Q1 FY26 Q&A Transcript
Q1 FY26 Trading Update Q&A Webcast Transcript
Vodafone Group Plc Q1FY26 Q&A Transcript
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July 24, 2025/10:00am, Vodafone Q1 FY26 Q&A
Good morning, everyone. We performed well across the Group in the first quarter, in line with our expectations, with good service revenue growth of 5.5%. Most importantly, we are starting to deliver the planned service revenue improvements in Germany, and we have completed our merger in the UK at the start of June, launching VodafoneThree, the country's leading mobile operator. I will come back to both Germany and the UK shortly. Our other European markets growth has slowed due to competitive pressure in Portugal, but we see good performance continuing across the region. Our emerging market portfolio has delivered strong growth in euro terms. Turkey continues to perform very well, and in Africa, we have further accelerated our growth across the footprint. So overall, good revenue growth, which delivered good EBITDAaL growth for the quarter of 4.9%. This is in line with our expectations, and today we are reiterating our growth guidance for both EBITDAaL and cash flow. Combined with our significant buyback programme, this guidance delivers strong, double-digit free cash flow growth per share for our shareholders. Coming back to Germany, the market has remained very competitive in mobile, but we are seeing tangible results from the actions we have taken. Whilst headline net customer additions are negative, we continue to see improvement on our most valuable customer base. In Consumer, our branded contract churn is now single-digit, the lowest it has been for the last four years, thanks to the ongoing improvement of our customer experience. In fixed, we continue to score well in independent network tests, retaining our leadership position as the best network in the country. As the market penetration has now plateaued, our focus is on driving value, and we have taken proactive actions to increase ARPU for new acquisitions. And we secured a significant win for our brand in time for the 2025-26 football season, as we become the main sponsor of the Borussia Dortmund club. Now turning to VodafoneThree in the UK. With the joint venture now operational, we are working to deliver a significant step-change in experience for our customers. We are making a fast start to integrate our Consumer multi-brand strategies across VodafoneThree, VOXI, SMARTY and Talkmobile, with a particular focus on the net customer losses of the Three brand. We now have the opportunity to make a real impact by transforming network quality and overall experience for all customers. On the network front, we have already seen the first integration benefits. All Three customers are benefiting from more mid-band spectrum, with up to 40% higher 4G speeds across the country. And we have started integrating our networks to allow all our customers to seamlessly use both the Vodafone and the Three networks across the country. We have also launched a new customer promise called 'Just Ask Once.' Vodafone UK was already leading the industry on the customer service side, and this new commitment aims to resolve any query quickly and painlessly with a dedicated advisor who proactively updates the customer. However, of course, this is just the beginning of a multi-year integration. We are well on track with our original financial guidance for the merger in this financial year, and you all know that we expect to deliver at least £700 million of cost and capex synergies per annum from the fifth year. Our growth trajectory in the UK, combined with strong positions in growing markets across Europe, Africa and Turkey, as well as improving trends in Germany, give me confidence that we now have the right mix of markets, capabilities and financial capacity to drive good growth over the medium term. Of course, we still have more to do, and our focus will be on continuing to improve our customer experience across Europe and Africa and further simplifying our internal operations.
VODAFONE PARTICIPANTS
Margherita Della Valle
Vodafone Group Chief Executive
Luka Mucic Vodafone Group Chief Financial Officer
ANALYST PARTICIPANTS
Robert Grindle Deutsche Numis
Maurice Patrick Barclays
Carl Murdock-Smith Citigroup
Andrew Lee Goldman Sachs
James Ratzer New Street Research
Paul Sidney Berenberg
Akhil Dattani JP Morgan
David Wright Bank of America Merrill Lynch
Joshua Mills BNP Paribas Exane
Ottavio Adorisio Bernstein Societe Generale
Luka and I will now be pleased to take your questions.
Javier Borrachero Kepler Cheuvreux
Margherita Della Valle, CEO Vodafone Group
Vodafone Group Plc Q1FY26 Q&A Transcript
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Robert Grindle
Good morning, Margherita and Luka. It was good to see the improved service revenue growth trend in Germany, which is approaching stable ex the MDU effect. How are you feeling about the prospect for getting back to Germany growth anytime soon? Commercial activity is a bit softer in Q1, however, with broadband net outs going backwards. Please, could you say something about what the dynamic is in the market at this point? Thank you. Perhaps I take the financial part. You are absolutely right. ex-MDU is almost stable in Q1. The key reasons for that, if I can just take a quick look back, is obviously the increase in wholesale revenue contribution +1% quarter-over-quarter, and then also another percent from a better business performance driven by IoT phasing, and also the effect that we had negative one-offs in mobile in Q4, which have not repeated themselves. We are obviously feeling good about the trajectory that we are on in Germany. As we had said at the full-year results, we fully expect Germany to be back in service revenue growth territory during the year, so it will come in the coming quarters. Now, you will hopefully understand that I am finding it hard to give you a precise quarterly service revenue guidance for a single market, but the way how to think about the next quarter obviously is we will finally lose the MDU impact due to the full lapping. That was close to 3% still of a negative impact in Q1. This will be gone. At the same time, we will, of course, continue to benefit from the ramp up of the 1&1 agreement to a full scale that we expect to reach in the second half of the year. Those are positives against that. As I said, in Q1, we had a positive phasing impact in our B2B business in IoT that is not expected to recur in Q2, and we, of course, also need to take into account the, I would say, long-term trend of TV headwinds that we are facing in the outside of the MDUs as well as the competitive environment in mobile, but this all being said, I think the momentum is clearly so strong that it will carry us back to growth during the year, while we also expect to see gradually improving trend on the profitability front in Germany. Maybe I take, Robert, the commercial performance side. I would say different sets of circumstances across mobile and fixed. Starting with mobile, no particular changes to the pricing environment since May, as you know, so the market remains very competitive. However, I need to say, as I anticipated in my introduction, that we look positively on our results in the quarter because, as you know, we care about value versus volumes, and if I look at what has happened in the last quarter, and I would say in the last few periods overall, the branded base, which is what we mostly care about because it has where our value stands, has improved in the last year, has grown, and its churn levels have consistently decreased. We have just recorded single-digit churn, and this is for the first time in the last four years on the branded base, and this is on the back, I would say, of two things. First of all, our customer experience step-up. We did say in May we had the best ever NPS in mobile as well as in fixed, and also you see the type of propositions that we are building around our branded base beyond the sort of front-book skirmishes.
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Luka Mucic
Vodafone Group
Margherita Della Valle
Vodafone Group
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Our focus is on creating value on that base, which is why you have seen us introducing handset financing with contracts of up to three years, working on Family Cards at the high end of the market for up-selling. We are pleased with the trends there. Obviously, the net ads were negative, and they were negative, however, because we continue to downsize the reseller segment in Consumer, which is, as you would expect, very low ARPU and low margin, and also, we had some negative low ARPU large contracts in B2B. So, overall, good progress. Different situation in fixed. In fixed, there was a change in the market environment. I mentioned already in May that the penetration of fixed has really plateaued in Germany, so there is not much market growth. And in these circumstances, on the back of the fact that also our churn has kept improving in that space, we have started to work on the front-book value early in Q1, and this has taken various shapes of a number of interventions, pricing in DSL, taking out the CableMax promo in cable, also reduction of some starting credits, reduction of commissions in indirect as well. Inevitably, all this adds some admittedly, I would say, looking at the numbers, small impact on the gross acquisitions. However, we have seen some positive signs in the market overall, I was mentioning this because, for example, in July, our main competitor has also reduced promotions in DSL. That is where we are on both segments. And I need to say, standing back from all these results, I said in May that we had done some structural changes in Germany. We have seen the step-up in customer experience with the best ever NPS. We are now seeing the impacts on churn. And I think we have all the ingredients in play in Germany, whether we are talking about the teams, the level of investments now, to really make the most of our position in the market. And we look forward, of course, to the return to growth that Luka was mentioning.
Robert Grindle
Thank you. Very comprehensive.
Deutsche Numis
Maurice Patrick
Yes, morning, guys. Hopefully, you can hear me and see me okay. If I could please just dive into the UK trends.
Barclays
In the UK, you showed a slowdown from about 3% to about 1%. You cite in the prepared remarks something around the business project milestones. However, if I understand correctly, the serious revenue growth trends now include Three UK. You have probably got a month in the 1Q numbers. You have changed the Group guidance. If I look at the net adds on the contract side, you have lost 46,000. So, curious to understand that 46,000 net adds or net losses, was that the Hutch base? Was that the Vodafone core branded base? When we think about the full inclusion for Q2, is that going to mean that we get a continued slowdown? Or maybe we should expect to see a recovery in the service revenues throughout the rest of the year? Thank you. Thanks for the question. I will perhaps cover the financial part and then when it comes to what we are seeing from an overarching more market momentum perspective, perhaps Margherita can attend to that.
Luka Mucic
Vodafone Group
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First of all, not sure that I understood it correctly. We have not changed company guidance around the UK. In fact, the trends that we have been seeing in Q1 are exactly in line with the expectations and I believe also with what I flagged already at our full-year earnings, where I said that we expect headwinds and a slowdown in the UK as a consequence of two factors on the top line, I have to qualify because in EBITDAaL, we continue to expect good growth from the UK. However, on the top line, I already flagged that we are seeing losses of some legacy managed services contracts in B2B that came with a very low margin, and they reside in the step- down in our B2B revenues that you will have noted where we had negative 3% growth in the quarter whereas consumer obviously continued to grow. So, that is the first thing. On the Three UK side, you are correct. We have one month of Three UK numbers in and also entirely as expected and as I flagged before, Three UK has been on a downward trend in terms of their growth rates for a while. In fact, in the first month of us consolidating their results, this growth has now turned slightly negative and the reason for that is essentially that they have seen customer losses on their first brand for a while. This has been substituted by SMARTY adds which in our reporting show up in prepaid and not in contract any more, and obviously, they come with a lower ARPU as you will imagine and that is resulting in the step-down. From a trend perspective because you have asked that question, as a result of these managed services step-down in B2B remaining in the numbers now for the remainder of the year, it will not worsen any further, but will obviously continue to affect it and the growth that we see in other parts like Digital Services in the UK, as elsewhere, will not fully compensate for that as well as the fact that we see these trends in Three UK continuing for a while before the whole positive effect of the merger will then take hold and will improve the performance again. We would expect for the next few quarters a slightly negative growth contribution from the UK, which then will unwind as we go into the next year. On the on the customer side of things, Maurice, I would say the negative net adds in the quarter as you may have seen from our press release, half of them was phasing of B2B contract, half of them was this Three brand performance that Luka was mentioning which is not new, and I need to say beyond the sort of short-term puts and takes of the financial performance, I think it is important to share the impact on these numbers and our top-line performance that the integration is going to have because it has going to be quite significant. You will have noticed from the action log that the team has hit the ground running, and it has fair to say that for the last two years we knew about the potential of what we could be doing, and therefore we have had the time to prepare. And I ’ll just mention maybe three examples of areas that specifically will impact the performance of the Three customer base going forward, coming from the integration. I would say number one, the changes to the network. The Three brand have a much higher churn than the Vodafone brand, and the number one reason of this churn is network quality. You will have heard in my introduction and read in the papers that actually the performance of the network that the Three customers are experiencing already today, I would say for the last month or so, has changed with spectrum sharing. We have improved the 4G speeds of up to 40% across the UK. However, most importantly we are bringing the two networks together and by allowing this to happen already this year we will have a drastic reduction of ‘ not-spots ’ for all our 28 million customers, including the Three customers, that will be able to use what today is the Vodafone network. It is a very significant reduction. We are talking about 16.5 thousand of square kilometres so it will be visible in the UK and will ramp up throughout the year. And more broadly, obviously we are investing €1.5 billion in the network, so definitely some thing that will impact this churn. Still on churn, second action is we are now bringing our market-leading CX - customer
Margherita Della Valle
Vodafone Group
Vodafone Group Plc Q1FY26 Q&A Transcript
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experience - approach to the Three base, and you have heard me mentioning before this new initiative that we are launching with Vodafone UK. We were always at the forefront of the industry now on customer service. And finally, convergence, and this will impact revenues. We have already opened the sale of fixed broadband products from Vodafone to the Three UK base. We are the fastest-growing broadband provider in the UK with our largest fibre footprint of any other operator, over 20 million households. And now the Three UK customers will access this. We are marketing directly to them. All this will impact net adds and will impact revenues going forward. And I need to say, as we have said many times before, this merger is really a fantastic opportunity for us to drive revenue across all segments. The integration is starting with good EBITDAaL growth this year and ramp up of EBITDAaL and free cash flow growth throughout the plan, as we have already discussed in the past.
Maurice Patrick
Very comprehensive, thank you.
Barclays
Carl Murdock-Smith
Hi, thank you very much. I wanted to ask about Other Europe and the outlook for service revenue trends there, specifically in Portugal and in Greece. In Portugal, we have seen a step- down in trends this quarter. Obviously, you have got the impact of Digi there, and I think we have just lapped the price increase from last year. I guess my question there is that step- down one time as we lap that, and then what is the outlook going forwards and will there be any further deterioration, or is that just a one-time move? And then in Greece, last quarter we obviously had the tough comp in the prior year in relation to public sector revenues. I was maybe expecting more of a bounce back this quarter in terms of the trends there. So just to comment around the performance there and the outlook going forwards as well, and regarding Other Europe in general. Thank you.
Citigroup
Margherita Della Valle
Yes, maybe I start just in terms of the news from Portugal and Luka can complement with the expectations on service revenue and EBITDAaL growth in Other Europe as a whole.
Vodafone Group
I would say no real surprises in Portugal. The situation with the entrance of Digi was the one we were expecting, as we discussed in the past in terms of price points. Vodafone Portugal in this context is, I need to say, competing very well. You may have seen that the impact on port-outs and customer number is small and not evolving over time, and this is a factor of the fact that we have a strong position in Portugal both on general loyalty and customer experience but also on TV specifically because TV is quite central to the offers in the market and our customer experience telco. I would say volumes are okay, but we had an impact on ARPU. You mentioned the lapping of the price increases, but more broadly, ARPUs have been under pressure in the market because of retention actions, because of the growth of second brands. And in terms of trend line, you should expect this to continue.
Vodafone Group Plc Q1FY26 Q&A Transcript
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Now, in the numbers or the outlook that Luka will share, you should consider though two elements of mitigation. The consumer pressure is expected to continue. On the other hand, we have a third of the revenues in B2B, which is performing quite well in Portugal. And also, if you move EBITDAaL level, we have a range of, I would say, mitigations that can be put in place in terms of trend lines. And in terms of what that means for Other Europe, we fully expect that service here of the revenue growth at the regional level will remain in growth territory for the year. In particular, we expect a better performance in the second half-year, actually, as we expect that in particular in B2B the growth trends will accelerate in the second half-year. Greece, because you have mentioned, that will be actually part of that story with an expected much stronger second half performance, also partly driven by what you outlined before. And from an EBITDAaL perspective, we also continue to expect a good performance and contribution from Other Europe for our full-year results. From that perspective, we have a lot of very well-performing markets there. And in Portugal, we have the resilience of our strong convergent position, plus the strength in B2B that will actually balance things out despite the Consumer pressure.
Luka Mucic
Vodafone Group
Carl Murdock-Smith
That is great. Thanks very much.
Citigroup
Margherita Della Valle
Thank you, Carl.
Vodafone Group
Andrew Lee
Good morning. I am just going to bring us back to Germany. One of the things that investors are getting excited about, and companies to an extent too, is the scope for in-market consolidation. I think I am right in saying that you still cannot yet commit to German top-line growth without the boost from 1&1 over the next two years, which is obviously a meaningful lag versus some of the growth that other countries are posting now already and could do post-consolidation. It would be good just to clarify that, but the question is, is German consolidation something that you could actively lead on in any scenario, or do you see yourselves more likely an indirect beneficiary if German consolidation were to happen? Thank you. Thank you, Andrew. I need to say for the underlying growth point it will very much depend really on the competitive conditions in the market, particularly in mobile. What we said previously is if conditions remain as they are today, this is unlikely to happen this year. However, of course, we will have to see. Specifically, on consolidation in Germany, obviously there is a flurry of speculation at the moment around consolidation all across Europe. And I need to say I could discuss extensively why that is important, as you know, and why we are pushing regulators for a change in the merger guidelines there and bringing the UK example to the fore. I think it has really an
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Margherita Della Valle
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important step. However, specifically for us, in Germany, our focus is on completing our turnaround. Our focus is growing in Germany on the back of increased operational excellence and all the elements I was talking about before. Structural, strong customer experience. Structural, strong position of the brand in the market. That is really what we are focussing our efforts on. And as far as 1&1 is concerned, after two years since we first concluded the agreement on wholesale, our focus is now on completing our transition and making sure that 1&1 can now benefit from our overall network nationwide. That is what we are focused on. I would say this is true more broadly, by the way, beyond Germany. I mean, on consolidation, you have seen us in the last two years really taking the matter in our own hands. And therefore, really, it is all about operational excellence now.
Andrew Lee
Thank you.
Goldman Sachs
James Ratzer
Yes, good morning. And thank you very much indeed for taking the question. A broader question, please, around your technology roadmap in Germany, especially on the cable infrastructure. If I look at your cable partnership in the Netherlands with Liberty Global, they have announced they are going to be stepping up their speeds to 2-4 Gbps with DOCSIS 4.0 coming in by end 2026, going to 8 Gbps. I think in Germany at the moment on cable, your maximum speed is 1 Gbps. I would just love to hear your latest thinking on the kind of technology path ahead for your cable infrastructure. And as we are discussing it, I see in the release you mentioned OXG passed 100,000 homes this quarter. Can you give us an update just there on what is the total number they have passed and how many subscribers you now have on the OXG network? Thank you.
New Street Research
Margherita Della Valle
Well, maybe I start with OXG. The pace is accelerating. We are now at 230,000 home pasts.
Vodafone Group
As you mentioned, the current run-rate is 100,000 households per quarter, more or less. And of course, we are working to build on that further acceleration. By the year-end, we will be some way above the half a million homes past. We are building across 31 cities. We have engaged 30 construction companies, and the orders out are already for 2.5 million households. So, now progressing well, I need to say we are pleased with the execution. It is early days for the commercial side. We are in testing now, and we will go commercial in the second half of the year. And so, we will start sharing customer numbers with you once it will become material, but certainly a good direction of travel there.
Vodafone Group Plc Q1FY26 Q&A Transcript
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More broadly, in terms of technology roadmap for Germany, and as you know, each market has its own very different conditions, our starting point of any strategy, which is typically a layer of actions over time is what customers want, what customers need. In Germany, the majority of the customer is still on speed of under 250 Mbps. And in the context of Germany, what we want to make sure is we serve as many customers as we can with the gigabit speed, which by the way is as far as any, I would say, consumer application idea has gone so far. So, more than sufficient to solve all customer needs. We are today retailing the largest footprint. And this is the same as actually in the UK of gigabit speed in Germany. And we do so by combining the 25 million cable households with an additional 5 million of wholesale households in fibre. Today, three out of four of German households can buy gigabit products from us. What is next? On top of the OXG evolution that will continue to run according to its plans, for the MDUs in particular, we continue to fiberise at pace the cable network. And you know the drill there. We are adding fibre segments. And on the back of that, we deliver a very good experience for our customers. And we see fibre advancing, I would say, organically within the network. I was mentioning earlier that we continue to be rated as the best network in the country across all technologies in terms of speed and in terms of reliability. And this is a testimony of this investment plan. And then selectively, what we are introducing in terms of the cable sequence in Germany is ‘ high split ’ , which is a technology that can also help with the speeds, particularly in enhancing the uplink speed. In the end, it is what I would describe as a multi-year technology pathway, which, we think, is definitely appropriate for what our customers need in Germany. And really pleased once again with customer satisfaction there as well as the churn levels. Actually, just a small point on this. We talk about churn reducing in fixed broadband in Germany for some time. I was actually looking at this recently. And it has now not just below other big markets like the UK, but it has now effectively below most of our European markets. So, good position in fixed broadband there with our customers. Thank you for that. Does that mean then just on the cable network, you are the 1 Gbps maximum speed is likely to probably just remain in place for the next few years? There are not imminent plans for a headline speed increase?
James Ratzer
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Margherita Della Valle
High split has an impact on that. It has impact on uplink and downlink. It will depend on the areas. However, in terms of the multi-gig story, keep in mind that even the gigabit products in Germany are still held by a very small minority of customers. Not only does it not have use cases, but it has really not on the radar. What people are optimising, which by the way is also true in the Netherlands, is the combination of price and quality. So, we are upgrading them to 1 Gbps, and it will take some time to get there.
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Luka Mucic
I just upgraded 1 Gbps. So, at least one additional customer on gigabit speed now.
Vodafone Group
James Ratzer
Got it. Thank you.
New Street Research
Paul Sidney
Yes, thank you very much for the question. I really appreciate it. I just had one question on Germany, but perhaps a little bit of potential read across for the UK.
Berenberg
However, my question is, we have heard many times from the Vodafone team over the course of the morning the phrase ‘ value over volume ’ , particularly when talking about the German market. It is a narrative we have heard from Deutsche Telekom pretty consistently over the past six months. So, I am sure it has not a coincidence that you are focusing on that ‘ value over volume ’ strategy. So, just wondering if that is really intentional and is it meant to send a message to the other German operators that there is an opportunity to extract more value from the German market? And is this a strategy that you will be following in the UK, following the completion of the Three UK merger? Thank you. Thank you, Paul. I would say from my perspective, it is a very much needed sentence when we talk about particularly mobile net adds, because as you know very well, whilst in broadband acquisitions come with ARPU. And therefore, I think it is logical that in the roundings, you look at this as a leading indicator of future revenue. This is absolutely not the case in mobile. And it has not been the case for many, many years, because in the context of the SIM count in mobile, there is a wide range of different values. We have even had markets historically where at some point people were distributing free SIMs. I do not think the SIM count is for the industry a good KPI, a good leading indicator of revenue. And I think it can end up being also, to the extreme, a very confusing red herring, because it drives people towards the wrong behaviours. Sorry, I went a bit long, but I am really passionate about this point, because a lot is made out of that, whilst ultimately, what we care about is obviously revenue, which is why in the specific of Germany, now you were asking about Germany, our focus has to be not number of SIMs, but has to be we have a valuable base. For us, we use this word branded base, as opposed to reseller base, because this is where effectively the value is entirely. And that is what we are targeting. And sorry, just the second part of the question in terms of is that a strategy you would be looking to follow in the UK and try and again get the whole market to focus on value rather than these quarterly KPI numbers?
Margherita Della Valle
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Paul Sidney
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Margherita Della Valle
Historically, it has to be the right approach anywhere in mobile for everyone.
Vodafone Group
Paul Sidney
Absolutely. I appreciate the answer. Thank you.
Berenberg
Akhil Dattani
Hi, morning. Thanks for taking the question. I just wanted to ask the question on B2B more generally.
JP Morgan
And the question is, obviously, we have had a pretty big push across Europe, in terms of rhetoric around data sovereignty. And we are seeing a lot of government initiatives, or at least rhetoric around government initiatives, to drive that agenda, whether that is the German €500 billion infrastructure bid, and some of the gigafactory type things being talked about now. However, there is a whole host of other similar rhetoric points we are seeing from governments across Europe. I guess what I was really trying to understand is, you know, what is your engagement on this topic? To what extent do you think this is relevant for Vodafone and Vodafone's B2B strategy? And can you give us some flavour if this is relevant for you? What sort of verticals are most interesting for Vodafone? So where are the areas where you think there is relevant leverage for you to play into? Thanks a lot.
Margherita Della Valle
Thank you, Akhil.
Vodafone Group
Luka Mucic
Yes, so first of all, it has very clear that given where geopolitics are going, that data sovereignty is an important consideration. It is becoming a topic that you get also more questions about from private customers. So where is my data? Where are you going to operate, for example, managed services around security and so on from? It is definitely becoming a bigger consideration. And therefore, of course, we are responding to it. You may have seen in the past some of our investments that we have made, for example, around in-country security operations centres that we have just opened up in Germany that goes into this area. We are certainly also looking at potential areas of investment to further strengthen our portfolio of capabilities in that respect and so expect us to be focused on that from an investment perspective. It is an area of opportunity for sure. The first areas that you are thinking about obviously are areas like public sector and defence, but they are not the only ones. We have excellent customer relationships in that space, both with national authorities as well as with institutions like the US Army, for example, for whom we are the provider and partner of choice across our entire footprint, actually both Europe and Africa. And so, we are going to continue to invest in this.
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However, as I said before, it has going beyond that from an engagement perspective into other sectors that have become concerned with the topic as well. What do you need to be able to offer? Well, customers, I think, want to have a partner that can be more than just a provider of SIMs or a reseller of software solutions.
Strengthening our ability to have a secure managed service that we can provide is the key opportunity here. And luckily, this is an area that is clearly prioritised as part of our strategy.
Margherita Della Valle
Just stepping back, we are currently growing double-digit in Europe in Digital Services. And if you look at what is in Digital Services in our reporting, ultimately it has three things. It is IoT, cloud and cyber. And I would say beyond the big declarations of the funding on sovereignty and defence, all these trends for us are supportive of further growth in this space. And we are a European company, so we have a lot of cards to play going forward. Can I just clarify one thing? I mean, if we look at Telefonica, they are quite openly saying that they want to do M&A to strengthen and bolster their capabilities in the space. Do you think that is something that Vodafone needs, or do you think this is much more organic and additive rather than revolutionary? I think incrementally it has possible, but what I would call small bolt-ons, where you acquire certain capabilities in certain areas. Do not see it as, I would say, normal M&A we talk about on mobile and the like. However, you know that we have increased our investment more broadly. We have been talking about this in the last two years. We are starting more people, sales specialists, to have legs on the ground of people that understand these areas. As Luka was mentioning, we have opened organically cyber operations centres and the like. And here and there, rather than build, maybe acquiring competencies could be the right route.
Vodafone Group
Akhil Dattani
JP Morgan
Margherita Della Valle
Vodafone Group
Akhil Dattani
Great. Thank you.
JP Morgan
David Wright
Thank you. I did actually really appreciate Akil's question. I think it has super relevant. And I guess the concern is that non-incumbents could be pushed out of this opportunity. And I wonder whether your shareholder base as well could even be a sort of compromise to concerns around national security and the provision of those services. However, following on from that, I did note a letter you sent regarding regulation of the incumbent telecoms, which is not unconnected with this, which is that you want the regulation of fixed wholesale access to be sustained or the rigour around that to be sustained. And I guess this might even come back to James's question. We are all together today. Is this basically protecting your right or even pre-empting a move to more wholesale fibre access? Because the concern would be as the incumbents invest, if there is a little bit more regulatory
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Vodafone Group Plc Q1FY26 Q&A Transcript
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relaxation, that you do not have the same opportunities to maybe wholesale and that leaves you, and I am going to say, stuck with a cable network. I was really interested in that regulatory letter you guys sent the other day. I would love your thoughts around that. I am not even sure that is a direct question, but I will let you answer. Thank you.
Margherita Della Valle
Well, maybe I will pick up on the "what is happening on fixed regulation" and the read-across to our strategy.
Vodafone Group
First of all, the reason for the letter. Let me be absolutely crystal clear, there is a big opportunity for simplifying regulation in telecoms across all areas, fixed as much as mobile. The status quo in fixed is not an option. We need to move the agenda on if we want to regain competitiveness in Europe. However, the reason why we have been calling out fixed is that there needs to be a very simple red line, and we wanted to make sure it was clear in the conversation on simplifying regulation, which we wholeheartedly support, and this is re-monopolisation. Where fixed is today is there are very large areas of Europe, as you know, which are served by one infrastructure. And again, as you know, this is set to stay with us for many, many years to come. In these conditions where for any customers, our customers, any other European customers, there is only one provider. It is really important that we maintain a degree of rules in the case of what I would call natural monopolies. What we mean by that and what we have been advocating with the Commission is that ex-ante regulation is maintained and fair and equitable access is guaranteed to European customers where there is one infrastructure. It is just as simple as that. And it has nothing to do with whatever we are doing with our own infrastructure. We are very happy with the strategy we were mentioning earlier in this conversation with James. We are continuing to invest in our cable network, and we are building fibre. However, in Germany, in our plans, for example, there will always be areas of the country where there will be a degree of wholesale. That does not change. And it is really important that if that happens in monopoly conditions, some framework rules are maintained.
It is very, very simple. Lots of simplification ahead for fixed regulation should not go all the way to create areas of monopoly.
David Wright
Interesting. However, if I am the incumbent, am I not saying yes, but none of you guys are investing? You are not overbuilding cable with fibre. VMO2 in the UK has stopped investing in rollout. Do I not say, but it us who are investing, not you?
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Margherita Della Valle
I think that this logic on who invests the most, we need to move to the point to a different point, which is if there is a monopoly in place, a monopoly cannot be managed without any rule. That is what we are talking about. Nothing to do with investment.
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Vodafone Group Plc Q1FY26 Q&A Transcript
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You know about our investments. In the cable network, the 7 million households of fibre we are building in Germany. However, it has not about who invests more or the less. It is all about if you have one infrastructure, then there needs to be some simple rules around it. As simple as that, and nothing new, I would say, across any sector.
David Wright
Okay. Thank you.
Bank of America Merrill Lynch
Joshua Mills
Thanks, guys. My question was coming back to Germany in the comments you were making earlier about the ‘ value to volume ’ strategy and how that might differ between the broadband market and the mobile market. I think what you were saying was broadband net adds could be looked at as an indicator for fixed revenues. They are now declining again. And in that context, how important and how much of a priority is it for you to grow the German broadband base and where you need to increase investments to drive that? The reason I am asking, and I suppose the context of the question is, as you referenced, the overall market growth is slowing maybe 200,000-300,000 subs a year for the whole of Germany. Most of those, if not more than 100%, are now going to the alt net. Logically, yourselves, Deutsche, other telcos would need to be losing customers to maintain an equilibrium. And DT has said quite clearly on their recent calls that whilst they are in negative net add territory, currently they do intend to stabilise that during the course of the year. From your perspective, given the comments you have made, is growing that base still a priority as it seemed to be with our discussions last year? Or would you be comfortable to see the modest broadband sub losses continue as long as you can continue to deliver the better broadband pricing trends to you referred to earlier in the call? Thanks. Sure. We have always been talking about a fair share of market growth in terms of our targets. And in the context of a stable market, our target is to maintain our base stable. And in the specific of broadband, the driving value then is about managing the value of the front-book and managing the base up across speed with cross-selling and up-selling and then more broadly driving churn down, whether it is through customer experience or through convergence with mobile. I would say this is the simple recipe for broadband. And you mentioned investment once again, let me reiterate it. We are very happy with our level of investment in Germany. We are very happy with our position on quality in Germany. And it is really do not take it from me, take it from the independent testing from the customers. And maybe if I could have one follow up just on that recipe, the part that is missing, which we do get in other markets, is back-book price increases. And I know in Germany, it triggers high churn. There is less of a back-book culture in that market. However, in the past, Vodafone has selectively made changes. As your network quality improves, is there any opportunity for you to introduce that ingredient into the recipe as well, going forward with back-book price rises?
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Margherita Della Valle
Vodafone Group
Joshua Mills
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Vodafone Group Plc Q1FY26 Q&A Transcript
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Margherita Della Valle
You are right. This is something we have done in the past in Germany, but in a very different context. I think what you should expect is us to always be very mindful of the evolution of inflation and cost.
Vodafone Group
What shape this will take in terms of intervention is, I would say, too early to tell, but it certainly is a consideration. Thank you.
Joshua Mills
Thank you.
BNP Paribas Exane
Ottavio Adorisio
Morning, and thanks for taking the question. It is a follow-up from previous questions on the investments in Germany, and also about what you share with us about OXG.
Bernstein Societe Generale
Now, you look to be relatively comfortable with the current pace of 100K a quarter. However, given the business plan, is 7 million. It will take you 17 years to cover that one, considering that you were looking for six years, and that was announced three years ago. You are very late in that rollout. I was just wondering if you can share with us the hurdle you are finding on the build-out. It is a lot to do with your partner? There is no way to invest and potentially willing to exit? Is Deutsche potentially overbuilding your network? Is the fact that the business plan has changed? And then what we should expect the pace in the run-rate should be? Thank you. If you think back to what I was saying earlier, Ottavio, I called out the word acceleration very, very clearly. And this is our ambition, of course. As you said, we have 7 million households to complete. The focus is accelerating. We closed last year with 130,000. And we discussed in the past, I think, the reason why in the beginning some of the construction was not starting as planned. However, now it does. We are in catch-up mode with over 30 construction partners in the country. And we are pleased with how it has going. However, as you said, we are looking forward to further acceleration. And yes, this is the ambition. However, how can we achieve that one? It is, frankly, the build-out is just the fact that you can find construction power or because your partner is not really willing to invest? Hence, the structure, OXG is going to remain like that over the next 12-24 months, or you are relatively happy about the situation?
Margherita Della Valle
Vodafone Group
Ottavio Adorisio
Bernstein Societe Generale
Margherita Della Valle
OXG is fully funded. There are no investment constraints of any kind. And again, we are working to keep accelerating as per the original business case. No change there.
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Vodafone Group Plc Q1FY26 Q&A Transcript
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Ottavio Adorisio
Perfect. Thank you.
Bernstein Societe Generale
Javier Borrachero
Yes, good morning, Margherita and Luka. I guess it is a little bit too early in the year to discuss maybe about the future share buyback shareholder remuneration. I think you always said end of the year is probably the time to do so. However, at the same time, probably quite soon you make it, or in the next months, you make it close to €1 billion, probably from Zegona. You sound pretty upbeat in terms of the second half of the year of the following quarters. So maybe, I do not know if there is something you could share with us, particularly in terms of potential extension of the share buyback programme. And also, your main shareholder is increasing its stake indirectly, simply because they are not somehow participating. I do not know what is the view, or how could this somehow have an influence in future share buyback programmes? And somehow related to this, are you happy, satisfied with your current footprint, I am thinking about the associates, and always comes to my mind, VodafoneZiggo, but also others. Any potential disposal, anything that could also shore up a future share buyback programme? Thank you. Yes. Let me try to take this and let me try to be brief. So first of all, you are right, we are executing on the commitment that we had given. Actually, the entirety of our capital allocation framework that we had defined last year is super important for us to continue to execute on. As you know, we had set our investment needs on the organic front, and we are following up on them. Capital intensity by market, staying where it is, we have moved to get into the leverage range that we had defined, and we are clearly there now. And what we also have been clear about is that by satisfying those two objectives and executing the share buybacks that we have agreed for Italy and Spain, which are now in the second half, so to say, but actually with the first €500 million already execut ed, that we have retained some strategic flexibility. Now, where we will go with this, we will clearly have to see later on. If we have excess capital, then we would certainly consider additional returns, but that is way too early. And certainly, I would not be the appropriate person to make a decision on that, given that I will leave at the end of November. So from that perspective, we have optionality, but we will take the right decisions, always in light of what drives most value for our shareholders, and we will then look for the right balance between organic opportunities, potentially some tuck-ins, as Margherita has said, and if we then have excess capital left, we can certainly do that. I do not want to speculate, honestly, speaking on things that we cannot really control. At what point in time we might get the redeemable preference shares distributed to us, let us see. And in terms of e&, I think you have mentioned this, yes, their shares indirectly increased, but that has no bearing on how we think about capital allocation. We are very happy with the fact that they are a strategic investor, and we have with them a great expert of the industry and with us on the board, but that is not influencing our choice in that respect.
Kepler Cheuvreux
Luka Mucic
Vodafone Group
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