Vodafone Fixed/Convergence Open Office - 19-20 September 2017 - Vodafone.com
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Vodafone Fixed/Convergence Open Office 19-20 September 2017
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2
Fixed/Convergence: A significant growth opportunity Nick Read Group Chief Financial Officer
Key takeaways
We have created Europe's largest NGN footprint, thanks to our
1 flexible infrastructure strategy
The shift to NGN is a significant window of opportunity for Vodafone
2 to achieve substantial and profitable market share gains
Significant fixed-line scale and advanced TV/content capabilities allow
3 us to unlock convergence benefits
Fibre builds will bring incremental growth and attractive returns,
4 given our disciplined investment criteria
4
The shift to NGN creates a window of opportunity for
substantial market share gains…
European fixed broadband customers (in Vodafone footprint)1 (m)
140
120
100
80
Legacy
copper
60
40
NGN
20
0
2015 2016 2017e 2018e 2019e 2020e 2021e
(% of BB base on NGN) 42% 51% 59% 66% 71% 76% 81% 5
Source: Analysys Mason
Vodafone has created a significant NGN footprint
European homes marketable (Q1 17/18) (m) Owned European NGN network vs. peers1 (m)
51
163 Not covered
Total incl’ ADSL and NGN
136 38
NGN wholesale 36
98
31
41 Strategic wholesale partnerships2
24
Owned NGN network 18
36 17
% of homes 22 25 60 83 100
Liberty DT Vodafone Orange BT TEF TI
Leading NGN marketable
footprint in EU, #3 on-net
1. Vodafone estimates as at Q1 17/18 6
2. Includes Telefonica (selected areas in Spain), Open Fiber (Italy) and SIRO (Ireland)
We are Europe’s fastest growing broadband provider
European broadband net adds (FY 16/17)1 (m) NGN on-net and off-net penetration (FY 16/17) (%)
On-net Off-net
Vodafone 1.3
44%
ORA 0.8
0.7 27% 27%
LBTY
22%
19%
0.2
BT
12%
8%
DT 0.2 4% 5%
2.5%
0% 1% 0% 1%
TEF 0.1 Europe NL DE ES PT IT UK
1. Note: JV with Ziggo is included in Vodafone and Liberty Global, based on company reports 7
And have reached significant scale
Total broadband customer base in Europe (Q1 17/18)1(m) Revenue market share (Q1 17/18) 1 (%)
Mobile Fixed
39%
37%
18.6 18.1 33%
17.5 32%
16.8 30%
22%
21%
9.3
8.1 7% 8%
7.3 4%
DT Orange LBTY Vodafone BT TEF TI DE UK IT PT NL
1. Vodafone includes VodafoneZiggo.
Source: Vodafone estimates and company reports 8
Fixed scale unlocks convergence opportunities
Non-converged to converged (FY 16/17) (m) Churn improvement (Q1 17/18) (%)
Consumer customers’ convergence pyramid1 Vodafone Spain, consumer contract customer churn
Households / SIMs
~40% of
fixed households 4 8 fully converged on Vodafone
have fixed and
mobile, and Upgrade
~17% of Vodafone Household / SIMs 22%
mobile SIMs
2 3 not in integrated bundles
Cross-sell
9 53 Single product
Fixed-only Mobile-only Vodafone customers
households SIMs
Acquire 9% 7%
Non-Vodafone
104
Households
Mass
Market
customers within
footprint
Mobile only 3P 4P (incl. TV)
Broadband Mobile SIMs
households
1. Mobile active consumer SIMs; excludes Eastern Europe; SIMs per household calculation based on regional averages 9
Supported by our leading TV platforms and expertise
TV markets TV customers (m)
VodafoneZiggo
Analogue
• Competitive premium content
Digital portfolio
• Distributor/partnership model
preferred to exclusive ownership
4.0 4.0
• TV drives ARPU growth (~20-50%)1
4.9 4.8 4.7 4.5
5.0 4.9 Giga TV
4.6 4.7 4.9 5.0 5.1 5.2
Live TV
Connected screens
Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18
Content in the Cloud
On Demand
1. When customers move from 2P to 3P (incl. TV) 10Markets are moving to convergence at different speeds
Fixed-mobile convergence as % of total fixed broadband households (%)
Market Market Vodafone consumer (Q1 17/18)2
FY 11/121 FY 16/171
88%
84
24%
48
21%
21 22 74%
8% 27%
12
8 7 9
3 5 4
2
ES PT NL DE UK IT
1. Analysys Mason – Multi-Play in Europe 11
2. Number of consumer broadband (RGUs) linked to a converged customer account relative to total consumer broadband customersWe have good momentum
Europe converged consumer net adds (LTM)1 (000s) Europe consumer converged customers (Q1 17/18) (m)
Fully converged customers and penetration of consumer broadband base
Europe 4.4
Spain Total Europe Italy
Spain
220 689 165 2.3
VodafoneZiggo² 0.6
Italy 0.5
Germany UK Germany 0.5
195 93
UK 0.1
Other Europe 0.4
• ~60% of European broadband net adds are converged • On average 2 SIMs per customer
over the last 12 months • Significant penetration potential
1. Last 12 months (Q2 16/17 to Q1 17/18). Excludes VodafoneZiggo
2. VodafoneZiggo stated as at Q4 16/17 12Vodafone Germany: Gigabit Investment Plan
Approx €2bn investment in fibre over the next 4 years… … to drive attractive incremental growth and returns
Giga-Business Under-served market:
• Targeting 100,000 companies in around •Summary Fixed as a % of European
service revenue1
1. We have created Europe's largest NGN footprint, thanks FY 16/17
to our flexible infrastructure strategy
2. The shift to NGN is a significant window of opportunity 28%
for Vodafone to achieve substantial and profitable market
share gains
3. Significant fixed-line scale and TV/content capabilities allow
us to unlock convergence benefits
4. Fibre builds will bring incremental growth and attractive FY 11/12
returns, given our disciplined investment criteria:
- IRR materially above WACC
12%
- Typical payback period 4-7 years
- Predictable regulatory framework
1. Excludes Vodafone Netherlands in all periods 14Vodafone Fixed/Convergence Open Office Vodafone Italy
Market overview
Service revenue (FY 16/17) (€bn) Mobile revenue share (FY16/17) (%) Fixed revenue share (FY 16/17) (%)
Others Others Others Vodafone
Fastweb Vodafone
6 3 8 7
6 18 WindTre Vodafone Fastweb
32 12
32
WindTre
19
FY 16/17 WindTre 7
51 33 66
TIM TIM TIM
Mobile customers (m) Fixed broadband customers (m) TV subscribers (000s)
Q1 17/18 Q1 17/18 Q1 17/18
30.0 30.3 7.4 590
22.8
2.3 2.4 2.4
10
Vodafone TIM1 WindTre Vodafone TIM WindTre Fastweb Vodafone TV TIMvision
1. Including M2M 16Our fixed footprint
Homes marketable (Q1 17/18) (m) Homes marketable with NGN (Q1 17/18) vs. peers1
Not covered
28.6
DSL (ULL + BS)
26.9
NGN Wholesale (FTTC)
13.3
Wholesale partnership
5.0 (FTTH Open Fiber)
3.5 Build (FTTC)
13.3m HHs 16.9m HHs 7.8m HHs 11.5m HHs
% HHs 12% 17% 47% 94% 100%
Build + Strategic partnership + Wholesale
FTTC FTTH Wholesale
Up to
3.5m HHs 1.5m HHs 9.5m HHs 8.3m HHs
Including Metroweb
By 2022, across 271 cities
in A&B areas
Initial self-build programme; Strategic Potential for a FTTC VULA access
reviewed following Open partnership with further 7m HHs via wholesale
Fiber agreement Open Fiber in C&D areas agreement with TIM
1. Vodafone estimate and company reports 17 17Commercial momentum in fixed and increasing NGN mix
Net add performance (000s) Total broadband market share & share of net adds (LTM) (%)
Total broadband net adds NGN net adds Market share (Q1 17/18) Share of customer net adds (LTM)
46
38
23
15 18 15
14 14
10
6
224 TIM Vodafone Fastweb WindTre Others
168
140
NGN broadband market share & share of net adds (LTM) (%)
Market share (Q1 17/18) Share of customer net adds (LTM)
44 47
27
FY 14/15 FY 15/16 FY 16/17 22 24
14 13
7
1 1
TIM Vodafone Fastweb WindTre Others
Source: Company reports 18FTTH delivering profitable growth
Acquisition rate1 (Index: Copper=100) Churn rate (Index: Copper=100)
-50%
2.0x -40%
100
1.6x
100
Copper FttC FttH Copper FttC FttH
1. Annual sales expressed as a percentage of covered HHs (average) 19Convergence still an untapped opportunity for Vodafone Italy
Convergence adoption still limited in Italy Strategy on Convergence
(% of fixed BB HHs with fixed-mobile bundles)
Get 100% of family SIMs from fixed
3.5x
customers
35%
Grow value with Vodafone TV and contents
10% Leverage on consumer IoT
development
5%
Increase ARPA and loyalty
Italy 2014 Italy 2016 EU Top 5 2016
Note: Internal market research 20Our convergence proposition
# Performance and reliability
Vodafone One • IperFibra and Mobile 4.5G
IPERFIBRA & 4.5G in a single offer • With Giga Vacanza take your broadband
to satisfy all family’s needs connection on holiday
• With Vodafone Always Connected you will
never be left without Data or Voice services
# Best entertainment with Vodafone TV
• IperFibra • Calls
• Fixed line • SMS • NOW TV Entertainment
• Giga + Pass
social&chat • HD Experience
• Maximum personalisation
# Exclusive advantages for your family
Vodafone TV IoT Add SIMs Pass • With Vodafone IoT, keep your most loved
• Calls ones safe and connected
• SMS
• Giga • Additional SIMs for your family
at an exclusive price
21Convergence progress
Converged customers and penetration ARPU and churn impact
Converged customers Converged BB RGUs as a % of
consumer broadband customers1
600 ARPU uplift Customer churn reduction (%)
27% (Q1 17/18) (Q1 17/18)
500
-50%
400
20%
325
300 29%
+28€
200 Mobile customer
€27 14%
ARPU uplift
100
0 (7€)
Q1 16/17 Q1 17/18 (€7) Typical discount Mobile Only Converged
1. Number of consumer broadband (RGUs) linked to a converged customer account relative to total consumer broadband customers 22Vodafone Fixed/Convergence Open Office Vodafone Spain
Market overview
Total Service revenue (FY 16/17) (%) Vodafone consumer convergence revenue (%)
Vodafone
19
Other 10 €23.5bn 52
Movistar Convergence
53 FY 16/17 47 Non-convergence
19
Orange
Mobile contract customers (m) Fixed broadband customers (m) TV subscribers (m)
Q1 17/18 Q1 17/18 Q1 17/18
13.3 6.0 3.7
11.6 11.4
4.2
3.2
1.3
2.1 0.5 2.1
Vodafone Orange Movistar Vodafone Orange Movistar Vodafone Orange Movistar
24Our fixed footprint
Homes marketable (Q1 17/18) (m) Homes marketable with NGN (Q1 17/18) vs. peers1
Total HH
28.9
ADSL Wholesale
27.7
NGN wholesale
19.2
Strategic wholesale
Not disclosed partnerships
10.3 Own NGN network
19.2 HHs 18.0m HHs 18.8m HHs (E)
% of homes 36% 66% 96% 100%
Strategic partnership &
Buy + Self & co-build +
wholesale
Cable FTTH Wholesale
7.5m HHs 3.5m HHs 8.9m HHs
Via Ono acquisition 690k overlap with cable
Evolving towards DOCSIS3.1 Regulated access + new
1Gbps upload/download and FTTH co-build agreement strategic partnership with
better experience with Orange Telefonica
25 25
1. Vodafone estimateCommercial momentum in fixed and improving mix
Net add performance (000s) Total broadband market share & share of net adds (LTM) (%)
Total broadband net adds NGN net adds Market Share (Q1 17/18) Share of customer net adds (LTM)
42
36 36
400 29 28
22
308 317
2 5 2
300
227 TEF (2) Vodafone ORA MM Other
204 212 209
200
NGN broadband market share & share of net adds (LTM) (%)
100
Market Share (Q1 17/18) Share of customer net adds (LTM)
38 41
0 30 29
1
FY 14/15 FY 15/16 FY 16/17 21 23
6 8
1 1
TEF Vodafone ORA MM Other
Source: Company reports
1. Includes proforma ONO 26Convergence strategy: using our new TV platform as differentiator
+120 channels
+65 channels
Basic TV
Vodafone TV Esencial Vodafone TV Total
Movies / TV series
Vodafone Football
4K content + Cine 4k
New
Service and
experience Vodafone Motor
improvement
27Our convergence proposition
28Convergence progress
Consumer converged customers and penetration Consumer ARPU and churn impact
Converged customers Converged BB RGUs as a % of
consumer broadband customers1
2,500 88% Convergence Customer churn reduction (%)
85% ARPU uplift (Q1 17/18)
(Q1 17/18)
2,000
€37.5
1,500 21.8%
1,000
+28€
€46.2 Mobile customer
ARPU uplift 8.4%
500
0 (7€)
(€8.7) Typical discount Mobile Converged
Q1 16/17 Q1 17/18
only customer
customer 4P with TV 7.2%
3P w/o TV 9.3%
1. Number of consumer broadband (RGUs) linked to a converged customer account relative to total consumer broadband customers 29Vodafone Fixed/Convergence Open Office Vodafone Germany
Market overview
Service revenue (€bn) Mobile service revenue share (%) Fixed revenue share (%)
FY 16/17 FY 16/17 FY 16/17 Telefonica
United Internet 5 Vodafone
Telefonica 10 21
Vodafone
Fixed 30 33 Unitymedia
12
50% €36bn 50%
€18bn €18bn
Mobile
37 52 Deutsche
Deutsche Telekom
Telekom
Mobile customers1 (m) Fixed broadband customers (m) TV customers (RGUs m)
Q1 17/18 Q1 17/18 Q1 17/18
45.2 42.0 45.2 13.0 7.7
6.3
6.4
4.4 3.0
2.1 3.4
Vodafone Deutsche Telefonica Vodafone Deutsche Telefonica United Unitymedia Vodafone Deutsche Unitymedia
Telekom Telekom Internet Telekom
31
1. Includes IoT and MVNO customersCommercial momentum in fixed
Net add performance (000s) Total broadband market share & share of net adds (LTM) (%)
Total broadband net adds NGN net adds Total BB market share (Q1 17/18) Share of BB net adds (LTM)
40
35
22 19
700 14
10
15
5 6
567 584 574
600
(2)
500 433 DT Vodafone UI UM TEF
400 376
322
300
NGN broadband market share & share of net adds (LTM) (%)
200
NGN market share (Q1 17/18) Share of NGN net adds (LTM)
100 45
0 31
1 25
FY 14/15 FY 15/16 FY 16/17 21
17 17
8 6 6 9
DT Vodafone UI UM TEF
Source: Company reports
1. Includes proforma Kabel Deutschland 32Our convergence strategy
CONVERGENCE
DIFFERENTIATION HH PENETRATION ARPU UPLIFT CHURN
Become the leading Focus sales on own Leverage Customer Base Bundle customers show
converged operator – in an customers to increase and foster Cross Sell in the less churn and value add
increasingly two-tier market share of wallet in own base FIXED & MOBILE
Customer Base
33Vodafone GigaKombi
Our highspeed fixed & mobile combination for you and your family!
4G|LTE HOME
MAX & SPEED
With all Vodafone Red tariffs With all Internet & Phone tariffs
Data flat with 4G|LTE Max up to 500 mbit/s Highspeed Internet up to 500 mbit/s
Voice & SMS Flat Fixed flat
GigaDepot Starting at TV packages optional bookable
GigaSharing for the whole family –
41,98 €
per month
with Red+ Allnet & Red+ Kids
Exclusive GigaKombi benefits
10GB for New Customers Special GigaKombi Hotline Team
€10 bundle discount on mobile bill Instant Access for new Fixed Customers
Additional €5 discount on every Red+ Allnet
Fixed to Mobile & Euro flat
34Convergence progress
Converged consumer customers and penetration ARPU and churn impact
Converged consumer Converged BB RGUs as a % of
customers (000s) consumer broadband customers1
ARPU uplift Customer churn reduction (%)
8% (Q1 17/18) (Q1 17/18)
500
Typical
discount:
400
5% -€10
300 15%
Significant
-50% mobile churn
Household
200 +€19
+28€
ARPU uplift
reduction in
converged
households
100
7-8%
0 (7€)
(€8.7)
Giga Kombi Mobile Converged
Q1 16/17 Q1 17/18
1. Number of consumer broadband (RGUs) linked to a converged customer account relative to total consumer broadband customers 35Gigabit Investment Plan
Our fixed footprint
Homes marketable Q1 17/18 (m) Homes marketable with NGN Q1 17/18 vs. peers1 (m)
Not covered
40.0
38.9
26.2 ADSL wholesale
NGN wholesale
12.6
Own NGN network
28m1 26m 13m1
% of homes 32 66 97 100 Recently announced fibre investment:
Buy + Wholesale + Own build & strategic partnership
Cable Wholesale FTTP
12.6m HHs 13.6m HHs Giga-Business Giga-
Acquired through KDG Municipality
Evolving Giga-Cable to Layer 2 VDSL
DOCSIS 3.1 to deliver 1Gbps wholesale access Around 2,000 Around 1m
download speeds with DT business parks households
37 37
1. Source: company reports, and Vodafone estimatesGiga-Business: fibre to business parks
German business park opportunity Strategic approach
38.9 2,000 business parks selected on basis of:
Business parks1
32,000 • Revenue potential and existing infrastructure
• Proximity to existing infrastructure to optimize costs for
construction and backhaul
KPIs per business park:
In scope
2,000 • Minimum 40% penetration required to build
• IRR >20%, Payback per parkGiga-Business: partnerships built on telecom scale and expertise
Vodafone Germany Business model Strategic partner
Build out after successful Deutsche Glasfaser example:
Strong market position and assets pre-sales (>40%) Expertise
• Number 1 challenger in fixed • Specialises in low-cost build out of
• Own fixed access network (cable, Synergies with mobile backhaul fibre optic access networks
DSL, fibre) Attractive cash-flow phasing through • Know-how transfer, scaling, speed,
• Nationwide fixed footprint long-term contract and cost effectiveness
• Best-in-class purchasing capability
reflecting leading multi-country scale
Vodafone provides the service Partner builds
and owns the customer the passive network
Central Office
Vodafone Passive fibre network
backbone
39Giga-Municipality: co-investment with local government % of households with 20%, Payback
Giga-Cable: accelerating the upgrade to 1Gbps
Vodafone household cable coverage and speeds
Opportunity
Today In FY 19/20 Future
• Half of new customers choosing ≥200Mbps
in Q1 17/18
12.6m 12.6m
Strategic approach
11m • 12.6m households upgraded to 1Gbps
• 2 year DOCSIS 3.1 roll-out starting 2018;
acceleration of original 4 year plan
7m • In combination with analogue switch off
leads to capacity capex savings
• PaybackFinancial implications: overall Gigabit Investment Plan
Vodafone Germany
• Incremental accrued capex of approximately €2bn over four years (FY 18/19 to FY 21/22)1
• Accretive to mid-term service revenue growth by 1-2pp, from the second full year of the plan (FY 19/20)
• Incremental EBITDA margins materially higher than the current average2
• Giga-Business up-front cash outflows will be around one-third of accrued capital expenditure, with the balance
paid over time
Vodafone Group
• Annual drag on Group cash-flows of €100-200m during the initial years of the plan
• No change to medium-term target of ‘mid-teens capex /sales’, excluding Gigabit Investment Plan capex which
will be disclosed separately going forwards together with related KPIs
Success-based investment to drive attractive incremental growth and returns
1. In FY16/17 Vodafone Germany’s capital expenditure was €1.7bn (15.8% of revenue) and represented 22% of the Group’s total capex
2. In FY 16/17 Vodafone Germany’s EBITDA margin was 34.1% 42Vodafone Fixed/Convergence Open Office Vodafone Portugal
Market overview Convergent customers
Vodafone service revenue (%) Total retail revenue market share (%) market share (bundles, %)
FY 16/17
(%) Others Others Vodafone
Vodafone 2
Fixed 21
3 9
25
NOS 30
€0.9bn FY 16/17
NOS 43
Q4 16/17
+1.7% YoY Mobile
46
79 MEO MEO
41
Mobile customers (SIMs m) Fixed broadband customers (RGUs m) TV subscribers (RGUs m)
Q4 16/17 Q4 16/17 Q4 16/17
1.4 1.3 1.6
7.7 1.4
4.7 4.5
0.5 0.5
Vodafone MEO NOS Vodafone MEO NOS Vodafone MEO NOS
44Our fixed footprint
Homes marketable (Q1 17/18) (m) Homes marketable with NGN (Q1 17/18) vs. peers
Not covered
5.0
2.7 NGN wholesale
2.5 Own NGN network
4.0m HHs 4.0m HHs 2.7m HHs
% of homes marketable 50 54 100
Self-build + Acquired + Wholesale
FTTH FTTH FTTH
2.3m HHs 0.2m HHs 0.2m HHs
1.8m own-build driven by Call option exercise on Public funded rural network
Project Spring, plus Optimus’ FTTH footprint with access obligations
reciprocal access with Meo (0.2m) as a remedy in the
covering an incremental Optimus/ZON merger
450k HH 45High 3P prices pursued by incumbents used to squeeze mobile ARPU;
keeping them low helped Vodafone retain value in mobile
3P prices determine the value perception Two possible reactions from … Always resulting in a positive
of mobile “fixed” competitors outcome for Vodafone
Current public prices Phase 1 - substantial fixed growth (pay TV)
Net Adds Customers EOP (m)
& Keep 3P prices 0.5 0.5
… and lose fixed to Vodafone 0.4
4P 3P 3P Mobile (their first option) 0.3
37
€56.9 €44.9 €28.9 €27.9 0.2
0.1
€12 Room
left for
or 12
0
to mobile Phase 2 - substantial decline in mobile losses
to convergence (net portouts)
56,9€ Reduce 3P prices NOS MEO Nowo
… and lose mobile acquisition
via 3P to 4P conversion
(their current option)
Q1 Q1 Q1 Q1 Q1
13/14 14/15 15/16 16/17 17/18
Note: Consumer segment offers and numbers 46Commercial momentum in fixed
Net adds performance (000s) Total broadband market share & share of net adds (LTM) (%)
Q4 16/17
Total broadband net adds NGN net adds FBB customer market share FBB net adds market share
50 50
150
40 38
128
118 122 18
125
112 110
100
96
(4)
Vodafone MEO NOS
75
NGN broadband market share & share of net adds (LTM) (%)
50
Q4 16/17
NGN customer market share Net adds market share
25
47
38
33
0 26 26
21
FY 14/15 FY 15/16 FY 16/17
Vodafone MEO NOS
Source: Company reports, competitors earnings statements, NRA and internal estimates; NGN excludes fixed over mobile solutions 47Our convergence strategy: ready for 4P
Two-stage strategy
SECURE THE BASE DRIVE 4P
FTTH FAST ROLL-OUT 3P FOCUS FOOTPRINT AND FIXED BASE
No regulatory access; need Get in customers’ premise Strong platform to play convergence
to speed up FTTH Gain scale (footprint and customer base)
deployment Market is convergent and reasons for not pushing 4P now
(self build or partnership) Retain value in mobile
diminished. Let’s play 4P!
VODAFONE RED CHANNELS AND HR INVESTMENTS MONETISATION
Red as the most important tool Gain capabilities and fully 4P customers churn less and are better targets for upsell
for mobile retention readapt the way of selling opportunities
Lead mobile data experience Positioning Vodafone as a Total Telecom provider
484G
Wi FI
Our convergence proposition
4X
faster
# Performance and reliability
Vodafone Fiber (TV, Internet, Home Phone)
+ Mobile • Fiber – Fastest speed available (1Gbps), 4X faster
Wi-Fi
4X Wi-Fi (powered by Vodafone Smart Router),
faster lower latency
TV, Smart router w/ 4X faster Wi-Fi & best 4G mobile
network, in a single offer to satisfy all family’s needs • Award winning Best 4G mobile network
4G
• TV • Voice Calls
• 4X Faster Wi-Fi • Texts # Best user experience with Vodafone TV
• Fixed Phone • Mobile Data
• TV interface renewed to a user centric experience; Fast
Zapping
Add SIMs • Variety of 4K & HD content available
Vodafone TV • Netflix, FOXPlay & 3rd parties TV Apps on the TV Box
• Calls
4G
• Text
• Data
# Exclusive advantages for families
Internet
service • Additional SIMs with + GB data for family members
4X faster Wi-Fi + GB data for all family
at exclusive prices
Fixed Phone • TV available in all screens, to take entertainment
Unlimited calls
everywhere
49Vodafone Fixed/Convergence Open Office EU regulation
Vodafone – policy options for convergence investment
Deeper gigabit
coverage
Differentiation, Co-investment /
innovation ownership
Fairer industry
profit distribution
Equivalent passive
access
Long term commercial Supports outdated
agreements technology
Quality & price
discrimination
Regulatory
Copper loop Regulated bitstream intensity
unbundling or VULA
51Using a flexible and capital smart infrastructure strategy
A market-by-market approach:
+ Immediate access DE ES NL
Buy + Potential to deliver sign synergies
– Time to integrate
+ Ability to differentiate ES PT IT
Self or co-build + Higher margin
– Capex intensive
+ Capex light ES IT IE DE
Strategic partnerships + Immediate access
– No/little ability to differentiate
+ Capex light
Regulated wholesale access – No/little ability to differentiate In all markets
– Low margin
Continuously optimising in every market
52Perspective on convergence regulation
Past 10 years Next 5 years
Support for Fibre
High barriers to entry
Control over own Mainly cable - fibre Co-investment
convergence infrastructure emerging slowly
Better access to
Scale matters
passive infrastructures
Less demand for regulated
Allows for low risk market entry ... Fixed incumbent earns fixed access
Regulated access super normal profits and Emergence of long term
(in remaining areas) … but information asymmetry leads to endemic cross-subsidises mobile and commercial agreements
Legal action to fight
discrimination and value transfer to incumbent content
against discrimination
?
Deregulation of competitive
Deregulation of Encourage competitive fibre and 4G fibre
competitive markets & 5G build out Mobile access
generally unregulated
Scale matters Operator appetite
varies by market Regulation will need to address
Access to must have Churn prevention potential new access
audio visual content Ineffective regulated & content bottlenecks
Significant price inflation for football access to content
53European Communications code status
EC has committed to the idea Ensuring competitive
that investment and Supporting Gigabit
access conditions to very
competition are key, by... investments
high capacity networks
Universal Level playing
Access Institutions Spectrum
service field
Harmonisation and
Enhanced level More European
Passive access Funds to be raised minimum 25 year
playing field for all harmonisation:
prioritised: positive, from general spectrum licences:
communications positive, but
pro fibre taxation or all positive, but
and IoT service opposed by
investment digital providers opposed by
providers Council and BEREC
Council
Parliament & Council finalise their Finalise Legal Implementation into
Trialogue
positions Text national legislation
October 2017 6-12 months 3 months Up to 24 months 54Forward looking statements
This presentation, along with any oral statements made in connection therewith, 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: expectations regarding the Group’s financial condition or results of operations including the confirmation of the Group’s guidance for
the 2018 financial year; expectations for the Group’s future performance generally; expectations regarding the Group’s operating environment and market conditions and trends; intentions and expectations
regarding the development, launch and expansion of products, services and technologies; growth in customers and usage; expectations regarding spectrum licence acquisitions; and expectations regarding,
service revenue, adjusted EBITDA, free cash flow, capital expenditure, and foreign exchange movements.
Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “ongoing”, “lead”, “surge”, “exceed”, “stabilise”, “maintain”, “sustain”, “improve”, “plans”,
“targets” “gain”, “grow”, “continue”, “retain” or “accelerate” (including in their negative form). 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: changes in general economic or political conditions in markets served by the Group
and changes to the associated legal, regulatory and tax environments; increased competition; the impact of investment in network capacity and the deployment of 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 expectation; the ability of the Group to integrate new technologies, products and services
with existing networks, technologies, products and services; the Group’s ability to grow and generate 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 and reduced customer retention; changes in the spending patterns of new and existing customers and
increased pricing pressure; the Group’s ability to expand its spectrum position or renew or obtain necessary licences and realise expected synergies and associated benefits; 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 may 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; changes in
foreign exchange rates, as well as changes in interest rates; the Group’s ability to realise benefits from entering into acquisitions, partnerships or joint ventures and entering into service franchising, brand
licensing and platform sharing or other arrangements with third parties; acquisitions and divestments of Group businesses and asset 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; the impact
of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; the Group’s ability to execute its strategy in fibre deployment, network expansion, new product
and service roll-outs, mobile data, Enterprise and broadband in emerging markets; developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes into
account when determining levels of dividends; the Group’s ability to satisfy working capital and other requirements; and/or 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 the headings
“Forward-looking statements” and “Risk management” in the Group’s Annual Report for the year ended 31 March 2017. The Annual Report can be found on the Group’s website (vodafone.com/investor). All
subsequent written or oral forward-looking statements attributable to the Company, to any member of the Group or to 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 or made in connection with this presentation will be realised. 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.
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