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Vodafone Group Plc ⫶ Q1 FY22 trading update

23 July 2021

Growth in Europe and Africa

• Group service revenue growth of 3.3%* (Q4: 0.8%*), with growth across both Consumer and Business segments
• Strong service revenue trend, including one-off growth of around 1.0 percentage point following COVID-19 disruption last year
• Good service revenue growth in Germany of 1.4%* (Q4: 1.2%*)

Q1 performance summary1	Q1 FY22	Q1 FY21	Reported	Organic
€m	€m	growth	growth2
Service revenue	9,390	9,110	3.1%	3.3%
- of which Germany	2,872	2,840	1.1%	1.4%
Other revenue		1,711	1,396	22.6%	20.2%
Total revenue	11,101	10,506	5.7%	5.6%

1. Our segmental reporting has been updated to include Vantage Towers A.G. as a separate reporting segment for the year ending 31 March 2022. See page 4.
2. Organic growth is a Non-GAAP measure. All amounts marked with an "*" in the commentary represent organic growth. See page 8.
3. • Europe mobile contract churn 1.6 percentage points lower than Q1 FY20 (pre-pandemic), but commercial activity yet to return to normal conditions
   • Roaming and visitor revenue grew 56% year-on-year, but still 54% lower than Q1 FY20 (pre-pandemic)
   • Vodafone Business service revenue growth of 2.7%*, driven by strong growth in IoT and digital services
   • Strong growth in Africa, with M-Pesa transaction volumes increasing 45% year-on-year
   • On track to deliver FY22 guidance with Adjusted EBITDAaL expected to be between €15.0 - €15.4 billion and Adjusted FCF of at least €5.2 billion

Nick Read, Group Chief Executive, commented:

"I am pleased to report that we are back to service revenue growth in Europe, as well as Africa. This growth was broad- based within both Consumer and Business segments, with the vast majority of our markets contributing. This is a result of our commercial and operating momentum built over the past 3 years as part of our strategic transformation.

In Europe, the operating and retail environment has not yet returned to normal conditions, but we are delivering a good service revenue performance. In our Business segment, we are seeing stronger growth with our public sector and corporate customers, whilst further building a pipeline of demand for our digital services, such as IoT, security and cloud.

In May we announced, for the first time, our medium-term growth ambition. We have entered the year in line with this ambition, on track to deliver our guidance for the year, and with a continued focus to optimise our portfolio, to accelerate the delivery of shareholder value."

For more information, please contact:
Investor Relations	Media Relations
Investors.vodafone.com	Vodafone.com/media/contact
[e-mail]	[e-mail]

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

A webcast Q&A session will be held at 10:00 on 23 July 2021. The webcast and supporting information can be accessed at investors.vodafone.com

Vodafone Group Plc ⫶ Q1 FY22 trading update

Operating review ⫶ A new generation connectivity & digital services provider

We are focused on growing our converged connectivity markets in Europe, and mobile data and payments in Africa. The next phase of our strategy focuses on three customer commitments and three enabling strategies, all of which work together towards realising our vision to become a new generation connectivity and digital services provider for Europe and Africa, enabling an inclusive and sustainable digital society.

Customer commitments	Enabling strategies
• Best connectivity products and services	• Simplified and most efficient operator
•	Leading innovation in digital services	•	Social contract shaping the digital society
•	Outstanding digital experiences	•	Leading gigabit networks

Strategic progress summary	Units	Q1 FY22	Q1 FY21
Best connectivity products & services
Europe mobile contract customers1	million	65.6	64.5
Europe broadband customers1	million	25.6	25.2
Europe Consumer converged customers1	million	7.9	7.4
Europe mobile contract customer churn	%	13.0	11.4
Africa mobile customers2	million	181.6	165.4
Africa data users2	million	86.6	82.1
Business service revenue growth3	%	2.7	(2.9)
Leading innovation in digital services
Europe TV subscribers1	million	22.3	22.2
IoT SIM connections	million	129.8	107.3
Africa M-Pesa customers2	million	49.7	42.8
Africa M-Pesa quarterly transaction volume2	billion	4.5	3.1
Outstanding digital experiences
Digital channel sales mix (acquisition)4	%	23.0	-
Digital channel sales mix (upsell and retention)4	%	23.0	-

1. Including VodafoneZiggo | 2. Africa including Safaricom | 3. Organic growth | 4. Based on Germany, Italy, UK, Spain only

Consumer ⫶ Europe (52% of service revenue)

In Europe, we are a leading converged connectivity provider with 7.9 million converged customers, 113 million mobile connections, 142 million marketable NGN broadband homes, we cover 98% of the population in the markets we operate in with 4G, and we have launched 5G in 243 cities in 10 markets in Europe. We have achieved this leading position by focusing on our core fixed and mobile connectivity. We are enhancing our products through capacity and speed upgrades, unlimited mobile plans, a distinct tiered branding hierarchy and convergent product bundles. In Consumer, we maintained our leadership/co-leadership NPS position in three of our four biggest European markets. During the quarter, retail footfall across our four largest markets improved compared to last year, but still remained 40% lower than pre-pandemic levels.

Consumer ⫶ Africa and Turkey (16% of service revenue)

In Africa, we are the leading provider of mobile data and mobile payment services. We have 182 million mobile customers in 8 markets which represent 40% of Africa's total gross domestic product. We cover 67% of the population in the African markets in which we operate with 4G services.

Our M-Pesa financial services platform grew strongly. During the quarter, the platform processed almost 4.5 billion transactions, an increase of 45% year-on-year. The VodaPay 'super-app' will be launched in South Africa, with over 70 merchants already joining the eco-system.

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Vodafone Group Plc ⫶ Q1 FY22 trading update

Vodafone Business (27% of service revenue)

In March 2021, we held a virtual briefing on Vodafone Business for investors and analysts (investors.vodafone.com/vbbriefing). This briefing outlined that: we operate in attractive markets; we have unique scale and capabilities; we have strong operating momentum; and we are on a clear growth pathway.

Our commercial momentum reaccelerated during the quarter, with service revenue growth of 2.7%* (Q4: nil%*). The strong performance was driven by growth in IoT and digital services, such as connectivity and cloud & security, and an easier comparative due to COVID-related disruption to projects in the prior year. We continued to see strong demand from SMEs and the public sector, with improvements also driven by the automotive sector and large multinationals. We became the first operator in Europe to launch Mobile Edge Computing ('MEC') with Amazon Web Services Wavelength and launched Cybersecurity-as-a-Service ('CaaS') in Germany. We continued to support SMEs with our V-Hub service, with 1.6 million visitors from 9 of our markets during the quarter. In Business, we maintained our leadership/co-leadership NPS position in 15 of the 16 markets in which we operate.

Digital services & experiences

We will be expanding on our plans for outstanding digital services & experiences at a virtual investor briefing in September 2021. During this event we will outline our progress on digitalising the consumer value chain in Europe; our performance and plans for financial services and Africa; and expand on our end-to-end IoT solutions for business.

Our Purpose ⫶ We connect for a better future

We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and provided a full update on our progress in our recently published FY21 Annual Report and supplementary materials. We have also made a number of announcements with respect to our purpose strategy during Q1.

Europe's largest network, powered by 100% renewables, driving carbon enablement

In June, we announced that our entire European operations - including mobile and fixed networks, data centres, retail and offices - will be 100% powered by electricity from renewable sources from 1 July 2021. As of today, our entire European network uses energy generated from solar, wind or hydro sources. This marks a key step towards our goal of reducing our own carbon emissions to 'net zero' by 2030 and across our entire value chain by 2040.

In addition, we continue to improve our own energy efficiency. Our energy use in FY21 remained broadly stable despite significantly higher data consumption. At our recent Technology Investor Briefing (investors.vodafone.com/vtbriefing), we explained that this was due to the use of more efficient mobile technology, the decommissioning of legacy equipment, and the application of advanced analytics across our network.

Our networks and technologies also play a crucial role in helping to address climate change - last year, the Carbon Trust calculated that our products and services enabled our Business customers to avoid around 7.1 million tonnes of CO2e in their own operations in FY21 (five times our own carbon footprint).

Circular economy

In May, we jointly launched the Europe-wide Eco Rating labelling scheme, working with four other major European operators and open to the whole industry. The initiative aims to give consumers a simple way to identify and compare the most sustainable mobile phones. The Eco Rating scores the environmental performance of a device across its life cycle - from extraction of raw materials, through its entire use, to recycling or disposal at end of life. As well as providing better consumer choice, the scheme encourages suppliers to reduce the environmental impact of their devices and supports the acceleration of the transition towards a more circular model for mobile phones.

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Vodafone Group Plc ⫶ Q1 FY22 trading update

Performance review ⫶ Growth in Europe and Africa

• Group revenue increased by 5.7%, supported by service revenue growth in Europe and Africa, and a recovery in handset sales following COVID-19 disruption in the prior year
• Group service revenue growth of 3.3%* (Q4: 0.8%*), with growth across Consumer and Business segments
• Strong service revenue trend, including one-off growth of around 1.0 percentage point following COVID-19 disruption last year
• On track to deliver FY22 guidance with Adjusted EBITDAaL expected to be between €15.0 - €15.4 billion and Adjusted FCF of at least €5.2 billion

Explanatory note:

Following the IPO of Vantage Towers A.G. in March 2021, Vodafone has updated its segmental reporting structure to reflect the way in which the Group now manages its operations. Vantage Towers A.G. is now reported as a new segment within the Vodafone Group's financial results. This change in reporting structure has taken effect for FY22 onwards and has no impact on service revenue. Total revenue is unaffected as charges from Vantage Towers A.G. to operating companies are eliminated on consolidation. A separate announcement that presents FY21 performance on a proforma basis for the new segmental reporting was published on 22 July 2021 and can be found on our website: investors.vodafone.com. However, there will be no change to our statutory information for comparative periods, which will remain as previously disclosed.

All amounts marked with an "*" in the commentary below represent organic growth which presents performance on a comparable basis, including merger and acquisition activity and foreign exchange rates.

					Other		Other Vantage	Common	Elimi-
	Germany	Italy	UK	Spain	Europe Vodacom	Markets	Towers1	Functions	nations1	Group
	€m €m €m €m	€m	€m	€m	€m	€m	€m	€m
Q1 FY22
Service revenue	2,872	1,076	1,256	925	1,228	1,126	829	-	125	(47)	9,390
Other revenue	340	166	296	105	156	338	91	303	220	(304)	1,711
Total revenue	3,212	1,242	1,552	1,030	1,384	1,464	920	303	345	(351)	11,101
Organic service
revenue growth
(%)2	1.4%	(3.6%)	2.5%	0.8%	4.2%	7.9%	18.4%	-			3.3%
Q1 FY21
Service revenue	2,840	1,120	1,193	920	1,171	950	840	-	109	(33)	9,110
Other revenue	327	110	270	74	147	203	97	-	210	(42)	1,396
Total revenue	3,167	1,230	1,463	994	1,318	1,153	937	-	319	(75)	10,506

Notes:

1. Vantage Towers A.G. is a new reporting segment for the year ending 31 March 2022. See explanatory note above.
2. Organic growth is a Non-GAAP measure. See page 8.

Further geographic performance information is available as a spreadsheet at investors.vodafone.com/reports-information/results-reports-presentations

Germany ⫶ Good service revenue growth maintained

Service revenue grew by 1.4%* (Q4: 1.2%*) and quarterly trends remained broadly similar due to offsetting impacts from the COVID-19 pandemic. Roaming and visitor revenue increased in Q1 having been materially impacted by lower international travel over the last 12 months. This benefit was offset by lower variable call usage, which peaked during last year's lockdown. Retail service revenue grew by 1.9%* (Q4: 1.8%*).

Fixed service revenue grew by 0.6%* (Q4: 1.4%*). The quarter-on-quarter trend was driven by lower variable call usage, partially offset by good Business demand. Retail activity in Q1 continued to be heavily impacted by COVID-19 lockdown measures, however customer footfall started to recover as restrictions eased towards the end of the quarter. We added 33,000 cable customers in the quarter, including 27,000 migrations from legacy DSL broadband. Almost half of our cable broadband customer base now subscribes to speeds of at least 250Mbps, and gigabit speeds are now available to 22.5 million households across our hybrid fibre cable network.

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Vodafone Group Plc ⫶ Q1 FY22 trading update

Our TV customer base declined by 75,000, reflecting lower gross customer additions given reduced retail activity during the COVID-19 pandemic. At the end of last year, we launched the 'DAZN' Pay-TV channel and our new Apple set-top box product, having already launched Vodafone TV on the Unitymedia footprint. The full benefit from these actions was not visible in our commercial results due to lockdown restrictions. Our converged customer base continued to grow, with 29,000 Consumer additions in Q1. We now have almost 1.7 million Consumer converged accounts.

Mobile service revenue increased by 2.3%* (Q4: 0.9%*), primarily due to higher roaming and visitor revenue compared to the prior year. Contract churn improved by 1.3 percentage points year-on-year to a record low of 10.7%. We also added a further 1.5 million IoT connections in the quarter, supported by strong demand from the automotive sector. In June, we launched a digital-only second brand, SIMon mobile in the value segment of the market.

We switched off our 3G network on 1 July 2021, with spectrum re-assigned to increase the capacity, speed and coverage of our 4G network, with 4G being up to 70% more energy efficient than 3G. Our 4G network now covers 99% of the population and our 5G network is available to more than 25 million people. We also launched Europe's first 5G standalone network in April. Standalone 5G enables higher speeds, enhanced reliability and ultra-low latency, in addition to using 20% less energy on customers' devices.

Italy, UK, Spain and Other Europe ⫶ Growth supported by good performance and one-off benefits

Italy

Service revenue declined by 3.6%* (Q4: -7.8%*), driven by continued price competition in the mobile value segment. The improvement in quarterly trends was largely driven by an easier prior year comparative due to COVID-19, but also supported by the ongoing stabilisation of the Consumer mobile customer base. Roaming and visitor revenue grew year-on-year and Business activity was higher compared to the prior year.

Market mobile number portability ('MNP') volumes remained below last year's level, despite the easing of national lockdown measures. Our active mobile prepaid customer base remained unchanged quarter-on-quarter. Our second brand 'ho.' continued to grow, with 115,000 net additions and now has 2.6 million customers. In June, we started migrating PostePay MVNO customers onto our network, and we expect the migration to complete by the end of July. In fixed, our customer base remained stable at almost three million. We also added 13,000 fixed-wireless access customers during the quarter, which are included in our mobile net additions.

Through our own next generation network and partnership with Open Fiber, our broadband services are now available to 8.4 million households. In addition, we cover 4.5 million households and businesses with fixed-wireless access, offering speeds of up to 100Mbps.

UK

Service revenue grew by 2.5%* (Q4: -0.6%*). The improvement in quarterly trends was driven by lower comparative performance related to COVID-19 disruption in the prior year and good commercial performance in the current year, notably in Consumer prepaid. COVID-19 disruption eased, leading to higher roaming and visitor revenue and the resumption of fixed project work in Business. This was partially offset by a reduction in mobile termination rates which took effect as of June.

Our commercial momentum reaccelerated in the quarter as retail store restrictions eased, adding 65,000 mobile contract customers in Q1. In June, we launched 'Vodafone Evo', an innovative mobile contract proposition offering customers a combination of flexible contracts, trade-in options, and early upgrades. We also announced an exclusive retail partnership with the Dixons Carphone Group, covering 300 stores and digital channels, with improved terms compared to our previous arrangement. We added 29,000 broadband customers in the quarter, with good demand for our new Vodafone 'Pro Broadband' product, which we launched in March. We now have 940,000 broadband customers, of which 467,000 are converged. Business demand for our SME and corporate products also remained strong, including for productivity and security solutions.

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