Vodafone Group Plc Half year results · Vodafone Group Plc Half year results ... India 3G coverage...

Vodafone Group Plc Half year results

10 November 2015

For the six months ended 30 September 2015

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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,

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The 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. These forward-looking statements include, without

limitation, statements in relation to the Group’s financial outlook and future performance. Some of the factors which may cause

actual results to differ from these forward-looking statements are discussed on the final slide of the presentation.

The presentation also contains non-GAAP financial information which the Group’s management believes is valuable in understanding

the performance of the Group or the Group’s businesses. However, non-GAAP information is not uniformly defined by all companies

and 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 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 and M-Pesa, 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.

Disclaimer

2

Half year highlights

All growth rates shown are organic unless otherwise stated 3

All growth rates shown are organic unless otherwise stated

1. Targeted urban areas

Financial

performance

• Q2 Group service revenue +1.2%; fifth consecutive quarter of improvement

• Q2 continued momentum in AMAP +6.7%; further recovery in Europe -1.0%

• H1 EBITDA return to growth, +1.9% to £5.8bn; full year EBITDA guidance now £11.7bn - £12.0bn

• Free cash outflow £0.5bn reflecting Project Spring phasing; net debt £28.9bn

• Interim dividend per share 3.68 pence, +2.2%

Strategic and

commercial

progress

• Project Spring: 80% through mobile build; 4G coverage now 80% in Europe

• Marketing high speed broadband to 66m homes across Europe; 42% on own infrastructure,

new converged offers launched

• 30m 4G customers (+10m in H1) in 19 markets. 12.5m fixed broadband customers (+0.5m)

• AMAP: 125m data users, India 3G coverage 94%1

• Strong commercial progress in mobile: H1 contract net adds 2.7m, churn improving, data volume +75%

• Enterprise revenue +1.9% in Q2; continued growth in VGE and M2M

• Vodafone India IPO preparations underway

Half year 15/16

Financial review

Nick Read Group Chief Financial Officer

Return to EBITDA growth

5

H1 15/16

(£m)

Reported

growth (%)

Organic

growth (%)

Q2 15/16

organic

growth (%)

Group revenue 20,226 (2.3) 2.8 2.3

Group service revenue 18,430 (3.7) 1.0 1.2

Group EBITDA1 5,786 (1.7) 1.9

EBITDA margin (%) 28.6 0.2ppt (0.3)ppt

D&A2 (4,142) 1.2 5.9

Adjusted operating profit1, 2 1,641 (6.5) (5.9)

All growth rates shown are organic unless otherwise stated

1. Reported excluding the impact of restructuring costs and significant one-off items. Restructuring costs were £114m in H1 15/16 and £84m in H1 14/15

2. Reported excluding the impact of restructuring costs and significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets

Lower financing costs; full year tax rate to include UK one-off

6

• Weighted average cost of debt 4.4% (H1 14/15: 5.4%)

• Adjusted effective tax rate 30.5% in H1; full year similar to H1 excluding UK one-off (medium term high 20s)

• Move to Euro reporting from 2017 financial year

1. Reported excluding the impact of restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets

H1 15/16

(£m)

H1 14/15

(£m)

Reported

growth (%)

Adjusted operating profit1 1,641 1,756 (6.5)

Net financing costs (552) (682)

Taxation (299) (288)

Non controlling interests (123) (89)

Adjusted earnings1 667 697

Adjusted earnings per share1 2.51p 2.63p (4.6)

Interim dividend per share 3.68p 3.60p 2.2

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Q1 14/15 Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

Group Europe AMAP

5th quarter of improved organic service revenue trends

• 7 out of 13 European markets are now back to growth in H1

• Maintained good momentum in AMAP

7

5.4ppt

7.2ppt

2.2ppt

Engines of growth

8

Mobile contract base (m)

Europe 4G & India 3G customer base (m) Enterprise service revenue growth (%)

NGN fixed customers (m)

(2.0)

(1.1)

1.4 1.8 1.9

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

21 27

35 41

48

+5m

YoY

+1.2m

YoY

+10m

YoY

+17m

YoY

4.4 4.7

5.1 5.3

5.6

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

86

87

88

90 91

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

Europe 4G India 3G

6.3 6.0

5.6 5.4 5.5 5.6

4.0

4.5

5.0

5.5

6.0

6.5

7.0

H2 12/13 H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16

EBITDA (£bn) Reported EBITDA margin (%)

EBITDA growth with margin stabilising

9 1. Constant currency, 100% Italy excl. KDG, Ono, HOL and Cobra

1

30.2

29.3

28.6 28.4

28.1

28.6

-250 -200 -150 -100 -50 0 50 100

EBITDA growth across our top markets

10 * Adjusted for intercompany phasing

(£m)

*

H1 14/15

-10% YoY

-c.£600m

H1 15/16

+1.9% YoY

+c.£100m

Absolute organic EBITDA growth YoY

11

£4.3bn

Pre-Spring1 Post-Spring

expected run rate

£4.8bn

Targeting margin expansion

Technology opex Expanded & modernised (Mar-16)

Mobile:

• c.90% EU 4G coverage

• Single RAN >90% in EU

• 90% high capacity backhaul in EU

• HD voice in all EU markets

• 84% 3G/4G AMAP coverage (excl. India)

• India 95% 3G coverage in targeted areas

Fixed:

• Converged services in all key EU markets

Enterprise:

• Increased global scale and footprint

Network expansion (by year

end):

• c.45k additional mobile sites

• 7.5m new households covered

by NGN

• 65 countries on IP-VPN

Spring is an exceptional investment programme

1. FY 13/14

12

Direct costs

£6.6bn

Customer costs

£8.8bn

Technology

costs

£4.4bn

Support costs

£6.7bn


Fit for growth – an opportunity to constrain costs below revenue growth

Components of our cost base:

FY 14/15

cost base (excl. interconnect)

2. Commercial efficiency 3. IT transformation

1. Regulatory incumbent

management

4. Shared services penetration

5. Centralised

procurement/logistics

6. ZBB/productivity

targeting

13


Fit for growth

Commission optimisation Digital sales & services

Commercial efficiency

H1 14/15 H1 15/16

Channel mix

% contract customer additions via Vodafone

branded channels

30% 35%

52% 63%

81% 87%

Improving returns on commission spend by:

Moving from volume to value

based commissions

Rewarding for good customer

experience • My Vodafone app 26%

penetration

• Target 70%

• Currently 5% of inflow revenue

• Target >10%

Sales

Service

14


Fit for growth

Organisational efficiency

Capex & opex efficiency Zero based budgeting Standardisation and scaled

footprint optimisation Shared services employees Procurement spend in VPC

250

300

350

H1 14/15 FY 14/15 H1 15/16

Finance TechnologyCustomer Ops OtherSavings (£m)

15k 17k

18.5k 17%*

* Targeting 25% of Vodafone employees by 2018

52% 57%

70%

H1 13/14 H1 14/15 H1 15/16

Targeting 80% of global spend

Scope:

Group functions - absolute cost targets

Group operations - multi-year productivity targets

Countries/P&L units - multi-year margin targets

15


M&A synergies secured

Organisational integration

Procurement centralised

Migration of DSL and mobile

customer base

Network: integrating national

backbone and mobile base stations

Converged propositions

launched

Complete

Complete

On target

157k DSL customers migrated

Mobile migration complete

Complete

Fully complete by the year end

On target

121k DSL customers migrated

On target to secure 100% of €240m/pa FY 15/16 exit run-rate: On target to secure 75% of €300m/pa

Composition of H1 EBITDA growth

H1 15/16 H1 14/15 Improvement

EU mobile contract net adds (000s) 1,075 349 +208%

Fixed broadband net adds (000s) 494 399 +24%

Consumer contract churn 17.6% 19.2% +1.6ppt

Enterprise churn 15.6% 16.4% +0.8ppt

16

Organic H1 14/15

EBITDA

Gross margin

5,583

161

Commercial costs

1. Commercial costs include A&R, and sales, distribution & advertising/promotion costs

1

117

Technology opex Other opex Organic H1 15/16

EBITDA

55

(229)

5,687

(£m)

Free cash outflow, reflecting phasing of Project Spring

17

H1 15/16

(£m)

H1 14/15

(£m)

EBITDA 5,786 5,884

Capital expenditure (3,708) (3,901)

Capital creditors (579) (6)

Working capital (1,203) (1,072)

Net interest (364) (580)


Dividends received1 - 127

Dividends to non-controlling interests (131) (140)

Other2 88 107

Free cash flow (541) 1

1. Principally relating to Indus Towers

2. Other relates to cash movements on share based payments and disposal of capital assets

• Capital creditor unwind, reflecting timing of Project Spring payments

Passing peak investment for capex and spectrum

18

1.4

2.5 2.2

3.1

2.7

FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16e

India EU 4G EU renewal AMAP

£2.4bn

5 year avg. Average over next 3yrs

expected to be lower

(2020: EU 700MHz)

Capex intensity

Spectrum spend (£bn)

Pre-Spring Spring Post-Spring

Mobile 13% 20% 12%

Maintenance/capacity - 10% 8%

Footprint growth - 10% 4%

Fixed - 26% 18%

Maintenance/capacity - 12% 9%

Footprint growth - 10% 5%

CPE - 4% 4%

13-14%

medium term

capital intensity

Balance sheet robust and in line with Spring plan

19 19

• H1 net debt £25.4bn including $5.25bn Verizon loan notes

– also includes £4bn of deferred licence payments

• H1 spectrum spend in India, Germany and the UK

4.1 28.9 0.5 1.0 c.30

Mar 2015 Spectrum Final 14/15

dividend

Other Sep 2015 Turkey/Italy

spectrum

H1 dividend Guidance FCF Mar 2016

22.3

0.7 +ive

(£bn)

2.0

£11.4bn

FY 14/15 EBITDA (restated) Guidance FY 15/16 EBITDA

20

• Performance in H1 15/16 in line with expectations

• Expect revenue and profitability trends to continue to improve in the second half

• Guidance for FY 15/16:

– EBITDA range narrowed to higher end of the range, £11.7-£12.0bn

– positive free cash flow after all capex

Guidance range narrowed, continued dividend growth

Now £11.7 - 12.0bn 3-5% YoY growth

Was £11.5 - 12.0bn

1. Based on FY 14/15 guidance FX, and adjusted for MVNO/regulatory (India) impacts and M&A

1

H1 15/16 summary

21

• Markets remain competitive, unsettled global economy

• A return to growth in both service revenue and EBITDA

• Strong commercial momentum

• Guidance updated: EBITDA range narrowed

– expect progress to continue in H2

– interim dividend per share of 3.68p, up 2.2%

• Robust balance sheet

Strategic &

commercial review

Vittorio Colao Group Chief Executive

25.8 25.2

24.2 24.7 24.6

29.8 29.3

28.8 29.0 29.1

22.9 22.6 21.2 21.0

20.9

24.3 23.1

21.1 20.4

21.0

Q2

14/15

Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16

Germany UK Italy Spain

272

509

351

467

608

Q2

14/15

Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16

18.6%

17.0%

18.9%

17.6%

17.1%

15.7%

22.0%

18.3%

Q2 13/14 Q2 15/16

Europe Germany UK Italy

• 4G churn and NPS better than 3G

• Improved direct channel mix

• Customer value management actions

Project Spring supporting commercial performance

23

• Improved network quality

• Base now 49% contract (46% a year ago)

• Market stabilisation

• Increasing penetration of larger data

bundles; content in all key markets

• 4G ARPU higher than 3G

Improving churn

Consumer contract (%)

Growing contract net adds

Europe (000s)

Stabilising ARPU QoQ

Consumer contract (local currency)

627 697

755 812

927

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

Project Spring supporting data demand growth

Avg. data usage NPS

4G stimulating data take up

106 110

116

122 125

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

24

Strong data adoption in emerging markets3

Data users (m) and share of mobile base (%)

1. 29.9m customers have a 4G device with a 4G plan (24.3m in Europe). 27.3m have a 4G smartphone with a 4G plan (22.2m in Europe)

2. iOS and Android

3. AMAP

10.5 13.7

20.2 24.1

29.9

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

• 20% of Europe

customer base,

(41% of contract)

35% 34%

36% 37% 38%

• Avg. smartphone

usage 649MB2, 3

Growing European smartphone usage Monthly average MB2

• 56% smartphone

penetration in

Europe

• 27% of customers

use >1GB

48%

3G 4G

2x

+9ppt

• 39% of Europe data

traffic on 4G

Increasing penetration of 4G customers (m)1

17.1

22.6 25.8

H1 13/14 H1 14/15 H1 15/16

11.2

11.8 12.0

12.3 12.5

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

39% 39% 42% 43% 45%

36 40 41

62 66

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

Project Spring supporting progress on convergence

25

Marketing high speed broadband to 66m homes

• 44% household

coverage in Europe

• 42% on own

infrastructure

% on fibre/cable

Growing share of Europe service revenue from fixed (%)

• Europe fixed

revenue +3.1%

in Q2

• 5.6m NGN (+0.3m)

• 9.3m TV (+0.1m)

Increasing size and quality of the fixed broadband base (m)

New fixed/converged propositions

Nov 2015

Apr 2015

Sep 2015

Oct 2015

Aug 2015

FY 15/16 launches To be launched (including TV)

• 27% of Group service revenue

• Global leader in M2M:

– 29 markets, 24m connections

– Top ranking by Gartner and

Machina Research

• A leading carrier of international voice:

58bn voice minutes p.a.

Project Spring supporting Enterprise momentum and scale

Investment

Spring investments on track

• IP-VPN in 65 countries; 254 PoPs2,

+34/83 since Sep 2013

• One Net in 12 countries for SMEs

• US MVNO for multinationals Oct 2015

• Growth from data and customers,

despite ARPU pressure

• Q2 VGE revenue +7.3%1, M2M +29%,

Cloud & Hosting +13%

• Key customer wins and strong pipeline

Momentum Organic service revenue growth (%)

(2.0)

(1.1)

1.4 1.8 1.9

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

Scale

1. Underlying growth

2. Points of Presence 26

(3.9)

(1.8)

(3.5)

(1.2)

Incl. KDG (1.8)

Incl. KDG

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

121

235

137 104

245

Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16

Service revenue growth (%) • Service revenue: underlying growth similar excluding one-offs

• Mobile revenue -2.8% (Q1: -2.1%); increased competition in

enterprise and consumer base re-pricing, offset customer growth

and improved direct channel mix

• Fixed: customer growth offsets ARPU pressure – KDG: +7.0% (Q1: +6.6%); +98k net adds1

– DSL: stabilising base but lower ARPU (promotional discounting)2

• Project Spring: 4G coverage 81%, dropped call rate -28% to 0.55%3

• EBITDA +1.0% in H1, margin 32.7%, +0.5ppt supported by

lower A&R

Germany: good contract base growth, some price pressure

27

Contract net adds (000s)

1. Including migrations

2. Prior to migrations

3. End of September

New converged

offer launched in November

Q2

14/15

Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16

Base Inflow

Repricing customer base

• Secured more 1,800 MHz spectrum to

boost 4G speed

• 89% high capacity backhaul (Sep 13: 76%)

• Ranked ‘Best Voice Network in Germany’

by ComputerBILD

Germany: key turnaround actions

28

30 32

35

H1 14/15 H2 14/15 H1 15/16

• Promotional focus on direct channels.

1,400 branded stores1

• Reduced commissions in indirect

channels

• Consumer contract ARPU stable QoQ

• Value upsell initiatives, e.g. data add-ons

1. Includes KDG stores

2. Excludes multi-SIM and instalments

2

71

77

81

H1 14/15 H2 14/15 H1 15/16

Improved network quality Better channel mix 4G coverage (%) Direct channel share of consumer

contract gross adds (%)

Consumer contract ARPU

Italy: mobile market remains stable, further recovery in trends

29

EBITDA growth and margin (%)

Service revenue growth (%) • Mobile service revenue -3.0% (Q1: -3.2%): – lapping prepaid price rises

– consumer prepaid ARPU +6.8%, lower churn and stabilising

customer base

– 4.0m 4G customers, up 3m YoY

• Fixed: sustained momentum; +67k broadband users in H1

• Project Spring: delivering 4G leadership (coverage 91%),

fibre footprint up to 2m households

• EBITDA returned to growth as top line pressure offset by

commercial and operating cost efficiencies

(10.2)

(8.0)

(4.1)

(2.0) (2.0)

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

(25.4) (24.0) (21.7)

(7.2)

2.3

H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16

37.1% 34.5% 33.7% 33.2% 34.1% Margin

Satisfied or

reimbursed!

1 day free browsing if you’re not satisfied

with 4G

Network guarantee

UK: improving in Enterprise, stable overall

Service revenue growth (%) • Mobile service revenue -0.5% (Q1: +0.7%) – customers given control of out-of-bundle spend, 08XX regulation

– customer growth; lower churn, direct channels (retail sales +48%)

– 5.3m 4G users, up 4.2m YoY

• Fixed: improving in fixed Enterprise (-0.7%, Q1: -2.1%) due

to VGE

• Project Spring: delivering network improvement – 4G coverage 82%1, London 99%

– P3 ranked #1 network in London for combined voice and data

• EBITDA: H1 margin 21.7%; 19.7% excl. network settlements;

-1.1ppt YoY due to phasing of central costs

30

(3.3)

(0.5) (0.6)

0.2

(0.5)

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

1. Ofcom basis 82%; Vodafone basis 75%

56

98

49

83 90

Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16


17.4% 19.0% 17.7% 15.8% 15.6% Churn

Marketing to 22m

premises. TV by end FY 15/16

14

78

14

54

92

Q2 14/15 Q3 14/15 Q4 14 /15 Q1 15/16 Q2 15/16

Spain: positive trends, good commercial momentum

31

(9.8) (9.3)

(7.8)

(5.5)

Incl. Ono

(2.0)

Incl. Ono

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

• Mobile revenue -6.8% (Q1: -9.5%) in more stable market – QoQ ARPU growth, data bundle adoption, contract net adds +92k

• Fixed revenue +10.7% (Q1: +4.2%) – +28k broadband net adds; strong take up of TV/football

– Ono integration proceeding well, fully migrated mobile customers

• Project Spring: 80% 4G coverage, 8m NGN premises reached1

• EBITDA +16.3% in H1, margin +3.7ppt2; handset financing and

Ono integration benefits more than offsetting TV costs

Service revenue growth (%)


#1

for Consumer

NPS

1. Including joint fibre build

2. Organic

784k converged customers since April

launch

Vodacom: strong performance and network leadership

32

0.3

(3.9)

(0.2)

4.5 3.9

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

South Africa Vodacom service revenue growth (%)

• Service revenue +3.0%; more rational market, voice decline

eases, contract churn still low 7.3%, ARPU stable

• Data growth driven by sale of affordable devices and data bundles – total usage +50%, revenue +32%

• Project Spring: marketing our network leadership; 4G coverage

47%, 3G at 98%; 85% high speed transmission

• EBITDA +13.5%, driven by significant cost actions in H2 14/15

International

• Service revenue +8.3%; data users +14%, and M-Pesa growth

• Capex up 29.7%, driving differentiation

in Tanzania and DRC

#1

Vodacom EBITDA margin (%)

36.4 36.4

35.0 35.4

37.1

H1 13/14 H2 13/14 H1 14/15 H2 14/15 H1 15/16

82m

data bundles sold in Q2, +91% YoY

24%

of Vodacom revenue

India: strong data demand, expanding 3G and 4G capability

33

13.6 16.6

19.4 22.1 23.8

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

3G data users (m)

13.1 14.7

11.7

6.9 5.6

13.1 14.7

13.2

10.6 9.2

Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16

1. MTRs, roaming price caps and service tax

2. Targeted urban areas

8% 9% 11% 12% 13%

Service revenue growth (%)

Reported Excluding MTRs

750 MB

Avg. usage

• Service revenue underlying +10.9% excl. all regulatory impacts1

– strong customer growth (2.8m net adds) partly offset by ongoing

competition on voice business

– data growth driven by 3G; total usage +69%, revenue +48%; 19% of

service revenue

• M-Pesa: 97k agents, 665k active users

• Project Spring 94% 3G coverage2, +3.7k 3G sites, retail store

expansion on track

– launching own 3G in seven new circles and 4G in five by end FY 15/16

• EBITDA +6.7% in H1, margin stable at 29.7%

3G penetration

India: strong track record of achievement

34

Strong platform

• Leading assets:

– 1 of 3 nationwide providers

– 1.7m distribution points, 9,900 branded retail

stores

– 42% of Indus, world’s largest tower company

• Strong brand recognition

• High quality customer base

Profitable growth

17

22

Q4

08/09

Q4

09/10

Q4

10/11

Q4

11/12

Q4

12/13

Q4

13/14

Q4

14/15

Q2

15/16

Revenue market share (%)

#1

for Consumer

NPS

Continuing opportunity

(Rs bn)

218

53 13

422

126 32

Service revenue EBITDA Op FCF

FY 09/10 FY 14/15

78% mobile

penetration

smartphone penetration

3%

4G penetration

• Strong growth; 5 year CAGR to FY 14/15:

– Service revenue +14.1%

– EBITDA +18.8%

– Operating FCF: +20.7%

• Economy recovering; 2015e GDP +7.5%

• Improving demographics

• Strategic growth areas: data, enterprise,

M-Pesa

23%

1.2bn Population

Q2 YoY service revenue growth

(vs. Q1)

Increased revenue market

share to 35.9%. NPS leader

Other key markets driving revenue / EBITDA growth

Improved revenue market

share leadership to 40.6%. NPS

leader

Ongoing convergence pressure

but signs of market recovery

4th consecutive quarter of

growth in a competitive market

Commercial execution and Project Spring driving data usage, customer growth and ARPU

35

+20.2% +5.2ppt

+1.1% +0.1ppt

+10.7% +4.6ppt

-0.2% +2.4ppt

• Revenue growth driven by

data, customer base (+814k

H1), ARPU (Q2 +14%), and

enterprise

• Revenue growth fuelled by

data and voice usage, ARPU

Q2 +15%

• Fixed broadband customers

H1 +56k, improving mobile

revenue

• Growth in enterprise and

consumer fixed revenue driven

by higher customer base

Leveraging Project Spring: leadership in customer experience

36

#1 NPS rank in seven of our top ten markets

Germany –

network

when it

matters

7.3

10.8

16.8

Q2

13/14

Q2

14/15

Q2

15/16

My Vodafone app users (m)

300

1,150

3,240

4,200

FY

12/13

FY

13/14

FY

14/15

H1

15/16

Project Spring: transforming our

stores

Marketing our network quality

Enhancing digital and retail experience NPS leadership

Turkey & NZ

money back

network

guarantee

ki

CARE: bringing Project Spring to life for our customers

37

C Connectivity A R E Always in

control Reward loyalty Easy access

• One day free browsing if

you’re not satisfied with 4G

Italy: satisfied or

reimbursed

• 30% upgrade to right

price plan

India: full credit for first

time bill shock

South Africa: Just 4 you UK Enterprise: Prime

Contact

• For SMEs & SOHO

• Dedicated contact owns

customer issues

• Personalised offers for

customer profile

• 24m bundles in first

month

Group-wide programmes to deliver “CARE”

Summary

H1 progress Priorities: H2 and beyond

• Complete Spring mobile build

• Increase network and service differentiation

• Launch TV in further markets, continue

to grow NGN footprint and enterprise

• Engage regulators on incumbent

monopolistic behaviour

• Focus on efficiency and margin

• 80% through Spring mobile build; material

enhancements to coverage and quality

• Step change in customer experience

underway

• Leading in data: 30m 4G customers, 5.6m

NGN

• Fully converged in Germany and Spain

• Strengthened capabilities in Enterprise

• EBITDA returned to growth, +1.9%

• Dividend per share up 2.2%

38

Q&A

39

41

Appendix

Project Spring KPIs

42

UK Germany

Deployment and experience

Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16

4G % outdoor population

coverage 73% 77% 78% 81%

% of data sessions >3Mbps 82% 82% 82% 82%

% of dropped calls 0.66% 0.57% 0.54% 0.58%

% homes reached by owned

NGN 35% 35% 35% 35%

% of targeted stores refitted 16% 18% 28% 39%

Commercial impact

4G customers (m) 3.4 5.0 5.5 6.5

Contract churn (%) 15.0% 14.2% 13.8% 15.5%

Contract mobile ARPU (EUR) 27.1 26.0 25.9 25.7

Average smartphone data

usage (MB) 550 620 593 632


Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16

4G % outdoor population coverage 57% 63% 68% 75%


% of dropped calls 0.86% 0.78% 0.75% 0.77%

% homes reached by owned NGN - - - -


Commercial impact

4G customers (m) 1.7 2.5 4.0 5.3

Contract churn (%) 19.0% 17.7% 15.8% 15.6%

Contract mobile ARPU (GBP) 27.4 26.7 26.6 26.4

Average smartphone data usage

(MB) 704 790 1,014 1,183

Project Spring KPIs

43

Spain Italy


Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16


coverage 76% 84% 88% 91%


% of dropped calls 0.63% 0.59% 0.60% 0.62%

% homes reached by owned NGN 2% 4% 5% 7%


Commercial impact

4G customers (m) 1.2 2.8 2.7 4.0

Prepaid churn (%) 38.4% 37.5% 32.4% 32.1%

Prepaid mobile ARPU (EUR) 10.9 10.8 11.4 12.2


(MB) 922 1,000 981 1,254


Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16



% of dropped calls 0.66% 0.60% 0.58% 0.60%

% homes reached by owned NGN 44% 45% 46% 46%


Commercial impact

4G customers (m) 2.2 2.9 3.3 4.3

Contract churn (%) 20.2% 21.6% 18.1% 20.1%

Contract mobile ARPU (EUR) 22.01 20.91 20.11 20.51


(MB) 966 977 1,097 1,063

1. Spain ARPU includes Ono from Q3 14/15

Project Spring KPIs

44

Vodacom (South Africa) India


Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16


coverage

(targeted urban areas)

90% 90% 91% 94%

% of data sessions (>400kbps) 70% 73% 74% 75%

% of dropped calls 1.14% 1.06% 1.02% 1.08%


Commercial impact

3G customers (m) 16.6 19.4 22.1 23.8

Prepaid mobile ARPU (INR) 154 150 149 144

Average data usage (MB) 310 331 357 393


Q3

14/15

Q4

14/15

Q1

15/16

Q2

15/16



% of dropped calls 0.80% 0.78% 0.67% 0.49%


Commercial impact

4G customers (m) 1.2 1.3 1.8 1.8

Contract mobile ARPU (ZAR) 383 374 381 393

Average smartphone data usage (MB) 445 410 501 541

Service revenue bridge

• M&A and one off items relates primarily to £0.3bn of service revenue from Ono and the UK ladder

settlement (£0.1bn)

45

(£m)

19,139

(1,326)

439 429

(380)

14

(102)

122 95 18,430

H1 14/15

reported

service

revenue

FX M&A & one off

items

In-bundle Out of bundle Incoming MTR Fixed line and

carrier

Other H1 15/16

reported

service

revenue

H1 15/16 H1 14/15

£m % £m %

Europe

Service revenue (26) (0.2) (107) (0.8)

EBITDA - (23)

AMAP

Service revenue (76) (1.4) (71) (1.3)

EBITDA (21) (42)

Group

Service revenue (102) (0.6) (178) (1.0)

EBITDA (21) (65)

Voice MTR impact

46

Profit

H1 15/16

(£m)

H1 14/15

(£m)

Adjusted operating profit1 1,641 1,756



Deferred taxation (1,476) 5,468

Customer & brand amortisation2 (521) (637)

Restructuring costs (114) (84)

Other (74) (144)

Profit for the year (1,584) 5,501


(Loss)/Profit attributable to owners of parent (1,698) 5,422

47 1. Now 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 15/16 £169m, H1 14/15 £240m), KDG (H1 15/16 £174m, H1 14/15 £253m) and Ono (H1 15/16 £108m, H1 14/15 £55m).

Adjusted EPS reconciliation

H1 15/16

(£m)

H1 14/15

(£m)

Reported

growth (%)

(Loss)/Profit attributable to owners of parent (1,698) 5,422

Taxation 1,517 (5,383)

Net financing costs 148 (197)

Customer & brand amortisation 521 637


Restructuring costs 114 84

Other 74 144

Adjusted profit for the year 667 697

Weighted average shares (m) 26,529 26,470

Adjusted EPS (p) 2.51 2.63 (4.6)

48

Taxation

H1 15/16

(£m)

H1 14/15

(£m)

Taxation 1,816 (5,095)

Deferred tax assets (1,476) 2,127 Deferred tax following revaluation of

investments in Luxembourg

Recognition of deferred tax assets - 3,341 Recognition of deferred tax asset for

losses in Luxembourg

Amortisation of deferred tax assets (258) (272)

Other 217 187

Adjusted tax expense 299 288

Effective tax rate 30.5% 30.6%

49

Financing costs

H1 15/16

(£m)

H1 14/15

(£m)

Underlying net financing costs (451) (578) • Primarily favourable FX movements YoY

Mark to market gains/(losses) (86) (80)

Potential interest on tax (15) (24)

Non-EPS FX revaluation (148) 197


Average cost of net debt 4.4% 5.4%

50

Cost of debt

51

Currency Percentage of

net debt

Forecast interest rate

for FY 15/16

EUR 78 2.1%

USD 11 1.0%

GBP (24) 0.5%

INR 21 10%

ZAR 4 7.0%

Other 10 4.0%

More information

www.vodafone.com/investor

2016 upcoming dates Visit our website for more information

For definitions of terms please see www.vodafone.com/content/index/investors/glossary 52

Prelim results

17 May

@VodafoneIR

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Q3 results

4 February

AGM

29 July

Forward-looking statements

53

This presentation, along with any oral statements made in connection therewith, contains or may contain “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, including the Group

Chief Executive’s statement on the outlook for the 2015 financial year; expectations for the Group’s future performance generally, including revenue and EBITDA growth measures to improve margin growth

and free cash flow; statements relating to the Group’s Project Spring investment programme, including opex, launches of 4G and 3G, targeted mobile, fixed and enterprise coverage expectations regarding

the operating environment and market conditions and trends, including future sales, customer usage, competitive and macroeconomic pressures, price trends and opportunities in specific geographic

markets; intentions and expectations regarding the development, launch penetration 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 Vodafone app, NGN, M-Pesa, consumer TV and converged services and the launch of a number of additional features; growth in customers

and usage; expectations regarding spectrum licence acquisitions, including cost anticipated new 3G and 4G availability and the customer uptake associated therewith; expectations regarding adjusted

operating profit, EBITDA margins, capital expenditure, net debt and foreign exchange rate movements; expectations regarding the integration or performance of current and future investments, associates,

joint ventures, non-controlled interests and newly acquired businesses, including KDG and Ono; and the outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or

potential regulatory changes.

Forward-looking statements are sometimes 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” or “targets” (including in their singular or negative form). 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: changes in economic or political conditions in markets served by operations of the Group that would

adversely affect the level of demand for its mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, which could require changes to the

Group’s pricing models, lead to customer churn, affect the relative appeal of the Group’s products and services as compared to those of its competitors or make it more difficult for the Group to acquire new

customers; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; higher than expected costs or capital expenditures;

slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers and the possibility that new products and services offered by the

Group will not be commercially accepted or do not perform according to expectations; the Group’s ability to expand its spectrum position or renew or obtain necessary licences, including for spectrum; the

Group’s ability to achieve cost savings; the Group’s ability to execute its strategy in fibre deployment, network expansion, new product and service roll-outs, mobile data, enterprise and broadband and in

emerging markets; changes in foreign exchange rates, including, in particular, changes in the exchange rate of pounds sterling, the currency in which the Group prepares its financial statements, to the euro,

the US dollar and other currencies in which the Group generates its revenue, as well as changes in interest rates; the Group’s ability to realise benefits from entering into partnerships or joint ventures and

entering into service franchising and brand licensing; unfavourable consequences to the Group of making and integrating acquisitions or disposals; changes to the regulatory framework in which the Group

operates, including possible action by regulators in markets in which the Group operates or by the EU to regulate rates the Group is permitted to charge; the impact of legal or other proceedings against the

Group or other companies in the mobile telecommunications industry; loss of suppliers; or disruption of supply chains or unfavourable developments in the availability or prices of commodities and raw

materials; developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes into account when determining levels of dividends; the Group’s ability to

satisfy working capital and other requirements through access to bank facilities, funding in the capital markets and its operations; changes in statutory tax rates or profit mix which might impact the Group’s

weighted average tax rate; and/or changes in tax legislation or final resolution of open tax issues which might impact the Group’s tax payments or effective tax rate.

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 the

headings “Risk Factors” and “Other Information – Forward-looking statements” in our half year financial report for the six months ended 30 September 2015 which can be found on the Group’s website

(vodafone.com/ content/index/investors). All subsequent written or oral forward-looking statements attributable to the Company, to 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.

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