Release Date: May 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vodafone Group PLC (VOD, Financial) has successfully reshaped its portfolio by selling operations in Spain and Italy and merging with Three UK, which has strengthened its market position.
- The company has returned EUR2 billion to shareholders through buybacks and EUR1.8 billion in dividends, with a new EUR2 billion buyback program starting.
- Vodafone Group PLC (VOD) has achieved significant improvements in customer experience, particularly in the UK and Germany, leading to record low levels of churn.
- The company is well-positioned for medium-term growth in adjusted free cash flow, with two-thirds of this growth coming from expanding assets.
- Vodafone Group PLC (VOD) has strong growth opportunities in Africa and Turkey, with significant potential beyond core connectivity, contributing to its overall financial performance.
Negative Points
- Vodafone Group PLC (VOD) faces challenges in the German market, including a declining broadband base and increased competition in mobile, impacting its financial performance.
- The company anticipates continued ARPU pressure in the German mobile market due to aggressive pricing by competitors.
- The UK merger with Three is expected to result in a EUR200 million adjusted free cash flow drag due to front-loaded investments and integration costs.
- Vodafone Group PLC (VOD) has experienced delays in its fiber build-out in Germany, impacting its ability to compete effectively in the broadband market.
- The company faces challenges in the UK B2B market, with headwinds from managed services and ARPU pressure in mobile, affecting its growth prospects.
Q & A Highlights
Q: Can you provide more details on the guidance and the outlook for Germany?
A: Margherita Della Valle, Group Chief Executive & Executive Director, explained that the guidance for Europe implies a mid-single-digit decline for Germany. The focus is on improving customer experience, with significant improvements in Net Promoter Scores (NPS) in Germany. Pricing remains a challenge, and the guidance assumes the current pricing environment will persist, leading to continued ARPU pressure in mobile. Luka Mucic, Chief Financial Officer, added that the German EBITDAaL recovery will see significant improvement as the year progresses, aided by the stabilization of the broadband base and the ramp-up of the 1&1 migration.
Q: What can customers expect from the UK merger, particularly regarding network improvements?
A: Margherita Della Valle highlighted that the merger will lead to immediate benefits in coverage and capacity as Vodafone and Three UK combine their networks. The EUR11 billion network plan will further enhance infrastructure, positioning Vodafone as a leader in customer satisfaction. The merger will also bring significant synergies, including EUR700 million in cost and CapEx synergies, and will strengthen Vodafone's position in the UK market.
Q: How is the B2B segment performing, and what are the expectations for FY26?
A: Luka Mucic reported strong growth in the B2B segment, with a 5.1% growth in Q4. The UK market faced challenges due to lower price increases and the loss of some managed services contracts. However, the digital services business is expected to drive growth, with continued investment in product portfolio expansion. B2B contributes close to 30% of Vodafone's service revenue, with a focus on cash flow contribution due to its asset-light nature.
Q: What is driving the growth in Africa and Turkey, and how does it impact Vodafone's overall strategy?
A: Margherita Della Valle emphasized the disciplined approach in high-inflation environments, focusing on revenue growth ahead of inflation and cost control. The markets in Africa and Turkey offer significant growth potential, with opportunities in digital services and financial services. Vodafone's execution in these regions has been strong, contributing to sustainable midterm adjusted free cash flow growth.
Q: Can you elaborate on the share buyback program and its impact on shareholder value?
A: Margherita Della Valle noted that the adjusted free cash flow per share is expected to grow by 17% year-on-year. Luka Mucic explained that the buyback program is seen as a value-accretive investment, with the current program expected to continue through the fiscal year. The focus remains on sustainable dividend growth and capital returns to shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
