Vodafone Group H1 2018/19 Results & Strategy Update - 13 November 2018
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Vodafone Group H1 2018/19 Results
& Strategy Update
13 November 2018
Disclaimer
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Vodafone Group’s industry. Although these measures are important in the
relied upon as a guide to the future performance of such investments.
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or otherwise acquire or dispose of securities in any company within the Vodafone
Vodafone, the Vodafone Portrait, the Vodafone Speechmark, Vodafone Broken
Group.
Speechmark Outline, Vodacom, Vodafone One, The future is exciting. Ready? and
This presentation contains forward-looking statements, including within the M-Pesa, are trademarks of the Vodafone Group. Other product and company
meaning of the US Private Securities Litigation Reform Act of 1995, which are names mentioned herein may be the trademarks of their respective owners.
subject to risks and uncertainties because they relate to future events. These
forward-looking statements include, without limitation, statements in relation to
Vodafone Group’s financial outlook and future performance. Some of the factors
which may cause actual results to differ from these forward-looking statements
are discussed on the final slide of this presentation.
2
Overview
• Good performance in most markets, Italy and Spain challenging
• Narrowing EBITDA guidance to mid-point of 3% underlying1 organic growth,
FCF raised to c.€5.4bn
• Driving business performance:
– Focus on operational execution and organic growth, supporting more
consistent commercial performance
– Radically simpler commercial propositions; internal emphasis on a few
key value drivers
– Openness to partnering to improve returns
• Multiple value drivers supporting structural FCF growth, deleveraging and
a sustainable dividend
1. Excludes the impact of UK handset financing and prior year settlements in UK and Germany
3
My long-term ambition
Deepening
Customer engagement + Accelerating
Digital transformation + Improving
Asset utilisation
Driving
Shareholder Returns
• Gaining profitable total • Agile, tech-company • Capturing announced deal • Significant FCF growth,
comms market share operating model synergies supporting 3-year LTIP
• Lower churn rates • More consistent • Capital-smart strategic ambition of c.€17bn FCF
commercial performance partnerships • Sustainable dividend payout
• >€1.2bn opex reduction • Virtual TowerCo in Europe
in Europe1
Creating shareholder value through a focus on operational excellence and organic growth
1. Opex reduction includes Europe and Common functions where referenced throughout the presentation
4
Value drivers >€0.5bn
cost/capex
synergies from
Germany/
>€1.2bn CEE1
net opex savings
in Europe by
17% FY21
49% 30% of group service
revenues
of group service
of group service revenues
revenues
Europe Consumer Vodafone Business Emerging Consumer Digital transformation Asset utilisation
• Fixed on-net share gains • Leading fixed challenger • Smartphone & data • Radically simpler • Capture M&A synergies
• 5G opportunities • Digital enabler to penetration • Digital first • Virtual TowerCo
• ‘One more product’ per SoHo/SMEs • Digital and financial • Leverage Group scale
customer/lower churn • Industrialising IoT/5G services
Deepening customer engagement
1. By the fifth full year post closing
5
H1 18/19 progress
€
Commercial momentum Digital transformation Asset utilisation
• Group service revenue +0.8%1 • 30% of Europe fixed new • Vodafone-Idea merger closed,
sales from digital channels Bharti Infratel/Indus Towers
• Europe Consumer broadband merger progressing
base +250k, converged • ‘Vodafone-Bit’ digital only
customers +611k product launched in Spain • Liberty Global Germany/CEE;
• Vodafone Business +1.0% service • EU opex down €0.2bn YoY regulatory submissions filed
revenue growth, led by fixed/IoT
• Adjusted EBITDA +2.9%2 • Merger announced in Australia
• Emerging Consumer mobile data of VHA and TPG
users +2.3m
Narrowing full year guidance to c.3% underlying EBITDA3 growth, raising FCF guidance to c.€5.4bn, stable interim DPS
All growth rates in this document are on an IAS 18 basis, organic and year-on-year, unless otherwise stated, with Vodafone India and Vodafone Qatar excluded from organic growth calculation
1. Excludes UK handset financing
2. Excludes UK handset financing and settlements 6
3. Excludes the impact of UK handset financing and prior year settlements in the UK and Germany
Good EBITDA growth in most markets, Spain and Italy challenging
H1 18/19 EBITDA growth (%)
12.1
10.3 10.2
7.3
4.8
(9.7)
(20.7)
UK¹ Other Europe Other AMAP Germany Vodacom Italy Spain²
Service
revenue 0.8 2.4 9.4 2.0 5.7 -6.4 -4.7
growth (%)
1. Adjusted for handset financing and one-off settlement from the prior year
2. Adjusted for one-off items and intercompany charges
7
Italy: clear response to competitive intensity
Actions Outcomes
ho customer base
Successful launch of second brand
+491k net ports
Active base management
More for more offers
Fixed line momentum
121k broadband net adds, price increase Jun Jul Aug Sep
Strong cost discipline € 6.99 6.99 7.99 9.99
Opex reduced by 8% Offer 30GB 30GB 40GB 50GB
8
Spain: commercial repositioning; cost transformation underway
Actions Outcomes
Mobile contract Vodafone vs. competitor A
Vodafone vs. competitor B
net ports (000s)
Exiting unprofitable football rights, focus on movies/series
€240m annual savings by FY21 (€150m FY20) 3
Repositioning the Vodafone brand (10)
(22) (18)
Stable ports vs. Orange (25)
(41) (45)
Strengthened Lowi (62)
Ports to MasMovil reduced to target Q3 17/18 Q4 17/18 Q1 18/19 Q2 18/19
Redesigning our operating model • Lost 60k football customers in Aug/Sept
Lower cost base, launch of ‘Vodafone Bit’ • Promos ended, porting activity stabilising
9
Good performance in key markets
Germany UK Vodacom Group
Environment Stable Stable Macro pressure in SA
Q2 service revenue
growth (%) +1.7 +1.11 +6.3
H1 EBITDA growth (%) +7.3 +12.12 +4.8
466 181 4,956
H1 customer net 97
115
195
adds (000s)
Mobile Contract Fixed broadband Mobile Contract Fixed broadband Mobile Contract Mobile Prepaid
1. Excluding handset financing
2. Adjusted for handset financing and one-off settlement from the prior year
10Financial review Margherita Della Valle Group Chief Financial Officer
Underlying growth
Half year financial highlights (IAS18 basis)
Service revenue Adjusted EBITDA Adjusted EBIT Free cash flow
Underlying Underlying
(€bn) (€bn) (€bn) (€bn) Pre-spectrum
Post-spectrum
+0.8%1
+2.9%2 +8.6%2
20.6
19.7
7.4 2.5 2.3
7.1 1.3
0.9
6.7 6.9 1.9 2.1
0.4 0.6
H1 17/18 H1 18/19 H1 17/18 H1 18/19 H1 17/18 H1 18/19 H1 17/18 H1 18/19
Growth despite pressures Underlying EBITDA margin2 Adjusted EBITDA growth Lower capital creditors
in Italy & Spain +30bps YoY and lower D&A
All percentage growth rates in this document are organic unless otherwise stated
1. Organic growth excluding UK handset financing
2. Organic growth excluding UK handset financing and settlements 12Adjusted and reported earnings
H1 18/19 H1 17/18
(€m)
IFRS 15 IAS 18
Adjusted EBIT 2,100 2,457
Impairment loss (3,495) - Spain (€2.9bn)
Associates (8) 171 Includes 1 month of Vodafone Idea
Restructuring (95) (33)
Amortisation of brand assets/other (317) (543)
Other income and expense (256) (44)
Operating profit (2,071) 2,008
Financing costs/income (815) 152 Mark to market losses on MCB put options & FX movements
Tax expense (1,409) (579) Group effective tax rate 25.9%, reflecting change in mix
Non-controlling interests (132) (104) of profits, mid-term rate still low to mid-20s
Non-operating income and expense (3) (1)
Discontinued operations (3,535) (345) €3.4bn loss on disposal following merger with Idea
Non-controlling interests 132 104
Profit/(loss) for the period (7,833) 1,235
Adjusted earnings1 979 1,773
Weighted average number of shares2 (m) 27,462 28,067 26,697m ex. mandatory convertible bond (MCB)
Adjusted earnings per share (eurocents)1 3.56 6.32 Impacted by lower EBIT, move to IFRS15, FX, higher net interest
1. Reported excluding impairment losses, the loss on disposal of Vodafone India, restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
2. Weighted average number of shares includes a dilution of 765 million shares (2016: 1,292 million shares) following the issue of £2.9 billion of mandatory convertible bonds (‘MCB’) in February 2016
13Service revenue growth
Quarterly trends2 Impacts of IFRS 153
(%) Ex. UK handset financing Reported (IAS18) IFRS 15 basis H1 18/19 (%) IAS 18 (ex. UK handset financing) IFRS 15
2.0
Germany 1.1
(6.4)
2.2
Italy (6.8)
2.1
1.6 0.8
1.6
1.1
UK 1.4
0.9
(4.7)
1.4 0.5 Spain (4.3)
1.3 1.1 0.3
0.3 5.7
Vodacom 5.4
(0.5)
(0.7)
Europe (1.0)
Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18¹ Q1 18/19 Q2 18/19 7.4
AMAP 7.3
1. Excluding the benefit of a German legal settlement
2. From Q1 18/19 and onwards wholesale voice transit revenue is excluded from organic growth
3. Q1 18/19 IFRS15 service revenue growth rate restated from 1.1% to 0.9% 14Service revenue growth drivers
H1 18/19 organic service revenue growth contribution
(pp)
0.3
1.2
0.5 (1.2) 0.8
0.4 (0.4)
Europe Europe Emerging Vodafone Italy/Spain Wholesale¹ H1 18/19
Consumer mobile Consumer fixed Consumer Business Consumer (ex. HF)
(excl. IT/ES) mobile
1. Includes common functions and eliminations
15Opex reducing for the third year in a row
EBITDA growth
(€bn)
0.2
6.9
0.1 Europe1 opex savings accelerating:
(0.1)
6.7 0.4
0.3
FY 17/18 FY 18/19e
H1 17/18 Direct margin Net A&R Europe opex¹ AMAP opex H1 18/19
organic EBITDA organic EBITDA
1. Europe and common functions opex
16Targeting >€1.2bn of net opex savings in Europe
Group opex Europe1 opex mix
(€bn) Europe1 AMAP (€bn) Commercial Technology Support
11.2
2.0 Targets: Functional targets:
- Customer ops: >30% net reduction
Growing < inflation 3.7
9.2 4.1 - Retail footprint: >15% reduction
- IT ops: >40% savings
>€1.2bn of net savings 1.4
- Shared Services: >25% efficiency saving
FY 17/18 FY 20/21e
Multi-year net opex savings
1. Europe and common functions opex
17Digital transformation: cost reduction levers
Digital first Radically simpler Leverage Group scale
Addressable cost base €8.0bn1
€2.5bn €1.0bn €1.5bn €3.0bn
Commissions Retail Customer Operations
footprint operations
Progress in H1 Progress Progress
• 10% reduction in frequency of • 40% of products retired over 3 years • Shared Services now 20,000 FTEs
human contact2 • 50% reduction in price plans - c.900 role reduction in H1
• 30% fixed sales from digital channels • Centralisation savings:
- 75% in finance ops, 40% in network ops
Opportunities Opportunities Opportunities
• Accelerated timeframe (5yr 3yr) • New simplified pricing models • Expanding shared services
• Increased ambition • Digital only plans • Centralise network design & IT operations
• ‘Virtual TowerCo’
1. Addressable cost base: total identified spend within which savings can be made through the Digital transformation programme
2. Excludes Spanish commercial repositioning impact
18Digital transformation: Germany broadband case study
Buy Onboard Install Get help
33% of broadband gross DSL calls down 30% Successful installations now 98% 20% of contacts now automated
adds now online
• Improved website design • Substitute calls by selfcare journeys • Grow automated and selfcare • TOBi support
• Online NPV >2x retail channel NPV • Push status and digital contacts installation • Ability to predict service needs
from day 1 • Manage technician appointments
Über-style
End-to-end process costs down c.25%
19Driving asset utilisation: creating a virtual TowerCo
Number of sites (tenancy ratio) Opportunities
Virtual TowerCo JVs
• Vertical internal organisation with
19,200 (1.1)
dedicated management team for
1,500 (1.7) controlled operations
3,100 (1.2)
• Driving operating efficiencies and
20,000 (1.3)
improving tenancy ratios
• Conducting due diligence to determine
optimal strategic and financial direction for
11,000 (1.6)
4,200 (1.4) CEE: 9,500 (1.4) all tower assets
9,100 (1.4)
GR: 2,300 (1.4)
20Driving asset utilisation: strong synergy track record
Synergies delivered from previous transactions1:
(€bn) (€bn) (€bn)
Vodafone Germany Vodafone Spain VodafoneZiggo
KDG synergy target: €300m pa Ono: synergy target: €240m pa VZ synergy target: €210m pa
9.1
8.6 4.8
4.4 3.2
3.0
€0.4bn €0.3bn >1/3 of
synergies synergies synergies
realised
Total cost and Total cost and Total cost and Total cost and Total cost and Total cost and
capex FY14 capex FY18 capex FY14 capex FY18 capex CY16 capex LTM
Germany/CEE acquisitions: targeting €535m annual run-rate cost & capex synergies2
1. Pro-forma for KDG in Germany, ONO in Spain (excluding Ono wholesale costs), and Ziggo in the Netherlands
2. By the fifth full year post completion
21On track for fourth consecutive year of EBITDA margin expansion
Group adjusted EBITDA margin
Ex. handset financing
(%) & settlements
Ambition
31.0%
30.7% 30.8%
29.5%
29.3%
28.5% 28.6%
H1 12/13 H1 13/14 H1 14/15 H1 15/16 H1 16/17 H1 17/18 H1 18/19
22Capital intensity stable
Capital intensity
H1 H2 Full year
Evolving capex mix Driving asset utilisation
16.1%
15.7% c.16% European NGN self build Smart capex planning
largely complete – €170m saved in FY19
14.7%
17.6% 17.3% 4G coverage now 95% in EU IT migration to the Cloud
14.1%
13.6% – 40% of applications now migrated
5G investment
FY 16/17 FY 17/18 FY 18/19
H1 Group data
traffic (PB): 985 1,631 2,541
5G ambitions funded within mid-teens1 capital intensity envelope
1. Excluding Gigabit plan
23Nearing the peak of the 5G spectrum cycle
Historical cash spectrum spend1
(€bn)
3.4
Upcoming
5G auctions3
1.5 1.6 1.6
10 year average
spectrum cash spend €1.2bn 1.1
c.1
Spectrum amortisation
below €1bn2
0.4 0.4 0.5
0.3
FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19e FY 20 FY 21
1. Ex. India and Netherlands
2. Annual spectrum amortisation charge, adjusted for the assumption that the 3G auctions in 2000 in Germany, Italy and UK had taken place at the average price /MHz/pop for European 3G auction since 2008
3. Major markets only 24Free cash flow
H1 18/19 H1 17/18
(€m)
IAS 18 IAS 18
Adjusted EBITDA 7,078 7,385
Capital additions (3,067) (3,263)
Capital creditors (821) (576)
Working capital (1,704) (1,718)
Net interest (369) (343) Net cost of debt 2.4% (ex. Liberty)
Taxation (395) (400) Liberty funding cost 2.4% to date
Dividends received from associates & investments 305 284
Dividends to non-controlling interests (185) (154)
Other1 52 74
Free cash flow (pre-spectrum) 894 1,289 FY 18/19 now expected to be c.€5.4bn2
Spectrum (231) (747) UK 5G spectrum acquired (3500MHz)
Restructuring (97) (127)
Free cash flow 566 415
1. Relates to non-cash movements on share based payments and disposal of capital assets
2. At guidance FX rates
25FY 2018/19 net debt outlook ~3.0x
pro-forma
leverage
post LBTY
Net debt
Estimated year
(€bn) end net debt A robust investment
31.5 0.8 c.€31-32bn
0.8 grade balance sheet:
(1.8)
(2.1) • Headroom above
c.3 minimum credit rating
c.(5.4) 4.0 • Long term maturities
• Hedged against EM
FX volatility
March KDG put VZ loan FY 18/19 Dividends Spectrum Net cash Start of MCB Other³ March
2018 option note FCF (accrued)² outflow to share 2019
reclassified guidance¹ India on buyback
closing
Committed to pro-forma target leverage range of 2.5x – 3.0x
1. At guidance FX
2. Includes Italy, Spain & the UK, excludes other potential auctions in major markets
3. Includes FX, restructuring and BEE special dividend 26Recurring FCF supporting €4bn annual dividend
Free cash flow pre-spectrum
(€bn)
c.€17bn cumulative 3yr LTIP ambition
Headwinds vs. plan:
5.4 c.5.4 • Spain repositioning
• Emerging market FX
4.1 Normalised Normalised
spectrum spectrum
Tailwinds vs. plan:
• Accelerating cost
transformation
1.3 Dividend Dividend
+
• DE/CEE acquisitions expected
to be materially accretive to
FY 16 FY 17 FY 18 NEW FY 20 FY 21 FCF1
FY 19 guidance
1. Not included in the FY 2017/18 LTIP
27Strategy update Nick Read Group Chief Executive
Our strategy
Our purpose: We connect for a better future
Deeper customer engagement
Europe Consumer Vodafone Business Emerging Consumer
Scaled platforms & Partner of choice
Leading global Europe’s largest M-Pesa Africa’s largest Europe’s largest
IoT platform TV and content payment platform Tower Co
distribution platform
77m sims 22m TV customers1 35m customers 58k sites across Europe
Best Gigabit Network Digital “First” Radically Simpler
1. Includes VodafoneZiggo and proforma for the acquisition of Liberty Global’s Unitymedia asset in Germany and UPC assets in Central and Eastern Europe
29Europe Consumer: Vodafone’s leading NGN footprint
European marketable homes (proforma)1 (m) Strengthening our reach and economics
Total homes
Germany /CEE acquisitions
168
• c.24m NGN marketable homes in Germany
Total incl. ADSL and NGN
145 • Transform CEE assets into fixed/converged challengers
NGN incl. wholesale
117
Strategic partnerships
61 Strategic wholesale partnerships2
OpenFibre fully funded, rollout accelerating
Owned NGN network CityFibre funding to build 5m homes, option for exclusivity
54
Network sharing agreement with MasMovil
for up to 1m homes
Gigabit upgrades in Germany / Spain
% of homes 32 37 70 86 100
1. Includes VodafoneZiggo and proforma for the acquisition of Liberty Global’s Unitymedia asset in Germany and UPC assets in Central and Eastern Europe
2. Includes Telefonica (selected areas in Spain) and Open Fiber (Italy)
30Europe Consumer: driving on-net penetration, lowering churn
Increase our on-net penetration and… … upsell more products and services
(%) Germany 29 Super Wi-Fi Gigaholiday
Spain 21
Italy 12 Always connected
Portugal 21
Ireland 13 Secure Net
converged TV & entertainment
Greece 2
Netherlands 46
0 10 20 30 40 50
H1 FY
On-net penetration1 18/19 22/232 Incremental churn benefit through
convergence and additional services
• Every 1m on-net Broadband customers increases cash flow by c.€0.25bn
1. Includes VodafoneZiggo and proforma for the acquisition of Liberty Global’s Unitymedia asset in Germany and UPC assets in Central and Eastern Europe
2. Mid-term ambition for on-net penetration
31Best Gigabit Network: building Europe’s largest 4G/5G network
95% 4G coverage
A densified and modernised network 88k 98% single RAN
4G sites 96% have high capacity backhaul
A leading 4G/5G spectrum position 8 already have 3.5GHz spectrum for 5G
markets
Co-lead in 5G deployment 66% in cities with more than 100k population are 5G ready1
of sites
5G ambition: leader in network perception, differentiation vs. value players
1. Includes 13 European markets (incl. NL). ‘5G ready’ defined as sites that are single RAN enabled with backhaul capability of >1Gbps
32Best Gigabit Network: efficient gigabit factory
Costs stable Relative radio cost of delivery
Europe network costs1 Europe data traffic (PB) Indexation of unit costs
H1 +57%
YoY
-70%
102 102 -80%
100
FY 15/16 FY 16/17 FY 17/18 3G 4G 5G
Targeting stable network costs despite strong expected traffic growth
1. Opex and depreciation, FY used to avoid seasonality
33Europe Consumer: 5G brings more opportunities
QoS Consumer IoT Fixed wireless access E-Gaming
Opportunities Tiered offers based on quality 2.5bn European Consumer Targeting rural, semi-rural and Mobile gaming population to
of service and/or speed IoT devices by 20251 non-fibre areas reach 157m by 20252
differentiation
Actions Building intelligent network V-brand CIoT platform Launching in 2020 ESL ‘premium partner’
capabilities for 2020+ launch and products launched (using 3.4 - 3.7GHz bands)
One more product per customer in a gigabit converged world
1. GSMA report, April 2018
2. Global Gaming Report 2018, Newzoo Research, forecasting mobile gaming population in Germany, Italy, the UK and Spain
34Vodafone Business: a unique asset
Global footprint Product mix
7% Cloud 3%
IoT
Mobile
60%
Vodafone markets
30% Fixed
Partner markets
• Owner economics in multiple markets • Leading fixed challenger
• 248,200 kms of fibre • Minimal exposure to legacy products and low margin IT projects
• Security and end-to-end control for customers • Attractive contribution margins
30% of group service revenues, growing at 1.0% in H1
35Vodafone Business: the challenger to incumbents
Mobile revenue share1
100%
Business
c.78%
Consumer
c.60%
50%
Competitor 4
Competitor 3
Competitor 2
Vodafone
Competitor 1 0%
Business Consumer Business Consumer Business Consumer Business Consumer
Enterprise fixed revenue 8% 7% 9% 13%
market share
1. Latest full year available
36Vodafone Business: Gigabit solutions for large corporates
Gain in fixed market share with SD-WAN1 Leveraging our IoT global leadership
Global IoT enterprise market – Total value chain (€bn2)
• Disrupt legacy relationships with lower cost solutions CAGR 17–25
232
• Differentiate through mobile integration and 202
Total 11%
applying Analytics and AI 168
Services 13%
143
134 121
97 97
74
54 28 34 Connectivity 12%
17 22
13 55 Hardware 8%
43 49 53
30
FY17 FY19 FY21 FY23 FY25
• Scale and improve connectivity platform
• Grow services in selective verticals beyond automotive
(services 24% of IoT revenues today)
1. Software Defined – Wide Area Networks
2. Mason Feb 2017 global forecast includes fixed, mobile and LPWA communication based services
37Emerging Consumer: Material data growth opportunities
Africa and Middle East data customers1 ARPU uplift in South Africa
161m
Customers +22%
78m +13%
Active data users
69m
Smartphone customers
36
4G customers
2G 3G 4G
• 43% smartphone penetration • Data revenue is 50% of Emerging Consumer mobile service revenues
• Leading/co-leading network NPS in all our markets • Data revenue growing at 18%
1. In Vodafone footprint, excluding JVs in Kenya and India
38Emerging Consumer: M-Pesa as a financial services platform
1. Money transfer & core services 2. Enterprise payments 3. Financial services 4. Mobile commerce
P2P transfers, international B2B, bank transfers, bills, Loans, handset financing, Merchant in-store
transfers salaries insurance, finance tools and online
% M-Pesa
penetration
% of into the
service customer
Progress by market revenue base
Kenya 30 83
Tanzania 32 58
Mozambique 11 63
DRC 7 26
Lesotho 7 37
Ghana 0.7 8
Egypt 0.1 1
39Summary
Clear focus on Strong ambition to Five value drivers for Consistent investment
operational execution transform our revenue growth in the best Gigabit
operating model and margin expansion networks
Free cash flow growth
Supporting a sustainable dividend and improved shareholder returns
40Q&A
41Appendix
42Germany: continued operational momentum, margin expansion
Actions Outcomes
Mobile contract and broadband net adds
Mobile contract Fixed broadband
Investing for network leadership 258
DOCSIS 3.1 upgrade in 30% of footprint 217 212 208
Growing in higher value channels 144
Direct >40% of gross adds 94 89
79 69
46
Driving convergence
1.2m converged customers, +513k H1 net adds
Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 Q2 18/19
Digital transformation delivering savings
EBITDA margin +150bps YoY • Wholesale drag in H2, Gigabit Plan ramping up
43UK: building commercial and financial momentum
Actions Outcomes
Mobile contract and broadband net adds
Mobile contract1 Fixed broadband
Investing for network leadership 104
#1 in London
77
66
Consumer focus on fixed and youth segment 53
44
Broadband base +201k yoy, VOXI net adds +39k 33
41 38
26
Fixed enterprise recovery 6
+1.9% growth in Q2, 15 networks closed Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 Q2 18/19
Driving efficiencies, partly through digitalisation
Opex reduced by 6% • EBITDA up 12%, H2 expected to improve further
1. Excludes the phasing out of Talkmobile customers. Reported contract net adds in FY 17/18: Q2 -3k, Q3 +6k, Q4 -14k, and in Q1 18/19 +60k.
44H1 YoY EBITDA walk
(€bn)
7.4 +2.9%
6.9 0.2 7.1
(0.1) (0.1) 6.7
(0.1) (0.1)
(0.3)
H1 17/18 FX/other Qatar India recharges UK settlement UK handset H1 17/18 H1 18/19 UK handset H1 18/19
reported EBITDA deconsolidation financing organic organic financing EBITDA reported
underlying underlying
EBITDA EBITDA
45Vodafone pro-forma NGN footprint by country1
Household coverage
(m)2 Owned Strategic partnership3 Acquired Assets Wholesale % Household coverage
70% 64% 75% 88% 58% 93% 38%
5.0
11.0
11.2
28.1
12.5
12.7 10.3 0.2
2.6 2.7 7.2 6.4
3.2
Germany Italy Spain UK Portugal VodafoneZiggo NLJV CEE¹
117m Households passed with NGN (incl. wholesale) 54m Households passed with own NGN
70% Coverage 32% Coverage
1. Includes VodafoneZiggo and proforma adjustments for the announced acquisition of Liberty Global’s Unitymedia asset in Germany and UPC assets in Central and Eastern Europe
2. As of 30 Sep 2018. Excludes 3.8m wholesale & self built NGN homes passed in Greece and Ireland
3. Of the 3.3m homes passed by Open Fiber, 2.6m were marketable by Vodafone at the end of Sep 2018 (up from 2.2m at the end of June 2018) 46Customer experience and commercial KPIs
Europe AMAP
Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2
17/18 17/18 17/18 18/19 18/19 17/18 17/18 17/18 18/19 18/19
4G customers (m)1,4 54.3 56.8 59.1 61.0 62.2 4G customers (m)2,3 34.3 47.2 56.2 68.4 73.8
Broadband customers (m)1 17.1 17.5 17.8 17.9 18.3 Broadband customers (m)2 1.7 1.8 1.9 1.9 2.0
Converged customers (m)1 4.7 5.0 5.3 5.8 6.0 Converged customers (m) 0.1 0.1 0.1 0.1 0.1
Contract churn (%) 16.8 18.1 16.5 15.8 17.4 Contract churn (%) 14.3 15.4 15.6 13.8 13.2
4G % outdoor population
93 93 94 94 95 3G/4G outdoor coverage (%) 86 86 87 87 88
coverage(%)1
% of data sessions >3Mbps 91 91 92 92 90 % of data sessions >3Mbps 87 88 88 87 86
% of dropped calls 0.41 0.36 0.34 0.36 0.36 % of dropped calls 0.56 0.52 0.51 0.50 0.48
All figures exclude India and VodafoneZiggo unless otherwise stated
1. Includes VodafoneZiggo
2. Includes Vodafone-Idea and other associates, excludes Qatar 47
3. AMAP restated from Q1 18/19 onwards due to Egypt clean-up
4. Europe restated from Q2 17/18 onwards due to UK clean-upFinancing costs (excluding Liberty financing costs)
HY 18/19 HY 17/18
(€m) (€m)
Net financing costs (815) 152
Mark to market - Mandatory convertible bonds 180 (176)
Foreign exchange1 215 (302)
Adjusted net financing costs (420) (326)
Other mark to market of derivative positions 5 (19)
Interest expense arising on settlement of outstanding tax issues (15) 33
Net financing costs before settlement of outstanding tax issues (430) (312)
Other FX/FV including Share buyback irrevocable2 - (25)
Liberty financing costs 65 -
Other 13 (30)
Underlying net financing costs (a) (352) (367)
Average net debt (b) (29,906) (29,465)
Net cost of debt3 2.4% 2.5%
1. Comprises foreign exchange rate differences reflected in the income statement primarily in relation to sterling and US dollar balances
2. FX/FV on Share buyback irrevocable is in HY17/18 only
3. Cost of debt: ((a/b)x2) x 100 48Forward-looking statements
This presentation, along with any oral statements made in connection therewith, contains “forward-looking and associated benefits; the Group’s ability to secure the timely delivery of high-quality products from suppliers; loss
statements” including within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to of suppliers, disruption of supply chains and greater than anticipated prices of new mobile handsets; changes in the
the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives. costs to the Group of, or the rates the Group may charge for, terminations and roaming minutes; the impact of a
failure or significant interruption to the Group’s telecommunications, networks, IT systems or data protection systems;
In particular, such forward-looking statements include, but are not limited to, statements with respect to: expectations changes in foreign exchange rates, as well as changes in interest rates; the Group’s ability to realise benefits from
regarding the Group’s financial condition or results of operations; expectations for the Group’s future performance entering into acquisitions, partnerships or joint ventures and entering into service franchising, brand licensing and
generally; expectations regarding the Group’s operating environment and market conditions and trends; intentions platform sharing or other arrangements with third parties; acquisitions and divestments of Group businesses and
and expectations regarding the development, launch and expansion of products, services and technologies; growth in assets and the pursuit of new, unexpected strategic opportunities; the Group’s ability to integrate acquired businesses
customers and usage; expectations regarding spectrum licence acquisitions; and expectations regarding, service or assets; the extent of any future write-downs or impairment charges on the Group’s assets, or restructuring charges
revenue, adjusted EBITDA, free cash flow, capital expenditure, and foreign exchange movements. incurred as a result of an acquisition or disposition; the impact of legal or other proceedings against the Group or
other companies in the mobile telecommunications industry; loss of suppliers or disruption of supply chains;
Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such
developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board
words as “plans”, “targets” “gain”, “grow”, “continue”, “retain” or “accelerate” (including in their negative form). By
takes into account when determining levels of dividends; the Group’s ability to satisfy working capital and other
their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty
requirements; and/or changes in statutory tax rates and profit mix.
because they relate to events and depend on circumstances that may or may not occur in the future. There are a
number of factors that could cause actual results and developments to differ materially from those expressed or Furthermore, a review of the reasons why actual results and developments may differ materially from the
implied by these forward-looking statements. These factors include, but are not limited to, the following: external expectations disclosed or implied within forward-looking statements can be found under the headings “Risk factors”
cyber-attacks, insider threats or supplier breaches; changes in general economic or political conditions in markets and “Other information – Forward-looking statements” in the Vodafone Group’s Half-Year Financial Report for the six
served by the Group and changes to the associated legal, regulatory and tax environments; increased competition; months ended 30 September 2018 and “Forward-looking statements” and “Risk management” in the Group’s Annual
increased disintermediation; the impact of investment in network capacity and the deployment of new technologies, Report for the year ended 31 March 2018. The Half-Year Financial Report and the Annual Report can be found on the
products and services; rapid changes to existing products and services and the inability of new products and services Group’s website (vodafone.com/investor). All subsequent written or oral forward-looking statements attributable to
to perform in accordance with expectation; the ability of the Group to integrate new technologies, products and the Company, to any member of the Group or to any persons acting on their behalf are expressly qualified in their
services with existing networks, technologies, products and services; the Group’s ability to grow and generate revenue; entirety by the factors referred to above. No assurances can be given that the forward-looking statements in or made
a lower than expected impact of new or existing products, services or technologies on the Group’s future revenue, in connection with this presentation will be realised. Any forward-looking statements are made as of the date of this
cost structure and capital expenditure outlays; slower than expected customer growth and reduced customer presentation. Subject to compliance with applicable law and regulations, Vodafone does not intend to update these
retention; changes in the spending patterns of new and existing customers and increased pricing pressure; the forward-looking statements and does not undertake any obligation to do so.
Group’s ability to expand its spectrum position or renew or obtain necessary licences and realise expected synergies
49More information
Visit our website for more information 2019 upcoming dates
Interim
dividend paid Q3 results Prelim results
1 Feb 25 Jan 14 May
Contact us
ir@vodafone.co.uk
+44 (0) 7919 990 230
www.vodafone.com/investor
For definitions of terms please see www.vodafone.com/content/index/investors/glossary
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