Vodafone Group Plc Annual Report 2025 143
Strategic report
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4. Impairment losses (continued)
Assumption Long-term growth rate For the purposes of the Group’s value in use calculations, a long ‑ term growth rate How determined into perpetuity is applied immediately at the end of the five-year forecast period and is based on the lower of: − The nominal GDP growth rate forecasts for the country of operation; and − The long-term compound annual growth rate in adjusted EBITDAaL as
Key assumptions used in the value in use calculations The key assumptions used in determining the value in use are:
Assumption Projected adjusted
How determined
Projected adjusted EBITDAaL has been based on experience adjusted for the − In Europe, mobile revenue is expected to benefit from increased usage as customers transition to higher data bundles, and new consumer and business following: products and services are introduced. Fixed revenue is forecast to grow as penetration is increased and more products and services are sold to customers; − Outside of Europe, revenue is expected to continue to grow as the penetration of faster data-enabled devices rises along with higher data bundle attachment rates, and new products and services are introduced; and − Margins are expected to be impacted by negative factors such as the cost of acquiring and retaining customers in increasingly competitive markets and by positive factors such as the efficiencies expected from the implementation of Group initiatives. The cash flow forecasts for capital expenditure are based on experience and include the ongoing capital expenditure required to maintain our networks, provide products and services in line with customer expectations, including of higher data volumes and speeds, and to meet the population coverage requirements of certain of th e Group’s licences. In Europe, capital expenditure is required to roll out capacity-building next generation 5G and gigabit networks. Outside of Europe, capital expenditure will be required for the continued rollout of current and next generation mobile networks in emerging markets. Capital expenditure includes cash outflows for the purchase of owned property, plant and
EBITDAaL
estimated by management.
Long-term compound annual growth rates determined by management may be lower than forecast nominal GDP growth rates due to the following market-specific factors: competitive intensity levels, maturity of business, regulatory environment The pre-tax discount rate for each cash-generating unit is derived such that when applied to pre-tax cash flows it gives the same result as when the observable post- tax weighted average cost of capital is applied to post-tax cash flows. The assumptions used to develop discount rates for each cash-generating unit are or sector-specific inflation expectations. − The risk-free rate is derived from an average yield of a ten-year bond issued by the government in each cash- generating unit’s respective country of − The forward- looking equity market risk premium (an investor’s required rate of return over and above a risk-free rate) is based on studies by independent operations; economists, the long-term average equity market risk premium and the market risk premiums typically used by valuation practitioners; − The asset beta reflecting the systematic risk of the telecommunications segment relative to the market is determined from betas observed for benchmarked to externally available data. comparable listed telecommunications companies; and − The region-specific leverage ratios are estimated from ratios observed for comparable listed telecommunications companies. Each cash- generating unit’s discount rate is determined in nominal terms to match Changes in risk-free rates have increased and decreased the cash-generating unit their nominal estimates of future cash flows.
Pre-tax discount rate
Projected capital expenditure
equipment and computer software.
Projected licence and To enable the continued provision of products and services, the cash flow forecasts for licence and spectrum payments for each relevant cash-generating unit include amounts for expected renewals and newly available spectrum. Beyond the five-year forecast period, a long-run cost of spectrum is assumed. spectrum payments
discount rates in the current year.
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