Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — Investor Presentation (May 2006)
37 slides from Vodafone Group Public's investor presentation, May 30, 2006
Slide 1: Vodafone Group Plc Strategy Update
Vodafone Group Plc Strategy Update Analyst Presentation 30 May 2006
Slide 2: Strategy update
Strategy update Arun Sarin Chief Executive The following presentation is being made only to, and are only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of it
Slide 3: Strategy Update – Agenda
Strategy Update – Agenda Competitive Environment and Vodafone’s Strategic Objectives Arun Sarin Europe Region – Cost Reduction and Revenue Stimulation Bill Morrow Emerging Markets – Focus on Growth Paul Donovan New Businesses – Mobile Plus Thomas Geitner Mobile Plus in Germany Fritz Joussen Aligning
Slide 4: The new realities of the mobile industry
The new realities of the mobile industry • Competition is intensifying from existing and new players • Significant price erosion • Customers have far greater choice in communications • Growing demand for broadband • Emerging markets delivering significant growth • Continued significant regulatory pr
Slide 5: Organisation to deliver new strategic objectives
Organisation to deliver new strategic objectives Europe • Cost reduction Bill Morrow • Revenue stimulation • Deliver strong growth in emerging markets EMAPA • Outperform on recently acquired businesses Paul Donovan • Maximise shareholder returns from affiliates Mobile Plus • Capture new sources of r
Slide 6: Emerging markets will deliver strong growth
Emerging markets will deliver strong growth Global mobile telecom annual revenues Vodafone Priorities Emerging markets are ~60% of total expected growth over next 5 years CAGR % • Deliver high performance in 434 existing operations £bn 159 12.3 310 • Outperform new acquisitions 89 business case • Ra
Slide 7: Vodafone will focus initially on three key areas
Vodafone will focus initially on three key areas Address fixed line revenue Develop integrated opportunity via Vodafone Create advertising mobile and At Home and Vodafone revenue stream PC offerings At Office Mobile centric approach – “Mobile Plus” offerings Targeting around 10% of total revenue in
Slide 8: Vodafone's approach to the US market
Portfolio management priorities Superior returns Selective approach Regional focus Strict criteria 13 Strategy update 30th May 2006 Vodafone’s approach to the US market • US market is relatively under penetrated (~ 70%) and valuable (300m population) • VZW is the market leader on all key metrics – N
Slide 9: Financial impact and capital structure
Financial impact and capital structure Cost reduction & Growth in emerging Deliver innovative Actively manage our revenue markets Mobile Plus products portfolio stimulation in Europe Targeting profitable growth Align financial policies to support new strategy • 60% dividend payout • Low Single A rat
Slide 10: Europe Region – Cost Reduction and Revenue Stimulation
Strategy Update – Agenda Competitive Environment and Vodafone’s Strategic Objectives Arun Sarin Europe Region – Cost Reduction and Revenue Stimulation Bill Morrow Emerging Markets – Focus on Growth Paul Donovan New Businesses – Mobile Plus Thomas Geitner Mobile Plus in Germany Fritz Joussen Aligning
Slide 11: The Europe Region generates around 80% of Group revenues and profits
The Europe Region generates around 80% of Group controlled revenues and profits Percentage of FY 05/06 controlled businesses Customers1 93.2mn 70% Revenue £23.5bn 80% Operating profit2 £5.8bn 83% Capex £2.8bn 70% Operating free £6.9bn 90% cash flow Employees3 40.7k 67% Note: Europe Region statutory
Slide 12: Market leader in revenue and EBITDA share
Vodafone is and must remain a market leader in revenue and EBITDA share Revenue1 share and position vs. key EBITDA share and position vs. key competitors FY 05/06 competitors FY 05/06 Vodafone Vodafone Vodafone Vodafone share position share position Germany 37% 1= Germany 45% 1 Greece 42% 1 Greece 4
Slide 13: Scale benefit and competitive advantage
Vodafone’s unique position gives us an advantage • Brand Global Scale benefit and competitive advantage • Supply chain • MNC proposition • Strategic partner appeal Unique • Common product development position Regional • Advertising cost sharing • Pan European offerings • Shared services • Standardis
Slide 14: Key actions to reduce operating and capital costs
Key actions to reduce operating and capital costs Today Actions Opportunity • Decision to outsource Outsourcing IT Application • ~6,500 FTEs involved in service delivery • Suppliers to be • Potential annual Development reduced from ~2,500 savings of 25-30% and • £560mn annual cost to 1-2 primary wit
Slide 15: We are evolving our business model to stimulate revenue
We are evolving our business model to stimulate revenue Today Going forward • Revenue share focus Customers • Customer market • Focus on customer value 7.7mn net adds share • Pushing services not just acquisitions (FY 05/06)1 • Extended contract terms Usage • Promotions • 3G bundles and smart tariff
Slide 16: Key actions to stimulate revenue – contd.
Key actions to stimulate revenue – contd. Today Actions Opportunity • Over 6mn customers benefiting • For recurring roamers, 15% increase in business • Target of 11mn Vodafone • Large percentage of HVCs customer minutes, 39% in customers by the end Passport (62% registrations from top postpay and 10
Slide 17: Emerging Markets – Focusing on Growth
Our primary objective is to drive our multi-year cash generation • Maintaining our market leadership positions • Aggressively reducing costs • Driving revenue stimulation • Focusing on execution 31 Strategy update 29. Mai 200630th May 2006 Emerging Markets – Focusing on Growth Paul Donovan CEO, EMAP
Slide 18: EMAPA – Priorities
EMAPA – Priorities EMAPA (FY 05/06) •Deliver high performance in controlled businesses Subsidiaries and JVs •Maximise shareholder returns in • 35.5 million customers affiliates • £4.2bn revenues •Leverage measurable synergy • £1.5bn EBITDA benefits from scale and scope Affiliates •Outperform acquisi
Slide 19: Romania and Czech Republic – successful integration
Romania and Czech Republic – successful integration Recent highlights Romania • Reversed revenue share trend +1.1pp FY 05/06 • Exceeded acquisition plan EBITDA by 17% Czech Republic • 2.2 pp increase in revenue market share FY 05/06 Romania • Positive ARPU trend 22mn population • Exceeded acquisitio
Slide 20: Egypt – Vodafone outperforming the market
Egypt – Vodafone outperforming the market Recent highlights Customers 60 • Penetration growth 55 Vodafone • Outperformance vs competition 50 MobiNil 45 • 6pp margin outperformance vs 40 Nov-02 Nov-03 Nov-04 Nov-05 May-03 May-04 May-05 Sep-05 Sep-02 Jan-03 Mar-03 Sep-03 Jan-04 Sep-04 Jan-05 Jan-06 Ma
Slide 21: India - catching up with China's market growth
India - catching up with China’s market growth Recent highlights • 10% of Bharti acquired in December 05 • Strong performance – Market growing at 4-5m customers per month – Bharti net additions around 1m per month – Revenue share leader with 3-4% lead over nearest competitor India 1.2bn population 6
Slide 22: New Businesses – Mobile Plus
New Businesses – Mobile Plus Thomas Geitner CEO, New Businesses and Innovation Mobile Plus will allow us to address new sources of revenue Global Revenues 20051 - £bn Advertising Fixed 226 Voice+Data 306 264 Mobile Source: IDC, Merrill Lynch, Zenith Optomedia 42 Strategy update 29. Mai 200630th May
Slide 23: Mobile Plus seeks to meet several customer needs
Mobile Plus seeks to meet several customers needs Desire for mobility and personalisation Access to communities Faster speed and availability Value and simplicity 43 Strategy update 29. Mai 200630th May 2006 Our customers regard Vodafone as a credible provider of communications services in addition
Slide 24: We will initially focus around three areas
We will initially focus around 3 areas • Extend our reach with Vodafone At Home and Vodafone At Office to address fixed line revenues • IP-based services that integrate mobile with the Internet/PC • Advertising-based services that are delivered in ways that customers find attractive 45 Strategy upda
Slide 25: IP-based communications will integrate mobility with the PC
IP-based communications will integrate mobility with the PC “Combining the Best of Both Mobile and the Internet” • All the benefits of the Internet on your mobile e.g. buddy list, email • All the benefits of mobile on your PC e.g. secure, personal Internet • Services that work seamlessly between the
Slide 26: Our approach will be different
Our approach will be different Vodafone advantages vs. Vodafone advantages vs. Incumbents + DSL Providers Internet Players Vodafone is: Vodafone has: • Customer demand led • Long term customer relationships and insights • Able to offer mobile and only the fixed services customers want • Control over
Slide 27: Mobile Plus in Germany
Summary of the opportunity • We have 3 initial focus areas to drive forward Mobile Plus – Extend reach with Vodafone At Home and Vodafone At Office to address fixed line revenue – Integrate mobile with the Internet/PC – Deliver advertising based services Mobile Plus will account for around 10% of to
Slide 28: Fixed to mobile substitution represents a big opportunity
Fixed to mobile substitution represents a big opportunity German German fixed mobile line market market • €25bn market volume • €29bn market volume • EBITDA margin: up to 40% • EBITDA margin: 37% (DTAG) • Share of minutes: 18% • Share of minutes: 82% • €24 ARPU • €43 ARPU Source: IDC, Company Data 5
Slide 29: There is a strong demand for DSL in Germany
There is a strong demand for DSL in Germany Top reasons for rejecting Vodafone Zuhause DSL penetration: 25% in 2005 up to 60% in 2009 Customer wants fixed 37% broadband internet access Nascent Growing Mature 90 markets markets markets Malaysia 80 70 China ARPU $US per Month 60 Singapore Czech Hong K
Slide 30: User Experience: Explore, Deliver, Use
User Experience I: Instantly ready to use • 1,800 own retail outlets Explore • 500k outbound customer contacts per month • SIM activation, provisioning of Homezone and geographical Deliver number within 5 minutes • Instant use of Vodafone Zuhause Voice and Data based on HSDPA before DSL installed Us
Slide 31: Financial summary - Vodafone Zuhause growth in FY 06/07
User Experience III: Mobile access to rich media personal content and applications on home PC connected to Internet Mobile access to home PC 3G/HSDPA DSL Media stream onto mobile phone 59 Strategy update 29 May 200630th May 2006 Financial summary - significant revenue growth from Vodafone Zuhause in
Slide 32: Aligning Financial Policies to Strategy
The Vodafone Germany strategy in a nutshell… German German mobile fixed line market market … is all about extending our mobile market share into fixed 61 Strategy update 29 May 200630th May 2006 Aligning Financial Policies to Strategy Andy Halford Chief Financial Officer 31
Slide 33: Agenda – Financial impact of strategy
Agenda 1. Financial impact of strategy 2. One Vodafone update 3. Returns and capital structure 4. M&A criteria 5. Summary 63 Strategy update 29. Mai 200630th May 2006 Financial impact of strategy Europe Region EMAPA Region New Businesses • Strong cash generation • Focus on customer and • New service
Slide 34: One Vodafone – Europe Region
One Vodafone – Europe Region Measure Before Updated • 1% revenue market share gains • Target remains unchanged versus established principal Revenue competitors by FY 07/08 • Stable combined opex and capex • Targeting flat opex in FY 07/08 from FY 03/04 to FY 07/08 1 from FY 05/06 2 Combined • Capex-
Slide 35: Returns and capital structure – aligned with strategy
Financial impact of strategy Europe Region EMAPA Region New Businesses • Strong cash generation • Focus on customer and • New service offerings revenue market share • Margin pressure from • Market by market approach leadership intensifying competition/ • Infrastructure-light approach reducing prices
Slide 36: Selective mobile M&A based on strict criteria
Selective mobile M&A based on strict criteria Strategic criteria • Consolidate our presence in existing local or regional markets • Preference for control • Will only make minority investments where: - Able to exert sufficient influence to add value - There is longer-term potential path to control F
Slide 37: Summary
Summary • Good financial performance in FY 05/06 • Five new strategic objectives to meet challenges and opportunities • Three principal business units will execute opportunities on the strategy • Vodafone has aligned its capital structure and returns to its strategy – Increased dividends; low Single