PLC
By:	By:	By:
Date:	Date:	Date:

95

PART II

GUARANTOR ACCESSION AGREEMENT

To:      THE ROYAL BANK OF SCOTLAND PLC as Agent

From:  [PROPOSED GUARANTOR]

Date: [                ]

Vodafone Group Plc –U.S.$[                ] Credit Agreement
dated [          ] June, 2003  (the “Credit Agreement“)

Terms used in this Deed which are defined in the Credit Agreement shall have the same meaning in this Deed as in the Credit Agreement.

We refer to Clause 26.5 (Additional Guarantors).

We, [name of company] of [Registered Office] (Registered no. [                    ]) agree to become an Additional Guarantor and to be bound by the terms of the Credit Agreement as an Additional Guarantor in accordance with Clause 26.5 (Additional Guarantors). [In addition, we also agree to become bound by all the terms of the Credit Agreement expressed to apply to or be binding on NewTopco]^*

Our address for notices for the purposes of Clause 32.2 (Addresses for notices) is:

[

                         ]

This Deed is governed by English law.

Executed as a deed by	)	Director
[PROPOSED GUARANTOR]	)
acting by	)	Director/Secretary
and	)

* Only in the case of accession by NewTopco.

96

PART III

BORROWER ACCESSION AGREEMENT

To:          THE ROYAL BANK OF SCOTLAND PLC as Agent

From:      [PROPOSED BORROWER]

[Date]

Vodafone Group Plc -U.S.$[                ] Credit Agreement
dated [          ] June, 2003 (the "Credit Agreement")

Terms used herein which are defined in the Credit Agreement shall have the same meaning herein as in the Credit Agreement.

We refer to Clause 26.6 (Additional Borrowers).

We, [Name of company] of [Registered Office] (Registered no. [ ] agree to become party to and to be bound by the terms of the Credit Agreement as an Additional Borrower in accordance with Clause 26.6 (Additional Borrowers).

The address for notices of the Additional Borrower for the purposes of Clause 32.2 (Addresses for notices) is:

[

                                      ]

This Agreement is governed by English law.

[ADDITIONAL BORROWER]

By:

THE ROYAL BANK OF SCOTLAND PLC
By:

97

PART IV

LENDER ACCESSION AGREEMENT

To:      THE ROYAL BANK OF SCOTLAND PLC as Agent

From:  [PROPOSED ADDITIONAL LENDER]

[Date]

Vodafone Group Plc -U.S.$[                ] Credit Agreement
dated [      ] June, 2003 (the "Credit Agreement")

Terms used herein which are defined in the Credit Agreement shall have the same meaning herein as in the Credit Agreement.

We refer to Clause 2.7 (Additional Lenders).

We, [Name of Additional Lender] agree to become party to and to be bound by the terms of the Credit Agreement as an Additional Lender in accordance with Clause 2.7 (Additional Lenders) with effect on and from [insert date].

Our Revolving Credit Commitment is U.S.$[                ].[Our Swingline Commitment is U.S.$[                 ]]¹

We confirm to each Finance Party that we:

(a) have made our own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in the Credit Agreement and have not relied exclusively on any information provided to us by a Finance Party in connection with any Finance Document; and

(b) will continue to make our own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Credit Agreement or any Commitment is in force.

The Facility Office and address for notices of the Additional Lender for the purposes of Clause 32.2 (Addresses for notices) is:

[                              ]

This Agreement is governed by English law.

[ADDITIONAL LENDER]

By:

THE ROYAL BANK OF SCOTLAND PLC
By:

VODAFONE GROUP PLC

By:

98

SCHEDULE 6

FORM OF CONFIDENTIALITY UNDERTAKING

FROM NEW LENDER

To:      [Existing Lender];
            Vodafone Group Plc;

Dear Sirs,

We refer to the U.S.$[                ] Revolving Credit Agreement dated [          ] June, 2003 (the “Credit Agreement”) between, among others, Vodafone Group Plc and The Royal Bank of Scotland (as Agent).

This is a confidentiality undertaking referred to in Clause 27 (Disclosure of information) of the Credit Agreement. A term defined in the Credit Agreement has the same meaning in this undertaking.

We are considering entering into contractual relations with [insert name of Lender] (the “Existing Lender”) andunderstand that it is a condition of our receiving information about Vodafone Group Plc and its related companies and any Finance Document and/or any information under or in connection with any Finance Document (the “Information”) that we execute this undertaking.

1.      Confidentiality Undertaking

We undertake (a) to keep the Confidential Information confidential and not to disclose it to anyone except as provided for by paragraph 2 below and to ensure that the Confidential Information is protected with security measures and a degree of care that would apply to our own confidential information, (b) to use the Confidential Information only for the Permitted Purpose, (c) to use all reasonable endeavours to ensure that any person to whom we pass any Confidential Information (unless disclosed under paragraph 2(b) below) acknowledges and complies with the provisions of this letter as if that person were also a party to it and (d) not to make enquiries of any member of the Group or any of their officers, directors, employees or professional advisers relating directly or indirectly to the Facilities, other than directly to the Group Treasurer of Vodafone.

2.      Permitted Disclosure

You agree that we may disclose Confidential Information:

(a) to members of the Purchaser Group and their officers, directors, employees and professional advisers to the extent necessary for the Permitted Purpose and to any auditors of members of the Purchaser Group;

(b) where requested or required by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body, (ii) where required by the rules of any stock exchange on which the shares or other securities of any member of

99

the Purchaser Group are listed or (iii) where required by the laws or regulations of any country with jurisdiction over the affairs of any member of the Purchaser Group.

3.      Notification of Required or Unauthorised Disclosure

We agree (to the extent permitted by law) to inform you of the full circumstances of any disclosure under paragraph 2(b) or upon becoming aware that Confidential Information has been disclosed in breach of this letter.

4.      Return of Copies

If you so request in writing, we shall return all Confidential Information supplied by you to us and destroy or permanently erase all copies of Confidential Information made by us and use all reasonable endeavours to ensure that anyone to whom we have supplied any Confidential Information destroys or permanently erases such Confidential Information and any copies made by them, in each case save to the extent that we or the recipients are required to retain any such Confidential Information by any applicable law, rule or regulation or by any competent judicial, governmental, supervisory or regulatory body or in accordance with internal policy, or where the Confidential Information has been disclosed under paragraph 2(b) above.

5.      Continuing Obligations

The obligations in this letter are continuing and, in particular, shall survive the termination of any discussions or negotiations between you and us. Notwithstanding the previous sentence, the obligations in this letter shall cease (a) if we become a party to the Facilities or (b) twelve months after we have returned all Confidential Information supplied to us by you and destroyed or permanently erased all copies of Confidential Information made by us (other than any such Confidential Information or copies which have been disclosed under paragraph 2 above (other than sub-paragraph 2(a)) or which, pursuant to paragraph 4 above, are not required to be returned or destroyed provided that any such Confidential Information retained in accordance with paragraph 4 shall remain confidential, subject to paragraph 2, for the period during which it is retained).

6.      Consequences of Breach, etc.

We acknowledge and agree that youor members of the Group (each a “Relevant Person”) may be irreparably harmed by the breach of the terms hereof and damages may not be an adequate remedy; each Relevant Person may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by any member of the Purchaser Group.

7.      No Waiver; Amendments, etc.

This letter sets out the full extent of our obligations of confidentiality owed to you in relation to the information the subject of this letter. No failure or delay in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privileges hereunder. The terms of this letter and our obligations hereunder may only be amended or modified by written agreement between us.

100

8.      Inside Information

We acknowledge that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation relating to insider dealing and we undertake not to use any Confidential Information for any unlawful purpose.

9.      Nature of Undertakings

The undertakings given by us under this letter are given to you and (without implying any fiduciary obligations on your part) are also given for the benefit of each other member of the Group.

10.     Governing Law and Jurisdiction

This shall be governed by and construed in accordance with the laws of England and the parties submit to the non-exclusive jurisdiction of the English courts.

11.    Third Party Rights

(a) Subject to paragraph 6 and to paragraph 9 the terms of this letter may be enforced and relied upon only by you and us and the operation of the Contracts (Rights of Third Parties) Act 1999 is excluded.

(b) Notwithstanding any provisions of this letter, the parties of this letter do not require the consent of any Relevant Person to rescind or vary this letter at any time.

12.     Definitions

In this letter:

“Confidential Information” means any information relating to Vodafone, the Group and/or the Facilities provided to us by you or any of your Affiliates or advisers, in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that (a) is or becomes public knowledge other than as a direct or indirect result of any breach of this letter or (b) is known by us before the date the information is disclosed to us by you or any of your affiliates or advisers or is lawfully obtained by us thereafter, other than from a source which is connected with the Group and which, in either case, as far as we are aware, has not been obtained in violation of, and is not otherwise subject to, any obligation of confidentiality;

“Permitted Purpose” means considering and evaluating whether to enter into the Facilities; and

“Purchaser Group” means us, each of our holding companies and subsidiaries and each subsidiary of each of our holding companies (as each such term is defined in the Companies Act 1985).

Yours faithfully

.................................
For and on behalf of
[New Lender]

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SCHEDULE 7

FORM OF ADDITIONAL LENDER'S FEE LETTER

Vodafone Group Plc (“Vodafone”)
Vodafone House
The Connection
Newbury
Berkshire RG14 2FN

For the attention of Gerry Bacon

[DATE]

Dear Sirs,

Fee Letter

You have asked us to participate in a U.S.$[                    ] credit facility (the "Facility") to provide support for the Group's continuing commercial paper programmes and for general corporate purposes of the Group including, but not limited to, acquisitions.

Terms defined in the credit agreement dated [               ] June, 2003 between (inter alia) Vodafone and the financial institutions listed therein (the “Credit Agreement”) have the same meaning in this letter unless otherwise defined in this letter or the context otherwise requires.

This letter sets out the terms upon which you have agreed to pay a fee in relation to our participation in the Facility.

1.	Fee
	You will pay to us for our account a non-refundable up-front fee equal to [ ] per cent. flat calculated on our Revolving Credit Commitment as at the date on which we become an Additional Lender pursuant to Clause 2.7 (Additional Lenders) of the Credit Agreement and payable 5 Business Days after that date;
2.	Finance Document
	This Fee Letter is a Finance Document.
3.	No Set-off
	All payments to be made under this Fee Letter will be calculated and made without (and free and clear of any deduction for) set-off or counterclaim).
4.	Governing Law
	This letter is governed by and construed in accordance with English law.

If you agree to the above please sign and return the enclosed copy of this letter.

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This letter may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this letter.

Yours faithfully,

[                    ]
…………………………………….
For and on behalf of
[ADDITIONAL LENDER]

We agree to the terms set out above.

[                    ]
…………………………………….
For and on behalf of
Vodafone Group Plc

[DATE]

103

SCHEDULE 8

FIXED RATE BONDS

1.      Airtouch Bonds

Financial Indebtedness of AirTouch under bonds issued by AirTouch in existence at the Signing Date to the extent the aggregate principal amount does not exceed U.S.$779,763,000 (being $250,000,000 7% due October 2003, $61,905,000 6.35% due June 2005, $217,659,000 7.5% due July 2006 and $250,199,000 6.65% due May 2008) (in respect of its existing bonds denominated in U.S. Dollars) and DM91,640,000 (in respect of its existing bonds denominated in Deutsche Marks); or

2.      Mannesmann Bonds

Financial Indebtedness of Vodafone Finance BV (previously Mannesmann Finance BV) under bonds issued by Vodafone Finance BV in existence as at the Signing Date to the extent that the aggregate principal amount does not exceed €6,000,000,000 (being, €2.5bn 4.875% due September 2004, DM960,000,000 5.25% due January 2005, and €3bn 4.75% due May 2009); or

3.      Japan Telecom Bonds

Financial Indebtedness of Japan Telecom under bonds issued by Japan Telecom in existence at the Signing Date to the extent that the aggregate principal amount does not exceed ¥175,000,000,000 (being seven issues each of ¥25bn due between August 2005 and September 2010).

104

SIGNATORIES

Borrower and Guarantor

VODAFONE GROUP PLC

By:      GERRY BACON

Mandated Lead Arrangers

ABN AMRO BANK N.V.

By:      CHRISTOPHER K. SLATER

BANC OF AMERICA SECURITIES LIMITED

By:      DILYS ROBERTSON

BANCO BILBAO VIZCAYA ARGENTARIA S.A. (LONDON BRANCH)

By:      CHRIS METHERELL                                       PAUL GRAHAM

BARCLAYS CAPITAL

By:      NIELS PEDERSEN

BAYERISCHE HYPO-UND VEREINSBANK AG

By:      PAUL HOUSE

BAYERISCHE LANDESBANK, LONDON BRANCH

By:      BRIAN CLARK

BNP PARIBAS

By:      MICHAEL E. MOLLOY

CITIGROUP CAPITAL MARKETS LIMITED

By:      PAUL HOUSE

105

COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH

By:      JOHN GOODINSON                                        MARK F. SMYTH

CREDIT AGRICOLE INDOSUEZ

By:      RUPERT DOUGALL

DEUTSCHE BANK AG LONDON

By:      J. FENNER                                                         D. BUGGE

HSBC INVESTMENT BANK PLC

By:      MIKE SERGISON

ING BANK N.V., LONDON BRANCH

By:      F. DEELEN                                                        R. WEIJERS

JPMORGAN CHASE BANK

By:      C.S. WILLIAMS

LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH

By:      PAUL HOUSE

LLOYDS TSB BANK PLC

By:      GRAHAM DODD

MIZUHO CORPORATE BANK, LTD.

By:      P.H.C. HOLE

NATIONAL AUSTRALIA BANK LIMITED ABN 12 004 044 937

By:      ANJALI PATEL

SUMITOMO MITSUI BANKING CORPORATION EUROPE LIMITED

By:      STEPHEN G. ODELL

106

THE BANK OF TOKYO-MITSUBISHI, LTD.

By:      I.R. COUTTS-WOOD

THE ROYAL BANK OF SCOTLAND PLC

By:      ELENA DIMANINA

UBS LIMITED

By:      PAUL HOUSE

WESTLB AG, LONDON BRANCH

By:      A.L.R. JOHNSON

WILLIAM STREET COMMITMENT CORPORATION

By:      DAVID WEIL

Co-Arrangers

BANCA INTESA SPA

By:      LAWRENCE WYBRANIEC

BANCO SANTANDER CENTRAL HISPANO, S.A. LONDON BRANCH

By:      MARTA SANCHEZ-PALENCIA                 JIM INCHES

KBC BANK NV

By:      PAUL HOUSE

SANPAOLO IMI BANK IRELAND PLC

By:      PAUL HOUSE

STANDARD CHARTERED BANK

By:      STEPHEN M. LILLEY                                      GRAHAME K. SMITH

107

TD BANK EUROPE LIMITED

By:      JULIE EVANS

THE BANK OF NEW YORK

By:      GERALD M. DORKIN

Lenders

ABN AMRO BANK N.V.
as Lender and Swingline Lender

By:      CHRISTOPHER K. SLATER

BANCA INTESA SPA
as Lender

By:      LAWRENCE WYBRANIEC

BANCO BILBAO VIZCAYA ARGENTARIA S.A. (LONDON BRANCH)
as Lender

By:      CHRIS METHERELL                                       PAUL GRAHAM

BANCO SANTANDER CENTRAL HISPANO, S.A. LONDON BRANCH
as Lender

By:      MARTA SANCHEZ-PALENCIA                 JIM INCHES

BANK OF AMERICA, N.A.
as Lender and Swingline Lender

By:      DILYS ROBERTSON

BARCLAYS BANK PLC
as Lender and Swingline Lender

By:      NIELS PEDERSEN

BAYERISCHE HYPO-UND VEREINSBANK AG
as Lender

By:      PAUL HOUSE

108

BAYERISCHE LANDESBANK, LONDON BRANCH
as Lender

By:      BRIAN CLARK

BNP PARIBAS (acting through its London Branch)
as Lender

By:      MICHAEL E. MOLLOY

BNP PARIBAS, NEW YORK BRANCH
as Swingline Lender

By:      MICHAEL E. MOLLOY

CITIBANK, N.A.
as Lender and Swingline Lender

By:      PAUL HOUSE

COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH
as Lender

By:      JOHN GOODINSON                                        MARK F. SMYTH

CREDIT AGRICOLE INDOSUEZ
as Lender

By:      RUPERT DOUGALL

DEUTSCHE BANK AG LONDON
as Lender

By:      J. FENNER                                                        D. BUGGE

DEUTSCHE BANK AG NEW YORK
as Swingline Lender

By:      J. FENNER                                                        D. BUGGE

109

HSBC BANK PLC
as Lender and Swingline Lender

By:      MIKE SERGISON

ING BANK N.V., LONDON BRANCH
as Lender

By:      F. DEELEN                                                        R. WEIJERS

JPMORGAN CHASE BANK
as Lender

By:      C.S. WILLIAMS

JPMORGAN CHASE BANK NEW YORK INTERNATIONAL FACILITY (IBF)
as Swingline Lender

By:      C.S. WILLIAMS

KBC BANK NV
as Lender

By:      PAUL HOUSE

LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH
as Lender

By:      PAUL HOUSE

LLOYDS TSB BANK PLC
as Lender and Swingline Lender

By:      GRAHAM DODD

MIZUHO CORPORATE BANK, LTD.
as Lender

By:      P.H.C. HOLE

NATIONAL AUSTRALIA BANK LIMITED ABN 12 004 044 937as Lender

By:      ANJALI PATEL

110

SANPAOLO IMI BANK IRELAND PLC
as Lender

By:      PAUL HOUSE

STANDARD CHARTERED BANK
as Lender

By:      STEPHEN M. LILLEY                                     GRAHAME K. SMITH

SUMITOMO MITSUI BANKING CORPORATION EUROPE LIMITED
as Lender

By:      STEPHEN G. ODELL

TD BANK EUROPE LIMITED
as Lender

By:      JULIE EVANS

THE BANK OF NEW YORK
as Lender

By:      GERALD M. DORKIN

THE BANK OF TOKYO-MITSUBISHI, LTD.
as Lender

By:      I.R. COUTTS-WOOD

THE ROYAL BANK OF SCOTLAND PLC
as Lender

By:      ELENA DIMANINA

THE ROYAL BANK OF SCOTLAND PLC (NEW YORK BRANCH)
as Swingline Lender

By:      ELENA DIMANINA

UBS AG, LONDON BRANCH
as Lender

By:      PAUL HOUSE

111

UBS AG, GRAND CAYMAN BRANCH
as Swingline Lender

By:      PAUL HOUSE

WESTLB AG, LONDON BRANCH
as Lender

By:      A.L.R. JOHNSON

WESTLB AG, NEW YORK BRANCH
as Swingline Lender

By:      A.L.R. JOHNSON

WILLIAM STREET COMMITMENT CORPORATION
as Lender

By:      JENNIFER HILL

Agent

THE ROYAL BANK OF SCOTLAND PLC

By:      ELENA DIMANINA

U.S. Swingline Agent

THE ROYAL BANK OF SCOTLAND PLC (NEW YORK BRANCH)

By:       ELENA DIMANINA

EX-4

Exhibit 4.21

Lord MacLaurin of Knebworth DL
Chairman

28 April 2003
Mr J E Schrempp Chairman of the Board of Management DaimlerChrysler Epplestrasse 225 70567 Stuttgart Germany	Our ref:                        SRS/je/053c

NON-EXECUTIVE DIRECTORSHIP OF VODAFONE GROUP PUBLIC LIMITED COMPANY

Further to the Board’s recent consideration of the Higgs Review of the role of non-executive directors, this letter is to confirm the terms of your appointment as a non-executive director of Vodafone Group Public Limited Company (the “Company”), without prejudice to your obligations to the Company under English Law.

1 Role

Your obligations and responsibilities as a non-executive director are to the Company and, like all directors, you should act at all times in the best interests of the Company, exercising your independent judgement on all matters. Non-executive directors have the same general legal responsibilities to the Company as any other director. The Board as a whole is collectively responsible for promoting the success of the Company by directing and supervising the Company's affairs. Your appointment as non-executive director of the Company is subject to the Company’s Articles of Association (the “Articles”) and the latter will prevail in the event of any conflict between them and the terms of this letter. A copy of the current version of the Articles is included in your director information pack.

In my view, the role of the non-executive director has a number of key elements and I look forward to your contribution in these areas:

• Strategy: you should constructively challenge and contribute to the development of strategy;

• Performance: you should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;

• Risk: you should satisfy yourself that financial information is accurate and that financial controls and systems of risk management are robust and defensible; and

Vodafone Group Plc
Vodafone House, The Connection, Newbury , Berkshire RG14 2FN, England
Telephone: +44 (0)1635 33251, Facsimile: +44 (0)1635 580857

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

• People: non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.

2 Appointment and Term

Subject to the terms of this letter, your appointment commenced on 1 May 2000 (the “Effective Date”) and was for an initial term of three years from the Effective Date. The Board has recently agreed to renew your appointment for a further term until 30 April 2006, unless terminated earlier in accordance with the Articles or the terms of this letter. The Articles require that directors submit themselves for re-election by shareholders periodically. In the event that you submit yourself for re-election and are not elected, your appointment as director will automatically terminate. The appointment will expire on 30 April 2006 without any automatic right of reappointment, although the Board may invite you to serve for an additional period. You will not be entitled to receive any compensation from the Company in respect of the termination of your directorship.

Overall, we anticipate a time commitment from you involving attendance at Board meetings (the Company currently has eight each year), the Annual General Meeting (usually held in July each year) and at least one Company/site visit per year. You will be expected to devote appropriate preparation time ahead of each meeting. In addition, each of the principal Board Committees meets about four times a year (and in some cases more frequently) and you should anticipate continuing to be a member of at least one of these Committees.

By accepting this appointment, you have confirmed that you are able to allocate sufficient time to meet the expectations of your role as currently envisaged, although you have told me, and the Board accepts that your role with DaimlerChrysler and other commitments are likely to mean that you cannot attend all Board meetings in person. I hope, nevertheless, that you will be able to join those meetings by videoconference or teleconference facilities. I would be grateful if, before accepting additional commitments that might affect the time you are able to devote to your role as a non-executive director of the Company, you would consult with me.

3 Fees

As you will be a non-executive director of the Company, the Board as a whole will determine your remuneration in accordance with the requirements of good corporate governance, the Financial Services Authority’s Combined Code and the Financial Services Authority’s Listing Rules. The fee for your services is £65,000 per annum and it is paid in equal instalments monthly in arrears. You may elect to be paid either in cash or in the Company’s shares. Please let me know if you may prefer to receive shares. You will also be entitled to be repaid all travelling and other expenses properly incurred in performing your duties in accordance with the Articles of Association. If you are invited to serve on one or more of the Committees of the Board (in which case this will be covered in a separate communication setting out the Committee's terms of reference and any specific responsibilities that may be involved) no additional fee will be payable, unless you are invited to Chair a Committee in which case an additional fee of £10,000 per annum will be payable in equal instalments monthly in arrears for so long as you hold that position.

SRS/je/053c 2 28 April 2003

Payment of all fees will cease immediately after your appointment as a non-executive director of the Company terminates for any reason.

4 Dealing in the Company's shares

You shall (and you shall procure that your wife and dependent children shall) comply with the provisions of the Criminal Justice Act 1993, the Financial Services and Markets Act 2000, the Financial Services Authority’s Model Code for Securities Transactions by Directors of Listed Companies and rules and regulations laid down by the Company from time to time in relation to such matters.

5 Competitive Businesses

In view of the sensitive and confidential nature of the Company’s business you agree that for so long as you are a non-executive director of the Company you will not, without the consent of the Board, which shall not be withheld unreasonably, be engaged or interested in any capacity in any business or with any company which is, in the reasonable opinion of the Board, competitive with the business of any company in the Group. In the event that you become aware of any potential conflicts of interest, these should be disclosed to me and to the Company Secretary as soon as possible. The Board agrees that the foregoing provisions of this paragraph shall not apply to any engagement or interest which you have or maintain at the present time for which the consent of the Board is deemed to have been given.

6 Confidentiality

You agree that you will not make use of, divulge or communicate to any person (except in the proper performance of your duties) any of the trade secrets or other confidential information of or relating to any company in the Group which you have received or obtained from or through the Company. This restriction shall continue to apply after the termination of your appointment without limit in point of time but shall cease to apply to information or knowledge which comes into the public domain otherwise than through your default or which shall have been received by you from a third party entitled to disclose the same to you.

Your attention is also drawn to the requirements under both legislation and regulation as to the disclosure of price sensitive information. Consequently, you should avoid making any statements that might risk a breach of these requirements unless made with prior clearance from me or from the Company Secretary or required to be disclosed by law or pursuant to any requirement of any governmental, official or regulatory body as a result of your role at DaimlerChrysler or otherwise.

7 Illness or Incapacity

If you are prevented by illness or incapacity from carrying out your duties for a period exceeding three consecutive calendar months or at different times for a period exceeding in aggregate three calendar months in any one period of twelve calendar months or if you become prohibited by law or under the Articles of Association of the Company from being a non-executive director of the Company, then the Company may terminate your appointment immediately.

SRS/je/053c 3 28 April 2003

8 Effect of Termination

Upon termination of your appointment howsoever arising, you shall forthwith or upon request of the Company, resign from office as a non-executive director of the Company and all other offices held by you in any other companies in the Group and your membership of any organisation acquired in and for the purpose of any such office, and should you fail to do so, the Company is hereby irrevocably authorised to appoint some person in your name and on your behalf to sign any documents and do anything necessary or requisite to give effect thereto.

9 Return of Company Property

You agree that upon termination of your appointment as a non-executive director, you will immediately deliver to the Company all property belonging to the Company or any member of its Group, including all documents or other records made or compiled or acquired by you during your appointment concerning the business, finances or affairs of the Group. However, the Board agrees that you may keep such Company property as may be necessary for insurance purposes or to comply with any legal or regulatory requirements to which you are subject.

10 Independent Professional Advice

In accordance with the Financial Services Authority’s Combined Code, the Board has agreed procedures for directors in the furtherance of their duties to take independent professional advice if necessary, at the Company’s expense. Naturally, if you have any queries or difficulties at any time please feel free to discuss them with me. I am also available at all times to provide you with information and advice you may need.

11 Insurance

The Company has effected a policy of insurance to indemnify directors against personal liability and defence costs which might result from claims against directors for negligence, breach of duty or breach of trust in relation to the Company. For so long as you are a director you will have the benefit of this policy. In the event and to the extent that the D&O cover from time to time maintained by the Company does not provide liability protection, the Company undertakes to indemnify you in your role as a non-executive director of the Company to the fullest extent permitted by law.

12 Review Process

The performance of individual directors and the whole Board and its committees is evaluated annually. If, in the interim, there are any matters which cause you concern about your role, please discuss them with me as soon as is appropriate.

13 Contract for Services

It is agreed that you will not be an employee of the Company or any of its subsidiaries and that this letter shall not constitute a contract of employment.

SRS/je/053c 4 28 April 2003

In this letter:

“Board” means the board of directors of the Company from time to time or any person or committee nominated by the board of directors as its representative or to whom (and to that extent) it has delegated powers for the purposes of this letter.

“Group” means the Company and any other company which is its subsidiary or in which the Company or any subsidiary of the Company controls not less than 25% of the voting shares (where “subsidiary” has the meaning given to it by section 736 of the Companies Act 1985).

This letter shall be governed by and construed in accordance with English Law. Both parties submit to the exclusive jurisdiction of the English Courts as regards any claim or matter arising in connection with the terms of this letter.

Please acknowledge receipt and acceptance of the terms of this letter by signing the enclosed copy and returning it to the Company Secretary.

Kind regards.

Yours sincerely

Ian MacLaurin

I hereby accept that the terms of this letter constitute the terms of my appointment as a non-executive director of the Company, superseding any and all previous letters of appointment.

Signed…/s/…Jürgen Schrempp…………… Date………25 July 2003………………

SRS/je/053c 5 28 April 2003

EX-4

Exhibit 4.22

Lord MacLaurin
Chairman

24 June 2003

Luc Vandevelde Esq
Chief Executive
Marks & Spencer plc
Michael House
Baker Street,
London, W1U 8EP

NON-EXECUTIVE DIRECTORSHIP OF VODAFONE GROUP PUBLIC LIMITED COMPANY

Further to our discussions, this letter is to confirm the terms of your appointment as a non-executive director of Vodafone Group Public Limited Company (the “Company”), without prejudice to your obligations to the Company under English Law.

1 Role

Your obligations and responsibilities as a non-executive director are to the Company and, like all directors, you should act at all times in the best interests of the Company, exercising your independent judgement on all matters. Non-executive directors have the same general legal responsibilities to the Company as any other director. The Board as a whole is collectively responsible for promoting the success of the Company by directing and supervising the Company's affairs. Your appointment as non-executive director of the Company is subject to the Company’s Articles of Association (the “Articles”) and the latter will prevail in the event of any conflict between them and the terms of this letter. A copy of the current version of the Articles is included in your director information pack.

In my view, the role of the non-executive director has a number of key elements and I look forward to your contribution in these areas:

• Strategy: you should constructively challenge and contribute to the development of strategy;

• Performance: you should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;

• Risk: you should satisfy yourself that financial information is accurate and that financial controls and systems of risk management are robust and defensible; and

• People: non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.

Vodafone Group Plc
Vodafone House, The Connection, Newbury , Berkshire RG14 2FN, England
Telephone: +44 (0)1635 33251, Facsimile: +44 (0)1635 580857

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

2 Appointment and Term

Subject to the terms of this letter, your appointment will commence on 1 September 2003 (the “Effective Date”) and is for an initial term of three years from the Effective Date, unless terminated earlier in accordance with the Articles or the terms of this letter. The Articles require that directors submit themselves for re-election by shareholders periodically. In the event that you submit yourself for re-election and are not elected, your appointment as director will automatically terminate. The appointment will expire on 31 August 2006 without any automatic right of reappointment, although the Board may invite you to serve for an additional period. You will not be entitled to receive any compensation from the Company in respect of the termination of your directorship.

Overall, we anticipate a time commitment from you involving attendance at all Board meetings (the Company currently has eight each year), the Annual General Meeting (usually held in July each year) and at least one Company/site visit per year. You will be expected to devote appropriate preparation time ahead of each meeting. In addition, each of the principal Board Committees meets about four times a year (and in some cases more frequently) and you should anticipate being a member of at least one of these Committees.

By accepting this appointment, you have confirmed that you are able to allocate sufficient time to meet the expectations of your role. If you are unable to attend a Board meeting in person, I hope, nevertheless, that you will be able to join those meetings either by videoconference or teleconference facilities. I would be grateful if, before accepting additional commitments that might affect the time you are able to devote to your role as a non-executive director of the Company, you would seek my agreement.

3 Fees

As you will be a non-executive director of the Company, the Board as a whole will determine your remuneration in accordance with the requirements of good corporate governance, the Financial Services Authority’s Combined Code and the Financial Services Authority’s Listing Rules. The fee for your services is £65,000 per annum and it is paid in equal instalments monthly in arrears. You may elect to be paid either in cash or in the Company’s shares. Please let me know if you may prefer to receive shares. You will also be entitled to be repaid all travelling and other expenses properly incurred in performing your duties in accordance with the Articles of Association. If you are invited to serve on one or more of the Committees of the Board (in which case this will be covered in a separate communication setting out the Committee's terms of reference and any specific responsibilities that may be involved) no additional fee will be payable, unless you are invited to Chair a Committee in which case an additional fee of £10,000 per annum will be payable in equal instalments monthly in arrears for so long as you hold that position. Payment of all fees will cease immediately after your appointment as a non-executive director of the Company terminates for any reason.

24 June 2003

2

4 Dealing in the Company's shares

You shall (and you shall procure that your wife and dependent children shall) comply with the provisions of the Criminal Justice Act 1993, the Financial Services and Markets Act 2000, the Financial Services Authority’s Model Code for Securities Transactions by Directors of Listed Companies and rules and regulations laid down by the Company from time to time in relation to such matters.

5 Competitive Businesses

In view of the sensitive and confidential nature of the Company’s business you agree that for so long as you are a non-executive director of the Company you will not, without the consent of the Board, which shall not be withheld unreasonably, be engaged or interested in any capacity in any business or with any company which is, in the reasonable opinion of the Board, competitive with the business of any company in the Group. In the event that you become aware of any potential conflicts of interest, these should be disclosed to me and to the Company Secretary as soon as possible.

6 Confidentiality

You agree that you will not make use of, divulge or communicate to any person (except in the proper performance of your duties) any of the trade secrets or other confidential information of or relating to any company in the Group which you have received or obtained from or through the Company. This restriction shall continue to apply after the termination of your appointment without limit in point of time but shall cease to apply to information or knowledge which comes into the public domain otherwise than through your default or which shall have been received by you from a third party entitled to disclose the same to you.

Your attention is also drawn to the requirements under both legislation and regulation as to the disclosure of price sensitive information. Consequently, you should avoid making any statements that might risk a breach of these requirements without prior clearance from me or from the Company Secretary.

7 Illness or Incapacity

If you are prevented by illness or incapacity from carrying out your duties for a period exceeding three consecutive calendar months or at different times for a period exceeding in aggregate three calendar months in any one period of twelve calendar months or if you become prohibited by law or under the Articles of Association of the Company from being a non-executive director of the Company, then the Company may terminate your appointment immediately.

24 June 2003

3

8 Effect of Termination

Upon termination of your appointment howsoever arising, you shall forthwith or upon request of the Company, resign from office as a non-executive director of the Company and all other offices held by you in any other companies in the Group and your membership of any organisation acquired by virtue of your tenure of any such office, and should you fail to do so, the Company is hereby irrevocably authorised to appoint some person in your name and on your behalf to sign any documents and do anything necessary or requisite to give effect thereto.

9 Return of Company Property

You agree that upon termination of your appointment as a non-executive director, you will immediately deliver to the Company all property belonging to the Company or any member of its Group, including all documents or other records made or compiled or acquired by you during your appointment concerning the business, finances or affairs of the Group.

10 Independent Professional Advice

In accordance with the Financial Services Authority’s Combined Code, the Board has agreed procedures for directors in the furtherance of their duties to take independent professional advice if necessary, at the Company’s expense. A copy of the relevant Board resolution is enclosed in your director information pack. Naturally, if you have any queries or difficulties at any time please feel free to discuss them with me. I am also available at all times to provide you with information and advice you may need.

11 Insurance

The Company has effected a policy of insurance to indemnify directors against personal liability and defence costs which might result from claims against directors for negligence, breach of duty or breach of trust in relation to the Company. For so long as you are a director you will have the benefit of this policy.

12 Review Process

The performance of individual directors and the whole Board and its committees is evaluated annually. If, in the interim, there are any matters which cause you concern about your role, please discuss them with me as soon as is appropriate.

13 Contract for Services

It is agreed that you will not be an employee of the Company or any of its subsidiaries and that this letter shall not constitute a contract of employment.

24 June 2003

4

In this letter:

“Board”	means the board of directors of the Company from time to time or any person or committee nominated by the board of directors as its representative or to whom (and to that extent) it has delegated powers for the purposes of this letter.
“Group”	means the Company and any other company which is its subsidiary or in which the Company or any subsidiary of the Company controls not less than 25% of the voting shares (where “subsidiary” has the meaning given to it by section 736 of the Companies Act 1985).

This letter shall be governed by and construed in accordance with English Law. Both parties submit to the exclusive jurisdiction of the English Courts as regards any claim or matter arising in connection with the terms of this letter.

Please acknowledge receipt and acceptance of the terms of this letter by signing the enclosed copy and returning it to the Company Secretary. I am greatly looking forward to working with you.

Kind regards

IAN MACLAURIN
Chairman

I hereby accept that the terms of this letter constitute the terms of my appointment as a non-executive director of the Company.

Signed…/s/…Luc Vandevelde…………………………………………………………………………………… Date……30 July 2003…………………………………………………

24 June 2003

5

EX-7

Exhibit 7

Unaudited computation of ratio of earnings to fixed charges
	Year ended 31 March
Under UK GAAP (unaudited)	2004		2003		2002		2001		2000
	£m		£m		£m		£m		£m
Fixed charges
Interest payable	1,091		1,123		971		1,156		405
Add: One third of rental expense	451		449		308		233		119
Add: Preference dividends	77		85		94		91		62
	1,619		1,657		1,373		1,480		586
Earnings
(Loss)/profit on ordinary activities before taxation	(5,047	)	(6,208	)	(13,539	)	(8,086	)	1,351
Less: Share of profit/(loss) in joint ventures and associated undertakings	546		(156	)	(1,457	)	(550	)	(185	)
Less: Share of net interest payable of joint ventures and associated undertakings	(215	)	(295	)	(342	)	(327	)	(51	)
Less: Loss on ordinary activities before taxation – discontinued operations	(7	)	(272	)	(428	)	—		—
	(5,371	)	(5,485	)	(11,312	)	(7,209	)	1,587
Add: Fixed charges	1,619		1,657		1,373		1,480		586
Add: Cash received from associated undertakings and joint ventures	1,801		742		139		353		236
Less: Preference dividends	(77	)	(85	)	(94	)	(91	)	(62	)
	(2,028	)	(3,171	)	(9,894	)	(5,467	)	2,347
Ratio of earnings to fixed charges	(1.3	)	(1.9	)	(7.2	)	(3.7	)	4.0
Deficiency between fixed charges and earnings	(3,647	)	(4,828	)	(11,267	)	(6,947	)	—
	Year ended 31 March
Under US GAAP (unaudited)	2004		2003		2002		2001		2000
	£m		£m		£m		£m		£m
Fixed charges
Interest payable	1,091		1,123		971		1,156		405
Add: One third of rental expense	451		449		308		233		119
Add: Preference dividends	77		85		94		91		62
	1,619		1,657		1,373		1,480		586
Earnings
(Loss)/profit on ordinary activities before taxation	(5,047	)	(6,208	)	(13,539	)	(8,086	)	1,351
Adjusted for:
Less: Share of profit/(loss) in joint ventures and associated undertakings	546		(156	)	(1,457	)	(550	)	(185	)
Less: Share of net interest payable of joint ventures and associated undertakings	(215	)	(295	)	(342	)	(327	)	(51	)
Less: Loss on ordinary activities before taxation – discontinued operations	(7	)	(272	)	(428	)	—		—
	(5,371	)	(5,485	)	(11,312	)	(7,209	)	1,587
UK/US GAAP Adjustments (a)
Less: Goodwill amortisation charge of subsidiary companies	(6,520	)	(5,487	)	(5,120	)	(3,034	)	(113	)
Add: Exceptional items	(476	)	405		(85	)	—		—
Add: Connection income	29		16		(15	)	(54	)	—
Add: Reorganisation costs	—		—		—		84		25
Less: Other	(213	)	(52	)	(53	)	(87	)	(9	)
	(12,551	)	(10,603	)	(16,585	)	(10,300	)	1,490
Add: Fixed charges	1,619		1,657		1,373		1,480		586
Add: Cash received from associated undertakings and joint ventures	1,801		742		139		353		236
Less: Preference dividends	(77	)	(85	)	(94	)	(91	)	(62	)
	(9,208	)	(8,289	)	(15,167	)	(8,558	)	2,250
Ratio of earnings to fixed charges	(5.7	)	(5.0	)	(11.0	)	(5.8	)	3.8
Deficiency between fixed charges and earnings	(10,827	)	(9,946	)	(16,540	)	(10,038	)	—

(a) For discussion of significant differences between UK GAAP and US GAAP and a reconciliation of net income between amounts calculated under UK GAAP and under US GAAP, see Note 36 to the Consolidated Financial Statements.

The fixed charges and earnings have been restated for the years ended 31 March 2000, 2001, 2002 and 2003 to treat Japan Telecom as discontinued operations; to exclude from US GAAP earnings adjustments the minority interest in such adjustments; and to include additional amounts within rental expense in both fixed charges and earnings.

EX-12

Exhibit 12

RULE 13a-14(a) CERTIFICATION

I, Arun Sarin, certify that:

1. I have reviewed this annual report on Form 20-F of Vodafone Group Plc (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

June 9, 2004	/s/ Arun Sarin
Date	Arun Sarin
	Chief Executive

RULE 13a-14(a) CERTIFICATION

I, Kenneth J. Hydon, certify that:

1. I have reviewed this annual report on Form 20-F of Vodafone Group Plc (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

June 9, 2004	/s/ Kenneth J. Hydon
Date	Kenneth J. Hydon

Financial Director

EX-13

Exhibit 13

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended March 31, 2004 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

June 9, 2004	/s/ Arun Sarin
Date	Arun Sarin
	Chief Executive

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended March 31, 2004 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

June 9, 2004	/s/ Kenneth J. Hydon
Date	Kenneth J. Hydon
	Financial Director

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-15

Exhibit 15

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration Statement No. 333-81825 on Form S-8 of Vodafone Group Plc and in Amendment No. 1 to Registration Statement No. 333-110941 on Form F-3 of Vodafone Group Plc of our report, dated May 25, 2004, appearing in the Annual Report on Form 20-F of Vodafone Group Plc for the year ended March 31, 2004.

DELOITTE & TOUCHE LLP
Chartered Accountants and Registered Auditors
London, England

June 9, 2004