0000839923--03-312022Q2false2021-09-30VODAFONE GROUP PUBLIC LTD CO0.00150.00150000839923vod:VodafoneInternationalHoldingsBvWithholdingTaxCaseMember2017-09-290000839923vod:VodafoneInternationalHoldingsBvWithholdingTaxCaseMember2016-02-120000839923vod:VodafoneInternationalHoldingsBvWithholdingTaxCaseMember2013-01-030000839923vod:LuxembergMemberifrs-full:TopOfRangeMember2021-04-012021-09-300000839923vod:LuxembergMemberifrs-full:BottomOfRangeMember2021-04-012021-09-300000839923country:DEifrs-full:TopOfRangeMember2021-04-012021-09-300000839923country:DEifrs-full:BottomOfRangeMember2021-04-012021-09-300000839923ifrs-full:CountryOfDomicileMember2021-09-300000839923vod:VodacomGroupLimitedMembervod:TransferOfVodafoneEgyptToVodacomGroupMembervod:VodafoneEgyptTelecommunicationsS.a.e.Membersrt:ScenarioForecastMember2022-03-310000839923vod:VodafoneIdeaAndIdeaCellularLegalCaseMember2021-09-300000839923vod:VodafoneIdeaAndIdeaCellularLegalCaseMember2021-09-152021-09-150000839923ifrs-full:TreasurySharesMember2020-04-012020-09-300000839923vod:VodacomSubSegmentMember2021-09-300000839923vod:VantageTowersMember2021-09-300000839923vod:UnitedKingdomSubSegmentMember2021-09-300000839923vod:SpainSubSegmentMember2021-09-300000839923vod:OtherMarketsSubSegmentMember2021-09-300000839923vod:OtherEuropeCountriesExcludingGermanyItalyUkAndSpainSubSegmentMember2021-09-300000839923vod:ItalySubSegmentMember2021-09-300000839923vod:GermanySubSegmentMember2021-09-300000839923vod:CommonFunctionsSegmentMember2021-09-300000839923vod:VodacomSubSegmentMember2021-03-310000839923vod:VantageTowersMember2021-03-310000839923vod:UnitedKingdomSubSegmentMember2021-03-310000839923vod:SpainSubSegmentMember2021-03-310000839923vod:OtherMarketsSubSegmentMember2021-03-310000839923vod:OtherEuropeCountriesExcludingGermanyItalyUkAndSpainSubSegmentMember2021-03-310000839923vod:ItalySubSegmentMember2021-03-310000839923vod:GermanySubSegmentMember2021-03-310000839923vod:CommonFunctionsSegmentMember2021-03-3100008399232019-04-012019-09-300000839923ifrs-full:Level1OfFairValueHierarchyMember2021-09-300000839923ifrs-full:Level1OfFairValueHierarchyMember2021-03-310000839923vod:VodacomGroupLimitedMembervod:TransferOfVodafoneEgyptToVodacomGroupMembervod:VodafoneEgyptTelecommunicationsS.a.e.Membersrt:ScenarioForecastMember2021-10-012022-03-310000839923vod:LuxembergMember2021-09-300000839923vod:LuxembergMember2020-09-300000839923vod:VodafoneIdeaLimitedMember2021-04-012021-09-300000839923ifrs-full:AssociatesMember2021-04-012021-09-300000839923ifrs-full:AssociatesMember2020-04-012020-09-300000839923vod:ShareBuybackProgrammeMemberifrs-full:TopOfRangeMembersrt:ScenarioForecastMember2021-11-182022-03-080000839923ifrs-full:TreasurySharesMember2021-04-012021-09-300000839923vod:TransferOfVodafoneEgyptToVodacomGroupMembervod:VodacomGroupLimitedMember2021-11-102021-11-100000839923vod:TransferOfVodafoneEgyptToVodacomGroupMembervod:VodacomGroupLimitedMembersrt:ScenarioForecastMember2021-10-012022-03-310000839923ifrs-full:AssetsAndLiabilitiesClassifiedAsHeldForSaleMembervod:VodafoneEgyptTelecommunicationsS.a.e.Member2020-04-012020-09-300000839923vod:InvestmentsInAssociatesAndJointVenturesMembervod:IndusTowersMember2021-04-012021-09-300000839923vod:InvestmentsInAssociatesAndJointVenturesMembervod:IndusTowersMember2020-04-012021-03-310000839923vod:PreviousBasisOfSegmentReportingMembervod:VodacomSubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:UnitedKingdomSubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:SpainSubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:OtherMarketsSubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:OtherEuropeCountriesExcludingGermanyItalyUkAndSpainSubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:ItalySubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:GermanySubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:CommonFunctionsSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMemberifrs-full:EliminationOfIntersegmentAmountsMember2021-04-012021-09-300000839923vod:VodacomSubSegmentMember2021-04-012021-09-300000839923vod:VantageTowersMember2021-04-012021-09-300000839923vod:UnitedKingdomSubSegmentMember2021-04-012021-09-300000839923vod:SpainSubSegmentMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMember2021-04-012021-09-300000839923vod:OtherMarketsSubSegmentMember2021-04-012021-09-300000839923vod:OtherEuropeCountriesExcludingGermanyItalyUkAndSpainSubSegmentMember2021-04-012021-09-300000839923vod:ItalySubSegmentMember2021-04-012021-09-300000839923vod:GermanySubSegmentMember2021-04-012021-09-300000839923vod:CommonFunctionsSegmentMember2021-04-012021-09-300000839923ifrs-full:EliminationOfIntersegmentAmountsMember2021-04-012021-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:VodacomSubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:UnitedKingdomSubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:SpainSubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:OtherMarketsSubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:OtherEuropeCountriesExcludingGermanyItalyUkAndSpainSubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:ItalySubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:GermanySubSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMembervod:CommonFunctionsSegmentMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMemberifrs-full:EliminationOfIntersegmentAmountsMember2020-04-012020-09-300000839923vod:PreviousBasisOfSegmentReportingMember2020-04-012020-09-300000839923vod:InvestmentsInAssociatesAndJointVenturesMembervod:IndusTowersMember2021-09-300000839923vod:IndusTowersMember2021-09-300000839923vod:InvestmentsInAssociatesAndJointVenturesMembervod:IndusTowersMember2021-03-310000839923vod:IndusTowersMember2021-03-310000839923vod:BhartiInfratelAndIndusTowersMergerMemberifrs-full:TopOfRangeMember2021-09-300000839923vod:VodafoneziggoGroupHoldingB.v.Member2021-09-300000839923vod:VodafoneIdeaLimitedMember2021-09-300000839923vod:TPGAndVHJointVentureAgreementMember2021-09-300000839923vod:OtherJointVenturesMember2021-09-300000839923vod:InfrastructureWirelessItalianeInwitS.p.a.Member2021-09-300000839923vod:VodafoneziggoGroupHoldingB.v.Member2021-03-310000839923vod:TPGAndVHJointVentureAgreementMember2021-03-310000839923vod:OtherJointVenturesMember2021-03-310000839923vod:InfrastructureWirelessItalianeInwitS.p.a.Member2021-03-310000839923ifrs-full:JointOperationsMember2021-04-012021-09-300000839923ifrs-full:JointOperationsMember2020-04-012020-09-300000839923ifrs-full:AdditionalPaidinCapitalMember2021-04-012021-09-300000839923ifrs-full:AdditionalPaidinCapitalMember2020-04-012020-09-300000839923vod:IfrsOtherOperatingIncomeExpenseMember2020-04-012020-09-300000839923ifrs-full:DerivativesMember2021-09-300000839923ifrs-full:DerivativesMember2021-03-310000839923vod:LongTermBondsMemberifrs-full:FinancialAssetsAtAmortisedCostCategoryMember2021-09-300000839923vod:LongTermBondsMemberifrs-full:FinancialAssetsAtAmortisedCostCategoryMember2021-03-310000839923vod:MoneyMarketInvestmentFundsMember2021-09-300000839923vod:FinancialAssetsAtFairValueThroughIncomeStatementMember2021-09-300000839923vod:DebtAndEquitySecuritiesMember2021-09-300000839923ifrs-full:DerivativesMember2021-09-300000839923vod:MoneyMarketInvestmentFundsMember2021-03-310000839923vod:FinancialAssetsAtFairValueThroughIncomeStatementMember2021-03-310000839923vod:DebtAndEquitySecuritiesMember2021-03-310000839923ifrs-full:DerivativesMember2021-03-310000839923vod:VodafoneIdeaAndIdeaCellularLegalCaseMemberifrs-full:TopOfRangeMember2021-09-300000839923vod:IpcomVVodafoneGroupPlcAndVodafoneUkCaseMember2021-09-300000839923vod:AccumulatedComprehensiveLossesMember2021-09-300000839923ifrs-full:TreasurySharesMember2021-09-300000839923ifrs-full:NoncontrollingInterestsMember2021-09-300000839923ifrs-full:IssuedCapitalMember2021-09-300000839923ifrs-full:EquityAttributableToOwnersOfParentMember2021-09-300000839923ifrs-full:AdditionalPaidinCapitalMember2021-09-300000839923vod:AccumulatedComprehensiveLossesMember2021-03-310000839923ifrs-full:TreasurySharesMember2021-03-310000839923ifrs-full:NoncontrollingInterestsMember2021-03-310000839923ifrs-full:IssuedCapitalMember2021-03-310000839923ifrs-full:EquityAttributableToOwnersOfParentMember2021-03-310000839923ifrs-full:AdditionalPaidinCapitalMember2021-03-310000839923vod:AccumulatedComprehensiveLossesMember2020-09-300000839923ifrs-full:TreasurySharesMember2020-09-300000839923ifrs-full:NoncontrollingInterestsMember2020-09-300000839923ifrs-full:IssuedCapitalMember2020-09-300000839923ifrs-full:EquityAttributableToOwnersOfParentMember2020-09-300000839923ifrs-full:AdditionalPaidinCapitalMember2020-09-300000839923vod:AccumulatedComprehensiveLossesMember2020-03-310000839923ifrs-full:TreasurySharesMember2020-03-310000839923ifrs-full:NoncontrollingInterestsMember2020-03-310000839923ifrs-full:IssuedCapitalMember2020-03-310000839923ifrs-full:EquityAttributableToOwnersOfParentMember2020-03-310000839923ifrs-full:AdditionalPaidinCapitalMember2020-03-3100008399232019-04-012020-03-3100008399232021-04-012022-03-3100008399232020-04-012021-03-310000839923vod:BoardMembersAndExecutiveCommitteeMembersMember2021-04-012021-09-300000839923vod:BoardMembersAndExecutiveCommitteeMembersMember2020-04-012020-09-300000839923vod:AccumulatedComprehensiveLossesMember2021-04-012021-09-300000839923ifrs-full:NoncontrollingInterestsMember2021-04-012021-09-300000839923ifrs-full:EquityAttributableToOwnersOfParentMember2021-04-012021-09-300000839923vod:AccumulatedComprehensiveLossesMember2020-04-012020-09-300000839923ifrs-full:NoncontrollingInterestsMember2020-04-012020-09-300000839923ifrs-full:EquityAttributableToOwnersOfParentMember2020-04-012020-09-300000839923vod:BhartiInfratelAndIndusTowersMergerMember2021-09-3000008399232020-03-310000839923ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember2020-04-012020-09-3000008399232020-09-300000839923ifrs-full:JointOperationsMember2021-09-300000839923ifrs-full:AssociatesMember2021-09-300000839923ifrs-full:JointOperationsMember2021-03-310000839923ifrs-full:AssociatesMember2021-03-310000839923ifrs-full:ForeignCountriesMember2021-04-012021-09-300000839923ifrs-full:CountryOfDomicileMember2021-04-012021-09-300000839923ifrs-full:ForeignCountriesMember2020-04-012020-09-300000839923ifrs-full:CountryOfDomicileMember2020-04-012020-09-3000008399232020-04-012020-09-3000008399232021-09-3000008399232021-03-3100008399232021-04-012021-09-30iso4217:EURxbrli:sharesiso4217:EURxbrli:sharesiso4217:INRxbrli:pure

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16
OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Dated November 23, 2021

Commission File Number: 001-10086

VODAFONE GROUP
PUBLIC LIMITED COMPANY

(Translation of registrant’s name into English)

VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN, ENGLAND
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F                   Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN EACH OF THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-240163), THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-81825) AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-149634) OF VODAFONE GROUP PUBLIC LIMITED COMPANY AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

This report on form 6-K includes the following items:

(a) Summary;
(b) Strategy;
(c) Our purpose;
(d) Financial performance;
(e) Cash flow and funding;
(f) Statement of financial position;
(g) Other matters;
(h) Other significant developments;
(i) Regulation;
(j) Legal proceedings;
(k) Risk factors;
(l) Unaudited condensed consolidated financial statements;
(m) Non-GAAP measures;
(n) Definitions; and
(o) Forward-looking statements and other matters.

Certain information is taken from the previously published results of Vodafone Group Plc for the year ended 31 March 2021. This report on Form 6-K should be read in conjunction with the Group’s annual report on Form 20-F for the year ended 31 March 2021. In particular the following sections:

the information contained under “Key performance indicators” on pages 4 and 5;
the information contained under “Market and strategy” on pages 8 to 15;
the information contained under “Our financial performance” on pages 23 to 31; and
the consolidated financial statements on pages 121 to 208.

The terms “Vodafone”, the “Group”, “we”, “our” and “us” refer to Vodafone Group Plc (“the Company”), and as applicable, its subsidiaries and/or its interest in joint ventures and/or associates.

GRAPHIC

Vodafone Group Plc H1 FY22 results

H1 FY22

H1 FY21

Change

 

Financial results

    

Page

    

€m

    

€m

    

%1

 

Group revenue

 

12

 

22,489

 

21,427

 

5.0

Group service revenue

 

12

 

19,010

 

18,418

 

2.8

*

Operating profit2

 

12

 

2,620

 

3,354

 

(21.9)

Profit for the financial period2

 

12

 

1,277

 

1,468

Basic earnings per share2

 

23

 

3.40

c  

4.30

c  

Cash inflow from operating activities

 

23

 

6,455

 

6,009

Interim dividend per share

 

48

 

4.50

c  

4.50

c  

1. * represents organic growth. See page 13. 2. Prior period re-presented for Vodafone Egypt which is no longer held for sale. See page 39.

Summary ⫶ Good financial performance

Financial performance

Total revenue increased by 5.0% to €22.5 billion (FY21 H1: €21.4 billion), driven by service revenue growth in European and African markets and a recovery in handset sales following COVID-19 disruption in the prior year, as well as favourable foreign exchange movements.

Operating profit decreased by 21.9% to €2.6 billion (FY21 H1: €3.4 billion), reflecting a prior year gain of €1.0 billion arising on the merger of Vodafone Hutchison Australia into TPG Telecom Limited. Excluding this, operating profit increased.

The Group made a profit for the period of €1.3 billion (FY21 H1: €1.5 billion). The profit decrease was primarily driven by lower operating profit more than offsetting lower financing costs and a net income tax credit. The tax credit was attributable to deferred tax credits in the UK and Italy reflecting the increase in the future statutory tax rate in the UK and the revaluation of assets in Italy.

Basic earnings per share was 3.40 eurocents, compared to basic earnings per share of 4.30 eurocents in the prior period.

Cash flow and dividend

Cash inflow from operating activities increased by 7.4% to €6.5 billion (FY21 H1: €6.0 billion).

The interim dividend per share is 4.5 eurocents (FY21 H1: 4.5 eurocents). The ex-dividend date for the interim dividend is 25 November 2021 for ordinary shareholders, the record date is 26 November 2021 and the dividend is payable on 4 February 2022

3

Vodafone Group Plc H1 FY22 results

Strategy ⫶ Focused on growth

We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and provided a full update in our FY21 Annual Report. We have also made further progress with respect to our purpose strategy during the first half of FY22.

In November 2018, we set out our ambition to reshape Vodafone and establish a foundation from which the Group can grow in the converged connectivity markets in Europe, and mobile data and financial services markets in Africa. As we begin the second phase of this transformation to become a new generation connectivity and digital services provider, in this section we outline that:

1. our strategy is focused on growth and improving shareholder returns;
2. we have clear near-term operational priorities; and
3. we have further strategic opportunities through portfolio optimisation.

1 ⫶ Strategy focused on growth & improving shareholder returns

We have now substantially delivered the first phase of our strategic ambition to reshape Vodafone into a stronger connectivity provider. This has been delivered through four key strategic priorities: (i) deepening customer engagement; (ii) accelerating our transformation to a digital first organisation; (iii) improving the utilisation of our assets; and (iv) optimising our portfolio. We executed at pace across all four priorities between FY19 and FY21 and by the end of March 2021, the three year highlights included:

mobile contract customer loyalty in Europe improved by 2.3 percentage points;
we added 4.3 million NGN broadband customers in Europe;
we increased the number of homes passed with our 1 gigabit capable fixed-line network in Europe to 43.7 million;
we launched 5G in 240 cities across 10 of our European markets;
we agreed 8 strategic network sharing partnerships with 9 mobile network operators in 7 markets; and
we executed 19 significant corporate transactions to optimise our portfolio.

The next phase of our strategy focuses on driving shareholder returns through growth. This will be delivered through three customer commitments and three enabling strategies, all of which work together towards realising our vision to become a new generation connectivity and digital services provider for Europe and Africa, enabling an inclusive and sustainable digital society.

4

Vodafone Group Plc H1 FY22 results

A ⫶ Strategic Progress Summary

Customer commitments

    

Enabling strategies

Best connectivity products and services

Simplified and most efficient operator
Leading innovation in digital services

Social contract shaping the digital society
Outstanding digital experiences

Leading gigabit networks

Customer commitments

    

Units

    

H1 FY22

    

H1 FY21

Best connectivity products & services

 

  

 

  

 

  

Europe mobile contract customers1

 

million

 

66.0

 

65.0

Europe broadband customers1

 

million

 

25.6

 

25.4

Europe Consumer converged customers1

 

million

 

8.3

 

7.6

Europe mobile contract customer churn

 

%

 

13.1

 

12.9

Africa mobile customers2

 

million

 

186.0

 

170.9

Africa data users2

 

million

 

87.6

 

84.5

Business service revenue growth*

 

%

 

1.2

 

(1.5)

Leading innovation in digital services

 

  

 

  

 

  

Europe TV subscribers1

 

million

 

22.2

 

22.3

IoT SIM connections

 

million

 

136

 

112

Africa M-Pesa customers2

 

million

 

49.0

 

45.3

Africa M-Pesa transaction volume2

 

billion

 

9.3

 

6.8

Outstanding digital experiences

 

  

 

  

 

  

Digital channel sales mix3 4

 

%

 

24

 

22

End-to-end TOBi completion rate5 6

 

%

 

41

 

33

1. Including VodafoneZiggo | 2. Africa including Safaricom | 3. Based on Germany, Italy, UK, Spain only | 4. Figure presented in H1 FY21 column reflects Europe digital channel sales mix in Q2 FY21 as the mix in Q1 was impacted by retail restrictions due do COVID-19 | 5. Group excluding Egypt | 6. Defined as percentage of total customer contacts resolved without human interaction through TOBi

Enabling strategies

    

Units

    

H1 FY22

    

H1 FY21

Leading gigabit networks

 

  

 

  

5G available in European cities1

 

#

 

244

 

127

Europe on-net gigabit capable connections1

 

million

 

46.5

 

39.4

Europe on-net NGN broadband penetration1

 

%

 

30

 

30

Simplified & most efficient operator

 

H1 FY22

 

FY21

Europe markets where 3G switched off1

 

#

 

4

 

1

1. Including VodafoneZiggo

5

Vodafone Group Plc H1 FY22 results

2 ⫶ Clear near-term operational priorities

In addition to the ongoing systematic execution of the second phase of our strategy, we have three operational areas that are currently being prioritised:

A. strengthen commercial momentum in Germany;
B. accelerate operational transformation in Spain; and
C. position Vodafone Business to maximise EU recovery funding opportunities.

A ⫶ Strengthen commercial momentum in Germany

Germany is both the largest connectivity market in Europe and Vodafone‘s biggest market. Germany has benefited from a more rational competitive environment compared to many other markets in Europe and is the only top five European market to have experienced ARPU growth for both mobile and fixed connectivity since 2017. Alongside the scale and rational market structure, Germany also presents the most significant converged connectivity opportunity of our larger markets, with only 18% of our mobile customers taking a fixed connectivity product, compared with 54% in Spain. Similarly, only 14% of our fixed connectivity customers in Germany take a mobile connectivity product, compared with 90% in Spain.

We are focused on taking advantage of this significant opportunity through the structural advantage we have created with our fixed connectivity services. Following the acquisition and commercial integration of the former Unitymedia assets, we can now reach over 23 million homes in Germany with 1 gigabit per second fixed line connectivity. Gigabit availability will also be rolled out to a further 1 million homes by the end of the financial year. Beyond this, we have clear upgrade plans for our hybrid fibre cable network that include a mix of demand-driven node-splitting – bringing fibre closer to our customers – and options for upgrading the last stretch of cable into customers’ homes.

Compared with other markets, we have a more traditional sales mix with respect to retail, online and call centres in Germany. This has contributed to a lower rate of winning new customers as our traditional retail channels have been significantly impacted by COVID-19, with lockdowns and lower footfall. As retail footfall recovers, we are focused on strengthening our commercial momentum through stronger marketing campaigns, enhanced targeting of existing customers with attractive cross-selling and up-selling products, and further leveraging of the shared Group capabilities we have created for effective digital marketing.

B ⫶ Accelerate operational transformation in Spain

Over the last four years, the competitive environment in Spain has intensified as the number of customer-facing brands has increased from around 60 in 2017 to almost 80 in 2021. This has resulted in significant price deflation, with mobile contract ARPU across the market declining by 16% since 2017. Given the relatively high operating leverage within the sector, this price deflation has had a significant impact on our financial performance in Spain.

Following a series of measures conducted between FY19 and FY21, we have stabilised our financial performance and are working to further support returns. We have recently concluded a restructuring plan, mainly affecting owned retail stores, as a part of our operational transformation and announced a reorganisation of the local executive committee, with new operational units focused on competitiveness and digitalisation in the Consumer segment.

Given the market backdrop, we have also conducted extensive interaction with policy makers and regulators at both the national and European level. We are pleased that a series of spectrum and taxation reforms are being pursued, including:

a well-structured spectrum auction, with an outcome below European benchmark levels;
longer duration for new licences with an extension of 20 years after the initial 20-year term;
the consideration of the reduction of spectrum licence fees; and
the consideration of the cessation of television taxation for network operators.

6

Vodafone Group Plc H1 FY22 results

In addition to these improvements, we are also actively pursuing further market structure opportunities including enhancing strategic network partnerships and in-market consolidation. We are also working to maximise the opportunities available for Vodafone Business from EU recovery funding programmes, which will be particularly significant in Spain.

C ⫶ Position Vodafone Business to maximise EU funding opportunities

The European Commission has launched a series of funding programmes with €750 billion available under the banner “NextGenerationEU”. These include the Recovery & Resilience facility, which combines €360 billion of loans and €312.5 billion of grants available to European Union Member States. Of these grants, approximately 70% will be allocated to European Union Member States in which Vodafone has an operating presence. These grants are planned to be 70% committed by the end of 2022. The range of funding presents a direct and indirect opportunity given that at least 20% of the total funding is planned to support the European Commission’s digital transformation agenda. We are tracking the progress of funding applications and approvals at the project level. The table below summarises the current funding status by country.

Country

    

Total funds

    

Digital allocation

    

Green allocation

    

Released so far

Germany

 

25.6bn grants

 

52

%  

42

%  

2bn

Italy

 

68.9bn grants + €122.6bn loans

 

25

%  

37

%  

25bn

Spain

 

69.5bn grants

 

28

%  

40

%  

9bn

Greece

 

17.8bn grants + €12.7bn loans

 

23

%  

38

%  

4bn

Portugal

 

13.9bn grants + €2.7bn loans

 

22

%  

38

%  

2bn

Czechia

 

7bn

 

22

%  

42

%  

1bn

Ireland

 

1bn

 

32

%  

42

%  

None

Romania

 

14.2bn grants + €14.9bn loans

 

21

%  

41

%  

None

In order to maximise our access to these opportunities, we have mobilised a dedicated cross-functional team comprising product specialists, business development executives and experienced regulatory affairs professionals. Our plans are focused on five core cross-market opportunities: digitalisation of SMEs; eHealth investments; smart cities; digital initiatives for a greener Europe; and connected education. We have an attractive and relevant suite of products and services designed to access funding opportunities available and further detailed information on the opportunity and our progress will be outlined in a dedicated virtual investor briefing in 2022.

7

Vodafone Group Plc H1 FY22 results

3 ⫶ Strategic opportunities through portfolio optimisation

Following the launch of the second phase of our strategy to be the new generation connectivity and digital services provider for Europe and Africa, we conducted an extensive portfolio review to assess the optimal structure to deliver our strategy.

Historically, our Group has been managed as a combination of geographically focused operating companies, which draw from a range of shared services. Over the last three years, we have been evolving our business model and organisational structures to operate in a more streamlined and agile matrix. We continue to recognise the importance of local, in-market scale and capabilities, but also strive to generate further value from the scale and breadth of our footprint.

Increasingly, we are managing our Group through four group-wide operational layers:

A. infrastructure assets;
B. shared operations;
C. growth platforms; and
D. retail & customer service.

A ⫶ Infrastructure assets

Our converged connectivity infrastructure is largely managed through three components: passive mobile, active mobile and fixed.

Our passive mobile infrastructure is now primarily held and operated through Vantage Towers’ network of 82,000 towers across ten European markets. The Vantage Towers IPO was completed successfully in March 2021 and the company has a current market capitalisation of €15 billion. We continue to own and operate our active mobile infrastructure in Europe directly, which includes 135,000 radios. In addition, our African operations operate a further 41,000 radios and 22,000 towers. We reached network sharing partnerships in 7 markets between FY19 and FY21 and are committed to enhancing asset utilisation through network sharing.

Our fixed connectivity infrastructure comprises consumer connectivity networks, mobile backhaul, and international terrestrial and submarine connections. Across the Group, our fixed connectivity networks include over 1.1 million kilometres of fibre infrastructure and more than 0.5 million kilometres of coaxial cable. We are actively exploring further opportunities for our fixed network assets to improve asset utilisation.

B ⫶ Shared operations

The connectivity value chain involves a high degree of repeatable processes across all our markets, such as procurement, network deployment, network operations, sales activities, customer support operations, and billing and transaction processing. As one of the largest global connectivity providers, we have a significant opportunity to standardise processes across markets, relocate operations to lower cost centres of excellence and apply automation at scale, delivering best-in-class efficiency levels.

We have consolidated our supplier management function into a single, centralised procurement company.

We manage our IT operations, network operating centres and back-office activities through three Shared Service Centres (‘_VOIS’) in Egypt, India and Eastern Europe. Approximately 30% of the Group’s headcount works in _VOIS and other shared operations, and over the last three years we have automated over 5,500 roles.

Vodafone Roaming Services manages our global roaming relationships with other operators and our Partner Markets team works with 30 local operators in building strategic alliances and extending our reach into different markets. These functions generate over €250 million revenue and cost savings annually.

Last year, we simplified our operating model and initiated one of our largest ever organisational changes to accelerate our transformation into a new generation connectivity and digital services provider for Europe and Africa. As part of this, we have moved to a unified technology operating model with one integrated European network and IT/digital team to drive efficiency, increase speed of execution, standardise key processes, and codify the best solutions for implementation across all of our markets.

8

Vodafone Group Plc H1 FY22 results

We have made good progress over the last three years, however there is still scope for further efficiencies, particularly with respect to network operations and digital services platforms.

C ⫶ Growth platforms

Over the last few years, we have invested in digital capabilities and scalable technology to build three digital growth platforms.

1. Leading digital consumer services Complementary digital services play a crucial role in deepening relationships with consumers, in addition to having attractive economic models. We now have over 50 million customers subscribing to a digital service, which leads to higher ARPU, improved distribution efficiency, higher NPS and lower churn. We are focused on further developing our strong positions in Consumer IoT, Vodafone TV, home services, device lifecycle services and loyalty applications.
2. The global IoT connectivity leader  Our IoT service was established in 2008 and has grown to be the largest IoT connectivity provider globally, with 136 million devices connected. Vodafone IoT has been recognised as a leader in managed connectivity by Gartner every year since 2014. Vodafone IoT currently generates €0.9 billion annual revenue with double-digit revenue growth.
3. The leading FinTech in Africa  Since formation in 2007 as a money transfer service, our financial services businesses in Africa – encompassing Vodacom Group, Safaricom and Vodafone Egypt – have collectively grown to be the leading FinTech in Africa. Vodacom Group and Safaricom together have 57 million customers, with M-Pesa transaction value of US$26.8 billion per month in the first six months of FY22. Our African FinTech business has significant growth opportunities through penetration growth in existing markets, expanding into new markets and scaling new products, including the recent launch of the VodaPay ‘super-app’ in South Africa. The Vodacom Group has clear financial ambitions to grow its new services, which include financial services, at or above 20% CAGR.

We will continue to incubate our three digital growth platforms and ensure we capture the opportunities available. We will also regularly assess ownership structures and our own financial reporting to maximise visibility and optionality.

D ⫶ Retail & customer service

Our retail and customer service operations are currently organised in three segments summarised in the table below.

    

Europe Consumer

    

Africa Consumer

    

Business

Annualised H1 FY22

Vodafone

Vodacom

Vodafone Business

Service Revenue

 

20 billion

 

6 billion

 

10 billion

Market capitalisation

 

 

 

15 billion

 

 

1. Europe Consumer In Europe, we are a leading converged connectivity provider with 8.3 million converged customers, 114 million mobile connections, 143 million marketable NGN broadband homes, and we have launched 5G in 244 cities in 10 markets in Europe.
2. Africa Consumer In Africa, we are the leading provider of mobile data and mobile payment services. We have 186 million mobile customers in 8 markets and we are the leading mobile connectivity provider by revenue market share in 7 markets. Our M-Pesa financial services platform processed over 9 billion transactions during the first six months of FY22 and has 49 million customers.
3. Vodafone Business Vodafone Business is a key growth driver for the Group, representing 27% of service revenue in the period. We operate in attractive markets with a compelling structural opportunity. Our strategy is grounded in our purpose to connect for a better future and is focused on three core elements. Firstly, to be the trusted partner for small and medium-sized enterprises. Secondly, to be the gigabit connectivity provider of choice to large enterprises. Thirdly, to be the leading end-to-end provider of IoT solutions for every organisation.

9

Vodafone Group Plc H1 FY22 results

Alongside the active optimisation of our portfolio over the medium-term, we have three initial priority areas to enable our strategy and realise value for our shareholders:

I. actively pursue opportunities for Vantage Towers;
II. actively pursue in-market consolidation opportunities in major European markets; and
III. integrate Vodafone Egypt into Vodacom to create a pan-African powerhouse.

I ⫶ Vantage Towers

By separating and listing Vantage Towers at pace, it is now in a prime position to drive consolidation within the European sector. We are actively pursuing accretive bolt-on transactions and industrial merger opportunities. We expect to deconsolidate Vantage Towers from the Group and monetise part of our holding over time, reserving strategic flexibility for our mobile business.

II ⫶ European in-market consolidation

Over the last decade, the performance of the European telecommunications industry has been weaker than other regions, which market commentators largely attribute to its regulatory environment. European regulation has been driving increasingly fragmented market structures compared with North America or Asia. Sustained price deflation and the inability to derive cost synergies from scale have impacted sector returns, which in turn limits the sustainability of capital investment in critical national infrastructure. As noted above, Germany has benefited from a more sustainable competitive environment compared to many other markets in Europe and those markets would benefit from in-market consolidation. We are pragmatically pursuing value accretive in-market consolidation to deliver sustainable market structures in our major European markets.

III ⫶ Vodafone Egypt

On 10 November, we announced that we have agreed to transfer our 55% shareholding in Vodafone Egypt to Vodacom Group, our African subsidiary, for €2,722 million on a debt free, cash free basis.  Based on Vodafone’s 55% share of net debt in Vodafone Egypt as at 30 September 2021, the total purchase consideration is €2,365 million. Approximately 80% of the consideration (€1,892 million) will be settled by the issuance of 242 million new ordinary Vodacom Group shares to Vodafone Group. As a result, Vodafone Group’s ownership in Vodacom Group will increase from 60.5% to 65.1%. The remaining 20% of the consideration (€473 million) will be settled in cash. The transaction is subject to a number of conditions but is expected to close before 31 March 2022.

The integration of Vodafone Egypt into Vodacom follows a series of other portfolio simplification transactions which have helped Vodacom become a pan-African connectivity and financial services powerhouse. Including Ethiopia, Vodacom will operate in markets with combined populations over more than 500 million people and including Egypt, Vodacom currently has number 1 market positions in seven countries. We will move at pace with the imminent integration of Vodafone Egypt, which will benefit from closer cooperation with Vodacom, enabling it to accelerate growth in financial services and IoT.

10

Vodafone Group Plc H1 FY22 results

Our purpose ⫶ We connect for a better future

We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and provided a full update in our FY21 Annual Report. We have also made further progress with respect to our purpose strategy during the first half of FY22.

Europe’s largest network, powered by 100% renewable electricity

From July 2021, our entire European operations – including mobile and fixed networks, data centres, retail and offices – are 100% powered by electricity from renewable sources. This marks a key step towards our goal of reducing our own carbon emissions to ‘net zero’ by 2030 and across our entire value chain by 2040.

Eco Rating

We have announced that the pan-industry Eco Rating labelling scheme we launched with four other major European operators in May is set to roll out globally. The announcement paves the way for Eco Rating to become a global harmonised labelling system, giving consumers everywhere consistent and transparent insight on the environmental impact of new smartphones. The Eco Rating scheme was initially launched in 24 European countries and has since been rolled out in Brazil and by Vodacom in South Africa. Eco Rating is now expected to launch in other countries including Argentina, Chile, Colombia, Ecuador, Mexico, Peru and Uruguay. More than 150 mobile phones from 15 manufacturers are now assessed by the Eco Rating initiative, nearly doubling the range of devices rated at launch.

Eco-SIM cards

We have recently announced that we are launching Eco-SIM cards made from recycled plastic as part of our commitment to reduce our impact on the environment. Starting from October 2021, we are providing customers with new Eco-SIMs in the half-sized format made from recycled plastic, progressively replacing SIM cards that are currently made from new plastic. Eco-SIM will be rolled out across all of our European markets, as well as in Egypt, Turkey and South Africa. The introduction of Eco-SIM – in the same material-efficient, half-sized card format – further eliminates the need for 320 tonnes of virgin plastic to be manufactured each year.  This has the potential to save an additional 1,280 tonnes of CO2e per year from not manufacturing new plastic to be used for the cards.

Vodafone Spirit

Spirit Beat is our bi-annual employee survey that measures progress on how people experience our culture (Vodafone Spirit), engagement, and connection to our purpose. It also includes a nudge engine which provides personalised coaching tips to employees based on results.

The results from the latest survey conducted in September show stability against the backdrop of a challenging environment and unprecedented change. Our employee engagement index remained high at 73 (January 2021: 74) and 93% of employees feel that their daily work contributes significantly to Vodafone’s purpose (“We connect for a better future”). As we reported in our FY21 Annual report, managers who demonstrate Vodafone Spirit continue to create a higher Spirit Index and employee engagement scores, compared to managers who do not.

As part of our future ready framework, we have introduced further flexibility to our working practices and set global standards for new hybrid ways of working. Results from the latest survey show that those who are hybrid-working feel more connected to Spirit and purpose and are also more engaged. Our first quarterly Global Spirit day also took place in October and was designed to provide dedicated space for personal growth, wellbeing, and connection.

11

Vodafone Group Plc H1 FY22 results

Financial performance ⫶ Sustainable growth in both European and African markets

Group revenue increased by 5.0% to €22.5 billion, driven by a return to growth of service revenue, strong recovery in handset sales following COVID disruption in the previous year and favourable foreign exchange movements during the period
Operating profit decreased by 21.9% as the prior year included a gain on disposal of €1.0 billion

Group financial performance

    

H1 FY221

    

H1 FY212

    

Reported

€m

€m

change %

Revenue

 

22,489

 

21,427

 

5.0

- Service revenue

 

19,010

 

18,418

 

3.2

- Other revenue

 

3,479

 

3,009

Operating profit

 

2,620

 

3,354

 

(21.9)

Investment income

 

129

 

183

Financing costs

 

(1,473)

 

(1,610)

Profit before taxation

 

1,276

 

1,927

Income tax credit/(expense)

 

1

 

(459)

Profit for the financial period

 

1,277

 

1,468

Attributable to:

- Owners of the parent

 

996

 

1,269

- Non-controlled interests

 

281

 

199

Profit for the financial period

 

1,277

 

1,468

Basic earnings per share

 

3.40

c  

4.30

c  

Notes:

1. The H1 FY22 results reflect average foreign exchange rates of €1:£0.86, €1:INR 88.11, €1:ZAR 17.13, €1:TRY 10.09 and €1: EGP 18.70.
2. In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had terminated. Consequently, the held for sale classification was reversed resulting in the following changes to the previously published results for the six months ended 30 September 2020: Operating profit has declined by €118 million, Profit before tax has declined by €118 million, Profit for the financial period has declined by €87 million, Basic earnings per share declined by 0.15 eurocents.

12

Vodafone Group Plc H1 FY22 results

Organic growth

All amounts marked with an “*” in the commentary represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21 results for Vantage Towers have been adjusted to reflect a full year of operation on a proforma basis in order to be comparable to FY22. Organic growth figures are non-GAAP measures. See non-GAAP measures on page 54 for more information.

Segmental reporting

Following the IPO of Vantage Towers A.G. in March 2021, the business is a new reporting segment for the year ending 31 March 2022 (‘FY22’). Comparative information for the year ended 31 March 2021 has not been re-presented. Total revenue is unaffected because charges from Vantage Towers A.G. to operating companies are eliminated on consolidation. The segmental results of Vantage Towers A.G. include the contribution from Cornerstone Technologies Infrastructure Limited as a joint operation with Telefonica in the UK.

Adjusted EBITDAaL

Adjusted EBITDA is now referred to as Adjusted EBITDAaL for FY22, with no change in the underlying definition. Adjusted EBITDAaL is our segment performance measure. Adjusted EBITDAaL is operating profit after depreciation on lease-related right of use assets and interest on leases but excluding depreciation, amortisation and gains/losses on disposal of owned fixed assets and excluding share of results in equity accounted associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other income and expense and significant items that are not considered by management to be reflective of underlying performance.

Geographic performance summary

Other

Other

Vantage

Common

Elimi-

H1 FY22

   

Germany

   

Italy

   

UK

   

Spain

   

Europe

   

Vodacom

   

Markets

   

Towers

   

Functions1

   

nations

   

Group

Total revenue (€m)

 

6,447

 

2,507

 

3,161

 

2,090

 

2,810

 

2,928

 

1,958

 

611

 

707

 

(730)

 

22,489

Service revenue (€m)

 

5,777

 

2,187

 

2,521

 

1,866

 

2,502

 

2,271

 

1,752

 

 

252

 

(118)

 

19,010

Adjusted EBITDAaL (€m)

 

2,892

 

917

 

638

 

445

 

836

 

1,062

 

683

 

305

 

(213)

 

Adjusted EBITDAaL margin (%)

 

44.9

36.6

20.2

21.3

29.8

36.3

34.9

49.9

FY21

FY22

Service revenue growth %

    

Q1

    

Q2

    

H1

    

Q3

    

Q4

    

H2

    

Total

    

Q1

    

Q2

    

H1

Germany

 

25.4

 

6.9

 

15.4

 

1.0

 

1.2

 

1.1

 

7.7

 

1.1

 

0.8

 

0.9

Italy

 

(6.5)

 

(7.9)

 

(7.2)

 

(7.8)

 

(8.8)

 

(8.3)

 

(7.8)

 

(3.9)

 

(1.6)

 

(2.8)

UK

 

(3.2)

 

(0.8)

 

(2.0)

 

(5.1)

 

(4.4)

 

(4.7)

 

(3.4)

 

5.3

 

4.7

 

5.0

Spain

 

(6.9)

 

(1.8)

 

(4.4)

 

(0.9)

 

(2.2)

 

(1.5)

 

(3.0)

 

0.5

 

(2.0)

 

(0.7)

Other Europe

 

3.8

 

(1.9)

 

0.8

 

(4.0)

 

 

(2.0)

 

(0.6)

 

4.9

 

2.7

 

3.8

Vodacom

 

(11.9)

 

(12.3)

 

(12.1)

 

(9.1)

 

(1.2)

 

(5.3)

 

(8.7)

 

18.5

 

14.6

 

16.5

Other Markets

 

(18.9)

 

(15.1)

 

(17.0)

 

(9.5)

 

(6.1)

 

(7.8)

 

(12.8)

 

(1.3)

 

10.0

 

4.3

Vantage Towers

 

 

 

 

 

 

 

 

 

 

Group

 

1.3

 

(2.5)

 

(0.7)

 

(3.9)

 

(2.4)

 

(3.1)

 

(1.9)

 

3.1

 

3.4

 

3.2

FY21

FY22

Organic service revenue growth %*2

    

Q1

    

Q2

    

H1

    

Q3

    

Q4

    

H2

    

Total

    

Q1

    

Q2

    

H1

Germany

 

 

(0.1)

 

(0.1)

 

1.0

 

1.2

 

1.1

 

0.5

 

1.4

 

1.0

 

1.2

Italy

 

(6.5)

 

(8.0)

 

(7.2)

 

(7.8)

 

(7.8)

 

(7.8)

 

(7.5)

 

(3.6)

 

(1.4)

 

(2.5)

UK

 

(1.9)

 

(0.5)

 

(1.2)

 

(0.4)

 

(0.6)

 

(0.5)

 

(0.8)

 

2.5

 

0.6

 

1.2

Spain

 

(6.9)

 

(1.8)

 

(4.4)

 

(1.1)

 

(1.3)

 

(1.2)

 

(2.8)

 

0.8

 

(1.9)

 

(0.6)

Other Europe

 

(3.1)

 

(1.8)

 

(2.4)

 

(0.7)

 

(0.2)

 

(0.4)

 

(1.4)

 

4.2

 

2.4

 

3.3

Vodacom

 

1.5

 

3.2

 

2.3

 

3.3

 

7.3

 

5.3

 

3.9

 

7.9

 

3.1

 

5.4

Other Markets

 

9.1

 

9.0

 

9.0

 

12.3

 

13.1

 

12.7

 

10.8

 

18.4

 

19.7

 

19.1

Vantage Towers

 

 

 

 

 

 

 

 

 

 

Group

 

(1.3)

 

(0.4)

 

(0.8)

 

0.4

 

0.8

 

0.6

 

(0.1)

 

3.3

 

2.4

 

2.8

Notes:

1. Common Functions Adjusted EBITDAaL includes a charge in relation to the impairment of prior year receivables.
2. Organic service revenue growth is a non-GAAP measure. See page 54 for more information.

13

Vodafone Group Plc H1 FY22 results

Germany 30% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

6,447

 

6,371

 

1.2

 

  

- Service revenue

 

5,777

 

5,723

 

0.9

 

1.2

- Other revenue

 

670

 

648

 

  

 

  

Adjusted EBITDAaL

 

2,892

 

2,844

 

1.7

 

7.7

Adjusted EBITDAaL margin

 

44.9

%  

44.6

%  

  

 

  

Reported total revenue increased by 1.2% to €6.4 billion, supported by service revenue growth.

On an organic basis, service revenue grew by 1.2%* (Q1: 1.4%*, Q2: 1.0%*), reflecting a higher customer base, broadband ARPU growth, and higher roaming and visitor revenue, which was partially offset by lower variable call usage revenue. Retail service revenue grew by 1.7%* (Q1: 1.9%*, Q2: 1.5%*).

Fixed service revenue grew by 0.9%* (Q1: 0.6%*, Q2: 1.2%*) supported by ARPU and customer base growth. The sequential improvement in trends was primarily driven by the lapping of the variable usage revenue peak in Q1 in the prior year. Our commercial momentum started to improve during the second quarter, reflecting a gradual recovery in retail footfall, however it is still below pre-pandemic levels. We added 86,000 cable customers during the period, including 38,000 migrations from legacy DSL broadband. Half of our cable broadband customers now subscribe to speeds of at least 250Mbps, and gigabit speeds are available to 23.1 million households across our hybrid fibre cable network.

Our TV customer base declined by 101,000, as reduced retail activity during the COVID-19 pandemic led to fewer gross customer additions. Our converged propositions, led by ‘GigaKombi’, allow customers to combine their mobile, landline, broadband and TV subscriptions for one monthly fee. During the period, we accelerated convergence penetration following a successful campaign and our converged customer base increased by 330,000 to almost 2 million Consumer converged accounts.

Mobile service revenue increased by 1.5%* (Q1: 2.3%*, Q2: 0.8%*), reflecting customer base growth, and higher roaming and visitor revenue. The slowdown in quarterly trends was attributable to the delayed retail recovery impacting commercial performance, and a reduction in mobile termination rates which took effect as of July. We added 54,000 contract customers during the period and contract churn improved by 1.1 percentage points year-on-year to 11.0%. In June, we successfully launched our digital-only second brand, SIMon mobile.  We added a further 3.4 million IoT connections during the period, supported by strong demand from the automotive sector.

Adjusted EBITDAaL grew by 7.7%*, supported by synergy delivery, ongoing cost efficiencies, higher service revenue, as well as some small settlements, partially offset by higher publicity costs. The Adjusted EBITDAaL margin was 2.7* percentage points higher year-on-year at 44.9%.

We continue to make strong progress in integrating the acquired Unitymedia assets and are executing faster than planned with respect to our cost and capital expenditure synergy targets.

We switched off our 3G network on 1 July 2021, with spectrum re-assigned to increase the capacity, speed and coverage of our 4G networks. Our 5G network is now available to more than 35 million people. We launched Europe’s first 5G standalone network in April. Standalone 5G enables higher speeds, enhanced reliability and ultra-low latency, in addition to using 20% less energy on customers’ devices.

14

Vodafone Group Plc H1 FY22 results

Italy 12% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

2,507

 

2,506

 

 

  

- Service revenue

 

2,187

 

2,249

 

(2.8)

 

(2.5)

- Other revenue

 

320

 

257

 

  

 

  

Adjusted EBITDAaL

 

917

 

800

 

14.6

 

14.7

Adjusted EBITDAaL margin

 

36.6

%  

31.9

%  

  

 

  

Reported total revenue was stable at €2.5 billion as lower service revenue was offset by higher equipment revenue.

On an organic basis, service revenue declined by 2.5%* (Q1: -3.6%*, Q2: -1.4%*) as a result of continued price pressure. The improvement in quarterly trends was supported by the migration of PostePay MVNO customers onto our network, which completed in early August.

Mobile service revenue declined by 3.0%* (Q1: -4.0%*, Q2: -1.9%*) as greater competition in the value segment and a lower active prepaid customer base year-on-year were partly offset by targeted pricing actions. Market mobile number portability volumes remained below prior year period levels, despite the easing of national lockdown measures. The quarter-on-quarter improvement in service revenue was supported by the positive contribution from PostePay MVNO customer migrations onto our network. Our second brand ‘ho.’ continued to grow, with 201,000 net additions supported by our best-in-class net promoter score, and now has 2.7 million customers.

Fixed service revenue declined by 1.3%* (Q1: -2.7%*, Q2: 0.1%*) driven by a shift in consumer demand towards fixed-wireless access connectivity, which was partially offset by higher Business activity compared to the prior year. We added 33,000 fixed-wireless access customers during the period, which are included in our mobile customer base. We now have over 3 million broadband customers, and 48% of our broadband base is converged. Our total Consumer converged customer base is 1.2 million, an increase of 41,000 during the period. Through our own next generation network and partnership with Open Fiber, our broadband services are now available to 8.6 million households. We also cover over 4 million households with fixed-wireless access, offering speeds of up to 100Mbps.

Adjusted EBITDAaL increased by 14.7%*, reflecting a 13.1 percentage point benefit from a €105 million legal settlement, and also supported by lower bad debt provisions. The Adjusted EBITDAaL margin was 4.6* percentage points higher year-on-year at 36.6%.

15

Vodafone Group Plc H1 FY22 results

UK 13% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

3,161

 

2,983

 

6.0

 

  

- Service revenue

 

2,521

 

2,401

 

5.0

 

1.2

- Other revenue

 

640

 

582

 

  

 

  

Adjusted EBITDAaL

 

638

 

636

 

0.3

 

1.8

Adjusted EBITDAaL margin

 

20.2

%  

21.3

%  

  

 

  

Reported total revenue increased by 6.0% to €3.2 billion, due to higher service revenue and equipment revenue, as well as an appreciation of pound sterling versus the euro.

On an organic basis, service revenue grew by 1.2%* (Q1: 2.5%*, Q2: 0.6%*), driven by a strong performance in the Consumer segment, and supported by higher roaming and visitor revenue, partially offset by a reduction in mobile termination rates.

Mobile service revenue grew by 1.3%* (Q1: 2.7%*, Q2: 1.0%*) driven by strong commercial momentum in Consumer, partially offset by post-pandemic slowdown in Business connections, as well as ARPU pressure on re-contracting multinational corporations. We added 149,000 mobile contract customers, supported by our new proposition ‘Vodafone EVO’ which offers customers a combination of flexible contracts, trade-in options, and early upgrades. Our digital sales now account for 33% of total sales. Contract churn remained broadly stable year-on-year at 12.5%. Our digital sub-brand ‘VOXI’ also continued to grow strongly, with 54,000 customers added in the period. We also announced an exclusive retail partnership with the Dixons Carphone Group, covering 300 stores and digital channels, with improved terms compared to our previous arrangement.

Fixed service revenue grew by 0.9%* (Q1: 2.1%*, Q2: -0.3%*) and was impacted by a tougher comparative as delayed Business fixed project work resumed in Q2 last year. Performance in the current period was also driven by the decision to end a large but unprofitable multinational contract, and a reseller entering into administration. Our commercial momentum in Consumer remained strong with 51,000 net customer additions during the period, with good demand for our Vodafone ‘Pro Broadband’ product. We now have almost 1 million broadband customers, of which 482,000 are converged.

Adjusted EBITDAaL increased by 1.8%*, as growth in service revenue, lower bad debt provisions, and continued strong cost control were partially offset by higher publicity costs. Our Adjusted EBITDAaL margin was stable* year-on-year at 20.2%.

In November 2021, we announced the expansion of our long-term strategic partnership agreement with CityFibre. The extended wholesale agreement in conjunction with our existing partnership with Openreach, will enable us to reach 8 million households with full fibre broadband by Spring 2022.

16

Vodafone Group Plc H1 FY22 results

Spain 10% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

2,090

 

2,050

 

2.0

 

  

- Service revenue

 

1,866

 

1,880

 

(0.7)

 

(0.6)

- Other revenue

 

224

 

170

 

  

 

  

Adjusted EBITDAaL

 

445

 

488

 

(8.8)

 

(0.6)

Adjusted EBITDAaL margin

 

21.3

%  

23.8

%  

  

 

  

Reported total revenue increased by 2.0% to €2.1 billion, primarily due to higher equipment revenue.

On an organic basis, service revenue declined by 0.6%* (Q1: 0.8%*, Q2 -1.9%*) driven by ongoing continued price competition in the value segment. The quarterly trend was largely driven by stronger prior year comparatives, reflecting the impact of easing COVID-19 restrictions in Q2 of the prior year.

The market remained highly competitive in the value segment. In mobile, we grew our contract customer base by 67,000, supported by strong public sector demand. In May, we announced price increases applying to the main Vodafone brand, effective across our customer base from 15 July 2021. Mobile contract churn increased by 3.9 percentage points year-on-year to 20.6% reflecting exceptionally low churn in the prior Q1 period due to portability restrictions, as well as the impact of the price increases implemented this year. Our second brand ‘Lowi’ added 144,000 customers during the period and now has a total base of 1.3 million.

Our broadband customer base decreased by 82,000 as a result of higher competitive intensity during the period and our price increases. Our TV customer base decreased by 38,000 as we concluded a promotion. We have recently renewed our exclusive agreement with HBO Max, and through our partnerships with other content providers such as Disney, we have the most extensive library of movies and TV series in the market.

Adjusted EBITDAaL declined by 0.6%* and the Adjusted EBITDAaL margin was 0.6* percentage points lower year-on-year at 21.3%. The marginal decrease in EBITDAaL reflects higher publicity and commercial content costs, partially offset by further cost reduction and lower bad debt provisions.

On 15 September, we announced a restructuring plan, mainly affecting owned retail stores, as part of our operational transformation. At the same time, we have committed to create new jobs in digital and technology. Negotiations were concluded in October. We have also announced a reorganisation of the local executive committee, with new operational units focused on competitiveness and digitalisation in the consumer business, as well as expanding our portfolio of products and services beyond connectivity.

17

Vodafone Group Plc H1 FY22 results

Other Europe 13% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

2,810

 

2,720

 

3.3

 

  

- Service revenue

 

2,502

 

2,411

 

3.8

 

3.3

- Other revenue

 

308

 

309

 

  

 

  

Adjusted EBITDAaL

 

836

 

870

 

(3.9)

 

4.5

Adjusted EBITDAaL margin

 

29.8

%  

32.0

%  

  

 

  

Total revenue increased by 3.3% to €2.8 billion, primarily reflecting service revenue growth, also supported by the appreciation of local currencies versus the euro.

On an organic basis, service revenue increased by 3.3%* (Q1: 4.2%*, Q2: 2.4%*), with all markets growing during the period. The growth in service revenue was supported by higher roaming and visitor revenue, partially offset by a reduction in mobile termination rates in Ireland, Czech Republic and Romania. The quarterly trend was due to stronger prior year comparatives, reflecting the impact of easing COVID-19 restrictions and high prepaid activity in Q2 in the prior year.

In Portugal, service revenue grew due to customer base growth and higher mobile ARPU. During the period, we added 66,000 mobile contract customers and 33,000 fixed broadband customers. In October, we announced that Vodafone Portugal had acquired 90MHz of 3,600MHz and 2x10MHz of 700MHz spectrum, with a 20-year licence through to 2041. The spectrum will enable us to significantly expand network capacity to meet growing demand for reliable, high quality voice and data services.

In Ireland, service revenue increased reflecting higher visitor revenue, supported by good mobile contract customer growth as competitive intensity stabilised. During the period, our mobile contract customer base increased by 40,000 and mobile contract churn improved 0.3 percentage point year-on-year to 8.2%.

Service revenue in Greece increased reflecting higher roaming and visitor revenue as international tourism grew year-on-year. During the period, we added 25,000 mobile contract customers and 82,000 prepaid customers as lockdown restrictions eased.

Adjusted EBITDAaL increased by 4.5%*, supported by good revenue growth and strong cost control. The Adjusted EBITDAaL margin increased by 0.4* percentage points and was 29.8%.

We have continued to make good progress on integrating the assets acquired from Liberty Global in Central Eastern Europe and we remain on track to deliver our targeted synergies.

18

Vodafone Group Plc H1 FY22 results

Vodacom 12% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

2,928

 

2,423

 

20.8

 

  

- Service revenue

 

2,271

 

1,949

 

16.5

 

5.4

- Other revenue

 

657

 

474

 

  

 

  

Adjusted EBITDAaL

 

1,062

 

891

 

19.2

 

5.6

Adjusted EBITDAaL margin

 

36.3

%  

36.8

%  

  

 

  

Total revenue increased by 20.8% to €2.9 billion and reported Adjusted EBITDAaL increased by 19.2%, primarily due to the strengthening of the local currencies versus the euro.

On an organic basis, Vodacom’s total service revenue grew by 5.4%* (Q1: 7.9%*, Q2 3.1%*). Growth across Vodacom’s international markets accelerated in the first 6 months following significant growth in our financial services platform (M-Pesa), however slowed in Q2 due to a strong prior year comparative in South Africa and the introduction of mobile money levies in Tanzania.

In South Africa, service revenue grew year-on-year, supported by sustained demand, incremental wholesale services and growth in new services such as fixed, IoT and financial services. We added 1.1 million prepaid customers and 140,000 mobile contract customers, with the latter supported by our new more-for-more ‘Vodafone Red’ proposition introduced in June and new contract wins in Business. Financial Services revenue in South Africa increased by 15.0%* to €75.9 million, reflecting the expansion of our service offerings, and 70% of our mobile customer base now uses data services.

In October 2021, we launched our new ‘VodaPay’ super-app in South Africa, bringing consumer and business capabilities under one platform. The application enables customers to access financial, insurance and eCommerce services and supports businesses with additional resource planning and ‘business-to-business’ functionalities.

In Vodacom’s international markets, service revenue increased during the half year. Growth was supported by an increase in M-Pesa transaction volumes and data revenue. This benefit was partially offset by the introduction of mobile money levies in Tanzania during Q2. M-Pesa transaction value increased by 49.7%, while M-Pesa revenue as a share of total service revenue increased by 3.4 percentage points to 22.8%, and 64.3% of our customer base is now using data services.

Vodacom’s Adjusted EBITDAaL increased by 5.6%* supported by good revenue growth, and positive operational leverage in Vodacom’s international operations. The Adjusted EBITDAaL margin decreased by 1.0* percentage point and was 36.3%.

On 10 November 2021, Vodacom Group announced it had entered into an agreement to acquire Vodafone Egypt from Vodafone for total consideration of €2.4 billion. See page 10 and Note 12 ‘Subsequent events’ in the unaudited condensed consolidated financial statements on page 53 for more information.

At the same time, Vodacom also announced that it had agreed to acquire a co-controlling 30% interest in the fibre assets currently owned by Community Investment Ventures Holdings (Pty) Limited (“CIVH”). CIVH owns Vumatel and Dark Fibre Africa, which are South Africa’s largest open access fibre operators. Vodacom’s investment and strategic support will further accelerate the growth trajectory of fibre roll-out in South Africa.

19

Vodafone Group Plc H1 FY22 results

Other Markets 9% of Group service revenue

H1 FY22

H1 FY21

Reported

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

1,958

 

1,898

 

3.2

 

  

- Service revenue

 

1,752

 

1,679

 

4.3

 

19.1

- Other revenue

 

206

 

219

 

  

 

  

Adjusted EBITDAaL

 

683

 

601

 

13.6

 

28.3

Adjusted EBITDAaL margin

 

34.9

%  

31.7

%  

  

 

  

Reported total revenue increased by 3.2% to €2.0 billion, as higher service revenue was partially offset by the depreciation of local currencies versus the euro.

On an organic basis, service revenue increased by 19.1%* (Q1: 18.4%*, Q2: 19.7%*) as a result of strong customer base and ARPU growth. The improvement in quarterly trends reflected higher roaming and visitor revenue, as well as increased demand for data as lockdown restrictions eased.

Service revenue in Turkey grew ahead of inflation, reflecting strong mobile customer base and ARPU growth. Mobile contract customer additions were 620,000 – the highest amongst any of our markets – including migrations from prepaid customers. We also added 363,000 prepaid customers as tourism to the market improved. Mobile contract churn improved by 4.8 percentage points year-on-year to 15.7%.

Service revenue in Egypt also grew ahead of inflation, supported by customer base growth and increased data usage. During the period, we added 134,000 mobile contract customers and 1.2 million prepaid mobile customers.

Adjusted EBITDAaL increased by 28.3%* and the Adjusted EBITDAaL margin increased by 2.7* percentage points. This reflected strong revenue growth and operating efficiencies in all markets. The Adjusted EBITDAaL margin was 34.9%.

Vantage Towers Delivering on our plan

H1 FY22

H1 FY211

Reported

    

Organic

    

€m

    

€m

    

change %

    

change %*

Total revenue

 

611

 

 

 

  

- Service revenue

 

 

 

 

- Other revenue

 

611

 

 

  

 

  

Adjusted EBITDAaL

 

305

 

 

 

Adjusted EBITDAaL margin

 

49.9

%  

 

  

 

  

Note:

1. Vantage Towers is a new reporting segment for the year ending 31 March 2022. See page 13 for more information.

Total revenue increased to €611 million as more than 570 new tenancies were added during the period, bringing the tenancy ratio to 1.42x. Vantage Towers continued to contribute to Europe’s digital transformation and reached a number of new partnership agreements with customers during the period. Vantage Towers reported its results on 15 November 2021.

20

Vodafone Group Plc H1 FY22 results

Associates and joint ventures

    

H1 FY22

H1 FY21

    

€m

    

€m

VodafoneZiggo Group Holding B.V.

 

(14)

 

(86)

Safaricom Limited

 

115

 

108

Indus Towers Limited

 

 

233

Other

 

10

 

5

Share of results of equity accounted associates and joint ventures

 

111

 

260

VodafoneZiggo Joint Venture (Netherlands)

The results of VodafoneZiggo (in which Vodafone owns a 50% stake) are reported here under US GAAP, which is broadly consistent with Vodafone’s IFRS basis of reporting.

Total revenue grew to €2.0 billion, primarily driven by mobile contract customer base growth and fixed ARPU growth, supported by higher roaming and visitor revenue.

During the period, VodafoneZiggo added 122,000 mobile contract customers, mainly driven by higher Consumer demand. Strong Business fixed performance was supported by an increase in the customer base, as well as higher demand for unified communications. The number of converged households increased by 23,000, with 45% of broadband customers now converged, delivering significant NPS and churn benefits. VodafoneZiggo now offers 1 gigabit speeds to 4.6 million homes and is on track to provide nationwide coverage in 2022.

During the period, Vodafone received €204 million in dividends from the joint venture, as well as €24 million in interest payments. The joint venture also drew down an additional loan from shareholders to fund an instalment arising from spectrum licences acquired in July 2020, with Vodafone’s share being €104 million.

Safaricom Associate (Kenya)

Safaricom service revenue grew to €1.1 billion due to strong Business fixed demand, and a recovery in M-Pesa revenue as transaction volumes increased and peer-to-peer transaction fees normalised.

Indus Towers Associate (India)

Indus Towers is classified as held for sale at 30 September 2021 in the consolidated statement of financial position. The Group’s interest in Indus Towers has been provided as security against certain bank borrowings secured against Indian assets and partly to the pledges provided to the new Indus Towers entity under the terms of the merger between erstwhile Indus Towers and Bharti Infratel.

Vodafone Idea Limited Joint Venture (India)

See Note 11 ‘Contingent liabilities and legal proceedings’ in the unaudited condensed consolidated financial statements on page 51 for further information.

Vodafone Hutchison Australia / TPG Telecom Limited Joint Venture (Australia)

In July 2020, Vodafone Hutchison Australia Pty Limited (‘VHA’) and TPG Telecom Limited (‘TPG’) completed their merger to establish a fully integrated telecommunications operator in Australia. The merged entity was admitted to the Australian Securities Exchange (‘ASX’) on 30 June 2020 and is known as TPG Telecom Limited. Vodafone and Hutchison Telecommunications (Australia) Limited each own an economic interest of 25.05% in the merged unit.

21

Vodafone Group Plc H1 FY22 results

Net financing costs

    

H1 FY22

    

H1 FY21

    

Reported

€m

€m

change %

Investment income

 

129

 

183

 

  

Financing costs

 

(1,473)

 

(1,610)

 

  

Net financing costs

 

(1,344)

 

(1,427)

 

5.8

Adjustments for:

 

  

 

  

 

  

Mark-to-market losses

 

397

 

368

 

  

Foreign exchange losses

 

56

 

231

 

  

Adjusted net financing costs1

 

(891)

 

(828)

 

(7.6)

Note:

1. Adjusted net financing costs is a non-GAAP measure. Adjusted net financing costs exclude mark-to-market and foreign exchange gains/losses. This metric is used by both management and the investor community. The H1 FY21 adjusted net financing costs has been aligned to the FY21 year-end presentation which no longer excluded lease interest. This increased adjusted net financing costs for H1 FY21 by €189 million.

Net financing costs decreased by €83 million, primarily due to lower foreign exchange movements on intercompany funding arrangements. Mark-to-market losses were driven by the lower share price, causing a mark-to-market loss on options held relating to the Group’s mandatory convertible bonds. Adjusted net financing costs remained stable year on year, reflecting consistent average borrowings less cash and cash equivalents balances and weighted average borrowing costs for both periods.

Taxation

    

H1 FY22

    

H1 FY211

    

Change

    

%

    

%

    

pps

Effective tax rate

 

(0.1)

%  

23.8

%  

(23.9)

Note:

1. In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had been terminated. Consequently, the held for sale classification was reversed, resulting in a decrease in the Effective tax rate of 0.2 pps compared to the previously published results.

The effective tax rate was (0.1)% in the six month period ended 30 September 2021. The tax credit was attributable to deferred tax credits in the UK, relating to the increase in the future statutory rate to 25% and in Italy relating to the revaluation of assets.

22

Vodafone Group Plc H1 FY22 results

Earnings per share

    

Reported

 

H1 FY22

H1 FY211

change

 

    

eurocents

    

eurocents

    

eurocents

 

Basic earnings per share

 

3.40

c

4.30

c

(0.90)

c

Note:

1. In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was held for sale. In December 2020, we announced that discussions with the potential purchaser had been terminated. Consequently, the held for sale classification was reversed, resulting in a decrease in Basic earnings per share of 0.15 eurocents compared to the previously published results.

Basic earnings per share was 3.40 eurocents, compared to 4.30 eurocents for six months ended 30 September 2020.

Cash flow and funding

Analysis of cash flow

H1 FY22

H1 FY21

Reported

    

€m

    

€m

    

change %

Inflow from operating activities

 

6,455

 

6,009

 

7.4

Outflow from investing activities

 

(2,811)

 

(5,013)

 

43.9

Outflow from financing activities

 

(3,795)

 

(7,050)

 

46.2

Cash inflow from operating activities increased by 7.4% to €6,455 million.

Outflow from investing activities decreased by 43.9% to €2,811 million, primarily due to lower outflows in relation to the purchase of short-term investments which outweighed higher spend on intangible assets and property, plant and equipment. Short-term investments include highly liquid government and government-backed securities and managed investment funds that are in highly rated and liquid money market investments with liquidity of up to 90 days.

Outflows from financing activities decreased by 46.2% to €3,795 million principally due to lower net outflow on borrowings which outweighed cash spent on our share buyback programme.

Borrowings and cash position

H1 FY22

Year-end FY21

Reported

    

€m

    

€m

    

change %

Non-current borrowings

 

(58,109)

 

(59,272)

 

  

Current borrowings

 

(11,412)

 

(8,488)

 

  

Borrowings

 

(69,521)

 

(67,760)

 

  

Cash and cash equivalents

 

5,824

 

5,821

 

  

Borrowings less cash and cash equivalents

 

(63,697)

 

(61,939)

 

2.8

Borrowings principally includes bonds of €48,584 million (FY21: €46,885 million) and lease liabilities of €12,428 million (FY21: €13,032 million).

The increase in borrowings is principally driven by the issuance of bonds with a nominal value of US$2,450 million (€2,114 million) utilising the US Shelf Programme.

23

Vodafone Group Plc H1 FY22 results

Statement of financial position

The consolidated statement of financial position is set out on page 40. Details on the major movements of both our assets and liabilities in the year are set out below.

Assets

Goodwill and other intangible assets decreased by €0.1 billion between 31 March 2021 and 30 September 2021 to €53.4 billion. This reflects the amortisation of computer software, partially offset by software and purchased licence additions in the period.

Property, plant and equipment decreased by €1.1 billion between 31 March 2021 and 30 September 2021 to €40.1 billion. This reflects the depreciation charge in the period, partially offset by additions in the period.

Other non-current assets increased by €1.1 billion between 31 March 2021 and 30 September 2021 to €33.1 billion, primarily due to a €0.9 billion increase in trade and other receivables.

Current assets decreased by €0.9 billion between 31 March 2021 and 30 September 2021 to €26.2 billion, primarily due to a €1.4 billion decrease in other investments, partially offset by an increase of €0.4 billion in trade and other receivables.

Assets held for sale remained stable between 31 March 2021 and 30 September 2021 at €1.3 billion and comprise the Group’s 28.1% interest in Indus Towers.

Total equity and liabilities

Total equity was broadly stable between 31 March 2021 and 30 September 2021 with an increase of €0.2 billion. This reflected an increase of €2.6 billion in total comprehensive income for the period, largely offset by dividends of €1.6 billion and the purchase of treasury shares of €1.0 billion.

Non-current liabilities decreased by €2.6 billion between 31 March 2021 and 31 September 2021 to €65.9 billion, primarily due to a €1.2 billion decrease in borrowings and a €1.2 billion decrease in trade and other payables.

Current liabilities increased by €1.4 billion between 31 March 2021 and 30 September 2021 to €30.1 billion, primarily due to a €2.9 billion increase in borrowings, partially offset by a decrease of €1.8 billion in trade and other payables.

Inflation

Inflation did not have a significant effect on the Group’s consolidated results of operations and financial condition during the six month period ended 30 September 2021.

24

Vodafone Group Plc H1 FY22 results

Other matters

Funding facilities

The Group has undrawn revolving credit facilities of €7.4 billion comprising euro and US dollar revolving credit facilities of €4.0 billion and US$4.0 billion (€3.4 billion) which mature in 2025 and 2026 respectively. Both committed revolving credit facilities support US and euro commercial paper programmes of up to US$15.0 billion and €8.0 billion respectively.

Post employment benefits

The €453 million net deficit at 31 March 2021 of scheme assets over scheme liabilities, arising from the Group’s obligations in respect of its defined benefit schemes, decreased by €332 million to a €121 million net deficit at 30 September 2021. The next triennial actuarial valuation of the Vodafone Section and CWW Section of the Vodafone UK Group Pension Scheme will be as at 31 March 2022.

Dividends

Dividends will continue to be declared in euros and paid in euros, pounds sterling and US dollars, aligning the Group’s shareholder returns with the primary currency in which we generate cash flow. The foreign exchange rate at which future dividends declared in euros will be converted into pounds sterling and US dollars will be calculated based on the average World Markets Company benchmark rates over the five business days during the week prior to the payment of the dividend.

The Board has announced an interim dividend per share of 4.50 eurocents (H1 FY21: 4.50 eurocents). The ex-dividend date for the interim dividend is 25 November 2021 for ordinary shareholders, the record date is 26 November 2021 and the dividend is payable on 4 February 2022. Dividend payments on ordinary shares will be paid directly into a nominated bank or building society account.

25

Vodafone Group Plc H1 FY22 results

Other significant developments

Board changes

On 27 July 2021, Renée James and Sanjiv Ahuja stepped-down as Non-Executive Directors.

Olaf Swantee was appointed as a Non-Executive Director at Vodafone’s Annual General Meeting on 27 July 2021 and subsequently resigned with effect from 25 September 2021 in light of a professional development which impacted his ability to serve on the Board.

On 30 September 2021 it was announced that Deborah Kerr will be appointed as a Non-Executive Director with effect from 1 March 2022.

Telecom services in Ethiopia

In May 2021, an international consortium named the Global Partnership for Ethiopia was awarded a licence to operate telecom services in Ethiopia.

The partners in the consortium are led by Safaricom Plc and will establish a new operating company in Ethiopia which aims to start providing telecommunications services from 2022. In addition to Safaricom, the partnership includes: Vodacom Group; Vodafone Group; Sumitomo Corporation and CDC Group.

Ethiopia is home to over 112 million people, making it the second largest country in Africa by population. It is one of the last countries in the world to introduce competition in the telecom industry, a process started by the government in 2019 as part of its economic reform agenda, with the support of the International Finance Corporation. The reforms aim to increase jobs, reduce poverty and grow the local economy in an inclusive and sustainable manner.

The consortium is proceeding with and adapting its plans for operational readiness, mindful of the recent declaration of a state of emergency in Ethiopia.

Spectrum acquisition in Spain

In July 2021, Vodafone Spain acquired 2x10 MHz of spectrum in the 700 MHz band from the Spanish Ministry of Economic Affairs and Digital Transformation (‘MINECO’) for €350 million (reserve price for the acquired block). The total amount was payable in a single instalment at the end of the auction process. In addition, a licensing fee of €15.5m will be payable each year.

The spectrum acquired has initial holding rights until 2041, with an automatic renewal with no additional fees for a further 20 years (until 2061), subject to meeting the licence obligations.

26

Vodafone Group Plc H1 FY22 results

Regulation

Introduction

Our operating companies are generally subject to regulation governing their business activities. Such regulation typically takes the form of industry specific law and regulation covering telecommunications services and general competition (antitrust) law applicable to all activities. The following section describes the regulatory frameworks and the key regulatory developments at national and regional level and in the European Union (‘EU’), in which we had significant interests during the period ended 30 September 2021. Many of the regulatory developments reported in the following section involve ongoing proceedings or consideration of potential proceedings that have not reached a conclusion. Accordingly, we are unable to attach a specific level of financial risk to our performance from such matters.

European Union (‘EU’)

The new European Electronic Communications Code (‘Code’) has updated the telecoms regulatory framework in Europe. The Code was required to be implemented by Member States in Europe by December 2020. However, the majority of the EU governments have not yet done that and, within Vodafone’s footprint, the Code has to date only been transposed in Germany, Hungary, Greece, Czech Republic (and UK). In other markets the law has either entered the approval process in the respective national parliament, or is still being discussed with interested stakeholders. Given the delay, the European Commission (‘EC’) has started infringement procedures and warned the remaining 18 Member States that in case of further delays the breach will be referred to the EU Court of Justice (CJEU).

In April 2021 the EC published its Artificial Intelligence (‘AI’) regulation (AI Act) setting out a number of prohibited AI use cases and new requirements for providers of high-risk AI.

Co-legislators have been developing their amendments to the Digital Services Act package (comprising a Digital Services Act and Digital Markets Act) since it was tabled in December. The lead European Parliament Committee on the Internal Market and Consumer Protection (‘IMCO Committee’) is set to vote on both texts in November 2021, with the EC working towards a General Approach on both files in December, paving way for trialogue talks under the French Presidency of the Council of the EU.

The EC has continued work under the EU Data Strategy, releasing an Inception Impact Assessment on the EU Data Act, and holding a public consultation over the summer months. The legislative proposal is due to be published by the EC on 1st December.

In December 2020, the EC published two legal acts mandated under the European Electronic Communications Code: (1) EC’s Recommendation on relevant markets (‘RMR’) to identify those product and service markets in which ex ante regulation may be justified; (2) the Delegated Act setting a single maximum Union-wide mobile voice termination rate and a single maximum Union-wide fixed voice termination rate (‘MTR’ and ‘FTR’) applicable to any provider of fixed and mobile termination services across the Union in the next five years.

In February 2021, the EC proposed the prolongation of the Roaming Regulation for 10 years in order to ensure the continuation of Roam-Like-at-Home. The EC proposes to reduce the wholesale caps for all services (data, voice and SMS) and bring new measures on transparency, quality of service and access to emergency communications. In addition, the European Parliament introduced in their position the introduction of further regulation of Intra-EU voice communications (currently capped at €0,19 per minute). The European Parliament and the Council are expected to start negotiations on the file in October 2021 and come to an agreement by the end of the year or in Q1/2022. The revised regulation shall enter into force in July 2022.

In March 2021, the EC published a “Connectivity Toolbox”, which is a joint deliverable of Member States and the EC containing best practices on network cost reduction, spectrum authorisation for 5G, the environmental footprint and environmental impact assessment of networks as well as Electronic Magnetic Fields. The objective of this toolbox is to reduce the cost of broadband deployment in Europe for Network Operators while the EC is in the process of revising the Broadband Cost Reduction Directive.

27

Vodafone Group Plc H1 FY22 results

In September the EC published a legislative proposal for a Decision of the European Parliament and of the Council establishing the 2030 Policy Programme “Path to the Digital Decade”. The proposal sets ambitious targets to be met by Member States by 2030 on the following 4 key pillars: a digitally skilled population and highly skilled digital professionals; secure and sustainable digital infrastructures (target is to have all European households connected to gigabit speeds and all populated areas covered by 5G); digital transformation of businesses; and digitisation of public services. The European Parliament and Council will need to endorse the targets through the regular EU legislative procedure.

Addressing the challenges posed by the COVID-19 pandemic, the Next Generation EU package is the Union’s means to support the recovery processes in EU Member States. The bulk of the proposed recovery measures are funded by a new temporary recovery instrument, the EU Recovery and Resilience Facility (RRF), worth nearly €750 billion, which was adopted in December 2020. A significant amount is allocated towards digital and green initiatives, with a minimum threshold of 20% of the RRF to be allocated to digital and 37% to green initiatives. In the period of May until October 2021, the EC approved the national plans under the RRF for 22 EU Member States, of which Czech Republic, Germany, Greece, Ireland, Italy, Portugal, Romania and Spain are within Vodafone’s footprint.

Germany

In May 2017, the national regulatory authority (‘BNetzA’) initiated the market review process for wholesale access at fixed locations in the markets for access to unbundled local loop (‘ULL’) and for virtual unbundled local access (‘VULA’) as well as for access to bitstream wholesale products. In its final market analysis issued in Q2 2019, BNetzA declared that only Deutsche Telekom (‘DT’) had significant market power (‘SMP’) for both copper and fibre-based wholesale products. No cable operator was defined as being dominant.

In October 2021, BNetzA published its draft regulation regarding the wholesale access markets (so-called Market 3a). In the draft, BNetzA proposes no significant changes in relation to the regulation of the copper network access (ULL; VDSL) but has suggested a light touch regulation of fibre access to the home (‘FTTH’). For first time in Germany, an access regime based on full equivalence of input (‘EoI’) is intended to enforce the equal treatment of wholesale demand and DT’s retail arm. In addition, BNetzA proposes improved access to DT’s passive infrastructure (ducts, masts) with SMP obligations to open DT’s passive network, including regulated prices for the first time. This would ensure Vodafone Germany’s wholesale based VDSL business in future, improve cost effective build out of Vodafone Germany’s own networks using ducts and eliminate the risk of complete deregulation of DT’s fibre networks.

As part of the process of implementing the Code, the German Parliament approved an abolishment of the right to bill TV services via ancillary costs in Multi Dwelling Units with a transition period for the existing footprint until June 2024. The law will enter into force in December 2021. Within the transition period the law does not allow households to have individual opt-outs for having the TV service billed via ancillary costs. In addition, new contracts with such billing schemes can be offered effectively until mid-2024, but must be terminated after this date. Furthermore, the amended law allows for a continued billing of the cost of deployment of new build fibre in-house networks via ancillary costs.

Frequency allocations at 800 MHz, parts of 1800 MHz, and 2600 MHz will expire at the end of 2025. Vodafone Germany currently holds allocations at 800 MHz and 2600 MHz. During the Summer 2021, BNetzA has consulted on different approaches to proceed with the spectrum, and is considering inter alia auctions, prolongation or licences or combinations of these, and will discuss these approaches with stakeholders in the coming months. BNetzA is expected to make a decision in 2022.

In response to a preliminary reference from the National Court in Germany, on 2 September 2021 the CJEU issued three Judgments related to zero-rated commercial offers of Vodafone Germany and Deutsche Telekom in Germany. The Judgements concluded that the specific zero-rated offers that were the subject of the Judgment, and which included an exclusion of roaming or tethering, or a limitation on the bandwidth for certain categories of application respectively, were not compliant with the Open Internet Regulation (‘OIR’). The National Court in Germany must now interpret and apply the Judgments in its own rulings.

28

Vodafone Group Plc H1 FY22 results

Italy

In March 2017, the national regulatory authority (‘AGCOM’) imposed a minimum billing period of one month for fixed and convergent offers, effective by the end of June 2017. The operators appealed AGCOM’s resolution before the Administrative Court and the appeal was rejected in February 2018. Vodafone Italy filed an appeal before the Council of State and after the public hearing held in July 2020, the Council of State issued a Preliminary referral to the Court of Justice in order to assess if the NRA has the power to impose minimum and binding billing periods under EU law.

In January 2020, the national competition authority (‘AGCM’) ruled that Vodafone Italy, TIM, Fastweb and WindTre had coordinated their commercial strategies relating to the transition from four-week billing (28 days) to monthly billing, with the maintenance of a 8.6% price increase, in violation of art.101 of TFEU. Vodafone Italy’s appeal on the Authority’s decision was heard by the Administrative Tribunal in May 2021. In a decision published on July 2021, the Administrative Tribunal accepted all Vodafone Italy’s defensive arguments, and annulled the AGCM’s decision and the sanction. The time limit for the AGCM to submit an appeal before the Council of State will expire in November 2021.

The frequencies in the 2.1 GHz band have been renewed until 2029. Vodafone Italy paid 240 million euros (a single payment) in April 2021 for the renewal.

In April 2021, AGCOM started a public consultation on the co-investment commitments presented by TIM in January 2021 to verify the applicability of Art. 76 of the Code. It is estimated that the public consultation period will close by end of the year.

United Kingdom

In March 2021, Vodafone Ltd acquired 40MHz of 3.6GHz spectrum expiring in 2041 for £176 million. Within the negotiation stage of the auction, Vodafone Ltd and Telefonica agreed to trade spectrum so that Vodafone Ltd’s holdings in the 3.4-3.6 GHz band will be sufficiently proximate to be efficiently used by network equipment. Vodafone Ltd’s total holdings in 3.4-3.6 GHz are 90 MHz, with fees payable from 2038.

The 2100MHz band, originally awarded for 3G usage, will become liable to fees from January 2022 (as the national regulatory authority (‘Ofcom’) levies fees on spectrum after an initial 20 year term). Ofcom has made an initial proposal that Vodafone Ltd’s fees will be set at £17M per year.  Vodafone has provided feedback on Ofcom’s approach, and the level of fees will be confirmed before the end of the 2021.

Ofcom is planning to conduct a review of the UK mobile market.  It is the first review of its kind and will examine the overall market structure and the ability of the market to fulfil the investment challenges that lie ahead. In parallel, DCMS have recently issued a Wireless Infrastructure Strategy call for evidence to help inform UK Government strategy on future technologies and infrastructure evolution in the sector, with a particular focus on outcomes in the second half of the decade.

Ofcom have approved Openreach’s long term pricing proposals for fibre to the premises (‘FTTP’), creating a more certain commercial environment for fixed broadband services, as consumers transition away from the legacy copper network.

Ofcom is conducting a review of Net Neutrality rules. With the UK no longer obliged to align with the European Union framework on Net Neutrality there is scope for the UK to reform the current rules, creating a space for service differentiation, while safeguarding against internet discrimination. However, the UK is still committed to high-level open internet alignment under the terms of the UK/EU trade deal.

29

Vodafone Group Plc H1 FY22 results

Spain

Vodafone Spain requested a three-year extension and modification of the commitments which ended in April 2020 in relation to the Movistar–DTS merger in 2015. Following Vodafone Spain’s extension request in February 2020, the national regulatory authority (‘CNMC’) rendered public its Resolution extending the term of most of the initial commitments for an additional period of three years, ensuring access to Movistar Estrenos and Movistar Series channels. The Resolution has eliminated the commitment that limited the terms in which Telefónica could acquire subscription video on demand (‘SVOD’) content, which has been appealed by Vodafone Spain.

In November 2020, a public consultation on the new Audiovisual Act, intended to transpose the Audio-Visual Services Directive into national legislation, was launched for comments. In June 2021, the Government opened a second public consultation on the Act, which closed on 12 July. The draft includes provisions such as the elimination of MNO contribution (0.9% telecoms revenues) to the Public Corporation RTV.

In November 2020, CNMC published a public consultation on Market 3a and 3b review. The proposal implies an increase in the number of deregulated municipalities and would reduce the period for closure of copper exchanges from five to two years. The measures were notified to the EC in June 2021, and approval is expected by the end of 2021.

In December 2020, the Government approved a Royal Decree modifying the current Consumer Law, in which companies providing telephony customer care services must offer an alternative number (mobile or landline) where the cost of a call must be equal to or less than the cost of a call to a standard geographic or mobile number.

In April 2021, the Government approved a Royal Decree-Law aimed at extending the duration of spectrum band concessions through the modification of the current General Telecommunications Act. The new article increases the duration to a minimum of 20 years and includes the possibility to allow for an extension of this initial period for a minimum duration of 5 years and a maximum duration of additional 20 years. In relation to existing concessions, the Royal Decree-Law makes it possible to extend these by 20 years, but this must be specifically requested and approved from the Ministry 2 years prior to the concession deadline.

In June 2021, the Ministry for Economy and Enterprise initiated the formal process of reassigning the 3.4-3.8 GHz band, and asked all operators to reach a consensus on this. In September 2021, the Ministry issued the draft Project of Ministerial Decree that will regulate the reassignment, and shared this with interested parties for comment. A final decision is expected by the end of 2021.

In June 2021, the CNMC approved the merger between MásMóvil and Euskaltel as it considers that the transaction does not significantly alter the competitive situation. Later, the Ministerial council provided its approval and finally, as Euskaltel is a listed company, in July 2021 Spain’s financial markets regulator, (‘CNMV’) has approved the proposed takeover.

In July 2021, the spectrum auction for the 700 MHz band took place. Vodafone Spain, Orange and Telefónica each won spectrum, with 2x10 MHz each. Vodafone Spain and Orange have paid €350 million each (starting price). Telefónica paid €310 million, but has higher coverage commitments.

Ireland

In April 2019, the national regulatory authority (‘ComReg’) published its final decision on Universal Service funding applications by eircom Ltd (‘eir’) for 2010 to 2015. ComReg found that the net cost of the Universal Service Obligation (‘USO’) did not represent an unfair burden on eir. Subsequently, eir have challenged this decision. The proceedings are ongoing, and Vodafone Ireland is a notice party to these proceedings.

In May 2019, ComReg initiated a review of the regulated Weighted Average Cost of Capital (‘WACC’). In its draft decision notified to the EC in June 2020, ComReg proposed the regulated fixed WACC should fall from 8.18% to 5.61%. It was subject to annual review in June 2021 and fell further to 5.56%.  The reduction from 8.18% has not been applied to wholesale pricing cost models.  In line with the decrease of the WACC, the EC urged ComReg to update relevant fixed pricing decisions as soon as possible, to ensure that prices in the Irish wholesale markets reflect current market conditions. ComReg issued its decision on the WACC in October 2020 and decided to update WACC as part of an overall review. A final decision on the Access Network Cost Model, incorporating the reduced WACC, is expected by end of 2021.

30

Vodafone Group Plc H1 FY22 results

In December 2020, ComReg published its decision on the Multi-Band Spectrum Auction. In late January 2021, Three Ireland (Hutchison) Ltd and Three Ireland Services (Hutchison) Ltd (collectively ‘Three’) lodged an appeal to the decision. The proceedings commenced in June 2021 and remain ongoing

ComReg and the Irish government have continued to extend the Temporary Spectrum Measures on 700MHz 2.1GHz and 2.6GHz spectrum.  The measures have extended for two further three-month periods until 1 April 2022.

Portugal

In June 2019, Vodafone Portugal launched a court action against the national regulatory authority (‘ANACOM’) seeking the revocation of Dense Air’s spectrum licence under the ‘use it or lose it’ principle. In March 2020, Vodafone Portugal launched another court action against an ANACOM’s December 2019 decision which amends – instead of revoking – Dense Air’s spectrum license. On November 2020, Vodafone Portugal brought a precautionary proceeding against ANACOM regarding the restrictive impact in the 5G auction of maintaining Dense Air’s spectrum licence. Legal proceedings are ongoing.

In February 2020, the Portuguese Government put forward a Resolution setting out its 5G Strategy. Following this, ANACOM launched a public consultation on the 5G Auction Regulation and in November 2020 ANACOM published its final decision. Vodafone Portugal submitted a court action against ANACOM in relation to discriminatory measures between new entrants and current MNOs in the final decision, which is pending decision. ANACOM approved further changes to the 5G Auction Regulation in June 2021 and September 2021, and Vodafone Portugal has appealed aspects of these also. In the meantime, the auction, which began in December 2020, is ongoing.

In July 2020, the national competition authority (‘AdC’) sent Vodafone Portugal and three other national operators a statement of objections (‘SO’) alleging that operators may have formed a cartel to limit competition in telecoms services advertising via the Google search engine. In October 2020, Vodafone Portugal responded to the SO and proceedings are ongoing. Vodafone has also filed motions and appeals with different authorities regarding procedural irregularities and invalidity of evidence collected during the December 2018 raid at Vodafone Portugal´s premises. In December 2020, a Court decision declared email evidence collected at Vodafone Portugal´s premises to be inadmissible.

Vodafone Portugal continues to challenge payment notices totalling €34.8 million issued by ANACOM regarding 2012-2014 extraordinary compensation of Universal Service net costs.

On July 2021, the Portuguese Government approved a Decree-Law that establishes a social tariff for broadband internet access (‘IST’), which will benefit consumers with low income or with special social needs. The Decree-Law set that ANACOM should promote a public consultation on bandwidth and price of the IST. ANACOM therefore consulted industry on the main characteristics of the IST. This process concluded with ANACOM setting a required bandwidth of 30/3 Mbps for download / upload, and an allowance of 30GB, and setting the maximum price operators may charge for the service, consisting of a of €5 (+VAT) for the service, plus €21,45 (+VAT) for the equipment.

Romania

The 5G Security Law was adopted in June 2021. The law provides operators 5 years to swap to authorised vendors for core network, and 7 years for radio access networks related to 5G

The 5G spectrum auction has been delayed until early 2022. Therefore, only short term and available and existing spectrum in 800Mhz, 2600Mhz FDD and TDD, and 3.5 GHz frequency bands will be auctioned in November 2021.

31

Vodafone Group Plc H1 FY22 results

Greece

In September 2021, the Government announced a reform on the ‘special mobile tax’, which is currently charged at between 12% - 20% of the mobile tariff, (and VAT of 24% is applied on top of this). Effective as of calendar year 2022, this ‘special mobile tax’ will be abolished for subscribers aged up to 29 years, and reduced to 10% for all other subscribers.

Nova (ex-Forthnet) has filed a complaint with the Administrative Court requesting the annulment of the Vectoring/FTTH allocation decisions. The hearing date has been postponed to November 2021.

In December 2020, Vodafone Greece acquired 2x10 MHz of 700 MHz, 2x20 MHz of 2.1GHz, 140 MHz of 3.5 GHz, and 400 MHz of 26 GHz in the recent auction for €130m. The spectrum acquired has a 15-year duration to 2035, with the option of a further five-year extension.

Following the publication of the 5G Auction Tender document, a petition by Greek residents for its annulment, as well as for any future administrative acts, was filed before the Council of the State on the grounds it infringed environmental protection provisions. The hearing date is set for December 2021.

The national regulatory authority’s (‘EETT’) decision in relation to Wind’s complaint against Vodafone Greece and Cosmote alleging abuse of dominance in relation to calls to mobile networks in Albania is pending.

Vodafone Greece appealed EETT’s decision on the MVNO access dispute resolution between Vodafone and Nova (ex-Forthnet). The hearing of the case is scheduled for December 2021 before the Administrative Court of Appeal.

The development of a margin squeeze test model based on non-discrimination obligation for OTE’s retail plans is currently in progress. Operators have provided their comments on the model, and these have been assessed by EETT.  The finalized model is expected to be notified to the EC and unless there are significant comments, the final decision is expected to be issued within Q1 2022.

In February 2018, EETT issued decisions related to the Universal Service Cost for the years 2010 (accounting to €24,83m) and 2011 (accounting to €21,98m). Based on these decisions, the Universal Service Cost has been proved an unfair burden for OTE, the designated Universal Service Provider 2010 and 2011. According to the Telecommunications Law 4070/2012 and the Ministerial Decision 28120/974/11-5-2007, in such cases, the Universal Service net costs are shared to all telecom operators. Based on this, the EETT issued a second round of decisions for the allocation of the Universal Service Cost to each operator. For the years 2010 and 2011, the allocated cost based on revenue for Vodafone Greece was €4.8m and €4.2m respectively. In June 2020, the Administrative Court of Appeal Court rejected the petitions for the annulment of EETT’s decisions. In June 2021 Vodafone appealed against the decisions before the Council of the State. Due to the suspension of court operations throughout Greece due to COVID-19, the deadline for the filing of the appeals has been postponed.

The NRA published the decision on the USO net cost for the period 2012-2016 of total amount €36,8m for all operators, with Vodafone Greece share being about €7,75m, payable in 5 yearly instalments. Vodafone Greece intends to file a petition for the annulment of the NRA’s decision.

Czech Republic

In August 2019, the EC sent a statement of objections to O2 Czech Republic, CETIN and T-Mobile Czech Republic with respect to the competition concerns in relation to the parties’ network sharing agreement. Following commitments offered by the parties in respect of the agreement, on 1 October 2021 the EC announced it was seeking stakeholder feedback on these commitments.

Vodafone filed a complaint to the EC, regarding Czech Republic’s 5G spectrum auction, arguing that the auction terms set by the Czech national regulatory authority (‘CTU’) infringed EU law. The case is pending.

The re-farming of 3.4-3.8GHz spectrum was completed in September 2021, to provide contiguous spectrum to each spectrum holder in this band (Vodafone Czech Republic has 60 MHz).

32

Vodafone Group Plc H1 FY22 results

In September the CTU published draft market analysis of mobile wholesale access market for comments.  The CTU has proposed in its consultation to impose regulation on the wholesale price for mobile voice, SMS and data. The consultation period ended on 25 October 2021. The market analysis and any consequent remedies imposed must be approved by the Commission before being published. A final decision is not expected until March 2022 at earliest.

Hungary

In January 2021, the national regulatory authority (‘NMHH’) published its market analysis decision for wholesale voice call termination on individual mobile networks. Each mobile network operator and mobile virtual network operator in Hungary is found to have SMP. Later, in June 2021, NMHH published its decision on obligations in market for wholesale voice call termination on individual mobile networks. In its decision, the NMHH maintained obligations regarding transparency, equal treatment, access and interconnection, while the accounting separation obligation was withdrawn. Magyar Telekom requested a review of the decision on market analysis and on the obligations in court. The court case is ongoing.

In July 2021 NMHH launched a sectoral inquiry on SMS termination service and retail bulk SMS service, based on a concern raised by the Hungarian Competition Office’s (‘HCO’).  HCO has indicated their view that mobile service providers (including Vodafone Hungary) in Hungary may have a uniform pricing practice for SMS termination and bulk SMS. The sectoral inquiry does not have a statutory deadline, but it is estimated it will conclude in Q2 2022.

In September 2021, NMHH published an examination of the justification for maintaining the national domestic directory inquiry service as a universal service. A final decision on whether to maintain this as a universal service will follow at a later date.

The Economic Competition Office investigation into the network and spectrum sharing and possible collusion in the previous spectrum tender by Magyar Telekom and Telenor is ongoing.

Albania

In June 2020, the Albanian national regulatory authority (‘AKEP’) issued its final decision on national and international MTRs. The National MTRs will remain unchanged at 1.11 ALL/min. In November 2020, AKEP issued a public consultation on its intention to develop its own cost model to ensure that MTRs reflect Albanian market conditions and characteristics accurately, and to set an appropriate glide path for the application of the target rates.

In June 2021 AKEP approved the “Results of the cost model of wholesale mobile network services”, a study conducted by the external consultant Terra. The study proposes a reduction in the national voice MTRs with a target tariff of 0,751Lek/min and the international voice MTRs with a target tariff of 0,762 Lek/min. A 2-year glidepath is proposed for the national MTR reduction, however there is no further elaboration on the international MTRs. The document at this stage is not binding. Both national and potentially international MTRs will be subject to a market analysis conducted by AKEP as per the rules and deadlines set in the Albanian legislation. There is no information as to when this will happen.

From the first of July 2021, roaming surcharge rates have been removed in the ‘West Balkan 6’ (‘WB6’) countries (Albania, Kosovo, Montenegro, Macedonia, Serbia , Bosnia). From these dates, users can ‘roam like at home’ across the WB6 markets. It is possible for operators to implement a Fair Usage Policy for data consumption in order to protect the operator from abusive usage.

AKEP is planning to negotiate an auction for all bands (3.5 MHZ 26 GHz, 700 MHZ – all of which are currently occupied by media operators). The Auction Documents are expected to be launched for public consultation during January – March 2022, with the auction expected to take place after March 2022.

33

Vodafone Group Plc H1 FY22 results

Vodacom: South Africa

In March 2021, the national regulatory authority (‘ICASA’) published a findings document on its market inquiry into mobile broadband services. ICASA found insufficient competition and designated Vodacom SA as a significant market power in several relevant markets at wholesale (site access, national roaming) and retail levels, proposing remedies primarily at the wholesale level. ICASA published the Draft Regulations for comment and held public hearings in August 2021. The next step is the publication of the Final Regulations and Reasons document.

In October 2020, ICASA issued an Invitation to Apply (‘ITA’) notice on the licensing process for international mobile telecommunications in respect of the provision of mobile broadband wireless access services for urban and rural areas using the complimentary bands IMT700, IMT800, IMT2600 and IMT3500, with applications closing in December 2020. ICASA also issued a composite ITA for an individual electronic communications network service license and radio frequency spectrum license for the wireless open access network with a closing date of March 2021.

In March 2021, following applications by Telkom, e.tv and MTN to review the publication of the ITAs, an interdict was granted against the ITA process pending the finalisation of the review proceedings. All parties, with the exception of e.tv, have subsequently concluded a settlement contained in consent order, granted in September 2021 by the High Court, which sets aside the ITAs. However, due to concerns that re-farming of spectrum will have on their ability to provide free-to-air broadcasting, e.tv has filed a supplementary affidavit, in which ICASA and the Minister are required to undertake a process of public consultation regarding the date of the migration to digital television, and measures to ensure customers continue to have access to free-to-air-broadcasting. ICASA and the Minister will oppose e.tv’s motion by filing an answering affidavit by 12 November 2021. The hearing is scheduled for 31 January 2022.

During April 2020, ICASA licensed available IMT spectrum on a temporary basis to 5 MNOs, including Vodacom SA, in response to the COVID-19 National State of Disaster. In August 2021, ICASA announced that it would no longer be extending the validity of temporary spectrum assignments.  The current temporary spectrum licences are therefore set to expire on 30 November 2021. In October 2021 Telkom filed an application to interdict the expiry of temporary spectrum allocation, and MTN and Vodacom joined the appeal later in October. The matter is scheduled to be heard on 15 November 2021.  ICASA and Rain will be opposing Telkom, MTN and Vodacom’s applications.

In May 2021, ICASA published a notice which announced the start of the Review of the Pro-competitive Conditions imposed on relevant licensees in terms of the Call Termination Regulations, to be completed by March 2022. This will be followed by cost modelling, to be completed by August 2022, and Final Regulations, to be published by September 2022.

Vodacom: Democratic Republic of the Congo

In August 2018, the Customs Authority issued a draft infringement report assessing that there were unpaid duties for alleged smuggled devices bought by Vodacom Democratic Republic of Congo (‘Vodacom DRC’) which amounted to US $44 million, to which Vodacom DRC objected. In May 2019, Vodacom DRC filed an administrative appeal at the Council of State, which is still pending.

In April 2020, a new decree introduced a Central Equipment Register System (‘CEIR’) and handset certification fees. In November 2020, Vodacom DRC was fined US $2.5 million by way of a Ministerial Decree for alleged shortcomings in its cooperation and implementation of charging mechanisms related to the CEIR system. Assessment of the Ministerial Decree indicated that its issuance was not in accordance with applicable laws and procedures on the basis that the Decree had to be gazetted prior to the fine becoming payable.  Vodacom DRC appealed the fine before the Minister of Communications and sought interim suspension of the decree. A decision on the petition for interim suspension and its respective implementation measure was meant to be issued by December 2020, however, this remains pending.

34

Vodafone Group Plc H1 FY22 results

In January 2021, Vodacom DRC received notice by the Minister of Communications, stating that a December 2020 investigation found non-compliant SIM cards without providing further details. Vodacom DRC sent a letter requesting further information on the details of the investigation. While awaiting a response to its letter in February 2021, Vodacom DRC was fined US $3.65 million by way of a Ministerial Decree for alleged non-compliance. Vodacom DRC initiated legal action and appealed for a stay of the execution of the fine for the duration of the appeal, which was granted.  The national regulatory authority (‘ARPTC’) is yet to produce the report that substantiates the fine and thus the appeal has not progressed further to date.

Vodacom: Tanzania

In February 2020, the national regulatory authority (‘TCRA’) issued new SIM Card Registration Regulations to formalise the ‘biometric only’ SIM registration requirement and restrict ownership of the number of SIMs by customers. Vodacom Tanzania has implemented biometric only SIM registration and is participating in the TCRA’s process on intended barring of non-compliant SIMs, whereby the final deadline for compliance has been set to 30 October 2021.

In February 2021, the TCRA issued a letter stating that Vodacom Tanzania has been found non-compliant with Quality of Service (‘QoS’) regulations and imposed a fine of US $3.5 million. However, instead of payment of this fine, Vodacom Tanzania entered a binding commitment to invest the equivalent value into its network for the purposes of improving network QoS in the non-compliant areas, by 31 October 2021.

In February 2021, the TCRA issued new Rules on Bundle Tariffs, Promotions and Special Offers and a Directive on a minimum data price floor to be implemented by April 2021. The TCRA further requested implementation of the rates in accordance with a glide path that will achieve the minimum price floor by July 2022. Vodacom Tanzania has complied with the request.

Vodacom: Mozambique

The Communications Regulator assigned Vodacom Mozambique temporary spectrum (2x5 MHz of 1800 band). This was assigned under a COVID-19 relief program and this temporary license remains valid whilst the “State of Calamity” declaration remains in force in Mozambique.

In April 2021, the Communications Regulator published new MTRs for the period 2021-2024, retrospectively effective as of January 2021. There is a glide path in place, with a final rate in 2024 of M 0,12.

Vodacom: Lesotho

In December 2019, the Lesotho Communications Authority (‘LCA’) issued a notice of enforcement against Vodacom Lesotho premised on its view that the company’s statutory external auditors were not independent, as required by the Companies Act. In September 2020, the LCA issued a penalty of M 134 million against Vodacom Lesotho. Despite Vodacom Lesotho reserving its rights for appeal within the statuary timeframe, in October 2020 the LCA issued a notice of revocation of the operating licence of Vodacom Lesotho for failure to pay a penalty of M134 million. Thirty percent of this fine was determined by the LCA to be payable in October 2020 and the balance was suspended for a period of five years, on the condition that Vodacom Lesotho is not found guilty for breach of any of its regulatory obligations in the future. Vodacom Lesotho has launched an application in the Lesotho High Court to have both determinations of the LCA imposing the fine and revoking its operating licence, respectively, reviewed and set aside. The Lesotho High Court has, in the meantime, issued an order interdicting the LCA from, inter alia, enforcing the payment of the said fine and revoking Vodacom Lesotho’s operating licence. The Lesotho High Court heard the matter in December 2020, and Vodacom Lesotho is awaiting judgement.

In June 2021, the Minister of Communications issued new SIM and Device Registration Regulations without prior consultations. The Regulations included a requirement for biometric registration and penalties for non-compliance. Subsequently, the Parliament directed the LCA to withdraw the Regulations to allow for a comprehensive public stakeholder consultation prior to promulgating regulations. The LCA initiated the consultation process which closed on the 30 September 2021. Vodacom Lesotho has made submissions through the consultation process and will also continue to engage with the LCA to shape the final Regulations.

35

Vodafone Group Plc H1 FY22 results

In August 2021, Vodacom Lesotho received approval for the renewal of its 3500MHz trial 5G spectrum (1x100MHz) for a further 6 months period expiring 31 March 2022. Vodacom Lesotho is engaging the LCA to convert the trial license to a permanent license.

Turkey

In December 2019, the national regulatory authority (‘ICTA’) approved and published its Fixed Broadband Wholesale Market Analysis, stating that Vodafone Turkey will have access to Türk Telekom fibre at different network levels based on regulated terms and fees and retail tariffs will be subject to an ex-ante margin squeeze test. In February 2021, ICTA published the rules and procedures for this test, which shall be applied from October 2021.

ICTA’s proposed action to broaden the scope of the 3G coverage to include new metropolitan areas was suspended by the Council of State motion, as Vodafone Turkey appealed to the administrative court. In April 2019, the Council of State accepted the case and annulled the ICTA decision. As of March 2021, Plenary Session of Administrative Law Divisions rejected ICTA’s requests and finalised the judgment in favour of Vodafone Turkey.

In August 2019, Vodafone Turkey received the payment order for the administrative penalty of TL 138 million due to the breach of pre-information obligations as per the District Sales Regulation & Consumer Law on Value Added Services. As the Court of Appeal upheld the decision, the Ministry of Commerce applied to the Council of State against the decision. The penalty amount was reduced by making use of the Amnesty Law, thus waiving the appeal case. In addition, engagement with the Ministry is ongoing, and a legislative proposal has been drafted for the Ministry’s previous and upcoming penalties to ensure a healthy investment environment.

Egypt

In September 2020, Vodafone Egypt submitted its proposal to acquire 40 MHz in response to the national regulatory authority (‘NTRA’) issuance of a bid for spectrum acquisition in the 2600 MHz band. In December 2020, Vodafone Egypt’s technical and financial proposal was accepted, and a new License Annex was signed between NTRA and Vodafone after payment of US $270 million and the remaining 50% to be paid over two years in two equal instalments. Vodafone Egypt has received the spectrum for testing.

Ghana

In January 2018, Vodafone Ghana paid 30% of the judgment debt into court (€4.8 million) in line with a Conditional Stay of Execution in relation to a High Court decision, affirmed by a panel of the Court of Appeal, on a parcel of land located at Afransi in the Central Region of Ghana. In May 2019, the Court of Appeal affirmed the High Court’s decision. An appeal is pending before the Supreme Court and another application which seeks to stop the plaintiff from enforcing the judgment was expected in April 2020. In July 2020, the Supreme Court granted Vodafone Ghana’s application to produce this new evidence as part of the documents to be relied on. The Plaintiff in December 2020 also filed for leave to produce new evidence at the trial. The Supreme Court heard this application in January 2021 and a date will be given by the Court for a mini trial of the matter to be conducted at the Supreme Court after which the Court will deliver its judgment

In June 2020, the national regulatory authority (‘NRA’) declared MTN Ghana as a SMP in Ghana. With immediate effect, several corrective market interventions were announced as follows: Asymmetric MTR Pricing, National Roaming, Price Floor/Ceiling as well as Technology Neutrality in the 1800MHz frequency band. While asymmetric pricing was implemented in October 2020 for a two-year period, national roaming and the other market interventions are still under discussion. In July 2021, as directed by the NRA, Vodafone Ghana entered technical and commercial discussions with MTN Ghana concerning National Roaming. Vodafone Ghana and MTN Ghana are executing a proof-of-concept in 3 regions for unidirectional roaming (the Oti Region, Volta Region and Northern East Region).

36

Vodafone Group Plc H1 FY22 results

In January 2020, Vodafone Ghana successfully renewed its 900MHz and 1800MHz licenses for 10 years, until 2029, pending payment of US25 million. Vodafone Ghana entered negotiations with the Ministry of Communications and Digitalisation (‘MoCD’) and Ministry of Finance to amend the terms of renewal in relation to increasing duration of license, payment terms, re-farming rights, and additional 800MHz spectrum, which continue. The MoCD has extended the payment deadline date to 31 December 2021.

The NRA assigned 2x5MHz of 800MHz frequency band on a temporary basis until June 2021 as part of Covid-19 measures.  Use of the temporary spectrum has been further extended till 31 December 2021.

The NRA has requested customer information from licensees as part of the Government’s tracking and tracing programme (‘EI 63’), which following an application was found by the High Court in June 2020 to be compliant with the emergency order. Information is still being provided to the government for this purpose.  However, in August 2021, the High Court ruled in favour of a private citizen, Mr. F. Kwarteng, who argued that the government’s information request infringed his personal privacy right. The Court held that certain portions of the EI 63 infringed on the privacy of customers and that these portions should be expunged, in particular: (i) Operators are prohibited from providing un-anonymised data on mobile money transactions and merchant details to the Government, as this is outside the scope of EI 63; (ii) Offending portions of EI 63 are to be expunged within 12 months of the Judgment; (iii) Vodafone was ordered to pay the Applicable GHS10,000.00 for contesting the Applicant’s position.

Legal proceedings

The following section describes developments in legal proceedings which may have, or have had, during the six months ended 30 September 2021, a significant effect on the financial position or profitability of the Company and its subsidiaries. This section should be read in conjunction with the information contained under ‘Legal proceedings’ on pages 195 to 197 of the Group’s Annual Report on Form 20-F for the year ended 31 March 2021.

Indian tax cases

Refer to ‘Contingent liabilities and legal proceedings on page 52.

UK: IPCom v Vodafone Group Plc and Vodafone UK

Refer to ‘Contingent liabilities and legal proceedings on page 53.

Spain and UK: TOT v Vodafone Group Plc, VGSL and Vodafone UK

Refer to ‘Contingent liabilities and legal proceedings on page 53.

37

Vodafone Group Plc H1 FY22 results

Risk factors

The key factors and uncertainties that could have a significant effect on the Group’s financial performance, include the following:

Cyber threat and information security

An external cyber-attack, insider threat or supplier breach could cause service interruption or the loss of confidential data. Cyber threats could lead to major customer, financial, reputational and regulatory impacts.

Geo-political risk in supply chain

Our operation is dependent on a wide range of global suppliers. Disruption to our supply chain could mean that we are unable to execute our strategic plans, resulting in increased cost, reduced choice and network quality.

Adverse political and regulatory measures

Adverse political and regulatory measures impacting our strategy could result in increased costs, create a competitive disadvantage or have negative impact on our returns.

Strategic transformation

Failure to execute on organisational transformation and portfolio activity (includes integrations, mergers or separations) could result in loss of business value and additional cost.

Global economic disruption

A global economic crisis could result in reduced telecommunication spend from businesses and consumers, as well as limit our access to financial markets and availability of liquidity, increasing our cost of capital and limiting debt financing options.

Technology failures

Network, system or platform outages resulting from internal or external events could lead to reduced customer satisfaction, reputational damage and/or regulatory penalties.

Market disruption

New telecoms entering the market could lead to significant price competition and lower margins.

Disintermediation and failure to innovate

Failure in product innovation or ineffective response to threats from emerging technology or disruptive business models could lead to a loss of customer relevance, market share and new/existing revenue streams.

Legal and regulatory compliance

Failure to comply with laws and regulations could lead to a loss of trust, financial penalties and/or suspension of our licence to operate.

IT transformation

Failure to design and execute IT transformation of our legacy estate could lead to business loss, customer dissatisfaction or reputational exposure.

TCFD disclosure

We recognise that climate change poses a number of physical (i.e. caused by the increased frequency and severity of extreme weather events) and transition-related (i.e. economic, technology or regulatory challenges related to moving to a greener economy) risks and opportunities for our business. As part of our commitment to operate ethically and sustainably, we are dedicated to understanding climate-related risks and opportunities and embedding responses to these into our business strategy and operations. We are aligning internal processes with the recommendations of the Task Force on Climate-related Financial Disclosures (‘TCFD’) focusing on four thematic areas that are core elements of how organisations operate: governance, strategy, risk management, metrics and targets.

38

Vodafone Group Plc H1 FY22 results

Unaudited condensed consolidated financial statements

Consolidated income statement

Six months ended 30 September

2021

20201

    

Note

    

€m

    

€m

Revenue

 

2

 

22,489

 

21,427

Cost of sales

 

  

 

(15,097)

 

(14,754)

Gross profit

 

  

 

7,392

 

6,673

Selling and distribution expenses

 

  

 

(1,675)

 

(1,676)

Administrative expenses

 

  

 

(2,870)

 

(2,580)

Net credit losses on financial assets

(230)

(378)

Share of results of equity accounted associates and joint ventures

 

 

111

 

260

Other (expense)/income

 

 

(108)

 

1,055

Operating profit

 

2

 

2,620

 

3,354

Investment income

 

  

 

129

 

183

Financing costs

 

  

 

(1,473)

 

(1,610)

Profit before taxation

 

  

 

1,276

 

1,927

Income tax credit/(expense)

 

3

 

1

 

(459)

Profit for the financial period

 

  

 

1,277

 

1,468

Attributable to:

 

  

 

  

 

  

– Owners of the parent

 

  

 

996

 

1,269

– Non-controlling interests

 

  

 

281

 

199

Profit for the financial period

 

  

 

1,277

 

1,468

Profit per share

 

  

 

  

 

  

Total Group:

 

  

 

 

– Basic

 

5

 

3.40c

4.30c

– Diluted

 

5

 

3.39c

4.29c

Consolidated statement of comprehensive income/expense

Six months ended 30 September

2021

20201

    

€m

    

€m

Profit for the financial period

 

1,277

 

1,468

Other comprehensive income/(expense):

 

 

Items that may be reclassified to the income statement in subsequent periods:

 

 

Foreign exchange translation differences, net of tax

 

(117)

 

(768)

Foreign exchange translation differences transferred to the income statement

(77)

Other, net of tax2

 

1,286

 

(2,058)

Total items that may be reclassified to the income statement in subsequent periods

 

1,169

 

(2,903)

Items that will not be reclassified to the income statement in subsequent periods:

 

 

  

Net actuarial gains/(losses) on defined benefit pension schemes, net of tax

 

200

 

(383)

Total items that will not be reclassified to the income statement in subsequent periods

 

200

 

(383)

Other comprehensive income/(expense)

 

1,369

 

(3,286)

Total comprehensive income/(expense) for the financial period

 

2,646

 

(1,818)

Attributable to:

 

 

  

– Owners of the parent

 

2,354

 

(1,950)

– Non-controlling interests

 

292

 

132

 

2,646

 

(1,818)

Notes:

1. In the previously published results for the six months ended 30 September 2020, the Group’s 55% interest in Vodafone Egypt was classified as held for sale. In December 2020, the Group announced that discussions with the potential purchaser had been terminated. Consequently, the held for sale classification was reversed resulting in the following changes to the previously published results for the six months ended 30 September 2020: gross profit has declined by €97 million, operating profit has declined by €118 million, profit before taxation has declined by €118 million, profit for the financial period has declined by €87 million, total comprehensive expense for the financial period has increased by €85 million and basic profit per share and diluted profit per share has declined by 0.15 eurocents.
2. Principally includes the impact of the Group’s cash flow hedges deferred to other comprehensive income during the period.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

39

Vodafone Group Plc H1 FY22 results

Unaudited condensed consolidated financial statements

Consolidated statement of financial position

    

30 September

31 March

2021

2021

    

Note

    

€m

    

€m

Non-current assets

 

  

 

  

 

  

Goodwill

 

  

 

31,729

 

31,731

Other intangible assets

 

  

 

21,697

 

21,818

Property, plant and equipment

 

  

 

40,116

 

41,243

Investments in associates and joint ventures

 

7

 

4,397

 

4,670

Other investments

 

  

 

1,043

 

925

Deferred tax assets

 

  

 

21,800

 

21,569

Post employment benefits

 

  

 

208

 

60

Trade and other receivables

 

  

 

5,690

 

4,777

 

  

 

126,680

 

126,793

Current assets

 

  

 

 

Inventory

 

  

 

714

 

676

Taxation recoverable

 

  

 

515

 

434

Trade and other receivables

 

  

 

11,330

 

10,923

Other investments

 

  

 

7,778

 

9,159

Cash and cash equivalents

 

  

 

5,824

 

5,821

 

  

 

26,161

 

27,013

Assets held for sale

 

4

 

1,256

 

1,257

Total assets

 

  

 

154,097

 

155,063

Equity

 

  

 

 

Called up share capital

 

  

 

4,797

 

4,797

Additional paid-in capital

 

  

 

150,886

 

150,812

Treasury shares

 

  

 

(7,130)

 

(6,172)

Accumulated losses

 

  

 

(121,973)

 

(121,587)

Accumulated other comprehensive income

 

  

 

29,312

 

27,954

Total attributable to owners of the parent

 

  

 

55,892

 

55,804

Non-controlling interests

 

  

 

2,155

 

2,012

Total equity

 

  

 

58,047

 

57,816

Non-current liabilities

 

  

 

 

Borrowings

 

  

 

58,109

 

59,272

Deferred tax liabilities

 

  

 

1,985

 

2,095

Post employment benefits

 

  

 

329

 

513

Provisions

 

  

 

1,810

 

1,747

Trade and other payables

 

  

 

3,674

 

4,909

 

  

 

65,907

 

68,536

Current liabilities

 

  

 

 

Borrowings

 

  

 

11,412

 

8,488

Financial liabilities under put option arrangements

502

492

Taxation liabilities

 

  

 

1,079

 

769

Provisions

 

  

 

867

 

892

Trade and other payables

 

  

 

16,283

 

18,070

 

  

 

30,143

 

28,711

Total equity and liabilities

 

  

 

154,097

 

155,063

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

40

Vodafone Group Plc H1 FY22 results

Unaudited condensed consolidated financial statements

Consolidated statement of changes in equity

    

Additional

    

    

Accumulated

    

Equity

    

Non-

    

Share

paid-in

Treasury

comprehensive

attributable to

controlling

capital

capital