Vodafone Group Plc Q1FY26 Q&A Transcript
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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
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