Slide 1: Arun Sarin, Chief Executive
Arun Sarin Chief Executive Vodafone Group Plc © Vodafone Group 2005 1
Slide 2: Important notice and forward-looking statements
The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following pre
Slide 3: Agenda
Agenda • Full Year Highlights Arun Sarin Chief Executive • Financial Review Ken Hydon Financial Director • Operational Highlights Andy Halford Financial Director Designate • Update on Japan Bill Morrow President Vodafone K.K. • Q&A Arun Sarin Chief Executive 3
Slide 4: Key Highlights
Key Highlights • Strong operational and financial performance – Robust customer and revenue growth – Out-performance versus peer group • Creating platform for future growth – 2.4 million 3G users on our networks – One Vodafone embedded into the business • Building and deepening the customer franchis
Slide 5: Mobile Results Highlights
Mobile Results Highlights 2004/5 Proportionate Customers 154.8m +12% Proportionate Turnover £42.8bn +9% Proportionate EBITDA* £16.5bn +10% Proportionate EBITDA Margin* 39.0% +0.1% Operating Cash Flow** £12.7bn +5% Free Cash Flow** £7.8bn +1% Adjusted EPS 10.41p +14% * Before exceptional items; EBITD
Slide 6: Growing Customer Share
Growing Customer Share 12% Proportionate Organic Increase In Customer Market Share Customer Growth Relative To Principal Competitors* 154.8m Germany 2.1% Germany +9% Italy 2.8% Italy +6% Japan +1% Japan (2.3%) Spain +18% UK +9% Spain 6.2% US +17% UK 2.2% Other +17% US 0.9% 2004/5 2004/05 vs 2003/04
Slide 7: Growing Revenue Market Share
Growing Revenue Market Share 9% Proportionate Organic Increase In Revenue Market Share Turnover Growth Relative To Principal Competitors* £42.8bn Germany 1.6% Germany +5% Italy +7% Italy 1.5% Japan -2% Spain +24% Japan (1.1%) UK +1% Spain 5.0% US +23% UK 1.6% Other +12% US 3.3% 2004/5 2004/05 vs 200
Slide 8: Increasing Share of Market EBITDA
Increasing Share of Market EBITDA 10% Proportionate Organic Increase In EBITDA* Market Share EBITDA* Growth Relative To Principal Competitors** Organic £16.5bn Margin Growth Germany 3.7% Germany 46.4% +8% Italy 2.2% Italy 53.2% +8% Japan 26.7% -8% Japan 0.0% Spain 34.7% +18% UK 33.8% +6% Spain 3.4%
Slide 9: Drivers of Outperformance
Drivers of Outperformance • Global scale and scope – Global design – multiple delivery – Roaming – Purchasing – One Vodafone • Local execution • Sharing best practice 9
Slide 10: 3G – Key Performance Indicators
3G – Key Performance Indicators Analysis of Controlled Base* ARPU 2.4 Million 3G devices +61% Mobile Connect +52% Cards 0.3 2G 2.5G Vodafone live! Vodafone live! with 3G 2.1 Mobile Connect Card* ARPU 3G consumer +90% devices Targeting 10 million 3G consumer GPRS 3G devices by March 2006 * Total base
Slide 11: 3G Starting to Gain Momentum
3G Starting to Gain Momentum Key country breakdown Total 3G devices at end of March (000) GERMANY GERMANY 358 358 ITALY ITALY 665 665 SPAIN SPAIN 88 88 JAPAN JAPAN 798 798 UK UK 190 190 OTHER OTHER 253 253 TOTAL TOTAL 2,352 2,352 11
Slide 12: 3G – A Platform for Growth
3G – A Platform for Growth Richer content - Music, games, mobile TV, video - Increased portfolio; increased New Handsets functionality; lower cost - 60% coverage in Europe; quality Extend Capacity improvements in Japan More Value for Money - Bigger bundles; greater transparency 12
Slide 13: One Vodafone
One Vodafone Progressing well and on track FY 2004/5: FY 2006/7: • Establish objectives • Deliver improvements • Detailed plans • Significant benefits 2004/5 2005/6 2006/7 2007/8 + FY 2005/6: FY 2007/8: • Implement plans • Deliver annual targets • Deliver improvements • £2.5bn pre tax cash flow • Li
Slide 14: One Vodafone: £2.5bn annual benefits
One Vodafone £2.5bn annual pre tax cash flow* benefits from 2007/8 Service Platforms Networks Capex, Opex £1.4 bn & Handsets IT Delivery £2.5bn Customer Management £ Roaming Revenue £1.1 bn Terminals * EBITDA adjusted for exceptional items and working capital movements (excluding intercompany) less
Slide 15: Consumer & Business Propositions
Consumer & Business Propositions Vodafone Simply Blackberry® from Vodafone Vodafone Vodafone Travel Promise Push E-mail Vodafone Mobile Connect 3G/GPRS data card Consumer Business 15
Slide 16: Japan Update
Japan Update Vodafone K.K. recovery path 24 Months Customer numbers global scale benefits ¾ Bill Morrow joins ¾ greater range of handsets local market focus ¾ coverage strengthened greater product innovation ¾ 3G launched ¾ distribution realigned continued investment in ¾ Shiro Tsuda joins ¾ improve
Slide 17: Increasing Returns to Shareholders
Increasing Returns to Shareholders Dividends Per Share 4.07 Cash Returns to Shareholders 100% (£ Billions) (Pence) % of FCF 27% 77% ~100% 2.03 payment 1.69 1.40 1.47 £6.0bn FY 00/01 FY01/02 FY02/03 FY 03/04 FY 04/05 2.0 4.5 Share Purchases (£ Billions) 4.0 £2.3bn 4.5 4.0 1.3 1.1 1.0 FY03/04 FY04/05
Slide 18: Outlook for FY 05/06 under IFRS
Outlook for FY 05/06 under IFRS Organic Mobile Revenue Growth* 6 – 9% Mobile EBITDA Margin* 0 – 1% lower Free Cash Flow £6.5 – 7.0 billion Fixed Asset Additions Around £5.0 billion * Proportionate Basis 18
Slide 19: Six Strategic Goals
Six Strategic Goals Provide superior shareholder returns Delight our customers Leverage scale and scope Expand market boundaries Build the best team Be a responsible business 19
Slide 20: Ken Hydon, Financial Director
Ken Hydon Financial Director Vodafone Group Plc © Vodafone Group 2005 20
Slide 21: Statutory Results
Statutory Results Year ended 31 March Analysis of Turnover Growth 2005 2004 Increase 2.0 £m £m % 0.2 Turnover 34,133 33,559 2 1.6 1.5 Group operating profit* 10,904 10,749 1 Net interest payable (604) (714) (15) (0.5) (£ Billions) Profit before tax* 10,300 10,035 3 1.0 Tax** (2,832) (3,050) Goodwill
Slide 22: Statutory Results: Mobile Trading Results
Statutory Results Mobile Trading Results Direct Costs and Operating Expenses* Year ended 31 March £17.0 bn £16.5 bn 2005 2004 Increase £m £m % Acquisition & Retention 3.9 Turnover 33,184 31,915 4 3.5 Costs Service revenue 29,322 28,249 4 Net other revenue 557 512 9 Interconnect 6.2 & Other 6.3 Net c
Slide 23: Statutory Results: Effective Tax Rate
Statutory Results Year ended 31 March 2005 2004 Increase Effective Tax Rate £m £m % Turnover 34,133 33,559 2 37.5% 35.7% 35.5% Group operating profit* 10,904 10,749 1 30.4% Net interest payable (604) (714) (15) 27.5% Profit before tax* 10,300 10,035 3 Tax** (2,832) (3,050) Goodwill amortisation (14,
Slide 24: Statutory Results: Vodafone Sweden impairment
Statutory Results Year ended 31 March 2005 £m 2004 £m Increase % • Vodafone Sweden: Turnover 34,133 33,559 2 - £315m impairment Group operating profit* 10,904 10,749 1 Net interest payable (604) (714) (15) - Unique combination of factors: Profit before tax* 10,300 10,035 3 Tax** (2,832) (3,050) • Fi
Slide 25: Statutory Results: Adjusted EPS
Statutory Results Year ended 31 March 2005 2004 Increase Adjusted EPS* (Pence) £m £m % Turnover 34,133 33,559 2 10.41 9.10 Group operating profit* 10,904 10,749 1 Net interest payable (604) (714) (15) 6.81 Profit before tax* 10,300 10,035 3 Tax** (2,832) (3,050) 5.15 Goodwill amortisation (14,700) (
Slide 26: Tangible Fixed Assets
Tangible Fixed Assets March 2005 March 2006 (IFRS Basis*) • £5.1 bn additions • Additions around £5 billion Geographic Analysis Category Analysis Other Other Operations Operations 2G Netw ork 2% Germany 2% 12% 16% Other Mobile 25% Other Mobile 31% Italy 14% 3G Netw ork Spain 36% 10% United Kingdom J
Slide 27: Cash Flow
Cash Flow Year ended 31 March 2005 2004 Increase Analysis of Free Cash Flow £m £m % Operating cash flow 12,713 12,317 3 9.0 Tangible capital expenditure (4,820) (4,350) 11 Hedge Closures £8.5bn Intangible capital expenditure (59) (21) 181 8.5 JT FCF Pre-disposal Operating free cash flow 7,834 7,946
Slide 28: Net Debt
Net Debt Gross Debt Maturity Profile Total = £11.9 billion • March 2005: 5.0 £bn Gross debt (11.9) 4.0 Cash & investments 3.6 3.0 £ Billions Net Debt (8.3) 2.0 1.0 • Committed to credit profile - < 1 Year 1-2 2-5 5 - 10 10 - 20 > 20 Years Years Years Years Years 28
Slide 29: International Financial Reporting (IFRS)
International Financial Reporting (IFRS) • Effective for 2005/06 • 2005/6 Outlook: – IFRS basis – No material difference to UK GAAP proportionate guidance – No further significant differences to those already identified • July 2005: – FY 2004/5 results on an IFRS basis 29
Slide 30: Cash Flow Outlook for FY 05/06
Cash Flow Outlook for FY 05/06 Impact of IFRS Free Cash Flow Net Debt • Proportionate consolidation • Proportionate consolidation • US$1.6 bn Preference shares • Financial Instruments (IAS 39) Outlook for FY 05/06 Free Cash Flow Net Debt • VZW dividend c.£0.7bn lower • Higher cash returns to shareho
Slide 31: Summary
Summary • Robust set of results • Strong financial position • Increased returns to shareholders 31
Slide 32: Andy Halford, Financial Director Designate
Andy Halford Financial Director Designate Vodafone Group Plc © Vodafone Group 2005 32
Slide 33: Germany: Strong Customer Growth
Germany Strong Customer Growth 60% Market Share Of Net Additions* 50% 40% • Market leading share of new customers 30% 20% 10% • Further reducing T-Mobile market lead 0% Vodafone T-Mobile E-Plus O2 Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 • Slightly lower churn at 18.3% Closing Customers +9% 27.2m • Successfu
Slide 34: Germany: Further Increasing Turnover
Germany Further Increasing Turnover Turnover €8.0bn +5% €8.3bn • Driven by increased customer base • Termination rate reductions 2003/4 2004/5 • Data revenues up 85% Service Revenue Growth (Year-On-Year) 7% • Overall ARPU down 3.5% 6% 5% 4% • Market revenue share up 1.6% versus principal competitor
Slide 35: Germany: Increasing EBITDA
Germany Increasing EBITDA EBITDA Margin 46.4% 45.0% +1.4pp • Equally strong focus on profitability • Improved operating efficiency 2003/4 2004/5 EBITDA • Aggregate customer costs stable +8% €3.9bn €3.6bn • 1.4% margin improvement • Largest EBITDA share 2003/4 2004/5 35
Slide 36: Italy: Continued Customer Growth
Italy Continued Customer Growth 70% Market Share Of Net Additions* 60% 50% • Aggressive competition 40% 30% 20% • Focus on innovative promotions 10% 0% V odafone TIM Wind 3 (10%) Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 • Targeted retention Closing Customers • Churn relatively stable at 17.2% 21.1m +6% 22.5m
Slide 37: Italy: Increasing Turnover
Italy Increasing Turnover Turnover +7% €8.2bn €7.6bn • Driven by growth in customers • 4% increase in voice usage per customer 2003/4 2004/5 • Messaging revenue up 14% Service Revenue Growth (Year-On-Year) 10% • Data revenue up 85% 8% 6% • Overall ARPU stable at €359 6% • 665,000 total 3G devices Q1
Slide 38: Italy: Increasing EBITDA
Italy Increasing EBITDA EBITDA Margin* 52.6% +0.6pp 53.2% • Increase in acquisition and retention costs from low base • Tight control of operating costs 2003/4 2004/5 EBITDA* • Promotions driving more on-network +8% €4.3bn €4.0bn traffic • Further improvement in margin 2003/4 2004/5 * Before excepti
Slide 39: Spain: Exceptional Customer Growth
Spain Exceptional Customer Growth 60% Market Share Of Net Additions* 50% • Very strong performance 40% 30% 20% • Focus on high value customers 10% 0% Vodafone TEM Amena • Contract mix up from 43% to 47% Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 Closing Customers • Churn down from 23.6% to 21.9% 11.5m 9.7m +18
Slide 40: Spain: Driving Up Turnover
Spain Driving Up Turnover Turnover €4.8bn +24% • Very strong performance despite €3.9bn termination rate reductions • Successful promotional activities • Increased voice usage 2003/4 2004/5 Service Revenue Growth (Year-On-Year) • ARPU up 10% 23% 21% 22% 21% • Non-voice revenues up 46% • Increased re
Slide 41: Spain: Investment In Growth
Spain Investment In Growth EBITDA Margin 36.3% -1.6pp 34.7% • Strong profit performance • Additional investment in: 2003/4 2004/5 – Customer acquisition EBITDA €1.7bn +18% €1.4bn – Customer retention • 18% increase in EBITDA 2003/4 2004/5 41
Slide 42: UK: Continued Customer Growth
UK Continued Customer Growth 60% Market Share Of Net Additions* 50% • Intensely competitive 40% 30% • Churn stable at 29.7% 20% 10% 0% • New tariffs introduced: -10% Vodafone O2 T-Mobile Orange 3 Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 – Corporates & Business Closing Customers +9% 15.3m 14.1m – Consumer • I
Slide 43: UK: Increased Turnover Impacted By Regulation
UK Increased Turnover Impacted By Regulation Turnover Service Revenue Growth 16% +6% £5.1bn £4.8bn 14% 14% Estimated impact of 13% incoming termination 12% rate cut 10% Year on year growth 8% 2003/4 2004/5 6% +4% • Termination rate –4% impact 4% 3% • Messaging revenue up 15% 2% +4% 0% • Data revenue
Slide 44: UK: Operational Efficiencies
UK Operational Efficiencies EBITDA Margin* FY03/04: 33.6% FY04/05: 33.8% • Solid performance 36.3% 34.3% 31.4% 33.3% • Operational efficiencies delivered • Additional investment in: H1 03/04 H2 03/04 H1 04/05 H2 04/05 EBITDA* – Customer acquisition +6% £1.7bn £1.6bn – Customer retention • Further EB
Slide 45: Verizon Wireless: Strong Customer Growth
Verizon Wireless Strong Customer Growth Net Additions +17% 6.5m 5.6m • Fast changing competitive environment • Penetration still only 63% 2003/4 2004/5 • Consistent focus on execution Closing Customers • Market leading net adds share again +17% 45.5m 38.9m • Record low churn of 17.2% • 24% customer
Slide 46: Verizon Wireless: Excellent Revenue Performance
Verizon Wireless Excellent Revenue Performance Proportionate Turnover $12.7bn +23% • ARPU up 4% $10.3bn • Significant increase in voice usage 2003/4 2004/5 • V CAST and BroadbandAccess performing strongly Service Revenue Growth (Year-On-Year) 23% 23% 23% • Non-voice revenues up 131% 18% Q1 FYO5 Q2 F
Slide 47: Verizon Wireless: Record Financial Results
Verizon Wireless Record Financial Results EBITDA Margin 35.9% 37.3% +1.4pp • Leveraging scale • Increased investment in customer retention 2003/4 2004/5 Proportionate EBITDA • Tight operating cost control $4.7bn $3.7bn +28% • Record margin • Largest EBITDA in industry 2003/4 2004/5 47
Slide 48: Other Operations
Other Operations • 48.7 million proportionate customers – 11 Controlled businesses – 8 Associates & 1 Investment • Strong growth: – Proportionate turnover +12% – Proportionate EBITDA +10% • Intense competition: Sweden • Strong performances: Egypt, Greece, Hungary, Ireland, Portugal 48
Slide 49: Operating Results: Key Takeaways
Operating Results Key Takeaways • Continued strong customer growth • Revenues per customer generally stable • Cost control maintaining margins • Generally outperforming established competitors • 3G services starting to gain momentum 49
Slide 50: One Vodafone: Networks and Service Platforms
One Vodafone • Largest cost opportunity Networks and • Integrated network plan and team of Supply Chain 280 established • Accelerated leased line replacement • Hosting centres now running in Germany and Italy Service Platforms • Dedicated team of 380 people • 8 businesses migrating over next year 50
Slide 51: One Vodafone: IT Delivery and Customer Management
One Vodafone • Consolidation of billing and CRM systems IT Delivery • Agreeing target platform and migration path • Initial focus on customer facing systems • Sharing best practice Customer • Segment based customer management Management • Support to MNC and roaming propositions 51
Slide 52: One Vodafone: Terminals and Roaming
One Vodafone • Focus on exclusivity and customisation Terminals • Significantly increased global sourcing • Balance local needs vs. global scale • Tariff simplification Roaming • New voice roaming proposition • Increase capture rates 52
Slide 53: One Vodafone - Summary
One Vodafone - Summary • Focus now on execution • Largest benefits in network area • IT has upside but on longer time horizons • £11.7bn 2007/8 target being embedded in business targets • Focus on 1% market revenue share gain versus established competitors • 10% mobile capex to sales by 2007/08 53
Slide 54: Bill Morrow, President Vodafone Japan
Bill Morrow President Vodafone Japan © Vodafone Group 2005 54
Slide 55: Key takeaways from the first months
Key takeaways from the first 2 months • Many challenges, but original innovative spirit and solid foundation still present • 15 million customers; revenue of £5.6 billion and EBITDA of £2.0 billion • Implication of migration and structural changes from 2G to 3G • Increased emphasis on: – Handset ran
Slide 56: Japan Financial Review
Financial Review Turnover ¥1.50tn -2% ¥1.47tn • Challenging market conditions • Weak customer additions • Loss of high value customers • ARPU reduced by 9% 2003/4 2004/5 EBITDA Margin* 28.5% -1.8% 26.7% • Reduced operating expenses • Lower customer acquisition volumes • Increased investment in reten
Slide 57: Transformation plan recap 2004/05
Transformation plan recap 2004/05 • 9-1 integration – Integration of key business systems complete East Japan call centres (FY03) Network operations (FY04) Consolidated logistics network (FY04) ERP systems (FY04) Shop operation support (FY04) Sales incentive and commission related proces
Slide 58: Milestones for Recovery
Milestones for Recovery Turnaround Growth FY2004/05 FY2005/06 FY2006/07 FY2007/08 Handsets Services Pricing Network Customer 58
Slide 59: Milestones for Recovery (1): Handsets
Milestones for Recovery (1): Handsets Turnaround Growth FY2004/05 FY2005/06 FY2006/07 FY2007/08 Improve 3G handset functionality, add features Initial Handsets launch of Wider range of WCDMA 3G handsets Greater range of handsets Drive local innovation competitive 3G handsets (incl. Japan-specific) N
Slide 60: Milestones for Recovery (2): Services and pricing
Milestones for Recovery (2): Services and pricing Turnaround Growth FY2004/05 FY2005/06 FY2006/07 FY2007/08 Chaku-Uta long Improve music contents offering Innovative new services version (e.g., Terrestrial digital TV, better Vodafone live!BB Felica streaming service, GPS etc) Active spam measures Im
Slide 61: Milestones for Recovery (3): 3G network
Milestones for Recovery (3): 3G network Turnaround Growth FY2005 FY2004/05 FY2005/06 (ended March 06) FY2006/07 FY2007/08 1H 2H Improve rural area coverage & quality achieved good Network outdoor coverage, (4,000 additional outdoor BTS in FY05) Invest in capacity need better rural & indoor coverage
Slide 62: Milestones for Recovery (4): Customers
Milestones for Recovery (4): Customers Turnaround Growth FY2004/05 FY2005/06 FY2006/07 FY2007/08 1H 2H Customer Customer Drive customer awareness of Visible improvements Satisfaction image handset & network improvement to be seen from 2006 Weak From Net loss net loss Improving Competitive Net monthl
Slide 63: Summary
Summary • Recognise the current challenges • Detailed plan with measurable milestones • Bring in the right local people • Regain reputation for innovation • Confident that we will become competitive 63
Slide 64: Arun Sarin, Chief Executive
Arun Sarin Chief Executive Vodafone Group Plc © Vodafone Group 2005 64
Slide 65: Summary
Summary Differentiated customer propositions Outperformance versus competition Growing shareholder returns Building Vodafone for the future 65
Slide 66: Forward-Looking Statements
Forward-Looking Statements This presentation 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 p