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

Okay. Good morning, everybody. It's half past eight, and we are [indiscernible] and I now declare our Annual General Meeting open. And welcome to our 42nd Annual Meeting held at the Story Club in Bennington. Yes, we are back in London and at the Christian time. I hope you appreciate. But before we begin, I would like to mention that in line with our standard practice, this meeting is being webcast live, and you may appear on video. I'm the Chair of your Board. Jean-Francois M. van Boxmeer. To my left is our General Counsel and Company Secretary, Mike B, alongside Mika are Amparo Moraleda, Simon Segars, Christine Ramon and Anne-Francoise, non-executive directors; and to my right is our Chief Executive, Margherita Della Valle, Financial Officer, Pilar Lopez; and Simon Dingemans, Delphine Ernotte, Stephen Carter and Deborah Kerr, our nonexecutive directors. Our agenda today is as follows: Firstly, I will deliver my message for the year. We will then answer your questions, including any that were submitted to as remotely in advance of this meeting, and we will conclude with the resolutions. This is the usual legal notice on the screen, which is also available online for you to read. For those of you in the room, I would like to request that your mobile phones are for once switched off or at least set on silent. Since May 2023, when Margherita outlined her transformation road map, Vodafone has fundamentally changed to become a simpler and stronger business. As we enter a new area for telecoms with new forces driving demand for our connectivity and next-generation technologies unlocking new opportunities, we are focused on sustainable growth. Over the past 3 years, we have successfully reshaped our footprint, reset our capital structure and refocused our efforts to improve the experience we deliver to approximately 300 million customers across Europe and Africa. Vodafone has become a simpler scaled business in good markets, underpinned by a clear strategy. The Board and I have been pleased with both the pace of delivery and progress made in transforming our business. Full year '26 has been a busy year. In Europe, we completed our merger with three U.K. in May 2025, creating the largest mobile operator in the market. We have also continued to strengthen our footprint, including the acquisitions of telecom in Romania, the acquisition of SkyLink in Germany and the announced sale of a majority of our interest in VodafoneZiggo in the Netherlands. In Africa, we have continued to build on our market-leading positions, including the acquisition of a controlling stake in Safaricom, one of the continent's most successful telecoms and fintech operators. Alongside this, we have delivered a solid financial performance in line with our expectations. We have continued to grow service revenue, supported profitability and cash flow and maintained a disciplined approach to capital allocation. We also have a strong balance sheet and remain committed to enhancing shareholders' returns. In line with our capital allocation policy, we have introduced a progressive dividend and have completed a EUR 4 billion in share buybacks over the past 2 years. As we look ahead, we are entering a new chapter in shaping Europe and Africa's digital and economic future. Connectivity is critical infrastructure. underpinning productivity, innovation, security and public services. This reinforces our long-held view that advanced, secure and resilient networks are fundamental to long-term growth and competitiveness across regions. Well as there is still more to do to reach our full potential, Vodafone is well positioned to play a leading role in the next chapter and delivered sustainable value for shareholders over the long term. We have also seen several changes to your Board over the past year. Simon Dingemans was appointed Chair of the Audit and Risk Committee following last year's AGM. And Simon Sieger was appointed Independent Director. And Anne-Francoise Nesm also joined the Board, bringing further financial expertise and strength. Pilar Lopez joined Vodafone as Chief Financial Officer in December following a period as CFO designate. And Luka Mucic, a step down from the company at the end of November last year, and I would like to thank him for his commitment during a period of significant transformation. As announced on the 10th of July 2026, Hatem Dowidar who was appointed to the Board of Vodafone as the Nominee Director of [indiscernible] resigned from the Board with immediate effect following the termination of the relationship agreement between Vodafone and ENT. In line with our announcement on the 13th of July '26, I reconfirmed that Resolution 7 of the notice of the AGM to reelect Hatem Dowidar as a Director has been, of course, withdrawn. And that any votes already cast in relation to resolution does not apply. The numbering and form of all the other resolution in the -- resolutions in notice remains unchanged. In addition, Amparo Moraleda will not be seeking reelection at today's AGM after 9 years on the board. And I would like to thank her for her outstanding service and contribution to Vodafone. Thank you very much, Amparo. With effect from the conclusion of this AGM, Christine Ramon will be appointed Chair of the Remuneration Committee; and Anne-Francoise Nesme will be appointed Chair of the ESG committee taking over from Amparo. Finally, Olaf Koch will be appointed as a nonexecutive director with effect from the conclusion of today's meeting. is highly experienced and bring a strong focus on transformation, strategy and the German market. On behalf of the Board, I would like to thank all our colleagues across the group, who have continued to work tirelessly to support our customers and deliver on our strategy. As we look to the year ahead, I am confident that Margarita and her management team will continue to drive sustainable growth across the group. This morning, we released our Trading Update for the first quarter of the financial year. To view these results and our full year '26 results also, please scan the QR code above or visit our Investors website on the above link. We also have a suite of materials available online, including video interviews with some of my fellow boarders. And those materials are linked through the annual report, which can be accessed at the same link as above that you see here on the screen. Now, before we turn to your questions, I have two brief points. If you are a shareholder or a shareholder's validly appointed proxy, you are eligible to vote on the resolutions and to ask questions in this meeting. If you're not a shareholder or a validly appointed proxy, we are delighted to welcome you and to this meeting, but you cannot ask a question and nor are you, of course, eligible to vote. We are, of course, happy to take any general questions about Vodafone during the meeting, but would ask that you reserve any individual customer account matters for the U.K. customer service team. And representatives are available to assist you today outside of the meeting room in the foyer. In addition, they can be conducted using the details on Page 7 of the notice of the AGM. So if there are no objections, I propose that the notice convening the meeting has taken -- has been taken as read. And we will now commence our Q&A session with the questions submitted first by shareholders in advance of our meeting. We will read out the questions in the room first before providing our answers and then we will go on with the rest of the Q&A. I thank you for your attention. Over to you.

We have two questions from shareholder, Colin Fobinso. The first question is Vodafone predicts a high-end adjusted free cash flow figure for this year at EUR 2.9 billion and predicts a double-digit AFCF growth in the medium term. At what point will dividends start to rise in line with AFCF? Or to put it other way how much has AFCF got to be before we start seeing dividends returning to EUR 0.08 per annum levels?

Thank you. Our focus is indeed driving multiyear cash flow growth. You might have seen from the results of the fiscal year '26 that has just closed that we have delivered good growth, both of profit and cash flow in the last year. And just this morning with our first quarter results, we were communicating that we expect to achieve for FY '27, the upper end of our guidance range on adjusted free cash flow growth. That means in practical terms, 20% for this year. And following on, on that, with the new shape of Vodafone and the strength of our position in our markets, we're predicting organic growth of double digit for the following years as well. Now talking about organic growth. When I use these numbers. Clearly, there will be currency movements and the final reported outturn may be impacted also of that. But we are definitely in a growth outlook. And as we have been with our new shape, changing gears towards a definitive growth outlook in FY '26, we have also changed our dividend policy. And we have introduced a progressive dividend. So dividends are now growing. And this is the first time Vodafone gross dividend since 2018. What does it mean in terms of the future for the dividend specifically? We will decide the appropriate growth levels year-by-year, taking into consideration our position a lot, but also our balance sheet, the environment we operate in. What's important to note, however, is that taking into consideration, for example, the last two years, the history has shown that we have had a significant increase in our overall shareholder returns.

Mr. Forbes' second question is how is Satellite Connect Europe, AST JV going to increase revenue for the group? And are there any projected year-on-year figures?

Thank you. This is actually a really exciting part of our service. As you know, satellite technology has been evolving significantly and it will soon be possible to effectively use normal smartphones to also connect through satellites with full broadband. That's our intention, and we have been working for a few years to make that possible with our partner AST. We don't issue guidance on the revenue front, but in fairness, we don't see this as a massive revenue stream. It's a service that is going to be complementary and will support our customer satisfaction. I think as a customer, it's really important to be always connected, and our mission is to connect everyone wherever they are. So we are really excited about the opportunity to do this through satellites. You mentioned satellite Connect Europe because we are excited about this opportunity. We want to bring it to Europe overall. And therefore, we have created a special company that has also engaged and will work with other telecom operators across the continent that have chosen us to bring their satellite services. But at this point in time, the focus is really on launching the service itself that we really look forward.

Our last pre-submitted question comes from Philip Gallagher. When did senior management last review call centers in terms of systems, training and staff authorities?

I'd say constantly, it's a key priority, and many of you have heard us in the same setting talking about this last year. as Customer satisfaction is a key priority. We regularly report on it. And clearly, customer service is fundamental to customer satisfaction. After 3 years of work, we are now #1 in customer satisfaction in 11 out of the 15 markets in which we operate. Importantly, this is true now in the U.K. And I think you can see it's not just through the surveys that we are running, but also in the U.K., you have come that reports regularly on customer complaints. And you can see through their numbers, the progress that we have made. And now we are in a position to lead the industry on that. But of course, even leading the industry, there is much more that we should and can be doing. And as a management team, we are actually just back from one of the reviews that were just mentioned. We were at [indiscernible] which is our largest customer service hub in the U.K. with the leadership team to see what more can we do in training, processes, system to become constantly better. We take each and every one of the complaints of customers as an opportunity for learning and there is more, as I said, that we can be doing.

Thank you, Marita. We will now be happy to answer all the questions you might have here in the room. And if you wish to ask a question, there is a podium. The gentleman here has already identified and rushed through it. So that's clearly identified. And please identify yourself and then ask your question, and then please note that you will be recorded. We are online. Go ahead, sir.

My name is Andy Lee, my family investment firm is a long-term shareholder in Vodafone. And I have to say to begin with for the first time in years, I'm excited about owning Vodafone shares. I'd just like to say a brief word about our meeting this morning. Last year, I traveled in my car two hours in the rush hour to get to Newbury, your blended convention center in your last conference hall. And if you remember, Mr. Chairman, I asked you, could you please take a head count of the shareholders who had turned up? You did oblige me, you took a headcount. Do you remember the number?

No, I think, I guess, 14 or ...

9. But to be fair to you and to be fair to Vodafone, you later corrected it to 7 because 2 had gone early.

Yes, that's correct.

Can I say on behalf of myself, I cannot speak for my fellow shareholders. I commend your wisdom and your insight in choosing a location for this year's AGM that is a more amenable hour and a more amenable location. And I think you can see from the response that if you show the hand of friendship to your shareholders, they will show the hand of friendship to you, maybe even invest more. So thank you for that. I think the report about Vodafone, as I say, I'm much more excited than I have been in years. So my questions this morning should not be taken as criticism, they're really for clarification. AST has been mentioned this morning. I think to be fair to everyone, if they don't know, AST has run into some problems because Mr. Bezos rocket keeps exploding. So they can't get the satellites in the sky. So if you can't get the satellites in the sky, you can't get a signal anywhere. But a serious point, you've rather played down the contribution that, that technology may make to Vodafone. If there are problems getting the satellites up, is it worth the expenditure?

It definitely is worth us working on it, and it's not so much a matter of expenditure because we are going through it in partnership with AST. It's more the effort that I would say we have done with our engineers and we will continue to do to ensure that we can bring the best possible service in terms of full broadband experience. We want something more than just text messaging. We want our customers to be able to essentially not realize whether their service is coming from [indiscernible] in the center of London or a satellite. We want you to effectively be always connected seamlessly. I played down from a big revenue stream perspective compared to obviously, our terrestrial networks because it's complementary. The satellites kick into place an overall where terrestrial networks are not present. But this being said, I generally believe it's a really important service for our customers because of what I said earlier, which is ubiquitous connectivity, knowing you can be always connected, whether it's for safety reasons, whether it's for family reasons, whether it's for work reasons, whether you are in the middle of the sea, on top of a mountain, I think it's a very exciting prospect. And I think it's our duty to bring this service into action.

Can I just stay with the technology? You're also, I believe, experimenting with AI and with masks, which basically will decide for themselves when they need to change direction or extend the arm. I mean, it's fascinating technology, but you're experimenting in Albania, I just wonder whether Albania can replicate the conditions that you would face in Britain or any of your more populated markets.

Technology will continue to bring us opportunities to run our networks better, not just what I was mentioning before in terms of satellites, but also in terms of capacity, speed, latency. And therefore, we need to keep evolving with the technology. What you are referencing to is AI automation, which is a very exciting prospect. As with all automation, we have had automation in our networks for decades now, it just needs to be managed very, very carefully, which is why we are gradually doing trials, and you can rest assured that our focus will always be in making sure that our networks are first and foremost, reliable and secure. And for that, we won't just depend on technology. It will always be a mix of technology and human in the loop to ensure that our service remains very consistent and very reliable. But it could become even more consistent and reliable, thanks to the technology itself. As you know, AI can start anticipating falls, accelerating our resolve falls. So we're seeing this big opportunity.

As I said, I'm optimistic about that technology. I have one last question. You have a new shareholder, come on board, Mr. Xavier who was a shareholder before, had 2.5% of the company. I'm not going to go into what he said, but he wasn't very complementary about Chairman or the Chief Executive or basically the way the company was being managed. My only constellation is when he sold out, he lost a lot of money, not a -- he's lost more than I've lost on Vodafone or my company as well, but he's now back. And the important thing is he now owns a sizable chunk. He's bought the United Arab Emirates share. The important thing from the point of view of a shareholder is in the future, do you have to run things by him? Or are you able you and the Board and the senior executives? Are you still independent? Or do you have somebody breathing over your shoulder?

It's a very good question. I think it is his decision to have [indiscernible] to stake. I don't know at which price he previously sold its original 2.5% stake. One has to note that the comments he made embarking on this big stake is a note of much greater belief of the future of this organization than was previously the case when he bought the 2.5%. So I thought that the tone on this side was a lot more appreciative of what this company has achieved in the last couple of years. That said, the Vodafone company bears an independent board, and that will continue to be the case. We cannot, at this moment in time, say anything very precise of how the things will pan out as with such a big shareholding, he has to go through approval processes with several jurisdictions starting with this country. And so we will have to wait for that. As a general principle, we will engage with every shareholder also with him in a very constructive way as you can imagine. I think he is a special shareholder in so far, like in was a telecom operator himself. So it is not -- it is perhaps a different telecom operator. But in essence, it's the kind of same strategic investor you've got on your register, people who know how to operate the business. Now out of that fact comes, of course, also opportunities for us to develop further. So we have to look at it in a very constructive way. We will absolutely engage in a constructive way with him as a shareholder. And at the same time, you can see the whole Board is here gathered around. The U.K. has very strong principles guaranteeing the independence of the Board of Directors, and we will continue to be on that page.

Good morning, everybody. My name is Stanley Gold, been a shareholder for 25 years during the Verizon days. I contacted Margherita recently about a problem in late afternoon, and I had a personal reply back that same evening, which I found very refreshing. I'd like to repeat the previous notice. Thank you for having the meeting here. I see that the standing room only. A few years ago, my phone wouldn't accept the Vodafone app, Apple consequently have to change the phone. Again, they wouldn't support transport for London app. So had to get a new phone again. I think Apple should do something about there or perhaps [indiscernible]. Well, that's it.

Mr. Gold, I think that we should look directly at your current issues. As you know, as always, we have people in the room that can look also at the upside of the equation. And maybe we can help you specifically with this.

Apple, it's cheating.

It typically should work with all apps.

Okay. [indiscernible], private shareholder. A couple of questions. And again, restate what's being said, it's nice to be back in London and possible to attend. So that's good. I you are in 15 countries, mobile and fixed on your mobile, your in sort of 40 countries. So I'm just wondering what the strategy here is. It seems to have got fixed installations and so forth and mobile, and that's what you're counting. But when you're with mobile, and it's far more countries, it's just a sort of state not part of the map. So where are going with sort of mobile and fixed, which is more important. And that's question one. Do you want a question 2 at the same time?

Let's go.

Okay. So you mentioned later in the report, problems with sub undersea cables. And there is a great threat that they're going to be cut. And you obviously have considered that and rerouting. How involved are you in the repair of these? And how long will it take to do it?

I may start from this last question. There isn't a single answer. We're not directly involved in the repair as we don't have ships and technician. We use the services of companies that do this. And it's very interesting executions because as you can imagine, the cost to mobilize ships and technicians to go in the middle of the ocean to repair cables can be very significant on a daily basis. So a lot of the work at our end is about making sure that if there is any problem, we can identify very precisely where it is. But more broadly, I know we carry a substantial portion of the world's Internet traffic through those cables, and it's a key objective for us to ensure that activity is also in this case, very resilient, which could sometimes be a challenge. For example, people now always think about geopolitical threats on submarine cables, but in climate change, actually has had an impact in the way we operate, our job, which we do in collaboration with other cable operators and of course, with governments is ensure maximum resilience. And in this day and age, the best way to ensure resilience is multiple routings and therefore, for the same -- for connecting the same island or the same country, you want to ensure you have different points of connection so that if anything happens on one, you can resort on the order. It's repairs can be really very varied, and in some cases, can even take months, especially if it's in areas of the world where there are geopolitical tensions and it's difficult to operate. To your point on fixed and mobile, our 15 countries, which have now actually after the controlling stake in Safaricom that our Chairman mentioned earlier become 17. We always start from what our customers want in terms of telecommunication services. And this typically includes fixed and mobile. And the way we go about fixed can be different in different countries, depending on how fixed networks are developed. Our far penetration has gone. We are used to talk from the U.K. where we have, for example, at our disposal, the largest print of fiber in the country. and we do it through partnership. We work with other players, including Openreach and orders to ensure our customers have the maximum choice. But at the other end of the spectrum, we might also operate in African countries where the presence of fixed and fiber, in particular, is very small, and therefore, the domain service is mobile. So we go about it in different ways, but in all 17 markets, we offer the full range of services. The reason why you read, I think, 40, this is including the numbers of what we call our partner markets. There are geographies in the world that like to be able to use our services, our products, our expertise, and therefore, we are connected to them with partnership agreements, and they choose essentially what to take from us.

Keith private shareholder. Advertising at present is EUR 1 billion per year up to 2034. With the satellite system being delayed, how is this going to be covered for in the short term?

Sorry, I couldn't hear the very beginning of your questions.

Your advertising at present, spending EUR 1 billion in a year. So you're going to be emitted to EUR 1 billion a year which I presume would also cover the satellite system that you'll be using. And as it is a delay, how are you going to spend this per year while it's being rectified?