56 Vodafone Group Plc Annual Report 2025 Principal risks and uncertainties continued
Strategic report
Governance
Financials
Other information
Risk factors
Scenario
Emerging factors
Adverse changes in macroeconomic conditions
A severe contraction in economic activity leads to lower cash flow generation for the Group and disruption in global financial markets, which impact our ability to refinance debt obligations as they fall due in a cost-effective manner.
This is an externally driven risk, and the threat environment is continually changing. External factors, such as the conflicts in the Middle East, the ongoing war in Ukraine and the uncertainty around global trade and tariff policies, could impact the future path of monetary and fiscal policies, likely affecting economic activity across our global footprint. Additionally, financial markets are experiencing high levels of volatility, with sovereign debt at record levels. These factors could lead to a significant change in the availability and cost of capital.
Adverse change to macroeconomic conditions could result in reduced customer spending, higher interest rates, adverse inflation, or foreign exchange rates. Adverse conditions could also lead to limited debt refinancing options and/or increase in costs. Risk ranking movement: Increased Risk owner: Group Chief Financial Officer Adverse market competition Increasing competition could lead to price wars, reduced margins, loss of market share and/or damage to market value. Risk ranking movement: Increased Risk owner: Executive Chairman Vodafone Germany and CEO European Markets Adverse regulatory and policy environment Adverse regulatory measures and policies impacting our strategy could result in increased costs, create a competitive disadvantage, or have negative impact on our Return on Capital Employed. Risk ranking movement: New/change in scope Risk owner: Chief External and Corporate Affairs Officer Company transformation Failure to effectively transform Vodafone to adapt to future challenges and demands could increase operational complexity and hinder growth. Risk ranking movement: No change Risk owner: Group Chief Financial Officer/Executive Chairman Vodafone Germany and CEO European Markets Cyber threat An external attack, insider threat, or supplier breach cause service interruption or confidential data breaches. Risk ranking movement: No change Risk owner: Group Chief Technology Officer
Aggressive pricing, accelerated customer losses to low value players on mobile and fixed, and disruptive new market entrants in key European markets could result in greater customer churn and pricing pressures, impacting our financial position.
Emerging factors often depend on individual market structures and the competitive landscape. External factors, such as local and macroeconomic pressures, may impact household and individual connectivity spend. In addition, continued aggressive penetration pricing by disruptive low value players across markets on both mobile and fixed could accelerate customer losses and drive prices in markets. Geopolitical tensions, a re-evaluation of global alliances and international affairs, and ongoing conflicts amplify the risk of government intervention, which may include both protectionist interventions and security-related requirements. These could affect our operations, supply chains and conditions for competition in various ways. The increasing breadth and depth of external geopolitical challenges mean there is a continuous need to adapt to effectively mitigate the changing risk environment. Heightened uncertainty following elections in 2024, challenging fiscal environments in Europe and Africa, and the proliferation of emerging technologies also contribute to this risk. Like most companies, managing multiple large transformation programmes simultaneously requires careful coordination and consideration to achieve optimal outcomes. Given the current transformation programmes underway in some of our major European markets, it is essential to secure stakeholder alignment, efficient resource allocation, and proactive risk management. Additionally, in markets where we have divested, we enter into contracts to support the divested company. Once the contractual period ends, there is no obligation for them to continue using Vodafone services. Cyber risk is constantly evolving and is influenced by economic, technological and geopolitical developments. We anticipate threats will continue from existing sources as well as evolving ones based on new technologies such as satellite, Artificial Intelligence (‘AI’) and the future use of quantum computing.
Uncertainty, instability, and the growing complexity of global, regional, and national political environments may lead to unexpected political or regulatory interventions that would adversely affect our operations.
A significant transformation programme failure, including the inability to retain contracts for our ‘Business to telco’ offering with partner entities in the disinvested markets, could lead to a reduction in revenue or necessitate a change in the business model.
Sophisticated threat actors could target mobile network infrastructure using malware or vulnerability exploitation to compromise the details of customer call records, causing customer dissatisfaction, impact on reputation and potential regulatory sanctions. We model various scenarios within our framework to identify the areas of greatest risk for prioritisation.
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