vodafone group plc trading update

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Vodafone Group Plc Trading update 4 February 2016 For the three months ended 31 December 2015

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4 February 2016
Information in the following presentation 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. 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.
Disclaimer
which the Group’s management believes is valuable in
understanding the performance of the Group or the Group’s
businesses. However, non-GAAP information is not uniformly
defined by all companies and therefore it may not be comparable
with similarly titled measures disclosed by other companies,
including those in the Group’s 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.
Vodacom and M-Pesa are trademarks 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
trademarks of their respective owners.
2
All growth rates shown are organic unless otherwise stated 4
All growth rates shown are organic unless otherwise stated
1. Adjusting for inter-quarter timing differences
• Group service revenue +1.4%: sixth consecutive quarter of improvement
• Continued momentum in AMAP +6.5%, further recovery in Europe -0.6%
• Strong commercial progress: Europe mobile contract net adds 0.5m, Group fixed broadband
customers +0.4m
• Enterprise revenue +2.6%1; continued growth in VGE and M2M
• Project Spring: 92% through mobile build; 4G coverage now 84% in Europe, AMAP build
targets achieved. Customer experience targets met
• Continued data growth: volume +68%, 34.8m 4G customers (+4.7m)
• Marketing high speed broadband to 69m homes across Europe; 29m on own infrastructure
Q3 15/16 highlights
6.7 6.5
Q1 14/15 Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16
Group Europe AMAP
Delivering growth: 6th quarter of service revenue improvement Service revenue growth %
Continued customer and data growth in AMAP
8 out of 13 European markets back to growth
10 16 19 24 28
42 45
54 62
Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16
Europe 4G Emerging markets 3G
6
1. Adjusting for inter-quarter timing differences
Mobile contract base Millions NGN fixed customers Millions
Europe 4G & Emerging markets 3G customers Millions Enterprise service revenue growth %
87 88
90 91
Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16
4.7 5.1 5.3 5.6
Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16
(1.1)
Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16
+5m YoY +1.3m YoY
+3.7ppt YoY +26m YoY
Project Spring: delivering leading network positions & data growth
Italy: P3 test, Nov 2015 Points Spain: P3 test, Oct 2015 Points
India: sites, Dec 20152 Germany: Connect tests, Nov 2015 UK, London: P3 test, Oct 2015 Points
Download
Voice Data
Voice Data
Voice Data
Voice Data
47 77
48 12
15 12
Vodafone Op 2 Op 3 Op 4 Op 5 Op 6
2G 3G
Points 000s
South Africa:
Smartphone data usage: Europe >1GB, AMAP 0.7GB3
3. Monthly average 2. Estimated data for operators 5 and 6
11.8 12.0
12.3 12.5
• Of which 41% reached with own
infrastructure
8
• 6.0m NGN customers (+0.4m)
EU service revenue from fixed
Vodafone Red One, Nov 2015
• 2.8m customers take converged
• TV offers in UK and Italy in 2016
39% 42% 43% 45% 46%
% NGN customers
Fixed/converged: recent launches Fixed broadband customers European homes marketed
with high speed broadband
9
and wireless multi-room
300k football subscribers
Project Spring: supporting Enterprise growth
Continued growth Enabling Total Communications
Organic service revenue growth IP-VPN reach: 65 countries and 259 PoPs3 %
(1.1)
1.4
Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16
Key wins Q3 15/16
1. Adjusting for inter-quarter timing differences
2. Restated to include all M2M connections activated and under customer ownership (Q2: 32.6m)
3. Points of Presence
Security
28% of Group
• Mobile revenue -1.7% (Q2: -2.8%)
• Fixed revenue +1.7% (Q2: +0.0%)
• Enterprise revenue -3.2% (Q2: -3.9%);
continued price competition
dropped call rate -26% YoY to 0.46%1
• Channel mix improved YoY
• Consumer contract ARPU -3.9%
• KDG growth remains strong +7.0%
(Q2 +7.0%); base +96k
(Q2: -32k)2
105
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
Fixed broadband net adds Mobile contract net adds Service revenue growth % 000s 000s
• Mobile revenue +0.1% (Q2: -3.0%)
• Consumer prepaid ARPU +12.7%;
increased competitive pressures
13
network, 4G coverage 94%
• Strong data usage, +56%
3.0m homes passed
(8.0)
(4.1)
24
38
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
Fixed broadband net adds 4G customer adoption Service revenue growth % Millions 000s
UK: improving in fixed
• Continued strong retail gross
• Fixed Enterprise revenue +1.0%
contracts
(0.5) (0.6)
0.2
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
Fixed service revenue growth Mobile contract net adds Service revenue growth % 000s %
• Mobile service revenue -1.0%
– 08XX number regulation
1. Ofcom basis 86%, Vodafone basis 79%
Spain: strong execution on mobile, fixed and TV
15
coverage 86%
• Mobile OOB revenue decline
• 1.0m TV customers; strong platform
and content
cable
(9.3)
2,958
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
Fixed broadband customers Mobile contract net adds Service revenue growth % 000s 000s
• Greater impact from handset
India: more promotional pricing in the quarter
16
• Prepay ARPU -9% (Q2 -6%); total
outgoing voice prices -10%, MoU -0.3%
• Total outgoing minutes +8%
3G +69%2
• 3G coverage 94%3, 4G launched in
2 circles and 5 by end of FY
Data users and price changes Total customers and voice prices Service revenue growth %
• Intense competitive promotional
1. MTRs, service tax and roaming price caps
2. Browsing revenue
14.7
11.7
Vodacom: strong momentum continuing
driven by price and data growth
• Prepaid ARPU stabilising
• Data revenue +27%, now 35% of
service revenue, data bundles +85%
• Significant data leadership: 19m
(3.9)
(0.2)
7.2
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
386
374
381
393
409
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
South Africa 4G customers South Africa contract ARPU Vodacom service revenue growth % ZAR Millions
• SA service revenue accelerated to
7.2% (Q2: +3.0%) despite 20% MTR
cut
1.5
• Sixth consecutive quarter of service revenue improvement
• Strong performance in South Africa, improving trends in Germany and Italy
• Project Spring on track and near completion
• Delivering a differentiated network experience
• Strong progress on unified communications; record broadband adds
Outlook
• Full year 15/16 guidance confirmed
Q&A
(0.3) (0.4) (0.7) (1.3) (3.1)
Turkey Ghana Egypt Vodacom Romania Ireland India Portugal NL Italy Germany UK Greece Spain
Group +1.4%
22
Change QoQ (ppt)
+1.1 -3.4 +3.3 +4.3 +1.4 -0.2 +0.8 +1.1 -0.9 +1.7 +1.4 -1.0 -1.1 -3.3
Q3 15/16 service revenue growth %
Service revenue bridge
• M&A and one off items relate primarily to £21 million of service revenue mainly from HOL
23
9,789
carrier
Contract churn (%) 14.2% 13.8% 15.5% 16.2%
Contract mobile ARPU (EUR) 26.0 25.9 25.7 25.4
Average smartphone data usage
Deployment and experience
% of dropped calls 0.78% 0.75% 0.77% 0.70%
% homes reached by owned NGN - - - -
% of targeted stores refitted 40% 55% 70% 81%
Commercial impact
Contract churn (%) 17.7% 15.8% 15.6% 16.9%
Contract mobile ARPU (GBP) 26.7 26.6 26.4 26.1
Average smartphone data usage
Deployment and experience
% of dropped calls 0.57% 0.54% 0.58% 0.48%
% homes reached by owned NGN 35% 35% 35% 35%
% of targeted stores refitted 18% 28% 39% 49%
Project Spring KPIs
% of dropped calls 0.59% 0.60% 0.62% 0.53%
% homes reached by owned NGN 4% 5% 7% 10%
% of targeted stores refitted 90% 94% 96% 97%
Commercial impact
Prepaid churn (%) 37.5% 32.4% 32.1% 32.2%
Prepaid mobile ARPU (EUR) 10.8 11.4 12.2 12.7
Average smartphone data usage (MB) 1,000 981 1,254 1,313
Deployment and experience
% of dropped calls 0.60% 0.58% 0.60% 0.50%
% homes reached by owned NGN 45% 46% 46% 47%
% of targeted stores refitted 26% 30% 34% 40%
Commercial impact
Contract churn (%) 21.6% 18.1% 20.1% 19.6%
Contract mobile ARPU (EUR) 20.9 20.1 20.5 19.6
Average smartphone data usage (MB) 977 1,097 1,063 1,254
Project Spring KPIs
% of data sessions (>400kbps) 73% 74% 75% 79%
% of dropped calls 1.06% 1.02% 1.08% 1.03%
% of targeted stores refitted 38% 45% 55% 64%
Commercial impact
Prepaid mobile ARPU (INR) 150 149 144 141
Average data usage (MB) 331 357 393 438
Deployment and experience
% of dropped calls 0.78% 0.67% 0.49% 0.40%
% of targeted stores refitted 70% 76% 80% 83%
Commercial impact
Contract mobile ARPU (ZAR) 374 381 393 409
Average smartphone data usage (MB) 410 501 541 569
Forward-looking statements
27
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 Group’s financial condition, results of operations and
businesses and certain of the Group’s plans and objectives.
In particular, such forward-looking statements include, but are not limited to: statements with respect
to: expectations regarding the Group’s financial condition or results of operations, including the
confirmation of the Group’s guidance for the 2016 financial year; expectations for the Group’s future
performance generally, including revenue, EBITDA , free cash flow and capital expenditure statements
relating to the Group’s Project Spring investment programme; expectations regarding the operating
environment and market conditions and trends, including customer usage, competitive and
macroeconomic pressures, price trends and opportunities in specific geographic markets; intentions
and expectations regarding the development, launch 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 Vodafone Red, Smartpass, M-Pesa, and the launch of a number
of additional features; growth in customers and usage; expectations regarding spectrum licence
acquisitions, including anticipated new 3G and 4G availability and the customer uptake associated
therewith; and expectations regarding, EBITDA, free cash flow, capital expenditure, and foreign
exchange rate movements.
Forward-looking statements are sometimes, but 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 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 Group’s pricing models, lead to customer churn, affect the relative appeal of the
Group’s 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 Group’s ability to expand its spectrum position or renew or obtain necessary licences,
including for spectrum; the Group’s ability to achieve cost savings; the Group’s 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 Group’s 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 Group’s financial
condition, earnings and distributable funds and other factors that the Board takes into account when
determining levels of dividends; the Group’s 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 Group’s weighted average tax rate; and/or
changes in tax legislation or final resolution of open tax issues which might impact the Group’s 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 Group’s
website (vodafone.com/investor). 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.
More information
For definitions of terms please see www.vodafone.com/content/index/investors/glossary 28
Q1 results
22 July
Contact us
Prelim results
17 May