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LONDON -- Vodafone (VOD) - Get Vodafone Group Plc Report beat analysts' forecasts for its fiscal first half -- for what that's worth.

Vodafone is a very different company than the one it was this time last year, largely due to the purchase of Germany's


and the subsequent sale of mobile-operator


. As such, comparisons are largely meaningless and the job of making accurate forecasts hugely complicated.

Nevertheless, on the whole analysts and investors were pleased with Vodafone's results for the six-month period to September, and by midafternoon Vodafone's shares were up 21.75 pence, or 9.1%, to 260.00 ($3.80).

The company revealed that proportionate -- taking into account Vodafone's stakes in all its partners and applying them as if they existed in the comparable period -- EBITDA for the six-month period was

3.3 billion, up 22.2% from

2.7 billion the year before and higher than forecasts of around

3.0 billion. Proportionate revenue for the period grew 32.5% to

10.2 billion from

7.7 billion the year before.

There was, however, one blot on the results.

Marginally Behind

Although well flagged, Vodafone's EBITDA margins in both Germany and the U.K. fell during the period.

In Germany, the margins fell to around 30% from 45% because of the huge growth at its subsidiary

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. Vodafone added a massive 5.4 million customers, an increase of 49% during the period, which cost Vodafone dearly in terms of subsidized handsets and other enticement offers. In the U.K., margins fell to 30% from 33%.

Chris Gent, Vodafone's chief executive, was fairly nonchalant about this, arguing that revenue from new customers in Germany and the higher-quality customers Vodafone is signing up in the U.K. would begin to kick in during the second half of this fiscal year.


margins in Germany will recover to around 35% by the end of the year and with a higher-quality customer being signed up in the U.K., the margins will improve to where they were last year," Gent said on a conference call.

Well perhaps, but so far there has been no sign of this. And raising EBITDA margins and average revenue per user, or ARPU, is essential if Vodafone is to maintain its valuation, because by Vodafone's own admission subscriber growth is slowing as penetration levels rise to near 70%.

Vodafone said it expects significant improvements in the percentage growth figures for both operating profit and EBITDA in the full-year figures so it is obviously confident it can increase ARPU through the provision of data services.

Mark Lambert of

Merrill Lynch

believes that the potential to enhance ARPU does exist and he has been encouraged by evidence in countries such as Japan and in Scandinavia.

"However, we are still awaiting a major European example," Lambert says. He sees Italy with its high penetration, innovative operators, low PC penetration and favorable culture as holding the best potential for this. Merrill Lynch rates the stock a buy and has had an investment banking relationship with Vodafone in the past three years.

The telecom industry being what it is, there is never a week that goes by without some brouhaha, and Gent was also forced to comment on those that Vodafone has found itself embroiled in over the past few months.

Problems, Problems

Regarding reports this week that

British Telecom


is preparing to sue Vodafone and



over their joint development of the multiaccess portal called Vizzavi because it is detrimental to the business of


, the mobile-phone venture owned by both Vivendi and BT, Gent said he "wasn't sure what BT's game is."

"There could well be a development but BT hasn't approached us. BT would speak to Vivendi first," he said.

Gent was similarly unsure whether Italy, Holland and Switzerland would carry through with their threats to rehold the auctions for third-generation mobile licenses after they ended abruptly because bidders pulled out.

"Who knows, but it should not be a surprise that they ended early. Bidders had run out of money" after the huge amounts needed to buy licenses in the U.K. and Germany, he said.

Finally, Gent said that

Hutchison Whampoa


is unlikely to unload its 2.5% stake in Vodafone anytime soon. This stock-overhang fear has weighed on Vodafone's share price ever since Hutchison reduced this stake from 3.4% through a convertible bond earlier this year.

Hutchison "feels

Vodafone is undervalued," Gent said. "They are cash rich so they will make their mind up about selling when the shares are back at a higher level."

What that level is, Gent either didn't know or wasn't letting on. But if Vodafone's full-year results are indeed significantly better than the first-half figures revealed today, then this comparison will no doubt push up the stock closer to that level.