Full Year 2025 Vodafone Group PLC Earnings Call - Q&A
Good morning, everyone and thank you for joining us today.
As you will have seen from our results our performance in FY 'twenty five as being in line with expectations.
But before we move to Q&A I want to provide that on based on what has driven the results. The actions we have taken and the key priorities for FY 'twenty six.
And beyond.
Two years ago, I said that was the transformational agenda.
There's around three key pillars.
So much simplicity and grow.
Whilst we still have much more to do.
Yes on Vodafone today us changed.
We have reshaped the structure of the group simplify that we operate and improved our customer experience, therefore, not only changing where we operate Baltimore crucially, how we operate.
Okay.
Looking closer at each of these three areas.
We have right sized our portfolio with the saves all Spain, and Italy, and the merger of Vodafone and three U K.
We've also taken actions in a number of areas within our investment portfolio, including the further monetization of one such star Wars, and a simpler ownership structure in India.
With these actions we have reset our capital structure strengthened our balance sheet and returned 2 billion to shareholders through buybacks.
Top of one point they'd billion of dividends over the last year.
And the first tranche of the next 2 billion buyback program is starting today.
On customers.
We have refocused the cultural Vodafone on delivering a seamless and consistent experience our customers expect.
And we have changed just two examples.
In the U K and Germany, we have achieved a number of best Evers on customer experience.
In the U K, our market, leading NPS has been driving the lowest ever levels of churn for both mobile and broadband.
And in Germany, where there is clearly more to do we've made a real step change delivering our best ever net promoter scores and housing the gap to the incumbents in the market.
At the same time, we are becoming a leaner organization.
We have actually the planned 10000 role reductions and the introduction of commercial models in our shared operations will now enable us to accelerate productivity and efficiency gains.
Financially we are a believer that transformation and then he'll transition within the adjusted free cash flow outlook communicated in May 23.
As a result of the transformation gone in the last two years, we are now well positioned to grow our adjusted free cash flow over the medium term with two thirds of our adjusted free cash flow coming from growing assets.
The remaining third is generated from Germany, which we're turning around.
Let me start with Germany.
Over the last two years, we have faced a number of challenges with the declining broadband base the massive task of implementing the <unk> transition.
And more recently heightened competition in mobile.
Against this backdrop, we have been single mindedly focused on driving a structural reset of our operations.
Centered around delivering a better service to our customers.
Two years, along with the new management team investments in our networks and customer experience.
And a company wide restructuring heading towards completion we.
We are looking at a number of positive trends in our structural and leading indicators.
Reversing the inner show decline and our customer satisfaction, we have now delivered our best net promoter scores.
With dramatic improvements across all products.
And whilst we are still far from where we want to be we're already seeing the benefits in terms of increased loyalty.
We will continue to invest in our operational transformation throughout FY 'twenty six and.
And whilst we expect market conditions to remain challenging.
Our results, we benefit from our stable customer base and from the growing contribution of the one on one customer base migrating onto our network.
But whereas Germany is our priority markets, we should not lose sight of the fact that two thirds of our adjusted free cash flow is generated across what we can call our growth footprint.
In the U K, we've had a strong performance in FY 'twenty five both in terms of Kpis on financials.
Then even stronger EBITDA growth of 8% and allow the N. P. S leader in the market across both mobile and fixed resulting in record low level of customer churn.
Looking ahead.
Our merger with tree, which will complete soon we will be uniquely positioned for EBITDA and adjusted free cash flow growth as the leaders on all dimensions in mobile and leading challenger in fixed broadband.
As you know we will also benefit from our integration with 700 million annual cost and Capex synergies and additional revenue synergies for example in SWM.
Across Africa, and York here, we have strong local positions in each market and.
And significant growth opportunities beyond core connectivity.
We will continue to grow cash flows in euros through the cycle alongside delivering good returns.
And finally, we should not forget our Vodafone investments Division and.
And its operational infrastructure and innovation businesses.
These provide the mix of dividend flows to us and the potential for value realization when appropriate.
And with that I'll pass over to Luca to discuss our financials.
Luca: Thank you very much smuggled Ito so first off.
Luca: Obviously pleased to report that we delivered our FY 'twenty sized group guidance for both EBITDA and adjusted free cash flow.
Luca: Looking forward then our guidance for slide 26, which is on a pre U K merger basis.
Luca: To start we expect to deliver continued underlying growth both for adjusted EBITDA and adjusted free cash flow.
Luca: We expect adjusted EBITDA for the group to be between 11, and 11 3 billion euros. Within this we are targeting between 7.2 and $7 4 billion for Europe.
Luca: We also expect to deliver an acceleration in group adjusted free cash flow growth.
Luca: To arrange between two six and $2 8 billion euros.
Luca: As far as the UK merger is concerned we expect the pro forma FY 'twenty six impact to be round about 400 million of EBITDA contribution.
Luca: And round about 200 million euros, often adjusted free cash flow drag on a full year basis due to front loaded investments into the committed post merger network build out integration investment and interest payments on the depth of <unk>, but we will consolidate post merger.
Luca: And last but certainly not least I'm happy to say that our detailed work with hutchison around the validation of our joint business planning for the merger in the last few months as reconfirmed our expectations from the time when we agreed the original deal.
Luca: We still expect those margarita sets to reach a full run rate of 700 million pounds of annual cost and capex synergies by the fifth year and free cash flow accretion of the merger by the fourth year.
Luca: With that back to your mother later to close those out.
Speaker Change: Thank you Luca so to summarize alongside delivering on our financial commitments in the last two year.
Luca: Vodafone has changed.
Luca: We can now look forward to a new market snakes across two thirds of our portfolio. We have a solid growth track record strong assets in good position and significant potential for further growth with clear execution plan.
Luca: Within this the U K business, which will now represent a quarter of our service revenue is well positioned for growth as we rollout our best in class five G network and then even our merger synergies.
Luca: Separately in Germany, we will continue to drive a turnaround in what is fundamentally a good market delivering better financial performance.
Luca: This all adds up to good growth in adjusted free cash flow for FY 'twenty, six and of course, even stronger growth on a per share basis.
Luca: But most importantly puts us in a new growth trajectory for the years ahead and with that let me open to you all for questions.
Marguerite: Thank you Marguerite them as a reminder to analysts. Please only pose one question to give everybody a chance to speak.
Marguerite: Oh first question. This morning comes from Kinder, Tony That's J P. Morgan. Please go ahead.
Tony Kinder: Hi, good morning, Margaret to Luca Thanks for taking the question.
Marguerite: My question is really around the guidance and the German outlook I.
Marguerite: I guess first if we look at the comments you've given us for Europe, you've guided to seven two to seven 4 billion euros of EBITA.
Marguerite: You said mockery to most of our markets are now growing.
Speaker Change: So if I try and back out what that means it would imply probably sort of a mid single digit decline for Germany. So I just wondered if you could help us understand is that the right starting point for what you're thinking and I guess more concretely, what I'd love to understand is really how I should think about the pace and timing of that given the recovery you talked about.
Speaker Change: You talked about significant improvements in MTS, maybe you could talk us through what you've done to get there.
Speaker Change: Maybe some comments along the lines of what Youre assuming there.
Speaker Change: Finally, the big topic that people really seem focused on these German pricing do you see a need within your guidance to respond to what your peers are doing thanks a lot.
Speaker Change: Thank you I'll kill I think too you have done a capsule.
Speaker Change: Which probably is anticipating some of the older <unk>.
Speaker Change: <unk>, we will get later, so maybe I suggest I think the pricing 0.1st and then Luca can build on the guidance.
Speaker Change: Hmm.
Speaker Change: Market pricing in mobile is clearly a very important topic.
Speaker Change: After we touched on it.
Speaker Change: Last time in February.
Speaker Change: We have seen a few positive moves in the market but.
Speaker Change: While it is fair to say there were some positive moves.
Speaker Change: Definitely not as much AR.
Speaker Change: We would have liked.
Speaker Change: As you know better than most.
Speaker Change: And we've assumed in our guidance for reference in our forecast.
Speaker Change: That's the environment now stays where we are I think it's the appropriate a set of expectations for financial reasons.
Speaker Change: Which means that we will continue to see auto pressure in mobile within our numbers for the remainder of the year.
Speaker Change: This is coming mainly from the fact that why is there were some positive moves I think as again, you know very well.
Speaker Change: Particularly in the mid to high end of the market. The price points are still very aggressive and therefore, we will continue to twist pressure from docs I can talk to what we are doing and of course I mean of major on the most important step change in Germany for us.
Speaker Change: Earlier in my introduction, which is.
Speaker Change: The results on customer experience because as I said just now this is really something which we are single mindedly focused on.
Speaker Change: We have also taken action in mobile as you may have noticed to reshape our proposition.
Speaker Change: In the last few months and in particular, we have now introduced.
Speaker Change: You answered bundles with device financing, which is really important for us in terms of the range of proposition we have in the market.
Speaker Change: But just concluding on pricing before handing over to Luke on the on the moving parts of the guidance I would say that one thing is certain which is a as I said in February with all operators in Germany, I think big.
<unk> bases and big back books. The current situation is certainly damaging for each and every one of us Luca.
Speaker Change: Luca.
Speaker Change: So first of all on the on the implied.
Speaker Change: Submissions on the EBITDA evolution in Germany, I mean these are new.
Speaker Change: Numbers, obviously I think we have done our best to provide.
Speaker Change: Pretty clear range for Europe, as a whole and I would add a relatively narrow one within that there can be puts and takes across all of the market. So.
Speaker Change: What I can talk about is more than the momentum that we see for the German EBITA.
Speaker Change: Recovery.
Speaker Change: Firstly as Margherita has said as well there is going to be.
Speaker Change: And unknown and all of sudden that's disorder.
Speaker Change: Loosening of some of the markets surrounding us what I can say with confidence though is that we are looking at a significant improvement of EBITDA as we move through the year.
Speaker Change: That is partially somewhat mechanical in nature as you know we are going to lose the year over year drag from the MD use from the second quarter on in parallel we are progressing with the ramp up of the one on one migration that was off to a slow start when became.
Speaker Change: Together last time, but I have to say since then it has picked up so ethanol and better line of sight.
Speaker Change: I think it can expect from the second half year on how we will operate at the full run rate there and therefore this will of course be a big benefit.
Speaker Change: Through the second half performance outside of those mechanical impacts.
Speaker Change: We're obviously happy that we have now stabilized our commercial performance in broadband we believe in the potential of our overarching transformation efforts for the German market and I think as we progress through the year. This will more and more gradually to the strengths of our research in Germany.
Speaker Change: Great. Thank you both very much and I just sense that Luca congratulations on your broadband.
Speaker Change: A lot for the future as well.
Speaker Change: Thank you very much but it will still be with me for a couple more locations on this so but thank you.
Speaker Change: Thank you. The next question comes from Emmet Kelly at Morgan Stanley Emmett. Please go ahead.
Emmet Kelly: Yes. Thank you very much for taking the question.
Emmet Kelly: My question is on the customer experience and infrastructure in the UK market. So at Margarita when you presented your strategy before you mentioned that improving the customer experience is your probably your number one aim going forward.
Emmet Kelly: The U K market seems to be the market, where perhaps you're having amongst the greatest success.
Emmet Kelly: <unk> is obviously, a big push to develop infrastructure across Europe, especially you see this in Germany at the moment.
Emmet Kelly: All these thoughts together can you say a few words on what.
Emmet Kelly: Customer can expect to see in the U K from the merger.
Emmet Kelly: Particular from a network perspective, and this has clearly been a pain point in the U K I know if I look at open signal.
Emmet Kelly: In the U K networks ranked so far behind other developed markets. So could you maybe just say.
Emmet Kelly: Say, a few words on what's going to happen in the network as a frustrated that U K network user and I do remember sitting in our presentation in the late nineties with a former CEO of that when the telco companies talked about bringing for example service to the troops in London and that still is a pain point. So can you maybe just say you had the merch cohort progression.
Emmet Kelly: On the network side. Thank you.
Emmet Kelly: Sure and maybe I will start with that and then grow them up to the.
Emmet Kelly: A more general point on customer experience, which I think is really really important the most important number on the U K for you on that today, you're finding it as part of our guidance lies with giving us much detail as possible around the merger and that is one number you will like which is $1 5 billion of Capex invested in the U K.
Emmet Kelly: Markets.
Emmet Kelly: In our in this fiscal year.
Emmet Kelly: We are really excited and the teams that are ready to hit the ground running on the merger because it really gives us a unique opportunity from an infrastructure perspective.
Emmet Kelly: The thing about the 11 billion network plan, but let me say that from the very first year of <unk>.
Emmet Kelly: Operations are customers across the country in three customers of course, we'll see that immediate benefits from just the simple fact that as we combined two networks, we will have more coverage and more capacity, we will have to see exactly where you are.
Emmet Kelly: On that on that roadmap, but we will start to see the impact straight away and then as the year move on and the 11 billion gets fully deployed.
Emmet Kelly: We will see even more benefit.
Emmet Kelly: In terms of.
Emmet Kelly: What it means for us more broadly.
Emmet Kelly: It is truly transformative because first of all as a group we expand our exposure to the UK, 25% of our service revenues will be in the U K.
Emmet Kelly: <unk> in the U K, we will have a unique set of assets.
Emmet Kelly: If you look at it from whichever angle in a spectrum in the network.
Emmet Kelly: The customer basis, we will be really structurally position to drive EBITDA and free cash flow growth, even before you take into consideration the $700 million.
Emmet Kelly: Cost and Capex synergies, which have now been fully detailed in validated into the agreed joint business plan and on top of that revenue synergies for example from the network connected up anyway. So it's a it's a step change that cannot be underestimated first in the UK and it happens in a market where we are.
Emmet Kelly: Distantly outperformed and as you mentioned, we know a firm leader in customer satisfaction, we come from number three a few years ago.
Emmet Kelly: Now this leads me to the importance of customer experience and why we have done this journey and you have heard me.
Emmet Kelly: Talking about this since two years ago, when I thought we had a unique opportunity on this front for two reasons. One is as you've heard me say telcos not good enough on customer experience. So that can be changed but second which is important for us today is.
Emmet Kelly: It's the most important leading indicator for customer loyalty and therefore, then our performance more broadly we have seen how the reset the recipe is working in the U K, but anywhere in the group, having happy and loyal customers is the number one priority.
Emmet Kelly: We have and I need to tell you one of my biggest satisfactions.
Emmet Kelly: In the last two years has been to see how the culture of the company as really rallied around giving our customers deserve.
Emmet Kelly: Service that they deserve and winning our customers' trust every day. It has generated a lot of energy and the other thing that is really important is there are no quick fixes for customer experience. It's long hard work, which is why we're so happy after two years and you ask what have you done of investing in the network investing in <unk>.
Emmet Kelly: Stuart journey investing in processes.
Emmet Kelly: To see that we have across Europe, 5 million less detractors and obviously the most important place where we are working is Germany.
Emmet Kelly: We are not done by any stretch of the imagination, but it's good to see the trajectory and the results I was mentioning earlier as.
Emmet Kelly: As a function of what we have invested in the market and also are seeing all. This then translates look I'm sure. This can be another type of conversation on lowest turn in areas such as fixed broadband.
Emmet Kelly: So very important leading indicator you will always see is leading in our scorecard of less.
Emmet Kelly: Super Thank you very much.
Emmet Kelly: Yeah.
Emmet Kelly: The next question. This morning comes from Andrew Lee at Goldman Sachs. Andrew. Please go ahead.
Speaker Change: Margarita and Luca.
Speaker Change: Just had a question the German recovery just pulling.
Speaker Change: Following on from <unk> question.
Speaker Change: And then improvement through FY 'twenty six specifically are you in a position yet.
Speaker Change: You can see strong potential to grow the ex one one by underlying revenues and EBITDA in Germany in the third or fourth quarter of this year.
Speaker Change: If not why not.
Speaker Change: And the follow up.
Speaker Change: So that really if you highlighted broadband customers are flat at the moment in Germany, but with the pressures that youre, assuming through FY 'twenty six.
Speaker Change: If you can't grow in the second half of this year at some point what needs to change for you to grow in FY 2007, when do you think either execution needs to continue to get better.
Speaker Change: Or do you think the growth is out of your hands.
Speaker Change: Thank you.
Speaker Change: Thank you Andrew I may deal done FY, 'twenty, seven and what we need but first Luca on the service revenue trajectory during the year, yes.
Speaker Change: We have said, we expect to return to growth in service revenues during FY 'twenty six.
Speaker Change: A major component of that will be the one on one contribution obviously and again I think we had this conversation before I would always argue that this is a commercial agreement.
Speaker Change: As you would also see other.
Speaker Change: Agreements in the wholesale space with <unk> and others that contributes simply to the results and so from that perspective for me.
Speaker Change: Really a bit towards to disentangle this from the overarching.
Speaker Change: Performance of the country.
Speaker Change: The rest is essentially going to be a function of the competitive intensity in in mobile displays a significant role.
Speaker Change: And.
Speaker Change: In terms of the rest of the performance there from a service revenue perspective keep in mind.
Speaker Change: We have just talked and discussed about broadband we're actually very happy that we have stabilized the base. This was a significant part of.
Speaker Change: The underlying performance outside of the MD use.
Speaker Change: <unk> and.
Speaker Change: Slide 25, this is now stable.
Speaker Change: Our pool actually also.
Speaker Change: Quite.
Speaker Change: Reasonable shape, but what you should not forget.
Speaker Change: That we have also a constant underlying TV drag as I would call. It because television has been for a while even outside of <unk>.
Speaker Change: In a structural decline and I think that will continue into the midterm. So if you make the most out of that.
Speaker Change: Then you will obviously.
Speaker Change: And that one on one is an important contributor that will materially help to bring us back to growth.
Speaker Change: I'm, just going straight actually to the point, Andrew you made around the X one N. One.
Speaker Change: Growth rates I think the final answer is very much depends on the.
Speaker Change: The pricing conditions in mobile.
Speaker Change: And the jury is still out on that one, but let me say upfront that.
Speaker Change: I think in the current market environment that we just discussed with IQ I've seen it is unlikely.
Speaker Change: That the X, one and one which I agree with Luca shouldn't be taken in isolation, you could talk about like kind of orders.
Speaker Change: So, but that's that's where we are.
Speaker Change: In terms of 27, then so much that that exit of costs in Germany. In 2006 overall results much better than in 'twenty five but in particular second half with a better exit as we go into 2007, I mean look I could also give you lots of.
Speaker Change: New moving parts.
Speaker Change: Because there will be more of one in one there will be no more and use that will be full and realization at that point all the commercial investments that we have made including the anr, which as you know transitions through the years are all.
Speaker Change: All sorts of mechanical support like this but you are spot on on the fact that we count on and also the improvement we are making structurally in the loyalty of our base and in the fact that by then we will have a full run rate or a fully stable base on.
Speaker Change: Sure Frank to of course support us for the longer term in a growing Germany.
Speaker Change: Okay.
Speaker Change: It's been the thought now to debate the underlying what constitutes underlying but I guess that that's what investors need to see the kind of the growth in FY 'twenty seven and it.
Speaker Change: It sounds like we need a supportive price environment to achieve.
Speaker Change: Assuming stable stable.
Speaker Change: Stable customer base into FY 'twenty seven is the kind of base case.
Speaker Change: I think everyone can make it starts months I was really keen for this year to be quite specific on our expectations for Europe to allow you to fanfare, but beyond Europe, and Germany. What I think is really important in the discussion today and we may have a chance.
Speaker Change: I'll pick it up later is is the guidance of the group growth itself for FY 'twenty safe slash the numbers around the page and also for the midterm, but I leave that to.
Speaker Change: Other questions.
Speaker Change: Thank you. The next question. This morning comes from Joshua Mills up BNP Paribas accent Treasurer. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hi, guys. Hopefully you can hear me I wanted to just tack slightly and moved to the <unk> segment.
Speaker Change: I think in the report you called out some headwinds from the U K <unk> market and specifically managed services.
Speaker Change: With some pressure in the mobile space I Wonder if you could give us a bit more color on what's happening there and maybe brought into question.
Speaker Change: Youll seem to be to be landscape more broadly across your different geographies and what you're assuming about the b to b growth in your FY 'twenty six guidance and then perhaps just more specifically could you remind us now what percentage of Vodafone group service revenue, but also.
Speaker Change: Group EBITDA is coming from the <unk> segment. Thank you.
Speaker Change: Yeah I guess.
Speaker Change: If you don't mind I will I will take those questions. So first of all.
Speaker Change: Actually very happy about.
Speaker Change: The growth trajectory that we have achieved with our b to b business. During FY 'twenty. Five saw you have seen that we have shown quarterly acceleration every quarter as we had expected.
Speaker Change: At the Q1 earnings call, we exited with five 1% growth in Q4, and we continue.
Speaker Change: Continue to.
Speaker Change: Believe into that potential and actually would expect this good growth at the group level two.
Speaker Change: To continue.
Speaker Change: Now in terms of the market's performance. It was obviously differing by market in the UK we had.
Speaker Change: A decline in the full year.
Speaker Change: Q4 was actually positive but for the full year it was slightly negative.
Speaker Change: There are a couple of reasons for that one is that.
Speaker Change: The same actually a year over year price increase pressure is applied to be to be that we also saw a bit in consumer.
Speaker Change: Essentially it's B Engel.
Speaker Change: Price increases came in due to the lower inflation that.
Speaker Change: Lower rates on that has been weighing on the growth in <unk>.
Speaker Change: From a go forward perspective.
Speaker Change: Yes, we have outlined that we are losing a couple of pretty old I have to say and also relatively low margin managed services contracts in the UK otherwise.
Speaker Change: <unk>.
Speaker Change: Kind of performance in the UK as elsewhere in Europe will clearly differ between a core connectivity business, which will be lower growth and then additional.
Speaker Change: Additional support from our digital services business that we are investing into where we have been adding additional agents, where we continue to build out.
Speaker Change: Our portfolio and where we are clearly expecting continued growth opportunities. So yes, U K will be challenged in FY 'twenty six from a b to b perspective, but in the broader sense, we continue to expect.
Speaker Change: Positive growth in B to B.
Speaker Change: From a group perspective.
Speaker Change: Certainly.
Speaker Change: See the strengths of our portfolio and in particular in what we call. It beyond connectivity as a strong underpinning of that where we have much higher growth rates than in cool.
Speaker Change: And just maybe a quick build on this point of the digital services I'd say the way. The demand is moving we have always had strong demand across Europe and Africa for digital services. The recent sort of geopolitical induced focus on sovereign they can.
Speaker Change: <unk> services on defense areas is also something that will be supporting for a continued good digital services growth for us.
Speaker Change: Yeah.
Speaker Change: Thanks, and maybe just to follow up if we kept ballpark figure on the revenue and EBITDA exposure.
Speaker Change: Yes, absolutely so sorry for that.
Speaker Change: Yes, we are approaching a third.
Speaker Change: 30% is still slightly below.
Speaker Change: <unk>.
Speaker Change: But.
Speaker Change: It's becoming it's.
Speaker Change: It's a decent piece of business for us close to 30%.
Speaker Change: In terms of.
Speaker Change: The EBITDA performance.
Speaker Change: B structural margins in the B to B business are slightly lower because digital services comes with a lower EBITDA margin than core connectivity, however, and thats. The more important point for me and what I'm really excited about obviously the capital intensive.
Speaker Change: <unk> of this business is very low we have an asset light business in this space. We are relying in addition to some old capabilities also on our strong strategic partnerships to bring the solution capabilities to the market and business actually from a returns and from a cash flow perspective very positive for us.
Speaker Change: This business is not only measured in my eyes at least from an EBITDA perspective, but in particular from a cash flow contribution perspective.
Speaker Change: Alright, thank you.
Speaker Change: Thank you. The next question comes from Carl Murdock Smith at Citigroup Com. Please go ahead.
Speaker Change: Alright, thanks, very much for the question and Marguerite or as you were kind enough to say its up.
Speaker Change: I'll step in and ask.
Speaker Change: One of the highlights of today's guidance was the strength at a group level largely due to Africa and Turkey.
Speaker Change: Kind of what gives you confidence of the medium term growth opportunity in those markets in Euro terms, what has driven that step changing growth and cash flow generation and what synergies all of their across the group and what options might you consider in the medium term if investors continue to apply.
Speaker Change: Weightings to euro of free cash flow from Europe versus a year of free cash flow from elsewhere in the great. Thank you.
Speaker Change: I would call out the fact that when I talk about.
Speaker Change: 66% of cash flow generated within.
Speaker Change: Our current growth portfolio.
Speaker Change: It's not just stuck in Africa, but it's going to be increasingly in the U K and of course, the consistent position of our other European markets for completeness now if I look then.
Speaker Change: Turkey, and Africa, and the reasons behind the performance that you have seen where we have demonstrated.
Speaker Change: Hard currency growth in all our geographies I would say.
Speaker Change: A two part answer the first.
Speaker Change: The discipline, where you have a high inflationary environment to grow revenue ahead of inflation and costs below inflation applied in the day to day execution in these markets and this is a muscle I think we have trained.
Speaker Change: That quite well by now, but it's not just that that are also pool that aspects. One is the quality of our performance and the second is the actual market potential per se.
Speaker Change: So if I maybe start from the market potential I mean, it's visible to everyone that these are markets, where connectivity is still potential to grow. The population is growing data is growing data is being monetized, but what is most attractive is that there are also what we would call non lead.
Speaker Change: Now the growth opportunities in this market that we are exploiting again talking about digital services right, whether youre talking about <unk>.
Speaker Change: Financial services of course for Africa, or whether you are talking about all the digital services for example, southern data centers.
Speaker Change: In those territories.
Speaker Change: Already making an impact so there is a broad range of services, where Vodafone in those markets is effectively the provider of choice that gave us confidence on our multi year growth.
Speaker Change: And then on top of that we are pleased with our execution.
In those geographies, whether you look at Turkey, whether you look at it whether you look at Africa more broadly I mean, we discussed I think a couple of calls ago about what is driving the growth in Turkey. For example, you will have seen we continued to build on our highest ever market share we outperformed market grow.
<unk>.
Speaker Change: And we have really clear execution plan and strong teams in place to make the most of this potential opportunity and then you close with saying Okay. This is a well and good I see the growth coming but in all the calls we talk about Germany.
Speaker Change: And therefore is that anything you want to change about that and I think what you will see us doing is continuing to bring to life as we did in the results presentation today that.
Speaker Change: The group is.
Speaker Change: Covering.
Speaker Change: Number of different geographies, Europe Africa, Germany, or other countries the U K.
Speaker Change: That's that's what we are going to continue to work on driving performance and ultimately we are a single goal which is.
Speaker Change: Sustainable mid term.
Speaker Change: Adjusted free cash flow growth, we said bye bye back in our March 23 that we had the goal to use the cash flow level of those days as a base to grow from and I think we have proven in the last two years that we have executed on our financial guidance and now it's time to go in.
Speaker Change: To the proper growth phase also thank you to all of these opportunities.
Speaker Change: And perhaps just briefly because you have mentioned sooner Gs.
Speaker Change: There are synergies both in terms of leveraging the scale of the group between the emerging markets and Europe, we're doing that already today on the procurement front.
Speaker Change: Acquire Ron capabilities and so on we leverage this but there is also an exchange of best practices, which can be very fruitful like.
Speaker Change: Like for example in AI, we have capabilities in Europe.
Speaker Change: We are leveraging also to help our emerging markets to quickly adopt those practices on the flip side in Turkey. For example, we have excellent ditch.
Speaker Change: Digital nurturing skills, we have a great innovation there.
Speaker Change: We are also bringing to other European countries. So all of that just makes the combination so much stronger than the cigna thoughts alone.
Speaker Change: That's great. Thank you very much.
Speaker Change: The next question. This morning comes from Adam Fox Rumley HSBC Adam. Please go ahead.
Speaker Change: Thanks, very much I'd like to ask a question on the Sharepoint box. Please I wondered if you could reflect a bit on the value the buybacks, bringing to you and.
Speaker Change: Annual shareholders at the moment.
Speaker Change: Thank you bill in euros, but another 2 billion euros to go its a huge portion of the market cap.
Speaker Change: Theres no reference to share data in your presentation anyway. So presentation may at least you are not really linked kicked off huge commitment to the narrative that you're trying to tell us to stop sort of 5% dividend yields signal, providing much valuation support so I guess I'd just like to.
Speaker Change: To check are you still assessing this is the right allocation of capital into that sustainability clearly given the free cash flow it generates at the moment the dividend the Gulf looking into the medium term.
Speaker Change: 2 billion euros is unlikely to be the right number going forward. Thank you very much.
Luca: I'll, let Luca talk to Mr.
Luca: The strategy around buybacks and returns more broadly, but there is one number.
Luca: That's a I think is really important in your question is a really valid one if you look at our adjusted free cash flow guidance for FY 'twenty six at the midpoint of the guidance we are growing.
Luca: Just the free cash flow per share by 17% year on year and I completely agree with you that the per share element of these kpis is really important but.
Okay.
Luca: Would agree is underappreciated.
Luca: When you.
Luca: Ask about.
Luca: The capital allocation strategy more broadly.
Luca: I think when we first talked about this when I was coming in.
Luca: Around two years ago.
Luca: We were a single mindedly focused on a dividend that was back then considered.
Luca: So not properly covered by underlying cash flow and with no kind of fantasy for growth for the future.
Luca: We have in the meantime, too significant.
Luca: Value creation events through the sales of both Spain.
Luca: In Italy.
Luca: At the point in time, where from our perspective clearly there.
Luca: Share price levers did suggest.
Luca: That there was value in putting some of this capital to work.
Speaker Change: By making sure that things like the ones that Margarita has talked about and that is.
Luca: Growing the free cash flow contribution on a per share basis could come to fruition so in that sense.
Luca: We have followed through on the commitment that we have given.
Luca: We have rebased the dividend.
Luca: With an ambition to grow it over time.
Luca: And we stick by that commitment.
Luca: In terms of the capital returns through share buybacks I think we are executing on them.
Luca: Because we believe.
Luca: It is from a value perspective.
Luca: <unk>.
Luca: Positive and accretive investment and.
Luca: Certainly.
Luca:
Luca: I believe.
Luca: Value accretion potential.
Luca: That's why.
Luca: Not only is what our food and started a share buyback program. Today I have also decided to buy back some more shares for my own personal.
Luca: And I think in that respect it is for me a logical thing to do.
Luca: Let's see what the future brings the current program will probably take us round about through the end of the current fiscal year and then we will reassess together as well obviously on the appropriate dividend level.
Luca: Thank you.
Speaker Change: The next question. This morning comes from James Ratz Apnea St. James. Please go ahead.
Speaker Change: Yes, good morning, Margaret Luca Yes. Thank you very much indeed sort of kind of bigger picture question, which is I think a lot of people would like to understand your longer term financial outlook for the company and I know there are a lot of moving parts in Vodafone at the moment, but when I look at your major peers.
Speaker Change: They also have a lot of moving parts and uncertainties and yet pretty much all of them provide detailed quantified three year financial targets.
Speaker Change: I mean actually even one of your own largest businesses vodacom provide.
Speaker Change: Provides three yet quantified financial outlook now I do see Youre now, stating some medium term free cash flow growth expectations, but thats fairly vague. So would vodafone consider providing detailed three year financial guidance. So we can get more visibility on your.
Longer term outlook and and if not what's holding you back.
Speaker Change: I think that James you are coming from a very valid and in terms of.
Forgetting the numbers for a second painting the picture of what we are targeting to achieve in the mid term I think is going to be important.
Speaker Change: You know that we have gone through two years of significant transformation and this is actually the first time that I can look forward and say.
Speaker Change: We are where we wanted to be in terms of shape and hopefully that will also simplify everyone's life in terms of the numbers and the moving parts. We have the shape of the group that we want to add which is why what you'll find in the presentation today is it clear.
Speaker Change: Outline of our this looks like what are the growth opportunity and why we have the confidence to now state that we are moving from the base to grow from.
Speaker Change: Of two years ago to proper growth, we will now go through the UK integration as soon as we close we will start off they very quickly.
Speaker Change: And we will bring this shape back to life in our results I think you should expect to see more from us in the future in terms of.
Speaker Change: Talking to the vision.
Speaker Change: In the mid to long term, but we first needed to get there.
Speaker Change: The building sites closed which is what we are doing now.
Speaker Change: This is now the business is in the kind of right sized.
Speaker Change: All the Big picture M&A can we expect that may be in the H, One guide and so the results you would actually be willing to give some three detailed let's say revenue EBITDA free cash flow trends. This let's say.
Speaker Change: Major peers in Europe, and I say, even vodacom are doing the same.
Speaker Change: In various different ways, but I would refrain for now to give guidance on guidance is that fair.
Anthony: Anthony a consideration to give a more.
Queens it out.
Anthony: Look what's really important for US is now to move towards this gradual sustainable free cash flow generation and give you the confidence of what the moving parts for that.
Anthony: Okay.
Anthony: <unk> of course, you can do it I think it would be appreciated by the market.
Anthony: Thank you.
Speaker Change: The next question comes from David Wright of Bank of America Merrill Lynch. David. Please go ahead.
Speaker Change: Yeah, Thanks, guys and answer your question that might actually follow.
Speaker Change: A follow on a little bit from from James but just on the U K.
Speaker Change: A couple of clarifications, you've talked about EBITDA boost of <unk> 4 billion.
Speaker Change: Euros I think it is in your original deal presentation, you talked about pre <unk> 16.
Speaker Change:
Speaker Change: <unk> EBITDA of 612 million pounds. So that's obviously it.
Speaker Change: It looks like it's broadly half I suspect that's mostly.
Speaker Change: Handset accounting, but if you could clarify that firstly Luka you also mentioned I think.
Speaker Change: Your words earlier in the presentation that the free cash flow dilution you'd stated.
Speaker Change: Including.
Speaker Change: Uh huh.
Speaker Change: Structuring spend but I don't think it is is it because your free cash guidance is ex restructuring so what's the restructuring spend we could expect.
Speaker Change: On top of that and I guess, there's just flows through to James is point really is your free cash flow guidance is before restructuring, which has been a significant amount for every one of them for the last and I might even say 10 years.
Speaker Change: Telefonica more recently.
Speaker Change: Broke down the free cash flow into it and at the end of the day, what's distributable.
Speaker Change: And I just wondered if you could start giving us some visibility of <unk> III.
Speaker Change: Free cash flow after restructuring given that is essentially what's distributable I appreciate spectrum has a lot more commercial.
Speaker Change: But those dynamics, what would really help us and just and if I might just add margarito. Once the deal is not closed yet.
Speaker Change: I kind of we all felt it sort of don't if there's just anything you cannot that thank you.
Speaker Change: Yes, maybe I'll take that I'd say watch the space I mean, we got the approvals from off Glen the CMA during the month of April.
Speaker Change: We have then been able to lock down the joint business plan, which is done and we are now going through the customary closing adjustments but.
Speaker Change: Watch this space.
Speaker Change: So and then on the on the 400 million, Yes of course this represents the EBITDA.
Speaker Change: EBITDA contribution under our preliminary view under the Vodafone accounting policies and there are various puts and takes there.
Speaker Change: Hum.
Speaker Change: Lisa calling things it was accounting and so on.
Speaker Change: I think it's probably better for the details and the puts and takes to be followed up on an IR call, but it's our best view of.
Speaker Change: How the results present themselves.
Speaker Change: Our accounting policies youre right of not been talking about restructuring.
Speaker Change: I've talking I've been talking more broadly about integration investments so that's not necessarily all restructure.
Speaker Change: Restructuring from a restructuring perspective.
Speaker Change: First of all I think we had.
Speaker Change: In FY 'twenty five.
Speaker Change: Compared to the prior year relatively calm.
Tom: Tom here from a cash.
Speaker Change: <unk>.
Speaker Change: And found about $250 million.
Speaker Change: I believe of restructuring expenses, there will be a moderate step up as we go into FY 'twenty six on the restructuring not only from the U K, but also from the fact that in Germany, we still have to fully complete the second wave of our restructuring program.
Speaker Change: That we have there when you think about only the impacts for the U K.
Speaker Change: Would it be actually broadly neutral because.
Speaker Change: We also will upon the closing benefit from the spectrum sale proceeds.
Speaker Change: To to be able to so the merge up per say is from a below the afcs level broadly neutral in FY 'twenty six.
500 million spree restructuring guide that still applies though and we should we should probably assume that's quite heavily.
Speaker Change: Heavily phase to the first couple of years that's correct.
Speaker Change: The 500 million across five years, absolutely yes, okay.
Speaker Change: Yes, yes, yes, but I really think that Australia upfront, but in EMEA I wanted to be clear the 200 million you see out of the same.
Speaker Change: <unk> and full FCS level, there isn't any additional drag below the line.
Speaker Change: Okay. Thank you so much.
Speaker Change: The next question. This morning comes from atopic utter ACO at Bernstein at Aveo. Please go ahead. Your line is open.
Speaker Change: Okay. Thanks.
Speaker Change: Good morning, good morning Luca.
Yeah.
Speaker Change: My question is again on the free cash flow you provided a good breakdown on slide 23, where she with Germany or at 33% of your adjusted free cash flow.
Speaker Change: As a mismatch between that number and the one one calculate 'twenty that's the operating free cash flow EBITDA minus capex for Germany is around 47%.
Speaker Change: So the question is that do you book all the interest in hard currency in Germany, and the 22 billion of tax assets actually at $19 billion this quarter.
Speaker Change: In Luxembourg can all useful to offset that ghansham and taxes and again on free cash flow you booked.
Speaker Change: <unk> 307 billion from vantage towers. This.
Speaker Change: Oh this year.
Speaker Change: Last time vantage have towers was listed what's generates around $430 million of cash.
Speaker Change: So if I do pro rata it looks that to you over distribution or vantage towers at you over given the balance sheet like you do the Vodafone Siegel with just organic regenerated. Thank you.
Luca: So maybe just an observation and then I'll hand over to Luca for the detail.
Luca: Suspect your numbers are from our three UK merger ottaviani, because even on EBITDA, that's not what you find in our results for FY 'twenty five but.
Luca: More broadly Luca I think I think you're probably referring to the slide that has the distributional strong free cash flow generation the gross market.
Luca: That's a very simplified view obviously.
Luca: So from that perspective.
Luca: You should not kind of one to one try.
Luca: Trying to reconcile this with the group number yes.
Luca: Thing is obtained there Ted.
Luca: Finally, there is no extra interest or other things it's EBITDA.
Luca: EBITDA minus Capex, we've done an attribution of interest across the market CNS vaccines off.
Luca: In Huron specific.
Technical elements, it's what you would expect to do what is in there just to be clear is indeed, the Vodafone investments dividends of course in all of the dividends that neutral precedes closing some back down our free cash flow.
Luca: It's not a breakdown of EBITDA. So the full 30 meter, including the Vodafone investment Division, which is 9% in the slides comes into play and there maybe if I can just add then on the vantage Thomas.
Luca: Results actually.
Luca: This is underpinned by the performance of vantage towers, which has been growing.
Luca: <unk> revenues as well as profits are.
Luca: Quite reliably and if I can add that obviously has their own.
Luca: <unk> as well, which includes for example, which is doing very well and will actually provide a special dividend in FY 'twenty six that will provide support as well so in that respect.
Luca: This is just a reflection of.
Luca: The strong performance of vantage tell us that allows us.
Speaker Change: To distribute dividends not only to us by the way, but also to our core shareholders from the consortium.
Luca: So you would expect to extract around 300 million of dividends from vantage going forward.
Luca: Okay.
Luca: Let's see what medicine, Youll really hasn't been there is no. There is no reason to.
Luca: Not expect the same dividend levels from bondage.
Luca: Perfect. Thank you.
Polo Tang: The next question comes from Polo Tang UBS Polo. Please go ahead.
Polo Tang: Thanks for taking the question, it's on Germany, specifically fiber Mdu's can you maybe talk through what impact of fibre upgrades are having in terms of your German broadband net adds and NPS and can you give an update in terms of how the <unk> joint venture is doing in terms of upgrading the footprint of <unk> 7 million MDU homes.
Polo Tang: And do you think you need to upgrade the remaining 19 million homes and your cable footprint to fiber and just relates to this point about mdu's Deutsche Telekom last week on its call highlighted that now has access to $5 7 million MDU homes. So are you seeing any signs of increased competition in the AMD space alone.
Polo Tang: Do you think that there will be one or two fiber infrastructures and each MDA because longer tariffs.
Speaker Change: Sure I'll start from issue on the impact of fiber in our in our.
Speaker Change: All numbers in our customer satisfaction.
Speaker Change: There is no impact of a fiber on Dol.
Speaker Change: You know that we have just opened a.
Speaker Change: Our our sales footprint.
Speaker Change: Two wholesale agreements that do include fiber for example from Deutsche Telekom, Linda she loves about them, because we want to give our customers in the DSL area.
Speaker Change: Access to fiber, which is why today, we effectively offer gigabit products to three out of four of German nozzles.
Speaker Change: And this is our strategy I would say pretty much everywhere you can see we have the same approach in that in the UK now disconnections that immaterial at the moment, we are talking about the single digit.
Speaker Change: Gross ads.
Speaker Change: So.
Speaker Change: The results that you see in our numbers and the results in terms of customer satisfaction and actually.
Speaker Change: Products of <unk>.
Speaker Change: Quite significant churn reduction in our cable.
Speaker Change: A state because obviously this is the very vast majority of our customers.
Speaker Change: In a market, which now we should all recognizing Germany doesn't have much.
Speaker Change: Got it in terms of penetration anymore, it's plateauing.
Speaker Change: The stabilization of our customer base in the last couple of quarters as come from churn reduction.
Speaker Change: And we are very pleased to see now.
Speaker Change: Cable churn, where we also have by the way the highest ever NPS in order for them is the requirement for Campbell. Our cable churn is now very much in line with what you would expect it's actually below for example, the fixed broadband churn that we have in the UK, which is growing strongly and this churn reduction is.
Speaker Change: As a function of the fact that we have really changed the customer experience that you have seen us and you've heard us talking about network investments.
Speaker Change: The last couple of years improve customer base management and processes and also.
Speaker Change: We have done a lot of work on legacy, who tests, which have now less than 15% across the whole customer base of Vodafone as an outcome of all this we have at best in test results as you have seen on the network across all metrics.
Speaker Change: In fixed broadband in Germany.
Speaker Change: Third just recently, a third less network complaints from our customers.
Speaker Change: This best further NPS so.
Speaker Change: This is the sort of structure out as customer experience transformation that I see as a leading indicator of performance and that we will continue to drive in that space I agree with what I said before which is on top of a better service to our customers also.
Speaker Change: A wider footprint in which we can think gigabit product is going to allow us to be.
Speaker Change: One stop shop for the customers across fixed mobile and TV and this is a very clear objective.
Speaker Change: Now you asked where are we on fiber and then what's going on in the in the US. So maybe just covering these aspects so in terms of our own fiber builds.
Speaker Change: I've seen in these results.
Speaker Change: That's what makes G has been running late compared to the original plan. The majority of the build was.
Speaker Change: To be done with <unk>, which helps me had some issues in the last 12 months, but we have taken action. We now have 29 different building companies working across 22 cities in Germany as of today were reaching 200000 households, and our sort of cruising speed of now is.
Speaker Change: 100000 per quarter, but we are looking forward to an acceleration in our metals that are already been issued 442 million and I think it's really important.
Speaker Change: There will always be competition in the <unk> there was competition in the <unk> before that's not new but we really want to leverage the economic benefit that we have been working on deals and the strong partnerships that as you will have seen.
Speaker Change: As carried us through the <unk>.
Speaker Change: In addition of the T V. No front of course, a good Ah.
Speaker Change: Good business case, I would say also from.
Speaker Change: Fiber in in those areas. So these are the.
Speaker Change: The areas of focus for us its continuing to hide that is in a nutshell. If I had to summarize same started just before we'll continue to find their eyes are cable networks that satisfies our customer needs and is now getting very good satisfaction, we will continue to over build ourselves in DMD use because.
Speaker Change: That is a strong economic case for that and then in deal in that area of the county, where today, we have a sell DSL, we will grow with fiber together with the fiber build us that that's the same.
Speaker Change: The same strategy.
Speaker Change: Okay.
Speaker Change: We have time for one last question today, which comes from Robert Grindle at.
Speaker Change: Deutsch numerous Robert Please go ahead.
Speaker Change: Hi, there. Thank you for the question alongside all the changes with Vodafone the World has changed a fair bit too since we last met you.
Speaker Change: You mentioned the opportunity on sovereign data as a result of geopolitical change, perhaps German stimulus plans are good news.
Speaker Change: There too although that's helpful side are you expecting any impact from the trade tariffs on equipment pricing or equipment availability at this stage.
Speaker Change: We shouldn't be worried about capex that was mobile data in Q4 is growing at less than half.
Speaker Change: The rate of a year ago.
Speaker Change: Is this more Wi Fi offload or lower growth in demand.
Perhaps.
Speaker Change: I can I can cover quickly the capex.
Speaker Change: Question and general cost question here.
Speaker Change: I believe we are.
Speaker Change: Pretty well cover ups overall, we have most of the multi year agreements with fixed terms, which essentially puts the onus of any tariff driven changes on the on our partners and suppliers so from that perspective.
Speaker Change: I think we are as well as.
Speaker Change: As one can be I would add perhaps all of that also the strong.
Speaker Change: Balance sheet position that we're in now also from a financial.
Speaker Change:
Speaker Change: ROE perspective, I think we are now substantially de leverage we have.
Speaker Change: Very long maturity of our outstanding debt, which was very helpful.
Speaker Change: At $161 billion of liquidity, which gives us a lot of optionality in that respect as well so while obviously we are monitoring the situations.
Speaker Change: Carefully I think on the cost and Capex side, we are well covered from a financial stability perspective, we're also very worried about the combo.
Speaker Change: Yes, I would say for the general sort of tariff on macro I mean.
Speaker Change: You know where we stand.
Speaker Change: And relatively insulated from these dynamics on the mobile and data front, let me add that its not necessarily a bad thing what we are describing it really depends on where I know data growth and I think some of the reshaping of the group in Europe that we.
Speaker Change: Have done in the last couple of years is also impacting the volumes of data growth because that have been markets that are at very very low prices for what we're saying.
Speaker Change: Actually.
Speaker Change: Our limited offers becoming the stand out that are not part of the group.
Speaker Change: Any more so I think don't always see negatively.
Speaker Change: Yeah.
Margarita: Thank you. This was the last question and I would now like to hand back to Margarita for any closing remarks.
Margarita: Thank you Vanessa and thank you everyone for your time again today.
Margarita: You in July.
Margarita: So you then bye bye.
Margarita: Yeah.
Margarita: [music].