Vodafone - Earnings Call - Q2 2025 Pre Recorded

Transcript

Speaker 0

Hello, everyone. I'm joined as usual by Luca for our Alfea results.

Speaker 1

Hi, everyone.

Speaker 0

At the group level, results are in line with our overall expectations. Luca will go into more detail on this shortly. But more broadly, we are continuing to drive change across Vodafone, change in our portfolio and change in our operations. Starting from our portfolio, we are now moving towards the completion of the group reshaping initiated last year with the imminent closing of the regulatory reviews in Italy and The UK. Together with our main transactions, we have also seen a good level of activity within Vodafone investments, where we have now achieved our fifty-fifty target position in Vantage towers and more recently signed an MoU in Romania to support consolidation in that market.

We have also achieved new milestones in our strategic partnerships. Our new commercial shared operations supported by Accenture are now live. We have formed a new API alliance with other industry players and we have set up a new strategic partnership with Google. Our main focus within our operations continues to be Germany, where we have just completed the formation of a new management team of industry experts with new directors in consumer, in business and IT. But before diving into Germany, Luca, can you share our financial highlights?

Speaker 1

Yes, absolutely. So to start off, there are a few key takeaways for me here in our results. The first and most important one is certainly that our performance in H1 is in line with expectations. And that is despite the fact that we stepped up our investment in Germany in order to prepare ourselves for the growth opportunities in this market post the MDU transition. Now this has been possible because we had a strong performance elsewhere in the group.

At the group level, our adjusted EBITDA grew 3.8% in organic terms. And within that, we delivered good growth virtually across all of our market segments with the exception of Germany. For example, The UK grew a very strong more than 8%, the other European markets over 3%. And then, of course, in our emerging markets, both in Africa and in particular in Turkey, which grew by more than 50% in euro terms, we had a very strong showing. Also, as we anticipated in Q1, our B2B performance has accelerated to 4% in Q2.

That was mainly driven by digital services, where we continue to invest both in go to market capabilities, but also in our product portfolio and in partnerships. Germany, on the other hand, is facing a significant, but again anticipated pressure from the MDU transition. Our Q2 service revenue in Germany declined by 6.2%, but this was again in line with the guidance that we provided to the market in July. So it is with that in mind and given the solid performance of the group that we have increased our commercial investments in Germany. And we have indeed delivered an improved operational trends in Q2 with our mobile net adds up and the cable base now almost stable.

So against the backdrop of our increased investment in Germany, but good performance elsewhere, we are today reiterating our guidance for the full year, and we are confident that we will achieve it.

Speaker 0

Vodafone is changing and Germany is changing. As you would expect, the mandate of the new team is all about customer experience. So what is changing for our customers? As you know, the step up in the pace of fiberization of our cable network has delivered what is now recognized as the best broadband network in the country by all main independent tests. We are now complementing our cable footprint with wholesale fiber, so that we can offer gigabit enabled broadband to our customers in 30,000,000 households.

This represents 75% of all German households, much more than what any other operator can offer. Also, the MDU transition is now substantially complete. It was a major undertaking as we had to re contract 4,000,000 customers within a few months. And with this behind us, we can now fully dedicate our attention to driving growth and convergence. As Luca mentioned, our commercial KPIs have already gradually improved in Q2, but we expect further progress.

We need to put Vodafone back at the top of customers' preferences. This means investment in branding, products and channels, but most importantly, we need to continue improving the overall experience we provide to our customers and interact with us. We are focusing on B2B because of the significant demand for digital services from our customers. From small businesses all the way to public sector, we are supporting our customers' digital transformation by bringing them much more to than connectivity. And we are continuing to broaden our capabilities in this space.

For example, this month, we are opening a new security operations center in Romania to serve our European customers. On mobile private networks, we have now established a leading position across a number of sectors. And we are seeing the benefits of our unique partnership with Microsoft in Software as a Service. But Luca, perhaps you can talk to our recent performance in B2B.

Speaker 1

Sure. So first of all, overall, as I said before, our performance in B2B was good with service revenue growth accelerating to four percent in the quarter. But it's worthwhile double clicking a little bit into these results. From a markets perspective, we had, in particular, a very strong showing in our smaller European markets, which grew 7.5% as well as in South Africa. The U.

K. And Germany were a bit softer than I know is possible. But overall, we expect for B2B further acceleration in the second half year. Now in terms of the portfolio in B2B, connectivity is still a major component of our revenue and will remain very significant for us. But digital services are an increasingly important part of the overall mix, with growth in Digital Services in Q2 at almost 18%, which is a sizable step up from 6.7% in Q1.

Within Digital Services, we delivered particularly strong growth in our cloud portfolio, which grew at over 30% in the quarter. And finally, from a customer segment view perspective, we delivered a strong step up in growth from the public sector.

Speaker 0

Luc, any final thoughts?

Speaker 1

Sure. For me, there is two takeaways. One, our performance in the first half is in line with our expectations, and we are confident in delivering our guidance for the full year. But it's also worth mentioning that we continue to make great progress on the portfolio front. We've just received €1,300,000,000 as we sold down our stake in Vantage towers as planned to achieve the fifty-fifty co control situation with our private equity partners.

And this comes on top of the €4,100,000,000 that we have already realized from the sale of Spain. And a further €8,000,000,000 is expected from the sale of Italy in early twenty twenty five, so not that far down the road. This is important from the CFO's perspective, of course, as it gives us flexibility to really follow through on our capital allocation framework, and that is to continue to invest our businesses at the right level, ensure we operate at the right leverage and then, of course, fund the €4,000,000,000 capital return program that we are now well into. So Margarita, what are your priorities for us in the second half?

Speaker 0

We all remain focused on our priorities of customers, simplicity and growth. In the near term, my priority is the operational performance in Germany, particularly how we engage with existing customers and win new ones. We are driving significant change across our operations, ensuring that we are putting all the building blocks in place for long term sustainable growth. And for the group more broadly, we look forward to FY 2026 with our new portfolio shape positioning us in good markets with good local scale to compete effectively and drive growth.