Vodafone : sites/vodafone ir/files/2021 06/vodafone technology investor briefing.pdf

Vodafone Technology

Investor Briefing

Thursday, 17th June 2021

Vodafone Technology Investor Briefing

Thursday, 17th June 2021

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Introduction

Johan Wibergh

Chief Technology Officer, Vodafone

Welcome

Hello, everyone. I am Johan Wibergh, and I am the Chief Technology Officer at Vodafone. And I am very happy that you have taken your time to join us for this Q&A. And this Q&A is part of our Technology Investor Briefing.

So I hope you have had time to review the detailed presentations on the IR website that we released this morning. And also let me highlight then that there were five additional supporting mini brief technology details on that website on subjects such as Open RAN with a special appearance from Michael Dell.

We got a lot of interest earlier regarding the cable evolution DOCSIS, so we provide a specific deep dive on that. And we also are giving you a view on our supply chain sourcing model. So I would really encourage you to take a look at those presentations as well if you have not had the time to do that yet.

So before we open for questions today, let me provide a couple of key takeaways that I want to ensure we get across to you. I think all of us know that due to COVID-19 the pace of the digital transformation has really been speeding up. It is almost like a dramatic digital transformation that is ongoing for the last year. And I think we all understand that that would have been impossible to do without a well performing mobile and fixed connectivity from operators.

We think that Vodafone is well positioned to take advantage of this speed up in digital transformation. And I think there are specific three items I really want to list out as being important here. I mean, first of all, I think we are good on leveraging our group scale. And I think we can use that to further differentiate ourselves from competition and now really are thinking about ways of working scalable platforms, etc. And we are probably going to come into that several times during the Q&A.

Secondly, I think we are really good in driving relentless cost efficiencies, improved asset utilisation, at the same time driving up quality and customer satisfaction. And then, thirdly, I am fully convinced that all these changes we are going through is really creating a foundation and really enabling a revenue growth in new products and services. And I think we are really creating the capability in-house to make that happen. And that becomes a value-add on top of the core connectivity business we are doing today.

We placed a lot of focus in the video on our recent reorganisation as being taking the efficiency of our factory to the next level. And I think it really leverage our scale benefits both of doing things much more efficient but also then speeding up what we are doing to get to more revenue. And this will help us as we transition into a new generation connectivity and digital services provider.

For this Q&A, I am joined by two of my colleagues. First of all, Scott Petty, who leads our Digital and IT organisation in Europe, and also Alberto Ripepi, who leads Networks in Europe. And they both have a global responsibility in Vodafone when it comes to strategy and architecture.

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And together, we will handle all the questions that you will be bringing up. I have to say I am very fortunate to have as good team members as Scott and Alberto. Both of them have been with Vodafone a long time. They are extremely capable and they are really good in making an organisation perform really well. It is really about getting things to work faster. It is really about getting things work better for our customers. And it is really about doing everything much more cost efficient. And I think both of them have a very big track record in achieving that.

We will do our best to answer all your questions. We will try to not get too technical and hopefully can get the message across well.

Q&A

Polo Tang (UBS): Firstly, thank you for all the videos today and all the presentations. It is very helpful, very informative. My one question is really about DOCSIS 4.0. I mean, you mentioned that broadband speeds with DOCSIS 4.0 could reach up to 10 gigabits per second. But what are the CapEx implications in terms of deploying 4.0? And would it require a big reengineering of the cable network and would it lead to a step-up in terms of CapEx?

Johan Wibergh: Thank you, Polo. It is a great question. So maybe if I start, and then I will ask Alberto to walk through is the evolutions to get into DOCSIS 4.0.

But if I take a market as an example, if you take Germany, because that is where the question comes after since Deutsche Telekom have made a lot of comments regarding their fibre build. I think overall we feel that we are in a starting point and a very strong strategic position in Germany. I mean, today our network reaches with gigabit speeds 22 million households while the market has around five million, the rest of the market.

If you look on the mobile network side, there are three mobile networks that are built. They have all got similar type of performance. Maybe one of the competitors is a little bit weaker in the countryside, but all three mobile networks in Germany have very similar type of performance. There is not really a big difference. We got a very strong IoT position in Germany and also on TV due to the cable TV positioning. So I think we are starting from a very good position meeting competition due to those acquisitions we have made.

Then, Alberto, maybe you can walk through the specific cable steps we would take.

Alberto Ripepi: Yes. Thank you, Johan, and thanks for the question. So as you mentioned, what is matter is the fact that we have 22 million households that are already gigabit capable. You need to keep in mind that we have a very flexible architecture. And this is the beauty of our architecture because we already fibreised our network.

The strategy that we have to evolve these hybrid fibre cable networks is in following different steps. First of all, during the pandemic, we saw growth of the demand in some specific areas and we are addressing and we addressed it through the, what we called, node-segmentation. So this is the way that we put the fibre very close to the customer to reduce the sharing of the common asset.

And then this is something that is for us BAU that we continue to do because we are doing the traffic modelling forecast to understand what is the evolution of our traffic, identifying the

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areas where there is demand and investing in a cost-conscious way only where the demand is growing.

Then keep in mind that we already deployed almost in all markets the DOCSIS 3.1 and we are going to complete Germany at the beginning of the next calendar year. And this will bring us to 24 million households gigabit cable.

Then we have several areas that we can continue to invest to improve our performance. And are very, very cost conscious and focusing on where the demand is growing. And so we will go through, number one, the distributed cable architecture that would allow us to bring the modem closer to the households and so using again the sharing of the media.

Then we have the possibility and we already started to deploy in Spain of high split of full spectrum, where we can increase and we can modulate the bandwidth between downlink and upstream to increase the upstream capability. And this is something that we can do in a very reasonable way in a progressive way when the node-segmentation is happening. So it is not necessary to do nationwide tomorrow but where demand is growing to cope with the growth of the demand.

And then it will come to DOCSIS 4.0 that has been now released by the Cable Association from CableLabs. And we are starting to trial. It is too premature to say what are the CapEx required in the DOCSIS 4.0. But what I want to stress is the fact that our architecture can allow us to invest progressively where demand is growing and where capability. And we have a network that is already capable of much more than our competitors in the markets.

In the past, we suffered due to the shift of the usage pattern in some areas of capacity issues, but this is largely resolved and we have a very strong process now in place like what we have in the mobile to invest where it matters. I hope that we have answered your question.

Emmet Kelly (Morgan Stanley): So my question relates to 5G and which killer apps you see emerging for 5G and how you are preparing for that? If I look back at 3G, I think the killer app for 3G was probably the iPhone, which came a few years later after the 3G networks were launched. Now when you look at 4G, I would say video was probably the killer app for 4G. And again, that kind of manifested itself a few years after 4G was launched. So what are the killer apps you see for 5G? And in specific relating to network slicing or autonomous cars, is this something that you are already preparing for?

Johan Wibergh: Well, thanks, Emmet. That is a great question. So maybe if I start and say a few words and then maybe Scott seems to be involved in some of the business applications, if you want to add on a couple of examples there.

So as you said, I think, if you look on the business case for Vodafone in deploying 5G, it is mainly driven by all the cost savings we can do. The key thing for us when it looks on the data growth we are having and the cost per gigabyte that we need to have to make sure, because we always need to make sure that cost per gigabyte goes down faster than any possible data growth, because otherwise we will have a problem.

And since 5G is up to five times more cost efficient if you use Massive MIMO technology, the business case on deploying 5G starts and builds upon really more on the cost savings you can get from it. So it is important to keep that in mind.

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