Vodafone Group Stock

Good morning, everyone, and thank you for joining us. Before moving to Q&A, I will briefly provide an update on our performance in FY '26 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.

And 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 FY '27 and beyond. And as I mentioned, growth, that leads me on to our financial results. We are pleased with our performance in FY '26 as we have achieved the upper end of our expectations. Group service revenue growth remained 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. And 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 Europe 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 EBITDAaL for FY '26, 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 '24.

And following our announcement of a progressive dividend policy, we increased the full year FY '26 dividend by 2.5%. For FY '27, we are guiding for continued good growth in both adjusted EBITDAaL and adjusted free cash flow.

But 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. And 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.

But 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 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. And 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. And 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.

And 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 3 years, we are a simpler and stronger business. We have a clear strategy and through continued execution of our priorities, we are well positioned for growth. And our confidence in our growth portfolio is reflected in our midterm ambition to deliver double-digit organic growth in adjusted free cash flow.

And with that, Pilar and I are looking forward to your questions.

[Operator Instructions] The first question this morning comes from Robert Grindle at Deutsche Numis.

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. To 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? And what is underlying your raised level of confidence?

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 3 years, a really deep transformation. We have changed where we operate. We have changed how we operate. We have changed our capital structure. So 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. And then 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.

And 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. So 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 '27 and growth for the midterm.

The next question this morning comes from Carl Murdock-Smith at Citigroup.

That's great. I wanted to ask about the European EBITDAaL guidance for next year and the moving parts within that. So in the U.K., you've got an extra 2 months of VodafoneThree and synergy delivery. Other Europe is portfolio normally fairly predictable. So 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 EBITDAaL decline in Germany next year? And what is that implied decline underlying kind of ex-1&1?

Thank you, Carl. And 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 fiscal '27, we expect a decline as the trends that we've seen in Q4, we expect those to continue into this year, into fiscal '27.

As you rightly mentioned, we expect a strong growth in the U.K. because of the fiscal '27 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. And 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 good growth in adjusted EBITDA and adjusted free cash flow for the group, as you've seen in the guidance for fiscal '27. Margherita.

Yes, on Germany, you are right. We expect EBITDA to remain under pressure in Germany in FY '27. And 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. So if I start from Vodafone, from a top line perspective, we have exited FY '26, as you have seen, with better trends with, in particular, B2B returning to growth and also consumer broadband growing.

But as we will move through FY '27, 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. And 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 A&R 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 headcount, in terms of automation, in terms of IT simplification.

But 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 consumer. And 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 unchanged. So net-net, I would say what do 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, but EBITDA will still decline.

The next question this morning comes from Polo Tang at UBS.

Just have a question on M&A and use of cash. So how should we think about your appetite to do large deals? I think the prior commentary suggested a focus on bolt-on deals, but does the U.K. JV buyout for GBP 4.2 billion mark a change of position? And 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?

Sure. Maybe I wrap it all up, M&A and leverage. So 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. But in essence, it was planned.

And 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 '27, we will be back within the lower half, and this is the result of, of course, the proceeds from the Netherlands as well as the growth we are guiding for today.

And 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. Now 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.

The next question comes from Joshua Mills at BNP Paribas Exane.

So as you called out in the presentation, there's been some notable improvements in German Net Promoter Score customer satisfaction levels, but 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.

So should we take from that message that Vodafone is comfortable to see this level of continued subscriber losses as long as you can continue to execute on the price actions you mentioned? Or does your guidance assume that the subscriber losses will improve a bit throughout the year? If I could just squeeze one small one on the German EBITDA outlook for next year on EBITDA declining. But in previous years, you've talked about the ambition to stabilize German EBITDA growth in the medium term. So does your new multiyear free cash flow guidance still assume that German EBITDA will stabilize over the next, say, 2 to 3 years?

Maybe I start from the end, which is the prospects for Germany, and then I go back to your point around net adds and volumes in Germany. So if I look at -- if I look beyond FY '27, let's position it this way, and step back when -- what do we see when we look at Germany? We see the largest telecom market in Europe, a market in which we have a powerful brand and scaled operations across both fixed and mobile. And if you think about our P&L drivers, our TV headwind obviously will not last forever. And if you think about mobile, which is the other area of pressure that we see today and if you look backwards, the German market has a history of positive ARPU development in mobile. And this is because every single operator in Germany has large customer bases.

So 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, will continue to grow in the coming year and also productivity opportunities as we have all across the group.

So 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 test. And 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.

And if you look at Q4 specifically, we have had, for the first time, the full impact of the price increases of calendar '25. Additionally, we have had the last price increases we did in January within the quarter. And it's fair to say that also during the quarter, we all saw more promotional activity actually at the low end of the market in the DSL offers from the incumbent. So as a result of all this, as I said, lower gross adds, but actually still happy -- very happy with our churn levels. We talked about this in previous calls. Again, highest ever level of customer satisfaction in our cable network has translating into good levels of loyalty in line with the rest of Europe, actually better than where we are in the U.K. And 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. So a 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.

The next question this morning comes from David Wright at Bank of America Merrill Lynch.

Margherita, I think if I was to reread the transcript so far, you've mentioned on multiple times how critical scale is. And 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 Telefonica interest in 1&1. I think what I would like to know is how critical is that 12 million customer base to your scale in Germany. And I think Luka in the past suggested that if there was any interest from Telefonica, you guys would not counterbid. So how critical is that asset to you in Germany?

Thank you, David. As you know, we don't like to comment on hypotheticals. But 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. And 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. But 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 customers has nothing to do with what you would expect to have or we would expect in our plans to have by that point because, 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. So 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.

I see. So 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 don't give you -- 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.

The next question this morning comes from Akhil Dattani at JPMorgan.

I've got a follow-up question on your 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 than on euro terms, should we assume, therefore, there's a very heavy weight of confidence around Africa vis-a-vis Europe? So can you sort of help us understand that? And how should we try and think about your perception of the translation effect into euros?

And 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? And you've referred Margherita before to regulation, the need for regulatory change. We've obviously got the new EU merger draft rules that have come out 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.

Okay. thanks for -- I mean, from a guidance perspective. So if I take -- I mean, guidance for '27, we are guiding for good adjusted free cash flow growth this year, and this is ultimately driven by good adjusted EBITDA growth and then broadly stable capital intensity by market. And 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 Vodacom guidance double digit over the midterm and also continued growth in Turkey in euros. And it's important to take into account that we manage our business in emerging markets for euro growth, as you've seen in the last couple of years.

So if I step back, this is what we see in the rest of the world. And then as I mentioned, for CapEx, small CapEx moves, important to take into account the peak in the U.K. in fiscal '27. And then from then onwards, really stable capital intensity more or less everywhere market by market. And I give the floor 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. But as Pilar has just mentioned, our focus, and we have put this also on the slides is euro growth. That's what we are looking at is adjusted free cash flow growth in Europe year after year. Then what do we expect for Europe? FY '26 and also implicit in the guidance of FY '27, you see that we have now stabilized Europe. And we see momentum building. We have just talked about Germany today, but also Germany in the longer term.

And then 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 GBP 700 million cost and CapEx synergies, GBP 700 million to go for by 2030. So 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. And I need to say the first reading of the draft of the 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. Now there is more to do, and we are engaged in the consultation. As we have this couple of months. I think there are a couple of things that can be better.

The first step 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. So let's be specific. And the other aspect is also to address the remedies side of the equation. Today, there is this still narrow focus on blunt instrument, which is structural remedies. And 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 consumers and for investments.

But if I go back to Vodafone in a way. 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 cash flow pro forma for the portfolio changes that you've done like Safaricom? Or does it not capture those items?

No, no. It's always fully organic.

Always organic.

The next question comes from James Ratzer at New Street Research.

Hard to keep it to one question, and I was excited to see the FWA announcement you made in the U.K. But 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.

But yet, if I think about what we know today, the U.K. CapEx is being front-loaded on the network upgrade. There should be synergies to come as well in the U.K. And if I look in Germany, more of the fiber upgrade or all of your fiber upgrades 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.

So 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, James. I see the angle you're coming from. And absolutely, in the U.K., we will have, let's say, peak CapEx this year. But we want to retain a degree of flexibility in our scenarios, to your point, for growth opportunities. So 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. So 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 investments in the last 2 years 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, like we have done in Germany with scaling on cloud. Why are we doing all this? Because there is strong demand.

And so you have seen, for example, we announced that we are the partner in Germany for AWS Europe 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 may be 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.

So I 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 time line? Yes. Yes, of course. Absolutely. I mean we are growing today.

That's what I was looking at excluding the 1&1 impact.

Of course.

The next question comes from Andrew Lee at Goldman Sachs.

I had a question on U.K. organic service revenue growth. And just noting your positive commentary on revenue synergies on the buy-in of Hutch 3 earlier than expected. Can we break it down into the kind of 2 pillars of what's going to drive the improvement in growth, the revenue synergy side, you say it 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 time line of each and just thinking -- well, on the market repair side, are we just going to 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 going to change. I mean we can have a long debate on all the drivers of competition in telecoms, but 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. But 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. We -- 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 3 brands 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 are 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 large, we are selling to the 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 3. And then 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 was -- it's now marketed also to the Vodafone customers. And 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. So 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 a 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.

Can I just -- a quick follow-up. Just can you give us a sense because U.K. is not growing organic service revenue growth right now, give or take the lumpiness. So can you give us a sense of the time line of scale when we're actually going to see that cross-selling and churn boost come through? And what does that look like in terms of growth?

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. There was even a change by a large customer, which led to interrupting revenue in the quarter. If you look at consumer, 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 broadband 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. Looking ahead into fiscal '27, we expect the U.K. to grow in fiscal '27. And 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, and it has been impacting us throughout the year, and we will start lapping that early into this year and also the effect I mentioned for Q4. So definitely, we expect the U.K. to grow in fiscal '27.

The next question this morning comes from Paul Sidney at Berenberg.

Just a follow-up on the group portfolio and capital allocation. Vodafone has executed extremely well over the past couple of years on exiting noncore 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, the noncore stakes and JVs here and there. And given the growth in Africa that's being delivered, I think it's around 1/3 of your profits now at the group level. Is there an opportunity to increase your exposure to Africa? I'm just really just 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. And 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 manage 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.

And 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. And 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. And 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 increase stakes in existing assets?

We're happy with our -- very happy with our current shape in Africa in terms of geographies.

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

So 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 USA talked at length about the relationship with NVIDIA, putting compute and inference at the edge of their network and combining stand-alone 5G with physical AI. So is it really consumer? Is it cost? Is it about the network?

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 network front, I mean, there is a fascinating 2-way relationship between networks and AI because on one hand, 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 faults and the like.

But on the other hand, 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 work without a strong network infrastructure.

And 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. Again, when we look at the future in our outlook, we are thinking about the demand for uplink, for example. So the usage of the network will over time change.

But 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 how we run the company.

Definitely. And for us, AI is an enabler of cost efficiencies and driving productivity. And in fact, it's 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 as a result, enhance our service and also support growth.

Margherita mentioned networks. The other 2 key areas where AI is making a difference today is customer care. where we are delivering high standards of customer experience. My favorite examples there, the TOBi and SuperTOBi, the AI voice agent for relatively simple, high-volume calls. But also on top of that, we overlay the Super TOBi with Gen AI 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 set operations. We are embedding AI at a scale.

In fact, our set 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 a set operation is the perfect setup to give us a competitive edge in terms of getting the AI benefits through our supplier network. And then 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. So really for us, a key enabler. We are seeing significant savings already, but more importantly, it's positioning us for a structural change of our cost base while delivering high standards of customer experience, which is a key priority, the key priority for us.

And maybe just to add that all this is built on foundations that are essential for scale. I would just mention 2 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.

And 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. And just a very quick follow-up as well on that, Margarita. Just looking at the -- maybe the defensive angles on AI. Obviously, not everybody out there is a good actor. And I read stories about a lot of fraudulent traffic emerging as a result of AI, deep fakes, et cetera. And I know if you look at e-mail since it turned up in the late '90s, apparently 55%, 60% of global e-mail traffic is now actually spam and fraudulent e-mail. So 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?

It goes both ways actually. AI raises new threats for things like fraud or cyber, but AI also allows us to have better defenses -- and for example, you might have seen that across our markets in Europe, we are rolling out for our customers, this fraud alerts, you receive a call and you know in advance that it's a suspicious call. This is really very helpful. And the same thing

has actually happened 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, yes, because everything needs to be much more flexible to react much more quickly. And again, AI helps us in doing that. So both sides.

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 EBITDAaL 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 '26 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.

And 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, whilst 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 7 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.

And 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. And 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 multiyear 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 '26 guidance.

And with that, Pilar and I look forward to answering your questions.

[Operator Instructions] Our first question today comes from Maurice Patrick at Barclays.

Maybe just diving straight into Germany, if that's okay. I mean if I look at Slide 4 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 ask 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?

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

Yes. 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 1. We don't expect EBITDA to return to positive this year in half 2. 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 2. That's why the better performance than in half 1, 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, then obviously, your question is where are we going from here? Obviously, we will tell you more in May. Today is not the time in the 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 4 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 I 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 4 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 2 different trends from what we see today. You mentioned that we expect -- we see an improvement in fixed broadband. We see an improvement in our numbers. And 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. So 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. So this aspect around pricing still leave a degree of uncertainty on next year, as you can imagine. But 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. So expect continued improvement in this direction from our actions. The market, I think we will tell you more in May.

Our next question today comes from Akhil Dattani from JPMorgan.

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. And 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?

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've 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 market. 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. And 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 accumulated 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 summarize 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.

And for Q3, this has led to an inflow ARPU level that is the best we have seen in at least 3 years, and is year-on-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, 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.

Our next question today comes from Robert Grindle from Deutsche Numis.

Perhaps taking a more group-wide holistic than a single country view. In Q3, we saw OSR growth firmly positive in Europe for 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 full year '27 and beyond? Are you feeling more or less optimistic based on the 9 months to date?

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 multiyear growth trajectory that we have been discussing since May.

So maybe Pilar you can take those.

Yes, Robert, thanks for the question. And yes, I mean, as Margherita was saying, early days to provide exact detail, we will come back in May. But at a high level, we remain very confident on the multiyear outlook for adjusted free cash flow growth for '27. Several components there that we need to take into account.

From an EBITDAaL 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 '27, which is a very relevant fact.

From an EBITDA perspective, emerging markets, I mean, we typically with lower inflation is 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 '27.

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 '27, 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 or all EBITDA and CapEx, consistent with the multiyear 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 '27 will be a full year of integration, and we guided before on the size of the integration and restructuring costs 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 '27.

And then in terms of the spectrum, I think it's worth reminding everyone there will be the second installment of Turkey spectrum. And potentially, there could be some more spectrum in Egypt where we have ongoing conversations. Beyond that, I mean, early to provide 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.

Our next question today comes from Emmet Kelly from Morgan Stanley.

Yes. 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 like 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, Emmet. 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 2 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 element of our performance there is Vodafone cash, which, again, comes from cross-fertilizing idea and leveraging platforms across the compete -- continents.

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, and that sometimes is faster than with B2B acquisition like you have seen with Skaylink. So I think there could be more moves like this also in Africa.

Our next question today comes from Polo Tang from UBS.

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 you think that this will impact both Vodafone and also the U.K. -- the broader U.K. 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 multipartner 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 largest -- the access to the largest gigabit footprints 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. And 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, 3 out of 4 of German households have it through us. You now also see it in Turkey, it's our general approach to the market.

Our next question today comes from James Ratzer from New Street Research.

So the question to us 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 in 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, 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 2 things happened 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 hand, 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, 3 out of 4 of German households.

So Germany, from that perspective, was their 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.

And 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 level 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 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.

Our next question today comes from Andrew Lee from Goldman Sachs.

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 customer of towers? And do you think now is a good time to buy the rest of INWIT given it's the cheapest it's been for a very long time?

Starting maybe from the end, I would say we are happy with our position in where we are in -- 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. We are -- 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 itself, for example, if there is an opportunity of consolidation. So 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.

And just on INWIT, just specifically on INWIT, I mean, obviously, you're not going to say you want to buy it in today, but this is a stock that you have historically said you might want to buy the minorities over time. And 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, 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.

Our next question today comes from Joshua Mills from BNP Paribas Exane.

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 to the 1&1 revenues were in the service revenue growth. I think last quarter, it was about [ EUR 80 million ] of revenues, which are 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 for 1&1 to continue. And you also mentioned that the MDU headwind would have an impact. So I just wanted to understand, are we now at the maximum run rate -- maximum MVNO revenues in this quarter to 1&1? Or will that continue to increase on a quarter-on-quarter basis just as we get into Q4?

And then secondly are there any MDU revenues to fall out so? 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, and I thought all that all of those MDU headwinds were out of the business.

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, merger -- 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 can help you with the full equation in more detail.

Our next question today comes from David Wright from Bank of America Merrill Lynch.

So my question, it's on Germany again, but a little more strategically, we can see the value now and support that the [ Einstein ] deal has given, and it's a very margin-rich wholesale revenue stream. There's obviously a lot of debate in the market around Telefonica'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 [ Einstein ] 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, and this is obviously a critical asset for you guys. So I'm just interested in how you think about that trade-off if we saw the headline offer from TEF today.

Thank you, David. As you know, generally speaking, we don't particularly like to speculate on hypotheticals. But certainly, you raised the point on how -- 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 time lines, we agreed to move the national roaming agreements from Telefonica 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 2.5 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 that -- to those networks. The risk, as you mentioned, should be seen in conjunction with the conditions of the consolidation. And again, incredibly difficult to speculate today. But in any consolidation play, there are some changes. Those changes affect market dynamics. And 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.

Our next question today comes from Paul Sidney from Berenberg.

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, 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 the whole market up in value and not obsess about volumes?

Obviously, a very, very open question, Paul. 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, and move beyond the sort of headline of net adds.

Now as you heard me say before, this is particularly true for mobile because in mobile, the range of quality of what is behind scene numbers is just so huge that I think it's truly and 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. And 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 to -- 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.

We have time for one more question today, and that comes from Carl Murdock-Smith from Citigroup.

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?

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 to, and 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 3 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. And it looks like we will not see any real-world impact from any changes until at least '27.

On investments, the news are mixed, and 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 hand, 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 remit of the member states, but 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. And the one area which is something I keep pushing for is net neutrality in Europe, still even in the current draft sort of one-size-fits-all approach, which then creates obstacles to driving innovation in B2B and particularly through slicing and other services.

Now all of this, I'll go back to where I started, is still very much in draft. And as you know, with European processes, it will take some time until we actually know where we land.

Thank you very much. This concludes our Q&A session today. And 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, and we will close the year at the upper end of our guidance range. And our operational progress is consistent with our multiyear growth trajectory. We look forward to see you all for our full year results in May. Thank you.

Good morning, everyone, and thank you for joining us today. Before moving to Q&A, I will briefly provide an update on our transformation progress and financial performance. I want to specifically talk you through our operational execution in the first half in Germany and the U.K. In Germany, our turnaround continues. And in the U.K., we are now driving the integration of Vodafone and Three, both of which remain top priorities. But first, a quick recap on our position as a group.

As you know, over the past 2.5 years, we have changed both where we operate and how we operate. In the last 6 months, we have completed the reshaping of the group that I announced in May '23. We have completed the merger of Vodafone and Three in the U.K. and the acquisition of Telekom Romania's assets. All of Vodafone's operations are now in a strong position, at scale in all our markets. And importantly, all these markets have sustainable structures.

Our capital structure has also been reset with appropriate investment levels, a stronger balance sheet and over EUR 5 billion returned to shareholders via buybacks and dividends over the last 18 months, with a further EUR 1 billion of buybacks to come over the next 6 months. But most importantly, we have also delivered a step change in our operational transformation. Whilst we still have more to do in our drive to operational excellence, we have boosted customer satisfaction, we have simplified our operations and powered growth beyond traditional connectivity by expanding our digital and financial services.

Now, mentioning growth leads me on well to our financial results. We performed well in the first half, in line with our expectations. Our group service revenue growth has accelerated to 5.8% in Q2, supported by growth across Europe and Africa. On the profitability front, group EBITDAaL grew by 6.8% in the first half, with nearly all our markets posting EBITDAaL growth. With this solid performance across the group and a positive outlook, we have confirmed today that we now expect to close the year at the upper end of the growth guidance that we set out in May.

Alongside solid financial results, we have also made good operational progress in Germany and the U.K. Our 2 largest markets have different starting points and different competitive landscapes, but both markets are demonstrating the impact of our strategic priorities, customer, simplicity and growth.

Taking it to market in turn. Germany is the largest telecom market in Europe, and we operate at scale across both mobile and fixed. In mobile, our 5G stand-alone network covers over 90% of the population, and now, serves over 40 million customers, including 1&1 as well as almost 60 million IoT SIMs. And on fixed broadband, we can offer gigabit connectivity to 3 out of 4 German households, more than any other operator in the country. Our gigabit broadband reach has indeed continued to expand during the quarter. We are now marketing OXG fiber to 1 million homes. Our brand is strong, and customer satisfaction in Germany has stepped up in the last 2 years.

We have simplified customer journeys. We have introduced GenAI in customer care across chatbots and agent assistance. And our improvements across all call center KPIs are being recognized by independent testers. And in terms of growth, we have followed a disciplined execution focused on value. We have introduced new propositions in mobile, driving differentiation and upselling, and we have continued to increase front book ARPUs in fixed.

We also continue to expand our capabilities to satisfy the growing demand for digital services. Just 2 weeks ago, we announced the acquisition of an established cloud service specialist, active across Germany and Europe.

Looking at Germany as a whole, we are well positioned to drive structural growth, as we have the right assets and the right team in place, a team that is fully focused 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.

And now, on to the U.K., we are the largest mobile operator in the country, serving almost 30 million mobile customers, and we are also the fastest-growing broadband provider, with the largest gigabit footprint of any operator just like in Germany, as we are able to sell fiber to about 22 million U.K. households.

Vodafone U.K. is already the market leader in customer satisfaction, and we are now extending our customer experience standards to Three customers. And all of our customers are set to benefit from our GBP 11 billion network investment, as we build the best-in-class 5G network for the U.K. We have made a very fast start. Independent tests are already confirming noticeably better speeds and coverage in less than 6 months.

In terms of growth, as you know, we have good commercial momentum in the U.K., which is now being supported by our cross-selling opportunities, with Vodafone broadband offers now open to Three customers and FWA open to Vodafone customers. And our multi-brand approach is proving effective in making the most of the market demand opportunities.

The combination of these revenue synergies with our GBP 700 million cost and CapEx synergies gives us a strong growth trajectory in the U.K. We will leverage our unique assets in the market to extend our customer experience leadership, monetize our improved mobile network quality and continue to drive fixed service growth. And this is just our 2 largest markets.

We hold leadership positions across our African markets, where yesterday, the team reported another strong set of results, in line with their medium-term double-digit EBITDAaL growth guidance. We are excited about the future in Africa, as it combines structural opportunities across all our services, from core connectivity to financial services to B2B.

Coming back to group in closing, our objectives continue to be the same, to improve our customer experience across our markets, further simplify our business and deliver sustainable cash flow growth in FY '26 and beyond. The turnaround of Germany, the U.K. integration and our strong positions in growing markets across Europe and Africa, all give me confidence in our growth outlook.

With the reshaping of the group behind us, now is the right time to deliver on our ambition to grow our dividend over time. We announced today that we are moving to a progressive dividend policy.

And now Luka and I are looking forward to your questions.

[Operator Instructions] The first question this morning comes from Maurice Patrick at Barclays.

If I could ask a little bit about the EBITDA run rate for the second half and also next year, so you've delivered 6.8% organic year-on-year growth, you tightened the guidance towards the upper end of the range. I think if I look at the full-year guidance, it implies 4%, 5% growth for the full year. So your guidance, even at the high end, seems to imply a slowdown versus the first half, despite Germany probably having easier comps. As you exit the MDU drag, maybe you could help us understand some of the EBITDA sort of levers in second half. I know you called out higher SAC in the U.K., for example. And it's probably a bit early to talk about FY '27, but if you could give us some indications of some of those building blocks, that would be very helpful.

Sure. Luka, all over to you.

Excellent. Well, first of all, of course, we are very, very pleased with our performance in H1 on the EBITDA front. This was really a combination of very strong emerging markets growth, in the U.K., doing very well. And then Germany, improving as well over the last year, given that the MDU impact is now dissipating and we had a benefit of wholesale.

If you look forward to the second half, yes, our outlook at the high end of the range implies a slowdown. And there are 3 factors that I would call out for that. On the positive front, we absolutely expect Germany to continue to improve in H2 because then we have 0 MDU impact, and we will reach the full run rate of our wholesale migration of 1&1 this quarter.

So from Q4, we will then be at full run rate, just standing at around EUR 11 million. So we're almost done with the migration there. So this will help, of course. But on the flip side, first of all, we continue to expect that our emerging markets' growth contribution will trend down given that inflation moderates. You have seen some of that already in the first half year. I think that trend can be expected to continue.

And also the U.K., which had a very good first half, we'll see a slowdown in EBITDA growth, first, because -- I know I've talked about that already on the last earnings, but there should be a slowdown in topline growth, in particular, in Q3, as we are facing very tough compares in particular in our B2B business, where we had a positive one-off last year, which should then sequentially increase and improve going into Q4 and beyond into FY '27, but it will dampen the performance.

We also had some phasing impact in the strong performance in the first half year in the sense that the marketing expenses that are planned for this fiscal year in the U.K. are more back-end loaded to the second half year. So if you pair that up with the emerging market slowdown, that's driving the expectations.

Now, FY '27 is in particular, for me, very far out. Obviously, I'm sure Margherita and Pilar will be back to give you a precise outlook going into FY '27. From my perspective, perhaps just some high level puts and takes. First of all, we would expect the U.K. to be a very positive contributor and have a strong EBITDA performance based on the fact that we expect, for the first time, more sizable synergies from the merger coming together for this year, that was really basically no contribution from synergies, but it will start to step up in the next year.

And in Germany, we will face puts and takes, obviously, in the first half, the benefit from the MDUs being fully out of the numbers, and in Q1, still a ramp-up effect from the wholesale migrations. But then for the remainder of the year, they will be out of the numbers in terms of year-over-year help. So then, we will have to see what the market conditions do to see what that means for the German performance. And then, also in FY '27, I would continue to see a year-over-year challenge from an emerging markets growth perspective.

On the positive note, I think what we are seeing is that the mix in our EBITDA contribution continues to shift back more favorably to Europe now in the balance between emerging markets and Europe, and that obviously drives also good predictability, which should be a net positive.

The next question this morning comes from Akhil Dattani at JPMorgan.

I've got a question around Germany, just to unpack a bit of what you mentioned, Margherita, around the turnaround initiatives that you've taken so far, and how we see the fruits of that bearing into the numbers. You talked just to a lot of different things that you've done in Germany. But if we look at the moment and we strip out the MDU effect and the 1&1 impact, the German revenue trends are still declining 2% to 3%. So I'd love to understand what you think it takes in the timeline to see the underlying momentum starting to improve. And then, if we layer on to that, the scale effect of 1&1, how should we think about the H2 outlook for Germany for revenue and EBITDA?

I will maybe ask Luka to take the last part of your question on 1&1, and then, I'll talk to the actions that we are taking.

We seem to have a mic to fix, apologies for the...

I hope I was still able to be heard in my first answer.

Yes, you were. Please go ahead, Luka.

1&1 first.

Okay. Sure. So first of all, in terms of our expectations for Germany overall, we certainly expect that Germany will continue to grow in the second half year. The wholesale support will obviously be a factor, in that I would also expect that towards the end of the year, our B2B performance will start to move upwards because we had very good success of contracting new digital services business that always takes a while to come into the numbers, but that should be helping also the year-end performance there.

In terms of the impact that it has had, I really prefer always to talk about wholesale as a whole because in conjunction with the 1&1 win, so to say, we had also then a subsequent loss of another smaller MVNO, Lyca, which went the other way around. If you make the math out of those, the contribution of both in the quarter was just above EUR 80 million as a whole. And then, in the second half year, we would expect that the contribution from 1&1 will also be around EUR 100 million. In Q4, we are lapping then the loss of Lyca. So those are kind of the puts and takes to take into account in terms of wholesale momentum. Yes.

In terms of underlying performance, so if we exclude wholesale, Akhil, you are absolutely right, it's broadly stable. And if I look at the second half of the year, you shouldn't expect to see big step-ups quarter-on-quarter. But over time, the actions I was referring to in my introduction, which are all speaking to the long-term health of the business, will actually support our topline performance.

It's a bit early to talk about '27, as Luka was mentioning before because, I mean, also in Germany, we will obviously have to see what the environment will be, both from a macro and from a competitive perspective. But whilst we should expect the headwind in TV to continue, and equally, we don't have full control of the dynamics in mobile, the topline will benefit from these actions. And let me maybe bring this to life a little bit.

So first of all, we have talked about customer experience improving. With customer experience improving, we are seeing churn reducing. It's coming through in our numbers. Clearly, the customer experience is improving because of the investments in our networks, because the changes to our approach to customer service. Overall, net-net, the NPS is going up. We are continuing to beat record levels for us in fixed and stepping up in mobile. In some subsegments, we are now actually leading in the market. Clearly, there is more to do, but all this is playing in our numbers to churn.

I talk to the work we are doing on ARPU and supporting value in the market. We're really focused there on all what is in our control, and this is going to, again, help us. In fixed, you will have seen, for example, us gradually moving up front book ARPU in the last 6 months. The last moves were only 3 weeks ago, and we are seeing the benefits of that in mobile. We have upselling.

And finally, actually, Luka mentioned B2B. B2B is perhaps one of our biggest growth opportunities in Germany. We are investing in digital services. Again, you've heard the Skaylink acquisition. It's growing double digit. We see this as supporting growth going forward. So all this, as a package, is really the result of the actions we have taken supporting our long-term health of the business as we go into FY '27.

The next question this morning comes from Carl Murdock-Smith at Citigroup.

That's great. I wanted to ask about the U.K. You touched in the presentation on making a fast start on integration. Can you provide a bit more color on your early actions and synergy delivery? And also comments on in what ways the commercial performance in Q2 and revenue has been a bit better than the decline you had suggested we could expect when you spoke at last quarter's results.

Maybe, again, I will let Luka start with the outperformance on the revenue front, and then, I will pick up on the integration.

Yes, happy to. I mean, normally, CFOs don't like surprises, but in this case, I will make an exception because, indeed, we saw obviously coming into the merger a combination of a slowdown in Three that we have discussed at our last earnings call, plus we had the underlying challenge in our own business, so to say, before the merger with the B2B managed services terminations that we had to fight against. So that was underpinning, I would say, a cautious stance.

Also, if you take into account that the team, of course, was to be very busy on all of the integration steps. But I have to say -- the teams together and driving for very, very positive actions in terms of rolling out our base management practices to Three, making early wins on the network quality and improvement front with the sharing of spectrum and now increasingly the activation of MOCN, which obviously is positive, in particular, also helping performance on the Three network.

So in that sense, we have seen a combination of improving churn trends, very good consumer performance, in particular, in home broadband, which I think had the biggest net adds jump in the quarter that we have ever seen in Q2 in the U.K. Then also initial cross-selling benefits and successes. FWA was a very positive story for us. And that in combination has outweighed the underlying decline in B2B legacy managed services to an extent that, frankly, was a bit better than what we would have expected. So very positive.

I should perhaps add as a last point that the good actual current commercial trading performance was not only in consumer, but we had actually also a good performance in B2B, not enough, of course, to change the trends from the managed services side for this year, but of course, encouraging if we move further beyond that.

Just a bit more color on the actions, I'd say and reiterate, as Luka said, the team is doing a really great job. I think we are progressing at a pace that has not seen before in U.K. telcos in terms of bringing the 2 companies together. Just to give you a sense, we're only a few months in, and we are already completing the integration of the third levels in the organization.

And on networks and on other operations, what are the things we are seeing? On the network front, we talked in Q1 about higher speeds for Three customers, the whole customer base of Three, because of how we are using the spectrum together. I'd say Q2 was all about rolling out our multi-operator core network to allow customers to use seamlessly both networks. You may remember me saying that we had a target of 8,000 sites upgraded for MOCN by year-end. Well, actually, it will be, I think, by tomorrow, is the latest. We will get there this week.

And this obviously talks to the reduction of not spots for our base. You know that we are targeting a surface of 10x the size of London. And it's actually really visible today. You don't need to take my word for it. Opensignal has already published the report, saying it's noticeable and measurable. I can't wait to tell you more about this in the coming quarters, as we will also see the customer reactions. But it's a very strong pace.

Operationally, beyond the networks and the teams coming together, what is also coming together really well now is what I would call our multi-brand strategy. We now have a single team, for example, in consumer, managing across all our brands. And these brands allow us to cover all market needs, and do this in a consistent, coherent ways is quite powerful.

And then, as Luka mentioned, we have been opening cross-selling. So that's obviously supporting our commercial momentum. We were already the market leader in growth in broadband. We are now offering our broadband offers to the whole Three base and the FWA offers to the Vodafone base. As you can see, almost -- the first things we are excited about at the moment are the revenue synergies, and this come, of course, on top of the GBP 700 million cost and CapEx synergies that are, of course, part of our business case. So good momentum in the U.K., and you will see this continuing ahead of us.

The next question comes from Polo Tang at UBS.

It's a question on Germany. So there are proposed changes to legislation that will make it easier for operators such as Deutsche Telekom to access MDUs and deploy fiber. So what's your view on the impact of these potential changes? And can you also talk to the economics for the OXG fiber JV? From memory, it's about EUR 7 billion of CapEx to build a footprint to 7 million homes. But can you remind us what the equity injections that are required for the JV? And how should we think about the wholesale costs that the German unit has to pay to OXG JV longer term?

Thank you, Polo. I think I will take both sides of your questions, maybe starting from the draft Telco Act, which is being discussed in Germany. And there are a lot of measures as part of this that are all geared towards simplifying and accelerating high-speed network builds in Germany, for example, by simplifying permits processes. And this is actually really good. It's good for the fiber build-out. It's good for the 5G build-out. So I think the government is really pushing in the right direction in the country.

Now, as part of all the discussions going on, there are some elements, and you referred into the in-building wiring debate that we feel are unnecessary, and we're openly sharing our -- what I would call, our real-life insights on what's happening on the fiber building. And I think it's very clear to everyone that the bottleneck in fiber building in Germany has nothing to do with housing association and has more to do with other factors such as construction capacity limits.

But beyond that, today, these are discussions. There is no draft law to really comment upon. But just to take your point, even if all the discussions that are going on were translating into law, for the reasons I've just described, actually, the impact is going to be just a marginal, maybe acceleration of the fiber building towards the housing associations. And that will benefit all players in the market, including OXG.

It's unclear whether this discussion will ever become a draft law, and it's unclear at this point when this draft law will become law. But assuming it happens, if it happens at some point in 2026, you need to keep in mind, and I'm going to the next part of your question, that by then, OXG will be already marketing anyway to millions of customers in the housing associations. So, standing back, I don't see this as a major impact on whatever speculation is going on, definitely.

And the other point I would say is that actually, if you take all the discussions that are going on in Germany across the Telco Act and across the copper switch off, again, I think it's moving in the right direction overall, and it will be supportive for telecoms overall.

You asked about OXG economics, I think. And so on the equity injections, these are very small. I mean, obviously, Luka could add any detail. But I think we said this when we were setting up the JV because of the, I would call it, self-financing over time. It's really at the margin in terms of equity requirements, very, very small.

On the front of the wholesale costs and revenues, depending on which side of the equation you look at, I think -- I know that there has been some work going on, on trying to, from an analytics perspective, get to this calculation. I think it's really important that you keep in mind that it's a very -- let me say, there are 3 nuances to the calculations that maybe are worth sharing, and IR can help you sort of bringing them to life more precisely than I can do in a call.

The first point is that there is no commitment or obligation whatsoever for Vodafone cable customers to be migrated to fiber into OXG. That just is not there. The second aspect is that 20% of the OXG footprint will be actually outside the cable areas. And then, finally, obviously, penetration into the OXG households will build over time. So it will be during the 6 years of rollout, which are exactly planned, as you were describing, but it will also obviously continue to build after that. So all this is very gradual, and I think brings to, I would say, a different conclusion than some of the calculations we have seen, but I would let really the IR team to help you out on where to go.

I would just say that we are really happy with the progress now with OXG. You know that the first year, 1.5 years, obviously, were challenging to set things up. But we have now already built to 350,000 households. We are opening the -- we have opened the sales to 1 million households. We have connected the first customers. We have also opened wholesale, 1&1 and a regional operator are already connected. And 3 million households are already, let's say, committed in the construction orders. We have more than 30 construction partners. I mean, it's a big building site across many, many cities in Germany, and we now look forward to see this coming through in our numbers.

Just very quickly on the equity. So in 3 years, the equity contribution and injection was just above EUR 70 million. So it's really to underscore the point for Margherita, very, very small.

The next question this morning comes from Emmet Kelly at Morgan Stanley.

My question, yet again this quarter, is on Vodafone Turkey. On my numbers, it represents, I think, almost half of the organic EBITDA growth that we've seen since last year. I guess, most notable is the EBITDA margin uptick at your Turkish business. So could you talk a little bit about the topline trends you're seeing there and expect to see? And on your cost management program, if you could say a few words on that.

Perhaps I can take this because indeed -- I mean, Türkiye has been a tremendous success story in the last couple of years, not only in terms of the financial success, which has been clearly there, just to give you some absolute numbers, which are perhaps not so easily visible, just in the last 2 years, they have increased both EBITDA as well as cash flow back close to EUR 300 million each, which for the size of the business is obviously a tremendous improvement, and that's in hard currency, so not in local currency.

And while that growth, of course, inevitably, as we had already indicated, has started to come down because of the lowering in inflation. It's still significantly outperforming inflation. And in absolute terms in euros, it has still been in mid-teens on the service revenue front in the last quarter and was more than 20% up in hard currency for the half year. So where is this coming from? It's coming from a set of unique capabilities.

Yes, the team has always been very prudent and forward-looking and leaning into the inflation environment by managing costs very successfully, but there is more to it from my perspective. Türkiye is probably among the best digital capabilities that we have across the group. They have a very high proportion of digital sales. They have a very agile base management model, like a very targeted micro-segment-related calls to provide them access to targeted upsell offerings, post-to-post migrations.

So the team has really built a machine there around a set of digital capabilities that are very unique and that we are partially exporting also to other countries, such as the loyalty app, for example, the happy app that we're now also rolling out in other countries. So it's not only a story of cost-cutting and riding an inflation wave, not at all, it's actually based on a very proven and successful management model.

And while I've shared before that, as we think forward, certainly, the inflationary trends will continue to recede, and therefore, growth may come down. I think they have been increasing also their relative competitive position in the market. And I think that based on the strength of the management team will certainly continue.

If I can just build on that, Emmet, for a second, looking at the group as a whole, we are extremely proud of Turkey, but I need to say, we're equally happy about all our countries. We regularly publish in our reports the service revenue growth ex-Turkey given the hyperinflation environment, and you have seen this growing to 3% in the quarter. And this is a reflection of the strength of the portfolio. We have Africa, of course, also growing strongly, double-digit EBITDA growth, which is in line with our upgraded guidance there.

And then, overall, taking on the opportunities in the U.K. that we have just described, and the turnaround in Germany, where we have now turned the corner with the topline, but obviously are looking forward to the profitability improvement, all these taken in aggregate is, I would say, where we wanted to be through the group transformation. And it's the reason why you hear us talking about an outlook of midterm free cash flow growth. Yes, every part of the group is contributing.

The next question this morning comes from Joshua Mills at BNP Paribas Exane.

I wanted to come back to the U.K. market and focus on your FWA proposition in particular. So following the Three U.K. merger, you had a very strong spectrum position. You mentioned in your comments earlier that you're happy with how the FWA business is developing. Could you give us a bit more detail about the net adds on that business? And what your longer-term ambition with FWA might be? How you balance that against the desire to grow on the fixed broadband base as well? And just one short clarification, when you have your FWA customers, are they included in your broadband numbers or your mobile customer numbers?

Yes.

Yes. I'll start from -- I'll cover it all in one go. The net adds are in mobile because that's the supporting technology. And if I'm not mistaken, it's 17,000 in the quarter. They have accelerated, but let me talk to you about how we look at FWA more broadly. It's obviously a great opportunity for us to leverage, what I would describe, as our overall asset superiority in the market. We have -- I was talking earlier, the largest fiber footprint available to our customers with 22 million households, but obviously, fiber in the U.K., is not everywhere yet, whilst we will be offering FWA to all the population in the U.K., thanks to the capabilities that we have today.

And we see it as an opportunity because it allows us to bridge the time until fiber comes and maybe cover areas also where fiber may not come at all in the most rural areas. If fiber comes, it's great to get our customers first on FWA, and then, moving them on as the time progresses. So we really see it as an opportunity in the market. As I said before, it's now open to everybody, whether they are in Three brands, or I would say, ex-Three brands, ex-Vodafone brands, and we look forward to see this support our growth.

Now to the next question from David Wright at Bank of America Merrill Lynch.

David, we cannot currently hear you.

Sorry. I'm on the -- I do apologize and apologize for no video or lower -- maybe not a bad thing. But just a technical question, I suspect, just for yourself, Luka, super straightforward. In the first half, adjusted EBITDAaL common functions was maybe a little surprisingly negative. It shows minus EUR 14 million. It's been running a fairly consistent clip of EUR 22 million, EUR 23 million in the last couple of halves. So just any explanation there and just how we should think about that full year number and maybe even into 2027? That's it from me.

It reminds me of the old days because when I was CFO that it was a recurring question, ultimately. It's actually quite structural. Maybe you want to go to that?

Yes. Exactly. So if I go back in the history, to Margherita's days, before I arrived, I think, historically, common functions EBITDA was actually always negative. And then, in the last 2 years, it turned positive as a result of some of the M&A activity that was going on, which created one-time effects. And last year, it was also helped through a quite sizable central provision release, and that is obviously creating headwinds in the year-over-year. But structurally, from a go-forward perspective, should actually expect common functions EBITDA to rather be negative than neutral to positive. And the reason for that is just simply that the help from kind of the M&A transition to also above the line EBITDA recognition essentially is dissipating.

Just to come back to why it's been structurally negative. It's a very simple thing, David. It's because -- you know that our shared operations' costs are paid for in the markets, but that's not the case for what we call corporate services. So just the HQ cost, I mean, if I take ourselves and the IR team supporting this core, right? This stay at the central EBITDA level, which is a cost, but don't see this as big movements.

Okay. Can I take that H1 number and just double it for the full year? Is that reasonable just to get a proxy?

Well, it's an area that, again, because we are talking about small numbers, can have variations. So I think we wouldn't be very specific at that level of detail, to be honest.

The next question this morning comes from James Ratzer at New Street Research.

So we haven't yet had a question on the dividend, I think. So it would be great just to get a kind of updated kind of thinking on cash return for kind of next year and beyond. Because I think in the past, you've set out you had a kind of ambition to grow the dividend and to be progressive. You've now been more quantitative. But just for this year, I think, you've just set out the 2.5% for this year, but really kind of not beyond FY '26. I mean, it looks to me like leverage is going to end up right at the bottom end of your 2.25x to 2.75x guidance. So, going beyond FY '26, how are you then thinking about what progressive dividend could look like and potential scope for any share buybacks going into next year?

Sure, James. I have to take this one in this round given that this is going to be the last call from Luka. Let me give you a little bit the broader picture now how we think about returns as you're saying. So first of all, we have given you good visibility on one component, which is dividends. We are talking about a progressive dividend policy, which means that we expect growth year after year going forward. The first year is expected to be 2.5%. So we've been quite detailed. Of course, we will have to assess this every year from now on.

Why progressive dividend policy? It's simply because you have heard us say, when we reshaped the group, and we rightsized the dividend according to the new shape, we were very clear from the beginning that our ambition was to grow the dividend over time. In this half year, we have completed the reshaping with the U.K. And so the time is now. You know that we have an outlook supportive in terms of midterm free cash flow growth. So it was appropriate to bring the ambition into reality.

As far as buybacks, clearly, these are also a component of our toolbox for shareholder returns. We are EUR 3 billion in the EUR 4 billion that we had communicated at the time of the various transactions. And starting today, the penultimate tranche, so in the next 6 months, we will be busy on delivering another EUR 1 billion. Beyond that, we will have to assess our position. We will assess our position depending on -- and I think you are spot on, depending on where we will be as a company, where the market environment will be at that point. And we will clearly assess it through the lens of our capital allocation policy that you were referring to earlier, which I think is very well known. So, full visibility on the dividend decisions on the buyback when the time is right.

The next question this morning comes from Paul Sidney at Berenberg.

I just had a question around the Skaylink acquisition. We've seen a lot of excitement in the sector around data centers, AI, cloud services, cybersecurity, you name it, obviously, Deutsche Telekom, announcing a pretty high-profile partnership with NVIDIA to build a data center and Telecom Italia having a recent event, looking at their AI capabilities. So just a very broad question about is this really a material revenue driver for your business looking forward? And could we expect more similar acquisitions to Skaylink in some of your other geographies?

Sure. Paul, let me try and give you a bit of an overview on how I look at this. So first of all, digital services are now over 1/4 of our B2B revenues. So it starts to become quite material. And it's going really well. We continue to use the word double-digit. It's basically double-digit everywhere. It's double-digit in Germany. And overall, I think there is a lot of potential for us to grow in B2B in these domains.

And that's why we have, even before the acquisition of Skaylink, continued to invest. I mean, 2 years ago, for those of you who remember, I was talking about, again, for the long-term health of the business, stepping up the investment in B2B in these areas, and it's all been about building capabilities to essentially respond to the demand of our customers.

Now, in terms of all the points that you have raised, I think it's really important for us to assess where there is demand, where this demand is best served by Vodafone as opposed to other areas, and where there are also good returns. We certainly see big opportunities to continue to grow on IoT. We could go on and talk for hours about IoT. We see equally very good growth for us already today in cloud, where Skaylink operates. Cloud is a big contributor to our double-digit growth, and also, security with cyber in mind.

We also think that our, I would say, most biggest opportunity segment-wise are in the SME space on all these services, so middle-sized company. Why? Because these are the companies that are used to buy technology from Vodafone. We have been serving connectivity to them. We have strong partnership. They look at us to help them. In these days, for example, sovereign cloud is a super big topic of conversations. We are well placed to help them with that.

The more you go in the value chain, especially in Europe towards things like gigafactories and other areas, I think you will see us sort of prioritizing in a very clear way because in some areas, the economics are still to be proven, the capacity utilization needs to be proven, and therefore, we are very rigorous in the way we go about the opportunity to serve the demands by starting to address the areas which really, for us, are low-hanging fruits. And to your question, yes, there will be more activity in this space in terms of building capabilities, and sometimes, this may continue to involve small bolt-on M&A.

We have time for one last question this morning to allow all participants to observe the 2-minute silence at 11:00 a.m. for Remembrance Day here in the U.K.

This last question comes from Robert Grindle at Deutsche Numis.

Great to see your stock get its mojo back. I hope that translates to Italy and Germany, especially before Luka moves on. Margherita, the footprints reshaped, you've merged the U.K., not to mention all the operational stuff. This was a large entrée. So what do you look forward to spending more time on with your new CFO colleague? We have the capital allocation question. You addressed that. More capabilities in digital seem to be underway. Do you see any footprint infill need? Any more consolidation opportunity? And conversely, do you see that the Vodafone balance sheet needs further simplification?

As you indicated, we are really pleased to have, I call it, completed the building site after the last couple of years and get the group we wanted and see our position today being at scale with strong brands in all the markets in which we operate, and these markets being markets where we have sustainable structure. This is all the foundations we needed for good growth.

Looking forward, there is obviously much more to go for, but you should expect that not to make the headlines through M&A. You should expect that to be our continued execution of our transformation. And really, all we need today to make the most of our growth opportunities, be it in Germany, be it in the U.K., be it in Africa, is disciplined execution, focused on operational excellence to make the most of what we have.

And I mentioned earlier, customer simplicity and growth. Our priorities have not changed. Our opportunities have not changed. It's great that today, we are in a completely different position on customer experience, but lead and colead in 11 out of 15 markets is not enough. So my #1 priority will continue to be to push on that.

Group simplification, we have made lots of inroads. I mean, we are completing this year the, for example, roles reduction that we talked about to simplify the group when we announced the strategy. But there is always more to do, and we have the opportunity to become much more simpler. I mean, one of the slides, by the way, in our PowerPoint today is about AI because there is a lot to go for to make us faster, more agile.

And then, you mentioned B2B. And it's been a feature of this call, which I really appreciate because I believe it's a strong opportunity for us. If you think about it, we have a really strong competitive position there. We are trusted by businesses and governments across Europe and Africa. And so it's a fantastic growth opportunity. In all the areas we operate in, we have strong demand for our services. So it's about really bringing -- accelerating the growth in the years ahead now, and it's in our hands.

Great to hear. Good luck, Luka.

Thank you.

Thank you. We're on time.

This concludes the Q&A session. And I would now like to hand it back to Margherita for any closing remarks.

I would really like to take the opportunity to thank Luka, last call. Luka has been great support on -- well, all the things we've talked about in this call. And thank you for your time, as always, today, and look forward to see you all in the next quarters. Thank you.