Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — H1 2002 Earnings Presentation
63 slides from Vodafone Group Public's earnings presentation, November 2001
Slide 1: Vodafone
O vodafone
Slide 2: Sir Christopher Gent, Chief Executive
Sir Christopher Gent Chief Executive Vodafone Group Plc
Slide 3: Agenda
Agenda • Overview of the results Sir Christopher Gent • Analysis of results Ken Hydon • Group funding • KPIs and business drivers Julian Horn-Smith • Major operational initiatives • Global products and services Thomas Geitner • Vodafone’s prospects Sir Christopher Gent
Slide 4: Results Overview
Results Overview • Statutory results: – Exclude full consolidation of JT and J-Phone – Control only acquired after period close • Proportionate results: – Include JT and J-Phone at levels of ownership throughout period Excellent financial performance and very strong growth
Slide 5: Financial Highlights
Financial Highlights 1 Proportionate Half-Year to September 2001 Mobile Only Sept 2001 Change Turnover £13.492 bn +33% EBITDA 2 £4.778 bn +46% Group operating profit 3 £3.321 bn +44% Registered customers 95.6 m +15%4 1 Includes performance of Japanese entities at level of ownerships throughout the p
Slide 6: Financial Highlights
Financial Highlights 1 Statutory Half-Year to September 2001 Sept 2001 Change Group Turnover 2 £8.906 bn +27% Group Operating Profit 2 £3.392 bn +40% Profit Before Taxation 2 £3.011bn +65% Adjusted EPS 2 2.51 pence +63% 1 Excludes consolidation of Japan Telecom and J-Phone 2 Before goodwill and exce
Slide 7: Financial Highlights
Financial Highlights H1 Margin Performance & Cash Flow • Mobile EBITDA margin of 35.4%; +3.1pp – Changes in commercial policies – Increased focus on overhead management • Group EBITDA* margin of 32.9%; +3.0pp • Capex of £1.8 billion - 20% below original plans • Free cash flow generation of over £600
Slide 8: Operational Highlights
Operational Highlights Customer Growth Stabilisation in ARPU i Net growth moderated i After years of decline i But higher rate than expected i Better mix of contract to prepaid Improved Margin Performance Rise in Data Revenues i Lower acquisition costs i 9.1% in controlled subsidiaries i Better over
Slide 9: Geographic Expansion
Geographic Expansion • Presence achieved in all geographic territories • Achieved control of Eircell in Ireland • Final cash payment for 25% Swisscom Mobile • Completed Iusacell transaction in Mexico • Disposed of 11.7% stake in Shinsegi, South Korea
Slide 10: Geographic Expansion: Japan
Geographic Expansion Japan • Conclusion of tender offer in Japan • 66.7% control of JT secured • Control of J-Phone with ~70% interest • World leading wireless internet market – Data at 14.6% of service revenues – World’s highest mobile internet adoption levels
Slide 11: Ken Hydon, Group Financial Director
Ken Hydon Group Financial Director Vodafone Group Plc
Slide 12: Statutory Results
Statutory Results 6 months to 30 September 2001 2000† Increase Adjusted EPS (Pence)†* £m £m % Turnover 8,906 7,019 27 2.51 Group operating profit * 3,392 2,420 40 2.00 Net interest payable (381) (597) (36) 1.54 Profit before tax * 3,011 1,823 65 Tax (1,086) (680) 60 Exceptional items (4,763) (132) 3
Slide 13: Proportionate Results: Mobile Turnover
Proportionate Results* Mobile Turnover 6 months to 30 September 2001 2000* Growth Analysis of Turnover £m £m % Germany 2,057 2,056 - Rest of Italy 1,328 1,137 17 World 6% Germany United Kingdom 1,805 1,662 9 Japan 15% Other Europe 2,694 1,454 85 15% Italy Total Europe 7,884 6,309 25 10% Americas 2,8
Slide 14: Proportionate Results: Mobile EBITDA
Proportionate Results* Mobile EBITDA** 6 months to 30 September Total Organic EBITDA** Margin 2001 Growth* Growth Margin £m £m % % 35.4% Germany 931 50 44 45.3 33.4% Italy 655 27 28 49.3 United Kingdom 565 14 14 31.3 32.3% Other Europe 952 111 36 35.3 Total Europe 3,103 49 32 39.4 Americas 1,000 23
Slide 15: Proportionate Results: Other Operations
Proportionate Results* Other Operations 6 months to 30 September 2001 2000* Growth £m £m % Other Operations: Turnover 834 372 124 • Arcor • Japan Telecom EBITDA ** (1) 6 N/A • Vizzavi • Cegetel * September 2000 stated on a pro forma basis for Mannesmann ** Before exceptional items
Slide 16: Cash Flow
Cash Flow 6 months to 30 September 2001 2000 Increase £m £m % Operating Cash Flow per Share Operating cash flow 3,640 1,888 93 (pence) Capital expenditure (1,816) (1,357) 34 5.37 Tax paid (545) (829) (34) Net interest paid (449) (609) (26) 4.29 Dividends received & other (1) 246 N/A Free cash flow b
Slide 17: Capital Expenditure
Capital Expenditure Analysis of Capital Expenditure September 2001: Other Operations 9% • £1.8 billion Other Mobile Germany 10% 28% • Excludes: – Verizon Wireless Other Europe 21% – J-Phone Italy 14% – Japan Telecom United Kingdom 18%
Slide 18: Capital Expenditure: Capital Intensity
Capital Expenditure March 2002: Capital Intensity 30% • £5 billion 25% • Includes: 20% 15% – £1 billion in Japan 10% • 2% on GPRS 5% 0% • 20% on 3G 1997/8 1998/9 1999/0 2000/1 2001/2 2002/3 Forecast Forecast 2G GPRS & 3G
Slide 19: Net Debt
Net Debt £bn At 31 March 2001 6.7 Increase during the period 2.5 At 30 September 2001 9.2 £bn Recent transactions: - JT tender offer 1.8 - JT debt assumed 6.2 8.0 Committed to single ‘A’ credit ratings
Slide 20: Summary
Summary • Strong growth: – EBITDA – Operating cash flow per share – Free cash flow – Earnings per share • Financial strength • Shareholder value
Slide 21: Julian Horn-Smith, Group Chief Operating Officer
Julian Horn-Smith Group Chief Operating Officer Vodafone Group Plc
Slide 22: Realignment of Strategy
Realignment of Strategy • Sharpened focus on revenue growth and margin improvement • Attracting, servicing and retaining high value customers and effective cost control • Delivered 3 percentage point increase in margin
Slide 23: Customers
Customers Contract net additions as a percentage of total net additions 70% 60% 50% 40% 65% 64% 30% 20% 43% 35% 10% 16% 7% 1% 5% 0% 6m t o 6m t o 6m t o 6m t o 6m t o 6m t o 6m t o 6m t o S ep - 00 S ep - 01 S ep - 00 S ep - 01 S ep - 00 S ep - 01 S ep - 00 S ep - 01 Omnitel Airtel Vodafone UK D2 Vo
Slide 24: Subsidiary ARPU
Subsidiary ARPU * 500 400 £ per customer per annum 300 200 100 0 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Contract Prepay Total * Comprises annualised quarterly data for European subsidiaries (excluding Malta and Hungary), weighted by network customer numbers, but not by shareholding percentage
Slide 25: Usage per customer per month
Usage Usage per customer per month * 200 minutes per customer per month 150 2x 100 50 0 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Highest Lowest Weighted Average * Average monthly usage by quarter in European subsidiaries (excluding Malta and Hungary). Average weighted by network customer numbers, b
Slide 26: Non-Voice Revenue
Non-Voice Revenue % growth in non-voice revenue Non-voice revenue as a % vs 6 months to Sep-00 * of service revenues ** 70% 9.2% 60% 9.0% 8.8% 50% 8.6% R even u e £m R even u e £m 40% 8.4% 66% 9.1% 30% 8.2% 20% 40% 8.6% 8.0% 10% 7.8% 8.1% 0% 7.6% 6m to Mar-01 6m to Sep-01 12m to Mar-01 12m to Jun-01
Slide 27: Customer Acquisition Spend
Customer Acquisition Spend % decrease in acquisition spend - 6m to Sep-01 vs 6m to Sep-00 0% -10% -21% -25% -20% Revenue £m -30% -57% -40% -50% -60% -70% Vodafone UK D2 Vodafone Omnitel Vodafone
Slide 28: Overheads
Overheads Overheads (excl. depreciation & amortisation) as a % of Turnover * 29% 28% 27% 26% 25% 24% 23% 22% 21% 20% Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Weighted Average * European Subsidiaries (excluding Malta and Hungary)
Slide 29: Vodafone UK: Customer Base & Churn
Vodafone UK Customer Base & Churn 12,799 12,279 14,000 10,240 26% 30% 26% 12,000 24% 25% Customers (000s) 10,000 8 ,1 6 8 Churn % * 7 ,9 8 5 20% 8,000 6 ,2 9 6 15% 6,000 10% 4,000 2,000 3 ,9 4 4 4 ,2 9 4 4 ,6 3 1 5% 0 0% Sep-00 Mar-01 Sep-01 C o ntra ct Prepa id C hurn * 6 months annualised
Slide 30: Vodafone UK: Quarterly ARPU and Cost to Connect
Vodafone UK Quarterly ARPU Cost to Connect 200 150 £ p er cu stomer p er q u arter 150 £ p er g ross ad d ition 100 100 50 50 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 00/01 00/01 00/01 00/01 01/02 01/02 00/01 00/01 00/01 00/01 01/02 01/02 Con tract Prep aid Total Con tract Prep aid Total
Slide 31: D2 Vodafone: Customer Base & Churn
D2 Vodafone Customer Base & Churn 21,864 20,968 19% 25,000 20% 12% 16,527 Customers (000s) 20,000 11% 15% Churn % * 15,000 1 2 ,4 9 0 1 3 ,0 6 9 10% 10,000 7 ,9 6 7 5% 5,000 8 ,5 6 0 8 ,4 7 8 8 ,7 9 5 0 0% Sep-00 Mar-01 Sep-01 C o ntra ct Prepa id C hurn * 6 months annualised
Slide 32: D2 Vodafone: Quarterly ARPU and Cost to Connect
D2 Vodafone Quarterly ARPU Cost to Connect 200 300 EUR p er cu stomer p er q u arter 250 EUR p er g ross ad d ition 150 200 100 150 100 50 50 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 00/01 00/01 00/01 00/01 01/02 01/02 00/01 00/01 00/01 00/01 01/02 01/02 Con tract Prep aid Total Con tract Prep aid To
Slide 33: Omnitel Vodafone: Customer Base & Churn
Omnitel Vodafone Customer Base & Churn 16,652 20,000 15,680 18% 20% 13,591 16% Customers (000s) 15,000 12% 15% Churn % * 15,095 10,000 14,176 10% 12,161 5,000 5% 1,430 1,504 1,557 0 0% Sep-00 Mar-01 Sep-01 Contract Prepaid Churn * 6 months annualised
Slide 34: Omnitel Vodafone: Quarterly ARPU and Cost to Connect
Omnitel Vodafone Quarterly ARPU Cost to Connect 250 60 EUR p er cu stomer p er q u arter 200 EUR p er g ross ad d ition 40 150 100 20 50 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 00/01 00/01 00/01 00/01 01/02 01/02 00/01 00/01 00/01 00/01 01/02 01/02 Con tract Prep aid Total Total
Slide 35: Verizon Wireless: Customer Base & Churn
Verizon Wireless Customer Base & Churn 28,682 30,000 26,282 27,122 50% 1,803 1,676 25,000 2,386 Customers (000s) 40% 33% Churn % * 20,000 30% 27% 30% 15,000 23,896 26,879 25,446 20% 10,000 5,000 10% 0 0% Sep-00 Mar-01 Sep-01 Contract Prepaid Churn * 6 months annualised
Slide 36: Verizon Wireless: Quarterly ARPU and Cost to Connect
Verizon Wireless Quarterly ARPU Cost to Connect 200 250 US$ p er cu stomer p er q u arter 200 US$ p er g ross ad d ition 150 150 100 100 50 50 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 00/01 00/01 00/01 00/01 01/02 01/02 00/01 00/01 00/01 00/01 01/02 01/02 Total Total
Slide 37: J-Phone: Customer Base & Churn
J-Phone Customer Base & Churn 11,102 12,000 9,966 50% 9,108 388 10,000 277 40% Customers (000s) 33% 31% 8,000 Churn % * 27% 30% 6,000 1 0 ,7 1 4 9 ,1 0 8 9 ,6 8 9 20% 4,000 2,000 10% 0 0% Sep-00 Mar-01 Sep-01 C o ntra ct Prepa id C hurn * 6 months annualised
Slide 38: J-Phone: Quarterly ARPU and Cost to Connect
J-Phone Quarterly ARPU Cost to Connect 40,000 50,000 Yen p er cu stomer p er q u arter 40,000 Yen p er g ross ad d ition 30,000 30,000 20,000 20,000 10,000 10,000 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 00/01 00/01 00/01 00/01 01/02 01/02 00/01 00/01 00/01 00/01 01/02 01/02 Total Total
Slide 39: Multi National Accounts
Multi National Accounts • 11 Multi National Accounts secured to date incl. – KPMG; – Deloitte & Touche; – Unilever; – Sun Microsystems; – Reuters • Winning new partners, particularly systems integrators who assist in Corporate Sector
Slide 40: Brand
Brand • Launched global ad campaign-“How Are You” – Communicates the brand values: • Dependability; • Empathy; • Can-do attitude; • Innovation; and • Joie de Vivre – Paves way for single brand • Communicate to employees the link between corporate values and brand values
Slide 41: Brand cont.
Brand cont. • October Portugal and Spain moved to single brand – Ahead of early 2002 timetable • Further migrations over course of the next year • Revenue and cost synergies evident • Ferrari sponsorship starts next year – Significant catalyst to Vodafone brand globally – Introduce products through
Slide 42: Global Internet Platform
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Slide 43: Vizzavi Europe
Vizzavi Europe • Portal operational in UK; France; Germany; Greece; Italy; Netherlands; Portugal and Spain • Customer base at 5.4 million in October • Increase in WAP page views to 63 million in October • Current offering: – Location based services; WAP games; and SMS • Future services: – Unified an
Slide 44: Thomas Geitner, Chief Executive Group Products and Services
Thomas Geitner Chief Executive Group Products and Services
Slide 45: Launched February 2001, 4m customers
• Launched February 2001 • 4m customers at end Sept 2001 • 11 countries across Europe • Certainty and predictability of roaming charges to customers
Slide 46: Virtual Home Environment
Virtual Home Environment • Launched January 2001 • Generated 6m* roaming minutes • The product DNA of our brand • Integrated across 11 operators • 3 further countries expected by end of 2001 * Proportionate figure
Slide 47: Assisted Roaming
Assisted Roaming • Benefits highest value roaming customers • 16 operators globally • Inbound capture rate increasing since introduction in March 2001
Slide 48: Pre-Paid Roaming
Pre-Paid Roaming • Launched in May 2001 • 12 European countries by end FY 2002 • Seamless roaming for 45m* European Pre-Paid customers • >11m* roaming minutes and 5m* text messages • Spanish top-up cards available to UK customers * Proportionate figures
Slide 49: GPRS
GPRS • Data products across Europe • Greater data usage as supply of devices increases • By Christmas: 13 different terminals
Slide 50: GPRS Roaming
GPRS Roaming • Roll out in 10 European networks • Unlock demand from corporate customers – New data revenue created – Better value access to services
Slide 51: Customer Applications
Customer Applications • Focus on customer applications • Range of 2.5G applications • Foundation for 3G launch
Slide 52: Unified Messaging
Unified Messaging BRINGING EUROPE TOGETHER top services categories find stuff my vizzavi Tuesday, 14th June, 2001 Message centre mesange cone | (Gatwfelder. 1s] Move message to. ¢ Folders = QFrom Subject Date a > Compose = Instructions: to reach the 04/29/2001. 3 min 15 pence = @ Sharon.Cohen@ynet.c
Slide 53: Instant Messaging
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Slide 54: Summary
Summary • Further significant synergy potential • Substantial synergies already created – Brand – Products – Technology – Supply Chain Management – Global Account Management
Slide 55: Sir Christopher Gent, Chief Executive
Sir Christopher Gent Chief Executive Vodafone Group Plc
Slide 56: Mobile Prospects for H2
Mobile Prospects for H2 Customer Growth Data Revenues i Don’t expect repeat of exceptional i Continues to improve-prior to GPRS growth at Christmas i Further enhancements and additional i Net growth likely to exceed 20% GPRS services i Good mix to be sustained in H2 i Wider variety of GPRS devices A
Slide 57: Japan in H2
Japan in H2 • Will consolidate JT and J-Phone from 12 October • J-Phone continues to exceed expectations – Better customer growth, good ARPUs, improving margins • Initial review of Japan Telecom undertaken – Revised forecasts for financial year issued by JT – No material impact on the Group’s result
Slide 58: Group Outlook in H2
Group Outlook in H2 • Better performance in controlled mobile assets in H1 - expect continued performance in H2 • Fixed line businesses in difficult market – Plans in place to improve fundamentals – Benefits not visible until next year
Slide 59: Outlook in FY 2003
Outlook in FY 2003 • Customer growth just under 10%* • ARPU stabilisation or slight improvement – Increased usage and data contribution • Healthy EBITDA growth - before 3G • 3G launch in H2 of 2002 is an important step – Financial impact not significant until end 2003 • Reduced capital expenditure e
Slide 60: Vodafone's Prospects
Vodafone’s Prospects • No further acquisitions or stake increases planned for this financial year • Expect good EPS* performance this year and next * Pre goodwill and exceptionals
Slide 61: Summary
Summary • Enhanced global leadership position • Excellent progress on new products and services • Better operational and margin performance Delivering strong growth momentum • Current market conditions highlight Vodafone’s defensive and growth qualities
Slide 62: Conclusion
Conclusion • Transitioning to new service environment of 3G • Better financial performance than many anticipated • Complete confidence remains in revenue growth opportunities from GPRS and 3G • Good immediate growth prospects for this year and next
Slide 63: Vodafone
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