Vodafone Group Results: for the year ended 31 March 2019 14 May 2019 Disclaimer By watching this webcast, you agree to be bound by the following conditions. You This presentation also contains non-GAAP financial information which Vodafone’s may not disseminate these slides or this recording, in whole or in part, without the management believes is valuable in understanding the performance of the prior consent of Vodafone. Vodafone Group. However, non-GAAP information is not uniformly defined by all companies and therefore it may not be comparable with similarly titled measures Information in this presentation relating to the price at which relevant investments disclosed by other companies, including those in the Vodafone Group’s industry. have been bought or sold in the past or the yield on such investments cannot be Although these measures are important in the assessment and management of the relied upon as a guide to the future performance of such investments. Vodafone Group’s business, they should not be viewed in isolation or as This presentation does not constitute an offering of securities or otherwise replacements for, but rather as complementary to, the comparable GAAP measures. constitute an invitation or inducement to any person to underwrite, subscribe for or References to Vodafone are to Vodafone Group Plc and references to Vodafone otherwise acquire or dispose of securities in any company within the Vodafone Group are to Vodafone Group Plc and its subsidiaries unless otherwise stated. Group. Vodafone, the Vodafone Portrait, the Vodafone Speech Mark, Vodafone Broken This presentation contains forward-looking statements, including within the Speech Mark Outline, Vodacom, Vodafone One, The future is exciting. Ready? and meaning of the US Private Securities Litigation Reform Act of 1995, which are M-Pesa, are trade marks owned by Vodafone. Other product and company names subject to risks and uncertainties because they relate to future events. These mentioned herein may be the trade marks of their respective owners. forward-looking statements include, without limitation, statements in relation to Vodafone Group’s financial outlook and future performance. Some of the factors which may cause actual results to differ from these forward-looking statements are discussed on the final slide of this presentation. 2 Overview • Good growth in most markets, competition in Spain/Italy & headwinds in South Africa • FY 19 guidance achieved • Reduced financial headroom given weaker revenue growth and higher spectrum costs in the year • Rebasing the dividend to 9 eurocents per share in order to: – Rebuild headroom, supporting our transformation – Accelerate deleveraging to the low end of our 2.5x-3.0x range – Secure a progressive dividend • Mid-term FCF ambition: new LTIP target of €17.7bn (incl. Liberty assets) 3 FY 19: executing at pace on our strategic priorities Accelerating Deepening Improving digital Portfolio customer asset & radical management engagement utilisation simplification 1m 50% 5G active India Broadband net adds of the €1.2bn net EU VIL JV completed opex target already network sharing Successful VIL rights issue actioned in the UK, IT & ES Indus Towers merger on track Record low Simplified IBM, ARM & AT&T New Zealand Mobile contract churn Price plans in DE/ES partnerships €2.1bn disposal All guidance metrics achieved All growth rates in this document are on an IAS 18 basis, organic and year-on-year, unless otherwise stated, with Vodafone India and Vodafone Qatar excluded from organic growth calculations 4 Driving consistent commercial performance, record low mobile churn Group mobile contract churn (%) Group fixed broadband customers1 (m) 18.0 17.4 16.1 16.6 14.7 16.0 16.0 13.4 12.0 14.8 FY 15 FY 16 FY 17 FY 18 FY 19 FY 15 FY 16 FY 17 FY 18 FY 19 H1: 384k • Consumer NPS lead/co-lead in 16 out of 20 markets Net additions 1.3 1.3 1.3 1.0 H2: 655k (including 5 of our top 6) 1. Excludes VodafoneZiggo 5 Good EBITDA growth in most markets, Italy stabilising in H2 FY 19 EBITDA growth (%) 11.3 11.0 7.6 4.3 1.9 (5.8) (23.5) UK¹ Other AMAP Other Europe Germany² Vodacom Italy Spain Service revenue growth (%) 0.6 5.2 2.1 1.5 3.8 (5.9) (6.4) 1. Adjusted for handset financing and one-off settlement in the prior year 2. Adjusted for one-off settlement in the prior year 6 Spain: commercial performance stabilising, launched unlimited -8.9% Q4 service revenue growth (Q3 -7.4%) Vodafone contract net ports (000s) Movistar + Orange + other MasMovil Competing effectively in premium segments Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Contract port positive against Tef and Orange Mobile Successful commercial repositioning in value segment (3) Stable ports, Lowi c.30% market share1 (+18pp yoy) (55) (56) Unlimited data plans launched Speed differentiated, value accretive (103) Fixed Operating model transformation underway (15) 1,000 FTE exits, network sharing with Orange, (28) (38) content costs reduce in H2 (79) 1. Mobile net adds market share in value segment in H2 7 Italy: mobile pressure moderating, strong fixed customer growth -6.1% Q4 service revenue growth (Q3 -4.6%) Market net ports (m) Reduced by c.50% MNP activity now below ‘pre-new entrant’ levels 5.5 3.9 3.8 Churn reducing to Q4 levels of last year 2.9 Spin down pressure Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Prepaid ARPU -5.8% Headline price evolution (€) Price increases in value segment and 2nd brands Vodafone Ho Competitor 1 Competitor 2 Vodafone to €18.99 and Ho to €12.99 20 Strong fixed momentum 15 +83k broadband net adds in Q4 (FY +282k) 10 Cost actions support margins 5 Opex down 10% YoY; 1,130 FTE efficiencies Sep-18 Dec-18 Mar-19 8 Financial review Margherita Della Valle Group Chief Financial Officer Full year financial highlights (IAS 18 basis) Underlying growth Service revenue Adjusted EBITDA Adjusted EBIT Free cash flow (€bn) (€bn) Underlying (€bn) Underlying (€bn) Pre-spectrum Post-spectrum & restructuring +0.3%1 +3.1%1 +9.4%1 41.1 14.7 14.1 39.2 4.8 4.5 5.4 5.4 13.4 13.8 4.2 3.8 4.0 4.4 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 Growth despite pressures Underlying EBITDA margin1 Driven by adjusted EBITDA Stable in Italy & Spain +50bps YoY growth 1. Organic growth excluding UK handset financing and settlements in the UK and Germany during the prior year 10 Adjusted and reported earnings FY 18 FY 19 (€m) IAS 18 IFRS 15 Adjusted EBIT 4,827 4,253 Impairment loss - (3,525) Includes Spain (€2.9bn) Associates 389 (348) Includes 7 months of Vodafone Idea Restructuring (156) (486) Amortisation of brand assets/other (974) (583) Other income and expense 213 (262) Operating profit 4,299 (951) Financing costs/income (389) (1,655) Mark to market losses on MCB put options & FX movements Tax expense 879 (1,496) Includes Spanish deferred tax asset write-down of €1.2bn Non-operating income and expense (32) (7) Group effective tax rate 24.4%, mid-term rate still low to mid-20s Discontinued operations (1,969) (3,535) €3.4bn loss on India disposal following merger with Idea Non-controlling interests (349) (376) Profit/(loss) for the period 2,439 (8,020) Adjusted earnings1 3,218 1,451 Weighted average number of shares2 (m) 27,770 27,607 26,771m ex. mandatory convertible bonds (‘MCBs’) Adjusted earnings per share (eurocents)1 11.59 5.26 Primarily reflects lower adjusted EBIT and Associates 1. Reported excluding impairment losses, the loss on disposal of Vodafone India, restructuring costs, significant one-off items and amortisation of acquired intangible customer bases and brand intangible assets 2. Weighted average number of shares outstanding includes a dilution of 700 million shares (2018: 1,013 million shares) following the issue of £2.9 billion of mandatory convertible bonds in February 2016 and 136 million 11 shares following the placing in March 2019 of subordinated mandatory convertible bonds totalling £1.72 billion with a 2 year maturity date due in 2021 and £1.72 billion with a 3 year maturity date due in 2022. Service revenue growth Quarterly trends (%)1 Impact of IFRS 15 in FY 19 (%)1 IAS 18 basis (ex. UK handset financing) IFRS 15 basis2 IAS 18 basis (ex. UK handset financing) IFRS 15 basis 1.1 0.9 1.5 Germany 0.8 0.5 0.3 Italy (5.9) 0.1 (6.2) 0.0 0.6 UK 0.3 (6.4) Spain (5.8) (0.6) (0.7) Vodacom 3.8 Q1 19 Q2 19 Q3 19 Q4 19 3.9 Europe (1.1) • Q4 drags from (1.4) 6.1 - UK: phasing of project revenues in the prior year Rest of World 6.4 - Spain: full impact of promotional discounts in Q3 Group 0.3 - Italy: MTR cut & phasing of loyalty programme 0.1 1. Excluding the benefit of a German legal settlement in Q4 18 2. Q2 19 and Q3 19 IFRS 15 service revenue growth rates restated from 0.3% to flat and 0.4% to 0.3% respectively 12 Service revenue growth drivers FY 19 organic service revenue growth contribution (ex. HF & MTRs) (pp) 1.1 0.2 1.0 (1.3) 0.3 (0.7) Europe Vodafone Emerging Italy/Spain Wholesale FY 19 Consumer Business Consumer Consumer & MTRs¹ (ex. HF & settlement) (ex. IT/ES) % of service 33% 30% 16% 16% 5% revenue 1. Includes common functions and eliminations 13 Over 50% of €1.2bn EU opex target actioned EBITDA growth (€bn) Progress against EU opex target 0.4 13.8 0.1 Still to be €0.4bn2 delivered 0.1 (0.2) 13.4 delivered in FY 19 >€1.2bn of which: Organic • >50% digital opex grew net reduction • 30% leveraging scale 5% vs.