Corporate Responsibility Report 2015/2016 of Vodafone Hungary

Table of Contents

Highlights 4 Introduction by the CEO 6 About our report 7 Our operating environment 9 Our responsible operation 14 › Vodafone around the globe and in Hungary 14 › Our strategy and values 16 › Our corporate governance 18 › Our organisation 20 › Our value chain 20 › Our stakeholders 22 › Our memberships 23 › Our products and services 24 › Ethical and regulatory compliance 33 Our sustainability performance 37 › Our economic performance 38 › Our social performance 42 › Responsibility towards our customers 52 › Responsibility towards our customers 52 › Supporting communities 57 › Our environmental performance 62 › Prizes and awards 70 Our commitments 73 List of abbreviations 76 GRI index 78

3 Highlights

Zero tolerance of discrimination

70 colleagues have worked with us for over 10 years

In the past 4 years we have decreased our carbon emissions ratio (against data traffic) by 80%

86% of our employees feel that their leaders support their personal wellbeing

Close to 100% 4G coverage for Budapest (including metro lines

600 jobs offered at our regional customer service centre in Miskolc

6 424 students are participating in our Digital School Programme

740 000 sheets of paper are saved annually since we introduced electronic contracting

Introduction by the CEO

Dear Reader,

Thank you for your time and attention, dedicated to getting to know Vodafone Hungary’s actions, with emphasis on our corporate responsibility (CR). We have been publishing our Corporate Responsibility (CR) reports every year since 2008, because we consider transparency and sharing information an important part of responsible operations and creating social value. This year we would like to inspire our stakeholders by showing how much strength is in cooperation. This is why we made cooperation the central theme of the 2015/2016 report.

Vodafone has always worked in close cooperation with numerous partners: employees, suppliers, authorities, competitors and customers. However, the development of the mobile communications infrastructure projects that such cooperation will become more frequent and more intensive in the future. With the help of our partners, our IoT solutions are accessible by corporations (smart meters), small- and medium size enterprises (ReadyPay) and consumers (Vodafone Wallet). We are most proud of our largest social programme ever, the Vodafone Digital School Programme, which involved 6 424 children andclose to 700 teachers in 25 schools in the first quarter of 2016. We are confident that through this programme we can also contribute to increasing Hungary’s competitiveness and the quality of education – thus to the foundation of a better future. Cooperation has an exceptional role in our Connecting for Good initiatives. The Cserhát Rescue Dog Association did not just increase its efficiency with our help, but increased the geographical scope of its work; our technological solutions also greatly contributed to the success of the “Lapról hangra” (From Page to Voice) Programme.

Such results would not have been possible without the enthusiastic, conscientious and inspiring work of our employees and partners. Their creativity, can-do spirit and sense of mission is energizing and inspiring for all of us. We hope that our report can communicate this dynamism, encouraging our partners, employees and customers to see the opportunities that the future may bring.

Kind regards, Diego Massidda CEO

6 About our report

Vodafone is committed to operating in a sustainable and responsible fashion, and we work hard to continually improve in all areas. Our 2015/2016 report presents business events and results from the last business year.

Transparency is an important part of responsible operation. For us, at Vodafone, it is important to communicate clearly not only with customers but also with other stakeholder groups affected by the company’s operation. Vodafone has been publishing its annual Corporate Responsibility (CR) Report every year since 2008, reporting on its economic, social and environmental results, as well as the impact of its business activity. The 2014/2015 CR report was published in May 2016.

This report aims to offer credible and detailed information to the owner, as well as state, corporate and key NGO leaders and decision-makers about the company’s operations and their effects. It has been proven over the past few years that the Corporate Responsibility Report is an outstandingly important means of communication, providing management with a tool that enables the company to continually develop.

This report presents the Corporate Responsibility performance of Vodafone Hungary Mobile Telecom- munications Ltd. (hereinafter Vodafone Hungary Ltd or Vodafone) for the financial year 2015/2016, i.e. from 1st of April 2015 to 31st of March 2016.1 The report has been prepared in line with the Global Reporting Initiative’s 4th generation guidelines (GRI G4) fulfilling ‘Core’ disclosure requirements.2

GRI is the most widespread and commonly used reporting guideline standard across the world’s GRI G4 – Materiality leading corporations.3 The content and indicators presented in the report were defined by weighing GRI G4 aims to generate better focused reports which present key topics in a much more detailed up their operational, financial and other risks as manner than before. This will allow companies to use well as their importance and potential effects on their resources much more efficiently, and enable Vodafone’s successful future operation; along with stakeholders to read a report offering relevant the significance of any present, future, mandatory information to them. or voluntary commitments, and also the reporting practices of other domestic and international play- Based on the expectations posed by GRI G4, a materiality survey must be run to set the contents ers in the telecommunications industry. of CR reports. This identifies key areas and topics for the company.

1 The scope of the report excludes Vodafone Shared Services Budapest (VSSB), which is 100% owned by Vodafone International Holdings B.V., and over which Vodafone Hungary Ltd. has no managing authority. Vodafone Hungary Ltd. did not have significant managerial influences over Tesco MBL Zrt., who concluded their operations on 2015 April 16. 2 For more information, please visit the Global Reporting Initiative’s website at www.globalreporting.org 3 According to the international survey www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/corporate-responsibility/Documents/corporate-responsibility-reporting-survey-2013-exec-summary.pdf

7 The reliability of information and data featuring in the present report is ensured by databases and records backed by the information and technology systems, as well as management checks at several levels. In some cases, data published in previous years’ reports have been adjusted and re-published, marked thus .*

Vodafone welcomes feedback, and takes it into consideration in the development of corporate responsibility programmes and reporting practices. Any comments, queries or recommendations may be sent to [email protected] to be received and processed by the Corporate Responsibility team.

For an explanation of the abbreviations featuring in the report, please consult the List of Abbreviations later in this document.

For environmental reasons, this report is only published electronically on Vodafone’s website at http://www.vodafone.hu/english

In 2015 Vodafone drafted its materiality survey with the help of KPMG, whose results are shown on the heat map above: Vodafone used on-line research to identify the most significant areas and topics most relevant to its operation. The survey was conducted with the participation of relevant stakeholder groups (the company’s management, employees, customers, suppliers, non-profit organisations and authorities, as well as communities affected by the media and the company’s operations). In the course of this evaluation, these stakeholders indicated the topics most relevant to Vodafone from the list published as part of GRI G4.

In line with the ‘Core’ application level of GRI G4, we have selected a relevant indicator to represent each identified topic. This year’s report contains a total of 17 indicators. We have supplemented the description of selected areas with information that helps us understand how Vodafone handles the topics in question, covering everything from data security to energy efficiency to customer satisfaction.

8 Our operating environment

Global challenges

Each generation wants to build a better future for the next one. As science and technology keep pro- gressing, we get a better idea about the global technological, social and environmental processes that will shape our future. As we better understand the local effects and causes of global processes, we also learn about their interdependencies. Such knowledge will help us better prepare and take advantage of future opportunities.

These challenges can only be tackled through tight cooperation between certain members and groups of society. The global community has taken two significant steps in this direction in 2015: in Septem- ber, Millennium Development Goals were replaced by Sustainable Development Goals (SDG), while in December representatives of 193 nations adopted the first global, legally binding regulation on climate change.

Sustainable Development Goals: SDGs4

In September, 2015, the 193-member United Nations (UN) General Assembly unanimously adopted the new global development programme, which aims to eliminate poverty and develop a sustainable future by 2030.

Source of picture: www.sustainabledevelopment.un.org The new Sustainable Development Goals (SDGs) replace the Millennium Development Goals (MDGs) coming to an end in 2015. All three traditional pillars (economic, social and environmental) of sustainability contributed to the formulation of universally valid, sustainable development goals. A total of 17 goals and 169 targets were set.

4 Source: Ministry of Foreign Trade and Foreign Affairs: International Development and Humanitarian Department (http://nefe.kormany.hu/post-2015)

9 How do we contribute to the Sustainable Development Goals?

Vodafone Group’s operations should contribute to almost all SDGs. Our existing projects already work towards reaching the most relevant goals, the following list details some of them:

SDG Vodafone programme Further information

1. No poverty Financial inclusion (e.g. mPesa) Vodafone’s transformational solutions (pg. 28)

2. Zero hunger Vodafone Farmers’ Club Vodafone’s transformational solutions (pg. 28)

3. Health and well-being mHealth solutions Vodafone’s transformational solutions (pg. 28)

Workplace health and safety Our responsibility towards our employees (pg. 42) Co-operation with suppliers for Our value chain (pg. 20) a healthy work environment 4. Quality education Vodafone Digital School Programme Vodafone Digital School Programme (pg. 61)

5. Gender equality 100% salary for mothers Our responsibility towards on maternity leave our employees (pg. 42) Vodafone for the safety Mobile for Good Causes (pg. 30) of women programme 6. Industry, innovation Solutions based on machine-to-machine Our products and services (pg. 24) and infrastructure solutions; i.e. Internet of Things (IoT) Network development Impacts of our infrastructural investments (pg. 39) 7. Reduce inequalities 100% salary for mothers Our responsibility towards on maternity leave our employees (pg. 42) Vodafone Farmers’ Club Vodafone’s transformational solutions (pg. 28) Vodafone Digital School Programme Vodafone Digital School Programme (pg. 61)

Network development Impacts of our infrastructural investments (pg. 33) Extension of access to financial Vodafone’s transformational solutions (pg. 28) services (e.g. mPesa) 8. Sustainable cities and communities Solutions based on machine-to-machine More information about Velotrack is solutions; i.e. Internet of Things (IoT), available in Hungarian online e.g. Velotrack 9. Responsible consumption Solutions based on machine-to-machine Our products and services (pg. 24) and production solutions; i.e. Internet of Things (IoT) Co-operation with suppliers for a Our value chain (pg. 20) responsible and sustainable 10. Climate action Solutions based on machine-to-machine More information about enabling a low solutions; i.e. Internet of Things (IoT) carbon economy is available online More information about sustainable options is available online More information about minimising our carbon footprint is available online 11. Partnerships for achieving goals We work with our corporate partners, Cooperation in Hungary: Our NGOs, public organizations, etc. on both memberships (pg. 20) global and local level.

10 Vodafone among the best – according to Transparency International5

In 2015 Transparency International (TI) compiled a survey of the world’s 35 largest global telecommunications companies (29 service providers and 6 equipment manufacturers) about their publishing practices. The report ranks global telecommunications companies based on their disclosure practices in anti-corruption programmes, organisational transparency and country-by-country reporting.

Vodafone Group finished third in the overall ranking, which may have been backed up by the fact that apart from publishing a Group-level report, Vodafone operating companies in several countries also publish local reports.

The future of mobile communication The role of products and services offered by telecommunications companies will increase in the future due to two factors: firstly, population growth and the digitisation of corporate processes will further increase demand, and secondly, mobile solutions that offer environmentally friendly and carbon- decreasing solutions will play a key role in creating a sustainable future. According to research conducted in 2014 by IDC and EMS, an American cloud-services provider, the volume of data stored in clouds will increase 180-fold by 2020. This trend offers numerous new opportunities, as the European Commission estimates that by 2020, 2.5 million new jobs will be created in Europe alone thanks to cloud services.6 However, this will also make the safe transferring and storage of data critical. The EU’s data protection regulation is already in preparation, but harmonisation with national law is expected to take many years still. It is important to be responsible for our customers, just as it is important to recognise responsibility relative to our partners in the value chain. As mobile communication will play an increasingly significant role in both the everyday lives of consumers and corporations, the expectations towards responsible operations will increase from such stakeholders as well. So, we expect an increase in interest in the sources of the raw materials offered as part of our products and services and their ethical and sustainable sourcing. Alongside this we anticipate increasing cooperation between mobile communications companies, affected communities and non-governmental organisations (NGOs). Mobile communication has seen incredible transformation over the past decades, changing our world and the way we live and think. In 25 years, the number of mobile subscriptions has increased to 7.1 billion, and in the past 5 years the number of mobile broadband subscriptions has reached 2.9 billion. Ericsson estimates that by 2019 there will be 9 billion subscriptions, of which 7.5 billion users will use mobile broadband.7 In 2010, half of all mobile traffic was voice (i.e. speech-based communication), while the other half was data transmission. This ratio is continually shifting in favour of data traffic (surfing the net, using different applications, watching videos and listening to music), and in 2014 its volume was ten times that of voice traffic. This trend will continue into the future as well, as a result of the rapid development of the Internet of Things (IoT), and by 2020, data traffic is expected to grow tenfold again on current levels.8

5 Transparency International: Transparency in corporate reporting – Assessing the world’s largest telecommunications companies (https://transparency.hu/hirek/a-latszatra-egyre-jobban-ugyelnek-a-lenyeg-azonban-sokszor-rejtve-marad/) 6 The European Commission: The European Cloud Strategy (https://ec.europa.eu/digital-agenda/en/news/european-cloud-strategy-0) 7 http://www.haon.hu/ericsson-hat-ev-mulva-a-vilag-90-szazalekat-lefedi-a-szelessavu-mobilnet/2693585 8 Portfolio.hu: Almost the whole world can use mobile internet in 6 years (http://m.portfolio.hu/vallalatok/telekom/hat_ev_mulva_szinte_az_egesz_vilag_mobilnetezhet.206181.html)

11 The Internet of Things – the web of every day

The Internet of Things (IoT), where everyday devices will be capable of communicating with each other, seems less like science fiction and more like our medium- and long-term future in view of current developments. From smart bicycles, smart meters and smart homes to smart clothes, almost everything we use will collect and share data.

451 Mobility Research estimates that by 2019 the number of connected devices may reach 908 million, a rise from 252 million in 2014. The causes of this growth include the use of cloud networks and solutions, wearable technology, and the availability of processes based on smart technology automatized on the internet.9

The McKinsey & Company study evaluates the impact of IoT on the economy by the year 2025 at 11 trillion dollars. The survey cites competing standards as the key factor in hindering the development of IoT, as this will make it difficult for different devices to communicate with each other. The solution, stated in the report, is cooperation between developers and the interoperability of systems.10

To serve the exponentially growing demands of the future, the telecommunications industry is constantly working on adapting and preparing. A number of companies, including Vodafone, are already testing 5G, the next generation of mobile communications networks, which will reach data transfer speeds of over 10 GB/sec, increasing radio network capacity one thousand-fold compared to current 4G networks. Vodafone Group is working with Huawei, Nokia, Ericsson, Intel and Qualcomm Technol- ogies in preparing for the new standard, which will be formally defined in 2020 by the International Telecoms Union.12

Mobile communication in Hungary

The development of the Hungarian telecommunications industry is posing a significant challenge to market players, primarily due to the increased demand for data that the growing number of smartphones require. 92% of Hungarian households have a mobile phone, of which an increasing share are smartphones. In 2011 only one in five households had a smartphone, and the figure stood at 50% by 2015. There are about 3 million mobile Internet subscriptions, and almost 2 million post-paid subscriptions offer unlimited data volumes or unlimited within the service provider’s network.13 This tendency will strengthen in the future due to the mobile usage habits of young people: 87% of people under 30 connect to the internet from their handsets or tablets. In 2015, the smart devices market grew significantly in Hungary. The number of smartphones increased by 400 000, to over 3.15 million devices.14

9 M2M Zone: Rapid Developments – IoT and M2M are at the forefront (http://www.m2mzona.hu/gyartas/porognek-a-fejlesztesek-az-iot-es-a-m2m-az-elvonalban?utm_campaign=heti_hirlevel&utm_medium=email&utm_source=hirlevel) 10 M2M Zone: Internet of Things could be a goldmine (http://www.m2mzona.hu/gyartas/aranybanya-lehet-a-dolgok-internete?utm_campaign=heti_hirlevel&utm_medium=email&utm_source=hirlevel) 11 HVG.hu: 5G is already being tested (http://hvg.hu/tudomany/20140515_mar_tesztelik_az_5gt ) 12 http://www.vodafone.com/content/index/what/technology-blog/vodafone-group-partners-technology-companies.html# 13 Usage of telecommunication services by residential users in 2015 (http://nmhh.hu/dokumentum/169926/lakossagi_tavkozles_2015_piackutatasi_jelentes.pdf) 14 Online habits of people under 30 (http://coffein.cafecommunications.hu/2016/03/igynetezneka30alattiak/)

12 The development of the Hungarian telecommunications industry is posing a significant challenge to market players, primarily due to the increased demand for data that the growing number of smartphones require. 92% of Hungarian households have a mobile phone, of which an increasing share are smartphones. In 2011 only one in five households had a smartphone, and the figure stood at 50% by 2015. There are about 3 million mobile Internet subscriptions, and almost 2 million post-paid subscriptions offer unlimited data volumes or unlimited within the service provider’s network. This tendency will strengthen in the future due to the mobile usage habits of young people: 87% of people under 30 connect to the internet from their handsets or tablets. In 2015, the smart devices market grew significantly in Hungary. The number of smartphones increased by 400 000, to over 3.15 million devices.14

And there is now a growing number of digital natives amongst both our consumer and business customers. These are users who more or less run their work and private lives online. The biggest challenge for mobile service providers is how to provide all the services simultaneously and flawlessly, that had previously been provided by several operators. Hungarian consumers consider mobile service providers similarly important to utility companies, since mobile communication has become an integral part of their daily lives.15 A study published by the Hungarian National Media and Infocommunications Author- ity (NMHH) confirms this, as it found that 71% of respondents consider their mobile phone as an essential part of their daily lives, and 16% would struggle to cope without their phones.16

In Hungary developing telecommunications infrastructure is key to creating the opportunity for less developed regions to join economic cycle. Creating opportunities via telecommunications requires investment from public and private market movers. For example, the fibre optic networks of the towns of Marcali, Lengyeltóti, Fonyód, Kecskemét and Kunszentmárton were developed using non-refundable European Union subsidies. The 220 km long optic network in question currently makes it possible for 33 settlements to receive internet, TV and telephone services.17

The effects of Hungarian investments are tangible: the study published by OpenSignal at the beginning of 2016 states that mobile operators in Hungary offer an average 4G network download speed of 28MB per second, to users ranking Hungary third in the word. The study showed that 4G services were used by Hungarian devices for 79% of their up time. At the time of the study, the 4G network coverage of all major operators was above 90%.18

15 Hvg.hu: 4G is important but taking care is even more (http://hvg.hu/brandchannel/bchvodafone_20150706_4G_is_fontos) 16 NMHH: Usage of telecommunication services by residential users in 2015 (http://nmhh.hu/dokumentum/169926/lakossagi_tavkozles_2015_piackutatasi_jelentes.pdf) 17 Sg.hu: A fiber-optic network is being developed in several micro-regions for 1.5 billion HUF (https://sg.hu/cikkek/117231/masfel-milliardert-fejlesztenek-optikai-halozatot-tobb-kistersegben) 18 OpenSignal: The State of LTE (February 2016) (http://opensignal.com/reports/2016/02/state-of-lte-q4-2015/)

13 Our responsible operation A Vodafone világszerte és Magyarországon

Vodafone Group is one of the world’s leading mobile telecommunications companies, present in Europe, the Middle-East, America, Africa and Asia providing services to over 461 million customers worldwide. In 2015, we built our 4G network in 20 countries, and over 35 million customers connected to it in 2016. In Europe, our outdoor 4G coverage reached 84% of the population in February of 2016, and our Voice over LTE (VoLTE) service was available in four markets.

Through our acquisitions, we can offer an ever-widening portfolio of services to our customers. In 2015, we became the third largest fixed operator in Europe. We had access via fibre networks to over 50 million homes across Europe, of which 28 million were reached via our own new-generation cable and fibre networks. In 2015, we had over nine million television customers in six markets.

With the help of M-Pesa (see the Our products and services chapter, framed) our money transfer services are gaining a market share. In 2015, we had close to 12 million M-Pesa customers, and that number is steadily increasing, as it supports both residential customers and small enterprises in developing markets.

14 Availability of Vodafone’s services around the world19

As an international company, we aim to offer tailor-made solutions to customers, adapted to local circumstances and requirements. Vodafone operates subsidiaries in 26 countries, and is also present in 57 additional countries through partnership agreements. On partner markets, we conclude co-operation agreements with local operators for the marketing of our global products and services. This strategy enables Vodafone to introduce new services on new markets, thus creating added value to both the partner companies’ and Vodafone’s customers.20 Vodafone is headquartered in the United Kingdom.

According to the M2M Scorecard survey published by Analysis Mason in July 2015, Vodafone was rated the best Machine to Machine (M2M) communications service provider in the world, based on technological enablement as well as customer and aftersales support. In providing IoT services, Vodafone works with 205 partners worldwide, including over 55 network operating partners, apart from the 26 networks operated by Vodafone. The report considers the ability to provide enabling technologies to co-operating partners as a key success factor in M2M development.21

As a member of Vodafone Group, Vodafone Hungary has been offering mobile communications services to consumers, small offices and medium and large businesses in Hungary for 16 years. Our headquarters are at 6, Lechner Ödön fasor, 1096 Budapest.

Our main activity is providing public cellular telephone services and the designing, development, construction and maintenance of the related network; as well as the wholesale and retail trading, maintenance and repairs of infocommunications and ICT products; along with telecommunications and technical research and experimental innovation.

We conduct our retail operations via 25 brand dealerships, 152 distribution partners and our on-line web shop, as well as via a network of supply agents. We have a wholesale presence through supermarkets and petrol stations.

19 http://www.vodafone.com/content/index/about/where.html 20 More information about our international presence: http://www.vodafone.com/content/index/about/where.html 21 http://www.vodafone.com/business/m2m/vodafone-tops-analysys-masons-independent-m2m-annual-scorecard-for-record-fourth-time

15 Our strategy and values

We are constantly working on creating products and services for customers offering benefits, which, in turn make the lives of our customers and stakeholders better. Global changes and social and technological innovations increasingly empower individuals to become active and pro-active players not only in their close environment, but also in society in general. With our mobile solutions, we wish to empower our clients to become positive agents of change, instead of just trend followers. Our brand positioning and strategy were developed along these lines.

Our strategy

As emphasised by our slogan, ‘Power to You’, we have a customer focus at the forefront of our operation. We know that we can only be successful in the long run, if we create value, i.e. high-quality products and services that can evoke the satisfaction of our customers.

To reach our strategic targets, we have identified three pillars:

A reliable network: It is our goal to provide extraordinary customer experience through our fast and reliable mobile Internet service, available virtually everywhere in the country.

Unmatched customer experience: All our colleagues consider meeting our customers’ needs as a top priority and conduct their work accordingly day by day.

Competitive solutions always: It is our goal to become a service provider on the mobile communications market that offers the best solutions to its customers.

Code of Conduct22

The primary purpose of our Code of Conduct is to give guidance to our employees about how to act in a responsible and ethical way in their day-today work. It defines the framework necessary for complying with the responsibilities stipulated by law and the relevant guidelines, and helps colleagues act in an appropriate way in all operative areas and at all levels of the company. Complying with the Code of Conduct is compulsory for all our employees, as the observation of its provisions ensures proper conduct at the workplace and compliance with the legislative environment.

22 For more information on our Code of Conducts, please visit: http://www.vodafone.com/content/index/about/conduct.html

16 What we expect from everyone What we expect from our leaders Our Code of Conduct defined the mandatory obligations Our line managers have an important role in ensuring our for everyone who works for and with us, from directors to Code of Conduct is understood and applied by their teams. interns. Every individual is expected to: In particular, we expect our line managers to:

1. Behave in an ethical manner, taking pride 1. Be a role model for working the Vodafone Way; in their actions and decisions; 2. Ensure their team members are familiar 2. Comply with the principles and rules found with our Code and that they understand it; in our Code of Conduct; 3. Hold their team members accountable 3. Fulfil their legal and regulatory obligations; for complying with our Code. 4. Understand the Vodafone Way and apply our business principles to their work; 5. Report any unethical working practices or unsafe or inappropriate behaviour which is in breach of our Code of Conduct.

To ensure that all our employees have up-to-date knowledge of the rules and guidelines in our Code of Conduct, our employees participate in mandatory e-learning training programmes. The programme offers guidelines about how to behave in certain risky business situations, and covers subjects such as anti-bribery action, the protection of customers’ personal data and safety at work.

Every employee must sign up to the Code of Conduct in writing when joining the company. Non-compliance with our Code of Conduct has serious consequences, including disciplinary action or, if necessary, dismissal.

17 Our corporate governance

Our company’s management

Openness and flexibility are important to large corporations like Vodafone, as they enable us to adapt quickly to our customers’ and society’s changing needs. At the same time, it is at least as important for the company and its employees and management to show stability and reliability.

Our approach: Recruitment

All applicants are treated the same way in the process of recruiting employees, and decisions are made primarily on professional grounds. Equal treatment is regulated by our Recruitment Policy.

All discrimination is strictly banned on the grounds of gender, religion, race, marital status, disability, political affiliation, union membership or any other involvement that is not strictly related to the job in question. We recruit staff without any prejudice, in an open, transparent and fair way.

50% of Vodafone Hungary’s management is of Hungarian nationality.

Proprietor Vodafone Hungary Ltd. is a single-entity, private limited company, 100% owned by Vodafone Europe B.V., the sole exerciser of ownership rights. The proprietor’s primary function is to make decisions in fundamental and strategic matters.

Chief Executive Officer (CEO) The Chief Executive Officer (CEO) is also appointed by the proprietor. His main responsibility is the operative management of the company, and he also bears full responsibility for the company’s results. In 2015/2016, this position was filled by Mr. Diego Massidda.

Chairman The chairman is appointed by the proprietor. The Chairman’s main responsibility is the formulation of the corporate strategy, and the building and development of the company’s external strategic relations. This position was created in 2011, separating the strategic and operational levels of governance. This position is filled by Dr. György Beck.

Board of Directors The company’s management body, which is made up of senior officers who make decisions related to the company’s management and operations. Its members as at March 31, 2016 were as follows: 1. Dr. György Beck (Chairman) 2. Diego Massidda (CEO) 3. David Garcia (Finance Director) 4. Alexandre Froment-Curtil (Director of Consumer Business Unit)

18 Menedzsment (GMT: General Management Team)

This is the operative management of the company, responsible for developing and executing corporate strategy. In 2015/2016, there were two changes in Vodafone Hungary’s management team: Amrita Gangotra joined the team as Technology Director, after Gábor Döbrőssy joined Vodafone’s international team leading the European Network Operations team as Head of Performance and Partner Management; and Zsuzsanna Tóth joined the team as HR Director, after Ibolya Gothárdi pursues her career outside of Vodafone.

Members of the management team as at March 31, 2016 included:

Diego Massidda Amrita Gangotra David Garcia Alexandre Froment-Curtil Chief Executive Officer Technology Director Finance Director Director of Consumer Business Unit

Marchhart Pál Király István Tóth Zsuzsanna Schay Dániel Director of External Affairs Director of Enterprise Human Resources Director Director of Commercial Business Unit Operations

Auditor

This is an external controlling body selected by the proprietor, whose task is to examine the company’s operation and management to determine whether the company’s statutory accounts comply with relevant legislation, and whether they give a real picture of the company’s properties, finances and operational performance. The auditor function is currently filled by PricewaterhouseCoopers Auditing Ltd.

19 Our organisation

Our organizational structure is created in a way that enables us to best serve our business goals. Our key values include speed, simplicity and trust. The following organizational chart summarises Vodafone’s main areas of operation, which have not changed in 2015/2016:

Chief Executive Officer

Technology Human Director of Director of Director Finance Resources Director of Enterprise Director of External Director Director Consumer Business Unit Commercial Affairs Business Unit Operations

Our value chain

Vodafone Hungary is in contact with 3 305 business partners, including 479 suppliers from 10 countries. Most of our suppliers (410) are companies operating in Hungary.

Vodafone does not have a multi-level supply chain but rather a wide and diverse base of suppliers. This concept divides suppliers into first tier (direct suppliers) and second tier (subcontractors of first tier, i.e. vendors) suppliers. In Hungary, most of our vendors work in the fields of Sales and Marketing, Property Management Services, Human Resources and Corporate Services.

Vodafone Group’s current procurement policies divide procurement processes into two levels: the activities of Vodafone Procurement Company (VPC) and those of Local Market Operations. Accordingly, we differentiate between central (VPC) and local procurement. In the case of local procurement, Vodafone Hungary orders products or services directly from local suppliers based on signed contracts. In the case of VPC procurement, Vodafone Hungary orders from VPC, as a supplier, based on a global contract.

Network infrastructure and related services account for the majority of our procurement. The products we sell to customers (such as mobile devices, SIM cards, routers and set-top boxes for cable TV) to connect to our network also account for a significant proportion of our procurement spending, and they fall into the ‘terminals’ category. To support our local operation, we also need general corporate and commercial support functions, from professional advisory support to catering and cleaning, and we rate these services as ‘services and trade’.

Vodafone Group is not a manufacturer and does not directly own or operate factories or other production plants with the exception of a technology operation that is part of its Vodafone Automotive ‘Internet of Things’ (IoT) business. A range of smartphones and tablets that carry the Vodafone logo are designed and manufactured by our suppliers, according to our specifications. We do not own, operate or control these manufacturing plants.

20 Supply Chain Integrity

We are working with partners and peers to drive integrity, transparency and high standards across the industry’s supply chain and do our utmost to keep everyone who works in our operations safe. Vodafone Group works with more than 15 000 direct suppliers around the world, which, in turn, have a very large number of their own suppliers. Conduct that is at odds with Vodafone’s principles and beliefs can occur at any point in these long and complex supply chains and poor behaviour by an individual supplier in any tier can have negative consequences for a large number of businesses connected to it. Ensuring responsible and ethical behaviour across our supply chain is therefore of key importance. Establishing this chain is highly challenging for us, and our efforts in this area span multiple jurisdictions and cultures and encompass vast numbers of people.

The security of those working in the supply chain is an area of special concern to many stakeholders, from customers and employees to proprietorsand policymakers. We seek to encourage those who work with us – directly or indirectly – to adopt sustainable business practices. Enhancing supplier performance improves quality, boosts productivity, stimulates innovation and helps to secure a better working environment for anyone working with us.

In 2015/2016 Vodafone Hungary conducted supplier audits targeting work environment and related health- and safety practices a total of four times. In the case of Huawei and its subcontractors, audits focused on compliance with occupational safety regulations.

Quality assurance of suppliers

To become a Vodafone supplier, a company must clearly acknowledge its acceptance of our standards – as outlined in the Code of Ethical Purchasing – and confirm that in the course of its operation it complies with those requirements. Vodafone Group conducts due diligence on all new suppliers to check that they meet requirements. Due diligence checks are based on a previous, thorough risk assessment; thus, the extent of the due diligence is defined not by the individual supplier’s reliability, but by the weighting of the risk identified. Due diligence is conducted by colleagues who do not have a commercial relationship with our suppliers, thus avoiding conflicts of interest and an objective outcome to audits.

21 Our stakeholders

As responsible members of Hungarian society, we are aware that the quality of relationships we have with stakeholders has a significant impact on the success of our Company, and therefore we consciously try to look after and develop them. The following diagram summarizes key stakeholder groups of strategic importance, as well as the ways and topics of communication we have with them.

In order to be able to create value for our stakeholders and for wider society, it is paramount that we continuously work with our most important stakeholders. We must learn what are the most important topics and problems that are key for them, so that we can work together to find solutions. Our long-term planning and sustainable operations require for us to develop partnership and strategic partnership with our key stakeholder groups.

PROPRIETOR CUSTOMERS • Accounting • Information regarding products and services • Preserving and enriching proprietor value • Data protection • Managing customer feedback and complaints

EMPLOYEES PUBLIC ORGANISATIONS • Creating healthy, safe and inclusive workplace free of discrimination (REGULATORY AUTHORITIES, MUNICIPALITIES, ETC.) • Respecting human rights • Regulating operations • Offering fair payment • Verification of compliance with laws and regulations • Employee advocacy platform • Role of telecommuni-cations in solving social problems

MEDIA CIVIL SOCIETY • Business activities and developments • Accessibility of information for people with disabilities • Sponsorship • Safety of women and children • Social investment programmes • Digital education for disadvantaged children • Sponsorship and donations • Volunteering and community work • Civil cooperation based on mobile technology solutions

COMMUNITIES CLOSE TO INFRASTRUCTURE VENDORS • Safeguarding health and safety • Business ethics • Installing base stations • Workplace safety and environ-mental protection • Electromagnetic field issues

22 Our memberships

Vodafone is a member and supporter of several international and national organizations. These relationships create an opportunity for us to collaborate with other organizations, to share best practices and launch new initiatives in Hungary.

Hungarian Mobile Wallet Communi-cations Hungarian Association: Reconciliation Water Polo Zsuzsanna Winkler Council (HÉT): Association: leadership member, Csaba Babos, György Beck, Balázs Fodor, leadership member Co-Chair participates in projects

Business Council Hungarian Donors Hungarian GSM for Sustainable Forum (MAF): Advertising Association Development: Emese Zolnai, Association: (mandatory Emese Zolnai, participates Péter Baráth, membership) participates in projects Board Member in projects

Chinese-Hungarian National Association British Chamber Business of Entrepreneurs Association of of Commerce Council: and Employers: IT Companies in Hungary György Beck, György Beck, (IVSZ) (BCCH) Board Member Co-Chair

American Chamber Hungarian ICT Association of Commerce Business Leaders of Hungary in Hungary Forum (HBLF) (HTE) (AmCham)

23 Our products and services

Today we consider it natural that we can access and be accessed anywhere at any time. We can make calls, send text (sms) messages, write e-mails or use maps.

Often, we are not even conscious of the fact that it is all owing to mobile technology. Telecommunica- tions products and services, however, are not only able to change the day-to-day lives of people; they can also contribute to the achievement of global targets. At Vodafone, we strive to make sure we help people with reliable, fast and high quality technology, services and solutions, whilst also contributing to sustainable development.

Our services may be grouped in two different ways, depending on the payment approach used; into pre-paid subscriptions or post-paid packages. Our customers may choose the product best suited to their needs from a wide product and service portfolio. We provide a detailed description of our products and services and our current offers separately for the consumer segment, small business and medium sized/corporate customers.

Solutions for our consumer segment customers

We dedicated the financial year of 2014/2015 to pulling down barriers and obstacles. We want mobile communication to mean opportunities, not limitation to our customers and the wider society. The financial year of 2015/2016 is about exploiting the opportunities emerging as a result of pulling down barriers, together with our customers, business and civic partners. Cooperation in this area is also central, because we alone cannot take advantage of the opportunities offered by technology while together we become capable of building an innovative and creative future, relying on an innovative, creative and pragmatical approach.

Good Bye Roaming Costs

As of April 1, 2015, we abolished roaming charges within the European Union (EU) for our customers with personal or business Red subscriptions. Our Red customers were able calls and use their data plans anywhere within the EU just as if they were at home.

Customers without a Red subscription have the opportunity to use our Europe Daily Ticket, which offers voice, data and text services for a fixed price across the EU. We offered two solutions to our pre-paid customers, “Europe at home prices” and “Europe data daily ticket”.

With our new World Daily Ticket, which is based on the characteristics of our Europe Daily Ticket, we offered local rates for voice, data and text services in the most popular American, African and Asian countries.

With the World Daily Ticket, our customers could use local telecommunication services subject to the same terms and conditions as at home not only in EU member states, as well as Iceland, Liechtenstein, Norway, Switzerland, Serbia, The Ukraine, Russia and Turkey, but also in numerous American, African, Asian and Eastern-European countries. As of October 2015, our customers could use the World Daily Ticket in 36 countries.

24 Families in focus

In developing solutions for our consumer segment customers, we also focus especially on families. The results of our 2015 survey showed a clear demand for solutions that satisfied the needs of all family members, such as Vodafone Family. In today’s dynamic, rushed world families have little time left for being together and for the constant supervision of children. Mobile communication brings together those who are far away, and helps in sharing experiences.

The results of the survey showed that an increasing proportion of families use their mobile communications tools for everyday contact with other family members. It has become clear that mothers play a key role in forming a family’s habits in using mobile communications and the internet. Survey results show that it is mothers who are most aware of potential danger sources, and they are more often the ones to decide when children should receive mobile devices, and what type. The survey confirmed that it is especially important for parents and children to be able to contact each other at all times. Our pre-paid Kid subscription, designed specifically for younger children, makes it possible for family members to talk to each other for free even if the card’s balance is zero. We also offered our Young package to older children who are already active internet users.

Family packages can be freely mixed and matched, but we also offered three standard packages (S, M and L). A pre-requisite for a family package is the availability of two post-paid subscriptions, therefore a family of four may call each other for free with only the subscriptions of the two adults. With extended families and grandparents in mind, these family packages may be further extended with cards for both adults and children.

Call+

In 2015, next to the Vodafone Message+ application, we introduced another Vodafone application; i.e. Call+. Call+ is a bespoke application developed by Vodafone Group, based on GSM technology, differen- tiating itself from other similar applications by offering perfect voice quality. Vodafone was the first service provider to offer a call application enriched with other functions. Call+ makes it possible to set the priority and topic of a call, and enables sound or text messages, in an easy manner, in case the called party is unavailable. Pictures, calendar events and location information can also be shared within the application, and video calling is also allowed. The application makes it possible to share this information even if the called party has not downloaded it, and in such cases, the subject of the call is sent in a text message (SMS), while location information is forwarded as an MMS.

Vodafone Wallet

Vodafone Wallet is an outstanding example of cooperation, offering a fast, safe and convenient mobile wallet application, developed with our partners, OTP Bank and MasterCard. Vodafone Wallet is a digital wallet, which enables contactless payment in mobile devices capable of near-field communication (NFC) and with a SIM card, by touching the mobile handset against an NFC terminal. Paying with mobile devices requires four things: an NFC/wallet enabled mobile handset and SIM card, a subscription for the handset in question and an OTP MasterCard© Mobil PayPass™ card that can be applied for at OTP Bank. The technological conditions for paying with mobile devices are available nation-wide, as at the launch of Vodafone Wallet it could be used at 45 thousand terminals.

More than a mobile payment tool, each Vodafone Wallet may cover up to 1 500 loyalty cards thanks to the Loyalty card extension. Most card readers used in shops can read the required information from the screens of NFC-enabled smartphones. The application makes it possible to save both Hungarian and foreign-issued cards, and if a specific loyalty card is not installed in the application, its bar code can be photographed and saved.

25 Solutions for customers living with disabilities

Ensuring equal opportunities for all is especially important for us, so we make sure to adapt our products and services to the needs of people living with disabilities. We have been offering special price plans to organizations representing people with disabilities since 2007. In September, 2015 we extended our fleet contract with the Hungarian Association of the Deaf and Hard of Hearing (SINOSZ), making it possible for the third largest language minority group in the country, that of the deaf and hard of hearing to share in the benefits of mobile communication to the largest extent possible. We have already made the package available for less than 3 000 HUF, offering free calls and text messages between fleet members, 2 GB data and 100 units that may be used for calls or text messages. We offered SINOSZ members additional data options at a discount.

Considering the requirements of our special customers, we aim to provide barrier-free communication not just for the deaf and hard of hearing, but also for people living with other disabilities. In our ‘accessibility fleet packages’ users can choose the service combination most suited to their needs, depending on whether they can use voice, text or data-based solutions best. The fleet package can be used regard- less of membership of any of the organizations, who hold official certificates issued by the Hungarian State Treasury and who hold the parking permit issued to people with disabilities. The package includes the fleet versions of our Go, Go+ and Red EU services.

To learn and to understand– Szájkóder exhibition

In November, 2015 we invited our employees to a special exhibition in our office building, which showed how the deaf and hard of hearing perceive the world, focusing on lip-reading as the single device and channel serving as a connection to the world. The exhibition made it possible for our employees to experience daily life situations that never cause problems for themselves, but which may be a problem for deaf and hard of hearing persons. We also took the opportunity to showcase our initiatives that aim to help people with disabilities, such as the Jeles and Hallatlan applications and our ‘accessibility’ fleet.

The exhibition offered a great opportunity for our employees to learn about the realities of everyday life for people with disabilities. This way they can better understand their needs and will be able to offer them help more effectively.

Solutions for business customers

Co-operation is especially important when it comes to business customers. In 2015/2016, we worked on helping our business partners benefit from the opportunities offered by mobile communication, enhancing existing solutions and finding new ones.

26 ReadyPay – increasing mobility

In February, 2016 we introduced our new solution, ReadyPay, for small and medium businesses (SMEs) that makes it fast and easy for them to adapt to an electronic payment system. The ReadyPay mPOS is a mobile card reader terminal, which is so small it can fit into a pocket, ideal for mobile retailers and service providers on the move. The terminal accepts any kind of card payment method, from cards with magnetic strips or chips, to contactless cards and mobile handsets. The device may be useful for de- liveries, for example for products ordered over the internet and paid upon delivery, or in taxis or for any other businesses that do not yet have a traditional card reader terminal.

The terminal connects to the internet via Bluetooth to a smartphone or tablet. Payment can be initiat- ed through the ReadyPay application installed onto the smart device, by entering the payment sum. Afterwards, the bank card or mobile wallet can be read by the card holder using the mPOS terminal, and the PIN code may be entered if necessary. Following this, the transaction continues in the same way as is customary for traditional card readers, in OTP Bank’s systems. Confirmation of the transaction is sent to the application installed on the smart device, and also by e-mail.

The service is provided in cooperation with OTP Bank, as a financial service provider, and the Ingenico Group’s Hungarian subsidiary, who are experts in card reader terminals and safe financial transactions. MasterCard also participated in the development of this solution.

IoT races on

The most important outcomes of introducing Machine to Machine (M2M project Internet of Things; i.e. IoT) technology have been increased competitiveness, fast returns, flexible corporate operations and innovation. The Vodafone M2M Barometer23 survey shows that the number of companies using IoT technologies increased by 23% in the last twelve months – this means that almost a quarter of all companies worldwide use technical possibilities to boost productivity. 83% of the companies surveyed reported an increase in their competitiveness, and 59% reported a fast return on investment (ROI), as a result of IoT investments.

23 The complete report is accessible in its original language here: http://m2m-mktg.vodafone.com/barometer2015

27 The fastest growth in IoT adoption, 88% was found in the retail sector, with retailers enthusiastically adopting solutions such as digital signature capability, smart payment solutions, and asset tracking to streamline the supply chain. The healthcare industry also experienced significant growth, 47%, as M2M solutions are used for remote supervision of patients and collecting test data. Adoption of M2M technologies increased 32% in the utility services sector, primarily due to the spreading of smart meters aiming to boost energy efficiency. In the automotive sector, there is also increasing demand for the adoption of IoT, with a 14% increase due to the “connected car” strategy.

Vodafone M2M Barometer study shows that M2M technology is increasingly used for more sophisticat- ed solutions, which are becoming more integrated into various cloud-based solutions and have increasing role in analysing big data.

Vodafone’s IoT communication solutions ranked first for the fourth consecutive year in the survey of Analysis Mason’s M2M Scorecard, a market research company, published in early July, 2015.

Connected cars

By now, several telecommunications operators offer a variety of services based on SIM cards embedded into cars. Cooperation in this industry is especially important, as standardisation is necessary to enhance the market of connected cars. General Motors, Jaguar Land Rover, Renault Nissan, Scania and Volvo Cars have already joined GSMA, a leading mobile industry organization. Together, these car companies are working with the GSMA on developing a standard specification for connected cars.

The specification will enable cars to connect to the network of a selected service provider, and will support several pre-installed services, such as real-time navigation systems, claims settlement, telematics or remote diagnostics. By joining the GSMA initiative, car companies are expecting cost savings, easier location of cars and the enhanced affordability of car-related services.

Vodafone’s Transformational Solutions

With the development of products and services supporting society and sustainability, Vodafone Group is also seeking new market opportunities. We develop our solutions by working closely together with our customers and partners, with the aim of better recognising new solutions and innovative uses for existing technologies, based on a wide range of experiences. Globally, we are focusing our developments on six key areas: agriculture, education, financial services, healthcare, solutions with low environmental impact and ‘smart’ solutions.

The technology solutions developed and gathered by the Group give an inspiring example for the optimal utilisation of benefits offered by mobile communication technology, in line with the needs of local communities. In all instances, we assess which solutions are worth introducing or even further developing in Hungary. Below, we list a few of Vodafone Group’s global programmes, including some also implemented in Hungary.

Financial services

Mobile technology is increasingly employed to offer creative and innovative solutions in various areas of life, including finances. Vodafone’s M-Pesa service enables ever more users to manage their finances actively even if they do not have the opportunity to open a bank account. Launched in 2007, M-Pesa is now available in ten developing countries, through 261 000 agents.

28 Using M-Pesa is very easy: customers register for the service at an authorised agent – often this is a small mobile phone store or retailer – and then deposit cash in exchange for electronic money which they can send to their family or friends. Once they have registered all transactions are completed securely by entering a PIN number and both parties receive a text message confirming the amount that has been transferred. The recipient receives the electronic money in real-time and then redeems it for cash by visiting another agent.

There are already 25.3 million active users of M-Pesa globally, and we processed 4.5 billion transactions in the financial year 2015/2016. In addition to sending payments, our customers can now use M-Pesa to borrow, save, make purchases and receive salaries and government benefits. Mobile shopping solutions are the most dynamically expanding financial services in Hungary today. They allow our customers to pay for mobile parking or buy assistance services in a cash-free way.

Agriculture

Population growth and the depletion of natural resources are likely to exert increased pressure on agriculture. Its main objective will be to produce ever more food using ever fewer resources. Mobile technology, which enables significant increases in productivity, plays a major role in creating new solutions and systems to help agriculture adapt. Vodafone Group’s sustainability page provides an overview of our global solutions supporting growth in agriculture.

Vodafone Farmers’ Club

The world’s population has passed 7 billion, but one-third of them rely on food grown by 500 million smallholder farmers. They make up half of the world’s starving population, because the farmers have limited access to information, capital and market opportunities. Vodafone’s Farmer’s Club aims to help, through the introduction of a social business model, offering a wide variety of services that can contribute to increasing farmers’ productivity.

By accessing Vodafone’s mobile services specifically developed to help smallholder farmers, such as on-line invoicing, payments and loans or field auditing, these farmers may become more productive, which in turn may increase their revenues and livelihoods.

The introduction of mobile services may benefit 70 million Indian farmers, and the use of these services could enhance earnings by an average of $128 a year for almost two-thirds of Indian small- scale farmers.

Apart from India, Vodafone is focusing on three other countries, Ghana, Kenya and Tanzania. The company also plans to launch the Farmer’s Club in New Zealand, which requires a unique concept, as New Zealand’s agriculture is more developed than the agriculture of other countries. New Zealand is harnessing the strength of its extensive rural network to connect farms, agribusinesses and rural communities, helping drive productivity, profitability and innovation.

29 Education

Our main goal is to make education accessible to ever more people and also to offer an interactive learning environment for children and adults who live far from conventional educational institutions. We are applying our educational solutions not only in international projects, but also in Hungary. The Vodafone Hungary Foundation has been a sponsor of the Programme for Complex Instruction (PCI) since 2010 (to find out more about the Programme, please refer to the section: Our Social Perfor- mance). We also launched an educational campaign to promote sign language (to find out more, please refer to the section: Mobile for Good). In December, 2015 we launched the Vodafone Digital School Programme, enhancing the digital knowledge of several thousands of underprivileged students and contributing to the transformation of Hungarian digital education.

Healthcare

An aging population in the developed world and population growth in developing countries are putting increasing pressure on healthcare. Mobile technology can efficiently support efforts to improve healthcare quality and access, cut costs and increase efficiency. Vodafone Group is working with pharmaceuti- cal companies, medical equipment manufacturers, health insurers, NGOs and government agencies to develop the healthcare solutions of the future.

Mobile for Good

It is self-evident to us that we must use our creativity, technologies and innovative services to help wider segments of society. We provide our strategic partners with customised solutions that enable them to work more efficiently and effectively.

Vodafone for the Safety of Women Programme24

Under the Mobile for Good scheme, the Vodafone Hungary Foundation joined forces with the NANE Women’s Rights Association to run a comprehensive safety programme to support victims of domestic violence. Participants in the programme receive a mobile alert device that uses the GSM network and is the size of a matchbox. The handset will send an alert at the push of a button in an emergency, along with the exact geographical coordinates of the device, allowing police control room staff to initiate prompt intervention. Participants say they feel much safer with the device, and many have called it their mobile bodyguard. Five Budapest police stations have joined the programme since 2014, which enables them to respond very quickly. On average, women participating in the scheme make 50-60 emergency calls a year and help always arrived in time.

24 Further information: https://www.youtube.com/watch?v=F8wUzCaClw0

30 Vodafone helps in the search for missing persons

The Cserhát Rescue Dog Association25 was founded in 2010 with the objective of providing specialist help to people in an emergency, even under extraordinary conditions. The Association works with the police, the national disaster management agency, the Slovakian Central Specialist Rescue Service and other NGOs in the effort to find missing persons in Hungary and areas in Slovakia just across the border. The specialised rescue team can be very useful during mountain rescue, major fires and flood defence. Cooperation between Cserhát Rescue Dog Association and the Vodafone Hungary Foundation started in 2011. Vodafone helps the Association both financially and with the expertise of its employees in imple- menting state of the art mobile technologies into its operations.

In possession of a number of special skills and many years of experience, and thanks to the support of the Vodafone Hungary Foundation, the Cserhát Rescue Dog, Special Rescue and Voluntary Firefighter NGO Association extended its portfolio of services from finding missing persons with dogs to searching for them with a unique, locally developed tracking system comprised of thermographic cameras and drones, which significantly boost the successful outcome of searches.

Since its launch, the Association has been called into action over 120 times to help in cases of fire or other technical and other rescues. In total, the Association was called out to search for missing persons on 49 occasions, of which 44 were successfully completed. In 50% of cases they managed to save the person who’d disappeared, and in 22 cases they managed to pass on the body to family members.

The Cserhát Association is the first NGO in Hungary that, in just 5 years, managed to put all the required conditions in place to qualify for becoming the official partner of the National Police Headquarters, helping people in emergency situations nation-wide. With the co-operation agreement signed in June, 2015, the three organisations aim to make searches for missing persons more efficient, and develop new the methodologies to use GPS and GSM-based tracking systems.

The programme won the Shared Value Creation Special Award from the Hungarian Donors’ Forum (MAF) in October, 2015.

Vodafone Instant Network

The international Vodafone Foundation developed its Instant Network in 2011 to provide assistance in disaster zones. The Network is a device the size of three suitcases weighing less than 100 kg and it can be set up in 40 minutes. It enables the setting up of a free communications network to assist with the work of rescue and aid organisations in disaster zones. Two of our colleagues, Csaba Pervai and Róbert Tóth regularly help in the installation of the Instant Network in disaster areas.

The Instant Network Mini, an upgraded version of the Vodafone Instant Network, was used for the first time in 2015 at the site of the Nepal earthquake. As a robust backpack that can be taken as hand luggage on commercial flights, the Mini can provide up to five concurrent calls within a radius of 100 metres and enable text messages to be sent to thousands of people. It can be deployed in as little as 10 minutes.

25 Further information: http://www.csmke.hu/en/

31 Our colleague, Róbert Tóth was also on Lesvos island between 11 and 22 November where he participated in action organised by UNCHR (United Nations High Commissioner for Refugees) and TSF (Télé- coms Sans Frontières). They built instant mobile charger stations and wireless hotspots for refugees reaching the shores, so they could easily contact their families and friends back at home. Róbert even had team leader responsibilities during the deployment, as - just like Csaba Pervai - he earned the necessary certificate with excellent results in the course finished in the summer of 2015.

Mobile technology for people living with disabilities

Vodafone Hungary Foundation has been working with the Hallatlan Foundation for 10 years, supporting the wider use of sign-language. The first result of this cooperation was a sign language dictionary, which has been made available on-line and on mobile devices, and serves as an efficient way of teaching Hungarian sign language. A version of the dictionary intended for children, and the application called “Jeles”, which is now available on the iOS and Android platforms for free, made its debut at the Sziget Festival in 2014. We introduced our sign language interpreter video service in September 2013, and its main benefit is that it is possible for interpreters to help customers from a remote location. The service is free for the deaf and hard of hearing, and is available 24 hours a day with the help of a video-chat programme installed in a smartphone or tablet. In 2015/2016, the interpreter service received 1 676 calls. The service is available in Vodafone’s city centre shop.

Vodafone Hungary Foundation launched its “From Page to Sound Reading Out Application” in cooperation with the IT for Visually Impaired Persons Foundation in April, 2015. The aim of this application was to make it easier for volunteers to read out news and articles to visually impaired persons. The application, which is free to download, was developed with the support of Vodafone Hungary Foundation and the participation of Adatközpont Ltd. and record sound in MP3 format that can be uploaded to the internet with just one click. The “From Page to Sound” webpage, established in 2011 and offering free services has seen approximately 2 600 articles uploaded, read out by over 1 000 volunteers; however, the Foundation found it a challenge to ensure that content remains up-to-date. The Foundation signed an agreement with three outstanding and well-recognised educational institutions operating in Hun- gary: the Eötvös Loránd University, the GNM Theatre Study Hall and the Komlósi Educational Studio to have their students and employees read and upload 300 new articles a week.

Vodafone Guardian application

The Vodafone Guardian app makes it safe for children to use their smartphones, as it offers a security solution against unsolicited content and other risks of Internet use. With the help of the popular, free and extremely simple to use development enables users to select who and in what time periods children may call or text and what phone numbers the child may call or text to. Internet and Bluetooth connectivity, camera use, video and all other options are just as simple to control, which makes it easy to prevent children from downloading files and applications on their smartphones that they may find disturbing.

32 Ethical and regulatory compliance

Anti-bribery

Our Approach: Anti-Bribery

The Anti-Bribery Policy of Vodafone Hungary provides guidance to our employees and contractors on how to operate ethically; it sets out Vodafone’s global anti-bribery programme and it conforms that Vodafone has a zero tolerance approach to corruption. Accordingly, Vodafone’s chief executive and management apply the zero tolerance principle towards employees as well.

Our existing policy is based on the UK Bribery Act, the US Foreign Corrupt Practices Act (FCPA), the OECD’s Convention Combating Bribery of Foreign Public Officials in International Business Transactions and the Hungarian Criminal Code. We updated our policy in early 2015. We are subject to and compliant with the World’s strictest anti-bribery legislations, to the UK Bribery Act.

The Finance Director of Vodafone Hungary is responsible for the Policy, its reviews and implementation. The performance of Vodafone Hungary in relation to its Anti-Bribery Policy forms part of the Finance Director’s performance review. The Policy was updated in early 2016.

Vodafone Group states anti-bribery aims for each quarter and each country; and the chief executives of the local markets are responsible for the achievement of these targets. Vodafone Group’s anti- bribery team measures the effectiveness of these measures and checkpoints every year. The local Vodafone markets set out additional targets as well, taking into account the anti-bribery manager’s recommendations and the findings of local internal audits and risks assessments. In a given country, it is the relevant Deputy CEO’s responsibility to oversee the achievement of these goals. In Hungary, it is the responsibility of the CFO.

Bribery, corruption and non-compliance with local laws represents material risk, as they may result in reputational damage, fines and even imprisonment. We recognise this risk and now conduct annual risk assessments to identify existing risks and prevent non-compliance.

We will continue to pay special attention to our anti-bribery measures, particularly our preventative and investigative activities. This includes regularly educating our employees through presentations, news- letters and face-to-face conversations, and the due diligence of our suppliers and partners before entering into contracts with them. Starting from FY2015/2016, we are extending our anti-bribery program’s scope to certain high risk vendors (with the high risk arising from the nature of their work), whereby we provide support in setting up their anti-bribery programmes. We plan to involve more partners in the future.

Knowledge of and compliance with the relevant regulations is essential if we as a company want to operate ethically. Vodafone Hungary’s Anti-Bribery Policy formed a key part of our mandatory on-line training courses in the year 2015/2016, and we expect every new hire to complete our on-line anti-bribery course. In 2015/2016, we further increased the focus on our trainings, ensuring that all our senior managers participated in anti-bribery training. In addition, we also provided tailor-made trainings to

33 our colleagues working in high risk areas. From time to time we send reminder communication to our colleagues, e.g. in the Christmas ‘gift’ period, where we point out the relevant details of the appropriate legislation.

Vodafone’s Audit Committee and CFO are given detailed feedback on the anti-bribery programmes (e.g. the rate of participation in training courses; the results of the annual risk assessment exercise; the findings of special audits into critical, high-risk areas etc.). Based on the feedback we received, 100% of our controls met Vodafone Group’s exacting criteria in 2015/2016.

In the 2015/2016 reporting period we checked for and did not encounter any cases of suspected bribery or corruption involving our company or its employees.

Bearing in mind

It is highly important that our Anti-Bribery Policy provides guidelines to our employees, but fighting corruption cannot be done in an isolated fashion, therefore one Policy is not sufficient for the efficient prevention of corruption. In 2015 Vodafone Group updated its External Communications and Investor Communications Policy, focused on the anti-bribery aspects of advertising with media outlets. The changes ensure that our operations are in line with our most important values and that we can meet new challenges with unified and consistent solutions.

Anti-competitive behaviour

Our approach: Anti-competitive behaviour

Vodafone Group operates a number of international as well as local compliance activities; our educational programme “Doing what’s right” is one of the most important. Our policy on compliance with competition law includes rules on anti-competitive behaviour and provides contact information for the manager responsible for compliance (the head of the Regulatory and Legal office) and the company’s lawyers. Vodafone Hungary’s chief executive officer bears responsibility for compliance with the policy. The members of Vodafone’s Board and its management are regularly checked for compliance with competition legislation, and our CEO addresses an annual message to all employees about the importance of compliance.

Vodafone Group defines annual and biannual group-level compliance targets that concern, among other things, communication to employees, on-line training courses, regular consultations, course completion rates, new contract reviews and risk assessments.

We monitor and document compliance and Vodafone Group’s Legal office holds annual audits. We draw the conclusions from the audits and the feedback received, and we plan further improvements in our systems accordingly.

Vodafone did not exhibit any anti-competitive behaviour in the 2015/2016 reporting period and thus it is not subject to any legal proceedings citing anti-competitive behaviour or the breach of anti-trust or monopoly laws.

34 Social compliance

Our Approach: Social compliance

Our Code of Conduct regulates our compliance with the written and unwritten rules of society; responsibility for compliance with the Code resides with Vodafone’s Human Resources Director. Vodafone Group’s Human Resources Director approves the modifications of the Code of Conduct, which is updated every three years. Vodafone formulates targets relating to the requirements in the Code of Conduct for the Group as a whole; the “Doing What’s Right” campaign launched in 2015 is part of this process, targeting the most relevant and riskiest areas. We measure the results of the campaign regularly and report it to our management. The performance reviews of our colleagues and managers responsible for compliance (our internal communications, training and development and legal teams) reflect the success of their efforts to check the effectiveness of our compliance programmes.

Each year, Vodafone Group measures compliance and delivery against the targets in its local markets, specifically focusing on the regulations concerning high-risk areas, compliance with such regulations and training completion rates. The local market chief executives are given the results of these audits and the recommendations for improvement; the timeframes available for taking the necessary steps are short. We have found that it is primarily in the documentation of our results that we should improve. As in 2015/2016 we made a significant progress in the documentation of our controls, we achieved a much better ranking during the annual compliance audit than in previous years.

We consider it especially important to talk to every customer who turns to the authorities so that we can find a mutually beneficial solution. As a result, over 80% of complaints end in an agreement, where authorities terminate proceedings as a result.

In 2015/2016, we did not receive any significant monetary fines (we consider fines of above 1 million HUF as significant).

We received one non-financial sanction as a result of providing mistaken information over the telephone. We found our processes to be appropriate, there was no need to further improve them, and related parties received necessary feedback.

Fines and non-monetary sanctions 2012/2013 2013/2014 2014/2015 2015/2016

Total monetary value of significant fines 100 050 76 725 235 000 - (th HUF) Number of non-monetary sancions (no) 1 6 - 1

Cases brought through dispute resolution 97 - 128 92 mechanisms (no)

Source: Vodafone internal reports

Our sustainability performance Our economic performance Hungary’s Gross Domestic Product (GDP) grew by close to 3% in 2015, driven primarily by an increase in industrial, retail, tourism and hospitality output. In the meantime, both inflation and unemployment decreased.26 GDP grew by 0.4% in the first quarter of 2016, compared to the same period in the previous year, while the consumption of households grew by 4%.27

Our economic performance grew in line with Hungarian economic trends. Our operating costs increased by 1%, our revenues grew by 3%, compared to 2014/2015. Employee wages and benefits increased by 10%, partly due to the 5% increase in the workforce, and partly due to wage payments.

IT development package

In 2015/2016, we performed internal IT developments with the aim of improving customer experience. Introduced in the autumn of 2015, our most recent IT package covered a wide range of our operations, from simpler customer identification, more automated corporate customer service, more precise customer seg- mentation as well as LTE access to prepaid customers and foreigners who roam with Vodafone Hungary.

Direct economic value generated

130 000

120 000 36 36 14 446 110 000 14 095 50 51 14 312 12 181 100 000 16 080 14 556

14 419 90 000 13 817

84 551 85 497 80 000 78 755 76 342

HUF million 2012/2013 2013/2014 2014/2015 2015/2016

Revenues Community investments Payments to government

Employee wages and benefits Operating costs

26 Hungarian Central Statistical Office (http://www.ksh.hu/docs/hun/xftp/gyor/jel/jel21512.pdf) 27 Hungarian Central Statistical Office (http://www.ksh.hu/docs/hun/xftp/gyor/jel/jel21604.pdf)

38 Our approach: Economic performance

In order to prevent fines, fraud and reputational loss, we continually develop our internal financial processes, relying on our financial, money laundering, travel and expense settlement, as well as car and insurance policies.

Our main goal is to eliminate all material misstatements and fraud from our financial processes and make sure they comply with all tax and accounting regulations. We conduct internal and external audits to achieve this.

We regularly review our processes and requirements in order to comply with the changing regulatory requirements at all times. The CFO of Vodafone Hungary is responsible for the financial results.

Our indirect economic impacts Building a network has a direct, positive effect on building the economy, as it creates new jobs We make a significant contribution to local eco- through suppliers and contractors that may nomic growth as we create jobs, buy products and provide the required resources and materials for services, pay taxes and invest into local communi- setting up the network as well as through the ties. Our networks and services enable businesses physical building of the network. to enhance their productivity and competitive- Providing better access to technology also con- ness, and they help improve efficiency in public tributes to economic development indirectly, as services. it creates new business opportunities, and also contributes to the increasing the efficiency and Budapest hosts Vodafone Shared Services Buda- productivity of exiting processes. pest (VSSB), one of Vodafone’s service centres, which supports Vodafone’s global operations in finance, administration, IT, human resources and Investing in Vodafone’s network supplier management.

The impacts of our infrastructural investments Impact of the spread of Impact of network new technologies deployed construction Mobile broadband investments can have a major by the mobile network impact on a country. Various international stud- + GNP and employment + GNP and employment ies have shown the correlation between digital expenditure on new job opportunities network construction + GNP and employment infrastructure, the growth rate of a country (gross + GNP and employment new business opportunities suppliers of goods and services + GNP more efficient processes national product, GNP) and job creation. The avail- required for network construction ability and widespread use of digital infrastructure and higher productivity provides an opportunity for developing new servic- + GNP + GNP + Employment + Employment es, boosting productivity and making businesses for the value string for the value string more efficient.28 + Gross National Product (GNP) + Employment for the country

28 “L’impact degli investimenti in NGN sullo sviluppo economico del Paese”, AGCOM – Autorità per le Garanzie nelle Comunicazioni (2010); “Wireless Broadband infrastructure: a catalyst for GDP and job growth 2013-2017”, PCIA-The Wireless Broadband Infrastructure* (2013);”The impact of Broadband on Jobs and the German Economy”, Dr. Raul L. Katz – Adjunct Professor, Columbia Business School, Director of Business Strategy Research, Columbia Institute for Tele-Information (2010).

39 Broadband networks enable government agencies The most visible elements of our network are the to offer citizens on-line information and services base stations, which cover the whole country. and implement intelligent systems in towns and Less visible, but equally important are our data cities (smart city). All this may generate further warehouses and the storage area network (SAN) business opportunities, and thereby economic equipment, which ensures connections between growth and new jobs. servers. Due to the increased requirements of stor- ing, analysing and processing data, the infrastruc- Network development ture behind our data warehouse required upgrading. Our data warehouse acquires information from 26 We started building our 4G network in 2014/2015. different IT and network systems, generating 850 10 months after acquiring the so-called spectrum, reports, and its size keeps growing by 40% every we completed our coverage of Budapest and the year. The presence of a professionally functioning biggest cities of the country with this faster mobile SAN equipment pool is crucial to us, so we can have internet service. Our 4G network offers mobile broad- efficient access to the data stored in our data ware- band with speeds of up to 75 Mbps, as well as the house. The replacement of the SAN devices had fastest and most stable service to our customers. become necessary due to growing data volumes, to enable us to provide fast data services. We planned the timing of the 4G coverage of lake Balaton for the start of the summer season in 2015, to ensure that our vacationing customers have excellent access to mobile internet. By the end of summer, our customers could use our 4G roaming services in 35 countries. By the fall of 2015, we covered 100% of the metro lines in Budapest. Covering metro lines with mobile internet is a complex and complicated process all over the world, partly due to the fact that it requires building underground and partly due to the special expectations and limited access – as building the network must be completed in a way that does not disturb the transport of millions of passengers. Every evening, our employees worked on 50 sites across four metro lines to ensure that a few days after the complete coverage of Budapest, the metro lines were also covered.

Flexible capacity building

Mass events that may span a day or a week, such as music- and gastro festivals or Formula 1 races are becoming increasingly popular in Hungary. To enable our customers to use their phones without any problems in a crowd of many (tens of) thousands, we set up temporary base stations near the events. Over the course of the summer of 2015 we prepared for five key events; we were at the Volt Festival, the Balaton Sound, the Sziget and Strand Festivals and at the Formula 1 race. On average, we installed six stations at each event, all with 2G, 3G and 4G capability.

During the five special events, there were 3,3 million minutes of calls using the installed stations, and a total data traffic of 8 500 GB was conducted by Vodafone and roaming subscribers.

40 Impacts of improvements made gaining committed, well-trained and enthusiastic to our customer service centre employees. We worked with the Labour Centre, Miskolc Branch and Service Centre of the Gover- In 2009, the management of Vodafone Hungary nment Office of Borsod-Abaúj-Zemplén County decided to set up the Miskolc Regional Customer during the recruitment, selection and training Service Centre, which we expanded by hiring 240 processes. additional employees in 2013. The growth of the Miskolc Regional Customer Service Centre has The Customer Service Centre in Miskolc meets the continued since, reaching over 600 employees in highest international standards and is a centre of 2015/2016. 170 employees in Miskolc have been reference for both Miskolc and Vodafone. In the with us for over 5 years; they were awarded with a past few years, the employees of the regional cus- diploma on the Centre’s sixth birthday. tomer service centre in Miskolc dealt with over 1.6 million calls on average per year and respond- Our Regional Customer Service Centre is a prime ed to nearly 70,000 e-mails and letters; it dealt example of a successful cooperation that creates with service activation requests about 400,000 a win-win situation for all parties involved. Our times and mobile number porting 100,000 times. investment facilitates the city’s economic devel- The total value of our investment surpassed opment, offering new workplaces and valuable 1 billion HUF in the past 6 years. work for local, young employees; and Vodafone is

41 Our social performance

Our responsibility towards our employees

We would like to continue providing our employees with an optimal workplace experience and we therefore survey their opinions about the company every year. We process the results of the People Survey and devise action plans based on the consolidated feedback. The performance reviews of our team leaders incorporate the Key Performance Indicators (KPI) in the People Survey. These indices measure how employees feel at the company; among other things, we ask them how proud they are of working for Vodafone, whether they would recommend Vodafone products and services to their friends and colleagues, and how they rate their managers’ performance. These efforts have helped us achieve improvement in all three areas. We distribute the results of the People Survey to all our team leaders, managers and directors, so that they can work with their teams to formulate action plans for growth.

Our approach: Employment

We recognise that our success depends primarily on the ability, qualifications, commitment and enthusiasm of our employees. Beyond trying to attract the best people to our company, we run regular training courses and improve working conditions year after year to motivate and retain our employees. We create a safe, exciting and inclusive working environment for our employees, recognise their talents and encourage their continued growth.

Human Resources Management works in line with global and local policies and processes, which we review annually and communicate before they enter into force. In order to ensure that our employees have up-to-date information at all times, we inform them even if the rules and processes remain unchanged after a review. The Code of Conduct describes the main guidelines for our employees. To find out more, please refer to the section on Our values.

All our active employees took part in our performance review process, which centres on self-knowledge and the individual’s annual targets derived from the overall business goals. We monitor performance throughout the year and help individuals reach their targets.

There is no collective agreement or works council at the company, but a 6-member employee representation body protects our employees’ interests, health and safety. The representation body works in compliance with the Labour Code. Our employees’ interests are also represented by an employee representative, who coordinates with Vodafone’s management on a local and Group-level as well.

According to the results of the People Survey conducted in 2015, we have not only improved compared to previous year’s results, but we also achieved outstanding scores on Vodafone Group level as well. On a global comparison, our Engagement Index (which measures the involvement of colleagues) is third best within the Vodafone markets and our Employee Net Promoter Score (ENPS) is at a record high and grew 12 points compared to 2014. Similarly, feedback confirms that we have improved in terms of the question “Action was taken following the issues raised in the last People Survey”. We are proud of our results and achievements, and we would like to continue to work on enhancing cooperation in the future.

42 10-15 years at Vodafone

It has become tradition at Vodafone that our top managers reward our colleagues who have been working with us for 15 or 10 years. At the end of 2015 more than 70 of our colleagues deserved a special thank you from us, as they have been contributing to our team for more than a decade. We would like to thank them for their conscientious and dedicated work!

Our headcount as of the end of 2015/2016 stood 99% of our employees work full-time, with only at 1 916, representing an increase of nearly 5% 13 employees, mostly women, working part-time. over the previous year. We have 8% more male and 98% of our employees are contracted for an indefi- 2% more female employees this year. The propor- nite period of time; 44 of our staff, 20 men and 24 tion of female staff remained at 54% as of March women have fixed-term contracts with us. 31, 2016 – similarly to the past three years’ data. We are a youthful and dynamic company; 27% of our employees are younger than 30 years, two- thirds are between 30 and 50 years old, and 2% are older than 50.

Number of employees according to gender Male Female

1 013 1 037 801 875

698 729 812 879

2012/2013 2013/2014 2014/2015 2015/2016

Source: Vodafone internal reports

43 New joiner and leaving employees Male Female

225 225 2015/2016 142 210

216 370 2014/2015 150 241

110 265 2013/2014 78 158

163 249 2012/2013 110 129

Leaving employees New joiner employees

Source: Vodafone internal reports In 2015/2016, we welcomed 465 new colleagues. The number of employees leaving surpassed 360 this year as well, and fluctuation continued to stand around 20%.

Most of our new joiners (close to 50%) are older than 30 years and younger than 50 years of age, and a total of 3 new male joiners were over 50. Two-thirds of leaving employees were between 30 and 50 years old, and 4 persons were over 50 years old (two women and two men).

Employee diversity

Our approach: Diversity

We aim to create an accepting and respectful work environment where everyone feels appreciated. Respecting individuals and human rights consist the basis of our relationships with our employees, customers and business partners. We do not tolerate any form of discrimination, and it is our responsibility to enforce these values.

A dedicated colleague is responsible for employee diversity within the Human Resources team. She works in line with Vodafone Group’s guidelines and local initiatives to help nurture an inclusive corporate culture in which every employee feels good, and to contribute to Vodafone’s efforts towards achieving its corporate diversity objectives.

44 Corporate diversity plays a very important role in the successful operation of our company, which is why we aim to create a work environment in which the uniqueness of each individual employee is respected, valued and celebrated. We believe our strong commitment to diversity (be it culture, skills, age, sexual identity or handicap) is a source of business strength. We would like to ensure that all our employees can feel comfortable in the workplace being themselves.

We have recognised that diversity fosters innovation and helps us better understand our customers. Equal treatment and gender balance are important constituent part of diversity, which is why we continuously monitor the ratio of women versus men in different positions.

Proportion of female employees by business unit (female employees/male employees)

2012/2013 2013/2014 2014/2015 2015/2016

7,5

2,6 2,3 1,9 1,8 1,9 1,8 1,5 1,7 1,5 1,3 1,1 1,2 1,3 0,8 0,8 0,9 1,0 0,9 0,9 0,9 0,7 0,7 0,5 13% 14% 15% 15%

Direct employees of CEO Consumer Business Unit Commercial Operations Enterprise Business Unit Finance HR External Affairs

Source: Vodafone internal reports

The proportion of men and women is almost the same among our staff. However, there are more significant differences by rank. In 2015/2016, over twice as many female employees worked in non-managerial positions as male employees; and half as many employees are female as there are male specialists and managers. Currently only one in seven directors are women. At present, only one out of every seven directors are female. On March 31, 2016 our Board of Directors comprised of two female members and six male members. Five Board members are aged between 30 and 50 years, and three members are older than 50 years.

The proportion of female employees varies by business units as well. The greatest proportion of women employees can be found in the Commercial Operations, in the HR and in the External Affairs teams. In these teams, the number of female employees is nearly twice as high as that of male employees. The proportion of female employee is 15% in our Technology team, which was only 13% in 2011/2012.

Proportion of female employees by rank (female employees/male employees)

Staff Specialists Managers Directors

2,42 2,35 2,16 2,23

0,66 0,66 0,70 0,64 0,47 0,44 0,29 0,40 0,42 0,14 0,23 0,18

2012/2013 2013/2014 2014/2015 2015/2016

Source: Vodafone internal reports

45 LGBT

For the creation of a corporate culture based on organised by the company for the second time tolerance and diversity, we need to maintain dia- in 2015. The video conference gave the opportu- logue in these subjects. Such an initiative was the nity to several openly homosexual employees to second global video conference about LGBT (lesbi- share their personal experiences about working for an, gay, bisexual and transgender) communities, Vodafone.

Training and development

Our approach: Training and development

We endeavour to align the training of our employees with our business strategy. We design training plans offering courses on topics that contribute to the professional and personal development of our employees. We review our training system on an annual basis, based on the standards assembled by Vodafone Group.

The training of our employees is governed by Vodafone’s global policy. Our Human Resources team member responsible for employee involvement is in charge of our development programmes.

In 2015/2016, our colleagues received 8 649 hours of training in total, including online and classroom sessions. We tailored training courses to our employees’ availability, offering shorter (1-2 hours’ long) and longer (1-2 days’ long) courses. On average, our staff and specialist employees received 3 hours of training in 2015/2016, manager-level employees received 36 hours. Our managers receive classes in leadership skills, which is highly important as they may influence the motivation, enthusiasm and commitment of their direct reports. The professional and leadership skills of our mid-managers ensure the efficient, tailor-made and on-the job development of our employees, as well as their adherence to Vodafone’s values.

Average hours of training by rank

2013/2014 2014/2015 2015/2016

45,7

34,0 35,8 28,0

11,3 6,6 3,8 3,1 3,5

Staff and Specialists Managers Directors Senior leadership

Source: Vodafone internal reports

46 Our training programme focuses on enhancing the effectiveness of frontline employees working in sales and customer care, therefore our employees in the Consumer Business Unit received 17 hours of training on average in 2015/2016. Units that support our everyday work, such as Finance, HR and Tech- nology teams also received a higher number of classes on average, 11, 7 and 5 hours respectively. To support the most effective operations of our customer care services, we also offered courses to employees supporting related processes.

In the next few years, we would like to prioritise leadership skills learning. We are proud of the results we have achieved. Our courses have 99% participation rate, and feedback from our employees shows a satisfaction rate of 95%.

Average hours of training by business unit

2013/2014 2014/2015 2015/2016

17,3

11,0

7,2 7,2 6,0 5,7 4,7 5,1 3,1 1,4 1,4 1,7 0,8 0,6 0,4 0,5

Consumer Business Consumer opera- Finance HR External Affairs Technical Unit tions and Enterprise department Business Unit

Source: Vodafone internal reports

47 E-learning materials are meant to complement lectures and courses are grouped by topic, there- classroom learning and offer the opportunity of fore the HR, marketing- finance, legal, technol- delving into professional subjects, either in their ogy or sales-related materials can be separately areas of expertise, or other areas. The e-learning accessed. The Academies offer a variety of tools materials of Vodafone Academies provide many to our employees, such as thematic courses, live advantages, as they are easily accessible, free of webinars, offline videos and useful tips and blogs. charge, and offer interactive learning. E-learning

Workplace health and safety

Our approach: Health and safety

Vodafone Hungary’s Health and Safety Policy complies with Hungarian law as well as Vodafone Group’s internal standards on safety. Our Policy is regularly updated, considering changes in the Hungarian regulations and in international trends. We have an extensive training portfolio about occupational health and safety, beyond the compulsory courses. Everyone working for Vodafone must comply with our Health and Safety Policy and Vodafone’s 7 Absolute Rules.

Our main priority is to prevent accidents at the workplace. Our unique health and safety management system covers not just our employees but our contractors too. Occupational health and safety is managed on a strategic level. Our action plans ensure safe and innovative operations. These action plans are based on specific, measurable, agreed upon, realistic and time-based (SMART) targets and performance indicators, whose status is reported quarterly to the management and Vodafone Group. During tenders with high-risk profile, apart from professional and commercial criteria, we also include an assessment, with special focus, of the occupational health and safety performance of potential suppliers.

Vodafone’s management and the leadership team of specific business units participate in occupational safety visits quarterly (or more often), where they enhance their understanding about high-risk activities. The venues of such visits are often base stations, but engine rooms and warehouses are also very popular. Business units affected by workplace health and safety have specific goals set to ensure safe and healthy working conditions.

48 The health and safety of our employees is very important to us, so we offer regular training courses, health screening and consultations, and organise health check and wellbeing programmes once a quarter or twice a year. Our colleagues can enjoy office-based treatments, and are also eligible for employee discounts when they use the services of our partners.

Our Health@Work programme contributes to the heightened health awareness of our employees, and a corresponding decrease in the number of sick days. The programme offers health check-ups that consider the risks of sedentary work. For example, employees who spend an extended time sitting in front of a computer can have a three-dimensional spinal exam, an ophthalmological exam and employees working under stress can participate in relevant laboratory tests. 120-150 employees are currently participating in each campaign.

We consider potential risks, including seasonality. As a result, in the summer of 2015 we organized first- aid courses for our appointed first-aid colleagues, and placed defibrillators in our offices in Budapest and Miskolc, to ensure that they are accessible in emergencies. As the share of external injuries is low in office environments, our training courses focused on treating non-external injuries.

49 We help our employees avoid seasonal illnesses by Our high-risk jobs include driving and building work offering them regular flu jabs or jabs against tick- at a height in our expanding network, during devel- borne diseases, and running periodic campaigns opment and maintenance jobs. Whether performed on the importance of prevention. The occupational by our employees or our contractors, we aim to health and ophthalmological service our company prevent accidents and injuries in these jobs. We provides and the fact that we regularly communi- conduct targeted audits during our network devel- cate useful information on the subject has played an opment projects, to ensure maximum compliance important part in helping prevent illnesses. with Vodafone’s health and safety guidelines. We involve our suppliers and contractors in checking The merit of our joint efforts was that in 2015/2016 compliance, and regularly check 10% of ongoing the number of sick days decreased to a tenth (13) projects. of that of previous years’, while the number of lost days and total number of injuries stagnated. In 2015/2016, there have been no cases of occupational diseases or fatalities.

In accordance with the GRI guidelines, we publish our health and safety rates to demonstrate how they have changed as our headcount increased.29 The number of days lost due to workplace accidents has grown nearly 1.5 days per employee in recent years, whereas absentee rate has decreased from 46.4 days to 44 days.

Work-related health and safety 2012/2013 2013/2014 2014/2015 2015/2016

Total number of injuries 18 5 3 4

Male 13 1 1 1

Female 5 4 2 3

Occupational diseases (no) - - - -

Male - - - -

Female - - - -

Lost days (no) 251 40 144 13

Male 216 6 58 2

Female 35 34 86 11

Missed (absentee) days (no) 5 167 7 767 8 463 8459

Male 1 833 2 330 2 651 3 247

Female 3334 5 437 5 812 5 212

Source: Vodafone internal reports

29 Injury Rate (IR) captures the frequency of injuries relative to the total hours worked by all employees. Occupational Disease Rate (ODR) captures the frequency of occupational diseases relative to the total hours worked by all employees. Lost days Rate (LDR) compares the number of days lost as a result of workplace accidents to the total hours worked by all employees. Absentee Rate (AR) compares the number of days not worked by employees to the total number of days worked.

50 In 2015, we organized our first Day for Traffic Safe- Feedback from the People Survey suggests that ty with the aim to increase awareness about safe 97% of our employees believe we take health and driving. During the campaign, our colleagues had safety rules seriously. We also regularly ask our the opportunity to try driving in dangerous condi- colleagues whether they feel that their line man- tions on world-class simulators and could listen to agers support their personal wellbeing. In 2015 interesting presentations about traffic safety. a very high proportion, 86% of our colleagues In 2014, we introduced the First Aid Hotline. Our responded approvingly. Line managers have a vari- colleagues can call the hotline to ask for prompt ety of tools to apply in order to support the well- help if they suffer an accident or feel unwell. Our being of colleagues, from optimising resource use, solution helps us create a safe environment at through flexible work opportunities, to supporting work and meets the requirements of the dynamic work-life balance. We are proud of the fact that office concept. the safety awareness of our colleagues featured among the top achievements in our employee satisfaction survey.

GRI rates 2012/2013 2013/2014 2014/2015 2015/2016

Injury Rate (IR) 0,19 0,05 0,03 0,04

Occupational Disease Rate (ODR) - - - -

Lost Days Rate (LDR) 2,40 0,38 1,38 0,12

Absentee Rate (AR) 34,47 48,42 46,37 44,15

Source: Vodafone internal reports

51 Responsibility towards our customers

Vodafone provides mobile communication services to over 2.7 million users in Hungary, including consumers, small businesses, medium-size and large companies, public institutions and other organisations.

Data protection

Our approach: Data protection

We treat our customers’ data as if they were our own. We use a general enterprise business impact analysis matrix to assess these risks, and a privacy risk management methodology to reduce them. Our methodology complies with Vodafone’s global policies as well as international standards (such as those of the Internal Association of Privacy Professionals, IAPP).

Our main priority is to evade risk and prevent privacy incidents; we achieve this by creating structured processes and tools and employing a uniform approach to privacy risk management.

We grant access to personal data only to those employees who need such information in their roles and jobs. We protect the data by ensuring that the persons accessing, or having the right to access, the protected data are identified. In line with the policy on the protection of the personal data of subscribers, every Vodafone employee must be familiar with, and respect, the rights of subscribers and telecommunication service users to personal privacy and the protection of their personal data, and they must comply with all the relevant rules in the prevailing laws and internal regulations and directives. Our Information Security Regulation describes this in detail.

As set out in our Electronic Data Storage Regulation, we store our data primarily on our own servers and create regular backups. A separate policy regulates our strict protection measures concerning classified information.

Data protection and secure mobile telephony are their trust in us when they chose our services. We increasingly important in mobile communica- foster a corporate culture in which our colleagues tions. The spread of these technologies and their recognise personal and security risks instinctively increased use have intensified these risks. The pro- as well as consciously, and where they know how tection of privacy and personal data is a vital part to manage these risks. We have set out our data of our responsibility to customers. It is our obliga- protection obligations in the Code of Conduct, tion to safeguard their data as they demonstrated which all Vodafone employees are bound by.

52 Customer satisfaction

Our approach: customer satisfaction

Customer satisfaction, and its key performance indicator, the Net Promoter Score (NPS, measuring how likely our customers recommend our products and services to others), is so important for us, we have also incorporated it in our employee performance reviews. We use the results to create action plans to improve client satisfaction, and constantly monitor their implementation.

We measure NPS every month, surveying general questions on a representative sample and specific ones on a predefined sample. We forward the survey results to the relevant departments and senior management. Our customers may give us feedback in a number of ways, in on-line questionnaires, phone interviews and via our call centre. We use detailed analysis to identify the main drivers behind the NPS score, and identify areas to be developed along these drivers.

We request feedback about our customer care services in text message after contacting us. In accordance with Vodafone Group’s standards, we measure and evaluate customer transactions through the Vodafone Heartbeat system.

Each month, we arrange for 40 top and middle managers to spend a day with customers, which is mandatory. In the course of the day they get involved in operative customer-related jobs, observe the work done by the customer service staff, attend client meetings and visit sales points and/or customers.

Similarly to previous years, direct customer re- In 2015/2016, our customer service team also took lationships receive high priority during our daily special care in enhancing customer experience. As operations, so we created the Ready Business Zone a result of setting this objective, we can proudly say for our business customers. This space is eminently that our customers received useful and immediate suitable to enable us to present each innovative answers to their questions in 90% of cases, and ther- technology or novel business solution to our cus- efore over 90% responded to questions concerning tomers, and to receive feedback from them. We or- our customer services with an “excellent” rating. ganized segment-specific workshops and customer meetings to ensure direct contact to our consumer In 2015/2016, our NPS improved in all consumer customers. Starting in February 2016, we organized and business segments, compared to previous year, these workshops for employees working in consu- and Vodafone strengthened its leading position mer and business marketing teams. The aim of the- in customer experience.30 The results of a survey se workshops is to create a common understanding conducted between the beginning of April and end and methodology for employees with different pro- of September, 2015 confirmed that Vodafone’s Red fessional backgrounds, in product development and and other post-paid customers are more likely to marketing processes, whilst keeping customer ex- recommend Vodafone’s services to their friends perience in focus all the time. Face-to-face meetings and acquaintances than customers of other mobile with customers represent a constant component in operators.31 our workshops. We have received significant positive feedback about these workshops and face-to-face customer meetings from participants.

Red customers are most likely to recommend their service provider post-paid subscriptions unlimited subscriptions 34,3

17,4 Telekom Next 54 10 12,7 Vodafone Red Telenor All-in 4,6

Vodafone Telekom Telenor

30 Our 2015/2016 CR report does not contain segment- and product-specific customer satisfaction data due to their confidential nature. 31 Survey participants had to respond to one question: “If your friends and acquaintances would turn to you for advice about choosing a mobile service provider, would you recommend your provider?” The consumer survey was conducted online, monthly, on a sample of 2 400 respondents, based on Vodafone’s and its competitors’ client base. NPS data was recorded by an independent, third-party, NRC, coordinated by TNS Hoffmann.

55 Responsible marketing

Our approach: marketing communication

Vodafone’s Brand Guidelines and Brand Policies and its Sponsorship Policies define the framework for our marketing communications. We review our internal policies every year to ensure they remain up-to-date at all times.

A key constituent part of our responsibility to our customers is the fact that we conduct our marketing communications in compliance with the law and ethical considerations. In accordance with the principle of responsible marketing, we aim to communicate with our customers with openness and clarity, and support them in making robust decisions. The law protects the right of consumers to fair information and privacy, but we go beyond the legal obligations when we help our customers understand, and safely use, our services.

There had been no non-compliance regarding marketing communication in 2015/2016 2015/2016.

56 Supporting communities

All over the world, there are Vodafone foundations living conditions. As a result, the support provid- working on raising living standards by mobilising ed can yield results sustainable in the long term. the local community. Vodafone Foundation gives Complex social problems require extensive coop- donations and contributes its network, technol- eration, which is why we have joined Vodafone’s ogies and employees to the effort of enabling international “Mobile for Good” initiative and, in change in these communities. Besides the help addition to our donations, we now provide assis- they provide, mobile technology and donations tance relying on our equipment and mobile tech- can also be a catalyst for social change in these nology capacities, in cooperation with our partners communities. and employees. We have an increasing number of apps that offer mobile communication solutions As part of its global corporate responsibility policy, to special customer needs (e.g. in emergencies, Vodafone set up local foundations in 27 countries for child safety or for disabled persons). To find out with the aim of running programmes adapted to more about these programmes, please refer to the the needs of the local community. Established in section on Our products and services. 2003, Vodafone Hungary Foundation has donated more than HUF 1.4 billion to its non-governmen- We intend to make good use of the resources allo- tal partners. Beyond our donations, our indus- cated to our social investment programmes, which try-specific social investment programmes play we have grouped into three main areas: Mobile for an increasingly important role; they are organised Good; Supporting communities and Education for jointly by Vodafone Hungary and the Foundation disadvantaged children. We wish to make the work in cooperation with Vodafone Shared Services of Vodafone Hungary Foundation more focused, Budapest. therefore in 2015/2016 we concentrated on our Digital School Programme and on the Vodafone The Vodafone Hungary Foundation focuses its Volunteering Community. To make efficient use of sponsorship efforts on schemes that empower our resources, we reorganized and merged activi- people who have the will to change their own ties, or discontinued some. For example,

57 we did not launch our Full-Time Angel Programme 57 board games, 101 low-value sports devices and in 2015/2016, because we would like to align it other tools required for arts-and-crafts sessions. to the Digital School Programme, launched in De- Part of the sum was used to cover transport costs cember 2015, and we merged the Programme for to the workshop venues. Complex Instruction (PCI) with the Digital School Programme. In December 2015, Vodafone Hungary contributed to erecting the monumental Christmas tree, set Vodafone Humanitarian Fund up on Erzsébet square. Vodafone supported the initiative with an online campaign: every “#alway- Vodafone Hungary Foundation set up the Voda- stogether” (#mindigegyütt) hashtag resulted in fone Humanitarian Fund in January, 2011, with the the donation of two more logs to the Christmas involvement of Hungarian Interchurch Aid (HIA). firewood collection event. A total of nearly 3 000 This cooperation is considered unique in Hungary pictures were uploaded and shared, which means as Vodafone can respond immediately if a disaster that around the same number of people donated occurs. This gives a secure background to HIA in its firewood through Vodafone. Once pulled down, work, enabling it to deliver its aid packages as fast logs from the Christmas tree were distributed as possible. among 25 families in need, with the help of Hun- garian Interchurch Aid, providing enough firewood Responding to the migrant crisis in the sum- for the entire winter season. mer of 2015, HIA organized an extraordinary aid programme with the aim to help asylum seekers, In the winter of 2015, 10 Vodafone volunteers focusing on women and children. HIA requested helped in distributing 1 000 meals to those in HUF 1 million from the Fund to spend on tools re- need, as part of the “love.hunger” (“szeretet. quired for organizing children’s workshops, such as éhség”) charity campaign. 135 various skill-building games and equipment,

58 Volunteering working day doing volunteering work every quarter. Vodafone also offers financial support to volun- Internal Full-Time Angel teering programmes. Since its launch in autumn 2010, the Vodafone Volunteering Community has We launched our fourth Internal Full-Time Angel completed 192 volunteering programmes, in which Programme in 2015, offering the opportunity to 3 200 of our employees have taken part, donating two of our colleagues to help a Kenyan orphanage more than 23 400 hours of work. The National for one month. Apart from organizing gardening Volunteer Centre (ÖKA) provides expert support in and other small-scale renovations around the organising these programmes. orphanage, they volunteered to help the children living in the orphanage and their educators. Colleagues working in Budapest and Miskolc also actively participate in the Vodafone Volunteering Vodafone’s Internal Full-Time Angel programme Community. In the summer of 2015, our colleagues aims to give employees of Vodafone Hungary and in Miskolc helped the Miskolc unit of the Éltes Vodafone Shared Services Budapest (VSSB) the Mátyás member institution, i.e. the kindergarten of opportunity to do four weeks of voluntary work in Gagarin street, for the second time. an international environment. This offered them a chance for personal growth, enhancing their knowl- Vodafone’s volunteers celebrated Christmas in edge and improving their cultural sensitivity and 2015 with close to 300 underprivileged children. networking skills. Vodafone partnered with the Taita In a departure from the earlier tradition, this time Foundation, and the selected Internal Full-Time children not only received but also gave presents. Angels did their volunteering work at the St. Joseph In exchange for the gifts, the children prepared orphanage in Bura, Kenya. beautiful drawings for the volunteers.

They key tasks of the volunteers was to continue and improve the experimental farm, built in 2014 with the help of an agriculture expert, to replace the monotonous, nutrition-poor meals of children with a healthy and diverse food, provided by the local farm. In 2015, the main task for the Angels was to further develop the pilot farm, bringing it to fruition. As part of this effort, they continued the development of the irrigation system, building a 20 square metre open-roof drying unit and renovating the rainwater collection gutter system that had degrad- ed over the years.

Vodafone Volunteering Community32

Employees of Vodafone Hungary and Vodafone Shared Services Budapest can apply to spend one

Volunteer of the Year

It is important for us that all our employees know about the volunteering opportunities offered, therefore in 2015 we launched the Volunteer of the Year Award, to reward an employee who demonstrated the most outstanding performance in volunteering. The winning award went to Zoltán Erős, Quality expert colleague.

32 Further information: http://www.vodafone.hu/vodafonerol/vallalati-felelossegvallalas/vodafone-a-tarsadalomert/dolgozoi-onkentesseg

59 Vodafone Big Bike Challenge

6 Hungarian colleagues participated in the Deloitte Ride across Britain charity tour, starting in Land’s End in Cornwall and finishing in John O’Groats in Scotland. Vodafone’s international team consisted of 115 members from 5 countries completing 1 500 km in nine days. Donations collected during the tour organised in September, 2015 also contributed to the goal of the charity to collect GBP 1 million. The idea was to support the international Vodafone Foundation’s Instant Network Schools programme in the Democratic Republic of Congo, offering digital education for children and young people who live in refugee camps. Do- nations were collected through calling or texting 13670, where each call contributed HUF 250 to the cause.

Instant Classroom

Working with the UN High Commissioner for Refugees’ (UNHCR), Vodafone Group developed the Instant Classroom for use in areas without reliable electricity and internet supply. The Instant Classroom equipment can be transported in a 52-kg case, and consists of a laptop, 25 tablets with a pre-installed curriculum, a projector, speakers and a modem for 3G connection. The tablets connect locally to the laptop, and so do not need internet connectivity.

In 2015 Vodafone Group, in cooperation with the UNHCR, distributed Instant Classroom packages in 12 Kenyan, Tanzanian, and Congolese schools, offering modern educational aid equipment to up to 15 000 children and young adults that are currently only infrequently available, and typically in much more developed countries.

60 Education the digital competences of students and teachers, the inclusive education of children with different Our educational programmes aim to enhance social backgrounds, and the improvement of their social mobility and equal opportunities in society, academic achievements are also important goals and to identify and support underprivileged talent- of the Digital School Programme. The Programme ed young people. for Complex Instruction (PCI)33 is helping achieve this goal, hence it provides an important pillar Vodafone Digital School Programme for the Vodafone Digital School Programme. The Vodafone Hungary Foundation has been support- Vodafone Hungary and the Vodafone Hungary ing the PCI since 2010. Foundation consider its engagement in enhancing Hungary’s competitiveness, in training the future The teaching methodology, based on organizing generation and in decreasing social inequalities team work with the aim of enhancing the knowl- very important. In line with such responsibilities, edge level of all children and providing continuous Vodafone launched its Digital School Programme success for them, was developed by Stanford Uni- in December, 2015 with the aim of enhancing the versity. At the end of 2015, PCI was applied in digital knowledge of underprivileged children, 17 schools in Hungary, and was introduced to and hence incentivise the digital transformation eight further schools under the helm of the Voda- of Hungarian education. The Programme encom- fone Digital School Programme. Training teachers passed 25 schools, 6 424 students and 690 teach- in the PCI methodology in these eight schools was ers. In the schools participating in the programme, sponsored by the Vodafone Hungary Foundation. Vodafone distributed over 1 300 Tab Speed LTE tablets and provided 3GB of data for educational The Vodafone Digital School Programme is an use free of charge as well as financed the training excellent example of wide-range cooperation be- courses regarding internet safety for children and tween the Ministry of Human Capabilities (Emberi their teachers. Erőforrások Minisztériuma, EMMI), the Klebelsberg Institution Maintenance Centre (Klebelsberg In- A common characteristic of participating schools tézményfenntartó Központ, KLIK), the Foundation was their openness and inclusive spirit. As a result, for the Students of Hejőkeresztúr and the Associ- a high proportion of students in these schools ation for Community Development (Együttható were underprivileged, had multiple issues or Egyesület), as a professional partner. special education needs. Apart from developing

33 Further information: http://www.vodafone.hu/docs/Komplex-Instrukcios-Program.pdf

61 Our environmental performance

There is clear evidence that global temperatures Our objective is to make the advantages and are rising alarmingly and a very strong consensus opportunities offered by mobile communication among scientists and policymakers that carbon available to more and more people and to grab the dioxide emissions from fossil fuels such as coal, oil opportunity offered by the use of our services to and gas – together with greenhouse gases – are reduce our customers’ and stakeholders’ ecolog- having a direct impact on the climate. Communi- ical footprint. We see it a constant challenge how cations infrastructure (such as base stations, data to increase our market penetration and curb the centres, switchboards) cannot function without environmental effect of our activity at the same energy, and most of the electricity used by com- time. munications companies is currently provided by national power generation companies, which use Our central challenge is how to ensure that more fossil fuels. Infrastructure in more remote loca- customers can benefit from our services all the tions rely on local power source, such as diesel, while decreasing our environmental impacts. to generate electricity “off-grid”. Vodafone Hun- gary also applies diesel generators to ensure the continuous operation of our devices.

62 Reducing the environmental impact of our products and services

We are committed to the reuse or recycling of an increasing amount of waste. Most of the waste produced by our offices, client service centre and shops is paper, ink, packaging and IT devices. We have set up recycling points in our offices, and set our printers to print double-sided by default. We either donate our replaced IT devices or send them back to the suppliers. We collect waste selectively in our offices, and have supported our less confident colleagues with regular internal communication, to enable them to join in.

Electronic contracting

The most efficient way of decreasing waste is to avoid its creation. By introducing electronic contracts, we not only increased our service speed, but also introduced an environmentally-friendly solution that significantly contributes to decreasing the paper waste created via our operations. Based on our calculations, we can save 740 thousand sheets of paper a year.

Electronic contracts decreased the expected average time of administration by a third, as there is no longer need to print, copy or scan papers. As part of this faster and more comfortable methodology, our clients receive their copy of the contract and the access link to the General Terms and Conditions in electronic form, to their e-mail address. Clients without an e-mail address will receive help from our employees in setting up a free e-mail account.

We gradually replace our network devices with more energy-efficient ones, and we look for options to reuse or recycle the electronic waste thus produced either within our own network, or at our partners’. If reuse or recycle is not optimal from a technological perspective, we give replaced equipment to an expert partner that checks if such equipment can be utilized on the market. Equipment that cannot be reused is later recycled as spare parts or raw material.

As a result of our network development, in 2015/2016 we resold 25 tonnes and recycled 2.2 tonnes of telecommunications equipment. Upgrading our network to LTE gave us the opportunity to change the batteries of our network devices. 336 tonnes of discharged batteries were recycled, 9.5 tonnes were reused, while 179 kg of hazardous waste was properly disposed of, making them unsuitable for being connected to the power network.

Eco-rating

Vodafone Group began to develop a system for rating handsets on the basis of environmental and social credential, in partnership with industry organizations, competitors, suppliers and civil organizations. The aim of rating devices was to empower customers to make informed choices about the phones they choose to buy. Recent research has indicated that customers like the scheme, but the vast majority do not use it in their purchasing choices, therefore we decided to discontinue this scheme in 2015/2016, to further save resources.

63 Our energy consumption

The challenges of energy consumption and its environmental impact will continue to grow in the future, as we reach an increasing number of customers with ever more products and services – the global ICT industry therefore has a meaningful greenhouse gas emissions challenge. It is estimated that the global ICT industry will account for around 2% of total global greenhouse gas emissions by 2030, which comes close to the level of greenhouse gas emissions generated by civil aviation.35 Vodafone can contribute to decreasing its environmental impact and decreasing its greenhouse gas emissions by both optimising its own energy consumption and by decreasing the energy consumption of its customers.

Optimising energy consumption with Vodafone’s help

Act LVII of 2015 drew big corporations’ attention to the importance of energy efficiency. Our experience confirms that on average 10-30% of a companies’ energy consumption can be saved, as well as related costs, by the continuous monitoring and evaluation of their energy consumption habits. Mobile communication technology, especially IoT, can offer numerous opportunities in this field, and so we launched the Vodafone Energy Management service in 2015. Our service offers help to customers in assessing energy management, planning, measuring and analysing results with the help of our energy partners.

Our energy monitoring solution makes it possible for customers to continuously monitor their energy consumption (electricity, gas, steam, etc.) and hence empower them to make appropriate decisions about required investments for improving their energy efficiency.

We typically obtain the energy we need for our operations (powering, heating or cooling our base stations, data centres, offices, etc.) indirectly through energy providers, energy traders, or, in the case of leased premises, through tenants.36

34 Global e-Sustainability Initiative (GeSI): SMARTer2030 (http://smarter2030.gesi.org/downloads/Full_report2.pdf) 35 We do not currently report the figures related to heating because these are not always available for rented property, where the price of heating is often included in the rent.

64 Our approach: energy consumption

In the focus of our efforts is the energy efficiency of our network, data centres and offices, as they are responsible for most of the load we place on the environment. In order to be able to offer alternatives which are more environmentally friendly to an ever-increasing number of customers, we need to further expand our capacities. Our network development is governed by international and Hungarian legal regulations as well as Vodafone’s internal rules, which take environmental as well as health and safety aspects into consideration.

In accordance with Act LVII of 2015 on Energy Efficiency published in May, 2015, in 2016 we plan to run a mandatory energy-efficiency audit. We plan to extend the scope of the audit to our full radio network, the main hubs, the office buildings, the retail network and to the company car fleet as well.

We constantly improve every aspect of our opera- modernisation of RAN infrastructure. Our objective tion with a view to further cutting our energy con- is to spread the use of free-cooling technology, to sumption. For this reason, we install base stations replace air-conditioned base stations and to update that have 2G, 3G and 4G technology; use software old, obsolete air conditioning equipment. We are that optimizes the number of radio channels in use also constantly monitoring opportunities to use relative to the actual data transmission demand; new, energy efficient equipment newly emerging use batteries that withstand higher temperatures; on the market, as well as renewable energy sources. cool our network devices by means of free cooling rather than air conditioners; and have installed When it comes to energy consumption generated smart energy control systems, which allow us to by our operation and carbon-dioxide emissions, check and control the performance of our systems we must achieve two tasks at the same time. On remotely. the one hand, we wish to increase the choice and volume of services and opportunities offered by us, We built free cooling, air-conditioned systems in to maximise the benefits we offer to our customers three of our six server rooms, drastically lowering and the wider society. On the other hand, we are the energy used in cooling our machine rooms, ex- aware of the environmental challenges posed by ternal ambient temperature permitting. Emissions our products and services. To monitor our perfor- saved by this system may reach 76 tonnes per year, mance in solving this dilemma, in the process of per server room. We have completed the upgrading comparing data we must take into consideration of the outdated cooling system of the remaining both tasks. This is the reason that we chose to three server rooms and have also replaced the old report per-unit data. power supply system, further increasing their energy efficiency.

In the 2015/2016 financial year, we took great steps towards modernizing the equipment used in our radio network (rectifiers and air-conditioners). Our completed RAN projects enable us to save approximately 2.6 HWh of electricity annually, saving the emissions of 835 tonnes of carbon-dioxide into the atmosphere. In 2016/2017, we continued the

65 Our per-unit data for the past years show a marked decreasing tendency, even though the energy intensity relative to base stations and revenues showed a 1-2% increase in 2015/2016. Our energy consumption relative to data traffic decreased by 30%, which shows the increasing efficiency of our network operations. It is clear that we can serve an increased number of customers while decreasing our environmental footprint.36

Our consumption of solar energy increased by 72% in the past year, from 8 GJ to 13.5 GJ.

Energy intensity relative to base stations (GJ/base station)

81 79 79

2012/2013 2013/2014* 2014/2015* 2015/2016

Energy intensity relative to revenues (GJ/bn HUF)

1 905

1 722 1 664 1 676

2012/2013 2013/2014* 2014/2015* 2015/2016

Energy intensity relative to data traffic (GJ/TB)

17 12

2012/2013 2013/2014* 2014/2015* 2015/2016

Source: Vodafone internal reports

36 * Emission data are republished due to enhanced data collection methodology. Data affected: diesel consumption and air travel.

66 Our carbon footprint

Vodafone Group has promised to cut its global carbon footprint by 50% on the 2006/2007 emissions (1.23 million tonnes of carbon dioxide) by 2020. As a group entity we, too, are continually looking into ways to improve our efficiency and reduce our carbon dioxide emissions. Vodafone Group’s prime objective is to lower its customers’ carbon dioxide emissions by twice our own emission by March 2018.

We are committed to achieving growth and minimizing our carbon footprint at the same time. We work together with our customers and suppliers on finding solutions for cutting the environmental effects of our services from the use of materials to responsible waste disposal.

Our approach: emissions

Our prime impact on the environment is the energy consumption of our network and the related carbon dioxide emission. The amount of data processed by our data centres increases by the day as our customers transmit more and more voice and data. We constantly invest into more energy- efficient equipment and energy-saving technologies, and look into ways to operate base stations with renewable energy.

Those responsible for our environmental performance are Vodafone Hungary’s executives as well as the Technology and Value Chain teams. Our Smart Energy Control system checks the performance of our shops in Győr and Budapest. We have a management system in place, which helps us constantly improve our performance and reduce our environmental impact by assisting us in assessing risks, setting objectives, monitoring progress and reporting our performance. We analyse and review our performance on an annual basis.

67 We try and further reduce our emissions through flexible work options (e.g. the Flexi Office / Mobile Office concept introduced in our head office), which can reduce the environmental impact caused by travel. Our offices are equipped with a technology that connects colleagues all over the world, consider- ably reducing the need for flight miles. Our uniform communication system brings together our voice, data and video applications on a single on-line platform.

Our emission intensity decreased in line with our energy intensity.37 This decrease was achieved by reducing the travel mileage of our employees and in part by the optimisation of our direct energy use, greatly helped by the more efficient operation of our network.

Emission intensity relative to base stations

(t CO2/base station)

12 11 11 9

2012/2013** 2013/2014** 2014/2015** 2015/2016

Emission intensity relative to revenues

(t CO2/bn HUF)

250 235 235 192

2012/2013** 2013/2014** 2014/2015** 2015/2016

Emission intensity relative to data traffic

(t CO2/TB)

5 4 2 1

2012/2013** 2013/2014** 2014/2015** 2015/2016

Source: Vodafone internal reports

37 ** Emission data are republished due to enhanced data collection methodology. Data affected: refrigerant gases, used in cooling.

Prizes and awards

Our work focuses on our customers and the wider society, striving day-by-day to offer them new opportunities, so the primary award for us is their recognition of us. We are, of course, also honoured when professional forums and other organizations also take an interest in our work and recognise our activities, considering them worthy of awards. In 2015/2016, we received several awards and prizes which also encourage us to believe that we are on the right path.

70 Social awards Marketing awards

Corporate Volunteer of the Year Award Customer of the Year at the Gold Blade

The National Volunteer Centre (ÖKA) chose the Vodafone and its agencies won a total of 13 prizes Vodafone Volunteering Community as the Corpo- at the Hungarian Gold Blade Award, earning us the rate Volunteer Programme of the year in late 2015. title of Customer of the Year. The Association of Since 2011, the Vodafone Volunteering Community Hungarian Communications Agencies has been completed 192 programmes with over 3 200 par- organizing this festival since 2010, at which the ticipants, donating close to 23 000 work hours. With biggest brands and agencies compete for the the help of our 8 strategic partners, we had a positive prize, by comparing their creativity. In 2015 we influence on enhancing the standard of living of two- won 2 Gold, 3 Silver and 8 Bronze blades. thirds of persons in need involved in these projects. Content Marketing Award 2015 CSR Hungary Award Our M2M Zone project won gold prize at the Con- The Vodafone Library for the Rehabilitation of tent Marketing Award 2015 in B2B communica- Children and Young People with Speech and Motor tion solutions category. M2M Zone is a dedicated Impairments programme was awarded the Hungar- website for news related to M2M communications. ian Business Responsibility Award in the “Common The goal of the website is to inspire and inform affairs – a shared responsibility” category. Under Hungarian companies that may then achieve the programme, from September, 2015, a website competitive advantage or increase their revenue that’s unique even in an international context and with the help of M2M. Instead of launching tactical offers several hundreds of developmental games campaigns and writing PR articles, we joined forc- and teaching aid materials was set up by Vodafone’s es with Economic Radio to create a news portal Full-Time Angel and Assistant Lecturer at the ICT and a radio programme broadcasting authentic Faculty of ELTE University, Brigitta Miksztai-Réthey, and fresh content. by also involving the Vodafone Hungary Foundation, the Bliss Foundation and the ICT Faculty of ELTE. LolliPOP-awarded advertisements The goal of the website is to aid children and young adults with multiple disabilities, including speech and Our videos received five bronzes in the 2015 motor impairments, to develop their communica- LolliPOP: Red Candy (introducing our Red Birthday tions skill. We received a CSR Hungary Award for the campaign), Max Story Book, our Vodafone Red fourth consecutive time in 2015. Roaming campaign, Vodafone Red Birthday, True Dream Exhibition and Birthday Christmas awards. Shared Value Creation Award (MAF) The Max Story Book also won gold in the category of BTL based, integrated campaigns. “Vodafone for the Search of Missing Persons” Pro- gramme won the Shared Value Creation Award of the Best Customer Experience Project Award Hungarian Donors Forum (MAF) in October 2015. Our “RED Birthday” project won the Best Customer Most Touching Good Deed Award Experience Project Award in 2016, one of the most highly coveted forms of recognition in customer The Vodafone Library for the Rehabilitation of experience and customer service. The award was Children and Young People with Speech and Motor won due to the uniqueness, the innovativeness of Impairments won the jury’s special award for Most the programme and its highly positive effect on Touching Good Deed at the 3 Good Deeds com- customer experience – quoting the original expla- petition. This was the second time our social pro- nation for the award. grammes won Good Deed Awards – in 2015, three of our programmes won an award.

Our commitments To enable our responsibility projects and programmes to evolve and expand efficiently it is indispensa- ble that we define objectives to pursue, constantly monitor their fulfilment, and raise awareness about the major challenges on the way.

It is important to us to select sustainability objectives that are crucial in terms of our operation, conduct of business and impact on our stakeholders. Seeing the technological and organizational development of the past years, we decided to set new commitments with the involvement of the executives.

These commitments are meant to serve as guidelines for the formulation, implementation and evaluation of our day to day responsibility activities. The tables below show the implementation status of last year’s commitments and our new commitments.

Status of our 2015/2016 commitments

Topic Commitment Objective Area Responsible Status

Enhancement of the Anti- Maintain anti-corruption awareness, Compliance documentation of anti- Compliance Completed corruption zero incidents manager corruption controls Enhancement of data Data Data Zero data protection non-compliance External protection trainings and Protection Completed protection incidents Affairs controls Manager Workplace Launching and Decrease the number of days lost and health and enhancement of health HR HR Director Completed days absent safety promotion programmes Completed CR Strategy formulated with the involvement of the stake- Formulation of holders. External CR strategy Vodafone’s long term CR CR Specialist Completed Affairs strategy until 2020 Maximization of Vodafone’s social and environmental potential, optimal and efficient use of the available resources Showing the economic, environmen- Generating Vodafone’s tal and social impacts of Vodafone’s External Reporting Annual Report using the CR Specialist Completed operation and expressing them in Affairs Real Value Methodology figures in a credible manner

74 Our commitments for 2015/2016

Topic Commitment Objective Area Responsible

Design and implement a unique wellbeing programme, Workplace Launching and Health & focusing on nutrition, fitness and mental hygiene. health and enhancement of health HR Wellbeing Goal: to have 50% of employees participate in the prog- safety promotion programmes Manager ramme. (Basis: 0 persons / goal: 900 persons) Building free-cooling systems in our server rooms Energy Decreasing energy Head of that drastically decreases the amount of energy HR efficiency consumption Property used for cooling. Introduction of pro bono Reorganization of the corporate volunteering program- volunteering in the me, which, in addition to physical volunteering, should External CR strategy CR expert company’s volunteer also involve the capabilities and competences of the Affairs projects company’s employees in the service of a good cause.

75 List of abbreviations List of 2G Second-generation wireless communication technology, offering average download speed of 20-40 Kbit/sec. Average download speed: 2-3 Mbit/s. 3G is the new generation of fast data transmission, launched globally in late 2005. Besides the usual GSM services 3G 3G utilizes high data speed in the provision of mobile multimedia services such as the downloading of entire pieces of abbreviations music, high-speed Internet, or video telephony.

B2B Business to Business: sales channel, used for corporate and business customers.

Refers to databases that contain so much and such complex information that only data mining techniques can Big data extract useful data from them.

EDGE- Abbreviation for Enhanced Data rates for GSM Evolution, a digital mobile phone technology offering up to three times technology faster download speed than GPRS (General Packet Radio Service).

GRI Global Reporting Initiative (www.globalreporting.org) is a forum developing international reporting standards.

GRI G4 The fourth-generation version of GRI, which will be mandatory for reports published starting from 2016.

HBLF Hungarian Business Leaders Forum

IoT Internet of Things: a network of devices that can share data and communicate with each other.

Abbreviation for Long Term Evolution, a technology which makes it possible to transmit high resolution video and LTE (4G) other services that require high bandwidth.

M2M Machine to Machine technology, which allows data communication between machines.

mPOS Mobile Point of Sales – i.e. mobile payment terminals

NFC Near Field Communication: short distance radio communication.

NMHH National Media and Infocommunications Authority

Sustainable Development Goals: signed at the UN Summit, based on the eight Millennium Development Goals SDG (MDGs).

TI Transparency International: an independent, international organisation whose aim is to reduce corruption.

Voice over IP: sound transmission over the Internet Protocol (IP), where sound is transmitted over the internet, or VoIP other IP-based data network.

77 GRI index

GRI sections Reference Description Report section(s) Page(s) General standard disclosures Strategy and analysis G4-1 A statement from the most senior decision-maker of the Introduction by the CEO 3 organization about the importance of sustainability Organizational profile G4-3 Name of the organization About our report 4 G4-4 Primary brands, products, and services Vodafone around the globe and in Hungary 12 Our products and services 21 G4-5 Location of the organization’s headquarters Vodafone around the globe and in Hungary 12 G4-6 Countries where the organization operates Vodafone around the globe and in Hungary 12 G4-7 Nature of ownership and legal form Our company’s management 18 G4-8 Markets served Vodafone around the globe and in Hungary 12 G4-9 Scale of the reporting organization, including: number of Vodafone around the globe and in Hungary 12 employees, net sales revenue, total capitalization broken Our economic performance 38 down to debt and equity, quantity of products produced Our responsibility towards our employees 35 or services provided G4-10 Total number of employees by employment contract, Our responsibility towards our employees 35 employment type and region G4-11 Percentage of total employees covered by a collective Our responsibility towards our employees 35 agreement G4-12 The organization’s supply chain Our value chain 17 G4-13 Any significant changes during the reporting period in the Our organisation 17 organization’s size, structure, or ownership G4-14 Whether and how the precautionary principle manifests Our strategy and values 14 itself in the organization G4-15 Charters, basic principles, or other initiatives to which the Our memberships 20 organization subscribes or which it endorses G4-16 Memberships in associations (such as industry associations) Our memberships 20 and national or international advocacy organizations Identified Material Aspects and Boundaries G4-17 Organizational structure including the company’s major Vodafone around the globe and in Hungary 12 units, operating companies, subsidiaries and joint ventures G4-18 Description of the process defining the report’s content About our report 4 G4-19 A list of all the material aspects identified in the process About our report 4 of defining the report’s content G4-20 Boundaries to the meaning of Material Aspects within the About our report 4 organization G4-21 Boundaries to the meaning of Material Aspects outside the About our report 4 organization G4-22 The effect of any restatements of information provided in About our report 4 previous reports, and the reasons for such restatements G4-23 Material changes from previous reporting periods in the About our report 4 report’s scope, aspect boundaries, or measurement methods

80 GRI sections Reference Description Report section(s) Page(s) Stakeholder engagement G4-24 List of stakeholder groups engaged Our stakeholders 19 in a dialogue by the organization G4-25 The basis and basic principles of the Our stakeholders 19 identification and selection of stakeholders G4-26 Description of the methods used to engage stakeholders Our stakeholders 19 G4-27 Key topics and concerns that have been Our stakeholders 19 raised through the dialogue with stakeholders Report profile G4-28 Setting the reporting period About our report 4 G4-29 Date of the most recent previous report About our report 4 G4-30 Setting the reporting cycle About our report 4 G4-31 Contact details for those who may have About our report 4 any queries about the report or its contents G4-32 GRI content index GRI index 57 G4-33 Certification About our report 4 Governance G4-34 Introducing the governance structure of the organization Our corporate governance 4 Ethics and integrity G4-56 Internal declarations about the organization’s mission, Our strategy and values 13 values, standards of behaviour and other principles Specific standard disclosures Economic indicators – Economic performance G4-EC1 Direct economic value generated and distributed Our economic performance 32 (EVG&D) including revenues, operating costs, employee wages and benefits, donations and other community investments, economic value retained, and payments to investors and to the government Economic indicators – Market presence G4-EC6 Procedures pertaining to the employment of locals, and Our corporate governance 14 the ratio of locals in senior management at the organisation’s most significant sites Economic indicators – Indirect economic impacts G4-EC7 Impacts of development of infrastructure Solutions for customers 22 investments and services – commercial, in-kind, living with disabilities or pro bono – primarily for the public good Vodafone’s transformational solutions 24 Mobile for Good 26 Our direct indirect economic impacts 33 Supporting communities 44

Environmental indicators – Energy G4-EN5 Energy intensity Our energy consumption 49 Environmental indicators – Emissions G4-EN18 Greenhouse Gas (GHG) Emissions Intensity Our carbon footprint 51 Environmental indicators – Products and services G4-EN27 Measures to mitigate the environmental impact Reducing the environmental effects of our 48 of products and services products and services

81 GRI szekciók Referencia Meghatározás Hivatkozás a jelentésben Oldalszám Social indicators – Labour practices and decent work conditions: Employment G4-LA1 Total employee churn Our responsibility towards our employees 35 Social indicators – Labour practices and decent work conditions: Occupational health and safety G4-LA6 Injury rate, occupational diseases rate, lost day rate, Workplace Health and Safety 39 absentee rate and work-related fatalities by region Social indicators – Labour practices and decent work conditions: Training and education G4-LA9 Average hours of training that the organization’s Training and Development 38 employees have undertaken by employee category Social indicators – Labour practices and decent work conditions: Diversity and equal opportunity G4-LA12 Composition of governance bodies and breakdown Employee Diversity 37 of employees into employee categories by gender, age group, minority group membership and other indicators of diversity Social indicators – Anti-corruption action G4-SO5 Reactions to incidents of corruption Anti-Bribery 28 Social indicators – Anti-competitive behaviour G4-SO7 Anti-competitive behaviour Anti-Competitive Behaviour 30 Social indicators – Legal compliance G4-SO8 Legal compliance Social Compliance 30 Social indicators – Product responsibility: Product and service labelling G4-PR5 Practices for customer satisfaction and their results, Customer Satisfaction 41 including the results or key conclusions of customer satisfaction surveys conducted Social indicators – Product responsibility: Marketing communication G4-PR7 Fines in relation to legal and ethical non-compliance in Responsible Marketing 43 marketing communications Social indicators – Product responsibility: The protection of personal data G4-PR8 The protection of personal data, number of complaints Data Protection 41 Social indicators – Product responsibility: Legal compliance G4-PR9 Compliance Ethical and Regulatory Compliance 28 Responsible Marketing 43

Publisher: Vodafone Hungary Plc. Directory of Corporate Communication

Head Office: Vodafone Hungary Plc.

Special thanks to the colleagues of Vodafone for their help in compiling this report.

KPMG Consulting Ltd. provided technical assistance in compiling this publication.