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MARKET COMMENT
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Vodafone (LSE: VOD)(NYSE: VOD) was in a fighting mood this morning as it issued a robust set of six-month results that beat most analysts' expectations. Amongst the highlights was a 10% rise in the interim dividend, to the rather odd amount of 0.7946p per share. They could have made it a nice round 0.8p for a mere £4m extra. Sales rose by two-thirds to £14.9b, with much of the increase due its increased holdings in Japan. Profits before tax and goodwill got a similar boost, coming in £4.25m, a 41% rise over last year. Basic earnings per share was 3.28p. The company is obviously focusing on cash flow, which is good to see particularly in light of this morning's revelations from SFI Group (LSE: SUF). Vodafone's net debt stands at £10.7b and it generated free cash flow of £2.9b in the last six months. But it's not all plain sailing. Whether customers will be happy to pay for data services to offset the predicted decline in voice revenues is unclear. Although data accounted for 13.2% of revenues in the last year, 10% of this relates to SMS messaging, with the bulk of the remaining 'internet data' revenues coming from Japan. One thing I won't be doing over a mobile phone is looking at Vodafone's results. Running to six separate announcements, it's hard to pick out the key figures from all the alternative presentations that are offered. There's also the question of minority holdings in France and the US, the two most notable geographical holes in Vodafone's plan for world domination, and what Vodafone will have to pay to plug those gaps. 3G barely got a mention in these results apart from a note that Vodafone expects its 3G infrastructure to be operational in its major markets in the next twelve months and in Japan next month. The cost of this Japanese launch and increased advertising spend will mean profits across the group could be lower in the second half. At least that seemed to be what Chris Gent, the company's CEO, was implying in post-match interviews this morning. If you assume free cash flow of £5.5b for the full year, Vodafone is currently valued at around 14 to 15 times this figure. Full-year earnings per share of around 6p would imply a price to earnings ratio of 18 times. Despite the negatives, Vodafone still has decent growth prospects and the shares still look like reasonable long-term value, even after this morning's jump in price. > Vodafone discussion board