Vodafone Group Stock

Good afternoon, everyone, and welcome to the VodafoneThree Investor Briefing. It's great to have so many of you here with us today in London, and a very warm welcome to everyone joining us online, too. I'm Kelly Barlow, Strategy and Portfolio Director at VodafoneThree, and I have the pleasure of being your host for this afternoon's briefing. The VodafoneThree leadership team and I are excited to be here to share with you our strategy, our ambitions for growth and our plans to build the U.K.'s best network.

Over the course of the afternoon, you'll hear about the fast start we've made in our first year, our ambitious network rollout plans to connect every community in every corner of the U.K., the exciting growth opportunities we see across both consumer and business and how all of this ties into delivering significant long-term value creation. For those of you here in person, we have a number of demo areas that bring the story to life. Colleagues from across the business will show you examples of our work in action from our recently launched propositions to the ways we're looking to enhance our customers' journeys.

So make sure you use your time in the break, that's at about 3:30 p.m. to speak to them. And if you're joining us online, don't worry, we haven't forgotten about you. Alongside the main webcast, you'll have access to additional content through the portal, including case studies and video explainers. Throughout the afternoon, we'll have a number of mini Q&A sessions with our network, consumer and business directors. Now during those mini Q&A sessions, we'll only be able to take questions from the room. But at the end of the presentations, I'll be joined by the leadership team for a more fulsome Q&A session. [Operator Instructions]

Now without further ado, let's invite our first speaker to the stage to tell us more about why VodafoneThree is such an exciting part of the group growth story. Please welcome CEO of European Markets, Ahmed Essam.

Good afternoon, everyone. Great to be here. Before I start, I wanted to pass on Margherita's apologies for not being able to join us today. She had fully intended to be here, but was asked to join the U.K. Prime Minister and German Chancellor in Germany as part of the U.K. Germany Technology Corridor initiative. She knows that you are in excellent hands with the VodafoneThree team this afternoon and sends her best wishes for a productive and insightful session. So today is an exciting day for Vodafone. We're setting out for the first time in detail our strategy and growth ambitions for the U.K.

We're issuing new bold targets, and we're outlining the clear execution plan we have in place. We created VodafoneThree because we saw a clear opportunity to transform the U.K. market to create the scale to invest, to deliver a step change in network quality and customer experience and to build a stronger business capable of delivering good returns and sustainable long-term value. And we've made a strong start. We're seeing tangible benefits for customers. The integration is progressing at pace, and our commercial momentum has accelerated. As a result, we now have even greater confidence in the opportunity ahead.

That's why we chose to take full ownership earlier this year and why VodafoneThree is set to become an increasingly important contributor to Vodafone's growth ambitions. So before Max and his team take you through the U.K. plans in more detail, let me recap from a group perspective. Why change was needed, why the merger was the right strategic course, why we are confident in VodafoneThree today and why we chose to move to full ownership. Before turning specifically to the U.K., I want to briefly step back and place VodafoneThree in the context of Vodafone's wider transformation.

At our fiscal year '26 results, we said Vodafone is entering a new chapter, a business that is simpler, stronger and growing. Simpler because we've reshaped our portfolio and focused on markets and segments where we can win. Stronger because we've reset the fundamentals, customer experience, productivity and capital discipline through our customer simplicity and growth strategy. And now Vodafone is growing. We have attractive opportunities across Europe, Africa and B2B, underpinning our ambition to deliver double-digit organic free cash flow growth in the medium term. VodafoneThree is an important part of that growth story.

In fact, it's one of the clearest examples of our transformation strategy in action because when we reviewed the portfolio back in 2023, the U.K. stood out as one of the markets where structural change was needed. And to understand why we are so confident in VodafoneThree today, it's worth reminding ourselves of the challenges we faced. As Margherita has consistently said since becoming CEO, Vodafone needed to change. We needed to change both where we operated and how we operated. Our strategy was based on a simple principle. Vodafone should focus on good markets with sustainable structures, where we have scale, strong positions and the ability to earn return above our local cost of capital.

There were 4 markets where we believe structural action was required. The U.K. has always been an important market for Vodafone. It's our home market. It's one of Europe's largest telecoms markets. And it's a market where Vodafone has strong customer and brand positions. But the market structure was not sustainable. Vodafone U.K. and Three U.K. were both subscale. Returns were well below the cost of capital. And that limited the ability of both businesses to invest and compete. And the impact was clear. Limited investment affected our customer experience, and the market was not delivering its full potential for consumers, for businesses and for the country.

Organic action alone could not address the structural challenge. We needed greater scale, and we needed a market structure that supports investment, competition and attractive returns. The merger was designed to solve that challenge. By bringing Vodafone and Three together, we created a scaled operator with the assets and resources to invest for the long term. We made a clear commitment to invest GBP 11 billion over 10 years to build the U.K.'s best and most advanced 5G standalone network. This will create better outcomes for customers, for the country and for competition.

For customers, our merger means a significantly better network experience through greater coverage, reliability and performance. For the country, it means one of Europe's leading 5G platforms supporting productivity, innovation and economic growth. And for competition, it means a scaled operator capable of challenging the 2 established converged players and strengthening competition. Our merger also marks an important milestone case in the shift towards a more investment-led approach to market structure, an approach that recognizes the importance of scale in building a next-generation network that customers and businesses deserve. The strategic rationale was clear when we announced the transaction.

And as you will hear today, the evidence from our execution strongly reinforces that rationale. VodafoneThree now brings together 4 powerful drivers for value creation. It starts with network leadership. VodafoneThree has more network assets than any other operator in the U.K., a fully funded GBP 11 billion investment program and a road map to building the U.K.'s best 5G standalone network. A strong foundation for differentiation, and that creates a meaningful commercial advantage. VodafoneThree has the U.K.'s largest mobile customer base. It has a clear multi-brand strategy, an increasingly differentiated proposition portfolio and leadership positions in customer experience.

Together, these trends enable us to serve a broad range of customers more effectively. But we're not limited to mobile. VodafoneThree is the fastest-growing broadband provider. It has a significant opportunity in convergence, including Vodafone TV. More broadly, in consumer, we can monetize network quality through propositions such as SuperMobile. And in business, it is well placed to respond to growing demand for secure, resilient and intelligent connectivity. A larger, more efficient business, significant savings opportunities and now as fully owned business, the ability to leverage Vodafone Group's global scale, capabilities and expertise even more effectively.

Finally, all of this translates into improved returns. Together, these create a clear path to stronger cash generation. This is why we see VodafoneThree as much more than an integration of 2 businesses. It is one of the most exciting growth and value creation opportunities in the Vodafone portfolio. And that brings me to our decision to take full ownership. Full ownership was always envisaged as part of the original transaction framework with a clear pathway towards 100% ownership over time. What changed was the opportunity and the confidence to move earlier. Over the past year, the business has made a very fast start.

Integration has progressed rapidly and ahead of schedule. Management has delivered against all its commitments, and we're already seeing tangible benefits for customers translating into good commercial momentum. That gave us much greater visibility and confidence around the long-term value creation opportunity. Against this backdrop, 2 specific factors allowed us to accelerate our move to full ownership. The first was valuation. We were able to acquire full control at an attractive value compared to the GBP 16.5 billion embedded within the original put and call framework. Second was balance sheet capacity.

When we first agreed the merger, we were still working hard to reshape the Vodafone's portfolio, which we did successfully by the sale of our operations in Italy and Spain. The acquisition added just under 0.5 turns of our group leverage while keeping us comfortably within our target range. And of course, there is an additional benefit that we're particularly pleased about. Full ownership simplifies governance. It gives the business full and easy access to Vodafone Group's scale and capabilities. And it allows Vodafone shareholders to capture all the future cash flow growth and synergies. When we announced the merger, we committed to delivering GBP 700 million of annual cost and CapEx synergies by fiscal year [ '23 ] (sic) [ '30 ].

Today, as you will have all read this morning, we're increasing that ambition to GBP 1 billion by fiscal year 2032. That reflects the progress already made, the clear line of sight we now have on execution and the additional opportunities created by full ownership. Darren will take you through those in more detail later in the day. Overall, we believe this was the right opportunity at the right moment at an attractive valuation. Let me conclude by coming back to Vodafone Group. We have set a clear ambition to deliver double-digit adjusted free cash flow growth over the medium term, and VodafoneThree will be an important contributor to that ambition.

The business now combines a scaled position in one of Europe's largest telecoms markets, a leadership position in customer experience and network commitment that will reach 99.96% 5G standalone population coverage, the highest of any other operator. It has significant opportunities to grow and will deliver an upgraded target of GBP 1 billion of annual cost savings by fiscal year 2032. Today is about sharing with you how the team will build the U.K.'s best network, how we will turn network quality into differentiated customer propositions, how we will grow in broadband convergence and business, how we will deliver the integration and synergy plan and above all, how this will deliver a better experience and greater value for customers across the U.K., ultimately translating into earnings, cash flow, returns and long-term value for shareholders.

I'm very pleased with the start VodafoneThree has made, and I'm confident in the opportunity ahead. And today, especially is a very important day for me because it's a moment of pride for myself, for the team who have taken this from an idea to a transaction to CMA, to an approval, to an integration to the moment we are in today, and I want to thank you for sharing this moment with us.

So with that, let me hand over to Max and the VodafoneThree team, and thank you very much.

Thanks so much. Good afternoon, everyone. Thanks again for joining us. It is great to see you all. 16 months ago now, we launched VodafoneThree and welcomed everyone to a new era of connectivity for the U.K. VodafoneThree, a new scaled operator, one which is to set a new benchmark for mobile connectivity to deliver the U.K.'s best network, a world-class 5G standalone network, a network to be proud of and one that the country needs to realize its digital ambitions. Ahmed mentioned the fast start we have made. And whilst we are very proud of our progress to date, the team and I are super clear. Now is not the time for victory laps. We have a lot to do.

Today, we're going to demonstrate the clarity of our plan and the confidence we have in delivering it. Throughout the afternoon, you're going to hear from a committed leadership team. Andrea will outline how we're building the U.K.'s best network, the assets we have, the plans and the progress to date. Rob will then cover how we're accelerating our leadership position in consumer, how we will monetize network quality and drive converged growth. Nick will explain similar themes in business, monetizing network quality for private sector and public sector, driving fixed and digital service growth. And finally, Darren will talk about the delivery of synergies, breaking down for you our new upgraded financial target.

We're going to have time for Q&A in the plenary throughout the afternoon. Please do take the opportunity to visit the demo areas as they will help bring everything we talk about this afternoon to life. But it all starts with this, our mission, purpose, our goals, a simple strategy slide, one which I use internally and externally every day and everyone in VodafoneThree is working towards. Our mission and purpose is simple: to connect every community in every corner of the U.K. by building the U.K.'s best network. We have a network commitment, yes, and we are leveraging this as much as we can internally.

It is truly motivating for all of our teams to be working on such a clear mission and purpose that will make such a difference to all 4 nations of the United Kingdom. As a proud Brit, it's personally so motivating to be working on something that is so important for both this generation and the next. Our goals are simple, too. We aim to be the best, #1 network. 99.96% 5G standalone population coverage. No one else has such a plan. And it's front-loaded in its delivery, 90% by the end of year 3, 99% by the end of year 5, 99.96% by year 8. And that 0.96% doesn't sound like a lot, but it's very important. It's actually 2.5x the size of Wales in geographic coverage.

#1 for customers. This means delivering the best customer experience, whether that be lowest churn, best NPS, fewest Ofcom complaints, it's all of the above. And we will not take our eye off the market as many mergers do. We aim to capitalize on opportunities such as fixed growth, protect our scale in mobile through our multi-brand strategy, whilst at the same time, monetizing network quality. And arguably the hardest goal and the most important, #1 for people. Our people deliver the plans, the initiatives, our people deliver the synergies.

We are integrating quickly and effectively building a best place to work, leveraging the best of both legacy businesses to create a better, leaner organization that attracts and nurtures the best talent. And how do we do it? With pace, a customer-first mindset and acting as one team, arguably the most important words you'd hear today apart from the upgraded GBP 1 billion target. We're going really fast, delivering benefits to customers as quickly as possible, delivering near-term synergies and crucially delivering the operational milestones to unlock future synergies, especially in networks and IT.

But pace is only part of the story. It's also about operating with a customer-first mindset. Every change we make to unlock cost efficiency is also an opportunity to improve customer experience. We're no longer 2 businesses. We think, act, celebrate, learn with humility as one team. And finally, the critical output of all of that translates into GBP 1 billion of sustainable incremental annual value. That number is evidence that we have greater confidence. We are building a strong track record of milestone delivery. Before we talk about the progress to date, let's quickly discuss the landscape we are in, starting with mobile.

For many years, the U.K. mobile market has been falling behind international peers on network quality. And at the same time, prices have fallen with increased competition. Yet quality now is becoming even more important than ever to customers. Our research shows 50% of customers will consider switching if network quality were better and 43% of people believe where they live leaves them behind when it comes to digital connectivity. Customers now expect fast, reliable, secure connectivity wherever they are. For VodafoneThree, the opportunity is clear. We have more assets than anyone else, the strongest spectrum holding in the country.

This enables us to deliver a faster network than anyone else, and that means we can and will deliver the best quality mobile network. Monetizing network quality has been a challenge for the industry. It isn't new. We saw quality premiums in 4G launch and 5G launch, but over time, those premiums have been traded away. We have a clear plan on how to monetize network quality. We're leading the way through innovations like Vodafone SuperMobile, a completely new mobile category for customers. But our plan also includes how to position SuperMobile across our multi-brand portfolio in consumer and monetizing quality effectively across all of our segments in consumer, in business and in wholesale.

And for wholesale, none of our current customers sell 5G+ today, but it will be available as an add-on for an appropriate fee. Focusing on customer experience is critical, too. Removing friction, simplifying operations, lowering churn supports both mobile revenue and margin and ultimately drives up the likelihood that customers will buy more from us, which brings me on to fixed, the clearest growth opportunity for VodafoneThree. In consumer, we start with relatively low fixed share today of 5%. Therefore, we have significant headroom for growth. We have a strong proposition, the largest fiber footprint in the U.K. alongside a fixed wireless access product that is cheaper than copper with better margins.

Together, they allow us to offer fast broadband to 28 million homes and premises more than anyone else. We then have the largest mobile customer base to cross-sell into. It's this combination that results in us being the fastest-growing home broadband provider today. There's lots of competition in the infrastructure market. I'm sure it will lead to consolidation. But as it stands, we, VodafoneThree, are an attractive partner, and we're well positioned for growth. It's also worth noting that consumer broadband is one of the clearest examples of where Vodafone Group helps us with route to procurement scale benefits and with content partnerships for the recent Vodafone TV launch.

For business, the opportunity is equally exciting. As organizations digitalize, connectivity is becoming increasingly strategic and network quality is crucial. On top of more predictable performance, customers are demanding greater security, resilience and sovereign capabilities, particularly across critical industries and public sector. That's where the SuperMobile portfolio for business comes into play. Building on the local slicing we launched early this year, we can now offer SLAs on both national and critical, and dedicated critical business slices. This is exactly the type of opportunity that simply did not exist before we had the scale and capabilities of VodafoneThree.

In business, we're the biggest in mobile, but only have 13% share of fixed, also plenty of room for growth. We have the second largest fixed network for businesses in the U.K. Complementing that, we have our partners and fixed wireless access proposition makes us credible and well placed in business fixed. Customers include household names such as Amazon, Scottish Power and Standard Chartered Bank. And there's one final factor shaping the market, the regulatory environment in which we operate. For our industry, this creates both opportunity and risk.

The merger of Vodafone and Three marked a turning point in U.K. regulation with both the CMA and Ofcom recognizing that 3 scaled operators would deliver better outcomes for the country, customers, competition and shareholders. But there's still more we can do. Across the industry, there's broad alignment on 3 priorities as part of the mobile market review. First, planning reform, so we can upgrade and deploy network infrastructure quicker. Reform of net neutrality rules, enabling greater service differentiation and innovation. Energy reform, recognizing the role telecommunications networks play as critical national infrastructure and ensuring operators can invest efficiently in resilient connectivity.

Alongside those priorities, it's important that competition remains both effective and sustainable. It means avoiding market distortions, ensuring a level playing field and maintaining investment incentives needed to deliver world-class digital infrastructure for the U.K. Ultimately, it isn't just important for the telco industry, it's important for the long-term health of the U.K. The key takeaway is that the direction of travel is positive. Conversations have been constructive. There is increasing alignment across industry and a broad recognition of the need to support sustainable investment. We now await the legislation that will provide the framework to turn consensus into action.

Our first year, we've made a fast start. On network, we've moved at pace with our network build. We optimized our spectrum holding quickly, delivering better 4G speeds for Three and SMARTY customers. Roaming was enabled across both networks in over 10,000 sites. We selected our network partners in record time, locking in the unit costs we need to deliver the plan. And we hit all our year 1 targets for network upgrades, which means faster speeds for our customers. As we talk today, we are exactly on track for our CMA commitments. These network improvements, alongside best practice sharing and customer service have delivered meaningful improvements in customer experience.

Churn, for example, on Three is down 3 points year-on-year. Vodafone has market-leading mobile churn. Three has climbed to be one of the best in the Ofcom complaints table alongside Vodafone. And Vodafone has also strengthened its lead as the best in the U.K. for NPS. We're not taking our eye off the market opportunity either. We delivered a record year for home broadband growth. And we moved at pace through integration, 3 levels of management in place by Christmas. The fourth level was completed by the end of the summer. Property plans have been communicated and execution is underway.

Taken together, that puts us ahead of plans for people-related synergies and reinforces our confidence in the broader integration program, a fast start indeed. The financial result of 4.5% EBITDA growth with only a small benefit of synergies in the year. Year 2, this is the really critical year for delivery. In many ways, we describe it, this is the year where we break the back of our plan. FY '27 is the first year where we'll see material synergies of over GBP 100 million being delivered, the majority of which are in sales and marketing, procurement, people and retail-related costs, all of which are delivered or are on track.

In Networks, we will more than double the pace of our site upgrade program this year. It's challenging, but going well, and Andrea will talk about that more. Reaching this level of delivery is exactly what we need to achieve the full network integration plan and then realize the network synergies in year 5. This is also the year where we launched new market-leading propositions. That includes Vodafone SuperMobile designed to monetize the network and offer customers a completely new category of mobile connectivity. In fixed, we are leveraging our fiber footprint and fixed wireless access.

We've announced the upcoming launch of enhanced Pro broadband together with whole home Wi-Fi and parental controls with speeds up to 8 gigabits a second. And just last week, we launched Vodafone TV, filling a gap in our broadband portfolio. We know many customers like to buy broadband and TV together. So this helps us grow our fixed share. We're focused on making it easier and simpler for customers to interact with us, focused on fundamentals, removing customer friction in journeys, tackling root causes of complaints, ensuring right first-time IT and digital delivery. This year, we will continue to roll out our single converged app, Just Ask -- rollout the Just Ask Once promise and AI-enabled service capabilities.

And finally, retail. We delivered the IT and digital capability to enable multi-brand in stores, which not only supports customer experience, but is also the key enabler for retail synergies. We are exactly on track in the rollout of multi-brand stores and the corresponding retail consolidation program, which will complete next fiscal year. In summary, the merger was the catalyst the industry needed. We're in a much stronger position in the market than we were as 2 separate businesses. Year 1 was about building strong foundations. We delivered immediate network and customer experience improvements while maintaining good commercial momentum.

Year 2 is about acceleration, unlocking the full potential of our network, breaking the back of our plan. Network delivery doubles, retail consolidation on track and accelerating. We're ahead of plan on the organization side. We are well positioned for growth in both consumer and business fixed. Now we start to differentiate with our new propositions and monetize the network. We're 16 months into the integration. Our confidence in delivery has increased, resulting in, of course, upgraded targets. We have the right assets, we have the right strategy, and I have a brilliant team.

With that, I will hand over to one of them, Andrea.

Thank you, Max. Building the U.K.'s best network is VodafoneThree's ambition and mission. It's the foundation for delivering the best customer experience, new market-leading products and services and enabling us to create long-term value from our industry-leading GBP 11 billion private investment program. Let me start with giving you an overview of what I will cover today. There are 4 main areas. First, we start from a position of strength with more network assets than any other operator and a clearly funded regulated rollout plan. Second, we've moved quickly to bring meaningful improvements to our customers from day 1.

Third, our next phase of this journey, covering 99.96% of the U.K.'s population with 5G standalone as we consolidate and upgrade the IT and the network platforms. And finally, how we will deliver a world-class connectivity experience for all of our customers. Let me start with what we got from the merger. We have more network assets than any other operator in the U.K. That starts with our site footprint. As you can see, significantly more cell sites than our competitors. That scale gives us the flexibility to design the strongest possible network footprint, retaining sites that add the greatest coverage and capacity while simplifying where the networks overlap.

We will remove duplication and consolidate overlapping sites. In time, we will have a more efficient and effective footprint of around 26,000 sites. That still leaves us with more sites than anyone else. But importantly, as we rationalize these overlapping sites, those savings help to fund the next phase of our investment. We also have a very clear spectrum advantage. We hold around 20% more spectrum than any other U.K. operator, including more than half of the U.K. C-band spectrum holding. That enables us to deploy C-band spectrum at scale, delivering what matters most to our customers, greater capacity and faster speeds.

Faster speed is data quality. Combined with the scale of our network and backed by GBP 11 billion investment, these assets give us a truly unique advantage and forms the foundation of our strategy. We have a clear and ambitious plan to build the U.K.'s best network, connecting every community in every corner of the U.K. Our 5G standalone network will significantly increase network capacity, improve speeds, reliability and performance across the entire country. But this program goes beyond just the radio network itself. It also modernizes the core and IT infrastructure.

Our ambition is simple: to build the U.K.'s first AI-ready network, an intelligent and autonomous network that can dynamically adapt, improving network performance and helping us bring capabilities to the market more quickly. We have clear milestones throughout the entire journey. We made very specific site and spectrum deployment commitments to the regulator. We promised to deliver coverage, capacity and performance outcomes. And importantly, we're already demonstrating delivery against them. We've exceeded our target plan in year 1, which I'll come to in a second.

Over the next year, we will accelerate this rollout by upgrading twice as many sites as we did in year 1. These upgrades are in addition to the 10,000 sites we enabled Multi-Operator Core Network technology in year 1. MOCN was designed to bring immediate benefits to the customers by allowing them to connect automatically to the best available coverage, VodafoneThree signal at no extra cost. The site upgrades that have been committed to the CMA, the Competition Market Authority go much further. They involve modernizing the underlying infrastructure, deploying new industry-leading equipment and integrating the spectrum, the foundation of our 5G standalone network.

We've already begun to offer our customers the capabilities that will truly differentiate this network, dedicated national network slices for consumers and businesses through Vodafone SuperMobile and SuperMobile for Business, the U.K.'s first national business-only 5G plus slice. SuperMobile provides customers access to our fast track with up to 4x faster speed and a minimum speed guarantee of 15 megabits per second. No one else is offering this. Next year, we will follow this up with dedicated national critical slice for blue light organizations, providing priority connectivity to first responders and critical public services.

By 2029, we will have delivered 65% more network capacity than Vodafone and Three would have achieved separately, alongside almost 90% of 5G standalone population coverage. By 2030, 99% of the population will have access to 5G standalone, providing the platform for the next generation of digital services and experiences. And by 2034, our network will be 2.5x today's capacity. Think about the scale of that. It's quite an incredible thing to be able to say, 2.5x the capacity today. Average speeds will be up to 5x faster than the separate networks would have offered.

And we will have delivered our plan, 99.96% 5G SA coverage, population coverage by 2034. As Max has told you already, that 0.98% (sic) [0.96%] matters as it means nearly 700,000 people across 48,000 square kilometers of the U.K.'s most remote areas. We are the only operator committing to go that far. And importantly, it's a network design not just for today's demand, but for the next decades to come. We moved the pace to bring immediate customer benefits. Within just 2 weeks from the merger approval by deploying previously unused 18 megahertz spectrum across to the Three sites, we increased capacity, reduced congestion and delivered up to 40% improvement in 4G speeds to 7 million of our Three customers.

After just 1 month, we started enabling Multi-Operator Core Network technology across the network. And as I said a moment ago, MOCN is now live in over 10,000 sites across the U.K. That's enabled us to eliminate more than 16,500 square kilometers of not spots. These are just some early examples of how using the combined scale and assets of VodafoneThree along with innovative technology to improve coverage, increase capacity and enhance network performance. And as you'll see on the next slide, these improvements are already reflected in our key network KPIs. So where are the customers seeing these improvements?

Let's start with coverage. Slide 21 shows the improvement from our baseline to the latest reported position. Coverage continues and will continue to improve as we roll out upgrades, deploy the additional spectrum and integrate more sites into the combined network grid. We're also seeing significant improvements in speed. On Vodafone, average 5G download speeds have increased by 82%. That's according to Ookla, reaching 313 megabits per second, fast enough to load a 1 gigabyte file in just 30 seconds. Network latency is also improving, which means more responsive applications, better performance and smoother experiences for activities like gaming.

Adding more capacity to the network enables us to meet the growing demands of our customers. The rate at which Vodafone data consumption is growing has almost doubled. On Three, it's nearly tripled. Yet notwithstanding this increase in demand, we're serving that demand with speeds that continually improve. So we've talked about what we've already achieved. Now let's talk of what's next. As I mentioned, the goal is to create one single densified network of around 26,000 sites. Through our long-term partnerships, including Beacon with Virgin Media O2 and MBNL, the joint venture between EE and Three, we're able to make the most efficient use of our infrastructure.

The result will be a denser network grid. That will help us eliminate areas of weak services and create a more seamless experience with fewer coverage spots, stronger signals and more consistent experience across the country. The important thing here is that investment pays for itself. By delivering the savings from the network rationalization and simplification, we unlock those funds to deploy and invest back into the upgrade program. But sites are only part of the story. We're upgrading every layer of the network architecture. That starts from moving from 2 separate radio access networks to a single upgraded network, built using the latest technology from Ericsson and Nokia, including Massive MIMO antennas.

Massive MIMO antennas allow each site to handle far more traffic more efficiently. For customers, that means higher capacity, faster speeds, particularly in the busy areas where networks are under the greatest strain. It's just one of the key technologies behind high-performing 5G networks. 5G networks provides us with a much efficient foundation as we support growing data traffic with evidence pointing to 90% greater energy efficient than 4G network. Without these technologies, future demand simply becomes much harder to support sustainably. We're also upgrading our transport and backhaul infrastructure and delivering intelligent voice and data networks to support our entire user base.

We're building one of U.K.'s biggest data core networks with a capacity of 9 terabits per second. It will deliver scalable capacity so we can support the growing needs of our customers, not only in the medium term, but also in the long term. Taken together, these upgrades will improve performance and provide the flexibility needed to support services such as network slicing and advanced 5G applications. So what I hope you take away from this is that we're using this moment to modernize the entire network and build something fundamentally market-leading and future-proof. And this principle doesn't only apply for the network. It also applies for our IT transformation.

This is one of the largest transformation programs happening anywhere in Vodafone. We're taking 2 businesses, 2 technology estates, thousands of underlining systems and moving them towards a single set of platforms, processes and operations. And we've already made a great start. In under just 1 year, we've brought together Vodafone and Three systems to serve both sets of customers, laying foundation for a single business. And just last month, we supported the launch of new commercial propositions such as SuperMobile. We've enabled our multi-brand operations so contact centers and retail channels can sell to and serve all customers, allowing them to seamlessly move across the entire VodafoneThree portfolio.

The next phase is about scaled migration. By autumn 2027, all consumer customers will be supported by a single platform. In 2028, enterprise customers will follow. Internally, we'll bring HR functions, finance and procurement onto a single platform. The foundations for this are already in place with Microsoft Multi-Tenant Organization implemented for a unified employee experience. Ultimately, by the end of 2028, we will have decommissioned Three's legacy IT stack. This all matters because simplification is what allows us to move faster, launch products more quickly, reduce complexity and cost to serve and ultimately deliver benefits of the merger.

So moving on to AI. Our AI strategy has 3 pillars. First, network for AI. We've designed our network to support the most demanding AI use cases. As AI usage grows, demand for connectivity, capacity and ultra-low latency will increase significantly. That's why we are upgrading every layer of the network from the radio access network, transport infrastructure through to the core. This will create the capacity needed to support the most data-intensive AI applications. The second pillar is embedding AI directly into the layers of the network itself.

We are deploying AI-ready RAN radio access network equipment into our network as well as other enablers, which will provide a platform for dynamic network management in the future. And finally, we will use AI to boost productivity and efficiency, automating and helping our teams make faster, better, more intelligent decisions. We are already bringing some of these use cases to life. AI, for example, will enable us to dynamically manage the energy consumed by our network. You will see a demo in the breakout area. Through software and machine learning, we can adjust the radio power based on real-time live traffic, improving energy efficiency.

And we're already deploying Agentic AI tools to support our rollout program. My field engineers today can use AI to assess build quality in real time while also identifying health and safety risks. In summary, we will create a more intelligent network, a more efficient operations and an overall better customer experience. When we talk about delivering an unparalleled network experience, we're really talking about the end state of everything I've shown you today, a single AI-ready network with combined mobile, broadband and global connectivity assets into one seamless customer experience. That's what we're building towards today.

We'll provide the best connectivity experience possible wherever customers are and however they choose to connect. It starts with the mobile network, but extends much further. Through our partnerships in broadband, we have the largest gigabit footprint in the U.K. with over 24 million marketable households within reach of our services. This asset-light model means our approach is less capital intensive, lower risks and enables wide reach. And it's supported by Vodafone's global connectivity assets, including subsea cables. Increasingly, it will extend beyond traditional terrestrial networks through satellite technologies designed to help us deliver connectivity in the hardest-to-reach location. That's an incredibly powerful combination, reliable, trusted, connectivity that's increasingly ubiquitous from the seabed to the star.

So let me leave you with 4 key messages. First, we start from a position of strength. We have more network assets than any other operator and a fully funded investment program and a clear path to build the U.K.'s best network. Second, we've moved quickly. Customers are already seeing the benefit through better coverage, faster speeds and improved performance. And third, we're delivering one of the most ambitious network and IT transformation program anywhere in Europe, creating a 5G standalone AI-ready platform for the future. And finally, it's all focused on one single outcome, delivering the best experience for customers and creating the foundation for future growth and innovation.

And with that, I'd like to welcome Kelly back on stage so I can take a few questions on networks. Thank you.

Thank you, Andrea. It's really impressive to see the progress we've already made and the clear road map we have in place to build the U.K.'s best network. As mentioned, we'll be taking questions from the room for this session. [Operator Instructions]

Impressive stuff going on. It's Robert Grindle from Deutsche Bank. I'd just like to ask about the network sharing you do in the U.K. You're clearly expanding or upgrading your network very quickly. Does that slow you down at all? And how do you mitigate the fact that you've got a partner in a large part of the country?

Before we agreed the merger, before the merger went through, we renegotiated our terms of our active network sharing agreement with Virgin Media O2. And the contract is built in such a way that we have financial incentives to work together and move faster. There's also penalties in the contract if we under deliver. There's a vested interest in both parties to use the available assets that the merger has brought together. And we also commit demand, multiyear demand. So we know what to expect from each other, and that demand is consistent with us hitting the CMA target. So it's a good partnership that enables the CMA target, and there's a lot in it for both parties to keep investing in the sharing agreement that we have in the active -- the Beacon active sharing agreement that we have.

It's James Ratzer from New Street Research. So could I ask a couple of questions. Firstly, specifically on kind of deploying new spectrum into the network. On how many sites at the moment have you actually deployed the C-band spectrum? And if you could talk about your kind of plans on how that might evolve in future and you also talked about the network capacity going up by 2.5-fold by 2034. Does that include any plans in there for what Ofcom is talking about on the upper 6 gigahertz spectrum band? And kind of if it doesn't or maybe you could talk about how that might fold into the potential for capacity to grow as well?

Two questions. so let me start with the first one, James. So when we got the approval from the CMA, the CMA prescribed a certain number of sites with a certain very specific spectrum holding for each site. So we have to hit a certain number of sites, and we have to hit a certain number of configurations on those sites. And they're divided into 3 main areas: high band, mid-band and low band. You heard from Max, we front-loaded our plan because the CMA wanted to see -- we want to see benefits to our customers at the start of this program. So we front-loaded all of our upgrades, C-bands in the urban areas, so we can get that C-band uplift.

We won't be deploying C-band in the most remote areas now because those are going to be low band. To answer your number -- your question specifically, today, with the upgrades so far done and the exact number is commercially sensitive how many C-band sites have upgraded. But just to give you a feel of the upgrade sites that we've upgraded in C-band in the first year, we are covering 50 million people. 50 million people in the U.K. today has access to our C-band spectrum, which, as you know, is 200 megahertz the highest that any other operator has.

Does that answers your questions?

I beg your pardon. Oh, the 6 gigahertz? So we've consulted with Ofcom on the high band 6 gigahertz. Our representation to Ofcom is very simple. If you look at the projection, the data projection and the traffic projections, we need dedicated high band 6 gigahertz for mobile. We being a converged player, I know how much I need more spectrum on the fixed side. I know how much I need in mobile. And I can categorically say that is valuable spectrum required for mobile and should be ring-fenced to mobile.

[indiscernible].

It is, yes. Yes, it's upside. Yes.

Any further questions?

It's Paul Sidney from Berenberg. Just a very big picture question. Looking forward, I mean, you've given targets out to 2034. Does it make sense for VodafoneThree to own fixed infrastructure looking forward, given it's a very fragmented market. We've obviously seen the events of the past week. Would it make sense just to improve your economics? And is that something you're thinking about?

It's important to own the right infrastructure. So we've monetized our towers. And we've seen that the sharing of our mobile infrastructure in the U.K. has brought benefit. We've just shown that even though we don't own them, we can still deliver on the outcome and focus on the outcome for our customers. On the fixed it's important to own the critical part of that infrastructure, owning data centers, which we do, some of the important work is important because it creates opportunities for future growth, having sovereign AI capability.

When I talk about AI, I often talk about AI and RAN, where I can if I own the infrastructure, I can offload some of my RAN workloads in the data center, and I can use the RAN capability for AI inferencing where I'm not using the RAN. So the answer is owning the critical infrastructure that makes a difference that differentiate, absolutely. Where it can be shared and doesn't affect your business like RAN sharing and you monetize it through a tower company, then it probably doesn't make sense owning it.

Thank you all for your questions. That's all the time we've got for questions now. Andrea, thank you very much.

Thank you very much. Thank you.

So we've heard how the investments we're making are helping us build the U.K.'s best network and create a stronger platform for the future. So how do we translate that network leadership into better customer experiences, stronger propositions and growth? Well, to answer that question, please welcome VodafoneThree's Consumer Director, Rob Winterschladen.

Thank you, Kelly. Good afternoon. So as you've just heard, we're building the U.K.'s best network. My focus is how we turn that into commercial success in the consumer market. VodafoneThree already has a strong position in consumer. We are the U.K.'s #1 mobile operator, consistently the fastest-growing provider in fixed, and we lead the market on customer experience. The opportunity now is to keep building on those strengths. We will maintain our strong commercial momentum, which you've already seen over the last year, whilst staying laser-focused on customer experience.

We will set new benchmarks for customers through the launch of new market-leading propositions such as Vodafone SuperMobile. And as the fastest-growing player in fixed, we have a huge opportunity to accelerate growth by cross-selling broadband and TV to the U.K.'s largest mobile customer base. The common thread running through all of this is value, creating more value from the network investments, creating more value from our customer relationships and ultimately creating more value for the group. So let me start with the structure of the market.

Mobile remains the largest segment of the U.K. consumer communications market. It is worth around GBP 12.5 billion and accounts for around 40% of operators' service revenues. And it's where VodafoneThree has its strongest position. As I've said, we are the leader in mobile. Our position is different in fixed. At around GBP 10.5 billion, it is a large market, but it's one where we still have significant headroom to grow. We are already the fastest-growing broadband provider. We also have the U.K.'s largest multiple gigabit footprint and fixed wireless access gives us an additional way to reach customers with around 4.5 million homes in the U.K. that still cannot get full fiber broadband.

And now with Vodafone TV, we are extending our commercial offering, facilitating our ability to drive convergence even harder across our customer base. In other words, we already lead where the market is largest, and we still have significant headroom in convergence where our growth opportunity remains strongest. And importantly, we are not just growing, we are outperforming the market. As you can see on the chart, last year, our consumer service revenue growth accelerated steadily through the year with particularly strong growth in Q4.

At the same time, the broader market moved from negative to just 0.2% growth. What that tells us is we are continuing to gain momentum and continuing to take share, and it's a really good early indicator that our strategy is working. A key strength for VodafoneThree is our portfolio of brands. Each brand has a clear role addressing different segments of the market. Vodafone is our flagship brand focused on premium customers and families. Three plays an important role in the mid-market focused on youthful customers, while SMARTY, VOXI and Talk Mobile allow us to compete effectively across predominantly digital and value-conscious customer segments.

And we have one convergence brand, which is Vodafone. That means one destination, one stack to develop converged propositions on and clarity for all our frontline teams on where to send customers for convergence. This clear multi-brand approach enables us to effectively target and cover all segments of the market and meet the different customer needs. And that becomes increasingly important as we look to monetize network value sorry, network quality and drive value, not just volume. Propositions like SuperMobile will, in time, be available for customers of our other brands.

And our objective is really simple. Use one leading network, the nation's network. Support a clear portfolio of brands and give customers a compelling reason to choose the proposition that is right for them. We have an omnichannel strategy, and we will maintain our commitment to the high street across the U.K., which for those customers like coming into stores, and there's still plenty of them, means we can serve them in more locations with more brands than before. We're focused on using our footprint more efficiently, more effectively, consolidating overlapping stores and transforming them into multi-brand destinations, giving customers more choice and a better experience under one roof.

For example, since the merger, we have expanded the Three brand into 134 additional locations where it didn't previously have a presence. And we have converted 42% of our estate to multi-brand locations, which means they can now serve both Three and Vodafone customers. And that number will continue to grow as the retail integration program progresses. And importantly, our multi-brand stores are already able to seamlessly migrate Three customers to Vodafone. That capability will be key as we move Three customers onto the Vodafone stack later in the plan.

So by removing overlapping sites, we're creating meaningful efficiencies and helping support the synergy benefits that Darren is going to talk about later. As part of the retail transformation, we are also investing in the in-store customer experience. That includes our flagship destinations as well as our local high street stores. We are creating modern, vibrant retail environments, stores that better showcase our brands and products. We're building a retail estate that gives us greater reach, operates more efficiently and delivers a better experience for our customers.

Beyond retail, digital continues to become an increasingly important part of how customers interact with us to manage their accounts and get support. Today, digital journeys account for a significant proportion of both sales and service interactions across all our brands. The slides show that we have strong digital capabilities across the portfolio, but it also highlights one of the clearest opportunities from the merger. We can take what Vodafone does well in digital and apply it more consistently across Three.

Vodafone has strong digital metrics. Three has made good progress, but we see clear opportunities to narrow that gap further by bringing the best of Vodafone's digital capabilities to the Three brand. One example is AI-enabled customer service. So Vodafone's AI-powered chat capability is already being used by Three. That will help us improve service quality whilst reducing friction in the customer journey and it will allow us to create a more consistent experience across both brands.

At the same time, the Three digital platform is moving on to the Vodafone technology stack. That migration will give us a stronger platform for shared future innovation, and it will also support a broader and more consistent range of digital services across Vodafone and Three. Leading the way on digital today are actually our value brands. With the exception of some indirect sales, brands like SMARTY and VOXI, which offer simpler propositions are predominantly digital. Talk Mobile looks slightly different largely because of its customer profile. But the goal is simple. Make digital interactions easier, improve satisfaction, increase the digital mix across sales and service and create a better overall customer experience.

You can see examples of that work in the demos here today. And this is all underpinned by our market-leading customer experience. Vodafone continues to hold the #1 Net Promoter Score position in the market. Three has continued to narrow the gap to competitors, but there is still more work to do. We have a clear opportunity to apply the strongest capabilities from across the combined business and improve Three's relative position. Brand NPS is only one measure. We are also seeing our best levels of deep detractors. That reduction tells us that fewer customers are experiencing serious friction or dissatisfaction.

Our latest performance also shows our best ever Ofcom complaints performance across the portfolio. In fact, since the merger, Three has recorded its lowest level of complaints ever. Complaints are down 40% year-on-year, and Three has moved from the bottom of the Ofcom table to second place. And that is translating into lower churn, stronger retention and greater customer loyalty, which I'll come on to next. That's important because customer experience is not simply a service metric. It is one of the strongest drivers of retention of lifetime value and ultimately, sustainable growth.

And we are increasingly seeing that reflected in our commercial performance. And we're one of the U.K.'s most awarded customer experience brands. So when we brought Vodafone and Three together, we said we would move quickly. We wanted to capture the commercial opportunities created by the merger, and that is exactly what we have done. Over the past year, we've launched a series of new propositions and services. They strengthen our position across mobile, broadband and convergence. They include Vodafone Together Family, Vodafone Fixed Wireless Access, Just Ask Once, the converged My Vodafone app and most recently, Vodafone SuperMobile and Vodafone TV.

On Three, we've also introduced speed-tiered propositions, including plans offering speeds of up to 100 megabits per second. Our approach to the 2 main brands is deliberate. On Vodafone, we are continuing to build and launch new propositions. On Three, our immediate priority is the migration onto the Vodafone technology stack. We do not want to add unnecessary complexity to the Three platform before that migration, but we are continuing to make targeted commercial interventions where they add value for customers. The new speed tiers are one example.

Each of our launches has a clear role. Some improved customer experience, some help us grow in broadband and convergence. Vodafone SuperMobile allows us to monetize our network leadership. And together, they strengthen our ability to grow and protect ARPU. And the commercial results are encouraging. During FY '26, we delivered more than 219,000 total consumer net adds. We achieved record fixed gross adds and net adds. And as I've said, we were the fastest-growing broadband provider. We also delivered growth in both mobile and broadband ARPU. Mobile contract ARPU increased by 2% in the fourth quarter and broadband ARPU by 5% in Q4 year-on-year.

At the same time, customer retention remains a real strength. Mobile churn is at record lows across Vodafone, VOXI, Talk Mobile and SMARTY, whilst Three churn is at its lowest level in 4 years. Fixed churn is also at its lowest level across broadband and fixed wireless access. Taken together, the combination of an improved network, market-leading propositions and enhanced customer experience is already translating into commercial momentum. And I've already touched on our recent launches. They address different customer needs, and they create value in different ways.

Our broadband refresh is about increasing choice and improving performance. It includes Vodafone fixed wireless access supported by a single postcode checker for fixed and fixed wireless access. And we are launching the only social fixed wireless access tariffs in the country. We are also strengthening our Pro Broadband proposition with broadband speeds up to 8 gigabits per second on our Pro 4 router, and we're currently trialing speeds of up to 10 gigabits per second at the moment. So the opportunity is significant. We can use our fiber and our fixed wireless access footprint to reach more households. Now extends to over 28 million homes nationwide, more than any other provider.

We can offer more choice, and we can increase broadband penetration across our existing mobile base. The second launch is Vodafone SuperMobile. This is not just a new tariff. It is a new category built around things customers value the most, speed, reliability and security. What's exciting about Vodafone SuperMobile is it allows us to compete on quality and innovation, not just on price. It is an important step in putting value back into mobile and creating a clearer link between network investment and customer benefit and commercial returns. I'll go into a deeper dive on this in a moment.

The third launch is Vodafone TV. Our customers have told us they want television and entertainment as part of their connectivity relationship and around 1 in 4 broadband customers in the U.K. takes a TV service with their broadband. So this is an established need. Vodafone TV helps us create greater value across both our home and our mobile relationships, and it gives customers another reason to choose Vodafone for the connectivity and entertainment needs. And this is just the start. We will keep innovating to strengthen customer value and support growth. So together, these launches demonstrate how we are supporting the value creation framework Max outlined earlier.

So to go a bit deeper on SuperMobile, convergence and TV. We talked a lot today about building the U.K.'s best network. SuperMobile is the first major example of how we are translating that network advantage into a differentiated customer proposition. Before I explain the commercial opportunity in more detail, let's take a look at our launch campaign.

[Presentation]

So what you've just seen is our ambition to redefine quality in the mobile market. As Max said earlier, historically, our industry has tended to compete on price and on data allowances. Vodafone SuperMobile creates a new category.

The context is changing. Customers are streaming more content on the move. Their phones increasingly sit at the center of their digital lives. And AI is creating new experiences that depend on fast, reliable, low-latency connectivity. In that environment, theoretical peak speed is not enough. Customers need confidence that their connection will perform when it matters most. Vodafone SuperMobile is our highest performance mobile plan. And as I've said, it's built around 3 elements: speed, reliability and security. So first, speed. We are building the nation's network, bringing together spectrum and infrastructure and technology at unprecedented scale and pace.

Our 5G+ network unlocks new slicing capabilities, which are at the heart of SuperMobile. We call it the 5G+ Fast Track. It provides a dedicated slice on the network for our SuperMobile customers, and it can deliver speeds up to 4x faster than standard plans. Second, reliability. Performance is not just about how fast the connection can be. It is about whether customers can depend on it. Vodafone SuperMobile is the U.K.'s only plan with a guaranteed minimum mobile speed, where customers who are within 5G plus coverage, we guarantee at least 15 megabits per second download speed. It gives customers confidence and it differentiates our proposition.

And finally, security. SuperMobile includes advanced security features enabled by 5G plus encryption. It also includes our market-leading Secure Net Mobile at no extra cost. SecureNet helps customers against -- protect customers against malware and viruses. It provides identity protection, scam call protection and network level parental controls. We want all of our customers to be able to experience the best mobile connectivity available. SuperMobile has launched first on Vodafone. It will also be available through VOXI as a monthly add-on, and we plan to expand it into our other brands over time.

SuperMobile introduces quality-based pricing. For Vodafone contract customers, it is available for GBP 3 more than full speed plans on a 24-month subscription and as a GBP 12 rolling monthly add-on. It allows us to monetize network quality and protect ARPU. And it creates a direct connection between capital investment, customer benefit and commercial return. Our ambition is to reshape how the mobile market competes. Alongside mobile, perhaps the biggest opportunity is for growth in broadband and convergence. Through our asset-light strategy, we now have the U.K.'s largest full fiber footprint, reaching more than 3/4 of the U.K.'s households.

It also gives customers access to the fastest broadband speeds in the market, including speeds of up to 8 gigabits per second, which we will launch in November. Alongside fiber, fixed wireless access gives us another growth lever. Today, our fixed wireless access footprint covers around 16.5 million households. It allows us to bring high-quality fiber-like broadband to customers who don't yet have access to fiber. It also helps us make better use of the investments we're already making in our mobile network. The convergence opportunity is equally important. Across Vodafone and Three, we have around 6.6 million mobile-only households, and that number does not include the further opportunity across our value brands. These are not customers we need to acquire. We already serve them. The opportunity is to deepen those relationships. Together, broadband TV and mobile allow us to build deeper customer relationships, increase value per household and strengthen retention over time. That is why we are so excited about the convergence opportunity ahead.

Let me finish on Vodafone TV. When investors hear a telecoms operator talk about TV, the natural question is whether this means getting into the content business. The answer is no. We are not planning to own content, bid for sports rights, build studios or make large investments. Instead, we see TV as an important component of a stronger converged proposition. Our objective is not to create a stand-alone TV business. Our objective is to grow and retain higher-value connectivity relationships. Today, there is more content than ever. It is spread across multiple streaming apps alongside live TV, on-demand services, games, music and other digital applications. And customers can find it difficult to discover what they want and can end up paying for bundles of content with content in them that they do not use or consume.

So Vodafone TV is built around an aggregated entertainment experience. It brings together live TV, streaming services, on-demand content, apps and gaming through a single interface. Customers can create individual profiles, receive personalized recommendations and smart voice AI search helps them find content across the platform. The hardware is compact but powerful. It supports 4K entertainment, Dolby Vision, Dolby Atmos, and it's built on Android TV. And we have partnered with the best, Netflix, HBO Max, Freely. We have over 150 additional streaming channels, more than 300 cloud console-grade games and thousands of apps through the Google Play Store. Vodafone TV isn't just TV. It is a complete family entertainment platform.

And it's not just the home experience. The companion app takes content with the customer wherever they go. And for the best out-of-home content streaming experience, you need the best network experience. So Vodafone SuperMobile becomes the perfect partner for Vodafone TV, giving you the speed and reliability you need to stream your favorite content uninterrupted. Importantly, we're taking a low-cost partnership-led approach. We are not taking content ownership risk. We're using partnerships to broaden the customer proposition in a capital disciplined way. And we are bundling Vodafone TV with home broadband, fixed wireless access and mobile plans.

We're increasing customer choice, and we're expanding the commercial opportunity beyond the traditional broadband TV bundles. Vodafone TV broadens our role in the home. It strengthens our converged proposition, and it can help us win and retain broadband customers. It can encourage customers to take higher-value bundles, and it gives them another reason to stay. Ultimately, it's another way we're turning customer relationships into broader, longer-lasting engagement with our brand, whilst remaining disciplined in how we invest and allocate capital. And if you get the chance later today, I'd encourage you to spend some time in the demo area and experience the platform for yourselves.

So let me close with 4 messages. One, we start from a strong position. Two, we've maintained strong commercial momentum since the merger; three, we're creating new ways to monetize network quality through propositions such as Vodafone SuperMobile. And finally, four, we see significant growth opportunities across broadband, fixed wireless access, TV and convergence, supported by the U.K.'s largest mobile customer base and the largest marketable fiber footprint. Taken together, that gives us real confidence in our ability to drive sustainable consumer growth and create long-term value in the years ahead.

And with that, I will hand back to Kelly.

Thanks, Rob. Thank you, Rob. It's great to hear more about how we're leading in the consumer market and really exciting to hear more about those new propositions you've just launched. So we've now got time for just a few questions for Rob. As we say, this is a mini Q&A. We've got the full Q&A session at the end, but we'll try to take a couple of questions. [Operator Instructions].

Carl Murdock-Smith from Citi. I suppose today, we're being asked to think forward quite a long time out to kind of 2032. And a lot of investor conversations I'm having at the moment are about Agentic AI. So and consumer mobile feels like one of the potentially more impacted areas. So my question is, how are you adapting to engage with AI agents? And in terms of on that kind of time frame, what's your base case for the impact on pricing and churn? And what kind of scenario analysis have you done?

So I think the first thing to say is the U.K. market is a very well established and mature switching market. So today, customers are using search. They're using a plethora of comparison websites to do price comparisons. We've got regulated communications that have to go at the end of the contract. We need to do annual best tariff notifications for our contract customers. So the point is that the U.K. is already a very mature switching market. In terms of what we're looking at to do in the future, I think it's important to note that, first of all, it's not just all about price. So customers don't just care about price.

What do they care about? They care about network. They care about care. They care about customer experience. They care about proposition. So what do we do? I mean we're building the U.K.'s best network. We are leading on customer experience, and we continue to build innovative props like we've just talked about with Vodafone SuperMobile, which there's nothing else like that on the market. Vodafone TV to create an even stronger converged proposition. And a lot of our customers don't just take mobile. A lot of our customers are converged.

They're taking multiple products and services, which I think is important to note in the context of this. So when I think about the future, I also think about all the opportunity that Agentic brings for us. And actually, when you go into the demo area, you will see how we are starting to harness Agentic and some of the demos that you'll see is how we're going to bring that Agentic capability into our digital estate to help us drive sales and help us drive service in the not-too-distant future. And then there's other opportunities.

So discoverability, for example, we have been doing a lot of work in GEO, so the Agentic equivalent of SEO. And that investment is really paying off for us. So I think about the recent iPhone 18 launch. If you look in ChatGPT, Vodafone, we're top ranking operator in terms of discoverability within ChatGPT. So that's working for us as well. In terms of looking further afield and to answer the rest of your question around scenario planning, et cetera, I'm not going to disclose numbers in terms of what we may or may not think about where this might be in 2032. But hopefully, the other answers give you some context for how we're thinking about Agentic.

Great. Next question.

It's Josh Mills at BNP Paribas. I think one of the phrases you used earlier was reshaping how the mobile market competes in the U.K. And you talked about the capacity advantage you have at the moment, the speed advantages, which are coming. And to Carl's question, it sounds like going forward, speed tiering is going to be one of the differentiators between the Vodafone versus Three versus SMARTY brands. So how are you thinking about moving fully to an unlimited mobile market proposition across all of your brands in the future, maybe moving to a more delineated speed-tiering model like we see in the Swiss market, for example? And is that something that you would be looking to in the next few years? And if so, why not?

So we still see value in data allowances and finite data allowances, as you'll see as you look across our brands with clear ladders. And yes, we've introduced speed tiering in some of our brands already. So it's there in Vodafone, it's there in Three. The SuperMobile element is slightly different. So SuperMobile is not about speed tiering. It's all about quality and actually providing a level of speed and reliability and security that you don't get outside of the proposition. So it's a slightly different paradigm, I guess. Will we -- are we thinking about moving to unlimited-only plans? Right now, we don't see the need for that. We think there is still a lot of value to be made from the structures that we've got in the market.

One very quick follow-up on the SuperMobile offers and the technology that you're bringing there, is there any obligation under the CMA wholesale terms or any voluntary agreements that you've made, which mean that technology goes to the MVNOs as well? Or is that exclusively reserved for Vodafone branded customers?

So I think Max talked about it at the beginning. So when we launched SuperMobile, we launched across every segment, consumer, enterprise and wholesale.

We've just got time for one last question.

Polo Tang from UBS. Just have a question in terms of your portfolio of brands because you actually have 5 major brands. So does it make sense to rationalize the portfolio or simplify the portfolio going forward? And specifically on the Three U.K. brand, do you have to pay a brand fee to Hutchison for its use?

Okay. So 2 questions. So let me take the first question first. So we have a multi-brand strategy in mobile, and we have a single brand strategy in convergence. So let me start with convergence, and I think I outlined the rationale for that in the presentation. But we want a single destination in convergence for our customers. We want a single stack to be able to develop convergence propositions on. And we want a single destination brand for our frontline colleagues to take our customers to. It's clean, it's simple.

On mobile, we have lots of customers with many different needs. So what we've effectively done is created a multi-brand strategy, which allows us to serve those needs. With Vodafone, we play in the premium end of the market, targeting families and convergence with Three mid-market, targeting more youthful or younger customers. And then we've got VOXI, Talk and SMARTY, which are all focused at the more value-conscious end of the market, serving different segments within that. As we said at the beginning of the merger, we may rationalize our brands at some point, but we don't see it as a big strategic decision. Value brands are low cost.

Thanks, Rob. Perhaps we can pick up that final question through the IR team, just conscious of time. Look, thank you, everybody, for your questions and your active participation in the first part of today's session. We'll reconvene at 3:30 p.m. after the break. For those of you joining us here in person, refreshments are available upstairs and the demo areas are open for you to explore if you haven't done already. For those joining online, you'll find additional content in the portal, including case studies, videos and explainers that you can browse during the break.

So we look forward to welcoming you back shortly before 3:30 p.m., and we'll continue the afternoon with a closer look at Vodafone Business and get more of a breakdown on the financials from Darren. Thank you, everyone.

[Break]

Welcome back, everybody. I hope you're all feeling refreshed and have had a chance to explore some of our demos and additional content during the break. Before the break, you heard how VodafoneThree is building the U.K.'s best network and how we're turning that capability into differentiated consumer propositions.

But the opportunity doesn't stop there. Many of the same capabilities we've discussed today from 5G stand-alone to network slicing to AI-ready infrastructure are becoming increasingly important for businesses, too. As organizations across the U.K. embrace AI, embrace digitization and automation, connectivity is becoming more critical than ever.

And before I hand over to VodafoneThree's Business Director, Nick Gliddon, to take us through how we're supporting and connecting businesses across the U.K., here's a video to set the scene.

[Presentation]

Thank you, and good afternoon, Kelly, thank you very much. I had the pleasure of spending some time with some of you up in the demo area. And I was a bit risky, and I said, what do you want to hear from me? Well, the first person I spoke to said, be quick because we want to hear from Darren Purkis, who's coming after you. So I promised to be on time. But many of you said 2 other things.

The first said, can you give me an education on what business is and the business market? And then secondly, can you talk a little bit about what you are in the business market and how you differentiate yourself?

So the good news is I can't change the slides, but that's what I was going to talk about. So I'm really pleased with that. So I'm pleased to be here today specifically to explain why Vodafone Business is another important driver of growth and value for VodafoneThree. I know many of you spent time with the demos upstairs. I know there were lots of questions. What I'm going to do is, as I walk through, I'll bring out the demos, and we'll talk about how they're relevant and how they reflect the slides.

So at Vodafone Business, our mission is to connect businesses to their potential and power the U.K.'s next generation of business growth. And I'm personally really excited about this and the opportunity in front of us. There's 4 reasons why. Firstly, we have great foundations significant scale, long-standing trusted customer relationships, a broad set of capabilities that give us a platform for growth.

Second, we're simplifying the business. That means we can deliver market-leading customer experience at a lower cost to serve. We can also differentiate. We have the U.K.'s best network, fixed and mobile, and our opportunity now is to create more value from both. And finally, we can grow. We can grow by expanding beyond core connectivity into some of the fastest-growing parts of the market.

Now together, these 4 elements help us deepen the customer relationships, run a more efficient business and deliver long-term sustainable growth. Let's start with scale. Vodafone Business is already a large and a strategically important part of VodafoneThree. We generate GBP 1.85 billion of annual service revenue. That's about 27% of the company's total service revenue. And that scale extends to customers.

We power over 6.5 million mobile connections, 15 million IoT connections and our reach spans the whole market. We go from sole traders and small businesses to major corporations, public services and critical national infrastructure. Many of you in this room will use the services we provide.

The numbers are really striking, in 2 small U.K. businesses powered by Vodafone Business. Around 70% of the Fortune 500 choose us, and our network supports 80% of the U.K.'s emergency services. That's 80%. That gives us reach across almost every part of the economy with a truly diversified customer base and multiple routes to grow. We're particularly strong in SoHo and private. In SME and public, we've definitely got greater headroom to grow.

So the opportunity is not just to win more customers, it's to do more with the customers we have. We can deepen our relationships, we can drive convergence, and we can focus our investments where we see the greatest growth potential. And as I'll come on to later, bringing these relationships under one brand, and we've made the choice to go under the business brand, the Vodafone Business brand, enables us to deliver a consistent experience and make better use of our scale.

Now our foundations extend well beyond core connectivity. Mobile remains our largest category, contributing just over half our service revenue today. But alongside that, we've built strong positions in fixed connectivity, unified communications, cloud, security and IoT. And our capabilities span everything from broadband to software-defined networks to public cloud and managed security. So we have that scale and that breadth, but the value isn't in the number of products that we have, it's how we bring them together.

Today, the average customer relationship is still concentrated in a relatively small number of product categories. But the feedback I hear and we get from customers is they want fewer suppliers, but in that supplier, they want someone who can bring connectivity, cloud, security together.

So our role is to make the portfolio easier to buy, easier to manage and more valuable as an integrated solution. When we get it right, it gives us a clear opportunity to capture a greater share of their spend. So scale matters, but so does local expertise. And Vodafone business combines both. We benefit from Vodafone's global footprint. That includes a Vodafone business presence in 75 countries together with international infrastructure, subsea cable systems.

We can draw on group platforms and capabilities at a global scale. We've got over 240 million IoT connections worldwide. So we've got that global capability, but equally important, we understand the needs of U.K. customers. We can take those global capabilities and apply them in ways that solve U.K. challenges.

Vodafone Business as a whole supports more than 5 million business customers, including the U.K.-headquartered organizations with multi-market and international requirements, actually like lots of you here today. And we also benefit from strategic partnerships with leading tech companies such as Microsoft, Cisco, Fortinet, AWS and Google. They broaden our capabilities and our portfolio. And that allows us to do it in a capital-efficient manner, which gives us advantages. And these advantages are important.

We combine Vodafone's scale with deep U.K. market experience, and that is a real point of differentiation that is very difficult to replicate. Now these foundations matter because the market is changing and the market is changing a lot, and customers are asking more from us than ever before. So core connectivity remains essential, but increasingly, customers need connectivity, cloud, security and applications, and they need them to work together.

And as more critical workloads move to cloud and cyber risk increases, that needs become even greater. And so what we do is we move into our opportunity to addressable markets into fast-growing adjacent services. We're already the market leader in mobile, and the mobile market is worth about $2.6 billion. In fixed, we're a really credible challenger in a market that's about $5.6 billion, and we've grown 8 out of the last 12 quarters in fixed. And just like consumer, the core connectivity market, it is relatively mature, grow maybe 1, 2 percentage through to 2030.

So we can take market share there, but the adjacent markets are a different story. And in adjacent markets, we talk about unified communications, cloud, security, they're all growing at double-digit rates. So 3 opportunities for growth: protect and extend what we're doing in mobile, grow our share in fixed and we drive convergence when we do that and then expand selectively into the faster-growing services where our connectivity assets, our customer relationships and our wider capabilities give us the right to win.

Market is changing fast, change creates opportunity, and that's a great opportunity for Vodafone Business. So the first of these is AI and digitization. Organizations are adopting more cloud. They need more automation. They need more data-intensive applications that become increasingly dependent on high-quality connectivity and infrastructure.

AI doesn't work in isolation. It needs connectivity. It needs capacity. It needs security, it needs resilience and it needs access to compute. And that's where we play a critical role. So U.K. AI infrastructure market alone, 6.5 billion by 2030. And at the same time, customer preferences are changing. So they want technology that's easy to buy, easy to manage. When you think about that, today, 70% of small businesses manage their technology primarily through mobile. And we think that's worth just over $3 billion, and that's across integrated communications and the adjacent services.

And then finally, and some of you asked upstairs, we're seeing greater demand for differentiated services. They want secured outcomes. They want performance and they want that confidence. And our survey and our insight says 76% of businesses are prioritizing service level compliance. They increasingly want clarity about the performance they're going to receive. That's an opportunity.

So finally, security, resilience and sovereignty have moved to the top of the agenda. The fundamental business priorities. Again, market research, U.K. AI cybersecurity market, we think is going to be over GBP 8 billion by 2030. And that creates a further opportunity across security and sovereignty and all those services and the managed services around that.

And these trends expand the services we can deliver for customers. They play to our strengths, strong network assets and capabilities, trusted customer relationships, secure capabilities and they give us a right to compete. Our ambition isn't simply to participate in these markets.

It's to use our connectivity leadership as the platform to capture more of that value chain, that technology value chain. So what are we going to do about it? We've built our strategy around 3 priorities: simplify, differentiate and grow. Simplify is about delivering a better customer experience while we reduce our cost to serve. And we do that through standardization, automation and we remove unnecessary complexity.

Next is differentiate. We are monetizing our network and our investment and our customer scale through distinctive propositions, single business brand, greater use of our own infrastructure. And again, lots of conversations with many of you upstairs about using our own infrastructure and our own assets in the U.K. And then finally, grow. We're expanding beyond traditional connectivity into areas such as sovereignty, security and AI, where we see attractive growth and a clear right to win. Plays to our strengths, outcomes we're targeting are straightforward, drive the efficiencies, improve the returns, accelerate the growth.

So let's start, and I'll try and give some examples about how we're simplifying and the way we work with our customers. So what's the objective? Objective is to create a differentiated customer experience with a structurally lower cost base. So we've got market-leading position in customer experience. We outperform our competitors and we significantly outperform our competitors on NPS.

And in SoHo, we're the clear brand NPS leader. And our ambition is simple. We stay ahead. But at the same time, we improve the underlying economics of how we serve customers. And the great thing about those 2 objectives is they reinforce one another. Better customer experience means simpler ways of working, translates to lower cost. Removing friction from customers also removes unnecessary activity and complexity.

How do we achieve that? Four principles, get it right first time. make it effortless, own the outcome and know the customer. And these are what matter most for customers. In all our customer advisory boards, in all our research, they sit behind everything we're investing in.

Now we also have a new sales and service platform that creates a simpler, faster and more connected end-to-end experience. And that's really important because we do it for our customers. And as Max talked about, we also do it for our employees. We deploy AI and automation. We deploy it at scale. That reduces our manual activity, improves our productivity, speeds up our response times. And we build a simpler operating model, standard product and process, more consistent ways of working.

By 2030, we're targeting 25% improvement in workforce productivity, 20% improvement in speed to market and more and a 25% reduction in cost to serve. And that creates for us a more efficient, scalable business model and a stronger platform for profitable growth. And lots of you talked to me upstairs about difference in enterprise and how you drive profitable growth. That's how we do it.

Now I want to talk a little bit about how we differentiate ourselves. We've got 3 levers to do this. Firstly, we have a set of differentiated propositions. We want to convert our investment in the U.K.'s best network into products and services that customers are willing and their value -- sorry, customers are willing to value and they're willing to pay for.

So in mobile offerings such as Vodafone SuperMobile for business, turns network capacity and capability into customer value. And I'll come back to that in a minute. Significant opportunity in fixed wireless. We can leverage the 3 footprint. We can scale 5G business broadband. We can give more customers a high-quality alternative to traditional fixed connectivity, and we can drive convergence at the same time.

And in fixed and converged services solutions such as software-defined networks, SD-WAN, they help Business Connect to manage multiple sites, the applications, the cloud services, and they do that through a single platform. And you've seen that upstairs in some of the demos with Optus and some of the things that we're talking through.

Now our brand positioning is really important. We're bringing our customers together under a single Vodafone Business brand, and that creates a more consistent experience and greater scope to cross-sell, to upsell and to drive convergence, and we can do that on the 3 business. We're migrating more than 1 million 3 business connections to Vodafone Business.

So it's not just simply about migration. It's about strengthening the customer relationships. We give them access to a broader range of products and solutions, increased convergence and we improve retention.

Now the third area was the area, I think, that had the most engagement upstairs, and that was improving our connectivity economics. This is about making greater use of the assets we've already built and continue to invest in. So we want to, in our fixed environment, move a greater proportion of the services that we sell onto our own infrastructure, and we want to do that through automated delivery. We've made some really good progress on that.

Last year, we doubled the number of fixed services delivered on our own network. So we started with a base of around 8%. We then moved to 16%. Some months, we get to 19%, just under 20%. And our objective is we will get to 30% -- and we'll achieve that through our new customer wins.

As new customers come in, we put more of those assets or more of those opportunities on our assets. But we've also got a series of targeted migrations, and we'll have greater automation and process improvement. So we don't have to get those new customers. We just have to move those customers on to our services and our assets.

And those actions do 3 things for us. They improve the customer experience, the value and the retention. They increase the proportion of higher-value connectivity revenue and they make better use of the assets we've got and continue to invest in.

Now let me talk about SuperMobile for business as a specific example because I think this is quite interesting. Firstly, Supermobile in business is a portfolio of mobile connectivity offerings, and it's anchored to our national business slice.

Now the national business slice doesn't have any consumer traffic on it. It's for businesses. We launched it last month. It's the only business-specific mobile network slice in the U.K. It provides dedicated capacity for business. And it's in the places and the moment where performance really matters, that's when you use a national business slice.

It's enterprise grade. What does that mean? It means it's got skewed performance, speeds and it turns that connectivity into confidence. And so for businesses, confidence means you can keep teams working, you can stay connected. You can roll a truck and ensure that, that truck executes on the installation at the time.

And we're working -- and when we announced this, we're working with a range of brilliant organizations to explore what this capability can do for them, but not just for them, for their people, for their operations and for their customers. SuperMobile as part of the portfolio includes 5G local slicing. Max mentioned that at the start. We launched that back in April. That's the U.K. first time in the U.K., we've offered a guaranteed provide service level agreement back to performance at specific locations where connectivity can't fail.

And we were the first to do that in the market. And we're seeing that delivered in the real world. So an example of the Principality Stadium where the local slice delivers assured connectivity for match day. We broadcast where we did it at the Kings Coronation where we did it for ITN and ITN didn't then need to roll a satellite truck. They just gave them the ability to streamline content direct to their new studio.

So we've got real-world examples that demonstrate the potential, and we're working through with lots of customers and lots of organizations. Thank you. And then we talked about the future. So there's one aspect I'm really excited about. And Max touched on this a little bit. For organizations providing essential services depending on connectivity, it's mission-critical.

And so that's why, and Andrea mentioned this as well, we're building a dedicated national critical slice. We reserve capacity and prioritized traffic, no consumer, no general, no business. It's for organizations where every second matters. And this changes on what they can rely on mobility to do.

So I'm going to try and explain that with the use of a video, so you can play the video, please.

[Presentation]

I said at the start, I was excited about some of the things we're doing, and I hope you're seeing that we're setting new benchmark for business connectivity. And for me, that's a world where mobile doesn't simply support operations, it moves into the customer and it becomes part of the operation itself, part of their business process, part of their systems, part of their performance, and that creates opportunities for managed services for us. And it's a great example of how we think about growth, which actually brings me to the final priority that I've got, which is growth.

So again, when we think about growth, we're not starting from scratch. We've got assets and capabilities that are already there, customer relationships. What I'd really like to walk you through now though is how we build on those strengths and we expand the role we play for our customers.

So firstly, I would start and we would start with infrastructure. So that's data centers, fiber, subsea cable, satellite. They're the foundations that provide enterprise-grade connectivity with the coverage, speed, resilience, low latency that business customers need. Business customers want more though. They want trusted partnership. They want greater responsibility for the technology that supports their business.

And that means you need to go to applications, to cloud, to communications, security and managed services. And from there, we can enable new technologies, AI infrastructure connectivity, AI-enabled service propositions delivered directly or you can deliver them in partnership.

So strategic direction is clear, move further up the customer technology stack, increase our share of customer spend, but remain anchored and trusted in secure connectivity that our customers rely on. I think the opportunity is significant. The adjacent markets we've highlighted represent more than $6 billion of addressable spend, and we've got several of those are growing materially faster than core connectivity.

I hope I've identified a number of areas we're particularly well positioned to grow, and I hope you'd agree with that. Areas where secure and resilient connectivity are becoming mission-critical, where our capabilities give us an advantage. And I want to bring that to life with 3 sectors.

Firstly, defense. U.K. is undertaking a significant monetization of its defense capabilities, requires secure and sovereign digital infrastructure. Government defense spending is increasing significantly. Connectivity is a critical part of that. Modern defense depends on secure -- sorry, modern defense really depends on securely connecting forces, assets and locations.

We've got really strong relationships in this space. Dedicated operations exist today, designed to support the unique requirements of defense and other critical organizations. And our ambition is to do more across secure connectivity, infrastructure and managed services.

Second one I want to talk to you about is energy and utilities. Here, digitization, decentralization, they're transforming critical national infrastructure. Millions of assets across electricity, gas, water networks, they all need to be monitored, managed in real time. And it's an area where we've got real considerable experience. We provide and support with managed services across all of the U.K. electricity, gas transmission and distribution operators, and it gives us a strong platform for growth.

And then finally, public sector. Digital transformation and resilience are becoming increasingly important to the delivery of public services. Government technology spending continues to create significant opportunities for modernization. And we've got significant relationships across central, local government, health care and emergency services. I hope you saw the NHS 111 upstairs. And we manage a substantial part of public sector mobile market today.

So in public sector, our ambition is to scale our position as their trusted transformation partner, and we capture more connectivity, modernization and the managed services spend. Common theme across the sectors. Connectivity is no longer single communication service, increasingly part of the operational infrastructure itself, plays directly to our strengths, scale, security, sovereign, resilient networks and established customer relationships.

So to conclude, we start from a position of real strength, significant scale, trusted relationships, broad and differentiated portfolio, and we've got the capabilities that Vodafone Group brings and gives us global reach. I think the opportunity we've got is really exciting and greater -- and for that, we've got a really clear strategy: simplify, differentiate and grow.

And as I've said before in the presentation, these priorities reinforce each other. Simpler business, better economics, differentiated network, more reasons for the customers to choose us. Stronger customer relationship gives us the platform to expand and capture more share of wallet and the growth opportunities.

So it now really comes down to execution, turning our scale into growth, our capabilities into customer value because that's how we'll connect businesses to their potential and how we'll help power the U.K.'s next generation of business growth. And when we deliver this, that's how we'll create long-term value for VodafoneThree and Vodafone shareholders. Thank you very much.

Thank you, Nick. It's great to hear more about Vodafone Business. It's one of the less visible parts of our story. So it's fantastic to hear about the scale of the business, the role it plays in supporting organizations of all sizes across the U.K. and the opportunity for future growth. So I'll now open the floor to questions. Please do introduce yourself once you have the microphone.

It's Polo Tang from UBS. I was particularly interested in terms of your comments about the national critical slice and what you may or may not be doing with emergency services. But is there an opportunity for you to take some of the business in terms of the emergency services network from EE?

Is that the plan going forward? And then just on the point about taking share from BT, they're obviously switching off their legacy PSTN network. So is that providing a tailwind for you in terms of the SME and SoHo segment?

So on the first one, yes, I would -- we're going to be a real challenger and we're going to offer alternative to government in that space and the alternative to many customers. So I think you've got ESN. Actually, we do quite a lot with ESN today, but we also do a lot with other customers in that environment.

I think on the PSTN switch-off, I think you've got lots of opportunities. So we have an at-scale business today. PSTN is being switched-off. That's great when you got things like fixed wireless access. It's great when you can do a high-gain antenna and leverage all of the 5G FA capabilities that Andrea is building.

So I think we can compete, actually build the network out far more than we've ever been in the past. And we're credible across the country on that one. Good. Sorry, I think it was a question there, was it? Are they worried about the question you're going to ask? I think that was--

No, no, I don't worry. Well, maybe your biggest competitor in the fixed business is scaling back on its international footprint, selling assets, et cetera. Is that a relative advantage for you as they become less international because you can presumably pull on expertise elsewhere in Vodafone Group?

And then on the bottom end of your competition, the altnets are increasingly getting into -- after focusing on consumer in the beginning, they're increasingly offering business services.

Is that affecting your SME business at this stage or too early or not?

I'll do the altnet one first. Not really partly because when you look at a lot of the services we provide, you've got to provide the managed services wrap, you've got to provide security or we've got a range of portfolios. And as I said, the customer demand is, don't just give me a piece of connectivity, you need to give me a wrap around that. And often, if you're a business, you need to have a professional way of doing a really good install or a statement of work or scope of work.

So when our engineers turn up, you can't just knock on Deutsche Bank or [Goldman store] and say, hi, I'm here to install. You can't do that in SME business or a large-scale customer. So you need a professional level of professionals you need a business skill to be able to do that. That's the first. Then when you talk about the biggest competitor, I think you've got 2 opportunities or 3 opportunities. Firstly, I'm not sure they are internationally.

I think I've done a lot of international, and I think we're pretty well placed, and we compete really well. I expect us to scale that. I think you've also got the geopolitical complications where if you become an American company, some companies can't actually work with you or have risk if you're now contracting on American paper. So there's other things you need to think through.

But also the U.K. is also a really exciting destination from SDI. So when you think about FDI in, often those decisions might be made around the world. That decision might be made in Germany. The decision might be made in Abu Dhabi, that decision might be made in Johannesburg. Actually, that's where we are.

So you've often had that. So I don't want to sound overconfident, but I just think we're really good at this stuff, and we know how it works. That's the way we do it.

We've just got time for one final question, if there are any more questions in the room? Otherwise, we'll leave it there.

Very good.

Okay. Well, thank you, Nick, and thank you, everybody, for your questions. So this afternoon, we've seen how VodafoneThree is leveraging its network leadership and scale to drive growth across both consumer and business. To bring these elements together and to explain how they translate into stronger returns, synergy delivery and long-term value creation, please join me in welcoming VodafoneThree's Chief Financial Officer, Darren Purkis.

Thank you, Kelly. It's great to see so many familiar faces here today. You've now heard about the many opportunities created by the merger across both consumer and business. This final section is about how we now bring these opportunities, combined with the synergies we're targeting and how that translates into strong adjusted EBITDA and free cash flow growth and materially better returns over time.

I have to say, standing here, I am genuinely excited by what we're building. We're only 16 months into the journey, and we're making great progress, and I have real confidence in our ability to deliver. There are 4 messages I'd like to take away today. Number one, the merger had a clear rationale. It addressed the structural problem in the U.K. market, and it created the scale needed to invest and compete effectively.

Second, we have a clear path to delivering GBP 700 million annual cost and CapEx synergy target by FY '30. FY '27 will be the first year where you'll see material synergies with more than GBP 100 million delivered. I'm extremely confident we can deliver these savings, which represent a significant midterm tailwind for the business.

Third, the strong execution we've already demonstrated and the progress we've made to date have increased our confidence to the point where we're now upgrading our cost ambitions. Together with the benefits of full Vodafone Group ownership, we're able to move at an even faster pace, enabling us to increase our annual cost and CapEx target to GBP 1 billion by FY '32.

And finally, the combination of synergy delivery, EBITDA growth and a clear investment profile create a path to good operating free cash flow growth. They also support returns well above the cost of capital over time. However, before discussing the merger itself, it's worth stepping back a bit and looking at the broader market context.

As Max said earlier, the U.K. has been one of Europe's most competitive mobile markets for many years. The industry has consistently delivered affordable services and low prices for consumers. As a result, the U.K. has some of the most affordable mobile data relative to income globally. But that affordability has not been matched by network quality.

As the charts show, the U.K. continues to lag many comparable markets on key measures of network quality and performance. It ranks behind the other G7 countries on overall network excellence. It underperforms the EU 27 on consistent quality and download speed, along with many other metrics you've all seen before.

In other words, consumers have benefited from affordability, but the industry has struggled to generate the returns needed to sustain the investments at the levels seen elsewhere. The result has been a cycle of low returns, constrained investment and lower network quality. That has increasingly impacted the U.K. ability to compete on the international stage. That is the backdrop against which Vodafone and Three assess the opportunity.

And it helps to reiterate why structural change was required. As Ahmed highlighted earlier today, before the transaction, Vodafone and Three were the 2 smallest mobile network operators in the market. Both lack sufficient scale and both generated returns materially below the cost of capital.

As a result, the economics did not support the investment required to improve network quality and compete effectively. It was never a question of whether the U.K. was an attractive market. The question was whether either business operating independently had the scale to earn the appropriate returns while funding the necessary level of investment. The merger addressed that directly.

It combined 2 subscale positions to create one operator with the customer base, network assets and financial capacity to invest and compete sustainably. As you can see, the merger creates a structurally stronger business and a more level playing field across the MNOs. We moved from 2 small operators to scaled player with approximately 27% market share today.

The outcome is not less competition. It's stronger competition, an operator able to self-finance the levels of investment required to materially improve network quality, an operator that can challenge the incumbents.

Prior to the merger, there was little incentive for any operator to significantly increase investment in mobile infrastructure, while so much capital was being directed towards the fiber rollout. The market lacked a scale challenger capable of changing that dynamic. VodafoneThree changes that. We now have the scale to invest meaningfully, improve quality and compete more effectively. And that scale underpins both our investment program and our synergy opportunity.

Our value creation model has 4 connected elements. First is integration and restructuring. We set out a detailed program to deliver GBP 700 million of annual cost and CapEx synergies by FY '30 and whose progress today underpins our increased ambition. Second, investment. These efficiencies effectively support the financing of our GBP 11 billion network investment program over the 10 years.

It's deliberately weighted towards the first 5 years, reflecting the scale of work required. It includes IT integration, rollout of the nation's network sites and the retail rationalization program. Third is network leadership. The program creates a denser, higher capacity 5G stand-alone network.

As Andrea and Max have outlined earlier today, our significant investment will enable us to deliver 5G stand-alone population coverage of 99.96% by 2034, more than any other operator. That significantly improves our customer experience and the commercial capabilities of the business. And the final element is the financial returns.

Together, these elements materially improve our EBITDA, free cash flow and returns profile. We expect the transaction to be free cash flow accretive to the group by FY '29. And we expect returns, including goodwill, to exceed the cost of capital by FY '32. This is why investment and return should not be viewed as competing priorities. Scale and synergies allow us to fund better infrastructure while building a financially stronger and sustainable business.

Now let me turn to Wholesale. The MVNO segment is an important and growing part of the U.K. mobile market. Our strategy is to participate in that growth, but we will do so with clear pricing discipline and without undermining value on network quality. As part of the merger, we made specific wholesale commitments to ensure continuity in the market during the early years of the network build.

More specifically, for the first 3 years after the merger, we have an obligation to provide wholesale terms to prospective MVNOs through the wholesale reference offer. These standard terms were established to ensure that the conditions for MVNOs post-merger would not be any worse than that of premerger.

For existing Vodafone and Three wholesale customers, there are also rollover commitments for contracts expiring within the 3 years immediately post-merger close. Both customers can extend their contracts for up to a further 5 years under the same terms. Both conditions are clearly linked to our network commitments with clear oversight from both the CMA and Ofcom.

Over time, we will monetize network quality effectively in all our segments. None of our wholesale partners sell 5G+ today, but can by taking an add-on for an appropriate fee. But I want to be clear about the nature of that opportunity. We have a disciplined wholesale framework. We will pursue wholesale growth where it is incremental, profitable and consistent with protecting network quality and value. This makes wholesale a credible additional source of value. It is not a substitute for retail growth, and it is not a volume at any cost strategy.

Now turning to our targets. As we've announced today, we're increasing our annual cost and CapEx ambition to GBP 800 million by FY '30 with a clear path to GBP 1 billion by FY '32. The reason we can do that is simple, confidence in delivery. My confidence comes from 3 things: the detailed preparation work we did before the merger, the clear execution plan that's in place and most importantly, the strong progress we've made to date.

As you can see, we already have the plans in place to deliver the organizational, retail and commercial change required. Combined, these represent 45% of the total cost and CapEx synergy target, much of which will be delivered in the first 3 years. Within this, organization is the largest component. We moved quickly to establish the combined business structure.

All teams have now been integrated down to the fourth level of the organization. We expect half of the target to be delivered by the end of year 2. And many functions will reach their end state well ahead of IT migration. Once the IT migration is then complete, we will have a consolidated -- we'll have everyone consolidated onto a single stack and the full organizational changes will be implemented by year 4.

In retail, we will consolidate overlapping stores. That supports approximately a 30% reduction in the premerger retail cost base while maintaining a significant presence on the high street. The program is well underway, and we expect it to complete by the end of year 3. Lease expiries have been aligned to the program plan, giving us certainty around timing for this crucial aspect.

Commercial represents a further 10% of the overall synergy target. This includes the rationalization of marketing, sales, distribution and logistics activity. Progress is ahead of the initial plan with more than 80% of the marketing synergies and 50% of logistics synergies expected to be delivered by year 2.

Turning to network integration. Unsurprisingly, this is the largest individual opportunity, representing around 30% of the total synergies. It includes site rationalization, the consolidation of operating centers and field operations and capital savings once the early investment phase is complete. Network operating cost benefits begin from this year and build over the 5-year program. CapEx savings emerge later following that main investment period.

Importantly, and as Andrea has noted, we are well on track here, which gives us a high degree of confidence in the delivery of this plan. IT consolidation contributes approximately 15%. These benefits come from customer and data migration, platform consolidation and the decommissioning of duplicated systems. The designs are now complete and the build is well underway. Testing and business readiness activities are now being planned, and we expect delivery to be completed by year 4.

Procurement represents the remaining 10%. These savings come from combining purchasing scale, eliminating duplicated contracts. I would also highlight the material savings our procurement function has already delivered through our relentless pursuit of cost optimization, both through synergy realization and ongoing cost-saving programs. These savings have helped us offset some of the inflationary cost pressures the business faces each year.

So the key point is this. This is not one large independent program. It is a portfolio of identifiable initiatives. Each has accountable owners, defined milestones and a clear delivery profile. The plans are in place, execution is underway, and our progress to date gives us a high degree of confidence in delivery.

Cost synergies, however, are only part of the story. While we're not providing a specific figure, we're also seeing meaningful revenue opportunities across 4 areas: number one, creating the best network in the U.K. better network quality improves customer retention. It creates monetization opportunities through propositions, as you've seen with Rob and Nick on Supermobile, and it supports further upselling opportunities.

As discussed earlier, each of these contributes to stronger long-term growth. In addition to upselling, we're also looking to capitalize on cross-selling opportunities, selling into the 3 mobile customer base, and we can strengthen retention through converged offers, supported again through the launch of new propositions, including Vodafone TV, helping us to improve lifetime customer value.

The addition of fixed wireless access from 3 creates another meaningful revenue synergy opportunity and benefit from on-net economics. This will further strengthen our position as the U.K.'s fastest-growing broadband provider. It will allow us to offer fiber-like speeds across the entire country regardless of the pace of fiber rollout.

And finally, 5G stand-alone is creating opportunities for dedicated enterprise applications. These include national, regional and critical infrastructure network slices. The services create opportunities to monetize assured performance, resilience and low latency connectivity.

Full Vodafone Group ownership now also adds another opportunity, enables us to simplify further our reporting and governance structure, reduces management complexity and supports faster decision-making. It also allows us to make full use of Vodafone Group's procurement scale, commercial platforms and shared services. These benefits create a further GBP 100 million annual cost and CapEx opportunity over the next 4 years. That increases the target that will be realized by FY '30 to GBP 800 million.

Importantly, it also means that Vodafone shareholders now capture 100% of the value created through future synergy delivery and cash flow growth from the business. Slide 66 sets out how we move then from our original target to the GBP 1 billion by FY '32. The original GBP 700 million by FY '30 remains the foundation of our plan, and we have a clear line of sight across each work stream.

As we consistently said, FY '27 is an important point in the profile. It represents the peak year of our investment cycle. It will, therefore, be the final year which we report a net dissynergy. As cost synergies build, the CapEx dis-synergies then gradually unwind, becoming accretive by FY '30.

As I noted earlier, FY '27 will be the first year in which we see deliver material cost synergies. They will be well above GBP 100 million, and we will continue to build towards a full target by FY '30. So looking to what's changed versus what we committed to before. Full group ownership allows us to increase the pace of delivery and add further group scale efficiencies.

As a result, our annual cost and capital expenditure ambition increases from GBP 700 million to GBP 800 million by FY '30. The move from GBP 800 million to GBP 1 billion is driven principally by 2 factors: number one, further CapEx savings as we near the completion of our network build, having front-loaded investment in the early years; number two, further benefits as we rationalize the network to our target site footprint and optimize infrastructure across our sites. This gives us a clear path to GBP 1 billion target.

On top of these targets, we will maintain our relentless focus on cost optimization across the business. That will remain a key feature of our plan in the years ahead. As I've said, the investment and integration profile is deliberately front-loaded. FY '27 is the peak year for CapEx at approximately GBP 1.4 billion.

From that point, annual investment moderates. At the same time, we remain on track to deliver our GBP 11 billion program over 10 years and achieve 99.96% 5G stand-alone coverage. Around 3/4 of the integration and restructuring costs will be incurred within the first 2 years. That reflects the pace at which we are integrating platforms, customers, stores and operations.

Importantly, these costs are temporary. As these costs reduce, the synergy run rate increases and a greater proportion of earnings converts into free cash flow. So FY '27 does not represent the steady-state economics of VodafoneThree. It is the peak investment year, and it is that investment that enables the structurally stronger economics that follow. Slide 68 brings together the key financial indicators over time. I've provided a lot of color on the upgraded efficiency targets.

Now let me show what that means for our other key financial metrics. We expect adjusted EBITDA to grow mid- to high single digits on a compound annual growth rate basis between now and FY '32. That growth is supported by synergy delivery as well as the underlying commercial momentum of the business. Operating free cash flow defined here as adjusted EBITDA less CapEx will more than triple by FY '32.

That reflects our updated cost forecast and the group buyout benefits. And crucially, returns improve. Return on capital employed moved from negative territory on the premerger baseline to above the cost of capital by FY '32. We expect further improvement as the network program matures.

The improvement in return on capital employed is initially gradual, and that was always expected. It reflects the deliberately front-loaded investment profile of our plan. As the program progresses, that balance changes. Once we're through the more capital-intensive phase, profitability continues to grow. That growth will be driven by the full delivery of our cost targets and the monetization of the U.K.'s best network. and it will enable us to deliver returns well above the cost of capital. This is an exciting growth profile.

And as Ahmed outlined earlier today, we will be a key contributor to the group's midterm free cash flow ambition, a business with a stronger earnings growth, materially higher cash generation and a sustainable returns above its cost of capital. Let me finish with the same 4 messages I started with. First, the merger had a clear rationale.

It created the scale to invest, compete and earn sustainable returns. Second, we have a detailed plan to deliver our annual cost and CapEx target. Third, our increased confidence in synergy delivery, combined with the benefits of full Vodafone Group ownership has enabled us to increase the target to GBP 1 billion by FY '22. And finally, the financial profile is clear and compelling.

Taken together, this gives me and the whole management team you've heard from today, tremendous confidence in what lies ahead. We have a clear plan. We're delivering against that plan, and we believe VodafoneThree can create significant and sustainable long-term value for Vodafone shareholders. The foundations are in place, delivery is underway, and I firmly believe the best is yet to come. With that, I'd like to hand back to Kelly before we wrap up with management Q&A. Thank you for listening.

Thank you, Darren. So that brings us to the end of our formal presentations. We're now going to move into our leadership Q&A. Throughout today, we've explored how VodafoneThree is turning the promise of the merger into tangible outcomes. We've seen the scale of the opportunity created by combining the 2 businesses, the progress being made to build the U.K.'s best network, how we're creating new opportunities for growth across consumer and business.

And finally, how that all translates into synergies, value creation and stronger returns. So this is your opportunity to put your questions to the team across everything you've heard this afternoon. We're just going to take a few moments to reset the stage to allow for this.

So please stay with us for a moment. -- thank you for your patience. I'd now like to ask Max, Andrea, Rob, Nick and Darren back to the stage to join me for our final Q&A. We'll have around 45 minutes, and I'll be taking questions both from the room and from those joining online. If you're asking a question, please keep it concise.

So our first question is from our online audience. So the question is, how are you ensuring that SuperMobile users actually receive the quality and speed of service they pay for? So Andrea, I'll start with you in terms of how the network works and then Rob and Nick, please comment on how the customer proposition builds on that.

There's 2 fundamental ingredients to get SuperMobile working. First is to have 5G SA, 5G plus coverage because that gives you the inherent 5G SA capability. Once you've got the 5G SA coverage and an associated 5G SA core, you can introduce slicing slicing.

So you've got the coverage. You've got the core that is an SA native core that allows you to have slicing. Once you got slicing, you can start prioritizing the traffic. The capacity that we're introducing into the network, I said we're putting up to 5x more -- well, 2.5x more capacity and up to 5x speed enables you to have enough capacity and the speed to be able to differentiate on top of already raising the bar for all the other customers.

So it's the combination of those 3 things, SA core, your slicing capability and your prioritization with enough capacity and speeds to be able to -- on top of already raising bar for performance for all the customers to give you more differentiated service.

Thanks, Andrea. Rob, Nick, anything to add?

A couple of points. I think the first is to say we are tracking the performance of every single SuperMobile user in the country. So we know exactly what speeds people are getting, and we know exactly who is getting the minimum guaranteed speed that we talked about previously.

And when we made that guarantee, we made it. So if a customer, for whatever reason, feels they are not getting the speed guarantee, they are welcome to call us, have a conversation with us. We have an ability to see what speeds they're getting. And as we said in our proposition, they keep their contract for free. And so far, nobody is doing it.

Take a question from the room.

Andrew Lee from Goldman Sachs. I had a question just maybe a challenging question. simply, are you doing enough on cost efficiencies? You presented a growth outlook that if we strip out the synergies, I think maximum, the underlying EBITDA growth is 4% in a 3-player market. And just conscious of a new shareholder in Vodafone Group, we look across the rest of Europe, and we see costs being ripped out of Spain and Italy post Vodafone's running of those assets.

So how confident are you that you're pushing hard enough on your cost efficiencies? And what scope is there to do more on that front? And if you don't mind, a second question, but I don't think I'm going to get an answer on it, but I have to ask anyway. Why didn't you have a go at taking up TalkTalk?

Darren, can we start with you on cost efficiency?

Yes. Look, I think initially, I would say it's probably not the right way to look at it to try and take it out. There's a number of things, elements within there. Firstly, you've got significant inflationary impacts within the business that's going on -- within the markets going on. Inflation has run at over 3% since the merger and for the year leading into the merger.

So we've had to work really hard to take additional costs out to stand still in some areas to get back to the same position. So we are doing a huge amount on cost programs, and we are taking more cost out. Incrementally, as part of the synergies, there are circa 20%, which are CapEx synergies, which won't flow into the EBITDA, but obviously go into the 3x cash flow. So we feel we're doing a lot. We feel we're doing as much as we can. We are going through a program, and we have very clear line of sight for all of those synergies.

But we will continue to look as hard as we can for further opportunities, and there may be further things that come as we go through that program. But we are pushing extremely hard. And as I say, it's difficult because you need to strip out the CapEx element to get to a true underlying as well as the inflationary impacts that we're fighting against.

Maybe if I just build on that. I think we are doing enough. There's obviously the opportunity in -- with AI. And we're learning all the time. You might have seen from some of our demos what we're doing in that space. So AI will definitely help within our plans and is being built into the plans that we have, but there are opportunities for more. So I'll give you an example and bring that to life some color.

So when we look at one particular use case, we have some productivity gains from the use of AI in developing code and digital. And some of our tests have shown that, that productivity gain could be up to 40%. Now 10% is what we would have in our plans to cover inflation.

So there is a delta there of a potential opportunity statement. So we're learning all the time about what we could do with that. Do we take that straight as an overlay as a cost efficiency initiative? Or do we redeploy that potential productivity gain in digital and go after all the other opportunities that we were talking about in terms of digitization of the business. So we're learning all the time. We're seeing opportunities and potentially, there could be some more. But that gives you an example of how we're thinking about AI and how we're advancing in that space.

And the other question is relatively straight up, hopefully, you've seen through the course of today that we believe in our organic growth opportunity, both in consumer and in business. And that transaction, I don't think it has any bearing on what -- on that growth opportunity. So we're now in, as you know, in an expedited process in terms of providing feedback to the regulators, and we will do so in due course.

Next question.

It's David Wright from Bank of America. My first question, I'll ask 2, if that's okay. I suspect it's for you, Rob. you have the -- you've obviously got the fixed wireless access product, but you also have wholesale fixed fiber. But it would seem that fixed wireless access is a lot more profitable to you because that's owner economics, it's network economics.

So I'm just wondering within your marketing when customers are calling in or when you're actually speaking to customers, how you think about that? Do you -- would you rather prefer to push an FWA into a customer rather than a fixed line where you make just a lot less money? That's question one.

And then question two, Darren, maybe to you. I just don't understand why you exclude goodwill from return on capital when it's an acquisition. It's a transaction-based.

Goodwill isn't excluded. It's included in the calculation.

It's included.

Yes, it should say on the slide as well. If it doesn't, apologies...

I thought you said excluding goodwill...

Including...

And that's my mistake.

Yes. So we -- I mean, we obviously have the biggest full fiber footprint in the country, 24.5 million homes, asset-light strategy. And what I'd say is the economics on both are attractive. They're different, but they're attractive. With fixed wireless access, as you rightly point out, we get good on-net economics, but it comes with carrying costs, whereas the profile on fiber is different. So it's lower gross margin, but it's less CapEx.

So full fiber continues to be the real growth engine in broadband, and we see fixed wireless access as complementary to that, in particular, the areas where fiber is not yet available. So when it comes to the conversation with customers, -- there's 3.5 million homes with no fiber where we have fixed wireless access coverage. And so for those customers, we are having the conversation with fixed wireless access because it's better than copper, it's faster and in most cases, it's cheaper.

But for customers where we have fiber footprint, we are having conversations about fiber. Obviously, there are also other segments of customers like students, like renters, et cetera, where the customer need is actually for something easier to install that we can take with them when they move around as well. So fixed wireless access is perfect for that. But the real growth driver is still fiber, and we see fixed wireless access as complementary.

If I just build on that as well. So we look at profitability end-to-end, not just at the EBITDA level. So there is a cost to carry, as Rob said. And we see this as complementary. And then there's also an area within fixed wireless access, which we are looking at. And the area that we're looking at, it's obvious that it's a better product, better margins, it's better customer experience than in copper.

Where we have capacity available at a site-by-site level, it may be better economics for us to put that on FWA. So we will be looking at that site by site. But we're very confident in our portfolio. We look at customer experience, we look at economics and we look at lifetime value. And we will build a portfolio of solutions to connect every community in every corner of the U.K. And that's the way in which we look at things.

Carl Murdock-Smith from Citi. I'll ask one because I'm a good boy. So I suppose the target that I was maybe expecting to see today that I haven't seen is 4.3 million broadband customers by 2034 that you have mentioned in press interviews. So my question is, is that a target?

And if it is, I suppose it's partially following on from the FW and fiber question, are you expecting your broadband net adds to accelerate in a maturing market?

I'll take that. Yes, we expect to double. That -- we're sticking by that commitment. Our growth is exactly on that trajectory. What you can expect to see moving forward is mix is shifting in mix. So you can expect to see shifting in mix towards FWA. But yes, the target still remains and the -- and we don't need acceleration. Actually, we need to maintain some of the pace that we've already been doing, but there will be mix changes.

Next question please.

It's Josh Mills from BNP Paribas. I wanted to come back to the CMA wholesale commitments that you made and what you were talking about earlier on the stage. So one of the debates we're having at the moment in the sector is about Starlink, the ability to enter different markets and assuming that direct-to-device mobile satellite connectivity isn't a solution near term, MVNOs look like an option.

So first part of the question is, under the current terms, if Starlink came to you, would you be obliged to give them an MVNO? Or is there any reason in the terms that may not apply to Starlink and SpaceX whereas it would to other retail partners? And then secondly, some of the MVNOs on Vodafone's network, Revolut, Klarna, et cetera, are very cheap at the moment, kind of GBP 15 global roaming, et cetera.

Is there any floor pricing structure in the terms, which would prevent future partners from undercutting you on price? So I'm just trying to understand if Sink came in, decided to charge GBP 5 a month in order to boost their conversion strategy, how disruptive that could be?

Yes, I'll take that. So the first question was around the wholesale reference offer. That we have an obligation to provide any prospective partner that comes along. There are certain conditions that they have to meet, and they take that under an NDA and they decide whether those terms are appropriate for them. Assuming they meet those criteria, then yes, we will be obliged to provide that connectivity for them. The second part of the question, I think it's slightly -- you can look at the headline pricing and people like Klarna and Revolut have introductory offers.

But you look at Revolut post their introductory offer, it's aligned with where the other MVNOs and where sub-brands are actually pricing. So it's not that dissimilar. So I don't think it's a massive undercut from others. People like Klarna, they've got a big headline, but it's -- you've got to pay GBP 45 to get what they're offering on their premium membership service. So it's all linked in with other areas. So it's not as easy just to underplay those.

But I think we have a contract with the aggregator. The aggregator then has a contract with the onward partner. And we have no influence and we can't have any influence on the onward partners' pricing.

Peed caps within the offers as well.

Yes. So you'll see the MVNOs coming to market. They're on SpeedCap. They're very simple MVNO plans, simple SIM-only plans. And what we're trying to -- and we've talked a lot about today is the quality that we're selling into the market now and the differentiation that we want to bring not just the SuperMobile speed, but secure net, the wraparound services on business or on consumer that provides the whole end-to-end connectivity that consumers want now and are willing to pay for.

It's Polo Tang from UBS. Maybe a question for Darren, just in terms of clarifying the net synergy profile from here because you've obviously got 3 different buckets in terms of you outlined OpEx synergies, you've got your CapEx profile. And then on top of that, you've got restructuring. So when will the deal synergies be net accretive? Can you maybe just talk through the profile?

Yes. So when we talk about the GBP 700 million, GBP 800 million, they're net of dissynergies. So that's excluding integration and restructuring costs. However, as I said, 75% of those are spent within the first 2 years. So actually, you're through the majority of that profile by the end of this year.

We are net accretive next year on total. But we are -- and as I say, we are starting to see the material cost synergies come through this year, and they build over time. we have the peak CapEx year and then that starts to moderate. So next year, you see a net positive position in synergies.

Matt Howett from Assembly. Max, I just wanted to pick up on your point about net neutrality reform for innovation. You pointed out that the mobile market review was quite sort of encouraging in that respect.

Do you have the same sort of sense from what is the sort of new government, new administration, new department for that to continue? And sort of are you any clear on what that would look like, what it would enable and also how your partners might feel about that, people like Netflix, who obviously sometimes can sit on a very different side of the fence.

Great question, Matt. So yes, very encouraged by the conversations on net neutrality reform, energy reform and planning reform. And as I mentioned earlier, lots of alignment across the industry, lots of alignment with regulators, lots of alignment with government.

But we need to see now consensus turn into action and legislation. And on net neutrality reform, in particular, we are looking for reform around application slices or category level, category level slicing, where we think there's a great opportunity for enhanced customer experience and also monetization of the network, particularly in B2B.

And now we're going to take a question from our online audience. I think this is one for you, Andrea. Is Open RAN still considered strategic in the future of VodafoneThree's radio modernization plans?

It's a very good question. Because the CMA imposed very strict deadlines in terms of number of sites and in terms of spectrum solutions on those sites by certain clear deadlines, Unfortunately, the current technology Open RAN road map did not enable us to meet those deadlines. That's why we took the difficult decision to abandon Open RAN for now in the U.K. network.

We doubled down on 2 main suppliers with a 2 billion contract, Nokia and Ericsson. They developed specific radios that meet our spectrum holding. They weren't available. They're developing that specifically for us, something that unfortunately, the Open RAN vendors could not meet. So it was a forced decision based on the strict deadlines we got from the CMA to meet those requirements.

Another question in the room.

It's Emmet Kelly from Morgan Stanley. I've got a couple of questions, please. The first question is for Andrea on the network, please. So you've laid out some very compelling plans about building best network here in the U.K. I guess if I look at other examples of companies that have tried to do this like Odido in the Netherlands or T-Mobile U.S.A., it obviously takes a while to catch up with the market leaders. Like Open signals suggest that EE has quite a lead at the moment.

So how should we think about the timing on Best network? When do we really see it in terms of Open Signal surveys, people are talking about it, your consumers talking about it in the pub or whatever. So that would be the first question. And the second question is for Darren. If I rewind the clock quite a few years ago, subscriber acquisition and retention cost is a KPI that Vodafone used to give kind of showing my age here, but going back many, many years.

Can you maybe say a few words on acquisition retention costs, where they are in the U.K. market? It's always been quite a heavy acquisition retention cost market. Are these going up? Are they going down? And are there any benefits from the merger on acquisition and retention costs?

So maybe I'll start with the question you posed to me. So we're already demonstrating network leadership in the areas where we have completed our plans. So if you look at London, for example, NET CHECK has already declared us as the best network in London. Ookla has declared us the fastest 5G plus network nationally. When we look at the other benchmarking companies and other statistics, the gap with EE is closing, and it's directly linked to the areas where we're completing our plans.

So I showed you earlier how we're bringing C-band, 200 megahertz that no one else has to 50 million subscribers, adding 82% increase in speeds. So what we see is where we're completing our plans, we are superior. Once we complete the plans, we will be superior. And you can see that there's a very clear road map to get there in terms of time scales, in terms of deadlines and outputs.

So 99% population coverage, 99.96%. Once you got that coverage, once we deliver the capacity in the core, that will give us superiority. And we're already seeing that superiority when we've completed our plans in particular areas.

So I think there was the second part of the question first before the hands fly out. But the second part of the question, let me start with that and Max jump in if you want to. But acquisition retention costs remain a material cost into the business. What I would say, however, is that the merger has created real opportunities for synergies within there.

If you think of some of the items that go into those acquisition retention costs, you've got channel mix. We've already spoken today about Vodafone leading the way on digital. That is a much more cost-effective channel. By moving the way that Vodafone go with the 3 side of things, we get a significant synergy.

So we are pushing and learning all the time and synergizing. Cost center costs that go through on acquisition retention as well, we're synergized on those part of the organizational structure piece. So third-party costs, overseas costs, we are synergizing on all of those. So big opportunities, and there's a number of other areas, big opportunities wherever we've got an opportunity, we're looking to synergize on those.

We're looking to learn from the best of both brands and taking that into what we do going forward. We've done a lot of that already. We've learned a lot in 16 months, and we're continuing to push that quite hard going forward.

Yes. Look, Bill, I mean it's all about digital. The digital costs are -- and as Rob's charts pointed out, there's clear opportunities for us to improve digital mix, which would improve costs across all of our brands. And then there are some things happening in the market at the moment.

Home broadband is particularly competitive. And we've seen BT go back into affiliate, which is quite a reversal of strategy, which has pushed some costs up there. So it's really important that you have a multichannel and omnichannel approach and that you try to push the digital mix.

So to give you a sense of some trends, what we're seeing in the market, but also the overall opportunity that we see in terms of cost efficiency coming from acquisition and retention costs.

We've got another question from the online audience. The question is, please, can you expand on the AI-related benefits, both on cost and revenue over the next 3 to 5 years? Maybe start with you, Darren, if there is anything you can expand on, but then it'd also be great to hear from Nick about how he's thinking about AI and driving that simplicity and growth in the business space as well.

Yes. Look, I think AI gives us 2 opportunities. One, there is cost efficiencies that we're looking through, and Max has already talked on one of the previous questions about where we've got an opportunity we're starting to utilize and we're closing gaps, but we've got more that we can do.

So there's a lot we're doing on the cost side, but it also gives us opportunities in growth. So it's not just in cost optimization, it's in growth opportunities. And certainly, how we serve our customers could be a cost, but it could be an efficiency in how we best serve our people, how we get the best service, how we get the quicker service, Cost optimization on networks, AI will be self-optimizing on the network. So there are many, many facets to how AI will play into our business.

Cost is one, growth is one, efficiency. We're looking at all of those, and we're taking them as we can. But they are not all switches that you flip overnight. You have to invest in them, you have to build them properly, and you have to do it with care as well, especially when you're dealing with consumers and businesses. So we're doing the balance, and we're working hard on that, but AI is definitely a focus for us now and going forward as well.

Yes. Let me do one internal and one external. So external unified communications, we're seeing 20% of our customers already deploy AI on the services we use for transcribing and building on that. And then internally, proposal work, bid work, bid buddy is something we use internally. It's quite extensive, really sophisticated in the way you do it. There's lots of opportunities. I know there's load in consumer as well. So it's...

Yes. Look, I think there's monetization opportunities here as well. I mean we've talked a lot about the network. We've talked a lot about SuperMobile. SuperMobile will be the plan that allows AI to perform best. It's low latency. It's on the slice, it's reliable. As those AI and agentic workloads and those use cases get more and more complex, more and more demanding on the network, we've got the connectivity solution for that. So that brings monetization opportunities.

The very profile of a customer who would use an AI agent is a perfect candidate for SuperMobile.

Another question in the room?

Karen Egan from Enders Analysis. Probably a question for Rob really about consumer propositions. The first one is you recently introduced speed tiering on 3 and then you also introduced SuperMobile. Is the consumer proposition getting a little bit complicated? It sounds like you kind of may be confusing even some telecoms analysts about the difference between them.

And by the time they kind of choose their gigabytes, they choose which speeds, they choose whether they want SuperMobile and various other things. Are you starting to think about it differently now that it's on 3 and that you've introduced SuperMobile? Because it looks like you have been kind of changing some of the pricing around there. And the second question is quite a simple one about -- just Ask once. I think when you launched -- just Ask once on mobile, you pointed towards it being launched on broadband.

Is that something that is in the near-term horizon? And would it be on the same terms with the right to cancel?

Let me start in reverse order because the answer is easier. It's done. It's live across all the Vodafone products. And then in terms of your first question, I mean, effectively, if you look at what we've done in Vodafone, right, you've got 100 megabits per second, you've got full speed and then you've got SuperMobile.

You look at what we've got in 3, you've got 100 megabits per second, you've got a full speed add-on. And as we've talked about in the future, we will be launching SuperMobile across all our brands. So you can see the strategy. You can see how we're starting to use network and network quality to monetize to drive more value out of the plans that we sell. So I think if you simplify it down to 100 full speed SuperMobile, that kind of simplifies the structure that you see in the strategy.

Brian Potterill from Enders Analysis. A question for Darren. You mentioned about the wholesale commitments, one of which was the rollover obligation. Now you've got 2 big MVNOs who are pricing aggressively and growing. Has that taken effect? So is the rollover obligation happened? Or have we still got something down the road? So have you recontracted with them?

Clearly, I can't talk about individual companies, commercials, contracts. So all I would say is that all of the partners that both Vodafone and 3 have opportunities to roll over on the existing contract that they had at the prevailing rates.

Clearly, I'm not going to talk about whether the people have recontracted or what they've asked for or that's commercially sensitive information.

James Ratzer from New Street. So 2 questions, please. So the first one was about TalkTalk. So we've just lived through an interesting 2 or 3 years where they're very generously donating probably 300,000 to 350,000 of their customer base into -- back into the market every year. I would suggest Vodafone has probably been quite a beneficiary of them losing customers. Now maybe under new ownership, that rate of customer loss is going to diminish.

So if that is the case and they hold on to their customers now under BT ownership, what does Vodafone do to maintain its kind of broadband growth in the consumer segment? Do you need to change strategy to become actually more price aggressive than you have been in the past?

And then the second question is one of your other competitors, Sky, has the slogan believe in better, but they're not on the best mobile network in the U.K. at the moment if we to believe the pitch you're making. So what are you doing or are you interested in trying to get them on to the best mobile network in the U.K.

Do you want to take the first one?

I can take the first one. So let me take about the wholesale.

Let me take the question first. So look, we're building the best network, and we're building the capacity and capability to offer services to partners. That said, as I said in my presentation, we have a clear pricing discipline. So we will only take people on where it is incremental for us in both profit and cash flow, where it protects the network integrity and where it protects SuperMobile.

So we will not do anything that diminishes what we have in our own business, and we will look after our own brands before we take anyone on. So does that mean we're interested or not interested? It's not about a Sky or anybody else. We're building the capability and capacity, but we would follow those pricing principles and those core fundamentals around the framework before we decide to take anybody on in the market.

And I'm afraid that the answer is exactly the same. I think it would have demonstrated today the opportunities we have for organic growth, both in consumer and in business. We believe in our propositions. We're improving our propositions all the time in consumer and in business. And we don't believe that, that transaction would have an impact on those growth ambitions. So I'm afraid it's the same answer I gave earlier.

Next question...

It's Robert from Deutsche Bank. The first question is, you've got a big fixed broadband ambitions, a bit more FWA in the mix, but fiber is still the main gig. You're offering 8 gigabits soon. Are your customers asking for higher speeds? And the question is, your footprint for fiber, only part of it has got XGS-PON type speeds.

Do you need to increase your -- effectively your net coverage going forward? And the second question is on the guidance for EBITDA. You've got a range from mid- to high single digits. What are the outcomes which affect that range? Is it mainly a revenue thing because the costs and the synergies are all kind of fixed or something else?

Should I talk about -- I mean, as I've been on record saying before, we're open to new partnerships. I think what's really important is what do we look for in the partnerships, and that is economics and also customer experience. And we don't talk about customer experience enough. So as a reseller of home broadband, we need to ensure that our customer experience is excellent, that the churn is a key KPI and the first life economics are low and then we need customers to stay.

So the failure rates on installs, complaints in life, fault rates, these are all critical metrics that measure customer experience and are vital for us. Having partners who are pushing the boundaries around customer experience, that is all part of what we look for in a great partner. So a fantastic example is Community Fiber, one of our partners, a smaller footprint, fantastic customer experience metrics, great for lifetime value.

And to your question sorry, Kelly. To your question about the EBITDA range, there's a range for a reason. There is the cost side of it, very, very confident. We've got the plans, and they will be delivered. The other side on the revenue side, it comes down to a mix. So it could be a mix of the products we're selling.

So if there's a higher broadband over FWA, that will slightly impact that. It could be how much of the SuperMobile we deliver. So we're very confident in our revenue growth. We're very confident in the opportunities, but the range reflects the mix of what will be delivered.

And your question, which was are customers asking for faster speeds. The answer is if you -- sorry, the answer is yes. And if you look at where the market share is and you look by speed, -- right now, over 45% of new market additions are taking over 900 megabits per second, and that is increasing and has increased year-on-year. So they are demanding faster and faster speeds.

More questions from the room?

It's Paul Berenberg again. Just a couple of quick questions, please. We've heard a lot about SuperMobile today. And I just wondered, do you think there's any merit in moving towards a different way of selling mobile products to consumers and enterprises. I mean is 5G SuperMobile just to start where consumers can look at a list of optional extras, almost like buying a car, if you take alloy wheels or a sports package, whatever it may be to get them to pay an extra GBP 3, GBP 4, GBP 5 a month.

And then just a quick one -- what's the most important financial metric Vodafone U.K. looks at internally to monitor its success? Is it revenue growth, EBITDA growth, free cash flow, ROCE, all of the above? What's the most important thing?

Nick, do you want to comment on?

Yes. Let me -- I'll leave that second part for Darren, I think. But in terms of the first one, I mean, effectively, what we are trying to do is change the market. And we're trying to change the way mobile trades in the market. We are trying to add a new dimension, which has never been there before, which is quality. So in essence, that's what we're trying to do.

And we've got it in a subscription or you can, as you say, a little bit like the cars, you can take it as a monthly add-on along with lots of other monthly add-ons we've got. So yes, we are trying to change the way mobile trades.

I think from an enterprise perspective, when you think about that, you've got to think about the output. So I was talking about how you put various products together. So if you -- you'll have -- as a business, you'll have a persona and you'll have a policy for that persona. So what you give to your field engineers because you -- if they miss an appointment or they can't complete the appointment, the cost of that is pretty high. You've got to roll that truck twice.

So a lot of what we do when we talk to big enterprise customers or even kind of medium enterprise customers, you talk about what's the application, what are you trying to achieve and why are you're giving that person mobility. Then the second thing is if you think about that mobility with the smaller businesses, it can be even more critical, right, because you don't have a procurement function or you don't have other functions.

So that element and that level of trust and that ability to link those personas and portfolio together, I think it's really powerful. And I think that's what we're seeing. So that's kind of why I had some of that integration in the slide. So yes, I agree with the question. And actually, in terms of trying to do it, actually, we're doing it now, and it works really well. And when you do that, you really have a substantially lower churn as well.

And the second part of the question around key metrics, Darren?

Yes. No, I'll start. For me, they go hand in hand. We are very focused in VodafoneThree on driving revenue growth, driving EBITDA growth. But ultimately, we need to drive free cash flow, and we need to drive returns for shareholders. So yes, we're very focused as a management team on execution in the business, driving our business, getting revenue and EBITDA growth.

They translate though into the free cash flow and the return on capital. So I don't see them as being independent. I see them one leading to the other. We're very focused on all of them, clearly going up to the shareholders. The cash flow, the returns are very, very important.

This is our final question. If anyone's got a last question before we close.

It's [indiscernible] from [indiscernible] Research. Firstly, given my Vodafone affiliation, I wanted to say thank you. I know there's a lot of effort that goes into this event. So well done, and I think it was very informative. I have 2 questions. The first one is on the $200 million additional synergies in the latter years.

I think, Darren, you mentioned mainly network-related CapEx and leases. If it's possible to give us a split between them or whether you can give us an indication of how much MBNL affects this journey to 26,000 sites at the end? And then my second question is on the network remedy with Ofcom and the CMA. We have the capacity side, which is fine.

But then I would challenge the merits of the coverage in a world of direct to device. And the world has changed in the last 2 years. It may change more in the next couple of years. So my question will be can you divert some of these investments somewhere else? Is it a discussion you can have?

And if you can give us an indication of the amount out of the EUR 11 billion that's really dedicated towards the coverage package.

Darren, do you want to comment on the first?

Yes. So I'm trying to remember. The first one was the split between the extra EUR 200 million at the back end. It's broadly half and half between site rationalization and CapEx. The CapEx is the natural progression that we see, and that is where we come to the end or more towards the end of our network rollout program. As we've mentioned, it's more front weighted.

The second part of it, the site rationalization isn't specifically MBNL. It's general site rationalization. So as we're starting to decommission sites, we start to see those benefits come through. I think the second part of the question is certainly for Andrea though.

So on the CMA, when we discussed the merger, we had a long debate about how do you measure the success and the behavioral remedies that go with the approval. Radio is nondeterministic. So trying to get a very clear measurement on the output of what this merger was going to deliver in terms of coverage and speed is very hard. It's not deterministic and it's statistical.

And you'd always have an edge case where you're not actually achieving the output. So we had this great agreement to say, why don't you focus on the input because the input is deterministic. If you put a certain number of frequencies, and a certain amount of bandwidth on a prescribed number of sites by a certain date, you know you'll get something out of it. And so there's no but.

So that's really clear, really simple, and we don't create an industrial measurement and subjective review. Now the beauty of that, it's simple, it's measurements. And you know that if you do that, you're going to get an output.

And as I said earlier in my presentation, we've made commitments on specific number of sites with specific number of configurations, high, medium and low by certain dates that give you an output. And so we measure the input that knows the monetary trustee and Ofcom measure us on both. But we're held to the input.

Perhaps build on that as well. Actually, it goes back to the start -- they start the day, what's our purpose? Our purpose is to connect every community in every corner of the U.K., and we see satellites as a fantastic opportunity to do the remaining 0.04% that won't be covered by Andrea's fantastic world-class 5GSA network.

Thank you for all your questions, everybody. Now I like to hand over to Max for final remarks.

Thank you, Kelly. And thank you. Thank you all for joining us today, whether it's been online out there or here in the room and for your attention and excellent questions throughout the afternoon. For those of you who are, please, we will be here. The management team will be here.

Please do stay behind for a drink. But a few thank yous. I'd like to thank my brilliant team A lot of efforts gone into there. You've heard today from Kelly, from Andrea, Rob, Nick and Darren, but supporting us, of course, there is a huge team behind us that have worked incredibly hard over the past 16 months to deliver this fast start that we've shared with you today.

So as we close, I hope you take away 2 key conclusions. Firstly, the scale of the opportunity that is in front of us. And secondly, the clarity and confidence we have in delivering it. The new era of connectivity is well underway. Thank you.

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.