Full Year 2021 Vodafone Group PLC Earnings Call (Q&A)
I just thought I'd, just take a couple of minutes.
And just go through the key highlights I am pleased with our resilient performance in FY 'twenty one despite a very challenging period for everyone. We met all of our guidance generated 5 billion euros of free cash flow pre spectrum and confirmed the stable dividends of nine <unk>.
We delivered 10 consecutive quarters of lower churn and added over one 4 million and GM fixed broadband customers. This year exiting this year with growth.
We'll also continue to drive efficiencies and achieved a one 2 billion net opex savings target, we established three years ago.
And we're ahead of our plan on integrating and Liberty assets and have successfully IPO vantage talent. So I would say a strong delivery across our strategic priorities.
But the world has changed around us and many many ways positive negatively.
But for US I think this is a really unique moment in time.
And then because effectively accelerated digitalization by five years and in addition to that you have the EU recovery funds that are going directly to digital and further accelerating these trends I feel the hard work and the focus that we've had as a management.
<unk> team over the last three years has really positioned us to grab that opportunity and advance to the next phase of our strategy to ensure that we capture that demand and our focus is being a new generation connectivity and digital services provider.
Now today for the first time, we've provided our midterm ambition targets with a clear strategic focus on growth.
Growth in service revenue in.
Importantly, in Europe, as well as Africa growth, and EBITDA and free cash flow and growth and return and capital ultimately above whack over the medium term.
We have a window of opportunity to see to deliver this growth and we're choosing to invest more.
And whilst our incremental investment and <unk> will continue to be funded through internal efficiencies. We do plan to step up investment and high return opportunities, particularly Vodafone business and vantage talents underpinning all of this is a firm commitment to our dividend.
And with that Margarita and Vodafone Red colors, and myself will take your questions.
Thank you Mike.
Our first question comes from Jacob Bluestone at Credit Suisse. Jacob Your line is now open. Please go ahead.
Great. Thanks for taking the question and maybe if I just pick up on that final point.
Around Capex and investments.
Yes. The Capex is the main reason today that the for cash flow guidance is a bit below consensus and I think if you include the bandwidth growth investments and capex would be around 5% above consensus for FY 'twenty two.
And I was hoping you could maybe just expand a little bit on the capex, whereas it going if we look at FY 'twenty. One in particular, you had a sort of quarter increase and network coverage and capacity does that where the money is going and if you can sort of explain a bit what is it that gives you the confidence that this will drive topline growth and is this the peak.
Capex or will you see it continuing to rise from here. Thank you.
Well Jacob maybe Margaret you want to go through where we are investing in the Capex and then maybe a return to the important subject and growth.
Sure a J code by rail for simplicity breach the capex between the pre pandemic world for FY 'twenty and we are planning to grow post pandemic and get seen and my presentation and slide that for us effectively doing debates to FY 'twenty two.
If you look at the increase between pre pandemic and post pandemic, the capex outgoing essentially into two different areas.
The first one which you mentioned is network performance. It's connectivity, we have seen our customers behaviors changing significantly this year.
And it's a change that we now see a structure and a number of areas I mentioned earlier in the presentation that six traffic is growing at a rate, which is 60% higher today than it was before so we are spending more to service our network performance, which in turn and we support that.
Our commercial momentum at that point in time, and which customers have never been as focused I would say on quality as day after day and if you look at the increase in Capex I would say about the Ter goes into this network performance investment.
The remaining two tower and going into new growth areas.
The first is going to be focused on digital platforms and services because we believe we have some really strong business cases.
To grow in those areas and as Nick mentioned with the support of the European recovery funds.
In the background are mostly Cds sales areas, such as Vodafone business, where are we not explained in the capital market day that we have recently and what type of opportunities that we believe we have.
The second growth area for the final third of the spend is going into vantage growth Capex and again and all that area that as business is going to give us a return in excess of our cost of capital and therefore support our target to deliver returns above block in.
And the meat.
You also asked.
Where are you spending and the network capacity you have seen a step up.
And in FY 'twenty, one as we move into FY 'twenty, two and the capacity investments will go back down.
But also we will as and acceleration of the <unk>.
Investment that wins total compensate for that so that's why also in the mid term Icd's third additional capex going for network performance.
And maybe just building on the growth.
And so this confidence and growth.
I think it's really important to understand we are exiting in growth and.
And actually excluding roaming quarter for is a one 7% growth rates, which of course will come through as we move into quarter, one and start lapping the roaming impact. So we have momentum we are growing and this is not capex to create growth is capex to accelerate.
And with profile and I look at it in three ways first of all Vodafone business is about 30% of the group.
Vodafone business, excluding roaming growing at let's call it around 2% and accelerating.
I really think we're not highlighted that we have a very unique position, it's really important to understand that there's only two players and the business segment and each of the market us and the incumbent and we are taking market share and where.
Taking market share because we have a unique scale, we have a unique scale in terms of footprint in terms of platform in terms of strategic partnerships. We address all of the segments from public Corporates me Soho and now youre going to get the EU recovery funds being very targeted and to speed digitalization.
And we all the speed and champion and so I think that is a natural growth every day plus public investments into E government initiatives smart cities and various others E health and therefore, we can also play a significant role in that and then you go into what is just over 50% which is <unk>.
European consumer we see that moving into growth, we see it moving into growth because we have effective second brand strategy and the value tier and the main mid to high and with the Vodafone brands were taken fixed share will drive and unlimited and driving convergence and ads and digital services on top.
We're also looking to the UK change, which has moved towards CPI RPI and model and we are taking that model and putting that condition in for a contract through Europe to provide us optionality to move towards a more investment led pricing model going forward and then.
And I'll take the last let's call. It just over 15%, which is emerging consumer and here. We're obviously going through a path of upgrading from <unk> for GE penetration that moves up and is up through higher usage of data and of course, we've got financial services, which is already.
And <unk> over 10% of <unk> digital services and financial services combined over 10% of the service revenue of our emerging markets and growing in double digits, which we see as a really differentiated position versus other players and the market and then of course, you've got roaming, which we lapped and.
And we will start to contribute to growth and I would say that contributes and over the next two to three years and and finally wholesale deals like in Italy that we've managed to secure so we have many drivers of that topline growth that gives us confidence.
Thank you.
Thank you Jay come from our next question comes from David Wright from Bank of America Merrill Lynch. David. Please go ahead. Your line is now open.
Thank you very much guidance for taking the call.
Mike just a follow on from Jacobs.
So if we think about those moving parts the vantage gross capex on the Bts and so obviously.
There is a home for that you've got to build the powers.
And maybe sort of coming through full year 'twenty for only 23 trial for but then that should slow.
The question is and whether the digital.
Services and platforms and Bachelor and cause a little more accelerates from.
And ultimately the I'm sorry, I'm trying to find is is whether this kind of 8 billion euro capex. It seems to be broadly baked in for midterm guidance is now the levels are going forward or whether the rates are a little benefit from.
Investment and that we could see that that capex level sort of getting.
Beyond that and I guess, just the obvious follow on on your comments on the fixed line.
Capex.
That dine and surely quite focused and Spain, and I'm still struggling to understand how Spain and looks like it's going to meet your return on capital.
Our framework and and obviously any comments on what may or may not happen with mass and available Super interesting so funky.
Well, maybe I I'll cover the lesser stain points and you want to cover for them.
So in terms of for kept at that interest and how we see this unfolding over time and you have seen.
We have been very specific and the expectation as you mentioned for FY 'twenty, two and as we look to the meat.
We have been giving you two important reference point and our expectation of EBITDA growth mid single digit and free cash flow growth also a mid single digit we have not guided for a specific.
And number of capital intensity or Capex as such because we think it's important to retain a degree of flexibility in this equation and this is very much linked to the part of the Capex that we are investing into growth growth capex for vantage, which of course will be lumpy by nature and all.
And so the growth opportunities and the digital services, which in turn will depend on our business cases, but.
If you want to sort of work out a little bit the financial equation. This if you look at the midpoint of our mid single digit EBITDA growth and you bridge. It for the free cash flow growth you will realize that once you take into account for.
Of course as EBITDA growth it will be Tox and then also the gradual unwind of the working capital support that we have and in the year just gone and you will realize that actually the variability is is quite quite limited.
I think you also asked whether we expect <unk> capex to a degree.
Greece after the.
And the ambition period of the meet them and I think this gets us a long way away I would say so maybe what we can call out today is yes, there could be scenarios.
Going in this direction I would say mainly for for two reasons.
One is again the business cases of the growth I mean, we will invest for as long as we see the significant opportunity and as Nick mentioned I think this is a really important point in time for that so we will have to see in the in the long term what happens and also in terms of technology cycles I suppose at some point, we will move.
Over the five day cycle, and we will need to see what's.
The next debt technology that but again, it's a bit of a long way away and I think it's worth noting that we have been for the first time the painting quite clearly what our overall mid term ambition is and I think this gives you some pretty clear goalposts so that all.
And just maybe David just turn into Spain.
I'm not going to engage and.
And narrative around market speculation and I think you would expect us to what I would say is that we have made it very clear that we are always open to market consolidation.
Adds value for our shareholders and we are we actively.
Engage with players throughout the whole of Europe, and our markets. What I would say is that obviously mass mobile has gone for a let's say a very logical very safe option in terms of consolidation with another value player.
I see that have and moderate impacts on the marketplace I think for us.
Firstly, we are very much focused on our organic strategy and to your point about market back in the store.
And we worked very hard.
With the team in terms of always going through the local plan and what I would say is it's a number of elements.
First of all we will be accelerating and Vodafone business, we see as a huge opportunity with the EU recovery funds actually Spain will be received and the largest amount of EU recovery funds, you see that and one of the day charts in the presentation.
And that plays very much squarely into.
And our advantages as a company I would say, we've got a very effective dual brand strategy and consumer low he's been very effective at the low end and what we've done at the higher and with the Vodafone and Brian is really drive unlimited into the base and in commitment into the base and convergence. So I mean, we have a very.
Resilient position and I think that showing and a commercial performance I would say the other.
Added extra debt that we've been working on is engagement with government I went to see the precedent and the economy Minister very good meeting they really understand the criticality and importance of that.
Our sector and our business and they've been very proactive and.
In terms of coming up with initiatives you will have heard discussions around extended spectrum from 20 years for 40 years and also some tax concessions to support the sector. So I think there is a really positive moves to improve returns and that was my point for the president and we need to improve returns for the sector you need our services.
And to be competitive as a country and then finally, what I'd say is network sharing we've yet to see the benefits of network sharing we continue to look at ways, we can share more and accelerate and digital capabilities. So that we drive more efficiencies and channel mix and various other things.
Just maybe David coming back to a point you made just to and.
And reposition.
And you said.
They invest significantly more into into Spain on the back of this additional envelope and I think it's important for pointed out that's not the case our capital allocation is clearly a process very much driven forensically.
And by returns and the majority of the additional investment is essentially going to two areas one is Germany.
And of course, and then the order for our platforms and of course for vantage.
Central activities, you will have seen debt, we have recently changed our operating model and technology have I.
Our senior team driving Europe technology, and we wanted to make sure that these new development. These new investments have done one for.
And the benefits of all day market. So just wanted to point out is really Germany and central development.
That's super clear and maybe just one follow on just on the return on capital profile of Spain, and you've kind of been lagging sort of two three years since you've really made Rosie and ups.
Kind of a cool hurdles for these regions.
Do you think Spain as a.
Cost of capital plus business on a two day, if you if you're kind of putting a foggy around below per round around this kind of return on capital ambition is Spain, there or do you need to does it need some kind of additional restructuring do you think to make that make the grade.
Okay.
I think it needs to.
Three things it needed.
It needed first of all digital acceleration, we're going to get that post pandemic. So we've revised our plans in terms of the pace at which we're moving on digital.
And needed network sharing and data sharing and we're engaged on that and the third it needed a little bit more support from the government.
And funding.
And we're getting both of those things so what I'd say is we're tracking well for the plan.
Total thank you.
Thank you very much day events.
Our next question comes from James at New Street Street, Sorry, James There you go your line is now open great.
Yes. Thank you good morning, Nik and owning Margarita. So two questions. Please the first one was just regarding your medium term growth ambition and mid single digit and tying that in with the accelerated investments you're making at the moment and I think your guidance for this year would imply around 3% to 5% organic EBIT.
Dag growth so to hit mid single digits.
Growth and tying in with incremental investment you're making is it fair to assume you're baking in EBITDA growth beyond FY 'twenty, two going above 5% to start seeing the returns from these new investments that youre, making.
And then secondly, just on a point of detail.
Around the vantage gross capex for this year that you're taking out of the free cash flow guidance, I mean, I'm thinking that should be around 200 million euros could you just give us sort of stay or do you think thats a sensible number for this year and.
Could you explain to us what's the logic for taking out the built to suit capex out of the free cash flow guidance, given vantage I think as you and all of its build to suit for Vodafone.
And I, just don't <unk> been making that investment anyway with advantage of being an independent company or not so just in towards standard logic for stripping that out of the official free cash flow guidance and Keith.
James I'll, let margherita handle your three part question.
[laughter].
So if we start from.
And maybe the last.
Question and actually thank you for asking about these two day, because I think it's an important point.
It's a change.
Offsetting the debt on our free cash flow guidance. So it's helpful debt that we have a food for discussion.
First of all the reason why we are doing this is because clearly we now have a tower company in our mix and we need to adopt.
Adopt the standard out of the sector of the tower the tower companies.
Cause the growth Capex are by nature lumpy.
And in the power for World and we can have new opportunities of build to suits or ground lease buyout programs. Clearly this will body overtime and in that sense. It is appropriate to give a guidance before.
This variability now specifying guidance for ambition in this case before and non technical Capex, because clearly as we will publish our results in Nashville's you will always find our free cash flow net of everything.
For the bottom line, so clearly full transparency that but we want the flexibility for vantage power to invest when the group business cases come up essentially.
You also asked about.
Yeah.
Why do you include build to suit in the growth.
Capex, Steve and it's mostly dedicated to for Vodafone again.
Following industry practice.
What is in our and what he and Kindle growth Capex first of all what is not.
Is that the ongoing maintenance Capex a month that you expect those to be fully embedded in our guidance and that in our targets. What is out is again its project activities and typically its build to suit and ground lease buyout and lease renegotiation and Cds as the sort of three <unk>.
And a big buckets and if you think about it as I think I already mentioned previously.
When vantage would make it investment choices, if we prioritize areas, where vodafone with SBA differently I think it's perfectly clear when we talk about the ground lease buyouts, we would never and prioritize this in our Capex envelope, but also when you think about coverage investments and build and that's why.
<unk> is now doing for Vodafone.
And the three vantage world, we would have chosen a different type of mix on delivery of the coverage expansion, which would not be just building.
But we would also of course include and I think you have seen US doing that include third party sites and and leases so.
A very different approach now that our advantage is that and I think you will also see.
And that's when you look at FY, 'twenty, one where vantage started operating but still decent accelerates and the growth capex and it seemed a lot of destination and we're effectively immaterial in FY 'twenty, one, but we see this is clearly positive and we want to vantage to invest because it allows us to take it.
<unk> per share of <unk> of industry value going forward. So so we want to take that opportunity and I think you said what number should we expect a year, maybe two reference points.
And the capital market day day, not I think showed a very clear slide on the plan that was foreseen on built to suit <unk> and the like and I think if you take the numbers in that slide in aggregate you come to a conclusion of around 300 million per year.
Oh from rate.
Please keep in mind that on top of that.
Even vantage and the ability to retain its leverage.
<unk> and order a billion dollars for additional investment path that can be either a dedicated for inorganic so M&A, but equally could go if the right opportunities come up.
For build to suits for many other operators to go towards organic and.
And of course, this will be phased over that around over time.
Going back to your previous question, there and I think it was around how do we do we are in the mid term.
And mid single digit EBITDA phasing and.
On the first year, where we have the traditional guidance actually the growth rate and slightly higher than the one you mentioned the lower end of the range is 3% and the higher end of the range is about five is around five and a five 5%. If you. If you work out the math, so I would say.
We are getting are clearly into the trajectory how you read the trajectories were not giving annual guidance with this mid term ambition, we are and rather affecting if you want the viewing is for that if you come to meet them and you look back and you look back at what has been the average over the year.
And there would be some years, which would be a little bit higher some years, maybe a little bit low and I think.
We have already given quite a lot of visibility in these numbers around how we see the trajectory unfolding.
Thanks for answers.
New investments Youre, making you'd have.
High levels of confidence, we could hopefully get up towards for.
Higher and in that range over the medium term.
I think actually you're right. It wasn't sort of completing your question and I think in terms of phasing you arrive when and when you were explaining our you'd imagine in terms of sequence and defense that.
We are growing to invest to grow in a way in our plan. So we have high confidence from the short term growth because it's happening now on tobacco for the execution of the strategy and debt we will use some of the.
Growth to invest as we have just described and inter these investments will drive further growth with of course, we've come in two three years' time, depending on the type of business cases.
That's clear thank you very much.
Thank you James.
Our next question comes from Sam Mchugh from Exane. Some your line is open. Please go ahead.
Great. Thanks, two questions sorry, and one is very short just on tax I don't know if.
If you are planning to make use of a goodwill amortization schemes and Italy.
And what you're assuming for cash tax and FY 'twenty, two and then maybe next year as well.
And then secondly, just big picture on vantage now that the IPO is done.
And investors generally don't like free cash flow definition for express and Xbox and <unk>.
People are a bit skeptical about looking for the growth Capex, how would you feel about being the majority owner for the vantage and.
It does feel like deconsolidation and it could be more levered you wouldn't have to recognize the growth Capex and what your views changed for told and the last six months around that thanks very much.
Okay.
And I take this to the other.
And so in terms of Italy, and yes, there is an opportunity to effectively for tax reasons and restart the depreciations of assets, which have been fully amortized already.
And we are looking into it the only thing I would say at this stage is in the context of the group tax Bill don't see these as Betty.
That and material as an opportunity I think the best way to look at.
A part of Capex.
Projects per Se tax projections is you start from <unk> 1 billion of cash stocks in our AR and our free cash flow and the CD.
Growing over time together with our EBITDA growth, we've been quite specific in the press release in terms of our expectation on effective tax rates.
And we see these in the sort of Hy 'twenty gross.
And for so I think you can you can easily do the math from that.
Positive sales.
I think it's a short answer really look whether it's control or co control like we have found and Italy, what we've done in Spain, we see the towers and vantage towers as being an important strategic asset for us mainly because of two things I would say look this is still a fairly immature market.
In terms of towers, mainly owned by other operators of course that will change over time and.
And then the second thing is obviously technology visibility past five G.
And would like a little bit of clarity a game. That's a matter of time. So what I would say is look we're focused on ensuring we don't miss any growth opportunities for vantage towers.
And we're firmly behind them I don't think we're constraining and so.
And therefore, I think we have the right balance and it's because we see the opportunity of these business cases, which hold and either good returns that we havent really and what we're doing in terms of the guidance and and midterm ambition.
And so we're very sorry for insurance.
Yeah.
Just from.
Yeah.
Our next question comes from Robert Grindle Deutsche Bank.
Please go ahead your line is open.
Thank you good morning, both.
But in your presentation, Nick mentioned shareholder returns are a key focus.
Your next strategy Phase are you thinking about the bottom of your leverage range.
And then to start talking about raising the dividend.
And second question is <unk> mobile commerce to the and interesting deal with Mastercard.
And which put a big value on our African payments business could you look at doing something similar with and payroll.
Let's talk for the first and I'll cover that lesson.
And I take the first and then yes in terms of a relationship between leverage and and dividend I would look first at the near term and in the near term you will see us very focused on deleveraging as you know, it's one of our three capital allocation priorities.
Yes.
And.
The ambition we have illustrated today is supporting this evolution through growth you have seen us maintaining debt leverage stable at two eight times net debt to EBITDA in FY 'twenty, one clearly, we have and the COVID-19 drag and the currency drag from.
COVID-19 affecting our EBITDA, but we have been able to maintain.
The leverage ratio stable and looking forward, we see opportunities to deleverage through growth.
And as we believe that on the need the single digit EBITDA growth ambition. This will be the near term priority in terms of dividend distribution. So you should expected us.
<unk>.
In the near term as we move beyond this phase and to your point, we progress on the deleveraging and then of course, we will reconsider our dividend distributions again and that in the context of for our capital allocation priorities invest in infrastructure and deleverage and then either attractive returns too.
Shareholders.
Yes, I think I think in terms of mobile money or Fintech and Africa, I think and you're right to point out and so a huge opportunity we believe and this for now.
10, plus years, and we are a clear number one and the African market we have.
Have a base if you could include all of our markets for <unk>.
Our money of over 60 million active customers. So were about three times the size of that so what I would say is that we are absolutely focusing on investment and the platform.
So that's the and pays a platform, but healthy and peso platform evolves from what I would say, it's a feature phone world into a small fund world and.
That's going to involve as many apps, so biniak deal with for instance loans or insurance and now.
How do we build additional financial services and Youre going to see from Vodacom the launch of <unk> to play.
As a as a brand and South Africa, and ultimately we want to evolve the Super App.
Strategy and I will leave <unk> talk about that and a little bit more so is a priority with scaled priority investment unconstrained at the moment, we all separating those asset sales into a separate legal entities, because we think that the business will grow at a significant pace.
But at this point in time, we are funding that expansion of the business.
Clearly theres intrinsic benefits between the Fintech and the telecom business, because things like distribution churn et cetera, but look let's see how it evolves over the coming years Super excited and space.
Thank you.
Thank you Robert.
Yeah.
Our next question comes from Carl Murdock Smith and spun back call. Your line is open. Please go ahead.
Good morning.
And I was just wanted to give you a bit more chance to talk again about the social contracts, particularly with regards to the UK spectrum auction, which yielded very good results largely due to your decision that you are comfortable with three gaming subject and one gig and.
The spectrum can you talk for your your approach to that auction and <unk>.
For more broadly and the thought process that caused you to take your foot off the gas. So early was and that with the new auction process.
Yeah, I would explain it.
And Martin slightly differently for that that strategy, because because actually you have to back up what was daily 18 months two years of a process. Originally when the auction was designed it was going to be bundles and spectrum. So you're going to have the low band bundled with the higher bands. So the <unk>.
700, with the three and a half and it would have come with coverage obligations. So for us that was an artificial construct that would have driven up the option pricing and the capital commitment for us and was not optimal for the industry. So what we did we did actually share leadership here. We went for the rest of the industry and we said.
Well really what we want is the bands to be auction separately, but we understand what the government from a policy perspective, which is coverage. So why don't we come together and offer proactively coverage and.
And if we offered the coverage what we're all skin and return was to separate the bonds out and drop the coverage obligations against the bands.
Engage with Ofcom on that basis, and the industry and everyone was supportive and I think that's what the perfect social contracts is what youre, saying as I understand as a sector you government your policies, but I think this is our way of achieving the goal and a more efficient way for the industry and.
And allowing us to optimize and improve our returns and so as a result for that they would be aggregated we could bid on individual guidance. We already had a lots of low band between 809 hundred we didn't need the 700 being combined together, we would've had to bid for the 700, which would have been <unk>.
So really what we did was we optimized our ability to go into the auction and get exactly what we wanted and so now we have the second largest spectrum holding and the country, both high and low band will launch five G on 900.
Very effectively and at the same time and then the auction didn't get overheated. So I think that's a really good outcome I could also say, Greece has been a really great outcome, Netherlands has been a good outcome Hungary as being a good theres only one country the share I've been unhappy with that Portugal.
Around 515 or whatever it is of course, it's still about half of the European benchmark comprised and.
But frankly I have not been happy with the construct of express that before but generally every other European countries is heading and a good direction and its compensation with the industry.
That's great. Thank you.
Okay.
Thank you very much com.
Our next question comes from Nick Celsis and trip and Nick. Please go ahead. Your line is now open.
Thanks very much.
Two questions. Please the first one is on <unk>.
Net promoter scores and customer engagement and so you haven't been publishing those recently and obviously the Kpis and Q4 were a little bit on the weak side.
So could you talk to us a little bit about how you're seeing.
Customers.
And and their how they look at the Vodafone brands and the second question I had was thinking about otherwise feed spend capex for the buyouts out of.
Area spending and Germany. So you extend your network into new areas is that something you've been thinking about or something you might do with the partner thanks very much.
Yeah. Thanks, Mike.
What I would say is in terms of NPS I think what we are increasingly doing is.
<unk> got a lot more sophisticated now as relationship NPS for large corporates.
And in Germany, MTS, which I'm really excited about so NPS can be.
For the moment in time or a point in time.
<unk>, whereas now, Germany, mps's, measuring and sweat and journey of the customer. So I would say the reason why we don't report because we have lots of definitions that we're trying to target different outcomes and if I was aggregating a picture what I would say is Vodafone business NPS really good performance strong across the board I think people have rarely seen.
And that's really helping the pandemic we were proactive supportive.
And available with right product so.
Really good I'd say, a second brand NPS is a really compete and very strongly across the board for Vodafone NPS for consumer I'd say step tough from the pandemic has been a bit flattish over the rest of the year. Obviously, we continue to work I wouldn't say, it's either positive or negative I would just say it was an AR and AR.
Solid position.
And if I, if I stand back and so I would say the one thing I would point sales were also doing now reputational.
Indexes from this.
And how the wider stakeholder community view, Vodafone and that has positively lifted throughout the year because of the way we dealt with the processes and the way we plan into our social contract with society.
I would say positive trajectory on the brand and of course, we did together, we can and I think you said here I think a guy and resonated well tonality wise with the mood.
<unk>.
People.
I'd say in terms of Germany, and Capex, and we all looking or footprint.
Various opportunities whether that's as I said before consortium's is something that we look at across the board generally can we join consortiums that are doing fiber builds and obviously that can either be as a strong anchor customer or it can be as an investor.
And we are very open to those different models and.
And we're having various discussions.
Okay. Thanks, so much per day.
Yeah.
Thank you Mike.
Our next question comes from charge offs at Citigroup Joe Trust. Your line is now open.
Good morning, and thank you for taking my question.
And Germany.
And there are no developments and the market assumption interest and remember constantly remark and also ramping off of fiber deployment.
Microsoft to pause for the first one now and will be some type of wins from this change are so if you kind of talk us through what other things and options and are taking to offset those in the coming year.
The fiber and Illinois property, the Europe, only player of our support and infrastructure owner.
Characterizing reseller of virtual telecom fiber hub interest.
And our views about the commitment model approach with telecom has put cohort and wherever you believe and balances.
The protections for infrastructure ownership and the way the wholesale accounts design okay.
And maybe you want to share with the second part.
Yes.
Just standing back in terms of the actions, we're taking I mean, clearly the priority for US was always to turbocharge our net.
At work. So we are now go and gigabit networks for 22 million households over 90% of our footprint.
It's really important to understand that is fine, but it's like a hybrid fiber network, it's getting closer and closer in terms of fiber builds as we do node splits and within the network. So I'd say increase and performance. We've also got a development roadmap for the next step for US is high split.
DOCSIS three one high split delivers a one gig up speed upload space three gig down. So we have a good path for that and of course and you've got DOCSIS for zero. After that so I'd say, we got a really strong roadmap in terms of.
Increasing speeds on what is already a very differentiated network and as I've said to Nick's question outside our cable footprint, we're open to it because it <unk> either as a customer or as an investor to accelerate fiber builds and I'd say on top of that we're also working on strength.
And then.
TV proposition.
We inherited units HPV premium TV proposition, which was a bit weak. We've now harmonized that proposition, we've launched Apple TV and we've launched Vodafone CEB. So I think we got a good roadmap for the rest of the year coming through in terms of what we can offer and the television from and of course, we.
Can you talk for a leading mobile and so when you bring it all together I think again, great rational market best economy in Europe.
Increasingly government funding and support and the industry and we have a really differentiated business.
On the contingent model and intelligence I wouldn't say this is a particularly and <unk>.
Particular areas of focus I think.
Some other where for media weeks, and which was fully expected.
From a wholesale perspective, clearly our focus.
Today is in penetrating our own infrastructure with added one percentage point of penetration of cable in the last year and we are eagerly waiting for the lock down.
<unk> is in Germany to accelerate our growth.
As you know we have put in place and number of measures.
Cyclical in terms of integration of the Unitymedia footprint that we couldn't see the impact of because of the lockdown, but we are we look forward for an acceleration in penetration.
Together with something I'm really happy about which is the value. We are guessing it's not just about volume. It's really about value you may have noticed and our results today that are at a per growth in cable in Germany as it for 5% in Q4, and this is really driven by our approach.
To drive the mix up value in terms of.
Speak steering.
We have been very successful and doing so we have half of the base already today, which is a 250 megabit per second or above and we have just actually 1 million customer on that on gigabit speeds and this is what it's the mix that is driving our out for so the story for us of.
I would say fixed broadband and Germany, Italy, and the penetration of auto and infrastructure with the best possible value mix.
Okay.
Thank you Joseph.
The next question comes from Polo Tang UBS Polo. Your line is open. Please go ahead, yes, hi, and thanks for taking the question two quick ones and first one is can you remind us what the key triggers or else it going forward and happy being changed given that you've got new medium term.
Guidance and the second question is when you look at your portfolio. What are your latest thoughts on your 50% steak and beef and <unk> and do you think you have sufficient scale and Ireland.
For.
Two follow ons, and so youll too fast for instance, and.
First for in terms of a relative essentially it's the same components same construct so it's cumulative free cash flow over the three year period and CSR measure. So so you won't see any change and the construct or waiting for.
I would say secondly in terms of portfolio.
And the Vodafone Z go.
Really good market really good business.
I think that the performance relative to others in the marketplace continues to.
And to do well.
We're really pleased as they advanced the upgraded the network. They are about 40% through DOCSIS three one and the network the complete that by 2022 high convergence MX and.
And importantly stable leverage and then bring and dividends excess cash back to shareholders. So look we really love the business. We think it's a good partnership with Liberty and <unk>.
Good financial model for us.
And in Ireland.
Alright Islands.
Yes, and then do you have sufficient scale and Ireland.
For the number one operator and oil and so on revenue market share for number one of course, tyro and something we've been building out and fixed and we have to look at whether we want to extend that theres also wholesale opportunities on fixed as well. So we are engaged with the various players. So my view is we've got real momentum I mean island.
A challenging period with second brands being launched into the market, we launched and second brands and immediately the response was price and moved up on second brands, which is a healthy development obviously.
Thanks.
Thank you for that.
Our next question comes from Andrew Lee from Goldman Sachs. Andrew. Please go ahead. Your line is open.
Hi, Good morning, good morning for you guys.
Two questions first we've obviously got the Capex outlook as a context, but you're also guiding to revenue growth in Europe for the first time zone and I can remember.
Just wondering if you could talk.
A bit more about the opportunity from network investment linked pricing.
And maybe not to the inflation linked pricing and the UK and whether there is scope for that elsewhere and.
And then the second question just how to face off.
And from.
Sydney and investors they've been around for a while today on Capex I know that Europe is basically about your outlook and confidence and your outlook on capex for visibility notice and success based elements for the Capex.
And your forecast.
Which countries can you give investors that you have a day three of the spring investment cycle the.
And the risk and Heinz pay more capex to achieve for the same growth outlook is limited.
Thank you for Murdo and handle the first new handle the second and I.
I think just on pricing I think the important thing here is it goes a little bit back to the social contracts.
We're engaging with governments.
To say look you want to accelerate and connectivity and high speed connectivity and the country you understand why it's so critical given the pandemic and everything that went on that it is core to the competitiveness of the country going forward, if you need that and you need more investment.
Like we're trying to do then we need the right policies and part of that is to say that we need to be able to charge appropriate pricing as an industry. So this is really us taking a step and I think the UK when the incumbent steps forward like they did in the UK.
Say look we want to invest but we need to earn the right returns, but we cannot install and so have a conversation with policymakers and regulators to say this is a constructive way to move forward and so I think it's landed well in the UK I think customers are also appreciated it and they want high quality connectivity and they understand.
The standard now that pricing and our industry has been deflationary for so long is good price and you get a lot of value for money compared to any other industry. I think is about the service that's being provided now going forward and so what we've said is okay. Given that why don't we go through all of our contracts.
And the rest of Europe, and put that provision and the contracts, which then provides us the optionality to go that route obviously it depends on the competitive environment from responses, but we think that the industry really should reflect on this moment as and opportunities that go in this direction.
And on the Capex point, and let me say debt. This is really very very different from screen, we're not talking about and.
And exceptional program to establish a different positioning in terms of network leadership, we're very very happy about our current position is one of the quality networks in Europe. The reason why we are investing more as I was saying in the beginning is to respond to the changes that we have.
And in our environment and to take the opportunities that we have from that.
You have heard me say that two thirds of the extra spend is all about opportunities around business cases that deliver strong returns and therefore, our thoughts and clearly we also have a personality. It's again the equation of we grow.
We invest part of this growth in order to accelerate.
Future growth. So we clearly have optionality around that and that firmly positions around the capital allocation framework that we discussed already a year ago, which is invest and our infrastructure day leather and then ease and attractive returns for shareholders. So you will always see us.
And the opportunities of growth as the option to accelerate growth very very different set of circumstances.
Thank you.
Thank you Andrew.
The next question comes from Maurice Patrick from Barclays. Morris. Your line is open. Please go ahead.
Yes, hi, guys and thanks for taking my question just a question on just maximizing returns.
From your existing assets and Germany Glenn.
And if I'm not wrong and I wanted to lower in corporate and market shares in cable and Europe, and Germany and.
And looking at the numbers it seems like operational momentum is slowing such as if you look at group and that's had some cable net migration from the comp and the law.
Last 12 months with Deutsche has talked for the balance and accrued we mentioned because of the IP migration and maybe some thoughts and so is it right that sort of X migration momentum is slowing.
And does that impact your thoughts towards wholesale for the top of mind.
And they go to wholesale day with telecom companies you have to choose towards wholesale shifting.
And Morris and I think the simple answer is that we've had and a bit of an exceptional year with the pandemic and various section.
Sectional lockdown situation and of course, we are the challenger and the market and therefore, we need retail presence to keep the engine of growth going. So we will look very much looking for retail opening back up again, and Germany, and regaining the sort of momentum and numbers, we were doing before clearly locked.
Towns and shop retail favors incumbents.
As a more natural thing and I think you've seen that from other players in Germany as well I would say in terms of wholesale provision we just.
Launched tests a day.
I have yet to really get going because of the lockdown. So so we look forward to them contributing and clearly this is always something that is open and swaps and clearly we will always assess the opportunity.
Great. Thank you.
Thank you Morris.
Our final question today comes from Akhil, the Tommy from Jpmorgan. Your line is open. Please go ahead.
Yes, hi, good morning, and thanks for taking my question.
Two please for me as well and.
First is on return on capital if you could maybe just disclose for us what the return on capital and the financial year just completed was.
And I guess the question more broadly to that is.
Given the construct of orders for <unk>, which is mid single digit EBITDA growth, but spending a bit more and capex. How do we think about your ability to get return on capital above what which is obviously ultimately what you're guiding to so if you can maybe talk us through those levers and im.
Sure this and P&L versus cash flow elements to that as well.
And then the second piece is just you talked earlier about.
And chi being interested in volume state so partnerships with incumbents on infrastructure or even at the pump partners can you just help us understand what the merits of that might be because in a lot of cases that doesn't give you a preferential wholesale terms. So it could create a lot of long term value and infrastructure asset, but it wasn't.
Necessarily change your wholesale economics, if you could maybe just talk specifically about what the slope per se.
And what you might want to do those sorts of deals that interest as well.
Yes.
And just cover the last one first and then pick up.
So the reason why you would entertain them is number one.
These consultants so there's lots of conversations but are they getting traction or they get in build.
Act as a huge brands to actually get penetration behind these builds and so what it does is it gives confidence to investors decide this particular consortium is likely to learn the right type of returns and is likely to be successful. So that's why I talk about and anchor tenant or anchor customer.
We don't have to invest in it and if theres enough and for funds coming in and they just want us as an anchor customer to drive the penetration, we're very happy to do that because we won't penetration outside of our cable footprint, obviously to get higher performance connectivity. So I agree.
And with you if we can go that route we would go that route we did see fiber on net basis. As an example in the UK I'm, just saying there may be examples where people would like us to invest something yeah, and we would be happy to do that if it meant that our consortium got off the ground. So I'd say this is an anchor customer first.
And then potential to invest if it got consortiums of the ground.
On the return on capital Festival on sales.
We have published today ever pre tax controls the return on capital of five 5% and post stocks.
At three 9%, so clearly obviously still very much.
Our cost of capital in terms of dynamics in the last year I think the pretax Controle, we went down around 80 basis points six three to five five and essentially what does happen is pandemic no growth in Egypt, and therefore changes of perimeter really affecting us and this was the first 12 months and which.
We consolidate and Liberty.
And for as well as we moved from.
And some assets into English, which is obviously not in the control setting itself. So that explains.
And the plan looking forward our mid term ambition is really being built.
Around return on capital and the needs and the possibility now to deliver return on capital above work and we see really significant opportunities ahead of US I think we see the opportunity of really material step changes in this year on year trend I would say for a for reasons.
So first of all service revenue growth clearly in Europe as well as in Africa.
Companion and number two by continued to work on our digital transformation and cost efficiency and you can see clearly from our.
Midterm ambition that we're talking about margin expansion on the back of that so these are the first two points, but then importantly third point is really this new investment profile.
And really Oh can I say obsessed internally in finding opportunities of business cases that the boss and <unk>.
In terms of return and this is where the two thirds of new Capex investment and we're talking about are coming from and so it really support from the capital allocation and finally, a bit more technical and maybe we are also replacing and our financial yield three D amortization with the new <unk>.
<unk> license amortization, and we will get a little bit of a benefit from that but really a significant.
Opportunity plan built around returns and not just that total level, but as usual you will hit all saying this and I'll also add.
The individual market level with a lot of focus by market and by initiatives to dry dock. This is really a key objective.
And on that.
And I say, thanks, very much always thoughtful questions. Thank you for taking the time and invested in us to understand the direction as we're really reinforced and we are growing we're taking the opportunity on that growth to invest to grow faster and I look forward, along with Margaret and sustainable.
And our investors over the next couple of weeks take care bye. Thank you.
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