Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — FY2001 Earnings Presentation
70 slides from Vodafone Group Public's earnings presentation, 2001
Slide 1: Slide 1
Slide 2: Chris Gent, Chief Executive
Chris Gent Chief Executive Vodafone Group Plc
Slide 3: Agenda
Agenda • Overview of the results Chris Gent • Review our strategy and progress • Analysis of results Ken Hydon • Group funding • Highlights and KPIs Julian • Project Momentum and Group Synergies Horn-Smith • Future Development Chris Gent • Questions
Slide 4: Financial Highlights: Proportionate
Financial Highlights Proportionate Year to March 2001 Proportionate mobile March 2001 Change Turnover £21.43 billion +29% EBITDA1 £7.04 billion +28% 2 Group operating profit £5.02 billion +26% Registered customers 82,997,000 +56% 1 Before exceptional items 2 Before goodwill and exceptional items
Slide 5: Financial Highlights: Statutory
Financial Highlights Statutory Year to March 2001 Statutory Basis March 2001 Change Group operating profit 1 £5.20 billion +105% Profit before taxation 1 £4.03 billion +87% Basic EPS 1, 2 3.75 pence -20% 1 Before goodwill and exceptional items 2 Reflects expected dilution following Mannesmann and Ai
Slide 6: Financial Highlights
Financial Highlights Year to March 2001 • Very strong financial progress • Shows benefits of: – Effective integration of Mannesmann and AirTouch – First year of trading for Verizon Wireless
Slide 7: Group Strategy
Group Strategy Three Dimensions of Growth • Strong customer growth • Continued geographic expansion • Good progress on introduction of new services and data revenue growth
Slide 8: First Dimension of Growth
First Dimension of Growth Customer Growth • 29.7 million registered new customers world-wide • Fourth year of compound growth >50% • EBITDA margins maintained at 32.9% in mobile and 31.6% in business overall
Slide 9: Second Dimension of Growth
Second Dimension of Growth Geographic Expansion • Control taken in Airtel • Investment in 25% of Swisscom Mobile • Acquisition of Eircell • Investment in 34.5% of Iusacell • Strategic partner in China Mobile (Hong Kong) Limited with a 2.2% shareholding • Series of investments in Japan, resulting in
Slide 10: Third Dimension of Growth
Third Dimension of Growth Data Services Data as % of service revenues Year ended 2001 March 2001 Controlled Subsidiaries 8.1 9.3 Group overall 6.2 7.0 • Prior to introduction of GPRS services • On track to achieve 20% to 25% of revenues from data by March 2004
Slide 11: Group Strategy
Group Strategy • Net debt of £6.7 billion at year end = 5.4% of our market capitalisation, despite acquisitions and 3G licence costs • Reorganisation of Company to achieve better focus and resource allocation Operational Review Committee chaired by Julian Horn-Smith Project Momentum initiative led b
Slide 12: Group Strategy
Group Strategy • Introduction of a COO – Separate focus on operational performance – Aimed at sustaining high growth • Establishment of Project Momentum to ensure we capture the benefits of our global position: – Product Management and Innovation – Technical Implementation and Co-ordination, includi
Slide 13: Group Strategy
Group Strategy • Project Momentum targeted at: – Delivering synergies for all Group operating companies envisaged and projected at time of Mannesmann acquisition – Effective integration of Group operations
Slide 14: Ken Hydon, Group Financial Director
Ken Hydon Group Financial Director Vodafone Group Plc
Slide 15: Presentation of Results
Presentation of Results • Statutory basis: – AirTouch from 30 June 1999 – Verizon Wireless from 3 April 2000 – Mannesmann from 12 April 2000 • Pro forma proportionate basis: – Includes our share of associates and investments – AirTouch and Mannesmann from 1 April 1999 – Mannesmann assets sold or hel
Slide 16: Statutory Results
Statutory Results Year to Turnover Group operating profit * 31 March 2001 Increase £ millions £m % 15,004 Turnover 15,004 91 Group operating profit * 5,204 105 Net interest payable (1,177) 194 Profit before tax * 4,027 87 7,873 Tax (1,290) 88 5,204 Exceptional costs (240) (126) 3,360 2,538 Goodwill
Slide 17: Pro forma Proportionate Turnover: Mobile
Pro forma Proportionate Turnover Mobile Year to 31 March Total Organic 2001 Growth Growth £m % % Germany 4,102 15 20 Italy 2,323 19 23 Other Europe 3,318 30 22 Continental Europe 9,743 21 22 United Kingdom 3,458 17 17 United States 5,008 37 27 Asia Pacific 2,771 80 50 Middle East & Africa 448 13 19
Slide 18: Pro forma Proportionate EBITDA: Mobile
Pro forma Proportionate EBITDA Mobile Year to 31 March Total Organic EBITDA 2001 Growth Growth Margin £m % % % Germany 1,421 (2) 2 34.6 Italy 1,048 28 33 45.1 Other Europe 1,065 69 61 32.1 Continental Europe 3,534 22 24 36.3 United Kingdom 1,068 14 14 30.9 United States 1,627 42 31 32.5 Asia Pacific
Slide 19: Pro forma Proportionate Results: Other
Pro forma Proportionate Results Other Year to 31 March 2001 Growth £m % Arcor: Turnover 802 (3) • EBITDA positive • Profitable in 2003 EBITDA * (27) (259) Vizzavi: • £63m start-up losses Operating profit ** (237) 39 • Profitable in 2004 * Before exceptional costs ** Before amortisation of goodwill a
Slide 20: Cash Flow
Cash Flow Year to Year to 31 March 31 March 2001 2000 Increase £m £m £m Operating cash flow 4,587 2,510 2,077 Capital expenditure (3,799) (1,918) (1,881) Tax paid (1,574) (325) (1,249) Net interest paid (969) (313) (656) Dividends received 455 236 219 Other 1,124 186 938 Free cash flow before 3G lic
Slide 21: Capital expenditure
Capital expenditure Continuing US cellular Mannesmann 5.5 5.0 2000/1: 4.5 4.0 • £1.8 billion Mannesmann 3.5 2001/2: £ billion 3.0 2.5 • £5 billion in 2001/2 2.0 1.5 • 3% on GPRS 1.0 0.5 • 20% on 3G 0.0 March 2000 March 2001 March 2002 (Forecast)
Slide 22: Disposals
Disposals Year to 31 March Deferred 2001 proceeds £bn £bn Orange 18.7 3.1 Atecs 2.9 2.3 Infostrada 5.2 - Watches & Clocks 1.1 - Verizon 2.5 - US Conflicted Properties 1.8 - Total 32.2 5.4
Slide 23: Debt
Debt • £6.7 billion at 31 March 2001 • Recent transactions: – Japan Telecom (25%) – Grupo Iusacell – Share placing – Japan Telecom, J-Phone & Airtel • Committed to single ‘A’ credit ratings
Slide 24: Summary
Summary • Organic growth • Financial strength • Shareholder value
Slide 25: Julian Horn-Smith, Group Chief Operating Officer
Julian Horn-Smith Group Chief Operating Officer Vodafone Group Plc
Slide 26: Basic Value Drivers
Basic Value Drivers • Customer growth • ARPU • Cost-to-connect • Churn
Slide 27: Proforma Proportionate Customers
Proforma Proportionate* Customers Contract Prepay 0 0 0 0 0 0 0 0 0 ,00 ,00 ,00 ,00 ,00 ,00 ,00 ,00 ,00 0 10 20 30 40 50 60 70 80 90 2000 Closing customers at 31 March Europe 2001 Increase 2000-2001 2000 UKMEA 2001 Total Contract Prepay Americas 2000 Europe 73% 29% 110% & Asia 2001 UKMEA 46% 17% 66%
Slide 28: Subsidiary ARPU
Subsidiary ARPU* 600 £ per customer per annum 500 400 Contract 300 Prepay Total 200 100 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 99/00 99/00 99/00 99/00 00/01 00/01 00/01 00/01 * comprises annualised quarterly data annualised for all subsidiary companies, weighted by network customer numbers, but not by shareholdi
Slide 29: Customer Acquisition Costs
Customer Acquisition Costs* 200 180 160 140 120 Contract 100 Prepay 80 Total 60 40 20 0 Q1 00/01 Q2 00/01 Q3 00/01 Q4 00/01 *comprises handset subsidy and distribution channel commissions across all subsidiary companies, weighted by acquisition cost value and customer base, not by shareholding perce
Slide 30: Churn Rate
Churn Rate* 35% 30% 25% 20% Total Contract 15% Prepay 10% 5% 0% Q1 99/00 Q2 99/00 Q3 Q4 99/00 Q1 00/01 Q2 Q3 Q4 99/00 00/01 00/01 00/01 *comprises quarterly annualised data for all subsidiary companies, weighted by network customer numbers, not by shareholding percentage
Slide 31: Active Customers as at 2001
Active Customers as at 2001 Network Prepay Contract Total Market Active Penetration* % % % % Germany 85 89 87 64 Italy 93 92 93 76 UK 82 99 88 72 Group Total 88 94 90 n/a Definition: Customers who have made or received a call in the last three months or, where information is not available, customers
Slide 32: D2 Vodafone: Customer Base & Churn
D2 Vodafone Customer Base & Churn Customer Base & Churn Active Base Information at 31 March 2001 25,000 20,968 25,000 20,968 15% Customers (000s) 15% 20,000 2,783 Customers (000s) 20,000 12% 11% 15,000 12,490 10% Churn % 15,000 11,107 12,490 8,478 1,889 10,000 18,185 10,000 6,554 3,523 894 5% 730 5,
Slide 33: D2 Vodafone: ARPU, Cost to Connect & Data
D2 Vodafone ARPU, Cost to Connect & Data ARPU & Cost to Connect Data as % of Service Revenues Euros Year to 31 March 2001 Year to Month of Contract Prepay Blended March 01 March 01 Registered ARPU - 2001 611 151 378 Messaging Data 13.1% 15.7% -2000 679 284 559 Internet Data 0.3% 0.5% Active ARPU 683
Slide 34: Omnitel Vodafone: Customer Base & Churn
Omnitel Vodafone Customer Base & Churn Customer Base & Churn Active Base Information at 31 March 2001 18,000 15,680 20,000 14% 15% 16,000 14,176 13% 1,100 Customers (000s) 18,000 12% 14,000 980 16,000 15,680 Customers (000s) 12,000 14,000 11,222 10% 10,000 Churn % 12,000 10,000 7,018 8,000 14,580 14
Slide 35: Omnitel Vodafone: ARPU, Cost to Connect & Data
Omnitel Vodafone ARPU, Cost to Connect & Data ARPU & Cost to Connect Data as % of Service Revenues Year to Month of Euros 2001 2000 March 01 March 01 Registered ARPU 338 380 Messaging Data 6.0% 7.0% Active ARPU 364 n/a Internet Data 0.2% 0.2% Cost to Connect 37 27 Total Non Voice Services 6.2% 7.2%
Slide 36: Vodafone UK: Customer Base & Churn
Vodafone UK Customer Base & Churn Customer Base & Churn Active Base Information at 31 March 2001 14,000 12,279 14,000 12,279 30% 12,000 26% 30% 12,000 25% 1,499 Customers (000s) Customers (000s) 10,000 8,791 10,000 7,985 Churn % 8,000 7,985 20% 8,000 5,556 5,079 1,455 6,000 6,000 4,294 1,845 10,780
Slide 37: Vodafone UK: ARPU, Cost to Connect & Data
Vodafone UK ARPU, Cost to Connect & Data ARPU & Cost to Connect Data as % of Service Revenues £ Year to 31 March 2001 2000 Year to Month of Contract Prepay Blended Contract Prepay Blended March 01 March 01 Registered ARPU 550 156 306 562 178 380 Messaging Data 5.7% 6.5% Active ARPU 556 191 348 n/a n
Slide 38: Verizon Wireless: Customer Base & Churn
Verizon Wireless Customer Base & Churn 21,692 25,435 27,122 30,000 31% 29% 29% 1,676 30% 25,000 Customers (000s) 2,044 1,304 20,000 Churn % 20% 15,000 25,446 22,591 10,000 20,388 10% 5,000 0 0% Mar-99 Mar-00 Mar-01 Contract Prepay Churn
Slide 39: Verizon Wireless: ARPU, Cost to Connect & Data
Verizon Wireless ARPU, Cost to Connect & Data ARPU & Cost to Connect Data as % of Service Revenues US$ Year to 31 March Year to Month of 2001 2000 March 01 March 01 Registered ARPU 551 472 Messaging Data n/a n/a Cost to Connect 200 228 Internet Data 0.6% 0.8% Total Non Voice Services 0.6% 0.8% Note:
Slide 40: New Operating Environment
New Operating Environment • Penetration rates much higher • Competition intensifying • Regulatory environment shifting
Slide 41: Growth Drivers
Growth Drivers • Development of new services – March 2001 data revenue 9.3% of controlled total service revenue, up from 1% 18 months ago • Capture of synergies and economies of scale • Adoption of best practice • Focus on cost reduction and asset efficiency
Slide 42: Project Momentum: New Services
Project Momentum New Services • Good progress made in launch of new cross-market products and services • Targets exceeded for customer connections to new services • Initial focus on European market – Expansion beyond these territories later
Slide 43: Project Momentum: Eurocall
Project Momentum New Services • Eurocall – Launched 3 months ago – >1.6 million users at April 2001 – Base of roaming customers expected to increase – Increase in current usage – Reduce churn levels – Create a platform for further tariff products and services
Slide 44: Project Momentum: Short code access
Project Momentum New Services • Short code access – Deployed by 10 Vodafone operators – 4 more operators following this summer – Usage ~10% above levels expected – In future all products and services available in easy-to-use way while roaming
Slide 45: Project Momentum: Assisted roaming
Project Momentum New Services • Assisted roaming – Introduced 2 months ago – SIM card programmed to roam onto Vodafone networks – Highest value business customers benefit – 18 operators currently participating
Slide 46: Project Momentum: Prepay and GPRS roaming
Project Momentum New Services • Seamless prepay roaming – Recently launched in UK – Enable 55 million prepay customers to roam – No risk of fraud – Roaming traffic boosted • GPRS roaming – Commence Q3 to include 7 operators by year end – Benefit to corporate customers needing information and data ap
Slide 47: Project Momentum: New Services timeline
Project Momentum New Services Instant Messaging Service: D2 Vodafone Omnitel Vodafone Unified Messaging Service: Airtel Q3 Omnitel Vodafone E-wallet services: Omnitel Vodafone Unified Messaging Service: D2 Vodafone Other subsidiaries Q4 E-wallet and location based services Micro-payments 2002
Slide 48: Project Momentum: m-services initiative
Project Momentum New Services • Vodafone actively involved in m-services initiative within GSM Association – Defines standards for WAP on GPRS – Creates common platforms – Improves user interface Creation of standardised mobile data environment in Europe – Similar to J-Sky and I-Mode in Japan
Slide 49: Vizzavi Europe
Vizzavi Europe • Benefits of strong portal offering – Powerful retention tool for customer base – Additional network traffic – Reduced churn – Incremental revenue Value Generation
Slide 50: Vizzavi Europe
Vizzavi Europe • Development and roll-out continues • Operations in UK, France and Netherlands • 800,000 customers now served • Italy, Germany, Greece and Portugal incorporated by July 2001, serving >2 million customers
Slide 51: Vizzavi Europe
Vizzavi Europe • Services now: – WAP games, e-mail, picture mail, music streaming, news and finance content and location-based services • Services later this year: – Unified messaging, instant messaging and e- commerce • Continuous enhancements
Slide 52: Vizzavi Worldwide
Vizzavi Worldwide • First version deployed in New Zealand • During 2001 – Australia, Egypt and Romania • Discussions ongoing for use of platform or elements of it – Japan, US, China and Vizzavi Europe
Slide 53: Project Momentum: Supply Chain Management
Project Momentum Supply Chain Management • GPRS deployed in most Vodafone companies • Delivery of GPRS handsets from various suppliers • Wider variety, PDAs and PC cards during Q3 Take-up and usage will accelerate • 30 million handsets purchased last year • Development of strategic relationships wit
Slide 54: Project Momentum: Supply Chain Management
Project Momentum Supply Chain Management • 3G launch in leading markets expected H2 2002 • 3G network roll-out influenced by dual band handset availability • Commercial quantities of handsets in H2 2002 • Infrastructure contracts with Ericsson, Nokia and Siemens • Benefits of group-wide procurement
Slide 55: Project Momentum: IT and Technology
Project Momentum IT and Technology • Standardised platforms across Group’s networks • Focus on offering benefits of GPRS technology – Expanded data service portfolio – Harmonised technologies – Unified billing systems • Launch of 3G – More capacity – Greater spectrum efficiency – Faster speed rates
Slide 56: Project Momentum: Multi-National Account Management
Project Momentum Multi-National Account Management • Service for multinational accounts commenced • Major contracts in accountancy and FMCG segments • Demand for multinational services expected to grow • Important focus in future will be signing large national contracts in a broader global relations
Slide 57: Project Momentum: Global Brand Management
Project Momentum Global Brand Management • Well defined strategic framework – Become one of top 10 global brands – Offer seamless service in all our markets • Key brand values established
Slide 58: Global Brand Management
Global Brand Management Valuable operating brands Single Vodafone brand • Dual branding rolled out in Germany, Italy, Sweden, Netherlands, Greece, Portugal and Egypt • Spain and Ireland to follow this year • Co-ordinated alongside transitional advertising campaign • Wieden & Kennedy appointed global
Slide 59: Global Brand Management
Global Brand Management • Sponsorship agreements: – Formula One motor racing - Ferrari – Manchester United – England cricket – Australian rugby team – Vodafone Derby • Commitment to single Vodafone brand – Reinforce our identity with customers, service delivery capability and market leadership
Slide 60: Chris Gent, Chief Executive
Chris Gent Chief Executive Vodafone Group Plc
Slide 61: Future Development
Future Development • Operational priorities for the Group: – Roll-out of the Vodafone brand – Introduction of new data and voice services – Achievement of financial targets – Completion of integration of recent acquisitions
Slide 62: Customer Growth
Customer Growth • Customer growth rate likely to moderate as markets reach high penetration levels • Relatively low penetration rates in the US, Japan and China: potential for rapid growth • Net customer growth envisaged to be approximately half the level, on a proportionate basis, of that achieved
Slide 63: Customer Growth
Customer Growth • Emphasis shifts from market growth to customer retention, focusing on highest revenue generating customers • Stimulate more voice traffic usage to increase value of service to • Introduce new data applications customer base
Slide 64: Geographic Expansion
Geographic Expansion • Future acquisitions unlikely to match recent scales • Opportunities will only be taken which focus on improving our existing presence • Mindful of shareholders and bondholders Look for good returns and value • Recent opportunities passed on due to: – Inadequate return on inves
Slide 65: New Services
New Services • Launch of new data and voice service initiatives imminent • Commence build of 3G networks this year in preparation for launch of commercial service • Coincident with delivery of dual mode GSM/3G handsets H2 2002
Slide 66: Future Development
Future Development • Priority is margin improvement and cash-flow growth • Emphasis shift from pure customer growth and overall market share to gaining and retaining highest revenue, quality customers • Consolidating our position in the most valuable sectors of the market becomes more important • Th
Slide 67: Future Development
Future Development • Further margin improvement expected through: – Purchasing programme – Best practice on overall cost control measures • Vision and values communicated to employees • Passionate about: – Our customers – The people in the Company – Achieving results – The role we play in the commun
Slide 68: Immediate Future
Immediate Future • Emphasis on cost control and margins – Enable good cash-flow growth as market transitions to new data services • Migration from fixed to wireless • Multiplier effect of networking/communities Increases voice and data traffic
Slide 69: Summary
Summary • Unrivalled global position • High quality and huge customer base • Exciting growth opportunity ahead Ideally placed to sustain leadership for benefit of customers and shareholders
Slide 70: Cautionary Statement
Cautionary Statement This presentation contains certain ‘forward-looking statements’ with respect to the financial condition, results of operations and business and some of our plans and objectives with respect to these items. In particular, certain statements concerning our expectations and plans,