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Vodafone Group Plc Half year results 10 November 2015 For the six months ended 30 September 2015

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  • Vodafone Group Plc Half year results

    10 November 2015

    For the six months ended 30 September 2015

  • Information in the following communication relating to the price at which relevant investments have been bought or sold in the past,

    or the yield on such investments, cannot be relied upon as a guide to the future performance of such investments. This presentation

    does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite,

    subscribe for or otherwise acquire or dispose of securities in any company within the Group.

    The presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995

    which are subject to risks and uncertainties because they relate to future events. These forward-looking statements include, without

    limitation, statements in relation to the Groups 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 the presentation.

    The presentation also contains non-GAAP financial information which the Groups management believes is valuable in understanding

    the performance of the Group or the Groups businesses. However, non-GAAP information is not uniformly defined by all companies

    and it may not be comparable with similarly titled measures disclosed by other companies, including those in the Groups industry.

    Although these measures are important in the assessment and management of the business, they should not be viewed in isolation

    or as replacements for, but rather as complementary to, the comparable GAAP measures.

    Vodafone, the Vodafone Portrait, the Vodafone Speechmark, Vodacom and M-Pesa, are trade marks of the Vodafone Group. The

    Vodafone Rhombus is a registered design of the Vodafone Group. Other product and company names mentioned herein may be the

    trade marks of their respective owners.

    Disclaimer

    2

  • Half year highlights

    All growth rates shown are organic unless otherwise stated 3

    All growth rates shown are organic unless otherwise stated

    1. Targeted urban areas

    Financial

    performance

    Q2 Group service revenue +1.2%; fifth consecutive quarter of improvement

    Q2 continued momentum in AMAP +6.7%; further recovery in Europe -1.0%

    H1 EBITDA return to growth, +1.9% to 5.8bn; full year EBITDA guidance now 11.7bn - 12.0bn

    Free cash outflow 0.5bn reflecting Project Spring phasing; net debt 28.9bn

    Interim dividend per share 3.68 pence, +2.2%

    Strategic and

    commercial

    progress

    Project Spring: 80% through mobile build; 4G coverage now 80% in Europe

    Marketing high speed broadband to 66m homes across Europe; 42% on own infrastructure,

    new converged offers launched

    30m 4G customers (+10m in H1) in 19 markets. 12.5m fixed broadband customers (+0.5m)

    AMAP: 125m data users, India 3G coverage 94%1

    Strong commercial progress in mobile: H1 contract net adds 2.7m, churn improving, data volume +75%

    Enterprise revenue +1.9% in Q2; continued growth in VGE and M2M

    Vodafone India IPO preparations underway

  • Half year 15/16

    Financial review

    Nick Read Group Chief Financial Officer

  • Return to EBITDA growth

    5

    H1 15/16

    (m)

    Reported

    growth (%)

    Organic

    growth (%)

    Q2 15/16

    organic

    growth (%)

    Group revenue 20,226 (2.3) 2.8 2.3

    Group service revenue 18,430 (3.7) 1.0 1.2

    Group EBITDA1 5,786 (1.7) 1.9

    EBITDA margin (%) 28.6 0.2ppt (0.3)ppt

    D&A2 (4,142) 1.2 5.9

    Adjusted operating profit1, 2 1,641 (6.5) (5.9)

    All growth rates shown are organic unless otherwise stated

    1. Reported excluding the impact of restructuring costs and significant one-off items. Restructuring costs were 114m in H1 15/16 and 84m in H1 14/15

    2. Reported excluding the impact of restructuring costs and significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets

  • Lower financing costs; full year tax rate to include UK one-off

    6

    Weighted average cost of debt 4.4% (H1 14/15: 5.4%)

    Adjusted effective tax rate 30.5% in H1; full year similar to H1 excluding UK one-off (medium term high 20s)

    Move to Euro reporting from 2017 financial year

    1. Reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets

    H1 15/16

    (m)

    H1 14/15

    (m)

    Reported

    growth (%)

    Adjusted operating profit1 1,641 1,756 (6.5)

    Net financing costs (552) (682)

    Taxation (299) (288)

    Non controlling interests (123) (89)

    Adjusted earnings1 667 697

    Adjusted earnings per share1 2.51p 2.63p (4.6)

    Interim dividend per share 3.68p 3.60p 2.2

  • -10.0%

    -8.0%

    -6.0%

    -4.0%

    -2.0%

    0.0%

    2.0%

    4.0%

    6.0%

    8.0%

    Q1 14/15 Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Group Europe AMAP

    5th quarter of improved organic service revenue trends

    7 out of 13 European markets are now back to growth in H1

    Maintained good momentum in AMAP

    7

    5.4ppt

    7.2ppt

    2.2ppt

  • Engines of growth

    8

    Mobile contract base (m)

    Europe 4G & India 3G customer base (m) Enterprise service revenue growth (%)

    NGN fixed customers (m)

    (2.0)

    (1.1)

    1.4 1.8 1.9

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    21 27

    35 41

    48

    +5m

    YoY

    +1.2m

    YoY

    +10m

    YoY

    +17m

    YoY

    4.4 4.7

    5.1 5.3

    5.6

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    86

    87

    88

    90 91

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Europe 4G India 3G

  • 6.3 6.0

    5.6 5.4 5.5

    5.6

    4.0

    4.5

    5.0

    5.5

    6.0

    6.5

    7.0

    H2 12/13 H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16

    EBITDA (bn) Reported EBITDA margin (%)

    EBITDA growth with margin stabilising

    9 1. Constant currency, 100% Italy excl. KDG, Ono, HOL and Cobra

    1

    30.2

    29.3

    28.6 28.4

    28.1

    28.6

  • -250 -200 -150 -100 -50 0 50 100

    EBITDA growth across our top markets

    10 * Adjusted for intercompany phasing

    (m)

    *

    H1 14/15

    -10% YoY

    -c.600m

    H1 15/16

    +1.9% YoY

    +c.100m

    Absolute organic EBITDA growth YoY

  • 11

    4.3bn

    Pre-Spring1 Post-Spring

    expected run rate

    4.8bn

    Targeting margin expansion

    Technology opex Expanded & modernised (Mar-16)

    Mobile:

    c.90% EU 4G coverage

    Single RAN >90% in EU

    90% high capacity backhaul in EU

    HD voice in all EU markets

    84% 3G/4G AMAP coverage (excl. India)

    India 95% 3G coverage in targeted areas

    Fixed:

    Converged services in all key EU markets

    Enterprise:

    Increased global scale and footprint

    Network expansion (by year

    end):

    c.45k additional mobile sites

    7.5m new households covered

    by NGN

    65 countries on IP-VPN

    Spring is an exceptional investment programme

    1. FY 13/14

  • 12

    Direct costs

    6.6bn

    Customer costs

    8.8bn

    Technology

    costs

    4.4bn

    Support costs

    6.7bn

    Targeting margin expansion

    Fit for growth an opportunity to constrain costs below revenue growth

    Components of our cost base:

    FY 14/15

    cost base (excl. interconnect)

    2. Commercial efficiency 3. IT transformation

    1. Regulatory incumbent

    management

    4. Shared services penetration

    5. Centralised

    procurement/logistics

    6. ZBB/productivity

    targeting

  • 13

    Targeting margin expansion

    Fit for growth

    Commission optimisation Digital sales & services

    Commercial efficiency

    H1 14/15 H1 15/16

    Channel mix

    % contract customer additions via Vodafone

    branded channels

    30% 35%

    52% 63%

    81% 87%

    Improving returns on commission spend by:

    Moving from volume to value

    based commissions

    Rewarding for good customer

    experience My Vodafone app 26% penetration

    Target 70%

    Currently 5% of inflow revenue Target >10%

    Sales

    Service

  • 14

    Targeting margin expansion

    Fit for growth

    Organisational efficiency

    Capex & opex efficiency Zero based budgeting Standardisation and scaled

    footprint optimisation Shared services employees Procurement spend in VPC

    250

    300

    350

    H1 14/15 FY 14/15 H1 15/16

    Finance TechnologyCustomer Ops OtherSavings (m)

    15k 17k

    18.5k 17%*

    * Targeting 25% of Vodafone employees by 2018

    52% 57%

    70%

    H1 13/14 H1 14/15 H1 15/16

    Targeting 80% of global spend

    Scope:

    Group functions - absolute cost targets

    Group operations - multi-year productivity targets

    Countries/P&L units - multi-year margin targets

  • 15

    Targeting margin expansion

    M&A synergies secured

    Organisational integration

    Procurement centralised

    Migration of DSL and mobile

    customer base

    Network: integrating national

    backbone and mobile base stations

    Converged propositions

    launched

    Complete

    Complete

    On target

    157k DSL customers migrated

    Mobile migration complete

    Complete

    Fully complete by the year end

    On target

    121k DSL customers migrated

    On target to secure 100% of 240m/pa FY 15/16 exit run-rate: On target to secure 75% of 300m/pa

  • Composition of H1 EBITDA growth

    H1 15/16 H1 14/15 Improvement

    EU mobile contract net adds (000s) 1,075 349 +208%

    Fixed broadband net adds (000s) 494 399 +24%

    Consumer contract churn 17.6% 19.2% +1.6ppt

    Enterprise churn 15.6% 16.4% +0.8ppt

    16

    Organic H1 14/15

    EBITDA

    Gross margin

    5,583

    161

    Commercial costs

    1. Commercial costs include A&R, and sales, distribution & advertising/promotion costs

    1

    117

    Technology opex Other opex Organic H1 15/16

    EBITDA

    55

    (229)

    5,687

    (m)

  • Free cash outflow, reflecting phasing of Project Spring

    17

    H1 15/16

    (m)

    H1 14/15

    (m)

    EBITDA 5,786 5,884

    Capital expenditure (3,708) (3,901)

    Capital creditors (579) (6)

    Working capital (1,203) (1,072)

    Net interest (364) (580)

    Taxation (430) (418)

    Dividends received1 - 127

    Dividends to non-controlling interests (131) (140)

    Other2 88 107

    Free cash flow (541) 1

    1. Principally relating to Indus Towers

    2. Other relates to cash movements on share based payments and disposal of capital assets

    Capital creditor unwind, reflecting timing of Project Spring payments

  • Passing peak investment for capex and spectrum

    18

    1.4

    2.5 2.2

    3.1

    2.7

    FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16e

    India EU 4G EU renewal AMAP

    2.4bn

    5 year avg. Average over next 3yrs

    expected to be lower

    (2020: EU 700MHz)

    Capex intensity

    Spectrum spend (bn)

    Pre-Spring Spring Post-Spring

    Mobile 13% 20% 12%

    Maintenance/capacity - 10% 8%

    Footprint growth - 10% 4%

    Fixed - 26% 18%

    Maintenance/capacity - 12% 9%

    Footprint growth - 10% 5%

    CPE - 4% 4%

    13-14%

    medium term

    capital intensity

  • Balance sheet robust and in line with Spring plan

    19 19

    H1 net debt 25.4bn including $5.25bn Verizon loan notes

    also includes 4bn of deferred licence payments

    H1 spectrum spend in India, Germany and the UK

    4.1 28.9 0.5 1.0

    c.30

    Mar 2015 Spectrum Final 14/15

    dividend

    Other Sep 2015 Turkey/Italy

    spectrum

    H1 dividend Guidance FCF Mar 2016

    22.3

    0.7 +ive

    (bn)

    2.0

  • 11.4bn

    FY 14/15 EBITDA (restated) Guidance FY 15/16 EBITDA

    20

    Performance in H1 15/16 in line with expectations

    Expect revenue and profitability trends to continue to improve in the second half

    Guidance for FY 15/16:

    EBITDA range narrowed to higher end of the range, 11.7-12.0bn

    positive free cash flow after all capex

    Guidance range narrowed, continued dividend growth

    Now 11.7 - 12.0bn 3-5% YoY growth

    Was 11.5 - 12.0bn

    1. Based on FY 14/15 guidance FX, and adjusted for MVNO/regulatory (India) impacts and M&A

    1

  • H1 15/16 summary

    21

    Markets remain competitive, unsettled global economy

    A return to growth in both service revenue and EBITDA

    Strong commercial momentum

    Guidance updated: EBITDA range narrowed

    expect progress to continue in H2

    interim dividend per share of 3.68p, up 2.2%

    Robust balance sheet

  • Strategic &

    commercial review

    Vittorio Colao Group Chief Executive

  • 25.8 25.2

    24.2 24.7 24.6

    29.8 29.3

    28.8 29.0 29.1

    22.9 22.6 21.2 21.0

    20.9

    24.3 23.1

    21.1 20.4

    21.0

    Q2

    14/15

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    Germany UK Italy Spain

    272

    509

    351

    467

    608

    Q2

    14/15

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    18.6%

    17.0%

    18.9%

    17.6%

    17.1%

    15.7%

    22.0%

    18.3%

    Q2 13/14 Q2 15/16

    Europe Germany UK Italy

    4G churn and NPS better than 3G

    Improved direct channel mix

    Customer value management actions

    Project Spring supporting commercial performance

    23

    Improved network quality

    Base now 49% contract (46% a year ago)

    Market stabilisation

    Increasing penetration of larger data

    bundles; content in all key markets

    4G ARPU higher than 3G

    Improving churn

    Consumer contract (%)

    Growing contract net adds

    Europe (000s)

    Stabilising ARPU QoQ

    Consumer contract (local currency)

  • 627 697

    755 812

    927

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Project Spring supporting data demand growth

    Avg. data usage NPS

    4G stimulating data take up

    106 110

    116

    122 125

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    24

    Strong data adoption in emerging markets3

    Data users (m) and share of mobile base (%)

    1. 29.9m customers have a 4G device with a 4G plan (24.3m in Europe). 27.3m have a 4G smartphone with a 4G plan (22.2m in Europe)

    2. iOS and Android

    3. AMAP

    10.5 13.7

    20.2 24.1

    29.9

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    20% of Europe

    customer base,

    (41% of contract)

    35% 34%

    36% 37% 38%

    Avg. smartphone

    usage 649MB2, 3

    Growing European smartphone usage Monthly average MB2

    56% smartphone

    penetration in

    Europe

    27% of customers

    use >1GB

    48%

    3G 4G

    2x

    +9ppt

    39% of Europe data traffic on 4G

    Increasing penetration of 4G customers (m)1

  • 17.1

    22.6 25.8

    H1 13/14 H1 14/15 H1 15/16

    11.2

    11.8 12.0

    12.3 12.5

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    39% 39% 42% 43% 45%

    36 40 41

    62 66

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Project Spring supporting progress on convergence

    25

    Marketing high speed broadband to 66m homes

    44% household

    coverage in Europe

    42% on own

    infrastructure

    % on fibre/cable

    Growing share of Europe service revenue from fixed (%)

    Europe fixed

    revenue +3.1%

    in Q2

    5.6m NGN (+0.3m)

    9.3m TV (+0.1m)

    Increasing size and quality of the fixed broadband base (m)

    New fixed/converged propositions

    Nov 2015

    Apr 2015

    Sep 2015

    Oct 2015

    Aug 2015

    FY 15/16 launches To be launched (including TV)

  • 27% of Group service revenue

    Global leader in M2M: 29 markets, 24m connections Top ranking by Gartner and

    Machina Research

    A leading carrier of international voice:

    58bn voice minutes p.a.

    Project Spring supporting Enterprise momentum and scale

    Investment

    Spring investments on track

    IP-VPN in 65 countries; 254 PoPs2,

    +34/83 since Sep 2013

    One Net in 12 countries for SMEs

    US MVNO for multinationals Oct 2015

    Growth from data and customers,

    despite ARPU pressure

    Q2 VGE revenue +7.3%1, M2M +29%,

    Cloud & Hosting +13%

    Key customer wins and strong pipeline

    Momentum Organic service revenue growth (%)

    (2.0)

    (1.1)

    1.4 1.8 1.9

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Scale

    1. Underlying growth

    2. Points of Presence 26

  • (3.9)

    (1.8)

    (3.5)

    (1.2)

    Incl. KDG (1.8)

    Incl. KDG

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    121

    235

    137 104

    245

    Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16

    Service revenue growth (%) Service revenue: underlying growth similar excluding one-offs

    Mobile revenue -2.8% (Q1: -2.1%); increased competition in

    enterprise and consumer base re-pricing, offset customer growth

    and improved direct channel mix

    Fixed: customer growth offsets ARPU pressure KDG: +7.0% (Q1: +6.6%); +98k net adds1 DSL: stabilising base but lower ARPU (promotional discounting)2

    Project Spring: 4G coverage 81%, dropped call rate -28% to 0.55%3

    EBITDA +1.0% in H1, margin 32.7%, +0.5ppt supported by

    lower A&R

    Germany: good contract base growth, some price pressure

    27

    Contract net adds (000s)

    1. Including migrations

    2. Prior to migrations

    3. End of September

    New converged

    offer launched in November

  • Q2

    14/15

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    Base Inflow

    Repricing customer base

    Secured more 1,800 MHz spectrum to

    boost 4G speed

    89% high capacity backhaul (Sep 13: 76%)

    Ranked Best Voice Network in Germany

    by ComputerBILD

    Germany: key turnaround actions

    28

    30 32

    35

    H1 14/15 H2 14/15 H1 15/16

    Promotional focus on direct channels.

    1,400 branded stores1

    Reduced commissions in indirect

    channels

    Consumer contract ARPU stable QoQ

    Value upsell initiatives, e.g. data add-ons

    1. Includes KDG stores

    2. Excludes multi-SIM and instalments

    2

    71

    77

    81

    H1 14/15 H2 14/15 H1 15/16

    Improved network quality Better channel mix 4G coverage (%) Direct channel share of consumer

    contract gross adds (%)

    Consumer contract ARPU

  • Italy: mobile market remains stable, further recovery in trends

    29

    EBITDA growth and margin (%)

    Service revenue growth (%) Mobile service revenue -3.0% (Q1: -3.2%): lapping prepaid price rises consumer prepaid ARPU +6.8%, lower churn and stabilising

    customer base

    4.0m 4G customers, up 3m YoY

    Fixed: sustained momentum; +67k broadband users in H1

    Project Spring: delivering 4G leadership (coverage 91%),

    fibre footprint up to 2m households

    EBITDA returned to growth as top line pressure offset by

    commercial and operating cost efficiencies

    (10.2)

    (8.0)

    (4.1)

    (2.0) (2.0)

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    (25.4) (24.0) (21.7)

    (7.2)

    2.3

    H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16

    37.1% 34.5% 33.7% 33.2% 34.1% Margin

    Satisfied or

    reimbursed!

    1 day free browsing if youre not satisfied

    with 4G

    Network guarantee

  • UK: improving in Enterprise, stable overall

    Service revenue growth (%) Mobile service revenue -0.5% (Q1: +0.7%) customers given control of out-of-bundle spend, 08XX regulation customer growth; lower churn, direct channels (retail sales +48%) 5.3m 4G users, up 4.2m YoY

    Fixed: improving in fixed Enterprise (-0.7%, Q1: -2.1%) due

    to VGE

    Project Spring: delivering network improvement 4G coverage 82%1, London 99% P3 ranked #1 network in London for combined voice and data

    EBITDA: H1 margin 21.7%; 19.7% excl. network settlements;

    -1.1ppt YoY due to phasing of central costs

    30

    (3.3)

    (0.5) (0.6)

    0.2

    (0.5)

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    1. Ofcom basis 82%; Vodafone basis 75%

    56

    98

    49

    83 90

    Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16

    Contract net adds (000s)

    17.4% 19.0% 17.7% 15.8% 15.6% Churn

    Marketing to 22m

    premises. TV by end FY 15/16

  • 14

    78

    14

    54

    92

    Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16

    Spain: positive trends, good commercial momentum

    31

    (9.8) (9.3)

    (7.8)

    (5.5)

    Incl. Ono

    (2.0)

    Incl. Ono

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    Mobile revenue -6.8% (Q1: -9.5%) in more stable market QoQ ARPU growth, data bundle adoption, contract net adds +92k

    Fixed revenue +10.7% (Q1: +4.2%) +28k broadband net adds; strong take up of TV/football Ono integration proceeding well, fully migrated mobile customers

    Project Spring: 80% 4G coverage, 8m NGN premises reached1

    EBITDA +16.3% in H1, margin +3.7ppt2; handset financing and

    Ono integration benefits more than offsetting TV costs

    Service revenue growth (%)

    Contract net adds (000s)

    #1 for

    Consumer NPS

    1. Including joint fibre build

    2. Organic

    784k converged customers since April

    launch

  • Vodacom: strong performance and network leadership

    32

    0.3

    (3.9)

    (0.2)

    4.5 3.9

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    South Africa Vodacom service revenue growth (%)

    Service revenue +3.0%; more rational market, voice decline

    eases, contract churn still low 7.3%, ARPU stable

    Data growth driven by sale of affordable devices and data bundles total usage +50%, revenue +32%

    Project Spring: marketing our network leadership; 4G coverage

    47%, 3G at 98%; 85% high speed transmission

    EBITDA +13.5%, driven by significant cost actions in H2 14/15

    International

    Service revenue +8.3%; data users +14%, and M-Pesa growth

    Capex up 29.7%, driving differentiation

    in Tanzania and DRC

    #1 Vodacom EBITDA margin (%)

    36.4 36.4

    35.0 35.4

    37.1

    H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16

    82m

    data bundles sold in Q2, +91% YoY

    24%

    of Vodacom revenue

  • India: strong data demand, expanding 3G and 4G capability

    33

    13.6 16.6

    19.4 22.1 23.8

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    3G data users (m)

    13.1 14.7

    11.7

    6.9 5.6

    13.1 14.7

    13.2

    10.6 9.2

    Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

    1. MTRs, roaming price caps and service tax

    2. Targeted urban areas

    8% 9% 11% 12% 13%

    Service revenue growth (%)

    Reported Excluding MTRs

    750 MB

    Avg. usage

    Service revenue underlying +10.9% excl. all regulatory impacts1

    strong customer growth (2.8m net adds) partly offset by ongoing competition on voice business

    data growth driven by 3G; total usage +69%, revenue +48%; 19% of service revenue

    M-Pesa: 97k agents, 665k active users

    Project Spring 94% 3G coverage2, +3.7k 3G sites, retail store

    expansion on track

    launching own 3G in seven new circles and 4G in five by end FY 15/16

    EBITDA +6.7% in H1, margin stable at 29.7%

    3G penetration

  • India: strong track record of achievement

    34

    Strong platform

    Leading assets:

    1 of 3 nationwide providers

    1.7m distribution points, 9,900 branded retail stores

    42% of Indus, worlds largest tower company

    Strong brand recognition

    High quality customer base

    Profitable growth

    17

    22

    Q4

    08/09

    Q4

    09/10

    Q4

    10/11

    Q4

    11/12

    Q4

    12/13

    Q4

    13/14

    Q4

    14/15

    Q2

    15/16

    Revenue market share (%)

    #1 for

    Consumer NPS

    Continuing opportunity

    (Rs bn)

    218

    53 13

    422

    126 32

    Service revenue EBITDA Op FCF

    FY 09/10 FY 14/15

    78% mobile

    penetration

    smartphone penetration

    3%

    4G penetration

    Strong growth; 5 year CAGR to FY 14/15:

    Service revenue +14.1%

    EBITDA +18.8%

    Operating FCF: +20.7%

    Economy recovering; 2015e GDP +7.5%

    Improving demographics

    Strategic growth areas: data, enterprise,

    M-Pesa

    23%

    1.2bn Population

  • Q2 YoY service revenue growth

    (vs. Q1)

    Increased revenue market

    share to 35.9%. NPS leader

    Other key markets driving revenue / EBITDA growth

    Improved revenue market

    share leadership to 40.6%. NPS

    leader

    Ongoing convergence pressure

    but signs of market recovery

    4th consecutive quarter of

    growth in a competitive market

    Commercial execution and Project Spring driving data usage, customer growth and ARPU

    35

    +20.2% +5.2ppt

    +1.1% +0.1ppt

    +10.7% +4.6ppt

    -0.2% +2.4ppt

    Revenue growth driven by

    data, customer base (+814k

    H1), ARPU (Q2 +14%), and

    enterprise

    Revenue growth fuelled by

    data and voice usage, ARPU

    Q2 +15%

    Fixed broadband customers

    H1 +56k, improving mobile

    revenue

    Growth in enterprise and

    consumer fixed revenue driven

    by higher customer base

  • Leveraging Project Spring: leadership in customer experience

    36

    #1 NPS rank in seven of our top ten markets

    Germany

    network

    when it

    matters

    7.3

    10.8

    16.8

    Q2

    13/14

    Q2

    14/15

    Q2

    15/16

    My Vodafone app users (m)

    300

    1,150

    3,240

    4,200

    FY

    12/13

    FY

    13/14

    FY

    14/15

    H1

    15/16

    Project Spring: transforming our

    stores

    Marketing our network quality

    Enhancing digital and retail experience NPS leadership

    Turkey & NZ

    money back

    network

    guarantee

  • ki

    CARE: bringing Project Spring to life for our customers

    37

    C Connectivity A R E Always in control

    Reward loyalty Easy access

    One day free browsing if

    youre not satisfied with 4G

    Italy: satisfied or

    reimbursed

    30% upgrade to right

    price plan

    India: full credit for first

    time bill shock

    South Africa: Just 4 you UK Enterprise: Prime

    Contact

    For SMEs & SOHO

    Dedicated contact owns

    customer issues

    Personalised offers for

    customer profile

    24m bundles in first

    month

    Group-wide programmes to deliver CARE

  • Summary

    H1 progress Priorities: H2 and beyond

    Complete Spring mobile build

    Increase network and service differentiation

    Launch TV in further markets, continue

    to grow NGN footprint and enterprise

    Engage regulators on incumbent

    monopolistic behaviour

    Focus on efficiency and margin

    80% through Spring mobile build; material

    enhancements to coverage and quality

    Step change in customer experience

    underway

    Leading in data: 30m 4G customers, 5.6m

    NGN

    Fully converged in Germany and Spain

    Strengthened capabilities in Enterprise

    EBITDA returned to growth, +1.9%

    Dividend per share up 2.2%

    38

  • Q&A

    39

  • 41

    Appendix

  • Project Spring KPIs

    42

    UK Germany

    Deployment and experience

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    4G % outdoor population

    coverage 73% 77% 78% 81%

    % of data sessions >3Mbps 82% 82% 82% 82%

    % of dropped calls 0.66% 0.57% 0.54% 0.58%

    % homes reached by owned

    NGN 35% 35% 35% 35%

    % of targeted stores refitted 16% 18% 28% 39%

    Commercial impact

    4G customers (m) 3.4 5.0 5.5 6.5

    Contract churn (%) 15.0% 14.2% 13.8% 15.5%

    Contract mobile ARPU (EUR) 27.1 26.0 25.9 25.7

    Average smartphone data

    usage (MB) 550 620 593 632

    Deployment and experience

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    4G % outdoor population coverage 57% 63% 68% 75%

    % of data sessions >3Mbps 84% 84% 86% 87%

    % of dropped calls 0.86% 0.78% 0.75% 0.77%

    % homes reached by owned NGN - - - -

    % of targeted stores refitted 29% 40% 55% 70%

    Commercial impact

    4G customers (m) 1.7 2.5 4.0 5.3

    Contract churn (%) 19.0% 17.7% 15.8% 15.6%

    Contract mobile ARPU (GBP) 27.4 26.7 26.6 26.4

    Average smartphone data usage

    (MB) 704 790 1,014 1,183

  • Project Spring KPIs

    43

    Spain Italy

    Deployment and experience

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    4G % outdoor population

    coverage 76% 84% 88% 91%

    % of data sessions >3Mbps 90% 92% 94% 92%

    % of dropped calls 0.63% 0.59% 0.60% 0.62%

    % homes reached by owned NGN 2% 4% 5% 7%

    % of targeted stores refitted 85% 90% 94% 96%

    Commercial impact

    4G customers (m) 1.2 2.8 2.7 4.0

    Prepaid churn (%) 38.4% 37.5% 32.4% 32.1%

    Prepaid mobile ARPU (EUR) 10.9 10.8 11.4 12.2

    Average smartphone data usage

    (MB) 922 1,000 981 1,254

    Deployment and experience

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    4G % outdoor population coverage 69% 75% 78% 80%

    % of data sessions >3Mbps 81% 83% 83% 81%

    % of dropped calls 0.66% 0.60% 0.58% 0.60%

    % homes reached by owned NGN 44% 45% 46% 46%

    % of targeted stores refitted 20% 26% 30% 34%

    Commercial impact

    4G customers (m) 2.2 2.9 3.3 4.3

    Contract churn (%) 20.2% 21.6% 18.1% 20.1%

    Contract mobile ARPU (EUR) 22.01 20.91 20.11 20.51

    Average smartphone data usage

    (MB) 966 977 1,097 1,063

    1. Spain ARPU includes Ono from Q3 14/15

  • Project Spring KPIs

    44

    Vodacom (South Africa) India

    Deployment and experience

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    3G % outdoor population

    coverage

    (targeted urban areas) 90% 90% 91% 94%

    % of data sessions (>400kbps) 70% 73% 74% 75%

    % of dropped calls 1.14% 1.06% 1.02% 1.08%

    % of targeted stores refitted 23% 38% 45% 55%

    Commercial impact

    3G customers (m) 16.6 19.4 22.1 23.8

    Prepaid mobile ARPU (INR) 154 150 149 144

    Average data usage (MB) 310 331 357 393

    Deployment and experience

    Q3

    14/15

    Q4

    14/15

    Q1

    15/16

    Q2

    15/16

    4G % outdoor population coverage 34% 35% 41% 47%

    % of data sessions >3Mbps 84% 85% 85% 86%

    % of dropped calls 0.80% 0.78% 0.67% 0.49%

    % of targeted stores refitted 64% 70% 76% 80%

    Commercial impact

    4G customers (m) 1.2 1.3 1.8 1.8

    Contract mobile ARPU (ZAR) 383 374 381 393

    Average smartphone data usage (MB) 445 410 501 541

  • Service revenue bridge

    M&A and one off items relates primarily to 0.3bn of service revenue from Ono and the UK ladder

    settlement (0.1bn)

    45

    (m)

    19,139

    (1,326)

    439 429

    (380)

    14

    (102)

    122 95 18,430

    H1 14/15

    reported

    service

    revenue

    FX M&A & one off

    items

    In-bundle Out of bundle Incoming MTR Fixed line and

    carrier

    Other H1 15/16

    reported

    service

    revenue

  • H1 15/16 H1 14/15

    m % m %

    Europe

    Service revenue (26) (0.2) (107) (0.8)

    EBITDA - (23)

    AMAP

    Service revenue (76) (1.4) (71) (1.3)

    EBITDA (21) (42)

    Group

    Service revenue (102) (0.6) (178) (1.0)

    EBITDA (21) (65)

    Voice MTR impact

    46

  • Profit

    H1 15/16

    (m)

    H1 14/15

    (m)

    Adjusted operating profit1 1,641 1,756

    Net financing costs (700) (485)

    Taxation (340) (373)

    Deferred taxation (1,476) 5,468

    Customer & brand amortisation2 (521) (637)

    Restructuring costs (114) (84)

    Other (74) (144)

    Profit for the year (1,584) 5,501

    Non controlling interests (114) (79)

    (Loss)/Profit attributable to owners of parent (1,698) 5,422

    47 1. Now reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets

    2. Customer amortisation relate primarily to Italy (H1 15/16 169m, H1 14/15 240m), KDG (H1 15/16 174m, H1 14/15 253m) and Ono (H1 15/16 108m, H1 14/15 55m).

  • Adjusted EPS reconciliation

    H1 15/16

    (m)

    H1 14/15

    (m)

    Reported

    growth (%)

    (Loss)/Profit attributable to owners of parent (1,698) 5,422

    Taxation 1,517 (5,383)

    Net financing costs 148 (197)

    Customer & brand amortisation 521 637

    Non controlling interests (9) (10)

    Restructuring costs 114 84

    Other 74 144

    Adjusted profit for the year 667 697

    Weighted average shares (m) 26,529 26,470

    Adjusted EPS (p) 2.51 2.63 (4.6)

    48

  • Taxation

    H1 15/16

    (m)

    H1 14/15

    (m)

    Taxation 1,816 (5,095)

    Deferred tax assets (1,476) 2,127 Deferred tax following revaluation of

    investments in Luxembourg

    Recognition of deferred tax assets - 3,341 Recognition of deferred tax asset for

    losses in Luxembourg

    Amortisation of deferred tax assets (258) (272)

    Other 217 187

    Adjusted tax expense 299 288

    Effective tax rate 30.5% 30.6%

    49

  • Financing costs

    H1 15/16

    (m)

    H1 14/15

    (m)

    Underlying net financing costs (451) (578) Primarily favourable FX movements YoY

    Mark to market gains/(losses) (86) (80)

    Potential interest on tax (15) (24)

    Non-EPS FX revaluation (148) 197

    Net financing costs (552) (682)

    Average cost of net debt 4.4% 5.4%

    50

  • Cost of debt

    51

    Currency Percentage of

    net debt

    Forecast interest rate

    for FY 15/16

    EUR 78 2.1%

    USD 11 1.0%

    GBP (24) 0.5%

    INR 21 10%

    ZAR 4 7.0%

    Other 10 4.0%

  • More information

    www.vodafone.com/investor

    2016 upcoming dates Visit our website for more information

    For definitions of terms please see www.vodafone.com/content/index/investors/glossary 52

    Prelim results

    17 May

    @VodafoneIR

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    4 February

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    29 July

  • Forward-looking statements

    53

    This presentation, along with any oral statements made in connection therewith, contains or may contain forward-looking statements within the meaning of the US Private Securities Litigation Reform Act

    of 1995 with respect to the Groups financial condition, results of operations and businesses and certain of the Groups plans and objectives.

    In particular, such forward-looking statements include, but are not limited to: statements with respect to: expectations regarding the Groups financial condition or results of operations, including the Group

    Chief Executives statement on the outlook for the 2015 financial year; expectations for the Groups future performance generally, including revenue and EBITDA growth measures to improve margin growth

    and free cash flow; statements relating to the Groups Project Spring investment programme, including opex, launches of 4G and 3G, targeted mobile, fixed and enterprise coverage expectations regarding

    the operating environment and market conditions and trends, including future sales, customer usage, competitive and macroeconomic pressures, price trends and opportunities in specific geographic

    markets; intentions and expectations regarding the development, launch penetration and expansion of products, services and technologies, either introduced by Vodafone or by Vodafone in conjunction

    with third parties or by third parties independently, including the Vodafone app, NGN, M-Pesa, consumer TV and converged services and the launch of a number of additional features; growth in customers

    and usage; expectations regarding spectrum licence acquisitions, including cost anticipated new 3G and 4G availability and the customer uptake associated therewith; expectations regarding adjusted

    operating profit, EBITDA margins, capital expenditure, net debt and foreign exchange rate movements; expectations regarding the integration or performance of current and future investments, associates,

    joint ventures, non-controlled interests and newly acquired businesses, including KDG and Ono; and the outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or

    potential regulatory changes.

    Forward-looking statements are sometimes not always identified by their use of a date in the future or such words as will, anticipates, aims, could, may, should, expects, believes, intends,

    plans or targets (including in their singular or negative form). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty 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

    implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would

    adversely affect the level of demand for its mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, which could require changes to the

    Groups pricing models, lead to customer churn, affect the relative appeal of the Groups products and services as compared to those of its competitors or make it more difficult for the Group to acquire new

    customers; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; higher than expected costs or capital expenditures;

    slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers and the possibility that new products and services offered by the

    Group will not be commercially accepted or do not perform according to expectations; the Groups ability to expand its spectrum position or renew or obtain necessary licences, including for spectrum; the

    Groups ability to achieve cost savings; the Groups ability to execute its strategy in fibre deployment, network expansion, new product and service roll-outs, mobile data, enterprise and broadband and in

    emerging markets; changes in foreign exchange rates, including, in particular, changes in the exchange rate of pounds sterling, the currency in which the Group prepares its financial statements, to the euro,

    the US dollar and other currencies in which the Group generates its revenue, as well as changes in interest rates; the Groups ability to realise benefits from entering into partnerships or joint ventures and

    entering into service franchising and brand licensing; unfavourable consequences to the Group of making and integrating acquisitions or disposals; changes to the regulatory framework in which the Group

    operates, including possible action by regulators in markets in which the Group operates or by the EU to regulate rates the Group is permitted to charge; 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 or unfavourable developments in the availability or prices of commodities and raw

    materials; developments in the Groups financial condition, earnings and distributable funds and other factors that the Board takes into account when determining levels of dividends; the Groups ability to

    satisfy working capital and other requirements through access to bank facilities, funding in the capital markets and its operations; changes in statutory tax rates or profit mix which might impact the Groups

    weighted average tax rate; and/or changes in tax legislation or final resolution of open tax issues which might impact the Groups tax payments or effective tax rate.

    Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under the

    headings Risk Factors and Other Information Forward-looking statements in our half year financial report for the six months ended 30 September 2015 which can be found on the Groups website

    (vodafone.com/ content/index/investors). All subsequent written or oral forward-looking statements attributable to the Company, to any member of the Group or to any persons acting on their behalf are

    expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in or made in connection with this presentation will be realised. Subject

    to compliance with applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not undertake any obligation to do so.