Margherita Della Valle: Good morning, everyone, and thank you for joining us. Before moving to Q&A, I will provide an update on the actions we are taking as we begin our new chapter as a simpler, stronger, and growing business. We made a strong start to our new growth chapter with good financial performance, growing customer satisfaction, and a fast start with our cost program that we announced in May. This underpins my confidence to upgrade our financial guidance for the year. As I mentioned, simpler, it is worth highlighting that we have continued to simplify our portfolio during the H1 of the year, completing two important transactions in the UK and with Safaricom in Kenya. In June, we announced that we increased our stake in Safaricom, strengthening our exposure to one of Africa's leading operators and our world-class financial services platform, M-Pesa.
Margherita Della Valle: In July, we took full ownership of VodafoneThree in the UK, giving us greater flexibility to move faster and capture 100% of the value created by the largest mobile operator and the fastest-growing broadband provider in the market. As you heard from us last month at our VodafoneThree investor briefing, we are already seeing the benefits of our 100% ownership reflected in our plans. We raised our annual cost and CapEx synergy targets and provided a confident midterm outlook, with operating cash flow in the UK expected to more than triple by FY32. These transactions are a great example of how we are building a more focused Vodafone with even more exposure to attractive long-term growth opportunities. That leads me on to talk about our good growth momentum and the strong start we have made in our multi-year growth outlook.
Margherita Della Valle: I am very happy with our overall group performance in the H1 of FY27, as we continue to see improvements across all group key metrics. Group service revenue growth accelerated to 6.4% in Q2, the highest in three years, with both Europe and Africa growing. We also delivered the best-ever growth in Vodafone Business at 6.6%. This was supported by a record performance from our digital services portfolio, as we continue to enhance our propositions with the smart, secure, and sovereign solutions that our B2B and public sector customers need. In our emerging markets, once again, we reported double-digit organic growth in both Africa and Türkiye, which continues to translate into strong growth in euro terms. Growth in adjusted EBITDA for the group also accelerated to 6.4% in the H1, supported by strong top-line growth and margin expansion.
Margherita Della Valle: Most importantly, we are on track to deliver very strong growth in adjusted free cash flow. This is just the first year of our multi-year double-digit cash flow growth trajectory. Looking at our FY27 outlook, we said in our Q1 update in July that we were tracking towards the upper end of the group guidance ranges, and this was after only three months of our fiscal year. I am really pleased that with such a strong H1, I am confident to upgrade our outlook. To translate what this means in percentage terms, the midpoint of our upgraded guidance range implies organic growth just above 20% in adjusted free cash flow. Whilst I am very happy with the group overall performance, I am under no illusion that we still have much more to do in Germany.
Margherita Della Valle: But if you look beyond the headlines, you can see that we have turned the corner in important parts of our business, with consistent growth in consumer broadband and in B2B. We also see continued improvements in customer satisfaction across all our products. We continue to invest in our scale, mobile, and fixed networks, and simplify our customer journeys. We are also taking action to further step up our productivity in Germany with the next phase of our headcount reduction program. Yesterday, we announced 2,300 role reductions. This means that we will have reduced headcount in Germany by 40% since we began our transformation. Looking now to the rest of the group, we have continued to make good progress in improving our customer experience, simplifying our business, and driving sustainable growth. Starting with our number one priority, our customers.
Margherita Della Valle: We are improving customer experience by removing friction, resolving issues faster, often with the assistance of AI, and offering new propositions, such as SuperMobile in the UK. We can see it in our results. We hold leadership positions now in customer satisfaction in 12 of our markets. Sentiment within our customer base is improving across all our segments. Most importantly, our mobile customer loyalty continues to grow. From a simplicity perspective, we have started the next phase of our cost transformation journey, building on a long track record of driving change inside Vodafone. As you will remember, in May, we announced that we will deliver over EUR 2 billion annual gross savings by FY30 across Europe and our shared operations. This will translate into over EUR 1 billion in annual net OpEx savings. This is a comprehensive program. We will remove more than 30% of our addressable costs.
Margherita Della Valle: We have made a fast start, delivering over EUR 200 million of gross savings in the first six months, supported by 3,000 role reductions, as well as the first EUR 50 million synergies in the UK. We now have clear line of sight on a net reduction in OpEx of over EUR 200 million for the full year. The delivery of this program will have meaningful impact on our results. The net savings target is equivalent to more than 10% of our adjusted EBITDA in Europe, driving margin expansion in the years ahead. That takes me to our third strategic pillar, growth. You have heard me talk about Europe. We are taking structural actions in Germany, see unique opportunities in the UK, and will deliver the next wave of productivity growth and margin expansion. There are two other important growth levers within our portfolio, Africa and B2B.
Margherita Della Valle: In Africa, the growth drivers remain attractive, growing customer base underpinned by population growth, increasing data usage, expanding next-generation connectivity, and Africa's largest fintech platform with over 100 million users and millions of merchants. In B2B, we are one of Europe's leading platforms for businesses, with 5 million customers. We continue to gain share in growing markets as we expand our range of products and services, bringing the best of connectivity, but also cloud, security, AI, and other digital solutions together to help businesses and the public sector accelerate their digital transformation and adoption of AI. With our sustained digital services growth, we now have a portfolio with revenue in excess of EUR 2 billion, meaning we have moved firmly beyond core connectivity into non-linear growth opportunities such as cloud, IoT, and security.
Margherita Della Valle: Taking this all together, through the continued execution of our strategic priorities of customers, simplicity, and growth, we are well-positioned for the future. Our growth will be driven by our strong market positions and the full breadth of opportunities across Europe, Africa, and B2B. It is these strong foundations that underpin my confidence in our medium-term ambition to deliver double-digit organic growth in adjusted free cash flow. This year, we have made a strong start, which enables us to upgrade our FY27 group guidance. Just to recap, the midpoint of our new group ranges imply that our organic growth will be accelerating to 7% for adjusted EBITDA and 21% for adjusted free cash flow. With that, Pilar and I are looking forward to your questions.
Operator: Thank you very much. As a reminder to everyone, please only pose one question, just to give all analysts a chance to speak this morning. Our first question today comes from Akhil Dattani at JPMorgan. Akhil, please go ahead.
Akhil Dattani: Hi, morning. Thanks for taking the question. I have a question, Margherita, on the guidance upgrade that you talked us through just now. There are two quick parts to it. The first is that you were previously guiding to the upper end of your former ranges, and the upper end of your former range is now the midpoint of your new ranges. I guess I would love to understand what the messaging is here. Is it optimism that it is the upper half of this range? Can you sort of talk us through specifically where the greater optimism is in the business as a whole? The second piece of it is in the mix, you have left the European guidance unchanged. H1 EBITDA was down 1. The implied H2 is anywhere from -2 to +6, so it is quite a big range implied for H2.
Akhil Dattani: Maybe you could help us understand what are the key swing factors for H2 that determine where you come out for Europe. Thanks a lot.
Margherita Della Valle: Thank you, Akhil, and maybe, Pilar, you can build on where is the optimism coming from.
Pilar López Álvarez: Thank you, Akhil. Thank you for the question. As you rightly said, in July, we were already expecting to deliver at the upper end of the previous ranges. Since then, we have really seen a strong momentum in our execution. We have seen it in the UK, which is performing strongly with top-line delivery and the synergy delivery. We are seeing in Germany consistent growth in consumer broadband and in B2B. This has allowed us to absorb the impact of the European Court of Justice ruling, remember, earlier in the quarter, which has had an impact of EUR 100 million on our EBITDA, and that has allowed us to reconfirm the Europe outlook. Beyond Europe, you have seen the strong performance in Africa and Turkey in the H1, and we are expecting that good growth to continue.
Pilar López Álvarez: You have also seen the fast start we have made to the efficiency program overall. With that, we now expect that acceleration in growth that Margherita was referring to. At the midpoint of the new guidance range, we are expecting to grow organically adjusted EBITDA 7% and adjusted free cash flow over 20%. You mentioned the European guidance. We are very confident at the midpoint of the guidance, where Europe is stable. In fact, as I mentioned, we were able to stay in the outlook because the UK and Germany were performing better, and they allow us to, again, as I say, to reconfirm and absorb the impact of the ECJ.
Margherita Della Valle: Maybe if I can build on that, Akhil. I think the key word for us is acceleration. In May, as a result of all the changes we have been driving and we are driving in the group, whether it is portfolio or whether it is investment on customer and simplicity, I talked about we are opening a new growth chapter. By that is what we mean. We mean acceleration of growth. This is where we see very much the 7% and the 20% or 21% that we are announcing today as a good first step. But the optimism is coming really from the midterm. In May, we said we were expecting to have double-digit growth from now on in our organic cash flow generation. Again, this is the result of the changes. I will reiterate what I just said earlier, right?
Margherita Della Valle: We have structural actions in Germany with progress quarter after quarter, unique opportunities in the UK. We now have a cost reduction program that is worth net to the bottom line, 13% of European EBITDA. So, a very nice push that makes us confident on Europe. Whether it is in Europe or beyond Europe, I think you will agree that now across our markets, we are in strong position. I talked earlier around breadth of opportunities because wherever you look, you see reasons to expect growth in Europe, growth in Africa, growth in B2B. So, pleased to have done a strong start. Guidance upgrade today, but our focus is all around acceleration for the midterm.
Akhil Dattani: That is really clear. Thanks very much.
Operator: Thank you. Our next question today comes from Carl Murdock-Smith from Citigroup. Carl, please go ahead.
Carl Murdock-Smith: Thank you. Morning. I would like to ask about Germany, please. You made the comment this morning that you have much more to do in Germany. You have had to make the non-cash impairment to the German business today. You are facing the impact of the recent ECJ ruling that you have mentioned. Deutsche Telekom was making some positive comments last week about its ability to take further share in the MDU market, as some access bottlenecks get resolved going forward. Can you expand a bit more on your earlier comments about what you are doing to turn the business around, but also to protect your MDU business in the face of potentially greater pressures going forward? Thank you.
Margherita Della Valle: Thank you, Carl. Maybe one-liner from Pilar on the accounting, then I will talk about the business.
Pilar López Álvarez: Yeah. You mentioned non-cash, and as you know, we regularly review the carrying value of all of our assets, and now in the context of higher interest rates. The mechanics of the impairment, close to three-quarters of the charge have to do with higher German government bond yields, and that impact the discount rate. You have seen in the release, the discount rate we are applying is 8% now versus 7.5% in the last disclosure. So really, the impairment has to do with the higher interest rates and the impact of the ECJ that, as you mentioned, in the introduction.
Margherita Della Valle: On Germany more broadly, I think beyond the headlines, you will see in all the data points that we are giving that quarter after quarter, we continue to see structural progress. In the last year, this has been exemplified by the fact that we are now consistently growing in Vodafone Business, and we are also consistently growing in consumer on the broadband part of our business. These, for us, were really important shifts. As we just mentioned, actually, if it had not been for the ECJ ruling, Germany, like the UK, were both tracking ahead, which is why we have completely reconfirmed our European guidance for the year, absorbing EUR 100 million impact. So, we are taking the right actions for sustainable growth in what is, we said this previously, the largest market in Europe. We are operating at scale in both fixed and mobile, and we have a strong brand.
Margherita Della Valle: Now, you mentioned, I said there is more to do, and I am under no illusion. Our financial performance in the last few years in Germany has been disappointing, but we have not been sitting still. Step by step, we have continued to look resolutely on the midterm sustainable growth objective, which is why we have continued to invest on our long-term health of the business, and we have simplified our operations. The simplification is ongoing. You know that in March, we completed the first wave of our headcount reductions in Germany and across Europe. In Germany specifically, that first wave reduced the headcount by 20%, and now we have just announced yesterday another 2,300 headcount reductions.
Margherita Della Valle: But the important point is that we are simplifying, we are getting leaner, as we should, but at the same time, we have two, I would call them, significant growth drivers that we are pushing in Germany. The first one is, as everywhere else, customer experience. You hear us saying, and it may be a bit boring at this point, but quarter after quarter, our NPS, which we track obsessively across all our products, continues to improve. This is because we are simplifying our journeys, we are investing in our networks, we become better and broader every single day. The second growth driver is, we can now say that we have developed real assets in Germany, and more broadly, on B2B digital services.
Margherita Della Valle: You heard in my introduction, I talked about cloud, I talked about AI, I talked about cybersecurity, all things that our customers are really demanding from us. It is the investments we have done, and we will continue to do in that space, that have driven, for example, in Germany, 30% digital services growth in H1. So, I stand by what I said. We are not yet where we need to be. I think this is clear. But again, as I said, I think we are building a very different Vodafone Germany, which is fit for the future.
Carl Murdock-Smith: Thank you. Any comment on the point about MDU going forward and the ability to protect that?
Margherita Della Valle: Sure. We actually did not see any significant movements in MDUs, but perhaps it is because the fiber penetration in MDUs, and particularly in what I would call the cable MDUs, which are not all the MDUs of Germany, the fiber penetration is still very low, so we did not see it. The impact on our net adds that we may want to talk about later is, if we have negative net adds, it is gross adds. It is not coming from churn. Also, when you look at the numbers we publish, you will find that a disproportionately high amount of these negative net adds are in the DSL areas. So, nothing to do with the cable MDUs.
Carl Murdock-Smith: That is great. Thank you very much.
Operator: Thank you very much. Our next question today comes from Andrew Lee at Goldman Sachs. Andrew, please go ahead.
Andrew Lee: Good morning. Question on cost efficiencies for both of you. It seems you are more confident in achieving those cost efficiencies today than you were six months ago. So, just wanted to ask, is that simply just the pace of achieving cost efficiencies, or have you gained in confidence in the scope to maybe even raise those ambitions at a gross and net basis? That is the question, and if you can give any color on what you are seeing that is giving you the confidence here, that would be helpful. Thank you.
Margherita Della Valle: Sure. I was smiling, Andrew, when you were asking me about cost, because it reminded me of when we started working together.
Andrew Lee: Hello
Margherita Della Valle: which was at the beginning of the first wave, a few years ago, of our cost transformation programs. Now we are on wave 3. I would say Pilar can give us an update of what we see in terms of action, but we are just at the beginning of the wave 3, and we are effectively executing on what we presented to you in May, which is what we are very simply working on. From this
Pilar López Álvarez: Yeah
Margherita Della Valle: fiscal year onwards, we will keep updating you on the progress. Pilar?
Pilar López Álvarez: No, definitely. Just maybe to put in context the targets we set, we committed in May, which Margherita had in her introduction, the over EUR 2 billion annual cost savings, this is effectively a 30% reduction of our addressable cost base across Europe and shared operations. This will translate into over EUR 1 billion of net OpEx savings. We like to set net targets that we can track, you can track on our EBITDA. Effectively, this is 13% of our Europe EBITDA. That is just to put in context. Then in terms of the confidence, well, it is the first 6 months. You have seen there is a fast start with EUR 200 million of gross savings delivered in this H1. Where are we delivering those savings?
Pilar López Álvarez: It is a combination of the UK synergies, EUR 50 million gross savings this H1, simplification, and you have heard about the 3,000 role reduction in the H1 after the 11,000 we reduced in the past, and the announcement we made in Germany yesterday, another 2,300 over the next couple of years. There are a number of examples of how we are simplifying with our shared operations across the board. Then the third lever is AI. There, it is great to see how the scaled platform that we have built is already delivering savings. There are a number of areas where we are being pretty innovative. You have some of the examples in the presentation, and those are already delivering real savings and contributing to the net target that we set. I think what else to say there?
Pilar López Álvarez: Well, there are headwinds, and we also need to be very aware of those in terms of inflationary pressures on payroll, on energy, on the cost of the tower leases. But despite the headwinds, we have made a faster start in H1, and we will continue accelerating in the delivery, and we expect to deliver over EUR 200 million of net cost reduction already this fiscal. As Margherita said, there is a long track record of delivering against targets. As we have more visibility and progress on our delivery, we will update on progress, of course, and also we will update on further opportunities as we have done in the past.
Margherita Della Valle: The short summary is EUR 1 billion to the bottom line in Europe, and roughly a quarter of that will be delivered on the first year of the plan. So, a very logical phasing.
Andrew Lee: Thank you.
Operator: Thank you very much. Our next question today comes from Joshua Mills at BNP Paribas Exane. Joshua, please go ahead.
Joshua Mills: Hi, guys. Thanks for the questions. I am going to dig into Germany in a bit more detail. Firstly, on the service revenue trends, you talked about strong B2B growth. Could you just give us an update on what percentage of your German service revenue is coming from B2B at the moment? Then within the mix, it looks like the digital services business has been a big driver of that. Perhaps you could give maybe a bit of flavor on whether much better digital service revenue growth is driving this, or whether the connectivity side of things has really changed as well. That would be the first question. Secondly, on competition, with results last week, I think DT were commenting a bit on mobile competition, and we have seen the launch of the new Simsalasim MVNO, and also Revolut in the German mobile market.
Joshua Mills: Are you seeing any change on mobile competition going forwards? Thanks very much.
Margherita Della Valle: Maybe in a nutshell, I start from the second part, which is not really. I would say we have seen a few moves in this quarter, some up, some down. Net-net, I think nothing is materially changing in the pricing environment in Germany. All the MVNOs you are talking about, MVNOs are not new in any of our markets. I would say, generally speaking, very much more of the same. On B2B, turning around B2B was one of our key priorities in Germany. As I was mentioning earlier, you see now the consistent growth, so maybe I can give you a bit more data points behind this. In terms of sizing, roughly, IR can help with the precision, but imagine roughly 25% of the revenues in Germany from B2B and 25% or a little bit more of the B2B revenues coming from digital services.
Margherita Della Valle: Now, this last percentage is moving very fast, so we need to update it. Our strategy in Germany has really been to focus on gaining share on the new growth areas, cloud, AI, security. We are also improving our connectivity, by the way, to your point, but all the growth, the real growth is coming from digital services. Three things have made a difference to us in the last year. The first is, you might remember me saying it for across the group, we have spent quite a bit of time and investment in expanding our portfolio in digital services. If I take the things that maybe are more relevant to Germany in the near term, just to give you a sense, we have launched an AI concierge service to support SME in driving their productivities.
Margherita Della Valle: We are seeing great success from our German cybersecurity operations center to serve our B2B customers. Then we have launched a sovereign AI proposition also in the last six months. This is, I would say, the organic side, but second driver, we have also been investing inorganically. You might remember, we have acquired, maybe it is a year ago now, Skaylink, a company that is helping customer, particularly in the Mittelstand in Germany, moving to the cloud. Again, if I look at, I do not know, the last two quarters, we have already signed over 100 contracts with Vodafone customers, so significant synergies. We bring together all our range of services. Last but not least, I would call out our team in Germany. It is fair to say that we have gone through, again, a lot of change, sale processes, effectiveness.
Margherita Della Valle: The team has been great at building a strong pipeline. We see the momentum, and we will see the momentum continuing in the quarters to come. Expect this to be a good growth opportunity for us in Germany. Absolutely one of our best growth opportunities ahead of us. By the way, I say Germany, not just in Germany.
Operator: Thank you very much. Our next question this morning comes from David Wright at Bank of America Merrill Lynch. David, please go ahead.
David Wright: Hello, guys. Hopefully you can hear me. Yeah, on Germany again, there is obviously been a lot of discussion around bringing the costs down. I wondered to what extent you think about bringing the CapEx down, decapitalizing the business, and whether that could be more network sharing agreements, whether it be on the mobile side or even the fixed line side. Deutsche Telekom, I think, indicated a potential willingness to share in fiber. Is that a route that you could pursue? I say that within a general framework of cable infrastructure operators moving in that direction. Then just a super quick add-on on Germany, which is just on the accounting side, maybe to confirm. You mentioned a provision taken against the ECJ ruling. Is that a cash flow out item this fiscal year, and is that the provision included in the cash flow guidance? Thank you.
Margherita Della Valle: Thank you, David. Pilar, you can take the provision.
Pilar López Álvarez: I mean, we have taken a small provision related to the ongoing class action. We do not expect the class action to conclude at best till late calendar 2027. Again, a small provision, and again, from a cash, potential cash timing perspective, we do not expect the action to conclude, again, at best late 2027. I hope that helps you clarify.
David Wright: That is not in this year's cash flow guidance?
Pilar López Álvarez: Absolutely not. It is-
Margherita Della Valle: The process will last well into 2027, the court process. We said it is small. It is worth saying that when you look at the EBITDA trends in H1 in Germany, it is worth 2 percentage points. We have done -3.2, and -2 of that was this provision.
David Wright: Really sorry. Just to confirm that the EBITDA is adjusted for the EUR 100 million or so?
Margherita Della Valle: Yeah.
David Wright: The cash flow guidance is only adjusted for the derecognition, which is more like EUR 60, EUR 65?
Pilar López Álvarez: Correct.
David Wright: Okay, thank you. On to the infra piece, Margherita.
Margherita Della Valle: Yeah. On to the CapEx. I would say, David, I would not guide to any material reduction of our capital intensity in Germany. This is because, if you think about our fixed line strategy, we will continue to invest on mobile, digital services, and the like. Specifically, as a recap of our strategy in fixed in Germany, we have three pillars, as you know. One is continuing to invest in our cable network, and our cable network performance will continue to grow for years to come. Within our CapEx envelope, we are continuing to fiberize the cable network, and it is getting closer and closer to the buildings in Germany, meter by meter. On top of that, as you know, we reallocate frequencies and all the things that are strengthening the cable performance.
Margherita Della Valle: We have just increased the uplink speeds, for example, for all our business customers in Germany. The cable roadmap has its own evolution, positive evolution. In parallel with that, we are building fiber within OXG, and this is always happy to do in partnerships, as you have seen. We have now reached 1.1 million households. We expect to be at 1.4 million at the end of the fiscal year. We are probably the second-biggest fiber builder in the country now. We are building across more than 75 cities, so this is progressing well.
Margherita Della Valle: Last but not least, our objective in every market in Vodafone is to give to our customers the broadest possible choice in making sure they access gigabit products, which is why in the DSL areas, we are also wholesaling fiber in Germany where it is available. Therefore, that gives us the possibility to essentially sell gigabit speeds to more than three-quarters of German households, and we will continue to do so. Anyway, back to where we started, you should continue to expect the cable network to evolve, and you should continue to expect our portfolio of CapEx initiatives in Germany to be broadly similar. We will continue to build fiber through partnerships.
David Wright: Thank you. Thank you.
Operator: Thank you very much. Our next question today comes from James Ratzer at New Street Research. James, please go ahead.
James Ratzer: Yes, good morning, and thanks very much for taking the questions. Margherita, I mean, I think my question really builds a bit more on the question from Andrew earlier around cost reduction. I do not want to underestimate the difficulty in the challenge you have in terms of the cost reduction and the magnitude of what you have announced. But it seems like since you announced it back in May, we have obviously had one very big change, which was that Xavier Niel announced that he is coming onto your shareholder register, and he has obviously a very strong and successful reputation on being very aggressive around cost reduction. So, as presumably you have had preliminary discussions with him and his team, do you think your 2 billion target is you going absolutely flat out on cost reduction from here?
James Ratzer: I mean, is there any scope at all, given the fresh eyes his team might have brought to your business, that there can be any scope for that to be increased? What can you say at this stage also about what we should expect around board representation? I think the voting rights now are just a fraction below 20%. I mean, if we use the Etisalat framework, that might allow him one board seat. Is that what we should expect, or do you think he could end up taking two board seats? Thank you.
Margherita Della Valle: James, on Vega, I think it is important to say that we never comment on engagement with individual shareholders, but in this particular case, the share transfer is still not approved, so the effects are not completed. There is a number of regulatory processes still open, particularly the NSIA process in the UK, and this is about national security. I think Vega's expectations were for a conclusion of all these processes by the end of this calendar year, but that is not where we are. It would really not be appropriate for me to comment or speculate on behalf of a future shareholder. If I instead answer around our own plans, again, you have been with us for a long time, so you are familiar with all the cost transformation programs that we have also run in the past.
Margherita Della Valle: I need to say there is one characteristic, you may have heard me say this before, that I do care about when we announce cost transformation, which is to be able to commit to net OpEx reduction that effectively can be really directly visible in the P&L. I think you are used to that with us, and that's how, as we started our new growth chapter in May, we shaped our forecast for the future. As Pilar was saying earlier, this plan comes from, if you want, the various opportunities that we have today as we update every three years or so into a new plan, and it's a combination of overall simplification continuing, UK synergies, and the very significant contribution that AI is making into our operations. As we look at all this, we look at what's possible, and we benchmark as much as we possibly can.
Margherita Della Valle: We have just started, and so in terms of the future, as Pilar was mentioning, we will continue to update you, and we'll see what the opportunities are, exactly as we used to do in previous occasions.
James Ratzer: Great. Thank you.
Operator: Thank you very much. Our next question this morning comes from Robert Grindle from Deutsche Numis. Robert, please go ahead.
Robert Grindle: Yeah, thank you, and good morning. I am going to follow up on the costs, I am afraid. It is not about your costs out, it is about the costs of taking those costs out, because you have had a fast start, and you plan to do more in H2, including the German headcount reduction. But there does not seem to be any increase in the restructuring costs that you are talking about, the EUR 700 million or so. So, were the German headcount reductions always in the plan for that, or did you get better value elsewhere? Maybe it is AI, maybe you are just getting good at this. Some color there would be helpful. Thank you.
Margherita Della Valle: The short answer, Rob, I will give it, is that it was already in the plan, yeah. We announced these plans back in May, and by definition, the impact were included in our May guidance. So, no change, no surprises. It is interesting how many questions on costs we get today, and we did not get in May. We have probably a lot to say then.
Robert Grindle: Nevertheless, you seem to be going ahead of plan, whereas you are meeting your targets, so good going. Thanks.
Margherita Della Valle: Thank you.
Operator: Thank you very much. Our next question today comes from Polo Tang from UBS. Polo, please go ahead.
Polo Tang: Hi. Thanks for taking the question. I just have one question in terms of OXG. You have a new partner for the fiber JV with Société Générale replacing Altice in Germany. However, this means that Vodafone will now have to fund equity injections of up to EUR 1.2 billion. Can you clarify how these equity injections will be accounted for, and will it impact adjusted free cash flow?
Margherita Della Valle: I think the situation is a little bit different, but let me tell you where we stand. First of all, we have been pleased to welcome a new partner in OXG. Société Générale knew OXG well because they were involved from the very start, and their presence essentially gives us an enhanced funding position together with full strategic flexibility as we look into the future. The governance of the JV is unchanged. The objectives of the JV are unchanged. Société Générale comes in with different terms from Altice, and this is because we are at a different stage of the rollout. They are a financial investor, not a strategic investor, but perhaps the most important point is, we should face it, the conditions in the fiber market in Germany today are very different from where they were four years ago. So, that's where we are.
Margherita Della Valle: In terms of funding and equity contribution, the funding of the JV will be a mix of debt and equity, and in exactly what proportion, I think that also evolves over time, depending on the rollout, again, overall conditions and the strategy that the JV will want to adopt. But from a Vodafone perspective, keep in mind that any equity that will come out from the mix of debt and equity will be very much phased over the duration of the build. I think you have seen this very clearly in the last two to three years. We've built 1.1 million households, and equity contributions from both partners have been very much phased. So, they will continue to be phased, and we will see the impact as we go along.
Polo Tang: Thanks.
Operator: Thank you very much. We have time for one last question this morning, and this question comes from Emmet Kelly at Morgan Stanley. Emmet, please go ahead.
Emmet Kelly: Yes. Good morning, everybody. Thank you for taking my question. My question is on Africa, please. You have been consolidating the extra 15% equity stake in Safaricom since 1 July. Obviously, the acquisition takes you to a majority, gives you consolidation of Kenya, Ethiopia, and the tech business. However, I think most of us know that in September, Kenya's High Court declared the 15% stake sale void. Might be a question maybe more for Vodacom, but I would be keen to get your opinion on this. Can you give us an update on where we stand today and how this situation might evolve going forward. What is your expectation there. Thank you very much.
Margherita Della Valle: Thank you, Emmet. Absolutely. I mean, consistently with our strategy, it was a very natural step for us to add this 15% stake into Safaricom that we have been working with for a very long time, as you know. Leading telco, strong positions, and strong growth opportunities, also between connectivity and financial services. We have had local legal challenges in the Kenyan court, as you say. That process is now going through the appeals court, and the appeal has been fast-tracked for urgent resolution, so we look forward to that. In the meantime, as we wait for the conclusion of the appeal, you will have seen the court has indicated that the status quo is maintained. So, we keep going and look forward to the conclusion of the legal process.
Emmet Kelly: Thank you very much.
Operator: Thank you. This concludes our Q&A session this morning. I would now like to hand back to Margherita for any closing remarks.
Margherita Della Valle: Just want to say thank you for your time, thank you for following us, and looking forward to see you again when we have the results of our full year. Thank you.
