Vodafone Group PLC (VOD) 2016 Q4 法說會逐字稿

So good morning, everyone.

My name is Tim Boddy.

I'm the Investor Relations Director of Vodafone.

Welcome to our full year results.

Some brief housekeeping items before we start.

The format of today's presentation has changed slightly.

We're going to have a shorter Q&A session, based on your feedback, with more time at the end to connect with management, many of whom as you can see are in the room, across the hall of our exco.

And if you need to ask questions in the formal Q&A session, there is a microphone somewhere near your seats, where you need to hold down the button while you're speaking.

That is it.

I will now turn over to Vittorio Colao, Chief Executive of Vodafone.

So good morning, everybody.

Thank you for coming to our year-end results presentation.

A special welcome to Peter Moyo, who sits in the first row.

Peter is the outgoing Chairman of Vodacom.

Peter is going to run a listed company very soon.

I think you're here to basically get the credit for the wonderful contribution.

And hopefully, we'll also learn something, but Peter, it's great to have you here in such a good day's for Vodacom's results.

So as we have had 2 big transactions post Project Spring, we thought it was good to change a little bit the format of today's presentation.

I will go through a little bit longer illustration of results at the beginning, but I will not go into the details of the countries.

You still have the details of the country in the appendix, and you will be able to get the usual things, but I will try to stay a little bit at the higher level.

Then Nick will go through the financial review, as always.

And then I will come back and give an update of our strategy across Vodafone post these transactions post Project Spring and try to give the sense of direction for Vodafone towards 2020.

And then of course, Nick and I will take questions from you.

A reminder: India is not included, due to IFRS accounting rules, into the numbers, but again, for India as well, you have all the details in the appendix.

So let's start with the full year highlights.

I have to say we had a good year, 1.9% organic revenue growth.

This is growth in both fixed and mobile.

And in most of our customer -- in our markets, we are gaining share.

Good results on EBITDA, 5.8% EBITDA growth.

This is a 130 basis points margin expansion.

Nick will cover operating leverage but also cost reduction that has been successful in the year, 29.7% margin.

Cash flow goes up 3x.

Of course, CapEx levels are going back to the normal level post Project Spring, EUR 7.7 billion invested; EUR 4.1 billion cash flow but EUR 4.3 billion in guidance terms.

And finally, the board this morning agreed to increase the dividend by 2% to EUR 0.1477, which is consistent with our intention of having a progressive dividend policy.

So overall, including India, we have met our guidance last year.

Now let's have a look at the 3 areas of the group.

First of all, Europe.

In Europe, as you can see from the red part of the chart, we continue to have good commercial momentum: 1 million contract net adds across the piece, 1.2 million broadband homes added and 1.6 million NGN homes.

We are again the fastest-growing NGN and broadband provider throughout Europe.

AMAP ex India, the blue part in the center, continues to grow very well.

We have a 6.8 percentage growth.

We added 9.7 million customers in the year and 7.5 million data active users in the year.

Now this chart doesn't say, but even in AMAP we have growth in fixed broadband, 300,000 homes, mostly in Egypt and Turkey.

And finally, the third part is India.

Now of course, India, as we all know, has been challenged by the entrance of Jio.

We had in the last quarter a minus 11.5% growth.

This is actually in-line or better than the 2 reference competitors.

We have seen the numbers yesterday.

The good news is that we are retaining now voice and data users.

We have, well, actually increasing data customers in the last quarter.

Data customers have gone up to 38 million from 35 million, 3G and 4G, and so we see some signs that our, let me say, sacrifice of ARPU is working commercially in India.

Now as I said, I don't want to go into the details market by market.

You have them in the appendix, but let me still give you an overview of how things went across the piece.

First of all, our strategy of customer differentiation based on network and customer experience measured by the NPS; as you can see from the chart, #1 in Germany, #1 in Italy, #1 in Spain.

We are not #1 in the U.K. In the U.K., as you all know, we had technical issues.

Now we have a pretty well-working network; #1 data and voice in London, #1 voice outside of London and good performance on data.

We have fixed the billing mistakes.

Now billing mistakes are practically eliminated.

And we have halved the number of complaints that are coming into the call centers, which now have also very good response in average 14 seconds we take calls, which is down 96% from the 6, 7 minutes that was the case 6, 7 month ago.

So not a great performance yet perceived by all the customers, but for sure, the basic operations are now in good shape.

The central block is the growth.

I already commented on mobile and fixed growth.

One -- just one comment on Italy: It looks like a negative on prepaid, but the reality is that the active prepaid numbers, customer numbers in Italy are actually stabilized.

And we are doing pretty well across the piece instead on the mobile front.

And finally, the piece of the slide that I really like, the bottom part, service revenue growth, EBITDA growth.

As you can see, we have positive leverage almost everywhere, exception of course the U.K. In Germany, despite MTR headwinds, 1.9%; 4.5% of EBITDA.

In Italy, despite a very competitive headline market, we are going 2.3%; and an amazing 10% at EBITDA level, excellent drop-down on costs here by our local colleagues.

And Spain, ex handsets financing, 4% growth, 8% EBITDA growth, again a very good job done on cost and an excellent job done especially on IT cost.

As I said, in the U.K. the financial performance clearly lags the operational recovery, minus 3.3%.

Here there have been the famous billing issues.

We have roaming hits.

There's also some accounting stuff, but again, as I said, the important thing in the U.K., we have fixed the basic operations now.

There's a lag, and then it will come also to the financials.

Emerging markets, again a fairly similar picture: #1 in South Africa, #1 in India, #1 Egypt, #2 by a small amount in Turkey; and I have to say, good customer growth with good increase in usage, and this is important.

Underlying usage, voice up 10%, data up 78% in AMAP.

So the essential classic engine of customer and usage growth continues to work in AMAP.

Given the presence of the outgoing Chairman, I have to say, South Africa, amazing.

Peter, excellent performance on contract.

I mean this is the lowest churn I've ever heard in mobile in the world on contract, 3.2% churn on an yearly basis.

This means 100% essentially of the customers are happy.

And excellent growth in data, 1.4 million data customers added in the year, 19 million total; an amazing data analytics and CVM machine that we are replicating throughout emerging markets.

So it's not surprising that the result is continued growth of revenues and adjusted EBITDA growth of 7.5%.

But also, if you look at Turkey, you look at Egypt, 30% growth in Turkey.

Here again, good job on the commercial front but also rationalization of A&R, rationalization of costs, 30% EBITDA growth; 22.7% in Egypt, where I was recently, again another great CVM machine.

In Egypt, actually, we are gaining market share despite the fact that we are very high -- so that actually could be the next target in South Africa, Peter.

So pretty good.

Now U.K. -- sorry.

India, as you would expect, a more negative performance.

Q4 prices still see voice negative 15% and data around the same number.

The good news is that we start seeing stabilization of recharges.

And so despite the fact that we have put more costs in it and we have a broader presence, we think we have another couple of quarters of pressure, but probably the pressure will start easing off towards quarter 3. And as I said, we are now operational in 18 circles with 4G, so fully competitive; and building our customers, which is an important thing in that context.

So before handing over to Nick.

I don't talk about the small markets.

We have a number of good stories also in our smaller markets, but they are in your pack, in appendix.

Just a quick snapshot on the -- on Q4.

Blue part, this is the customer side of the story.

We are ending the year in 19 out of 21 markets leader or coleader in consumer NPS.

We have very strong markets for voice everywhere and 3/4 of the markets for data.

And we have now reached 36 million homes passed in our own footprint and 96 million total on the foot so -- on the whole footprint.

So pretty good progress from the customer point of view.

We continued to grow, in the fourth quarter, in the 3 chosen engines, 62% growth in data; record NGN, as I said.

And enterprise continues to grow, 2%.

And the financials group service revenue, 1.5% growth despite the headwinds that Nick will talk about.

But most importantly, I want to draw your attention on the EBITDA growth.

In the second half of last year, the margin expanded by 170 basis points, which I think is quite remarkable.

And with that, I will hand over to Nick to talk about the overall financials.

Thank you.

Thank you, Vittorio.

Good morning, everyone.

So our strategic moves to further strengthen our India and Netherlands business over the course of this year has resulted in an unusually complex set of results, so I will try to simplify the picture.

All the numbers in our statutory reporting as per the press release this morning now exclude India following the merger announcement with Idea.

However, from an operational perspective, there is no change.

The group remains highly focused on the management of the business both prior to completion and thereafter.

With that said, moving to the first chart.

To aid comparability with future reporting, this slide shows our results for the year both including and excluding the Netherlands.

This year, our performance clearly demonstrates that we are achieving significant operational leverage, which is starting to positively impact our EBIT and our return on capital.

On the left, organic service revenue grew 1.9% year-on-year and was broadly consistent across H1 and H2 as expected.

In the middle, thanks to our Fit for Growth program, we grew adjusted EBITDA faster than service revenue, up 5.8%, accelerating through the year, significantly improving on last year's growth of 2.3%.

On a guidance basis which includes both India and the Netherlands for the full year, EBITDA was up 3.4% to EUR 15.8 billion.

Turning to the chart on the right.

To ensure the appropriate internal focus on return on capital, we have changed our annual bonus criteria for FY '18 from EBITDA to EBIT across the group.

In this context, I'm very pleased to be able to report an inflection in adjusted EBIT during the fiscal year with an acceleration of 12% organic growth in H2.

Going forward, we expect our EBITDA growth to continue to outpace the increase in our D&A expenses, lifting our EBIT margins and our return on capital.

Our reporting loss for the year was EUR 6.1 billion, which reflects 3 large noncash exceptional items that are excluded from our adjusted earnings per share calculation highlighted on this chart.

Let me focus on India.

You will remember, at the half year, we booked a net EUR 5 billion noncash impairment charge for our Indian business as a result of increased competition in the marketplace.

Following the merger announcement with Idea, we have revised our fair value of the business and have written back EUR 1.3 billion of the impairment in the second half.

Excluding these items, adjusted EPS grew 17%, which includes the dilution of shares due to the issuance of mandatory convertible bonds at the end of the prior year.

Due to -- as communicated previously, these bonds are aligned to our Verizon loan notes.

And we are able to use the proceeds from the notes to buy back these bonds as they mature, avoiding dilution to our shareholders.

Our effective tax rate this year was 25.4%, excluding India, consistent with our unchanged medium-term guidance at a mid-20s tax rate.

So turning to service revenue.

As the chart on the left shows, our top line performance has broadly been consistent throughout the year.

You will remember that, a year ago, we called out some exceptional items that delivered a strong Q4 in FY '16, which are listed at the bottom of the slide.

Together with a full-quarter impacts of the large MTR cut in Germany, the combined impacts of all of these was roughly 80 basis points on a quarter-over-quarter basis, so the true underlying Q4 performance was consistent with the previous quarters.

So solid momentum into FY '18.

However, as the chart on the right shows, we will now face the final year of EU regulation on roaming, which is a drag worth EUR 300 million.

This impact, together with the ongoing effect of the German MTR cut, is expected to weigh on our revenue growth by around 1 percentage point compared to last year.

Turning to our 3 key strategic growth drivers, which Vittorio will cover in more detail later: mobile data, convergence and enterprise.

In aggregate, these allowed us to gain profitable total comms revenue market share in most of our major markets.

Excluding the regulatory drags I just described, our European consumer mobile business is now back to modest growth, reflecting the contribution from our more-for-more commercial actions.

Emerging market growth, largely driven by data, continues to be a key contributor, reflecting the excellent performance across the footprint.

Our momentum in convergence remains strong, with base growth of over 1.5 million customers during the year supporting revenue market share gains in fixed and TV.

And in enterprise, we continue to outperform our international peers, reflecting gains in fixed and continued momentum with multinational corporates, along with good growth in AMAP.

As you see on the right of this chart, these healthy performances are partially offset by the EU roaming MTR regulation; and by our strategic decision to exit some highly volatile, low-margin wholesale carrier contracts, which represents about half of the drag you see highlighted on the chart, along with the decline in MVNOs of around EUR 60 million.

Now moving to our cost base.

We sustained our commercial momentum over the year with strong customer growth and structurally lower churn, as demonstrated at the top of the chart.

However, our operating expenses declined in absolute terms during the year, reflecting the impacts of our Fit for Growth initiatives.

Our gross margin contribution represented just over half of our EBITDA growth in the year whilst facing a drag of approximately EUR 200 million of increased content costs, principally in Spain and Portugal.

The remainder of our EBITDA growth was driven by a net organic decline in our operating cost base of EUR 0.3 billion.

By focusing more on direct channels and the optimization of subsidy and commission models, we reduced customer costs by EUR 0.2 billion.

We were able to hold our technology costs flat, absorbing incremental pressure from Project Spring of about EUR 200 million, excluding India.

Finally, we further reduced our support costs by EUR 0.1 billion despite inflationary pressures in AMAP given our 0-based budgeting approach.

So on an underlying basis, our operating costs you see highlighted in the box declined EUR 0.5 billion, adjusted for Project Spring, a result significantly helped by the final run rate delivery of KDG and Ono synergies.

Our Fit for Growth progress underpins the guidance we're giving today for a further net reduction in organic operating costs during the coming fiscal year.

Rather than go through the drivers again which are outlined on the left-hand side, I'd like to focus more on a key enabler we are rolling out to structure our approach to margin optimization and cost efficiency, which we believe will play a key role in delivering our margin expansion targets.

Currently under development using a single global instance of SAP, combined with our data warehouse and data analytics tools, we are able to determine the profitability of our business at a micro level, moving beyond the flawed focus on averages to the drivers of cost and profitability at an individual customer level.

As you see on the right, our customer profitability analytics platform will give us multiple views of profitability given the [hold] of data at customer level.

We are now rolling out this platform across our markets and see substantial opportunity for margin improvement as we gain a richer and deeper understanding of the profitability of our business.

With healthier top line growth and a declining cost base, our margin expansion has accelerated this year.

During FY '12, '15, we were struggling to grow margins given the structural pressures on the industry.

Only 6 markets improved margins in this period, collectively representing around 21% of the group's EBITDA.

Following our investment in Project Spring, convergence and customer excellence, combined with Fit for Growth focus, we are seeing the results.

In the past year, 15 out of our 22 controlled operations have improved their margins, representing over 80% of the EBITDA.

Looking at our EBITDA performance on a market-by-market basis.

There are some very strong results in the year.

Italy was the stand-out performer, expanding margins by 300 basis points and growing EBITDA over 10% year-over-year.

I consider this a great example of our Vodafone model, best network, more-for-more proposition, convergence drives whilst reshaping channel economics and Fit for Growth delivery and absolute decline in costs, all achieved in a highly competitive market.

Spain achieved a 210 basis points expansion in margins, growing EBITDA by 9%.

Effectively, a reduction in handset subsidies, with absolute cost declines, more than offset the step-up in content costs.

I was also pleased with the progress on costs in Germany, which helped to accelerate H2 EBITDA and deliver a 150 basis points improvement in margins over the year.

The U.K. is the clear underperformer on margins, which I will address in my next slide.

In AMAP, we continued to achieve excellent growth and margin expansion in Turkey and Egypt despite cost inflation.

And South Africa had a very strong performance, thank you, Peter, with EBITDA margin reaching 42.7% for the year.

In India, it's worth noting that, since Jio has announced charging, we have seen a stabilization in a number of our commercial metrics such as prepaid recharges, but clearly the situation remains fluid.

Moving to the U. K. Vittorio has already commented on the commercial and operational actions taken on the left of this slide, so let me focus on the financial performance on the right.

The top chart shows that in sterling terms our service revenue remained stable over the last 4 quarters.

Q4 revenue last year benefited from a one-off capacity sale in carrier services, which we highlighted last year, with a strong comp in enterprise.

Therefore, the real underlying service revenue this quarter decreased by around 3%, which is similar to last quarter.

Our results for April have been consistent with this underlying performance.

The reported EBITDA decline was material, but this reflects a number of unusual items.

Excluding these items, the EBITDA declined by approximately 7% this year.

Given our commercial and operational results, we expect evident financial progress by H2 and have agreed a plan for margin recovery over the targeted 3-year long-range plan.

Moving to CapEx.

Our CapEx as a percent of service revenues was 16% this year, at the top end of our mid-teens range, as expected.

We remain confident that this level of investment will allow us to meet our growth objectives and maintain network leadership.

This slide is focused on how we allocate our CapEx across the business to support our strategic objectives.

The chart shows the mix of spending across our top 5 markets, which make up about 65% of our local CapEx spend.

Just under 50% of our CapEx was spent on ensuring a stable, high-quality experience for our customers in a world where data is growing at approximately 60%.

Therefore, 50% is spent on growing and developing our business.

We spent 20% on adding mobile capability, 4G+ coverage et cetera.

8% was spent on fixed.

Vittorio will shortly talk about the infrastructure strategy; and the trade-offs between buy, build and rent options.

And as previously stated, the mid-teens outlook has limited fiber build.

We continuously evaluate fiber business cases, but we have yet to identify opportunities with the appropriate targeted returns.

We will continue to explore these options and will bring forward on a case-by-case basis if compelling returns can be achieved.

IT transformation remains a key priority as we build new digital capabilities that deliver a customer experience at low cost.

Again, Vittorio will describe these shortly.

And finally, 14% or 2.2 percentage points of our capital intensity is directly linked to our commercial success and revenue generation.

The other critical item of our capital expenditure is spectrum.

India has driven the majority of our spectrums cost over the past few years, but as you can see from the chart, excluding India and Netherlands, our cash spending on spectrum has averaged EUR 1.2 billion since 2010, a period where we secured our 4G spectrum.

FY '16 was high given an exceptional 4G auction in Germany, our largest market.

Our spectrum amortization charge over the last 4 years has risen to around EUR 1.8 billion, but it's important to remember that this includes the excessively expensive 3G auctions in Germany, U.K., Italy.

If we paid 4G prices for this spectrum, our normalized spectrum amortization charge would move below the cash spectrum average.

Predicting spectrum costs in an individual year is challenging, obviously.

However, over the coming 3 years, we do not expect a major change in our overall average spectrum investment levels.

The tapering in growth of D&A resulting from our normalized capital intensity and less-volatile spectrum creates the opportunity for EBITDA expansion to deliver strong EBIT growth, as we saw in H2.

Turning to free cash flow, which increased by EUR 2.8 billion this year as Project Spring came to an end.

As previously highlighted, we saw a large outflow of capital creditors, reflecting the timing of the final Project Spring payments, which fell in H1.

Cash interest expenses declined EUR 830 million, thanks to our effective treasury management.

Given our strategic decision to shift from floating to fixed in the summer, we have now locked in a cash interest rate of around 2.5% for at least the next 5 years, limiting our exposure to a rise in interest rates.

Our cash tax performance in the year was a little bit better than expected given a number of favorable settlements.

In FY '18, we expect to pay around EUR 1 billion in cash taxes.

We also saw rising dividends from our joint ventures and associate investments.

These businesses have strong market positions.

And over time, we believe they will be worth far more than the current dividend streams the loans suggest.

We expect to receive substantial dividends from VodafoneZiggo in the future, noting last week the JV guided a total cash return to its parents of at least EUR 500 million during calendar 2017.

Let me take the opportunity to briefly cover VodafoneZiggo, which experienced a tough quarter in a highly competitive market.

We expect top line pressure to increase this year given the impact of back book repricing, roaming and our investment decision to drive convergence into the base.

However, we are focused on accelerating the significant synergies we believe the JV is well placed to deliver, significant long-term value.

Moving from free cash flow to dividends.

Clearly, the right and only way to think about dividend cover is on a post-spectrum basis.

On this basis, excluding India, as the chart on the left shows, we almost covered the dividend during FY '17.

Turning to the chart on the right.

Our 3-year long-term management incentive plan has been set on a new group moving forward, which excludes India.

However, it is important to note that our annual incentive continues to include India, which is appropriate given we expect to have full control of the business for much or all of the coming fiscal year.

Despite the absence of India, which was previously expected to contribute to our free cash flow in the outer years, the midpoint of the 3-year free cash flow target has modestly increased to EUR 16.6 billion versus a EUR 16.3 billion previously.

If we took the average cash spectrum cost of EUR 1.2 billion per the year I previously covered and assumed the next 3 years were in line with this average, you can see the dividend is fully covered at target.

Ultimately, the board understands the importance of the dividend and have the intention to increase the dividend per share annually.

Moving to net debt.

The chart shows the bridge from March '16 to March '17, all of which are well-known items, with the exception of India capital injection.

Clearly, given India is excluded from the group results, the capital injection which was pay -- to pay spectrum appears as an outflow.

Excluding India, net debt at the end of the year was EUR 31.2 billion.

And at 2.2x net debt-to-EBITDA, it sits in the middle of the targeted 2 to 2.5x range.

Including the debt at Vodafone India, net debt was EUR 39.8 billion.

We expect to contribute a vast majority of Vodafone India's net debt into the merged entity at closing, subject to the usual closing adjustments.

So finally, looking ahead to our guidance for the fiscal year, starting with our baseline of EUR 13.5 billion.

On an organic basis, we expect to grow by 4% to 8% from this level, which is equivalent to a range of EUR 14 billion to EUR 14.5 billion.

To achieve this growth, as previously discussed, we will have to absorb EUR 300 million of roaming headwinds.

However, this will be offset by the EBITDA benefit of approximately EUR 300 million flowing from the introduction of handset financing in the U.K., which moves us in line with market practice as we did in Spain.

Note that this benefit does not flow to free cash flow, as it's effectively reversed in working capital and will have a drag on service revenues of EUR 130 million.

When considering the guidance range, the key swing factor in the year is clearly Italy.

The other factors are the usual ones: competitive intensity in all our major markets; and macroeconomic, political instability.

Our free cash flow guidance of around EUR 5 billion assumes that we remain towards the upper end of our mid-teens envelope on capital expenditure.

Clearly, maintaining this strong momentum requires a clear strategy and robust execution, which brings me neatly back to Vodafone 2020 and Vittorio.

Great.

So let's talk about our strategy going forward.

First of all, let's see what is Vodafone today and start from after -- transactions after spring.

If you look at Vodafone today, you really think of 3 things.

One is Europe.

Europe is now 3/4 of the total.

There is 0.6% growth, which is a combination of a healthy and positive [3.5] on fixed line and again broadband 1.2 million in the year, convergence.

I will talk about these things.

And mobile, slightly negative in the year because of the impact of MTR, roaming and that accounting changes.

But as I said, growth in EBITDA, 100 basis points in the year.

So this is 3/4 of Vodafone.

1/4 is AMAP ex India.

Good growth, 7.7% growth; 150 basis points growth in EBITDA margin; and I would say, the classic sustained momentum of mobile customer growth and usage growth.

Then the last part is India, where actually we had 220 basis points reduction in EBITDA.

And as Nick has said and as I have said, the Jio impact will be seen for a few more quarters, but as you know, we have taken action there.

Throughout the piece, we have improved in the year our asset composition in the Netherlands with the joint venture with Ziggo.

Now we have a leading essentially competitor at par with the main operator, KPN, there.

Nick has said there is some pressure in consumer, some pressure in SoHo, but if you think that we only have 25% of the Ziggo homes having mobile, again the opportunity there is more in the convergence direction.

We announced yesterday that Vodacom and Safaricom simplification.

And this has clearly a dual purpose: on one hand, as I said, simplify, but also to be sure that the 2 excellence points that we have in Africa, the excellence of Safaricom financial inclusion, a great management of marketing presence and the excellence of Vodacom which is more multi-country management and, of course, detailed analytics and CVM go together to exploit opportunities in a more organized way across Africa.

And finally, the merger with Idea, which is essentially 40% market share, 1400 megahertz of spectrum and EUR 10 billion of synergies and becoming a champion of Digital India.

So this is what is Vodafone today, 3/4, 1/4 and the big joint venture in the fastest and biggest market in the world.

In terms of strategy, just a reminder, this is not a slide that you have already seen.

This the latest slide coming out of our board strategy review, but most of it should be familiar to you.

And that -- it has the beauty that we put everything in one slide and now the whole of Vodafone can stay strategic and stay in one slide.

This is Vodafone 2020.

The left part, part number one, is what you know.

It's the core communication strategy.

I will cover it later, but essentially, it's about being #1, #2 in customer experience and network delivery.

The second is, let me call it, the seeds for the future.

Somebody calls it the -- more the Vodafone 2025 strategy, but you need to put the seeds now.

And it's new digital businesses.

I will cover them briefly.

And the third one, I will not cover because it's, I think, fairly known stuff that we debated a lot, but it's really about technology and cost excellence, move from 4G to 4G+ to 4.5G.

Fiberization, there was a lot of concern about fiberization.

Today, we have 95% -- sorry.

Our target is to get to 95% of urban sites fiberized.

We are already at 70%, so we are going in that direction.

Cloudification, virtualization, if any of you have questions, Johan is here in the room and can tell you about our technology problems that I have to say I am more and more comfortable with.

The more I see us and I ask vendors where we are, the more confident I am that we are going in the right direction.

Fit for Growth, under Nick's leadership and Margherita's, which you see her, so if you want, you can ask her as well, is getting into Phase 2 and as you have seen is starting to deliver.

And then our digital first program is something new.

We have not announced it yet.

We just mentioned it today.

It's really the new wave of investments to essentially improve the customer experience but also reduce dramatically costs.

This is about machine learning and robotics.

It's about online, and it's about billing transformation that Nick mentioned.

This, I will not cover in the rest.

All of these enabled by the commercial platform CARE.

Serpil Timuray could not be here today, but we have Brian from enterprise.

It's the way we will deliver through connectivity, good offers, rewarding loyalty and easy access; and then the way we organize, which I will use -- which I'll dedicate one word to at the end of this presentation.

But essentially, it's 3 business pillars: one, delivery, commercial delivery mechanism, one; organization; and cultural element.

So let's review how the core communication is going.

I am pleased.

We are increasing the gap versus our competitors in NPS in consumer, a little bit against both the next best and the second next best, as you can see on the left part of the chart.

And we lead in 19 out of 21 markets, but also, in enterprise we have -- we are maintaining an 8-point lead and we are leading in 15 out of 20 markets.

So the strategy seems to be working, at least based on what the customers are telling us.

And what really makes me proud is the right part of the chart, and here there's 3 key numbers.

We are improving our NPS position in 16 markets, the one above the horizontal line.

We are leading in 19 markets, the one to the right of the vertical line.

And yes, we have more work to do in the U.K. and the Netherlands, as we said, but in the U.K., we think we are on the right track.

And in the Netherlands, we are now starting the integration.

So from a customers' point of view, the work done is being recognized.

Now from an infrastructure point of view, again this is a mixed qualitative, quantitative chart.

This says that we have 92% 4G coverage in Europe and a number that is well used in the U.S. We cover 315 million POPs, as they say, which is the vastest, the biggest coverage that you can think of.

We reached 59% of homes through NGN; and 22%, i.e.

36 million, through our own NGN.

Now this is an increase of 21 million in 2 years.

7 million is Ono.

7 million is Ziggo, and 7 million is our own build.

And I will cover a little bit the difference between the different phones.

And this is the powerful technology platform that we have built over with spring and with the acquisitions.

We then have qualitative elements that make me also relatively confident that Vodafone is in a good shape: 0.37% drop rate, which I've never seen anywhere in my life with 20-plus years in this sector; and 92% of data sessions above 3 megabit per second, which really means video quality almost everywhere.

But also, as I said, fiberization is going ahead, 70%.

I remember people were saying, "How are you going to deal with the need for fiber?" The answer is we are.

And 6 million homes in Germany with more than 400 megabit per second.

So I would say both from a qualitative and a quantitative point of view I think the investments that we have made in the last years have been pretty, pretty solid; and are now delivering also not just in the eyes of the customers but also objectively a very powerful platform.

So then the question is monetization.

Let's start with mobile data, which is 1 of the 3 areas of growth.

Here I will not go into the details.

On commercial level, we keep doing 2 things essentially.

To simplify, we have more-for-more offers, which means EUR 2, EUR 3, EUR 1, EUR 5, to give more to the customers, more is more data.

It's roaming.

It's rollover of plans is something included in this kind of expansion of ARPU.

And that's one way of delivering.

The other way is personalized offers, which is more the Italian case or the South African case, where instead of being at the headline kind of super-competitive, super-promotional level, you go one by one and will make offers of the same kind but more personalized, which of course has the advantage of improving the yield.

And Nick has shown the kind of funnel with all the euros coming down.

The result of this is a continued growth of data in Europe.

We are now 55% growth and 1.7 gig per customer of usage.

It's the top part of the central slide.

And as you can see from the lower part, stabilization or even some improvement of ARPU throughout the piece.

Now the part, the chart on the right is the one I really like.

It's the potential.

So what is the potential for mobile data?

Again, here we could give you very complicated numbers, but the broad message is we have 516 million customers, including joint ventures, in Vodafone.

There's, of these, 212 million smartphones.

Of these, 100 million are 4G smartphones.

And of these, 75 million are 4G customers.

So one way of looking at it, of course, different ARPUs, different countries, but we have an 85% 4G opportunity in our customer base, which I think is a good indicator that with a powerful network and a good capacity we can actually continue along this strategy in a successful way.

Second element was convergence.

Often, we are asked, "Okay, tell us about your strategy." This -- let me start with an explain of Spain in terms of infrastructure strategy.

In Spain, we have 10.2 million homes that we cover through our own infrastructure.

We have an undisclosed number that we can reach additionally through commercial agreement with Telefónica.

And then we have the regulated rates, at which we can get access from Telefónica again, and this leads to 18.7 million homes.

Then these homes will evolve.

There's the ADSL coverage, which now is wholesale and over time will go into VDSL or into potentially our own build.

And that gets to 96% of the homes or 27.7 million.

And then there is a little bit of the country which will essentially not be covered.

And this is how we look at the markets.

We always look at how to balance commercial deals with regulated access with our own investment and try to reach the highest possible number in terms of economic coverage.

I know this will be great.

And I asked to get this by GDP and not by homes, but apparently it's very complicated, but essentially try to be where it makes sense with your own investment and try to leverage on shared and eventually third-party access where the case is less [pulsed].

Now if I do the same thing for Europe, the same numbers are 36 million; 41 million, of course with multiple partnerships, Italy, other places; 96 million; 119 million.

And the white spaces remain only 25% of marginal homes, which is that essentially, we can cover already today 75% of the convergence opportunity in consumer through a variety of very efficient, I would call it, smart capital deployment strategy throughout Europe.

Now what is then the next step?

The next step is clearly to deploy the convergence strategy.

And the first element of it is how many homes are converged already today in the Vodafone portfolio, a question that often investor ask me.

And here we try to give you an organic answer.

The number of homes that we have in Vodafone today, excluding enterprise, the 1.7 million at the bottom; and including Ziggo if -- is 14.9 million.

Of these, 4.3 million, the little pink bubble there, are converged.

So 25% of the Vodafone homes have already a Vodafone mobile in their own -- in their household.

Then you get to the other question, which is, "But how many SIMs?

How many mobile customers actually are into homes?" And here I need you to follow with patience because there are a couple of complexities.

So first of all, starting from the top of the pyramid, these 4 million homes have 8 million SIMs, so it's a ratio of 2. And these are fully converged homes, so these are integrated packages.

Then you go down one level, and there are homes where we are in both in fixed and in mobile but in less-integrated level.

This here 2, the number on the left; and 3 million SIMs.

So this makes the total 6 and 11, and this gives the answer to the question how many SIMs are in converged homes.

And the answer is 17%.

This excludes Eastern Europe, for simplicity of the [guide].

And here clearly the opportunity is to upgrade them, so link the fixed and the mobile and bring them one floor up.

Then you'll go one level below.

And we have 9 million homes where we have 53 -- sorry, 9 million homes where we don't have SIMs and 53 million SIMs which are not in Vodafone homes.

And here the job is clearly cross-sell and bring them up.

And then of course, you go one level below, and there's the homes where we don't have Vodafone and the SIMs where we don't have Vodafone, and that's an acquisition market.

So if you look at the overall picture, we are already between 40 and -- 20% and 40%, more or less, converged, whether we look at mobile or fixed.

And there is a clear work to bring up the numbers.

This is, I think, a good start of our convergence strategy.

With the platforms that I described before, we are confident that these numbers can improve over time.

Now TV is, of course, part of this story.

Why TV is important is simply because it makes the convergent offer more appealing.

And it also has a positive benefit on churn.

In Spain we do 27%, 13%, 7%; so 27% churn, single mobile; 13% when you add fixed; and 6% or 7% when you add TV.

So clearly, TV has a kind of gluing effect, which is positive.

In TV we have now 7 markets active.

We have a Vodafone TV platform which is the nascent platform with, I will say, a very good performance.

We are very happy about it.

It's cloud based.

It's multiscreen.

It's multi feeds.

It's on demand and leaner.

So it is the most modern platform.

We are going to leverage on it to launch.

And it's available to all of our markets, to basically launch on marginal markets at a lower cost because we share the platform.

I often get the question, "What's the Vodafone distribution strategy?" I can only repeat that we do want to have premium content because premium content is important in our offer.

We -- if we can, we'd like not to get it exclusive because we don't believe that exclusivity in the long run creates a lot of value for telcos.

But if we need to bid for exclusivity in order to get it, we will, as we have done in a couple of market.

GigaTV in Germany is the latest deployment of this strategy.

And again, it has all the content, all the premium content; and it is very advanced from a technology point of view.

Then finally, the third element of our core strategy, enterprise.

Again, if you have questions later, Brian Humphrey (sic) [Brian Humphries], you don't know him; raise your hand, Brian, is here in the room.

He is the new CEO who joined a few months ago.

Enterprise is doing well.

It's now 30% of group service revenue.

And 30% of these revenues are coming from fixed.

As you can see, the growth, middle bar, is 2.3%.

This is a combination of 1.5% on mobile, 4.5% on fixed.

The 1.5% in mobile is again coming from pressure on ARPU but growth in customers, so we are sustaining well the pressure in the enterprise segment from a pricing point of view having a good growth.

And fixed, as you see, we have 3 lines of businesses, IP-VPN, Cloud and Hosting and IoT, which are growing double digits.

So enterprise continues to be an area of growth; an area that I want to keep it as profitable, disciplined growth, but clearly we have an opportunity because we are sub, I will say, 30% market share.

So we can grow there, continue to grow there very well.

Now one word on the new digital businesses, which again somebody talks about the '25 strategy.

First of all, it's 3 main areas.

There is more, but I will say these are the 3 main areas.

First one is enterprise IoT.

We launched many years ago, in 2007, when nobody was talking about IoT.

It's about smart metering, automotive, logistics.

This is now available in 17 markets.

The reason why I mention it is because recently I was in Barcelona, at the Mobile World Congress, among CEOs and people who are supposed to be experts of the industry, and they mentioned that Vodafone have 700 -- more than EUR 700 million of revenues in this area.

And they were surprised, around the table.

Nobody believed that it was possible.

Now the reason why nobody believed is because the total market in the world is considered to be 6 billion.

So it means that, even not being in certain big markets, we have a 12% market share.

It's growing nicely.

The reason why I mention it today is because this is a market which is supposed -- estimated to go up to more than -- EUR 20 billion, EUR 22 billion by 2025.

So the growth opportunity having a leadership position in enterprise IoT is very important.

The second area is data analytics.

Now data analytics, we launched in 2015.

For the time being, it's inward focused, so we are not selling to third parties, but it's already active in 14 markets.

We serve more than 300 data scientists.

Sorry, we will have more than 300 data scientists operating in 14 markets.

And it's the engine and intelligence behind things like Play Every Day, again, in South Africa.

South Africa is one of the kind of high points of this.

But also in Turkey, where we have digital money, but also in Italy, also in other places.

Now the reason why I mention it today, last year, this overall engine produced more than 3 billion offers to customers.

And that does not mean 3 billion accepted offers, but we produce 2, 3 offers per customer in order to get them accepted.

It's a huge machine.

And it's behind, I think, the secret and the profitability and the success of places like South Africa or Italy or Egypt.

And it will be more and more, as Nick has said, our approach to marketing because that's the way we can profitably grow in the data environment.

Third one, on the right, is the new baby.

The new baby was launched this year.

It's really consumer IoT.

It's smaller kind of vehicles tracking, consumer devices, family trackers, home security, this type of more consumer-ish type of applications.

Here we cannot talk about money numbers because it's very difficult to even estimate what -- how big this thing could be, but the real thing is that the number of objects that are forecasted to be connected goes in the hundreds of millions very soon.

Now not all of them will be profitable.

Not all of them will be realized, but again we think this is a great opportunity.

It is about 100 people that will be working on this.

So final slide before concluding.

I'm often asked, "How do you manage this group.

How do you face the external environment, the social and political, the kind of business challenges of the macro world?" And the answer is essentially in this chart.

Today, we are 23.

Tomorrow, we'll be 22 controlled companies.

And we have 3, and we will be 4, joint ventures and associates.

A few years ago, we moved to the current model, which we call in the Vodafone way kind of jargon "one company, local roots," which we think is particularly appropriate in this historical moment, in this historical social, political moment.

This is really about having very, very strong shared single-company platforms, where it does really make the difference.

And this could be hard things like procurement or enterprise or technology architecture, shared services where we have now a lot of capability but also softer things like HR and management, compliance, to be sure that the company is properly run, and brand architecture, which actually if you think about it, this is the reason why we have 48 partner markets, companies of every size who want to be part of our way of running the business.

And this is what deliver the scale benefits, but then we always said -- I always said I want to have local roots.

Local roots means local commercial execution; local community and political engagement, which is very important in the current world; and local communication; and local social responsibility.

So we are very convinced that this model is the model that has explained the success in places so diverse like Africa or Europe or convergence, nonconvergence or the Middle East versus Pacific; and will continue to be the basic setup that will enable the implementation of Vodafone 2020.

So to summarize, I would say strong strategic progress; good transactions to increase the value of the portfolio; sustained revenue growth; and I'm really happy, margin expansion and cost reduction to support cash flow and dividends, which is an intention of the board.

Outlook for '17, '18, this is labeled outlook.

In the original version, it was Vittorio's objectives.

Vittorio's objectives for '17, '18 are really NPS leadership.

I have really the ambition to be at the top in all of the market, to gain profitable revenue market share in total communication with our 3 engines of growth and to deliver the guidance that Nick has illustrated of 4 to 8 percentage points of growth in EBITDA and EUR 5 billion of cash flow to support the dividend intentions of the board.

I thank you for your attention.

And now I think Nick and I will move to questions.

Let's start with James, and then we go this way with Polo.

And then we come back, Maurice and all the others.

James?

Two questions, please.

The first one, on India.

Your new joint venture partner Idea has talked about the idea that we could assume the bottom in the last quarter in terms of revenue trends and things can start to sequentially improve from here.

Was wondering if you'll assume the same trend in your own business looking ahead for this year.

And secondly, looking kind of longer term in your European businesses, we're seeing an increasing number of moves to unlimited data offerings in Europe, so I'd be interested to get your kind of thoughts on how the industry progresses on that front.

Does that potentially curtail the ability to monetize data in the medium to longer term?

I'll do the first.

Yes, you do the first.

It's about guidance.

You better do the first.

Yes.

I mean, in terms of India, as I sort of highlighted out, when you look at sort of March performance versus January and you do it by segment basis, what we're really seeing is, since Jio announced their charging, we've seen a stability in total recharge values.

We're also seeing a stability in high-value customers; medium-value customers, slight uptick, if anything; low-value customers, the same but more about ARPU capture as the market consolidates on SIMs.

So I think it's a bit early to call the bottom of the market given it remains fragile.

And Jio could always determine a new promotion, but what I'd say is that we're starting to see a stabilization on the important metrics going forward.

And of course, the key date is September because that's when Jio entered the market.

So we'll start annualizing, and that's when you should start to see some improvements on the year-over-year performances.

On the European question, let me say this.

First of all, there is a difference between worry free and free.

We like worry free because worry free is what liberates usage and what allows customers actually to appreciate the quality of the networks.

Free is a little bit less of a good concept, at least in our view.

And in the market, you see a wide variety of things.

There's free content added to high-end packages.

There is a kind of unlimited, which is really unlimited up to 5, 6, 7 gig and then it's constrained or choked [in some support] . In general we are more for the worry free rather than the free.

And we will take actions and do commercial actions to liberate usage but in exchange of some monetization.

I think that in unlimited unrestricted is actually not a great thing for the industry and which is why we will be more segmented, more focused.

And then engines like the CVM and data analytics engines that we have now in our -- all of our offers.

And again, South Africa was a great example.

It will be crucial to be able to deliver the right offer to each customer without going into mass unlimited, generalized.

Nick?

Yes.

[Matt?]

So Nick Delfas from Redburn.

Just going on Slide 22.

I understand that's your incentive for '18, '19 and '20.

And I guess it implies at least 10% growth at the average in free cash flow in '19 and '20 from the -- sorry, from -- yes, from the '17 base.

But can you just talk about what happened to the equivalent chart from last year?

So is that adjusted for deconsolidation of India?

So just if you can talk a little bit about the incentive scheme.

And then the second question is just on enterprise.

How come you are still growing in enterprise mobile given all the "bring your own device" trends, roaming et cetera?

So if you could clarify it a little bit, what's going on there.

Yes.

So let me take the incentive, the moving parts on the incentives.

See it as India is coming out.

Obviously, India was going to be contributing in the outer years in terms of free cash flow.

Obviously, today, it doesn't really generate free cash flow.

However, you've also got a bit of FX movement.

And then essentially, you've got the EUR 0.7 billion working capital Project Spring drag of FY '17 effectively coming out of the numbers when you start to think about FY '18 onwards.

So that's like the positive factor on top of the growth of the business.

And in terms of how you're rewarded from the equivalent chart from last year, so just that we understand how this works.

So...

So on the previous one, we stay with India performance within the plan, yes.

So up until the year that India the completion happens, in the year the completion happens, we just put in what the target was for India in that 1 year, but all the ones leading up to completion, the actual performance is in there.

So bottom line, management will be hit by, if this is what you're looking for, the Jio impact into the market....

We make it easier for ourself.

Let me put it in a simple way.

And [Aremco] would never allow us, anyhow.

So on the enterprise thing, again I encourage you to talk to Brian, who is in the thing, but the high-level answer is, first of all, the "bring your own device" thing, which is visible in some large banks, is not a generalized thing in the market.

There are some institutions that are going into "bring your own device, you pay for it;" others that don't.

We have a lot of additional services that we give, especially in the area of security, device management and other stuff, which is -- are considered important by a number of customers.

And don't forget that we have more and more integrated fixed and mobile offers, which are now a large majority, especially the -- at the higher end, where this thing of bring your own device doesn't really play.

Having said that, Brian has developed something that he will talk about, if you want, later in the individual sessions called BYOX, which is a very flexible offer that you give to large companies that want to go more into the "bring your own device" thing but still want to retain control of the service component.

And so we have also adapted our offers to take into consideration that need.

Now having said that, probably we are also good in enterprise, so we'll continue to grow because of that.

Yes, I think you had a question, yes, Andrew?

And then -- yes.

It's Andrew Beale from Arete.

I just wanted to come back to the incentives and just to understand.

I guess you've got the short-term incentive, which you mentioned was EBIT.

Is it exclusively EBIT in terms of the 1 year?

Or can you just give us the weightings of those?

And then the rest is the 3-year cash flow incentive.

Is that correct?

Yes.

So see, the annual incentive, the short-term incentive is 20% service revenue, 20% EBIT, 20% free cash flow.

So the 20% that was on EBITDA has gone to EBIT.

And then 40% is customer appreciation, which was a lot of the things that Vittorio was presenting.

On the long-term incentive plan, it's free cash flow.

Okay.

And then just in terms of the EBITDA guidance.

I guess your exit run rate was 6.2% growth in the second half.

And you obviously had the EUR 300 million benefit from handset financing that you gave, EUR 300 million offset from roaming, but you also had some drags in the previous year for content and so on.

Are there any other moving parts that we should be thinking about?

Or is it you're coming in at 6 and you're really guiding to 6 and the other two -- the other things equals the -- equal each other out?

Yes, look, I mean we're a large group.

And of course, there are a lot of moving parts.

And I think we are pretty transparent on anything material that happens in the group.

So you're calling out a number.

I could talk about content.

I could call out synergies various other things bring.

What I would say broadly is, yes, we're in a 4 to 8, midpoint being 6, at that level.

Yes, it does include U.K. handset financing, but it also includes a lot larger impact in terms of EU regulation impacts onto our results as well.

So broadly speaking, I'd say our underlying performance is in line with the range.

David, yes?

It's David Wright from Bank of America.

Two questions, please.

Just on the wider balance sheet, you've shown that the gearing comes down with the Indian deal, obviously assuming completion, from 2.6x down to 2.2x, give or take.

The Indus transaction, and maybe an update on that, please, will bring you down to pretty well 2.0, thereabouts.

With a 2.5% cost of debt, it feels somewhat underleveraged in this environment.

Your -- obviously, your free cash flow is starting to cover your dividend, thereabouts this year or so, maybe a year after.

So what is the plan for that balance sheet, as it were?

And you mentioned briefly, I think, you analyze fiber projects one market that does stand out where you maybe are on the scale in fixed line ownership, as Germany.

Could there be an opportunity to maybe even consider a fiber build plan in Germany co-led with Deutsche or et cetera?

And then maybe a second, quick question, if I could, just on Italy.

You flagged that as being one of your stand-out markets for cost cutting.

I think a lot of the benefit, though, came with the 28-day billing both for mobile and fixed that laps H2, but could you talk a little about how you're thinking about the Iliad entry?

Obviously, TI is quite front forward with this kind of mobile.

What you guys are thinking.

Yes, let me take the whole of it because I don't want Nick to get into complicated gearing ratios.

First of all, you correctly said that there are 2 ifs.

First of all, of course, we need to complete first the main Indus transaction; second, update on Indus.

And of course, we are in discussions.

We intend to monetize that, but again how it happens and when it happens and how it interacts with the first deal is still to be seen.

So we are not -- we don't have a time line.

I don't have an update really to give you other than we are working flat out on both sides, the main side and the other one.

The main side is progressing well.

We have filed with CCI.

We have filed with the stock exchange.

We will do the court case.

Once we have done the court, we can go to DoT, but it -- there are steps.

And Indus, of course, requires talking to our 2 partners, the Idea one but also Bharti, because there is an interaction with what they do; and that we are again flat out on that as well.

Once those things happen, we will make a judgment.

And again, you mentioned fiber in Germany.

We could mention a lot of other things.

We will look at whether we have good investment cases, which is so far we haven't seen.

We will look at them, and if they make sense, we will invest in them.

We will look at different type of gearing and different type of shareholder remunerations, but it's a bit early now because neither one nor the other are short term.

So you and I, we'll see each other probably again before that gets unlocked.

Italy, Italy and Iliad: Let me say these 3 things.

First of all, we take Iliad very seriously, so we are not dismissive.

And I said it from the beginning.

I don't take the fact that distribution is difficult in Italy as a barrier.

I don't take the fact that prices are very low as a barrier.

As you have seen in India, people can also come at 0s sometimes.

What really gives me comfort that we are taking the right approach is 2 things.

First of all, we are really building the strength of our Italian business on excellent quality of network and excellent marketing and relationship one on one with the customers.

That's the best long-term defense of any company rather than this secondary thing.

Second, we are contemplating all possible countermeasures.

There is a project with a funny name that we follow and is considering all possible options, and we are preparing for all of them.

And again, we will be as prepared as one can be for the coming of this new competitor.

Third, it's also true that, if you look at the Italian market, it's incredibly promotional again now.

There are offers below the line that are really rock-bottom.

And therefore, it is also true that the space which is left is not huge, but we are taking it very seriously.

Yes, shall we move here, Simon, yes?

Maurice and (inaudible).

(inaudible) on the U.K....

Sorry.

Simon, can you just press (inaudible)?

It went red.

It was very encouraging.

Okay, that's better.

Simon Weeden from Citi.

I was -- my first question was on the U.K. And your comments seem to be that, the second half of the coming financial -- the current financial year, will see an improvement in trends.

And I wondered if you could give us any color around how bad the first half could be given that, in that context; and also whether you're taking into account any deemed consent rebase and how much that might be.

And that was one question.

The second question is just around 4.5G and 5G and what you see as being the most urgent contributors from a commercial point of view from the pipeline of new technological features that those provide and what we might see coming first and what the customer demand is, how you're framing your thoughts about that.

I'd just do the U.K..

So what I would say is, I think as Vittorio clearly covered in his presentation, we really do see tangible clear results in terms of network and customer operations, so we are performing strongly in those areas, and therefore, that's given us a lot more confidence in terms -- and visibility in terms of commercial momentum, which, again, we had a very good fixed net additions.

Mobile net additions look low, but as Vittorio's talked Mobile is dragging on those net adds by about, I don't know, from memory, 25,000, something around there.

So ultimately, there is good progression, which means that H1 will show some progress.

It's just really the type of progress we're looking for will be more evident in H2.

No, that's not a factor in our consideration if they...

Yes.

Evolution to 4G+, 5G, we see that as a continuum.

We are moving.

There's a big announcement today in Italy about 4.5G.

We basically look at things with the customer's eyes.

We are not keen to jump into technologies for the sake of them.

But it's clear that 4.5G and then 5G will enable, at the same time, some interesting fixed wireless solutions.

I'm not saying that it will replace fiber.

I'm just saying that in certain places, certain areas, it will make sense, and also all the Internet of Things, low latency type of applications, which we are all working on.

So we see this as an evolution.

Johan is preparing the network.

Single RAN, fiber, virtualization, all of these are investments that we will make during the Vodafone 2020 strategy, but things will be clearly ready for the development.

But we are not keen on the technology.

We are keen on the applications.

Maurice, and then Jerry, and then Dhananjay, and then we go up there.

Maybe you call them, if you will.

It's Maurice from Barclays.

I guess, a question on Germany.

On Friday, you saw the announcement that Drillisch and United Internet looking to combine their operations in the markets.

I mean, do you think a combination of the 2, which will leave some of the low-end competitions, are making more for more easier?

Or do you subscribe to the view perhaps that a more -- as a strong United Internet with the MBA MVNO contract [alliance] become more aggressive?

I guess related to that, it's just on wholesale revenues.

Did your guidance assume much run-off of the MVNO revenues you make, I guess, at the group level, but also Germany perhaps related to this?

Very easy answer.

I believe that, as always, everything depends on the wisdom of your competitors.

So there are cases where consolidation is positive and cases where it's less positive.

This one, I think, is positive because it will create a long-term viability for United, which otherwise was more less clear.

And in general, with big increase in data.

All these MVNO models are becoming -- at the end of the day, they're becoming difficult to support.

So I think it will be positive.

Of course, the wisdom is always in their behavior.

And on the wholesale side we have in Germany, I think we have secured a couple of years of wholesale revenues from United Internet.

And then I assume that we'll migrate to the new home.

But that will be good because it will leave the D networks up there.

And then there's a new home, which is a third network, which will be more wholesale and not just at the same positioning.

So...

And just to be able to -- that within our long-range plan, we do assume a sharp rundown...

Yes.

On the contract in the LTUs.

Jerry, yes, and then Dhananjay, and then Polo, and then we go up there, yes.

You keep push...

It's Jerry Dallas from Jefferies.

A question on the U.K.'s role within the group.

How important is the U.K. now there is still the sort of core group objectives of growing profitability, growing the dividend, improving returns?

What dissynergies would there be if the U.K. were to be carved out of Vodafone today?

And how significant might, perhaps, the loss of competitive advantage in Global Enterprise be if the U.K. were not part of the group?

And then the second question relates to your CapEx guidance.

I suppose in November, the perceived range was in the order of 15% to 16%.

You've subsequently taken the view, perhaps, to pull back on fiber or own build in Spain.

And does that, therefore, mean that the -- sort of the new teens guidance is more like 15% as a result of this pullback in Spain?

Or are there other things that have sort of come in to take its place?

Let me take the U.K. question, and Nick will give you the guidance question on CapEx.

First of all, there's no plan currently to carve out the U.K., so your question is a very hypothetical one.

I do believe that there is a good potential in the U.K. for improving their margins and go back to a level of profitability which is significantly higher than the current one.

And we do have an opportunity to have a stronger commercial platform.

Don't forget we have very high spectrum allocation, and so we can play more aggressively, which we have started doing recently in the kind of data environment.

And part of the coming back in London is also linked to the fact that in London, people are starting to recognize that we have a good network with a good capacity.

So there's no plan in the direction that you are hinting at.

And in terms of how strategic, clearly, enterprise is important in the U.K. as we have a lot of the old Cable & Wireless customers, but also new customers.

So it is an important component of the whole enterprise strategy.

That's the simple answer.

Just on capital guide -- capital intensity guidance, as I said in the presentation, we'll be at the upper end.

So you can assume between '15 and '16, there was a bit of a pullback on Spain, but I'm not going to call it huge.

And you've got other factors like success-based CapEx, be given our commercial momentum, that that's gone through and a little stronger than we had originally planned.

So I would call it good CapEx.

Yes.

Shall we go here, Polo, Dhananjay -- sorry, Polo, whichever order.

It's Polo Tang from UBS.

I just have 2 questions.

I think one of the main standouts from these results is actually cost savings.

So you talked about entering the next phase in terms of the Fit for Growth program, but how much of an opportunity is left?

And is there something that can be a tailwind for several years?

The second question is really just coming back to Germany, but rather than the new frill segment, can you actually talk about what you're seeing in terms of the competitive landscape in the premium segment of German mobile?

So we've obviously had stream-on and in terms of that initiative from T-Mobile.

And can you also talk about -- maybe about the response to your Big Data bundle offers?

Because from memory, I think you got a 12-gig offer at EUR 33, so what's been the reception for that?

Yes.

Nick and Margherita here can be asked any question on cost.

I give you my high-level answer.

My high-level answer is that, on one hand, again, my colleagues have set up a very systematic machine to go through all the cost elements.

And either by sharing or by share elimination, I think they have done a good job, but the job will continue.

I personally believe that there is more they have to do on the commercial cost front just as an industry, not just as ourselves.

The more you think about it, if it's about SIM-only, it's about essentially 3 brands of devices and devices which have longer lives.

The whole distribution cost that the industry carry is, I think, too high.

Online, hence, our digital first program, which I will not talk about today because, otherwise, my colleagues say that I'm violating.

We will talk about it.

But clearly, we'll have a commercial element that has to be the next wave of cost.

But I would say confidence on cost.

Nick?

Yes, very good.

Very good.

I think what's really exciting also is digital.

Yes.

Just everything.

My Vodafone app, yes, digital in the shared service centers, AI, all of those things give us a multiyear opportunity structurally.

I give you a small angle.

That was in Egypt, where we have our kind of machine learning unit.

They showed me a human kind of interaction with our systems and the system-based one.

By the time the human had finished one thing, which was a change of address, the machine changed 7. So this gives you the idea of the type of opportunity that you can have if you apply better analytics and better systems to our own industry, so I think the opportunity is great.

On Germany, you asked me about the premium segment.

Listen, what we are seeing is Deutsche has done the stream-on offer, which you can look at it in 2 different ways.

You can say, well, at the end of the day, it's a good thing because it will push the MVNOs into a more difficult space, and it can push the bottom of the market in a more difficult space.

You can also say what was available before for 55 and 45 now is available for 55, 45 plus music, plus video.

So it's not really a more for more, it's the same for more, so it's a little bit -- the way we would like to implement those things is different, but directionally, I think it's the right direction.

Probably, the implementation could be a little bit more inclined to a more-for-more type of strategy.

If I compare our results with Deutsche's results, there's nothing to brag about, but we did better than them in the latest round, so I think we are doing something right.

Our giga offers are all inclined to be at the high end and to take usage up in Germany.

Usage is up to 1.2 gig finally in Germany with these offers.

Germans are more cautious users of data.

But the vision is the same as Italy, the same as the other places, take people up in usage and try to increase loyalty, reduce churn, improve direct relationship and, eventually, give more data in exchange for this.

Dhananjay?

Vittorio, my question is related to your branding and commercial strategy in the context of Vodafone 2020.

How sustainable is a -- is what, in my view, simplistically spoken, is a monobrand strategy in markets that are increasingly segmented and a competitive landscape -- take BT in the U.K., take Deutsche Telekom in Germany -- where you have, at a minimum, 2, if not 3, brands that are attempting to address a very different customer segment and needs.

It is not sustainable, which why we have more brands ourselves, as simple as that.

If you look at Germany, we have Otelo, and we have now Vodafone Easy, which is a sub -- it's not exactly a new brand, but it's a sub thing.

In Spain, we have Lowi, which is becoming now a converged brand as well.

And in more countries, in The Netherlands, we have always historically had them.

So there's a tactical/segmented user either of product brands -- sorry, Portugal, Greece, I mean, I can mention on and on and on -- of brands which are either segmented brands or discount brands which we will use.

I prefer the segmented brands because they cater to a specific segment.

Youth is the classic example, Vodafone U or things like that.

And I prefer to have some kind of attachment to the main brand.

But if needed, we can also have them separate, like we do have in several cases.

Can I just very briefly follow up on that?

So if you were to take your advertising costs over a 5-year period, what percentage of that would you allocate to curating these second brands product or stand alone?

Not a huge amount, Dhananjay.

And this is the important point to get.

Vodafone is the brand that remains a brand, like Deutsche, like Telefónica MoviStar, like everything else.

When you use these second brands or sub-brands it's most of the times, focused on segments, and therefore, you have much more direct access, much more online, much less retail, in order to address a specific segment.

The massive -- the big part of our EUR 750 million spending still goes into Vodafone.

Yes?

It's Robert Grindle from Deutsche Bank in disguise.

That's really -- I mean, almost unrecognizable.

I'm overly [compensated], what can I say.

Yes, just a quick one on Nick's comment on the exiting of the low-margin carrier business in the U.K. Is it a case that you've chosen to exit that type of business, so was there a particular contract?

Would you get back into that space if the economics improved at some point in the future?

And then my second question is about handsets and equipment revenues.

There was an even wider gap between total group revenue growth this quarter and service revenue growth.

It must be handset sales.

But actually, it started to narrow a bit in Europe.

I wonder, is the European handset cycle improving?

And of course, it's important for future service revenue growth as well.

So in terms of handset cycles, no, I've not seen any material shifts in handset cycles, so I have to review that gap just to see if there's anything other that's skewing it.

But in terms of metrics of handsets sold, no.

In terms of the first question was around?

The carrier in the U.K.

Yes, the U.K. carrier, these are ultra-low, low margins.

And our strategy is being one of we build the network for ourselves, and then we can sell capacity to third parties at a reasonable margin.

If they get too low, there tends to be high volatility.

And we said let's take the volatility out of the system.

We have high growth ourselves as a company already, yes.

So we chose to exit those contracts, so it's our choice to exit those.

Could there be more some more of those next year?

Yes, there could always be more of those.

So see it as a bit like an airline, you're constantly yield managing your infrastructure for your own business first versus others.

Yes.

Should we go back one and then -- yes, and then Emmet.

It's Guy Peddy from Macquarie.

Just want to follow up.

There's been lots of chatter about margin in here, but I just wanted to bring it back down to the revenue line.

if I look across Europe, there are some -- some operators are giving the messages that, perhaps, things are getting a little bit tougher; consumer pricing is getting a little bit tighter; the ability to absorb price increases is limiting; product innovation is falling, i.e.

4G has been around here for a long time, and giving more data isn't really an innovation; the fixed line side there's been no major evolutions of technology, so therefore, things are getting a little bit stagnant as well.

Is that something that you're picking up in your business that, perhaps, the overall industry is getting a little bit tougher now than, perhaps, it was 18, 24 months ago when 4G was newer, et cetera?

Yes, let me give a quick answer.

What I'm picking up is that not all of the pricing moves that I see across Europe made complete sense to me.

Some of them look a little bit short term and not -- don't factor in competitors' reactions, which I will not say which ones.

But clearly, we do like our model because in our model, all pricing moves are very seriously evaluated and very focused by segment, and that's why we think we are generating a good margin to this year.

So do we see the same thing?

Probably, yes.

Do we manage it exactly in the same way?

Probably not.

And I hope we will be able to continue like that.

Back, yes?

How many do we have?

One, yes.

Two.

Last 2.

Okay.

Shall I go for the first?

A couple of questions.

The first one is on -- a follow-up on India.

One of the reasons why that keeps going up this year was the EUR 3.6 billion equity injection in India.

Now with the NewCo, you're going -- with the debt you confer yourself, and Idea will have a 4.5x roughly debt to EBITDA.

Because most of the towers are leased, the debt will be capitalized under full credit by the credit ratings, so it will be in excess of 6x.

And EBITDA is going down 23% on your side, 34% on their side.

They have a narrowed interest rate of 10% on the debt.

If I remember, that's what you said on the presentation of the deal.

So do you reckon that is a sustainable balance sheet going forward?

And what the risk that you have to keep injecting equity over the next 1 or 2 years?

And this actually aside, I've seen also -- I've noticed that more than 10% of your free cash flow is dividends from associates.

Then you've got also this shareholder recharged another EUR 20 million, so almost 15% of your free cash flow comes from taking cash out of these associates.

What's the gearing you have in place like Australia, Ziggo and, of course, India and Indus, of course, that's for one that contributed the dividends?

And the second question is on the...

It's the third.

It's the third on a multilevel.

This one is very simple.

It's actually a clarification of the broadband because, as you said, was many different variable but a bit convoluted.

So you have 36 million NGN coverage, and a coverage on the wholesale of 83 million is the balance between the 119 million and 36 million.

How many of the NGN customers connected are on the 36 million coverage?

And how many on the wholesale coverage?

It should be relatively simple as well.

Yes.

So Tim, you think the last one, please?

Yes, yes.

Okay, can I suggest, because rather than getting into filling our whole spreadsheet out, we do -- we cover a lot the more detailed points on the ones when afterwards.

But what I would say in terms of India, I would say that currently, on the plans of the 2 combined businesses, there is no further need to put in capital to the business.

So of the question then becomes, how is trading currently versus our expectation?

And we are smack in line with our trading and expectations.

So as I say, it's really important that when Jio started charging, what happened to our commercial metrics, and basically, I'm saying they've stabilized, and therefore, we'd gone into April results are in line with our expectation, and the same for Idea.

There are a number of other aspects.

Obviously, we have to dispose of towers, the orphan towers that sit within our business, their business, India's stake in Indus, obviously, from a leverage perspective.

But currently, we feel comfortable from a go-forward basis.

I suggest, all the shareholder recharges, et cetera, that our free cash flow is driven of the fact that we have operational leverage on our core business.

It's real free cash flow generation.

And our capital intensity is now normalizing going forward, which I hopefully highlighted in the presentation.

And in terms of on footprint, NGN, 26% penetration on average?

(inaudible) 27 million in broadband (inaudible)

Yes.

Yes.

Okay.

One more, probably the last one, and then we can move to individual sessions with the ExCom members, which I'll introduce quickly.

Emmet?

It's Emmet Kelly of Morgan Stanley.

On Slide 35, you talked about some of your new digital businesses, in particular, IoT and data analytics.

And could you talk a little bit about the data analytics side and how you might be able to monetize that?

Just read some reports which show that mobile operators have, perhaps, the best data set out there in the market in terms of Big Data.

You've got location-based data.

A lot of the data you have is realtime as well.

You have data on some customers going back about 3 or 4 years.

You have their surf history as well.

You say you're not selling to third parties in terms of data monetization.

Can you just say what the revenue opportunity could be here at some stage in the future?

Thank you, Emmet, for your question because it's a very easy answer for me.

First of all, thank you for saying that we have one of the most interesting data sets.

I am very jealous of one company that knows what we are all thinking and another company that knows what we are all buying.

Those 2 companies also have a very interesting data set.

Yes, we do have a very interesting data set, and the answer to your question is we have not, for the time being, decided to apply to third-party revenues.

The reason is very simple.

We had to set up a centralized data analytics unit.

We have to hire people in a lot of markets who are very difficult to hire and very much in demand.

And we have a huge opportunity in our own business.

So the initial work of this 200 and whatever, 50, 80, 60, 300 people by the end of the year is really focused on improving our economics.

And there is so much that we can do in our own kind of commercial manager.

But even in his management view on -- in the technology, where you put sites, how much CapEx you put, where you put it, how you put it, there is so much value that we can generate.

And honestly, it's a value that comes with the 30-and-plus percent EBITDA margin.

While if you sell to third parties, you have completely different type of [wins] . So for the time being, these units are focused internally.

By the end of this year, when we have deployed everywhere and we are 100% sure that we have the cruising speed on our own exploitment, then we'll start thinking about the external work.

Now let me very quickly say that we would really love to interact with you on a one-to-one basis.

Just for your information, you have -- if you're interested in small European countries, Ahmed is the CEO of the small countries, raise your hand; Brian is the new CEO of enterprise; Margherita, Deputy CFO on cost and everything else.

Matthew Kirk and, behind him, Joakim Reiter, his successor on Regulation and all the pleasures of dealing with Brussels; Vivek, CEO of emerging markets and the expert of Safaricom, Vodacom, India and everything else; Rosemary Martin, if you're interested in compliance, anti-bribery and legal risks; and Johan, CTO, is very well known.

Thank you very much for your questions.

We really look forward to a further interaction in the next 15 or 20 minutes.

Thank you.

Thank you.