vodafone group plc half year · pdf filevodafone group plc half year results 15 november 2016...
TRANSCRIPT
Vodafone Group Plc Half year results
15 November 2016
For the six months ended
30 September 2016
Information in this presentation relating to the price at which
relevant investments have been bought or sold in the past or the
yield on such investments cannot be relied upon as a guide to the
future performance of such investments.
This presentation does not constitute an offering of securities or
otherwise constitute an invitation or inducement to any person to
underwrite, subscribe for or otherwise acquire or dispose of
securities in any company within the Group.
This presentation contains forward-looking statements within the
meaning of the US Private Securities Litigation Reform Act of 1995
which are subject to risks and uncertainties because they relate to
future events. Some of the factors which may cause actual results
to differ from these forward-looking statements are discussed on
the final slide of this presentation.
Disclaimer
This presentation also contains non-GAAP financial information
which the Group’s management believes is valuable in
understanding the performance of the Group. However, non-GAAP
information is not uniformly defined by all companies and
therefore it may not be comparable with similarly titled measures
disclosed by other companies, including those in the Group’s
industry. Although these measures are important in the
assessment and management of the Group’s business, they
should not be viewed in isolation or as replacements for, but
rather as complementary to, the comparable GAAP measures.
Vodafone, the Vodafone Portrait the Vodafone Speechmark,
Vodacom, M-Pesa and Vodafone One are trade marks of the
Vodafone Group. The Vodafone Rhombus is a registered design of
the Vodafone Group. Other product and company names
mentioned herein may be the trade marks of their respective
owners.
2
Group Chief Executive Vittorio Colao
Business review
Financial performance
• Q2 Group service revenue +2.4% (Q1 +2.2%); underlying momentum offsets increased roaming drag
• Improvement led by Europe, +1.0%; base growth and more-for-more actions stabilising ARPU, AMAP, +7.1%
• H1 Group EBITDA +4.3% to €7.9bn, supported by strong cost control
• Non-cash impairment in India of €5.0bn, net of tax, reflecting increased competition
• Dividend per share €c4.74, up 1.9%1
All growth rates shown in this document are organic unless otherwise stated
1. Based on 31 March 2016 year-end €: £exchange rate of 1.2647
2. Targeted coverage by end FY 16/17
First half highlights
Continued momentum in growth engines in Q2 • Data: volume +61%; driven by growth in 4G customers to 59m
• Enterprise: continued outperformance, +3.3% service revenue growth
• Fixed: broadband base +327k to 14.0m, of which 6.0m on-net. 31m on-net NGN households reached
4
Strategic progress • Strengthened spectrum position in India: 4G in 17 key circles (91% of service revenues)2
• JV agreements: Ziggo Netherlands regulatory approval received, Sky New Zealand merger approval ongoing
1,444 1,290
1,135
1,425 1,415
230
414 416 348 327
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
21.8 21.2 20.8 21.0 21.4
25.4 24.6 24.0 25.0 25.4
14.6 14.7 14.6 13.7 13.9
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Group Europe AMAP
Continued momentum
5
Stabilising ARPU in Europe Financials
Service revenue growth1 (%)
• Growing revenue despite 0.4pp
roaming regulation drag
• Benefiting from more-for-more offers
1.2 1.4 1.8 2.2 2.4
(1.0) (0.6) (0.3) 0.3 1.0
6.7 6.5 7.4 7.7
7.1
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Group Europe AMAP
Growing customer base
(000s) Customer net adds
• Contract customer growth, supported by
lower churn
• Fixed net adds +42% due to Europe NGN
Consumer contract ARPU (€)
Mobile contract
Fixed broadband
1. Q4 15/16 shows underlying growth (excl leap year impact and accounting changes). Reported organic growth rates are Group +2.5%, Europe +0.5% and AMAP +8.1%
Enhancing customer experience: network
6
Mobile network improvement
69% of European urban sites
with fibre1
90% 4G coverage across Europe (+10pp YoY)
37m on-net NGN coverage
pro-forma for Ziggo
53% NGN coverage in Europe, matching incumbents
Fixed network improvement
82
88
90
1.16
0.99
0.68
Q2 14/15 Q2 15/16 Q2 16/17
User experience (%)
37
66
82
22 27 31
Q2 14/15 Q2 15/16 Q2 16/17
European NGN homes reached (m)
15/20 Best data network in
markets
Largest NGN
footprint in Europe, #2 on-net
European data sessions >3Mbps
AMAP dropped call rate
Total
On-net
1. Big 4 European markets (Germany, Italy, Spain, UK) 4G sites
Enhancing customer experience: CARE
7
Percentage point improvements are YoY
1. My Vodafone App is available in 21 markets, with 13 markets offering real time monitoring
17
Network ‘guarantee’
markets
90% EU data
sessions >3Mbps (+2pp)
13 Real time monitoring
markets1
My Vodafone App penetration
39% (+13pp)
17 Personalised offers
markets
Consumer contract churn
17.0% (-1.2pp)
14 24/7 live help
markets
First contact resolution
66% (N/A)
Enhancing customer experience: Net Promoter Score
8
• Gap to third maintained despite more-for-more actions
(2)
1 2
1
11 12
13 14
Mar 15 Sep 15 Mar 16 Sep 16
(points)
1. Gap to next best based on 21 markets, gap to 3rd based on 20 markets and represents the simple average of the difference in Consumer NPS between Vodafone and the 3rd ranking competitor.
In markets where Vodafone is the 3rd ranking competitor the negative difference between Vodafone and the 2nd ranking competitor is used.
Consumer NPS1 Consumer NPS
Gap to next best
Gap to third
Example CARE actions
Score improving YoY C
ha
lle
ng
er
Le
ad
/C
o-l
ea
d
• Lead/co-lead in 18/21 markets; 78% of revenue
Spain, mobile network
guarantee
Network NPS +6 points Apr - Sep 16
Germany, legacy migration to Red Giga tariffs
to reward loyalty
NPS +16 points May - Aug 16
Score not improving YoY
'4G try me here'
Mobile customers (% of base)
417 455
498
569
670
75
67 64 62
61
20
30
40
50
60
70
80
400
500
600
700
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Growth engines: data take-up
9
Increasing 4G penetration Growing data usage Further growth opportunity
Mobile data traffic
30.1 34.8
46.8 52.5
58.9
24.3 28.1
33.4 36.0
39.3
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
(m) 4G customers
• 4G now 57% of EU data traffic (+19pp YoY)
• Rising smartphone average usage:
– Europe 1.4GB, +48%, AMAP 0.9GB, +37%
• Strong data growth driven by 4G
• 3G/4G capacity utilisation up only +1pp
4
34 32
Europe
122m AMAP
348m
• Smartphone penetration still only ~50%
Group
Europe
Volume (PB)
Growth (%)
4G data users
3G/2G data users
25.8
23.9 24.8
29.8 28.1 28.5
10.1 10.8
11.8
23.4
19.0 20.1
Q2
14/15
Q3
14/15
Q4
14/15
Q1
15/16
Q2
15/16
Q3
15/16
Q4
15/16
Q1
16/17
Q2
16/17
Growth engines: data monetisation
10
… lowering unit data prices ‘More-for-more’ actions...
Examples
H1 13/14 H1 14/15 H1 15/16 H1 16/17
European ARPU per GB
+€2
More value to subscribers
More value to operators
Germany UK
Italy1
Spain
May 2016
April 2016
April 2016
Feb 2015 onwards
+€1-6
+€5
+£1-4
• Unlimited EU roaming
• Extra 1 - 2GB
• 4G max
• Personalised CVM
• 4G, dedicated
customer service
• EU roaming allowance
• EU & US roaming
allowance
• Extra 0.5 - 1GB
• EU roaming allowance
• Up to an extra 5GB
… and stabilising ARPU
Consumer contract (local currency)
40% CAGR decline
over last
two years
1. Consumer prepaid
~30% of Enterprise service revenue
2.5
4.7
1.7
3.3
4.6
2.8
Total Enterprise Fixed Mobile
3.8
14.7
21.3
VGE IoT Cloud & Hosting
Growth engines: enterprise
11
Improving in mobile Growing in strategic areas
Service revenue growth Q2 service revenue growth (%) (%)
• Fixed outperformance; IP-VPN +7.6%
• Mobile improvement; ARPU decline
easing, customers +7.5%
• VGE: lower growth; roaming impact
• IoT: 45m connections, +39%
Q2 16/17
Q1 16/171
Leading network and service
of H1 Group service revenue
NPS leader
out of
Enterprise markets
Largest 4G IoT footprint
countries
IP-VPN global networks in
countries
Platform
in
1. Q1 16/17 service revenue growth has been restated to take into account the reallocation in Germany of certain customers from Enterprise SoHo to consumer
12
Growth engines: fixed and convergence - momentum
230
414 416
348 327
294
374
415 381
354
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Total broadband
NGN
(000s)
Customer momentum
• 51% of broadband customers on NGN (+6pp YoY)
Group fixed broadband net adds
NGN self-build progress
Germany
• Market leading 400 Mbps
launched June
Italy
• +0.2m in Q2. Enel rolling out in 5 cities, 250 longer-term
Spain
• +0.6m HH in Q2
Portugal
• +0.1m in Q2
Greece
• Commenced fibre roll-out
Ireland
• 65k Siro HH to be passed by year end
31m households
passed +4m
YoY
27%
13%
6%
Mobile only Triple Play Quad Play
Driving convergence
13
Growth engines: fixed and convergence - opportunity
NGN on-net penetration
• 85% of Europe NGN base is now on-net
• Only 1.9 RGUs per unique fixed subscriber in Europe
• 9.8m TV customers (+121k QoQ)
On-net
customers (m)
On-net
households (m)
Penetration
(%)
3.2 13.7 23
2.1 9.5 22
0.2 4.1 5
Others 0.4 3.4 12
Europe 5.9 30.7 19 Spain churn
Lowering churn via convergence
-14pp
Further growth opportunity
(%)
% of Fixed broadband customers on converged offers
-7pp
25% Q2 15/16
28% Q2 16/17
1. A converged customer is a customer who has fixed broadband and mobile voice products and has a cross discount or an integrated convergent offer
Roaming caps: €300m revenue
impact in FY 16/17
pre-mitigation
Partial mitigation through worry-free offers:
55% of roamers
Convergence momentum supported by regulatory process
14
Minimum 25 year spectrum licences
Future remedy of choice
is passive duct and pole access
Access deregulated only if: investment is in fibre
and there is sustainable competition via
commercial agreements, co-investment or wholesale access
Further harmonisation
of EU regulation “Double lock” safeguard; BEREC
and EC can over-rule NRAs
No material regulatory
impact on cable networks
€63bn invested in the
last 3 years
European Framework review: key proposals
EC has committed to the idea
that investment and
competition are key...
… supporting Gigabit
investments...
… ensuring competitive
access conditions to very
high capacity networks
245
196
49
8 20
66
105 134
108 92
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
(1.8)
(0.4)
1.6 1.6
3.1
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Germany: improving in all segments
1. Cable service revenue growth was 6.2% in Q2 (Q1 +6.6%) excluding one-off from reclassification of CPE revenue from non-service revenue to service revenue
The German regulator intends to reduce mobile termination rates at the end of November 2016. An assumed 50% reduction would impact service revenue growth by around 1.5pp on a run-rate basis
Customer experience KPIs Financial results
• Mobile +1.3% (Q1 -0.3%); stabilising ARPU;
enterprise improved
• Fixed +6.1%; DSL turnaround, +2.9%
(Q1 -0.9%), cable strong +9.2%1
• H1 EBITDA +3.0%; margin 34.0%, +1.3pp – revenue growth and cost efficiencies
• Growing branded consumer contract base
• Indirect channels competitive
• Mobile prepaid back to growth, +218k
• DSL net adds +20k (LY -32k); stable cable
gross adds
• 4G coverage 89%, +9pp YoY; leading
375 Mbps in 27 cities
• Leading voice network quality
• CXX: migration of customers to new
portfolios
Mobile contract
Fixed
Service revenue growth (%) (000s) Customer net adds
15
(points) Consumer NPS
(3) (4)
7
14
H1 15/16 H1 16/17
Gap to next best
Gap to third
16
Italy: growth driven by ARPU enhancement and stable active base
KPIs Financials
(207) (266) (261)
(318) (289)
24 38 63 46 33
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Mobile
Fixed
(000s) Customer net adds
(2.0)
(0.3)
1.3 1.2
2.2
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Service revenue growth (%)
• Network NPS #1: 4G coverage 96%,
7.3m 4G customers
• Enel fibre deployment accelerating
• CXX: ‘Satisfied or reimbursed’ network
guarantee
• Mobile active prepaid base stable in Q2
• Fixed broadband net adds +79k in H1 to
2.0m; 0.4m on fibre (+300k YoY)
• Mobile: +1.6% (Q1 +1.4%); consumer
prepaid ARPU +9.3%
• Fixed +5.2% (Q1 +0.1%); strong base
growth and higher ARPU
• EBITDA +10.3%, margin 36.7%, +2.6pp;
tight cost control
Customer experience
(points) Consumer NPS
7
(4)
8
2
H1 15/16 H1 16/17
Gap to next best
Gap to third
Customer experience
P3 network rating
17
UK: mixed performance
KPIs Financials
90 94
1
26
92
5 14
20 28 30
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Mobile contract
Fixed
(000s) Customer net adds Service revenue growth (%)
• Leading network. 96% 4G coverage1,
recovering customer service
• CXX: first to remove line rental in
consumer broadband
• Mobile contract base +2%
• Fixed consumer broadband base
accelerating up to 97k
• Mobile -1.9% (Q1 -3.6%); lapping 08XX
regulation
• Fixed -2.9% (Q1 -1.8%); loss of two large
enterprise customers
• H1 EBITDA -6.5%, margin 18.9%, -2.8pp – enterprise fixed, increased regulation,
customer care costs
(0.5) (0.7) (0.8)
(3.2)
(2.1)
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Reported
Q4 ex. carrier effect
(0.1)
1. Based on Ofcom definition, Vodafone definition 92%
(3)
(35)
(8)
4
13
Sep
15
Dec
15
Sep
16
Touch point NPS
(points)
Co-best nationwide
#1 voice nationwide
#1 in London
(2.0) (3.1) (3.2)
1.3 0.0
1.0 0.7 0.6
4.9 3.5
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
18
Spain: sustained growth and commercial momentum
KPIs Financials
92 83
105
53
91
28
79
64
1
40
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
Mobile contract
Fixed
(000s) Customer net adds Service revenue growth (%)
• 92% 4G coverage. 6.4m 4G customers
• 14.7m NGN homes passed, 9.5m
on-net
• CXX: network performance guarantee
launched in June
• Regained commercial momentum
in Q2 following April tariff change
• Convergence: Vodafone One 2.0m
users
• Stable underlying performance QoQ:
– M4M offers and higher customer base
– Q2 lapping OOB data proposition in PY
• H1 EBITDA +4.9%, margin 27.7%,+1.2pp;
cost savings offset higher content costs
Customer experience
Reported
Ex. handset financing
(points) Consumer NPS
0
8 9
12
H1 15/16 H1 16/17
Gap to next best
Gap to third
67 67 68 70 70
24 26 28 32 36
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
• Data revenue +16% (Q1 +22%);
data prices -14%
• Voice revenue +2.7%; customer growth
• H1 EBITDA +2.6%; margin 29.6%, -0.1pp;
higher network costs offset by opex
savings
• Total data users flattening; increased
competitive pressure
• Rising 3G/4G adoption:
– smartphone penetration 35% (+6pp YoY)
• Network NPS #1
• Spectrum holding +62% in auction1
– 4G footprint in 17 circles, representing 94%
of data revenue2
Customer experience KPIs Financial results
5.6 2.3
5.3 6.4 5.4
5.3
5.3
4.9 1.3
0.9
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
India: increased competitive pressures
1. Vodafone invested a total of INR 203bn (€2.7bn) in the October 2016 spectrum auction
2. By end FY 16/17
3. Regulatory impacts include MTRs, service tax, roaming price caps and other items
10.2
7.6
10.9
6.3
Underlying growth
7.7
19
Data users
Consumer NPS
(%) (m) (points) Service revenue growth
52% 3G/4G
0
2
1
6
H1 15/16 H1 16/17
Gap to next best
Gap to third
Total
3G/4G
Regulatory impact3
Reported
India: a leading telecom operator in a long-term growth market
20
Strong nationwide position
17
23
Q4
08/09
Q4
09/10
Q4
10/11
Q4
11/12
Q4
12/13
Q4
13/14
Q4
14/15
Q4
15/16
Q1
16/17
Continuing growth opportunity
Large market, fast
GDP growth…
1.3bn population
77
40
Voice SIM Unique user
Prepared for more competition
Revenue market share (%)
#1 Brand
#1 Consumer NPS
#1 Enterprise mobility
… low penetration (%)
#1 retail outlets, leading CVM
Vodafone RED
‘unlimited plans’
Commercial focus:
4G 90 day promo:
10GB for price of 1GB
Flex
One recharge fee
for Calls, SMS and
Data
High-end users
Value seekers
10p
30p
30p
Low cost voice plans
long distance
local off-net
local on-net
254m devices
Smartphones1 4G handsets1
52m devices
39% penetration
8% penetration Investment focus: on 12 leadership and 5
strong challenger circles; ~91% of revenue
1. Estimated market penetration at May 2016
21
Vodacom: network leadership, continued strong growth
KPIs Financials
383 359
86 265
H1 15/16 H1 16/17
Total prepaid Just 4 You
(m) South Africa total prepaid bundle sales Vodacom service revenue growth (%)
• Leading 4G coverage 69%:
– #1 on download speeds and dropped calls
• CXX: “Just 4 You”; launched “Dropped
Call Compensation” with free minutes
• Customers +7.6%; record low contract
churn 4.8%
• Prepaid net adds +920k
• Data users +4%1, data bundles +47%
3.0
7.2 6.5 5.7 5.6
8.3
10.7 10.2
4.4 2.6
Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17
3.9 7.2 6.3 4.4 4.1
Group
South Africa
Internationals
Customer experience
South Africa consumer NPS
1. Active data customers have been restated to exclude customers with free allocated data bundles not used
+33%
• SA: data revenue +21%, contract ARPU
+5.7%
• Intl’: customer registration pressure
easing, return to positive net adds
• Group H1 EBITDA +4.0%; margin 38.6%,
stable underlying as SA offsets Intl’
(points)
17 16
21
16
H1 15/16 H1 16/17
Gap to next best
Gap to third
22
What’s next?
CLOUD
Gigabit Vodafone
4G+/5G
Internet
of Things
Fiberisation
What’s next: key programs towards a Gigabit Vodafone
23
Technology Network leadership
4G+/5G
Fiberisation sites and Fttx
IT transformation
by country /cluster
Transformation
Commercial Best in class service
CXX/CARE
Enterprise divisions – VGE, IoT and Cloud & Hosting
New Consumer IoT and
Data analytics units
Efficiency Top quartile
Fit 4 Growth
Digital
Zero based
budgeting Virtualisation
and cloud
Group Chief Financial Officer Nick Read
Financial review
24
7.6 7.9
H1 15/16 H1 16/17
Organic EBITDA growing faster than revenue
24.2 24.8
H1 15/16 H1 16/17
Organic service revenue (€bn)1 Organic EBITDA (€bn)1 Organic EBIT (€bn)1
2.1 2.22
H1 15/16 H1 16/17
1. Excluding UK ladder settlement and India accounting changes. H1 15/16 restated for H1 16/17 foreign exchange rates
2. Reported organic EBIT includes a benefit from lower depreciation and amortisation charges following the treatment of the Netherlands as an asset held for sale
YoY growth +2.3% +2.0%
+1.0%
+4.3% +3.6%
+1.9%
H1 15/16 H2 15/16 H1 16/17 H1 15/16 H2 15/16 H1 16/17
(3.0)%
(5.8)% (7.5)%
H1 15/16 H2 15/16 H1 16/17
+7.5%2
25
Adjusted operating profit stabilising
26
H1 16/17
(€m)
H1 15/16
(€m)
Reported
growth (%)
Adjusted operating profit1 2,283 2,281 0.1
Adjusted net financing costs (1,013) (764)
Adjusted tax expense (277) (417)
Non controlling interests (134) (172)
Adjusted earnings1 859 928
(Loss)/profit for the period (5,003) (2,344) n/a
Weighted average number of shares2 (m) 27,912 26,529
Adjusted earnings per share1 3.08c 3.50c (12.0)
1. Reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
2. Weighted average number of shares includes a dilution of 1,325 million shares following the issue of £2.8 billion of mandatory convertible bonds in February 2016
• Financing costs higher:
– Lower capitalised interest
– FX losses on intragroup funding
– Underlying broadly stable
• Share count: 26,587m excl. dilution
from mandatory convertible bonds
• Net impairment of €5.0bn in India
16.5 15.7 15.1
5.4 4.1
3.6 3.5 3.1 2.6 2.2 2.2
0.5
(2.1) (3.3)
Ghana Turkey Egypt India Vodacom Romania Spain Germany Greece Italy Portugal Ireland UK NL
Q2 15/16 Q3 15/16 Q4 15/162 Q1 16/17 Q2 16/17
Europe (1.0) (0.6) (0.3) 0.3 1.0
AMAP 6.7 6.5 7.4 7.7 7.1
Group 1.2 1.4 1.8 2.2 2.4
• 10 out of 13 European markets are in positive growth; Europe service revenue improved 2.0pp YoY
• Continued good momentum in AMAP, pressures in India
Europe service revenue continues to accelerate
Q2 16/17 organic service revenue (%)
1
1. Excluding impact of handset financing
2. Underlying service revenue excludes leap year benefit and accounting changes 27
All growth engines contributing
(0.1)
2.3
1.8
0.6 0.8
(0.8)
European consumer
mobile
AMAP consumer
mobile
Consumer fixed line Enterprise Carrier, wholesale
and other
H1 16/17
1. Other includes mobile and fixed wholesale, common functions and eliminations
1
H1 16/17 service revenue growth contribution (pp)
• Europe consumer mobile: largest driver of improvement in growth (H1 15/16 -1.0pp)
• AMAP consumer mobile; 0.6pp from Turkey, 0.4pp from South Africa and 0.4pp from India
• Low margin carrier voice headwinds set to reduce
Data
1.1 (excl. roaming)
0.1 (excl. roaming)
28
Cost base stable despite strong commercial momentum
H1 16/17 H1 15/16 Improvement
Mobile contract net adds (000s) 2,840 2,740 +3.6%
EU fixed broadband net adds (000s) 525 395 +33%
EU contract churn (Q2) 15.5% 15.7% 0.2pp
7.6 0.3
0.0
(0.1)
0.1 7.9
Organic H1 15/16
EBITDA
Gross margin Customer costs Technology costs Support costs Organic H1 16/17
EBITDA
(€bn)
29
Fit for growth: H1 cost drivers
Direct costs
€3.7bn +2%
Customer costs
€7.0bn 0%
• European A&R 17.2% of SR, down 0.3pp YoY
• Focus on branded channels
• Increasing online penetration (My Vodafone App 39%)
• Wholesale access fees up due to off-net broadband base, +0.5m YoY
• Content cost up €85m in Spain and Portugal
Technology costs
€3.5bn +3%
• Mobile sites +5% YoY due to Project Spring, +2% YTD
Support costs
€0.7bn -14%
• Common functions: Zero based budgeting
H1 16/17 cost base (excl. interconnect)
Total
€15.1bn Other
€0.2bn
30
Fit for growth: phase two targets identified
OpCo driven
initiatives
Group led
initiatives
Total savings
Phase 1
delivery
Phase 2
focus
ZBB
Shared
services
Sales
& distribution
Networks
& IT
Procurement
Shared services: • Digital solutions
• Insourcing application development
Sales & distribution: • Customer care through digital support
• Optimisation of indirect channels
Network & IT: • Transfer 65% of IT applications to the Cloud
• 40% reduction in data centre costs
ZBB: • Implemented across support functions
globally 2016-17 2018-20
Procurement: • Targeting 80% of global spend
• Tear down model
31
Fit for growth: benchmarking our opex performance
Higher cost saving opportunity
vs. top quartile
Lower cost saving opportunity
vs. top quartile
• Gap closing vs. top quartile
• Southern Europe most efficient
• AMAP improving despite higher
inflation pressures
• Targets set for further
improvement in all markets; focus
on Northern Europe
1. A.T. Kearney Global Competitive Benchmarking for Telecoms 2016, 3 year period
Efficiency improvement vs. mobile peers1
Ga
p v
s. t
op
qu
art
ile
Greece
South Africa
Spain
Turkey
Italy
Portugal
Germany Ireland
UK
32
La
rge
imp
rove
me
nt
Sm
all
imp
rove
me
nt
4.5
2.4 1.7
1.0
(0.9)
Ghana Egypt Turkey SA India
Broad based margin improvement
3.6
2.6
1.3 1.2 1.1
(0.1) (0.7)
(1.5)
Greece Italy Germany Spain Ireland NL UK¹ Portugal
YoY organic change in A&R and opex (%)
Europe AMAP
H1 organic EBITDA margin movement YoY (pp)
33 1. Excludes the benefit of the UK ladder settlement and FX adjustments
0.7
1.1
0.4
H1 14/15 H1 15/16 H1 16/17
Delivering on our EBITDA margin targets
34
Countries growing EBITDA > service revenue
Out of 26 countries
Group
Europe
AMAP
EBITDA margin movement YoY (pp) Multi-year margin targets
10 countries
FY 12-15
15 countries
FY 15/16
19 countries
H1 16/17
H1 15/16 H1 16/17
Capital additions normalising
Mobile
Mix of capital additions
IT
Fixed
Capacity / speed
Coverage
Capacity / speed
Coverage
AMAP
Europe
€4.0bn (14.7% of revenue)
€5.1bn (18.3% of revenue)
Capital intensity outlook (% of revenue): ‘mid-teens’
Europe: • Continue to deploy 4G+; prepare to co-lead in 5G
• >95% urban sites with fibre backhaul
AMAP: • Accelerate 4G expansion
Fixed • Footprint expansion (Southern EU)
• DOCSIS 3.1
IT • Converged modern billing & CRM systems
• Cross channel customer journeys
35
India: circle by circle investment strategy
0.4%
Leadership Challenger
Other
Market position #1 or #2
• RMS: 27%, Q1 gain
+0.8pp QoQ
• Voice: 900/1800 MHz
• Data: 3G/4G with 3-5 carriers,
scope to refarm 900 MHz
Market position #2 or #3
Market position #3 - #5
• RMS: 16%, Q1 gain
+0.5pp QoQ
• Multiple data carriers
• RMS: 11%, Q1 gain
0.0pp QoQ
• ICR agreements
Spectrum
acquired since
2010
93%
6%
FY 15/16
Capex
80%
4%
FY 15/16
EBITDA
96%
16%
4%
FY 15/16
Revenue
80%
11%
9%
5 circles
5 circles 12
circles
36
Free cash flow reflects final Project Spring payments
H1 16/17
(€m)
H1 15/16
(€m)
EBITDA 7,906 8,039
Capital additions (3,973) (5,149)
Capital creditors (1,476) (809)
Working capital (1,463) (1,676)
Net interest (363) (504)
Taxation (534) (597)
Dividends received1 129 -
Dividends to non-controlling interests (274) (182)
Other2 63 122
Free cash flow 15 (756)
1. Principally relating to Indus Towers
2. Relates to cash movements on share based payments and disposal of capital assets
• Capital creditor unwind, reflecting
timing of Project Spring payments
• Underlying effective tax rate 27.5%,
medium-term rate is mid-20s
37
• H1 net debt excludes £2.8bn mandatory convertible bonds
and $5.0bn Verizon loan notes
• H2 includes:
– India and Egypt spectrum purchases
– First tranche of VZ loan notes ($2.5bn)
– Net cash inflow of c.€0.5bn from the expected Netherlands
JV dividend distribution
Leverage
38
36.9 0.2 2.4
1.2 40.7 c.3.5
1.3 (2.2) (≥4.0)
39-40
Mar 2016 Spectrum Final 15/16
dividend
Other Sep 2016 Spectrum
and other
H1 dividend VZ loan
notes
Guidance
FCF
Mar 20171 2
3
Net debt (€bn)
H1 16/17 H1 15/16
Gross cost of
debt (%) 3.7 3.9
Average life of
bond debt 9.4yrs 7.0yrs
Net debt/EBITDA 2.6x 2.5x
1. Spectrum purchases in Germany
2. Other includes (€15m) free cash flow, €61m acquisitions and disposals, €333m FX and €142m restructuring costs
3. Spectrum includes €2.7bn of Indian spectrum; other includes restructuring and cash inflow from expected Netherlands JV completion
€15.3bn
FY 15/16 EBITDA (rebased) Guidance FY 16/17 EBITDA
at May 2016
Guidance FY 16/17 EBITDA
at Nov 2016
39
• Performance in H1 16/17 ahead of expectations
• Expect revenue and profitability trends to continue at a similar underlying pace in the second half
• Guidance for FY 16/172,3:
– Organic EBITDA growth narrowed to €15.7bn to €16.1bn
– Free cash flow at least €4.0bn
• Interim dividend per share of 4.74 eurocent, up 1.9%4
Guidance range narrowed, consistent dividend growth
€15.7bn - €16.1bn
€15.7bn - €16.2bn
1. Rebased for FY 16/17 FX guidance rates
2. We have based guidance for the financial year ending 31 March 2017 on our current assessment of the global macroeconomic outlook and assume foreign exchange rates of €1:INR 76.4, €1:ZAR 16.5, €1:£0.79, €1:TRY 3.2
and €1:EGP 9.8. Guidance excludes the impact of licence and spectrum payments, material one-off tax-related payments, restructuring costs, and any fundamental structural change to the Eurozone. It also assumes no
material change to the current structure of the Group, and has not been adjusted for the potential de-consolidation of Vodafone Netherlands following the announced intention to create a 50:50 Joint Venture with Ziggo.
3. We have also excluded from guidance an expected one-off impact on EBITDA arising from foreign exchange losses on foreign currency denominated liabilities of Vodafone Egypt following the devaluation of the Egyptian
pound; given ongoing exchange rate volatility, it is not yet possible to quantify this impact, which has no impact on Group free cash flow.
4. Interim dividend for 2015/16 has been restated to eurocents using 31 March 2016 rate of £1 = €1.2647
1
3 - 6% 3 - 6%
FY 16/17 EBITDA guidance
Summary
• Extending differentiation: NPS leadership maintained through
substantial network investments and CARE programme
• Sustained commercial momentum: good performances in Germany,
Italy, Spain and South Africa, well prepared for competition in India,
focused on improving the UK
• H1 modestly ahead of expectations, increasing competition in India
• Driving operating leverage: organic EBITDA growing faster than
revenue
• Returns to shareholders: euro dividend per share +1.9%
40
Q&A
41
42
Appendix
43
Currency of
payment
Dividend policy under euro reporting
44
Dividend policy
Exchange rate
Denomination
Policy
Average of the five business days
in the week prior to payment
Intend to grow full year dividends
per share in € annually
FY 15/16 interim
= 4.65 cents
3.68 pence
Rebased FY 15/16 interim
£:€ 1.2647 Year end FX
YoY growth 1.9%
FY 16/17 interim = 4.74 cents
Calculation for FY16/17 interim dividend
x
24 November 2016 Ex-dividend date
Key interim dividend dates:
25 November 2016 Record date
3 February 2017 Payment date
14
4
10
2.3
10
6
5 25
0.2
Germany Italy Spain UK Portugal
45
European homes reached with NGN1
Wholesale NGN
Own NGN
60% 35% 67% 87% 50%
Population coverage
1. Excludes several smaller markets (Greece, Ireland, Netherlands)
(millions)
Customer experience and commercial KPIs
46
AMAP Europe Q2
15/16
Q3
15/16
Q4
15/16
Q1
16/17
Q2
16/17
4G customers (m) 24.3 28.1 33.4 36.0 39.3
Contract churn (%) 15.7% 16.7% 16.1% 15.3% 15.5%
4G % outdoor population
coverage 80% 84% 87% 89% 90%
% of data sessions >3Mbps 88% 90% 91% 91% 90%
% of dropped calls 0.60% 0.50% 0.46% 0.47% 0.47%
Call setup success 99.8% 99.8% 99.9% 99.9% 99.9%
Q2
15/16
Q3
15/16
Q4
15/16
Q1
16/17
Q2
16/17
4G customers (m) 5.8 6.7 13.4 16.5 19.6
Contract churn (%) 19.4% 20.9% 20.5% 18.2% 18.0%
3G/4G outdoor coverage
(excluding India) 83% 83% 85% 85% 85%
% of dropped calls 0.99% 0.93% 0.86% 0.70%1 0.68%
Call setup success 99.4% 99.4% 99.3% 99.5% 99.5%
1. Improvement partially reflects calculation methodology change
Other key markets
Market
Organic
Q2 service revenue
growth
(%)
Reported
H1 EBITDA
(€m)
Reported
H1 EBITDA margin
(%)
Mobile customers Fixed broadband
customers
Net adds
(000)
Closing
customers
(000)
Net adds
(000)
Closing
customers
(000)
(3.3%) 316 34.8% (68) 4,963 20 143
2.2% 172 34.8% 43 4,831 27 493
2.6% 130 30.1% 79 5,869 15 586
0.5% N/A1 N/A1 (2) 1,965 10 257
3.6% N/A1 N/A1 195 8,683 3 61
15.7% 335 20.8% 206 22,581 41 465
15.1% 356 44.7% 623 39,666 9 240
47
Egypt
Turkey
Romania
Ireland
Greece
Portugal
Netherlands
1. Number not disclosed
25,601
(1,170) (188)
665
(386)
45
(41)
130 149 24,805
H1 15/16
reported
service
revenue
FX One-off
items
In-bundle Out of
bundle
Incoming MTR Fixed line
and carrier
Other H1 16/17
reported
service
revenue
Service revenue bridge
(€m)
48 1. Excludes UK fixed ladder settlement and a reporting change of certain dealer commissions in India
1
H1 16/17 H1 15/16
€m pp €m pp
Europe
Service revenue (29) (0.2) (36) (0.2)
EBITDA (7) -
AMAP
Service revenue (12) (0.2) (106) (1.4)
EBITDA (5) (29)
Group
Service revenue (41) (0.2) (142) (0.6)
EBITDA (12) (29)
Voice MTR impact
49
Profit
H1 16/17
(€m)
H1 15/16
(€m)
Adjusted operating profit1 2,283 2,281
Net financing costs (685) (964)
Taxation 384 (2,493)
Customer & brand amortisation2 (515) (724)
Restructuring costs (37) (156)
Impairment loss (6,375) -
Other (58) (288)
Profit for the year (5,003) (2,344)
Non controlling interests (126) (159)
(Loss)/Profit attributable to owners of parent (5,129) (2,503)
1. Reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets
2. Customer amortisation relate primarily to Italy (H1 16/17 €170m, H1 15/16 €234m), KDG (H1 16/17 €165m, H1 15/16 €242m) and Ono (H1 16/17 €114m, H1 15/16 €150m) 50
Adjusted EPS reconciliation
H1 16/17
(€m)
H1 15/16
(€m)
Reported
growth (%)
(Loss)/Profit attributable to owners of parent (5,129) (2,503)
Impairment 6,375 -
Taxation (661) 2,076
Investment income and financing costs (328) 200
Customer and brand amortisation 515 724
Non controlling interests (8) (13)
Restructuring costs 37 156
Other 58 288
Adjusted profit for the year 859 928
Weighted average shares (m)1 27,912 26,529
Adjusted EPS (€ cents) 3.08 3.50 (12.0)
1. Weighted average number of shares outstanding includes a dilution of 1,325 million shares (2015: nil) following the issue of £2.9 billion of mandatory convertible bonds in February 2016. 51
Taxation
H1 16/17
(€m)
H1 15/16
(€m)
Income tax 384 (2,493)
Deferred tax assets - India (1,375) -
Deferred tax assets - Luxembourg 588 2,015
Amortisation of deferred tax assets 230 359
Other (104) (298)
Adjusted tax expense (277) (417)
Adjusted effective tax rate1 27.5% 30.5%
52 1. Lower rate in the current period is primarily due to the ongoing impact of the re-organisation of our Indian business which took place during the year ended 31 March 2016
Financing costs
H1 16/17
(€m)
H1 15/16
(€m)
Net financing costs (685) (964)
Mark to market of the Mandatory Convertible Bond (89) 0
FX1 (239) 200
Adjusted net financing costs (1,013) (764)
Other mark to market of derivative positions 84 118
Interest expense arising on settlement of outstanding tax issues 31 21
FX impact on intragroup lending 116 (19)
Capitalised interest2 (1) (142)
Other (59) (4)
Underlying net financing costs (842) (790)
Interest received (228) (182)
Underlying gross financing costs (a) (1,070) (972)
Average gross debt (b) (58,178) (49,344)
Cost of debt3 3.7% 3.9%
1. Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances
2. Interest capitalised on India spectrum, until brought into use
3. Cost of debt: ((a/b) x 2) x 100 53
Gross and net debt
H1 17
€bn
H1 16
€bn
Average gross debt 58.2 49.3
Average cash and short term investments (19.2) (12.6)
Average net debt 39.0 36.7
Average life of bond debt 9.4 years 7.0 years
54
Currency sensitivity
Currency H1 16/17 closing
net debt (€bn)
EUR 28.7
ZAR 1.8
GBP (0.7)
INR 4.0
Other 6.9
Total 40.7
Currency H1 16/17 closing
EBITDA (€bn)
EUR 4.2
ZAR 0.8
GBP 0.7
INR 0.9
Other 1.3
Total 7.9
A 1% change in Impacts EBITDA by approx. (€m) Impacts FCF by approx. (€m)
INR:€ 20 5
ZAR:€ 15 5
GBP:€ 20 10
TRY:€ 5 2
EGP:€ 5 2
55
Forward-looking statements This presentation, along with any oral statements made in connection therewith, contains “forward-
looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995
with respect to the Group’s financial condition, results of operations and businesses and certain of the
Group’s plans and objectives. In particular, such forward-looking statements include, but are not
limited to, statements with respect to: expectations regarding the Group’s financial condition or
results of operations; expectations for the Group’s future performance generally, including growth
and capital expenditure; expectations regarding the Group’s operating environment and market
conditions and trends, including customer usage, competitive position and macroeconomic
pressures, spectrum auctions and awards, price trends and opportunities in specific geographic
markets; intentions and expectations regarding the development, launch and expansion of products,
services and technologies, either introduced by Vodafone or by Vodafone in conjunction with third
parties or by third parties independently including the rollout of TV in the United Kingdom;
expectations regarding free cash flow and foreign exchange rate movements and tax rates;
expectations regarding the integration or performance of current and future investments, associates,
joint ventures, non-controlled interests and new acquired businesses; expectations regarding MTR
rates in the jurisdictions in which Vodafone operates; expectations regarding Vodafone India, the
outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or
potential legislative and regulatory changes, including approvals, reviews and consultations.
Forward-looking statements are sometimes, but not always, identified by their use of a date in the
future or such words as “will”, “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”,
“intends”, “plans”, “prepares” or “targets” (including in their negative form or other variations). By their
nature, forward-looking statements are inherently predictive, speculative and involve risk and
uncertainty because they relate to events and depend on circumstances that may or may not occur in
the future. There are a number of factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking statements. These factors
include, but are not limited to, the following: general economic and political conditions of the
jurisdictions in which the Group operates and changes to the associated legal, regulatory and tax
environments; increased competition; levels of investment in network capacity and the Group’s ability
to deploy new technologies, products and
services; rapid changes to existing products and services and the inability of new products and services
to perform in accordance with expectations; the ability of the Group to integrate new technologies,
products and services with existing networks, technologies, products and services; the Group’s ability
to generate and grow revenue; a lower than expected impact of new or existing products, services or
technologies on the Group’s future revenue, cost structure and capital expenditure outlands; slower
than expected customer growth, reduced customer retention, reductions or changes in customer
spending and increased pricing pressure; the Group’s ability to expand its spectrum position, win 3G
and 4G allocations and realise expected synergies and benefits associated with 3G and 4G; the Group’s
ability to secure the timely delivery of high quality products from suppliers; loss of suppliers, disruption
of supply chains and greater than anticipated prices of new mobile handsets; changes in the costs to
the group of, or the rates the Group may charge for, terminations and roaming minutes, the impact of a
failure or significant interruption to the Group’s telecommunications, networks, IT systems or data
protection systems; the Group’s ability to realise expected benefits from acquisitions, partnerships,
joint ventures, franchises, brand licences, platform sharing or other arrangements with third parties;
acquisitions and divestments of Group businesses and assets and the pursuit of new, unexpected
strategic opportunities; the Group’s ability to integrate acquired business or assets; the extent of any
future write downs or impairment charges on the Group’s assets, or restructuring charges incurred as a
result of an acquisition or disposition; a developments in the Group’s financial condition, earnings and
distributable funds and other factors that the Board takes into account in determining the level of
dividends; the Group’s ability to satisfy working capital requirements; changes in foreign exchange
rates; changes in the regulatory framework in which the Group operates; the impact of legal or other
proceedings against the Group or other companies in the communications industry and changes in
statutory tax rates and profit mix.
Furthermore, a review of the reasons why actual results and developments may differ materially from
the expectations disclosed or implied within forward-looking statements can be found under “Forward-
looking statements” and “Principal risk factors and uncertainties” in the Group’s annual report for the
financial year ended 31 March 2016. The annual report can be found on the Group’s website
(vodafone.com/investor). All subsequent written or oral forward-looking statements attributable to
the Company or any member of the Group or to any persons acting on their behalf are expressly
qualified in their entirety by the factors referred to above. No assurances can be given that the forward-
looking statements in or made in connection with this presentation will be realised. Subject to
compliance with applicable law and regulations, Vodafone does not intend to update these forward-
looking statements and does not undertake any obligation to do so.
56
More information
www.vodafone.com/investor
2017 upcoming dates Visit our website for more information
For definitions of terms please see www.vodafone.com/content/index/investors/glossary
+44 (0) 7919 990 230
Contact us
2 February
Prelim results
16 May 3 February
57
Q3 results Interim dividend paid