Vodafone Group Public Ltd Co 6-K, filed Nov 23, 2021
Vodafone Group Public Ltd Co (VOD)
About this 6-K
Vodafone Group Public Ltd Co filed this 6-K on November 23, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16
OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
Dated November 23, 2021
Commission File Number: 001-10086
(Translation of registrant’s name into English)
VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ⌧ Form 40-F ◻
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ◻
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ◻
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN EACH OF THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-240163), THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-81825) AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-149634) OF VODAFONE GROUP PUBLIC LIMITED COMPANY AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.
This report on form 6-K includes the following items:
| (a) | Summary; |
| (b) | Strategy; |
| (c) | Our purpose; |
| (d) | Financial performance; |
| (e) | Cash flow and funding; |
| (f) | Statement of financial position; |
| (g) | Other matters; |
| (h) | Other significant developments; |
| (i) | Regulation; |
| (j) | Legal proceedings; |
| (k) | Risk factors; |
| (l) | Unaudited condensed consolidated financial statements; |
| (m) | Non-GAAP measures; |
| (n) | Definitions; and |
| (o) | Forward-looking statements and other matters. |
Certain information is taken from the previously published results of Vodafone Group Plc for the year ended 31 March 2021. This report on Form 6-K should be read in conjunction with the Group’s annual report on Form 20-F for the year ended 31 March 2021. In particular the following sections:
| ● | the information contained under “Key performance indicators” on pages 4 and 5; |
| ● | the information contained under “Market and strategy” on pages 8 to 15; |
| ● | the information contained under “Our financial performance” on pages 23 to 31; and |
| ● | the consolidated financial statements on pages 121 to 208. |
The terms “Vodafone”, the “Group”, “we”, “our” and “us” refer to Vodafone Group Plc (“the Company”), and as applicable, its subsidiaries and/or its interest in joint ventures and/or associates.
| | | | H1 FY22 | | H1 FY21 | | Change |
|
Financial results |
| Page |
| €m |
| €m |
| %1 |
|
Group revenue |
| 12 |
| 22,489 |
| 21,427 |
| 5.0 | |
Group service revenue |
| 12 |
| 19,010 |
| 18,418 |
| 2.8 | * |
Operating profit2 |
| 12 |
| 2,620 |
| 3,354 |
| (21.9) | |
Profit for the financial period2 |
| 12 |
| 1,277 |
| 1,468 | | | |
Basic earnings per share2 |
| 23 |
| 3.40 | c | 4.30 | c | | |
Cash inflow from operating activities |
| 23 |
| 6,455 |
| 6,009 | | | |
Interim dividend per share |
| 48 |
| 4.50 | c | 4.50 | c | | |
| 1. | “*” represents organic growth. See page 13. 2. Prior period re-presented for Vodafone Egypt which is no longer held for sale. See page 39. |
Summary ⫶ Good financial performance
Financial performance
Total revenue increased by 5.0% to €22.5 billion (FY21 H1: €21.4 billion), driven by service revenue growth in European and African markets and a recovery in handset sales following COVID-19 disruption in the prior year, as well as favourable foreign exchange movements.
Operating profit decreased by 21.9% to €2.6 billion (FY21 H1: €3.4 billion), reflecting a prior year gain of €1.0 billion arising on the merger of Vodafone Hutchison Australia into TPG Telecom Limited. Excluding this, operating profit increased.
The Group made a profit for the period of €1.3 billion (FY21 H1: €1.5 billion). The profit decrease was primarily driven by lower operating profit more than offsetting lower financing costs and a net income tax credit. The tax credit was attributable to deferred tax credits in the UK and Italy reflecting the increase in the future statutory tax rate in the UK and the revaluation of assets in Italy.
Basic earnings per share was 3.40 eurocents, compared to basic earnings per share of 4.30 eurocents in the prior period.
Cash flow and dividend
Cash inflow from operating activities increased by 7.4% to €6.5 billion (FY21 H1: €6.0 billion).
The interim dividend per share is 4.5 eurocents (FY21 H1: 4.5 eurocents). The ex-dividend date for the interim dividend is 25 November 2021 for ordinary shareholders, the record date is 26 November 2021 and the dividend is payable on 4 February 2022
3
Vodafone Group Plc ⫶ H1 FY22 results
Strategy ⫶ Focused on growth
We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and provided a full update in our FY21 Annual Report. We have also made further progress with respect to our purpose strategy during the first half of FY22.
In November 2018, we set out our ambition to reshape Vodafone and establish a foundation from which the Group can grow in the converged connectivity markets in Europe, and mobile data and financial services markets in Africa. As we begin the second phase of this transformation to become a new generation connectivity and digital services provider, in this section we outline that:
| 1. | our strategy is focused on growth and improving shareholder returns; |
| 2. | we have clear near-term operational priorities; and |
| 3. | we have further strategic opportunities through portfolio optimisation. |
1 ⫶ Strategy focused on growth & improving shareholder returns
We have now substantially delivered the first phase of our strategic ambition to reshape Vodafone into a stronger connectivity provider. This has been delivered through four key strategic priorities: (i) deepening customer engagement; (ii) accelerating our transformation to a digital first organisation; (iii) improving the utilisation of our assets; and (iv) optimising our portfolio. We executed at pace across all four priorities between FY19 and FY21 and by the end of March 2021, the three year highlights included:
| ● | mobile contract customer loyalty in Europe improved by 2.3 percentage points; |
| ● | we added 4.3 million NGN broadband customers in Europe; |
| ● | we increased the number of homes passed with our 1 gigabit capable fixed-line network in Europe to 43.7 million; |
| ● | we launched 5G in 240 cities across 10 of our European markets; |
| ● | we agreed 8 strategic network sharing partnerships with 9 mobile network operators in 7 markets; and |
| ● | we executed 19 significant corporate transactions to optimise our portfolio. |
The next phase of our strategy focuses on driving shareholder returns through growth. This will be delivered through three customer commitments and three enabling strategies, all of which work together towards realising our vision to become a new generation connectivity and digital services provider for Europe and Africa, enabling an inclusive and sustainable digital society.
4
Vodafone Group Plc ⫶ H1 FY22 results
A ⫶ Strategic Progress Summary
Customer commitments |
| Enabling strategies |
● Best connectivity products and services | | ● Simplified and most efficient operator |
● Leading innovation in digital services | | ● Social contract shaping the digital society |
● Outstanding digital experiences | | ● Leading gigabit networks |
Customer commitments |
| Units |
| H1 FY22 |
| H1 FY21 |
Best connectivity products & services |
|
|
|
|
|
|
Europe mobile contract customers1 |
| million |
| 66.0 |
| 65.0 |
Europe broadband customers1 |
| million |
| 25.6 |
| 25.4 |
Europe Consumer converged customers1 |
| million |
| 8.3 |
| 7.6 |
Europe mobile contract customer churn |
| % |
| 13.1 |
| 12.9 |
Africa mobile customers2 |
| million |
| 186.0 |
| 170.9 |
Africa data users2 |
| million |
| 87.6 |
| 84.5 |
Business service revenue growth* |
| % |
| 1.2 |
| (1.5) |
Leading innovation in digital services |
|
|
|
|
|
|
Europe TV subscribers1 |
| million |
| 22.2 |
| 22.3 |
IoT SIM connections |
| million |
| 136 |
| 112 |
Africa M-Pesa customers2 |
| million |
| 49.0 |
| 45.3 |
Africa M-Pesa transaction volume2 |
| billion |
| 9.3 |
| 6.8 |
Outstanding digital experiences |
|
|
|
|
|
|
Digital channel sales mix3 4 |
| % |
| 24 |
| 22 |
End-to-end TOBi completion rate5 6 |
| % |
| 41 |
| 33 |
1. Including VodafoneZiggo | 2. Africa including Safaricom | 3. Based on Germany, Italy, UK, Spain only | 4. Figure presented in H1 FY21 column reflects Europe digital channel sales mix in Q2 FY21 as the mix in Q1 was impacted by retail restrictions due do COVID-19 | 5. Group excluding Egypt | 6. Defined as percentage of total customer contacts resolved without human interaction through TOBi
Enabling strategies |
| Units |
| H1 FY22 |
| H1 FY21 |
Leading gigabit networks | | |
|
|
|
|
5G available in European cities1 |
| # |
| 244 |
| 127 |
Europe on-net gigabit capable connections1 |
| million |
| 46.5 |
| 39.4 |
Europe on-net NGN broadband penetration1 |
| % |
| 30 |
| 30 |
Simplified & most efficient operator | | |
| H1 FY22 |
| FY21 |
Europe markets where 3G switched off1 |
| # |
| 4 |
| 1 |
1. Including VodafoneZiggo
5
Vodafone Group Plc ⫶ H1 FY22 results
2 ⫶ Clear near-term operational priorities
In addition to the ongoing systematic execution of the second phase of our strategy, we have three operational areas that are currently being prioritised:
| A. | strengthen commercial momentum in Germany; |
| B. | accelerate operational transformation in Spain; and |
| C. | position Vodafone Business to maximise EU recovery funding opportunities. |
A ⫶ Strengthen commercial momentum in Germany
Germany is both the largest connectivity market in Europe and Vodafone‘s biggest market. Germany has benefited from a more rational competitive environment compared to many other markets in Europe and is the only top five European market to have experienced ARPU growth for both mobile and fixed connectivity since 2017. Alongside the scale and rational market structure, Germany also presents the most significant converged connectivity opportunity of our larger markets, with only 18% of our mobile customers taking a fixed connectivity product, compared with 54% in Spain. Similarly, only 14% of our fixed connectivity customers in Germany take a mobile connectivity product, compared with 90% in Spain.
We are focused on taking advantage of this significant opportunity through the structural advantage we have created with our fixed connectivity services. Following the acquisition and commercial integration of the former Unitymedia assets, we can now reach over 23 million homes in Germany with 1 gigabit per second fixed line connectivity. Gigabit availability will also be rolled out to a further 1 million homes by the end of the financial year. Beyond this, we have clear upgrade plans for our hybrid fibre cable network that include a mix of demand-driven node-splitting – bringing fibre closer to our customers – and options for upgrading the last stretch of cable into customers’ homes.
Compared with other markets, we have a more traditional sales mix with respect to retail, online and call centres in Germany. This has contributed to a lower rate of winning new customers as our traditional retail channels have been significantly impacted by COVID-19, with lockdowns and lower footfall. As retail footfall recovers, we are focused on strengthening our commercial momentum through stronger marketing campaigns, enhanced targeting of existing customers with attractive cross-selling and up-selling products, and further leveraging of the shared Group capabilities we have created for effective digital marketing.
B ⫶ Accelerate operational transformation in Spain
Over the last four years, the competitive environment in Spain has intensified as the number of customer-facing brands has increased from around 60 in 2017 to almost 80 in 2021. This has resulted in significant price deflation, with mobile contract ARPU across the market declining by 16% since 2017. Given the relatively high operating leverage within the sector, this price deflation has had a significant impact on our financial performance in Spain.
Following a series of measures conducted between FY19 and FY21, we have stabilised our financial performance and are working to further support returns. We have recently concluded a restructuring plan, mainly affecting owned retail stores, as a part of our operational transformation and announced a reorganisation of the local executive committee, with new operational units focused on competitiveness and digitalisation in the Consumer segment.
Given the market backdrop, we have also conducted extensive interaction with policy makers and regulators at both the national and European level. We are pleased that a series of spectrum and taxation reforms are being pursued, including:
| ● | a well-structured spectrum auction, with an outcome below European benchmark levels; |
| ● | longer duration for new licences with an extension of 20 years after the initial 20-year term; |
| ● | the consideration of the reduction of spectrum licence fees; and |
| ● | the consideration of the cessation of television taxation for network operators. |
6
Vodafone Group Plc ⫶ H1 FY22 results
In addition to these improvements, we are also actively pursuing further market structure opportunities including enhancing strategic network partnerships and in-market consolidation. We are also working to maximise the opportunities available for Vodafone Business from EU recovery funding programmes, which will be particularly significant in Spain.
C ⫶ Position Vodafone Business to maximise EU funding opportunities
The European Commission has launched a series of funding programmes with €750 billion available under the banner “NextGenerationEU”. These include the Recovery & Resilience facility, which combines €360 billion of loans and €312.5 billion of grants available to European Union Member States. Of these grants, approximately 70% will be allocated to European Union Member States in which Vodafone has an operating presence. These grants are planned to be 70% committed by the end of 2022. The range of funding presents a direct and indirect opportunity given that at least 20% of the total funding is planned to support the European Commission’s digital transformation agenda. We are tracking the progress of funding applications and approvals at the project level. The table below summarises the current funding status by country.
Country |
| Total funds |
| Digital allocation |
| Green allocation |
| Released so far | ||
Germany |
| € | 25.6bn grants |
| 52 | % | 42 | % | € | 2bn |
Italy |
| € | 68.9bn grants + €122.6bn loans |
| 25 | % | 37 | % | € | 25bn |
Spain |
| € | 69.5bn grants |
| 28 | % | 40 | % | € | 9bn |
Greece |
| € | 17.8bn grants + €12.7bn loans |
| 23 | % | 38 | % | € | 4bn |
Portugal |
| € | 13.9bn grants + €2.7bn loans |
| 22 | % | 38 | % | € | 2bn |
Czechia |
| € | 7bn |
| 22 | % | 42 | % | € | 1bn |
Ireland |
| € | 1bn |
| 32 | % | 42 | % | | None |
Romania |
| € | 14.2bn grants + €14.9bn loans |
| 21 | % | 41 | % | | None |
In order to maximise our access to these opportunities, we have mobilised a dedicated cross-functional team comprising product specialists, business development executives and experienced regulatory affairs professionals. Our plans are focused on five core cross-market opportunities: digitalisation of SMEs; eHealth investments; smart cities; digital initiatives for a greener Europe; and connected education. We have an attractive and relevant suite of products and services designed to access funding opportunities available and further detailed information on the opportunity and our progress will be outlined in a dedicated virtual investor briefing in 2022.
7
Vodafone Group Plc ⫶ H1 FY22 results
3 ⫶ Strategic opportunities through portfolio optimisation
Following the launch of the second phase of our strategy to be the new generation connectivity and digital services provider for Europe and Africa, we conducted an extensive portfolio review to assess the optimal structure to deliver our strategy.
Historically, our Group has been managed as a combination of geographically focused operating companies, which draw from a range of shared services. Over the last three years, we have been evolving our business model and organisational structures to operate in a more streamlined and agile matrix. We continue to recognise the importance of local, in-market scale and capabilities, but also strive to generate further value from the scale and breadth of our footprint.
Increasingly, we are managing our Group through four group-wide operational layers:
| A. | infrastructure assets; |
| B. | shared operations; |
| C. | growth platforms; and |
| D. | retail & customer service. |
A ⫶ Infrastructure assets
Our converged connectivity infrastructure is largely managed through three components: passive mobile, active mobile and fixed.
Our passive mobile infrastructure is now primarily held and operated through Vantage Towers’ network of 82,000 towers across ten European markets. The Vantage Towers IPO was completed successfully in March 2021 and the company has a current market capitalisation of €15 billion. We continue to own and operate our active mobile infrastructure in Europe directly, which includes 135,000 radios. In addition, our African operations operate a further 41,000 radios and 22,000 towers. We reached network sharing partnerships in 7 markets between FY19 and FY21 and are committed to enhancing asset utilisation through network sharing.
Our fixed connectivity infrastructure comprises consumer connectivity networks, mobile backhaul, and international terrestrial and submarine connections. Across the Group, our fixed connectivity networks include over 1.1 million kilometres of fibre infrastructure and more than 0.5 million kilometres of coaxial cable. We are actively exploring further opportunities for our fixed network assets to improve asset utilisation.
B ⫶ Shared operations
The connectivity value chain involves a high degree of repeatable processes across all our markets, such as procurement, network deployment, network operations, sales activities, customer support operations, and billing and transaction processing. As one of the largest global connectivity providers, we have a significant opportunity to standardise processes across markets, relocate operations to lower cost centres of excellence and apply automation at scale, delivering best-in-class efficiency levels.
We have consolidated our supplier management function into a single, centralised procurement company.
We manage our IT operations, network operating centres and back-office activities through three Shared Service Centres (‘_VOIS’) in Egypt, India and Eastern Europe. Approximately 30% of the Group’s headcount works in _VOIS and other shared operations, and over the last three years we have automated over 5,500 roles.
Vodafone Roaming Services manages our global roaming relationships with other operators and our Partner Markets team works with 30 local operators in building strategic alliances and extending our reach into different markets. These functions generate over €250 million revenue and cost savings annually.
Last year, we simplified our operating model and initiated one of our largest ever organisational changes to accelerate our transformation into a new generation connectivity and digital services provider for Europe and Africa. As part of this, we have moved to a unified technology operating model with one integrated European network and IT/digital team to drive efficiency, increase speed of execution, standardise key processes, and codify the best solutions for implementation across all of our markets.
8
Vodafone Group Plc ⫶ H1 FY22 results
We have made good progress over the last three years, however there is still scope for further efficiencies, particularly with respect to network operations and digital services platforms.
C ⫶ Growth platforms
Over the last few years, we have invested in digital capabilities and scalable technology to build three digital growth platforms.
| 1. | Leading digital consumer services ⫶ Complementary digital services play a crucial role in deepening relationships with consumers, in addition to having attractive economic models. We now have over 50 million customers subscribing to a digital service, which leads to higher ARPU, improved distribution efficiency, higher NPS and lower churn. We are focused on further developing our strong positions in Consumer IoT, Vodafone TV, home services, device lifecycle services and loyalty applications. |
| 2. | The global IoT connectivity leader ⫶ Our IoT service was established in 2008 and has grown to be the largest IoT connectivity provider globally, with 136 million devices connected. Vodafone IoT has been recognised as a leader in managed connectivity by Gartner every year since 2014. Vodafone IoT currently generates €0.9 billion annual revenue with double-digit revenue growth. |
| 3. | The leading FinTech in Africa ⫶ Since formation in 2007 as a money transfer service, our financial services businesses in Africa – encompassing Vodacom Group, Safaricom and Vodafone Egypt – have collectively grown to be the leading FinTech in Africa. Vodacom Group and Safaricom together have 57 million customers, with M-Pesa transaction value of US$26.8 billion per month in the first six months of FY22. Our African FinTech business has significant growth opportunities through penetration growth in existing markets, expanding into new markets and scaling new products, including the recent launch of the VodaPay ‘super-app’ in South Africa. The Vodacom Group has clear financial ambitions to grow its new services, which include financial services, at or above 20% CAGR. |
We will continue to incubate our three digital growth platforms and ensure we capture the opportunities available. We will also regularly assess ownership structures and our own financial reporting to maximise visibility and optionality.
D ⫶ Retail & customer service
Our retail and customer service operations are currently organised in three segments summarised in the table below.
|
| Europe Consumer |
| Africa Consumer |
| Business | |||
Annualised H1 FY22 | | Vodafone | | Vodacom | | Vodafone Business | |||
Service Revenue |
| € | 20 billion |
| € | 6 billion |
| € | 10 billion |
Market capitalisation |
|
| — |
| € | 15 billion |
|
| — |
| 1. | Europe Consumer ⫶ In Europe, we are a leading converged connectivity provider with 8.3 million converged customers, 114 million mobile connections, 143 million marketable NGN broadband homes, and we have launched 5G in 244 cities in 10 markets in Europe. |
| 2. | Africa Consumer ⫶ In Africa, we are the leading provider of mobile data and mobile payment services. We have 186 million mobile customers in 8 markets and we are the leading mobile connectivity provider by revenue market share in 7 markets. Our M-Pesa financial services platform processed over 9 billion transactions during the first six months of FY22 and has 49 million customers. |
| 3. | Vodafone Business ⫶ Vodafone Business is a key growth driver for the Group, representing 27% of service revenue in the period. We operate in attractive markets with a compelling structural opportunity. Our strategy is grounded in our purpose to connect for a better future and is focused on three core elements. Firstly, to be the trusted partner for small and medium-sized enterprises. Secondly, to be the gigabit connectivity provider of choice to large enterprises. Thirdly, to be the leading end-to-end provider of IoT solutions for every organisation. |
9
Vodafone Group Plc ⫶ H1 FY22 results
Alongside the active optimisation of our portfolio over the medium-term, we have three initial priority areas to enable our strategy and realise value for our shareholders:
| I. | actively pursue opportunities for Vantage Towers; |
| II. | actively pursue in-market consolidation opportunities in major European markets; and |
| III. | integrate Vodafone Egypt into Vodacom to create a pan-African powerhouse. |
I ⫶ Vantage Towers
By separating and listing Vantage Towers at pace, it is now in a prime position to drive consolidation within the European sector. We are actively pursuing accretive bolt-on transactions and industrial merger opportunities. We expect to deconsolidate Vantage Towers from the Group and monetise part of our holding over time, reserving strategic flexibility for our mobile business.
II ⫶ European in-market consolidation
Over the last decade, the performance of the European telecommunications industry has been weaker than other regions, which market commentators largely attribute to its regulatory environment. European regulation has been driving increasingly fragmented market structures compared with North America or Asia. Sustained price deflation and the inability to derive cost synergies from scale have impacted sector returns, which in turn limits the sustainability of capital investment in critical national infrastructure. As noted above, Germany has benefited from a more sustainable competitive environment compared to many other markets in Europe and those markets would benefit from in-market consolidation. We are pragmatically pursuing value accretive in-market consolidation to deliver sustainable market structures in our major European markets.
III ⫶ Vodafone Egypt
On 10 November, we announced that we have agreed to transfer our 55% shareholding in Vodafone Egypt to Vodacom Group, our African subsidiary, for €2,722 million on a debt free, cash free basis. Based on Vodafone’s 55% share of net debt in Vodafone Egypt as at 30 September 2021, the total purchase consideration is €2,365 million. Approximately 80% of the consideration (€1,892 million) will be settled by the issuance of 242 million new ordinary Vodacom Group shares to Vodafone Group. As a result, Vodafone Group’s ownership in Vodacom Group will increase from 60.5% to 65.1%. The remaining 20% of the consideration (€473 million) will be settled in cash. The transaction is subject to a number of conditions but is expected to close before 31 March 2022.
The integration of Vodafone Egypt into Vodacom follows a series of other portfolio simplification transactions which have helped Vodacom become a pan-African connectivity and financial services powerhouse. Including Ethiopia, Vodacom will operate in markets with combined populations over more than 500 million people and including Egypt, Vodacom currently has number 1 market positions in seven countries. We will move at pace with the imminent integration of Vodafone Egypt, which will benefit from closer cooperation with Vodacom, enabling it to accelerate growth in financial services and IoT.
10
Vodafone Group Plc ⫶ H1 FY22 results
Our purpose ⫶ We connect for a better future
We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and provided a full update in our FY21 Annual Report. We have also made further progress with respect to our purpose strategy during the first half of FY22.
Europe’s largest network, powered by 100% renewable electricity
From July 2021, our entire European operations – including mobile and fixed networks, data centres, retail and offices – are 100% powered by electricity from renewable sources. This marks a key step towards our goal of reducing our own carbon emissions to ‘net zero’ by 2030 and across our entire value chain by 2040.
Eco Rating
We have announced that the pan-industry Eco Rating labelling scheme we launched with four other major European operators in May is set to roll out globally. The announcement paves the way for Eco Rating to become a global harmonised labelling system, giving consumers everywhere consistent and transparent insight on the environmental impact of new smartphones. The Eco Rating scheme was initially launched in 24 European countries and has since been rolled out in Brazil and by Vodacom in South Africa. Eco Rating is now expected to launch in other countries including Argentina, Chile, Colombia, Ecuador, Mexico, Peru and Uruguay. More than 150 mobile phones from 15 manufacturers are now assessed by the Eco Rating initiative, nearly doubling the range of devices rated at launch.
Eco-SIM cards
We have recently announced that we are launching Eco-SIM cards made from recycled plastic as part of our commitment to reduce our impact on the environment. Starting from October 2021, we are providing customers with new Eco-SIMs in the half-sized format made from recycled plastic, progressively replacing SIM cards that are currently made from new plastic. Eco-SIM will be rolled out across all of our European markets, as well as in Egypt, Turkey and South Africa. The introduction of Eco-SIM – in the same material-efficient, half-sized card format – further eliminates the need for 320 tonnes of virgin plastic to be manufactured each year. This has the potential to save an additional 1,280 tonnes of CO2e per year from not manufacturing new plastic to be used for the cards.
Vodafone Spirit
Spirit Beat is our bi-annual employee survey that measures progress on how people experience our culture (Vodafone Spirit), engagement, and connection to our purpose. It also includes a nudge engine which provides personalised coaching tips to employees based on results.
The results from the latest survey conducted in September show stability against the backdrop of a challenging environment and unprecedented change. Our employee engagement index remained high at 73 (January 2021: 74) and 93% of employees feel that their daily work contributes significantly to Vodafone’s purpose (“We connect for a better future”). As we reported in our FY21 Annual report, managers who demonstrate Vodafone Spirit continue to create a higher Spirit Index and employee engagement scores, compared to managers who do not.
As part of our future ready framework, we have introduced further flexibility to our working practices and set global standards for new hybrid ways of working. Results from the latest survey show that those who are hybrid-working feel more connected to Spirit and purpose and are also more engaged. Our first quarterly Global Spirit day also took place in October and was designed to provide dedicated space for personal growth, wellbeing, and connection.
11
Vodafone Group Plc ⫶ H1 FY22 results
Financial performance ⫶ Sustainable growth in both European and African markets
| ● | Group revenue increased by 5.0% to €22.5 billion, driven by a return to growth of service revenue, strong recovery in handset sales following COVID disruption in the previous year and favourable foreign exchange movements during the period |
| ● | Operating profit decreased by 21.9% as the prior year included a gain on disposal of €1.0 billion |
Group financial performance
|
| H1 FY221 |
| H1 FY212 |
| Reported |
| | €m | | €m | | change % |
Revenue |
| 22,489 |
| 21,427 |
| 5.0 |
- Service revenue |
| 19,010 |
| 18,418 |
| 3.2 |
- Other revenue |
| 3,479 |
| 3,009 | | |
| | | | | | |
Operating profit |
| 2,620 |
| 3,354 |
| (21.9) |
Investment income |
| 129 |
| 183 | | |
Financing costs |
| (1,473) |
| (1,610) | | |
Profit before taxation |
| 1,276 |
| 1,927 | | |
Income tax credit/(expense) |
| 1 |
| (459) | | |
Profit for the financial period |
| 1,277 |
| 1,468 | | |
| | | | | | |
Attributable to: | | | | | | |
- Owners of the parent |
| 996 |
| 1,269 | | |
- Non-controlled interests |
| 281 |
| 199 | | |
Profit for the financial period |
| 1,277 |
| 1,468 | | |
| | | | | | |
Basic earnings per share |
| 3.40 | c | 4.30 | c | |
Notes:
| 1. | The H1 FY22 results reflect average foreign exchange rates of €1:£0.86, €1:INR 88.11, €1:ZAR 17.13, €1:TRY 10.09 and €1: EGP 18.70. |
| 2. | In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had terminated. Consequently, the held for sale classification was reversed resulting in the following changes to the previously published results for the six months ended 30 September 2020: Operating profit has declined by €118 million, Profit before tax has declined by €118 million, Profit for the financial period has declined by €87 million, Basic earnings per share declined by 0.15 eurocents. |
12
Vodafone Group Plc ⫶ H1 FY22 results
Organic growth All amounts marked with an “*” in the commentary represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21 results for Vantage Towers have been adjusted to reflect a full year of operation on a proforma basis in order to be comparable to FY22. Organic growth figures are non-GAAP measures. See non-GAAP measures on page 54 for more information. Segmental reporting Following the IPO of Vantage Towers A.G. in March 2021, the business is a new reporting segment for the year ending 31 March 2022 (‘FY22’). Comparative information for the year ended 31 March 2021 has not been re-presented. Total revenue is unaffected because charges from Vantage Towers A.G. to operating companies are eliminated on consolidation. The segmental results of Vantage Towers A.G. include the contribution from Cornerstone Technologies Infrastructure Limited as a joint operation with Telefonica in the UK. Adjusted EBITDAaL Adjusted EBITDA is now referred to as Adjusted EBITDAaL for FY22, with no change in the underlying definition. Adjusted EBITDAaL is our segment performance measure. Adjusted EBITDAaL is operating profit after depreciation on lease-related right of use assets and interest on leases but excluding depreciation, amortisation and gains/losses on disposal of owned fixed assets and excluding share of results in equity accounted associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other income and expense and significant items that are not considered by management to be reflective of underlying performance. |
Geographic performance summary
| | | | | | | | | | Other | | | | Other | | Vantage | | Common | | Elimi- | | |
H1 FY22 |
| Germany |
| Italy |
| UK |
| Spain |
| Europe |
| Vodacom |
| Markets |
| Towers |
| Functions1 |
| nations |
| Group |
Total revenue (€m) |
| 6,447 |
| 2,507 |
| 3,161 |
| 2,090 |
| 2,810 |
| 2,928 |
| 1,958 |
| 611 |
| 707 |
| (730) |
| 22,489 |
Service revenue (€m) |
| 5,777 |
| 2,187 |
| 2,521 |
| 1,866 |
| 2,502 |
| 2,271 |
| 1,752 |
| — |
| 252 |
| (118) |
| 19,010 |
Adjusted EBITDAaL (€m) |
| 2,892 |
| 917 |
| 638 |
| 445 |
| 836 |
| 1,062 |
| 683 |
| 305 |
| (213) |
| — | | |
Adjusted EBITDAaL margin (%) |
| 44.9 | % | 36.6 | % | 20.2 | % | 21.3 | % | 29.8 | % | 36.3 | % | 34.9 | % | 49.9 | % | | | | | |
| | FY21 | | FY22 | ||||||||||||||||
Service revenue growth % |
| Q1 |
| Q2 |
| H1 |
| Q3 |
| Q4 |
| H2 |
| Total |
| Q1 |
| Q2 |
| H1 |
Germany |
| 25.4 |
| 6.9 |
| 15.4 |
| 1.0 |
| 1.2 |
| 1.1 |
| 7.7 |
| 1.1 |
| 0.8 |
| 0.9 |
Italy |
| (6.5) |
| (7.9) |
| (7.2) |
| (7.8) |
| (8.8) |
| (8.3) |
| (7.8) |
| (3.9) |
| (1.6) |
| (2.8) |
UK |
| (3.2) |
| (0.8) |
| (2.0) |
| (5.1) |
| (4.4) |
| (4.7) |
| (3.4) |
| 5.3 |
| 4.7 |
| 5.0 |
Spain |
| (6.9) |
| (1.8) |
| (4.4) |
| (0.9) |
| (2.2) |
| (1.5) |
| (3.0) |
| 0.5 |
| (2.0) |
| (0.7) |
Other Europe |
| 3.8 |
| (1.9) |
| 0.8 |
| (4.0) |
| — |
| (2.0) |
| (0.6) |
| 4.9 |
| 2.7 |
| 3.8 |
Vodacom |
| (11.9) |
| (12.3) |
| (12.1) |
| (9.1) |
| (1.2) |
| (5.3) |
| (8.7) |
| 18.5 |
| 14.6 |
| 16.5 |
Other Markets |
| (18.9) |
| (15.1) |
| (17.0) |
| (9.5) |
| (6.1) |
| (7.8) |
| (12.8) |
| (1.3) |
| 10.0 |
| 4.3 |
Vantage Towers |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Group |
| 1.3 |
| (2.5) |
| (0.7) |
| (3.9) |
| (2.4) |
| (3.1) |
| (1.9) |
| 3.1 |
| 3.4 |
| 3.2 |
| | FY21 | | FY22 | ||||||||||||||||
Organic service revenue growth %*2 |
| Q1 |
| Q2 |
| H1 |
| Q3 |
| Q4 |
| H2 |
| Total |
| Q1 |
| Q2 |
| H1 |
Germany |
| – |
| (0.1) |
| (0.1) |
| 1.0 |
| 1.2 |
| 1.1 |
| 0.5 |
| 1.4 |
| 1.0 |
| 1.2 |
Italy |
| (6.5) |
| (8.0) |
| (7.2) |
| (7.8) |
| (7.8) |
| (7.8) |
| (7.5) |
| (3.6) |
| (1.4) |
| (2.5) |
UK |
| (1.9) |
| (0.5) |
| (1.2) |
| (0.4) |
| (0.6) |
| (0.5) |
| (0.8) |
| 2.5 |
| 0.6 |
| 1.2 |
Spain |
| (6.9) |
| (1.8) |
| (4.4) |
| (1.1) |
| (1.3) |
| (1.2) |
| (2.8) |
| 0.8 |
| (1.9) |
| (0.6) |
Other Europe |
| (3.1) |
| (1.8) |
| (2.4) |
| (0.7) |
| (0.2) |
| (0.4) |
| (1.4) |
| 4.2 |
| 2.4 |
| 3.3 |
Vodacom |
| 1.5 |
| 3.2 |
| 2.3 |
| 3.3 |
| 7.3 |
| 5.3 |
| 3.9 |
| 7.9 |
| 3.1 |
| 5.4 |
Other Markets |
| 9.1 |
| 9.0 |
| 9.0 |
| 12.3 |
| 13.1 |
| 12.7 |
| 10.8 |
| 18.4 |
| 19.7 |
| 19.1 |
Vantage Towers |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Group |
| (1.3) |
| (0.4) |
| (0.8) |
| 0.4 |
| 0.8 |
| 0.6 |
| (0.1) |
| 3.3 |
| 2.4 |
| 2.8 |
Notes:
| 1. | Common Functions Adjusted EBITDAaL includes a charge in relation to the impairment of prior year receivables. |
| 2. | Organic service revenue growth is a non-GAAP measure. See page 54 for more information. |
13
Vodafone Group Plc ⫶ H1 FY22 results
Germany ⫶ 30% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 6,447 |
| 6,371 |
| 1.2 |
|
|
- Service revenue |
| 5,777 |
| 5,723 |
| 0.9 |
| 1.2 |
- Other revenue |
| 670 |
| 648 |
|
|
|
|
Adjusted EBITDAaL |
| 2,892 |
| 2,844 |
| 1.7 |
| 7.7 |
Adjusted EBITDAaL margin |
| 44.9 | % | 44.6 | % |
|
|
|
Reported total revenue increased by 1.2% to €6.4 billion, supported by service revenue growth.
On an organic basis, service revenue grew by 1.2%* (Q1: 1.4%*, Q2: 1.0%*), reflecting a higher customer base, broadband ARPU growth, and higher roaming and visitor revenue, which was partially offset by lower variable call usage revenue. Retail service revenue grew by 1.7%* (Q1: 1.9%*, Q2: 1.5%*).
Fixed service revenue grew by 0.9%* (Q1: 0.6%*, Q2: 1.2%*) supported by ARPU and customer base growth. The sequential improvement in trends was primarily driven by the lapping of the variable usage revenue peak in Q1 in the prior year. Our commercial momentum started to improve during the second quarter, reflecting a gradual recovery in retail footfall, however it is still below pre-pandemic levels. We added 86,000 cable customers during the period, including 38,000 migrations from legacy DSL broadband. Half of our cable broadband customers now subscribe to speeds of at least 250Mbps, and gigabit speeds are available to 23.1 million households across our hybrid fibre cable network.
Our TV customer base declined by 101,000, as reduced retail activity during the COVID-19 pandemic led to fewer gross customer additions. Our converged propositions, led by ‘GigaKombi’, allow customers to combine their mobile, landline, broadband and TV subscriptions for one monthly fee. During the period, we accelerated convergence penetration following a successful campaign and our converged customer base increased by 330,000 to almost 2 million Consumer converged accounts.
Mobile service revenue increased by 1.5%* (Q1: 2.3%*, Q2: 0.8%*), reflecting customer base growth, and higher roaming and visitor revenue. The slowdown in quarterly trends was attributable to the delayed retail recovery impacting commercial performance, and a reduction in mobile termination rates which took effect as of July. We added 54,000 contract customers during the period and contract churn improved by 1.1 percentage points year-on-year to 11.0%. In June, we successfully launched our digital-only second brand, SIMon mobile. We added a further 3.4 million IoT connections during the period, supported by strong demand from the automotive sector.
Adjusted EBITDAaL grew by 7.7%*, supported by synergy delivery, ongoing cost efficiencies, higher service revenue, as well as some small settlements, partially offset by higher publicity costs. The Adjusted EBITDAaL margin was 2.7* percentage points higher year-on-year at 44.9%.
We continue to make strong progress in integrating the acquired Unitymedia assets and are executing faster than planned with respect to our cost and capital expenditure synergy targets.
We switched off our 3G network on 1 July 2021, with spectrum re-assigned to increase the capacity, speed and coverage of our 4G networks. Our 5G network is now available to more than 35 million people. We launched Europe’s first 5G standalone network in April. Standalone 5G enables higher speeds, enhanced reliability and ultra-low latency, in addition to using 20% less energy on customers’ devices.
14
Vodafone Group Plc ⫶ H1 FY22 results
Italy ⫶ 12% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 2,507 |
| 2,506 |
| — |
|
|
- Service revenue |
| 2,187 |
| 2,249 |
| (2.8) |
| (2.5) |
- Other revenue |
| 320 |
| 257 |
|
|
|
|
Adjusted EBITDAaL |
| 917 |
| 800 |
| 14.6 |
| 14.7 |
Adjusted EBITDAaL margin |
| 36.6 | % | 31.9 | % |
|
|
|
Reported total revenue was stable at €2.5 billion as lower service revenue was offset by higher equipment revenue.
On an organic basis, service revenue declined by 2.5%* (Q1: -3.6%*, Q2: -1.4%*) as a result of continued price pressure. The improvement in quarterly trends was supported by the migration of PostePay MVNO customers onto our network, which completed in early August.
Mobile service revenue declined by 3.0%* (Q1: -4.0%*, Q2: -1.9%*) as greater competition in the value segment and a lower active prepaid customer base year-on-year were partly offset by targeted pricing actions. Market mobile number portability volumes remained below prior year period levels, despite the easing of national lockdown measures. The quarter-on-quarter improvement in service revenue was supported by the positive contribution from PostePay MVNO customer migrations onto our network. Our second brand ‘ho.’ continued to grow, with 201,000 net additions supported by our best-in-class net promoter score, and now has 2.7 million customers.
Fixed service revenue declined by 1.3%* (Q1: -2.7%*, Q2: 0.1%*) driven by a shift in consumer demand towards fixed-wireless access connectivity, which was partially offset by higher Business activity compared to the prior year. We added 33,000 fixed-wireless access customers during the period, which are included in our mobile customer base. We now have over 3 million broadband customers, and 48% of our broadband base is converged. Our total Consumer converged customer base is 1.2 million, an increase of 41,000 during the period. Through our own next generation network and partnership with Open Fiber, our broadband services are now available to 8.6 million households. We also cover over 4 million households with fixed-wireless access, offering speeds of up to 100Mbps.
Adjusted EBITDAaL increased by 14.7%*, reflecting a 13.1 percentage point benefit from a €105 million legal settlement, and also supported by lower bad debt provisions. The Adjusted EBITDAaL margin was 4.6* percentage points higher year-on-year at 36.6%.
15
Vodafone Group Plc ⫶ H1 FY22 results
UK ⫶ 13% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 3,161 |
| 2,983 |
| 6.0 |
|
|
- Service revenue |
| 2,521 |
| 2,401 |
| 5.0 |
| 1.2 |
- Other revenue |
| 640 |
| 582 |
|
|
|
|
Adjusted EBITDAaL |
| 638 |
| 636 |
| 0.3 |
| 1.8 |
Adjusted EBITDAaL margin |
| 20.2 | % | 21.3 | % |
|
|
|
Reported total revenue increased by 6.0% to €3.2 billion, due to higher service revenue and equipment revenue, as well as an appreciation of pound sterling versus the euro.
On an organic basis, service revenue grew by 1.2%* (Q1: 2.5%*, Q2: 0.6%*), driven by a strong performance in the Consumer segment, and supported by higher roaming and visitor revenue, partially offset by a reduction in mobile termination rates.
Mobile service revenue grew by 1.3%* (Q1: 2.7%*, Q2: 1.0%*) driven by strong commercial momentum in Consumer, partially offset by post-pandemic slowdown in Business connections, as well as ARPU pressure on re-contracting multinational corporations. We added 149,000 mobile contract customers, supported by our new proposition ‘Vodafone EVO’ which offers customers a combination of flexible contracts, trade-in options, and early upgrades. Our digital sales now account for 33% of total sales. Contract churn remained broadly stable year-on-year at 12.5%. Our digital sub-brand ‘VOXI’ also continued to grow strongly, with 54,000 customers added in the period. We also announced an exclusive retail partnership with the Dixons Carphone Group, covering 300 stores and digital channels, with improved terms compared to our previous arrangement.
Fixed service revenue grew by 0.9%* (Q1: 2.1%*, Q2: -0.3%*) and was impacted by a tougher comparative as delayed Business fixed project work resumed in Q2 last year. Performance in the current period was also driven by the decision to end a large but unprofitable multinational contract, and a reseller entering into administration. Our commercial momentum in Consumer remained strong with 51,000 net customer additions during the period, with good demand for our Vodafone ‘Pro Broadband’ product. We now have almost 1 million broadband customers, of which 482,000 are converged.
Adjusted EBITDAaL increased by 1.8%*, as growth in service revenue, lower bad debt provisions, and continued strong cost control were partially offset by higher publicity costs. Our Adjusted EBITDAaL margin was stable* year-on-year at 20.2%.
In November 2021, we announced the expansion of our long-term strategic partnership agreement with CityFibre. The extended wholesale agreement in conjunction with our existing partnership with Openreach, will enable us to reach 8 million households with full fibre broadband by Spring 2022.
16
Vodafone Group Plc ⫶ H1 FY22 results
Spain ⫶ 10% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 2,090 |
| 2,050 |
| 2.0 |
|
|
- Service revenue |
| 1,866 |
| 1,880 |
| (0.7) |
| (0.6) |
- Other revenue |
| 224 |
| 170 |
|
|
|
|
Adjusted EBITDAaL |
| 445 |
| 488 |
| (8.8) |
| (0.6) |
Adjusted EBITDAaL margin |
| 21.3 | % | 23.8 | % |
|
|
|
Reported total revenue increased by 2.0% to €2.1 billion, primarily due to higher equipment revenue.
On an organic basis, service revenue declined by 0.6%* (Q1: 0.8%*, Q2 -1.9%*) driven by ongoing continued price competition in the value segment. The quarterly trend was largely driven by stronger prior year comparatives, reflecting the impact of easing COVID-19 restrictions in Q2 of the prior year.
The market remained highly competitive in the value segment. In mobile, we grew our contract customer base by 67,000, supported by strong public sector demand. In May, we announced price increases applying to the main Vodafone brand, effective across our customer base from 15 July 2021. Mobile contract churn increased by 3.9 percentage points year-on-year to 20.6% reflecting exceptionally low churn in the prior Q1 period due to portability restrictions, as well as the impact of the price increases implemented this year. Our second brand ‘Lowi’ added 144,000 customers during the period and now has a total base of 1.3 million.
Our broadband customer base decreased by 82,000 as a result of higher competitive intensity during the period and our price increases. Our TV customer base decreased by 38,000 as we concluded a promotion. We have recently renewed our exclusive agreement with HBO Max, and through our partnerships with other content providers such as Disney, we have the most extensive library of movies and TV series in the market.
Adjusted EBITDAaL declined by 0.6%* and the Adjusted EBITDAaL margin was 0.6* percentage points lower year-on-year at 21.3%. The marginal decrease in EBITDAaL reflects higher publicity and commercial content costs, partially offset by further cost reduction and lower bad debt provisions.
On 15 September, we announced a restructuring plan, mainly affecting owned retail stores, as part of our operational transformation. At the same time, we have committed to create new jobs in digital and technology. Negotiations were concluded in October. We have also announced a reorganisation of the local executive committee, with new operational units focused on competitiveness and digitalisation in the consumer business, as well as expanding our portfolio of products and services beyond connectivity.
17
Vodafone Group Plc ⫶ H1 FY22 results
Other Europe ⫶ 13% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 2,810 |
| 2,720 |
| 3.3 |
|
|
- Service revenue |
| 2,502 |
| 2,411 |
| 3.8 |
| 3.3 |
- Other revenue |
| 308 |
| 309 |
|
|
|
|
Adjusted EBITDAaL |
| 836 |
| 870 |
| (3.9) |
| 4.5 |
Adjusted EBITDAaL margin |
| 29.8 | % | 32.0 | % |
|
|
|
Total revenue increased by 3.3% to €2.8 billion, primarily reflecting service revenue growth, also supported by the appreciation of local currencies versus the euro.
On an organic basis, service revenue increased by 3.3%* (Q1: 4.2%*, Q2: 2.4%*), with all markets growing during the period. The growth in service revenue was supported by higher roaming and visitor revenue, partially offset by a reduction in mobile termination rates in Ireland, Czech Republic and Romania. The quarterly trend was due to stronger prior year comparatives, reflecting the impact of easing COVID-19 restrictions and high prepaid activity in Q2 in the prior year.
In Portugal, service revenue grew due to customer base growth and higher mobile ARPU. During the period, we added 66,000 mobile contract customers and 33,000 fixed broadband customers. In October, we announced that Vodafone Portugal had acquired 90MHz of 3,600MHz and 2x10MHz of 700MHz spectrum, with a 20-year licence through to 2041. The spectrum will enable us to significantly expand network capacity to meet growing demand for reliable, high quality voice and data services.
In Ireland, service revenue increased reflecting higher visitor revenue, supported by good mobile contract customer growth as competitive intensity stabilised. During the period, our mobile contract customer base increased by 40,000 and mobile contract churn improved 0.3 percentage point year-on-year to 8.2%.
Service revenue in Greece increased reflecting higher roaming and visitor revenue as international tourism grew year-on-year. During the period, we added 25,000 mobile contract customers and 82,000 prepaid customers as lockdown restrictions eased.
Adjusted EBITDAaL increased by 4.5%*, supported by good revenue growth and strong cost control. The Adjusted EBITDAaL margin increased by 0.4* percentage points and was 29.8%.
We have continued to make good progress on integrating the assets acquired from Liberty Global in Central Eastern Europe and we remain on track to deliver our targeted synergies.
18
Vodafone Group Plc ⫶ H1 FY22 results
Vodacom ⫶ 12% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 2,928 |
| 2,423 |
| 20.8 |
|
|
- Service revenue |
| 2,271 |
| 1,949 |
| 16.5 |
| 5.4 |
- Other revenue |
| 657 |
| 474 |
|
|
|
|
Adjusted EBITDAaL |
| 1,062 |
| 891 |
| 19.2 |
| 5.6 |
Adjusted EBITDAaL margin |
| 36.3 | % | 36.8 | % |
|
|
|
Total revenue increased by 20.8% to €2.9 billion and reported Adjusted EBITDAaL increased by 19.2%, primarily due to the strengthening of the local currencies versus the euro.
On an organic basis, Vodacom’s total service revenue grew by 5.4%* (Q1: 7.9%*, Q2 3.1%*). Growth across Vodacom’s international markets accelerated in the first 6 months following significant growth in our financial services platform (M-Pesa), however slowed in Q2 due to a strong prior year comparative in South Africa and the introduction of mobile money levies in Tanzania.
In South Africa, service revenue grew year-on-year, supported by sustained demand, incremental wholesale services and growth in new services such as fixed, IoT and financial services. We added 1.1 million prepaid customers and 140,000 mobile contract customers, with the latter supported by our new more-for-more ‘Vodafone Red’ proposition introduced in June and new contract wins in Business. Financial Services revenue in South Africa increased by 15.0%* to €75.9 million, reflecting the expansion of our service offerings, and 70% of our mobile customer base now uses data services.
In October 2021, we launched our new ‘VodaPay’ super-app in South Africa, bringing consumer and business capabilities under one platform. The application enables customers to access financial, insurance and eCommerce services and supports businesses with additional resource planning and ‘business-to-business’ functionalities.
In Vodacom’s international markets, service revenue increased during the half year. Growth was supported by an increase in M-Pesa transaction volumes and data revenue. This benefit was partially offset by the introduction of mobile money levies in Tanzania during Q2. M-Pesa transaction value increased by 49.7%, while M-Pesa revenue as a share of total service revenue increased by 3.4 percentage points to 22.8%, and 64.3% of our customer base is now using data services.
Vodacom’s Adjusted EBITDAaL increased by 5.6%* supported by good revenue growth, and positive operational leverage in Vodacom’s international operations. The Adjusted EBITDAaL margin decreased by 1.0* percentage point and was 36.3%.
On 10 November 2021, Vodacom Group announced it had entered into an agreement to acquire Vodafone Egypt from Vodafone for total consideration of €2.4 billion. See page 10 and Note 12 ‘Subsequent events’ in the unaudited condensed consolidated financial statements on page 53 for more information.
At the same time, Vodacom also announced that it had agreed to acquire a co-controlling 30% interest in the fibre assets currently owned by Community Investment Ventures Holdings (Pty) Limited (“CIVH”). CIVH owns Vumatel and Dark Fibre Africa, which are South Africa’s largest open access fibre operators. Vodacom’s investment and strategic support will further accelerate the growth trajectory of fibre roll-out in South Africa.
19
Vodafone Group Plc ⫶ H1 FY22 results
Other Markets ⫶ 9% of Group service revenue
| | H1 FY22 | | H1 FY21 | | Reported | | Organic |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 1,958 |
| 1,898 |
| 3.2 |
|
|
- Service revenue |
| 1,752 |
| 1,679 |
| 4.3 |
| 19.1 |
- Other revenue |
| 206 |
| 219 |
|
|
|
|
Adjusted EBITDAaL |
| 683 |
| 601 |
| 13.6 |
| 28.3 |
Adjusted EBITDAaL margin |
| 34.9 | % | 31.7 | % |
|
|
|
Reported total revenue increased by 3.2% to €2.0 billion, as higher service revenue was partially offset by the depreciation of local currencies versus the euro.
On an organic basis, service revenue increased by 19.1%* (Q1: 18.4%*, Q2: 19.7%*) as a result of strong customer base and ARPU growth. The improvement in quarterly trends reflected higher roaming and visitor revenue, as well as increased demand for data as lockdown restrictions eased.
Service revenue in Turkey grew ahead of inflation, reflecting strong mobile customer base and ARPU growth. Mobile contract customer additions were 620,000 – the highest amongst any of our markets – including migrations from prepaid customers. We also added 363,000 prepaid customers as tourism to the market improved. Mobile contract churn improved by 4.8 percentage points year-on-year to 15.7%.
Service revenue in Egypt also grew ahead of inflation, supported by customer base growth and increased data usage. During the period, we added 134,000 mobile contract customers and 1.2 million prepaid mobile customers.
Adjusted EBITDAaL increased by 28.3%* and the Adjusted EBITDAaL margin increased by 2.7* percentage points. This reflected strong revenue growth and operating efficiencies in all markets. The Adjusted EBITDAaL margin was 34.9%.
Vantage Towers ⫶ Delivering on our plan
| | H1 FY22 | | H1 FY211 | Reported |
| Organic | |
|
| €m |
| €m |
| change % |
| change %* |
Total revenue |
| 611 |
| — |
| — |
|
|
- Service revenue |
| — |
| — |
| — |
| — |
- Other revenue |
| 611 |
| — |
|
|
|
|
Adjusted EBITDAaL |
| 305 |
| — |
| — |
| — |
Adjusted EBITDAaL margin |
| 49.9 | % | — |
|
|
|
|
Note:
| 1. | Vantage Towers is a new reporting segment for the year ending 31 March 2022. See page 13 for more information. |
Total revenue increased to €611 million as more than 570 new tenancies were added during the period, bringing the tenancy ratio to 1.42x. Vantage Towers continued to contribute to Europe’s digital transformation and reached a number of new partnership agreements with customers during the period. Vantage Towers reported its results on 15 November 2021.
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Vodafone Group Plc ⫶ H1 FY22 results
Associates and joint ventures
|
| H1 FY22 | | H1 FY21 |
|
| €m |
| €m |
VodafoneZiggo Group Holding B.V. |
| (14) |
| (86) |
Safaricom Limited |
| 115 |
| 108 |
Indus Towers Limited |
| — |
| 233 |
Other |
| 10 |
| 5 |
Share of results of equity accounted associates and joint ventures |
| 111 |
| 260 |
VodafoneZiggo Joint Venture (Netherlands)
The results of VodafoneZiggo (in which Vodafone owns a 50% stake) are reported here under US GAAP, which is broadly consistent with Vodafone’s IFRS basis of reporting.
Total revenue grew to €2.0 billion, primarily driven by mobile contract customer base growth and fixed ARPU growth, supported by higher roaming and visitor revenue.
During the period, VodafoneZiggo added 122,000 mobile contract customers, mainly driven by higher Consumer demand. Strong Business fixed performance was supported by an increase in the customer base, as well as higher demand for unified communications. The number of converged households increased by 23,000, with 45% of broadband customers now converged, delivering significant NPS and churn benefits. VodafoneZiggo now offers 1 gigabit speeds to 4.6 million homes and is on track to provide nationwide coverage in 2022.
During the period, Vodafone received €204 million in dividends from the joint venture, as well as €24 million in interest payments. The joint venture also drew down an additional loan from shareholders to fund an instalment arising from spectrum licences acquired in July 2020, with Vodafone’s share being €104 million.
Safaricom Associate (Kenya)
Safaricom service revenue grew to €1.1 billion due to strong Business fixed demand, and a recovery in M-Pesa revenue as transaction volumes increased and peer-to-peer transaction fees normalised.
Indus Towers Associate (India)
Indus Towers is classified as held for sale at 30 September 2021 in the consolidated statement of financial position. The Group’s interest in Indus Towers has been provided as security against certain bank borrowings secured against Indian assets and partly to the pledges provided to the new Indus Towers entity under the terms of the merger between erstwhile Indus Towers and Bharti Infratel.
Vodafone Idea Limited Joint Venture (India)
See Note 11 ‘Contingent liabilities and legal proceedings’ in the unaudited condensed consolidated financial statements on page 51 for further information.
Vodafone Hutchison Australia / TPG Telecom Limited Joint Venture (Australia)
In July 2020, Vodafone Hutchison Australia Pty Limited (‘VHA’) and TPG Telecom Limited (‘TPG’) completed their merger to establish a fully integrated telecommunications operator in Australia. The merged entity was admitted to the Australian Securities Exchange (‘ASX’) on 30 June 2020 and is known as TPG Telecom Limited. Vodafone and Hutchison Telecommunications (Australia) Limited each own an economic interest of 25.05% in the merged unit.
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Vodafone Group Plc ⫶ H1 FY22 results
Net financing costs
|
| H1 FY22 |
| H1 FY21 |
| Reported |
| | €m | | €m | | change % |
Investment income |
| 129 |
| 183 |
|
|
Financing costs |
| (1,473) |
| (1,610) |
|
|
Net financing costs |
| (1,344) |
| (1,427) |
| 5.8 |
Adjustments for: |
|
|
|
|
|
|
Mark-to-market losses |
| 397 |
| 368 |
|
|
Foreign exchange losses |
| 56 |
| 231 |
|
|
Adjusted net financing costs1 |
| (891) |
| (828) |
| (7.6) |
Note:
| 1. | Adjusted net financing costs is a non-GAAP measure. Adjusted net financing costs exclude mark-to-market and foreign exchange gains/losses. This metric is used by both management and the investor community. The H1 FY21 adjusted net financing costs has been aligned to the FY21 year-end presentation which no longer excluded lease interest. This increased adjusted net financing costs for H1 FY21 by €189 million. |
Net financing costs decreased by €83 million, primarily due to lower foreign exchange movements on intercompany funding arrangements. Mark-to-market losses were driven by the lower share price, causing a mark-to-market loss on options held relating to the Group’s mandatory convertible bonds. Adjusted net financing costs remained stable year on year, reflecting consistent average borrowings less cash and cash equivalents balances and weighted average borrowing costs for both periods.
Taxation
| H1 FY22 |
| H1 FY211 |
| Change | |
|
| % |
| % |
| pps |
Effective tax rate |
| (0.1) | % | 23.8 | % | (23.9) |
Note:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had been terminated. Consequently, the held for sale classification was reversed, resulting in a decrease in the Effective tax rate of 0.2 pps compared to the previously published results. |
The effective tax rate was (0.1)% in the six month period ended 30 September 2021. The tax credit was attributable to deferred tax credits in the UK, relating to the increase in the future statutory rate to 25% and in Italy relating to the revaluation of assets.
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Vodafone Group Plc ⫶ H1 FY22 results
Earnings per share
| | | |
| | Reported |
|
| | H1 FY22 | | H1 FY211 | | change |
|
|
| eurocents |
| eurocents |
| eurocents |
|
Basic earnings per share |
| 3.40 | c | 4.30 | c | (0.90) | c |
Note:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had been terminated. Consequently, the held for sale classification was reversed, resulting in a decrease in Basic earnings per share of 0.15 eurocents compared to the previously published results. |
Basic earnings per share was 3.40 eurocents, compared to 4.30 eurocents for six months ended 30 September 2020.
Cash flow and funding
Analysis of cash flow
| | H1 FY22 | | H1 FY21 | | Reported |
|
| €m |
| €m |
| change % |
Inflow from operating activities |
| 6,455 |
| 6,009 |
| 7.4 |
Outflow from investing activities |
| (2,811) |
| (5,013) |
| 43.9 |
Outflow from financing activities |
| (3,795) |
| (7,050) |
| 46.2 |
Cash inflow from operating activities increased by 7.4% to €6,455 million.
Outflow from investing activities decreased by 43.9% to €2,811 million, primarily due to lower outflows in relation to the purchase of short-term investments which outweighed higher spend on intangible assets and property, plant and equipment. Short-term investments include highly liquid government and government-backed securities and managed investment funds that are in highly rated and liquid money market investments with liquidity of up to 90 days.
Outflows from financing activities decreased by 46.2% to €3,795 million principally due to lower net outflow on borrowings which outweighed cash spent on our share buyback programme.
Borrowings and cash position
| | H1 FY22 | | Year-end FY21 | | Reported |
|
| €m |
| €m |
| change % |
Non-current borrowings |
| (58,109) |
| (59,272) |
|
|
Current borrowings |
| (11,412) |
| (8,488) |
|
|
Borrowings |
| (69,521) |
| (67,760) |
|
|
Cash and cash equivalents |
| 5,824 |
| 5,821 |
|
|
Borrowings less cash and cash equivalents |
| (63,697) |
| (61,939) |
| 2.8 |
Borrowings principally includes bonds of €48,584 million (FY21: €46,885 million) and lease liabilities of €12,428 million (FY21: €13,032 million).
The increase in borrowings is principally driven by the issuance of bonds with a nominal value of US$2,450 million (€2,114 million) utilising the US Shelf Programme.
23
Vodafone Group Plc ⫶ H1 FY22 results
Statement of financial position
The consolidated statement of financial position is set out on page 40. Details on the major movements of both our assets and liabilities in the year are set out below.
Assets
Goodwill and other intangible assets decreased by €0.1 billion between 31 March 2021 and 30 September 2021 to €53.4 billion. This reflects the amortisation of computer software, partially offset by software and purchased licence additions in the period.
Property, plant and equipment decreased by €1.1 billion between 31 March 2021 and 30 September 2021 to €40.1 billion. This reflects the depreciation charge in the period, partially offset by additions in the period.
Other non-current assets increased by €1.1 billion between 31 March 2021 and 30 September 2021 to €33.1 billion, primarily due to a €0.9 billion increase in trade and other receivables.
Current assets decreased by €0.9 billion between 31 March 2021 and 30 September 2021 to €26.2 billion, primarily due to a €1.4 billion decrease in other investments, partially offset by an increase of €0.4 billion in trade and other receivables.
Assets held for sale remained stable between 31 March 2021 and 30 September 2021 at €1.3 billion and comprise the Group’s 28.1% interest in Indus Towers.
Total equity and liabilities
Total equity was broadly stable between 31 March 2021 and 30 September 2021 with an increase of €0.2 billion. This reflected an increase of €2.6 billion in total comprehensive income for the period, largely offset by dividends of €1.6 billion and the purchase of treasury shares of €1.0 billion.
Non-current liabilities decreased by €2.6 billion between 31 March 2021 and 31 September 2021 to €65.9 billion, primarily due to a €1.2 billion decrease in borrowings and a €1.2 billion decrease in trade and other payables.
Current liabilities increased by €1.4 billion between 31 March 2021 and 30 September 2021 to €30.1 billion, primarily due to a €2.9 billion increase in borrowings, partially offset by a decrease of €1.8 billion in trade and other payables.
Inflation
Inflation did not have a significant effect on the Group’s consolidated results of operations and financial condition during the six month period ended 30 September 2021.
24
Vodafone Group Plc ⫶ H1 FY22 results
Other matters
Funding facilities
The Group has undrawn revolving credit facilities of €7.4 billion comprising euro and US dollar revolving credit facilities of €4.0 billion and US$4.0 billion (€3.4 billion) which mature in 2025 and 2026 respectively. Both committed revolving credit facilities support US and euro commercial paper programmes of up to US$15.0 billion and €8.0 billion respectively.
Post employment benefits
The €453 million net deficit at 31 March 2021 of scheme assets over scheme liabilities, arising from the Group’s obligations in respect of its defined benefit schemes, decreased by €332 million to a €121 million net deficit at 30 September 2021. The next triennial actuarial valuation of the Vodafone Section and CWW Section of the Vodafone UK Group Pension Scheme will be as at 31 March 2022.
Dividends
Dividends will continue to be declared in euros and paid in euros, pounds sterling and US dollars, aligning the Group’s shareholder returns with the primary currency in which we generate cash flow. The foreign exchange rate at which future dividends declared in euros will be converted into pounds sterling and US dollars will be calculated based on the average World Markets Company benchmark rates over the five business days during the week prior to the payment of the dividend.
The Board has announced an interim dividend per share of 4.50 eurocents (H1 FY21: 4.50 eurocents). The ex-dividend date for the interim dividend is 25 November 2021 for ordinary shareholders, the record date is 26 November 2021 and the dividend is payable on 4 February 2022. Dividend payments on ordinary shares will be paid directly into a nominated bank or building society account.
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Vodafone Group Plc ⫶ H1 FY22 results
Other significant developments
Board changes
On 27 July 2021, Renée James and Sanjiv Ahuja stepped-down as Non-Executive Directors.
Olaf Swantee was appointed as a Non-Executive Director at Vodafone’s Annual General Meeting on 27 July 2021 and subsequently resigned with effect from 25 September 2021 in light of a professional development which impacted his ability to serve on the Board.
On 30 September 2021 it was announced that Deborah Kerr will be appointed as a Non-Executive Director with effect from 1 March 2022.
Telecom services in Ethiopia
In May 2021, an international consortium named the Global Partnership for Ethiopia was awarded a licence to operate telecom services in Ethiopia.
The partners in the consortium are led by Safaricom Plc and will establish a new operating company in Ethiopia which aims to start providing telecommunications services from 2022. In addition to Safaricom, the partnership includes: Vodacom Group; Vodafone Group; Sumitomo Corporation and CDC Group.
Ethiopia is home to over 112 million people, making it the second largest country in Africa by population. It is one of the last countries in the world to introduce competition in the telecom industry, a process started by the government in 2019 as part of its economic reform agenda, with the support of the International Finance Corporation. The reforms aim to increase jobs, reduce poverty and grow the local economy in an inclusive and sustainable manner.
The consortium is proceeding with and adapting its plans for operational readiness, mindful of the recent declaration of a state of emergency in Ethiopia.
Spectrum acquisition in Spain
In July 2021, Vodafone Spain acquired 2x10 MHz of spectrum in the 700 MHz band from the Spanish Ministry of Economic Affairs and Digital Transformation (‘MINECO’) for €350 million (reserve price for the acquired block). The total amount was payable in a single instalment at the end of the auction process. In addition, a licensing fee of €15.5m will be payable each year.
The spectrum acquired has initial holding rights until 2041, with an automatic renewal with no additional fees for a further 20 years (until 2061), subject to meeting the licence obligations.
26
Vodafone Group Plc ⫶ H1 FY22 results
Regulation
Introduction
Our operating companies are generally subject to regulation governing their business activities. Such regulation typically takes the form of industry specific law and regulation covering telecommunications services and general competition (antitrust) law applicable to all activities. The following section describes the regulatory frameworks and the key regulatory developments at national and regional level and in the European Union (‘EU’), in which we had significant interests during the period ended 30 September 2021. Many of the regulatory developments reported in the following section involve ongoing proceedings or consideration of potential proceedings that have not reached a conclusion. Accordingly, we are unable to attach a specific level of financial risk to our performance from such matters.
European Union (‘EU’)
The new European Electronic Communications Code (‘Code’) has updated the telecoms regulatory framework in Europe. The Code was required to be implemented by Member States in Europe by December 2020. However, the majority of the EU governments have not yet done that and, within Vodafone’s footprint, the Code has to date only been transposed in Germany, Hungary, Greece, Czech Republic (and UK). In other markets the law has either entered the approval process in the respective national parliament, or is still being discussed with interested stakeholders. Given the delay, the European Commission (‘EC’) has started infringement procedures and warned the remaining 18 Member States that in case of further delays the breach will be referred to the EU Court of Justice (CJEU).
In April 2021 the EC published its Artificial Intelligence (‘AI’) regulation (AI Act) setting out a number of prohibited AI use cases and new requirements for providers of high-risk AI.
Co-legislators have been developing their amendments to the Digital Services Act package (comprising a Digital Services Act and Digital Markets Act) since it was tabled in December. The lead European Parliament Committee on the Internal Market and Consumer Protection (‘IMCO Committee’) is set to vote on both texts in November 2021, with the EC working towards a General Approach on both files in December, paving way for trialogue talks under the French Presidency of the Council of the EU.
The EC has continued work under the EU Data Strategy, releasing an Inception Impact Assessment on the EU Data Act, and holding a public consultation over the summer months. The legislative proposal is due to be published by the EC on 1st December.
In December 2020, the EC published two legal acts mandated under the European Electronic Communications Code: (1) EC’s Recommendation on relevant markets (‘RMR’) to identify those product and service markets in which ex ante regulation may be justified; (2) the Delegated Act setting a single maximum Union-wide mobile voice termination rate and a single maximum Union-wide fixed voice termination rate (‘MTR’ and ‘FTR’) applicable to any provider of fixed and mobile termination services across the Union in the next five years.
In February 2021, the EC proposed the prolongation of the Roaming Regulation for 10 years in order to ensure the continuation of Roam-Like-at-Home. The EC proposes to reduce the wholesale caps for all services (data, voice and SMS) and bring new measures on transparency, quality of service and access to emergency communications. In addition, the European Parliament introduced in their position the introduction of further regulation of Intra-EU voice communications (currently capped at €0,19 per minute). The European Parliament and the Council are expected to start negotiations on the file in October 2021 and come to an agreement by the end of the year or in Q1/2022. The revised regulation shall enter into force in July 2022.
In March 2021, the EC published a “Connectivity Toolbox”, which is a joint deliverable of Member States and the EC containing best practices on network cost reduction, spectrum authorisation for 5G, the environmental footprint and environmental impact assessment of networks as well as Electronic Magnetic Fields. The objective of this toolbox is to reduce the cost of broadband deployment in Europe for Network Operators while the EC is in the process of revising the Broadband Cost Reduction Directive.
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Vodafone Group Plc ⫶ H1 FY22 results
In September the EC published a legislative proposal for a Decision of the European Parliament and of the Council establishing the 2030 Policy Programme “Path to the Digital Decade”. The proposal sets ambitious targets to be met by Member States by 2030 on the following 4 key pillars: a digitally skilled population and highly skilled digital professionals; secure and sustainable digital infrastructures (target is to have all European households connected to gigabit speeds and all populated areas covered by 5G); digital transformation of businesses; and digitisation of public services. The European Parliament and Council will need to endorse the targets through the regular EU legislative procedure.
Addressing the challenges posed by the COVID-19 pandemic, the Next Generation EU package is the Union’s means to support the recovery processes in EU Member States. The bulk of the proposed recovery measures are funded by a new temporary recovery instrument, the EU Recovery and Resilience Facility (RRF), worth nearly €750 billion, which was adopted in December 2020. A significant amount is allocated towards digital and green initiatives, with a minimum threshold of 20% of the RRF to be allocated to digital and 37% to green initiatives. In the period of May until October 2021, the EC approved the national plans under the RRF for 22 EU Member States, of which Czech Republic, Germany, Greece, Ireland, Italy, Portugal, Romania and Spain are within Vodafone’s footprint.
Germany
In May 2017, the national regulatory authority (‘BNetzA’) initiated the market review process for wholesale access at fixed locations in the markets for access to unbundled local loop (‘ULL’) and for virtual unbundled local access (‘VULA’) as well as for access to bitstream wholesale products. In its final market analysis issued in Q2 2019, BNetzA declared that only Deutsche Telekom (‘DT’) had significant market power (‘SMP’) for both copper and fibre-based wholesale products. No cable operator was defined as being dominant.
In October 2021, BNetzA published its draft regulation regarding the wholesale access markets (so-called Market 3a). In the draft, BNetzA proposes no significant changes in relation to the regulation of the copper network access (ULL; VDSL) but has suggested a light touch regulation of fibre access to the home (‘FTTH’). For first time in Germany, an access regime based on full equivalence of input (‘EoI’) is intended to enforce the equal treatment of wholesale demand and DT’s retail arm. In addition, BNetzA proposes improved access to DT’s passive infrastructure (ducts, masts) with SMP obligations to open DT’s passive network, including regulated prices for the first time. This would ensure Vodafone Germany’s wholesale based VDSL business in future, improve cost effective build out of Vodafone Germany’s own networks using ducts and eliminate the risk of complete deregulation of DT’s fibre networks.
As part of the process of implementing the Code, the German Parliament approved an abolishment of the right to bill TV services via ancillary costs in Multi Dwelling Units with a transition period for the existing footprint until June 2024. The law will enter into force in December 2021. Within the transition period the law does not allow households to have individual opt-outs for having the TV service billed via ancillary costs. In addition, new contracts with such billing schemes can be offered effectively until mid-2024, but must be terminated after this date. Furthermore, the amended law allows for a continued billing of the cost of deployment of new build fibre in-house networks via ancillary costs.
Frequency allocations at 800 MHz, parts of 1800 MHz, and 2600 MHz will expire at the end of 2025. Vodafone Germany currently holds allocations at 800 MHz and 2600 MHz. During the Summer 2021, BNetzA has consulted on different approaches to proceed with the spectrum, and is considering inter alia auctions, prolongation or licences or combinations of these, and will discuss these approaches with stakeholders in the coming months. BNetzA is expected to make a decision in 2022.
In response to a preliminary reference from the National Court in Germany, on 2 September 2021 the CJEU issued three Judgments related to zero-rated commercial offers of Vodafone Germany and Deutsche Telekom in Germany. The Judgements concluded that the specific zero-rated offers that were the subject of the Judgment, and which included an exclusion of roaming or tethering, or a limitation on the bandwidth for certain categories of application respectively, were not compliant with the Open Internet Regulation (‘OIR’). The National Court in Germany must now interpret and apply the Judgments in its own rulings.
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Vodafone Group Plc ⫶ H1 FY22 results
Italy
In March 2017, the national regulatory authority (‘AGCOM’) imposed a minimum billing period of one month for fixed and convergent offers, effective by the end of June 2017. The operators appealed AGCOM’s resolution before the Administrative Court and the appeal was rejected in February 2018. Vodafone Italy filed an appeal before the Council of State and after the public hearing held in July 2020, the Council of State issued a Preliminary referral to the Court of Justice in order to assess if the NRA has the power to impose minimum and binding billing periods under EU law.
In January 2020, the national competition authority (‘AGCM’) ruled that Vodafone Italy, TIM, Fastweb and WindTre had coordinated their commercial strategies relating to the transition from four-week billing (28 days) to monthly billing, with the maintenance of a 8.6% price increase, in violation of art.101 of TFEU. Vodafone Italy’s appeal on the Authority’s decision was heard by the Administrative Tribunal in May 2021. In a decision published on July 2021, the Administrative Tribunal accepted all Vodafone Italy’s defensive arguments, and annulled the AGCM’s decision and the sanction. The time limit for the AGCM to submit an appeal before the Council of State will expire in November 2021.
The frequencies in the 2.1 GHz band have been renewed until 2029. Vodafone Italy paid 240 million euros (a single payment) in April 2021 for the renewal.
In April 2021, AGCOM started a public consultation on the co-investment commitments presented by TIM in January 2021 to verify the applicability of Art. 76 of the Code. It is estimated that the public consultation period will close by end of the year.
United Kingdom
In March 2021, Vodafone Ltd acquired 40MHz of 3.6GHz spectrum expiring in 2041 for £176 million. Within the negotiation stage of the auction, Vodafone Ltd and Telefonica agreed to trade spectrum so that Vodafone Ltd’s holdings in the 3.4-3.6 GHz band will be sufficiently proximate to be efficiently used by network equipment. Vodafone Ltd’s total holdings in 3.4-3.6 GHz are 90 MHz, with fees payable from 2038.
The 2100MHz band, originally awarded for 3G usage, will become liable to fees from January 2022 (as the national regulatory authority (‘Ofcom’) levies fees on spectrum after an initial 20 year term). Ofcom has made an initial proposal that Vodafone Ltd’s fees will be set at £17M per year. Vodafone has provided feedback on Ofcom’s approach, and the level of fees will be confirmed before the end of the 2021.
Ofcom is planning to conduct a review of the UK mobile market. It is the first review of its kind and will examine the overall market structure and the ability of the market to fulfil the investment challenges that lie ahead. In parallel, DCMS have recently issued a Wireless Infrastructure Strategy call for evidence to help inform UK Government strategy on future technologies and infrastructure evolution in the sector, with a particular focus on outcomes in the second half of the decade.
Ofcom have approved Openreach’s long term pricing proposals for fibre to the premises (‘FTTP’), creating a more certain commercial environment for fixed broadband services, as consumers transition away from the legacy copper network.
Ofcom is conducting a review of Net Neutrality rules. With the UK no longer obliged to align with the European Union framework on Net Neutrality there is scope for the UK to reform the current rules, creating a space for service differentiation, while safeguarding against internet discrimination. However, the UK is still committed to high-level open internet alignment under the terms of the UK/EU trade deal.
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Vodafone Group Plc ⫶ H1 FY22 results
Spain
Vodafone Spain requested a three-year extension and modification of the commitments which ended in April 2020 in relation to the Movistar–DTS merger in 2015. Following Vodafone Spain’s extension request in February 2020, the national regulatory authority (‘CNMC’) rendered public its Resolution extending the term of most of the initial commitments for an additional period of three years, ensuring access to Movistar Estrenos and Movistar Series channels. The Resolution has eliminated the commitment that limited the terms in which Telefónica could acquire subscription video on demand (‘SVOD’) content, which has been appealed by Vodafone Spain.
In November 2020, a public consultation on the new Audiovisual Act, intended to transpose the Audio-Visual Services Directive into national legislation, was launched for comments. In June 2021, the Government opened a second public consultation on the Act, which closed on 12 July. The draft includes provisions such as the elimination of MNO contribution (0.9% telecoms revenues) to the Public Corporation RTV.
In November 2020, CNMC published a public consultation on Market 3a and 3b review. The proposal implies an increase in the number of deregulated municipalities and would reduce the period for closure of copper exchanges from five to two years. The measures were notified to the EC in June 2021, and approval is expected by the end of 2021.
In December 2020, the Government approved a Royal Decree modifying the current Consumer Law, in which companies providing telephony customer care services must offer an alternative number (mobile or landline) where the cost of a call must be equal to or less than the cost of a call to a standard geographic or mobile number.
In April 2021, the Government approved a Royal Decree-Law aimed at extending the duration of spectrum band concessions through the modification of the current General Telecommunications Act. The new article increases the duration to a minimum of 20 years and includes the possibility to allow for an extension of this initial period for a minimum duration of 5 years and a maximum duration of additional 20 years. In relation to existing concessions, the Royal Decree-Law makes it possible to extend these by 20 years, but this must be specifically requested and approved from the Ministry 2 years prior to the concession deadline.
In June 2021, the Ministry for Economy and Enterprise initiated the formal process of reassigning the 3.4-3.8 GHz band, and asked all operators to reach a consensus on this. In September 2021, the Ministry issued the draft Project of Ministerial Decree that will regulate the reassignment, and shared this with interested parties for comment. A final decision is expected by the end of 2021.
In June 2021, the CNMC approved the merger between MásMóvil and Euskaltel as it considers that the transaction does not significantly alter the competitive situation. Later, the Ministerial council provided its approval and finally, as Euskaltel is a listed company, in July 2021 Spain’s financial markets regulator, (‘CNMV’) has approved the proposed takeover.
In July 2021, the spectrum auction for the 700 MHz band took place. Vodafone Spain, Orange and Telefónica each won spectrum, with 2x10 MHz each. Vodafone Spain and Orange have paid €350 million each (starting price). Telefónica paid €310 million, but has higher coverage commitments.
Ireland
In April 2019, the national regulatory authority (‘ComReg’) published its final decision on Universal Service funding applications by eircom Ltd (‘eir’) for 2010 to 2015. ComReg found that the net cost of the Universal Service Obligation (‘USO’) did not represent an unfair burden on eir. Subsequently, eir have challenged this decision. The proceedings are ongoing, and Vodafone Ireland is a notice party to these proceedings.
In May 2019, ComReg initiated a review of the regulated Weighted Average Cost of Capital (‘WACC’). In its draft decision notified to the EC in June 2020, ComReg proposed the regulated fixed WACC should fall from 8.18% to 5.61%. It was subject to annual review in June 2021 and fell further to 5.56%. The reduction from 8.18% has not been applied to wholesale pricing cost models. In line with the decrease of the WACC, the EC urged ComReg to update relevant fixed pricing decisions as soon as possible, to ensure that prices in the Irish wholesale markets reflect current market conditions. ComReg issued its decision on the WACC in October 2020 and decided to update WACC as part of an overall review. A final decision on the Access Network Cost Model, incorporating the reduced WACC, is expected by end of 2021.
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Vodafone Group Plc ⫶ H1 FY22 results
In December 2020, ComReg published its decision on the Multi-Band Spectrum Auction. In late January 2021, Three Ireland (Hutchison) Ltd and Three Ireland Services (Hutchison) Ltd (collectively ‘Three’) lodged an appeal to the decision. The proceedings commenced in June 2021 and remain ongoing
ComReg and the Irish government have continued to extend the Temporary Spectrum Measures on 700MHz 2.1GHz and 2.6GHz spectrum. The measures have extended for two further three-month periods until 1 April 2022.
Portugal
In June 2019, Vodafone Portugal launched a court action against the national regulatory authority (‘ANACOM’) seeking the revocation of Dense Air’s spectrum licence under the ‘use it or lose it’ principle. In March 2020, Vodafone Portugal launched another court action against an ANACOM’s December 2019 decision which amends – instead of revoking – Dense Air’s spectrum license. On November 2020, Vodafone Portugal brought a precautionary proceeding against ANACOM regarding the restrictive impact in the 5G auction of maintaining Dense Air’s spectrum licence. Legal proceedings are ongoing.
In February 2020, the Portuguese Government put forward a Resolution setting out its 5G Strategy. Following this, ANACOM launched a public consultation on the 5G Auction Regulation and in November 2020 ANACOM published its final decision. Vodafone Portugal submitted a court action against ANACOM in relation to discriminatory measures between new entrants and current MNOs in the final decision, which is pending decision. ANACOM approved further changes to the 5G Auction Regulation in June 2021 and September 2021, and Vodafone Portugal has appealed aspects of these also. In the meantime, the auction, which began in December 2020, is ongoing.
In July 2020, the national competition authority (‘AdC’) sent Vodafone Portugal and three other national operators a statement of objections (‘SO’) alleging that operators may have formed a cartel to limit competition in telecoms services advertising via the Google search engine. In October 2020, Vodafone Portugal responded to the SO and proceedings are ongoing. Vodafone has also filed motions and appeals with different authorities regarding procedural irregularities and invalidity of evidence collected during the December 2018 raid at Vodafone Portugal´s premises. In December 2020, a Court decision declared email evidence collected at Vodafone Portugal´s premises to be inadmissible.
Vodafone Portugal continues to challenge payment notices totalling €34.8 million issued by ANACOM regarding 2012-2014 extraordinary compensation of Universal Service net costs.
On July 2021, the Portuguese Government approved a Decree-Law that establishes a social tariff for broadband internet access (‘IST’), which will benefit consumers with low income or with special social needs. The Decree-Law set that ANACOM should promote a public consultation on bandwidth and price of the IST. ANACOM therefore consulted industry on the main characteristics of the IST. This process concluded with ANACOM setting a required bandwidth of 30/3 Mbps for download / upload, and an allowance of 30GB, and setting the maximum price operators may charge for the service, consisting of a of €5 (+VAT) for the service, plus €21,45 (+VAT) for the equipment.
Romania
The 5G Security Law was adopted in June 2021. The law provides operators 5 years to swap to authorised vendors for core network, and 7 years for radio access networks related to 5G
The 5G spectrum auction has been delayed until early 2022. Therefore, only short term and available and existing spectrum in 800Mhz, 2600Mhz FDD and TDD, and 3.5 GHz frequency bands will be auctioned in November 2021.
31
Vodafone Group Plc ⫶ H1 FY22 results
Greece
In September 2021, the Government announced a reform on the ‘special mobile tax’, which is currently charged at between 12% - 20% of the mobile tariff, (and VAT of 24% is applied on top of this). Effective as of calendar year 2022, this ‘special mobile tax’ will be abolished for subscribers aged up to 29 years, and reduced to 10% for all other subscribers.
Nova (ex-Forthnet) has filed a complaint with the Administrative Court requesting the annulment of the Vectoring/FTTH allocation decisions. The hearing date has been postponed to November 2021.
In December 2020, Vodafone Greece acquired 2x10 MHz of 700 MHz, 2x20 MHz of 2.1GHz, 140 MHz of 3.5 GHz, and 400 MHz of 26 GHz in the recent auction for €130m. The spectrum acquired has a 15-year duration to 2035, with the option of a further five-year extension.
Following the publication of the 5G Auction Tender document, a petition by Greek residents for its annulment, as well as for any future administrative acts, was filed before the Council of the State on the grounds it infringed environmental protection provisions. The hearing date is set for December 2021.
The national regulatory authority’s (‘EETT’) decision in relation to Wind’s complaint against Vodafone Greece and Cosmote alleging abuse of dominance in relation to calls to mobile networks in Albania is pending.
Vodafone Greece appealed EETT’s decision on the MVNO access dispute resolution between Vodafone and Nova (ex-Forthnet). The hearing of the case is scheduled for December 2021 before the Administrative Court of Appeal.
The development of a margin squeeze test model based on non-discrimination obligation for OTE’s retail plans is currently in progress. Operators have provided their comments on the model, and these have been assessed by EETT. The finalized model is expected to be notified to the EC and unless there are significant comments, the final decision is expected to be issued within Q1 2022.
In February 2018, EETT issued decisions related to the Universal Service Cost for the years 2010 (accounting to €24,83m) and 2011 (accounting to €21,98m). Based on these decisions, the Universal Service Cost has been proved an unfair burden for OTE, the designated Universal Service Provider 2010 and 2011. According to the Telecommunications Law 4070/2012 and the Ministerial Decision 28120/974/11-5-2007, in such cases, the Universal Service net costs are shared to all telecom operators. Based on this, the EETT issued a second round of decisions for the allocation of the Universal Service Cost to each operator. For the years 2010 and 2011, the allocated cost based on revenue for Vodafone Greece was €4.8m and €4.2m respectively. In June 2020, the Administrative Court of Appeal Court rejected the petitions for the annulment of EETT’s decisions. In June 2021 Vodafone appealed against the decisions before the Council of the State. Due to the suspension of court operations throughout Greece due to COVID-19, the deadline for the filing of the appeals has been postponed.
The NRA published the decision on the USO net cost for the period 2012-2016 of total amount €36,8m for all operators, with Vodafone Greece share being about €7,75m, payable in 5 yearly instalments. Vodafone Greece intends to file a petition for the annulment of the NRA’s decision.
Czech Republic
In August 2019, the EC sent a statement of objections to O2 Czech Republic, CETIN and T-Mobile Czech Republic with respect to the competition concerns in relation to the parties’ network sharing agreement. Following commitments offered by the parties in respect of the agreement, on 1 October 2021 the EC announced it was seeking stakeholder feedback on these commitments.
Vodafone filed a complaint to the EC, regarding Czech Republic’s 5G spectrum auction, arguing that the auction terms set by the Czech national regulatory authority (‘CTU’) infringed EU law. The case is pending.
The re-farming of 3.4-3.8GHz spectrum was completed in September 2021, to provide contiguous spectrum to each spectrum holder in this band (Vodafone Czech Republic has 60 MHz).
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Vodafone Group Plc ⫶ H1 FY22 results
In September the CTU published draft market analysis of mobile wholesale access market for comments. The CTU has proposed in its consultation to impose regulation on the wholesale price for mobile voice, SMS and data. The consultation period ended on 25 October 2021. The market analysis and any consequent remedies imposed must be approved by the Commission before being published. A final decision is not expected until March 2022 at earliest.
Hungary
In January 2021, the national regulatory authority (‘NMHH’) published its market analysis decision for wholesale voice call termination on individual mobile networks. Each mobile network operator and mobile virtual network operator in Hungary is found to have SMP. Later, in June 2021, NMHH published its decision on obligations in market for wholesale voice call termination on individual mobile networks. In its decision, the NMHH maintained obligations regarding transparency, equal treatment, access and interconnection, while the accounting separation obligation was withdrawn. Magyar Telekom requested a review of the decision on market analysis and on the obligations in court. The court case is ongoing.
In July 2021 NMHH launched a sectoral inquiry on SMS termination service and retail bulk SMS service, based on a concern raised by the Hungarian Competition Office’s (‘HCO’). HCO has indicated their view that mobile service providers (including Vodafone Hungary) in Hungary may have a uniform pricing practice for SMS termination and bulk SMS. The sectoral inquiry does not have a statutory deadline, but it is estimated it will conclude in Q2 2022.
In September 2021, NMHH published an examination of the justification for maintaining the national domestic directory inquiry service as a universal service. A final decision on whether to maintain this as a universal service will follow at a later date.
The Economic Competition Office investigation into the network and spectrum sharing and possible collusion in the previous spectrum tender by Magyar Telekom and Telenor is ongoing.
Albania
In June 2020, the Albanian national regulatory authority (‘AKEP’) issued its final decision on national and international MTRs. The National MTRs will remain unchanged at 1.11 ALL/min. In November 2020, AKEP issued a public consultation on its intention to develop its own cost model to ensure that MTRs reflect Albanian market conditions and characteristics accurately, and to set an appropriate glide path for the application of the target rates.
In June 2021 AKEP approved the “Results of the cost model of wholesale mobile network services”, a study conducted by the external consultant Terra. The study proposes a reduction in the national voice MTRs with a target tariff of 0,751Lek/min and the international voice MTRs with a target tariff of 0,762 Lek/min. A 2-year glidepath is proposed for the national MTR reduction, however there is no further elaboration on the international MTRs. The document at this stage is not binding. Both national and potentially international MTRs will be subject to a market analysis conducted by AKEP as per the rules and deadlines set in the Albanian legislation. There is no information as to when this will happen.
From the first of July 2021, roaming surcharge rates have been removed in the ‘West Balkan 6’ (‘WB6’) countries (Albania, Kosovo, Montenegro, Macedonia, Serbia , Bosnia). From these dates, users can ‘roam like at home’ across the WB6 markets. It is possible for operators to implement a Fair Usage Policy for data consumption in order to protect the operator from abusive usage.
AKEP is planning to negotiate an auction for all bands (3.5 MHZ 26 GHz, 700 MHZ – all of which are currently occupied by media operators). The Auction Documents are expected to be launched for public consultation during January – March 2022, with the auction expected to take place after March 2022.
33
Vodafone Group Plc ⫶ H1 FY22 results
Vodacom: South Africa
In March 2021, the national regulatory authority (‘ICASA’) published a findings document on its market inquiry into mobile broadband services. ICASA found insufficient competition and designated Vodacom SA as a significant market power in several relevant markets at wholesale (site access, national roaming) and retail levels, proposing remedies primarily at the wholesale level. ICASA published the Draft Regulations for comment and held public hearings in August 2021. The next step is the publication of the Final Regulations and Reasons document.
In October 2020, ICASA issued an Invitation to Apply (‘ITA’) notice on the licensing process for international mobile telecommunications in respect of the provision of mobile broadband wireless access services for urban and rural areas using the complimentary bands IMT700, IMT800, IMT2600 and IMT3500, with applications closing in December 2020. ICASA also issued a composite ITA for an individual electronic communications network service license and radio frequency spectrum license for the wireless open access network with a closing date of March 2021.
In March 2021, following applications by Telkom, e.tv and MTN to review the publication of the ITAs, an interdict was granted against the ITA process pending the finalisation of the review proceedings. All parties, with the exception of e.tv, have subsequently concluded a settlement contained in consent order, granted in September 2021 by the High Court, which sets aside the ITAs. However, due to concerns that re-farming of spectrum will have on their ability to provide free-to-air broadcasting, e.tv has filed a supplementary affidavit, in which ICASA and the Minister are required to undertake a process of public consultation regarding the date of the migration to digital television, and measures to ensure customers continue to have access to free-to-air-broadcasting. ICASA and the Minister will oppose e.tv’s motion by filing an answering affidavit by 12 November 2021. The hearing is scheduled for 31 January 2022.
During April 2020, ICASA licensed available IMT spectrum on a temporary basis to 5 MNOs, including Vodacom SA, in response to the COVID-19 National State of Disaster. In August 2021, ICASA announced that it would no longer be extending the validity of temporary spectrum assignments. The current temporary spectrum licences are therefore set to expire on 30 November 2021. In October 2021 Telkom filed an application to interdict the expiry of temporary spectrum allocation, and MTN and Vodacom joined the appeal later in October. The matter is scheduled to be heard on 15 November 2021. ICASA and Rain will be opposing Telkom, MTN and Vodacom’s applications.
In May 2021, ICASA published a notice which announced the start of the Review of the Pro-competitive Conditions imposed on relevant licensees in terms of the Call Termination Regulations, to be completed by March 2022. This will be followed by cost modelling, to be completed by August 2022, and Final Regulations, to be published by September 2022.
Vodacom: Democratic Republic of the Congo
In August 2018, the Customs Authority issued a draft infringement report assessing that there were unpaid duties for alleged smuggled devices bought by Vodacom Democratic Republic of Congo (‘Vodacom DRC’) which amounted to US $44 million, to which Vodacom DRC objected. In May 2019, Vodacom DRC filed an administrative appeal at the Council of State, which is still pending.
In April 2020, a new decree introduced a Central Equipment Register System (‘CEIR’) and handset certification fees. In November 2020, Vodacom DRC was fined US $2.5 million by way of a Ministerial Decree for alleged shortcomings in its cooperation and implementation of charging mechanisms related to the CEIR system. Assessment of the Ministerial Decree indicated that its issuance was not in accordance with applicable laws and procedures on the basis that the Decree had to be gazetted prior to the fine becoming payable. Vodacom DRC appealed the fine before the Minister of Communications and sought interim suspension of the decree. A decision on the petition for interim suspension and its respective implementation measure was meant to be issued by December 2020, however, this remains pending.
34
Vodafone Group Plc ⫶ H1 FY22 results
In January 2021, Vodacom DRC received notice by the Minister of Communications, stating that a December 2020 investigation found non-compliant SIM cards without providing further details. Vodacom DRC sent a letter requesting further information on the details of the investigation. While awaiting a response to its letter in February 2021, Vodacom DRC was fined US $3.65 million by way of a Ministerial Decree for alleged non-compliance. Vodacom DRC initiated legal action and appealed for a stay of the execution of the fine for the duration of the appeal, which was granted. The national regulatory authority (‘ARPTC’) is yet to produce the report that substantiates the fine and thus the appeal has not progressed further to date.
Vodacom: Tanzania
In February 2020, the national regulatory authority (‘TCRA’) issued new SIM Card Registration Regulations to formalise the ‘biometric only’ SIM registration requirement and restrict ownership of the number of SIMs by customers. Vodacom Tanzania has implemented biometric only SIM registration and is participating in the TCRA’s process on intended barring of non-compliant SIMs, whereby the final deadline for compliance has been set to 30 October 2021.
In February 2021, the TCRA issued a letter stating that Vodacom Tanzania has been found non-compliant with Quality of Service (‘QoS’) regulations and imposed a fine of US $3.5 million. However, instead of payment of this fine, Vodacom Tanzania entered a binding commitment to invest the equivalent value into its network for the purposes of improving network QoS in the non-compliant areas, by 31 October 2021.
In February 2021, the TCRA issued new Rules on Bundle Tariffs, Promotions and Special Offers and a Directive on a minimum data price floor to be implemented by April 2021. The TCRA further requested implementation of the rates in accordance with a glide path that will achieve the minimum price floor by July 2022. Vodacom Tanzania has complied with the request.
Vodacom: Mozambique
The Communications Regulator assigned Vodacom Mozambique temporary spectrum (2x5 MHz of 1800 band). This was assigned under a COVID-19 relief program and this temporary license remains valid whilst the “State of Calamity” declaration remains in force in Mozambique.
In April 2021, the Communications Regulator published new MTRs for the period 2021-2024, retrospectively effective as of January 2021. There is a glide path in place, with a final rate in 2024 of M 0,12.
Vodacom: Lesotho
In December 2019, the Lesotho Communications Authority (‘LCA’) issued a notice of enforcement against Vodacom Lesotho premised on its view that the company’s statutory external auditors were not independent, as required by the Companies Act. In September 2020, the LCA issued a penalty of M 134 million against Vodacom Lesotho. Despite Vodacom Lesotho reserving its rights for appeal within the statuary timeframe, in October 2020 the LCA issued a notice of revocation of the operating licence of Vodacom Lesotho for failure to pay a penalty of M134 million. Thirty percent of this fine was determined by the LCA to be payable in October 2020 and the balance was suspended for a period of five years, on the condition that Vodacom Lesotho is not found guilty for breach of any of its regulatory obligations in the future. Vodacom Lesotho has launched an application in the Lesotho High Court to have both determinations of the LCA imposing the fine and revoking its operating licence, respectively, reviewed and set aside. The Lesotho High Court has, in the meantime, issued an order interdicting the LCA from, inter alia, enforcing the payment of the said fine and revoking Vodacom Lesotho’s operating licence. The Lesotho High Court heard the matter in December 2020, and Vodacom Lesotho is awaiting judgement.
In June 2021, the Minister of Communications issued new SIM and Device Registration Regulations without prior consultations. The Regulations included a requirement for biometric registration and penalties for non-compliance. Subsequently, the Parliament directed the LCA to withdraw the Regulations to allow for a comprehensive public stakeholder consultation prior to promulgating regulations. The LCA initiated the consultation process which closed on the 30 September 2021. Vodacom Lesotho has made submissions through the consultation process and will also continue to engage with the LCA to shape the final Regulations.
35
Vodafone Group Plc ⫶ H1 FY22 results
In August 2021, Vodacom Lesotho received approval for the renewal of its 3500MHz trial 5G spectrum (1x100MHz) for a further 6 months period expiring 31 March 2022. Vodacom Lesotho is engaging the LCA to convert the trial license to a permanent license.
Turkey
In December 2019, the national regulatory authority (‘ICTA’) approved and published its Fixed Broadband Wholesale Market Analysis, stating that Vodafone Turkey will have access to Türk Telekom fibre at different network levels based on regulated terms and fees and retail tariffs will be subject to an ex-ante margin squeeze test. In February 2021, ICTA published the rules and procedures for this test, which shall be applied from October 2021.
ICTA’s proposed action to broaden the scope of the 3G coverage to include new metropolitan areas was suspended by the Council of State motion, as Vodafone Turkey appealed to the administrative court. In April 2019, the Council of State accepted the case and annulled the ICTA decision. As of March 2021, Plenary Session of Administrative Law Divisions rejected ICTA’s requests and finalised the judgment in favour of Vodafone Turkey.
In August 2019, Vodafone Turkey received the payment order for the administrative penalty of TL 138 million due to the breach of pre-information obligations as per the District Sales Regulation & Consumer Law on Value Added Services. As the Court of Appeal upheld the decision, the Ministry of Commerce applied to the Council of State against the decision. The penalty amount was reduced by making use of the Amnesty Law, thus waiving the appeal case. In addition, engagement with the Ministry is ongoing, and a legislative proposal has been drafted for the Ministry’s previous and upcoming penalties to ensure a healthy investment environment.
Egypt
In September 2020, Vodafone Egypt submitted its proposal to acquire 40 MHz in response to the national regulatory authority (‘NTRA’) issuance of a bid for spectrum acquisition in the 2600 MHz band. In December 2020, Vodafone Egypt’s technical and financial proposal was accepted, and a new License Annex was signed between NTRA and Vodafone after payment of US $270 million and the remaining 50% to be paid over two years in two equal instalments. Vodafone Egypt has received the spectrum for testing.
Ghana
In January 2018, Vodafone Ghana paid 30% of the judgment debt into court (€4.8 million) in line with a Conditional Stay of Execution in relation to a High Court decision, affirmed by a panel of the Court of Appeal, on a parcel of land located at Afransi in the Central Region of Ghana. In May 2019, the Court of Appeal affirmed the High Court’s decision. An appeal is pending before the Supreme Court and another application which seeks to stop the plaintiff from enforcing the judgment was expected in April 2020. In July 2020, the Supreme Court granted Vodafone Ghana’s application to produce this new evidence as part of the documents to be relied on. The Plaintiff in December 2020 also filed for leave to produce new evidence at the trial. The Supreme Court heard this application in January 2021 and a date will be given by the Court for a mini trial of the matter to be conducted at the Supreme Court after which the Court will deliver its judgment
In June 2020, the national regulatory authority (‘NRA’) declared MTN Ghana as a SMP in Ghana. With immediate effect, several corrective market interventions were announced as follows: Asymmetric MTR Pricing, National Roaming, Price Floor/Ceiling as well as Technology Neutrality in the 1800MHz frequency band. While asymmetric pricing was implemented in October 2020 for a two-year period, national roaming and the other market interventions are still under discussion. In July 2021, as directed by the NRA, Vodafone Ghana entered technical and commercial discussions with MTN Ghana concerning National Roaming. Vodafone Ghana and MTN Ghana are executing a proof-of-concept in 3 regions for unidirectional roaming (the Oti Region, Volta Region and Northern East Region).
36
Vodafone Group Plc ⫶ H1 FY22 results
In January 2020, Vodafone Ghana successfully renewed its 900MHz and 1800MHz licenses for 10 years, until 2029, pending payment of US25 million. Vodafone Ghana entered negotiations with the Ministry of Communications and Digitalisation (‘MoCD’) and Ministry of Finance to amend the terms of renewal in relation to increasing duration of license, payment terms, re-farming rights, and additional 800MHz spectrum, which continue. The MoCD has extended the payment deadline date to 31 December 2021.
The NRA assigned 2x5MHz of 800MHz frequency band on a temporary basis until June 2021 as part of Covid-19 measures. Use of the temporary spectrum has been further extended till 31 December 2021.
The NRA has requested customer information from licensees as part of the Government’s tracking and tracing programme (‘EI 63’), which following an application was found by the High Court in June 2020 to be compliant with the emergency order. Information is still being provided to the government for this purpose. However, in August 2021, the High Court ruled in favour of a private citizen, Mr. F. Kwarteng, who argued that the government’s information request infringed his personal privacy right. The Court held that certain portions of the EI 63 infringed on the privacy of customers and that these portions should be expunged, in particular: (i) Operators are prohibited from providing un-anonymised data on mobile money transactions and merchant details to the Government, as this is outside the scope of EI 63; (ii) Offending portions of EI 63 are to be expunged within 12 months of the Judgment; (iii) Vodafone was ordered to pay the Applicable GHS10,000.00 for contesting the Applicant’s position.
Legal proceedings
The following section describes developments in legal proceedings which may have, or have had, during the six months ended 30 September 2021, a significant effect on the financial position or profitability of the Company and its subsidiaries. This section should be read in conjunction with the information contained under ‘Legal proceedings’ on pages 195 to 197 of the Group’s Annual Report on Form 20-F for the year ended 31 March 2021.
Indian tax cases
Refer to ‘Contingent liabilities and legal proceedings on page 52.
UK: IPCom v Vodafone Group Plc and Vodafone UK
Refer to ‘Contingent liabilities and legal proceedings on page 53.
Spain and UK: TOT v Vodafone Group Plc, VGSL and Vodafone UK
Refer to ‘Contingent liabilities and legal proceedings on page 53.
37
Vodafone Group Plc ⫶ H1 FY22 results
Risk factors
The key factors and uncertainties that could have a significant effect on the Group’s financial performance, include the following:
Cyber threat and information security
An external cyber-attack, insider threat or supplier breach could cause service interruption or the loss of confidential data. Cyber threats could lead to major customer, financial, reputational and regulatory impacts.
Geo-political risk in supply chain
Our operation is dependent on a wide range of global suppliers. Disruption to our supply chain could mean that we are unable to execute our strategic plans, resulting in increased cost, reduced choice and network quality.
Adverse political and regulatory measures
Adverse political and regulatory measures impacting our strategy could result in increased costs, create a competitive disadvantage or have negative impact on our returns.
Strategic transformation
Failure to execute on organisational transformation and portfolio activity (includes integrations, mergers or separations) could result in loss of business value and additional cost.
Global economic disruption
A global economic crisis could result in reduced telecommunication spend from businesses and consumers, as well as limit our access to financial markets and availability of liquidity, increasing our cost of capital and limiting debt financing options.
Technology failures
Network, system or platform outages resulting from internal or external events could lead to reduced customer satisfaction, reputational damage and/or regulatory penalties.
Market disruption
New telecoms entering the market could lead to significant price competition and lower margins.
Disintermediation and failure to innovate
Failure in product innovation or ineffective response to threats from emerging technology or disruptive business models could lead to a loss of customer relevance, market share and new/existing revenue streams.
Legal and regulatory compliance
Failure to comply with laws and regulations could lead to a loss of trust, financial penalties and/or suspension of our licence to operate.
IT transformation
Failure to design and execute IT transformation of our legacy estate could lead to business loss, customer dissatisfaction or reputational exposure.
TCFD disclosure
We recognise that climate change poses a number of physical (i.e. caused by the increased frequency and severity of extreme weather events) and transition-related (i.e. economic, technology or regulatory challenges related to moving to a greener economy) risks and opportunities for our business. As part of our commitment to operate ethically and sustainably, we are dedicated to understanding climate-related risks and opportunities and embedding responses to these into our business strategy and operations. We are aligning internal processes with the recommendations of the Task Force on Climate-related Financial Disclosures (‘TCFD’) focusing on four thematic areas that are core elements of how organisations operate: governance, strategy, risk management, metrics and targets.
38
Vodafone Group Plc ⫶ H1 FY22 results
Unaudited condensed consolidated financial statements
Consolidated income statement
| | | | Six months ended 30 September | ||
| | | | 2021 | | 20201 |
|
| Note |
| €m |
| €m |
Revenue |
| 2 |
| |
| |
Cost of sales | | |
| ( |
| ( |
Gross profit | | |
| |
| |
Selling and distribution expenses | | |
| ( |
| ( |
Administrative expenses | | |
| ( |
| ( |
Net credit losses on financial assets | | | | ( | | ( |
Share of results of equity accounted associates and joint ventures | | |
| |
| |
Other (expense)/income | | |
| ( |
| |
Operating profit |
| 2 |
| |
| |
Investment income | | |
| |
| |
Financing costs | | |
| ( |
| ( |
Profit before taxation | | |
| |
| |
Income tax credit/(expense) |
| 3 |
| |
| ( |
Profit for the financial period | | |
| |
| |
| | | | | | |
Attributable to: | | | | | | |
– Owners of the parent | | |
| |
| |
– Non-controlling interests | | |
| |
| |
Profit for the financial period | | |
| |
| |
| | | | | | |
Profit per share | | | | | | |
Total Group: | | | | | | |
– Basic |
| 5 |
| | ||
– Diluted |
| 5 |
| | ||
Consolidated statement of comprehensive income/expense
| | Six months ended 30 September | ||
| | 2021 | | 20201 |
|
| €m |
| €m |
Profit for the financial period |
| |
| |
Other comprehensive income/(expense): | | | | |
Items that may be reclassified to the income statement in subsequent periods: | | | | |
Foreign exchange translation differences, net of tax |
| ( |
| ( |
Foreign exchange translation differences transferred to the income statement | | — | | ( |
Other, net of tax2 |
| |
| ( |
Total items that may be reclassified to the income statement in subsequent periods |
| |
| ( |
Items that will not be reclassified to the income statement in subsequent periods: | | | | |
Net actuarial gains/(losses) on defined benefit pension schemes, net of tax |
| |
| ( |
Total items that will not be reclassified to the income statement in subsequent periods |
| |
| ( |
Other comprehensive income/(expense) |
| |
| ( |
Total comprehensive income/(expense) for the financial period |
| |
| ( |
| | | | |
Attributable to: | | | | |
– Owners of the parent |
| |
| ( |
– Non-controlling interests |
| |
| |
|
| |
| ( |
Notes:
| 1. |
| 2. |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
39
Vodafone Group Plc ⫶ H1 FY22 results
Unaudited condensed consolidated financial statements
Consolidated statement of financial position
| | |
| 30 September | | 31 March |
| | | | 2021 | | 2021 |
|
| Note |
| €m |
| €m |
Non-current assets | | | | | | |
Goodwill |
|
|
| |
| |
Other intangible assets |
|
|
| |
| |
Property, plant and equipment |
|
|
| |
| |
Investments in associates and joint ventures |
| 7 |
| |
| |
Other investments |
|
|
| |
| |
Deferred tax assets |
|
|
| |
| |
Post employment benefits |
|
|
| |
| |
Trade and other receivables |
|
|
| |
| |
|
|
|
| |
| |
Current assets | | | | | | |
Inventory |
|
|
| |
| |
Taxation recoverable |
|
|
| |
| |
Trade and other receivables |
|
|
| |
| |
Other investments |
|
|
| |
| |
Cash and cash equivalents |
|
|
| |
| |
|
|
|
| |
| |
Assets held for sale |
| 4 |
| |
| |
Total assets |
|
|
| |
| |
| | | | | | |
Equity | | | | | | |
Called up share capital |
|
|
| |
| |
Additional paid-in capital |
|
|
| |
| |
Treasury shares | | |
| ( |
| ( |
Accumulated losses | | |
| ( |
| ( |
Accumulated other comprehensive income |
|
|
| |
| |
Total attributable to owners of the parent |
|
|
| |
| |
Non-controlling interests |
|
|
| |
| |
Total equity |
|
|
| |
| |
| | | | | | |
Non-current liabilities | | | | | | |
Borrowings |
|
|
| |
| |
Deferred tax liabilities |
|
|
| |
| |
Post employment benefits |
|
|
| |
| |
Provisions |
|
|
| |
| |
Trade and other payables |
|
|
| |
| |
|
|
|
| |
| |
Current liabilities | | | | | | |
Borrowings |
|
|
| |
| |
Financial liabilities under put option arrangements | | | | | | |
Taxation liabilities |
|
|
| |
| |
Provisions |
|
|
| |
| |
Trade and other payables |
|
|
| |
| |
|
|
|
| |
| |
Total equity and liabilities |
|
|
| |
| |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
40
Vodafone Group Plc ⫶ H1 FY22 results
Unaudited condensed consolidated financial statements
Consolidated statement of changes in equity
| | |
| Additional |
| |
| Accumulated |
| Equity |
| Non- |
| |
| | Share | | paid-in | | Treasury | | comprehensive | | attributable to | | controlling | | |
| | capital | | capital1 | | shares | | losses2 | | the owners | | interests | | Total equity |
|
| €m |
| €m |
| €m |
| €m |
| €m |
| €m |
| €m |
1 April 2020 brought forward | | | | | | ( | | ( | | | | | | |
Issue or reissue of shares |
| — |
| |
| |
| ( |
| |
| — |
| |
Share-based payments |
| — |
| |
| — |
| — |
| |
| |
| |
Transactions with non-controlling shareholders in subsidiaries |
| — |
| — |
| — |
| ( |
| ( |
| ( |
| ( |
Comprehensive (expense)/income3 |
| — |
| — |
| — |
| ( |
| ( |
| |
| ( |
Dividends |
| — |
| — |
| — |
| ( |
| ( |
| ( |
| ( |
30 September 2020 |
| |
| |
| ( |
| ( |
| |
| |
| |
| | | | | | | | | | | | | | |
1 April 2021 brought forward |
| | | | | ( | | ( | | | | |
| |
Issue or reissue of shares |
| — | | | | | | ( | | | | — |
| |
Share-based payments |
| — | | | | — | | — | | | | |
| |
Transactions with non-controlling shareholders in subsidiaries |
| — | | — | | — | | ( | | ( | | |
| |
Comprehensive (expense)/income |
| — | | — | | — | | | | | | |
| |
Dividends |
| — | | — | | — | | ( | | ( | | ( |
| ( |
Purchase of treasury shares |
| — | | — | | ( | | — | | ( | | — |
| ( |
30 September 2021 |
| |
| |
| ( |
| ( | | | | |
| |
Notes:
| 1. |
| 2. |
| 3. |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
41
Vodafone Group Plc ⫶ H1 FY22 results
Unaudited condensed consolidated financial statements
Consolidated statement of cash flows
| | | | Six months ended 30 September | ||
| | | | 2021 | | 2020 |
|
| Note |
| €m |
| €m |
Inflow from operating activities |
| 8 |
| |
| |
| | | | | | |
Cash flows from investing activities | | | | | | |
Purchase of interests in subsidiaries, net of cash acquired |
| |
| ( |
| ( |
Purchase of interests in associates and joint ventures | | |
| ( |
| — |
Purchase of intangible assets | | |
| ( |
| ( |
Purchase of property, plant and equipment | | |
| ( |
| ( |
Purchase of investments | | |
| ( |
| ( |
Disposal of interests in subsidiaries, net of cash disposed | | | | — | | |
Disposal of interests in associates and joint ventures | | | | — | | |
Disposal of property, plant and equipment and intangible assets | | |
| |
| |
Disposal of investments | | |
| |
| |
Dividends received from associates and joint ventures | | |
| |
| |
Interest received | | |
| |
| |
Outflow from investing activities | | |
| ( |
| ( |
| | | | | | |
Cash flows from financing activities1 | | | | | | |
Proceeds from issue of long-term borrowings | | |
| |
| |
Repayment of borrowings | | |
| ( |
| ( |
Net movement in short-term borrowings | | | | | | ( |
Net movement in derivatives2 | | | | ( | | |
Interest paid3 | | | | ( | | ( |
Purchase of treasury shares | | | | ( | | — |
Issue of ordinary share capital and reissue of treasury shares | | | | | | |
Equity dividends paid |
| |
| ( |
| ( |
Dividends paid to non-controlling shareholders in subsidiaries | | |
| ( |
| ( |
Other transactions with non-controlling shareholders in subsidiaries | | |
| |
| ( |
Other movements with associates and joint ventures | | |
| — |
| |
Outflow from financing activities | | |
| ( |
| ( |
| | | | | | |
Net cash outflow | | |
| ( |
| ( |
| | | | | | |
Cash and cash equivalents at beginning of the financial period4 |
| |
| |
| |
Exchange gain/(loss) on cash and cash equivalents | | |
| |
| ( |
Cash and cash equivalents at end of the financial period4 |
| |
| |
| |
Notes:
| 1. |
| 2. |
| 3. |
| 4. |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
42
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
1 Basis of preparation
The unaudited condensed consolidated financial statements for the six months ended 30 September 2021:
| ● | are prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (‘IAS 34’) as issued by the International Accounting Standards Board (‘IASB’) and as adopted by the United Kingdom; |
| ● | are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the Group’s annual report for the year ended 31 March 2021; |
| ● | apply the same accounting policies, presentation and methods of calculation as those followed in the preparation of the Group’s consolidated financial statements for the year ended 31 March 2021, which were prepared in accordance with International Accounting Standards in conformity with the requirements of the UK Companies Act 2006, International Financial Reporting Standards (‘IFRS’) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and IFRS as issued by the IASB. Income taxes are accrued using the tax rate that is expected to be applicable for the full financial year, adjusted for certain discrete items which occurred in the interim period in accordance with IAS 34; |
| ● | include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented; |
| ● | do not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006; and |
| ● | were approved by the Board of directors on 16 November 2021. |
The information relating to the year ended 31 March 2021 is extracted from the Group’s published annual report for that year, which has been delivered to the Registrar of Companies, and on which the auditors’ report was unqualified and did not contain any emphasis of matter or statements under section 498(2) or 498(3) of the UK Companies Act 2006.
The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and the reported amounts of revenue and expenses during the period. Actual results could vary from these estimates. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Going concern
As outlined on page 3, trading during the period demonstrated a robust operating model for the Group. The Group has a strong liquidity position with €
Critical accounting judgements and estimates
The Group’s critical accounting judgements and estimates were disclosed in the Group’s annual report for the year ended 31 March 2021; in addition, accounting judgements exercised by management as at 30 September 2021 relating to identifying indicators of impairment are disclosed below. The ongoing impact of COVID-19 has been factored into our latest forecasts, including those considered as part of management’s review of potential indicators of impairment; judgements relating to this review are discussed below.
43
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
1 Basis of preparation (continued)
Judgements relating to potential indicators of impairment
The Group performs its annual impairment test for goodwill and indefinite lived intangible assets at 31 March and when there is an indicator of impairment of an asset. At each reporting period date judgement is exercised by management in determining whether any internal or external sources of information observed are indicative that the carrying amount of any of the Group’s cash generating units (‘CGUs’) is not recoverable.
As part of this assessment, management reviews the key assumptions underlying the valuation process performed during the annual impairment test at 31 March 2021, as well as other market factors. Indicators assessed include the year to date performance of the Group’s CGUs against their latest forecast, as well as considering any valuation implications from observable movements in share prices, market multiples, risk free rates and long-term growth rate estimates.
Based on management’s assessment, no indications of impairment were identified for the Group’s CGUs during the period to 30 September 2021 that would indicate the carrying amount of any of the Group’s CGUs is not recoverable.
New accounting pronouncements adopted
On 1 April 2021, the Group adopted certain new accounting policies where necessary to comply with amendments to IFRS, none of which had a material impact on the consolidated results, financial position or cash flows of the Group. Further details are provided in the Group’s annual report for the year ended 31 March 2021.
2 Segmental analysis
Updated segmental reporting structure
Following the IPO of Vantage Towers A.G. (‘Vantage Towers’) in March 2021, Vodafone has updated its segmental reporting structure to reflect the way in which the Group now manages its operations. Vantage Towers is now reported as a new segment within the Vodafone Group’s financial results. This change in reporting structure has taken effect for the year ending 31 March 2022 onwards and has no impact on service revenue. Total revenue is unaffected as charges from Vantage Towers to operating companies are eliminated on consolidation. There has been no change to the segmental presentation of amounts derived from the income statement for comparative periods, which will remain as previously disclosed. Segmental information for the half year to 30 September 2021 is also presented on the previous basis of segmental reporting.
Operating segments
The Group’s operating segments are established on the basis of those components of the Group that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Group has determined the chief operating decision maker to be its Chief Executive Officer. The Group has a single group of similar services and products, being the supply of communications services and related products.
Revenue is attributed to a country based on the location of the Group company reporting the revenue. Transactions between operating segments are charged at arm’s-length prices. With the exception of Vodacom, which is a legal entity encompassing South Africa and certain other smaller African markets, and Vantage Towers which comprises companies providing mobile tower infrastructure in a number of European markets, segment information is primarily provided on the basis of geographic areas, being the basis on which the Group manages the rest of its worldwide interests.
The operating segments for Germany, Italy, UK, Spain, Vodacom and Vantage Towers are individually material for the Group and are each reporting segments for which certain financial information is provided. The aggregation of other operating segments into the Other Europe and Other Markets reporting segments reflects, in the opinion of management, the similar local market economic characteristics and regulatory environments for each of those operating segments as well as the similar products and services sold and comparable classes of customers. In the case of the Other Europe region (comprising Albania, Czech Republic, Greece, Hungary, Ireland, Portugal and Romania), this largely reflects membership or a close association with the European Union, while the Other Markets segment (comprising Egypt, Ghana and Turkey) largely includes developing economies with less stable economic or regulatory environments. Common Functions is a separate reporting segment and comprises activities which are undertaken primarily in central Group entities that do not meet the criteria for aggregation with other reporting segments.
Revenue disaggregation
Revenue reported for the period includes revenue from contracts with customers, comprising service and equipment revenue, as well as other revenue items including revenue from leases and interest revenue arising from transactions with a significant financing component. The tables overleaf disaggregate the Group’s revenue by reporting segment.
44
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
2 Segmental analysis (continued)
The table below presents the results for the six months ended 30 September 2021 in line with our updated segmental reporting structure.
|
| |
| |
| Revenue |
| |
| |
| |
| |
| | | | | | from | | | | | | | | |
| | | | | | contracts | | | | | | Total | | |
| | Service |
| Equipment |
| with |
| Other |
| Interest |
| segment |
| Adjusted |
| | revenue | | revenue | | customers | | revenue1 | | revenue | | revenue | | EBITDAaL |
| | €m | | €m | | €m | | €m | | €m | | €m | | €m |
Six months ended 30 September 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| | | | | | | | | | | |
| |
Italy |
| | | | | | | | | | | |
| |
UK |
| | | | | | | | | | | |
| |
Spain |
| | | | | | | | | | | |
| |
Other Europe |
| | | | | | | | | | | |
| |
Vodacom |
| | | | | | | | | | | | | |
Other Markets |
| | | | | | | | — | | | | | |
Vantage Towers | | — | | — | | — | | | | — | | | | |
Common Functions2 | | | | | | | | | | — | | | | ( |
Eliminations |
| ( | | — | | ( | | ( | | ( | | ( | | — |
Group | | | | | | | | | | | | | | |
The tables below present the results for the six months ended 30 September 2021 and 30 September 2020 under the previous basis of segmental reporting.
|
| |
| |
| Revenue |
| |
| |
| |
| |
| | | | | | from | | | | | | | | |
| | | | | | contracts | | | | | | Total | | |
| | Service |
| Equipment |
| with |
| Other |
| Interest |
| segment |
| Adjusted |
| | revenue | | revenue | | customers | | revenue1 | | revenue | | revenue | | EBITDAaL |
| | €m | | €m | | €m | | €m | | €m | | €m | | €m |
Six months ended 30 September 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| |
| |
| |
| |
| |
| |
| |
Italy |
| |
| |
| |
| |
| |
| |
| |
UK |
| |
| |
| |
| |
| |
| |
| |
Spain |
| |
| |
| |
| |
| |
| |
| |
Other Europe |
| |
| |
| |
| |
| |
| |
| |
Vodacom |
| |
| |
| |
| |
| |
| |
| |
Other Markets |
| |
| |
| |
| |
| — |
| |
| |
Common Functions2 | | | | | | | | | | — | | | | ( |
Eliminations |
| ( |
| — |
| ( |
| ( |
| ( |
| ( |
| — |
Group | | | | | | | | | | | | | | |
| | |
| |
| Revenue |
| |
| |
| |
| |
| | | | | | from | | | | | | | | |
| | | | | | contracts | | | | | | Total | | |
| | Service |
| Equipment |
| with |
| Other |
| Interest |
| segment |
| Adjusted |
| | revenue | | revenue | | customers | | revenue1 | | revenue | | revenue | | EBITDAaL |
|
| €m | | €m | | €m | | €m | | €m | | €m | | €m |
Six months ended 30 September 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| |
| |
| |
| |
| |
| |
| |
Italy |
| |
| |
| |
| |
| |
| |
| |
UK |
| |
| |
| |
| |
| |
| |
| |
Spain |
| |
| |
| |
| |
| |
| |
| |
Other Europe |
| |
| |
| |
| |
| |
| |
| |
Vodacom |
| |
| |
| |
| |
| |
| |
| |
Other Markets3 |
| |
| |
| |
| |
| — |
| |
| |
Common Functions2 | | | | | | | | | | — | | | | ( |
Eliminations | | ( | | — | | ( | | ( | | — | | ( | | — |
Group3 | | | | | | | | | | | | | | |
Notes:
| 1. |
| 2. |
| 3. | In the previously published results for the six months ended 30 September 2020, the Group’s |
45
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
2 Segmental analysis (continued)
A reconciliation of Adjusted EBITDAaL, the Group’s measure of segment profit, to the Group’s profit before taxation for the financial period is shown below.
| | Six months ended 30 September | ||
| | 2021 | | 20201 |
|
| €m |
| €m |
Adjusted EBITDAaL |
| |
| |
Restructuring costs |
| ( |
| ( |
Interest on lease liabilities |
| |
| |
Loss on disposal of property, plant & equipment and intangible assets | | ( | | ( |
Depreciation and amortisation on owned assets | | ( | | ( |
Share of results of equity accounted associates and joint ventures | | | | |
Other (expense)/income2 | | ( | | |
Operating profit |
| |
| |
Investment income |
| |
| |
Financing costs |
| ( |
| ( |
Profit before taxation | | | | |
Notes:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s |
| 2. | For the six months ended 30 September 2020, the Group recorded a gain of € |
The Group’s non-current assets are disaggregated as follows:
|
| 30 September |
| 31 March |
| | 2021 | | 20211 |
| | €m | | €m |
Non-current assets2 |
|
|
|
|
Germany |
| |
| |
Italy |
| |
| |
UK |
| |
| |
Spain |
| |
| |
Other Europe |
| |
| |
Vodacom |
| |
| |
Other Markets |
| |
| |
Vantage Towers | | | | |
Common Functions3 |
| |
| |
Group |
| |
| |
Notes:
| 1. | Non-current assets at 31 March 2021 have been re-presented to reflect the updated segmental reporting structure. |
| 2. | Comprises goodwill, other intangible assets and property, plant & equipment. |
| 3. | Comprises central teams and business functions. |
46
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
3 Taxation
| | Six months ended 30 September | ||
| | 2021 | | 20201 |
|
| €m |
| €m |
United Kingdom corporation tax (expense)/income2 | | | | |
Current period | | ( |
| ( |
Adjustments in respect of prior periods | | |
| |
Overseas current tax (expense)/income | | | | |
Current period | | ( | | ( |
Adjustments in respect of prior periods | | ( |
| |
Total current tax expense |
| ( |
| ( |
| | | | |
Deferred tax on origination and reversal of temporary differences | | | | |
United Kingdom deferred tax |
| |
| |
Overseas deferred tax |
| |
| ( |
Total deferred tax credit/(expense) |
| |
| ( |
Total income tax credit/(expense) |
| |
| ( |
Notes:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s |
| 2. | UK operating profits are more than offset by statutory allowances for capital investment in the UK network and systems plus ongoing interest costs including those arising from the € |
The six months ended 30 September 2021 includes deferred tax on the use of Luxembourg losses of €
4 Assets held for sale
Assets held for sale at 30 September 2021 and 31 March 2021 comprise the Group’s
The relevant assets are detailed in the table below.
|
| 30 September |
| 31 March |
| | 2021 | | 2021 |
| | €m | | €m |
Non-current assets | | |
| |
Investments in associates and joint ventures | | |
| |
Total assets held for sale | | | | |
47
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
5 Earnings per share
| | Six months ended 30 September | ||
| | 2021 | | 2020 |
|
| Millions |
| Millions |
Weighted average number of shares for basic earnings per share | | | ||
Effect of dilutive potential shares: restricted shares and share options |
| |
| |
Weighted average number of shares for diluted earnings per share |
| |
| |
Earnings per share attributable to owners of the parent during the period | | | ||
| | Six months ended 30 September | ||
| | 2021 | | 20201 |
|
| €m |
| €m |
Profit for basic and diluted earnings per share |
| |
| |
| | | | |
|
| eurocents |
| eurocents |
Basic profit per share |
| | | |
Diluted profit per share |
| | | |
Note:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s |
6 Equity dividends
| | Six months ended 30 September | ||
|
| 2021 | | 2020 |
|
| €m |
| €m |
Declared during the financial period: | | | | |
Final dividend for the year ended 31 March 2021: |
| |
| |
Proposed after the end of the reporting period and not recognised as a liability: | | | | |
Interim dividend for the year ending 31 March 2022: |
| |
| |
7 Investment in associates and joint ventures
|
| 30 September |
| 31 March |
| | 2021 | | 2021 |
| | €m | | €m |
VodafoneZiggo Group Holding B.V. | | | | |
INWIT S.p.A. | | | | |
TPG Telecom Limited | | | | |
Other | | | | |
Investment in joint ventures |
| |
| |
Investment in associates |
| |
| |
|
| |
| |
48
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
8 Reconciliation of net cash flow from operating activities
| | Six months ended 30 September | ||
| | 2021 | | 20201 |
|
| €m |
| €m |
Profit for the financial period | | | | |
Investment income | | ( |
| ( |
Financing costs | | |
| |
Income tax (credit)/expense | | ( |
| |
Operating profit | | |
| |
Adjustments for: | | |
| |
Share-based payments and other non-cash charges | | |
| |
Depreciation and amortisation | | |
| |
Loss on disposal of property, plant and equipment and intangible assets | | |
| |
Share of result of equity accounted associates and joint ventures | | ( |
| ( |
Other income expense/(income) | | |
| ( |
Increase in inventory | | ( |
| ( |
Increase in trade and other receivables | | ( |
| ( |
Decrease in trade and other payables | | ( | | ( |
Cash generated by operations | | |
| |
Taxation | | ( |
| ( |
Net cash flow from operating activities | | |
| |
Note:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s |
9 Fair value of financial instruments
The table below sets out the financial instruments held at fair value by the Group.
|
| 30 September |
| 31 March |
| | 2021 | | 2021 |
| | €m | | €m |
Financial assets at fair value: | | | | |
Money market funds (included within Cash and cash equivalents)1 | | | | |
Debt and equity securities (included within Other investments)2 | | | | |
Derivative financial instruments (included within Trade and other receivables)2 | | | | |
Trade receivables at fair value through Other comprehensive income (included within Trade and other receivables)2 | | | | |
| | | | |
Financial liabilities at fair value: | | | | |
Derivative financial instruments (included within Trade and other payables)2 | | | | |
| | | | |
Notes:
| 1. | Items are measured at fair value and the valuation basis is Level 1 classification, which comprises financial instruments where fair value is determined by unadjusted quoted prices in active markets. |
| 2. | Quoted debt and equity securities of € |
The fair value of the Group’s financial assets and financial liabilities held at amortised cost approximates to fair value with the exception of non-current bonds with a carrying value of €
49
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
10 Related party transactions
Transactions with joint ventures and associates
Related party transactions with the Group’s joint ventures and associates primarily consists of fees for the use of products and services including network airtime and access charges, fees for the provision of network infrastructure and cash pooling ventures. No related party transactions have been entered into during the year which might reasonably affect any decisions made by the users of these unaudited condensed consolidated financial statements except as disclosed below.
| | Six months ended 30 September | ||
| | 2021 | | 2020 |
|
| €m |
| €m |
Sales of goods and services to associates |
| |
| |
Purchase of goods and services from associates |
| |
| |
Sales of goods and services to joint ventures |
| |
| |
Purchase of goods and services from joint ventures |
| |
| |
Interest income receivable from joint ventures1 |
| |
| |
Interest expense payable to joint ventures2 | | | | |
| | 30 September | | 31 March |
| | 2021 | | 2021 |
|
| €m |
| €m |
Trade balances owed: | | | |
|
from associates |
| |
| |
to associates |
| |
| |
from joint ventures |
| |
| |
to joint ventures |
| |
| |
Other balances owed from associates | | — | | |
Other balances owed from joint ventures1 |
| |
| |
Other balances owed to joint ventures2 |
| |
| |
Notes:
| 1. | Amounts arise primarily through VodafoneZiggo, TPG Telecom Limited and INWIT S.p.A. Interest is charged in line with market rates. |
| 2. | Amounts are primarily in relation to leases of tower space from INWIT S.p.A. |
In the six months ended 30 September 2021 the Group made contributions to defined benefit pension schemes of €
Dividends of €
Dividends received from associates and joint ventures are disclosed in the consolidated statement of cash flows.
50
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
11 Contingent liabilities and legal proceedings
Note 29 “Contingent liabilities and legal proceedings” to the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2021 sets forth the Group’s commitments, contingent liabilities and legal proceedings as of 31 March 2021. There have been no material changes to the Group’s commitments, contingent liabilities or legal proceedings during the period covered by this report, except as disclosed below.
Vodafone Idea
As part of the agreement to merge Vodafone India and Idea Cellular in 2017, the parties agreed a mechanism for payments between the Group and Vodafone Idea Limited (‘VIL’) pursuant to the difference between the crystallisation of certain identified contingent liabilities in relation to legal, regulatory, tax and other matters, and refunds relating to Vodafone India and Idea Cellular. Cash payments or cash receipts relating to these matters must have been made or received by VIL before any amount becomes due from or owed to the Group. Any future payments by the Group to VIL as a result of this agreement would only be made after satisfaction of this and other contractual conditions.
The Group’s potential exposure under this mechanism is now capped at INR
On 15 September 2021, the Government of India announced a relief package and a series of reforms for the telecom sector including a
There are significant uncertainties in relation to VIL’s ability to make payments in relation to liabilities covered by the mechanism and no further cash payments are considered probable from the Group as at 30 September 2021.
The carrying value of the Group’s investment in VIL is €
Indus Towers merger
The merger of Indus and Bharti Infratel completed on 19 November 2020 and the combined entity was renamed Indus Towers Ltd (“Indus Towers”). Under the terms of the merger a security package was agreed for the benefit of Indus Towers which can be invoked in the event that VIL is unable to satisfy certain payment obligations under its Master Services Agreements with Indus Towers (the ‘MSAs’). The security package includes:
- | A prepayment in cash of INR |
- | A primary pledge over |
- | A secondary pledge over shares owned by Vodafone Group in Indus Towers (ranking behind Vodafone’s existing lenders for the remaining € |
In the event of non-payment of relevant MSA obligations by VIL, Indus Towers will have recourse to the primary pledge shares and, after repayment of the Bank Borrowings in full, any secondary pledged shares, up to the value of the liability cap. VIL’s ability to make MSA payments to Indus Towers is uncertain and depends on a number of factors including its ability to raise additional funding.
51
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
11 Contingent liabilities and legal proceedings (continued)
Indian tax cases
In January 2012, the Supreme Court of India found against the Indian tax authority and in favour of Vodafone International Holdings BV (‘VIHBV’) in proceedings brought after the Indian tax authority alleged potential liability under the Income Tax Act 1961 for the failure by VIHBV to deduct withholding tax from consideration paid to the Hutchison Telecommunications International Limited group (‘HTIL’) in connection with its 2007 disposal to VIHBV of its interests in a wholly-owned Cayman Island incorporated subsidiary that indirectly held interests in Vodafone India Limited (‘Vodafone India’).
The Finance Act 2012 of India, which amended various provisions of the Income Tax Act 1961 with retrospective effect, contained provisions intended to tax any gain on transfer of shares in a non-Indian company, which derives substantial value from underlying Indian assets, such as VIHBV’s transaction with HTIL in 2007. Further, it sought to subject a purchaser, such as VIHBV, to a retrospective obligation to withhold tax. On 3 January 2013, VIHBV received a letter from the Indian tax authority reminding it of the tax demand raised prior to the Supreme Court of India’s judgement and updating the interest element of that demand to a total amount of INR
In response to the 2013 letter, VIHBV initiated arbitration proceedings under the Netherlands-India Bilateral Investment Treaty (‘Dutch BIT’). The arbitration hearing took place in February 2019. In September 2020, the arbitration tribunal issued its award unanimously ruling in VIHBV’s favour. The Indian Government applied in Singapore to set aside the award primarily on jurisdictional grounds. The proceedings have been transferred to the Singapore International Commercial Court (‘SICC’).
Separately, on 24 January 2017, Vodafone Group Plc and Vodafone Consolidated Holdings Limited formally commenced arbitration with the Indian Government under the United Kingdom-India Bilateral Investment Treaty (‘UK BIT’) in respect of retrospective tax claims under the Income Tax Act 1961 (as amended by the Finance Act 2012). Although relating to the same underlying facts as the claim under the Dutch BIT, the claim brought by Vodafone Group Plc and Vodafone Consolidated Holdings Limited is a separate and distinct claim under a different treaty. After the Delhi High Court first upheld, and subsequently dismissed, the Indian Government’s application for an injunction preventing Vodafone from progressing the UK BIT arbitration as an abuse of process, the Indian Government appealed the dismissal. Hearings took place from 2018 to 2020 with frequent adjournments. Following the award in the Dutch BIT, the Delhi High Court dismissed the injunction appeal proceedings. Vodafone has undertaken to proceed with the arbitration commenced under the UK BIT only if the award already published under the Dutch BIT is set aside. The Delhi High Court also permitted the formation of the UK BIT tribunal.
In August 2021 the Indian Parliament passed new tax legislation which affects the retrospective effect of the Finance Act 2012. The impact of this legislation on the Dutch and UK BIT proceedings, in particular whether the Indian Government will withdraw its challenge to the arbitration award in the Dutch BIT, is unknown as of the date of this report. The SICC granted a stay in the Dutch BIT proceedings and agreed not to set a date for the hearing until after 1 January 2022.
VIHBV and Vodafone Group Plc will continue to defend vigorously any allegation that VIHBV or Vodafone India is liable to pay tax in connection with the transaction with HTIL. Based on the facts and circumstances of this matter, including the outcome of legal proceedings to date, the Group considers that it is more likely than not that no present obligation exists at 30 September 2021.
52
Vodafone Group Plc ⫶ H1 FY22 results
Notes to the unaudited condensed consolidated financial statements
11 Contingent liabilities and legal proceedings (continued)
UK: IPCom v Vodafone Group Plc and Vodafone UK
On 22 February 2019, IPCom sued Vodafone Group Plc and Vodafone Limited for alleged infringement of two patents claimed to be essential to UMTS and LTE network standards. If IPCom could have established that one or more of its patents was valid and infringed, it could have sought an injunction against the UK network if a global licence for the patents was not agreed. The Court ordered expedited trials on the infringement and validity issues. The trial on the first patent was in November 2019 and removed the risk of an injunction so IPCom withdrew the second patent trial listed for May 2020, although the court did find that there had been limited infringement of the patent. Both IPCom and Vodafone appealed certain aspects of the judgement from the first trial at a hearing in January 2021 with the Court of Appeal finding in favour of both parties on different issues. The validity of the first patent was considered by the Board of Appeal of the European Patent Office at a hearing in July 2021. The patent was found to be invalid and was revoked. As a result Vodafone has
Spain and UK: TOT v Vodafone Group Plc, VGSL and Vodafone UK
The Group has been defending cases brought against it in Spain and the UK by TOT Power Control and Top Optimized Technologies (jointly ‘TOT’) alleging breach of confidentiality and patent infringement. In November 2021 TOT agreed to drop all of its claims against the Group in Spain and the UK for payment, by Vodafone, of a non-material amount and therefore the cases have been settled.
Further background relating to these claims is provided in the Group’s Annual Report for the financial year ended 31 March 2021.
12 Subsequent events
Vodafone Egypt
On 10 November 2021, the Group announced that it had agreed to transfer its
The total consideration is €
Under the terms of the sale and purchase agreement, the cash element of the Purchase Consideration will be adjusted for any movement in the net debt and agreed working capital of Vodafone Egypt between signing and closing. Completion of the transaction is subject to a number of regulatory approvals, but is expected to close before 31 March 2022.
Share buyback programme
On 17 November 2021, the Group announced that it had commenced a new irrevocable and non-discretionary share buyback programme. The programme will further reduce the issued share capital of Vodafone to partially offset the increase in the issued share capital as a result of the maturing of the first tranche of the subordinated Mandatory Convertible Bonds. Goldman Sachs will serve as the principal and will decide on the timing of share purchases. The programme, which commences on 18 November 2021 and will end no later than 8 March 2022, will repurchase no more than
53
Vodafone Group Plc ⫶ H1 FY22 results
Non-GAAP measures
In the discussion of the Group’s reported operating results, non-GAAP measures are presented to provide readers with additional financial information that is regularly reviewed by management. However, this additional information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be comparable with similarly-titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself a measure defined under GAAP. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
The non-GAAP measures discussed in this document are listed below, together with the location of the definition and the reconciliation between the non-GAAP measure and the closest equivalent GAAP measure.
Non-GAAP measure |
| Defined on page |
| Closest equivalent GAAP measure |
| Reconciled on page |
Performance metrics | | | | | | |
Organic Adjusted EBITDAaL growth | | Page 54 | | Not applicable | | Not applicable |
Organic percentage point change in Adjusted EBITDAaL margin | | Page 54 | | Not applicable | | Not applicable |
Organic revenue growth | | Page 54 | | Revenue | | Pages 55 and 56 |
Organic service revenue growth | | Page 54 | | Service revenue | | Pages 55 and 56 |
Organic mobile service revenue growth | | Page 54 | | Service revenue | | Pages 55 and 56 |
Organic fixed service revenue growth | | Page 54 | | Service revenue | | Pages 55 and 56 |
Organic retail service revenue growth | | Page 54 | | Service revenue | | Pages 55 and 56 |
Financing metrics | | | | | | |
Adjusted net financing costs | | Page 22 | | Net financing costs | | Page 22 |
Organic growth
All amounts marked with an “*” in this document represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21 results for Vantage Towers have been adjusted to reflect a full year of operation on a proforma basis in order to be comparable to FY22.
Organic growth is calculated for revenue and profitability metrics, as follows:
| - | Adjusted EBITDAaL; |
| - | Percentage point change in Adjusted EBITDAaL margin; |
| - | Revenue |
| - | Service revenue; |
| - | Mobile service revenue; |
| - | Fixed service revenue; and |
| - | Retail service revenue. |
Whilst organic growth is not intended to be a substitute for reported growth, nor is it superior to reported growth, we believe that the measure provides useful and necessary information to investors and other interested parties for the following reasons:
| - | It provides additional information on underlying growth of the business without the effect of certain factors unrelated to its operating performance; |
| - | It is used for internal performance analysis; and |
| - | It facilitates comparability of underlying growth with other companies (although the term “organic” is not a defined term under GAAP and may not, therefore, be comparable with similarly titled measures reported by other companies). |
We have not provided a comparative in respect of organic growth rates as the current rates describe the change between the beginning and end of the current period, with such changes being explained by the commentary in this document. If comparatives were provided, significant sections of the commentary for prior periods would also need to be included, reducing the usefulness and transparency of this document.
54
Vodafone Group Plc ⫶ H1 FY22 results
Six months ended 30 September 2021
| | | | | | Reported | | M&A and | | Foreign | | Organic |
| | H1 FY22 | | H1 FY21 | | growth | | Other | | exchange | | growth* |
|
| €m |
| €m |
| % |
| pps |
| pps |
| % |
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| 5,777 |
| 5,723 |
| 0.9 |
| 0.3 |
| — |
| 1.2 |
Mobile service revenue |
| 2,541 |
| 2,503 |
| 1.5 |
| — |
| — |
| 1.5 |
Fixed service revenue |
| 3,236 |
| 3,220 |
| 0.5 |
| 0.4 |
| — |
| 0.9 |
Italy |
| 2,187 |
| 2,249 |
| (2.8) |
| 0.3 |
| — |
| (2.5) |
Mobile service revenue |
| 1,589 |
| 1,638 |
| (3.0) |
| — |
| — |
| (3.0) |
Fixed service revenue |
| 598 |
| 611 |
| (2.1) |
| 0.8 |
| — |
| (1.3) |
UK |
| 2,521 |
| 2,401 |
| 5.0 |
| 0.6 |
| (4.4) |
| 1.2 |
Mobile service revenue |
| 1,797 |
| 1,700 |
| 5.7 |
| — |
| (4.4) |
| 1.3 |
Fixed service revenue |
| 724 |
| 701 |
| 3.3 |
| 2.0 |
| (4.4) |
| 0.9 |
Spain |
| 1,866 |
| 1,880 |
| (0.7) |
| 0.1 |
| — |
| (0.6) |
Other Europe |
| 2,502 |
| 2,411 |
| 3.8 |
| 0.1 |
| (0.6) |
| 3.3 |
Vodacom |
| 2,271 |
| 1,949 |
| 16.5 |
| — |
| (11.1) |
| 5.4 |
Other Markets |
| 1,752 |
| 1,679 |
| 4.3 |
| — |
| 14.8 |
| 19.1 |
Vantage Towers |
| — |
| — |
| — |
| — |
| — |
| — |
Common Functions |
| 252 |
| 219 |
|
|
|
|
|
|
|
|
Eliminations |
| (118) |
| (93) |
|
|
|
|
|
|
|
|
Total service revenue |
| 19,010 |
| 18,418 |
| 3.2 |
| 0.2 |
| (0.6) |
| 2.8 |
Other revenue |
| 3,479 |
| 3,009 |
|
|
|
|
|
|
|
|
Revenue |
| 22,489 |
| 21,427 |
| 5.0 |
| 0.1 |
| (0.9) |
| 4.2 |
| | | | | | | | | | | | |
Other growth metrics |
|
|
|
|
|
|
|
|
|
|
|
|
Vodafone Business - Service revenue |
| 5,086 |
| 4,984 |
| 2.0 |
| 0.5 |
| (1.3) |
| 1.2 |
Germany - Retail service revenue |
| 5,636 |
| 5,557 |
| 1.4 |
| 0.3 |
| — |
| 1.7 |
| | | | | | | | | | | | |
Adjusted EBITDAaL1,2 |
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| 2,892 |
| 2,844 |
| 1.7 |
| 6.0 |
| — |
| 7.7 |
Italy |
| 917 |
| 800 |
| 14.6 |
| 0.1 |
| — |
| 14.7 |
UK |
| 638 |
| 636 |
| 0.3 |
| 5.8 |
| (4.3) |
| 1.8 |
Spain |
| 445 |
| 488 |
| (8.8) |
| 8.2 |
| — |
| (0.6) |
Other Europe |
| 836 |
| 870 |
| (3.9) |
| 9.2 |
| (0.8) |
| 4.5 |
Vodacom |
| 1,062 |
| 891 |
| 19.2 |
| — |
| (13.6) |
| 5.6 |
Other Markets |
| 683 |
| 601 |
| 13.6 |
| — |
| 14.7 |
| 28.3 |
Vantage Towers |
| 305 |
| — |
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Percentage point change in Adjusted EBITDAaL margin1,2 |
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| 44.9 | % | 44.6 | % | 0.3 |
| 2.4 |
| — |
| 2.7 |
Italy |
| 36.6 | % | 31.9 | % | 4.7 |
| (0.1) |
| — |
| 4.6 |
UK |
| 20.2 | % | 21.3 | % | (1.1) |
| 1.2 |
| (0.1) |
| — |
Spain |
| 21.3 | % | 23.8 | % | (2.5) |
| 1.9 |
| — |
| (0.6) |
Other Europe |
| 29.8 | % | 32.0 | % | (2.2) |
| 2.7 |
| (0.1) |
| 0.4 |
Vodacom |
| 36.3 | % | 36.8 | % | (0.5) |
| — |
| (0.5) |
| (1.0) |
Other Markets |
| 34.9 | % | 31.7 | % | 3.2 |
| — |
| (0.5) |
| 2.7 |
Vantage Towers |
| 49.9 | % | — |
|
|
|
|
|
|
|
|
Notes:
| 1. | In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had been terminated. Consequently, the held for sale classification was reversed resulting in the following changes to the previously published results for the six months ended 30 September 2020: Adjusted EBITDAaL for Other Markets declined by €12 million. As a result, the Adjusted EBITDAaL margin for Other Markets declined by 0.6 pps. |
| 2. | In respect of Adjusted EBITDAaL and Adjusted EBITDAaL margin information presented in the tables above, the ‘M&A and Other’ column includes adjustments for Vantage Towers to reflect a full year of operation on a proforma basis so that organic metrics are calculated on a comparable basis. |
55
Vodafone Group Plc ⫶ H1 FY22 results
Quarter ended 30 September 2021
| | | | | | Reported | | M&A and | | Foreign | | Organic |
| | Q2 FY22 | | Q2 FY21 | | growth | | Other | | exchange | | growth* |
|
| €m |
| €m |
| % |
| pps |
| pps |
| % |
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| 2,905 |
| 2,883 |
| 0.8 |
| 0.2 |
| — |
| 1.0 |
Mobile service revenue |
| 1,287 |
| 1,277 |
| 0.8 |
| — |
| — |
| 0.8 |
Fixed service revenue |
| 1,618 |
| 1,606 |
| 0.7 |
| 0.5 |
| — |
| 1.2 |
Italy |
| 1,111 |
| 1,129 |
| (1.6) |
| 0.2 |
| — |
| (1.4) |
Mobile service revenue |
| 807 |
| 823 |
| (1.9) |
| — |
| — |
| (1.9) |
Fixed service revenue |
| 304 |
| 306 |
| (0.7) |
| 0.8 |
| — |
| 0.1 |
UK |
| 1,265 |
| 1,208 |
| 4.7 |
| 1.6 |
| (5.7) |
| 0.6 |
Mobile service revenue |
| 902 |
| 854 |
| 5.6 |
| 1.0 |
| (5.6) |
| 1.0 |
Fixed service revenue |
| 363 |
| 354 |
| 2.5 |
| 3.0 |
| (5.8) |
| (0.3) |
Spain |
| 941 |
| 960 |
| (2.0) |
| 0.1 |
| — |
| (1.9) |
Other Europe |
| 1,274 |
| 1,240 |
| 2.7 |
| 0.1 |
| (0.4) |
| 2.4 |
Vodacom |
| 1,145 |
| 999 |
| 14.6 |
| — |
| (11.5) |
| 3.1 |
Other Markets |
| 923 |
| 839 |
| 10.0 |
| — |
| 9.7 |
| 19.7 |
Vantage Towers |
| — |
| — |
| — |
| — |
| — |
| — |
Common Functions |
| 127 |
| 110 |
|
|
|
|
|
|
|
|
Eliminations |
| (71) |
| (60) |
|
|
|
|
|
|
|
|
Total service revenue |
| 9,620 |
| 9,308 |
| 3.4 |
| 0.4 |
| (1.4) |
| 2.4 |
Other revenue |
| 1,768 |
| 1,613 |
|
|
|
|
|
|
|
|
Revenue |
| 11,388 |
| 10,921 |
| 4.3 |
| 0.1 |
| (1.5) |
| 2.9 |
| | | | | | | | | | | | |
Other growth metrics |
|
|
|
|
|
|
|
|
|
|
|
|
Vodafone Business - Service revenue |
| 2,544 |
| 2,520 |
| 1.0 |
| 1.0 |
| (1.9) |
| 0.1 |
Germany - Retail service revenue |
| 2,836 |
| 2,802 |
| 1.2 |
| 0.3 |
| — |
| 1.5 |
Quarter ended 30 June 2021
| | | | | | Reported | | M&A and | | Foreign | | Organic |
| | Q1 FY22 | | Q1 FY21 | | growth | | Other | | exchange | | growth* |
|
| €m |
| €m |
| % |
| pps |
| pps |
| % |
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Germany |
| 2,872 |
| 2,840 |
| 1.1 |
| 0.3 |
| — |
| 1.4 |
Mobile service revenue |
| 1,254 |
| 1,226 |
| 2.3 |
| — |
| — |
| 2.3 |
Fixed service revenue |
| 1,618 |
| 1,614 |
| 0.2 |
| 0.4 |
| — |
| 0.6 |
Italy |
| 1,076 |
| 1,120 |
| (3.9) |
| 0.3 |
| — |
| (3.6) |
Mobile service revenue |
| 782 |
| 815 |
| (4.0) |
| — |
| — |
| (4.0) |
Fixed service revenue |
| 294 |
| 305 |
| (3.6) |
| 0.9 |
| — |
| (2.7) |
UK |
| 1,256 |
| 1,193 |
| 5.3 |
| 0.2 |
| (3.0) |
| 2.5 |
Mobile service revenue |
| 895 |
| 846 |
| 5.8 |
| — |
| (3.1) |
| 2.7 |
Fixed service revenue |
| 361 |
| 347 |
| 4.0 |
| 0.9 |
| (2.8) |
| 2.1 |
Spain |
| 925 |
| 920 |
| 0.5 |
| 0.3 |
| — |
| 0.8 |
Other Europe |
| 1,228 |
| 1,171 |
| 4.9 |
| 0.1 |
| (0.8) |
| 4.2 |
Vodacom |
| 1,126 |
| 950 |
| 18.5 |
| — |
| (10.6) |
| 7.9 |
Other Markets |
| 829 |
| 840 |
| (1.3) |
| — |
| 19.7 |
| 18.4 |
Vantage Towers |
| — |
| — |
| — |
| — |
| — |
| — |
Common Functions |
| 125 |
| 109 |
|
|
|
|
|
|
|
|
Eliminations |
| (47) |
| (33) |
|
|
|
|
|
|
|
|
Total service revenue |
| 9,390 |
| 9,110 |
| 3.1 |
| 0.2 |
| — |
| 3.3 |
Other revenue |
| 1,711 |
| 1,396 |
|
|
|
|
|
|
|
|
Revenue |
| 11,101 |
| 10,506 |
| 5.7 |
| 0.1 |
| (0.2) |
| 5.6 |
| | | | | | | | | | | | |
Other growth metrics |
|
|
|
|
|
|
|
|
|
|
|
|
Vodafone Business - Service revenue |
| 2,542 |
| 2,464 |
| 3.2 |
| 0.3 |
| (0.8) |
| 2.7 |
Germany - Retail service revenue |
| 2,800 |
| 2,755 |
| 1.6 |
| 0.3 |
| — |
| 1.9 |
56
Vodafone Group Plc ⫶ H1 FY22 results
Definitions
Key terms are defined below. See page 54 for the location of non-GAAP measure definitions.
Term |
| Definition |
Adjusted EBITDAaL (previously referred to as Adjusted EBITDA although no change in the definition). | Adjusted EBITDAaL is operating profit after depreciation on lease-related right of use assets and interest on leases but excluding depreciation, amortisation and gains/losses on disposal of owned fixed assets and excluding share of results in equity accounted associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other income and expense and significant items that are not considered by management to be reflective of underlying performance. | |
Africa | | Comprises the Vodacom Group and businesses in Egypt and Ghana. |
ARPU | | Average revenue per user, defined as customer revenue and incoming revenue divided by average customers. |
B2C | | Business-to-Consumer refers to the process of selling products and services directly between a business and consumers who are the end-users. |
Capital additions | | Comprises the purchase of property, plant and equipment and intangible assets, other than licence and spectrum payments and integration capital expenditure. |
Churn | | Total gross customer disconnections in the period divided by the average total customers in the period. |
Common Functions | | Comprises central teams and business functions. |
Converged customer | | A customer who receives fixed and mobile services (also known as unified communications) on a single bill or who receives a discount across both bills. |
Depreciation and amortisation | | The accounting charge that allocates the cost of a tangible or intangible asset to the income statement over its useful life. This measure includes the profit or loss on disposal of property, plant and equipment and computer software. Includes Right-of-use assets. |
Direct costs | | Direct costs include interconnect costs and other direct costs of providing services. |
Eliminations | | Refers to the removal of intercompany transactions to derive the consolidated financial statements. |
Europe | | Comprises the Group’s European businesses and the UK. |
Fixed service revenue | | Service revenue (see below) relating to the provision of fixed line and carrier services. |
GAAP | | Generally Accepted Accounting Principles. |
IFRS | | International Financial Reporting Standard. |
Incoming revenue | | Comprises revenue from termination rates for voice and messaging to Vodafone customers. |
Integration capital expenditure | | Capital expenditure incurred in relation to significant changes in the operating model, such as the integration of recently acquired subsidiaries. |
Internet of Things (‘IoT’) | | The network of physical objects embedded with electronics, software, sensors, and network connectivity, including built-in mobile SIM cards, that enables these objects to collect data and exchange communications with one another or a database. |
Mobile customer revenue | | Represents revenue from mobile customers from bundles that include a specified number of minutes, messages or megabytes of data that can be used for no additional charge (‘in-bundle’) and revenues from minutes, messages or megabytes of data which are in excess of the amount included in customer bundles (‘out-of-bundle’). Mobile in-bundle and out-of-bundle revenues are combined to simplify presentation. |
Mobile service revenue | | Service revenue (see below) relating to the provision of mobile services. |
MVNO | | Mobile Virtual Network Operator. |
Next generation networks (‘NGN’) | | Fibre or cable networks typically providing high-speed broadband over 30Mbps. |
Operating expenses | | Comprise primarily sales and distribution costs, network and IT related expenditure and business support costs. |
Other Europe | | Other Europe markets include Portugal, Ireland, Greece, Romania, Czech Republic, Hungary and Albania. |
Other Markets | | Other Markets comprise Turkey, Egypt and Ghana. |
Other revenue | | Other revenue includes connection fees, equipment revenue, interest income and lease revenue. |
Reported growth | | Reported growth is based on amounts reported in euros and determined under IFRS. |
Retail revenue | | Retail revenue comprises service revenue (see below) excluding Mobile Virtual Network Operator (‘MVNO’) and Fixed Virtual Network Operator (‘FVNO’) wholesale revenue. |
Roaming and Visitor | | Roaming: allows customers to make calls, send and receive texts and data on our and other operators’ mobile networks, usually while travelling abroad. Visitors: revenue received from other operators or markets when their customers roam on one of our markets’ networks. |
Service revenue | | Service revenue is all revenue related to the provision of or ongoing services including but not limited to, monthly access changes, airtime usage, roaming, incoming and outgoing network usage by non-Vodafone customers and interconnect charges for incoming calls. |
SME | | Small and medium sized enterprises. |
Vodafone Business | | Vodafone Business is part of the Group and partners with businesses of every size to provide a range of business-related services. |
Notes
| 1. | References to Vodafone are to Vodafone Group Plc and references to Vodafone Group are to Vodafone Group Plc and its subsidiaries unless otherwise stated. Vodafone, the Vodafone Speech Mark Devices, Vodacom and Together we can are trade marks owned by Vodafone. Vantage Towers is a trade mark owned by Vantage Towers AG. Other product and company names mentioned herein may be the trade marks of their respective owners. |
| 2. | All growth rates reflect a comparison to the quarter ended 30 September 2020 unless otherwise stated. |
| 3. | References to “Q1” and “Q2” are to the three months ended 30 June 2021 and 30 September 2021, respectively, unless otherwise stated. References to the “year”, “financial year” or “FY22” are to the financial year ending 31 March 2022. References to the “last year”, “last financial year” or “FY21” are to the financial year ended 31 March 2021 unless otherwise stated. |
| 4. | Vodacom refers to the Group’s interest in Vodacom Group Limited (‘Vodacom’) as well as its operations, including subsidiaries in South Africa, DRC, Tanzania, Mozambique and Lesotho. |
| 5. | This trading update contains references to our and our affiliates’ websites. Information on any website is not incorporated into this update and should not be considered part of this update. |
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Vodafone Group Plc ⫶ H1 FY22 results
Forward-looking statements and other matters
This report contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives.
In particular, such forward-looking statements include, but are not limited to, statements with respect to: the Group’s sustainable business strategy and 2025 targets; expectations for the Group’s future performance generally; expectations regarding the operating environment and market conditions and trends, including customer usage, competitive position and macroeconomic pressures, price trends and opportunities in specific geographic markets; intentions and expectations regarding the development, launch and expansion of products, services and technologies, either introduced by Vodafone or by Vodafone in conjunction with third parties or by third parties independently, including the launch of VodaPay; expectations regarding the Group’s environmental targets, expectations regarding the integration or performance of current and future investments, associates, joint ventures, non-controlled interests and newly acquired businesses.
Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “will”, “anticipates”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets” (including in their negative form or other variations). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: external cyber-attacks, insider threats or supplier breaches; general economic and political conditions including as a consequence of the COVID-19 pandemic, of the jurisdictions in which the Group operates, including as a result of Brexit, and changes to the associated legal, regulatory and tax environments; increased competition; increased disintermediation; levels of investment in network capacity and the Group’s ability to deploy new technologies, products and services; rapid changes to existing products and services and the inability of new products and services to perform in accordance with expectations; the ability of the Group to integrate new technologies, products and services with existing networks, technologies, products and services; the Group’s ability to generate and grow revenue; a lower than expected impact of new or existing products, services or technologies on the Group’s future revenue, cost structure and capital expenditure outlays; slower than expected customer growth, reduced customer retention, reductions or changes in customer spending and increased pricing pressure; the Group’s ability to extend and expand its spectrum position to support ongoing growth in customer demand for mobile data services; the Group’s ability to secure the timely delivery of high-quality products from suppliers; loss of suppliers, disruption of supply chains and greater than anticipated prices of new mobile handsets; changes in the costs to the Group of, or the rates the Group my charge for, terminations and roaming minutes; the impact of a failure or significant interruption to the Group’s telecommunications, networks, IT systems or data protection systems; the Group’s ability to realise expected benefits from acquisitions, partnerships, joint ventures, franchises, brand licences, platform sharing or other arrangements with third parties; acquisitions and divestment of Group businesses and assets and the pursuit of new, unexpected strategic opportunities; the Group’s ability to integrate acquired business or assets; the extent of any future write-downs or impairment charges on the Group’s assets, or restructuring charges incurred as a result of an acquisition or disposition; a developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes into account in determining the level of dividends; the Group’s ability to satisfy working capital requirements; changes in foreign exchange rates; changes in the regulatory framework in which the Group operates; the impact of legal or other proceedings against the Group or other companies in the communications industry and changes in statutory tax rates and profit mix.
Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under “Forward-looking statements” and “Principal risk factors and uncertainties” in the Group’s annual report for the financial year ended 31 March 2021. The annual report can be found on the Group’s website (https://investors.vodafone.com/reports-information/latest-annual-results). All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Any forward-looking statements are made of the date of this presentation. Subject to compliance with applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not undertake any obligation to do so.
Copyright © Vodafone Group 2021
-End-
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Vodafone Group Plc ⫶ H1 FY22 results
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
VODAFONE GROUP PUBLIC LIMITED COMPANY | |
(Registrant) | |
| |
| |
Dated: November 23, 2021 | |
| |
By: /s/ R E S MARTIN | |
Name: Rosemary Martin | |
Title: Group General Counsel and Company Secretary | |
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