Chief Executive Vittorio Colao’s pay totalled £11 million last year, but tax breaks allowed the world’s second largest mobile phone company by revenues to pay no U.K. corporation tax for a second year running.

With revenues of nearly £45 billion last year, Vodafone reported underlying earnings of £13 billion, and a global profit of more than £3 billion. The U.K. business generated more than £5 billion in revenues and £1.2 billion in underlying earnings.

Vodafone paid £2.6 billion in tax to other nations last year, but its U.K. corporation tax bill was zero. According to the annual report, published on Friday, the company did pay £24 million in respect of tax recalculated for previous years.

U.K. levies are minimal at Vodafone because the company is allowed tax breaks on the cash it invests in buying spectrum and in network equipment, and the £300 million a year in interest its U.K. operating company still pays on money raised to buy spectrum at the 3G airwaves auction 13 years ago.

Vodafone’s tax payments are notably lower than the cash it distributes in dividends. In the last year, shareholders benefited from a 13 per cent rise in the stock price and £4.8 billion in dividends. The company is cash rich, thanks to money collected from Verizon Wireless, America’s largest mobile network, in which Vodafone holds a 45 per cent stake. Speculation that Vodafone would be tempted to offload the stake has helped boost demand for its shares.

In light of the economic crisis in Europe, which has taken its toll on Vodafone’s revenues there, Mr. Colao’s pay is to be frozen for a second year running, along with that of most of his top team.

“When considering what, if any, pay increases to award, the committee is always mindful of both wider conditions as well as what is happening elsewhere within Vodafone,” remuneration committee Chairman Luc Vandevelde wrote in the annual report.

The Chief Executive’s total rewards including share options, cash bonus and pension, fell from nearly £16 million in 2012. His base pay, which includes fees as well as salary, rose by £11,000 to £1.11 million, and his private healthcare and car allowance rose £6,000 to £30,000. In addition he received £333,000 cash in lieu of pension.

Missed targets for the group’s underlying earnings, cash generation and revenues meant Mr. Colao’s share awards and cash bonus were lower than in 2012. He received £8.25 million in shares and £1.313 million in cash bonus.

A collapse in consumer confidence has made trading tough for Vodafone in the eurozone. In southern Europe, revenues fell by 11 per cent, and operating profits by 28 per cent. — © Guardian Newspapers Limited, 2013

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