Q3 2022 Vodafone Group PLC Trading Statement Presentation
Speaker 1: And secondly, to drive more value from our assets and this included establishing network sharing agreements in each of our European markets than aggregating the towers together for Guantish towers and then the successful 12 billion Euro IPO of Guantish towers last year.
We'll have more value from our assets and this included establishing network sharing agreements in each of our European markets in aggregate in the channels together quality talent and then the successful 12 billion Euro IPO vantage towers last year.
Now to achieve this we have been pragmatic and open minded in our approach to these transactions to improve shareholder returns and we intend to continue to operate in that way moving forward.
Speaker 1: Now to achieve this, we have been pragmatic and open-minded in our approach to these transactions to improve shareholder returns. And we intend to continue to operate in that way moving forward.
Speaker 1: We've had a clear long-term strategy to drive sustainable growth, and we're determined to improve shareholder returns. And we outlined three operational priorities and three portfolio priorities. So let me just touch on them. In terms of the operating priorities, we said that we are focused on improving the commercial performance in Germany, and clearly in broadband, which is our major focus.
We've had a clear long term strategy to drive sustainable growth and we're determined to improve shareholder returns and we outlined three operational priorities and three portfolio priorities. So let me just touch on them in terms of the operating priorities we have.
<unk> said that we are focused on improving the commercial performance in Germany, and clearly in broadband which is a major focus.
In Spain, you saw the announcement of a restructuring in quarter, three and we moved to a fully franchised model within our retail our states and have had a series of initiatives with the government to improve the economics for the sector.
Speaker 1: In Spain, you saw the announcement of our restructuring in quarter three, and we moved to a fully franchise model within our retailer states and have had a series of initiatives with the government to improve the economics for the second.
And EU recovery funds with very much focused on positioning ourselves as Vodafone business, which is about 30% of the group to capture those opportunities.
Speaker 1: In EU recovery funds, we very much focus on position in ourselves as Gold-of-Home Business, which is about 30% of the group to capture those opportunities.
Speaker 1: Turning to the strategic portfolio priorities. We've made very good progress in terms of Egypt moving into Vodakom. It got unanimous approval by the minority shareholders and we're on track to conclude that by March. And in terms of the other two.
Turning to the strategic portfolio.
<unk>, we've made very good progress in terms of Egypt moving into Vodacom. It got unanimous approval by the minority shareholders and we're on track to conclude that by March and in terms of the other two activities. They are primarily what.
Speaker 1: They are primarily what we are doing in terms of further activities around vantage towers and moving to a potential industrial merger, continuing to advance those conversations.
We are doing in terms of further activities around vantage talents and moving to a potential industrial merger continuing to advance those conversations as we are the second one which is in market consolidation now clearly there is much we can say about those.
Speaker 1: as we are the second one which is in market consolidation. Now clearly,
Speaker 1: There isn't much we can say about those in market consolidation activities, but I just want you to know that we are very proactive, we are very pragmatic and we are getting good engagement from our counter-polities to advance this moving forward.
Market consolidation activities, but I just want you to know that we are very proactive we are very pragmatic and we are getting good engagement from our accounts of policies to advance this moving forward.
Speaker 1: Our goal is just to ensure that we have a set
<unk> is just to ensure that we have a set of strong assets and healthy markets delivering strong returns for our shareholders.
Speaker 1: strong assets in healthy markets, delivering strong returns for our shareholders. And on that, I will open to...
On that I will open to Q&A.
Thank you very much.
Speaker 2: Our first question today comes from David Wright of Bank of America, Merrill Lynch. David, please go ahead.
Our first question today comes from David Wright of Bank of America Merrill Lynch. David. Please go ahead.
Speaker 3: Okay, guys, I hope you can hear me clearly not too worried about seeing me. Yeah, so Nick, I just want to try and extend a little on those.
Okay, guys I Hope you can hope you can hear me clearly not too worried about semi.
Yes, so Nick.
I just want to try and extend a little on those final comments and I appreciate that this E.
Speaker 3: Final comments and and I appreciate that there's a lot you can't surely say But just regarding pragmatism. I think one thing you have said is that return on capital
<unk> com shortly say, but.
Just regarding pragmatism I think one thing you have said is that return on capital regionally.
Speaker 3: regionally is a focus and you even defined this a couple of years ago and we've had some momentum.
It's a focus and you even define this a couple of years ago, and we've had some momentum.
Speaker 3: But it seems to me that the asset that stands out is Spain. And I obviously refer to reports this morning about potential Muslim-veiled deals. We've also had reports of Italy and the UK and everything quite frankly recently. But is it fair to say that Spain is to stand out asset for you from a return on capital perspective? And then also on the whole sort of pragmatism debate and would you be willing
But it seems to me that the asset that stands out as Spain, and I, obviously refer to reports this morning.
Potential market deals.
Wholesale reports are actually in the U K and everything quite frankly recently, but is it fair to say that Spain.
Is the standout asset for you from a return on capital.
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And then also on the whole sort of pragmatism debate.
Would you be willing.
Speaker 3: in any of these circumstances to exit in entirety are there any sacred cows so to speak in those core European markets where if you got the right offer you would be willing to sell uh... one hundred percent
And any of these circumstances to exit in entirety are there any sacred cows, so to speak in those core European markets, where if you've got the right offer you would be willing to sell 100%.
I should probably leave it there given everyone else in the queue. Thanks.
Speaker 3: I should probably leave it there and give everyone else in the queue. Thanks.
Okay. Thank you David.
Speaker 1: Okay, thank you, David. Look, very important question. And maybe if I could sort of frame up, I think it was one, two years ago, I can't remember the exact presentation. We laid out our portfolio criteria, our framework of how we think about it. And I just want to reinforce because it's applicable to every single country that we operate in. And the criteria had three elements to it. The first element was
Very important question.
Maybe if I could sort of framework I think it was one two years ago I can't remember the exact presentation, we laid out our portfolio criteria or a framework of how we think about it and I just want to reinforce because it's applicable to every single country that we operate in.
And the criteria had three elements the first element was.
We want to have regional scale, but we have to have local scale.
Speaker 1: We want to have regional scale, but we have to have local scale. And that is important.
That is important to achieve.
The second thing was do.
Speaker 1: The second thing was, do we see the fact that we have a credible and actionable plan by management to ensure that return on capital is overwack in the medium term. And Margaret, through and I invest a lot of time specifically around the February period going through those reviews to understand on a multi-year basis what are the levers you are pulling to produce that out?
Do we see the fact that we have a credible and actionable plan volume management to ensure that return on capital is overlap in the medium term Margarita annoy invest a lot of time, especially around the February period going through those reviews.
I understand on a multi year basis, what are the levers you're pulling to produce that outcome.
Speaker 1: And these have to be in our control, things we can do on our business, not a women of prayer and we hope that this happens and that happens. What things are in our control to deliver that out?
These have to be in our control things, we can do on a business not a women of prior and we hope that this happens and that happens what things are that our control to deliver that outcome.
Speaker 1: And then the third thing that we say is, are we the best owner of this asset? We want to make sure that our group derives value for that asset being part of the group and that we are delivering value to that asset. And so we go through that criteria. And there could be circumstances where a particular market does not meet that criteria.
And then the third thing that we say is all we the best owner of this asset.
We want to make sure that our group the realized value for that asset being part of the group.
And that we are delivering value to that asset and so we go through that criteria and there could be circumstances, where.
Cipla market does not meet that criteria and in those situations. What we said is we will be very proactive we will be very pragmatic finding other alternative solutions and so specifically to your point other solutions can be JV.
Speaker 1: And in those situations, what we said is we will be very proactive. We will be very pragmatic at finding other alternative solutions.
Speaker 1: And so specifically to your point, other solutions can be JVs. It can be us moving into a majority control in position on an aggregation. It could be us moving into a minority control in position on an aggregation, or it could be a disposal. We don't close down options.
The us moving into a majority controlling position on an aggregation it could be osberg <unk> minority controlling position on an aggregation or it could be a disposal. We don't close down options, we evaluate everything with the lens of what's in the best interest of our shareholders.
Speaker 1: We evaluate everything with a lens of what's in the best interest about shareholders.
Okay. Thanks, very much thanks, Thanks Margaret.
Thank you very much David.
Speaker 2: Thank you very much David. Next question today comes from George C.R. DiCaparno from the 50 Group. George's please go ahead.
Our next question today comes from George <unk> from Citigroup. Please go ahead.
Speaker 4: So good morning and thank you for taking my question. As we were so Nick, very strong set of results, but we are telecom analysts and we always look at the last half empty. So I want to ask a bit about the German broadband performance this quarter.
Good morning, Thank you for taking my question.
And I was wondering if I make a very strong set of results, but we are quite obvious and we always look at the glass half empty. So I wanted to ask a bit about the term on broadband.
Performance.
Yes, Sir.
If you don't mind, you mentioned some initiatives if you don't mind updating us on.
Speaker 4: If you don't mind, you mentioned some initiatives, if you're not updating us on how you plan to address it within some announcements on personal changes. And could you perhaps give us a bit of an indication on whether the third quarter is the low point and the recovery will come already from the upcoming quarter. And if possible, can you also comment on whether this could also impact the service revenue performance in the coming quarters? Thank you.
How you plan to address it we've seen some announcements on personnel changes.
And could you, perhaps give us a bit of an indication on whether the third quarter is the low point in the recovery will come.
Already from the upcoming quarter.
And if possible can you also comment on whether this could also impact the service revenue performance in the coming quarters. Thank you.
Well George.
Speaker 1: Well, George, let me do a tag thing with Margarita. This can handle maybe the lesser part of your question. Maybe if it's start with the first part.
Let me do a taxane with Margaret this is getting to handle maybe the latter Paul.
Your question might be if a start with the first part.
Speaker 1: What I'd say is I called out the fact that improving German operation and commercial performance was one of our top three priorities.
What I would say as I called out the fact.
That.
Proving jevan operational and commercial performance was one of our top three priorities if.
Speaker 1: If I look at how financial performance been in Germany, I think it's a good performance. You saw the half year on the EBITDAW, etc. I think and consistency of service revenue. We've seen so many improvements in mobile, which is good. But the performance in broadband without that is below my hour expectation.
If I look at our financial performance in Germany, I think it's a good performance you saw half year on EBITDAR et cetera, I think I think consistency of service revenue and we've seen some improvement in mobile which is good.
The performance in broadband without now is below my our expectation and so why is that and what are the actions. We're taking I'd say first of all Covid remains a factor in our performance in Germany and it is a factor in two respects.
Speaker 1: And so why is that and what are the actions we're taking? I'd say, first of all, COVID remains a factor in our performance in Germany. And it's a factor in two respects.
Speaker 1: you know still with obviously restrictions over the quarter that we had, retail is still nowhere near pre-COVID levels. I think it's still running at around 50% of the level that it was at pre-COVID.
Still with obviously restrictions over the quarter that we had retail is still nowhere near pre COVID-19 levels I think it's still running at around 50% of the level that it was.
That's pre COVID-19 , so that is a really critical.
Speaker 1: So that is a really critical channel for us because we're the challenger in the market, taking share and therefore we need that retail performance to be in place. And the second aspect of COVID is just the sheer volume increase on our networks. It has been unprecedented in terms of that volume and especially on the uplink.
Channel for us because we're.
The challenge during the market taking share and therefore, we need that retail performance to be in place and the second aspect of Covid is just the sheer volume increase on our networks.
Unprecedented in terms of that volume, especially on the uplink. So we've been doing a series of upgrades to our network and they will continue by summer we will have lifted the capacity at the whole network by 60% versus pre COVID-19 levels.
Speaker 1: So we've been doing a series of upgrades to our network and they will continue. By summer, we will have uplifted the capacity of the whole network by 60% versus pre-COVID levels and we will have doubled the capacity on the up.
And we will have doubled the capacity on the uplink in the major centers, where we see the highest activity. So we are investing hard this takes time to roll through but we are very much focused on bringing that capacity up.
Speaker 1: in the major centres where we see the highest activity. So we are investing hard. This takes time to roll through, but we very much focused on bringing that capacity up.
Speaker 1: I would say then we had the new teleconc law that went into place.
I would say then we had the new telecom's law that went into place.
Speaker 1: And it had, I would say, two factors for us. The first factor was that essentially, it was a big heavy lift for us in terms of IT changes and in terms of customer journey changes. And frankly,
Had I would say two factors for us the first factor was that.
Essentially it was a big heavy lift for us in terms of IAC changes and in terms of customer journey changes.
And frankly.
Hi, gentlemen, same put a very conservative process in place that was very cumbersome.
Speaker 1: Adjerm team put a very conservative process in place. That was very cumbersome.
Speaker 1: And what it did was delayed the transactions with the customer in somewhat of a painful way.
And what it did was delayed the transactions with the customer.
What are the painful Hawaii.
Speaker 1: And therefore, what we said is, hold on a minute, we need to stand back. Our competitors did a simpler execution, less conservative than us, let's say. And I think we need to move to that execution. So what we're doing is, we are now putting in changes through the IT system and the customer journeys. But unfortunately, that will take quarter four to make all of the changes that we want to do.
And therefore, what we've said is hold on a minute we need to stand back our competitors did.
Simpler execution.
Less conservative than us, let's say and I think we need to move to that execution. So what we're doing is we are now putting in changes through the system and the customer journeys, but unfortunately that will take quarter four to make all of the changes that we want to do.
Speaker 1: I would say, secondly, as this new law.
I would say secondly.
Is this new law.
Speaker 1: Essentially said that the re-contracting was not automatic on the customer anymore. So that has an effect of bringing forward potential churn that we would have seen over the coming quarters. It pulls forward.
Essentially said that the.
Re contracting was not automatic on the customer had anymore.
So that has an effect of bringing forward potential churn that we would have seen over the coming quarters.
Pull forward.
Now that pull forward is industry or let's say sector dynamic and it would increase churn overall for all players. The challenge. We have is our retail channel is very important to capture assays share with the pro sides and that's what we're not saying so we're suffering the churn impact, but we're not.
Speaker 1: Now that pool forward is a industry or let's say sector dynamic and it would increase turnover all. Yeah, for all players. The challenge we have is that our retail channel is very important to capture our share of the gross ads and that's what we're not seeing. So we're suffering the churn impact but we're not benefiting from a higher gross ad uplift because of the retail constraint.
<unk> benefits from a higher gross add less because of the retail constraints.
Speaker 1: So there are a number of things we're doing on the commercial front, actions that go in place in terms of our plans and portfolio and marketing over the fourth quarter to improve performance. So all I'd say is
So there are a number of things we're doing on the commercial front.
<unk> got in place in terms of our plans and portfolio.
Marketing over the fourth quarter.
To improve performance so all I'd say is.
Speaker 5: Quarter four is going to be obviously a more challenging quarter because we have a full quarter impact to these things. And then we would expect to see improvement past quarter. I don't know if you want to. Sure. On the sort of numbers and the KPIs and the financial, we are focused on reaccelerating momentum, but let me go back to what Nick has just said, because I think it's really important.
Quarter, four is going to be obviously, a more challenging quarter, because we have a full quarter impacts of these things and then we would expect to see improvement of course the floor I don't know if you.
Yes sure.
Understood on the numbers and the Kpis and the financial.
We are focused on the accelerating momentum, but let me go back to what Nick has just said because I think it's really important.
Speaker 5: In Q3, we only add a partial impact from the factors which have just been described because the telco-low only came into effect on the 1st of December . As we get into Q4, we will have a full quarter of impacts and this will be both on 6th and on mobile.
In Q3, we only had a partial impact from the factors, which have just been described because the telco law or he came into effect on the first of December .
As we get into Q4, we will have a full quarter of impact and this will be both on fixed and on mobile now beyond Q4, We will then start to see a gradual improvement.
Speaker 5: Now beyond Q4, we will then start to see a gradual improvement because you will have the mechanical effects that Nicholas describing in terms of more volumes in the markets that will unwind gradually, and then of course our actions as well that will come into effect. So that's important.
As you will have the mechanical effect that Nick was describing in terms of more volumes in the markets that will unwind.
And then of course solid actions as well that will come into effect. So that's important for volumes.
Speaker 5: From revenue perspective, I need to say very pleased to see the consistent revenue generation that we are having in Germany, an older quarter at 1% growth, which is also an acceleration in mobile.
From a revenue perspective, I need to say very pleased to see the consistent revenue generation that we are adding in Germany another quarter.
1% growth.
Also an acceleration in mobile.
Speaker 5: If I think about the coming quarters into FY 23 for Germany, clearly we will have an impact from the fact that six broadband volumes have been lighter. But it's not all about volumes. These are tend to be relatively small movements. It's also important to remind that we are having a good dynamic on our own. On six, you will have seen this quarter around 2% growth on the whole of the bay.
I think about the coming quarters into FY 'twenty three for Germany, clearly, we will have an impact from the fact that fixed broadband <unk>.
<unk> have been lighter, but it's not all about volumes. These are tend to be relatively slow movement. It's also important to remind that we are having a good dynamic on apple on fixed you will have seen this quarter around.
2% growth on the whole of the base and then beyond.
Speaker 5: and then beyond six, you have mobile, you have seen a stronger quarter on volumes in mobile. Actually, probably a bit stronger than what it looks like. You have read 70K net ads in contracts in this quarter. In reality, we have also disconnected some zero traffic seen from the own Unity Media and DNO. So the real underlying performance is closer to 120K.
Mobile you have seen a stronger quarter on volumes in mobile I would say probably a bit stronger than what it looks like you have.
70, K net adds in contract in this quarter in reality. We are also disconnected sub zero traffic scene from the old anything and so the real underlying performance is closer to 120 K.
Speaker 5: so that's supportive and then finally we will have of course Vodafone business, good performance, this quarter strong demand, particularly I would say in Germany at the moment from the public sector where we are also seeing some early winds on the European recovery fund side.
So that's supportive.
And finally, we will have of course Vodafone business. Good performance this quarter strong demand, particularly I would say in Germany at the moment from the public sector, where we are also seeing some early wins on the European recovery funds.
Syed.
Speaker 5: Stepping back, Germany, a good market for us, but not just on service revenue, net of all this, but also as you know from an EBITDA perspective, we are continuing to outperform on the synergy delivery, so good operational leverage also going forward.
Stepping back Germany, a good market for us, but not just on service revenue net of all this but also as you know from an EBITDA perspective, we're continuing to outperform on the synergy delivery. So good operational leverage also going forward.
Thank you.
Yeah.
Thank you very much our next question today comes from Akhil.
Speaker 2: Our next question today comes from Akhil Dattani from JP Morgan. Akhil, please go ahead.
Honey from J P. Morgan. Please go ahead.
Hi morning, Nick morning, Margarita Thanks for taking my question.
Speaker 6: Hi, morning, Nick. Morning, moderator. Thanks for taking the question. I just wanted to ask a question on the broader operational outlook in terms of the revenue trends going forward. And three small parts, if I may. I mean, the first is if you could just give us some color on the puts and takes for Q4 and beyond, just so we understand how you're thinking about revenue.
I just wanted to ask a question on the broader operational outlook.
Some of the revenue trends going forward.
Recently, possibly if I may the first is if you could just give us some color on the puts and takes for Q4 and beyond just so we understand how youre thinking about revenues.
Speaker 6: The second is it's obviously great to see that all the UK telcos seem to be pushing through pricing. You've obviously talked about beyond the UK, so we're going to get an update on that. And the third thing I guess it's kind of linked to the UK pieces, but there's a lot of debate in the market at the moment around real versus nominal growth, given where inflation is. So given your guidance of growth in Europe .
Secondly, it's obviously great to see the all the U K telco seem to be pushing.
Pushing through pricing, you've obviously talked about beyond the U K. So if we could get an update on that.
Third thing I guess is kind of linked to the UK pieces.
There is a lot of debate in the market at the moment around real versus nominal growth given where inflation is so giving you a guidance of growth in Europe .
Speaker 6: I'm sure you have ambitions for both to continue improving, but could you just give us some thoughts around that real vested nominal question and then if it's to Zell, put it into us. Thanks a lot.
I am sure you have ambitions for growth to continue improving but could you just give us some thoughts around that wheel versus nominal question that this is all putting to us. Thanks a lot.
Yeah.
Speaker 5: I'll take the three in turn. So starting with near-term service revenue performance into Q4, I would say see it as very small puts and takes in the near term.
I think the thing into also starting with a near term.
Service revenue performance into Q4, I would say.
Does that a small puts and takes in the near term.
So I look at the markets I would say in Europe , you will as Spain, which will add a new one.
Speaker 5: If I look at the markets, I would say in Europe you will have Spain, which will have a new MTR reduction and also will laugh.
MTR reduction and also will lap.
Speaker 5: the price increases that we did in November last year for the first time for a full quarter. So that will be a drag. On the other end, you are seeing the UK results continuing to accelerate with very strong commercial momentum, so that will be supportive. And then beyond
The pricing changes that we did in November last year for the first time for a full quarter. So that would be a drag on the other end you have seen the UK results continuing to accelerate with very strong commercial momentum that would be supportive.
Beyond Europe .
Speaker 5: In South Africa, we are lapping the peak quarter last year in terms of service revenue growth. You had the COVID measures and then you had the healthy roaming, so a little bit of puts and takes in the near term into Q4, but nothing particularly significant overall.
In South Africa, we are lapping the peak quarter last year in terms of service revenue growth you had the Covid measures and then you add.
Since it all means so a little bit of puts and takes in the near term into into Q4, but nothing particularly significant overall.
Speaker 5: As maybe you are asking about CPI plus.
Maybe you're asking about.
CPI plus.
Speaker 5: pricing mechanism and how all this is going to play into next year. Trying to summarize on the pricing mechanism we're pleased with the progress. We have embedded into our contracts in five markets now the CPI plus mechanism and as we get into calendar 22 clearly the time has come to activate the mechanism. We will see two markets within these five that are going to go live first. UK and
Pricing mechanism in our this is going to play into next year.
Trying to summarize on the pricing mechanism, we're pleased with the progress we have.
That debt into our contracts in five markets now the CPI plus mechanism and as we get into calendar 'twenty. Two clearly the time has come to activate the mechanism.
We will seek to market within this size that are going to go live first.
UK and Ireland.
Speaker 5: and then you should expect more to follow.
And then you should expect more to follow this pricing dynamic unexpected to support service revenue.
Speaker 5: pricing dynamic are expected to support service revenue into FY 23.
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Slide 23, maybe more broadly you are asking what sort of NGL growth, we will have in FY 'twenty three and again a few puts and takes we're seeking now to do our target setting now in the in the coming weeks, but if they can serve the.
Speaker 5: maybe more broadly you are asking what sort of real growth we will have in FY23. Again, a few puts and takes. We are sitting now to do our target setting now in the coming weeks, but if I can share the outlook elements.
The outlook.
Men.
Speaker 5: of growth in Europe into next year, particularly. I'd say if I can get out of the way once again, what is a little bit technical, we will continue to have roaming tailwind.
Growth in Europe .
Two next year, particularly I would say if I can get out of the way once again, what is a little bit technical we will continue to have all maintained wins offsetting MTR headwinds exactly like this year. We will then as of course, the lapping of the Mds revenues in Italy.
Speaker 5: of setting NPR headwinds, exactly like this year. We will then have, of course, the lapping of the MD&O revenues in Italy, starting from Q2, so another, I would say, more technical.
Starting from Q2, so I know that I would say more technical drag, but from a business perspective, we will have the support of the pricing actions. We have just described.
Speaker 5: drag but from a business perspective we will have the support of the pricing actions we have just described.
Speaker 5: We will see the fact that commercial momentum this year was affected by COVID, the discussion we have had just now in Germany on fixed, but equally recovery mobile. And then the final element, which I think is really important for next year, is the European
We'll see.
Doctor commercial momentum this year was affected by Covid. The discussion we've had just.
Now in in Germany on fixed but equally they call. It in mobile and then the final element, which I think is really important for next year is the European recovery funds. This win stopped impact revenues materially.
Speaker 5: This will start impact revenues materially now, and we are very pleased with the progress, particularly Italy, Spain, but early signs also in Germany. And I hope we will have a chance to explain this in a little bit more detail later.
Now and we are very pleased with the progress, particularly in Italy, Spain, but early signs also in Germany, and I Hope, we will have a chance to explain this in a little bit more detail later.
Speaker 7: Net of all these puts and takes, technical and non-technical, I really see us as well set to continue to deliver sustainable growth in Europe and Africa into FY23.
Net of all these puts and takes technical and nontechnical I really see us as well set to continue to deliver sustainable growth in Europe and Africa.
Into FY 'twenty.
Great. Thanks, a lot.
Thank you very much.
Speaker 2: Our next question today comes from Morris Patrick from Bargley's. Morris, please go ahead.
Our next question today comes from Maurice Patrick from Barclays.
Please go ahead.
Hey, guys, you hopefully containment signed.
Speaker 8: Hi there, guys. Hopefully you can hear me fine. I can use the unmute function. Maybe a question on consolidation related to feedback you've had from the various stakeholders. When you made the pitch in November , Nick, around the need for consolidation, you talked about it. It seemed as though you were raising that agenda for more than just us in the audience of investors and analysts.
The mute function.
A question on consolidation related to feedback you've had from the various stakeholders when.
When you made the pitch.
Nick around the need for consolidation you talked about it seemed as though you were raising the agenda was to more than just the audience of investors and analysts I'm sure you've had a chance to float.
Speaker 8: I'm sure you had a challenge to float your views with people like the EC and Margaret Fishdog at Etel. Just curious if the hell those conversations have gone, what kind of feedback you've had if you think that a challenge we might see some sort of positive noise. Is it ahead of the result of the EC appeal? I think it's due this format around the Hattro 2 merger. So like latest thoughts in terms of the feedback you've had on the conversations around potential M&A.
Youll views with people like to see them.
Could you talk at all just curious as to how those conversations have gone what kind of feedback you've had if you think that the challenge we might see some sort of positive noise is ahead of the.
The results of the ECA appeal I think is due this summer and I'm not sure too much. So latest thoughts in terms of feedback you've had on the conversations around potential M&A.
Yes.
Speaker 1: Yeah, what I would say is, you know, though we talked about it in November , this has really been a conversation that's been building, I'd say, over the COVID period, so over the two year period, because that's when the conversation has really changed in terms of the dynamic.
What I would say is.
We talked about it in November this has really been a conversation that's been building I'd say over the Covid period. So over the two year period, because that's when the conversation has really changed in terms of that dynamic.
Speaker 1: You know, we, I think, did a very professional respond.
I think did a very professional response to COVID-19 with a five point plan that was recognized by governments started to proactively engage at different levels than we have ever experienced before I think I've said previously our that multiple calls with governments in terms of our response.
Speaker 1: to COVID with our five-point plan that was recognised by government.
Speaker 1: They started a proactive engage at a different level than we have ever experienced before. I think I said previously, I don't have multiple calls with government.
Speaker 1: in terms of our response how we could support what they needed to do.
Or we could support they needed to do and I think it opened up a different stream of discussion in the different stream was they wanted more critical national infrastructure next generation connectivity expanded as fast as possible.
Speaker 1: And I think it opened up a different stream of discussion and the different stream was.
Speaker 1: They wanted more critical national infrastructure, next generation connectivity expanded as fast as possible. What could they do to help facilitate that? And that gave us an opportunity to talk about the low returns in the sector. And if they want to attract investment, we have to improve the returns.
They do to help facilitate that and that gave us an opportunity to talk about the low returns in the sector and if they want to attract investment we have to improve the returns to an acceptable level and I went through those arguments about the fact that we are a highly fragmented sector.
Speaker 1: to an acceptable level and they went through those eyes.
Speaker 1: about the fact that we are a highly fragmented sector across Europe over 100 players.
Across Europe over 100 players use three China three all the arguments you've heard before but what it did was it allowed us to have a little bit of a framework of policies that we've engaged in I would say for the last two years and it was around spectrum and I think <unk> seen a number of.
Speaker 1: US 3 China 3 all the arguments you've heard before.
Speaker 1: But what it did was it allowed us to have a little bit of a framework of policies that we've engaged in, I would say, for the last two years. And it was around spectrum. And I think you've seen a number of good progress on spectrum. Frankly, all of the options, if I put Portugal to one side, have been good outcomes, whether it's Spain, Greece.
Good progress on spectrum, frankly, all of the auctions, if I put Spain, Portugal, one side has been good outcomes, whether it's Spain, Greece.
Speaker 1: UK in terms of just lowering the cost and understanding we need a certain size of spectrum and Spain going to that unprecedented level of doubling the duration of 40. We also talked about specific taxes for the sector. Spain again responded by lowering taxation on the sector.
U K in terms of just lowering the cost and understanding we need a certain size the spectrum and Spain going to the unprecedented level of double in the generation of 40, we also talked about specific taxes for the sector, Spain again responded by lowering taxation on the sector.
Speaker 1: And then the third was how do you focus the EU recovery funds on the goal of accelerating digitalization in Europe ? How do we stay competitive globally?
And then the third was how do you focus the EU recovery funds on the goal of accelerating digitalization in Europe , how do we stay competitive globally.
Speaker 1: And we really influence the focus that beyond SME's, because SME's in Europe are way down in the level of digitization on the business model versus others. The second was health, because the health industry needs to be modernized and digitized, and then public sector transformation. So we've been very targeted, very thoughtful about those engagements. And within that, the final one was consolidation.
We really influenced the focus will be on smedes because knees in Europe .
Way down in the level of digitalization on the business model versus others.
Second was health because the health industry needs to be modernized and visits.
And then public public.
Public sector transformation. So we've been very targeted very thoughtful about those engagements and within that.
And final one was consolidation.
Speaker 1: And my argument is, this is nothing to do with competition pricing, it's to do with we need industrial scale locally on top of our regional local scale. And if we don't have that, we don't earn the acceptable returns. So the case has to be by
My argument is this is nothing to do with competition pricing. It has to do with we need industrial scale locally on top of our regional local scale and if we don't have that we don't earn it.
Or returns.
The case has to be by country.
Speaker 1: And I think that has really resonated with every member state politician that I've engaged with, that he understands the logic. They look at marketplaces, let me pick UK, Spain.
And I think that has really resonated with every member state politicians I've engaged with the I understand the logic.
Look at marketplaces, let me pick U K, Spain.
Speaker 1: Italy and I would argue now Portugal that's now added two new entrance when they really meant to add one
And I would argue now Portugal, that's now added two new entrants when they really menswear one zone.
Speaker 1: as examples where you've got four M&O.
<unk>, where you've got for <unk>.
Speaker 1: and very big scaled envy and no, so it's already hyper-compensative and all we're talking about is going from four infrastructures down to three infrastructures to have the right economic.
A very big scaled and so it's already hyper competitive and all we're talking about is going from four infrastructures down to three infrastructure is to have the right economics.
Speaker 1: to earn a return at the pricing levels you see the number at the mark.
And our return at the pricing levels, you see the number of the markets.
Speaker 1: So what I would say is I think that the argument is not about, do we not want competition, we want competition, we are the challenger against the incumbents. So we're pro-composition, but what we're saying is please.
What I would say is I think that the argument is not about do we not want competition, we won't competition.
We are the challenger against the incumbents. So we are pro competition, but what we're saying is please.
Balance a new balance of competition versus encouraging investment going forward and I think that that is a very positive narrative for politicians and full Brussels of course, it will always come down to the fact pattern being presented for that country, but what I'd say is I think.
Speaker 1: balance, a new balance of competition versus encouraging investment going forward. I think that that is a very positive narrative for politicians and for Brussels. Of course, it will always come down to the fact that I'm being presented for that country. I think the countries will lean into the agenda and the sector is leaning into that agenda. And therefore, I think it's not about we need room changes. This is not about.
The countries will lean into the agenda and the sector is leaning into that agenda, and therefore I think it's about we need room changes. This is not about rule changes.
Speaker 1: Commissioner Vestigo has already said that she had enough flexibility depending on the situation of the market. And I think that there's a new reality now within the market, but the new economic context that allows a different judgment moving forward.
<unk> already said that she has enough flexibility depending on the situation of the market and I think there's a new reality now within the marketplace, a new economic context.
It allows a different judgment moving toward.
Thank you.
Thanks, Dan.
Thank you very much Morris.
Speaker 2: Thank you very much Morris. Next question today comes from Andrew Lee from Golden Sachs. Andrew please go ahead.
Our next question today comes from Andrew Lee from Goldman Sachs.
Please go ahead.
Speaker 9: Good morning guys, thanks for the contents of Hunter on the consolidation. It's probably you can go right now. Just had a couple of questions on to other kind of changing events that are going on in terms of operations. So Margaret, you hinted at the European Recovery Fund and maybe if you give us a bit more detail about firstly the timing and the impact of those recovery funds.
Good morning, guys, thanks for that competitive zone.
Consolidation was inspiring day right now.
A couple of questions on two other changing events.
What's going on in terms in terms of operations.
Great you hinted at the European recovery funds, and maybe you could give us a bit more detail about especially the timing and the <unk>.
And those recovery funds.
It's quite hard for us to get a sense of the materiality there.
Speaker 9: It's quite hard for us to get a sense of the materiality there. And then just secondly, on the cost side, I don't know if this is a revenue reporting quarter, but across your peers, we've seen quite a few delayed cost efficiencies and some misses on our text guidance over the past couple of days. I wonder if you could just give us an update on how your cost controls give it going, given cost inflation. And is anything changed in terms of the scope for cost efficiencies in the longer term from your perspective?
And then just secondly on the cost side I noticed that revenue reporting quarter, but across your page we've seen quite a few delayed cost efficiencies and some misses on opex guidance over the past couple of days I Wonder if you could just give us an update on how your cost controls going given cost inflation.
And has anything changed in terms of scope for cost efficiencies in the longer term from your perspective. Thank you.
Yeah.
European recovery funds III IV.
Speaker 5: European recovery fund first, we have really worked a lot.
We worked a lot I would say on this both in terms of investing in our digital services offer to make the most of the opportunity as well as working with the governments across Europe to ensure that.
Speaker 7: I would say on this, both in terms of, as you know, investing in our digital services offer to make the most of the opportunity, as well as working with the governments across Europe .
Speaker 7: to ensure that digitization of businesses was a key part of the agenda. So I need to say it's good to see now two major programs kicked off in two of our biggest markets.
Digitization of businesses was a key part of the NJ <unk> necessarily I need to say, it's good to see now two major programs kicked off in two of our biggest markets.
Speaker 7: We have Italy and Spain now going live in this week.
Italy, and Spain now going live.
It is weeks so let me just describe those two programs in Spain first.
Speaker 7: So let me just describe those two programs in Spain first.
Speaker 7: 3 billion have been allocated to SME digitization and of these also billion for the companies between 10 and 49 employees are going live effectively now and these will be subsidizing digital tool key.
<unk> has been allocated to SME Digitization and of these also billion sort of of companies between 10, and 49 employees are going live effectively now and these will be subsidizing digital tool kits for these for these companies and the money will be.
Speaker 7: for these companies and the money will be effectively spent over the coming year. More tranches, so also billion now, more tranches for the full 3 billion will be distributed in the coming year and beyond.
Effectively spent over the coming year more tranches. So also be you know more tranches for the full 10 billion will be distributed in the coming year and beyond.
Speaker 7: So in terms of how this impacts us and our revenue performance in Spain, we will be a key aggregator of digital services. So we will have two kits at the ready for our customers to effectively subscribe through the website on this model. And we should, we are not going to be the only players. There will be other telcos and also other players outside telcos, but...
So in terms of how this impacts us.
Our revenue performance in Spain, we will be a key aggregator of digital services. So we will have to keep at the ready for our customers to effectively subscribe through the website on this model and we should we're.
We are not going to be the only place that would deal with the telcos and also their players outside telcos, but.
Speaker 7: because of how we are positioned in terms of our markets in business in Spain, a term of revenues are business in Spain as well as in Italy and we have really strong assets, we are gaining share. We think that also in terms of these allowances, we will have a good share in our numbers going forward.
Because of how we are positioned in terms of our markets and business in Spain, a third of our revenues our business in Spain as well as in Italy, and we have really strong gas since we are gaining share we think that also.
In terms of these allowances, we will have a good share in our numbers going for.
Speaker 7: Italy, this probably in terms of P&L, we start flowing more in terms of our own results around the summer. The program that is kicked off now is also for SMEs, but it's focused on connectivity vouchers.
Italy.
This probably in terms of P&L, we start throwing more in terms of our own results around the summer. The program that has kicked off now is also for Smes, but it's focused on quoting activity vouchers, so pure connectivity not broader digital.
Speaker 7: So pure connectivity, not broader digital. 600 million again being distributed over two years in this case and again, well positioned for the phone to get advantage of that. And then finally, we start to see Germany moving on a different level. We're not talking vouchers there. We're talking about public sector tender.
$600 million.
Again being distributed over two yes in this case and again well positioned therefore to get advantage of that and then finally, we start to see Germany moving on a different level, we're not talking about such that we are talking about public sector fund there.
Speaker 7: on 5G digital services and the like in which we are also starting to see some wins for Vodafone.
One five.
Digital services and the like in which we are also starting to see some wins.
For the fall.
Speaker 1: So I think you should expect this to be material into FY23 for us. And again, place to our strength and the investments we have made in business. Sorry, just before you go on to the second. I think one build I would say is that being really the only genuine pan-European player.
I think you should expect this to be material into FY 'twenty three for us and again plays to our strength in the investments we have made in business I'm sorry, just before you go into the second.
I think one build I would say is.
That being really the only genuine pan European player.
A lot of the governments are asking us what are other countries doing what's best practice, what's accelerating so the mechanisms of how they do the schemes, we're really facilitating a lot across the countries.
Speaker 1: A lot of the governments are asking us what are other countries doing, what's best practice, what's accelerating. So the mechanisms of how they do these schemes, we are really facilitating a lot across the countries. We love the scheme in Spain. Look, I frankly, I give Spain government full credit for how they are. They are executing this because the mechanism is really good to get the funds to speed quickly on the services and that's something that we are keen to replicate in a number rather than market. And we're seeing traction on that. So again, it's another reason to have a slightly higher dialogue.
The scheme in Spain, I, frankly, I guess, Spain government full credit by how they are they are executing this because the mechanism is really good the funds to smedes as quickly on the services and that's something that we are keen to replicate in a number of markets and we're seeing traction on that.
It's another reason to have a slightly higher dialogue.
Speaker 1: with the various policy makers. Sorry.
With the various.
Policy makers.
Inflation in Opex.
Speaker 7: inflation and OKX moving from revenue to cost. I think it's a really good point that you're raising here because we are seeing as everyone else in the industry and beyond inflationary pressure building into next year, which are stronger than what we would have seen in a normal year. And probably to bring this to life, I'd say the key examples for Vodafone would be on one end employment cost.
<unk> from revenues.
Revenues to cost I think it really.
Good point that you're raising.
Because we have seen as everyone else in the industry and beyond inflationary pressure building into next.
<unk>, which is stronger than what we would have seen in a normal year and probably to bring this to life I would say the key examples for Vodafone would be on one end employment costs, it's 15% of our service revenue and clearly we are seeing pressure for increases there and then the second aspect is everyone.
Speaker 7: It's 15% of our service revenue and clearly we are seeing pressures for increases there. And then the second aspect of everyone else is energy to actually give you a sense of scale. If energy prices were to remain where they are today.
Els is energy.
To actually give you a sense of scale if energy prices were to remain where they are today.
Speaker 5: just for Europe in order for next year, we are talking about the cost increase of 150 million. And this is with our, with most of the year being aged. So we are talking about an impact, which is part of the second half of the year. So it is material.
Just for Europe in broader for next year, we're talking about a cost increase of $150 million and this is with our.
Most of the year being edge. So we're talking about an impact which is part of the second half of the year. So it is material.
Speaker 5: As you know, we are starting from a really strong position on cost management. We have talked in November about the Vodafone continuing to progress in efficiencies, top quartile moving to the top of the top quartile. So we are in a good position there and we also are really working hard to
As you know we have a we're starting from a really strong position on all cost management we.
We have talked in November about Vodafone continuing to progress and efficiencies top quartile moving to the top of the top quartile. So so we are in a good position there and we also are really working hard too.
Push further our key cost efficiencies, which are always the same essentially as you know very well we are leveraging our scale to that.
Speaker 7: push further our key cost efficiency levers, which are always the same one, essentially, as you know very well, we are leveraging our scale to drive shared service operations and then digitize these operations at speed.
I've shared service operations and then digitize these operations at speed.
Speaker 7: The big driver of further efficiencies coming into next year is going to be the transformation we've just done this year in technology. You know, we have integrated all our European teams in technology and therefore we can expect an acceleration of efficiencies from that. But equally, it's going to be a more challenging year than usual in terms of the pressure and the end wins for inflation against that. You
Big driver of further efficiencies coming into next year is going to be the transformation. We have just gone this year in technology, we have integrated all our European teams in technology and therefore, we can expect an acceleration of efficiencies from docs, but equally it's going to be a more challenging year.
The unusual in terms of the pressure and the headwinds for inflation against that now.
Speaker 5: We are sitting down in the coming weeks to actually plan, as I was saying earlier, next year. So what I can tell you today is that, first of all, we are well on course for the reminder of the year. You remember we have to deliver another 200 million net op-ex reduction in FY22, fully on track to deliver this. It will position us as having cut net to the bottom line over 16% of European op-ex.
We are sitting down in the coming weeks to actually plan as I was saying earlier next year. So what I can tell you today is that first of all we are well on course for the remainder of the year. You remember we have plenty of another 300 million net opex reduction in FY 'twenty two.
<unk> fully on track to deliver this it will position us as having cost net to the bottom line over 16% of European Opex. So quite a result and of course supporting.
Speaker 7: So quite a result and of course supporting us confirming that we will close a bit that in line with Alfon Gaidance at the upper end of our original target range. Beyond this year, we will do the final numbers in the coming week and of course update you in May. What I can say now is that we continue to see us.
As we see it means that we will close EBITDA in line with our fund guidance at the upper end of our original target range.
<unk>.
DCF, we will do the final numbers in the coming week and of course update you in May.
What I can see Ah I can say now is that we continue to see us.
Speaker 7: well positioned to deliver the continued step up that we have put in our midterm ambition in terms of continues to grow continuously growing return. But the precise element of that, we will share in may as part of our guidance.
Well positioned to deliver.
Continued step up.
That we have put in our midterm ambition in terms of continuing is continuously growing data, but the precise elements of that we will share in may as part of our guidance.
Thank you.
Thank you very much Andrew.
Speaker 2: Our next question today comes from Jerry Delis from Jeffries. Jerry, please go ahead.
Our next question today comes from Jerry Dellis from Jeffries Jerry. Please go ahead.
Yes. Good morning. Thank you very much for taking my question I had a question related to Germany. Please.
Speaker 10: Yes, good morning. Thank you very much for taking my question. I had a question related to Germany, please. You mentioned three months ago the possibility of investing in fiber to housing associations, and that could be a useful mechanism for maintaining the collective contract arrangement into the medium term.
You mentioned three months ago, the possibility of investing in fiber to housing associations and that could be a useful mechanism for maintaining the collective contracts arrangement into the medium term, but just be interested in your sort of thoughts on that now that you're sort of towards some early insights to the impac.
Speaker 10: just be interested in your thoughts on that. Now that you're armed with some early insights of the impact of the German telecom law in other areas. And you mentioned that one of the issues that you've been feeling in broadband this quarter.
Are the sort of German telecom low in other areas and you mentioned.
One of the issues that you've been sort of ceiling in broadband this quarter is related to the it systems.
Speaker 10: is related to the IT systems. And there have been some glitches as it seems to me in terms of customer attention.
Some glitches as it seems to me in terms of customer retention.
Speaker 10: I don't quite understand what it is about your IT systems that have sort of created these challenges. I'd just be grateful if you could explain that briefly please.
I don't quite understand what it is about your it system instead of sort of created these challenges. So just be grateful if you could explain that briefly please thank you.
Yes, Jeremy maybe maybe I'll start with the latter and then sort of format. So.
Speaker 1: Yeah, Jerry, maybe I'll talk with the latter and then talk to the former. So it's very simple. When I say that our team did a conservative process.
It's very simple when I say that our team did a conservative process.
Speaker 1: It was a painful process for the customer and it requires customer confirmation.
It was a painful process for the customer.
It requires customer confirmation.
Speaker 1: And we were requiring the customer to come from back in an email to us.
And we were requiring the customer to come back in an email to us.
Speaker 1: And that is a painful process because you imagine we've gone through the whole call.
That is a painful process because you imagine we've gone through the whole coal.
Speaker 1: We've had this transaction and then we send them a link to then confirm that was, I mean, it's too many steps, whereas others have done things like record the conversation, send the file as confirmation. So there's many other ways that you could be less conservative in your application of the customer confirming back to us.
We've had the transaction and then we send them a link to then confirm backs was I mean, it's too many steps, whereas others have done things like record the conversations tend to fall as confirmation. So there's many other ways that you could be less conservative in your application of the customer confirming.
Back to us.
Speaker 1: So that was one part and then the second part was, I'd say our IT systems, the execution itself was not as let's say stable as we would have liked. And therefore,
So that was one part and then the second part was I would say our IC systems. The execution itself was no.
Nice stable as we would have liked.
And therefore, we had challenges so I'd say, we are improving the customer journey, but improving the customer journey you after them rewrite the code for the journey.
Speaker 1: So I'd say we're improving the customer journey, but improving the customer journey, you have to then rewrite the IT code.
Speaker 1: for the journey and that is, you know, in the big systems of tail codes that takes time. So, look, it was our management. I am sure the other competitors will not mention it. And I'm saying it's our execution. We understand the issue and we are rewriting the code, we are rewriting the journeys, we know what we need to do, the team are on it, but it just takes a bit of time through two four.
In the big systems of Telcos that takes time. So so it was a management I am sure. The other competitors will not mention it.
And I'm, sorry, and it's our execution, we understand the issue and we are revising the code. We are rewriting the journey, we know what we need to do the team are on it but it just takes a bit of time through Q4.
Speaker 1: I'd say on the former question, if I understood it correctly, you know, I commented about the fact that we are engaging with housing associations.
I'd say on the former question if I understood it correctly.
Commented about the fact that we are engaging with housing associations.
Speaker 1: At the time of November , around about our engagement was just under 50% of the housing associations. Clearly we've had the festive periods, COVID, various other things. So I wouldn't say it's overly advanced to now, but by March, the end of March, we are aiming to have contacted two thirds of the housing association.
At the time of November around about our engagement was just under 50% of the housing associations.
Clearly we've had the festive period.
And at various other things so I wouldn't say, it's overly advanced to now but by marks the end of March we are aiming to have contacted two thirds if the housing Association.
So I think we can do a lot more color when we get to it.
Speaker 1: So I think we can give a lot more colour when we get to my...
It still is really into three buckets, which is first of all the housing associations that could be interested and have been filed by accelerated to the building, but are not interested in changing the wiring in the building until they do a refurbishment and that is normally a five to 10 years.
Speaker 1: It still is really into three buckets, which is, first of all, the health and associations that could be interested in having fiber accelerated to the building, but are not interested in changing the wiring in the building until they do a refurbishment, and that is normally a five to 10 year cycle.
So there is another group of customers, saying just tell us about the upgrades of the cable network because we've done one disruption either in the building or outside the building and then the third all saying yes.
This isn't even on the register its not something Thats important.
Speaker 1: when we understand that to the first bucket, that is the first bucket where we say, okay, if it's feasible or not.
We understand that so the first bucket that is the first bucket, where we say okay. If it suddenly.
<unk>.
Speaker 1: We may then say we do want to accelerate fibre to the building in so some zones, area, etc. And if it was sizable enough, all we were pointing out was there's plenty of infra funds sitting out there that would love to co-invest in that model we would do it off-talented.
We may then say, we do want to ask overwrites fiber to the building in some zones area or et cetera, and if it was sizable enough. All we were pointing out was this plenty of infra funds sitting out there that would love to co invest in that model, we would do it off balance sheet.
Got it okay. Thank you.
Right.
Speaker 2: Thank you very much, Jerry. Next question today comes from Karl Morddoch Smith from Behrnberg. Karl, please go ahead.
Thank you very much Gerry.
Our next question today comes from Kalmar Dock Smith from their inbox.
Please go ahead.
Okay.
Good morning, guys.
Speaker 8: Morning, ghosts and thanks for the question. I just wanted to kind of ask on the CPI plus dynamic. Can you remind us who the other three, which the other three countries are where you've embedded CPI plus dynamics? And then kind of as we move forward in the next few months, one of the very interesting things I suppose.
I just want to kind of.
On the CPI plus.
Dynamic.
Can you remind us of which the other three countries on what you've embedded CPI plus dynamics.
As we move forward in the next few months on a very interesting thing plus the prices.
Speaker 8: how much of these products increases will stick, versus how much will have to be reinvested into retention and acquisition. So it's just wondering if you talk a bit to that in terms of your assumptions and also kind of have you seen anything in the market as yet, obviously we've started getting the communications happening and the increases happening in the UK. So are you seeing?
How much of these price increases will stick versus how much will have to be reinvested into retention.
Acquisition. So I was just wondering if you could talk a bit to that in terms of your assumptions and also have you seen anything in the markets as yet obviously, we start to get into the communications happening of these.
Increases happening in the UK. So are you seeing any changes to the kind of special offers in the market. Thank you.
Speaker 1: Yeah, well, maybe I just touched on the UK because it's sort of like a live example, being executed now, and maybe Margarita touched on ours. Just in terms of the UK, clearly BTE, Virgin, three have all communicated already to the customer. So those communications have gone out. Our communication is planned for...
Maybe I'll just touch on the U K, because it's sort of like a live example, being executed sit down and maybe I'm going to touch on is just in terms of the U K.
Clearly BCE Virgin.
Three of all communicated already to the customer.
So those communications have gone out and communication is planned for March so that's when we'll be engaging with no change.
Our plans in terms of execution.
Clearly when you think about the euro.
Youre really allude into what we call the front book back book dynamics, Yes, So you'll re pricing the back book.
On a base and therefore, what could on the mine is potentially from promos.
What I would say is just bearing mind.
The U K as an example.
Third of that commercial activity that we do in any given month.
Only a third of it is actually new customers coming into Vodafone I had actually two thirds of it is us just doing renewals on the base.
So that renewals process has that formula within it okay.
The third yes, it could be susceptible to promos, we have to see how the market develops what I would say is we're coming out of.
Friday.
We're coming out of January .
We are seeing in a number of competitors throughout the U K price increases.
Because of the actions taken on the back book, So what I'm, saying is it is a market dynamic.
You have to move from pricing sort of in line with your back book dependent on where you are if they are empowered to you or whatever.
Operators are well aware of that.
I have to say our evolves, it's not something we control it's a market dynamic.
Obviously, we want a healthy marketplace and we need to improve returns I think that's why the UK market. The players put through the changes and we'll see how it evolves.
In terms of perimeter across Europe at the moment, we have live UK, Ireland, Portugal, Hungary and Albania.
And we cannot comment on specific markets, but we have an order major markets, which are.
We are working on with a mechanism, which would be a bit broader than CPI plus.
But always.
Always in mind that the same I would say logic, which we think is the necessary logic for the industry.
As we see the need to invest more and also as we discussed earlier with just the fact that our own cost base is increasing in terms of how this will feed into the 70 <unk> revenue trends into FY 'twenty three.
Back to what we were discussing earlier, we will continue to add on pricing the traditional pressure.
We have seen also this year, particularly in southern Europe in terms of items competitiveness in consumer, particularly at the low end, we don't expect this to change and whether that is market stands.
These movements will give us a chance to stop.
Working in the order direction again, something the industry needs.
The Activations UK Ireland growing lies in April as far as the orders are concerned.
Again also in market consideration, so it's difficult for us today to sort of tell you a precise scheduling, but definitely right approach for the industry that we havent evening.
Just a final bill to Margaret's point.
It may be that incumbent chooses not to do a CPI plus type model and do some other form of price increase in a different way.
And if that's case.
Okay.
Going in a healthy direction. That's all we care about is how do we improve and produce sustainable returns.
A healthy sector.
That's great thanks very much.
Thank you very much Carl.
Our next question today comes from Robert Grindle from Deutsche Bank.
Robert Please go ahead.
Good morning, Thank you.
Interesting is going on in your mobile data traffic growth, which has been easing post the early pandemic, but slowed more materially in Q3 absolute petabytes declined sequentially in Europe , what we're just seeing less working from home here.
MSR growth is accelerating so prices must be improving constant volumes. So I think so that should help capital intensity.
Are you seeing less congestion in the network.
Or less pressure on volume related capex, leaving more headroom for new services.
Sticking with the mobile network I see that Johan and team are getting into Openreach open Lam chip architecture design is that something beyond the specification and testing or is it just about improving the ecosystem for open mind. Thanks.
Our total lesser in central yes, any questions if I start on the traffic trends are up.
Absolutely too we have seen a moderation of the traffic growth upselling mobile as well as in fixed but I think you said that maybe away from.
The sort of quarter on quarter elements that includes a degree of seasonality I would say the best way for me to look at it is post COVID-19 .
And the compound of the last two years.
Hi.
And if you look at it in this way accumulating Q3. This year in Q3 last year, you would see that traffic at least for us.
In Europe , and mobile has increased about 80% so it still is around.
Run rate of 40%.
On average per year year on year, so not very different from the run rates, we were having before it should just fluke and similar reasoning for fixed which has been up 70% on the 20th accumulated in Europe .
If you look just at this particular quarter than you have certain dynamics in terms of how the various COVID-19 lockdowns in not restrictions played and in particular, just on Q3 versus last year, it's a real slowdown because last year, we had peaks in variable.
Usage, driven by the sort of the key smashed lockdowns of 'twenty 'twenty.
2020.
That impacted traffic all in all I would say also linking into your sort of capex.
So the implication I don't see a major major movements there.
And just on open Ryan.
It is fair to say that.
We really believe in open Brian we have been doing a lot of front running on the thinking of value from Ryan and what we're trying to do is drive a bigger and bigger ecosystem around open Ryan. We think that this is important for diverse the resilience of networks moving forward, if we're going to have.
And fewer vendors, we need to find another route to create.
Sort of more diversity and so I think we're making very good progress you know that we signed an mou with the other major European players.
In terms of development of overran the standards defenders, we're engaging with.
Had a meeting with a number of them because it last week or the week before this was a topic on the agenda in terms of the next steps of what we've been doing that actually we've seen a demo of open Ryan and making sure that we had full interoperability between the components and the operators. So in other words like a shed ran.
Execution.
Im very pleased with how it's progressing we've also just opened in Malaga. This Monday, a new R&D center that is 600 software engineer and specialist salespeople and within that there's 50 people dedicated to open ran development. So that's where we are.
Century, and we're also going to do.
In Dresden as well. So so we are we are trying to provide.
Places, where new vendors new software.
Providers can come and engage with the industry effectively on open ran.
And we've just done the first ever commercial launch in the U K. So the first site has evolved just in case you want to go there for lunch.
And this is part of the first commercial launch in Europe with 2500 sites. So I would say we're pushing ahead.
Very actively we're trialing interoperability in Germany, and Ireland and we're also.
Trailing down in Africa as well.
Okay.
Yeah.
Okay.
Robert.
What I would like to see more European players.
Furthermore, it is all of the U S people involved the Hyperion and what I was encouraging with my counterpart and in Brussels and member States is we need to develop a European ecosystem goes back to my point about we have an opportunity in the digital decade of reassessing.
Europe can produce and I am very passionate and trying to create that alternative ecosystem as well.
That's a long one hour presentation for another day.
Okay. Thank you very much.
We have time for one more question today.
And that's coming from Jacob <unk> from Credit Suisse. Jacob. Please go ahead.
Great. Thanks for fitting me in.
Consolidations. So it may be a very short answer in which case, we should be fine in terms of time.
I just wanted to follow up on your <unk>.
What youre, saying.
Response to <unk> question earlier around engagement with particularly antitrust authorities as opposed to just with sort of with broader authorities.
Talked about how policymakers understand the importance of in market consolidation.
But just listening to some of the more recent comments from Investor day in particular.
She is still saying that competition drives investment not consolidation driving investment.
And also we've seen in the UK.
With the sort of reaction from the CMA to the stomach such deal that.
I think it's fair to say, it's not a walk in the park getting a deal over the line. So could you maybe comment on spin.
Specifically with antitrust authorities are you still confident that they too have shifted there.
Conium stance or is it just sort of politicians more broadly.
And also if some of these various reported transactions to sort of get to that stage do you think we'll see a different model of remedies from what we've seen in the past. Thank you.
Yes, let me try and.
Give some color.
I see.
Commissioner <unk> comment.
Yesterday.
My view is she is saying competition is healthy I don't disagree.
Violently agree I'm pro competition, we the composition, but theres a difference between competition and the hyper competition damages and constrained inward investment into what is critical for Europe to achieve digital decade objectives.
So what she also was saying was that there is not a magic number.
It doesn't need to be 456, there is no magic number in the U S phase III in China this rate.
There's over 100 in Europe . So I don't think a 100 is the magic number for sure.
You can decide where the three years, but what I'm, saying is that I think there's a reconsideration going on.
Re balancing I won't competition Baidu, one investment the <unk> investment was never part of the conversation before I would say is they are actively balance now. So I think there is a new balance and there is a new economic reality of where we are.
Covid <unk> pandemic.
That is all I had to stay globally competitive.
There is a lot of political pressure.
To say, we need investment we need this infrastructure to be competitive.
He is a highly competitive sector already and therefore, having industrial.
Scale is a valid argument and so to me when you talk about what are the arguments it's not pricing.
I hate the word market repair, it's not ever used by me I'm talking about industrial scale to get the economies right to make the investments, but still earn a return.
That's the central augment I know I would say from my engagement with the commissioner.
She says I hear argument of course, I will need to see the individual facts of our market.
But your argument is not invalid, if you'd like I can see the points you are registering.
So what I would say is don't see the world today is what the world was back in 2016. It has moved on.
<unk> is a new cycle with a completely different economic prices and therefore, it requires a different type of person a different consideration.
I think thats resonating just on your point of CMA I have not personally engage with them directly I think the comment they will really make it about the <unk> transaction is they were worried about a duopoly.
Yeah, I worry about GMO police and I worry about monopolies.
I agree okay, but we're not even remotely close so that scenario in any market in mobile.
Ross Europe , So to me, that's a bit of a irrelevant.
Right.
Thank you that's very helpful and so that's from visa.
Okay.
Yeah.
On that.
Let's say personal thank you for taking the time and energy to.
Spend with us.
I'm pleased with our Q3 results. We continue to have service revenue momentum. We've got three very clear operational priorities. We've got three very clear portfolio per our priorities. We are active engaged pragmatic to deliver shareholder value and I look forward to updating you.
Forward to updating you on further progress.
Moving forward so.
Okay.
Yeah.
Yeah.
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Yes.
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