Vodafone Group Plc Trading Update for the Quarter Ended 31 December 2016
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Vodafone Group Plc Trading update For the quarter ended 31 December 2016 2 February 2017 Disclaimer Information in this presentation relating to the price at which This presentation also contains non-GAAP information which the relevant investments have been bought or sold in the past or the Group’s management believes is valuable in understanding the yield on such investments cannot be relied upon as a guide to the performance of the Group. However, non-GAAP information is not future performance of such investments. uniformly defined by all companies and therefore it may not be This presentation does not constitute an offering of securities or comparable with similarly titled measures disclosed by other otherwise constitute an invitation or inducement to any person to companies, including those in the Group’s industry. Although these underwrite, subscribe for or otherwise acquire or dispose of measures are important in the assessment and management of the securities in any company within the Group. Group’s business, they should not be viewed in isolation or as replacements for, but rather as complementary to, comparable This presentation contains forward-looking statements within the GAAP measures. meaning of the US Private Securities Litigation Reform Act of 1995 which are subject to risks and uncertainties because they relate to Vodafone, the Vodafone Speech Mark, the Vodafone Portrait, future events. Some of the factors which may cause actual results to Vodacom, Vodafone One and M-Pesa are trademarks of the differ from these forward-looking statements are discussed on the Vodafone Group. The Vodafone Rhombus is a registered design of final slide of this presentation. the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners. 2 Commercial review Vittorio Colao Group Chief Executive Q3 16/17 highlights Financial Growth engines Customer Service revenue experience €12.3bn 4G driving Consumer NPS Group +1.7% data volumes Co/leader +53% in 18/21 markets €8.1bn Europe: +0.7% Enterprise Co/best data outperformance Sustained commercial network 15/21 markets performance revenue +3.3% €4.0bn AMAP: +3.9% Record broadband TransformationLargest EU NGN India slowdown net adds footprint +417k 90m homes passed1 All growth rates shown in this document are organic unless otherwise stated with Vodafone Netherlands excluded from organic growth from Q3 16/17 1. Including VodafoneZiggo 4 Commercial momentum Customer experience Growing customer base Consumer NPS1 (points) Customer net adds (000s)2 Gap to next best competitor Mobile contract India Gap to third Fixed broadband 14 14 1,425 1,415 12 10 1,290 1,135 1,048 2 1 0 414 416 348 327 417 (3) Q3 14/15 Q3 15/16 Q2 16/17 Q3 16/17 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 • YoY improvement in NPS points in 17/21 markets • Mobile impacted by India • Gap to competitors improving • Record fixed net adds, led by Europe NGN +430k 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. 5 2. Mobile contract additions in Q3 16/17 excludes a 125,000 impact in the UK following a one-off customer base adjustment, reported +923,000. All net adds excludes Vodafone Netherlands in Q3 16/17 All growth engines contributing Q3 16/17 service revenue growth contribution (pp) Data 1.2 0.7 (excl. roaming) 1.7 0.9 (0.8) 1.0 0.0 (excl. roaming) (0.1) European consumer AMAP consumer Enterprise Consumer fixed line Carrier, wholesale Q3 16/17 mobile mobile and other¹ • Delivering growth from branded retail customers, despite regulatory pressures • Lower revenue reflects strategic choices - wholesale and low margin carrier 1. Other includes mobile and fixed wholesale, common functions and eliminations 6 Growth engines: data take-up Mobile data traffic rising due to 4G Stabilising European ARPU Consumer contract (local currency) Volume (PB) Growth (%) UK Germany Spain Italy (consumer prepaid) 800 80 28.3 28.1 28.1 28.5 70 27.6 700 68 24.5 23.9 24.2 24.8 24.4 65 60 61 53 59 19.8 20.0 20.1 600 50 19.0 19.6 699 670 40 569 500 11.2 11.2 11.8 11.9 501 30 10.8 458 400 20 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 • Data growth slowing due to India; Europe /other AMAP • Continued benefit from more-for-more actions still strong • Continued opportunity: 4G penetration only 60% in • 4G base 65m1, +32m YoY Europe3 • Europe average data usage +51% to 1.5GB2 1. Excludes Vodafone Netherlands in Q3 16/17 2. Monthly smartphone usage 7 3. Based on 41m European 4G customers as a share of active data users Growth engines: enterprise Diversified revenue streams Growth in fixed driving outperformance Service revenue splits Enterprise service revenue growth (%) Mobile Group Fixed Multi-National AMAP Corporate Fixed 2.5 3.3 3.3 Public Sector National 5.4 Corporate 4.7 4.6 SME 2.8 Europe Mobile 2.5 1.7 SOHO Region Product Customer Q1 16/17¹ Q2 16/17 Q3 16/17 • 28% of Group service revenue • Outperformance due to fixed (IP-VPN +13%) and AMAP • NPS leader in 15/20 markets • Mobile: ARPU decline easing, customers growing • Leading network: IP-VPN to 73 countries, 49m IoT • Growth drivers: IoT +19%, Cloud & hosting +9%, VGE +2% connections 1. Q1 16/17 service revenue growth restated to take into account the reallocation in Germany of certain customers from Enterprise SOHO to consumer 8 Growth engines: fixed momentum Record net adds Largest NGN footprint in Europe Group fixed broadband net adds (000s)1 European NGN homes reached (m)2 Total NGN Total On Net % Penetration3 457 12% 414 416 415 417 381 9% 90 374 354 348 327 69 24% 19% 38 28 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q3 15/16 Q3 16/17 • Fixed broadband base now 14.3m, of which 7.4m NGN • 58% NGN coverage in Europe (incl. VodafoneZiggo)2, matching incumbents • 9.7m TV customers (+104k) • 3.5m converged customers (+189k) 1. Excludes Vodafone Netherlands in Q3 16/17 2. Includes VodafoneZiggo, 7.1m households passed and 3.1m broadband customers as of Q2 16/17 9 3. Number of customers divided by homes passed VodafoneZiggo: JV creates a fully-converged operator A strong integrated player Operational Total communications revenue market share (%)1 Board and management in place Other Tele2 8 4 Commercial T-Mobile VodafoneZiggo 8 37 Co-branded convergence proposition in Spring Q2 UPDATE Customer targeting initiatives executed NUMBERS KPN Financial 43 Net €0.6bn closing payment received €3.5bn NPV synergy target reconfirmed3 • Nationwide cable and 4G coverage • €4bn revenue, 10m fixed RGUs and 5m mobile2 1. Source: Vodafone estimates as at September 2016 2. See 31 December 2016 press release at www.vodafone.com for more details 3. Lower cost and capex synergy run rate offset by higher profits post sale of Vodafone Thuis 10 Operational review Nick Read Group Chief Financial Officer Continued growth in Europe, slowdown in India Q3 16/17 organic service revenue (%) Q3 15/16 Q4 15/162 Q1 16/17 Q2 16/17 Q3 16/17 Europe (0.6) 0.5 (0.3) 0.3 1.0 0.7 19.6 AMAP 6.5 8.1 7.4 7.7 7.1 3.9 Group 1.4 2.5 1.8 2.2 2.4 1.7 15.0 Group 1.3 2.1 1.7 2.0 2.2 (Ex. India) 8.3 4.1 4.0 3.0 2.8 2.2 1.8 1.7 1.2 0.0 (1.9) (2.0) (3.2) (6.4) Egypt Turkey Ghana Spain¹ Vodacom Italy Romania Portugal Germany Group Greece New India Ireland UK NL ex. Zealand Thuis 1. Excluding impact of handset financing 2. Figures in italics for Q4 15/16 represent underlying growth excluding leap year benefits and accounting changes 12 Germany: steady underlying growth Customer experience KPIs Financial results Consumer NPS (points) Customer net adds (000s) Service revenue growth (%) Gap to next best Mobile contract Reported 3.2 Gap to third Fixed Growth ex MTR impact 2.2 17 14 1.7 1.7 196 3.1 8 134 1.6 1.6 1.8 105 108 110 1 92 (0.3) 61 49 (0.4) (1) 20 (4) 8 Q3 15/16 Q2 16/17 Q3 16/17 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 • High network quality ranking: P3 • Continued focus on direct channels • Growth slowed due to MTR cuts1 and ‘connect’ close #2, Chip test joint first MVNOs • Solid in fixed: DSL net adds +33k • 400Mbps NGN passing >6m homes (LY +9k); cable +77k • Mobile 0.0%, Fixed +4.8%2 1. The German regulator reduced mobile termination rates in early December by 34% 2. Fixed service revenue growth was +3.1% (Q2 +4.4%) excluding one-off from reclassification of CPE revenue from non-service revenue to service revenue 13 Italy: growing in a promotional market Customer experience KPIs Financials Consumer NPS (points) Customer net adds (000s) Service revenue growth (%) Gap to next best Mobile 3.0 Gap to third Fixed 63 70 2.2 9 38 46 33 1.3 1.2 6 4 2 0 (0.3) (266) (261) (289) (4) (318) (344) Q3 15/16 Q2 16/17 Q3 16/17 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 • Leading quality: network NPS #1, 4G • Mobile active prepaid base stable • Mobile: +1.4%; consumer prepaid ARPU coverage 97% despite intense promotional activity +6.7%, tariff plan changes and lapping ‘Exclusive’ offers • 4.4m own NGN homes passed, incl.