LONDON (Reuters)—Mobile phone giant Vodafone unveiled plans to return an extra 3 billion pounds ($5.6 billion) to investors and hiked its dividends on Tuesday, spicing a well-flagged new strategy to cut costs and embrace new technology.

The British-based firm, under pressure from slowing growth in Europe and rivals with new technologies that link mobile and fixed-line devices, said it was paying out 60 percent of earnings in dividends and would keep future payouts high.

The extra cash for investors helped to overshadow Vodafone announcing the biggest loss in UK corporate history as a result of accounting writedowns, as well as details of a new strategy that will see it axe 400 head-office jobs and enter the fixed-line broadband Internet market.

“We’re very happy with the approach they have taken with the dividend,” said Richard Marwood, a fund manager at AXA Investments. “You are getting a sixth of the company’s market capitalization being returned to you within the next year.”

Shares in the world’s biggest mobile phone operator by revenues rallied as much as 3.5 percent in early trade.

Vodafone said its adjusted basic earnings rose 13 percent to 10.11p per share in the year ended March, topping the average forecast of 9.95p in a Reuters poll of 18 analysts.

But including impairment charges of 23.5 billion pounds, the loss before tax was a colossal 14.9 billion pounds. Its net loss for the year was 21.8 billion pounds, or 35.01p a share.

The firm boosted its annual dividend payout to 6.07p, up 49 percent and smashing analysts’ top forecast of 5.5p.

“It’s a 5-percent yield stock now,” said Dresdner Kleinwort Wasserstein analyst Robert Grindle, adding Vodafone was taking a sensible approach to cost control and introducing new services.

Vodafone , which had already announced plans to return 6 billion pounds to shareholders following the sale of its Japanese unit, said it would raise this total to 9 billion.

Vodafone Chief Executive Arun Sarin has come under pressure from investors and within his own board to spell out a strategy to cope with slower growth in markets such as Germany and Italy where mobile phone ownership is rife and competition is intense.

New Businesses; Happy with Verizon
The firm said it continued to expect modest revenue growth in Europe, but unveiled a plan to cut costs including 400 job cuts at its corporate center and outsourcing some IT activities.

Vodafone ’s “pure-play” mobile operation has come under fire at a time when fixed-line and mobile businesses are converging into a cheaper, single service that works across both networks.

The firm said on Tuesday it had responded with its recently created “New Businesses” unit, and announced plans to launch a series of products including high-speed Internet access in Germany in the third quarter of this financial year.

Vodafone said it would sell businesses where it could not make a strong enough return, but added it remained a happy shareholder in U.S. group Verizon Wireless. Speculation is rife that Vodafone will sell its 45-percent in Verizon Wireless to its joint venture partner Verizon Communications.

Some investors had feared Vodafone , whose takeover of Germany’s Mannesmann in 2000 was the largest in history and contributed along with the Japan sale to Tuesday’s goodwill writedowns, might look to offset slower growth in Europe by making acquisitions in emerging markets or buying a fixed-line operator.

But the company said it expected a lower level of merger and acquisition activity in the future.

Vodafone said it was aiming for a low single-A credit rating and had no plans to return more money to investors. Ratings agency Fitch cut its rating on Vodafone to A- from A.

At 0935 GMT, Vodafone shares were up 2.5 percent at 122-3/4p, the second-highest gainer on the benchmark FTSE-100.

The shares have underperformed European sector peers by about 9 percent over the past 12 months and trade at about 11.4 times forecast earnings, versus a sector average of 12.1.

(Additional reporting by Mark Potter and David Cullen)

http://www.eweek.com/article2/0,1759,1969176,00.asp?kc=EWRSS04069TX1K0000701

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NEW YORK (Reuters)—Shares of Internet phone service provider Vonage Holdings Corp. fell as much as 14 percent in their market debut on Wednesday on concern about fierce competition and whether the company will ever turn a profit.

The shares were down $2.05 to $14.95 in late-morning trading on the New York Stock Exchange after falling as low as $14.50 earlier in the session.

Vonage has acknowledged it may never be profitable and is viewed with skepticism by many analysts, who cite the growing competition it faces in providing voice-over-Internet protocol (VoIP) services.

“It’s very hard to see what their competitive advantage is,” said Richard Greenfield, an analyst at Pali Research. “We basically believed, pre-IPO, that the price should be $10 or less.”

The IPO, which priced Tuesday at $17 a share, the midpoint of a previously established range, raised $531 million. The Holmdel, New Jersey-based company said it plans to use the proceeds to fund expansion and marketing and repay debt.

Since its inception in 2001, Vonage has incurred losses in every quarter, a deficit that reached $455 million on March 31, according to a filing with the U.S. Securities and Exchange Commission.

“It’s a wildly unprofitable company still selling at a very high valuation,” said Tom Taulli of Newport Coast, California, an IPO analyst and author of “Investing in IPOs.” He said he was surprised the company had managed to raise half a billion dollars through the IPO.

“That’s not an easy thing to do in this market,” he said.

Not only does Vonage face pressure from similar services by eBay Inc.’s Skype and Google Inc., it also competes with telephone and cable television giants offering all-in-one packages of voice, Internet and entertainment.

If the shares’ sharp decline holds, Vonage’s opening day will be the weakest among major tech IPOs in the past 24 months, according to Dealogic.

Analysts have said that while Vonage would likely add customers for the next few years due to a rise in high-speed Internet subscriptions, it may have a harder time ahead as cable and telecom companies’ bundled services take hold.

The company has grown rapidly in the last two years, more than tripling its subscribers since 2004, but conceded in the SEC filing that it does not expect to sustain that level of growth.

Some skeptics say Vonage likely chose to go public because it was desperate for capital and no company came up with an adequate takeover offer.

“You could always find a buyer, but they probably couldn’t find one at the price they wanted,” Taulli said.

Citigroup Global Markets Inc., Deutsche Bank Securities and UBS Investment Bank Inc. were the joint book-running managers on the IPO.

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Toshiba America will start selling wireless voice-over-IP phones and a wireless PDA to work with its Strata CIX series of IP PBX equipment, the company said.

The products, two wireless phones and a wireless combination phone/PDA using Windows Mobile, are available through Toshiba dealers starting May 18. The company did not release pricing for the devices.

The phones are the Hitachi IP5000 and the SpectraLink Link 6020. The Hitachi phone will use a company’s existing 802.11b Wi-Fi network, while the SpectraLink phone uses a private wireless network operating in the 900MHz band. The third device is the MC50 PDA, which runs Toshiba’s SoftIPT softphone software and also uses Wi-Fi.

“It’s the next evolution in communications,” said Toshiba America Product Manager Greg Portis. “You can move without being tethered to a specific location.” Portis said that at Toshiba, “wireless” refers to anything you can use to communicate and conduct dialogue through without being restricted to “a certain space.”

Portis said the phones are designed to work with Toshiba’s Strata CIX, a PBX designed for SMBs (small and midsize businesses). “It’s our converged system,” he said.

Portis noted that no special software was required for the Strata CIX, although he did say that some settings needed to be optimized. He declined to say exactly what form of optimization was required, except that it was needed to work properly with customers’ WLANs (wireless LANs). The Strata CIX and the wireless devices use SIP (Session Initiation Protocol) as their standard means of VOIP signaling.

http://www.eweek.com/article2/0,1759,1964733,00.asp?kc=EWRSS04069TX1K0000701

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A BellSouth spokesperson has denied reports that the company had agreed to turn over phone call records to the National Security Agency.

“We have no contract with the NSA and we have not turned over any customer information to the NSA,” said Jeff Battcher, BellSouth’s vice president of corporate communications, in an interview with eWEEK on May 16.

Battcher said that Atltanta-based BellSouth spent several days investigating reports in USA Today that the company had agreed to turn over virtually all its customer calling data to the NSA, the government’s signals intelligence organization in Fort Meade, Md.

Click here to read more about the NSA’s secret collection of phone call records.

“BellSouth is a large corporation. [We] have over 65000 employees, we operate in 9 states,” Battcher said, explaining the delay in making the announcement, “we wanted to make sure that somewhere, sometime, this didn’t happen. We’re confident that this did not happen.”

http://www.eweek.com/article2/0,1759,1963033,00.asp?kc=EWRSS04069TX1K0000701

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For the second time May 16, a major phone company named in a USA Today story about records being sent to the National Security Agency is denying that any such records were sent.

Earlier on May 16, BellSouth issued a very strong denial that the company was even contacted by the NSA, much less asked to provide records.

In a statement issued late May 16, Verizon said the company cannot confirm or deny any relationship it might have with the NSA.

However, the company did say that the USA Today report that it had agreed to provide details of all phone records to the NSA was false.

“One of the most glaring and repeated falsehoods in the media reporting is the assertion that, in the aftermath of the 9/11 attacks, Verizon was approached by NSA and entered into an arrangement to provide the NSA with data from its customers’ domestic calls,” the company’s statement says. “This is false.”

“From the time of the 9/11 attacks until just four months ago, Verizon had three major businesses—its wireline phone business, its wireless company and its directory publishing business,” the Verizon statement said.

Four months ago, Verizon acquired MCI. MCI was not mentioned by USA Today as having been a participant in providing call data to the NSA.

http://www.eweek.com/article2/0,1759,1963275,00.asp?kc=EWRSS04069TX1K0000701

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Apple Computer is set to enter the mobile phone market with a handset with built-in iPod. A report on the Nihon Keizai Shimbun website Nikkei Net Interactive said Japanese broadband and telecoms company Softbank Corp and Apple plan to jointly develop cellular phone handsets that have built-in iPod digital music players and can download songs directly from Apple’s iTunes Music Store.

Softbank, which is listed on the Tokyo Stock Exchange, is a broadband infrastructure and services developer and its association with Apple is likely to be focussed on the development of the delivery of internet telephony services, such as VoIP and online digital downloads from iTunes.

Mobile phone carriers fear mobile VoIP as it threatens to undercut their relatively high margin revenue stream.

Speculation about the launch of an Apple iPhone has been around for months with telecoms analysts, such as Pam Duffey from Visiongain, predicting just six weeks ago that Apple was timing the launch of an iPhone with US mobile virtual network operator Helio. Duffy predicted that the phone would be produced in South Korea.

According to Ms Duffy: “The iPhone will likely be as disruptive to the existing carrier market as the iPod was to the mobile music industry. When the iPhone adds VoIP capability, it will be even more disruptive to carriers.”

http://www.itwire.com.au/content/view/4278/53/

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Vonage is cutting its customers in on its initial public offering.

In an e-mail, the VOIP (voice over IP) provider detailed a plan to allow its customers direct access to shares of its IPO offering, currently expected to price between $16 and $18.

“Because much of our success is attributable to our customers, we have asked the underwriters of the IPO to reserve shares of common stock for sale to certain Vonage customers at the IPO price in a Directed Share Program,” the company said in an e-mail.

To participate, potential investors need to have been a Vonage customer from Dec. 15, 2005, through Feb. 1, 2006. Customers don’t have to remain with Vonage to participate in the IPO.

The big question is whether customers will want to participate. Vonage, which had 1.6 million subscriber lines as of April 1, had a net loss of $85 million on revenue of $119 million for the quarter ending March 31. For 2005, Vonage lost $261 million on revenue of $269 million. Vonage competes with everyone from Verizon and AT&T to Skype.

http://www.eweek.com/article2/0,1759,1958913,00.asp?kc=EWRSS04069TX1K0000701

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Verizon Communications has eliminated a discount on Internet phone services it once offered to its broadband customers.

The discount’s end and price cuts announced May 3 suggest Verizon is trying to jump-start interest in the feature and starting to market it more aggressively, said Lynda Starr, a senior analyst at Frost & Sullivan.

At Verizon, unlimited calls to anywhere in North America and U.S. territories now costs $25 a month, regardless of whether you get broadband from Verizon.

Since its debut in July 2004, Verizon VoiceWing customers always received a $5 a month discount if they also got broadband from Verizon.

Verizon lowered the overall price of the service as well. It used to cost $30 for broadband customers, and $35 for non-broadband customers.

Since its introduction, Verizon’s VoiceWing has accrued 27,000 customers, or about 5 percent of the U.S. residential market, Starr said.

Ben Charny

http://www.eweek.com/article2/0,1759,1957275,00.asp?kc=EWRSS04069TX1K0000701

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WASHINGTON (Reuters)—Internet telephone service company Vonage Holdings Corp. may offer up to 31.25 million shares for between $16 and $18 a share in an initial public offering, according to a regulatory filing on Friday.

The offering, expected to be underwritten by Citigroup, Deutsche Bank Securities and UBS Investment Bank, would value the Holmdel, New Jersey-based company at about $2.6 billion, according to the filing with the U.S. Securities and Exchange Commission.

The company has applied for a New York Stock Exchange listing under the symbol “VG.”

http://www.eweek.com/article2/0,1759,1955222,00.asp?kc=EWRSS04069TX1K0000701

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