VOD

Good morning, everyone. Thank you for joining us. Before moving to Q&A, I will briefly provide an update on our performance in FY26, as well as our growth outlook. Vodafone is now entering a new chapter as a simpler and stronger business. Simpler because we have gone through a significant transformation over the last 3 years, covering all aspects of our business, including portfolio, capital structure, and operating model. We are stronger because our continued operational progress with our strategic priorities of customer simplicity and growth. With these foundations and the range of opportunities across our diversified and balanced portfolio, we are in a strong position to grow in FY27 and beyond. As I mentioned growth, that leads me on to our financial results. We are pleased with our performance in FY26, as we have achieved the upper end of our expectations.

Group service revenue growth remains strong in the fourth quarter at 5.1%, with growth across both Europe and Africa. In Germany, despite the ongoing pressure in TV and the mobile market remaining competitive, our performance has improved as we are now growing in B2B and consumer broadband. These improvements are a direct result of our actions. In consumer broadband, we have continued to improve customer satisfaction and increased front book prices, and our value equation is working. In B2B, we are benefiting from the capabilities we have developed in digital services, including cloud, security, and AI. In our emerging markets, we grew service revenue in euro during the year. Our second-largest division, Africa, reported a great set of results yesterday, with strong performances across all of our markets, delivering its highest service revenue growth in almost 2 decades.

On profitability, we delivered 4.5% organic growth in adjusted EBITDA for FY 2026, fully in line with the upper end of our guidance. We also generated EUR 2.6 billion of adjusted free cash flow, continuing the cash growth trajectory we have been building since FY 2024. Following our announcement of a progressive dividend policy, we increased the full year FY 2026 dividend by 2.5%. For FY 2027, we are guiding for continued good growth in both adjusted EBITDA and adjusted free cash flow. Let me move beyond financials for a moment to give you an update on where we are operationally and our confidence for the medium term. As you know, we are now focusing our resources on markets with sustainable structures where we have scale and strong positions.

With our new portfolio, we are entering an exciting new era for connectivity. We are operating in a more supportive environment with sustainable pricing models embedded in more markets than ever before, increasingly pro-investment spectrum decisions, and a better understanding of the benefits of in-market scale. Now let me look at our strategic progress in each of our markets, starting with Germany. I'm particularly pleased that we continue to deliver consistent NPS improvements across all segments quarter after quarter with our highest ever levels in mobile and cable. This is supported by the customer care initiatives that we are rolling out across our markets, such as our Just Ask Once commitment. In terms of the year ahead, we will continue to focus on becoming the market leader in customer experience, a one-stop shop provider for fixed, mobile, and TV, and a trusted B2B partner of choice.

Whilst we currently operate in a challenging market environment in Germany, I am confident that we are taking the right actions for the long-term health of the business. Turning to the U.K., we are still less than a year ahead into our integration, but we have made significant progress. The latest independent tests have continued to show the considerable mobile network quality improvements we are delivering for our customers. We can see this feeding through to our results with step changes in both customer satisfaction and loyalty. We have also recorded our fastest ever year of home broadband customer growth with the largest gigabit footprint of any operator. This year is an important one for us in the U.K. Not only have we announced that we will be taking full ownership of VodafoneThree, but we will also deliver the first meaningful cost and CapEx synergies.

We will continue to drive revenue synergies with our multi-brand portfolio, unified store footprint, and significant cross-selling opportunities. As an example, just yesterday, we announced that we are bringing fixed wireless access to a further 3.7 million homes. Finally, on Africa, we continue to expand beyond connectivity as we run Africa's largest fintech platform with over 100 million users now and millions of merchants. We are really excited about the future in Africa with structural growth opportunities from population and customer growth, rising smartphone penetration, and growing data usage. Bringing all this back to our growth outlook. Our growth will be driven by our differentiated assets, strong market positions, and attractive opportunities across Europe, Africa, and B2B. After the transformation of the last three years, we are a simpler and stronger business.

We have a clear strategy, through continued execution of our priorities, we are well positioned for growth. Our confidence in our growth portfolio is reflected in our midterm ambition to deliver double-digit organic growth in adjusted free cash flow. With that, Pilar and I are looking forward to your questions.

Thank you, Margherita. As a reminder, please only pose one question to give all analysts a chance to speak. The first question this morning comes from Robert Grindle at Deutsche Numis. Robert, please go ahead.

Good morning, and thank you. Before we get into the full year results detail, I'd like to revisit the reinstatement after quite some time. Your midterm targets to drive double digit free cash flow growth, which you just mentioned. In my mind, this is a step change in your confidence interval about prospects over multiple years. Why do you feel that now is the time to reinstate a longer term outlook? What is underlying your raised level of confidence? Thank you.

Thank you, Robert. I will reiterate some of what I was framing in my introduction. We think this is the right point in time because we are entering a new chapter. We have undergone in the last three years a really deep transformation. We have changed where we operate, we have changed how we operate, we have changed our capital structure. We are now opening this new chapter as I was saying, a simpler and stronger business. You mentioned this is the first time in a long time. I would like to add that it's probably the first time in a very long time that we operate in markets only from strong scaled position, and this is true for each and every one of our markets today. Just as we have this new setup, we see the world around us also evolving for connectivity.

We have, at this point in time, a more supportive environment for connectivity. If you think about demand, always strong, supply, and also regulation. Again, because of what we have done in the last few years in terms of setting our priorities and keeping driving operational momentum from customer simplicity and growth, we are stronger than ever before to take advantage of this new environment. You asked about the confidence in general. I would say when we look at our diversified and balanced portfolio and the growth opportunities that we have in each area, that's where we get our confidence for growth. Growth in FY 2027 and growth for the midterm.

Thank you.

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

That's great. Thank you very much. I wanted to ask about the European EBITDA guidance for next year and the moving parts within that. In the U.K., you've got an extra 2 months of VodafoneThree and synergy delivery. Other Europe is portfolio and normally fairly predictable. The big swing factor there is Germany. Is it fair to say that the new guidance at the midpoint implies a kind of low to mid-single digit EBITDA decline in Germany next year? What is that implied decline underlying kind of X 1&1? Thank you.

Thank you, Carl. Maybe Pilar, you cover the big picture for Europe, and then I will give you the moving parts for Germany.

Yes, definitely. Carl, thanks for the question. On the Europe outlook, our expectation reflects, to be honest, a balanced view of a range of potential outcomes and the mix of puts and takes for the different markets as you were suggesting in your question. First of all, in Germany, in FY 2027, we expect a decline. As the trends that we've seen in Q4, we expect those to continue into this year, into FY 2027. As you rightly mentioned, we expect a strong growth in the U.K. because of FY 2027 being the first year of the meaningful delivery of synergies, cost synergies in this case. Beyond that, we need to see how the competitive environment and the macro will evolve.

As you can see in the midpoint of the range of the outlook, Europe is expected to be broadly stable. Which if you allow me before I give the floor to Margherita for more on Germany. If I step back for a minute, when you look at the Europe midpoint and then take into account that Africa and Turkey will continue to grow well, we expect a good growth in adjusted EBITDA and adjusted free cash flow for the group as you've seen in the guidance for FY 2027. Margherita.

Yes, on Germany.

Over to you.

You are right. We expect EBITDA to remain under pressure in Germany in FY 2027. I can give you a sense of the key drivers for Vodafone, but also what we see from a market perspective that will determine these results. If I start from Vodafone from a top line perspective, we have exited FY 2026 as you have seen with better trends, with in particular B2B returning to growth and also consumer broadband growing. As we will move through FY 2027, we will see our top line results gradually converging to what is our retail service revenue growth. As of course we lap the wholesale migration of the prior year.

As you can see, our retail service revenue growth is still negative, and this is driven by the fact that we don't see any meaningful changes in the mobile market and therefore we are continuing to see a flow-through of the price reset that happened in the last couple of years through our base. Beyond that, beyond the top line on the cost front, we don't see any further pressure on commercial costs because as you know, our ANR has now fully annualized the past step up, so we expect this to be broadly neutral. We also expect to see the impacts of the various productivity initiatives that we are carrying through, showing up in terms of head count, in terms of automation, in terms of IT simplification.

Against that of course we will have a degree of inflation during the year. I mentioned the market earlier because I think ultimately where we sit in a range of outcomes in Germany will very much depend on the environment we are playing in and the environment we are playing in in consumer. Today we see slightly different trends as you know. In broadband we are making good progress in a supportive environment. Of course, the market is dynamic, so we will have to see how it evolves. Conversely in mobile, we talked about are there signs of changes at the beginning of the year, but effectively we see the situation fundamentally unchanged and therefore as I mentioned before, this being the biggest swing factor for our retail service revenue growth, we actually see it, see it unchanged.

net-net, I would say what we expect for the year, we expect that we will continue to make progress on the underlying health of the business as I was mentioning earlier. EBITDA will still decline.

That's great. Thank you very much.

Thank you, Carl. The next question this morning comes from Polo Tang at UBS. Polo, please go ahead.

Morning. Thanks for taking the question. Just have a question on M&A and use of cash. How should we think about your appetite to do large deals? I think the prior commentary suggested a focus on bolt-on deals. Does the U.K. JV buyout for GBP 4.2 billion mark a change of position? Can you remind us what you're targeting in terms of your leverage corridor, and how we should think about the evolution of your leverage profile going forward, given we've got the U.K. deal, Safaricom, but also the VodafoneZiggo deals that are in the pipeline. Thank you.

Sure. Maybe I wrap it all up. M&A and leverage. If I start from leverage, as you know, we always intended to buy out the U.K., always in the plan. We had the opportunity to do it earlier than expected. We might want to talk about this more later. In essence, it was planned. In terms of impact, our target remains the same. We always want to work in the current environment in the lower half of our leverage range. The U.K. deal, as you pointed out, temporarily brings us slightly above that, but it's only a temporary effect, and by the end of FY 2027, we will be back within the lower half, and this is the result of course, the proceeds from the Netherlands as well as the growth we are guiding for today.

Actually, I think this growth point is important because we have an outlook of growth. We will grow this year, we will continue to grow beyond this year and therefore we will maintain a strong balance sheet going forward. This being said, I'm very happy with the shape of the group as it is today, and our focus is going to remain on our organic execution and driving our double-digit organic free cash flow growth as we introduced earlier.

Thank you. The next question comes from Joshua Mills at BNP Paribas Exane. Joshua, please go ahead.

Hi guys. Thank you for taking the question. As you've called out in the presentation, there's been some noticeable improvements in German Net Promoter Scores customer satisfaction levels. The financials would suggest that's come at the cost of a lot of additional investment, which you said doesn't need to increase further next year. Should we take from that message that Vodafone's comfortable to see this level of continued subscriber losses as long as you can continue to execute on the price actions you mentioned? Does your guidance assume that the subscriber losses will improve a bit throughout the year? If I could just squeeze one small one in on the Germany EBITDA outlook, a very clear answer for next year on EBITDA declining. In previous years you've talked about the ambition to stabilize Germany EBITDA growth in the medium term.

Does your new multi-year free cash flow guidance still assume that Germany EBITDA will stabilize in the next, say, two to three years? Thanks.

Maybe I start from from the end, which is the prospects for Germany, and then I go back to your point around net adds and volumes in Germany. If I look at if I look beyond FY 2027, let's position it this way, and step back, when What do we see when we look at Germany? We see the largest telco market in Europe, a market in which we have a powerful brand and scaled operations across both fixed and mobile. If you think about our PNL drivers, our TV headwind obviously will not last forever.

If you think about mobile, which is the other area of pressure that we see today, if you look backwards, the German market has a history of positive ARPU development in mobile, and this is because every 1 operator in Germany has large customer bases. If I look ahead, I also consider that we have some additional growth drivers. Digital services, we have talked about how this is going to support B2B. It has brought it back to growth in this quarter. We continue to grow it in the coming year, and also productivity opportunities as we have all across all across the Group. If I think about beyond the near term, I see us in Germany in a strong position in the largest market in Europe.

We are making operational progress, and we are well-placed to stabilize and grow. Now, if I move from the future back to the current position on the net adds front, I think it's very, very clear that what's happening in broadband is we are suffering from an impact on the gross adds component of the volume equation because we have increased prices. We are seeing better Net Promoter Score. The quality of our services keep being rated at the top of all the independent tests. We have taken the opportunity to do a number of price increases. We are now with a front book which is ahead of the back book in Germany. If you look at Q4 specifically, we have had for the first time the full impact of the price increases of calendar 2025.

Additionally, we have had the last price increases we did in January within the quarter. It's fair to say that also during the quarter we saw more promotional activity actually at the low end of the market in the DSL offers from the incumbent. As a result of all this, as I said, lower gross adds, but actually still happy, very happy with our churn levels. Yeah, we talked about this in previous calls. Again, highest ever level of customer satisfaction in our cable network are translating into good levels of loyalty in line with the rest of Europe, actually better than where we are in the U.K. The overall value equation is working well, and this is what we care about.

We have talked about the fact that today fixed line has been stabilized overall in Germany despite the drag of TV, and this is because it includes an improvement in the trends of consumer broadband, which is driven by inflow ARPU, growing by 30% year on year. Bit of an impassionate speech to say to your question around customer losses, these are only a part of the equation. What we target ultimately is revenue growth and revenue growth standing back from our 10 million customer base. I hope this helps.

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

Called me out there. Sorry about that. Yes, thank you very much for taking the questions, guys. Margherita, I think if I was to reread the transcript so far, you've mentioned on multiple times how critical scale is. What I wanted to understand was the market where you are most exposed, and I talk purely on numbers today is Germany, and we have reports of Telefónica interest in 1&1. I think, you know, what I would like to know is how critical is that 12 million customer base to your scale in Germany. I think Luca in the past suggested that if there was any interest from Telefónica, you guys would not counterbid. How critical is that asset to you in Germany? Thank you.

Thank you, David. As you know, we don't like to comment on hypotheticals. If I think about the scenario that you are describing, I would frame it as something which is really in the midterm for a variety of reasons that you can imagine. It's not something that would impact us until an advanced midterm. Then at that point, it would happen in the context of you're assuming a consolidation sequence, and we would have to see what that sequence looks like. As always, when there is consolidation, as you know very well, there are puts and takes. For the markets and for the players.

The final point I would like to actually mention is that if you think about how we are looking at the hypothetical scenario, keep in mind that the type of cash flow we get today from those 12 million customer has nothing to do with what you would expect to have, or we would expect in our plans to have by that point. Of course, we see continued progress in the network build. I think 1&1 has communicated a target of 50% population coverage by that time. Clearly a very different position from the one we are in today if it was to happen, and would have to be considered in the context of the puts and takes of consolidation.

See, the midterm free cash guidance assumes that the 1&1 contribution migrates away. Is that correct?

No, that's not correct in the sense that We have a number of scenarios, as you can imagine, within our range of outcomes, and we are not specific on that point. What it does assume in all scenarios is a reduction of the cash contribution as 1&1 continues to grow its coverage, as you'd imagine.

Yeah. I think, I think that's what I meant. Thank you so much.

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

Hi. Morning. Thanks for taking the question. I've got a follow-up question on your adjusted free cash flow guidance and just the way we should be thinking about what you imply and mean by that. You've guided in organic terms, and you've obviously decided to give a midterm outlook with that. I guess what I'd love to understand is, given it's a guidance on organic terms and not Euro terms, should we assume therefore there's a very heavy weight of confidence around Africa vis-a-vis Europe? Can you sort of help us understand that, and how should we try and think about your perception of the translation effect into Euros? I guess just to follow up on that, I mean, within Europe specifically, how are you feeling around confidence on taking a view on the midterm?

You've referred, Margherita, before to regulation, the need for regulatory change. We've obviously got the new draft EU Merger Guidelines that have come out recently or been leaked recently. Maybe you could give us your thoughts on that and to what extent you feel that can help shape a more confident and durable growth story in Europe.

Thank you, Akhil. I will take the Europe side of the equation, and Pilar.

Definitely. Yeah.

Yeah.

Okay. Oh, okay. I Yeah, no, thanks, I mean, from our guidance perspective. If I take, I mean, guidance for FY27, we are guiding for good adjusted free cash flow growth this year. This is ultimately driven by good adjusted EBITDA growth and then broadly a stable capital intensity by market. You need to take into account that CapEx will peak this year in the U.K., and then it will go down from then onwards. I leave Margherita to comment about Europe. I mentioned about Europe before. For the rest of the world, you need to take into account that we expect to continue having good growth supported by a strong performance in Africa.

You saw the Vodafone guidance, the double digit over the midterm, also continued growth in Turkey in EUR. It's important to take into account that we manage our business on emerging markets for EUR growth, as you've seen in the last couple of years. If I step back, this is what we see in the rest of the world. As I mentioned, for CapEx, small CapEx moves. Important to take into account the peak in the U.K. in FY 2027. From then onwards, really a stable capital intensity more or less everywhere, market by market. I give the floor.

Yeah

to Margherita for the Europe comment.

Yes. You also mentioned currencies. Obviously, our guidance has to be organic because we cannot make assumptions on currencies. As Pilar has just mentioned, our focus, and we have put this also on the slide, is euro growth. Yeah, that's what we are looking at, is adjusted free cash flow growth in Europe year after year. What do we expect for Europe? FY 2026 and also implicit in the guidance of FY 2027, you see that we have now stabilized Europe. We see momentum building. We have just talked about Germany today, but also Germany in the longer term. We see in Europe another fantastic growth driver, as you know, in the U.K. U.K. had good growth in EBITDA this year. We are guiding for stronger because of the synergies in 27.

As you know, we have 700 million cost and CapEx synergies, GBP 700 million to go for by 2030. We see significant opportunity, and we are pleased with the momentum overall. Mergers and European environment. I think it's we have an opportunity now in terms of what's being discussed in Europe to create possibly the most significant shift in the industry for a couple of decades. I need to say the first reading of the draft Merger Guidelines I think is encouraging because it addresses the basics, which is broadening the assessment of the mergers from just one angle, pricing, to a broader view, which includes investments, includes innovation, and includes resilience.

The other point which I think is really important to us is that it specifically says that for sectors like ours, the assessment period has to be different because it takes time to see the evolution on these parameters. There is more to do, and we are engaged in the consultation, yeah. We have this couple of months. I think there are a couple of things that can be better. The first is being specific on these timelines and really recognize the length. You remember that the U.K. CMA led the way there with 8 years. Let's be specific. The other aspect is also to address the remedies side of the equation.

Today there is this still narrow focus on a blunt instrument, which is structural remedies. We would obviously advocate, again as per the U.K., a move towards the more sophisticated behavioral remedies, which I believe are actually better also for our consumers and for investments. If I go back to Vodafone in a way, you As I said before, we have already been proactive in this space. We are proactive in our markets, and we are focused on driving in Europe and in Africa and Turkey growth going forward on an organic basis.

That's clear. One super quick follow-up. Is the guidance for the midterm cashflow pro forma for the portfolio changes that you've done, like Safaricom, or does it not capture those items?

Not yet. No, no.

Okay.

It's always or fully organic.

Always organic.

Yeah.

Very clear. Thank you.

Thank you.

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

Yes. Good morning. Thank you, Margherita and Pilar. Hard to keep it to one question, and I was excited to see the FWA announcement that you made in the U.K.

I was actually going to ask my question today also on the new medium term free cash flow outlook, and in particular digging in there a bit on the CapEx side of things because you are guiding there that capital intensity by market is going to remain broadly stable. Yet if I think about what we know today, you know, the U.K. CapEx is being front-loaded on the network upgrade. There should be synergies to come as well in the U.K. If I look in Germany, more of the fiber upgrade or all of your fiber upgrade is being done off balance sheet through OXG rather than at the group level, all of which would suggest CapEx over time should be coming down.

Therefore, I mean, if that's right, what are the new areas where you see incremental investment coming in, and how do you then think about the future revenue benefits from where the new investment is going? Thank you.

Thank you, James. I see the angle you're coming from, absolutely in the U.K. we will have, let's say, peak CapEx this year. We want to retain a degree of flexibility in our scenarios, to your point, for growth opportunities. For example, in the markets that have strong double-digit growth, we want to continue to always be at the forefront of our leadership position in connectivity. I'm referring, for example, to Africa, right, where we are at the top end of the sort of next generation networks position and we want to continue to grow there, our investments in line with the growth of the demand for our services, data growth, population growth, as I was mentioning earlier. We need to continuously maintain our flexibility.

If you think about investment for growth, I would just reshape the answer a little bit because I think this is broader than CapEx and not necessarily high capital intensity at all. I think the area that is top of mind for us continues to be B2B. If you think about our capabilities built in the last 2 years, I mentioned earlier we have stepped up investment in the last 2 year on customer experience and on B2B, and we have hired sales specialists for digital services, we have broadened our product presence in digital services, and we have established new partnership, and we have done M&A, yeah, like we have done in Germany with scaling on cloud. Why are we doing all this? Because there is strong demand.

You have seen, for example, we announced that we are the partner in Germany for AWS European Sovereign Cloud coming up. We want to be in the best position to serve our customers for all these growing areas of demand. It may not imply a lot of CapEx, to be honest. It's maybe more OpEx in a way or costs in the EBITDA lines, but we will always try and make sure that we are best positioned to satisfy this demand because it's a significant growth driver for Europe and for Africa and Turkey.

Does that mean if I put that B2B angle together, do you think Europe as a whole can return to positive service revenue growth even as we lap the 1&1 contract?

you mean, without a defined timeline?

Yes.

Yes. Of course.

Yeah. Great. Okay.

Absolutely. I mean, we are growing today.

Well, that's with I was looking at excluding the 1&1.

Yeah

impact. Okay.

Yeah.

That's clear.

No, of course.

Thank you.

Absolutely.

Thank you very much.

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

Yeah. Good morning. I had a question on U.K. organic service revenue growth. Just noting your positive commentary on revenue synergies on the buy-in of Hutch Three earlier than expected. Can we break it down into the kind of two pillars of what's gonna drive the improvement in growth? There's the revenue synergy side you say is accelerating, and then there's, I guess, market repair or hopefully market repair, that should boost the growth outlook in the future. I wonder if you could just talk about the scale and the timeline of each.

Just thinking on, well, on the market repair side, are we just gonna have to wait for the cheap MVNO deals to roll off before we get some market repair and more rational behavior in the U.K. market, given we're seeing like the Revolut, Digi all coming in to undermine that pricing rationality. Any help you can give on U.K. would be really useful.

Yes. I mean, Andrew, I think the most important point to note is that our plans are about price competition continuing in the U.K. The deal baseline was more better return on capital employed, allowing us to invest more on the back of the scale of the infrastructure, right? We need large, well-invested, and well-utilized networks. That's why the deals create value. When I talk about revenue synergies, I'm not thinking about the pricing environment is gonna change. I mean, we can have a long debate on all the drivers of competition in telecoms. I think that we should continue to assume that there will always be a high degree of competition in the market. Against that degree of competition, we will be in a market that we serve in an efficient and scaled way with our network.

Most importantly, with the largest customer base in mobile in the U.K. and the fastest-growing fixed broadband, we will have a chance to drive revenue synergies that really I mean, you have seen us outperforming the market, I think, quarter after quarter for a very long time now. This is going to be a very significant booster of the top line. How? I'll give you just 2 examples. There could be more. The first one is churn. Yeah. You have seen in our press release that churn is going down across all the brands in the U.K., and we felt we had a particular opportunity on the Three brand because Vodafone has always been, well, as always, has been in the last 2 years, customer experience leader in the market, the best net promoter scores.

We're now extending our processes also to the bases we have acquired, and we are building a network that quarter after quarter is improving at a rate which I think in our industry normally you see on years. All this is driving better customer loyalty, and obviously, customer loyalty is a fantastic driver of the value equation for a telecom operator. The second aspect is cross-selling. With this, we are selling to these 28 million customers now in the U.K., the largest fiber footprint in the country that we already had as Vodafone. We are now marketing the services to Three. James was pointing out right now that we are also a 3.7 million households footprint on FWA, which wasn't available to us before. It's now marketed also to the Vodafone customers.

I think you see in our commercial performance in the U.K. already the signs of what these revenue synergies look like. In the release, we talked about the churn. If you look at the home broadband, we have just closed the fastest growth year in customer numbers that we have ever had in the market. We have a real leadership opportunity in the U.K. by managing our customer better, offering them more products, and covering the whole market segments with the full range of the brands we have acquired. This is a fantastic potential, and I can see now we're almost 1 year into the integration that is a big confidence booster for us in our performance. As I said, you have seen us as Vodafone alone outperforming. We count on the opportunities of the merger to drive this even further.

Thank you. Can I just quick follow-up? Just can you give us a sense that because U.K. is not growing organic service revenue growth right now?

Yes

It will take the lumpiness. Can you give us a sense of the timeline and scale when we're actually gonna see that cross-selling, you know, in churn, you know, boost come through, and what does that look like in terms of growth?

Yeah. There was, I mean, when you look at Q4, there was a decline in U.K. service revenue. It had to do with B2B, lower project activity.

Yeah. No, understood.

There was even a change via large customer, which led to interrupting revenue in the quarter. If you look at consumer improved quarter-on-quarter due to everything Margherita was pointing to. We continue to see ARPU growth in mobile and fixed. A strong churn reduction across the brands, as Margherita was saying. You've seen the highest ever fixed product net adds in the U.K., and also the strong performance in FWA. And all of this is thanks to this market-leading customer experience.

into FY 2027, we expect the U.K. to grow in FY 2027. We also expect there will be a step up in B2B revenues. As we lap the effect of termination of managed service contracts that we highlighted in Q1, it has been impacting us throughout the year. We will start lapping that early into this year. Also the effect I mentioned for Q4. Definitely we expect the U.K. to grow in FY 2027.

Thank you.

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

Yeah. Thank you very much. Good morning, everyone. Just a follow-up on the group portfolio and capital allocation. Vodafone has executed extremely well over the past couple of years on exiting non-core businesses, investing in your core businesses, particularly the recent U.K. deal, Safaricom consolidation. My question is, are there plans to continue to simplify the group? It's still a little bit complex. There's non-core stakes and JVs here and there, and given the growth in Africa that's being delivered, I think it's around a third of your profits now at the group level. Is there an opportunity to increase your exposure to Africa? I'm just really wanting to get an idea of what's the next priority in the in tray, given the optionality, the free cash flow growth that you're delivering gives you.

Sure. With Paul, with our Safaricom transaction, that's exactly what we are doing in terms of increasing our exposure to Africa. We are essentially taking control of one of the most successful companies in telecom and financial services on the whole continent, so we look forward to it. Beyond this, you talked about simplification. This for me reads as let's talk about Vodafone Investments, right? A couple of years ago, I was very keen to change our operating model to make sure that we managed in a different way the markets that we control, the strong markets we have just talked about, and the markets which we don't control and where we have positions.

This is why we have put together a very small team of financial and operational specialists with just the mission of managing what is a page in our presentation with all the stakes we have, whether it's in infrastructure, whether it's in innovation. Since we have set up that team, I think it's fair to say they've been quite active, as you mentioned. I mean, we have completed the 50/50 in Vantage. We have simplified India with the sale of Indus. We have sold infrastructure in fixed in Australia and obviously the sale of the Netherlands, which we will be completing imminently. What you can expect is looking forward, that same team will continue to be focused on the same thing, which is with agility and discipline, manage the portfolio for value creation.

Perfect. Maybe just a quick follow-up. Maybe it's an unfair question, but should we expect Vodacom itself to again look for opportunities to expand into different markets in Africa or, you know, increase stakes in some of their existing assets?

We are very happy with our current shape in Africa in terms of geographies.

Very clear. Thank you very much for your time.

We have time for one last question this morning. This question comes from Emmet Kelly at Morgan Stanley. Emmet, please go ahead.

Yes. Good morning, Margherita. Good morning, Pilar. Thank you for taking my question. My question please is just to get your updated thoughts on AI and what it means for Vodafone going forward, please. Just wondering, are you seeing any signs of increased data volume growth from AI or any kind of AI-centric consumer applications emerge that might move the dial for you? Or is AI mainly potentially largely about the potential for cost efficiencies, or is it really maybe about the network? I know 2 weeks ago, T-Mobile US talked at length about the relationship with NVIDIA, putting compute and inference at the edge of their network and combining standalone 5G with physical AI. Is it really consumer? Is it cost? Is it about the network? Thank you.

It's a little bit of everything, Emmet, so maybe I will take the network angle, and I can leave the productivity angle to Pilar. On the networks front, I mean, there is a fascinating two-way relationship between networks and AI because on one end, AI can make our networks more efficient. There is a slide in the presentation in which we talk about our zero touch operations and how we see not just productivity, but also speed in preventing falls and the like. On the other end, you touched on a very important point, which is AI demand for networks. AI needs good networks, and today you have an ecosystem around AI where you have, I don't know, NVIDIA building the chips, the hyperscaler building the data centers.

You have the tech company producing the software and the hardware, but none of that works without a strong network infrastructure. I completely agree with what you hinted to, which is the more AI moves into the physical world with things like vehicles and robotics, the more it will need data everywhere. Which means for us, ultra-low latency network, fast speeds, and we are preparing for that. When we look at the future in our outlook, we are thinking about the demand for uplink, for example. The usage of the network will over time change. As of now, if I think about this is all the things we need to be ready for, and I think it's a key driver for connectivity. The biggest impacts we see today are actually the impacts on the productivity front on the company.

Definitely. For us, AI is an enabler of cost efficiencies and driving productivity. In fact is one of the key drivers of the OPEX, gross and net savings targets that we have communicated and we have as a target. AI is also an enabler of capital discipline across the group. Our focus is, as we've discussed previously, is how we embed AI in our core operations, how we drive measurable savings, and, you know, as a result enhance our service and also support growth. Margherita mentioned networks. The other two key areas where AI is making a difference today is customer care, where we are delivering higher standards of customer experience.

My favorite examples there, the TOBi and SuperTOBi, the AI voice agent, for a relatively simple high-volume calls. Also on top of that, we overlay the SuperTOBi with GenAI and are able to deal with the most complex customer journeys and also achieve a higher customer experience as we deal with the most complex language and most complex journeys. The other area is shared operations. We are embedding AI at the scale. In fact, our shared operations are the perfect setup to be able to drive the benefits of AI. Favorite examples there, what we are doing in procurement. Our procurement platform, as I said, operation is the perfect setup to give us a competitive edge in terms of getting the AI benefits through our supplier network.

We also have the purchasing platform, where we are basically leveraging AI to tender in a more regular, frequent way. Margherita mentioned networks as a key area. Really for us, a key enabler. We are seeing significant savings already, but more importantly is positioning us for structural change of our cost base while delivering higher standards of customer experience, which is a key priority, the key priority for us.

Maybe just to add that all this is built on foundations that are essential for scale. I would just mention two points. One is we have a fully multi-vendor architecture. Even within the same use cases we are using different LLMs because of course, who knows where AI is going, and therefore we maintain total flexibility to make sure that at every point in time we have the best solutions for our needs. The second is that we have, I think, a unique position with a single data ocean for all our European markets, which is the ideal source, if you want, which we can leverage for all these AI use cases.

Super. Thanks. Just a very quick follow-up as well on that, Margherita. Just looking at the maybe the defensive angles on AI. Obviously, not everybody out there is a good actor, you know, read stories about a lot of fraudulent traffic emerging as a result of AI deepfakes, et cetera. I know if you look at email since it turned up in the late nineties, apparently 55%, 60% of global email traffic is now actually spam and fraudulent email.

Yeah.

Is this a big area of focus and maybe an area that you'll need to invest a lot of money in? Do you need to build significant defenses, and can you maybe differentiate yourself against other networks by building these defensive capabilities?

Yeah. It goes both ways actually. AI raises new threats for things like fraud or cyber, but AI also allows us to have better defenses. For example, you might have seen that across our markets in Europe, we are rolling out for our customers these fraud alerts. You receive a call, and you know in advance that it's a suspicious call. This is really very helpful. The same thing is actually happen on the cyber side. I think what's probably changing in these things, which are both good and bad, is mostly the speed at which we need to operate. Yeah? Everything needs to be much more flexible to react much more quickly. Again, AI helps us in doing that. Both sides.

Yeah, that's great. Thank you very much.

Thank you.

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

Thank you very much, Vanessa, and thank you for everyone. We have done something a little bit different in these results. As we are opening this new chapter, we have a special presentation for you online. If you want to have a summary of where Vodafone is today and where Vodafone is going, you will find 10, 15 minutes for that in a separate video online. Thank you very much.

Good morning, everyone, and thank you for joining us today. Alongside me, I'm pleased to be joined by Pilar, our new Group CFO. Welcome, Pilar.

Thank you, Margherita. It's great to be with everyone today.

Before going to Q&A, let me provide you, as usual, with a brief summary of our Q3 results. Overall, we continue to perform well and have maintained our good top-line momentum, having grown Group service revenue by 5.4% this quarter. This was supported by growth across both Europe and Africa, with continued growth in Germany, and strong contributions from both Africa and Turkey.

Moving to profitability, Group EBITDA grew by 2.3% in Q3 and 5.3% year-to-date, which is fully in line with our expectations and our trajectory to deliver the upper end of our FY 2026 guidance. Beyond these results, we continue to make good progress against our strategic priorities. In Germany, we continue to improve our customer experience. In mobile, our network test results have continued to improve despite having completed the migration of 12 million 1&1 customers, one of the largest in European telcos.

We now have more mobile customers using our network than any other operator in the country. In fixed, our NPS continues to grow quarter-after-quarter, and we have just increased upload speeds nationwide across our cable network. This has been supportive of our value strategy, while our price actions have impacted gross additions in the quarter. The improvement of our inflow revenue, with new customer ARPUs now 21% higher year-on-year, has stabilized consumer broadband revenues.

However, we still have more to do in what remains a competitive market environment. Moving to the U.K., following an exceptionally fast start, our integration and network investment plan is now well underway. Our initial network upgrades have been delivered ahead of schedule and are already enabling customers to benefit from greater mobile coverage and faster data speeds.

The progress that we have made in only seven months is already visible in independent network tests and has been noted by the U.K. regulator. However, this is just the start of our 10-year plan to invest GBP 11 billion to build U.K.'s leading 5G network. Stepping back, I remain very excited about the potential of this merger. Vodafone has more mobile assets than any other operator, is the fastest-growing fixed broadband provider, and we have clear line of sight on GBP 700 million of annual cost and CapEx synergies, plus opportunities to realize revenue synergies on top.

Turning to Africa, in December we announced that we would be acquiring a controlling stake in Safaricom, one of the strongest telcos on the continent. This transaction will strengthen our position in Africa even further, as it simplifies Vodacom and reinforces its leadership position. We have structural growth opportunities with rapidly expanding population, increasing data usage, and accelerating demand for digital services. We are in a unique position with our scaled networks, digital platforms, and admired brand.

Vodacom is already delivering a strong performance today, and it provides some of the most exciting opportunities across the group. Finally, turning to business, we have now completed the acquisition of Skaylink, which will support our growth in digital services across key areas such as cloud and security. In summary, as we enter the final quarter of the year, our performance has been good. Across the group, we are seeing Net Promoter Scores increasing, complexity reducing, and we are accelerating our opportunities in digital and financial services. These are solid foundations for our multi-year growth trajectory. To summarize, we are trading in line with our expectations, and we are on track to deliver the upper end of our FY 2026 guidance. With that, Pilar and I look forward to answering your questions.

Thank you, Margherita. As a reminder, please only pose one question to give all analysts a chance to speak this morning. Our first question today comes from Maurice Patrick at Barclays. Maurice, please go ahead.

Good morning, guys. Hopefully you can hear me well. Thanks for the intro comments. Maybe just diving straight into Germany, that's okay. I mean, if I look at slide four in the presentation, you show stabilization of service revenues. That's obviously helped by 1&1. You've got weaker net adds on the broadband side, but a stronger front-book ARPU, and you've talked about that value of volume. But investors asked a lot about the trajectory of EBITDA in Germany, specifically around this year and next. I think you were down 4% in the first half. Could you give us a sense of where you see the EBITDA landing for the second half of this year, and then thoughts into the stabilization, if that's the case, next year? Thank you.

Sure. I'll maybe let Pilar lead on the trends this year and then give you a sense of how I see Germany evolving.

Yeah. So, I mean, you've seen our numbers. If we look into the second half of the year, the most important thing is it will be in line with the reiteration of our guidance, the EBITDA and free cash flow guidance for the group, and the Europe guidance that we have reiterated today. We expect the second half of the year, in terms of EBITDA performance, to be better than half one. We don't expect EBITDA to return to positive this year in half two.

I mean, you've seen continued ARPU pressure in mobile, TV headwinds, the acquisition and retention year-over-year based on prior year activities. There are also tailwinds into half two. That's why the better performance than in half one, the lapping of the MDU, the wholesale 1&1 completion, full run rate in Q4, and the lapping of the MVNO. So that's what you should expect for the second half of the year in Germany, in terms of EBITDA.

So a better second half than, obviously, your question is, where are we going from here? Obviously, we will tell you more in May. Today is not the time in a quarterly results announcement to give a single market guide, but I think it's important to share what we see about the market and, as always, the moving parts. I will start to cover what we have really good visibility on for next year in Germany, and then what's still open for debate. On the areas where we have good visibility, I would call out four areas. The first one, as Pilar mentioned, in the near term, you should expect the TV headwind to continue. What you should expect also to continue into next year is the support to EBITDA from wholesale, obviously to a lower level than this year, but still positive and then I would add B2B.

The team is doing a great job in building a strong pipeline. You know how fast we are growing in digital services, but also beyond that. And so expect B2B to significantly improve as we move into next year. And then the fourth element is costs, as we probably have discussed before. Next year is the year, for a variety of reasons, where you should expect to see all the simplification actions that we have done on our cost base to show through the P&L.

So on these four areas, I would say we have good visibility. Where there is still a degree of uncertainty, inevitably, is the consumer market and what's happening in the market more broadly, which, of course, is not entirely into our control. And I would call out two different trends from what we see today. You mentioned it. We see an improvement in fixed broadband.

We see an improvement in our numbers. It's fair to say that, from what we see, the general market environment is also more supportive, so moving in the right direction. Mobile, which is in itself a key swing factor, of course, for the results, I would say so far no changes. What we continue to see is just the price moves, which were done roughly a year ago or more, that are washing through our base. This aspect around pricing still leaves a degree of uncertainty on next year, as you can imagine. What I can say is that even if nothing changes, you should expect our results to gradually benefit from all the actions you have seen us taking, focused on customer experience, focused on value. Expect continued improvement in this direction from our actions. The market, I think we will tell you more in May.

That's very clear. Thank you.

Thank you very much. Our next question today comes from Akhil Dattani from JPMorgan. Akhil, please go ahead.

Hi, good morning. Thanks for taking the question. Margherita, maybe I could follow up on the prior question and just dig a little bit deeper into the German broadband message that you're giving us around value versus volume. I'd love to understand a bit better the conviction you have around that journey. And I guess, specifically, if you could talk us through the actions you've taken. You've mentioned in your slides another price up in January, and then how we should think about the way that impacts broadband losses going forward.

I guess it's hard for us to know, are there particular losses this quarter that sort of wash through going forward? So maybe you could give us a bit of a journey from that. I guess within answering it, could you help us understand the extent to which competitors are replicating that directional trend and any sort of important variables that you might be seeing in the Altnet market? Thanks a lot.

Sure. So sort of big picture, what's going on in broadband? As you know, the market penetration has plateaued, and the only operators that today are seeing any meaningful growth are the Altnets in the rural areas. In that context, for us, just reiterating what you have heard before, it makes sense to focus on value. Now, there is one element of volume which is very important, which is churn from our perspective. And on churn, I need to say we are very pleased with our performance. Our fixed broadband churn in Germany, I may have mentioned it before, is now below the majority of all European markets. It's below the U.K. And we keep, quarter-after-quarter, seeing our Net Promoter Score on our cable network just beating another record. So that's moving all in the right direction.

As you know, on the back of the investments we have done in our network and in our processes. What you have seen this quarter is the impact on gross additions from the price moves we have cumulated over now a series of months. And actually, to your question on what's going to happen next, what I can say is that for Q4, given we have taken another price action just a week ago, you should expect, from what we see, similar trends on the gross adds side. What have we done on pricing? There is a slide in our presentation that summarizes it because it's been really a step-by-step movement. And we may have commented in the past about the beginning of that movement. Since March, we have increased effective pricing on DSL. We have reduced the promo durations across the board. We have taken out starting credits.

We have increased equipment cost, all the things you are familiar with. For Q3, this has led to an inflow ARPU level that is the best we have seen in at least three years and is, year-over-year, up 21%, which obviously is material. Now, I said we have moved again last week, and this is important because last week we have really done a more-for-more move across our whole cable portfolio in Germany. And this was coming with higher speeds, particularly higher uplink speeds nationwide, which have enabled us to do another step on pricing in a more-for-more fashion. Now, what we see then is that the value equation is working today. You see it also in our fixed line trends in the P&L.

Essentially, the drag on TV is still in there, but as you can see, it's slightly being now eroded because we have seen fixed broadband in consumer improving and is now stable. Now, you asked about what's happening around us. Based on what we see, clearly, the market will always be dynamic. But based on what we see today, we see also the market environment improving as we do our actions. In terms of more broadly, as I said, it's a dynamic market. But from my perspective, what you should always expect Vodafone to be doing is really maximize for overall service revenue trajectory. And that remains the absolute principle.

Thank you very much.

Thank you. Our next question today comes from Robert Grindle from Deutsche Numis. Please go ahead.

Good morning, and thank you. Perhaps taking a more group-wide, holistic than a single country view, in Q3, we saw OSR growth firmly positive in Europe for a second quarter, despite the tough comp in the U.K., and well into double-digit EM growth continuing. What can you say, if anything, and we're already a chunk through Q4, on your overall prospects for a full year 2027 and beyond? Are you feeling more or less optimistic based on the nine months to date? Thank you.

Thank you, Robert. I mean, once more, it's going to be about moving parts because, of course, this is a quarterly update. But Pilar will tell you the direction of travel on these moving parts. To your question, what you will find is that it's all very consistent with our multi-year growth trajectory that we have been discussing since May. So maybe, Pilar, you can take those.

Yeah, Robert, thanks for the question. And yes, I mean, as Margherita was saying, early days to provide the exact detail. We will come back in May. But at a high level, we remain very confident on the multi-year outlook for adjusted free cash flow growth for 2027. Several components there that we need to take into account. From an EBITDA perspective, we expect continued good growth for the group overall. Margherita spoke in detail about the German trends. We also expect the U.K., the first meaningful cost synergies to be delivered in 2027, which is a very relevant fact. From an EBITDA perspective, emerging markets, I mean, typically, with lower inflation, are likely to slow down. That is something, again, that you need to take into account in terms of EBITDA. But as I said, continued good growth for the group overall into fiscal 2027.

Then in adjusted free cash flow, you obviously have CapEx. On that one, I mean, I'm happy to say that we remain very confident with the capital intensity, with the level of capital intensity that we have at the moment. In fiscal 2027, there will be a step up in the U.K. in line with that year being the peak of the investment program in the U.K. But again, all EBITDA and CapEx consistent with the multi-year growth trajectory that we've been sharing with you. Then you also need to take into account, below adjusted free cash flow, there are a number of moving parts. And the main ones for me to flag right now have to do, again, with the U.K. in terms of integration costs. Fiscal 2027 will be a full year of integration.

We guided before on the size of the integration and restructuring cost in the U.K. overall and the fact that it was going to be front-loaded. So you have to take that into account into fiscal 2027. And then in terms of spectrum, I think it's worth reminding everyone, there will be the second installment of the Turkey spectrum. And potentially, there could be some more spectrum in Egypt, where we have ongoing conversations. Beyond that, I mean, early to provide the exact levels. We will come back in May. And if you need any more in terms of the mechanics, investor relations can provide you more details if you need to.

Thank you, Robert.

Thank you very much. Our next question today comes from Emmett Kelly from Morgan Stanley. Emmett, please go ahead.

Yes. Good morning, everybody. I had a question, again, kind of on the group. So you're moving to a majority of Safaricom via Vodacom. And that obviously brings you control in Kenya, brings you M-Pesa and also a growth business in Ethiopia. So it looks like Vodafone and Orange are now kind of emerged as the big leaders in African telcos. Can you maybe just give a few thoughts on what you think this move brings to you in terms of the portfolio, in terms of the growth outlook for the group, technology? And given where your balance sheet is post the sales of Spain and Italy, whether Africa is an area where you could look at further portfolio expansion going forward? Thank you.

Thank you, Emmett. In terms of opportunities in Africa, I think you have heard it in my introduction. We think we are in a really good position for making the most of the exciting growth opportunities in the continent. We have very healthy growth on population, data, demand for financial services, and in B2B, actually, strong demand now for digital services. And Vodacom, I would like to say, is what I would call the resident technology company in Africa, good and scaled network, but also good and scaled platforms for the continent. The reason why it was a natural step for us to move to a controlling position in Safaricom was that this further simplifies the Vodacom estate and also strengthens it. And in particular, we see big opportunities to continue across the continent to leverage our best practices, leverage our scale platforms.

I was actually just two weeks ago in Egypt, for example. And you might remember us having similar discussions when we merged Egypt into Vodacom a few years ago. We were in Egypt. And one of the outstanding elements of our performance there is Vodafone Cash, which, again, comes from cross-fertilizing idea and leveraging platforms across the continent. So I'm very happy with Africa. As you can imagine and you're right, it's taking a bigger role. It has a strong performance today, double-digit, guidance upgraded now probably a year ago, everything double-digit, and some of the most exciting growth opportunities.

Now, you mentioned M&A. And I think it's important to, however, sort of contextualize that from our perspective, M&A now is more about what I would call bolt-on acquisition in the B2B space, where we are increasing, expanding our capabilities. That sometimes is faster done with B2B acquisition, like you have seen with Skaylink. I think there could be more moves like this also in Africa.

Very clear. Thank you.

Thank you very much. Our next question today comes from Polo Tang from UBS. Polo, please go ahead.

Thanks for taking the question. Just have one question on the U.K. broadband market because there's been lots of reports about potential consolidation with owners of VMO2 looking to acquire Netomnia and also TalkTalk starting an M&A process. So if there is consolidation, how do you think this will impact both Vodafone and also the broader UK broadband market, for example? Do you think pricing could improve, or do you expect there to be more competition? So any thoughts? Much appreciated.

I think the general thought is that a degree of consolidation, obviously, in the current environment makes sense in that space. But what I can tell you is that we are looking at it from a Vodafone perspective. And from our perspective, we are really pleased with our position in the U.K., which is essentially a multi-partner play, wholesaling from a range of partners. And actually, this is a play in the U.K. But you can see it in different ways. We have the same objective, ultimately, in every market in which we operate, delivered in slightly different ways. But we are always keen to give our customers the access to the largest gigabit footprint available in the country. And the best way for doing this in the U.K. is to wholesale from multiple partners, Openreach, CityFibre, Community Fibre. Who knows? There could be more in the future.

With 22 million households, this is one of our key drivers for growth. So we expect to continue to manage the markets in exactly the same way. It's working for us. It will continue to work through a degree of consolidation. The general principle is maximum access to our customers to the gigabit footprint. You see it in Germany. Three out of four of German households have it through us. You now also see it in Turkey. It's our general approach to the market.

Thanks.

Thank you very much. Our next question today comes from James Ratzer from New Street Research. James, please go ahead.

Yes. Good morning, Margherita and Pilar. Thank you for doing the call and taking the question. So the question I want to ask today is really about FWA, please. So firstly, in the U.K., just to kind of understand some of your near-term delivery and longer-term aspirations, it looks like in the quarter, your FWA adds fell to 11,000 from 21,000 the prior quarter. What's driven that? And do you see the scope for that to reaccelerate in the next few quarters and thoughts longer term? And also in Germany, do you see an opportunity to deploy more FWA in the rural areas there? Thank you.

Thank you, James. Starting with the U.K., I mean, the short answer is yes. We expect FWA to continue to grow. One thing you need to keep in mind is that two things happen in Q3. It's a combination, actually, of seasonality. The quarter with December in it is never a strong quarter for FWA and also price competition around the Black Friday week, particularly around the lower end of the market in terms of speeds. I think both factors affected the 11,000 versus a higher number before. But equally, it will continue to grow.

Now, this being said, just as I may have done already last time when we had this discussion, certainly, we need to contextualize what we see in terms of FWA opportunity, which is, for us, essentially, the most important point is using FWA for our customers on the way to fiber, as we can be there now. And then when fiber gets there, connect them seamlessly. But the key focus overall, the key big numbers, let's put it this way, are always going to come from the fiber side of fixed broadband. But more growth ahead, for sure, and an opportunity for us in the U.K., for sure. Is it an opportunity also in Germany? I think this is a really good question. We have had, actually, an FWA product on the market in Germany for many, many years. It's there, yes, you might remember, GigaCube.

I would say it's a less lively market than the U.K. is. Two reasons, probably, that I can think of. On one end, just the depth, also historically, of our gigabit penetration with our cable network. I was saying just earlier to Polo that we cover with the full footprint, including the 5 million of fiber wholesale, three out of four German households. So Germany, from that perspective, was there first. And then I think maybe customer behaviors are also impacting. This also depends on trade-offs that they make between different products. But I think it's a good question still. And it makes sense to just reflect. I think all markets will have a degree of FWA. Then it depends on the level of coverage, mostly, how far developed it goes.

Why do you see that as a migration to fiber? Because don't you make a higher gross margin on FWA than wholesale fiber?

I think it's because, ultimately, there will always be, how can I say, layers of services with different levels of efficiency and effectiveness. And therefore, it's quite likely that for the majority of people, yes, that's fiber arrives into your city or your village. And there is a natural step towards that. There will always be areas that either will have fiber very late or never and therefore, that will remain permanent. But I don't think it's logical to think of it as a permanent feature. Again, I mean, we could discuss for long. There is also a type of customers, students, people who move a lot may find it very convenient, obviously. But if you are in a residential area, I think in the end, that's the frame we are looking at it with.

Thank you.

Thank you very much. Our next question today comes from Andrew Lee from Goldman Sachs. Andrew, please go ahead.

Yeah. Hi, everyone. Hi, Margherita. And hi, and welcome, Pilar. I had a question on towers and your thoughts on Vantage. So over the last year or so, and particularly a few months, we've seen towers derate a lot with concerns on contract renegotiation risk, consolidation risk, satellite risk. Do you share those concerns, both as an owner of Vantage and as Vodafone a customer of towers? And do you think now is a good time to buy in the rest of INWIT, given it's the cheapest it's been for a very long time? Thank you.

Starting maybe from the end, I would say we are happy with our position in where we are from an INWIT perspective, specifically, of course. I mean, there will be different trends, as always, in the market, more broadly on the tower space. First of all, we are happy to have achieved our initial position that we were targeting with the full 50/50 in Vantage. And we are happy with how the Vantage growth is actually developing. You can see this in its financials. And it's a good contributor of dividends to the group. So happy with all of that. You are right. The tower market is evolving. And we think that there will be further possible changes across the footprint in which we operate in Europe with potential more movements towards consolidation.

And so in terms of our position within Vantage, I think that will really depend on how we see the market more broadly evolving and whether there are other opportunities strategically. We would consider those as they present themselves, for example, if there is an opportunity of consolidation. We are happy with the operations as they stand today, both sides. We will keep looking at the evolution of the market and assess at every point in time in the next few years what's the appropriate position for Vodafone.

Just on INWIT, just specifically on INWIT, I mean, obviously, you're not going to say you want to buy it in today. This is a stock that you have historically said you might want to buy in the minorities over time. Obviously, the multiples have gone down a lot in terms of valuation. Is this an opportunity to be nimble and take advantage of that? Or it's not obvious that that's the case at this point in time?

As I said, I'm pretty happy with where we are with INWIT. But of course, it's for the Vantage board to decide as it goes along what's the most appropriate position on all its participations.

Thank you very much. Our next question today comes from Joshua Mills from BNP Paribas Exane. Joshua, please go ahead.

Hi, guys. Hopefully, you can hear me. I just want to dig into the German service revenue trends in a bit more detail. I think last quarter, you gave some helpful color on how much of a tailwind the 1&1 revenues were in the service revenue growth. I think last quarter, there's about EUR 80 million of revenues, which were incremental, expecting about EUR 100 million this year. If you could confirm whether that's the case, that would be very helpful.

Related to that, I think in the introductory comments, Margherita, you said we should expect the wholesale tailwind from 1&1 to continue. You also mentioned that the MDU headwind would have an impact. I just wanted to understand, are we now at the maximum MVNO revenues in this quarter for 1&1? Or will that continue to increase on a quarter-on-quarter basis as we get into Q4? Thirdly, are there any MDU revenues to fall out still? Because looking at the chart on the bottom left of slide 4, it looks like there was no real impact this quarter or last quarter. I had thought that all of those MDU headwinds were out of the business. Thanks.

Thank you, Joshua. I think it's actually a simple answer because on MDUs, obviously, we have completed the transformation. And therefore, the new low impact is fully behind us. And then on 1&1, we are hitting run rate now, sorry, transfer completed in December. And so the EUR 0.1 billion of quarterly revenue run rate is achieved for now onwards. Now, this being said, obviously, as we go into a full year of revenues, obviously, this plus the fact that we have entirely lapped another wholesale element, which was the loss of Lyca, will be supportive to our trends next year. But maybe IR can help you with the full equation in more detail.

Thanks.

Thank you very much. Our next question today comes from David Wright from Bank of America Merrill Lynch. David, please go ahead.

Yes. I hope you guys can hear me. So my question, it's on Germany again, but a little more strategically. We can see the value now and support that the Heinz-Neiss deal has given. And it's a very margin-rich wholesale revenue stream. There's obviously a lot of debate in the market around Telefónica's M&A ambitions. And one obvious route for them would be to try and regain control of the asset.

I know in the past, you have pushed back a little on your sort of need to compete in such a scenario. But could you just talk to us about how you would consider the value of Heinz-Neiss to Vodafone as opposed to the value of maybe market repair? And obviously, you do have a lot of balance sheet headroom right now. You're giving EUR 2 billion back to shareholders in buyback. This is obviously a critical asset for you guys. I'm just interested in how you think about that trade-off if we saw the headline offer from TEF today? Thanks.

Thank you, David. As you know, generally speaking, we don't particularly like to speculate on hypotheticals. But certainly, you raised the point on if consolidation was happening in this direction, how would you see it? And to that, I would respond that, first of all, I think it's important to keep in mind a little bit the history of the National Roaming Agreement. Just to reframe the timelines, we agreed to move the National Roaming Agreements from Telefónica to us in the summer of 2023.

It then took a good 12 months, as you might remember, to transform this agreement into a full-blown contract. And after that, well, we completed the migration effectively in December. So it took two and a half years from decision to full migration. So what if consolidation was happening in a direction that would bring the National Roaming Agreement outside of our perimeter?

Well, the way to think about it from our perspective is on a midterm. Again, timing is relevant. From a midterm perspective, there would be, of course, a risk on those revenues. By the way, keep in mind those revenues would not anyway remain exactly at the same level as today as 1&1 progresses its network build. But there would be a risk to those networks. The risk, as you mentioned, should be seen in conjunction with the conditions of the consolidation. Again, incredibly difficult to speculate today. But in any consolidation play, there are some changes. Those changes affect market dynamics. There is always a range of puts and takes that we would have to consider if that hypothetical in the midterm was playing out. That's as far as I can speculate with you today.

I appreciate that answer, Margherita. Thank you.

Thank you.

Thank you very much. Our next question today comes from Paul Sidney from Berenberg. Paul, please go ahead.

Yeah. Thank you very much. Good morning. And thanks for taking the question. It's really on the value over volume strategy that you flagged in Germany, which I was personally very pleased to hear. And we've seen a number of operators over the past 12 months giving strong indications of wanting to play that value game to investors and competitors, DT and yourselves in Germany, KPN in the Netherlands, Swisscom in Switzerland. The list goes on. But do you think this is now the way forward and the approach we should take in all of your markets for both mobile and broadband? I appreciate emerging markets might be a little bit different, but certainly for Europe. Is this the approach the industry should take, in your view, to try and get their whole market up in value and not obsess about volumes? Thank you.

Obviously, a very open question, Paul. But what I would love to see is I cannot speak for the market. But what I would love to see and encourage and you have heard me, I think, in November making the same speech is I would love to see telcos' performance judged on value, overall value, service revenue trends, yeah, and move beyond the sort of headline of net adds. Now, as I heard me say before, this is particularly true for mobile because in mobile, the range of quality of what is behind SIM numbers is just so huge that I think it's truly entirely distracting. But considering the full equation of value is also very important, as we discussed earlier, in broadband because ultimately, volumes are only half of the revenue equation.

I think as operators, our job is to always, in dynamic markets, manage that equation for the best overall trajectory. So it would be fantastic, I would say, if we moved from an analysis and reading perspective to a balanced view that mixes all the KPIs together. Certainly, that's what we do. And that's what makes sense in our markets, not just look at one side of the equation.

Great. Appreciate it. Thank you very much.

Thank you very much. We have time for one more question today. That comes from Carl Murdock-Smith from Citigroup. Carl, please go ahead.

That's great. Thank you. I'd love to hear your comments on the recent EU Digital Networks Act and also the Cybersecurity Act, in particular, your thoughts on the potential for spectrum period elongation and also on the usage of high-risk vendors. What kind of impact could the proposals make in the medium and longer term? Thanks.

Thank you, Carl. I think it's worth saying that this year is probably an important moment because after 10 years in which we didn't see much change, this year, we would have the opportunity in the EU to see reform for telcos, which, as you know, is very much needed. I would say we are judging all the proposals that are coming through. It's important to say we are just at the beginning of the processes. And as you know, it may take quite some time to get to a conclusion and to know exactly the direction we are taking. But to tell you about our reactions to what is going on, we judge, if you want, the direction of travel in three areas: consolidation and competition, investment and innovation.

On consolidation, as you know very well, no news at this stage. We have to wait for the merger guidelines review. It looks like we will not see any real-world impact from any changes until at least 2027. On investments, the news are mixed. You called out the important parts. On one end, we look very positively at the idea of perpetual spectrum licenses with automatic renewals that would create a much better environment in terms of certainty for investment. On the other end, the draft Cybersecurity Act is actually injecting a degree of uncertainty. Now, we are only at the beginning of a very, very long conversation because that is in the space of security, so firmly in the limit of the member states. We could expect long discussion between the Commission, the Parliament, the member states.

And what we will be engaged on is to make sure that, actually, we bring clarity because it's really important for us to manage any change in the context of our long-term investment cycle. And then the third point, which is innovation, I would say some positive news there, less maybe in the spotlight. But of course, much more to do. Again, we will be vocal in this direction. The positive news are around single-market steps because we have a proposal for passporting, which is really useful for us for our digital platforms like IoT, which work across country, and then also satellite, again, very important for our strategy, single satellite authorization across the EU that really simplifies our world. But I said that's really not enough.

The one area which is something I keep pushing for is net neutrality in Europe, still even in the current draft, a sort of one-size-fits-all approach, which then creates obstacles to driving innovation in B2B, in particular, through slicing and other services. Now, all of this I'll go back to where I started is still very much in draft. As you know, with European processes, it will take some time until we actually know where we land.

That's great. Thank you very much.

Thank you.

Thank you very much. This concludes our Q&A session today. I would now like to hand back to Margherita for any closing remarks.

Sure. Thank you all for joining us today, as usual. In summary, as you have seen, we are performing in line with our expectation. We will close the year at the upper end of our guidance range. Our operational progress is consistent with our multi-year growth trajectory. We look forward to seeing you all for our full-year results in May. Thank you.