Vodafone Group Plc Q2 FY2024 earnings call

• Priorities: Focus on customers (NPS improved in almost all markets), simplicity (completed shared operations review, agreement with Accenture), and growth (Germany service revenue growth, 14/17 markets grew in Q2). - Market actions: Exited Spain, progressing with U.K. merger with Three, exploring options in Italy. - Germany broadband: Repricing completed, expecting volume improvement, MDU transition starting in 2024, with MDU impact to be reported separately from Q4. - Common functions: Significant reduction in losses this quarter, related to cost management and charging subsidiaries.

In Germany, service revenue growth returned this quarter, supported by commercial model reengineering and broadband price actions. In Q2, 14 of 17 markets had broad-based improvement in service revenue. The company announced exit from Spain, is progressing with the U.K. merger with Three, and exploring options in Italy. For Germany broadband, repricing is done, expecting volume trend improvement, with MDU transition starting in 2024 and FY 2025 to have the largest impact from MDU.

• Reiterated financial guidance for the year. - Expect €3.3 billion free cash flow for FY 2024, with sale of Spain affecting cash flow but focused on operational excellence. - MDU transition impact to be reported separately from Q4, with FY 2025 having the largest impact from MDU. - Energy headwind expected to unwind, with FY 2025 and beyond seeing improvement in EBITDA growth.

• Spanish market is highly fragmented, requiring more than one round of consolidation. - Lease liabilities accounting assumptions may affect ratios, with credit agents potentially adjusting. - Italy remains a challenging market with prices below cost, requiring further actions.

Q: About capital allocation priorities for the group.

A: Margherita and Luka discussed capital allocation review post-Spain sale, focusing on investment, balance sheet, returns, and free cash flow outlook.

Q: On German commercial trends.

A: Margherita talked about broadband improvement, MDU transition starting in 2024, and reporting MDU impact separately from Q4.

Q: On EBITDA growth phasing.

A: Luka discussed energy headwind unwind, U.K. MVNO agreement lap, and MDU investment impact.

Q: On Spain asset sale.

A: Margherita explained clean exit from Spain, cash upfront, deferred compensation, and focus on markets with growth opportunities.

Q: On Italy and common functions.

A: Margherita and Luka talked about Italy's competitive market, common functions cost reduction, and Spanish deal impact.

Q: On NPS and market leadership.

A: Margherita discussed NPS trends, progress in closing gaps vs competitors, and long journey to customer satisfaction.

Q: On free cash flow and working capital.

A: Luka and Margherita addressed free cash flow guidance, working capital swings, and plans to smooth cash flow.

Q: On operational gearing and working capital.

A: Luka and Margherita discussed operational gearing in Germany and approaches to working capital management.