Vodafone Group Plc

We performed well across the group in the first quarter, in line with our expectations, with good service revenue growth of 5.5%. Most importantly, we are starting to deliver the planned service revenue improvements in Germany and we have completed our merger in the UK at the start of June, launching Vodafone 3, the country's leading mobile operator. I will come back to both Germany and the UK shortly. Our other European markets growth has slowed due to competitive pressure in Portugal, but we see good performance continuing across the region. Our emerging market portfolio has delivered strong growth in Euro terms. Turkey continues to perform very well and in Africa we have further accelerated our growth across the footprint. So overall, good revenue growth, which delivered good EBITDA growth for the quarter of 4.9%. This is in line with our expectations and today we are reiterating our growth guidance for both EBITDA and cash flow. Combined with our significant buyback program, this guidance delivers strong double digit free cash flow growth per share for our shareholders. Coming back to Germany, the market has remained very competitive in mobile, but we are seeing tangible results from the actions we have taken. Whilst headline net customer additions are negative, we continue to see improvement on our most valuable customer base. In consumer, our branded contract churn is now single digit, the lowest it's been for the last four years, thanks to the ongoing improvement of our customer experience. In fixed, we continue to score well in independent network tests, retaining our leadership position as the best network in the country. As the market penetration has now plateaued, our focus is on driving value and we have taken proactive actions to increase ARPU for new acquisitions. And we secured a significant win for our brand in time for the 25-26 football season as we become the main sponsor of the Borussia Dortmund club. Now turning to Vodafone 3 in the UK. With the joint venture now operational, we are working to deliver a significant step change in experience for our customers. We are making a fast start to integrate our consumer multi-brand strategies across Vodafone, Tree, Voxy, Smarty and TalkMobile, with a particular focus on the net customer losses of the Tree brand. We now have the opportunity to make a real impact by transforming network quality and overall experience for all customers. On the network front, we have already seen the first integration benefits. All three customers are benefiting from more mid-band spectrum with up to 40% higher 4G speeds across the country. And we have started integrating our networks to allow all our customers to seamlessly use both the Vodafone and the three networks across the country. We have also launched a new customer promise called Just Ask Once. Vodafone UK was already leading the industry on the customer service side, and this new commitment aims to resolve any query quickly and painlessly with a dedicated advisor who proactively updates the customer. But of course this is just the beginning of a multi-year integration. We are well on track with our original financial guidance for the merger in this financial year and you all know that we expect to deliver at least 700 million of cost and capex synergies per annum from the fifth year. Our growth trajectory in the UK, combined with strong positions in growing markets across Europe, Africa and Turkey, as well as improving trends in Germany, give me confidence that we now have the right mix of markets, capabilities and financial capacity to drive good growth over the medium term. Of course, we still have more to do and our focus will be on continuing to improve our customer experience across Europe and Africa and further simplifying our internal operations. Luca and I will now be pleased to take your questions.

Thank you, Margherita. As a reminder, please only pose one question to give everybody a chance to speak. Our first question this morning comes from Robert Grindle at Deutsche Numis. Robert, your line is open. Please go ahead.

Good morning, Margarita and Luca. It was good to see the improved service revenue growth trend in Germany, which is approaching stable ex the MDU effect. How are you feeling about the prospect for getting back to Germany growth anytime soon? Commercial activity is a bit softer in Q1, however, with broadband net ads going backwards. Please, could you say something about what the dynamic is in the market at this point? Thank you. Mm-hmm.

Perhaps I take the financial part. You're absolutely right. XMDUs, we were almost stable in Q1. The key reasons for that, if I can just take a quick look back, is obviously the increase in wholesale revenue contribution plus 1% quarter over quarter. And then also another percent from a better business performance driven by IoT phasing. And also the effect that we had negative one-offs in mobile and Q4, which have not repeated themselves. We are obviously feeling good about the trajectory that we are on in Germany, as we had said at the full year results we fully expect Germany to be back in service revenue growth territory during the year so it will come in the coming quarters now you will hopefully understand that I am finding it hard to give you a precise quarterly service revenue guidance for a single market but the way how to think about the next quarter obviously is we will finally lose the mdu impact due to the full lapping that was close to three percent still of a negative impact in q1 this will be gone at the same time We will, of course, continue to benefit from the ramp up of the one on one agreement to a full scale that we expect to reach in the second half of the year. So those are positives. Against that, as I said, in Q1, we had a positive phasing impact in our B2B business in IoT that is not expected to recur in Q2. And we, of course, also need to take into account the, I would say, long-term trend of TV headwinds that we're facing outside of the MDUs, as well as the competitive environment in mobile. But this all being said, I think the momentum is clearly so strong that it will carry us back to growth during the year, while we also expect to see a gradually improving trend on the profitability front in Germany.

maybe i take robert the commercial performance side i would say different sets of circumstances across mobile and fixed starting with mobile no particular changes to the pricing environment since may as you know so the market remains very competitive But I need to say, as I anticipated in my introduction, that we look positively on our results in the quarter because, as you know, we care about value versus volumes. And if I look at what has happened in the last quarter and I would say in the last few periods overall, The branded base, which is what we mostly care about because it's where our value stands, has improved in the last year, has grown and its churn levels have consistently decreased. We have just recorded single digit churn and this is for the first time in the last four years on the branded base. And this is on the back, I would say, of two things. First of all, our customer experience step up. We did say in May we had the best ever NPS in mobile as well as in fixed. And also you see the type of propositions that we are building around our branded base, beyond the sort of foreign books commissions. Our focus is on creating value on that base, which is why you have seen us introducing handset financing with contracts for up to three years, working on family cards at the high end. of the market for upselling. So we are pleased with the trends there. Obviously, the net ads were negative, and they were negative, however, because we continue to downsize the reseller segment in consumer, which is, as you would expect, very low ARPU. and low margin and also we had some negative large contracts in B2B. So overall good progress. Different situation in fixed. In fixed there was a change in the market environment. I mentioned already in May that the penetration of fixed has really plateaued in Germany, so there isn't much market growth. And in these circumstances, on the back of the fact that also our churn has kept improving in that space, we have started to work on the front book value early in Q1. And this has taken various shapes of a number of interventions, pricing in the SL, reduction of uh taking out the cable max promo in cable also reduction of some starting credits reduction of commissions in indirect as well inevitably all these had some admittedly i would say looking at the number small impact on the gross acquisitions But we have seen some positive signs in the market overall. I was mentioning this because, for example, in July, our main competitor has also reduced promotions in DSL. So that's where we are on both segments. And I need to say, standing back from all these results, I said in May that we had done some structural changes in Germany. We've seen the step up in customer experience with the best ever NPS. We are now seeing the impacts on churn. And I think we have all the ingredients in play in Germany, whether we're talking about the teams, the level of investments now to really make the most of our position in the market. And we look forward, of course, to the return to growth that Luca was mentioning.

Thank you. Very comprehensive.

The next question this morning comes from Morris Patrick at Barclays. Morris, please go ahead.

Yeah, morning, guys. Hopefully you can hear me and see me okay. If I could please just dive into the UK trends. I mean, in the UK, you showed a slowdown from about 3% to about 1%. You cite in the prepare mark something around the business project milestones. But if I understand correctly, the serious revenue growth trends now include for UK. So you've probably got a month gap. in the 1Q numbers, you've changed the group guidance. If I look at the net ads on the contract side, you've lost 46,000. So curious to understand that 46,000 contract net ads or net losses, was that the Hutch base? Was that the Vodafone core branded base? When we think about the full inclusion for 2Q, Is that going to mean that we get a continued slowdown or maybe we should expect to see a recovery in the service revenues throughout the rest of the year? Thank you.

Thanks for the question. So I'll perhaps cover the financial part and then when it comes to what we are seeing from an overarching more market momentum perspective, perhaps Margarita can attend to that. First of all, not sure that... I understood it correctly. So we have not changed company guidance around the UK. In fact, the trends that we have been seeing in Q1 are exactly in line with the expectations. And I believe also with what I flagged already at our full year earnings, where I said that we expect headwinds and a slowdown in the UK. as a consequence of two factors. On the top line, I have to qualify because in EBITDA, we continue to expect good growth from the UK. But on the top line, I already flagged that we are seeing losses of some legacy managed services contracts in B2B that came with a very low margin and they reside in the step down in our B2B revenues that you will have noted where we had a negative 3% growth in the quarter. whereas consumer obviously continued to grow. So that's the first thing. On the free UK side, you are correct. We have one month of free UK numbers in and also entirely as expected. And as I flagged before, free UK has been on a downward trend in terms of their growth rates for a while. In fact, in the first month of us consolidating their results, this growth has now turned slightly negative. And the reason for that is essentially that they have seen customer losses on their first brand for a while. This has been substituted by smarty ads, which in our reporting show up in prepaid and not in contract anymore. And obviously they come with a lower ARPU, as you will imagine. And that is resulting in the step down from a trend perspective, because you have asked that question. As a result of this managed services step down in B2B remaining in the numbers now for the remainder of the year, it will not worsen any further, but will obviously continue to affect it. And the growth that we see in other parts like digital services in the UK as elsewhere will not fully compensate for that. as well as the fact that we see these trends in free uk continuing for a while before the whole positive effect of the merger will then take hold and will improve the performance again we would expect for the next few quarters a slightly negative growth contribution from the uk which then will unwind as we go into the next year

On the customer's side of things, Maurice, I would say the negative net ads in the quarter, as you may have seen from our press release, half of them was phasing of B2B contract, half of them was this. three brand performance that Luca was mentioning, which is not new. And I need to say beyond the sort of short term puts and takes of the financial performance, I think it's important to share the impact on these numbers and our top line performance that the integration is going to have, because it's going to be quite significant. You will have noticed from the action log that the team has hit the ground running. And it's fair to say that for the last two years, we knew about the potential of what we could be doing. And therefore, we have had the time to prepare. And I just mentioned maybe three examples of areas that specifically will impact the performance of the three customer base going forward, coming from the integration. I'd say, number one, the changes to the network. The three brands have a much higher churn than the Vodafone brand. And the number one reason of this churn is network quality. You will have heard in my introduction and read in the papers that actually the performance of the network that the three customers are experiencing already today, I would say for the last month or so, has changed. With spectrum sharing, we have improved the 4G speeds of up to 40% across the UK. But most importantly, we are bringing the two networks together and by allowing this to happen already this year, we will have a drastic reduction of not spots. for all our 28 million customers, including the three customers that will be able to use what today was the Vodafone network. It's a very significant reduction. We are talking about 16.5 thousand of square kilometers. So it will be visible in the UK and will ramp up throughout the year. And more broadly, obviously, we're investing 1.5 billion euro in the network. Definitely something that will impact this churn. Still on churn. Second action is we are now bringing our market leading CX customer experience approach to the tree base. And you've heard me mentioning before this new initiative that we are launching with Vodafone UK. We were always at the forefront of the industry now on customer service. And finally, convergence. And this will impact revenues. We have already opened the sale of fixed broadband products from Vodafone to the three UK bays. We are the fastest growing broadband provider in the UK with our largest fibre footprint of any other operator, over 20 million households. And now the three UK customers will access this. We are marketing directly to them. So all this will impact net ads and will impact revenues going forward. And I need to say, as we have said many times before, this merger is really a fantastic opportunity for us. to drive revenue across all segments. So the integration is starting with good EBITDA growth this year and ramp up of EBITDA and free cash flow growth throughout the plan as we have already discussed in the past.

Very comprehensive. Thank you.

The next question this morning comes from Carl Murdoch-Smith at Citigroup. Carl, please go ahead.

Hi, thank you very much. I wanted to ask about other Europe and the outlook for service revenue trends there, specifically in kind of Portugal and in Greece. In Portugal, we've seen a step down in trends this quarter. Obviously, you've got the impact of Digi there. And I think we've just lapped the price increase from last year. So I guess my question there is, is that a step down? Is that a kind of one time as we lap that? And then what's the outlook going forwards and Will there be any further deterioration or is that just a one-time move? And then in Greece, last quarter, we obviously had the tough comp in the prior year in relation to public sector revenues. So I was maybe expecting more of a bounce back this quarter in terms of the trends there. So just to comment around the performance there and the outlook going forwards as well and regarding other Europe in general. Thank you.

Yes. Maybe I start just in terms of the news from Portugal. And Luca can complement with the expectations on service revenue and EBITDA growth in other Europe as a whole. I'd say no real surprises in Portugal. So the situation with the entrance of DG was the one we were expecting, as we discussed in the past in terms of price points. Vodafone Portugal in this context is, I need to say, competing very well. You may have seen that the impact on port-outs and customer number is small and not evolving over time. And this is a factor of the fact that we have a strong position in Portugal, both on general loyalty and customer experience, but also on TV specifically, because TV is quite central. to the offers in the market and how customers experience telco. So I would say volumes are okay, but we had an impact on ARPU. You mentioned the lapping of the price increases, but more broadly ARPUs have been under pressure. in the market because of retention actions, because of the growth of second brands. And in terms of trend line, you should expect this to continue. Now, in the numbers or the outlook that Luca will share, you should consider, though, two elements of mitigation. So the consumer pressure is expected to continue. On the other hand, we have a third of the revenues in B2B, which is performing quite well in Portugal. And also, if you move at EBITDA level, we have a range of, I would say, mitigations that can be put in place in terms of trend lines.

And in terms of what that means for other Europe, we fully expect that service revenue growth at the regional level will remain in growth territory for the year. In particular, we expect a better performance in the second half year, actually, as we expect that in particular in B2B, the growth trends will accelerate in the second half year. Greece, because you have mentioned that, will be actually part of that story with an expected much stronger second half performance, also partly driven by what you outlined before. And from an EBITDA perspective, we also continue to expect a good performance and contribution from other Europe for our full year results. So from that perspective, we have a lot of very well performing markets there. And in Portugal, we have the resilience of our strong convergent position plus the strength in B2B that will actually balance things out despite the consumer pressure.

That's great. Thank you very much.

Thank you, Carol. The next question comes from Andrew Lee at Goldman Sachs. Andrew, please go ahead.

Good morning. I was just going to bring us back to Germany. One of the things that investors are getting excited about and companies to an extent too is the scope for in-market consolidation. I think I'm right in saying that you still can't yet commit to German top line growth without the boost from one-on-one over the next two years, which is obviously a meaningful lag versus some of the growth that other countries are posting now already and could do post consolidation. It'd be good just to clarify that. But the question is, is German consolidation something that you could actively lead on? in any scenario, or do you see yourselves more likely an indirect beneficiary if German consolidation were to happen? Thank you.

Thank you, Andrew. I need to say for the underlying growth point, it will very much depend, you started from, it will very much depend really on the competitive conditions in the market, particularly in mobile. So what we said previously is if conditions remains as they are today, this is unlikely to happen this year. But of course, we will have to see. Specifically on consolidation in Germany, obviously there is a flurry of speculation at the moment around consolidation all across Europe. And I need to say I could discuss extensively why that's important, as you know, and why we are pushing regulators for a change in the merger guidelines there and bringing the UK example to the fore. I think it's really an important step. But specifically for us in Germany, our focus is on completing our turnarounds. Our focus is growing in Germany on the back of increased operational excellence. and all the elements I was talking about before structural, strong customer experience, structural, strong position of the brand in the market. That's really what we are focusing our efforts on. And as far as one and one is concerned, our focus is i mean after two years yeah since we first concluded the agreement on wholesale is now on completing our transition and making sure that one and one can now benefit from our overall network nationwide. That's what we are focused on. I'd say this is true more broadly, by the way, beyond Germany. I mean, on consolidation, you have seen us in the last two years really taking the matter in our own hands. And therefore, really, it's all about operational excellence now.

Thank you.

The next question this morning comes from James Ratzer at New Street. James, please go ahead.

Yes, good morning, and thank you very much indeed for taking the question. So a broader question, please, around your technology roadmap in Germany, especially on the cable infrastructure. I mean, if I look at your cable partnership in the Netherlands with Liberty Global, They've announced they're going to be stepping up their speeds to two to four gigabits per second with DOCSIS 4 coming in by end 2026, going to eight gigabits per second. I think in Germany at the moment on cable, your maximum speed is one gigabit. I'd just love to hear your latest thinking on the kind of technology path ahead for your cable infrastructure. And as we're discussing it, I see in the release you mentioned OXG passed 100,000 homes this quarter. Could you give us an update just therefore on what's the total number they've passed and how many subscribers you now have on the OXG network? Thank you.

Well, maybe I start with OXG. The pace is accelerating. We are now at 230,000 home pasts. As you mentioned, the current run rate is 100,000 households per quarter, more or less. And of course, we are working to build on that further acceleration. So by the year end, we will be some way above the half a million on past. We are building across 31 cities. We have engaged 30 construction companies and the orders out are already for two and a half million. uh households so now progressing well uh i need to say we are pleased with the execution it's early days for the commercial side so we are in testing now and we will go commercial in the second half of the year and so we will start sharing customer numbers with you once it will become material but certainly a good good direction of travel there More broadly, in terms of technology roadmap for Germany, and as you know, each market has its own very different conditions. Our starting point of any strategy, which is typically a layer of actions over time, is what customers want, what customers need. In Germany, the majority of the customer is still on speed of under 250 megabits per second. And in the context of Germany, what we want to make sure is we serve as many customers as we can with the gigabit speed which by the way is as far as any i would say consumer application idea has gone so far so more than sufficient to solve all customer needs we are today retailing the largest footprint and this is the same as actually in the uk of gigabit speed in germany and we do so by combining the 25 million cable households with an additional 5 million of wholesale households in fiber. So today, three out of four of German households can buy gigabit products from us. What's next? So on top of the OXG evolution that will continue to run according to its plans for the MDUs in particular, we continue to fiberize at pace the cable network. And you know the drill there. We are adding fiber segments. And on the back of that, we deliver a very good experience for our customers. And we see fiber advancing, I would say, organically within the network. I was mentioning earlier that we continue to be rated as the best network in the country across all technologies in terms of speed and in terms of reliability. And this is a testimony of this investment plan. And then selectively, what we are introducing in terms of the cable sequencing in Germany is iSplit, which is a technology that can also help with the speeds, particularly in enhancing the uplink speed. In the end, it's what I would describe as a multi-year technology pathway, which we think is definitely appropriate for what our customers need in Germany and really pleased once again with customer satisfaction there, as well as the churn levels. Actually, just a small point on this. We talk about churn reducing in fixed broadband in Germany for some time. I was actually looking at this recently and it's now not just below other big markets like the UK, but it's now effectively below most of our European markets. So good position in fixed broadband there with our customers.

So thank you for that. Does that mean then that kind of just on the cable network, the one gigabit maximum speed is likely to probably just remain in place for the next few years? There aren't imminent plans for a headline speed increase?

High split has an impact on that. It has impact on uplink and downlink. It will depend on the areas. But in terms of the multi-gig story, keep in mind that even the gigabit products in Germany is still held by a very small minority of customers so not only doesn't have use cases but it's really not on the radar what people are optimizing which by the way is also true in the netherlands is the combination of price and quality so we are upgrading them to one gigabit and it will take some time to get there i just upgraded to one gigabit so at least one additional customer on gigabit speed now i got it thank you

The next question this morning comes from Paul Sidney at Burenburg. Paul, please go ahead.

Yeah, thank you very much for the question. I really appreciate it. I just had one question on Germany, but perhaps a little bit of read across, potential read across for the UK. But my question is, we've heard many times from the Vodafone team over the course of the morning, the phrase value over volume, particularly when talking about the German market. It's a narrative we've heard from Deutsche Tell. pretty consistently over the past six months. So I'm sure it's not a coincidence that you're focusing on that volume, sorry, value over volume strategy. So just wondering if that's really intentional and is it meant to send a message to the other German operators that there is an opportunity to extract more value from the German market? And is this a strategy that you'll be following in the UK following the completion of the three UK merger? Thank you.

Thank you, Paul. I'd say it's a very much, from my perspective, it's a very much needed sentence when we talk about particularly mobile net ads. because as you know very well, whilst in broadband acquisitions come with ARPU and therefore I think it's logical that in the roundings you look at this as a leading indicator of future revenue. This is absolutely not the case in mobile. And it's not been the case for many, many years, because in the context of the SIM count in mobile, there is a wide range of different values. We've even had markets historically where at some point people were distributing free SIMs. So I don't think the SIM count is for the industry a good KPI of a good leading indicator of revenue. And I think it can end up being also to the extreme a very confusing red herring because it drives people towards the wrong behaviors. Sorry, I went a bit long, but I'm really passionate about this point because a lot is made out of that, whilst ultimately what we care about is obviously revenue, which is why in the specific of Germany, now you were asking about Germany, our focus has to be not number of SIMs, but has to be we have a valuable base. For us, we use this word branded base as opposed to reseller base, because this is where effectively the value is entirely. And that's what we are targeting.

And sorry, just the sort of second part of the question in terms of is that a strategy you'd be looking to follow in the UK and try and, again, get the whole market to focus on value rather than these quarterly KPI numbers?

Historically, it has to be the right approach anywhere in mobile for everyone.

Absolutely. I appreciate the answer. Thank you.

The next question this morning comes from Akhil Duttani at JPMorgan. Akhil, please go ahead.

Hi, morning. Thanks for taking the question. I just wanted to ask a question on B2B more generally. And the question is, obviously, we've had a pretty big push across Europe in terms of rhetoric around data sovereignty. And we're seeing a lot of government initiatives or at least rhetoric around government initiatives to drive that agenda. You know, whether that's the German 500 billion euro infrastructure bid and some of the gigafactory type things being talked about now. But there's a whole host of other similar things. rhetoric points we're seeing from governments across Europe. So I guess what I was really trying to understand is, you know, what is your engagement on this topic? To what extent do you think this is relevant for Vodafone and Vodafone's B2B strategy? And can you give us some flavor if this is relevant for you? What sort of verticals are most interesting for Vodafone? So where are the areas where you think there's relevant leverage for you to play into? Thanks a lot.

Thank you, Akhil.

Yeah, so first of all, it's very clear that given where geopolitics are going, that data sovereignty is an important consideration. It's becoming a topic that you get also more questions about from private customers. So where is my data? Where are you going to operate, for example, managed services around security and so on from? So it is definitely becoming a bigger consideration and therefore, of course, we are responding to it. You may have seen in the past some of our investments that we have made, for example, around in-country security operation centers that we have just opened up in Germany that goes into this area. We are certainly also looking at potential areas of investment to further strengthen our portfolio of capabilities in that respect and so expect us to be focused on that from an investment perspective it's an area of opportunity for sure the first areas that you're thinking about obviously is areas like public sector and defense, but they are not the only ones. We have excellent customer relationships in that space, both with national authorities as well as with institutions like the US Army, for example, for whom we are the provider and partner of choice across our entire footprint, actually both Europe and Africa and so we are going to continue to invest in this. But as I said before, it's going beyond that from an engagement perspective into other sectors that have become concerned with the topic as well. What do you need to be able to offer? Well, customers, I think, want to have a partner that can be more than just a provider of SIMs or a reseller of software solutions. So strengthening our ability to have a secure managed service that we can provide is the key opportunity here. And luckily, this is an area that is clearly prioritized as part of our strategy.

Just sort of stepping back, we are currently growing double digit in Europe in digital services. And if you look at what is in digital services in our reporting, ultimately it's three things. It's IoT, cloud and cyber. And I would say beyond the big declarations of the funding on sovereignty and defense, all these trends for us are supportive of further growth in this space. And we are a European company, so we have a lot of cards to play going forward.

Can I just clarify one thing? I mean, if we look at Telefonica, they're quite openly saying that they want to do M&A to sort of strengthen and bolster their capabilities in the space. Do you think that's something that Vodafone needs or do you think this is much more organic and additive rather than revolutionary?

I think incrementally it's possible, but what I would call like small bolt-ons, where you acquire certain capabilities in certain areas, don't see it as the, I would say, normal M&A we talk about. on mobile and the like, but you know that we have increased our investment more broadly. We've been talking about this in the last two years. We have put in starting more people, sales specialists, to have legs on the ground of people that understand these areas. As Luca was mentioning, we have opened organically cyber operation centres and the like. And here and there, rather than build, maybe acquiring competencies could be the right route.

Great. Thank you.

Thank you. The next question comes from David Wright from Bank of America Merrill Lynch. David, please go ahead.

Thank you. Caught me out a little there. But I did actually really appreciate Akhil's question. I think it's super relevant. And I guess the concern is that non-incumbents could be pushed out of this opportunity. And I wonder whether your shareholder base as well could even be a sort of compromise to concerns around national security and the provision of those services. But following on from that, I did note a letter you sent regarding regulation of the incumbent telecoms, which is not unconnected with this, which is that you want, you know, the regulation of fixed wholesale access to be sustained or the rigor around that to be sustained. And I guess this might even come back to James's question. We're all working together today. Is this basically protecting you're right or even preempting a move to more wholesale fiber access because the concern would be as the incumbents invest, if there is a little bit more regulatory relaxation, you don't have the same opportunities to maybe wholesale and that leaves you, and I'm going to say it's stuck with a cable network. So I was really interested in that regulatory letter you guys sent the other day. So I'd love your thoughts around that. I'm not even sure that's a direct question, but I'll let you answer, thank you.

Well, maybe I'll pick up on what's happening on fixed regulation and read across to our strategy. First of all, the reason for the letter. Let me be absolutely crystal clear. There is a big opportunity for simplifying regulation in telecoms across all areas, fixed as much as mobile. The status quo in fixed is not an option. We need to move the agenda on if we want to regain competitiveness in Europe. However, the reason why we have been calling out FIGS is that there needs to be a very simple red line. And we wanted to make sure it was clear in the conversation on simplifying regulation, which we wholeheartedly support. And this is remonopolization. Where fixed is today is there are very large areas of Europe, as you know, which are served by one infrastructure. And again, as you know, this is set to stay with us for many, many years to come. So in these conditions where for any customers, our customers, any other European customers that there is only one provider, it's really important that we maintain a degree of rules in the case of what I would call natural monopolies. What we mean by that and what we have been advocating with the Commission is that ex ante regulation is maintained and fair and equitable access is guaranteed to European customers where there is one infrastructure. It's just as simple as that. And it has nothing to do with whatever we are doing with our own infrastructure. We are very happy with the strategy we were mentioning earlier. in this conversation with James, we are continuing to invest in our cable network and we are building fiber. But in Germany, in our plans, for example, there will always be areas of the country where there will be a degree of wholesale that doesn't change. And it's really important that if that happens in a monopoly conditions, some framework rules are maintained. It's very, very simple. Lots of simplification ahead for fixed regulation. Shouldn't go all the way to create areas of monopoly.

Interesting. But if I'm the incumbents, am I not saying, yes, but none of you guys are investing? You know, you're not overbuilding cable with fiber. VMO2 in the UK isn't. Altnets have stopped investing in rollout. Do I not say, but it's us who are investing, not you?

I think that this logic on who invests the most, we need to move the point to a different point, which is if there is a monopoly in place, a monopoly cannot be managed without any rule. That's what we are talking about. Nothing to do with investment. You know about our investments. in the cable network, the 7 million households of fibre we are building in Germany. But it's not about who invests more or less. It's all about if you have one infrastructure, then there needs to be some simple rules around it. As simple as that and nothing new, I would say, across any sector.

Okay, thank you.

The next question this morning comes from Joshua Mills at BNP Paribas Exan. Joshua, please go ahead.

Thanks guys. And hopefully you can hear me. My question was coming back to Germany and the comments you were making earlier about the value to volume strategy and how that might differ between the broadband market and the mobile market. So I think what you were saying, Audrey, too, is broadband net ads could be looked at as a lead indicator for fixed revenues. They're now declining again. And in that context, how important and how much of a priority is it for you to grow the German broadband base? And will you need to increase investments to drive that? The reason I'm asking, and I suppose the context of the question is, as you referenced, the overall market growth is slowing, maybe 200,000, 300,000 subs a year for the whole of Germany. Most of those, if not more than 100%, are now going to the alt net. So logically, yourselves, Deutsche, other telcos would need to be losing customers to maintain an equilibrium. Indeed, he has said quite clearly on their recent course that whilst they're in negative net ad territory, currently they do intend to stabilize that during the course of the year. So from your perspective, given the comments you've made, is growing that base still a priority as it seemed to be with our discussions last year? Or would you be comfortable to see the modest broadband sub losses continue as long as you can continue to deliver the better fundraising trends you referred to earlier in the call? Thanks.

Sure. We have always been talking about a fair share of market growth in terms of our targets and in the context of a stable market our target is to maintain our base stable. And in the specific of broadband, the driving value then is about managing the value of the front book and managing the base up across speed with cross-selling and up-selling and then more broadly driving churn down, whether it's through customer experience or through convergence with mobile. I would say this is the simple recipe for broadband. And you mentioned investment. Once again, let me reiterate it. We are very happy with our level of investment in Germany. We are very happy with our position on quality in Germany. And it's really, don't take it from me, take it from the independent testing, from the customers.

Maybe if I could have one follow-up just on that recipe, the part that's missing, which we do get in other markets, is back book price increases. And I know in Germany, it triggers high trend. There's less of a back book culture in that market. But in the past, Vodafone has selectively made changes. As your network quality improves, there's only opportunity for you to to introduce that ingredient into the recipe as well going forwards with that book Price Rises.

You are right. This is something we have done in the past in Germany, but in a very different context. I think what you should expect is us to always be very mindful of the evolution of inflation and cost, what shape this will take in terms of intervention is, I would say, too early to tell, but it certainly is a consideration.

Thank you. Thank you.

Thank you. The next question this morning comes from Ottavio Adorizio at Bernstein. Ottavio, please go ahead.

Morning and thank you for taking the question. It's effectively a follow-up from previous questions on the investments in Germany and also about what you shared with us about OXCG. Now, you look to be relatively comfortable with the current pace of 100k per quarter. But given the business plan, it's a 7 million. It will take you 17 years to cover that one. Considering that you were looking for six years and that was announced three years ago, you're very late in that rollout. So I was just wondering if you can share with us the hurdle you're finding on the build out. It's a lot to do with your partner is not willing to invest and potentially willing to exit. Is Deutsche potentially overbuilding your network? Is the fact that business plan has changed? And then what we should expect? The pace in the run rate should be. Thank you.

If you think back to what I was saying earlier, Ottavio, I called out the word acceleration very, very clearly. And this is our ambition, of course. As you said, we have seven million households to complete. So the focus is accelerating. We closed last year with 130,000 and we discussed in the past, I think, the reason why in the beginning some of the construction wasn't starting as planned, but now it does. So we are in catch up mode with over 30 construction partners in the country and we are pleased with how it's going. But as you said, We are looking forward to further acceleration.

And yeah, this is the ambitions, but how can I achieve that one? Especially the build-out is just the fact you couldn't find a construction power or because your partner is not really willing to invest. And the shareholder structure of OXG is going to remain like that over the next 12 to 24 months or you're relatively happy about the situation?

OXG is fully funded. There is no investment constraints of any kind. And again, we are working to keep accelerating as per the original business case. No change there.

Perfect. Thank you.

We have time for one last question this morning, which comes from Javier Borrachero at Kepler Chevron. Javier, please go ahead.

Good morning, Margarita and Luca. I guess it's a little bit too early in the year to discuss maybe about a future shareholder remuneration. I think you always said end of the year is probably the time to do so. But at the same time, probably quite soon you may get, or in the next months, you may get close to 1 billion probably from Secona. You sound pretty, say, upbeat in terms of the second half of the year, of the following quarters. So maybe, I don't know if there's something you could share with us, particularly in terms of potential extension of the share-by-back program. And also, I mean, your main shareholder is increasing its stake indirectly simply because they are not somehow participating. I don't know what is the view or how could this somehow have an influence in future share-by-back programs. And somehow related to this, Are you, say, happy, satisfied with your current footprint, with your current, particularly I'm thinking about the associates, always comes to my mind, Vora Fonsigo, but also others. Any potential disposals, anything that could also, say, shore up a future Shave-A-Back program? Thank you.

Yeah, let me try to take this and let me try to be brief. So first of all, you're right, we're executing on the commitment that we had given. Actually, the entirety of our capital allocation framework that we had defined last year is super important for us to continue to execute on. As you know, we had set our investment needs on the organic front and we are following up on them. capital intensity by market staying where it is. We have moved to get into the leverage range that we had defined and we are clearly there now. And what we also have been clear about is that by satisfying those two objectives and executing the share buybacks that we have agreed for Italy and Spain, which are now in the second half, so to say, but actually with the first 500 already executed, that we have retained some strategic flexibility. Now, where we will go with this, we will clearly have to see later on. If we have excess capital, then we would certainly consider additional returns, but that is way too early, and certainly I would not be the appropriate person to make a decision on that, given that I will leave at the end of November. So from that perspective, we have optionality, but we will take the right decisions always in light of what drives most value for our shareholders. And we'll then look for the right balance between organic opportunities potentially some tuck-ins, as Margarita has said. And if we then have excess capital left, we can certainly do that. I don't want to speculate, honestly speaking, on things that we cannot really control. So at what point in time we might get the redeemable preference shares distributed to us Let's see. And in terms of EN, I think you have mentioned this. Yes, their share has indirectly increased, but that has no bearing on how we think about capital allocation. We're very happy with the fact that they are a strategic investor and we have with hudson a great expert of the industry with us on the board but that's not influencing our choice in that respect you have talked about vodafone investments briefly and our associate portfolio as you know i mean we have been quite busy in the first year of the vodafone investments team coming together we have significantly cleaned up our structure in India. We have moved forward with a fixed transaction in Australia. We have done the further sell down of Vantage Towers shares. We have seen appreciation, very nice appreciation in some of the, I would say, less focused investments that we have, in particular in the satellite space, where investment in AST is currently worth 650 million plus, which you obviously don't see in any sum of the parts valuation. So we're very happy with how the portfolio has developed. This is an area where we will continue to look for opportunities for value creation. So I wouldn't certainly rule out that there could be further value accretive transactions in this space. However, there is also nothing now immediately imminent.

This concludes the Q&A session, and I would now like to hand back to Margarita for any closing remarks.

Thank you very much for your time today and hope some of you at least can enjoy a good summer. Thank you. Thank you very much.