Vodacom Group Limited

Good morning everyone and thank you for taking the time to join us, Margherita and myself, at our Q1 trading results announcements. You will find on our websites, hopefully, a comprehensive set of materials to help you understand our results.

But I thought I would just take an opportunity just to touch very briefly, 30 seconds, one just the key highlights before we then go on to questions. We are back to service revenue growth in Europe as well as Africa with over a 3% growth in the quarter and we are growing in both consumer and business.

Around one percentage point of that growth was clearly lapping effects of COVID-19 last year that obviously suppressed that result. But even excluding that, I would say that is a very healthy growth rate for us as a business and we are firmly on track on our guidance.

Now, clearly we are not back to normal yet on our trading activity, our commercial activity and sales volumes. Football in the big four European countries in aggregate was around 40% below pre-COVID levels.

So we have yet to see that retell pickup that we are looking for and this was particularly evident and heavy in Germany. We have seen, in more recent weeks as retail stores have started to open up, volumes increasing and therefore we look forward to the back to school season that we are going to see.

Obviously, if activity was low, you can see from our churn numbers that in Europe mobile contracts, if we exclude Spain which had a specific legislation adjustment in COVID last year, you see that we were down 1.4 percentage points year-over-year. So we good churn trends across the vast majority of our markets.

In business, we saw service revenues grow 2.7%. We saw good growth rate in our digital services.

Clearly, the 2.7% was enhanced slightly because of obviously, again, the COVID impacts of last year. But we definitely expect and have been engaging with governments in terms of the EU Recovery Fund which we should start to see coming through in the second half of this year.

In Europe more broadly, we grew service revenue in all markets except Sicily and we had a particularly good rebound in the U. K.

and across the Europe other markets. Vodacom maintained strong momentum and particularly in financial services, which were up 34% in Q1 and we all due to launch a Vodacom super app called VodaPay Super App in the coming months in South Africa.

Clearly more to do, particularly in accelerating and improving shareholder value and we remain still very focused on optimizing our portfolio moving forward to ensure that we keep shareholder very much in our forefront of things that we are focused on. And on that, Margherita and I will take your questions.

Yes. Good morning Nick.

Good morning Margherita. I have a question on the revenue growth outlook.

In the first quarter, has great trends with easy comps but suppressed commercial momentum and particularly in Germany. So the question is, is the first quarter 2022 growth rate a high water mark for growth during the year and how should we think about commercial recovery through the years, especially in Germany.

Well, I will let Margherita answer in terms of service revenues sort of outlook or view. I would just say, in terms of trading, I mean clearly these remain challenging times.

I am not just talking our industry, challenging times for everyone. And it was always very clear that this would not be a linear recovery, so we should expect bumps in the road.

We are expecting bumps in the road in terms of how we are looking at things. Cleary, as I said, I am pleased with the 3% growth and the underlying growth rate that we had and we are firmly on track on our guidance.

I would say, in terms of commercial activity, if I look, it clearly has been suppressed. If we pick Germany, as your example, what we saw in April, May was a footfall down 80%.

It did then start to improve in June but still down 50%. So we are, by far, not there yet in terms of normalization.

If you look at examples of Spain, Italy on mobile net adds, these are still down year-over-year. So I would say, overall you were just seeing a lower level of activity.

And as I say, you see that in our churn. So I think this is the case of, let's see as we move into the back of the school period.

I think that becomes very important. We certainly are focused on the propositions, the promotions, the above the line campaigns that we will be hitting on back to school.

And we think that that will reignite our commercial momentum.

On service revenue growth. Of course, Q1 was a very special quarter.

We have seen roaming moving from being a headwind to a tailwind now. And on top of that, we have had this, what I call one-off effect from last year this time seeing the, effectively, shock of the pandemic in our market.

If you remember the presentation with did a year ago, in Q1 we were calling out the number off effects, particularly things like business projects being delayed from Q1 into Q2 or prepaid top-ups being more difficult in some markets. And I would say probably the market which was most affected by the beginning of the pandemic was Spain where the emergency decree was particularly severe.

Take in aggregate, these one-offs are worth about one percentage points which, as we say, is not going to recur as we move into the next few quarters. But we are well on track to deliver growth this year both in Europe and Africa and we are pleased with the momentum, as Nick mentioning on service revenue.

One data point I would call out from that perspective is that now we have all the data from the last 12 months. And what we have seen is that if you take the 12 months to March 21 through the pandemic, we have outperformed in retail service revenue growth.

All the incumbents and all the scaled players in our major European markets, both in fix and in mobile service revenue growth. So we are pleased with where we are.

Now you asked about the coming quarters, of course. And I would say, different growth drivers are affecting the profile for the remainder of the year.

If I take in turn consumer and business, I would say in consumer, near term, we are going to get the headwinds coming from the lighter sales driven by the pandemic in the last 12 months. As Nick said, we are now focused on reaccelerating after the summer with the back to school period.

And then it's very much repeat queue, so volumes but also price. And on price, we need to see how the balance between the more-for-more inflationary pricing actions that we are taking works against the competitive pressures.

In business, we are set for acceleration throughout the year. You have seen the good results already in Q1.

We are also gaining market share clearly in business. And I think there the speed of the acceleration will very much depend on the European Recovery Fund and how it will support our demand for, in particular, digital services.

And so timing of that will be critical. And in particular, how much of that will fall into the second half of this year and how much will be phased over the coming years.

But if I step back, I would say, definitely, as Nick mentioned already, on track to deliver our guidance this year.

Thank you, folks, for that color . That was really helpful.

Thank you.

Thanks so much indeed. So just a question on African fintech really.

Obviously, you have got a fantastic business there, particularly in Safaricom, but also in Vodacom. And it could be worth well over GBX10 per Vodafone share.

How do you think about how you illustrate that value to, I guess, the London market as opposed to within Nairobi where it is relatively well reflected perhaps within Safaricom? Thanks very much.

Yes. Nick, I think this is a really important topic.

You know that I have spoken about M-PESA now for 10 years. I mean I am very passionate about the transformational nature of it.

We have committed resource investment. We have never constrained the M-PESA platform and really tried to evolve it.

I am super excited. I really think that the pandemic, I mean, it's one of those platforms you have to do an awful lot of investment over three, four years to gain scale and then become the default player within each of the markets.

And we have done that investment over the last 10 years. We are the number one player in all of the markets that we are in.

So whether it's DRC with Hans there Lesotho, where Mohale Ralebitso is there, so having built that position and now to the question of how you can truly scale through more, if you like, use cases going forward. You saw that transaction volumes are materially up.

I mean, you have seen that in Vodacom International, the service revenue for M-PESA was up 43%. I mean, these are staggering numbers for a platform that's already number one in the marketplace.

And this is because we are really breaking out of just peer-to-peer. This is now companies paying their payroll using M-PESA, people doing their utility bills using M-PESA.

So we really do think it's an ecosystem, a platform. That's our mindset.

We are investing heavily behind it. One of the things we needed to start thinking about is that transition journey between feature phones and smartphones.

So we are now doing mini apps that then will allow us to do things like savings, micro loans, funeral, insurance, et cetera. And so this is a new product set that is coming to M-PESA.

And clearly, in South Africa, the financial services component will be done through what we are calling VodaPay, which is a super app, execution is slightly different. You add all of this together, it's talking 15% of Vodacom's service revenue.

So when I have spoken to Shameel and we have strategized about where we want to take that, we have said, look, we really need to start separating this business out into separate legal entities, make sure that we show complete transparency of this business and what it means to growth and margins. And then that also allows us other opportunities inorganically going forward.

And so I would say, at this moment, we are driving hard. We are investing heavily.

We are doing commercial partnerships with Alipay. We may do other commercial partnerships with other people.

I think there's an opportunity to take M-PESA outside of our footprint in Africa because it's really getting traction. So many opportunities, organic, maybe inorganic in the future, separate out the platform and then think about how we drive for shareholder value

How long will it take to separate out the platform legal entities?

We are running through that process. We have been for the last, I want to say, nine months.

We moved the platform down from the group down into Africa because that was an important component as well. Hosting locally.

And so there's a number of parts of the execution.

Okay. Fantastic.

Thank you.

Thank you.

Yes. Thank you for taking my question.

I have maybe a follow-up on some of the comments you made around back to school and commercial momentum. If we look at these results, perhaps the one area of weakness has been some of your KPIs, particularly in fixed.

So I just wanted to ask maybe a general question about what are the issues you see in different markets and particularly in some of the more competitive markets like Italy and Spain? Whether there is a point in time where the KPIs take priority and you could perhaps take a bit more action in order to stabilize your KPIs and be more promotional?

And then maybe a slightly separate question for Germany, do you expect when the footfall returns back to normal levels for the KPIs to fully recover? Or are there any other headwinds you may be facing?

Thank you.

George, just maybe I will add a few comments and then Margherita can do some builds. Look, I think we, as a company, have always been focused on value rather than chasing volume.

So we are a good rational player in the marketplace. We compete in a structural way, now increasingly on a dual-brand strategy.

So for every market, from a pricing perspective, we go through an exercise where we identify the various brands that we are competing against and decide how we are going to position pricing versus those brands and then we hold that position. So if they move up, move down, we adjust accordingly, to ensure that we have made it very clear what point of differentiation we have and where we need to match.

So I would say, we stay disciplined on that. Clearly, if shops are shut and footfall is down, the worst thing you can do is throw lots above the line marketing money into a market that's pretty quiet.

And this is an example in Germany. So when we saw that the retail activity was low, footfall was low, what we said is for quarter one, we are not going to go above the line.

This would be wasted marketing resource. And what we will do is we will store that up for later in the year when we felt that all the stores would open.

So I look, as an example, in Germany, generally, this has been our approach across all of the markets. Footfall, so U.K.

retail has been open. We have been above the line.

We have been commercially front-footed because it was appropriate to do that. Clearly, we manage our base, the lower churn and you are seeing that in the results.

If I look at Germany specifically, I would turn around and just say, look, we have clearly shaped a series of propositions and promotions for the back to school. So I mean we are good to go, as we are through the whole of Europe.

We have worked our TV portfolio. I think it's a strong portfolio.

We have been disappointed. We have not been able to get the retail stores because that's a really important part of the TV portfolio in stores.

So we are good to go on the TV portfolio. We have harmonized our propositions and pricing.

We have integrated our sales channels. These are all things we have talked about over the last couple of quarters.

It's just we haven't had the retail estate to really drive this. So our view is, as soon as that retail estate is fully open, we are on the front-foot again and we are confident that we have compelling propositions to drive.

And just maybe to add that, fixed is not exactly the same in all the markets. I think there are different dynamics across different markets.

And there were just a couple of points I wanted to point out. One is related to consumer.

And it's the fact that if you take a market like Italy, growth has now moved very much into FWA as a source of expansion. And for us, FWA is reported within mobile.

So just to keep that in mind when you look at the numbers because the market growth has really shifted there in consumer. And the other aspect is business.

A third of service revenue in fixed are from business, which is driven by very different factors. It's as much as 40% in certain markets now in Southern Europe.

And as you have seen from our reporting in business, we are growing well. And we expect further acceleration because all the areas of growth in fixed that distinguish us, we have very little legacy products, we are focusing on SD-WAN and other new products, will be even more propelled by the European Recovery Fund.

So I think it's just something to keep in mind when you project the fixed growth in the coming quarters.

Thank you.

Yes. Good morning.

Thank you for taking my question. I have a question really related to what you are seeing as the retail store footfall recovers in the months of June and July.

How are you seeing that better footfall translating into net adds recovery? I mean, obviously, what happens in the rest of the year is highly uncertain.

But perhaps if you could comment on what you are seeing in June and July, please, that would be helpful? And if you could make particular reference to the German situation, please, where I think we saw about 30,000 cable net adds in the last quarter and those were essentially only migrations from DSL?

It would be very interesting for us to understand what recovery you may be seeing in June, July there. Thank you.

Well, Jerry, I don't think it's appropriate to get down into weekly projections, results, et cetera. Well, I think on a slightly higher level, I would say, that as stores have opened, footfall is not bouncing back across retail, not our retail, but just the retail, full stop.

And I think it's because a lot of that has been the fact that the stores have opened back up just as we are moving into the vacation period. And so, I would say people are prioritizing other things at the moment, I don't know.

So I would say this is very much, the test will be back to school period. I am seeing it more toward the end of August and September as being a more normalized activity going forward.

You have seen everyone talking about the double jab, the certificates. You have seen what's happened in France, et cetera.

So I just think, at the moment, we are nowhere near normalization if we look at the month of June, July yet.

Thank you very much.

Hi Good morning. And thanks for taking the question.

I have got another question on Germany as well. Just trying to understand the weakness in net adds and a little bit more detail for fixed.

Your net adds are down 70% year-on-year. Footfall in the shops is down 70%.

The retail stores aren't your only distribution channels. You have got online.

You have got phones and so on. So it just seems like that the net adds drop is bigger than the footfall.

So presumably there's something else going on. I presume your online sales aren't down 70% as well.

So can you just sort of help us understand, is it literally just low footfall in the shops and low conversion? Or is there something more broad happening here in Germany that explains quite why the net adds are quite so weak?

And maybe if you can also just contrast it a bit with the numbers we saw from DT last quarter. And DT is showing a much stronger fixed line performance.

So if you can maybe just help us understand the differences in your trends versus what they have disclosed so far? Thank you.

So Jakob, I would say just in simple terms, when you are in lockdowns and restrictions, it's always going to favor the incumbent because they have a base and they are constantly marketing to the base. Of course, we can market to our base, but what we are looking to do is take share in the marketplace.

And that's why retail is a very important part to take share within the market. So what I would say is that, effectively, churn levels are down, activity levels are down.

If you were a customer at this point in time in semi-lockdowns, are you really going to change your fixed broadband provider? It's not going to be top of mind.

So this is what I mean. We made a conscious decision.

We are not going to run above the line campaigns. Because in the end, stimulating, try and stimulate demand when people are saying, you know what, I might think about it, but I am going to do it when we are out of lockdown restrictions.

So it's a very natural thing, in my opinion, that people would say, on that particular product, I am going to wait until I know we are back to normalization and then I may consider a provider, in which case we will be very much on the front foot.

I would say that for fixed in particular, you can subscribe online. But in most cases, you still need an engineer to come into your home to do the modification.

And again, not something I think people would have wanted to do, particularly in April and May in Germany and probably not something you are very inclined to do at this particular point in time.

I think there's a real, so you get the hard facts of COVID and then you get the sentiment around concerns. And I think the Delta variant coming into Europe has, if you like, suppressed a little bit because people are concerned.

And I think it's only when they see, yes, okay, it's come through, maybe the cases go up, the hospitalization doesn't really move, confidence returns. So it's a confidence thing.

So I just think at the moment, people are saying, I am going to stick with my current provider, as evidenced by our historically low churn in Germany. I mean it's not like we are underperforming on churn.

Got it. Thank you.

Hi. Good morning.

Could you hear me?

Yes, absolutely.

Perfect. Yes, just moving away from Germany and going to another country, in Italy.

Reduction in churn has damaged Vodafone, because you are in a market where you are winning market share. That has helped you in a market where you are losing market share, particularly in mobile.

So I was just wondering if you can give us a bit of color what you would expect over the next few quarters? Considering that the economy reopen, Iliad is very likely to remain aggressive and in fixed, they are going to launch and much, very likely, the offering you have, particularly going to use the same wholesaler.

So on the other side, you have got also competition from the incumbent, has recently signed their partnership for premium content with DAZN. So you have got basically two different drivers coming against you.

So how your retention policy is going to evolve in that market? And what you reckon will be your trends you are going to experience over the next two or three quarters, given what the circumstances are today?

And there is a quick one, unfortunately I have not been able to ask in the past, but I want to ask this one on India. India, this week has filed with the Supreme Court saying that no public sector bank is willing to offer guarantee for Vodafone Idea and all the assets are already secured with banks.

Since September, they tried to raise funds. Now it's almost a year.

No one has come with fresh funds because they want the controlling shareholders, i.e., Vodafone, to basically help out as well. So if you can tell us what's the strategy as it is now?

You have been very firm in the past, at least over the last 12 to 24 months, not to bring fresh funds and you try to look in the market, but so far nothing. And of course, the situation has been deteriorating, to say the least.

So what are you doing to break the impasse from there? Could it be there would be some repercussion on some of the other investment within this, considering that you guarantee the sales coming from Vodafone Idea?

Thanks.

Very comprehensive. I will tell you what, Margherita, you take your home market and I will take India.

So do you want to go first?

Sure. Italy, very competitive, as you mentioned.

We have some ups and downs regularly, particularly in the prepaid market. But I would say, the last few weeks, the last couple of months in Italy have certainly seen an increase in competitive intensity.

More allowances in mobile. We even had one of the three top mobile network operator going on TV with the headline of EUR5.99 for 100 gig, which clearly we don't see as sustainable.

And the competitive pressure on pricing has also hit fixed. By the way, fixed is another dimension of what we were discussing earlier in Italy.

We have seen, after a spike at the beginning of the pandemic in the fixed market, we have seen demand drying up, moving toward FWA. And in that context, price competition has heightened.

And to your point, I don't see this as reversing imminently given that there is an upcoming launch of Iliad. So very competitive.

Amongst the various factors you mentioned the agreement with DAZN. I need to say, I wouldn't put in this intense competition, football on TV as a key factor in the Italian market, much less B2B subscribers even less paying for football.

It's nowhere near a market like Spain. And of course, also football is available fully over the top as well.

So I don't think this is going to be a critical factor. But back to what we see in terms of growth in the coming quarter, competition will continue to be intense.

But at our end, you have seen the results improving. We are benefiting now, of course, from lapping the roaming drag, which was particularly strong in Italy.

But in the coming quarters, we will also see the benefit of our new wholesale deals coming into line in service revenue. And then a little bit more in terms of medium term, the European Recovery Fund.

We are mentioning it many times today, but Italy is the market that we will get the largest allocation, EUR190 billion, of which EUR70 billion is grant. And it's fair to say that we are very well-positioned ourselves in Italy to benefit from the increased demand on business services from the European Recovery Fund.

I was mentioning earlier, a third of our service revenue is business. We are consistently taking share of the market.

And therefore, we have a really great asset to get advantage from this. We need to see how it will phase in terms of timing, but a general improving trend on the back of these factors.

Yes. And just turning to India.

Really, India is a question for Vodafone Idea. But within the going concern statement, they highlighted very clearly, they are dependent as a going concern on refinancing of debts that are coming due in terms of monetization of assets, in terms of government support, so AGR or floor pricing, et cetera and raising funds.

So I mean it is, as you say, a highly stressed situation, a difficult situation that they are trying to navigate. I mean we, as a group, try to provide them as much practical support as we can.

But I want to make it very clear, we are not putting any additional equity into India.

Yes. Good morning Nick.

Good morning Margherita. Thank you for taking my question.

So I had a question just on your introductory comments, Nick. You mentioned that you, the management and the Board are still looking at the portfolio and options relating to the portfolio to deliver shareholder value.

Can you maybe just expand a little bit on your remarks and what options are open to you and the Board, please? Thank you.

Yes. Look, I think we have demonstrated over the last two-and-a-half years since I have been CEO and Margherita CFO that we are constantly optimizing the portfolio to drive shareholder value and we will continue to do that very actively.

What do I mean by very actively? I mean if I give you some sort of examples of areas.

So Vantage Towers. We are really pleased with the fact that Vantage Towers is now up and running.

The share price has moved on, what, just over 20% since the IPO. So I think that was vindication of the fact we kept the initial sale quite moderate, retaining approximately 82% of the interest in that company.

I think the timing was a good timing because now we are poised to help drive 5G but also consolidate in, if you like, the early rounds of the sector in Europe. So I think that is a really good growth opportunity for us going forward and we would want to take that.

We are clearly open to, as I have said before, co-control scenarios where sort of like-minded industrial players wanting to do combinations in the future. So we would certainly explore and entertain those type of discussions.

So we definitely want to do more things with Vantage Towers going forward. I would say second space would be in Africa.

Clearly, we have Egypt. And you saw that we did a new shareholder agreement with Telecom Egypt.

That gave us the optionality, not obligation, but optionality, to move it within the group. We could potentially move it to Vodacom.

That could always be a scenario. You know we did that with Safaricom and I think that was very successful.

Clearly, no obligation, but it's an option for us to explore. And then finally, I would just say, just in general, consolidation through Europe.

I still think that there's opportunity to consolidate. I think that in terms of how governments are now viewing consolidations, I think they have seen how critical we are as critical national infrastructure.

They understand the returns issue of the sector now. I really think they understand that.

I am having a series of very good conversations. I was talking to the Secretary State for the U.K., as an example, earlier in the week on this particular topic.

And I think they want to make sure we are a healthy sector because they understand that we enable, we are sector of sectors. So we enable all other sectors.

And therefore, they need to have competitive infrastructure for the country to be competitive globally. So what I would say is that conversation around what is the right amount of infrastructure in the country, whether infrastructure we can consolidate versus retail and other permutations, we are exploring a lot of different aspects, I would say, to see what can be realized.

So I would say very, very active in this area and we will see. Of course, it comes with complications because you have got EU Competition Commission.

But even Commissioner Vestager was commenting, saying that she was holding a meeting in October to really sort of stand back and start the conversation around the competitive framework that exists today. Now it might not change at all or it might be slightly moderated or they might do something more substantive.

But I think conversations around things like the definition of the market in which you participate become a more relevant conversation. We argue they more too tightly define it at the moment and it's broader than it looks.

And things like ensuring that they are reinforcing and enforcing a competition law when needed more rigorously than they do in certain situations to stop abuse. These type of things, I think, could be all positives in terms of direction.

Okay. Perfect.

Thank you very much.

Yes. Good morning.

Thank you. Nick and Margherita.

I just had a question really on your business outlook that you are seeing and the commentary you have given there. So firstly, I suppose at the full year results, you announced increase in your CapEx spend focused on business initiatives and you said some of that was going to be success-based.

So would love to hear an update on what success ratios you are seeing at the moment in some of those IoT and campus network projects. And then secondly, you talked a bit about the European Recovery Fund, which I think we all agree has the potential to be very significant.

Would love to hear kind of what you are seeing now bottom up on the ground on your ability to actually then bid for some of these contracts. What are you hearing from the SMEs who some of these funds are going toward to digitalize and your ability to then win some of the contracts from them indirectly?

Thank you.

Yes. James, let me, I mean, first of all, so we announced saying we are going to invest in digital services.

It does take us a while to build these digital services. If you remember, we were talking about a lot more integration of other people's services onto our platform so that we can bring those services to life.

So can I give you a tangible example because it sort of somewhat answers both. Spain is a really good example of the EU Recovery Fund.

So the Spanish government, I mean, I have been impressed at the speed that the government has moved. I mean, since I met them in April and I went through here's what you could do to make a difference for our sector, I mean they have hit every single point that I discussed with them.

So whether it was the good spectrum outcome that we have with lower pricing, et cetera, whether it's lower taxes that we are going to get sort of tens of millions benefit moving forward. And the third was around where could you really make a difference on accelerating digitalization and SMEs?

So they have badged EUR3 billion for the digitalization of SMEs, but already have said that they will release EUR0.5 billion in November. They are setting up effectively a digital hub to claim your subsidy.

And what they are doing is, they are targeting that first EUR0.5 billion on companies with employees one to 49, so let's say, SOHO and SMO at the S part of SMEs. And they are going to give a 90% subsidy level on digital services.

So what does it mean? And we formed a consortium, as have Telefonica, so really the two of us.

I mean, this would be the same you are going to see in all markets, ourselves and the incumbents, because of our business profile, tend to be the two operators that can form consortiums. So then we form a series of companies that come behind us in terms of offering digital services integrated with our offering, that we can bring to our customer base and they can use a 90% subsidy against those services.

And importantly, the 90% is paid upfront. And then we put the customer on a two-year, three-year contract for those services.

So we are really working very hard to, I mean, we have contributed a lot to the shaping of this, but also to ensuring that this will be a seamless experience for our customers. So I would say, this is the best case we have at the moment.

And what we are doing to other governments around Europe is saying, please replicate this. This is a really good model for us.

And we are hearing good traction across the board. Now everyone might do it through tax vouchers, whatever.

So some of the other countries might be more complicated. But this is a really good example of volume now.

I don't know if you have got some builds.

No. The only build would be the type of services that will be bought with the bundles.

You will have, I don't know, a security bundle, an e-commerce bundle, a business support systems bundles so that it's easy for companies of this size to know how to satisfy their needs. And within each bundle, you will have a combination of services readily available from the consortium.

And one final build, because you specifically mentioned it, was mobile private networks, of which again I think we have taken a real leadership position. We believe in mobile private networks.

We are investing behind it. We are standardizing it.

The key thing here is, how do you make it a series of products as opposed to it's always a bespoke expensive solution? We want to make sure that we can do this at scale.

So we are productizing effectively through pilots. And what you are going to see, I think, is traction in dedicated mobile private networks.

Then there's the more sophisticated version. So that's like a customer's campus, factory, et cetera, manufacturing plant, logistics, support versus a sort of hybrid one.

So you have got dedicated and you have got sort of hybrid. And the hybrid then mixes the ability to use our main macro network and the dedicated.

And that's a slightly more sophisticated. And that needs some more technology road map development.

And lastly, somewhat [indiscernible] because, yes, these are really, I think we have a really exciting proposition road map ahead of us. So I think the hardest thing we have at the moment is prioritization.

The demand is there. It's shift in that, you can hear what we are saying, shift in our proposition, prioritization and sequencing for the EU Recovery Fund.

Where the money moves, we want to make sure we have got the strongest proposition and partners lined up and it's a good seamless experience for vouchers or whatever and then develop more broader, strategic, differentiated products over time.

That's great. Thank you.

I appreciate all the color, there.

Thank you very much. You mentioned that the above the line marketing is pretty limited at the moment and I think the reasons you put forward there make a lot of sense.

But I wondered how you think that's affecting customers' perception of and desire for 5G? I am not so much talking about customers on the bleeding edge here, but more the larger pool of customers.

Or do you think it's kind of unlimited tariffs where bill worry and bill shock is being removed, that's really the thing that’s driving upside at the moment? Thank you.

Adam, can I give a view on this? Because for a consumer customer, 5G makes no difference, no difference on performance for any user case that they are using today and what we can see over the next five years.

So 5G is not for consumers. I mean it's nice to say I have got 5G, I have got an icon.

But this is a business application. You heard my passion around mobile private networks, et cetera, that's where the monetization is.

And so what we are focused on is building our 5G network for businesses. And secondly, in cities to lower our unitary cost where it goes to your point about unlimited, because it has a lower unitary cost, in which case unlimited we can deliver at a lower unit cost.

So we want to build the lowest unit cost factory in the industry in Europe so that we can compete at any level against any player and earn superior margins. So we are building it for that.

So we are not doing some of these deployments that some of our other peers are doing, which is using DSS, which is just trying to run a coverage claim for 5G. And actually, what we have seen is degradation in performance on the blend of 5G, 4G on that network with DSS.

So I would say, so going back to your marketing point, I think what we want to be marketing is the merit of a high-quality network that is a blend of 4G, 5G. You just want to know it's there.

You want to know it's reliable, that you have got the coverage, that you have got the performance you need, that you don't get dropped calls, et cetera. It's a seamless experience.

We want to deliver that for our customers. And that's our priority.

So our priority for consumers is high-quality network. But businesses, we are targeting 5G because we think that that is a monetization and transformational for our customers' experience.

Of course, above the line, we can talk about network more broadly, high-quality network, we can talk about propositions depending on which quarter we are in and whether we have exciting things to talk about.

Thanks very much.

Carl, you are on mute. But they are impressive headset there.

I mean, it really, you do look like you are flying in some sort of spaceship.

No, it's not. Now you can hear me?

There we go. No idea what happened there.

But I am not giving up on my trusty headset. I just wanted to ask about the decision to stay with Carphone Warehouse in the U.K.

and kind of what the new agreement gives you? I suppose it's particularly interesting, Nick, given your personal history with that, given that when you were CEO of the U.K.

business, you actually left Carphone. So I was just wondering if you could add some comments there?

Thanks.

Okay. I mean, clearly, it's a confidential commercial contract, but let me give you the essence to answer your question.

I think there was a feeling that a lot of operators have left Carphone and we are exiting the indirect channels. The answer is no, they are not.

They just left Carphone and went into a lot of other, I would argue, more aggressive and more expensive indirect channels. And so if you stand back in the U.K.

setting, indirect channels, I have always felt, even though I did exit Carphone, I have always felt, have a role to play to complement operators because they are offering something to a different target audience here. The issue I always had was we made no money on the first life of the customer.

And secondly, there was a high churn profile. So those two together are not good economics for us.

What I wanted was something where we worked together to develop a loyal base and this is the agreement we now have with Carphone. So the big difference is, we make money day one.

It is SIM-only. So they carry on selling their handsets, but this is SIM-only.

So you pick your handset and then come to Vodafone on a SIM-only offer. Importantly, we are working together on the base to improve the loyalty, lower the churn, give more products and services.

So what I would say is it's a fundamentally different arrangement between the two of us. I think it proves to be successful for both of us, because it has the right construct at the start which is, these are our customers together and how do we take them on a journey of more products and services and embed loyalty over a period of time.

And I think we could do that better together. And so that's why we were pleased to move forward on that basis.

And we would rather work with indirect channels that have that philosophy rather than a high-sell, high-churn, let's say, not so ethical, what would I say, approach to commercials.

Okay. That's great.

Thanks very much. Or maybe I should say roger, given the headset.

Thank you.

Yes. Exactly.

Look, you were the last question, I think. So look, thank you all for taking the time to join us.

I hope that you all take a bit of time out over the summer because I think everyone needs a little bit of a break, one way or the other. And look, we look forward to the back to school.

Please, if you are not a Vodafone customer, I can't think why you wouldn't be, you need to become one. We are going to have great propositions in the marketplace.

And we look forward to seeing you all in November. Take care.