Vodafone Group Plc India - Analyst & Investor Day

Transcription

1 Vodafone Group Plc India - Analyst & Investor Day Arun Sarin, Chief Executive 1 December 27 Disclaimer The following presentations are being made only to, and are only directed at, persons to whom such presentations may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not act or rely on these presentations or any of their contents. Information in the following presentations relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. These presentations do not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Group. The presentations contain forward-looking statements which are subject to risks and uncertainties because they relate to future events. Some of the factors which may cause actual results to differ from these forward-looking statements are discussed in the last slide of the final presentation and others can be found by referring to the information contained under the heading Risk Factors, Seasonality and Outlook Risk Factors in our Annual Report for the year ended 31 March 27. The Annual Report can be found on our website ( The presentations also contain certain non-gaap financial information. The Group s management believes these measures provide valuable additional information in understanding the performance of the Group or the Group s businesses because they provide measures used by the Group to assess performance. Although these measures are important in the management of the business, they should not be viewed as replacements for, but rather as complementary to, the comparable GAAP measures such as turnover and reported items on the consolidated profit and loss account or the consolidated statement of cash flows. Vodafone, Vodafone Live!, the Vodafone logos and Vodacom are trademarks of the Vodafone Group. Other product and company names mentioned herein may be the trademarks of their respective owners. The BlackBerry family of related marks, images and symbols are the exclusive properties and trademarks of Research in Motion Limited, used by permission BlackBerry is registered with the U.S. Patent and Trademark Office and may be pending or registered in other countries. 2

2 Outline of the day Opening remarks Arun Sarin, Chief Executive India Asim Ghosh, CEO Harit Nagpal, CMO Naresh Gupta, CTO Andrew Davies, CFO India Q&A EMAPA overview Paul Donovan, CEO EMAPA EMAPA Q&A 3 Delivering on our five key strategic objectives 1 Revenue stimulation and cost reduction in Europe 2 Innovate and deliver on our customers total communications needs 3 Deliver strong growth in emerging markets 4 Actively manage our portfolio to maximise returns 5 Align capital structure and shareholder returns policy to strategy 4

3 Increasing importance of EMAPA H1 7/8 total revenue growth EMAPA contribution to Group 7.1 (%) 2 25 (%) H1 6/7 H1 7/8 % of Group revenue (%) Group Europe EMAPA US Organic growth Pro forma impact 1 H1 6/7 H1 7/8 % of Group EBITDA EMAPA expected to be around 33% of Group EBITDA by FY11/12 EMAPA expected to be around 33% of Group EBITDA by FY11/12 1 Pro forma impact assumes inclusion of India and Turkey for the whole of both H1 7/8 and H1 6/7 5 EMAPA objectives Investing in future growth High performing organisations Country specific business models Two way value transfer between emerging markets and Vodafone Group Deliver strong growth in emerging markets 6

4 India investing in future growth Large, under-penetrated market Fast growing economy 1,323 1,14 27 population real GDP growth 7.1 (m) (%) China India 1 Europe US Brazil Russia Japan 1 China India Russia Brazil US Europe Japan Penetration 2 (%) Penetration expected to exceed 5% in the longer term Penetration expected to exceed 5% in the longer term 1 Europe includes the 27 countries in the EU. 2 Europe includes France, Germany, Italy, Spain and the UK. Market estimates for penetration as at September 27; India as at October 27 7 Vodafone Essar a high performing business Key operating and financial metrics Two way value transfer Customers - net adds Revenue growth (yoy) 2 EBITDA margin Capex - capex / revenue H1 7/ m 8.m 53% 34% 389m 54% Increasing capex to support growth Rebranded to Vodafone Strong sales of low cost handsets Increased site sharing Independent tower company established IT outsourcing agreement with IBM Performance to date in line with acquisition plan Performance to date in line with acquisition plan 1 Since acquisition in May. 2 Growth on a pro forma constant currency basis assuming the Group owned the business for the whole of both half years 8

5 Delivering on our acquisition plan Acquisition plan Progress Market positioning Penetration >4% by FY11/12 Market share 2-25% by FY11/12 19% penetration 17.5% market share Infrastructure sharing c.us$1bn cost savings over first 5 years c.1.5% EBITDA margin uplift Independent tower company established 2/3 of new sites already being shared Key operating assumptions 5 year EBITDA CAGR mid 3s Increased capex in the first 2 to 3 years Capex/sales in low teens by FY11/12 Performing in line with plan Over 1bn capex for FY7/8 Significant capex for next 2 years Taxation 11-14% cash tax rate - FY8-12 Longer term trend to c.3-34% Tax status in line with expectations Clear advice that no tax due on purchase Good progress with focused execution plan for next 2-3 years 9 Outline of the day Opening remarks Arun Sarin, Chief Executive India Asim Ghosh, CEO Harit Nagpal, CMO Naresh Gupta, CTO Andrew Davies, CFO India Q&A EMAPA overview Paul Donovan, CEO EMAPA EMAPA Q&A 1

6 India - Analyst and Investor Day Industry overview Asim Ghosh, CEO Vodafone Essar 1 December 27 Contents 1. Economy & demographics 2. Telecom market 3. Mobile market 4. Regulatory environment 5. Vodafone Essar 6. Strategy 12

7 Strong and stable economy (%) Real GDP growth Strong economy driven by Government reform since 1991 reduced bureaucracy encouraging Foreign Direct Investment capital market reforms relaxation of foreign exchange rules E 28E 29E 21E Inflation rates 1 (%) Recent growth due to investment and consumer spending broadly stable inflation and currency Strong outlook for nominal GDP growth in double digits real GDP growth in high single digits Nominal GDP per capita expected to double in five years from c.us$1, today E 28E 29E 21E 1 EIU, Datastream 13 Evolving demographics Population 1 Number of households Population (million) Growth rate (%) (millions) Household income (constant INR) >1, 5-1, <9 74 Youth population 2 Second largest population after China growth expected at 1.8% p.a relatively young population 32% 24% 17% 15% 15% Growing urban population from 317m in 25 to 356m in 21 4 India China UK US Malaysia Improving prosperity expected continued growth of middle earners and decline in deprived 1 Registrar General India. 2 Statistical sites of respective governments 1-34 years. 3 McKinsey Global Institute. 4 UN Department of Economic and Social Affairs 14

8 Rapidly growing telecom market Indian telecoms market revenues 1 2.4% of GDP 2.5% of GDP US$54.1bn 19% CAGR Strong telecom growth driven by low mobile penetration low calling prices strong economy increasing disposable income Mobile share of growth expected to be over-proportionate US$22.3bn 21% CAGR Government has clear teledensity targets 5m subscribers by 21 2m broadband subscribers by Mobile voice Mobile non-voice Fixed voice Fixed non-voice Underlying trends remain attractive Underlying trends remain attractive 1 OVUM 15 Rapidly growing mobile market 8 million net adds per month At the take-off point on the S-curve 25 Closing customers (m) Net additions (m) Lifetime prepaid plans 12 6% Mobile penetration 2 1 5% 15 Micro prepaid 8 4% 19% (Oct-7) Calling party pays 6 3% 1 Third and fourth operator entry 4 2% New Telecom policy 5 2 1% Jun-97 Jun-98 Jun-99 Jun- Jun-1 Jun-2 Jun-3 Jun-4 Jun-5 Jun-6 Jun-7 % Net additions of 67m customers YTD vs. 64m in all of CY 26 Net additions of 67m customers YTD vs. 64m in all of CY 26 Source: COAI, AUSPI at October 27 16

9 Mobile market structure 213m customers 19% penetration 88% prepaid Mumbai Metro circles A circles 469 average MOU 1 US$7 average ARPU 1 6 or 7 main operators Delhi Chennai B circles C circles Kolkata Metro circles 4 largest cities 39m mobile users, 63% penetration 6 operators A circles States with highest earning power 77m mobile users, 22% penetration 8 operators B circles 77m mobile users, 17% penetration 1 operators C circles States with lowest earning power 2m mobile users, 8% penetration 6 operators Map not to scale. Sources: COAI, AUSPI at October 27, TRAI performance indicator report June quarter Monthly 17 Vodafone Essar - historical development 1995 : Mumbai History Origins in Metros and one A circle; latter growth in A and B circles Established strong position even when 3 rd or 4 th entrant Continued focus on fundamentals and the long-term 2 : Delhi, Kolkata, Gujarat 22 : Andhra Pradesh, Karnataka, Chennai 24 : UP-E, Rajasthan, Haryana 25 : Punjab, UP-W, West Bengal 26 : Maharashtra, Kerala, Tamil Nadu (BPL 3) 28 : Assam, Bihar, Himachal Pradesh, Orissa, Jammu & Kashmir, North East, Madhya Pradesh 1 (Spacetel) 1 Licence pending 18

10 Vodafone Essar - Organisation Managing the challenge of 37m customers Group functions Marketing Technology/ Regulation Finance Legal IT HR CEO 5 Operations directors Each responsible for 2-5 circles 16 Circle CEOs Challenging environment land area c.3m km 2 (c.4m km 2 in EU) underdeveloped infrastructure rapidly growing - 1.6m net adds per month Established and experienced management team balance of central and local control 7, employees (4% in the centre) Operating approach use of scalable outsourcing model in IT, networks and distribution focus on efficiency - 5,3 customers per employee 19 Vodafone Essar - strong market position A leading player with operations in the key 16 out of 23 circles Operator No. of circles Circle leadership Customer share Revenue share Bharti % 26% Vodafone Essar % 18.5% BSNL % 15% IDEA % 8% Aircel 9 3 4% 3% Other GSM 1-6% 5% Total GSM 75% 76% Reliance (CDMA) 21-15% 15% Tata 2-9% 9% Other CDMA - <1% <1% Total CDMA 25% 24% We have a 2% customer market share within our 16 circles Source: Customer share - COAI, AUSPI October 27, Revenue share - TRAI June Includes Reliance 2

11 Vodafone Essar - footprint Metro circles 22% market share, overall no.1 player 9m customers 9 MHz in 3 circles 1% population coverage B circles 19% market share, overall no.1 player 15m customers 9 MHz in 6 circles 76% population coverage A circles 18% market share, overall no.2 player 14m customers 9 MHz in 3 circles C circles Licence received awaiting spectrum Already preparing network 57% population coverage Source: COAI, AUSPI October 27. Share based on customer market share 21 Network sharing - Indus Towers Key features Benefits to India Impact Independent company - Vodafone Essar, Bharti c. 42% each, Idea 16% Merger of existing passive infrastructure in 16 circles 1 Responsible for all new build and maintenance Services expected to launch by beginning of calendar 28 Supports the Government s teledensity target of 5m subscribers by 21 Accelerates improvement in coverage and quality, particularly in rural areas Agreement is open to other parties Largest tower company in the world - 7, sites Includes all existing towers of Vodafone Essar Drives operational efficiency Accelerates the expansion of coverage into rural areas Accelerates penetration in the Indian telecom market Accelerates penetration in the Indian telecom market 1 Excludes the 7 Spacetel circles - Assam, Bihar, Himachal Pradesh, Jammu & Kashmir, North East, Orissa, Madhya Pradesh 22

12 Evolving regulatory and political environment Public policy goals Regulatory framework Spectrum/ licences 5m telecoms connections by 21 (requires significant rural coverage) Passive infrastructure sharing encouraged. Active sharing under review Rural infrastructure development through USO subsidy Telecommunications Regulatory Authority of India (TRAI) - recommends policy Department of Telecommunications (DoT) - issues licences and sets policy Telecommunications Dispute Settlement Arbitration Tribunal (TDSAT) Spectrum allocation based on subscriber linked criteria, specifics under review Dual technology proposal under petition by COAI Awaiting spectrum in Spacetel circles Other In-principle approval of MNP to commence in Q4 28 Proposals for 3G/WiMAX for existing operators 23 Summary India has a large, fast growing and under penetrated market Strategic objectives.. Strategic objectives.. Expand distribution and network coverage to capture market share Drive a customer focused approach Leverage Vodafone products and services Manage costs to sustain and grow margins Vodafone Essar is a market leader - positioned to drive strong growth Vodafone Essar is a market leader - positioned to drive strong growth 24

13 India - Analyst and Investor Day Commercial overview Harit Nagpal, CMO Vodafone Essar 1 December 27 Contents 1. Evolving customer base 2. Key features of the Indian market 3. Rebranding 4. Innovative distribution 5. Customer service focus 6. Propositions and solutions 7. Future initiatives 26

14 Evolving mobile customer base Handset prices Call rates Customers Penetration Majority of base Customer benefit c.1995 US$3 4 UScent/min Incoming and outgoing calls charged Market: <1m VE: 1,.1% contract Status symbol for socialites and senior mgt. c.21 US$7 5 UScent/min CPP introduced May 3 Market: 5.7m VE: 1.2m.5% Tool to enhance business productivity Today US$3 2 UScent/min Outgoing calls only Market: 213m VE: 37m 19% prepaid Basic need for communication Falling Falling phone phone prices prices and and call call charges charges Accelerating growth Accelerating growth Fast growth in an under-penetrated and complex market Fast growth in an under-penetrated and complex market Benefit Benefit moving moving from from want want to to need need Source: COAI, AUSPI, company data 27 Indian market key features today Key features 1 Penetration 2 High monthly minutes of use 469 6% 53% Low outgoing call rate 2UScent Low monthly ARPU US$7 Minimal handset subsidy and acquisition cost High churn 49% 4% 2% % 16% Bank account 25% 3% TV Print Internet Key challenges Large landmass (one third of the US) but with underdeveloped infrastructure Absence of large retail organisations Need for low cost, frequent service and scalable operations Constant need for innovation in a rapidly evolving environment 1 COAI, AUSPI at October NRS 26 28

15 Commercial strategy Use Vodafone brand to target high value customers Expand and innovate distribution channels to increase market share Differentiate on enhanced customer services Provide innovative products to meet customers evolving needs Deliver a commercial strategy suitable for an evolving market Deliver a commercial strategy suitable for an evolving market 29 Rebranding From Hutch to Vodafone in 4 months From Hutch to Vodafone in 4 months Stores 4, points of sale rebranded within weeks Mass media coverage blocked 13 Star TV channels for 24 hrs Customer touch points 44 press articles 2,1 billboards covered Key benefits Highly attractive international brand Recognition ratios ahead of target after 8 weeks: - spontaneous awareness at 44% - brand consideration at 71% 3

16 Innovative distribution to reach the customer Urban Exclusive shops Scalable and outsourced distribution model Benefits Benefits Attract Attract new new customers customers and and build build brand brand awareness awareness Key features Key features Largest retail chain with 36 leased and 1,4 exclusive franchised shops c.3% of contract acquisitions Direct sales agent Hub & Spoke distribution Associate distributors Target Target customers customers directly directly at at home home and and office office Low Low cost cost and and fast fast access access to to low low ARPU ARPU segment segment (mainly (mainly prepaid) prepaid) Manage Manage local local terrain, terrain, create create shops shops and and manage manage communication communication and promotions 37 DSAs with 4,7 Feet on street and 2,3 Tele callers Call potential prepaid to contract conversions c.7% of contract acquisition One hub with multiple spokes 1, towns and villages (69% population cov.) 1 2,2 distributors serve 5, points of sale with 9,6 salesmen Local resident creates and serves rural retailers 1,9 distributors who know terrain, environment and influencers 1/3 of prepaid acquisitions (where implemented) and promotions Rural Vodafone innovates & manages sales channels distribution partner executes 1 Represented circles 31 Customer Service Shops Created a brand of of service through constant innovation Benefits Benefits Face Face to to face face service service in in urban urban areas areas Key features Key features Extensive and scalable chain of shops 71, walk-ins/day for own shops 93% satisfied customer response Vans Face Face to to face face service service in in remote remote areas areas Scalable model of 4 vans Franchised operation with 2, walk-ins/day Where own/exclusive shops impossible Call centres Leveraging Leveraging India s India s outsourcing outsourcing expertise expertise 7,2 seats outsourced 3.6m calls per day (66% through IVR) 9% satisfied customer response Self service kiosk Low Low cost cost service service points points in in high high traffic traffic urban urban areas areas 4 kiosks operate 24x7 with 22, transactions per day Focus on urban technology focused customer Well positioned for inbound sales opportunity Well positioned for inbound sales opportunity 32

17 Product innovations to meet evolving customer needs Propositions Propositions Benefits Benefits Voice Non-voice Enterprise Commitment plans on contract Bonus cards on prepaid Micro recharge Market leadership through series of firsts - banking, hotmail, messenger, movie clips Low cost animated campaign Search content: easy & free Leveraging EDGE network - data cards - BlackBerry - fixed cellular terminals - customised text based solutions Lower rate against commitment Protects ARPU and builds value perception 84% revenue growth 1 11% of service revenue (+2ppYoY) 1 Targeting growing Indian enterprise segment - 1+ VGE accounts - 4+ national accounts Customer centric approach: earn while building value perception Customer centric approach: earn while building value perception 1 H1 7/8 33 Future initiatives Voice Non-voice Mobile money transfer Use Vodafone s CRM expertise Manage churn and a declining ARPU Vodafone know-how in segmentation and real time marketing Leveraging Vodafone s Vodafone live! expertise Build on underdeveloped penetration of bank accounts in India Leverage M-PESA platform operating in Kenya Handsets Leveraging Vodafone s access to ultra low cost handsets for mass market Magic Box a stylish phone with affordable price of US$3 Cross selling with Vodafone Global Enterprise Enterprise Local strengths and Vodafone s global expertise Local strengths and Vodafone s global expertise 34

18 Summary Deliver strong growth in an under-penetrated and complex market Fast growing Indian market offers a great opportunity Local strength combined with Vodafone s global expertise Vodafone Essar is well positioned with its commercial strategy 35 India - Analyst and Investor Day Networks Naresh Gupta, CTO Vodafone Essar 1 December 27

19 Contents 1. Network landscape 2. Vodafone Essar network footprint 3. Network objectives 4. Execution 37 Network landscape Industry overview Oct Circles Customer base Base stations Population coverage Vodafone 16 37m 38k 66% in 16 circles Bharti 23 51m 55k 65% in 23 circles Idea 11 19m 19k 58% in 11 circles Reliance 23 38m 23k 54% in 23 circles BSNL 21 31m 33k 58% in 21 circles At critical inflection point 19% penetration (213m customers) 2 Government targeting 5m customers by 21 large untapped rural footprint Most national operators rolling-out aggressively >US$1bn mobile capex in 27 3 >1k additional base stations in 27 3 Evolving regulatory regime spectrum policy under review new operators under consideration 3G / WiMAX policy in final stages MNP approved in principle Scalability and cost control critical in competitive and evolving environment Industry in rapid growth phase in an evolving regulatory regime 1 Competitor reports and company estimates. 2 COAI, AUSPI October Company estimates 38

20 Vodafone Essar network footprint Network Operations per circle Population coverage Base stations 4 Metro circles c.1% 7.5k 5 A circles c. 57% 14.5k 7 B circles c.76% 15.5k 1 B circle 2 Awaiting licence Awaiting licence 6 C circles 2 Awaiting spectrum Awaiting spectrum Spectrum allotment in Mhz 9 MHz 18 MHz Attractive network c.38k base stations 1 9MHz in 12 (out of 16) circles first centralised core data network - fully GPRS / EDGE enabled - seamless data coverage progressing towards nationwide fibre backbone (c.37, km today) 1 Next Generation Networks - VoIP long distance network Wide coverage 66% population coverage (1% in key Metros) in our footprint 1 95% census towns coverage 1 carrying >15bn minutes per month 1 pan-india footprint post Spacetel circles roll-out Wide and growing network - progressing towards pan-india 1 October Spacetel circles 39 Network objectives Expand network coverage to grow market share Expand network coverage to grow market share Rapid roll-out Objectives Improve coverage and quality in current circles Expand footprint in 7 Spacetel circles Constantly improve cost efficiency Initiatives 1. Improve capacity and quality 2. Site sharing / Indus Towers 3. Network outsourcing 4. Fibre roll-out 5. Rural initiatives 6. Capital efficiency Indus Towers Independent tower company established with Bharti and Idea Operates in 16 circles Delivering a low cost network 4

21 1 Focus on capacity and quality Base station roll-out per month Oct-6 Dec-6 Feb-7 Apr-7 Jun-7 Aug-7 Oct-7 Pre Vodafone Post Vodafone Rapid base station roll-out post Vodafone now at c.1,9 per month (c.95 previously) Geographical Information System (GIS) to maximise population capture per base station 38k at Oct. 27; target 5k by Mar. 28 Capacity ramp-up in last 8 months radio capacity +5%; core capacity +43% capacity ahead of the curve to meet growth Anticipate Spacetel spectrum in 28 already preparing network for rapid deployment enables access to extra 28m people 1 Focus on quality audits through independent international firms continuous competitive benchmarking FY7/8 capex of over US$2bn compared to c.us$1bn previously 1 21 census 41 2 Site sharing (%) Vodafone Essar shared sites Pre Vodafone Post Vodafone Sep-6 Nov-6 Jan-7 Mar-7 May-7 Jul-7 Sep-7 Cumulative shared MoM incremental shared Current position bilateral sharing in all 16 circles pace increased significantly post Vodafone two-thirds of new sites shared 9pp rise in cumulative shared sites in 8 months 42% of 38k base stations shared 1 Benefits capex and opex savings faster roll-out Next steps Indus Towers drives operational efficiency accelerates the expansion of coverage particularly in rural areas Active infrastructure sharing following Government approval Costs optimised to serve low ARPU customers 1 October 27 42

22 3 Outsourcing of network operations Outsourcing cost per base station 1 Structure (US$ index) Q1 6/7 Q2 6/7 Q3 6/7 Q4 6/7 Up to 35% reduction Q1 7/8 Q2 7/8 Q3 7/8 NSN 2 scope - Manage network operations for RAN and core - Design, engineering, optimisation - Roll-out and field maintenance Vodafone Essar scope - Ownership, control, strategic direction Additional benefits Manage scale & complexity 12 out of 16 circles already outsourced 7 Spacetel circles to be outsourced from start Leverage NSN s core skills planning, optimisation and technology roll-out centralised network management centre Manage quality along with accelerated roll-out Reduces opex per site as the network expands 1 Cost charged by outsource partner per base station per quarter. 2 Nokia Siemens Network (NSN) 43 4 Fibre roll-out Fibre network 1 No independent fibre operators in India Fibre roll-out benefits reduce leased lines costs to lower opex minimise dependency on third parties leverage fibre for enterprise data solutions Significant fibre network growth post Vodafone Mar. 27 2,5 km; Oct , km c.5, km by Jun. 28 Provides backhaul for access and long distance traffic 55% of Vodafone inter circle traffic 1 commenced operations for national and international long distance calls Evolving pan-india unified transport network 1 October 27 44

23 5 Rural site initiatives Satellite connectivity Solar powered Large untapped rural market c.7% of total population 1 growing rural coverage c.8k USO funded towers for industry in phase 1 Rural environment under-developed infrastructure alternatives needed for power, transmission backhaul cost pressures to serve low ARPU customers Passive cooling material Cost optimisation initiatives site sharing VSAT (satellite) connectivity USO subsidy alternative (solar) power passive cooling material reduces energy costs Sharing of active infrastructure on government approval provides additional benefits 1 TRAI consultation paper on review of licenses June Capital efficiency Capex per customer 1 Market drivers Low tariffs coupled with high usage c.38% reduction Low affordability, large rural spread Intense competition, 6 or 7 main operators (GSM + CDMA) (US$) Initiatives Centralised purchase - standardisation and scale benefits All inclusive fully featured supplier prices - sustained price reduction over a period Infrastructure sharing Pioneered innovative capital productivity 1 Incremental capex divided by incremental customers on an annual basis 46

24 Summary Accelerate investment in rapid growth market Sustain quality in accelerating growth environment Manage costs to sustain margins Leading network fully featured, scalable and cost efficient Leading network fully featured, scalable and cost efficient 47 India - Analyst and Investor Day Financial perspective Andrew Davies, CFO Vodafone Essar 1 December 27

25 Contents 1. Historic financial summary 2. Customer and revenue trends 3. EBITDA and cost analysis 4. Cash flow performance 49 Overview of performance High growth business Margin expanding with scale Investing in growth Strong financial discipline 5

26 Hutch Essar - historic financial performance Customers ARPU CAGR (14%) 25 CAGR 78% (m) 15 (INR) Revenue 1 EBITDA % 29% 33% 34% Margin (INR bn) CAGR 52% (INR bn) CAGR 52% After elimination of inter circle revenue Source: Company estimates 51 Continued strong growth under Vodafone Customers Service revenue % +52% 67 (m) 2.4 (INR bn) 44 H1 6/7 H1 7/8 H1 6/7 H1 7/8 84% % prepaid 89% Voice Non-voice 85% prepaid growth increasing rural penetration 22% growth in contract contract base and growth mostly in Mumbai, Gujarat and Delhi Blended churn at 44%, slightly below industry average Customer growth more than offsetting ARPU decline to drive revenue growth 49% increase in voice revenue 84% growth in non-voice revenue now 11% of service revenue (+2pp YoY) driven by consumer data 52

27 Pricing and usage trends ARPU 1 Yield c.9 US$ c.2 UScents.83 (INR) (INR) 4 (mins) H1 6/7 H2 6/7 H1 7/8 MOU H1 6/7 H2 6/7 H1 7/8 H1 6/7 H2 6/7 H1 7/8 ARPU change mainly reflects increasing share of prepaid and rural customers c.1% YoY total minute growth MOU per customer growth driven by lower prices Yield pressure from mix and increasing competition yield remains above industry average due to higher contract mix 1 Monthly basis after eliminating inter circle amounts. 2 Total voice revenue divided by total minutes 53 EBITDA analysis EBITDA 3 (INR bn) % 23.9 EBITDA growth due to increasing customer base c.1pp adverse margin impact in H1 7/8 from rebranding costs (%) H1 6/7 H1 7/8 Original 13 circles BPL 3 EBITDA margin H1 6/7 H1 7/8 Original 13 circles BPL 3 Total Original 13 circles 92% of total EBITDA margins in 4 circles over 4% due to scale BPL 3 circles (acquired in Jan 26) EBITDA growth over 2% YoY; (8% of total EBITDA, +4pp YoY) turnaround being implemented as circles gain scale (c.5m customers; +12% YoY) 54

28 Cost structure analysis H1 7/8 cost analysis Acquisition & retention Interconnect Share of revenue (%) India Monthly cost per customer (US$) Cost per minute (UScents) Acquisition and retention absence of handset subsidies and high prepaid ratio strong sales of ultra-low cost handsets Interconnect termination rates less than 1 UScent 5% of outgoing traffic on-net, expected to trend higher Other direct Operating expenses Total Revenue per minute Other direct 11% related to various licence and spectrum charges Operating expenses customer facing costs and technology costs each contribute 45% of opex very low G&A costs outsourcing total IT costs to IBM 1 Illustrative purposes using an exchange rate of 4INR: 1US$, 2 Service revenue divided by total minutes. 55 Investing in growth H1 7/8 free cash flow Strong operating cash flows 13.4 (34.5) INR6bn of post acquisition working capital benefit generated by end of June 27 (INR bn) % capex intensity in H1 expected to rise further in H2 $5m of additional external financing to fund investment target of low teens intensity by FY11/12 EBITDA Working capital (2.) (3.5) (2.7) Capex Tax Interest FCF Cash tax rates 11-14% until FY212 due to various incentives longer term trend towards c.3-34% 56

29 Summary Vodafone has acquired a strong business Investing to accelerate growth Continuing to focus on the cost base Margin growth from a scalable operating model One team driving value growth One team driving value growth 57 India Question & Answer Session

30 EMAPA Delivering value in emerging markets Paul Donovan, CEO EMAPA 1 December 27 Contents 1. EMAPA overview 2. Key country highlights 3. Our strategy for delivering value 6

31 EMAPA objectives Investing in future growth High performing organisations Country specific business models Two way value transfer between emerging markets and Vodafone Group Deliver strong growth in emerging markets 61 EMAPA overview 1 Subsidiaries & Joint Ventures Eastern Europe Czech Republic Romania Hungary Turkey Poland (JV) Emerging Markets Middle East, Africa & Asia Egypt Kenya (JV) Vodacom (JV) India Pacific Australia New Zealand Fiji (JV) (%) Affiliates Associates Verizon Wireless (US) Egypt Turkey India Australia New Zealand Czech Republic Hungary Romania Poland Kenya DRC Mozambique Tanzania S Africa Mobile market penetration (Sept 7) Investments China Mobile Bharti (India) Population of over 1.1bn unserved in the footprint of our subsidiaries and JVs 1 Eastern Europe, Middle East & Africa, Asia Pacific and Affiliates 62

32 Market environment Common themes in emerging markets Strong GDP growth Economy Low incomes / wide distribution of wealth (rural vs. urban divide) Young population Low mobile penetration, competitive landscape still evolving Telecom sector Weak fixed line infrastructure and low internet penetration Predominantly 2G markets, prepaid with limited handset subsidies Growing political stability Regulation Evolving regulatory environment Spectrum policy crucial to market structure Strong organic growth opportunity Strong organic growth opportunity 63 EMAPA strong growth across the portfolio (%) (%) (%) Strong GDP growth (27) India Egypt Turkey Romania drives our customer growth India Egypt Turkey Romania... drives our revenue growth 3 India Egypt Turkey Romania India India and Turkey shown on a pro forma basis assuming the Group owned the businesses for the whole of both half years 1 EIU real GDP, 2 H1 7/8 average customer growth YoY, 3 H1 7/8 constant currency total revenue growth YoY - improved customer market share (now no.3) whilst benefiting from rising penetration - no.2 by revenue market share Egypt - strong economy driving penetration - market share leader by revenue (51%) Romania - improved business market share due to mobile connectivity devices - revenue market share of 45% Turkey - customer service and network improvements drove growth - revenue market share of 22% 64

33 Africa - key country highlights (%) (%) (%) Strong GDP growth (27) S Africa Tanz Moz Congo Kenya drives our customer growth S Africa Tanz Moz Congo Kenya... drives our revenue growth S Africa Tanz Moz Congo Kenya South Africa - continued double digit growth - revenue growth reinforced by data Tanzania - strong customer and revenue growth - 3G launched Mozambique - strong customer and revenue growth Democratic Republic of Congo - large market - good potential for sustained growth Kenya - most profitable company in East Africa - over 7% share of net adds in 1 st half of year - IPO process initiated 1 EIU real GDP, 2 H1 7/8 average customer growth YoY, 3 H1 7/8 constant currency total revenue growth YoY 65 Executing our strategy Building strong foundations Invest to accelerate penetration and usage in India Network and customer service enhancement in Turkey Leveraging global brand Differentiation Customer insight driven resource optimisation Ultra low cost handsets M-PESA money transfer in Kenya Cost management Learnings from Europe: cost management ahead of the curve Emphasis on insourcing and outsourcing Use of group scale, scope and best practice sharing Total communications solutions Mobile broadband services in South Africa Mobile advertising launched in Czech Republic Targeted solutions for enterprise in Romania 66

34 Differentiation - Ultra low cost handsets Addresses a wider market with affordable products and services particularly rural areas Over 3m handsets shipped across 32 markets up to Oct. 7 Vodafone 125 (B&W) and 225 (colour) retails at US$ Expanding into new segments with exclusive devices 1 Depending on specific model and local market conditions Vodafone 225 Vodafone M-PESA low cost money transfer Proposition Cheap, accessible mobile money transfer solution targeted at non-bank business and consumers Built around transfer of micro amounts (Thousands) 1,25 1, 75 5 Progress to date - Kenya M-PESA customer base growth (7) Money transferred using SMS 25 Mar Apr May Jun Jul Aug Sept Nov Future plans Plans to launch in India International money transfer agreement with Citi 68

35 Mobile broadband - Vodacom leading the way South Africa broadband market share iburst 3% MTN 32% Telkom ADSL 13% Vodacom 52% Market and innovation leadership Vodacom has c.1 million mobile broadband customers Providing an effective substitute for fixed line Simple, walk out of the store with broadband service Expanding rapidly availability of 3G Mobile advertising launched with innovative SMS service - free call me service funded with advertising revenue 69 Two way value transfer Vodafone synergies Reverse synergies CEO council for emerging markets senior representation from Vodafone companies in emerging markets drives best practice sharing Network fast HSDPA deployment in new markets Handsets ultra low cost handsets access to growing portfolio of handsets Services M-PESA in Kenya, expansion planned Cost initiatives Vodafone Egypt hosting call centres for Australia, with expansion planned IT support outsourced to Vodafone Egypt Total outsourcing model Combined Vodafone and China Mobile network feature roadmap Sourcing centres in Beijing and Hong Kong Improved network operating costs Indian experience on higher operating temperature for base stations solar powered base stations supply chain 7

36 China Mobile strategic stake Vodafone stake in China Mobile China Mobile recent progress (27) Vodafone has a 3.27% stake and a Board seat Vodafone is the lead foreign investor Established relationship since 21 Stake value has risen strongly now c.$12bn Optionality in potential industry restructuring Net adds (') 7, 6,5 6, Subscribers (m) Areas of collaboration Leveraging the combined scale: definition of a single feature network roadmap joint initiatives reviewing technologies beyond 3G network cost reduction initiatives Servicing Vodafone corporate customers in China Aspire JV, portal provider to China Mobile 5,5 5, 4,5 4, Jan Feb Mar Apr May Jun Jul Aug Sept Oct Joint initiatives for Beijing Olympics Net adds Subscribers 71 Summary Investing in future growth High performing organisations Country specific business models Two way value transfer between emerging markets and Vodafone Group Delivering strong growth in emerging markets 72

37 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This document 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. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as anticipates, aims, could, may, should, expects, believes, intends, plans or targets. In particular, such forward-looking statements include statements with respect to the increasing importance of the EMAPA region, which includes India, to the Group; the outlook for the Indian economy, including GDP and GDP per capita growth; demographic trends in India, including population growth estimates; the prospects for growth in the Indian telecommunications market generally, and in particular growth in the proportionate share of mobile telecommunications and in the numbers of mobile phone and broadband subscribers in India; Vodafone Essar s expansion into new regions in India; potential benefits of the Indus Towers site sharing operation, including anticipated market penetration and market share, cost savings, assumptions regarding key operating measurements, including capital expenditures, EBITDA and sales, and expected tax rates; the evolving regulatory and political environment in India, including public policy priorities with respect to the telecommunications market, licensing and spectrum allocation and expected approvals of new technologies; Vodafone s expectations regarding its Indian operations, including trends in operating expenses, interconnect costs, capital expenditures and capital expenditure intensity, revenue and cash tax rates; intentions regarding the development of products and services introduced by Vodafone Essar or by Vodafone Essar in conjunction with initiatives with third parties, including expectations regarding customer demand for new non-voice and enterprise products, targeted base station roll-outs and fibre network growth; anticipated governmental licensing of spectrum in Spacetel circles, access to populations covered by such spectrum and anticipated outsourcing of Spacetel circles; planned expansion of the M-PESA programme; and planned expansion of cost initatives involving Vodafone Egypt. 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 and make it more difficult to acquire new customers, and reduce profitability; the impact of investment in network capacity and the deployment of new technologies, or the rapid obsolescence of existing technology; slower than expected customer growth and reduced customer retention; changes in the spending patterns of new and existing customers; the possibility that new products and services will not be commercially accepted or perform according to expectations or that vendors performance in marketing these technologies will not meet the Group s requirements; the Group s ability to win spectrum licence allocations; a lower than expected impact of new or existing products, services or technologies on the Group s future revenue, cost structure and capital expenditure outlays; the ability of the Group to harmonise mobile platforms and delays, impediments or other problems associated with the roll-out and scope of and other new or existing products, services or technologies in new markets; the ability to realise benefits from entering into partnerships for developing data and internet services and entering into service franchising and brand licensing; the possibility that the pursuit of new, unexpected strategic opportunities may have a negative impact on the Group s financial performance; developments in the Group s financial condition; the possibility that new marketing or usage stimulation campaigns or efforts and customer retention schemes are not an effective expenditure; the possibility that the Group s integration efforts do not reduce the time to market for new products or improve the Group s cost position; the risk that, upon obtaining control of certain investments, the Group discovers additional information relating to the businesses of that investment leading to restructuring charges or write-offs or other negative implications; loss of suppliers or disruption of supply chains; the Group s ability to satisfy working capital requirements through borrowing in capital markets, bank facilities and operations; changes in exchange rates, including particularly the exchange rate of pounds sterling to the euro and the US dollar; changes in statutory tax rates and profit mix which would impact the weighted average tax rate and changes in tax legislation in the jurisdictions in which the Group operates; and changes in projected economic, demographic or market trends in the jurisdictions in which the Group operates. 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 Risk Factors, Seasonality and Outlook Risk Factors in Vodafone Group Plc s Annual Report for the year ended 31 March 27. 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 forwardlooking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements. 73 EMAPA Question & Answer Session