Vodafone Group Public Limited Company (VOD) Earnings Call Transcript & Summary

Hello, everyone. I am Johan Wibergh, and I am the Chief Technology Officer at Vodafone. And I'm very happy that you have taken your time to join us for this Q&A, and this Q&A is part of our Technology Investor Briefing. So I hope you have had time to review the detailed presentations on the IR website that we released this morning. And also, let me highlight then that there were 5 additional supporting mini brief technology deep dives on that website and on subjects such as Open RAN with a special appearance from Michael Dell. We've got a lot of interest earlier regarding the cable evolution DOCSIS. So we provided a specific deep dive on that and also giving you a view on our supply chain sourcing model. So I would really encourage you to take a look at those presentations as well if you haven't had the time to do that yet. So before we open for questions today, let me provide a couple of key takeaways that I want to make sure we get across to you. I think all of us know that due to COVID-19, the pace of the digital transformation has really been speeding up. It's almost like a dramatic digital transformation that's ongoing for the last year. And I think we all understand that, that would have been impossible to do without a well-performing mobile and fixed connectivity from operators. We think that Vodafone is well positioned to take advantage of this speed up in digital transformation. And I think there are a couple of -- specific 3 items I really want to lift up as being important here. I mean first of all, I think we are good on leveraging our group scale. And I think we can use that to further differentiate ourselves from competition and are really thinking about ways of working, scalable platforms, et cetera. We're probably going to come into that several times during the Q&A. Secondly, I think we're really, really good in driving relentless cost efficiencies, improved asset utilization at the same time as driving up quality and customer satisfaction. And then thirdly, I'm fully convinced that all the changes we're going through is really creating a foundation and really enabling a revenue growth in new products and services. And I think really we're creating the capability in-house to make that happen, and that becomes a value-add on top of the core connectivity business we are doing today. We placed a lot of focus in the video on our recent reorganization as being the -- taking the efficiency of our factory to the next level. And I think it really leverages our scale benefits, both of doing things much more efficient but also then speeding up what we are doing to get to more revenue. And this will help us as we transition into a new generation connectivity and digital services provider. For this Q&A, I'm joined by 2 of my colleagues: first of all, Scott Petty, who leads our digital and IT organization in Europe; and also Alberto Ripepi, who leads networks in Europe. And they both have a global responsibility in Vodafone when it comes to the strategy and architecture. And among -- together, we will handle all the questions that you will be bringing up. I have to say I'm very fortunate to have as good team members as Scott and Alberto. Both of them have been with Vodafone a long time. They are extremely capable, and they are really good on making an organization perform really well. It's really about getting things to work faster. It's really about getting things work better for our customers, and it's really about doing everything much more cost efficient. And I think both of them have a very big track record in achieving that. We will do our best to answer all your questions. We are not the ones that are meeting the investor analysts every day, so we may have -- but we will do our best to answer your questions in a good way. We will try to not get too technical. And hopefully, we can get the message across well. So with that, operator, we are ready to take the first question. [Operator Instructions]

Thank you very much, Johan. Our first question today comes from Polo Tang from RBS -- from UBS, sorry.

Firstly, thank you for all the videos today and all the presentations. It's very helpful, very informative. My one question is really about DOCSIS 4.0. I mean you mentioned that broadband speeds with DOCSIS 4.0 could reach up to 10 gigabits per second. But what are the CapEx implications in terms of deploying 4.0? And would it require a big reengineering of the cable network? And will it lead to a step-up in terms of CapEx?

Thank you, Polo. It's a great question. So maybe if I start, and then I will ask Alberto to walk through with the evolution steps to getting to DOCSIS 4.0. But if I take a market as an example, if you take Germany, it was -- typically, that's where the question comes up since Deutsche Telekom made a lot of comments regarding their fiber build. I think overall, we feel like we are in a starting point in a very strong strategic position in Germany. I mean today, our network reaches, with gigabit speeds, 22 million households while the market has around 5 million, the rest of the market. We have a -- if you look on the mobile network side, there are 3 mobile networks that are built. They have all got similar type of performance. Maybe one of the competitors is a little bit weaker in the countryside, but all 3 mobile networks in Germany have very similar type of performance. There's not really a big difference. We've got a very strong IoT position in Germany, and also on TV due to the cable TV positioning. So I think we're starting from a very good position in meeting competition due to those acquisitions we have made. Then, Alberto, maybe you can walk through the specific cable steps we would take.

Yes. Thank you, Johan, and thanks for the questions. As you mentioned, what does matter is the fact that we have 22 million households that are already gigabit capable. You need to keep in mind that we have a very flexible architecture, and this is the beauty of our architecture because we already fiberized our network. The strategy that we have to evolve this hybrid fiber cable network is in following different steps. First of all, during the pandemic, we saw growth in the demand in some specific areas. And we are addressing and we addressed it through what we called node segmentation. So this is the way that we put the fiber very close to the customer to reduce the sharing of the common asset. And then this is something that is for us a BAU that we continue to do because we are doing the traffic modeling forecast to understand what is the evolution of our traffic, identifying the areas where there is demand and investing in a cost cautious way only where the demand is growing. Then keep in mind that we already deployed almost in all markets the DOCSIS 3.1, and we are going to complete the Germany in this -- in the next calendar year, at the beginning of next calendar year. And this will bring us to 24 million households gigabit cable. Then we have several areas that we can continue to invest to improve our performance and are very, very cost conscious and focusing on where the demand is growing. And so we will go through, #1, the distributed cable architecture that would allow us to bring the model closer to the households and so reducing again the sharing of the media. Then we have the possibility, and we already started to deploy in Spain of high split of full spectrum where we can increase and we can modulate the bandwidth between downlink and upstream to increase the upstream capability. And this is something that we can do in a very reasonable way, in a progressive way when the node segmentation is happening. So it's not necessary to do nationwide tomorrow but where demand is growing to cope with the growth of the demand. And then it will come to DOCSIS 4.0 that has been now released by the cable association from the [ CableLabs ], and we are starting to trial it. It's too premature to say what are the CapEx required in the DOCSIS 4.0. But what I want to stress is the fact that our architecture can allow us to invest progressively where demand is growing and where capability. And we have a network that is already capable much more than our competitors in the market. In the past, we suffered due to the shift of the usage pattern in some areas of capacity issues, but this is largely resolved. And we have a very strong process now in place like what we have in the mobile to invest where it matters.

Thank you, Alberto. Really good.

Our next question today comes from Emmet Kelly from Morgan Stanley.

So my question relates to 5G and which killer apps you see emerging for 5G and how you are preparing for that. If I look back at 3G, I think the killer app for 3G was probably the iPhone, which came a few years later after the 3G networks were launched. And when you look at 4G, I'd say video was probably the killer app for 4G. And again, that kind of manifested itself a few years after 4G was launched. So what are the killer apps you see for 5G? And then specific relating to, say, network slicing or autonomous cars, is this something that you're already preparing for?

Thanks, Emmet. That's a great question. So maybe if I start and say a few words. And then maybe, Scott, since you've been involved in some of the business applications, if you want, you want to add on a couple of examples there. So as you said, I think, the reason -- if you look on the business case for Vodafone in deploying 5G, it's mainly driven by all the cost savings we can do. The key thing for us when it looks on the data growth we're having and the cost per gigabyte that we need to have to make sure -- because we always need to make sure that cost per gigabyte goes down faster than any possible data growth because otherwise, we would have a problem. And since 5G is up to 5x more cost efficient if you use massive MIMO technology, the business case on deploying 5G starts and builds upon really all the cost savings you can get from it. So it's important to keep that in mind. Then secondly, we then look on the various use cases coming up. The first use case then is just to provide data for the smartphones because -- as I said, due to the cost savings. From our perspective, we want to have as many customers as possible to buy 5G-based smartphones, and we -- hence, we will invest in less 4G technology. That will be more cost efficient for us from the network side. Then we have seen, shorter term, more examples on the business side and then more consumer to come. And I will ask Scott then to talk on the business side. We see things starting to come, being talked upon. And -- but we have very little on the consumer case being there. I think augmented reality will be an item that really, on the consumer side, we really, really believe big timing. But the first use cases have been on the business side. So Scott, can you cover a couple of cases you've been evolving?

Sure. Thanks, Johan, and thanks for the question, Emmet. First of all, it's probably worth just reminding us where we are on the 5G journey. The networks we've deployed today are nonstand-alone 5G networks, which means we're using 5G radio access network, but the core is still our LTE core. We'll go live with stand-alone core over the coming months. And that's important because it adds the speed improvements that we get with nonstand-alone but adds network slicing, mobile edge compute, you may have seen our announcement yesterday with AWS, and ultra-low latency, which I think are important features and capabilities for applications. So we've seen a couple of really good examples in the U.K. We ran our first stand-alone core trial with Coventry University, which is one of the leading medical teaching universities in the U.K. They've been using virtual and augmented reality in their teaching facility. So students can actually travel through the anatomy of the body, look at the organs and understand what's happening as part of that teaching experience, and they're building that as capability that they'll launch into production next year. We also did a partnership with Proximie in Wales. They've been running remote surgery applications between 2 hospitals, one in Cardiff and one Llandough, where remote surgeons are able to offer expertise, follow the outcome of the surgery in the remote location and actually track all of the vitals in the machinery that's in that environment using 5G applications. And that's taking advantage of network slicing capability to be able to maintain the traffic. I think we'll see a lot in the mobile private network MEC space. We're really pleased with our partnership with AWS, using AWS Wavelength that lets developers who are used to developing in AWS take their applications and rather than just run them in a technology center under AWS, push them to the edge of our network and really benefit from low latency. A great example is our partnership with Sportability (sic) [ Sportable ]. They're a sports tracking company. They provide trackers for players. They've just done a deal to insert sensors into the rugby ball to gather analytics and data about what's happening in contact sports. They found that deploying MEC and 5G was cheaper than building a WiFi LAN environment inside their stadium, gave them access to much greater speed and much, much lower latency to create a new broadcasting experience for the capabilities that they're leveraging. So I think we'll see those will be the earlier consumer style applications, leveraging MEC and low latency and wrapping that into a fan experience that people can leverage. And then finally, a lot's happening in the industry 4.0 space. We've announced a number of projects in the mobile private network area. Probably the most visible is the Ford electric car factory in Essex. They're using our 5G MPN to build that factory and use it as a way to control the massive amounts of data, virtualized applications augmented in virtual reality for the engineers and tracking those capabilities. And that factory will go live next year as they start to build out the components. So the early investments we made in our incubation centers to build partnerships with different players is really starting to pay benefits. It gave people early access to 5G technology, particularly stand-alone 5G technology, which is not yet live. They've been building platforms and code that will come into production next year.

Our next question today comes from Maurice Patrick from Barclays.

If I could ask an ESG-related question, please. Now on Slide 45, you show your energy consumption has been broadly flat over the past couple of years despite the increase in data traffic. Just curious to know where you see energy consumption going in the next few years. In the presentation, you talked about techniques such as massive MIMO, which I believe have doubled the energy footprint, compared to normal radio configurations. I'm guessing with the move to cloud and edge, that might also bring increased energy consumption. So curious to understand where you see overall energy consumption going.

Thank you, Maurice. Great question for that. Alberto, do you want to start from the network side?

Yes. As you said, over the last years, we were able to maintain almost flat our energy consumption despite the dramatic and the significant traffic increase that we had to manage. We are doing several initiatives to cope with what you say. Number one, we are shutting down the 3G almost in all markets, moving the spectrum from 3G to 4G and 5G. That is most efficient from the spectral efficiency perspective. And it's correct that 5G will introduce incremental consumption in terms of massive MIMO. On the other side, we need to keep in consideration that to manage 1 gigabyte, to download 1 gigabyte of traffic in 5G, the energy consumption is more or less 10x lower than the energy consumption that we have in 3G and several times lower the energy consumption that we have in 4G. So the combination of this in terms of downlink efficiency that we can have, it's an element. Then you need to keep in consideration that we are working with several vendors in parallel to reduce the consumption of 5G massive MIMO to make more efficient. And we are confident that we can achieve it in the next in the next time frame. And don't forget that we have also the programs that are running in parallel that are all the sharing agreements that are making energy efficient. So it's one of the key levers of the sharing, both passive and active, that we are doing in several markets. We are optimizing our core, reducing the consumption thanks to the cloudification, both in network and IT. In network, we already reached 64% of our network in cloud, in private cloud. We aim in 2 years to reach more than 80%, 85%. And we are optimizing all data centers and we plan to do -- and we have in the long-range plan our cooling and infrastructure consumptions. And we are starting to include the energy consumption in our consideration when we work on upgrading the network. So it's one of the elements that allow us to decide where we need to deploy additional spectrum to optimize the consumption. It's a matter of fact that energy has increased trend due to the 5G deployment. But we believe that with all the initiatives that we have in parallel, we can contain at a reasonable level this kind of impact. Scott, over to you, if you want to cover certain points.

Yes. Scott, do you want to add on something?

Just briefly to say we've also been innovating in managing our energy consumption. We've been deploying our IoT smart meters to our radio access networks, leveraging lithium batteries to be able to turn off sectors and components during that period, and we've built a series of applications to optimize our power consumption across our network. And we're experimenting with on-site generation capabilities for both our data centers, leveraging solar but also at our radio base stations using wind and alternate energy sources to reduce our load on the grid.

Thanks, guys. And just to add on, so our models where we analyze investments, also including buying from suppliers, we have -- it's based on the total cost of operation, total cost of ownership, i.e., we include energy consumption in the modeling when we decide how to do things and which means then that we favor solutions that are energy efficient. Okay. Thanks, Maurice.

Our next question today comes from Matthijs Van Leijenhorst from Kepler Cheuvreux.

In the previous comment you said, you will see an impact from phasing out some of the legacy infrastructure like 3G. Could you quantify the impact for us?

Do you want to comment on that, Alberto?

I think that this is visible already in terms of energy savings where we did. In terms of efficiency in the deployment of new capability, we did in Italy, Czech Republic, and we will do in Germany by June. And all the other markets will follow before the end of calendar year '22. The benefits are significant in terms of performance for the customers because with the spectrum that we free from the 3G, we can easily, easily deploy on 4G and 5G because it's already there. We need just to do either a software activation or a small activity on the site. Just to give you an example, we completed in March in Italy the switch off of the last 5 megahertz of 2,100 spectrum on 3G, and almost all sites already have activated these 5 megahertz on 4G. So it's capacity that is available for our customers. And you know that the spectral efficiency of 4G is much bigger than the spectral efficiency on 3G, and this is bringing significant energy savings. But at the same time, it is a significant CapEx reduction because we should not deploy additional spectrum, but we can reduce what is already in the site. And in all the markets, we are progressing quite speedy because we do believe that this is a very important factor for the efficiency but also for the customer experience.

And yes, you guys have an understanding on how we operate because many of the things we invest in have between 3 and 7 years write-off cycle. So everything we do, we think long term. We try to make sure we are cost efficient over a longer-term horizon. So all of these things have been in our planning for a long time, and it doesn't really change on our CapEx envelope. And we have already communicated to the market on how we see our CapEx envelope and our financial targets going forward. So thanks, Matthijs.

Our next question today comes from Georgios from Citigroup.

It's on network virtualization and more specifically on Open RAN. I think in your presentation, one of the presentations discussed the importance of MIMO in delivering great experience and consistent service to the customers. But also, you talked about your aspirations on Open RAN, and I know there are already contracts in some of the less dense areas in Europe that you have allocated to Open RAN vendors. I'm just curious as to where you think the ecosystem is when it comes to denser areas and solutions that are more equivalent to the massive MIMO solutions you get from the established vendors, where you are in terms of your collaboration with some of the other telcos that are working on this like Telefonica and Deutsche Telekom and anything you could share in terms of the key milestones we have to focus only in the next 12 months just to track the progress.

Yes. So I will ask Alberto to talk about this. But I want to say a couple of things beforehand because he wouldn't say it himself, I think. And I think Alberto's team has been really leading and driving Open RAN since we started with this many years back. And we've been doing trials in many countries with different vendors starting back also at least 2016 when we started doing testing on different things. His team is also having some of the important external -- like Germany in the tip as an example, with 500 companies that are working heavily on getting Open RAN established. We are part of Board members of the O-RAN Alliance. And on Monday this week, we did a major press announcement on awarding the first European commercial deployment on Open RAN to a combination of vendors, which included Samsung, NEC and Dell. And we tried to explain how we see it on the -- in one of the many deep dive videos. So I think Alberto's team has been really pushing the envelope here, being really first out. And we have also then teamed up with the other large European operators to go down this path. But Alberto, do you want to put some more color on the situation on Open RAN?

Thanks, Johan, and thanks for the introduction. The team will be very proud for your words. Yes, it's correct. Since 2014, we are working on Open RAN association to make sure that this is a reality happening. As you know, Open RAN is -- logically, it's a separation from hardware from software, and this is to the ability -- will leave us the ability to create an ecosystem that is more flexible than just having a vendor that is providing the full stack. And this will drive in the future -- at this moment in time, not. It will be a cheaper solution. At this moment in time, it's not a cost strategy, but it's more a strategy to create diversity in the RAN environment and to create the possibility to innovate at a better speed. And this will be possible once that you separate hardware from software and software multiple components because you can have multiple new companies that will join this arena and will compete and will introduce innovation. We saw this in the past in the cloud architecture that was happening. We have significant plans with Open RAN. We will deploy 2,600 sites in the U.K. But as you mentioned, you are very correct. The first initial implementation will go in the rural areas, where we need to have spectrum -- low spectrum capability, and massive MIMO will come later. We have plans that are very aggressive to deploy. So we are very serious on this technology because we do believe that the diversification in this arena is very, very important, and this will allow us to introduce faster innovation and reduce further the cost. The performance that we are measuring in all the pilots that we are doing, and we have 3 markets piloting the Open RAN, are very encouraging. In the 2G, 3G, 4G, we start to see performance that are comparable with the traditional vendors, and we are working with very innovative vendors to evolve. We selected the vendors in all the stack for the U.K., where we are already serving with several sites multiple customers. And we are happy with the progress so far. So we do believe that in the next couple of years, the sites that we committed to deliver will materialize, and this will improve significantly the ecosystem and the speed of the innovation for the RAN world.

Thank you, Alberto and Georgios.

Our next question today comes from Jakob Bluestone from Credit Suisse.

So I wanted to follow up just on your overall sort of CapEx step-up starting from this year. I think Johan said in his presentation that a big part of it is clearly related to the integration CapEx for the new partners that are sort of coming on board, but then that future CapEx would be lower. I'm just trying to understand your thinking around the mix of CapEx and how you see your CapEx overall levels evolving longer term, particularly as you complete this integration CapEx. Do you think it sort of steps up and curves down? Or will you find other stuff, and hence, it sort of stays flattish overall in terms of your absolute CapEx levels?

Thank you, Jakob. It's a great question. So let me talk a little bit briefly about the growth in CapEx. As Nick and Margherita talked about at the full year results, it's split more or less in 3 different buckets. 1/3 is going to network, and it's a big -- predominantly going to Germany. The second part is going into new products and services, where there is a business case where return on capital is better than WACC. And that is mainly decided centrally by my 2 colleagues, Vinod for Vodafone Business and Alex for Consumer. And then third part is in Vantage Towers, and that's very much about where they have strategic growth opportunities, i.e., they get customers. And hence, they need to build out more sites or they need to do changes on the sites to allow for more customers on them. That is what that CapEx is being for. That's also then driven on business case analysis. So everything is driven from investments that make sense. And it's not done by us in technology. We are, of course, a key part in saying this is how we would execute it, this is what it would cost. And then it's the various CEOs that are deciding upon to do that. We have provided visibility on some of our key financial metrics going forward, and that is the granularity we can give you. We provided on EBITDA, free cash flow, et cetera. We haven't said more on how CapEx would evolve, but this is how we think. Our key job here is to make sure that every single euro is spent as efficient as possible, and we are generally brutally chasing everything we can do in the organization to continue to drive down cost. You can see what we have done as a company on the OpEx side, and that's despite, as we said, growing energy cost, huge growth in data volumes, build out of the networks. And we've still been very effective in getting costs down, and we continue to chase on doing things on that. And a key part will be the new technology organization that will enable us to take it to the next level because -- and before, even if we have been very efficient as a company, when we now create one organization in Europe, it means basically that Scott and Alberto can drive this to the next level. Just a practical example, we have maybe a way of doing network operations today that is almost the same in every market, but it's not exactly the same. And when you do it exactly the same, you can cut away a huge amount of the tools, and then you can drive digital automation. So there are a lot of ways we can do to further drive efficiency. So that is what we are very much focused on. Okay. Thanks, Jakob.

Our next question today comes from Robert Grindle from Deutsche Bank.

Yes. You have highlighted that your cost per gigabyte will fall by 60% by full year '25. Is that on all the traffic carried in the year? Or is that the unit cost of incremental capacity added in the year, effectively falling by 20% CAGR? I think you were trying to reassure us that the greater efficiency will offset the increase in volumes. Historically, mobile traffic growth rates in Europe and emerging markets at Vodafone have always been very similar within a few percentage points. Do you think that's because the increased capacity that becomes available in the 2 regions is driven by the stable capital intensity target and that the businesses basically sell what the factory makes for them rather than the capacity being scaled up and down quickly on -- depending on the business need?

Thanks, Robert. Great question. So what we're trying to tell you in the presentation is that it's going to be at least more than 60% cost savings. And it is, like you say, we need to make sure that the cost to produce a gigabyte really goes down faster than an erosion on revenue, i.e., so any growth of data means that we can do that with the similar cost as we have today. And we've been able -- if you look back for I don't know how many years, we have always succeeded in doing that. And I feel very confident that we can do that going forward also. And that's why we always are chasing the latest technologies because it always will be so that the latest technologies will be more cost efficient per gigabyte. If you then look on the data growth, it is not really so that this is -- okay, this is what the network can produce in capacity, and that is what have been sold. It doesn't technically work like that. So it actually is the demand coming from customers, and there always are a few sites. It can be a beach in the summertime with a lot of tourists but there is a limit on how much data that can be produced. But usually, that is not the case. And the dynamics is really driven more from demand from customers, not what can be produced. Okay. Thanks, Robert.

Our next question today comes from Nick Delfas from Redburn.

A couple of questions, please. Can you prove that the scale you have across markets is working? Are there any metrics that you can share, I don't know, from A.T. Kearney or from other studies that show that the group effect is working in helping you achieve these scale economies? And another quick question on the technology. Have you given us how many homes per node you have in Germany? And is massive MIMO already working well? Are there any problems with it in terms of the weight or the EMF or local planning?

Yes. Thank you very much for your question. I will take the first one, and Alberto, if you can take number two. So we've been doing -- as a company, we've been doing an external benchmarking with -- I think it's not confidential. It's been with A.T. Kearney. That has been benchmarking many companies. And we are now up as a company, up in the top quartile and on the way up. Then I say I have a passion for benchmarking. And the way we think about this topic is a little bit like if you take the situation with our data centers, it used to be that we used to benchmark the cost of data centers with other telco companies. And we want bad -- we want great data, but we're doing well. We decided then to change the benchmark to say who's best in the world of running data centers, Yes, that's the hyperscalers. Okay. So let's benchmark with hyperscalers. Let's understand how we really are. So we did the benchmarking then. And then we said okay, our -- the cost position isn't good enough. We need to do things. And then we could say also they were spending much more money on doing transformations versus what we were doing. And hence, Alberto initiated several initiatives, and this is back to 2016 and 2017, where we were identifying what are the key transformations we needed to do, how we were operating data centers. And when we look at it now, we are really up where we need to be. We are very close to overall where the hyperscalers are on the things we are managing. We have done the same in different areas. So in network operation, in -- we also have JVs that we operate as a group, where we sell services. So we are -- Alberto is selling a network operation service to a JV. We have to compete on that in comparison with external companies. So we get to provide an offer, and then they benchmark us. And in that work, we see that we are coming out. And we are winning those deals on an independent basis, so to say, because the cost we are providing is lower than what they can buy from companies out in the market. So I think we have come very, very far. I'm also convinced that we can do it much, much, much more. And that's what we're starting now in the reorganization where we can take this to the next level. And there are so many more things we have identified that we will be working on the next coming years to take this to the next level. There's so much more cost savings to get done. And you can just imagine, even if we now supply chain have reduced it to a certain amount of SKUs we are buying, stock keeping units, by reducing it even further doing exactly the same things we're buying, we're going to be able to push prices down even a few more percentage points, which will make a huge importance to CapEx efficiency. So there's a lot of more things to work upon. Then, Alberto, sorry, over to you.

So saying exactly the node per segment that we have, it's more complicated because the node per segment is a distribution that is depending on the areas of the geography. What I can tell you is that how we plan the limitation of a number of customers that we have in each node in each segment to be sure that we don't get congestion. So we plan now with 1 year in advance in the worst and best scenario of the traffic evolution. We identify in this case the segment that will be highly loaded and the segment that will be congested to make proper investment in terms of fiber split and node split to put fiber close and reducing the number of customers per node in the next 12 months. So we have a very, very accurate training process now that we follow and also the CEO of Germany is following on a monthly basis. And I think it's much better to talk how we manage the congestion that -- rather than number of customers per segment because it's really distribution depending on rurals of the urban and urban areas. Of course, in the urban areas, we have very few customers per segment. And in the rural areas, we can have more customer per segment depending on the kind of traffic that they are doing. And the real-time communication is changing and shifting a bit the way that the capacity is used because it's not more just busy hour peak in the evening with the people streaming in television, but it's becoming more a flat peak that we have on the upstream to manage the real-time communication in the pandemic. So we have now an accurate plan, an accurate planning, and the congestion is largely solved in Germany in terms of capacity. And we continue to invest several thousands of node segment per year depending on the demand of the customers, so where traffic is demanded and growing by the customers. So it's not a massive deployment that we do spread, but we are very targeted and focused on the areas where customers are having higher demand.

And then you asked your question there on massive MIMO on 3.5 gigahertz. It's actually working really well. It propagates better than 1,800 megahertz. The grid we have is typically suitable for 1,800 and 2,100. It actually propagates better than expected. Still some improvements to get done in the algorithms. You can run 4 to 5 beams at the same time on a massive MIMO base station. There's still some improvements to get done in the algorithms, but it's really getting there. And the weights have come down, but they are now into -- some of the suppliers are into second or even third generation of massive MIMO radios. So it's turning out quite well. So they are somewhat more complex to install. In some countries, we have EMF regulations we need to consider and take care of. Sometimes there's some steel works due to that, but the performance is good.

Our next question today comes from David Wright from Bank of America Merrill Lynch. Please go ahead.

My question is a little bit 2-sided. First of all, you've talked about, obviously, the evolution of the cable networks. And you've given us some visibility into that. What I was wondering is, as you move up through the 3.1, 4.0 technology standards, do you get the step-change in efficiency that the guys moving from copper to fiber are getting? And what I mean by that is we're getting told by BT Openreach that the fault tolerance -- the faults are reporting falls by 50%, for example. So there is a very clear benefit feeding through to OpEx. Are you getting those kind of step changes here? Or is it much more gradual within the actual efficiency of return on capital on cable? And then if I could just ask, and I'm not sure I saw this in the presentation. But on stand-alone 5G, do you guys give any basic rollout targets, where you expect to be in terms of stand-alone 5G coverage by year X, year Y or year Z?

Okay. So let me just comment a little bit first on fiber versus cable and copper. And then maybe, Alberto, you can go a little bit more into depth on this. So I think first of all, if we look on actual customer feedback we are having, there is somewhere between 30% and 50% that are related to WiFi performance in people's home. And this whole debate about whether it's copper, fiber or cable is -- sometimes that discussions get left out. And I mean we see -- as an example, if you take on our fiber cable networks, we typically see like a gigabit speed going into the house. And then it goes over to the local WiFi and it drops to maybe 50 megabits, something like that. And also, it is very common that there is WiFi interference in the homes because many of the WiFi routers are configured to be working on the same channels. So it may work really well one day and then next day, your neighbor is home and then it doesn't work because they are operating on the same channel. And it's -- even if the CPEs are supposed to dynamically choose channel, often there's a lot of problems around that. Also, there are many customers that sit with older CPEs, with older WiFi standards that actually don't perform that well. They may not even support 5 gigahertz, only beyond 2.4 gigahertz. And there's still also very limited amount of customers with a meshed WiFi solution. We call it Super WiFi. That gives really great experience. So this is actually the biggest problem. And that often get overlooked in this old debate regarding which technology. This is the #1 issue to get resolved to get happier customers and get better performance. Then it is so, of course, that copper cables has a lot of problems, often been there for a long time in the ground. If it rains, you can have issues, et cetera. Of course, getting away from copper is a major thing because that's not the same with coax. But with copper cables, there is. But Alberto, do you want to build on this?

I think that you were saying right. If I look to the tickets that we have to manage, the vast majority are linked with CPE, WiFi and the topics like this one. It's not really issue that we have in the building with the coax. And this is an analysis that we do on a weekly basis and we control. When it comes to the cost, you need to look at this in a holistic way, not only the OpEx, too, that you can have at the end of the journey but also the total cost that you need to sustain in terms of investment. And our cost to upgrade our network is one order of magnitude lower than another company that need to build the FTTH. And this is the reason why we continue to do this evolution of our very flexible network and very good network that we have step by step where it matters. When it comes to the second question that you raised on the 5G, we have, of course, plans for the next 3 years in all the markets. We aim to deploy 5G right, first of all. That means with the dedicated spectrum on 3.5, where we can experience -- our customers can experience the real 5G with throughput -- with regard to throughput and latency. We acquired the spectrum in 9 European markets, and this is something that is ranging between 80 and 100 megahertz that we bought. And we deployed through a massive MIMO where we know that the efficiency of 1 gigabyte is 4, 5x the 4G. We currently have a plan to deploy 5G. Of course, there is also an [ activity ] that is used by many competitors that is the dynamic spectrum sharing that is giving you the icon but is not giving you the experience of 5G. The sharing of the spectrum with the 4G, you have more or less the same experience that you can have on 4G. In some cases, significantly worse. You can have interference. So we do deploy [ build right ] to where it matters, so where customers have high demand like city, sports, airports, industrial districts. Overall, we plan in several markets an acceleration in the next financial year. It is already in the long-range plan. We plan to have something in the order of magnitude of 50% population coverage in some markets like Germany, U.K. Ireland is 60%. So we have a significant plan that we will upgrade year by year. And this is the technology that we want to push in the market because it's much more efficient and give a better experience to our customers.

That is stand-alone 5G, just to be clear?

We do now nonstand-alone and we are migrating to stand-alone. Don't forget that we are the first operator deploying 5G stand-alone. U.K. and Germany are the markets where we are launching, and the next counts will come. And once that we launch 5G stand-alone, we'll migrate the traffic on this because these give also the experience of a very low latency and allow us to integrate the MEC and the AWS that is something that is -- we do believe has a business case, as mentioned by Scott.

There is a limit on phones that's supporting 5G stand-alone. There are very, very few phones that do that. Yes. So we always need to make sure we time it when phones becomes available. Okay. Thank you, David.

Our next question today comes from Sam McHugh from Exane.

I just want to ask about mobile networks and network sharing. So you have several agreements, obviously, in Europe for network sharing -- active network sharing, and they quite often include carve-outs in the urban areas. I just wondered what the kind of tech view was on those carve-outs. So are they carve-outs for commercial reasons or technical reasons? And does 5G and massive MIMO change your ability to do more network sharing in cities? And if I can just ask a ticky clarification. On the 5G coverage, what proportion of that do you think you'll do with massive MIMO within the 60% coverage target?

So if we do like this, just to get Scott the chance to talk also, I think you're going to have Scott answer the first just on doing the network sharing active carve-outs in the cities, et cetera, because Scott's previous job was the CTO in Vodafone U.K. So he's gone through all of that. And then I think the remaining questions, Alberto, if you could -- if you could help to fill on with those. Is that the case, Scott?

Yes, sure. Thanks, Johan. So our strategy for active sharing is to active share in rural and suburban areas where traffic density is lower and our ability to differentiate on network performance is lower. The cost benefits of active sharing outweigh any potential differentiation that we could create. That's not true in dense urban areas and particularly in cities where engineering acumen, build strategies, the way we build 5G gives us a differentiation and ability to compete and win customers based on the network quality and capabilities that we use there. And there, we use passive sharing as our primary sharing mechanism. We've learned these lessons, I guess, over the years, and we have reversed some of our original decisions to do active sharing in cities and reverted back to a passive sharing model to get that control and ability to compete in the marketplace. 5G gives us an incremental opportunity for differentiation. And therefore, we've been using -- carving out to passive sharing in dense urban areas for 5G to allow us to launch applications and new services more quickly than with our partners. In an active sharing agreement, it's more difficult to execute in an engineering sense in dense urban if the 2 sharing partners are not perfectly aligned on their strategies and their spectrum holdings. And we found certainly as our growth in IoT new business services that having flexibility in dense urban areas enabled us to compete and would outweigh any efficiency savings that we lost in only using passive sharing.

Thanks, Scott. Alberto, over to you.

Yes. Yes. As said by Scott, the importance of the sharing in the big urban areas, it's less relevant because the benefits that we can get, it's limited. On the contrary, in the big urban areas, so in the cities with the population higher than 100,000 inhabitants, it's the area where we accelerate and we push with massive MIMO. There is more capacity demand and also typically more demand also from the business perspective. So our plan is to differentiate the rollout in the urban areas and the rural areas and to adopt 3G -- 3.5 gigahertz and massive MIMO more in the big urban areas. Where we are already deploying, we are more or less aligned with our competitors in all the markets. U.K. is leading in terms of market massive MIMO. And as you know, in London, we got also the best 5G network, thanks to our deployment of massive MIMO. And the massive MIMO deployment, as you probably know, is a bit more complex than the normal deployment because we need to raise a bit the pole, but it's not something -- it's something that is not preventing us to accelerate the deployment. So it's something that is now a capability, and we are deploying at a speed that we believe is linked with the demand of the customers.

Thanks, Sam.

Our next question comes from Adam Fox-Rumley from HSBC.

I had a question on MEC, please. And I was interested in the scale of the build that's required to make MEC work. So to take maybe the U.K. as an example, is it -- do you need 10 sites? Do you need 100 sites, 1,000, 10,000? I'm getting different answers from different people. So I'd be very interested on your perspective there. And I guess practically, does Vodafone need to buy equipment for each of those sites? And then a short second question, if I may. Johan, I think 5 years ago, you probably would have been in charge mostly of network engineers. Now software is a much bigger piece. You referenced the change of culture that's required in your presentation. And I wondered how you're tracking that change of culture internally.

Okay. So if I start to take -- if we ask you, Scott, to talk about the U.K., specifically on MEC, even if it's Alberto's area, if you cover it since you know it well.

Sure. No problem. So our MEC deployment in the U.K., you really need to separate MEC used for the public macro network. And in that case, we're deploying MEC into technology centers. So between 4 and 8 technology centers for a country the size of the U.K. enables us to offer MEC services across the macro network with the low latency capabilities. However, MEC is also applicable to mobile private networks like the Ford example that I gave you earlier. And in that case, you'll see MEC actually deployed inside the factory, at very edge of the mobile private network. And that's where people get confused with the numbers, I think. In a macro network sense, probably 4 to 8 technology centers for a reasonable-sized country, we'll deliver the services you want. But if you -- in our case, we have 10 MPN projects in the U.K. And if they all use MEC, then that's another 10 MEC deployments to support those. So if you separate the 2, it's a fairly small number though for the macro now.

Thanks, Scott. Then if we talk about the important change overall on engineering, et cetera. So this is really a journey that started before my time, started really back in 2014, starting to build -- and it started originally in India and Egypt and starting to create a shared service organization. And that was initially more operational items but also some maintenance and simpler engineering topics. We decided then that it's really key to become big in software engineering for many reasons. I mean first of all, we actually -- we have found out it's actually more efficient to in-source versus buying from suppliers. Every time we in-source, we save 20% plus. Plus we also get people incentivized of doing what's best for us and not for the supplier long term. Then we realized we also need it because typically, the business model of operators have been that you buy everything from suppliers. If you do that, how do you then differentiate? Because the suppliers will sell it to everyone else. And part of the industry problem we're having is, of course, that there is not enough differentiation in the customer's eye. Now you can't be naive and think you can create differentiation overnight. But we said, we need to start adding on and building differentiation. We need to start creating add-on products that has more value and add more differentiation. And if you don't have that, it's hard. And as I said in the videos, I mean, software is eating the world. So we've been strategic to build a software engineering capability. So now we have about 7,000 people. So it's a sizable chunk of the technology organization. The target is to grow that. It's -- we said put the stake in the ground. So it's about 15,000 people in 2025, ifs and buts depending on how we succeed with things, et cetera. And we will also have a balance between what's in-house and what we buy from suppliers. We want to make sure that there's balance because we'll bring everything in-house. And we're working really hard on changing the culture of Vodafone. So when we started with the Tech2025 work back in January 2019, part of the work was to really talk to a lot of other companies. And we've been working. One of the advantage of having the scale of Vodafone is that we get to deal with some of the best companies in the world and some of the best people in the world. And I'm super grateful for the, I mean, Head of Engineering for Facebook, Jay Parikh. He's been a great guy. He helped us so much in the culture change. The Chief Architect of AWS has also been a great helper. And they have talked, and they have talked to us. They have shared information. We talked about the journey to do, and we've been changing the culture in Vodafone. And if you look at our internal presentations on Tech2025, we talked about 3 key pillars: culture, platforms and software engineering. And we are on the way of getting there. We are by no far excellent, but we are on the way getting there. And we gave some proof points on digital, on the pace, in the presentation. I talked about what Scott has achieved in the U.K. That's done with our own teams. That's the Vodafone employees achieving those results. So we are really starting to get there. We are getting -- winning. One of great guys won an award, in the U.K. And we are really starting to build an engineering country in Vodafone. Now we also need to be realistic that we're not where we're going to be and we can't really compete with the best companies in the world. But it's known that Vodafone has, in the network space, world-class experience, and we're working really hard to get there also overall in software engineering. The interesting thing there is when we went down this path -- and Alberto's team, he's networking engineering people, they said, hmm, this is really interesting. So now they have on our -- we have a scaled platform for data and Vodafone, which is built on Google Cloud. And it used to be that we were doing a drive testing on our networks, cars going around testing the performance. So what they have done instead is that we have -- we are getting performance data back from our customers' smartphones. It goes into GCP, Google Cloud. Then they are running very smart algorithms to analyze the performance of all the various places to come up with where they need to be tuning. So we're actually now starting to reduce drive testing because it's not needed anymore. So we both have the ESG benefit. We have a cost reduction benefit. We are faster getting the data. And you can see the excitement in our people when they're working with these things. So I think we are really -- we have turned the corner. Now having said that, there is still so much left to get done, but I'm very pleased with the progress. So thank you for asking that question because this is something I'm very passionate about when it comes to Vodafone's future. I think it's so important in evolving and changing the company long term. And I think it will differentiate us from companies that are telcos. You don't see it today, but it will really change us from -- it will make us another company in the future. I'm so convinced about that. Thank you.

Our next question today comes from Carl Murdock-Smith from Berenberg.

It's kind of following on slightly from Adam's question and following on slightly from Jakob's question actually. If I look at Slide 56 of the presentation, it says that your share of technology employees in software development will increase from 23% today to 50% by 2025. Am I right to think of that as your number of software engineers kind of slightly more than doubling from 7,000 today? Or is it that rather than it being that your technology group itself could shrink substantially at head count over that time frame? And then kind of the bit following on from Adam and Jakob's is in terms of that cultural piece and hiring piece and HR piece, how do you attract and retain top talent in an area like this where there's obviously lots of demand? And I suppose a bit from Jakob's question that sticks in my mind was that in your answer to him, you're kind of talking about technology as a ruthlessly efficient cost center, effectively. How do you attract people to come work for you as a cost center rather than maybe going to other companies where technology is viewed as a profit center and potentially more -- therefore, more attractive?

Great question, Carl. Really good question. Scott, do you want to give a try on that one?

Sure. Look, I think we have real opportunities in the technologies that we're developing for. And we find attracting software engineering talent actually reasonably easy to do. And we've been investing in resources, both in our offshore centers and our onshore centers, to support our digital initiatives and capability. We focus our measurement of our people on velocity, and this is -- let me try and explain that to you as a concept because this is what really gets software developers excited. If you have a squad of 10 to 12 developers, they're working 2 weekly sprints to develop story points or features that we deploy in the market. We challenge those teams to be as efficient as they possibly can to get as much throughput through that sprint as we possibly can. And we achieve that by building common standard platforms, reusing code, working in open source mindset where we share and we leverage off each other. And we challenge our teams focus on velocity as their primary measure of productivity in the way that they deliver and then balance that with the quality metrics, how many defects per release, how much -- how many issues do we have from a customer point of view. And that's built a really strong engineering culture in software development that's got teams very, very focused on performance and velocity, not costs. So we don't talk about cost per engineer or cost per feature point. We talk about velocity and throughput and speed. Ultimately, they reduce the cost per unit that you're producing. But more importantly, you can decide whether you want to produce more units or you can put it somewhere else. So the culture of the engineering team is all about how can I go faster, how can I reuse more, how can I leverage technology more effectively. That may result in lower cost, but that's not how we manage them. We'll focus them in the culture.

Thanks. Scott. Also just to add on, I think in the new organization, we are creating a European scale. There are actually not that many companies in Europe that have the engineering scale as we are having. And there are some really interesting technical challenges for people. If you consider the amount of data we are having, they're pretty advanced technical systems. I mean both the fixed and mobile networks is really, really advanced technology. On top of that, we're running a huge amount of servers, both on-prem and in AWS and Google. There's some pretty advanced technology available in Google Cloud. And we deal with the best people. We're doing co-development with Google. We need -- we get to meet some of the best people doing things together. That really stimulates people. So I think we have a very, very strong employee value proposition. I've actually been worried because we've been losing some people actually to both Google and AWS because we're starting to get really, really good people and we need to make sure we retain people. But -- so I think we are on our way. We have a lot more to do, but I think we are getting there. Now this capability, we can use it in 2 ways. One is to drive very, very efficient things. But also, we need to create -- make sure we have enough innovative things when it comes to new product development to make sure we really generate new value added. So there might -- of course, there will be different teams that are focused on different things, but it's a very similar capability. Thanks, Carl, for that. Really like that.

We've had a couple of questions on the webcast around Open RAN. So I'm just going to tie these together into a single question. What new vendors are you seeing enter the Open RAN software space? What innovations do you expect? And what is their business model? And secondly, are there any downsides from Open RAN? And how can you mitigate them?

You want to take that, Alberto?

So the vendors that we see are not the traditional vendors because I think that they would like to push as much as they can the traditional business. And we're entering a lot of newcomers that are bringing the innovation. And the business model, of course, for them is to introduce innovation that can be very easy to be deployed. And in the software side, it's something that we can achieve because of the separation from the [ ARPU ]. Otherwise, we have a much more complex thing to do. So with regards to the negative side effects, of course, it's something that we are mitigating in particular, the maturity of the technology. And so we are working exactly on this point on the maturity, having the right box and the right trials and the right testing. And we created an organization that is managing the integration. So you have 2 different low side that we need to consider. One is the maturity, and the second is that, of course, there is an integration complexity that is increasing. For this reason, we are having the lab to manage this kind of integration. So we are mitigating with the right test, right box from one side and the second one, creating a center that is managing properly the integration to make sure that we take the best value from the technology.

Thank you, Alberto.

Our next question today comes from Ottavio Adorisio from Societe Generale.

Sorry, I had some problem with the connection. So first of all, thank you for organizing the call. It's very informative. You provided a lot of details about all the developments you're making on the coverage and the capacity. And you said that effectively, there is a massive shift also in terms of the culture. The question is a bit broader. It was different from the past because effectively, for us, analysts, it's very difficult to grasp because what is going on in a network, it's invisible to us. What is visible to us is the financials that the company delivered. The financial has been not great in terms of how to monetize all the capacity, all the good things you're doing on the technology. So the question is what you reckon could be different over the next 3 to 5 years, I know that you're talking about a bit lengthy amount of time, in terms of efficiency the company can achieve both on the mobile and on the fixed, thanks to the technology rolling out, like you said, in terms of the cable in Germany, in terms of the mobile with 5G, massive MIMO and so on and so forth. Because so far, it's not been visible in the numbers. So the question is that when this -- all these changes you're talking today would be more visible and we can actually see other on the margins, on the P&L or on the capital intensity.

Ottavio, great question and a very difficult question also. So I can give you the way I think about this and have it in my head. So I think first of all, I share your frustration that if you look on the revenue development for us and I guess the whole sector, it's not really impressive at all. And we can all agree on that if you look on the core business we are having as Vodafone, the pure connectivity business, it is a very flattish business outlook, how it has been up until now, and it's a very challenging business. And we've been doing maybe slightly better in recent terms, but still, it's very challenging on the revenue. And it's not really where you want to be in. Since I deal with so many of our partners and vendors, many of them have double-digit revenue growth line. You sit in there, and they're feeling very well on what they've been able to achieve. Now to be realistic around the core connectivity business, that has a something between a flattish to a low single-digit revenue growth outlook probably if you look on the total part of it. If you then look on the Vodafone Business piece, in their presentation back in March on how we know they're seeing the market is ambitious, you're seeing that they have a higher growth rate opportunity. And when you start looking at those add-on things, we talked several about them here with MPN, where we have a very, very strong [ fund ]. You have MEC. We've got SaaS-based services, et cetera. And all of these are things that are sitting in the [ extracted chart ], on the 6 strategic areas, how we want to compete. So we see a somewhat better revenue outlook possibility on the Vodafone Business side. And technology is really key to make those things achievable. And I think -- so if you think about the core business, it has a certain outlook, and we're doing the best to really optimize that. But in the best case, it's probably a low single digit. Then there are some other areas around that, that are somewhat of a better outlook, and we highlight that on one of the slides in the pack. It's Slide 58 in the pack, where we try to show the connectivity growth area, where there could be somewhat of a better growth rate, where we have certain items. So highlight things like consumer IoT. We have SD-WAN, security that we're doing there. There are a few different areas, some that were not highlighted in March. And Alex will have, for consumer, an Investor Day going forward where he will talk about the growth possibilities. And then further out, we have an emerging growth areas where we -- financial services is strong for us in Africa with a double-digit revenue growth rate. We have a really strong position on IoT. So we need to make sure we utilize the skills and create those added values around the core connectivity that either, yes, adds revenue per customer. And then gradually, I hope you're able to create things that actually differentiating. If you can look on our IoT platform, it actually is differentiating versus competition. And we need to be able to create more value on that. I don't think we've done a good enough job on it as an industry in creating -- differentiating and adding value on things. And the core connectivity is a challenging business. Maybe it's low single digit. I don't know. And then it's the other things we can add on top of it and around it. And that is what we're working on. And that's my way of explaining the next-generation connectivity and digital services provider strategy. Let's see if we -- and that's our ambition to execute on.

Yes. And if I can follow up. Vodafone has been basically born as a mobile company, and it's been transforming over the last few years into convergent. And of course, you've been growing mostly inorganically by integrating the business inorganically in places like Portugal. But you still -- in the mobile, you effectively control the end to end because effectively, it's your network, most of the times the one to use it. In fixed, you have to rely a lot on your competitors/partners. And of course, the technology you have in fixed varies according to the geographies where you've got cables in Germany, you've got fiber in Italy and you've got a mix and hybrid in Spain. So my question is that what's the difference of managing a network when you have the end-to-end control like you do in mobile while you have to do it to rely on a partner that most of the times tend to be also your compete in the retail market. In terms of how you're managing the visibility you have, a direct pool in the network like you have in Germany makes a huge difference vis-a-vis places like Spain, U.K. or Italy.

Alberto, do you want to cover the differentiation between wholesale and our own network?

Of course, you are right. You are perfectly right because when it comes to the control on a mobile network or on a full-on network, we have full control, and we can guarantee the end-to-end performance. In some other cases, we are relying on the third party. But in this case, what we need to put in place is very strong [ O-RAN over the ] SLA with the other vendor, where we control effectively the appliance and the application of this. And as already said by Johan, don't forget that the vast majority of the tickets and incident that we are getting on the fixed network is not driven by the pure infrastructure even in the access. Yes, we can have some problematic open area access. But the vast majority is always coming from CPE and WiFi, where we have room for improvement, and we are deploying it. We have a very good control in the U.K., in Italy and in Spain, where we rely on partners. And we have also agreement in terms of resolution of the access problems, relying on the same third-party vendor to make repair in such a way we can directly contact the third party that is doing the repair in the access. But as I said, it's not our -- it's not the most painful point that we have in the end-to-end process.

Thank you, Alberto and Ottavio.

Our next question today comes from Andrew Lee from Goldman Sachs.

I had 2 questions, I'm afraid. The first one was just I wonder if you could just explain. In your digital transformation efforts, why are digital sales still such a low percentage of total sales? One of the technological obstacles to it not being higher -- it's not just you guys. BT also targeted 30% of its total sales being digital by 2024 at its recent CMD. And just wondering why in this business it's like that. And then the second question, just how do you now decide what you're going to do in-house versus what you do -- what Vantage does for you? And just specifically, maybe you can comment on is fiber backhauling going to be done by Vodafone or Vantage. And is Vantage is going to manage Open RAN sharing like [indiscernible] started to do? Or do you think you've got more expertise in that area?

Thank you very much, Andrew. So I think, Scott, if you take first. And then, Alberto, take the second one.

Sure. So Andrew, great question. Our digital sales have been growing steadily and actually quite strongly through the pandemic. And in some markets, we're quite close to digital being our biggest channel from a sales perspective. Not universal, but I think you'll see there's differences in cultures between particular markets. What's been driving those increases really are improvements in the journeys and the capabilities we offer in our digital tools. So for instance, in the U.K. last year, we launched an upgrade guarantee tool that ran from the MVA app. So as you're in the upgrade journey, you offer a price to upgrade. You run the diagnostics on your phone, and it gave you a guaranteed price for your trading of that particular phone. And we saw that result in almost 1/3 of our customers that went through the upgrade process and the app also traded in their phone. That's more than double from what we saw the year before. So part of it is very much capability driven, making sure you have all of the journeys that are required for the upgrade process. Simplification of our tariff models and our structures has helped dramatically our move to unlimited tariffs, and the simplification of the framework has made it easier for customers to make their own choices through digital journeys. And a little bit is reeducation of the market, a perception that's growing in many of our markets that you can negotiate deals. If you talk to our contact center staff or if you go into our retail stores, you can get a different price. And setting consistent commercial rules across our digital platforms and our retail and contact center sales platforms has also helped us drive up our percentage of digital sales. So I think we're making good progress on our capability, and we're seeing the reshaping of our tariff models that will see us have digital as one of our -- as our largest channel over the next couple of years.

Alberto?

Yes. Thank you. Thanks for the questions. So I know very well the Vantage setup since I was part of the core team. I was leading the core team over the setup of Vantage. So Vantage is focusing on the passive infrastructure. So everything that is linked with the passive infrastructure. So the [ cemetery ] search of the location, [ cemetery ] tower and so on, high conditioning power. But it's not linked with anything that is active. So they don't provide us neither Open RAN nor the 5G, nor the connectivity in the calling. We can agree with them in some specific cases when they are begging, for example, to bring the power to do in a synergic way to optimize the cost, the build of the fiber to connect that site. And so in this case, we can ask them to provide also the fiber, but we will remain the owner, and they will work on our behalf but only in the case that the new sites have the opportunity to create synergies, deploying and digging for power and fiber, or there is a demand that is coming from multiple operators that will be served in that passive infrastructure. And in this case, they can build in an optimal way, sharing the cost with multiple operators. Otherwise, the FTTS, fiber-to-the-sites or the microwaves are completely managed by the operators. And how we manage it, that this was the first part of your questions, Vantage is part of our processes. We work in a strictly contact with them, our deployment team, and we monitor the performance. Just for you to know, in 1 hour, I have a meeting with Vivek and the German team to see the progress of the German rollout in terms of new sites that they need to build to allow us to deploy the active part in the white spot areas.

Thank you very much, Alberto, and Andrew, thanks for the question.

Our last question for today comes from James Ratzer from New Street.

Question I really had to start with was just around your cable upgrade path, please. I mean I think you set out a pretty clear path around the DOCSIS upgrade. But in [ Gavin's ] presentation, he seemed to hint at the end that you've left the possibility open that there might be an FTTP overlay option. So I suppose I was just kind of going a question in what situations would you consider this. If you did, what might the CapEx implications be? And particularly also with cable, is N+0 part of your plan for upgrade? And if you move to DOCSIS 4, can we then start to move to this nirvana that's been talked about in cable, where we can see set-top box costs coming down and there's more intelligence centralized in the network? And if I am the last questioner, maybe just a follow-up if possible, I think, to one of the questions earlier from Nick Delfas around spectral efficiency and the propagation of massive MIMO. I think in your presentation, Johan, you were showing that there's 3 to 4x uplift on spectral efficiency with 5G. But could you talk about how you see that uplift across the radio of the cell? And I'm particularly interested in what uplift you're seeing in spectral efficiency at the edge of the cell. Are you still seeing the same uplift there? And if you are, then presumably, there's no real need to have to densify the existing mobile grid.

Okay. Thank you very much, James. If I start with the second question, I'll take that one. And then, Alberto, you get the cable upgrade path. So I think -- and I know you're quite knowledgeable in these areas also, James. I think the -- what you do on the cell side, and you have various frequency bands, is that you try to optimize in the cell on how you use the various frequency bands. So you may have hundreds of customers in a cell, and you try to make sure that the customer that's far away gets served by the lower frequency bands, 700, 800, 900, and customers that are close served by the larger frequency bands, the higher up. It depends on how far the customer is and what the need is. But the cell is trying to optimize, the schedule is trying to optimize how this is being served. And of course, the further away you are from the radio base station, you will have a weaker signal because there will be more interference and the signal will get weaker. And hence, you will not the same modulation on the signal and you will lose some of the spectral efficiency in that. And that's why it's -- but the radio base station is really good on analyzing each individual customer, where they are, what are the signal-to-noise ratios, what is the need, and then try to optimize. You can serve different customers in the different spectrum bands at the same time. So it ends up in a very, very complex algorithm, and that was part of how you really drive high performance there. And that is also one of the -- that's one of the key things. And I think that's where we have really good engineering skill set on how to configure and tune these things. This is also a very interesting area in Open RAN where we have a special controller where you can actually do more tuning and optimization from the side. And we put out the press release on this a couple of weeks back on some of the improvements we could achieve by using that [indiscernible] as it's called. So I'm sorry if I didn't give exact numbers because there's many it depends on, but all these things actually drives the cost efficiency. Getting all of these things work together is how you get more data through in that same cell by combining all these different things. Alberto, over to you.

Yes. Thanks, Johan. Thanks, James, for the question. So as mentioned already, we have a very flexible architecture that we have deployed in the markets, and we are continuing to deploy with the node split. Of course, we have an evolution of the coax in the access, but this opportunistically does not prevent us to deploy fiber where there is the economic return that is good for us. And we can do this with the consortium or joint venture depending on the commercial and the economics of the case. The fact that we have a network that is already fiberized up to a certain point make this decision really very easy depending on the economics that are in front of us.

Thank you, Alberto. Thank you very much, James.

Can I follow up on that, Alberto, if possible? Just on the kind of cable upgrade path. I mean just a follow-up. Would you -- I mean is N+0 part of the plan and you see it in a world where cable set-top box CapEx can start to come down after you've then completed the -- or made inroads into the DOCSIS 4 rollout?

The set-top box CapEx, it's something that we are working in terms of design of the set-top box in a way that will reduce the cost. And I do believe that it's a matter of time, but this will happen. But then we need to see and combine with all the other features that are going to be defined in the grid.

Thank you very much, James. And operator, with that, I think we are done.

Yes, that's our last question. I'll now hand back to you, Johan.

Okay. So I just want to say once again, thank you for taking time to listen to us. I hope it provided some value and insights in how we are thinking and working with things. And yes, maybe then thank you to you, Alberto and Scott, for also helping me out. And then I wish you all a nice day. Thank you.

Thank you very much.