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Vodafone Q1 FY22 Trading update Live Q&A Webcast

Friday, 23rd July 2021

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Vodafone Q1 FY22 Trading update Live Q&A Webcast

Friday, 23rd July 2021

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Vodafone Q1 FY22 Trading update Live Q&A Webcast

Friday, 23rd July 2021

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Vodafone Q1 FY22 Trading update Live Q&A Webcast

Friday, 23rd July 2021

Introduction

Nick Read

CEO, Vodafone

Welcome

Good morning, everyone, and thank you for taking the time to join us, Margherita and myself, at our Q1 Trading Results announcement. You will find on our website hopefully a comprehensive set of materials to help you understand our results. But I thought I would just take an opportunity just to touch very briefly, 30 seconds, on just the key highlights before we then go on to questions.

Key Highlights

We are back to service revenue growth in Europe as well as Africa with over a 3% growth in the quarter, and we are growing in both Consumer and Business. Around 1 percentage point of that growth was clearly a lapping effect of COVID-19 last year that obviously suppressed our results. But even excluding that, I would say that is a very healthy growth rate for us as a business and we are firmly on track on our guidance.

Now, clearly, we are not back to normal yet on our trading activity, our commercial activity and sales volumes. Footfall in the big four European countries in aggregate was around 40% below pre-COVID levels. So we have yet to see that retail pickup that we are looking for, and this was particularly evident and heavy in Germany.

We have seen in more recent weeks as retail stores have started to open up volumes increasing, and therefore, we look forward to the back-to-school season that we are going to see. Obviously, if activity was low, you can see from our churn numbers that, in Europe mobile contract, if we exclude Spain, which had a specific legislation adjustment in COVID last year, you see that we were down 1.4 percentage points year-over-year. So we had good churn trends across the vast majority of our markets.

In Business, we saw service revenues grow 2.7%. We saw a good growth rate in our digital services. Clearly, the 2.7% was enhanced slightly because of obviously, again, the COVID impacts of last year, but we definitely expect and have been engaging with governments in terms of the EU recovery funds, which we should start to see coming through in the second half of this year. In Europe, more broadly, we grew service revenue in all markets, except Italy, and we had a particularly good rebound in the UK and our cluster Europe, other markets.

Vodacom maintained a strong momentum, and particularly in Financial Services, which were up 34% in Q1, and we are due to launch Vodacom's Super App, called the VodaPay Super App, in the coming months in South Africa.

Clearly, more to do, particularly in accelerating and improving shareholder value, and we remain still very focused on optimising our portfolio moving forward, to ensure that we keep our shareholder very much in our forefront of things that we are focused on.

And, on that, Margherita and I will take your questions.

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Vodafone Q1 FY22 Trading update Live Q&A Webcast

Friday, 23rd July 2021

Q&A

Andrew Lee (Goldman Sachs): I had a question on the revenue growth outlook. In the first quarter, as great trends with easy comps but suppressed commercial momentum, particularly in Germany. So the question is, is the first quarter 2022 growth rate a high watermark for growth during the year? And how should we think about commercial recovery through the years, especially in Germany?

Nick Read: Well, I will let Margherita answer in terms of service revenue sort of outlook or view. Just say in terms of trading, I mean, clearly these remain challenging times. I am not just talking our industry, challenging times for everyone. And it was always very clear that this would not be a linear recovery. So we should expect bumps in the road. We are expecting bumps in the road in terms of how we are looking at things.

Clearly, as I said, I am pleased with the 3% growth and the underlying growth rate that we had. And we are firmly on track on our guidance. I would say in terms of commercial activity, if I look, it clearly has been suppressed. If we pick Germany as your example, what we saw in April-May was footfall down 80%. It did then start to improve to June, but still down 50%. So we are by far not there yet in terms of normalisation.

If you look at examples of Spain, Italy on mobile net ports, these are still down year-over- year. So I would say overall you are just seeing a lower level of activity. And as I say, you see that in our churn.

So I think this is a case of let us see as we move into the back to the school period. I think that becomes a very important. We have certainly focused on the propositions, the promotions, the above-the-line campaigns that we will be hitting on back-to-school. And we think that that will reignite our commercial momentum.

Margherita Della Valle: On the service revenue growth, of course, Q1 was a very special quarter. We have seen roaming moving from being a headwind to a tailwind now. And on top of that, we have had these, what I call one-off effects from last year at this time, seeing the effectively shock of the pandemic in our markets.

If you remember the presentation we did a year ago, in Q1, we were calling out a number of effects, particularly things like business projects being delayed from Q1 into Q2 or prepaid top-ups being more difficult in some markets. And I would say, probably the market which was most affected by the beginning of the pandemic was Spain, where the Emergency Decree was particularly severe.

Taken in aggregate, these one-offs are worth about 1 percentage points, which, as we say, is not going to recur as we move into the next few quarters. But we are well on track to deliver growth this year both in Europe and Africa, and we are pleased with the momentum, as Nick was mentioning, on service revenue.

One data point that I would call out from that perspective is that now we have all of the data from the last 12 months, and what we have seen is that if you take the 12 months to March 2021 through the pandemic, we have outperformed in retail service revenue growth, all the incumbents and all of the scaled players in our major European markets, both in fixed and in mobile service revenue growth. So we are pleased with where we are.

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