Vodafone Group Public Limited Company Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Transformation agenda centered on customers, simplicity, growth. Reshaped portfolio via sales of Spain/Italy and merger of Vodafone and Three U.K.
• Reset capital structure, returned €2 billion to shareholders via buybacks, with next €2 billion program starting.
• Focus on customer experience: U.K. and Germany achieved best-ever NPS, U.K. has lowest churn for mobile and broadband. Germany made step change in NPS, halving gap to incumbent.
• Became leaner with 10,000 role reductions and shared operations commercial models.
• Germany turnaround: Stabilizing customer satisfaction, investing in networks and operations, 1&1 customer base migration picking up.
• U.K. merger: Unique position for EBITDA and free cash flow growth, leveraging €700 million synergies.
• Africa and Turkey: High growth potential leveraging digital services and market opportunities.

Segment Performance

• Germany: Facing challenges like declining broadband base and competition, but seeing positive trends in customer satisfaction with best-ever Net Promoter Scores. Expected to see EBITDA improvement with reduction in MDU drag and ramp-up of 1&1 migration.
• U.K.: Strong performance in FY '25 with 8% EBITDA growth, NPS leader in mobile and fixed, record low churn. Merger with Three will drive EBITDA and free cash flow growth, with €700 million annual cost and CapEx synergies.
• Africa and Turkey: Strong local positions with significant growth opportunities beyond core connectivity, generating cash flows in euros through the cycle.
• Vodafone Investments: Provides dividend flows and potential for value realization.

Guidance

• FY '26 guidance: Adjusted EBITDAaL for group between €11 billion and €11.3 billion, Europe target €7.2-7.4 billion. Adjusted free cash flow range €2.6-2.8 billion.
• U.K. merger impact: Pro forma FY '26 EBITDAaL contribution ~€400 million, adjusted free cash flow drag ~€200 million due to front-loaded investments.
• Expect to reach full run rate of €700 million annual cost and CapEx synergies by fifth year, free cash flow accretion by fourth year.

Risks

• Market conditions in Germany remaining challenging.
• Uncertainty in mobile pricing environment affecting ARPU.
• MDU transition impact on EBITDA in Germany.
• Geopolitical changes and trade tariffs potentially affecting equipment pricing and availability.

Question and Answer Q: On guidance and German outlook, asking about EBITDA implications and pricing.

A: Margherita and Luka discuss EBITDA range for Europe, German EBITDA recovery, mobile pricing pressure.

Q: On customer experience in U.K., asking about infrastructure and merger benefits.

A: Margherita talks about U.K. network investment, merger benefits, and customer experience as leading indicator.

Q: On B2B segment, asking about headwinds and B2B growth.

A: Luka discusses B2B growth trajectory, U.K. challenges, and B2B's contribution to revenue and EBITDA.

Q: On share buyback, asking about value and capital allocation.

A: Margherita and Luka talk about adjusted free cash flow per share growth, capital allocation strategy.

Q: On U.K. merger details, asking about EBITDA boost and free cash flow.

A: Luka clarifies EBITDA contribution, restructuring spend, and free cash flow guidance.