Home » News » FTSE 100 » Vodafone Group Plc Trading update for the quarter ended 30 June 2019
Vodafone Group Plc

Vodafone Group Plc Trading update for the quarter ended 30 June 2019

Trading update for the quarter ended 30 June 2019


  • Group revenue of €10.7 billion, down by €0.2 billion due to foreign exchange rate effects.
  • Q1 organic service revenue declined 0.2%, improving compared to Q4 (-0.7%*); gradual recovery expected to continue.
  • Sequential progress in Europe, with service revenues -1.7%* (Q4: -2.1%**), as market conditions continued to improve in Italy and retail growth in Germany remained robust, offsetting the impact of competitor promotions in Spain.
  • Rest of the World grew 5.3%* (Q4: 5.7%*) as the impact of regulation introduced in March in South Africa was offset by strong growth ahead of inflation in other markets.
  • Good progress on strategic priorities during the quarter:
  1. Deepening customer engagement: Group mobile contract churn down 0.6 percentage points year-on-year to another record low; 115,000 converged customer net adds in Europe; 5G services launched in all major EU markets.
  2. Radical simplification & digital transformation: Simplified pricing plans with speed-tiered unlimited data launched in 5 markets; on track to meet the Group’s €400 million FY20 net operating expenses reduction target in Europe.
  3. Improving asset utilisation: Network sharing agreements signed in Spain/UK, Italy imminent; intention to monetise a substantial part of our European tower infrastructure over the next 18 months, depending on market conditions.
  4. Portfolio optimisation: Acquisition of Liberty Global’s cable assets in Germany and CEE approved by the EC; deal expected to complete by 31 July 2019. NZ$3.4 billion (€2.1 billion) New Zealand disposal also to complete on 31 July.
  • Confident on full year guidance1: adjusted EBITDA of €13.8-14.2 billion, free cash flow (pre-spectrum) at least €5.4 billion.
Quarter ended 30 June 
20192018Statutory growth
 €m €m%
Group revenue210,65310,902-2.3
Rest of the World2,5472,652-4
20192018Organic growth*
Alternative performance measures3€m€m%
Group service revenue8,9949,130-0.2
Rest of the World2,1142,1325.3

Nick Read, Group Chief Executive, commented:

“Our service revenue growth improved during the first quarter, led by Italy, and mobile churn fell to another record low. Following a significant quarter of commercial activity, we expect the gradual recovery in our service revenues to continue, underpinning our financial outlook for the year.

With the completion of the Liberty Global acquisitions, Vodafone will become Europe’s leading converged operator, with growing fixed and converged services contributing around half of our European service revenues. We have developed a detailed plan to deliver the customer benefits and capture the substantial synergies from the deal, which we will start to execute immediately.

We also have made good progress on improving the utilisation of our assets. We will capture industrial efficiencies through network sharing agreements signed in multiple markets, and today we are announcing the decision to create Europe’s largest tower company. We believe there is a substantial opportunity to unlock the embedded value of our towers, and we have started preparations for a range of monetisation options over the next 18 months, including a potential IPO.” 


Strategic progress

During Q1 the Group made good progress on its key priorities for the year ahead.

Deepening customer engagement

We aim to deepen customer engagement by selling additional products, particularly in fixed, contributing to revenue growth and a reduction in churn.

In mobile we saw an encouraging 0.5 percentage point year-on-year reduction in Europe contract churn during Q1, reaching a new record low level of 14.6%. Data usage growth remained strong at 49%, with average smartphone usage increasing to 3.9 GB per month in Europe.

We have now launched 5G in five European markets, with services available in Spain, Italy and Romania since June, and the UK and Germany since July. 5G roaming is now live for Vodafone 5G customers roaming on Vodafone networks in Germany, Italy, the UK and Spain. Our 5G network will be live across more than 50 cities and available in nine European markets by the end of the current financial year.

Including VodafoneZiggo, we had 18.8 million fixed broadband customers, 14.6 million NGN customers, 6.7 million converged customers and 13.6 million TV customers in Europe at the end of the period. Excluding VodafoneZiggo, we added 54,000 broadband customers, 237,000 NGN customers and 115,000 converged customers during the quarter. Our customer growth slowed compared to previous quarters, primarily reflecting increased competitor promotions in Spain and Germany, as well as slower broadband market growth in Italy. However, our Consumer mobile commercial performance in Spain stabilised in June.

Radical simplification & digital transformation

We have launched new simplified commercial propositions across multiple markets during the quarter, including speed-tiered unlimited mobile data plans in five markets (Spain, UK, Romania, Czech Republic and Malta) and new simplified mobile price plans in Germany. A simpler pricing structure with reduced discounts reduces complexity for customers and sales staff, enhancing our ability to sell ‘one more product’ including fixed, consumer IoT and device insurance.

The new speed-differentiated unlimited data plans are primarily targeted at our existing customer base, respond to customer demand for ‘worry-free’ data usage and create opportunities for ARPU growth. In only two months we have reached an unlimited customer base of over 700,000 SIMs. Customer satisfaction and data usage have significantly increased, and ARPU has increased.

We are making good progress on reducing operating costs, and continue to target a net reduction in operating expenses in Europe and Common Functions of at least €1.2 billion by FY21 compared to FY18 on an absolute organic basis. This includes €400 million of savings in FY20, matching our achievement in FY19.

Improving asset utilisation

We aim to improve the utilisation of all of the Group’s assets as part of our focus on improving returns on capital. In particular, we see a unique window of opportunity to initiate or extend our existing mobile network sharing agreements as the industry begins to deploy 5G.

In April, we announced an enhanced network sharing agreement with Orange in Spain. The new agreement expands active network sharing to around two thirds of the Spanish population, and extends the agreement to include 5G technology. The new agreement is expected to deliver cumulative operating expenses and capital expenditure savings to Vodafone of at least €600 million over the next ten years.

In July, we signed an agreement with Telefonica in the UK to extend our network sharing agreement to include 5G active equipment on joint network sites. Vodafone and O2 have also agreed to greater 5G network autonomy on approximately 2,700 sites in 23 of the UK’s larger cities, bringing the total proportion of autonomous sites to 25%. This gives both parties more flexibility to meet the needs of their customers and deploy future network technologies. In addition, Vodafone and O2 will now proceed to explore potential monetisation options for Cornerstone (our 50:50 joint venture company that owns and manages the parties’ passive tower infrastructure).

We have started the work required to legally separate our European Tower infrastructure into a new organisation (referred to as ‘TowerCo’), which will be operational by May 2020 with a dedicated management team. We intend to monetise a substantial proportion of TowerCo over the next 18 months, depending on market conditions. The ultimate form of monetisation may include an IPO or disposal of a minority stake in TowerCo, as well as potential disposals of minority or majority stakes at an individual country level.  We believe that there is significant scope to generate operational efficiencies and increase tenancy ratios across our Tower portfolio, and that it will be possible to monetise towers while preserving network differentiation and long-term strategic flexibility.

Portfolio management

We continue to actively manage our asset portfolio as we focus on reducing our financial leverage towards the lower end of our targeted 2.5-3.0x range. In July, we received regulatory approvals for our acquisition of Liberty Global’s cable assets in Germany and Central and Eastern Europe (“CEE”), and for the disposal of our New Zealand business.

The EC approved our acquisition of Liberty Global’s cable assets in Germany, Czech Republic, Hungary and Romania on 18 July 2019, and we expect to close the transaction on 31 July 2019. The acquisition targets expected cost and capex savings of €535 million by the fifth full year post-completion, with an NPV of at least €6 billion including integration costs. We have developed a detailed plan to deliver the customer benefits and capture the significant opportunities for value creation from the deal.

On 13 May 2019, the Group agreed to the sale of Vodafone New Zealand Limited for a consideration of NZ$3.4 billion (€2.1 billion)4, implying an FY19 multiple of 7.3x Adjusted EBITDA5 and 16.2x Adjusted OpFCF6. We received regulatory approval for the transaction on 11 July and completion is expected on 31 July 2019.

On 8 May 2019, the Australian Competition and Consumer Commission (ACCC) opposed the proposed merger of Vodafone Hutchison Australia (“VHA”) and TPG Telecom (“TPG”). We remain firmly committed to the merger and have challenged the ACCC’s decision in Federal Court. The date of the initial hearing is scheduled for 10 September 2019.

We expect the merger of Indus Towers and Bharti Infratel to complete shortly, having received all remaining regulatory approvals with the exception of the Department of Telecommunications.


The Group has adopted the IFRS 16 accounting standard in FY20 for statutory reporting. Consequently, we have changed some of our alternative performance measures; specifically, we intend to report organic adjusted EBITDA and free cash flow pre-spectrum after deducting the depreciation and interest effects of leases capitalised under IFRS 16. Please see page 44 of our 2019 Preliminary Results release for updated definitions of our alternative performance measures.

Trading during the first quarter was in line with management’s expectations underlying the outlook statement for FY20. The Group therefore confirms its expectation that based on guidance FX rates and IFRS 15 and IFRS 16 accounting standards, adjusted EBITDA is expected to be in the range of €13.8 – 14.2 billion, implying low single digit organic growth. Free cash flow generation pre-spectrum is expected to be at least €5.4 billion, after all capex, before M&A and restructuring costs, and based on guidance FX rates.

Our financial guidance includes New Zealand and excludes the announced acquisition of Liberty Global’s assets. We intend to update our guidance to incorporate the benefit from the acquired Liberty Global assets and the impact of the New Zealand disposal at our interim results in November.

Notes*    All amounts in this document marked with an “*” represent
organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign
exchange rates. Organic growth is an alternative performance measure.
See “Alternative performance measures” on page 8 for further details and
reconciliations to the respective closest equivalent GAAP measure.
** Organic growth excluding the impact of settlements in Germany.
1.   Our financial guidance includes New Zealand and excludes the announced acquisition of Liberty Global’s assets.
2.   All revenue figures in this trading update are presented on an IFRS 15 basis.
3.  Alternative performance measurements are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Alternative performance measures” on page 8 for more information and reconciliations to the closest respective equivalent GAAP measure and “Definition of terms” on page 12 for further details.
4.   Converted from NZ$ to € at a rate of 1.6464 as of 31 March 2019.5.   Net of proforma Vodafone Partner Market Agreement service fees.6.   Adjusted OpFCF defined as Adjusted EBITDA minus capex. 

Join us on our new LinkedIn page

Follow us on LinkedIn