2nd UPDATE: Vodafone To Refresh Strategy In Autumn

(Adds analyst comments, details.) By Lilly Vitorovich Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Vodafone Group PLC (VOD.LN) will lay out a new strategy in the autumn that will take into account the explosion in wireless data and the growing number of mobile operating systems, Chief Executive Vittorio Colao said Friday, as the mobile giant reported a strong first-quarter performance and two agreements in the U.K. and India. Vodafone's current strategy, presented by Colao in November 2008 just a few months after he took the reins, is starting to pay off; the company returned to service revenue growth in the quarter ended June 30 after emerging from the recession as trends improved across the board. The strategy has also "positioned Vodafone for further growth in Europe, driven by mobile data, and in our emerging markets," the company said in a statement. "Two years down the road, it's about time to refreshen, update and explore," Colao told reporters on a conference call, without providing further details. Vodafone, which is facing a backlash over its strategy from institutional shareholder Ontario Teachers Pension Plan, or OTPP, posted a 1.1% rise in underlying service revenue--one of the key figures tracked by U.K. analysts--to GBP10.59 billion in the first quarter, beating market expectations of GBP10.39 billion. In May, the world's biggest mobile-network operator said it expects to return to underlying service revenue growth in the year ending March 31, 2011. Underlying data revenue rose 25% in the quarter, boosted by the rapid rise of smartphones. Revenue rose 4.8% to GBP11.26 billion from a year ago. Vodafone kept its full-year outlook for free cash flow to exceed GBP6.5 billion and for adjusted operating profit of between GBP11.2 billion and GBP12.0 billion. Capital expenditure should remain at GBP6.2 billion, adjusted for foreign exchange moves. "The single most important comment in Vodafone's results was the statement that 'Vodafone will set out how we intend to accelerate our strategy to drive shareholder value'," Sanford Bernstein telecom analysts said in a research note. They expect a "portfolio review and clearer commitment to change whether in the form of disposals or structural change." Sanford Bernstein has an outperform rating on Vodafone and 180 pence target price. Meanwhile, Vodafone said it has agreed to pay U.K. tax authorities GBP1.25 billion to settle a long-running dispute over tax on one of its foreign subsidiaries. The payout was well below its GBP3 billion provision. No further tax liabilities will arise in the near future under current legislation, it said. In India, where Vodafone operates through a joint venture with local partner Essar Group, the company said it has revised the agreement that gives it first option to buy out the Indian firm's 33% stake in Vodafone Essar Ltd. if some or all of the stake were for sale. Vodafone will now pay GBP510 million for the option to take account of the upfront cost of 3G licences that Vodafone secured in the recent Indian spectrum auction, provided the cost of the stake doesn't exceed $5 billion. The put option expires in May 2011. Meanwhile, Colao declined to comment on OTPP's call for a revamp of the group's board due to concerns about its strategy and track record on acquisitions. OTPP, which holds a 0.42% stake in Vodafone, plans to vote against the re-election of non-executive Chairman John Bond and Deputy Chairman John Buchanan at Vodafone's annual shareholder meeting July 27. OTPP said it will, however, vote for the re-election of Colao, who took the helm in July 2008 and has started to improve Vodafone's operating performance and competitiveness. Colao reiterated that the group's 45% stake in Verizon Wireless remains a good investment. It is still a thorny issue for investors, though, as the venture with Verizon Communications Inc. (VZ) hasn't paid a dividend since 2006. In November, Colao said resolving that issue was the group's top priority. Verizon reports second quarter earnings later Friday. At 0931 GMT, Vodafone shares were up 1 pence, or 0.8%, at 150 pence, valuing the company at GBP79.1 billion, in a slightly lower London market. The stock has risen 31% over the past 12 months, outperforming the FTSE 100 index, which has risen 18% over the same period. -By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com (END) Dow Jones Newswires July 23, 2010 05:39 ET (09:39 GMT)