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Vodafone Group Results: for the quarter ended 30 June 2018 25 July 2018 Disclaimer By reading these slides you agree to be bound by the following conditions. disclosed by other companies, including those in the Vodafone Group’s industry. Although these measures are important in the assessment and Information in the following presentation relating to the price at which management of the business, they should not be viewed in isolation or as relevant investments have been bought or sold in the past or the yield on replacements for, but rather as complementary to, the comparable GAAP such investments cannot be relied upon as a guide to the future performance measures of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person Vodafone, the Vodafone Speech Mark, the Vodafone Portrait, Vodacom, RED, to underwrite, subscribe for or otherwise acquire or dispose of securities in Vodafone One Net, Vodafone One and M-Pesa are trademarks of the Vodafone any company within the Vodafone Group. Group. The Vodafone Rhombus is a registered design of the Vodafone Group. Other product and company names mentioned herein may be the trademarks The presentation contains forward-looking statements, including within the of their respective owners. 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 No assurances can be given that the forward-looking statements in or made in forward-looking statements include, without limitation, statements in relation connection with this presentation will be realised. Subject to compliance with to the Vodafone Group’s financial outlook and future performance. Some of applicable law and regulations, Vodafone does not intend to update these the factors which may cause actual results to differ from these forward- forward-looking statements and does not undertake any obligation to do so. looking statements are discussed on the final slide of the presentation. The presentation also contains non-GAAP financial information which the Vodafone Group’s management believes is valuable in understanding the performance of the Vodafone Group or the Vodafone Group’s businesses. However, non-GAAP information is not uniformly defined by all companies and therefore it may not be comparable with similarly titled measures 2 Overview and Strategic progress Vittorio Colao Group Chief Executive 3 Q1 18/19 highlights: ongoing momentum Service revenue Leading Strong data Fastest growing Leveraging scale Clear NPS growth network growth fixed broadband and reach in leadership provider Enterprise 0.3%/1.1% 94% 57% 196k 0.9% 17/20 (IAS 18/IFRS 15 basis) 4G population coverage1 growth in mobile fixed broadband Enterprise service revenue markets as consumer data traffic net adds growth NPS co/leader (2.0% underlying3) 2 Group service revenue 70% 289k NGN household coverage Converged net adds €9.9bn reaching 115m homes1 (IAS 18 basis) All growth rates in this document are on an IAS 18 basis, organic and year-on-year, unless otherwise stated, with Vodafone India and Vodafone Qatar excluded from organic growth calculation 1. Europe. NGN coverage is pro-forma for the announced acquisition of Liberty Global’s assets in Germany and Central and Eastern Europe 2. Excludes the first time recognition in Germany of 205,000 prepaid mobile customers with fixed products in Q1 18/19 4 3. Excluding EU regulation (the net impact of out-of-bundle roaming & international visitors, and mobile termination rate changes) Solid commercial momentum Europe: customer net adds (000s) AMAP: customer net adds (m) Mobile contract1 Fixed broadband Mobile contract Mobile prepaid4 0.5 0.4 0.6 0.6 0.5 342 234 224 453 173 3.1 3.1 3.2 2.8 2.4 316 237 262 255 351k NGN 128 net adds Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 Service revenue 0.8% 0.8% 0.3% 0.4%2 (1.3)% 7.9% 6.2% 6.8% 7.8% 7.0% growth (underlying3) 1.8 2.4 1.9 1.7 0.5 1. Adjusted for the phasing out of Talkmobile customers in the UK since Q1 17/18 2. Excludes a legal settlement in Germany in Q4 17/18 3. Excluding EU regulation, UK handset financing, and a German legal settlement in Q4 17/18 5 4. Includes adjustments in Vodacom in H2 17/18 relating to changes in disconnection rules and in Egypt since Q3 17/18 due to regulator mandated changes in distribution policies Reducing churn in most markets Q1 18/19 mobile contract churn improvement YoY (pp) 5.9 3.4 2.1 1.5 1.2 0.8 0.6 0.4 0.4 0.3 0.2 (3.4) (4.4) Turkey Egypt Portugal UK¹ Hungary² Greece Czech Ireland Germany Romania South Italy Spain Republic Africa Annualised Churn (%) 18.9 9.7 9.6 13.2 8.3 10.4 8.9 9.3 12.9 12.3 4.6 19.3 23.5 1. Adjusted for the phasing out of Talkmobile customers in the UK since Q1 17/18; 14.0% on a reported basis 6 2. Underlying improvement following the loss of an Enterprise account in the prior year All three growth engines contributing Q1 18/19 organic service revenue growth contribution (pp) Data Fixed/ Enterprise Convergence 0.6 (0.6) 0.6 (0.8) 1.1 (0.4) 0.31 0.3 (0.2) European AMAP Consumer Enterprise² EU regulation UK handset Carrier, Q1 18/19 consumer consumer fixed line financing wholesale mobile² mobile and other³ Rising data usage and penetration Broadband Fixed-line share Final roaming Increasing impact Lower MVNO share gains gains impact under IAS 18 revenues 1. Includes a 0.5pp adjustment for the delay to Italian re-pricing following the move from 28-day to monthly billing 2. Excludes the impact of EU regulation and UK handset financing 7 3. Other includes common functions and eliminations EU Electronic Communication Code: a clear positive for Vodafone Fixed access Other areas Passive infrastructure access as 20 years minimum spectrum licences / a key priority harmonisation of availability De-regulation of FTTH/P only possible Intra-EU international calls subject to a cap of with credible co-investment partners 19c/minute from May 2019 Genuine wholesale-only OTT communications services subject to the same operators will not be regulated security and privacy obligations as operators ‘Symmetrical’ access regulation on cable only if competition is at risk, and subject to an EC veto 8 India: revenue declines moderating, merger on-track to close shortly Customer and ARPU growth Service revenue growth Vodafone-Idea merger Net adds (m) Prepaid ARPU (% change) Service revenue Service revenue MTR impact growth ex MTRs (%) (INR) X (INR) (13.9) (17.8) (14.2) (9.4) (9.6) 10 A scaled leader in India 98.2 3 5 91.8 90.4 89.0 88.8 81.1 77.4 76.3 (4) (3) (23) (24) (26) (28) (28) Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 • Retaining high-value customers at lower price • Continued intense price competition • DOT conditional approval received; targeting to points; SIM consolidation impacting net adds close merger before the end of August • Service revenue QoQ ex. MTRs -0.2% (Q4 -1.6%) • Improved revenue market share in Q4 • Pre-integration work well advanced, ensuring a fast start on synergy capture • NPS leader: +7 vs. next best; +10 in 12 leadership circles • CCI1 and SEBI2 approval received for Indus/Infratel merger 1. Competition Commission of India 9 2. Securities and Exchange Board of India Financial review Nick Read Group Chief Financial Officer 10 Adopting IFRS 151 IFRS 15 vs. IAS 18 revenue analysis Q1 18/19 (€bn) IFRS 15 impacts vs. IAS 18: 11.2 Total revenue 10.9 • Total revenue decreased vs. IAS 18 due to accounting treatment for dealer commissions 1.3 Other revenue 1.7 • Higher service revenue growth due to reduced drag from UK handset financing • Removes handset financing impact on EBITDA. 9.9 Service revenue 9.2 However, the guidance basis for EBITDA growth already excludes handset financing • No impact on free cash flow IAS 18 IFRS 15 Service revenue +0.3% +1.1% growth 11 1. IFRS 15 was adopted on 1 April 2018 for our statutory reporting, without restating prior year figures. Service revenue growth Group service revenue growth (%) IFRS 15 impact on service revenue growth (%) Reported Underlying1 IFRS 15 basis IFRS 15 IAS 18 2.0 2.9 Germany 2.4 2.5 2.3 2.4 Italy (6.7) 1.7 1.7 (6.5) UK 0.3 2.2 UK (4.9) 1.3 1.4 handset 1.1 financing 1.1 Spain (1.7) 0.3 (2.2) Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18² Q1 18/193 Vodacom 5.2 5.1 Drivers of Q1 sequential performance: Europe (0.4) • Italy: delayed repricing post move to monthly billing (1.3) • EU regulation: final quarter of roaming drag AMAP 7.2 • Spain: commercial actions to reposition pricing 7.0 1. Excluding EU regulation and UK handset financing 2. Excluding the benefit of a German legal settlement in Q4 17/18 12 3. From Q1 18/19 and onwards wholesale voice transit revenue is excluded from organic growth. Healthy growth across most markets Q1 18/19 service revenue growth (%) 16.7 14.0 5.4 5.4 5.1 3.6 2.4 2.1 1.8 1.7 - (2.2) (6.5) Egypt Turkey Hungary Czech Vodacom Portugal Germany Greece UK¹ Ireland Romania Spain Italy Republic Share of Group FY 17/18 EBITDA (%)2 3 4 1 1 15 2 27 2 12 2 1 10 16 1.