Vodafone Group Public Limited (VOD) 6-K 2023 Q2 Current report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Dated November 23, 2022

Commission File Number: 001-10086

VODAFONE GROUP
PUBLIC LIMITED COMPANY

(Translation of registrant’s name into English)

VODAFONE HOUSE, THE CONNECTION, NEWBURY, BERKSHIRE, RG14 2FN, ENGLAND
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ⌧                 Form 40-F  ◻

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ◻

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ◻

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN EACH OF THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-240163), THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-81825) AND THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-149634) OF VODAFONE GROUP PUBLIC LIMITED COMPANY AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

This report on form 6-K includes the following items:

(a) Summary;

(b) Strategy;

(c) Our purpose;

(d) Financial performance;

(e) Cash flow and funding;

(f) Statement of financial position;

(g) Other significant developments;

(h) Risk factors;

(i) Regulation;

(j) Unaudited condensed consolidated financial statements;

(k) Non-GAAP measures;

(l) Definitions;

(m) Notes; and

(n) Forward-looking statements and other matters.

Certain information is taken from the previously published results of Vodafone Group Plc for the year ended 31 March 2022. This report on Form 6-K should be read in conjunction with the Group’s Annual Report on Form 20-F for the year ended 31 March 2022. In particular the following sections:

● Information contained under “Our strategic framework” on page 1;

● Information contained under “About Vodafone” on pages 2 and 3;

● Information contained under “Key performance indicators” on pages 4 and 5;

● Information contained under “Market and strategy” on pages 8 and 9;

● Information contained under “Business model” on pages 10 and 11;

● Information contained under “Our financial performance” on pages 24 to 33; and

● Consolidated financial statements on pages 129 to 214.

The terms “Vodafone”, the “Group”, “we”, “our” and “us” refer to Vodafone Group Plc (‘the Company’), and as applicable, its subsidiaries and/or its interest in joint ventures and/or associates.

Vodafone Group Plc ⫶ H1 FY23 results

Summary ⫶ Resilient financial performance

		H1 FY23		H1 FY22		Change
Financial results (unaudited)	Page	€m		€m		%
Group revenue	6	22,930		22,489		2.0
Group service revenue	6	19,207		19,010		2.5	*
Operating profit	6	2,935		2,620		12.0
Profit for the financial period	6	1,243		1,277
Basic earnings per share	6	3.52	c	3.40	c
Interim dividend per share	41	4.50	c	4.50	c
Cash inflow from operating activities	17	6,280		6,455		(2.7)

			Year-end FY22
			€m
Borrowings less cash and cash equivalents	17	(68,510)	(62,596)

All amounts marked with an ‘*’ in this document represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions, the hyperinflation adjustments in Turkey and other adjustments to improve the comparability of results between periods. Organic growth figures are non-GAAP measures. See non-GAAP measures on page 46 for more information

Financial performance

Total revenue increased by 2.0% to €22.9 billion (FY22 H1: €22.5 billion), as service revenue growth and higher equipment sales was partly offset by unfavourable foreign exchange movements.

Operating profit increased by 12.0% to €2.9 billion, reflecting a higher share of income from associates and joint ventures and lower depreciation and amortisation. The Group made a profit for the period of €1.2 billion (FY22 H1: €1.3 billion) as an increase in operating profit and investment income was offset by a higher income tax charge, attributable to deferred tax credits recognised in the prior period which did not re-occur.

Basic earnings per share was 3.52 eurocents, compared to basic earnings per share of 3.40 eurocents in the prior year.

Cash flow and funding

Cash inflow from operating activities decreased by 2.7% to €6.3 billion (FY22 H1: €6.5 billion), with higher operating profit being more than offset by working capital movements and higher tax payments.

Borrowings less cash and cash equivalents increased by 9.4% to €68.5 billion, primarily driven by adverse foreign exchange movements on bonds and the accrual of interest in the period, recorded in Financing costs.

Current liquidity, which includes cash and equivalents and short-term investments, is €11.5 billion (€12.3 billion as at 31 March 2022). This includes €7.6 billion of net collateral which has been posted to Vodafone from counterparties as a result of positive mark-to-market movements on derivative instruments (€2.2 billion as at 31 March 2022).

The interim dividend per share is 4.5 eurocents (FY22 H1: 4.5 eurocents). The ex-dividend date for the interim dividend is 24 November 2022 for ordinary shareholders, the record date is 25 November 2022 and the dividend is payable on 3 February 2023.

Hyperinflationary accounting in Turkey

As anticipated and explained in the Group’s reporting for the year ended 31 March 2022, Turkey now meets the requirements to be designated as a hyperinflationary economy under IAS 29 ‘Financial Reporting in Hyperinflationary Economies’. The Group has therefore applied hyperinflationary accounting, as specified in IAS 29, for amounts reported by Vodafone Turkey for the period commencing 1 April 2022. See note 1 of the unaudited condensed consolidated financial statements for further information.

3

Vodafone Group Plc ⫶ H1 FY23 results

Strategy ⫶ Committed to improving returns through growth & portfolio action

Our strategy focuses on driving shareholder returns through growth, and is delivered through our customer commitments and enabling strategies. These work together towards our vision to become a new generation connectivity and digital services provider for Europe and Africa, enabling an inclusive and sustainable digital society.

We continued to make progress with our strategy during the first half of FY23 and highlights include: further deepening our customer relationships with lower customer churn; benefits from our increased capital investment with improvements in network quality; increasing penetration of financial services in Africa; and another successful year of digital enabled efficiencies. The table below includes a selection of KPIs that illustrates progress in our key areas of focus.

Customer commitments	Units	H1 FY23	H1 FY22
Best connectivity products & services
Europe mobile contract customers1	million	66.7	66.0
Europe broadband customers1	million	25.5	25.6
Europe Consumer converged customers1	million	9.3	8.3
Europe mobile contract customer churn	%	13.4	13.1
Africa mobile customers2	million	188.0	186.0
Africa data users2	million	90.2	88.6
Business service revenue growth*	%	2.6	1.2
Leading innovation in digital services
Europe TV subscribers1	million	21.7	22.2
IoT SIM connections3	million	152	136
Africa M-Pesa customers2	million	55.6	49.0
Africa M-Pesa transaction volume2	billion	11.9	9.3
Outstanding digital experiences
Digital channel sales mix4	%	26	24
End-to-end TOBi completion rate5 6	%	51	41
Enabling strategies
Leading gigabit networks
5G available in European cities1	#	344	244
Europe on-net gigabit capable connections1	million	50.1	46.5
Europe on-net NGN broadband penetration1	%	29	30
Simplified & most efficient operator
Europe markets where 3G switched off1	#	4	4

1. Including VodafoneZiggo | 2. Africa including Safaricom | 3. H1 FY23 includes an adjustment to our customer base to remove inactive SIMs | 4. Based on Germany, Italy, UK, Spain only | 5. Group excluding Egypt | 6. Defined as percentage of total customer contacts resolved without human interaction through TOBi

Our action plan to mitigate the current macroeconomic challenges includes price initiatives and an extension of our ongoing efficiency programme. Price initiatives have been implemented in 12 out of 13 European markets and include contractual price increases, reduced promotional discounts and new ARPU accretive product portfolios. We now have 7 European markets with inflation-linked pricing structures. The extension of our efficiency programme will generate over €1 billion of additional cost savings by FY26 through streamlining and simplifying our group-wide structure and further accelerating the digitalisation of our operations.

4

Vodafone Group Plc ⫶ H1 FY23 results

Our purpose ⫶ We connect for a better future

We believe that Vodafone has a significant role to play in contributing to the societies in which we operate and we want to enable an inclusive and sustainable digital society. We continue to make progress against our purpose strategy and provided a full update in our FY22 Annual Report on Form 20-F. Highlights and achievements from the first half of FY23 are summarised below.

Energy efficiency initiatives

The expansion of our networks and the significant increase in data traffic volumes means we now carry 7 times more mobile data compared to just five years ago, yet our total energy consumption has remained roughly consistent over the same period. We are committed to continually improving our energy efficiency, particularly the efficiency of our base station sites and our technology centres, which accounted for 96% of our total energy consumption in FY22.

Our strategy to optimise energy usage and improve energy efficiency includes modernising our networks. Between FY17 and FY22, the share of 4G and 5G traffic doubled on our network – and now accounts for over 90% of our mobile data traffic – as we shut down 3G networks in favour of more efficient 4G and 5G networks. In addition, we already put mobile radio capacity layers throughout Europe into low power modes during low traffic periods. We are now extending this functionality so that it operates 24 hours a day, 7 days a week, and we will continue to enhance this capability to maximise energy efficiency.

With respect to our passive infrastructure, we have been investing in power and cooling upgrades, IoT and smart metering. For example, we use AI-based algorithms to optimise cooling in 70 technology centres across Europe and Africa and we will increase our investment in passive infrastructure upgrades going forward. All these programmes are underpinned by our extensive energy data management and analytics system, which collects and stores data feeds from our electricity suppliers and from smart meters. This system is now live across 13 markets in Europe, with smart meters installed at 53,000 sites.

Sourcing renewable electricity

Following our energy purchasing hierarchy approach, we prioritise energy efficient practices, before moving on to on-site generation of renewable energy, renewable power purchase agreements (‘PPAs’) and Renewable Electricity Certificates (‘RECs’). Whilst on-site generation of renewable electricity accounted for less than 1% of our overall renewable energy consumption in FY22 due to technical and space constraints, we continue to drive innovation in this area. For example, our recent Renewable Power Challenge encouraged organisations to submit innovative solutions to the challenge of generating renewable power directly at our mobile base stations. We have shortlisted partners who develop microgrids in Africa and manufacturer micro wind turbines and will be supporting them as they develop proof of concepts to help us assess the feasibility and scalability of their solutions.

In Europe, we are expanding our PPA strategy and have now signed PPAs in Germany, Italy, UK, Spain and Greece, which address 15% of our FY23 electricity supply in Europe. These PPAs trade at a discount to current wholesale electricity prices and provide us with more economic certainty against potentially volatile wholesale electricity prices, as well as helping to create new renewable capacity. In Africa, Vodacom is pursuing numerous climate-related initiatives, including renewable energy powered rural sites and a pilot renewable energy solution in South Africa with the state-owned utility, Eskom.

Supporting customers in financial hardship

We are conscious of the cost-of-living pressures our customers are facing during this challenging macroeconomic period. We have implemented a cost-of-living plan, consisting of three elements: social or low-cost tariffs in all markets; extra measures to ensure our consumers and small businesses are supported, including our free V-Hub service for SMEs; and leveraging our technology & digital services to help customers reduce their energy usage.

The Spirit of Vodafone

Our employee survey measures progress on how our people experience our culture, engagement, and connection to our purpose. The results from the latest survey conducted in September show that our employee engagement index remained high at 76 (May 2022: 72) and 88% of employees feel that their daily work contributes to our purpose.

5

Vodafone Group Plc ⫶ H1 FY23 results

Financial performance ⫶ Resilient performance in Europe & Africa

● Group revenue increased by 2.0% to €22.9 billion, driven by service revenue growth and higher equipment sales

● Group service revenue trend impacted by declines in Germany, Italy and Spain, offset by acceleration in the UK and continued growth in Other Europe and Africa

● Service revenue growth in Turkey increased to 39.9%* (Q1: 35.8%*, Q2: 43.9%*), driven by higher inflation. Group service revenue growth excluding Turkey was 1.5%*

Group financial performance

	H1 FY231		H1 FY22		Reported
	€m		€m		change %
Revenue	22,930		22,489		2.0
- Service revenue	19,207		19,010		1.0
- Other revenue	3,723		3,479
Operating profit	2,935		2,620		12.0
Investment income	211		129
Financing costs	(1,418)		(1,473)
Profit before taxation	1,728		1,276
Income tax (expense)/credit	(485)		1
Profit for the financial period	1,243		1,277
Attributable to:
- Owners of the parent	986		996
- Non-controlled interests	257		281
Profit for the financial period	1,243		1,277
Basic earnings per share	3.52	c	3.40	c

Note:

1. The H1 FY23 results reflect average foreign exchange rates of €1:£0.85, €1:INR 81.27, €1:ZAR 16.88, €1:TRY 17.43 and €1:EGP 19.51.

6

Vodafone Group Plc ⫶ H1 FY23 results

Geographic performance summary

									Other				Other		Vantage		Common	Elimi-
	Germany		Italy		UK		Spain		Europe		Vodacom		Markets		Towers		Functions	nations	Group
H1 FY23	€m		€m		€m		€m		€m		€m		€m		€m		€m	€m	€m
Total revenue	6,592		2,377		3,392		1,965		2,894		3,202		1,953		657		696	(798)	22,930
Service revenue	5,730		2,125		2,712		1,782		2,552		2,472		1,721		—		268	(155)	19,207
Adjusted EBITDAaL	2,677		759		685		445		843		1,084		671		330		(250)
Adjusted EBITDAaL margin (%)	40.6	%	31.9	%	20.2	%	22.6	%	29.1	%	33.9	%	34.4	%	50.2	%

	FY22							FY23
Service revenue growth %	Q1	Q2	H1	Q3	Q4	H2	Total	Q1	Q2	H1
Germany	1.1	0.8	0.9	0.8	0.6	0.7	0.8	(0.5)	(1.1)	(0.8)
Italy	(3.9)	(1.6)	(2.8)	(1.6)	0.1	(0.8)	(1.8)	(2.2)	(3.4)	(2.8)
UK	5.3	4.7	5.0	6.3	8.9	7.6	6.3	8.3	6.9	7.6
Spain	0.5	(2.0)	(0.7)	(1.8)	(4.5)	(3.1)	(2.0)	(2.9)	(6.1)	(4.5)
Other Europe	4.9	2.7	3.8	3.5	0.7	2.1	2.9	2.1	1.9	2.0
Vodacom	18.5	14.6	16.5	11.0	10.6	10.8	13.5	7.8	9.9	8.9
Other Markets	(1.3)	10.0	4.3	7.6	(3.1)	2.1	3.3	(1.8)	(1.7)	(1.8)
Vantage Towers	—	—	—	—	—	—	—	—	—	—
Group	3.1	3.4	3.2	3.1	1.9	2.5	2.9	1.3	0.8	1.0

	FY22							FY23
Organic service revenue growth %*1	Q1	Q2	H1	Q3	Q4	H2	Total	Q1	Q2	H1
Germany	1.4	1.0	1.2	1.1	0.8	1.0	1.1	(0.5)	(1.1)	(0.8)
Italy	(3.6)	(1.4)	(2.5)	(1.3)	(0.8)	(1.0)	(1.8)	(2.3)	(3.4)	(2.8)
UK	2.5	0.6	1.2	0.9	2.0	1.4	1.3	6.5	6.9	6.7
Spain	0.8	(1.9)	(0.6)	(1.6)	(5.1)	(3.4)	(2.0)	(3.0)	(6.0)	(4.5)
Other Europe	4.2	2.4	3.3	2.9	2.7	2.8	3.0	2.5	2.9	2.7
Vodacom	7.9	3.1	5.4	4.4	3.1	3.7	4.6	2.9	4.8	3.9
Other Markets	18.4	19.7	19.1	19.8	19.8	19.8	19.4	24.7	26.7	25.7
Vantage Towers	—	—	—	—	—	—	—	—	—	—
Group	3.3	2.4	2.8	2.7	2.0	2.3	2.6	2.5	2.5	2.5

Note:

1. Organic service revenue growth is a non-GAAP measure. See page 46 for more information.

7

Vodafone Group Plc ⫶ H1 FY23 results

Germany ⫶ 30% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	6,592		6,447		2.2
- Service revenue	5,730		5,777		(0.8)	(0.8)
- Other revenue	862		670
Adjusted EBITDAaL	2,677		2,892		(7.4)	(7.4)
Adjusted EBITDAaL margin	40.6	%	44.9	%

Total revenue increased by 2.2% to €6.6 billion, driven by equipment sales.

On an organic basis, service revenue declined by 0.8%* (Q1: -0.5%*, Q2: -1.1%*), primarily reflecting broadband losses since H2 FY22, related to the implementation of new sector legislation.

Fixed service revenue declined by 1.6%* (Q1: -1.6%*, Q2: -1.7%*), driven by the lower broadband customer base, as a result of specific operational challenges related to the implementation of policies to comply with the new Telecommunications Act, which came into effect in December 2021. Our cable broadband customer base declined by 45,000 and we lost 38,000 DSL broadband customers during H1. Following improvements to both our IT systems and customer journeys, and the gradual unwind of churn related to the Telecommunications Act, the scale of customer losses continued to slow during Q2. In October, we announced an enhanced product portfolio, with customers now benefiting from up to five times higher upload speeds, flat rate phone calls, and no upfront connection fees, in return for a higher monthly fee. Gigabit speeds are available to 24 million households across our network.

Our TV customer base declined by 165,000 and our converged customer base decreased by 67,000 to 2.3 million Consumer converged accounts. These declines reflected the challenges related to compliance with the new sector legislation and fewer cross-selling opportunities.

Mobile service revenue increased by 0.2%* (Q1: 0.8%*, Q2: -0.4%*). Growth in the Business segment and an increase in roaming and visitor revenue was partly offset by lower MVNO revenues and a lower ARPU, reflecting mobile termination rate cuts and a change in the sales channel mix towards indirect and service providers. Towards the end of Q2 we reduced mobile promotions, supporting inflow ARPU. We added 71,000 contract customers during the period, and in Q2 our commercial momentum improved, supported by customer growth in Business and Consumer. We added a further 4.6 million IoT connections, driven by continued demand from the automotive sector.

Adjusted EBITDAaL declined by 7.4%*, reflecting the decline in service revenue, settlements in the prior year period which did not re-occur, and higher customer acquisition costs. The Adjusted EBITDAaL margin was 4.3* percentage points lower year-on-year at 40.6%.

We achieved our €425 million cost and capital expenditure synergy target for the integration of the Unitymedia assets acquisition in FY22, over two years ahead of plan.

On 17 October 2022, we announced we are creating a joint venture with Altice to deploy fibre-to-the-home (‘FTTH’) to up to 7 million homes over a six-year period. This partnership with Altice is complementary to our upgrade plans for our existing hybrid fibre cable network, which include bringing fibre closer to all connected homes through ‘node splitting’, DOCSIS 3.1 ‘high split’, and next generation technology advances, such as DOCSIS 4.0, which provide a path to 10Gbps speeds across our hybrid fibre cable network over time. The transaction is subject to customary conditions, including regulatory approval and is expected to close in the first half of 2023.

8

Vodafone Group Plc ⫶ H1 FY23 results

Italy ⫶ 11% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	2,377		2,507		(5.2)
- Service revenue	2,125		2,187		(2.8)	(2.8)
- Other revenue	252		320
Adjusted EBITDAaL	759		917		(17.2)	(17.3)
Adjusted EBITDAaL margin	31.9	%	36.6	%

Total revenue declined 5.2% to €2.4 billion due to lower service revenue and equipment sales.

Service revenue declined by 2.8%* (Q1: -2.3%*, Q2: -3.4%*), as a result of continued price pressure in the mobile value segment. The slowdown in quarterly trends was due to the migration of PostePay MVNO customers onto our network in the prior year, partly offset by robust Business demand.

Mobile service revenue declined by 5.2%* (Q1: -4.7%*, Q2: -5.6%*) as a result of promotional intensity in the mobile value segment and a lower active prepaid customer base. The quarter-on-quarter slowdown was due to the migration of PostePay MVNO customers onto our network in the prior year, partly offset by improving ARPU following our targeted pricing actions. Our second brand ‘ho.’ continued to grow and now has 2.9 million customers.

Fixed service revenue increased by 3.4%* (Q1: 4.2%*, Q2: 2.6%*), supported by robust Business demand for digital services. We added 23,000 fixed-wireless access customers in the period, which are included in our mobile customer base. Our Consumer converged customer base now stands at 1.3 million, an increase of 31,000 during the period, and 55% of our broadband customers are converged.

Our next generation network (‘NGN’) broadband services are now available to 25.9 million households, including 9.3 million through our own network and our partnership with Open Fiber. In October, we launched 5G fixed-wireless services and cover around 2 million households, which will increase to over 3 million by the end of the financial year. This complements our 4G fixed-wireless access products, which covers over 2 million additional households.

Adjusted EBITDAaL declined by 17.3%* including a 10.7 percentage point decline relating to a €105 million legal settlement received in the prior year period. Excluding the impact of the prior year legal settlement, Adjusted EBITDAaL declined as a result of lower mobile service revenue, partly offset by continued cost reductions. The Adjusted EBITDAaL margin was 4.7* percentage points lower year-on-year at 31.9%.

9

Vodafone Group Plc ⫶ H1 FY23 results

UK ⫶ 14% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	3,392		3,161		7.3
- Service revenue	2,712		2,521		7.6	6.7
- Other revenue	680		640
Adjusted EBITDAaL	685		638		7.4	6.6
Adjusted EBITDAaL margin	20.2	%	20.2	%

Total revenue increased by 7.3% to €3.4 billion driven by service revenue growth and an appreciation of the pound sterling against the euro.

On an organic basis, service revenue increased by 6.7%* (Q1: 6.5%*, Q2: 6.9%*). Consumer performance was supported by customer base growth and contractual annual price increases, as well as higher MVNO, roaming and visitor revenue. The improvement in quarterly trends was supported by the return to growth of our Business segment, partly offset by lower wholesale revenue.

Mobile service revenue grew by 10.5%* (Q1: 10.3%*, Q2: 10.8%*), driven by commercial momentum and annual price increases in Consumer, as well as higher roaming and visitor revenue. We continued to grow our customer base, supported by our flexible proposition Vodafone ‘Evo’ and despite implementing price actions, added 76,000 contract customers during the period. Contract churn remained broadly stable year-on-year at 12.7%. Our digital prepaid sub-brand ‘VOXI’ continued to grow, and had its best ever sales month in September following a successful seasonal campaign, adding 72,000 new customers during H1. Our digital sales mix improved by 4 percentage points year-on-year to 37% of total sales in the period.

Fixed service revenue declined by 2.8%* (Q1: -2.7%*, Q2: -2.9%*) as growth in our Consumer segment was offset by a decline in Business service revenue due to lower project activity. Consumer growth was supported by price actions, demand for our Vodafone ‘Pro Broadband’ product and continued penetration of our fibre-to-the-premises product. Our broadband customer base increased by 61,000 during the period and we now have over 1.1 million broadband customers, of which 54% are converged. Through our partnerships with CityFibre and Openreach we are able to reach over 9 million households with full fibre broadband, more than any other provider in the UK.

Adjusted EBITDAaL grew by 6.6%*, reflecting growth in service revenue, slightly offset by an increase in our operating expenses due to inflationary pressures, including energy. Our Adjusted EBITDAaL margin was stable year-on-year at 20.2%.

On 3 October 2022, we confirmed that we are in discussions with CK Hutchison Holdings Limited (‘CK Hutchison’) in relation to a possible combination of Vodafone UK and Three UK. The envisaged transaction would entail us combining our UK business with Three UK, with Vodafone owning 51% and CK Hutchison owning 49% of the combined business. There can be no certainty that any transaction will ultimately be agreed.

10

Vodafone Group Plc ⫶ H1 FY23 results

Spain ⫶ 9% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	1,965		2,090		(6.0)
- Service revenue	1,782		1,866		(4.5)	(4.5)
- Other revenue	183		224
Adjusted EBITDAaL	445		445		—	0.2
Adjusted EBITDAaL margin	22.6	%	21.3	%

Total revenue declined by 6.0% to €2.0 billion due to lower service revenue and equipment sales.

On an organic basis, service revenue declined by 4.5%* (Q1: -3.0%*, Q2: -6.0%*) driven by continued growth in the value segment, a lower customer base, and a reduction in mobile termination rates, partly offset by higher visitor revenue. The slowdown in quarterly service revenue trends was largely due to price increases implemented in Q2 last year, as well as the phasing of Business revenue and lower wholesale revenue.

The market remained highly competitive in the value segment. In mobile, our contract customer base was impacted by disconnections of 123,000 relating to temporary business SIMs provided to schools and higher education providers during the pandemic. Excluding these, our mobile contract customer base would have grown by 97,000 in H1.

In June 2022, we launched a new product portfolio, focusing on simplified and more transparent tariff plans to further improve customer loyalty. This has had a positive impact on both our commercial momentum and ARPU. Mobile contract churn in our Consumer segment has also improved by 3.6 percentage points year-on-year. In September 2022, we announced that tariffs will be increased in line with inflation for Consumer, SME and SOHO customers on the main Vodafone brand in Q4 and on an annual basis thereafter.

Our broadband customer base declined by 40,000 and our TV customer base decreased by 10,000 as a result of continued competitive intensity in the low value segment. However, our converged customer base increased by 7,000 to over 2.2 million.

We continue to see demand for our Business products, including a significant number of registration requests to the digital toolkit platform launched by the Spanish government in March 2022 as part of the EU recovery and resilience funding initiatives. This scheme enables businesses to access fully subsidised digital services on a single platform, with Vodafone being the orchestrator of their access to these digital services. Due to delays with the approval process, the first phase of the digital toolkit has been extended. The second and third phases, aimed at smaller businesses, were subsequently launched in September and October 2022.

Adjusted EBITDAaL grew by 0.2%*, as tax benefits (including refunds) and ongoing cost efficiencies offset lower service revenue. The Adjusted EBITDAaL margin was 1.4* percentage points higher year-on-year at 22.6%.

11

Vodafone Group Plc ⫶ H1 FY23 results

Other Europe ⫶ 13% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	2,894		2,810		3.0
- Service revenue	2,552		2,502		2.0	2.7
- Other revenue	342		308
Adjusted EBITDAaL	843		836		0.8	1.5
Adjusted EBITDAaL margin	29.1	%	29.8	%

Total revenue increased by 3.0% to €2.9 billion largely driven by service revenue growth.

On an organic basis, service revenue increased by 2.7%* (Q1: 2.5%*, Q2: 2.9%*), with growth in all markets other than Romania, which was impacted by a mobile termination rate reduction.

In Portugal, service revenue grew and we added 97,000 mobile contract customers and 27,000 fixed broadband customers during the period. On 30 September 2022, we announced that we had entered into an agreement to buy Portugal’s fourth largest converged operator, Nowo Communications, from Llorca JVCO Limited, the owner of Masmovil Ibercom S.A.. The transaction is conditional on regulatory approval, with completion expected in the first half of the 2023 calendar year.

In Ireland, service revenue increased due to customer base growth, higher roaming and visitor revenue, and contractual price increases. During the period, our mobile contract customer base increased by 28,000 and mobile contract loyalty remained solid, with churn at 9.6%. Our broadband customer base grew by 10,000 and broadband churn decreased by 2.0 percentage points year-on-year to 16.0%. In October 2022, we announced that we had agreed a wholesale network access agreement with Virgin Media Ireland. Vodafone is already the largest fibre-to-the-home provider in Ireland, covering over 1 million households, and this agreement will further extend our footprint and provide customers with even more choice.

Service revenue in Greece increased, reflecting higher roaming and visitor revenue and growth in Business fixed. During the period, we added 49,000 mobile contract customers and broadband customer loyalty improved, with churn decreasing by 0.7 percentage points year-on-year to 11.2%.

Adjusted EBITDAaL increased by 1.5%* as revenue growth was partially offset by higher taxes in Hungary, and higher customer acquisition and energy costs. The Adjusted EBITDAaL margin decreased by 0.7* percentage points year-on-year at 29.1%.

On 22 August 2022, we announced that we had entered into heads of terms with 4iG Public Limited Company and Corvinus Zrt in relation to the potential sale of 100% of Vodafone Hungary for a total cash consideration equivalent to an enterprise value of €1.8 billion. The transaction is subject to completion of confirmatory due diligence, the agreement of binding transaction documentation and regulatory approval.

12

Vodafone Group Plc ⫶ H1 FY23 results

Vodacom ⫶ 13% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	3,202		2,928		9.4
- Service revenue	2,472		2,271		8.9	3.9
- Other revenue	730		657
Adjusted EBITDAaL	1,084		1,062		2.1	(1.6)
Adjusted EBITDAaL margin	33.9	%	36.3	%

Total revenue increased by 9.4% to €3.2 billion and Adjusted EBITDAaL increased by 2.1%, primarily due to the strengthening of the local currencies versus the euro.

On an organic basis, Vodacom’s service revenue grew by 3.9%* (Q1: 2.9%*, Q2: 4.8%*) with growth in both South Africa and Vodacom’s international markets. Growth accelerated in Q2 due to a robust performance in Vodacom’s international markets.

In South Africa, service revenue growth was supported by contract price increases, partially offset by lower wholesale revenue and disruptions to the payment of social grants which impacted consumer discretionary spending. We added 113,000 mobile contract customers during the period, supported by consistent growth in both the Consumer and Business segments. Across the overall active customer base, 72% of our mobile customers now use data services. Financial Services revenue in South Africa grew by 8.1%* to €82 million, supported by demand for our insurance services. Our VodaPay ‘super-app’ has now reached 2.2 million registered users one year after its launch.

In Vodacom’s international markets, service revenue growth was supported by higher M-Pesa transaction volumes, notably in Tanzania in Q2, following reductions in levies on mobile money transactions introduced in the prior year. Growth was also supported by a higher customer base and continued growth in data revenue. M-Pesa revenue as a share of service revenue is now at 24.1%, which is 1.3 percentage points higher compared to the prior year. M-Pesa transaction volume increased by 28.5% over the same period. Our mobile customer base now stands at 43.9 million with 60.9% of our active customer base using data services.

Vodacom’s Adjusted EBITDAaL declined by 1.6%* as service revenue growth was offset by an increase in technology operating expenses as we continued to improve the resilience of our network, higher investment in customer growth, and inflationary cost increases. The Adjusted EBITDAaL margin decreased by 2.2* percentage points to 33.9%.

In November 2021, Vodacom Group announced it had entered into an agreement to acquire Vodafone’s 55.0% shareholding in Vodafone Egypt for a total consideration of €2.4 billion. Following the transaction, Vodafone Group’s ownership in Vodacom Group will increase from 60.5% to 65.1%. The transaction has received regulatory approval from the National Telecom Regulatory Authority of Egypt, and the required exemptions from Egypt’s Financial Regulatory Authority. It is anticipated that the remaining conditions will be fulfilled soon, following which the transaction can complete.

Last year, Vodacom announced that it had agreed to acquire a co-controlling 30% interest in the fibre assets currently owned by Community Investment Ventures Holdings (Pty) Limited (‘CIVH’). CIVH owns Vumatel and Dark Fibre Africa, which are South Africa’s largest open access fibre operators. Vodacom’s investment and strategic support will further accelerate the growth trajectory of fibre roll-out in South Africa helping close the digital divide. The transaction recently received approval to proceed from South Africa’s Independent Communications Authority and remains subject to regulatory approval from the country’s Competition Commission.

13

Vodafone Group Plc ⫶ H1 FY23 results

Other Markets ⫶ 9% of Group service revenue

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	1,953		1,958		(0.3)
- Service revenue	1,721		1,752		(1.8)	25.7
- Other revenue	232		206
Adjusted EBITDAaL	671		683		(1.8)	28.2
Adjusted EBITDAaL margin	34.4	%	34.9	%

Total revenue decreased by 0.3% to €2.0 billion due to the depreciation of local currencies versus the euro, notably with respect to the Turkish lira.

On an organic basis, service revenue continued to grow at 25.7%* (Q1: 24.7%*, Q2: 26.7%) reflecting a higher contribution from Turkey, impacted by accelerating inflation, as well as customer base and ARPU growth.

Service revenue growth in Turkey was driven by continued customer base growth, higher visitor revenue, and ongoing repricing actions to reflect increasing inflation in a challenging macroeconomic environment. We maintained our commercial momentum, with 768,000 mobile contract net additions in the period, including migrations from prepaid customers. Customer loyalty rates continued to improve, with mobile contract churn down by 3.3 percentage points year-on-year to 12.4%.

Service revenue in Egypt continued to grow, reflecting customer base growth and increased data usage. During the period, we added 1.8 million prepaid mobile customers.

Adjusted EBITDAaL increased by 28.2%* despite the inflationary pressure on our cost base due to worsening macroeconomic conditions. The Adjusted EBITDAaL margin decreased by 0.6* percentage points year-on-year to 34.4%.

Hyperinflationary accounting in Turkey

Turkey now meets the requirements to be designated as a hyperinflationary economy under IAS 29 ‘Financial Reporting in Hyperinflationary Economies’. The Group has therefore applied hyperinflationary accounting, as specified in IAS 29, for the period commencing 1 April 2022. See note 1 ‘Basis of preparation’ in the unaudited condensed consolidated financial statements for more information.  

During the period, service revenue in Turkey increased by 39.9%* and Adjusted EBITDAaL grew by 47.7%* due to ongoing repricing actions to reflect increasing inflation. Organic growth metrics exclude the impact of the hyperinflation adjustment in the period in Turkey. Group service revenue growth excluding Turkey was 1.5%* (Q1: 1.6%*, Q2: 1.4%*).

Vantage Towers

	H1 FY23		H1 FY22		Reported	Organic
	€m		€m		change %	change %*
Total revenue	657		611		7.5
- Service revenue	—		—		—	—
- Other revenue	657		611
Adjusted EBITDAaL	330		305		8.2	8.6
Adjusted EBITDAaL margin	50.2	%	49.9	%

Total revenue increased to €657 million, with 710 new tenancies added during the period, bringing the tenancy ratio to 1.45x. Vantage Towers reached a number of new partnership agreements with customers during the first half of FY23. Vantage Towers reported its results on 14 November 2022.

On 9 November 2022, we announced that we had entered into a strategic co-control partnership with GIP and KKR for Vantage Towers. A new JV will hold our 81.7% stake in Vantage Towers and will make a voluntary takeover offer for the outstanding Vantage Towers shares held by minority shareholders.

See note 13 ‘Subsequent events’ in the unaudited condensed consolidated financial statements for more information.

14

Vodafone Group Plc ⫶ H1 FY23 results

Associates and joint ventures

	H1 FY23	H1 FY22
	€m	€m
VodafoneZiggo Group Holding B.V.	162	(14)
Safaricom Limited	110	115
Indus Towers Limited	—	—
Other (including TPG Telecom Limited)	71	10
Share of results of equity accounted associates and joint ventures	343	111

VodafoneZiggo Joint Venture (Netherlands)

The results of VodafoneZiggo, in which Vodafone owns a 50% stake, are reported here under US GAAP, which is broadly consistent with Vodafone’s IFRS basis of reporting.

Total revenue remained stable at €2.0 billion, as mobile contract customer base growth, higher roaming revenue and contractual price increases were offset by a decline in the fixed Consumer customer base.

During the period, VodafoneZiggo added 117,000 mobile contract customers, supported by our best-in-class net promoter score and higher Consumer demand. VodafoneZiggo’s broadband customer base declined by 12,000 customers to 3.3 million due to increased price competition. The number of converged households increased by 11,000, with 38% of broadband customers now converged, delivering significant NPS and customer loyalty benefits. VodafoneZiggo now offers 1 gigabit speeds to 6.8 million homes and is on track to provide nationwide coverage by the end of 2022.

During the period, Vodafone received €90 million in dividends from the joint venture, as well as €26 million in interest payments.

Safaricom Associate (Kenya)

Safaricom service revenue grew to €1.2 billion due to a higher customer base and continued growth in M-Pesa revenue. During H1, Vodafone received €183 million in dividends from Safaricom.

Indus Towers Limited Associate (India)

Following the sale of shares in Indus Towers Limited (‘Indus Towers’) in February and March 2022, the Group holds 567.2 million shares in, equivalent to a 21.0% shareholding.

The Group’s interest in Indus Towers has been provided as security against certain bank borrowings secured against Indian assets and ranking behind this security, as a pledge provided to Indus Towers under the terms of the merger between Indus Towers and Bharti Infratel. Indus Towers has been classified as held for sale in the consolidated statement of financial position since 31 March 2021 and the Group’s share of Indus Towers’ results is not reflected in the Group’s consolidated income statement for H1 2023.

Vodafone Idea Limited Joint Venture (India)

On 31 March 2022, Vodafone Idea completed an equity capital raise, with the Group contributing INR33.75 billion using the proceeds realised from the sale of shares in Indus in February and March 2022. Following the capital raise, the Group’s holding in Vodafone Idea is equivalent to a 47.6% shareholding. On 25 July 2022, the residual proceeds from the sale of such shares in Indus of INR4.36 billion were contributed to Vodafone Idea in exchange for warrants convertible to equity within 18 months.

See Note 12 ‘Contingent liabilities and legal proceedings’ in the unaudited condensed consolidated financial statements for more information’

TPG Telecom Limited Joint Venture (Australia)

Vodafone Group owns an economic interest of 25.05% in TPG Telecom Limited, a fully integrated telecommunications operator in Australia. Hutchison Telecommunications (Australia) Limited owns an equivalent economic interest of 25.05%, with the remaining 49.9% listed as free float on the Australian stock exchange. The Vodafone Group also holds a 50% share of a US$3.5 billion loan facility held within the structure that holds the Group’s equity stake in TPG Telecom.

15

Vodafone Group Plc ⫶ H1 FY23 results

Net financing costs

	H1 FY23	H1 FY22	Reported
	€m	€m	change %
Investment income	211	129
Financing costs	(1,418)	(1,473)
Net financing costs	(1,207)	(1,344)	10.2
Adjustments for:
Mark-to-market losses	41	397
Foreign exchange losses	299	56
Adjusted net financing costs1	(867)	(891)	2.7

Note:

1. Adjusted net financing costs is a non-GAAP measure. Adjusted net financing costs exclude mark-to-market and foreign exchange gains/losses.

Net financing costs decreased by €137 million, primarily due to lower mark-to-market losses on options held relating to the Group’s mandatory convertible bonds partially offset by increased foreign exchange losses. Adjusted net financing costs remained broadly stable year-on-year, reflecting consistent average borrowing balances and weighted average borrowing costs for both periods.

Taxation

	H1 FY23		H1 FY22		Change
	%		%		pps
Effective tax rate	28.1	%	(0.1)	%	28.2

The Group’s effective tax rate for H1 FY23 was 28.1%.

The effective tax rate for H1 FY22 included an increase in our deferred tax assets in the UK of €498 million following the increase in the corporate tax rate to 25% and €274 million following the revaluation of assets for tax purposes in Italy. It also included €155 million relating to the use of losses in Luxembourg.

Earnings per share

					Reported
	H1 FY23		H1 FY22		change
	eurocents		eurocents		eurocents
Basic earnings per share	3.52	c	3.40	c	0.12	c

Basic earnings per share was 3.52 eurocents, compared to 3.40 eurocents for H1 FY22.

16

Vodafone Group Plc ⫶ H1 FY23 results

Cash flow and funding

Analysis of cash flow

	H1 FY23	H1 FY22	Reported
	€m	€m	change %
Inflow from operating activities	6,280	6,455	(2.7)
Outflow from investing activities	(4,089)	(2,811)	(45.5)
Outflow from financing activities	(2,993)	(3,795)	21.1
Net cash outflow	(802)	(151)	(431.1)
Cash and cash equivalents at beginning of the financial period	7,371	5,790
Exchange gain on cash and cash equivalents	282	11
Cash and cash equivalents at end of the financial period1	6,851	5,650

Note:

1. Comprises cash and cash equivalents as presented in the consolidated statement of financial position of €7,072 million (€5,824 million as at 30 September 2021), together with overdrafts of €226 million (€174 million as at 30 September 2021) and €5 million (€nil as at 30 September 2021) of cash and cash equivalents included within assets held for sale.

Cash inflow from operating activities decreased to €6,280 million which reflects higher operating profit, more than offset by working capital movements and higher taxation payments.

Outflow from investing activities increased by 45.5% to €4,089 million, primarily in relation to a lower net inflow in respect of short-term investments, which outweighed higher spend on property, plant and equipment. Short-term investments include highly liquid government and government-backed securities and managed investment funds that are in highly rated and liquid money market investments with liquidity of up to 90 days.

Outflows from financing activities decreased by 21.1% to €2,993 million. Higher inflows from the net movement in short term borrowings arising from collateral receipts outweighed lower proceeds from the issue of long-term borrowings and higher repayment of borrowings, the latter largely resulting from the repayment of debt in relation to licenses and spectrum, notably in Italy.

Borrowings and cash position

	Period-end FY23	Year-end FY22	Reported
	€m	€m	change %
Non-current borrowings	(59,907)	(58,131)	��
Current borrowings	(15,675)	(11,961)
Borrowings	(75,582)	(70,092)
Cash and cash equivalents	7,072	7,496
Borrowings less cash and cash equivalents	(68,510)	(62,596)	(9.4)

Borrowings principally includes bonds of €50,256 million (€48,031 million as at 31 March 2022), lease liabilities of €12,022 million (€12,539 million as at 31 March 2022) and cash collateral liabilities €8,395 million (€2,914 million as at 31 March 2022).

The increase in borrowings of €5,490 million was principally driven by an increase in collateral liabilities of €5,481 million and adverse foreign exchange movements on bonds of €3,109 million, which were partially offset by a decrease in spectrum liabilities of €1,899 million.

17

Vodafone Group Plc ⫶ H1 FY23 results

Funding facilities

As at 30 September 2022, the Group had undrawn revolving credit facilities of €8.1 billion comprising euro and US dollar revolving credit facilities of €4.0 billion and US$4.0 billion (€4.1 billion) which mature in 2025 and 2027 respectively. Both committed revolving credit facilities support US and euro commercial paper programmes of up to US$15 billion and €10 billion respectively.

Post employment benefits

As at 30 September 2022, the Group’s net surplus of scheme assets over scheme liabilities was €212 million (€274 million net surplus as at 31 March 2022). See note 10 ‘Post employment benefits’ in the unaudited condensed consolidated financial statements for more information.

Dividends

Dividends will continue to be declared in euros, aligning the Group’s shareholder returns with the primary currency in which we generate cash flow, and paid in euros, pounds sterling and US dollars. The foreign exchange rate at which future dividends declared in euros will be converted into pounds sterling and US dollars will be calculated based on the average World Markets Company benchmark rates over the five business days during the week prior to the payment of the dividend.

The Board has announced an interim dividend per share of 4.50 eurocents (H1 FY22: 4.50 eurocents). The ex-dividend date for the interim dividend is 24 November 2022 for ordinary shareholders, the record date is 25 November 2022 and the dividend is payable on 3 February 2023. Dividend payments on ordinary shares will be paid directly into a nominated bank or building society account.

18

Vodafone Group Plc ⫶ H1 FY23 results

Statement of financial position

The consolidated statement of financial position is set out on page 32. Details on the major movements of both our assets and liabilities in the year are set out below.

Assets

Goodwill and other intangible assets decreased by €1.5 billion between 31 March 2022 and 30 September 2022 to €51.7 billion. This primarily reflects the amortisation of computer software and licence and spectrum fees, partially offset by additions in the period.

Property, plant and equipment decreased by €1.0 billion between 31 March 2022 and 30 September 2022 to €39.8 billion. This principally reflected foreign exchange movements and depreciation charges whilst the impact of the classification of Vodafone Hungary as held for sale was offset by the adoption of hyperinflationary accounting in Turkey.

Other non-current assets increased by €4.2 billion between 31 March 2022 and 30 September 2022 to €35.6 billion, primarily due to a €4.5 billion increase in trade and other receivables driven by movements on derivative financial instruments arising from changes in foreign exchange and interest rates, partially offset by a decrease of €0.4 billion in deferred tax assets.  

Current assets increased by €0.2 billion between 31 March 2022 and 30 September 2022 to €27.8 billion. This was primarily due to an increase of €0.5 billion in trade and other receivables and an increase of €0.2 billion in inventory, partly offset by a decrease of €0.4 billion in cash and cash equivalents and a decrease of €0.1 billion in other investments.

Assets held for sale as at 30 September 2022 comprised (i) Vodafone Hungary and (ii) the Group’s interest in Indus Towers. Further detail is provided in note 4 ‘Assets and liabilities held for sale’ to the unaudited condensed consolidated financial statements.

Total equity and liabilities

Total equity increased by €0.8 billion between 31 March 2022 and 30 September 2022 to €57.7 billion, primarily due to (i) comprehensive income for the period of €1.7 billion, (ii) an opening balance adjustment of €0.6 billion for the adoption of hyperinflationary accounting in Turkey (see below) and (iii) share-based payments of €0.1 billion. These increases were offset by €1.6 billion of dividends paid to the Group’s shareholders.

Non-current liabilities increased by €1.9 billion between 31 March 2022 and 30 September 2022 to €65.2 billion, primarily due to a €1.8 billion increase in borrowings and a €0.2 billion increase in deferred tax liabilities.

Current liabilities increased by €0.6 billion between 31 March 2022 and 30 September 2022 to €34.2 billion, primarily due to a €3.7 billion increase in borrowings, offset by a €3.0 billion decrease in trade and other payables.

Inflation

Turkey now meets the requirements to be designated as a hyperinflationary economy under IAS 29 ‘Financial Reporting in Hyperinflationary Economies’. See note 1 ‘Basis of preparation’ in the unaudited condensed consolidated financial statements for more information and for a summary of the impact on the financial results of the Group for the six month period ended 30 September 2022.

19

Vodafone Group Plc ⫶ H1 FY23 results

Other significant developments

Board changes

At the Annual General Meeting on 26 July 2022, shareholder approval was obtained for the appointment of Stephen A. Carter, Delphine Ernotte Cunci and Simon Segars as non-executive directors.

Executive Committee changes

On 30 June 2022, Hannes Ametsreiter stepped down from his role as CEO of Vodafone Germany and as a member of the Group Executive Committee. On 1 July 2022, Philippe Rogge became CEO of Vodafone Germany and a member of the Group Executive Committee.

On 29 September, the Group announced the following changes to the Executive Committee:

- Rosemary Martin, Group General Counsel and Company Secretary, will retire on 31 March 2023.

- Maaike de Bie, currently Group General Counsel and Company Secretary at easyJet plc, will become Group General Counsel and Company Secretary on 1 March 2023 and will join the Executive Committee.

- Johan Wibergh, Group Chief Technology Officer, will retire on 31 December 2022.

- Scott Petty, currently Digital & IT Director, will become Group Chief Technology Officer on 1 January 2023 and will join the Executive Committee.

- Alberto Ripepi, Group Chief Network Officer, will join the Executive Committee on 1 January 2023.

On 14 November 2022, the Group announced that Christine Ramon will be appointed as a non-executive director with immediate effect.

Vodafone Hungary

On 22 August 2022, the Group announced that it had entered into heads of terms with 4iG Public Limited Company and Corvinus Zrt (a Hungarian state holding company) in relation to the potential sale of 100% of Vodafone Hungary for a total cash consideration equivalent to an enterprise value of HUF 715 billion (€1.8 billion).

The transaction is subject to completion of confirmatory due diligence, the agreement of binding transaction documentation and regulatory approval.

Vodafone Portugal

On 30 September 2022, the Group announced that Vodafone Portugal had entered into an agreement to purchase Cabonitel S.A., the owner of Nowo. The transaction is conditional on regulatory approval, with completion expected in the first half of 2023. Nowo is the 4^th largest converged operator in Portugal, with approximately 250,000 mobile subscribers, 140,000 fixed customers and 1 million homes connected.

Vodafone UK

On 3 October 2022, the Group noted press speculation in relation to Vodafone UK and Three UK. The Group confirmed that it is in discussions with CK Hutchison in relation to a possible combination of Vodafone UK and Three UK. The envisaged transaction would involve both companies combining their UK businesses, with Vodafone owning 51% and CK Hutchison owning 49% of the combined business. There can be no certainty that any transaction between the two companies will ultimately be agreed.

Vantage Towers

On 9 November 2022, the Group announced that it had entered into a strategic co-control partnership with GIP and KKR for Vantage Towers. A new JV will hold our 81.7% stake in Vantage Towers and will make a voluntary takeover offer for the outstanding Vantage Towers shares held by minority shareholders. See note 13 ‘Subsequent events’ in the unaudited condensed consolidated financial statements for more information.

20

Vodafone Group Plc ⫶ H1 FY23 results

Risk factors

The key factors and uncertainties that could have a significant effect on the Group’s financial performance, include the following:

Cyber threat

An external cyber-attack, insider threat or supplier breach could cause service interruption or the loss of confidential data.

Supply chain disruption

Disruption in our supply chain could mean that we are unable to execute our strategic plans, resulting in increased cost and reduced choice as well as service quality.

Adverse political and policy environment

An adverse political and policy environment could impact our strategy and result in increased costs, create competitive disadvantage or have a negative impact on our return on capital employed.

Strategic transformation

Failure to effectively execute the transformational activities to deliver on our strategy could result in loss of business value and/or additional cost.

Disintermediation

Failure to effectively respond to threats from emerging technology or disruptive business models could lead to a loss of customer relevance, market share and new/existing revenue streams.

Adverse changes in macroeconomic conditions

Adverse changes to economic conditions could result in reduced consumer spending, higher interest rates, adverse inflation, or foreign exchange rates. Adverse conditions could also lead to limited debt refinancing options and/or increase in costs.

Infrastructure competitiveness

Failure to meet customers’ expectations with best available broadband technology in our fixed and mobile networks could lead to loss of revenue.

Portfolio transformation

Failure to effectively execute on plans to transform and shape the portfolio could result in failure to deliver growth in revenue and improved returns.

Adverse market conditions

Increasing competition could lead to price wars, reduced margins, loss of market share and/or damage to market value.

Technology resilience and future readiness

Network, IT or platform outages and/or any delays delivering our IT modernisation programme could lead to dissatisfied customers and/or impact revenue.

Watchlist risks

Our watchlist risk process enables us to monitor material risks to Vodafone Group which fall outside of our top principal risks list. These include, but are not limited to:

Legal compliance

The legal compliance risk is made up of multiple sub-risks (sanctions and trade controls, competition law, anti-bribery and anti-money laundering). Controls are in place to monitor and manage these risks and for compliance with the relevant regulations and legislation.

21

Vodafone Group Plc ⫶ H1 FY23 results

Risk factors

Data management and privacy

As data volumes continue to grow and regulatory and customer scrutiny increases, it is important that we manage our data and privacy risks effectively.

Electromagnetic field (‘EMF’)

The health and safety of our customers and the wider public has always been, and continues to be, a priority for us. We know that some people are concerned about whether there are risks to health from mobile phones and radio masts. We refer to the current body of scientific evidence so that the services and products we provide are within prescribed safety limits and adhere to all relevant standards and national laws.

Climate change

As part of our commitment to operate ethically and sustainably, we are dedicated to understanding climate-related risks and opportunities and embedding responses to these into our business strategy and operations.

Emerging risks

We have a number of uncertainties where an emerging risk may potentially impact us in the longer term. In some cases, there may be insufficient information to understand the likelihood, impact or velocity of the risk. We also might not be able to fully define a mitigation plan until we have a better understanding of the threat.

We continue to identify new emerging risk trends, using the input from analysis of the external environment. Furthermore, we have strengthened the identification process by involving our functional experts and our global risk community in this emerging risk scanning exercise.

Once the emerging risks are prioritised by the functional experts, scenarios are created to assist in the analysis of each risk. These emerging risks and scenarios are provided to the Risk and Compliance Committee and the Audit and Risk Committee for further scrutiny. During the period, three additional emerging risks were added to our list:

- Inflation (beyond a three-year period);

- Generation Z as customers; and

- Disintermediation (beyond a three-year period).

Macro factors affecting the risk profile

Whilst the Group does not have significant operations in either Russia or Ukraine, Vodafone continues to monitor any potential impacts for the Group and its business. Various countries have implemented trade restrictions, economic measures and financial sanctions against Russia. These measures, together with the wider effects of the war, is having a negative impact on macroeconomic conditions, give rise to regional instability, increase costs, and disrupt supply chains.

22

Vodafone Group Plc ⫶ H1 FY23 results

Regulation

Introduction

Our operating companies are generally subject to regulation governing their business activities. Such regulation typically takes the form of industry-specific law and regulation covering telecommunications services and general competition (antitrust) law applicable to all activities. The following section describes the regulatory frameworks and the key regulatory developments at national and regional level and in the European Union (‘EU’), in which we had significant interests during the period ended 30 September 2022. Many of the regulatory developments reported in the following section involve ongoing proceedings or consideration of potential proceedings that have not reached a conclusion. Accordingly, we are unable to attach a specific level of financial risk to our performance from such matters.

European Union (‘EU’)

The European Electronic Communications Code (‘Code’) has updated the telecoms regulatory framework in Europe. The transposition process was due in December 2020 across all the Member States, but it has experienced delays in several countries. As a consequence, the European Commission (‘EC’) started infringement procedures against the remaining Member States at the same time, and afterwards referred the breach to the Court of Justice of the European Union (‘CJEU’). As of 30 September 2022, (within our footprint) the respective law remains in the review process in Ireland, with all other markets having transposed the Code. Additionally, outside of the EU, Albania is consulting on the transposition of the Code into Albanian legislation, with aim to fully align Albanian telecommunications legislation with the EU, as part of the Integration package for the accession of Albania into the EU.

Addressing the challenges posed by the COVID-19 pandemic, the Next Generation EU package is the Union’s means to support the recovery processes in EU Member States. The bulk of the proposed recovery measures are funded by a new temporary recovery instrument, the EU Recovery and Resilience Facility (‘RRF’), worth nearly €750 billion, which was adopted in December 2020. A significant amount is allocated towards digital and green initiatives, with a minimum threshold of 20% of the RRF to be allocated to digital and 37% to green initiatives. As of 30 September 2022, the EC had approved the national plans under the RRF for 25 EU Member States, of which Czech Republic, Germany, Greece, Ireland, Italy, Portugal, Romania and Spain are within Vodafone’s footprint.

In March 2021, the EC published a ‘Connectivity Toolbox’, a set of best practices for timely rolling out 5G and fast broadband. In July 2022, the EC published a report into the implementation of the elements of the Toolbox by Member States. However, there are delays to the implementation of the best practices, with two-thirds of the Member States still pending the implementation of Toolbox measures specific to permits, and 11 Member States have rejected the best practice proposal of introducing a single point of coordination for permits. Additionally, on the topic of network cost reduction, the revision of the Broadband Cost Reduction Directive (‘BCRD’) is expected to be published as part of the Connectivity Infrastructure Act in the Q3 of 2022.

In September 2021, the EC published a legislative proposal for a Decision of the European Parliament (‘Parliament’) and of the Council of the European Union (‘Council’) establishing the 2030 Policy Programme ‘Path to the Digital Decade’. The proposal sets targets to be met by Member States by 2030 on the following four key pillars: a digitally skilled population and highly skilled digital professionals; secure and sustainable digital infrastructures (target is to have all European households connected to gigabit speeds and all populated areas covered by 5G); digital transformation of businesses; and digitisation of public services. The Parliament and Council will need to endorse the targets through the regular EU legislative procedure. Political agreement was reached on 14 July and adoption is expected in Q4 2022.

Furthermore, in January 2022 the EC proposed the adoption of a ‘European Declaration on Digital Rights and Principles for the Digital Decade’ (‘Declaration’), covering issues including inclusion, freedom of choice online, online safety and security, and sustainable digitisation. The Declaration, which is yet to be endorsed by the Parliament and the Council, puts forward inter alia the commitment to “developing adequate frameworks so that all market actors benefiting from the digital transformation assume their social responsibilities and make a fair and proportionate contribution to the costs of public goods, services and infrastructures, for the benefit of all Europeans” and to “ensuring access to excellent connectivity for everyone”. Commissioner

23

Vodafone Group Plc ⫶ H1 FY23 results

Breton has recently signalled that a public consultation on the metaverse and the challenges associated with increased data traffic and connectivity will take place during the first half of 2023.

In February 2022, the EC published its proposal for a regulation laying down harmonised rules on fair access to and fair use of data (the ‘Data Act’). The Regulation applies to manufacturers of connected devices, data holders, recipients, and providers of data processing services (cloud service providers) who will be subject to new requirements to support switching and interoperability. Negotiations on the text are underway in the Parliament and Council.

On 24 March 2022, political negotiators in the EU Institutions reached agreement on the text of the Digital Markets Act (‘DMA’). This included a number of technical amendments from the December 2021 text, and compromises relevant to the financial thresholds for those platforms that fall within scope, the exact nature of some of the specific obligations (e.g., interoperability) and also fines (under the agreed text, gatekeepers can be sanctioned up to 10% of their annual worldwide turnover in the case of first infringements, and up to 20% in the case of repeated infringements). The DMA is expected to be formally adopted in 2022 and enter into force in early 2023.

Negotiations on the Digital Services Act (‘DSA’), the parallel file that focusses on the regulation of content online, concluded a month later, and the Parliament adopted the final negotiating text during the last plenary session before the summer break in July 2022. On 4 October 2022, the Council formally approved the final text of the DSA which will be published in the Official Journal of the EU before the end of October and enter into force 15 months later (the timeline is reduced for Very Large Online Platforms, for whom targeted obligations will come into force during summer 2023).

In June 2022, BEREC published an updated version of their Guidelines on Net Neutrality. These were updated in response to the recent CJEU rulings on zero-rating practices. BEREC interprets the rulings to prohibit all price-differentiation practices that are not application agnostic. This includes Vodafone Pass tariff, which was offered in eight EU markets. National Regulatory Authorities (‘NRAs’) are responsible for national enforcement of the guidelines.

On 1 July 2022, the EU-Roaming Recast Regulation entered into force, prolonging the existing Regulation to ensure the continuation of Roam-Like-at-Home (‘RLAH’) for 10 years. The new regulation reduces the wholesale price caps for all services (data, voice and SMS) and brings new measures on transparency (including on the use of non-terrestrial networks), quality of service and access to emergency communications. In May and June 2022, respectively, the European Body of Regulators (‘BEREC’) published its draft wholesale and retail guidelines providing interpretation guidance to the Regulation.

The European Commission adopted its draft Cyber Resilience Act (‘CRA’) on 15 September 2022, introducing horizontal cybersecurity requirements for products with digital elements and associated services that are placed on the European single market. The CRA addresses the cybersecurity of practically all products with a digital component, including semi-conductors, connected devices and more generally hardware and software (including non-embedded). All products in scope will be subject to conformity assessment. Highly critical products (identified through delegated acts) will be subject to European cybersecurity certification schemes. The EC’s draft CRA will now enter the standard co-legislative process with the Parliament and Council. Depending on the length of negotiations, the new law may come into force during the course of 2024.

Negotiations on the Artificial Intelligence Act (‘AI Act’) are progressing. Annex III of the AI Act describes a number of AI systems that pose a “high-risk” and will therefore be subject to additional ex-ante regulatory obligations and conformity assessment process before being placed on the market. Amendments in the Parliament and Council include “management of the Internet” and “safety components of critical digital infrastructure” within the Annex III. A vote in the lead Parliamentary committees on the text is tentatively scheduled by the end of 2022. In the Council, Member States are currently debating compromise text, also with a view to agree the Parliament’s version of the text before the end of the year, with trilogue negotiations likely to take place in 2023.

24

Vodafone Group Plc ⫶ H1 FY23 results

Germany

In July 2022, the NRA (‘BNetzA’) published its final regulation regarding the wholesale access markets (so-called Market 3a). In the decision, BNetzA has not set any significant changes in relation to the regulation of the copper network access but is going to implement a light touch regulation of fibre access (‘FTTH’). For the first time in Germany, an access regime for FTTH based on full equivalence of input (‘EoI’) will enforce the equal treatment of wholesale demand and Deutsche Telekom’s (‘DT’) retail arm. In addition, BNetzA will improve access to DT’s passive infrastructure (ducts, masts) due to its significant market power (‘SMP’) on broadband wholesale markets, including regulated prices for the first time. The implementation process will last until the end of 2023. In addition, the new regulation prolongs current unbundled local loop (‘ULL’) and bitstream access to DT’s copper network.

Italy

In March 2017, the NRA (‘AGCOM’) imposed a minimum billing period of one month for fixed and convergent offers, effective by the end of June 2017. The operators appealed AGCOM’s resolution before the Administrative Court and the appeal was rejected in February 2018. Vodafone Italy filed an appeal before the Council of State and after the public hearing held in July 2020, the Council of State issued a Preliminary referral to the CJEU in order to assess if AGCOM has the power to impose minimum and binding billing periods under EU law. The proceeding before the CJEU is still pending, but a decision expected within FY23.

In January 2020, the national competition authority (‘AGCM’) ruled that Vodafone Italy, Telecom Italia (‘TIM’), Fastweb and WindTre had coordinated their commercial strategies relating to the transition from four-week billing (28 days) to monthly billing, with the maintenance of an 8.6% price increase, in violation of Art.101 of Treaty on the Functioning of the EU (‘TFEU’). In July 2021, the Administrative Tribunal published its judgment annulling the AGCM’s decision and fine against Vodafone Italy for lack of evidence, accepting all of Vodafone Italy’s defensive arguments. According to the Tribunal, the alleged infringement was in fact the outcome of the companies’ independent choices to comply with legislation imposing an obligation to issue customer bills on a monthly basis. Prior to the Tribunal decision, Vodafone Italy had agreed to pay the €60 million fine in 15 monthly instalments of €4 million each. Following the Tribunal decision, Vodafone Italy started the process to be reimbursed for the two instalments, totalling €8 million, paid so far. The AGCM has submitted an appeal against the Tribunal decision to the Council of State. The public hearing has been scheduled for 26 January 2023.

In April 2021, AGCOM published a public consultation on the co-investment commitments presented by TIM in January 2021. On the basis of the public consultation, AGCOM asked TIM to make some amendments to the co-investment offer. TIM accepted the amendments and shared a final version of the co-investment offer with AGCOM.

In accordance with Article 76 of the Code, once a co-investment is approved, then a NRA may deregulate any new fibre network developed through the co-investment offer. Therefore, upon receiving the final co-investment offer in December 2021, AGCOM commenced a consultation on its proposed deregulation of any network rolled out on the basis of the co-investment offer. The final decision was expected by the middle of 2022, but on 20 May 2022, one week after AGCOM notified the co-investment offer to the EU Commission, TIM sent an official letter to submit a new co-investment offer to AGCOM communicating the intention to increase the wholesale prices proposed in the offer published in December 2021 to account for inflation. On 7 June 2022, AGCOM decided to withdraw the notified co-investment offer from the Commission, due to TIM’s change to include inflation into the co-investment prices. AGCOM will start a new market consultation on the new pricing structure proposed by TIM. Up to 30 September 2022, TIM has still not published the co-investment offer updated with the new prices asked, and AGCOM has still not launched the public consultation.

25

Vodafone Group Plc ⫶ H1 FY23 results

United Kingdom

The NRA (‘Ofcom’) is conducting a review of the UK mobile market, which commenced in May 2021. It is the first review of its kind, seeking to review the overall market structure and the ability of the market to fulfil the investment challenges that lie ahead. It runs alongside the government’s Wireless Infrastructure Strategy review, which is focused on future technologies and infrastructure evolution in the sector, with a particular focus on outcomes in the second half of the decade. Both projects are expected to conclude in the next six months.

Ofcom’s review of Net Neutrality rules is also underway. While the UK is still committed to high-level open internet alignment under the terms of the UK/EU trade deal, there is recognition by Ofcom that some reform is needed to ensure the potential of applications, devices and future technology is not constrained by the current rules. Ofcom has confirmed they will publish a consultation on the topic, which is expected by the end of 2022.

In November 2021, the Telecommunications Security Act (‘TSA’) was passed into legislation. This modified the Communications Act to allow the Secretary of State to issue High Risk Vendor (‘HRV’) designations that restrict the usage of named equipment suppliers. In February 2022, a draft HRV designation relating to Huawei products, which Vodafone UK uses in parts of its radio access network, was issued for consultation. Measures being consulted on restrict the use of Huawei in the UK’s telecoms networks, including the removal of Huawei from 5G networks by the end of 2027. The consultation closed in March 2022 and a final decision is awaited. The TSA also allows the Secretary of State to issue security regulations requiring providers of electronic communications networks and services to comply with a specified Code of Practice. In March 2022, the Department for Digital, Culture, Media and Sport (‘DCMS’) also carried out a consultation on the contents of these security regulations and associated Code of Practice, resulting in clarifications to the requirements and longer implementation timescales for Vodafone UK. Ofcom has similarly consulted on the compliance regime associated with the Code of Practice.

Spain

In November 2021, the government initiated the parliamentary process to approve the new Audiovisual Communication Bill Project. The most relevant changes are: (i) amending RTVE Financing law, to eliminate the requirement on mobile network operators (‘MNOs’) to contribute 0.9% telco revenues to the public corporation RTVE; and (ii) including over-the-top service providers in the requirement to provide 1.5% audiovisual revenue to RTVE. The text was approved by the Congress and entered into force on 9 July 2022, and the termination of the requirement on MNOs to contribute 0.9% of revenues to RTVE will enter into force in 2023.

In November 2021, the government published the draft Bill regulating customer service for consumers, which will introduce new requirements around the provision of customer care and managing customer complaints, and compensation. The text was approved by the Government on 31 May 2022 and now the parliamentary process has started. It is expected to be approved by the end of the year.

In December 2021, the National State Budget 2022 was approved. The law sets a reduction of spectrum fees (for 5G bands 700MHz and 3.5GHz) for a temporary period of two years, which resulted in €11.2 million savings for Vodafone Spain. It is expected a similar reduction will be applied in 2023.

In January 2022, the government launched a consultation for all stakeholders regarding the upcoming auction on the 26GHz band (24.25 – 27.50GHz), to assess demand and technical readiness. Vodafone Spain responded to the consultation in January 2022. The Ministry of Economic Affairs and Digital Transformation has confirmed its intention to call the auction before the end of 2022 and on 26 September 2022, opened another public consultation on the conditions of the auction of national/regional licences for operators.

In February 2022, the Ministry for Economy and Enterprise approved a Ministerial Decree that regulates the reassignment of the frequencies in the existing 3.4-3.8GHz concessions. This reassignment is a consequence of the granting of two new concessions in 2021. The Ministerial Decree foresees a six-month period in which the four operators holding concessions, Vodafone Spain included, must carry out a coordinated migration of the frequencies according to its new organisation. The migration process ended successfully in August 2022.

In March 2022, the government adopted a decision, then ratified by Parliament, on the Royal Decree-Law on Cybersecurity (‘Cybersecurity Law’). The Cybersecurity Law introduces the concept of high-risk suppliers (‘HRS’) and creates a new framework:

26

Vodafone Group Plc ⫶ H1 FY23 results

(i) for identifying HRS; (ii) limiting the use of HRS in both the Core and the Access networks, including the introduction of timeframes for the removal of HRS from the core and parts of the access network; and (ii) for 5G operators to develop a risk assessment on their networks, and a vendor diversification strategy. However, no supplier has been identified as ‘high risk’ so far.

Vodacom: South Africa (‘SA’)

In May 2021, the NRA (‘ICASA’) published a notice announcing the start of the Review of the Pro-competitive Conditions imposed on relevant licensees in terms of the Call Termination Regulations, to be completed by March 2022. ICASA has now completed the review and published its findings document. This will be followed by cost modelling, to be completed by February 2023, and final regulations, to be published by March 2023.

On 3 April 2022, ICASA published a set of amendments to the End-User and Subscriber Service Charter Regulations 2016 for public comment. The proposed amendments require that unused voice, SMS and data services obtained shall not expire before a period of six months, except for promotional packages. Furthermore, that the transfer of data must not be limited to specific products and/or payment types, with the exception of uncapped or free promotional bundled products and applies to any SIM card or device on the same network. New quality of service parameters are also proposed. Vodacom SA submitted a written response to the proposed changes in June 2022 and are waiting for ICASA to announce next steps.

Other Europe: Ireland; Portugal; Romania; Greece; Czech Republic; Hungary; Albania.

In the other European markets, the following were the key regulatory topics during this review cycle.

Spectrum

In relation to Spectrum, there has been progress with the allocation of spectrum in a number of markets.

In particular, in Portugal, in July 2022 the NRA (‘ANACOM’), approved the renewal of Vodafone Portugal’s rights of use for 900MHz and 1800MHz until 2033. However, Vodafone Portugal at the same time continues to appeal against certain aspects of the auction conditions, claiming the conditions between new entrants and mobile network operators were discriminatory. There is no expected date of conclusion of this action, and the rights of use remain in place for now.

However, there have also been a number of issues raised with spectrum allocation processes, and consequent delays to the process of allocation. In Ireland for example, the NRA’s (‘ComReg’), decision to proceed with its multi-band spectrum auction has been delayed due to an appeal against the decision by Three, which has been on-going since June 2021. As a result, ComReg and the Irish Government have been continuing to extend temporary spectrum measures with the latest extension now expected beyond October 2022.

In Albania, there have also been delays to the planned auction for 5G spectrum in all bands. This is due to the recent market consolidation in Albania, with new entrant 4iG acquiring ONE Telecommunications. This resulted in the NRA (‘AKEP’), supporting the re-balancing of spectrum between the remaining Albanian MNOs, including Vodafone Albania. Negotiations on the re-balancing are on-going and AKEP has confirmed it will not commence the auction until this has completed, expected by the end of 2022.

Concerns over EMF also trigged a residents’ petition in Greece for the annulment of the 5G Auction Tender document. Despite the auction process completing in December 2020 and the assigned 5G spectrum already being in use by Vodafone Greece, the petition against the Tender document was heard in January 2022, and a decision by the Council of State is now pending. In the case that the petition is accepted, the assignment of the 5G spectrum rights will be declared invalid.

27

Vodafone Group Plc ⫶ H1 FY23 results

Universal Service Obligations

Vodafone also remains involved in a number of disputes over obligations imposed by NRAs to contribute to Universal Service (USO) costs.

Vodafone Greece has three active appeals against the NRA (‘EETT’). These are in relation to charges amounting to around €16.75 million, imposed in relation to the provision of universal services by operator OTE for the period from 2010 through to 2016. Similarly, Vodafone Portugal continues to challenge payment notices totalling €34.8 million issued by ANACOM regarding 2012-2014 extraordinary compensation of USO costs.

Networks

With respect to network sharing, a number of network sharing or joint deployment agreements have been announced. Directly relevant to Vodafone, in Czech Republic, in March 2022 Vodafone Czech Republic and T-Mobile Czech Republic announced a project for joint deployment of fibre infrastructure, with the details of the process now being finalised.

Indirectly relevant to Vodafone, also in Czech Republic, in July 2022, the EC issued a decision with respect to a network sharing agreement by 02 Czech Republic, CETIN and T-Mobile Czech Republic. The decision has made binding commitments offered by the parties, that they must ensure their network sharing agreements do not reduce infrastructure competition in the Czech Republic. If the companies were to breach their commitments, the EC could impose a fine of up to 10% of their respective total annual turnover.

Additionally, in Greece, approval for the 5G extension of the existing 4G network sharing agreement between Vodafone Greece and Nova/Wind Hellas is pending with EETT since August 2021. Final clarifications are expected by the end of 2022.

Competition and Marketing

In Hungary, Vodafone awaits the outcome of a sectoral inquiry launched by the NRA (‘NMHH’), in relation to SMS termination services and retail bulk SMS services. Concerns were raised by the Hungarian Competition Office (‘HCO’) that mobile service providers in Hungary, including Vodafone, may be applying a uniform pricing practice for these services. There is no statutory deadline for the conclusion of this proceeding, but it is expected to conclude during the second quarter of 2023.

Additionally, in Hungary, in August 2022 Vodafone Hungary was fined HUF60 million by the HCO for misleading advertising of ‘unlimited’ passes. However, this was reduced from a fine previously estimated to have been HUF300 million, on basis that Vodafone Hungary did not challenge the decision and offered a commitment to provide 3 GB of data for free to affected customers as compensation.

Roaming

Following the successful implementation of the RLAH regime between the ‘West Balkan 6’ (‘WB6’) countries (Albania, Kosovo, Montenegro, Macedonia, Serbia, Bosnia), which from July 2021 removed roaming surcharge rates between these countries, the Regional Cooperation Council (‘RCC’) has started discussions to extend roaming reduction tariffs between the EU and WB6. In the fourth consultation meeting which took place on 15 July 2022 in Vienna, operators were presented with the proposal to: (i) remove voice from the glidepath, (ii) review the glidepath proposed in the previous meetings, and (iii) start the reduction of the tariffs starting from 1 January 2023. The RCC held the fifth consultation on 21 September 2022 where the removal of voice from the glidepath was approved, but no new glidepath was presented. The commencement date proposed for data roaming fees reduction is 15 October 2023.

28

Vodafone Group Plc ⫶ H1 FY23 results

Other Africa and Middle East: Democratic Republic of the Congo; Tanzania; Mozambique; Lesotho; Turkey; Egypt; Ghana.

Devices and Registration

The trend in these markets for additional controls and regulation over devices and user registration has continued.

In Tanzania, for example, the NRA (‘TCRA’), issued regulations that introduce a biometric registration requirement for SIMs, and restrict the ownership of number of SIMs by customer. The TRCA has directed disconnection of unverified SIMs in this category by 15 November 2022. A similar approach has been adopted in Ghana, which in October 2021 commenced a SIM card re-registration process, requiring registration of SIM cards against customers’ biometric national identification cards, with instruction to bar communications from non-registered SIMs by 30 September 2022. Similarly, in Lesotho, in December 2021, the Minister of Communication introduced new SIM Registration regulations, which must be complied with by June 2023. The regulations require the operator to enact biometric registration, establish a central database with the Communications Authority, re-register SIMs with a six-month timeline and enforce penalties of M5k per non-compliant SIM card. Vodacom Group is taking steps to comply with these new requirements.

However, in February 2021, Vodacom DRC was fined US$3.65 million by the Minister of Communications in relation to seven non-compliant SIM cards that were in use. Vodacom DRC has challenged the findings and the fine as part of an on-going legal action.

Spectrum

There has also been a number of updates in relation to spectrum renewals and new allocations in the region.

In Ghana, Vodafone Ghana renewed its 900MHz and 1800MHz licences up until 2029. However, Vodafone Ghana continues to negotiate with the relevant ministries on the terms of this renewal, including on the payment terms, with the current cost of the renewal standing at US$25 million. In Lesotho, Vodacom Lesotho had extended its right to use 3500MHz trial 5G spectrum up to 31 March 2022 when they vacated the spectrum bands upon expiry of these rights of use. Vodacom Lesotho is now engaging with the authorities to convert the trial licence to a permanent licence.

In both Mozambique and Ghana, Vodacom Mozambique and Vodafone Ghana are seeking to extend the rights to use spectrum that was temporarily assigned to them during the COVID-19 programme, with Vodacom Mozambique inquiring whether this could be converted into a permanent licence.

In addition, in Tanzania, the TCRA has indicated that it will be convening a spectrum auction in the 700MHz, 2300MHz, 2600MHz and 2500MHz band in October 2022.

In addition to auctions and renewals, a new law was introduced in the DRC in October 2021 that impacts Vodacom DRC’s operating licences. Specifically, the new Communications Act requires all operators to convert their current licences to new ‘technology neutral’ licences. However, the Government have not yet set out the detail on how this will work in practice.

Regulatory and Legal Disputes and Fines

A number of Vodafone and Vodacom companies in the region remain involved in legal and regulatory disputes.

In Lesotho, for example, there is a long running dispute between Vodacom Lesotho and the NRA (‘LCA’), on grounds their statutory external auditors were not independent. The LCA has issued a penalty of M134 million on Vodacom Lesotho and attempted to revoke their licence on basis of non-payment, despite the finding being subject to appeal. The LCA has been interdicted from enforcing the payment or licence revocation pending resolution of the matter before the Court. The matter was heard before the Court in December 2020, and judgment in still pending. Given the delay in proceedings, Vodacom Lesotho is now seeking to settle the matter with the LCA.

In Tanzania, the TCRA found that Vodacom Tanzania had failed to comply with regulatory quality of service targets, and has ordered Vodacom Tanzania to execute network improvement, with threat of fines if they fail to comply.

29

Vodafone Group Plc ⫶ H1 FY23 results

In Mozambique, Vodacom Mozambique is in negotiations with TMCEL, another operator Mozambique, on basis it has defaulted on interconnection payments to Vodacom, with a total of MT400 million outstanding as of July 2021. Vodacom Mozambique has agreed to a spectrum swap to cover this remaining debt, pending approval for the relevant authority, failing which it will consider interruption of interconnect services.

There is also an ongoing negotiation with the NRA in DRC (‘ARPTC’). This is in relation to new regulatory fees that were introduced in DRC in March 2022. To facilitate the payment of these fees, Vodacom DRC sought to raise consumer prices. In accordance with the Communications Act, Vodacom DRC notified these planned price increases to ARPTC. ARPTC has, however, rejected these consumer price increases, but did indicate it would enter into negotiations with Vodacom on how to manage the fee payments. These negotiations are on-going.

Another area of contention is in relation to the mobile money levy which was introduced in Tanzania in July 2021. Specifically, the Finance Act 2021 introduced the levy, which charged users of mobile money services, at a rate ranging from TZS10 to 10,000, depending on the value of the transaction. This immediately resulted in a drop in the number of users of Vodacom’s M-Pesa service. On the back of public pressure from operators and the public, since then the Regulator has been forced to reduce the initial levy by 60% and to exclude from scope transfers from a bank account to a mobile money account. There is still public concern, however, which may result in further reductions. \\

Outside of disputes with the regulator and other operators, Vodafone Ghana remains engaged in an ongoing legal dispute over a parcel of land. The plaintiff contends that, due to irregularities in the documentation, he is due US$16 million in compensation. The case has been heard at the Supreme Court and the judgement is due to be given on 30 November 2022.

30

Vodafone Group Plc ⫶ H1 FY23 results

Unaudited condensed consolidated financial statements

Consolidated income statement

		Six months ended 30 September
		2022		2021
	Note	€m		€m
Revenue	2	22,930		22,489
Cost of sales		(15,580)		(15,097)
Gross profit		7,350		7,392
Selling and distribution expenses		(1,711)		(1,675)
Administrative expenses		(2,819)		(2,870)
Net credit losses on financial assets		(332)		(230)
Share of results of equity accounted associates and joint ventures		343		111
Other income/(expense)		104		(108)
Operating profit	2	2,935		2,620
Investment income		211		129
Financing costs		(1,418)		(1,473)
Profit before taxation		1,728		1,276
Income tax (expense)/credit	3	(485)		1
Profit for the financial period		1,243		1,277
Attributable to:
– Owners of the parent		986		996
– Non-controlling interests		257		281
Profit for the financial period		1,243		1,277
Profit per share
Total Group:
– Basic	5	3.52	c	3.40	c
– Diluted	5	3.50	c	3.39	c

Consolidated statement of comprehensive income/expense

	Six months ended 30 September
	2022	2021
	€m	€m
Profit for the financial period	1,243	1,277
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Foreign exchange translation differences, net of tax	(424)	(117)
Other, net of tax1	924	1,286
Total items that may be reclassified to the income statement in subsequent periods	500	1,169
Items that will not be reclassified to the income statement in subsequent periods:
Net actuarial (losses)/gains on defined benefit pension schemes, net of tax	(42)	200
Total items that will not be reclassified to the income statement in subsequent periods	(42)	200
Other comprehensive income	458	1,369
Total comprehensive income for the financial period	1,701	2,646
Attributable to:
– Owners of the parent	1,415	2,354
– Non-controlling interests	286	292
	1,701	2,646

Note:

1. Principally includes the impact of the Group’s cash flow hedges deferred to other comprehensive income during the period.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

31

Vodafone Group Plc ⫶ H1 FY23 results

Unaudited condensed consolidated financial statements

Consolidated statement of financial position

		30 September	31 March
		2022	2022
	Note	€m	€m
Non-current assets
Goodwill		31,225	31,884
Other intangible assets		20,470	21,360
Property, plant and equipment		39,843	40,804
Investments in associates and joint ventures	7	4,381	4,268
Other investments		1,128	1,073
Deferred tax assets		18,699	19,089
Post employment benefits	10	493	555
Trade and other receivables		10,869	6,383
		127,108	125,416
Current assets
Inventory		991	836
Taxation recoverable		393	296
Trade and other receivables		11,506	11,019
Other investments		7,824	7,931
Cash and cash equivalents		7,072	7,496
		27,786	27,578
Assets held for sale	4	2,546	959
Total assets		157,440	153,953
Equity
Called up share capital		4,797	4,797
Additional paid-in capital		149,085	149,018
Treasury shares		(7,170)	(7,278)
Accumulated losses		(122,521)	(122,118)
Accumulated other comprehensive income		31,262	30,268
Total attributable to owners of the parent		55,453	54,687
Non-controlling interests		2,284	2,290
Total equity		57,737	56,977
Non-current liabilities
Borrowings		59,907	58,131
Deferred tax liabilities		681	520
Post employment benefits	10	281	281
Provisions		1,924	1,881
Trade and other payables		2,447	2,516
		65,240	63,329
Current liabilities
Borrowings		15,675	11,961
Financial liabilities under put option arrangements		486	494
Taxation liabilities		722	864
Provisions		722	667
Trade and other payables		16,614	19,661
		34,219	33,647
Liabilities held for sale	4	244	–
Total equity and liabilities		157,440	153,953

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

32

Vodafone Group Plc ⫶ H1 FY23 results

Unaudited condensed consolidated financial statements

Consolidated statement of changes in equity

		Additional		Accumulated	Equity	Non-
	Share	paid-in	Treasury	comprehensive	attributable to	controlling
	capital	capital1	shares	losses2	the owners	interests	Total equity
	€m	€m	€m	€m	€m	€m	€m
1 April 2021 brought forward	4,797	150,812	(6,172)	(93,633)	55,804	2,012	57,816
Issue or reissue of shares	—	1	90	(90)	1	—	1
Share-based payments	—	73	—	—	73	6	79
Transactions with non-controlling shareholders in subsidiaries	—	—	—	(38)	(38)	236	198
Comprehensive income	—	—	—	2,354	2,354	292	2,646
Dividends	—	—	—	(1,254)	(1,254)	(391)	(1,645)
Purchase of treasury shares	—	—	(1,048)	—	(1,048)	—	(1,048)
30 September 2021	4,797	150,886	(7,130)	(92,661)	55,892	2,155	58,047
31 March 2022 as reported	4,797	149,018	(7,278)	(91,850)	54,687	2,290	56,977
Adoption of IAS 293	—	—	—	565	565	—	565
1 April 2022 brought forward	4,797	149,018	(7,278)	(91,285)	55,252	2,290	57,542
Issue or reissue of shares	—	1	108	(100)	9	—	9
Share-based payments	—	66	—	—	66	5	71
Transactions with non-controlling shareholders in subsidiaries	—	—	—	(24)	(24)	(12)	(36)
Comprehensive income	—	—	—	1,415	1,415	286	1,701
Dividends	—	—	—	(1,265)	(1,265)	(285)	(1,550)
30 September 2022	4,797	149,085	(7,170)	(91,259)	55,453	2,284	57,737

Notes:

1. Includes share premium, capital reserve, capital redemption reserve, merger reserve and share-based payment reserve. The merger reserve was derived from acquisitions made prior to 31 March 2004 and subsequently allocated to additional paid-in capital on adoption of IFRS.

2. Includes accumulated losses and accumulated other comprehensive income.

3. This opening balance adjustment relates to the adoption of hyperinflationary accounting in Turkey. See Note 1 ‘Basis of preparation’ for more information.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

33

Vodafone Group Plc ⫶ H1 FY23 results

Unaudited condensed consolidated financial statements

Consolidated statement of cash flows

		Six months ended 30 September
		2022	2021
	Note	€m	€m
Inflow from operating activities	8	6,280	6,455
Cash flows from investing activities
Purchase of interests in subsidiaries, net of cash acquired		—	(1)
Purchase of interests in associates and joint ventures		(61)	(47)
Purchase of intangible assets		(1,433)	(1,593)
Purchase of property, plant and equipment		(3,456)	(3,118)
Purchase of investments		(871)	(580)
Disposal of property, plant and equipment and intangible assets		—	8
Disposal of investments		1,130	1,930
Dividends received from associates and joint ventures		463	469
Interest received		139	121
Outflow from investing activities		(4,089)	(2,811)
Cash flows from financing activities1
Proceeds from issue of long-term borrowings		187	2,282
Repayment of borrowings		(5,549)	(3,771)
Net movement in short-term borrowings		6,194	1,173
Net movement in derivatives		(205)	(110)
Interest paid2		(952)	(809)
Purchase of treasury shares		(1,090)	(1,101)
Issue of ordinary share capital and reissue of treasury shares		9	1
Equity dividends paid		(1,263)	(1,259)
Dividends paid to non-controlling shareholders in subsidiaries		(290)	(399)
Other transactions with non-controlling shareholders in subsidiaries		(34)	198
Outflow from financing activities		(2,993)	(3,795)
Net cash outflow		(802)	(151)
Cash and cash equivalents at beginning of the financial period3		7,371	5,790
Exchange gain on cash and cash equivalents		282	11
Cash and cash equivalents at end of the financial period3		6,851	5,650

Notes:

1. Includes the issuance of €nil and repayment of €885 million in relation to debt securities (Six months ended 30 September 2021: Issuance of €2,000 million and repayment of €657 million).

2. Interest paid includes €86 million of cash inflow (Six months ended 30 September 2021: €39 million inflow) on derivative financial instruments for the share buyback related to maturing tranches of mandatory convertible bonds.

3. Comprises cash and cash equivalents as presented in the consolidated statement of financial position of €7,072 million (€5,824 million as at 30 September 2021), together with overdrafts of €226 million (€174 million as at 30 September 2021) and €5 million (€nil as at 30 September 2021) of cash and cash equivalents included within assets held for sale.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

34

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

1   Basis of preparation

The unaudited condensed consolidated financial statements for the six months ended 30 September 2022:

● are prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’ (‘IAS 34’) as issued by the International Accounting Standards Board (‘IASB’) and as adopted by the United Kingdom;

● are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the Group’s Annual Report on Form 20-F for the year ended 31 March 2022;

● apply, with the exception of the application of IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ for the Group’s entities reporting in Turkish lira (see below), the same accounting policies, presentation and methods of calculation as those followed in the preparation of the Group’s consolidated financial statements for the year ended 31 March 2022, which were prepared in accordance with UK-adopted International Accounting Standards (‘IAS’), with International Financial Reporting Standards (‘IFRS’) as issued by the IASB and with the requirements of the UK Companies Act 2006. Income taxes are accrued using the tax rate that is expected to be applicable for the full financial year, adjusted for certain discrete items which occurred in the interim period in accordance with IAS 34;

● include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented; and

● were approved by the Board of directors on 15 November 2022.

The information relating to the year ended 31 March 2022 is extracted from the Group’s published Annual Report on Form 20-F for that year.

The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and the reported amounts of revenue and expenses during the period. Actual results could vary from these estimates. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Going concern

Trading during the period demonstrated a robust operating model for the Group. The Group has €6.9 billion of cash and cash equivalents available as at 30 September 2022 which, together with undrawn revolving credit facilities of €8.1 billion, cover all of the Group’s reasonably expected cash requirements over the going concern period. The Directors have reviewed trading and liquidity forecasts for the Group, which were based on current trading conditions, and considered a variety of scenarios including not being able to access the capital markets during the assessment period. In addition to the liquidity forecasts prepared, the Directors considered the availability of the Group’s revolving credit facilities which were undrawn as at 30 September 2022. As a result of the assessment performed, the Directors have concluded that the Group is able to continue in operation for the period up to and including December 2023 and that it is appropriate to continue to adopt the going concern basis in preparing the unaudited condensed consolidated financial statements.

War in Ukraine

Whilst the Group does not have any significant operations in either Russia or Ukraine, a review was undertaken by management to assess any consequences on the financial statements arising from the conflict or from the resulting sanctions imposed on Russia and Belarus. It was concluded there are no material impacts on the consolidated financial statements for the period ended 30 September 2022.

Critical accounting judgements and estimates

The Group’s critical accounting judgements and estimates are disclosed in the Group’s Annual Report on Form 20-F for the year ended 31 March 2022.

35

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

1   Basis of preparation (continued)

Judgements relating to potential indicators of impairment

The Group performs its annual impairment test for goodwill and indefinite lived intangible assets as at 31 March.

At interim reporting periods the Group performs a review to identify any indicator of impairment that may indicate that the carrying amount of any of the Group’s cash generating units (‘CGUs’) may not be not recoverable.  As part of this assessment as at 30 September 2022, the Group reviewed the key assumptions underlying the value in use valuations used in the annual impairment test at 31 March 2022. This included the year to date performance of the Group’s CGUs against their budgets, trends in energy and other costs and inflation rates, as well as considering the valuation implications of changes in other factors such as risk free discount rates and the assessment of long term growth rates.

Value in use assessments were performed for Vodafone Italy and Vodafone Spain as at 30 September 2022 reflecting assumptions materially similar to those disclosed in note 4 ‘Impairment losses’ of the consolidated financial statements in the Annual Report on Form 20-F for the year ended 31 March 2022.

The Group’s review of the potential impact of indicators of impairment and recoverable amounts did not indicate that the carrying amount of any of the Group’s CGUs was not recoverable as at 30 September 2022.

New accounting pronouncements adopted

On 1 April 2022, the Group adopted certain new accounting policies where necessary to comply with amendments to IFRS, none of which had a material impact on the consolidated results, financial position or cash flows of the Group. Further details are provided in the Group’s Annual Report on Form 20-F for the year ended 31 March 2022.

Basis of preparation changes adopted on 1 April 2022 - Hyperinflation in Turkey

As anticipated in the Annual Report on Form 20-F for the year ended 31 March 2022 and communicated in the Q1 trading update, Turkey met the requirements to be designated as a hyperinflationary economy under IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ in the quarter ended 30 June 2022. The Group has therefore applied hyperinflationary accounting, as specified in IAS 29, at its Turkish operations whose functional currency is the Turkish lira for the reporting period commencing 1 April 2022. This resulted in an opening balance adjustment of €565 million to consolidated equity.

In accordance with IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’, comparative amounts are not restated.

Turkish lira results and non-monetary asset and liability balances for the six months ended 30 September 2022 have been revalued to their present value equivalent local currency amount as at 30 September 2022, based on an inflation index, before translation to euros at the reporting date exchange rate of €1:18.16 TRL. The gain or loss on net monetary assets resulting from IAS 29 application is recognised in the income statement within Other income.

The Group also presents the gain or loss on cash and cash equivalents as monetary items together with the effect of inflation on operating, investing and financing cash flows as one number in the consolidated statement of cash flows.

The Group has presented the IAS 29 opening balance adjustment to net assets within currency reserves in equity. Subsequent IAS 29 equity restatement effects and the impact of currency movements are presented within other comprehensive income because such amounts are judged to meet the definition of ‘exchange differences’.

The inflation index selected to reflect the change in purchasing power was the consumer price index (CPI) issued by the Turkish Statistical Institute which has risen by 24% in the six months to 30 September 2022.

The main impacts on the consolidated financial statements for the six months ended 30 September 2022 of the aforementioned adjustments are shown below.

	Six months ended
	30 September 2022
	€m
Revenue	21
Operating profit	(14)
Profit for the financial period	(40)
Non-current assets	780
Equity	659

36

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

2   Segmental analysis

Operating segments

The Group’s operating segments are established on the basis of those components of the Group that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Group has determined the chief operating decision maker to be its Chief Executive Officer. The Group has a single group of similar services and products, being the supply of communications services and related products.

Revenue is attributed to a country based on the location of the Group company reporting the revenue. With the exception of Vodacom, which is a legal entity encompassing South Africa and certain other smaller African markets, and Vantage Towers which comprises companies providing mobile tower infrastructure in a number of European markets, segment information is primarily provided on the basis of geographic areas, being the basis on which the Group manages the rest of its worldwide interests. Transactions between operating segments are charged at arm’s-length prices.

The operating segments for Germany, Italy, UK, Spain, Vodacom and Vantage Towers are individually material for the Group and are each reporting segments for which certain financial information is provided. The aggregation of other operating segments into the Other Europe and Other Markets reporting segments reflects, in the opinion of management, the similar local market economic characteristics and regulatory environments for each of those operating segments as well as the similar products and services sold and comparable classes of customers. In the case of the Other Europe region (comprising Albania, Czech Republic, Greece, Hungary, Ireland, Portugal and Romania), this largely reflects membership or a close association with the European Union, while the Other Markets segment (comprising Egypt, Ghana and Turkey) largely includes developing economies with less stable economic or regulatory environments. Common Functions is a separate reporting segment and comprises activities which are undertaken primarily in central Group entities that do not meet the criteria for aggregation with other reporting segments.

Revenue disaggregation

Revenue reported for the period includes revenue from contracts with customers, comprising service and equipment revenue, as well as other revenue items including revenue from leases and interest revenue arising from transactions with a significant financing component. The tables below and overleaf disaggregate the Group’s revenue by reporting segment.

The table below presents the results for the six months ended 30 September 2022.

			Revenue
			from
			contracts			Total
	Service	Equipment	with	Other	Interest	segment	Adjusted
	revenue	revenue	customers	revenue1	revenue	revenue	EBITDAaL
	€m	€m	€m	€m	€m	€m	€m
Six months ended 30 September 2022
Germany	5,730	675	6,405	178	9	6,592	2,677
Italy	2,125	198	2,323	49	5	2,377	759
UK	2,712	630	3,342	34	16	3,392	685
Spain	1,782	142	1,924	31	10	1,965	445
Other Europe	2,552	281	2,833	53	8	2,894	843
Vodacom	2,472	509	2,981	207	14	3,202	1,084
Other Markets	1,721	230	1,951	2	—	1,953	671
Vantage Towers	—	—	—	657	—	657	330
Common Functions2	268	23	291	405	—	696	(250)
Eliminations	(155)	—	(155)	(643)	—	(798)	—
Group	19,207	2,688	21,895	973	62	22,930	7,244

Notes:

1. Other revenue includes lease revenue recognised under IFRS 16 ‘Leases’.

2. Comprises central teams and business functions.

37

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

2   Segmental analysis (continued)

The table below presents the comparative information for the six months ended 30 September 2021.

			Revenue
			from
			contracts			Total
	Service	Equipment	with	Other	Interest	segment	Adjusted
	revenue	revenue	customers	revenue1	revenue	revenue	EBITDAaL
	€m	€m	€m	€m	€m	€m	€m
Six months ended 30 September 2021
Germany	5,777	475	6,252	183	12	6,447	2,892
Italy	2,187	265	2,452	49	6	2,507	917
UK	2,521	593	3,114	30	17	3,161	638
Spain	1,866	178	2,044	33	13	2,090	445
Other Europe	2,502	248	2,750	52	8	2,810	836
Vodacom	2,271	455	2,726	190	12	2,928	1,062
Other Markets	1,752	201	1,953	5	—	1,958	683
Vantage Towers	—	—	—	611	—	611	305
Common Functions2	252	31	283	424	—	707	(213)
Eliminations	(118)	—	(118)	(611)	(1)	(730)	—
Group	19,010	2,446	21,456	966	67	22,489	7,565

Notes:

1. Other revenue includes lease revenue recognised under IFRS 16 ‘Leases’.

2. Comprises central teams and business functions.

A reconciliation of Adjusted EBITDAaL, the Group’s measure of segment profit, to the Group’s profit before taxation for the financial period is shown below.

	Six months ended 30 September
	2022	2021
	€m	€m
Adjusted EBITDAaL	7,244	7,565
Restructuring costs	(142)	(172)
Interest on lease liabilities	204	199
Loss on disposal of property, plant & equipment and intangible assets	(11)	(26)
Depreciation and amortisation on owned assets	(4,807)	(4,949)
Share of results of equity accounted associates and joint ventures	343	111
Other income/(expense)	104	(108)
Operating profit	2,935	2,620
Investment income	211	129
Financing costs	(1,418)	(1,473)
Profit before taxation	1,728	1,276

The Group’s non-current assets are disaggregated as follows:

	30 September	31 March
	2022	2022
	€m	€m
Non-current assets1
Germany	42,709	43,190
Italy	10,129	10,519
UK	5,847	6,226
Spain	6,129	6,433
Other Europe	6,855	8,548
Vodacom	6,319	6,383
Other Markets	3,349	2,467
Vantage Towers	8,190	8,179
Common Functions2	2,011	2,103
Group	91,538	94,048

Notes:

1. Comprises goodwill, other intangible assets and property, plant & equipment.

2. Comprises central teams and business functions.

38

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

3   Taxation

	Six months ended 30 September
	2022	2021
	€m	€m
United Kingdom corporation tax (expense)/income
Current period	(4)	(6)
Adjustments in respect of prior periods	9	15
Overseas current tax (expense)/income
Current period	(446)	(730)
Adjustments in respect of prior periods	12	(26)
Total current tax expense	(429)	(747)
Deferred tax on origination and reversal of temporary differences
United Kingdom deferred tax	(10)	544
Overseas deferred tax	(46)	204
Total deferred tax (expense)/credit	(56)	748
Total income tax (expense)/credit	(485)	1

Deferred tax on losses in Luxembourg

The tax charge for the six months ended 30 September 2022 includes deferred tax on the use of losses in Luxembourg. The Group would not recognise losses in Luxembourg which would be forecast to be used beyond 60 years. Current volatility in interest rates means that the period over which we expect to recover the losses is shorter than the 45 to 48 years disclosed as at 31 March 2022. The actual use of these losses and the period over which they may be used is dependent on many factors including the level of profitability in Luxembourg, changes in tax law and any changes to the structure of the Group.

Further details about the Group’s tax losses can be found in Note 6 ‘Taxation’ to the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2022.

39

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

4   Assets and liabilities held for sale

Assets and liabilities held for sale as at 30 September 2022 comprised (i) Vodafone Hungary and (ii) the Group’s 21.0% interest in Indus Towers. Assets held for sale as at 31 March 2022 comprised the Group’s 21.0% interest in Indus Towers.

On 22 August 2022, the Group announced that it had entered into heads of terms with 4iG Public Limited Company and Corvinus Zrt (a Hungarian state holding company) in relation to the potential sale of 100% of Vodafone Magyarország Távközlési Zrt (‘Vodafone Hungary’) for a total cash consideration equivalent to an enterprise value of HUF 715 billion (€1.8 billion).

The Group’s interest in Indus Towers has been provided as security against certain bank borrowings.

The relevant assets and liabilities are detailed in the table below.

	30 September	31 March
	2022	2022
	€m	€m
Non-current assets
Goodwill	412	—
Other intangible assets	474	—
Property, plant and equipment	440	—
Investments in associates and joint ventures	1,014	959
Trade and other receivables	18	—
	2,358	959
Current assets
Inventory	12	—
Trade and other receivables	171	—
Cash and cash equivalents	5	—
	188	—
Total assets	2,546	959
Non-current liabilities
Borrowings	47	—
Deferred tax liabilities	16	—
Provisions	23	—
Trade and other payables	1	—
	87	—
Current liabilities
Borrowings	15	—
Provisions	6	—
Trade and other payables	136	—
	157	—
Total liabilities	244	—
Net assets and liabilities held for sale	2,302	959

As part of the disposal of Vodafone Hungary, the Group will realise a loss comprising the cumulative foreign exchange losses arising from the retranslation of the consolidated net assets of Vodafone Hungary (which has a functional currency of Hungarian Forint) to the Group’s presentation currency in the period from acquisition of the Group’s interest to the date of disposal. This foreign exchange is required to be recycled to the income statement from the translation reserve. Based on the 30 September 2022 exchange rate of €:HUF: 423.0, a loss of approximately €0.3 billion would arise. The actual loss from the recycling of foreign exchange previously recognised in equity that would be recognised on disposal, will depend on the €:HUF exchange rate at the date of completion.

40

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

5   Earnings per share

	Six months ended 30 September
	2022	2021
	Millions	Millions
Weighted average number of shares for basic earnings per share	28,037	29,331
Effect of dilutive potential shares: restricted shares and share options	104	84
Weighted average number of shares for diluted earnings per share	28,141	29,415

Earnings per share attributable to owners of the parent during the period
	Six months ended 30 September
	2022	2021
	€m	€m
Profit for basic and diluted earnings per share	986	996
	eurocents	eurocents
Basic profit per share	3.52	3.40
Diluted profit per share	3.50	3.39

6   Equity dividends

	Six months ended 30 September
	2022	2021
	€m	€m
Declared during the financial period:
Final dividend for the year ended 31 March 2022: 4.50 eurocents per share (2021: 4.50 eurocents per share)	1,265	1,254
Proposed after the end of the reporting period and not recognised as a liability:
Interim dividend for the year ending 31 March 2023: 4.50 eurocents per share (2022: 4.50 eurocents per share)	1,237	1,229

7   Investment in associates and joint ventures

	30 September	31 March
	2022	2022
	€m	€m
INWIT S.p.A.1	—	2,851
VodafoneZiggo Group Holding B.V.	893	822
TPG Telecom Limited	123	84
Other	49	24
Investment in joint ventures	1,065	3,781
INWIT S.p.A.1	2,778	—
Safaricom PLC	478	428
Other	60	59
Investment in associates	3,316	487
	4,381	4,268

Note:

1. The shareholders’ agreement between the Group and Telecom Italia was terminated on 3 August 2022 due to a change in Telecom Italia’s shareholding in INWIT S.p.A. As a result, INWIT S.p.A. ceased to be a joint venture of the Group and is now classified as an associate.

41

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

8   Reconciliation of net cash flow from operating activities

	Six months ended 30 September
	2022	2021
	€m	€m
Profit for the financial period	1,243	1,277
Investment income	(211)	(129)
Financing costs	1,418	1,473
Income tax expense/(credit)	485	(1)
Operating profit	2,935	2,620
Adjustments for:
Share-based payments and other non-cash charges	46	98
Depreciation and amortisation	6,853	6,952
Loss on disposal of property, plant & equipment and intangible assets	9	26
Share of results of equity accounted associates and joint ventures	(343)	(111)
Other (income)/expense	(104)	108
Increase in inventory	(175)	(41)
Increase in trade and other receivables	(1,381)	(1,254)
Decrease in trade and other payables	(888)	(1,366)
Cash generated by operations	6,952	7,032
Taxation	(672)	(577)
Net cash flow from operating activities	6,280	6,455

9   Fair value of financial instruments

The table below sets out the financial instruments held at fair value by the Group.

	30 September	31 March
	2022	2022
	€m	€m
Financial assets at fair value:
Money market funds (included within Cash and cash equivalents)1	4,521	5,276
Debt and equity securities (included within Other investments)2	5,992	6,398
Derivative financial instruments (included within Trade and other receivables)2,3	8,769	4,626
Trade receivables at fair value through Other comprehensive income (included within Trade and other receivables)2	1,967	1,408
	21,249	17,708
Financial liabilities at fair value:
Derivative financial instruments (included within Trade and other payables)2,3	1,786	1,672
	1,786	1,672

Notes:

1. Items are measured at fair value and the valuation basis is Level 1 classification, which comprises financial instruments where fair value is determined by unadjusted quoted prices in active markets.

2. Quoted debt and equity securities of €2,537 million (€2,997 million as at 31 March 2022) are Level 1 classification which comprises items where fair value is determined by unadjusted quoted prices in active markets. The remaining items are measured at fair value and the basis is Level 2 classification which comprises items where fair value is determined from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

3. €8,524 million (€4,216 million as at 31 March 2022) of derivative financial assets and €1,596 million (€1,506 million as at 31 March 2022) of derivative financial liabilities are classified as non-current.

The fair value of the Group’s financial liabilities held at amortised cost approximates to fair value with the exception of non-current bonds with a carrying value of €48,299 million (€46,156 million as at 31 March 2022) and a fair value of €40,722 million (€46,348 million as at 31 March 2022). Fair value is based on Level 1 of the fair value hierarchy using quoted market prices.

The fair value of the Group’s financial assets held at amortised cost approximate to fair value with the exception of non-current debt securities with a carrying value of €1,003 million (€930 million as at 31 March 2022) and a fair value of €735 million (€830 million as at 31 March 2022). Fair value is based on Level 2 of the fair value hierarchy which comprises items where fair value is determined from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

42

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

10    Post employments benefits

Significant movements have been recorded in respect of the gross assets held by and liabilities of the Group’s pension schemes in the period. The Group has obtained valuations for its most material schemes in the UK, Germany and Ireland. Key financial information is presented below.

The Group’s plan liabilities are measured using the projected unit credit method using the principal actuarial assumptions set out below.

	30 September		31 March
	2022		2022
	%		%
Weighted average actuarial assumptions used1:
Rate of inflation2	3.2	%	3.3	%
Discount rate	4.7	%	2.4	%

Notes:

1. Figures shown represent a weighted average assumption of the Group’s plans in the UK, Germany and Ireland.

2. This rate of increase in pensions in payment and deferred revaluation are dependent on the rate of inflation.

Assumptions relating to life expectancy are unchanged from 31 March 2022.

Charges made to the consolidated income statement and consolidated statement of comprehensive income (‘SOCI’) on the basis of the assumptions stated above are:

	Six months ended 30 September
	2022	2021
	€m	€m
Total net cost/(credit) included within staff costs	6	(58)
Actuarial (losses)/gains recognised in the SOCI	(63)	246

The Group’s overall net surplus is analysed as follows:

	30 September	31 March
	2022	2022
	€m	€m
Assets	493	555
Liabilities	(281)	(281)
Net surplus	212	274

An analysis of the net surplus is provided below for the Vodafone UK Group Pension Scheme, comprising the Vodafone Section and the Cable & Wireless Section (‘CWW Section’).

	Vodafone Section		CWW Section
	30 September	31 March	30 September	31 March
	2022	2022	2022	2022
	€m	€m	€m	€m
Analysis of net surplus:
Total fair value of plan assets	2,026	3,399	1,886	2,850
Present value of plan liabilities	(1,856)	(3,166)	(1,648)	(2,565)
Net surplus	170	233	238	285
Net surplus are analysed as:
Assets	170	233	238	285

On 18 October 2022, the Group entered into short term liquidity facilities with both sections of the Vodafone UK Pension Scheme (‘the UK scheme’) for an aggregate amount of £450 million. These facilities can be used for short-term liquidity purposes in connection with potential future collateral calls, with the intention of reducing the risk the UK Scheme would be required to dispose of assets at short notice in the event of significant increases in interest rates. Drawings can be made from the facility until 27 January 2023, with all amounts borrowed required to be repaid by 28 February 2023. No amounts were drawn under these facilities at the date of this report.

43

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

11   Related party transactions

Transactions with joint ventures and associates

Related party transactions with the Group’s joint ventures and associates primarily consists of fees for the use of products and services including network airtime and access charges, fees for the provision of network infrastructure and cash pooling ventures. No related party transactions have been entered into during the period which might reasonably affect any decisions made by the users of these unaudited condensed consolidated financial statements except as disclosed below.

	Six months ended 30 September
	2022	2021
	€m	€m
Sales of goods and services to associates	11	10
Purchase of goods and services from associates	65	4
Sales of goods and services to joint arrangements	110	103
Purchase of goods and services from joint arrangements	69	132
Interest expense payable to associates1	25	—
Interest income receivable from joint arrangements1	22	26
Interest expense payable to joint arrangements1	—	26

	30 September	31 March
	2022	2022
	€m	€m
Trade balances owed:
by associates	16	8
to associates	8	6
by joint arrangements	122	139
to joint arrangements	59	34
Other balances owed by associates	—	80
Other balances owed to associates2	1,449	—
Other balances owed by joint arrangements1	986	1,080
Other balances owed to joint arrangements2	189	1,561

Notes:

1. Amounts arise primarily through VodafoneZiggo Group Holding B.V., TPG Telecom Limited and INWIT S.p.A. Interest is charged in line with market rates.

2. Amounts are primarily in relation to leases of tower space from INWIT S.p.A. which was classified as a joint venture in the comparative period but is now classified as an associate. See note 7 ‘Investment in associates and joint ventures’ for more information.

In the six months ended 30 September 2022, the Group made contributions to defined benefit pension schemes of €11 million (Six months ended 30 September 2021: €12 million).

In the six months ended 30 September 2022, dividends of €1.2 million were paid to Board and Executive Committee members (Six months ended 30 September 2021: €1.1 million).

Dividends received from associates and joint ventures are disclosed in the consolidated statement of cash flows.

12   Contingent liabilities and legal proceedings

Note 28 ‘Commitments’ and Note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2022 set forth the Group’s commitments, contingent liabilities and legal proceedings as at 31 March 2022. There have been no material changes during the period covered by this report.

44

Vodafone Group Plc ⫶ H1 FY23 results

Notes to the unaudited condensed consolidated financial statements

13   Subsequent events

On 9 November 2022, the Group announced that it had entered into a strategic co-control partnership with a consortium of long-term infrastructure investors led by Global Infrastructure Partners and KKR (together the ‘Consortium’) for Vodafone’s 81.7% stake in Vantage Towers A.G. (‘Vantage Towers’). Vodafone and the Consortium have created a joint venture (‘JV’) which will hold Vodafone’s 81.7% stake in Vantage Towers. The JV will make a voluntary takeover offer (‘VTO’) for the remaining 18.3% of shares in Vantage Towers at €32 per share.

The Consortium will acquire JV shares from Vodafone for cash consideration of €32 per share. The Consortium has fully committed equity in place to obtain a shareholding in the JV of between 32% and 40%, depending on the level of take-up in the VTO by minority shareholders. The Consortium intends to raise additional equity before completion to reach a shareholding of 50%. The Group’s minimum net cash proceeds will be €3.2bn based on 100% take up in the VTO. The maximum total net cash proceeds to Vodafone based on a 50% shareholding for the Consortium and 100% take up in the VTO will be €5.8 billion. The transaction is conditional on regulatory clearance and is expected to close in the first half of 2023.

On 9 November 2022, RRJ Capital entered into an irrevocable undertaking to accept the VTO in respect of its 2.4% shareholding in Vantage Towers. On 13 November 2022, the Group entered into an agreement to purchase Digital Bridge’s 4.1% shareholding in Vantage Towers at the offer price of €32 per share and committed to tender these shares into the VTO. This means that the JV will hold a minimum shareholding of 88.3% in Vantage Towers following completion of the VTO.

45

Vodafone Group Plc ⫶ H1 FY23 results

Non-GAAP measures

In the discussion of the Group’s reported operating results, non-GAAP measures are presented to provide readers with additional financial information that is regularly reviewed by management. This additional information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be comparable with similarly-titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself a measure defined under GAAP. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure. The non-GAAP measures discussed in this document are listed below.

Non-GAAP measure	Defined on page	Closest equivalent GAAP measure	Reconciled on page
Performance metrics
Organic Adjusted EBITDAaL growth	Page 47	Not applicable	Not applicable
Organic revenue growth	Page 47	Revenue	Pages 48 and 49
Organic Group service revenue growth excluding Turkey	Page 47	Service revenue	Pages 48 and 49
Organic service revenue growth	Page 47	Service revenue	Pages 48 and 49
Organic mobile service revenue growth	Page 47	Service revenue	Pages 48 and 49
Organic fixed service revenue growth	Page 47	Service revenue	Pages 48 and 49
Organic Vodafone Business service revenue growth	Page 47	Service revenue	Pages 48 and 49
Organic financial services revenue growth in South Africa	Page 47	Service revenue	Pages 48 and 49
Financing metrics
Adjusted net financing costs	Page 16	Net financing costs	Page 16

46

Vodafone Group Plc ⫶ H1 FY23 results

Non-GAAP measures

Performance metrics

Organic growth

All amounts marked with an ‘*’ in this document represent organic growth which presents performance on a comparable basis, excluding the impact of foreign exchange rates, mergers and acquisitions, the hyperinflation adjustments in Turkey and other adjustments to improve the comparability of results between periods.

Organic growth is calculated for revenue and profitability metrics, as follows:

- Adjusted EBITDAaL;

- Revenue;

- Group service revenue excluding Turkey¹;

- Service revenue;

- Mobile service revenue;

- Fixed service revenue;

- Vodafone Business service revenue; and

- Financial services revenue in South Africa.

Whilst organic growth is not intended to be a substitute for reported growth, nor is it superior to reported growth, we believe that the measure provides useful and necessary information to investors and other interested parties for the following reasons:

- It provides additional information on underlying growth of the business without the effect of certain factors unrelated to its operating performance;

- It is used for internal performance analysis; and

- It facilitates comparability of underlying growth with other companies (although the term ‘organic’ is not a defined term under GAAP and may not, therefore, be comparable with similarly-titled measures reported by other companies).

We have not provided a comparative in respect of organic growth rates as the current rates describe the change between the beginning and end of the current period, with such changes being explained by the commentary in this document. If comparatives were provided, significant sections of the commentary for prior periods would also need to be included, reducing the usefulness and transparency of this document.

Note:

1. This is a new non-GAAP measure for FY23 and has been included because of the hyperinflationary environment in Turkey.

47

Vodafone Group Plc ⫶ H1 FY23 results

Non-GAAP measures

Six months ended 30 September 2022

					Reported	M&A and	Foreign	Organic
	H1 FY23		H1 FY22		growth	Other	exchange	growth*
	€m		€m		%	pps	pps	%
Service revenue
Germany	5,730		5,777		(0.8)	—	—	(0.8)
Mobile service revenue	2,546		2,541		0.2	—	—	0.2
Fixed service revenue	3,184		3,236		(1.6)	—	—	(1.6)
Italy	2,125		2,187		(2.8)	—	—	(2.8)
Mobile service revenue	1,507		1,589		(5.2)	—	—	(5.2)
Fixed service revenue	618		598		3.3	0.1	—	3.4
UK	2,712		2,521		7.6	—	(0.9)	6.7
Mobile service revenue	2,003		1,797		11.5	—	(1.0)	10.5
Fixed service revenue	709		724		(2.1)	—	(0.7)	(2.8)
Spain	1,782		1,866		(4.5)	—	—	(4.5)
Other Europe	2,552		2,502		2.0	—	0.7	2.7
Vodacom	2,472		2,271		8.9	—	(5.0)	3.9
Other Markets	1,721		1,752		(1.8)	(1.2)	28.7	25.7
Of which: Turkey	676		815		(17.1)	(3.5)	60.5	39.9
Vantage Towers	—		—		—	—	—	—
Common Functions	268		252
Eliminations	(155)		(118)
Total service revenue	19,207		19,010		1.0	—	1.5	2.5
Other revenue	3,723		3,479
Revenue	22,930		22,489		2.0	(0.1)	1.5	3.4
Other growth metrics
Group service revenue excluding Turkey	18,549		18,212		1.9	—	(0.4)	1.5
Vodafone Business - Service revenue	5,149		5,086		1.2	0.6	0.8	2.6
South Africa - Financial services revenue	82		66		24.2	—	(16.1)	8.1
Adjusted EBITDAaL
Germany	2,677		2,892		(7.4)	—	—	(7.4)
Italy	759		917		(17.2)	(0.1)	—	(17.3)
UK	685		638		7.4	—	(0.8)	6.6
Spain	445		445		—	0.2	—	0.2
Other Europe	843		836		0.8	—	0.7	1.5
Vodacom	1,084		1,062		2.1	—	(3.7)	(1.6)
Other Markets	671		683		(1.8)	4.8	25.2	28.2
Of which: Turkey	215		282		(23.8)	16.1	55.4	47.7
Vantage Towers	330	��	305		8.2	—	0.4	8.6
Percentage point change in Adjusted EBITDAaL margin
Germany	40.6	%	44.9	%	(4.3)	—	—	(4.3)
Italy	31.9	%	36.6	%	(4.7)	—	—	(4.7)
UK	20.2	%	20.2	%	—	—	—	—
Spain	22.6	%	21.3	%	1.3	0.1	—	1.4
Other Europe	29.1	%	29.8	%	(0.7)	—	—	(0.7)
Vodacom	33.9	%	36.3	%	(2.4)	—	0.2	(2.2)
Other Markets	34.4	%	34.9	%	(0.5)	1.7	(1.8)	(0.6)
Vantage Towers	50.2	%	49.9	%	0.3	—	0.2	0.5

48

Vodafone Group Plc ⫶ H1 FY23 results

Non-GAAP measures

Quarter ended 30 September 2022

			Reported	M&A and	Foreign	Organic
	Q2 FY23	Q2 FY22	growth	Other	exchange	growth*
	€m	€m	%	pps	pps	%
Service revenue
Germany	2,873	2,905	(1.1)	—	—	(1.1)
Mobile service revenue	1,282	1,287	(0.4)	—	—	(0.4)
Fixed service revenue	1,591	1,618	(1.7)	—	—	(1.7)
Italy	1,073	1,111	(3.4)	—	—	(3.4)
Mobile service revenue	762	807	(5.6)	—	—	(5.6)
Fixed service revenue	311	304	2.3	0.3	—	2.6
UK	1,352	1,265	6.9	—	—	6.9
Mobile service revenue	1,000	902	10.9	—	(0.1)	10.8
Fixed service revenue	352	363	(3.0)	—	0.1	(2.9)
Spain	884	941	(6.1)	0.1	—	(6.0)
Other Europe	1,298	1,274	1.9	—	1.0	2.9
Vodacom	1,258	1,145	9.9	—	(5.1)	4.8
Other Markets	907	923	(1.7)	(2.2)	30.6	26.7
Vantage Towers	—	—	—	—	—	—
Common Functions	140	127
Eliminations	(92)	(71)
Total service revenue	9,693	9,620	0.8	(0.1)	1.8	2.5
Other revenue	1,959	1,768
Revenue	11,652	11,388	2.3	(0.2)	2.0	4.1
Other growth metrics
Group service revenue excluding Turkey	9,344	9,201	1.6	—	(0.2)	1.4
Vodafone Business - Service revenue	2,591	2,544	1.8	0.5	1.1	3.4
South Africa - Financial services revenue	42	33	27.3	—	(15.7)	11.6

Quarter ended 30 June 2022

			Reported	M&A and	Foreign	Organic
	Q1 FY23	Q1 FY22	growth	Other	exchange	growth*
	€m	€m	%	pps	pps	%
Service revenue
Germany	2,857	2,872	(0.5)	—	—	(0.5)
Mobile service revenue	1,264	1,254	0.8	—	—	0.8
Fixed service revenue	1,593	1,618	(1.5)	(0.1)	—	(1.6)
Italy	1,052	1,076	(2.2)	(0.1)	—	(2.3)
Mobile service revenue	745	782	(4.7)	—	—	(4.7)
Fixed service revenue	307	294	4.4	(0.2)	—	4.2
UK	1,360	1,256	8.3	—	(1.8)	6.5
Mobile service revenue	1,003	895	12.1	—	(1.8)	10.3
Fixed service revenue	357	361	(1.1)	—	(1.6)	(2.7)
Spain	898	925	(2.9)	(0.1)	—	(3.0)
Other Europe	1,254	1,228	2.1	—	0.4	2.5
Vodacom	1,214	1,126	7.8	—	(4.9)	2.9
Other Markets	814	829	(1.8)	(0.1)	26.6	24.7
Vantage Towers	—	—	—	—	—	—
Common Functions	128	125
Eliminations	(63)	(47)
Total service revenue	9,514	9,390	1.3	—	1.2	2.5
Other revenue	1,764	1,711
Revenue	11,278	11,101	1.6	—	1.1	2.7
Other growth metrics
Group service revenue excluding Turkey	9,205	9,011	2.2	—	(0.6)	1.6
Vodafone Business - Service revenue	2,558	2,542	0.6	0.7	0.4	1.7
South Africa - Financial services revenue	40	33	21.2	—	(16.6)	4.6

49

Vodafone Group Plc ⫶ H1 FY23 results

Definitions

Key terms are defined below. See page 46 for the location of definitions for non-GAAP measures.

Term	Definition
Adjusted EBITDAaL	Adjusted EBITDAaL is the segment performance measure in accordance with IFRS 8 ‘Operating Segments’. Adjusted EBITDAaL is operating profit after depreciation on lease-related right of use assets and interest on leases but excluding depreciation, amortisation and gains/losses on disposal of owned assets and excluding share of results of equity accounted associates and joint ventures, impairment losses, restructuring costs arising from discrete restructuring plans, other income and expense and significant items that are not considered by management to be reflective of the underlying performance.
Africa	Comprises the Vodacom Group and businesses in Egypt and Ghana.
ARPU	Average revenue per user, defined as customer revenue and incoming revenue divided by average customers.
Churn	Total gross customer disconnections in the period divided by the average total customers in the period.
Common Functions	Comprises central teams and business functions.
Converged customer	A customer who receives fixed and mobile services (also known as unified communications) on a single bill or who receives a discount across both bills.
Depreciation and amortisation	The accounting charge that allocates the cost of tangible or intangible assets, whether owned or leased, to the income statement over its useful life. The measure includes the profit or loss on disposal of property, plant and equipment, software and leased assets.
Eliminations	Refers to the removal of intercompany transactions to derive the consolidated financial statements.
Europe	Comprises the Group’s European businesses and the UK.
Financial services revenue	Financial services revenue includes fees generated from the provision of advanced airtime, overdraft, financing and lending facilities, as well as merchant payments and the sale of insurance products (e.g. device insurance, life insurance and funeral cover).
Fixed service revenue	Service revenue (see below) relating to the provision of fixed line and carrier services.
GAAP	Generally Accepted Accounting Principles.
IFRS	International Financial Reporting Standards.
Incoming revenue	Comprises revenue from termination rates for voice and messaging to Vodafone customers.
Internet of Things (‘IoT’)	The network of physical objects embedded with electronics, software, sensors, and network connectivity, including built-in mobile SIM cards, that enable these objects to collect data and exchange communications with one another or a database.
Mobile service revenue	Service revenue (see below) relating to the provision of mobile services.
MVNO	Mobile Virtual Network Operator: companies that provide mobile phone services under wholesale contracts with a mobile network operator, but do not have their own licence or spectrum or the infrastructure required to operate a network.
Next generation networks (‘NGN’)	Fibre or cable networks typically providing high-speed broadband.
Operating expenses	Comprise primarily sales and distribution costs, network and IT related expenditure and business support costs.
Other Europe	Other Europe markets include Portugal, Ireland, Greece, Romania, Czech Republic, Hungary and Albania.
Other Markets	Other Markets comprise Turkey, Egypt and Ghana.
Other revenue	Other revenue principally includes equipment revenue, interest income, income from partner market arrangements and lease revenue, including in respect of the lease out of passive tower infrastructure.
Reported growth	Reported growth is based on amounts reported in euros and determined under IFRS.
Revenue	The total of Service revenue (defined below) and Other revenue (defined above).
Roaming and Visitor	Roaming: allows customers to make calls, send and receive texts and data on our and other operators’ mobile networks, usually while travelling abroad. Visitor: revenue received from other operators or markets when their customers roam on one of our markets’ networks.
Service revenue	Service revenue is all revenue related to the provision of ongoing services to the Group’s consumer and enterprise customers, together with roaming revenue, revenue from incoming and outgoing network usage by non-Vodafone customers and interconnect charges for incoming calls.
SME	Small and medium sized enterprises.
Vodafone Business	Vodafone Business is part of the Group and partners with businesses of every size to provide a range of business-related services.

Notes

1. References to Vodafone are to Vodafone Group Plc and references to Vodafone Group are to Vodafone Group Plc and its subsidiaries unless otherwise stated. Vodafone, the Vodafone Speech Mark Devices, Vodacom and Together we can are trade marks owned by Vodafone. Vantage Towers is a trade mark owned by Vantage Towers A.G. Other product and company names mentioned herein may be the trade marks of their respective owners.

2. All growth rates reflect a comparison to the quarter ended 30 September 2021 unless otherwise stated.

3. References to “Q1”, “Q2”, “Q3” and “Q4” are to the three months ended 30 June, 30 September, 31 December and 31 March. References to “H1” and “H2” are to the six month periods ended 30 September and 31 March, respectively. References to the “year”, “financial year” or “FY23” are to the financial year ending 31 March 2023. References to the “last year”, “last financial year” or “FY22” are to the financial year ended 31 March 2022. References to “H1 FY23” are to the six month period ended 30 September 2022. References to “H1 FY22” are to the six month period ended 30 September 2021.  

4. Vodacom refers to the Group’s interest in Vodacom Group Limited (‘Vodacom’) as well as its operations, including subsidiaries in South Africa, DRC, Tanzania, Mozambique and Lesotho.

5. This document contains references to our and our affiliates’ websites. Information on any website is not incorporated into this update and should not be considered part of this update.

50

Vodafone Group Plc ⫶ H1 FY23 results

Forward-looking statements and other matters

This report contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives.

In particular, such forward-looking statements include, but are not limited to, statements with respect to: the Group’s sustainable business strategy; the sale of Vodafone Egypt, the combination of Vodafone UK and Three UK, the purchase of Cabonitel S.A., the co-control partnership arrangement for Vantage Towers and the sale of Vodafone Hungary; expectations for the Group’s future performance generally; expectations regarding the operating environment and market conditions and trends, including customer usage, competitive position and macroeconomic pressures, price trends and opportunities in specific geographic markets; intentions and expectations regarding the development, launch and expansion of products, services and technologies, either introduced by Vodafone or by Vodafone in conjunction with third parties or by third parties independently; expectations regarding the Group’s environmental targets, expectations regarding the integration or performance of current and future investments, associates, joint ventures, non-controlled interests and newly acquired businesses.  

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “will”, “anticipates”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets” (including in their negative form or other variations). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: external cyber-attacks, insider threats or supplier breaches; general economic and political conditions including as a consequence of the COVID-19 pandemic and ongoing war in Ukraine as well as in jurisdictions in which the Group operates, including as a result of Brexit, and changes to the associated legal, regulatory and tax environments; inflation; increased competition; increased disintermediation; levels of investment in network capacity and the Group’s ability to deploy new technologies, products and services; infrastructure competitiveness; rapid changes to existing products and services and the inability of new products and services to perform in accordance with expectations; the ability of the Group to integrate new technologies, products and services with existing networks, technologies, products and services; the Group’s ability to generate and grow revenue; a lower than expected impact of new or existing products, services or technologies on the Group’s future revenue, cost structure and capital expenditure outlays; slower than expected customer growth, reduced customer retention, reductions or changes in customer spending and increased pricing pressure; the Group’s ability to extend and expand its spectrum position to support ongoing growth in customer demand for mobile data services; the Group’s ability to secure the timely delivery of high-quality products from suppliers; loss of suppliers, disruption of supply chains and greater than anticipated prices of new mobile handsets; changes in the costs to the Group of, or the rates the Group my charge for, terminations and roaming minutes; the impact of a failure or significant interruption to the Group’s telecommunications, networks, IT systems or data protection systems; the Group’s ability to realise expected benefits from acquisitions, partnerships, joint ventures, franchises, brand licences, platform sharing or other arrangements with third parties or portfolio transformation; acquisitions and divestment of Group businesses and assets and the pursuit of new, unexpected strategic opportunities; the Group’s ability to integrate acquired business or assets; the extent of any future write-downs or impairment charges on the Group’s assets, or restructuring charges incurred as a result of an acquisition or disposition; developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes into account in determining the level of dividends; the Group’s ability to satisfy working capital requirements; changes in foreign exchange rates; changes in the regulatory framework in which the Group operates; the impact of legal or other proceedings against the Group or other companies in the communications industry and changes in statutory tax rates and profit mix.

Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under “Forward-looking statements” and “Principal risk factors and uncertainties” in the Group’s Annual Report on Form 20-F for the financial year ended 31 March 2022. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Any forward-looking statements are made as of the date of this presentation. Subject to compliance with applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not undertake any obligation to do so.

Copyright © Vodafone Group 2022

-End-

51

Vodafone Group Plc ⫶ H1 FY23 results

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

VODAFONE GROUP PUBLIC LIMITED COMPANY
(Registrant)
Dated: November 23, 2022
By:	/s/ R E S Martin
Name: Rosemary Martin
Title: Group General Counsel and Company Secretary

52