Vodafone Group Plc Interim Management Statement - RNS Released Pre-Market (2927N)

TIDMVOD

RNS Number : 2927N

Vodafone Group Plc

25 July 2014

Interim management statement for the quarter ended 30 June 2014

25 July 2014

Highlights

   --      Group service revenue declined 4.2%*; Europe -7.9%*, AMAP 4.7%* 

-- Evidence of commercial improvement in Germany (-4.9%*), Italy (-16.1%*) and UK (-3.2%*); Spain (-15.3%*) weaker on renewed competition

-- India (10.3%*) and Turkey (3.7%*) continue to show strong momentum; Vodacom was flat* impacted by an MTR cut in South Africa

-- Strong progress on Project Spring: 4G footprint across European markets up to 52%; 6.7 million 4G customers; Group data traffic up 73% year-on-year

-- Unified communications strategy advanced further: KDG integration commenced; completion of Ono; fibre alliances in Ireland and Portugal announced

-- Free cash outflow on a guidance basis of GBP0.6 billion reflecting Project Spring investment; net debt GBP14.1 billion (GBP11.0 billion including Verizon loan notes), before Ono consideration of GBP5.7 billion

 
                                         Quarter ended         Change 
                                                        -------------------- 
                                          30 June 2014   Reported   Organic* 
                                                  GBPm          %          % 
--------------------------------------  --------------  ---------  --------- 
 Group revenue                                  10,204        6.2      (4.4) 
 Group service revenue                           9,446        6.4      (4.2) 
 Europe                                          6,450       17.2      (7.9) 
 Africa, Middle East and Asia Pacific 
  ('AMAP')                                       2,894     (11.3)        4.7 
 Capital expenditure                             1,867       83.4 
 Free cash flow                                  (582)        n/m 
--------------------------------------  --------------  ---------  --------- 
 

Vittorio Colao, Chief Executive, commented:

"The year has started in line with our expectations. Through our commercial actions and investment, our performance is beginning to stabilise quarter-on-quarter in several of our European markets, with customer appetite for 4G services clearly growing. We also see very strong growth in demand for data in India. In unified communications, we have made further good progress on our strategy, continuing to implement our plans in several markets, and our customer growth trends demonstrate the strength of our commercial execution.

"Our GBP19 billion Project Spring investment programme has taken off quickly, with capex nearly doubling year-on-year, and our 4G coverage in Europe up 20 percentage points to 52% in the last nine months. We are increasingly well positioned to deliver high speed mobile and fixed data services to consumers and businesses alike."

Note:

 
 *   All amounts in this document marked with an "*" represent 
      organic growth which presents performance on a comparable 
      basis including merger and acquisition activity and movements 
      in foreign exchange rates. 
 

OPERATING REVIEW

Group overview

Group revenue was GBP10.2 billion and Group service revenue was GBP9.4 billion. On an organic basis Group service revenue decreased by 4.2%*, and excluding the impact of mobile termination rate ('MTR') cuts Group service revenue fell by 2.9%*.

Europe

In Europe, service revenue was down 7.9%*, or down 6.6%* excluding the impact of MTR cuts. Although competition and regulation continue to create a challenging operating environment, our performance in several markets is beginning to show some signs of stabilisation quarter-on-quarter. The improvement in both contract mobile and fixed customer additions trends seen in the second half of the 2014 financial year has continued into this quarter, and we have taken further steps to advance our unified communications strategy in Germany, Italy, Spain, Ireland and Portugal.

In Germany, service revenue declined by 4.9%* (Q4: -5.8%*). ARPU is stabilising quarter-on-quarter, and the base is benefiting from strong contract net additions in the second half of the 2014 financial year. Network performance continued to recover, with a significant reduction in dropped call rates. Kabel Deutschland ("KDG") service revenue continues to grow strongly. Integration commenced in April as planned.

In Italy, service revenue was down 16.1%* (Q4: -18.1%*(2) ). The slight improvement in trend reflects the impact of price rises towards the end of the previous quarter and continued strong enterprise customer net additions. Fixed line revenue returned to growth and we have begun our fibre-to-the-cabinet roll-out.

In the UK, service revenue was down 3.2%* including Cable & Wireless Worldwide ('CWW') on an organic basis for the first time (Q4: -3.6%*, or -4.0%* including CWW). The consumer mobile business returned to growth in the quarter, with continued good traction for 4G bundled with content packages. CWW integration continues to proceed in line with our overall financial plan.

In Spain, service revenue was down 15.3%* (Q4: -12.6%*). The revenue trend in mobile deteriorated, as a result of our response to competitor activity in converged services, and a market shift towards SIM-only and mid-tier handsets in integrated bundles. Our fixed line business continues to show strong momentum, and the completion of the Ono transaction will significantly strengthen our competitive position in the market. In July we revised our fibre agreement with Orange to target 2 million homes passed with self-built fibre by September 2015, with wholesale access to 1 million homes passed by the Ono network granted to Orange.

Elsewhere in Europe, Hungary continued to grow strongly, the service revenue trends in Portugal and the Netherlands improved, and Greece and the Czech Republic were relatively stable quarter-on-quarter.

AMAP

In AMAP, service revenue was up 4.7%*, or up 6.2%* excluding the impact of MTR cuts. We continued to see good growth across most markets, driven by leading network quality, increasing demand for data and strong commercial execution.

In India, service revenue was up 10.3%* (Q4: 11.9%*). As expected, the rate of growth slowed slightly quarter-on-quarter after price increases a year ago. However, data revenue growth accelerated in the quarter as 3G take-up continued to grow and we made further investments in 3G network roll-out. We continue to expand our M-Pesa service in India where we now have approximately 66,000 sales agents nationwide and 1.5 million registered users.

Vodacom organic service revenue was flat* (Q4: 5.1%*). The slowdown from the previous quarter was the result of the 50% MTR cut introduced in South Africa in April. Price competition in South Africa has intensified, but Vodacom has responded effectively with targeted promotions. The international businesses continue to grow well driven by continued customer growth, higher voice usage, increased data usage and M-Pesa, although overall growth was impacted by intense price competition.

In the other AMAP markets, Turkey service revenue was up 3.7%* (Q4: 6.8%*) as strong growth in the customer base was partly offset by an increase in competitive intensity. Egypt service revenue was down 0.7% against a very strong prior period performance. Ghana and Qatar both continued to grow very strongly.

4G, data and investment programme

Data growth continues to be very strong across the Group, with higher speeds and wider coverage stimulating customer data uptake and usage. Our two-year, GBP19 billion investment programme to accelerate and extend Vodafone's network and service differentiation across mobile and fixed line in our key markets has now commenced, and will position us very well to capture this significant data opportunity.

In Europe, our 4G network now covers 52% of the population, up from 46% in Q4, with 4,700 4G sites deployed in the quarter. As a result, data traffic growth in Europe has accelerated to 53% year-on-year in Q1 from 42% in the previous quarter, stimulated by the enhanced user experience and increasing appetite for music and video streaming. We are supporting the 4G roll-out with a targeted, local communications strategy focusing on network benefits and differentiation rather than price. At the same time, we are investing in additional 2G and 3G sites to improve voice quality and reliability, with a further 2,400 2G and 3G sites installed across Europe during the period.

In India, where we aim to have 95% 3G outdoor coverage in targeted urban areas over the next two years, we have taken 3G coverage on this footprint to 89%, with a further 2,305 sites added. In South Africa, we added 473 4G sites and 293 3G sites in the quarter. Around three-quarters of our sites are now connected to our own high capacity transmission network.

Vodafone Red

Our Vodafone Red plans which offer unlimited calls, texts and generous data allowances, are now used by 14.3 million customers, with 2.3 million added in the quarter. These Vodafone Red plans encourage customers to use our services more, while reducing our exposure to out-of-bundle revenue and competing services. 61% of mobile service revenue in Europe was in-bundle during the quarter.

Unified communications

We have made significant progress with our unified communications strategy during the quarter. We achieved residential broadband net additions of approximately 190,000, with continued growth in Germany, Italy, Spain and Portugal. Fixed line service revenue in Europe decreased by 2.8%*, with growth in Italy and Spain offset by declines in Germany and the UK.

The integration of KDG is now underway, creating a fully integrated operator in Germany able to offer the full range of high speed data services to enterprise and residential customers and realising significant cost and capital expenditure synergies in the process. The recent completion of the Ono acquisition will allow us to establish a similarly strong platform in Spain. In addition, our fibre roll-out in Italy, as well as recent announcements of fibre deployment plans in Ireland and shared next generation network access in Portugal, position Vodafone increasingly strongly across its European footprint.

Enterprise

Enterprise service revenue was down 2.9%*. While we saw some ongoing competitive pressure in our traditional national enterprise businesses, we achieved continued strong growth in strategic growth areas. Vodafone Global Enterprise revenue was up 1.6%*, driven by a number of new account wins and extensions. Machine-to-machine ('M2M') revenue was up 30.7%*, driven by increased innovation and a widening range of vertical markets.

We continue to focus on integrated offerings for enterprise customers, with fixed line revenue now representing 24% of enterprise service revenue. We won a number of key contracts in the quarter utilising our full range of services for enterprise customers, including unified communications, fixed line, mobile, M2M and cloud & hosting services. During the quarter we announced plans to acquire Cobra, a leading M2M provider to the automotive and insurance industries, for EUR145 million (GBP115 million), to enhance our M2M capabilities. The acquisition is subject to regulatory approval and is expected to complete in the third quarter of the 2014 calendar year.

Capital expenditure, cash flow and balance sheet

Capital expenditure of GBP1.9 billion in the quarter nearly doubled year-on-year as we began our two-year, GBP19 billion investment programme. Guidance free cash outflow of GBP0.6 billion in the quarter mainly reflected the significant increase in capital expenditure. Net debt at 30 June 2014 was GBP14.1 billion (or GBP11.0 billion taking into account the Verizon loan notes), an increase of GBP0.4 billion from 31 March 2014, mainly reflecting the free cash outflow during the quarter.

Summary and outlook

Trading in the first quarter was consistent with management's expectation underlying the outlook statement for the 2015 financial year(1) . The Group therefore confirms its outlook for the 2015 financial year.

Notes:

 
 *   All amounts in this document marked with an "*" represent 
      organic growth which presents performance on a comparable 
      basis including merger and acquisition activity and movements 
      in foreign exchange rates. 
 1   Full details on this guidance are available on page 8 of the 
      Group's preliminary announcement for the financial year ended 
      31 March 2014. 
 2   Italy organic service revenue growth for Q4 calculated on 
      a 100% ownership basis. 
 

Europe

Revenue increased 16.5%, including a 3.9 percentage point negative impact from foreign exchange rate movements and a 29.3 percentage point favourable impact from M&A activity. On an organic basis service revenue declined 7.9%*, driven primarily by a challenging operating environment in many markets, continued competition and the impact of MTR cuts.

 
 Revenue 
                      Quarter ended 
                            30 June         Change 
                   ----------------  -------------------- 
                      2014     2013   Reported   Organic* 
                      GBPm     GBPm          %          % 
-----------------  -------  -------  ---------  --------- 
 Germany             2,031    1,815       11.9      (4.9) 
 Italy               1,064        -          -     (16.1) 
 UK                  1,472    1,521      (3.2)      (3.2) 
 Spain                 706      870     (18.9)     (15.3) 
 Other Europe        1,191    1,314      (9.4)      (4.7) 
 Eliminations         (14)     (16) 
 Service revenue     6,450    5,504       17.2      (7.9) 
-----------------  -------  -------  ---------  --------- 
 Revenue             6,851    5,881       16.5      (8.9) 
-----------------  -------  -------  ---------  --------- 
 

Note:

 
 *   All amounts in this document marked with an "*" represent 
      organic growth which presents performance on a comparable 
      basis including merger and acquisition activity and movements 
      in foreign exchange rates. 
 

Germany

Service revenue decreased 4.9%*, but stabilised quarter-on-quarter in local currency.

Mobile service revenue declined 5.5%* as the price reductions from last year continued to penetrate the base. The contract customer base continued to grow as we maintain our focus on Vodafone Red and 4G where we had over 3.4 million customers and 1.5 million customers respectively at 30 June 2014. The roll-out of 4G services continued with a focus on urban areas, with overall outdoor population coverage of 70% at 30 June 2014. We made significant further improvements to our voice and data networks during the period.

Fixed line revenue decreased 3.2%* excluding KDG. KDG maintained its strong growth and contributed GBP378 million to service revenue during the quarter. The integration continued with the successful launch of a joint product portfolio, being marketed in both Vodafone and KDG stores under the "Zuhause Plus" name.

Italy

Service revenue decreased 16.1%* as improving trends in both mobile and fixed line were offset by the continuing effects of last year's summer prepaid price war penetrating the customer base and the negative impact of MTR cuts effective from July 2013. On a local currency basis, absolute service revenue during the quarter was broadly in line with the previous quarter to 31 March 2014.

Mobile service revenue declined 18.9%* as ARPU decreased following last year's significant price cuts. Although there has been some recovery in headline prices, the market remains very competitive. The number of enterprise customers increased further during the quarter, but this was more than offset by a further erosion of the consumer customer base. Vodafone Red, which had nearly 1.5 million customers at 30 June 2014, continues to penetrate further into the base leading to improved churn in the contract segment. 4G services are now available in 443 municipalities and outdoor population coverage has reached 48% at 30 June 2014.

Fixed line revenue grew 1.5%* as continued broadband revenue growth supported by approximately 25,000 net broadband customer additions during the quarter was partly offset by declining fixed line voice usage. Vodafone Italy now offers fibre services in 55 cities and is progressing well on its own fibre build plans.

UK

Service revenue decreased 3.2%* as consumer contract service revenue growth was offset by continued declines in enterprise, prepaid and fixed line.

Mobile service revenue declined 0.6%* reflecting pricing pressures in the prepaid and enterprise segments. We delivered strong growth in the consumer contract segment due to positive contract customer additions and the greater penetration of Vodafone Red plans into the customer base with continued good traction for 4G bundled with content packages, with 3.1 million customers at 30 June 2014. The roll-out of 4G services continued with overall outdoor population coverage reaching over 40% and 0.9 million 4G customers at 30 June 2014.

Organic fixed line revenues (which include the UK portion of CWW for the first time) decreased 10.1%* as a result of continued price competition and lower fixed termination rates. The sales pipeline continues to grow, supporting future revenue trends.

Spain

Service revenue decreased 15.3%* as a result of intense convergence price competition, macroeconomic pressure and an MTR cut from July 2013.

Mobile service revenue declined 17.6%*, compared to 14.4%* in Q4, as price reductions and a change in mix towards mid-tier handsets and SIM-only tariffs led to further falls in ARPU. We are responding to the decline in ARPU with price increases on lower tier contract tariffs, and bundled content on higher tier tariffs. Despite the more competitive environment, we continued to reduce customer churn, as a result of an improved customer experience and the continued take-up of Vodafone Red plans, with nearly 1.5 million customers at 30 June 2014. We had over 1.0 million 4G customers at 30 June 2014 and 4G services are now available in all Spanish provinces, with 58% population coverage.

Fixed line revenue growth remained positive at 7.3%* as we added approximately 48,000 new customers during the quarter. We now have more than 0.8 million homes covered by our joint fibre network with Orange. In July, we completed the acquisition of Ono and announced a revised agreement with Orange to build to 2 million homes in total, while providing wholesale access to Orange to 1 million homes passed by Ono.

Other Europe

Service revenue declined 4.7%* due to price competition, the challenging macroeconomic environment and MTR cuts. Service revenue declined 4.0%*, 3.2%* and 5.8%* in the Netherlands, Portugal and Greece respectively.

In the Netherlands, we saw continued success with our Vodafone Red plans. In Portugal, the broadband customer base and fixed line revenues continued to grow as the fibre roll-out gained momentum in a market moving strongly towards converged offers, while in Greece the customer base grew due to the focus on data.

AMAP

Revenue declined 10.2% as a result of a 16.3 percentage point adverse impact from foreign exchange rate movements, particularly with regards to the Indian rupee, the South African rand and the Turkish lira. On an organic basis service revenue grew 4.7%* driven by a higher customer base, increased customer voice usage, demand for data and strong commercial execution, partially offset by the impact of MTR reductions.

 
 Revenue 
                      Quarter ended 
                            30 June         Change 
                   ----------------  -------------------- 
                      2014     2013   Reported   Organic* 
                      GBPm     GBPm          %          % 
-----------------  -------  -------  ---------  --------- 
 India               1,026    1,091      (6.0)       10.3 
 Vodacom               839    1,005     (16.5)          - 
 Other AMAP          1,029    1,166     (11.7)        3.4 
 Service revenue     2,894    3,262     (11.3)        4.7 
-----------------  -------  -------  ---------  --------- 
 Revenue             3,209    3,572     (10.2)        6.1 
-----------------  -------  -------  ---------  --------- 
 

Note:

 
 *   All amounts in this document marked with an "*" represent 
      organic growth which presents performance on a comparable 
      basis including merger and acquisition activity and movements 
      in foreign exchange rates. 
 

India

Service revenue increased 10.3%*, driven by continued customer growth, strong data usage and improved voice pricing. Mobile customers increased by 3.3 million during the quarter giving a closing customer base of 169.9 million at 30 June 2014. Data usage grew 102% during the quarter, primarily driven by mobile internet customer growth and a 46% increase in usage per customer. At 30 June 2014 active data customers totalled 57 million, including 10 million 3G customers and 29 million smartphone users representing 17% penetration of the customer base.

M-Pesa continues to perform well, with national coverage through approximately 66,000 sales agents, 65% of which were in rural areas, with 1.5 million registered customers at 30 June 2014, of which approximately 300,000 are active.

Vodacom

Service revenue on an organic basis was flat* during the quarter reflecting the negative impact of MTR cuts in April 2014. In South Africa, organic service revenue decreased by 2.0%* as strong growth in data revenues of 18.5%* driven by higher smartphone penetration was offset by intensifying price competition and a 4.1 percentage point negative impact of MTRs cut effective from 1 April 2014.

Vodacom's mobile operations outside South Africa delivered service revenue growth of 8.4%* mainly from continued customer base growth. M-Pesa continued to perform well across all of Vodacom's mobile operations outside of South Africa, with over 6.4 million customers actively using the service.

Other AMAP

Service revenue increased 3.4%*, with growth in Turkey, Qatar and Ghana being partially offset by declines in Egypt and New Zealand.

Service revenue growth in Turkey was 3.7%* as strong growth in consumer contract and enterprise revenues were partly offset by a 7.1 percentage point negative impact from voice and SMS MTR cuts. As at 30 June 2014 the total customer base exceeded 20 million, with approximately 308,000 net additions in the quarter, largely driven by contract and Vodafone Red. We also continued to drive higher smartphone penetration.

In Egypt service revenue decreased 0.7%* as a result of a decline in the customer base. Revenue growth of 27.3%* in Qatar came as a result of continued net customer additions and the success of segmented commercial offers. In Ghana, service revenue grew 17.2%*, driven by an increase in customers and higher data usage.

Other transactions and developments

Grupo Corporativo Ono, S.A. ('Ono')

On 17 March 2014, Vodafone agreed to acquire Ono for a total consideration equivalent to EUR7.2 billion (GBP5.7 billion) on a debt and cash free basis (the 'Transaction'). Ono has the largest next-generation network in Spain and the Transaction enables Vodafone to take advantage of the rapid increase in the adoption of unified communications products and services in the Spanish market. The Transaction, which received European Commission approval on 3 July 2014, completed on 23 July 2014.

India minorities

On 11 April 2014, the Group acquired the remaining 10.97% of its Indian subsidiary, Vodafone India Limited, from Piramal Enterprises Limited for a total cash consideration of INR 89.0 billion (GBP0.9 billion), taking its ownership interest to 100%.

Neotel Proprietary Limited ('Neotel')

On 19 May 2014 Vodacom announced its intention to acquire 100% of Neotel, the second largest provider of fixed telecommunications services in South Africa, for a cash consideration equivalent to an enterprise value of R7.0 billion (GBP0.4 billion). Vodacom expects that the combination of Neotel with its existing fibre network, spectrum holdings and enterprise business will accelerate Vodacom's unified communications strategy, yielding substantial cost and capital expenditure synergies. The transaction remains subject to the fulfilment of a number of conditions precedent including applicable regulatory approvals (submissions have been made to both the Independent Communications Authority of South Africa (ICASA) and the Competition Commission of South Africa) and is expected to close before the end of the 2015 financial year.

Cobra Automotive Technologies S.p.A ('Cobra')

On 16 June 2014, Vodafone announced its intention to acquire Cobra, a leading provider of security and telematics solutions to the automotive and insurance industries, through a voluntary tender offer (the 'Tender Offer') valuing the entire fully diluted ordinary share capital of Cobra at EUR145 million (GBP115 million). The Tender Offer is conditional on, among other things, obtaining appropriate anti-trust approvals, and is expected to complete in the third quarter of the 2014 calendar year.

Vodafone Fiji Limited

On 1 July 2014, Vodafone announced that it has sold its entire 49% shareholding in Vodafone Fiji Limited to the Fiji National Provident Fund for a total cash consideration of FJ$160m (GBP51m). Vodafone will continue to have a presence in Fiji through a Partner Market agreement.

India tax

Details on this matter are available under the section entitled "Legal proceedings" on pages 164 to 166 of the Group's annual report for the financial year ended 31 March 2014. The Group did not carry a provision for the litigation or in respect of the retrospective legislation at 31 March 2014 or at previous reporting dates.

Telecom Egypt arbitration

Details on this matter are available under the section entitled "Legal proceedings" on pages 164 to 166

of the Group's annual report for the financial year ended 31 March 2014.

ADDITIONAL INFORMATION

 
 Service revenue - quarter ended 30 June(1, 2) 
 
                                   Group                   Europe                     AMAP 
                 -----------------------  -----------------------  ----------------------- 
                        2014        2013         2014        2013         2014        2013 
                        GBPm        GBPm         GBPm        GBPm         GBPm        GBPm 
                 -----------  ----------  -----------  ----------  -----------  ---------- 
 Mobile 
  in-bundle            3,929       3,493        3,050       2,655          828         778 
 Mobile 
  out-of-bundle        2,731       2,979        1,290       1,238        1,437       1,739 
 Mobile 
  incoming               680         801          358         361          322         440 
 Fixed line            1,719       1,210        1,486         993          188         171 
 Other                   387         391          266         257          119         134 
                 -----------  ----------  -----------  ----------  -----------  ---------- 
 Service 
  revenue              9,446       8,874        6,450       5,504        2,894       3,262 
                 -----------  ----------  -----------  ----------  -----------  ---------- 
 
                                                  % change 
                 ------------------------------------------------------------------------- 
                                   Group                   Europe                     AMAP 
                 -----------------------  -----------------------  ----------------------- 
                    Reported     Organic     Reported     Organic     Reported     Organic 
                 -----------  ----------  -----------  ----------  -----------  ---------- 
 Mobile 
  in-bundle             12.5         4.7         14.9         0.3          6.4        26.8 
 Mobile 
  out-of-bundle        (8.3)      (13.5)          4.2      (23.1)       (17.4)       (2.7) 
 Mobile 
  incoming            (15.1)      (16.2)        (0.8)      (19.0)       (26.8)      (12.8) 
 Fixed line             42.1         0.1         49.6       (2.8)          9.9        22.7 
 Other                 (1.0)       (4.5)          3.5       (9.3)       (11.2)         5.4 
                 -----------  ----------  -----------  ----------  -----------  ---------- 
 Service 
  revenue                6.4       (4.2)         17.2       (7.9)       (11.3)         4.7 
                 -----------  ----------  -----------  ----------  -----------  ---------- 
 
                                 Germany                    Italy                    UK(3)                Spain                India               Vodacom 
                 -----------------------  -----------------------  -----------------------  -------------------  -------------------  -------------------- 
                        2014        2013         2014        2013         2014        2013       2014      2013       2014      2013       2014       2013 
                        GBPm        GBPm         GBPm        GBPm         GBPm        GBPm       GBPm      GBPm       GBPm      GBPm       GBPm       GBPm 
                 -----------  ----------  -----------  ----------  -----------  ----------  ---------  --------  ---------  --------  ---------  --------- 
 Mobile 
  in-bundle              878         918          497           -          629         613        428       493        181       154        259        259 
 Mobile 
  out-of-bundle          239         299          271           -          313         331        132       184        635       714        462        590 
 Mobile 
  incoming                66          79           76           -           89          98         28        59        148       189         50         84 
 Fixed line              771         425          176           -          368         410         82        80         40         6          -          - 
 Other                    77          94           44           -           73          69         36        54         22        28         68         72 
                 -----------  ----------  -----------  ----------  -----------  ----------  ---------  --------  ---------  --------  ---------  --------- 
 Service 
  revenue              2,031       1,815        1,064           -        1,472       1,521        706       870      1,026     1,091        839      1,005 
                 -----------  ----------  -----------  ----------  -----------  ----------  ---------  --------  ---------  --------  ---------  --------- 
 
                                                                                  % change 
                 ----------------------------------------------------------------------------------------------------------------------------------------- 
                                 Germany                    Italy                       UK                Spain                India               Vodacom 
                 -----------------------  -----------------------  -----------------------  -------------------  -------------------  -------------------- 
                    Reported     Organic     Reported     Organic     Reported     Organic   Reported   Organic   Reported   Organic   Reported    Organic 
                 -----------  ----------  -----------  ----------  -----------  ----------  ---------  --------  ---------  --------  ---------  --------- 
 Service 
  revenue               11.9       (4.9)            -      (16.1)        (3.2)       (3.2)     (18.9)    (15.3)      (6.0)      10.3     (16.5)          - 
                 -----------  ----------  -----------  ----------  -----------  ----------  ---------  --------  ---------  --------  ---------  --------- 
 
 

Notes:

 
 1   The sum of the regional amounts may not be equal to Group totals due to Non-Controlled Interests 
      and Common Functions, and intercompany eliminations. 
 2   Organic growth presents performance on a comparable basis including merger and acquisition activity 
      and movements in foreign exchange rates. 
 3   The analysis of UK mobile and fixed service revenue for the quarter ended 30 June 2013 has been 
      restated following the integration of CWW into the UK business. 
 

ADDITIONAL INFORMATION

Mobile customers - quarter ended 30 June 2014

 
 (in thousands) 
                                           Net 
                   1 April          additions/        Other   30 June 
 Country              2014    (disconnections)    movements      2014   Prepaid 
----------------  --------  ------------------  -----------  --------  -------- 
 
 Europe 
 Germany            32,305               (366)            -    31,939     51.5% 
 Italy              27,773               (878)            -    26,895     81.7% 
 UK                 19,492                  80            -    19,572     40.1% 
 Spain              13,466               (236)            -    13,230     28.9% 
----------------  --------  ------------------  -----------  --------  -------- 
                    93,036             (1,400)            -    91,636     54.6% 
----------------  --------  ------------------  -----------  --------  -------- 
 
 Other Europe 
 Netherlands         5,267                (24)            -     5,243     27.2% 
 Ireland             2,121                (34)            -     2,087     56.4% 
 Portugal            5,569               (165)            -     5,404     75.6% 
 Romania             8,186               (200)            -     7,986     58.4% 
 Greece              4,899                  39            -     4,938     68.1% 
 Czech Republic      3,236                 (9)            -     3,227     38.7% 
 Hungary             2,578                  28            -     2,606     45.1% 
 Albania             1,954                 (6)            -     1,948     94.3% 
 Malta                 302                   6            -       308     82.1% 
----------------  --------  ------------------  -----------  --------  -------- 
                    34,112               (365)            -    33,747     57.0% 
----------------  --------  ------------------  -----------  --------  -------- 
 Europe            127,148             (1,765)            -   125,383     55.3% 
----------------  --------  ------------------  -----------  --------  -------- 
 
 AMAP 
 India             166,561               3,337            -   169,898     93.5% 
 Vodacom(1)         65,381               3,033            -    68,414     92.7% 
----------------  --------  ------------------  -----------  --------  -------- 
                   231,942               6,370            -   238,312     93.3% 
----------------  --------  ------------------  -----------  --------  -------- 
 
 Other AMAP 
 Turkey             19,754                 308            -    20,062     61.2% 
 Egypt              41,847               (110)            -    41,737     94.2% 
 New Zealand         2,336                (13)            -     2,323     64.4% 
 Qatar               1,327                  27            -     1,354     90.8% 
 Ghana               6,480                 201            -     6,681     99.6% 
----------------  --------  ------------------  -----------  --------  -------- 
                    71,744                 413            -    72,157     84.5% 
----------------  --------  ------------------  -----------  --------  -------- 
 AMAP              303,686               6,783            -   310,469     91.2% 
----------------  --------  ------------------  -----------  --------  -------- 
 
 Group             430,834               5,018            -   435,852     80.9% 
----------------  --------  ------------------  -----------  --------  -------- 
 

Note:

1 Vodacom refers to the Group's interests in Vodacom Group Limited and its subsidiaries, including those located outside of South Africa.

OTHER INFORMATION

Notes

1. Vodafone, the Vodafone Speechmark, Vodacom, M-Pesa, and Vodafone Red are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners..

2. All growth rates reflect a comparison to the quarter ended 30 June 2013 unless otherwise stated.

3. References to "the quarter" and "this quarter" are to the quarter ended 30 June 2014 unless otherwise stated. References to the "previous quarter" are to the quarter ended 31 March 2014 unless otherwise stated. References to "Q3" are to the quarter ended 31 December 2013 unless otherwise stated. References to "Q4" are to the quarter ended 31 March 2014 unless otherwise stated. References to the "2015 financial year" or "current financial year" are to the financial year ending 31 March 2015 and references to the "prior financial year" and the "2014 financial year" are to the financial year ended 31 March 2014 unless otherwise stated.

4. All amounts marked with an "*" represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates.

5. Reported growth is based on amounts in pounds sterling as determined under IFRS.

6. Vodacom refers to the Group's interest Vodacom Group Limited ('Vodacom') in South Africa and its subsidiaries, including its operations in the DRC, Lesotho, Mozambique and Tanzania.

7. Quarterly historical information including service revenue, mobile customers, churn, voice usage, messaging volumes, data volumes, ARPU, smartphones and fixed broadband customers is provided in a spread sheet available at vodafone.com/investor.

Forward-looking statements

This report contains "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group's financial condition, results of operations and businesses and certain of the Group's plans and objectives.

In particular, such forward-looking statements include, but are not limited to: statements with respect to: expectations regarding the Group's financial condition or results of operations, including the Group Chief Executive's statement on the first page of this report and the outlook for the 2015 financial year; expectations for the Group's future performance generally, including growth and capital expenditure; statements relating to the Project Spring organic investment programme; expectations regarding the operating environment and market conditions and trends, including customer usage, competitive and macroeconomic pressures, price trends and opportunities in specific geographic markets; intentions and expectations regarding the development, launch and expansion of products, services and technologies, either introduced by Vodafone or by Vodafone in conjunction with third parties or by third parties independently, and the launch of a number of additional features; expectations regarding smartphone adoption generally; expectations regarding Vodafone 2015; growth in customers and usage; expectations regarding spectrum licence acquisitions, including anticipated new 3G and 4G availability and the customer uptake associated therewith; expectations regarding adjusted operating profit, EBITDA margins, capital expenditure, free cash flow, and

foreign exchange rate movements; expectations regarding the integration or performance of current and future investments, associates, joint ventures, non-controlled interests and newly acquired businesses, including KDG, CWW, Ono, Cobra, and Neotel; and the outcome and impact of regulatory and legal proceedings involving Vodafone and of scheduled or potential regulatory changes.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "will", "anticipates", "aims", "could", "may", "should", "expects", "believes", "intends", "plans" or "targets". By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services; greater than anticipated competitive activity, from both existing competitors and new market entrants, which could require changes to the Group's pricing models, lead to customer churn or make it more difficult to acquire new customers; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; higher than expected costs or capital expenditures; slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers and the possibility that new products and services will not be commercially accepted or perform according to expectations; the Group's ability to expand its spectrum position or renew or obtain necessary licences, including spectrum; the Group's ability to achieve cost savings; the Group's ability to execute its strategy in mobile data, enterprise and broadband and in emerging markets; changes in foreign exchange rates, including, particularly, the exchange rate of sterling to the euro and the US dollar, or interest rates; the ability to realise benefits from entering into partnerships or joint ventures and entering into service franchising and brand licensing; unfavourable consequences of acquisitions or disposals; changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the EU to regulate rates the Group is permitted to charge; the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; loss of suppliers or disruption of supply chains; developments in the Group's financial condition, earnings and distributable funds and other factors that the Board takes into account when determining levels of dividends; the Group's ability to satisfy working capital and other requirements through access to bank facilities, funding in the capital markets and operations; changes in statutory tax rates or profit mix which might impact the weighted average tax rate; and/or changes in tax legislation or final resolution of open tax issues which might impact the Group's tax payments or effective tax rate.

Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under "Forward-looking statements" and "Principal risk factors and uncertainties" in our annual report for the year ended 31 March 2014. The annual report can be found on the Group's website (vodafone.com/investor). All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Subject to compliance with applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not undertake any obligation to do so.

For further information:

Vodafone Group Plc

 
 Investor Relations            Media Relations 
 Telephone: [phone]   www.vodafone.com/media/contact 
 

Copyright (c) Vodafone Group 2014

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