Slide 1: Vodafone
O vodafone
Slide 2: Sir Christopher Gent, Chief Executive
Sir Christopher Gent Chief Executive Vodafone Group Plc
Slide 3: Financial promotion notice
This presentation is being made only to, and is directed at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 and (b) persons to whom it may otherwise lawfully b
Slide 4: Agenda
Agenda • Overview of Results Sir Christopher Gent • Analysis of Results • Impairment Ken Hydon • Group Funding • KPIs and Business Drivers • Products and Services Julian Horn-Smith • Brand Development • Future Prospects and Q&A Sir Christopher Gent
Slide 5: Statutory Highlights
Statutory Highlights March 2002 Change Group Turnover £22.8bn +52% 1 Group Operating Profit £7.0bn +35% 1 Profit Before Taxation £6.2bn +54% Adjusted EPS 1 5.15 pence +45% 1 Before goodwill and exceptional items • EPS at higher level than before Mannesmann transaction Ahead of expectations
Slide 6: Cash Flow Highlights
Cash Flow Highlights • Free cash flow £2.4bn, after licences • Group net debt of £12.0bn Better than our expectations Good control on capex Excellent working capital performance
Slide 7: Proportionate Highlights
Proportionate Highlights March 2002 Change Turnover £29.8bn +34% EBITDA1 £10.1bn +44% Registered customers 101.1m +22% 1 Before exceptional items
Slide 8: Margin Performance Highlights
Margin Performance Highlights • Mobile EBITDA margin of 36%; +3pp • Group EBITDA margin* of 33%; +3pp Successful new commercial policies Better overhead management Lower exceptional costs * Includes fixed wire and exceptional costs
Slide 9: Operational Highlights
Operational Highlights Customer Growth ARPU i Satisfactory growth level i Stability in most markets i Improved customer mix i Despite reductions in incoming termination rates Rise in Data Revenues EBITDA i Data revenues increased 87% to i Improved margin performance >£2bn i From 30% to 33% i 11% at
Slide 10: Acquisition Highlights
Acquisition Highlights Japan • Gained control in October 2001 • Achieved highest ever market share • 2nd position in Japan • EBITDA margin +3.6pp above level prior to gain of control • EBITDA margin +5.9pp on 2001
Slide 11: J-Phone Vodafone Data Success
J-Phone Vodafone Data Success Sha-mail • 4 million camera phone customers – One third of customer base • Fastest growing cellular application • Movie Sha-mail achieved 115,000 users in first month – Better than DoCoMo’s Foma service in 6 months Revenue growth not dependent on 3G
Slide 12: Ken Hydon, Group Financial Director
Ken Hydon Group Financial Director Vodafone Group Plc
Slide 13: Statutory Results
Statutory Results Year to 31 March Turnover & Group Operating Profit* (£ billions) 2002 2001† Increase £m £m % 22.8 Turnover 22,845 15,004 52 Group operating profit* 7,044 5,204 35 Net interest payable (845) (1,177) (28) 15.0 Profit before tax* 6,199 4,027 54 Tax (2,140) (1,426) 50 7.9 7.0 Exception
Slide 14: Earnings Per Share
Earnings Per Share Adjusted EPS (Pence)* 5.15 4.90 Adjusted EPS*: 3.49 3.54 • 5.15 pence per share 2.57 • 45% increase on 2000/1 • 5% higher than 1999/0 1997/8 1998/9 1999/0 2000/1 2001/2 * Before amortisation of goodwill and exceptional items and restated following the adoption of FRS 19, “Deferred
Slide 15: Impairment Review
Impairment Review • Methodology: – In accordance with UK & US accounting standards – Discounted cash flow model – Forecasts to March 2011 – 2011 terminal growth at or below forecast nominal GDP – Long-term capital intensity below 10% – Pre-tax WACC in major mobile markets ranging from 8.8% in J-Phon
Slide 16: Proportionate Results: Mobile Turnover
Proportionate Results* Mobile Turnover Year to 31 March 2002 2001* Growth Analysis of Turnover £m £m % Rest of Germany 4,101 4,102 - World Italy 2,838 2,323 22 5% Germany United Kingdom 3,763 3,458 9 Japan 15% 16% Other Europe 5,617 3,318 69 Italy 10% Total Europe 16,319 13,201 24 Americas 5,638 5,0
Slide 17: Proportionate Results: Mobile EBITDA
Proportionate Results* Mobile EBITDA** Year to 31 March EBITDA** Margin Total Organic 2002 Growth* Growth Margin £m % % % 35.8% Germany 1,837 29 29 44.8 35.4% Italy 1,295 24 23 45.6 United Kingdom 1,294 21 21 34.4 Other Europe 2,037 91 31 36.3 33.4% Total Europe 6,463 40 27 39.6 Americas 1,907 17 13
Slide 18: Proportionate Results: Other Operations
Proportionate Results* Other Operations Year to 31 March 2002 2001* Growth £m £m % Turnover Other Operations: - Europe 821 767 7 - Japan 1,160 35 N/A • Arcor Total Turnover 1,981 802 147 • Japan Telecom EBITDA** • Vizzavi - Europe (8) (32) 75 - Japan 199 5 N/A • Cegetel Total EBITDA** 191 (27) N/A *
Slide 19: Cash Flow
Cash Flow Year to 31 March 2002 2001 Increase Operating Cash Flow Per Share £m £m % (Pence) 11.92 Operating cash flow 8,102 4,587 77 Capital expenditure (4,070) (3,740) 9 Tax paid (545) (1,574) (65) 9.26 Net interest paid (855) (969) (12) Dividends received & other 58 1,579 (96) 7.47 Free cash flow
Slide 20: Tangible Capital Expenditure
Tangible Capital Expenditure Analysis of Tangible Capital Expenditure March 2002: Other Operations Other 10% Germany • £4.1 billion Mobile 19% 8% • Includes: Japan Italy 16% 14% – £0.6 billion in J-Phone United – £0.1 billion in JT Kingdom Other 13% Europe 20% • Under 10% on 3G
Slide 21: Tangible Capital Expenditure
Tangible Capital Expenditure March 2003: 30.0% Tangible Capital Intensity • £6.0 billion 25.0% • Includes: 20.0% 15.0% – £1.6 billion in J-Phone 10.0% – £0.4 billion in JT 5.0% • 30% on 3G 0.0% 1997/8 1998/9 1999/0 2000/1 2001/2 2002/3 Forecast 2G GPRS & 3G
Slide 22: Net Debt
Net Debt Net Debt vs Controlled EBITDA* • £12.0 bn at 31 March 2002 (£ billions) 1.5x 12.0 • 14% of market capitalisation • Single ‘A’ credit rating 2.7x 1.4x 8.0 • 2002/3 transactions: 6.6 6.7 – Spain (2.2%) - £0.4 bn 4.9 – Spain (6.2%) - £1.3 bn 2.4 – China (1.1%) - £0.5 bn • Shareholder value 200
Slide 23: Summary
Summary • Strong growth: – EBITDA – Operating cash flow per share – Free cash flow – Earnings per share • No impairment in controlled mobile businesses • Financial strength • Shareholder value
Slide 24: Julian Horn-Smith, Group Chief Operating Officer
Julian Horn-Smith Group Chief Operating Officer Vodafone Group Plc
Slide 25: Introduction
Introduction • Review of operating performance • Value drivers • Progress on products and services • Implementation of single brand
Slide 26: Progress to Date
Progress to Date • Excellent operational execution – Refocus on customer value – Focus on revenue growth – Drive cost reductions – Focus on capital efficiency Strong cash flow result
Slide 27: The Transition
The Transition High Customer Focus Customer Growth - Portfolio of voice - Voice centric and data services
Slide 28: Global Organisation
Global Organisation • Unified Culture • Vodafone Values Passion for Our Our Our World customers people results around us
Slide 29: Operational Priority
Operational Priority • Launch new products and services – Extend benefits to customers – Leverage global brand – Leverage new technology Developing a Vodafone brand experience
Slide 30: Proportionate Customer Growth
Proportionate Customer Growth 120,000 100,000 22% Proportionate Customers 000's 80,000 60,000 40,000 20,000 0 Mar-01 Mar-02 Northern Europe, Middle East & Africa Central Europe Southern Europe Americas Asia Pacific
Slide 31: German Growth
German Growth Prepaid connections & handset subsidies & 15 month 3,000 disconnections 100 90 No. of connections / disconnections (000's) 2,500 80 Prepaid subsidy per handset (?) 70 2,000 60 1,500 50 40 1,000 30 20 500 10 0 0 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Quarter endi
Slide 32: Picture Messaging
Picture Messaging
Slide 33: J-Phone Vodafone
J-Phone Vodafone Market Share of Net Additions by Quarter 35% 30% 25% 20% 15% 10% 5% 0% Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Quarter ending
Slide 34: Verizon Wireless Customers and Churn
Verizon Wireless Customers and Churn 30,000 32% 28,000 Closing Customers (000's) Annualised Churn % 30% 26,000 24,000 28% 22,000 20,000 26% Mar-00 Mar-01 Mar-02 Year ending
Slide 35: Improved Customer Base
Improved Customer Base Comparison of contract base Contract gross additions as a % 2002 vs 2001 of total gross additions - year to 31 March 10,000 9% 60% 9,000 50% 8,000 Contract Customers (000s) 7,000 40% 6,000 17% 5,000 30% 57% 15% 51% 4,000 44% 45% 20% 3,000 31% 2,000 21% 10% 1,000 0 0% 2001 2002
Slide 36: Churn
Churn Annualised Quarterly Churn* 30% 25% Annualised Quarterly Churn % 20% 15% 10% 5% 0% Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Quarter ending Contract Prepaid Total *Controlled subsidiaries (excl. Japan)
Slide 37: Omnitel Vodafone Loyalty Scheme
Omnitel Vodafone Loyalty Scheme 8,000 28% 7,000 No. of Loyalty Scheme Members (000's) Annualised Quarterly Prepaid Churn % 26% 6,000 24% 5,000 4,000 22% 3,000 20% 2,000 18% 1,000 0 16% Jun-01 Sep-01 Dec-01 Mar-02 Quarter ending Loyalty Scheme Members Omnitel Vodafone Prepaid Churn Group Subsidiary P
Slide 38: Customer Satisfaction Measures
Customer Satisfaction Measures • Sales and service activation • Account management • Tariffs & pricing • Network quality & coverage • Billing (contract) • Top up (prepaid) • Customer service & support • Image • Information & communication • Additional services (i.e. data services, mobile internet)
Slide 39: Usage and ARPU
Usage and ARPU Monthly Contract Voice Usage* Annualised Quarterly ARPU* 250 500 Minutes per customer per month 200 400 Annualised Quarterly ARPU £ 150 300 100 200 50 100 0 0 Jun-01 Sep-01 Dec-01 Mar-02 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Quarter ending Quarter ending Contract Pre
Slide 40: J-Phone Vodafone month ARPU trend
J-Phone Vodafone 12 month ARPU trend 9,000 8,000 7,000 6,000 Monthly ARPU (Yen) 5,000 4,000 3,000 2,000 1,000 0 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02
Slide 41: J-Phone Vodafone
J-Phone Vodafone 180% Relative ARPU of voice and data users 160% 167% 140% 120% 132% 100% 100% 80% 60% 69% 40% 20% 0% Voice only users Average of all users Web and Mail users Packet users Note: Information supplied is for the Tokyo region only. Analysis based on customer revenue (i.e. excludes incom
Slide 42: Non-Voice Revenue
Non-Voice Revenue As a percentage of service revenues* 12.0% 11.0% 10.0% Revenue £m 9.0% 11.1% 8.0% 10.2% 9.2% 8.6% 7.0% 8.1% 6.0% 12m to Mar-01 12m to Jun-01 12m to Sep-01 12m to Dec-01 12m to Mar-02 * Controlled Group Total
Slide 43: SMS Usage
SMS Usage* Total SMS messages per quarter (millions) 8,500 75 SMS messages per active user per month 8,000 70 7,500 7,000 65 6,500 6,000 60 5,500 5,000 55 Jun-01 Sep-01 Dec-01 Mar-02 Quarter ending Total SMS messages per quarter Messages per active user * Controlled Subsidiaries (excl. Japan)
Slide 44: ARPU
ARPU • Reduction in non-calling SIMs • Stable voice usage • Increasing data usage • Healthy outlook for ARPU
Slide 45: Cost Management
Cost Management • Underestimated driver of competitive advantage • Evident in 3pp increase in EBITDA margin • Success due to: – Overhead reductions – Productivity improvements – Cost efficiencies
Slide 46: Vodafone UK
Vodafone UK Overheads as a percentage of turnover* 32% 30% 28% 26% 24% 22% 20% Jun-01 Sep-01 Dec-01 Mar-02 Quarter ending *Overheads exclude depreciation, amortisation and exceptional costs.
Slide 47: Acquisition and Retention Costs
Acquisition and Retention Costs Acquisition Cost per Gross Addition* Annualised Retention Cost per Customer* 150 10 Annualised Retention Cost per Average Customer £ Acquisition cost per gross addition £ 8 100 6 4 50 2 0 0 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-01 Sep-01 Dec-01 M
Slide 48: Product and Services
Product and Services • Transition from standardised GSM world to non-standardised IP world • Creation and development of new services by Vodafone and 3rd parties • Eliminate confusion of technology • Give customers easy, seamless way of using services, with a single brand
Slide 49: Customer Experience
Customer Experience • Colour • Intuitive service icons • Differentiation through brand experience • Ease of use • Compelling services
Slide 50: Customer Experience
Customer Experience Components - Technology • Powered by GPRS and 3G networks but seamless to our customers • Japan first 3G network with others to follow • Initial marketing focus on customer experience through GPRS • 3G services - mass market in 2004
Slide 51: Customer Experience
Customer Experience • Services – Business services – Picture messaging (MMS) – Unified messaging – Mobile Instant Messaging – Location based services • Content – Vizzavi
Slide 52: Why Vodafone's Customer Experience?
Why Vodafone’s Customer Experience? • Brand experience • Seamlessness • Interoperability • Ease of use
Slide 53: Seamless Voice Services
Seamless Voice Services • Prepaid roaming • Virtual Home Environment • Eurocall • Global Account Management
Slide 54: Partner Networks
Partner Networks • Teledanmark, Denmark • Radiolinja, Finland • No equity investment • Strength of brand and roaming products into new territories
Slide 55: Building a Global Brand
Building a Global Brand : UK Australia New Zealand Malta Hungary Albania : Portugal Spain Netherlands Ireland Greece Sweden Germany Egypt : Italy : Japan : Denmark Finland
Slide 56: Sponsorship - F1 and Manchester United
Sponsorship - F1 and Manchester United
Slide 57: Conclusion
Conclusion • Achieved operational objectives • Good progress on – Products & Services – Branding Key components of customer experience
Slide 58: Sir Christopher Gent, Chief Executive
Sir Christopher Gent Chief Executive Vodafone Group Plc
Slide 59: The Past Year
The Past Year • Achieved all objectives – Outperformed on financial indicators given last year and at half year • Key transition year Continued revenue growth Enhanced revenue growth - customer additions - additional customer usage
Slide 60: Customer Growth in FY03
Customer Growth in FY03 • Net growth of just <10% – Disconnection of non-revenue SIMs • Evident in prepaid in H1 • Return to net growth by half year • Continued contract customer growth Improved customer mix • Competitive gain through superior offerings
Slide 61: ARPU in FY03
ARPU in FY03 • Modest but real ARPU improvement* • Improvements arise primarily from: – Increase in data revenues • Sustained growth in SMS • New applications e.g. picture messaging – Competitive gain of high spending customers – Further increase in active customers – Greater usage of new voice serv
Slide 62: Operational Measures in FY03
Operational Measures in FY03 • Double digit revenue growth • Further improvements in EBITDA margin • Better operating cash flow • Continued control of capex; efficiency ratio slightly higher – But greater level of spend on 3G • Similar free cash flow levels
Slide 63: Data Outlook in FY03
Data Outlook in FY03 • Open 3G this year • Applications that matter, not technology • Data applications will work successfully in 2.5G environment • 20% of service revenues in 2004 – Voice revenue better than expectations – Delays in applications and terminals for 2.5G
Slide 64: Benefits of 3G
Benefits of 3G • Additional capacity • More efficient spectrum management techniques • Faster data rates • Enhances 2.5G applications • Facilitates new applications • Continued substitution from fixed to mobile • Ensures optimum capital efficiency
Slide 65: Transactions in FY03
Transactions in FY03 • Prepared to increase existing shareholding • Likely to be financed in cash – Strong balance sheet – Strong debt position • Position in CMHK increased – Cash return through dividend stream
Slide 66: Conclusion
Conclusion • Strong track record as growth market • Vodafone has executed better than others • Growth potential for business continues – No impairment for controlled mobile – Applications and terminals arriving in Europe this year • New developments will sustain long-term growth for years to come
Slide 67: Forward Looking Statement
Forward Looking Statement This document contains certain “forward-looking statements” with respect to Vodafone’s financial condition, results of operations and business and certain of Vodafone’s plans and objectives with respect to these items. In particular, forward-looking statements include state
Slide 68: Vodafone
O vodafone