Half Year 2022 Vodafone Group PLC Earnings Call - Q&A Session

Turning our commercial momentum in Germany, secondly, accelerates in our operational transformation in Spain, and third is our positioning Vodafone business to ensure that it really captures the maximum opportunity from the EU recovery funds.

And then fourth and final point, we're committed to improve shareholder returns through ongoing at sustainable growth alongside targeted portfolio actions I really think we've done a lot of heavy lifting over the last three years the structure Vodafone to capture value creation moving forward.

And we see a number of opportunities both medium term, but also near term in terms of that portfolio.

So on that I will open up for Q&A.

And I have to say please can we have one question per analyst.

I know you love to do the three part questions, but we want to make sure we get through everyone. Thank you.

Thank you very much Nick them. Our first question today comes from Polo Tang from UBS. Please.

Please go ahead.

Hi, Thanks for taking the question I have one question. So can you maybe just talk about the trajectory of service revenue growth into the second half specifically are there any headwinds were tailwind for Colette can you maybe talk about what you're seeing in terms of commercial trends and competitive dynamics for the different European.

Markets. Thanks.

And one question about quite broad I'll start on the underpinning.

In terms of what we see for the coming quarters.

I'd say, probably a couple of more second kind of headwinds to keep in mind in particular as we move into Q T. We are now lapping a price increase we did last year in November in Spain, and then as we get into Q4, we will have further MTR reductions you know we are on a new a glide path from the.

We had the MTR reductions drag in this quarter they will roughly double.

In Q4, but of course.

We're talking about MTS. This won't have any impact in terms of EBITDA and cash.

On the other end a couple off a pay to win.

We will still have some benefits in Italy from the recent MD&A migrations into Q3, and then you have seen our commercial momentum re accelerating and that will also flow into the survey 70 performance.

Admittedly this puts and takes out all relatively small if you think about it in the near term.

As we move into the next financial yes, it's important to talk about our two aspect in consumer we should start to see some support from the new pricing models without embedding into our European contracts. You know, we discussed the CPI plus investment linked pricing.

So on one end and then on business as Nick was mentioning when we started today needs in Europe to hit any of the European recovery fund coming to its own in terms of support to business demand. So generally speaking I would say on the service revenue front, we are well on track with our midterm.

Guidance of a sustainable growth in Europe, as well as in Africa, and then I focused on revenues because that was the angle of your question, but before moving maybe to the commercial plans into the market. Let's me also.

Emphasize the points that Nick was making earlier on the financial performance more broadly. We are also pleased to be already on track with the mid single digit EBITDA growth and that didn't get the chance to bring both our EBITDA margins and our return on capital today after six.

Ahead of where we were pre pandemic, so I would say good financial progression overall.

Maybe if I could just build I mean.

Stepping up a level rather than going down in some quarters.

Why do I think Vodafone is is uniquely placed to drive sustainable growth in a sector that frankly has been flat to declining I really think we have a structural advantage in it. It really is in three elements I mean European consumer.

And Marguerite touched on a number of things I mean, we are.

All of the challenger in fixed and convergent. So we see that as a growth engine for US. We also see that you know we we've got opportunities in wholesale and we're driving device lifecycle management, which I think will become more of a service going forward, how do you finance handsets and devices insurance et cetera.

We're really ramping up the science behind that and you'll see in a little bit about execution in the U K for us and that's why we're doing so well with the iPhone, where we're having a disproportionate market share game.

Is that not true share gain and of course, the CPI and <unk>.

Vodafone business, 30% of our.

Our business, we have a really good digital services roadmap, that's growing at double digit growth rates and we have the U recovery funds flowing in so that so we should see that as an accelerator and then of course Vodacom continues to do very strongly we were obviously move in Egypt into Vodacom as well, which is also.

Strongly performing and we have obviously financial services, which I really think is a standout opportunity within Africa and you've seen what we're doing with the employees of <unk> to pay I mean financial services for Vodacom is growing over 20%. So you can take a number of these structural aspects that maybe are a little bit dip.

From maybe some of our traditional competitors.

As a result of that we're taking market share in U K, we're taking market share in.

Italy, but holding in Spain slight loss in Germany, because of that sort of pandemic lockdown.

Really good performance across Africa really good performance across all of Europe. So.

<unk>.

Got good momentum.

Thanks.

Thank you very much Paolo.

Our next question today comes from Ah killed the Tani from J P. Morgan. Please go ahead.

Hi morning, Nik Modi Margarita.

Question around advances towers.

You've outlined two key messages today one is around.

Eventually deconsolidation of the business. So I guess I'd love to understand the thoughts behind that is that about a view that the assets not being fully reflected in your price was a bit more strategic.

And the second piece to that is you also talked about at an industrial deal with co control.

Is it safe to say, an industrial deal would be with another telecom.

There's really two major partners out there.

Enough to try to control it.

And if you do if you like that is that about scale synergies or is it something else. If you could just elaborate from that piece as well.

Okay.

I would say is.

I think we made a good early decision about separating out towers informing volunteer cells as a default.

G cycle. So the first priority is to capture organic growth, but we went out with the results. The Cheyenne progress on that we want to drive higher utilization of our assets and they are writing new tenancies.

And growing well and I think there's further opportunities to come in that direction I'd say the second aspect is I really see bolt on acquisition opportunities, where the in market to drive more synergies or whether that's new footprint I really think that they have a good pipeline of opportunity ahead with them and then the third.

Third aspect for us is to say well actually I think there's an opportunity to grow in industrial merger as you say.

And industrial merger has two aspects to it well maybe three aspects I would say first of all yes, there are synergies to be had with with and they can vary depending on maybe who the partner is I'd say a second aspect is it can widen out youll footprint, so that you're recovering more territory.

There is more opportunities going forward and then the third thing for me is the deconsolidation because although we're not holding back vantage talents. So you go on a couple of more years I think that we would not want any balance sheet constrained for vantage talents and it can.

<unk> capital structure once the consolidated and we've won co control with a like minded industrial player you highlight two players, yes, theres orange with Toten those Deutsche.

These are two really credible really high quality operators that we have a very strong relationship with so of course. They are they are opportunities of course, we don't discount others, but I think importantly, we want to really look at the landscape and shape the landscape across Europe now.

No. We did all the hard work through the separation with a view to really move at pace to shape. The landscape. It will consolidate that will probably be let's call. It three large players across Europe, we are definitely going to be one of those players to capture that five G opportunity coming through.

Great. Thank you.

Thank you very much Kim.

Our next question today comes from James Ratz Us from Nice St. James. Please go ahead. Your line is now open.

Great. Good morning, Nick and Walgreens can you hear me okay.

Yeah morning.

Great Yes.

Anyway.

For the time being exactly.

I hope it stays that way so.

Jim Please just regarding your potential network upgrade plans in particular in Germany is an area. We have a lot of discussions with investors on Nick. Thank you for the materials in the presentation. You gave I heard some of the comments you had that would be great to explore.

Those in a little bit more detail in particular around comments.

Waiting to fiber in Germany, you suggested that you might now looked at some opportunities with MD use with a new business model.

How big of an opportunity could that be how much the footprint without <unk> you talked a bit about wholesale again, I'm, just intrigued what new opportunities that might be in Germany with wholesale and you hinted at off balance sheet financing I think for the first time. So again just interested here what you see is the benefit.

Fitz from batch is that something that is just to kind of potentially keep capex at current levels. If there is any incremental investments just love to hear more thoughts and commentary around all those initiatives. Thank you.

Yes, James this.

As an important subject to us and we invest a lot of time in terms of how we're going to evolve our networks generally in Germany in particular.

Every network, especially every fixed network is it's very different country to country in terms of the model you can't read across just because there's a trend in one particular market that's going to happen in another so if we go to Germany specifically.

What I would say look at Germany is in two parts.

Out of footprint, Ralph cable footprint area and in that area.

We encourage fibre to the home builds now that can be us as our anchor wholesale tenants. So I mean, obviously it brings in the Vodafone brands, who have failed and committing volumes is very attractive to investors or we could be part of our concern.

<unk> and make investments in our infrastructure, we think the returns are attractive and if it's targeted in the right way. So when you remain very actively engaged in options in the off cable footprint. Then you go one cable footprint. So in other words, our 25 million homes and what I'd say is it breaks.

Then again into sort of two areas you've got the housing associations. This is let's call. It two thirds of our sort of cable customer base and then you got one third which is single dwelling units and we've been going through obviously, an upgrade cycle on our network, but we are very.

<unk> committed to we're very excited about.

Obviously, you've been very quick because part of the integration to prioritize the upgrade to one gigabit speeds. So we're now at 23 million households, just to make sure that everyone understands when we're upgrading and adding capacity, we're effectively taking fiber closer and closer so every hub.

Every housing association as we do node splits and so that is just what we do generally so that's why it's a hybrid fiber network is because fiber is getting increasingly deeper. So we've been doing that execution, we've been increasing the amount of those splits and we've been doing through the country.

And then next year, we start the cycle of high splits and highest split starts to provide you one gigabit upstream capability as well as increasing downstream to three gigabit speeds. So frankly as a customer you don't need anything more than that.

So therefore, it gives us a really good runway of capability moving forward.

Then of course, you've got DOCSIS, four et cetera. So I think we've got a very good roadmap of upgrading our capability now clearly as part of the new regulation around T V, which comes in 2024. So in other words for all the bulk contracts you go into a single contract.

<unk> been going through an engagement with those housing associations and we've had an engagement, let's say of about half of them and then the engagement has been really interesting because that engagements really fallen into I'd say three buckets of reaction because what we've been doing is explained in the roadmap for T V, but we both.

So I've been explaining the roadmap for our cable upgrade.

And what we found is there's bucket number one which is the housing association, saying they could be interested not definite but could be interested in fiber to the building, but one of the things I have specifically said is we are not interested in taking fiber through the building we would only do that through the night.

Refurbishment upgrade of the building, which is every let's call. It 510 years. So they don't want disruption in the building, but they quite like the idea that may be fine if it goes to the basement of course.

Connecting fiber to your cable network, we are excellently place to be able to do that as the natural partner and then I'd say the second bucket of housing associations are ones, where they say I really like the upgrade path. It seems to provide everything we need. Thank you very much and then the.

Third bucket.

What this isn't even though my my my roadmap both bolt process at the moment I don't consider a priority no one's talking about the need for any upgrades. So I would say these are the three buckets. We have to continue to engage with the housing associations and just get an idea of demand as we move forward.

And so I see this as something that evolves, it's not a rush, it's just something that we need to engage understand demands and then obviously as we understand more we can come back and give you more color I don't know if you want to talk a bit more about that.

Capex I'm sure from a funding perspective, our capex envelope within the midterm guidance doesn't include any fiber investment is thoughts I'm talking about S. E. T. H R E D or find the our Capex envelope includes.

Natural upgrade cycle off.

If the cable networks that make close justice Sky D. So gradually.

But I think the network has we have capacity and following the natural technology evolution of cable that's left in our midterm guidance.

As we have these conversations I at least possible dark fiber to the building business cases.

Become attractive in certain circumstances and from that perspective as you were mentioning earlier, we see also the possibility of infrastructure investment through JV being attracted to the opportunity. We see this a lot at the moment across Europe, and clearly Vodafone could be considered as a very interesting.

Partner for infrastructure capital for these type of deals.

Being absolutely clear if these business cases were to become material.

You should not expect us to use our balance sheet too.

To father's day.

I wasn't I didn't see any early days.

And frankly today, we are really focused on effectively marketing our current 23 million gigabit households, and the table evolution is getting our options as it just discussed so if something was to change then we would update you on it but that's our focus at the moment.

Great. Thank you really appreciate that.

Thank you very much James our.

Our next question today comes from David Wright from Bank of America Merrill Lynch. David. Please go ahead.

Okay, guys, hopefully you can see and hear me.

Nice to be on video instead of that picture from I think it was 2005.

So I'm going to ask a slightly different question.

I was terribly.

I always get very nervous when any one size thats all the speed you need them, but I'm going to stay away from the father of all the questions for now and the other thing you have mentioned in your presentation is the potential for pursuing strategic end market consolidation and I guess the question Dan.

Could you also consider that.

<unk> balance sheet.

For instance, do you when.

When you look at the actual service code associated priority for you to keep the service coast consolidated or could you actually consider an off balance sheet solution.

And then in market consolidation opportunity. Thank you.

Well David.

I think we have demonstrated that.

We have always been pragmatic when it comes through in market consolidation because ultimately the most important thing is you unlock the synergy you unlock the sky will recall and I think we demonstrated that in Netherlands, we've demonstrated that in Australia. So so I think we're always pragmatic.

I think I think the important thing if I sit back because you could say well look we've been here before on a market consolidation as a topic.

So why is why are you dialing into this and I think it's really important to understand we've just been through a pandemic.

And the pandemic engagement I have had with governments with regulators has been super high compared to ever before and <unk>.

Terms of them really saying well you know I think you've Vodafone for being there for US helping society remain connected and of course, our peers were doing that as well. So the sector was more appreciates. These hybrid site, but at the same time, they're really understanding we all critical national infrastructure and for them to truly compete on a global.

Basis by market, they know that they need inward investment in next generation technology. So whether it's the upgrades we were talking about on a fixed or five G. They want to see that as fast as possible.

In that conversation.

Say what holds back investment is the return on capital within some of these markets and we need to accelerate return on capital to an acceptable level and then inward investment would come into the sector.

So when you start to have that conversation they say well what are the levers that you need to see improved.

Well you know this fall there was spectrum and we've seen significant progress in spectrum recently, so whether it's Spain, Greece UK taxes within taxes come down on the industry. So you're seeing that in Spain, again, or whether it's network sharing and deployment. So I can go through lots of examples.

We're going through right now unless you won't be too yeah lots of examples of progress being made but the fourth topic is consolidation and what I point to is Americas with three scaled players on average with 95 million customers each showing a three players at scale 400 million customers each India three players.

Netherlands, three pilots, but some of our markets in southern Europe are at five players plus.

And what I'm, saying is and this is why return on capital was so low and what we need to do as consultants are going forward without punitive remedies. So I think that theres a real.

Understanding now of returns the importance of returns linked to investment which is what they want from a policy perspective, and therefore, I think there's a more openness to engage on the topic of consolidation.

But it feels like Youre going to have that the regulator is never going to say hey, guys come on doors right. When you go to you that youre going to have to.

Boat the regulation I'll start right, it's going to need a brave telco to say, okay. We want to do this he wanted to go four to three whatever it might be you're going to have to kind of provoke that reaction if that makes sense.

Well, Brian Telcos were going out with a very strong message because I think the climate is there to have a real conversation and honest conversation with governments and regulators and the European Commission and I think that there are other players suffering out there let's face it the.

Market cap at the whole sector is down so I think I think that there are a number of players that would say we would like to find a solution to drive shareholder value now of course I can say, we're pragmatic I can say were reasonable.

Right to be pragmatic and reasonable.

And that means reasonable valuations et cetera to try and unlock the synergies and the potential going forward and so so we will actively engage on that basis.

Thank you very much guys.

Yeah.

Thank you very much David our next question today comes from Andrew Lee from Goldman Sachs. Andrew. Please go ahead.

Yeah.

Good morning, Nicole.

Other question on operational hearing.

<unk> also delivered 30 basis points of European.

Organic service revenue growth.

Germany organic service revenue growth.

You delivered 5% of underlying EBITDA, a European EBITDA, thanks to the Italian one often seven plus.

So Germany EBITA growth.

So maybe there's some germany synergies in that but I wonder if you can just talk through the steps between revenue and EBITDA growth.

How sustainable is seemingly high unattractive operational gearing.

Yeah.

If I may be stopped from somebody and Andrew are in.

In terms of sustainability, you know that.

We are consistently believe that pre pandemic and margin expansion.

And significant operational leverage and you have seen that our mid term guidance, which is effectively pay dictated upon exactly the same type of equation going forward and as you pointed out we have already started delivering this.

In the in the first thoughtful of this fiscal year in terms of.

Moving path between revenues and costs. This is a little bit of.

Yeah, because we are lapping the COVID-19 crisis of last year and so there are number of moving parts that affect all flying that will look different.

In terms of all the second half of the year will look like so if I, if I tried to paint a little bit the picture for you of all of these kind of flights are clearly enough. One we had the benefit of.

Revenue growth.

<unk> revenue growth, because we were lapping the COVID-19 crisis.

Last year in Q1, we called out there were a number of one offs. So this was supportive to service revenue growth.

We also add a homing pay win that's to be fair, we lost for many years to come but a strong getting out flying because of bromine gas seasonality and then we had the benefit of the Italian settlement in the numbers, which is 100 million of.

Effectively state EBITDA.

No obviously no revenue implications as.

We move for war.

What do we see enough to eat you won't have the same push in terms of revenue growth and roaming.

The margin in particular, you won't have the recurrence.

The sector length, which of course was that wasn't one off on that and what you will start seeing playing through in the second half is that operating cost reductions you have seen that in I'll fly them. We have not had any incremental opex reduction year on year basis, because last year clearly, we intervene very quickly on coal ash.

Colgate's talk and we had the big step down of 300 million getting US one some of this has reversed actually this year, because we have to spend more clearly than last year in things like advertising sales and the like.

We will we are well on course to deliver our product gets off over 300 million opex reductions for the full year, but this is now going to be geared towards the second house so different.

In terms of revenues and cost elements, but scale.

Starting from your earlier point, good operational leverage to continue into the second half and into the future a year. According to the guidance I think you have seen that our EBITDA growth profile implicit in the guidance. We adjusted he stated this morning, and so you will have seen that we will continue.

Well, it's good EBITDA growth into the central mouth, and again beyond according to our midterm ambition. So operational leverage will continue to be a significant feature.

Okay.

Thank you very much Andrea.

Our next question today comes from Sam Mchugh from Exane.

Please go ahead.

Hey, good morning, everyone.

Just wanted to follow up on the M&A by countries.

Mike you called out the U K and the press release, we can.

I'm, giving you all implemented CPI plus price increases.

To a degree you will reintroduce roaming charges in the space of last month of each other.

Industry still have 10% to 20% free cash flow margins due in that context, how do you convince the competition authorities that you'd need consolidation without remedies.

And as such tight oligopolistic characteristics is there anything in the discussions you've had that would suggest that may be more often without kind of market structure. Thanks very much.

So I'm I feel very strong.

Our guidance already.

Comment.

I think.

The competitive environment remains a super competitive environment. So I mean, you got some massive brands they see.

Virginia, and I would sue skull sales too so.

Ah three I mean, that's a big market.

Players I think.

Hello.

In the end, what's really important is that you have to have scale locally.

And then we have the additional benefit of scale on a regional basis and I think if we can bring the two together we earn decent returns and those returns meaning that we can continue to invest and provide the infrastructure.

Governments are looking for so so I mean, the case is player returns are below market work in the U K and therefore needs to improve.

And therefore.

And therefore, they understand that and I think that they understand there is enough competition, even if there were one or two players less in the marketplace. So so it doesn't think it's a difficult narrative.

Right.

Thank you very much Sam.

Our next question today comes from.

And Kelly from Morgan Stanley.

Please go ahead.

Oh no no.

No.

We're on mute.

I am indeed.

Great expressions from the house.

One person.

What are you going to do absolutely.

I have a question please.

<unk> and vantage towers, just as a follow up on <unk> question earlier on so if I look at the statement that you made on the presentation you talked about monetization.

Time, so could you maybe just say a few words about how we should think about that monitor monetization how that might manifest itself and also maybe some of the lessons that you learned from the Verizon wireless asset sale back in 2014 in terms of how that monetization happens and how that was for shareholders and for the great. Thank you.

Yeah.

Uh huh.

In terms of vantage towns itself.

I think we are really well placed at this moment in time to really explore and industrial merger and that is our preference.

And through an industrial merger of course, you always let's say equalize size with co control and so obviously, if we start at 82% there is a monetization opportunity because we can bring down that stake equalized with someone else and still have co control of vol.

Once these towns.

Did something similar if you remember and in which we'd say Ah.

In Italy, so that.

It's not sort of module with an opportunity for us of course, and industrial merger might not happen and then in that case, we do have to you, but let's say, 82% to bring down that site. Further we would obviously want to stay in control about it sells for a moment in time and we can bring.

A degree of monetization. So we would definitely do some we have a lot of interest from strategics, we have a lot of interests from infra funds, but if the demand is definitely there. It's just us sequence in the right actions and we have an order of priority of what we would really ideally like to do.

Of course proceeds of that we received in if youre comparing with Verizon experience.

Cause by far number one is deleveraging. So so we would use those proceeds to delever, we always said that from a capital prioritization perspective number one we want to invest in our networks and growth platforms. We went out in May we told you where we want to invest so you'll know where we're investing.

The second is deleveraging and then the third is return to shareholders.

Super clear thank you so much.

Yeah.

Thank you very much and that's our next question today comes from Georgia yard to Connie from Citigroup.

Please go ahead. Your line is now open.

Good morning. Thank you for taking my question. It's also on vantage.

Hum.

I'm sorry.

Yep.

You can hear me and I wanted to maybe.

I hear from you what your plans would be medium term in an ideal scenario.

On the structure of the asset so as you highlight on slide six not to have a lot of radios that are now being run by Vodafone is obviously, that's cloud capabilities and other things that perhaps belong more advantage on the Vodafone group.

So I'm curious to understand from your perspective and their vendors.

Holiday, Sean whether you see more opportunities for those kind of predictable investments to be done on your behalf.

On page a instead.

Instead of the communication on the operation itself and if I could just ask a clarification on some of your previous comments on whether any consolidation you see there is a preference between in market or footprint expansion I guess, you could get both well what would be your preference.

In seeking a partner for vantage. Thank you.

Yeah, So what I would say unless I misunderstood. The first part of the question I mean vantage salaries about passive infrastructure it doesn't own the RIDEA, we on the right you know of our equipment.

No plans to change that model one of the things vantage talents could do is obviously fine but to the sides. So previously we would have some fiber to the site that you could obviously do fiber to the site. We would be open to those types of opportunities of course, you've got small cells and other types of <unk>.

Modules.

Bonds as towers would be open soon going forward that might be we might have done in the past and therefore it sounds can do so so I think there's a number of things that we could explore with vantage.

It's another reason why co control with another industrial partner, we think is a good long term model for us for all these reasons I would say in terms of the right partner.

It's finding a partner who shares your vision of what the growth opportunity is for vantage talent going forward.

It might be a partner that has in market synergies in which case, that's great, but I think what's more important needs to be share. The same vision of the opportunity and the expansion opportunity. We believe in growth, we think theres a lot of value to be created through vantage talents and we want that exposure so that grows.

I think the most important thing is shared vision and then secondly point if it brings new markets then as we develop new platforms and new opportunities for bones. It's of course, you have a bigger geographical platform on which to do it.

Yeah.

Thank you.

Yeah.

Thank you very much Georgia.

Next question today comes from Stan <unk> from Bernstein stand. Please go ahead.

Hello, I've got a question about Germany. So this quarter you added a large number of convergent customers I think it's more than just throw the southern net ads in Q2, that's probably six to 10 times more than in any quarter over the past couple of years.

What specific commercial activities have been driving these numbers.

What level of discounts on these new convergent customers getting thank.

Thank you.

And just to kind of go hey, canceling or discounts and what we're doing is simply adding benefit to the customer who has both fixed and mobile a weight off and its additional traffic that they can enjoy but of course, we are protecting the apple without any discounts.

Classic I would say of the convergence playbook.

You will see further growth in the coming quarters.

Opportunity on the post pandemic normalization of the market, putting any dive convergence now watsco again without discounting.

Thank you.

Yeah.

Thank you very much Stan.

Our next question today comes from Maurice Patrick from Barclays. Ross. Please go ahead.

Yeah.

Yeah, Hi, guys hopefully you can.

Okay.

A question about yoga, but less of your ambition of UK programs.

I noticed you any thoughts on it.

2000, and the constant quarter, despite being a charger.

<unk> announced a deal with Citi fund on Openreach to extend Yo Yo five of each and I believe in the.

Household weekend you talked about.

Maybe a desire to cope financial co invest or invest in fiber.

With me just maybe a few thoughts and soon you'll have no ambition to actually invest in U K fiber infrastructure despite the customer.

And that works out, but maybe sort of related to that Youll do you have plan strict celebrate before this activity in the quarters and years to come.

Yeah.

What I would say is I think there's a little bit of a phenomena, where the pandemic happens accelerated a lot of people, making choices on the Fritz fixed.

Fixed broadband so there might be a degree of if you like pull forward of activity and therefore as we've come out of the immediate pandemic.

Seeing a lower switcher market so in the U K, specifically its down about 15%.

From what it was before so I'd say generally when we look at the statistics around our gross add performance and market share is where it was before so we're pleased with the growth side of it is just slightly smaller market at the moment I don't know Thats temporary and then starts to expand again I think you're right to say I'm very pleased.

We have leveraged the wholesale market.

And I have struck.

A deal with the Openreach and also 60 fibre. So now we have the available the largest footprint of fiber to the home in the U K, we are more than happy to add to that in terms of other people. If they have pizza wholesale so if virgin once it's a wholesale and.

The terms are attractive enough.

For us to some volume of them then clearly we would do that we're always open as I've said before about Germany or footprint, if theres opportunity of fiber builds.

Have good economic returns for our shareholders of course will think about it if I look at the UK, though I think there's quite a lot of infra fund money coming at them very cheaply and therefore, whether our equity is really required.

Mr. Mark, but what people are really attracted to us having the vodafone as an anchor tenant. So some of these builds to ensure they are protected and the IRR. So so you know that.

It's an opportunity for us and of course, what we want is multiple opportunities and therefore, we get the right economic terms. So that we can drive convergence in the market. So at the moment, we're really pleased I mean, if you take the UK performance, we all take in revenue market share both on consumer and enterprise excellence.

Phone launch a great proposition and flex if you haven't seen it very very create save some things that we really think are has many many benefits, including increasing the tenure of customers on our contracts anytime a adds one point you have seen us presenting.

The latest edition of the English industry benchmarking that we share and then you call position on the whole lots of efficiencies now one of the top 10 year operators across the whole of Europe. We have two operators in the top three now one is etonian deal and that is that UK they've done a fantastic job on efficiency in the last couple of years, yes.

Ahmed.

Your budget will still be challenging.

Yeah.

Okay.

Yeah.

Okay. Thank you very much Morris. Our next question today comes from Nick <unk> from Redburn. Please go ahead.

Yeah.

Thanks, very much to date just a quick question on M&A again, so you've talked about bolt ons or mergers you've talked about off balance sheet joint ventures could you just specify and a recipe large deal for four to three we definitely talking merger or were talking acquisition, possibly running into multiple billions.

If you could just clarify that thanks very much.

Okay, I think I think I would tend to look at merger opportunities of different varieties because merger opportunities takes away some of the complexities of relative valuation synergies et cetera, you tend to get more.

Chris on the size of the prize if you like the synergies and building a stronger business.

It doesn't always have to mean, it's 50 50, it's combinations as I say we're pragmatic.

And in terms of overall M&A war chest, if you'd like for bolt ons, what kind of size are we.

Talking about within your deleverage plans.

Now don't get carried away I mean, we're talking.

Let me give you an example of a bolt on could be I would see a small business that gives us capability that maybe would take us two years to build ourselves accelerates the ability.

Iot as an example is is yeah.

Globally number one on connectivity of 136 million devices connected growing at $2 million a month, so really strong connectivity platform that we want to scale, but then what we wanted to develop and when services.

So yeah. So automotive were really strong insurance with strong health was strong yet so we want to build capability and sometimes there's a small player out there that gives us capability in our sector than we built build onto our platform and suddenly we got if you like a turbocharged position.

It's those type of things that we'd be talking about and just to add that this is happening obviously with you know context for capital allocation as Nick was reminding earlier.

Number one priority is to continue to progress on deleveraging.

Know that we have not yet at the bottom end of our desired leverage range and therefore that remains top of mind.

Alright, thanks very much.

Thank you very much Nick.

We have time.

Apologies apologies our next question today comes from.

Adam Fox Rumley from HSBC. Please go ahead.

Thank you, yes, I had a question on spine.

The Spanish restructuring and some of the wider implications, but also what you were saying about the.

Sorry.

Restructuring that you referred to I think it's mostly within the commercial channels and it was interesting to also hear Mercury's his comments in the <unk>.

Presentation around the structural changes and which are the stores being used post COVID-19. So I was wondering if you can kind of in combination that changes your view on the European store footprints.

In particular, the primacy of or otherwise of owned versus third party channels.

Recall that the Spanish closing was reported as being more own stores, but those are usually held onto some operators are more interested in keeping so any comments around that would be helpful. Thank you.

Right.

Let me maybe say a few comments and then if there's something specific.

When when we're when we're looking at channels clearly our starting point is digital.

Uh huh.

And then obviously our online channels et cetera, So we want them.

Very best digital experience. So that's number one than what we do is on the retailer sites, we're constantly model and through big data analytics, how how and online execution is complemented with retail what I mean by that is store sizes change locations change.

They could be express kiosk rather than standard format. So we're constantly evolve in the rates on the site over the last three years, we've reduced the estate by 15%, but will also reconfiguring. The site. So it's more effective so we're not really losing volume when we do that and then when we look at.

Other channels like Spain, as an example, there can be other.

Let's say door to door or other types of channel push channels that are more supportive of the let's say fixed broadband penetration of convergence penetration. So we look at obviously customer lifetime value, we look at pay backs by channel.

Depending on the needs of the market. So that's what we've been doing in Spain, more digital optimizing retail maybe widening some specific channels full commercial performance and then what we also did in Spain was introduced luxury second brand into our retail Assembly.

Which has been an increase in football within our stores and conversion both on lower <unk>, but also on the Vodafone Bryan as well so we've seen a good performance off the back of that.

I don't know if there's nothing specific sorry, Adam did I'll ask I'll answer everything you wanted it on that.

Yeah. Thank you.

Thank you yeah. Thank you.

Okay. Thank you very much Adam I'm afraid that's always got time for today, So I will hand back to Nick Marguerite just a wrap up.

But on behalf of Margaret and myself. Thank you very much for taking the time to join US hopefully you've seen in the <unk> results are there.

We are very much demonstrating sustained growth and driving shareholder value in the structure.

The phone has we look forward to seeing everyone on the road show.

Take care.

Okay.

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