Vodafone Group Public Limited Company Price & Performance (VOD)

We have also seen further improvements in our commercial performance, with our gigabit broadband base now stabilized. A result underpinned by structural changes to our customer experience, with a strong network and continued investment in customer satisfaction and brand. Our transformation of Vodafone Germany will now leverage the full reset of the leadership team with new directors for business, Consumer, IT and HR having joined in the last few months. However, as we highlighted in our results today, the combination of more challenging mobile market conditions and some one off items will impact the pace of our financial recovery in the second half of the year and the entry point into FY 'twenty six. Beyond this set of results, I'm pleased to say that we are now nearing the completion of our portfolio reshaping that I announced just over 18 months ago. In late December, we successfully completed the sale of Vodafone Italy having received €8,000,000,000 in cash. Proceeds from the deal have been used to reduce net debt and will also support the next $2,000,000,000 share buyback program which we intend to commence after the current program has completed. In the middle of this year. [indiscernible] And in the U. K, we have received approval from the CMA on our merger with 3.

We now expect the deal to complete in the next few months after which we expect to make a fast start in integrating the 2 businesses capturing significant cost synergies and delivering on our multiyear investment plan to build U. K. Best network. With these two transactions closing, we complete our portfolio transformation with Vodafone now having good positions and scale in all of our markets. Looking ahead, we will continue to prioritize the turnaround of Germany. As well as accelerating our growth opportunities across the rest. Of our portfolio. All the markets where we have been performing consistently well and following the U. K. Merger, we now represent around 70% of group revenue. With that, Luca and I are looking forward to your questions. Thank you, Margarita. As a reminder to analysts, please only pose one question to give everybody a chance to speak. Our first question this morning comes from Robert Grindle at Deutsche Numis. [indiscernible] Please go ahead.

Good morning. I'd like to ask about Germany, which is the issue du jour amongst decent performances elsewhere. [indiscernible] see improving KPIs, but note the commentary around tougher mobile delays to be [indiscernible] And also appears to be a bit sluggish. Please could you add some color on Germany into Q4? What has changed in H2? And how is that evolving into next year, please?

Thank you, Robert. Before handing over to Luca, for the financial outlook, maybe a couple of points of context. In Germany, in terms of both the market and Vodafone, and I'm sure we will have opportunities to discuss this further during this call, but in terms of headlines, Germany is, as you know, a fundamentally attractive market for scaled operators, with all big customer bases Historically, it's always been competitive, of course, but sustainably so. Now in the last few months, we have seen changes in the mobile market, which has become more challenging and don't need to give you any additional details on that because I think we have all commented. On this point. On Vodafone specifically, I'll reiterate a couple of points that I made in my introduction. We now have [indiscernible] leadership team, fully in place on the ground, driving the comprehensive turnaround. And as you will have seen also in these results, we do see signs of progress, whether we are talking about the stabilization of the broadband base, whether we are talking about customer satisfaction or even in mobile, despite the challenges, are branded additions performance. But it takes time. It takes time for these two come through into our financial performance, and it I'll hand over to Luca to give us more color around it and what we expect for the second half of the year.

Thanks, Margarita, and thanks for the question. So in terms of how this translates to the financials, let me start quickly on Service revenue in Q4, where would still expect an improvement, but it won't be meaningful. Because any contribution that we expect from the ramp up of 1 on 1 will likely be offset by the challenging market conditions that we are facing in mobile and competitive environment and intensity there. On the EBITDA side, as you have noted from our release, we now expect that half year 2 will actually be lower compared to half year 1. So just to outline why that is, it's a combination of and unexpected items on the expected front. We were always clear that half year 2 would be more impacted by the full run rate of the MDU transition coming to full bear. We are talking about around about a €100,000,000 negative headwind for each Q3 and Q4, whereas in the first half year, the MDU impact was still in the ramp up And also on the expected front, we are seeing less help from the energy relief in half year 2 compared to half year 1. Now originally, we were anticipating that we would be able to offset these headwinds with organic improvements in the second half year, again, mainly in mobile, but that has not materialized for a number of considerations.

First, again, because of the heightened competitive intensity in the mobile market, which has curtailed the improvements that we were expecting despite the would say, green shoots of good first brand performance that you have seen in our commercial trading numbers. We had higher expectations in that respect. And then also we were facing some one offs. In all of this, I think we need to bear in mind that we are a absolutely continuing to nevertheless invest in our CX brand and B2B performance because this is going to set us up for a sustainable return to growth and therefore we are continuing to lean into this And the other point to, of course, also note is that this of this changed assumptions for H2 in Germany, we are reiterating our guidance on the EBITDA front, which tells you then on the flip side that elsewhere in the group, we are actually and I would say, as [indiscernible] really performing better than we had originally anticipated. So that obviously is also giving us confidence as we move into the future. Talking about the future, perhaps a few words on the ambition for Germany heading into next year. Margarita, do you want to take this over?

Yes. If you want to sort of paint the bigger picture and in the sort of longer term for Germany, I move already straight into what we expect for FY 'twenty six. On the basis of what's going on. 2 clear positive supporting us into next year, Of course, first of all, the MDU transition will be behind us. So no more MDU drag from the 2nd quarter onwards. And then of course, the improved commercial performance that we are having already this year, although not going as far as we would have hoped in mobile, is going to obviously support the revenue trends However, there will be 2 swing factors. Factors, I would say, for the final outturn. And these swing factors first of all, the pace of acceleration of the wholesale revenues. Into our revenue mix And then second, the mobile market conditions. As we have said before, they are today more challenging there are no structural reason for it to be this way. But of course, we will need to judge Net net. Net net, I think it's a bit too early. To call the shots, and we will, as usual, give you a better update as we get into May, but our ambition remains the same and our ambition is to grow in Germany next year.

Thank you, Robert. Our next question comes from Polo Chan at UBS. Polo, please go ahead.

Thank you for taking the question. I just have one question about midterm free cash flow. So dividends received from Vantage Towers and Vodafone Ziggy are important contributors to the free cash flow of the group. And together, they represent more than €300,000,000 per annum. However, do you see risks to these dividends? For example, you've got Zagona talking about walking away from Vanish Towers in Spain in 4 years' time. And looking at VodafoneZiggo, what is your view on deleveraging the business compared to upstreaming cash? And looking at the starting point for adjusted free cash flow in FY 'twenty 5 of €2,400,000,000 Do you think this can grow in the near to midterm just given upfront restructuring costs with the merger in the UK?

Yes, perhaps I'll take that. So first of all, on the free cash flow from our associates, You have seen that in Vantage Towers, we had a very positive movement from last year. Into this year. We essentially are going from €200,000,000 to €300,000,000 expected dividends from Advantage alone without Borderphone ZIGO in FY 'twenty 5. And I would expect that this trend of Vantage Towers increasing its cash flow and therefore also then the dividend contributions to Vodafone and ARPA [indiscernible] a very healthy business development. And in terms of the market opportunity out there, not focusing on a singular market, but actually the whole breadth of the market coverage. I think there are enough opportunities for Vantage Towers to deliver that. So I'm actually very confident about the trajectory into the midterm future on Vantage towers. With Vodafonezigo, you obviously know that they are operating in a market where they have generally, I would say, pretty reasonable conditions. They have, of course, significant leverage and that needs to be taken into account They are going to report on their numbers in actually a short while and will then be, I think, also able to talk about their distribution strategy But for this year, I think they were originally some doubts and ultimately they have come out with a pretty good return expectation for us.

So I wouldn't be too concerned about that. I think in combination across both entities, Vantage Towers and Vodafone Sigel, should be quite okay. And yes, of course, as we have said, our ambition for the midterm is to shoot for growth in our adjusted free cash flow. You are right that we are going to see in the early years of the U. K. Merger coming together the free cash flow being dilutive from a contribution perspective from the UK, but elsewhere in the group, continue to make progress. We have been guiding for growth for FY25. And therefore, in combination, I think we're quite confident about our projection for the midterm in terms of our cash [indiscernible] Thanks.

Thank you. The next question comes from James Ratzer at New Street. James, please go ahead.

Yes. Good morning, Marge and Lucas. I was wondering, could I just ask about cash returns to shareholders? So I know you have the $2,000,000,000 buyback planned for FY26. As the Italy deal has now closed. But it seems like your leverage is still going to be around 2 times even including that buyback, so kind of below the 2.25 to 2.75 times range. You'd have about 3,000,000,000 I think of excess capital that could be dis distributed. So I'm kind of wondering with the share price where it is, can we expect you to announce something on accelerating returns at your full year results in May. And how do you see the balance really between and leverage going forward? Thank you.

Yes. Thanks for the question. I'll take this one as well. And let me start by saying that I'm really happy that we're bringing all of the elements of our capital allocation framework into execution I would argue like a clockwork because we have been successful in the portfolio transactions. We have now the funds from Italy in the bank account And that is, of course, very helpful. You're right, temporarily, this could set us up for staying below our targeted leverage range. But I would say you need to take 2 things in account with regard to this. 1 is, of course, the additional €2,500,000,000 of share buybacks that we have already committed to and that we continue to execute against. The other one is that upon closing the UK merger, we will actually add another €2,000,000,000 of debt to our consolidated group figures from the free side coming in. And that despite the fact that we'll also get some EBITDA through the combination will still result in us going into right where we wanted to be, which is the lower half of that 2.25 to 2.75 leverage range, but we will be in that in that corridor. Now from here on, you are obviously correct that we are in a very good position.

We have some extra freedom, so to say, on which we can decide. I think the pace of our share buyback that we are currently executing is about right. And there is no real opportunity to further accelerate this massively. But we will obviously execute on it. And then when we are done with it towards the end of our FY 'twenty six, we are going to reassess the situation. So it's a comfortable position to be in and gives us optionality But we also don't shouldn't overdo it. So with the UK debt being consolidated, I think you'll find us being within the debt leverage corridor that we have been announcing last year.

So it sounds like we shouldn't expect any form of extra tender or any new announcement with the results in May then on the cash return?

I think you should expect us to be predictable. And execute with reliability across our capital allocation framework, all of the conditions combined. And then take another hard look at what is most value accretive when we are done with that.

Got it.

Thank you, James. The next question this morning comes from Andrew Lee at Goldman Sachs. Andrew, please go ahead.

Good morning, Margarita. Good morning, Luka. I had, if I can, 2 just follow ups from the questions before. So just one follow-up, Margarita, to your comments when you're referring to the swing factors. Of German mobile competition and 1 on 1. Can we just infer from you referring to them as swing factors? Is that swing factors to delivering growth at all in Germany? And therefore, can we infer from that that if mobile competition stays where it is, that 111 has to be [indiscernible] without 1 on 1, you wouldn't be growing organic service revenue growth in Germany and it needs to be a certain degree of onboarding to deliver growth even at a headline basis. And then just the second part, just on your comments, Lika, on the Hutch implications. When we're thinking about modeling Hutchison coming in, do we see can we just take the Hutch numbers that are reported or are there any adjustments we should be making when thinking about modeling that? Thank you.

Thank you, Andrew. I'll just maybe go a bit broader than just the moving parts of the numbers actually in your 2 questions. [indiscernible] it's 2 important points more broadly. So if I start from Pricing and the overall competition environment in Germany. The answer to your question [indiscernible] it's big moving elements, both 1 and 1 in terms of the pace of the migrations and of course mobile pricing and therefore to start being specific is impossible until we have more visibility on both items. So I wouldn't go and do a build part by part of the performance the back of that. Let me tell you where I see the pricing environment going more broadly because I think this is an important topic we expected in November We discussed in November the fact that actually the competition pressures, which were in the lower end of the market and built also into the mid to high end of the market. And since then, you have seen in Q3 that All operators have been promotional. So this has impacted all operators. You know the details better than me. As I said earlier, it doesn't need to be this way. Because we have a fundamentally sound structure in place in the German market with 4 players.

So that's scale, all with big back books. Now these are promotions and promotions by definition not meant to last [indiscernible] And actually, we will see in the next few weeks how various deadlines are going to be managed. In terms of how this is going then to play out in the future, I would say that in these conditions, a change of direction is still very much possible And of course, as long as this will continue to be the case, you should expect Vodafone to be measured in its approach. This links to your question because at the moment, when we look at the future, we think about the current conditions. But as I said earlier, they could swing Either way, [indiscernible] quite easily. So when I say ambition to grow in Germany, year remains the case, it's in the current market conditions, to be specific. You then asked about the UK. And in a nutshell, I think it's worth saying that [indiscernible] Key financial parameters that we laid out for the impact of the merger in back in mid-twenty 23 have not changed. So they remain the same. But we will also need to sit down now with our partners and A final joint business plan.

Once the merger will complete. So we can't be much more specific than saying there are no reasons for the big parameters to change at this stage. And I would add that we are very much looking forward to increase our exposure to the UK [indiscernible] we are talking about a market in which we will now have some really strong structural condition for long term growth. As you know, we will have a unique combination of assets there, whether it's spectrum, whether it's network, whether it's customer base, This is going to be in a market where we have consistently outperformed. So we really look forward to the merger completion and to deliver on the parameters we have laid out. Anything to add?

No, just a very quick double click. One of those elements that will be happening as part of the final alignment and business planning is also the alignment of accounting policies So in that respect, while I don't expect any significant movements in this respect, Obviously, as part of our consolidated accounting, we will apply the Vodafone policies, and we will go through a detailed matching of Hutchison's accounting with ours. So this might in a few areas areas result in smaller adjustments. Just wanted to flag that, but this is also one of the steps that we will have to go through. Obviously.

The next question comes from Adam Foxromle at [indiscernible] Adam, your line is open. Please go ahead.

Thanks very much. I'm sorry, but it's it's quite a specific follow-up to Andrew's question. But I wanted to ask about the risk of a write down in Germany in light of your comments that trends are more challenging than expected. Margin of safety fell to just €500,000,000 at the interims and I wondered if there are any implications for the broader group And on the pricing side of things, I suppose is it possible to say how the current pricing levels in Germany compare with the pricing assumptions that go into the medium term [indiscernible] that then impact that value of value in use? Thank you. [indiscernible] So first of all, you are correct and we have been laying this out transparently that obviously we were going into the second half here with fairly limited headroom in Germany. And as we are going now through the replanning and our fair value assessments across the different segments We will obviously take current performance into account, but also changes in discount rates and so on. So it's too early to prejudge the outcomes of this accounting assessment that we are doing. [indiscernible] performance, which is lower than original expectations is, of course, increasing the risk of an impairment.

Having said that, an impairment obviously would be a non cash accounting event that would also be not having a cross read to any of the other segments as it's really then focused on the cash generating unit Germany. That we are going to assess as all of the other assets. And in all of them, as we are doing better than expected, there is obviously no increased risk for an impairment in any of the other ones. In terms of the the way how these assessments are going to be done, Of course, we will have to update our expectations for the financial performance into the future. However, this is a multiyear planning process. And so would certainly not be exclusively in one dimensionally focused on short term pricing environments that we are observing today. Okay.

The next question comes from Karl Murdock Smith at Citigroup. Tom, your line is open. Please go ahead.

Hi, thank you very much. I was wondering if you could expand a bit more on the German business decline. And the 3% decline there. There seems to be 3 moving parts. Lower ARPU, contract phasing and then digital services growth on the positive side. I was wondering if you could just kind of scale those and how those contribute towards the 3% decline overall. And with regards to the commentary around the mobile ARPU pressure, is that more macro or more competition led? And is it with respect to one particular contract or is it more broadly? And basically, what's the outlook for Vodafone business in Germany in the coming quarters?

Yes, perhaps I can take the business question and then you can comment on the more broader questions. Look, in Vodafone business, I think the the impact that we are seeing now is really twofold. One, you see an impact that we have already observed in the past few quarters that in the large enterprise segment, in mobile, you are facing or we are facing pressure because of the effect of the resigns of the last year, which came with a lower ARPU and therefore bringing the mobile performance down. And we also had some disconnect corporate sector. The other one that we have been flagging right now is indeed one that is confined to one single but material case So one of the significant projects that we are running in Germany is currently facing delays, and that is obviously then resulting in delayed revenue recognition and therefore a negative impact. But this is a phasing impact but it hits us in FY 'twenty five and perhaps also into the first part of FY 'twenty six. In the underlying you see in Germany actually, as elsewhere, it's especially in digital services, a good performance and this will continue to become a bigger part of the total tire everywhere, but also in Germany and will continue to grow much faster and therefore should give us then support as we work on building our base in that business And I think with Hagen now on board and the Envisk investments that we're doing into capacity, in that space.

In particular, I'm quite confident that we will also see in Germany a better performance in B2B as we move into the next year.

We'll just add that you referred to the macro. More broadly, and I think any pressure from the macro side could also be an opportunity for us because in terms of if you look at our position in B2B, this is true for Germany as everywhere else, We are much less exposed than incumbents to legacy products. So we are the challenger that can help corporates in particular to drive efficiencies And this is also driven by digital services, sometimes stepping in to help them becoming more efficient. So we see this very much as a competitive opportunity for us.

That's great. Thank you very much.

Thank you, Carl. The next question this morning comes from Akhil Duchani at JPMorgan. Akhil, your line is now open. Please go ahead.

Hi, good morning. Thanks for taking the question.

Just had a couple of follow ups on the comments you've both made on Germany, the German outlook. And there's they're all quite small, but the first one is you mentioned Luca, that in Q4, the recovery in service revenues won't be as material. You mentioned both competition but also one off. I guess I was just keen to understand how much is one off, how much is competition. But I guess the bigger question is, if we're running at still a, let's call it mid single digit service revenue decline, guess I'm just struggling a bit to understand Margarita your comments around the ambition to still return to growth into next year. So I guess what I would love to understand a bit more is, you know, what are the building blocks as you see them at a high level that are required and sustained? And obviously, you've mentioned a few, but I guess given the run rate we're seeing, it's a bit tricky. And I guess linked to that, at a high level, I guess what is a bit difficult to understand is if we look at the last 3 years, operating cash flow in Germany has now fallen a third in 3 years.

To what extent does that hamper your ability to reinvest to turn the business around? Because the scale of decline we've seen in the last few years has been quite challenging. And I just wonder whether commercially and financially that creates some constraints on the business. Thanks a lot.

Sure. And I'll keep this high level. So I'll answer all the sort of moving parts. First of all, your broader question on growth, I think the answer is visible, if you want, in the current performance, right? If you look at the growth rates mid single digit negative as you called out now, Within this mid single digit negative, you have 4 percentage points drag from MDU's And the rest, by and large, is the decline of the broadband base that we have suffered from in the last 12 months. Now if I project those two forwards and use stop impacting us negatively starting from Q2 next year. We have now stabilized our broadband base, as you have seen in the results this month. And on top of that, we have, of course, the growth coming from wholesale with the gradual migration on 1 and 1. And this is just if you want, taking into account the basic factors, we can then talk more about B2B and other sort of growth drivers in the future. But I think this is, if you want, the for service revenue growth in Germany. The point you were making on free cash flow is is really an important one because not influencing us.

At all would be my short answer. I think Luc has said it earlier. We are continuing to invest in our turnaround in Germany. And this is not changing. Yes, We are working with a set of turnaround actions that are all geared for mid low term growth in the market. Brand. Some of you may have noticed it if you are traveling around Germany, but we have started reenergized brought our investment in our brand to the right level. Which is share of voice matching market share. And for the first time in several years, and it to say, we are now co leading in the market in brand consideration both for users and non users. Another source of investment for us is customer experience, Again, you may see or perceive some of that, but we have turned around the trends in customer satisfaction We talk a lot about the U. K. Because it's now leading on every parameter, but in Germany, the level of detractors in our base, which is what internally we we really all focus on, is the lowest it's been in the last 10 years. And again, you know what actions have led us there, investing in our cable network and in general working on all our customer processes.

And this is why why you then see even in the context of some challenges in the mobile market with this promotions around the Christmas period, You see the numbers you see in the commercial performance the stabilization of the gigabit base in broadband. So we have stopped the longstanding erosion. And even in mobile, I was calling out earlier, headlines are not that exciting. But once you split the resellers reduction that we are leaving weight and is very low value, we have good growth in our branded additions, which is the ones we care about. You should expect us to continue to maintain these investments, whether it's B2B capabilities, whether it's customer satisfaction, whether it's brand ongoing as we go through this year and next year, because they are underpinning really the comprehensive turnaround. And I need to say I'm very energized now having seen the new leadership team in place in Germany. Again, some of you will have chances to meet I'm sure in the coming months, I think it's great to see how we now have real industry leaders working across operational excellence, across the company, and we have a very full agenda for FY 'twenty six.

Yes. And perhaps just to come back to your Q4 question on the service revenue front. That I think has 2 components. The main reason why we expect an improvement is the beginning of the lapping of the MDU impact. If you want to recall, in Q4, we had the first moderate impact in the last year, and that is partially then annualizing in the numbers. We obviously have the ramp up of revenues from 1 on 1. It's coming in, honestly speaking, slightly at a lower pace than we would have anticipated. It's a technically challenging migration process, in which I think 1 on 1 is still kind of working to accelerate and from that perspective would expect a smaller shortfall against our original expectations, but not significant So the main reason that is then working against us is the higher competitive intensity in mobile. I would say we have been holding up reasonably well in our first brand performance, but we had certainly higher expectations in that respect than what we could ultimately drive towards. And as you look into next year, obviously, we expect still that the 1 on 1 contract will ramp up to the full set of customers by the second half year.

Of FY 'twenty six. That's another component that will clearly underpin our ambition to grow again in the next year.

Super useful. Thanks so much.

The next question this morning comes from David Wright [indiscernible] Bank of America Merrill Lynch. David, please unmute yourself and go ahead.

Okay. I think I'm unmuted hopefully.

Yes, so a question on Germany, but I will just add a tiny comment, Luca. I think actually on the UK, the accounting is quite significantly different on acquisition subsidies. I think Hutch capitalizes them. You guys don't. So I think that is a difference that could be quite material Is it not We can just come back to that. So I guess on Germany, you've mentioned multiple initiatives Margarita, but I think the one differentiating factor but for most telcos performance and and if anything something that's hurt Vodafone over the years has been network quality. Telcos tend to work when they're either the best network or the cheapest price. And I think Vodafone for a long time was neither. And thus, I suspect a lot of your moves to add scale in the U. K. And shrink the portfolio. You haven't mentioned network investment. I'm just wondering We're not going to go over my long term fixed question here. But just on the mobile side now, are you even confident that your mobile network is a differentiating quality factor I think historically the D1 and D2 networks you guys and Deutsche were differentiated. I feel like you guys have dropped a bit O2D as caught up a bit.

Do you need any more CapEx in Germany in the mobile business to better defend yourself against essentially price competition because you can't compete on price. Do you need any more CapEx in the business? Thank you.

Sure, David. I mean, the short answer on Germany is that like we said multiple times in the past, we expect to maintain broadly similar capital intensity Going forward, we are happy with our shape. The only thing that is moving around at the moment is the €100,000,000 that we are investing for the 1 in 1 migration that is phased according to customer growth, But besides that, we are pleased with our position And back to the beginning of your question, I really believe that it's very important for Vodafone to have good quality, strong net position in the U. K. With returns in excess of cost of capital to build for the UK, for example, the best 5 gs network. So I completely agree on how important the quality of our networks is, but I feel very pleased with our position in Germany because mobile we are a strong number 2. I'm talking about the general network testing. I think we will all have views and parameters on how to explain that, but I refrain to sort of make a judgment and let's look at independent testing, right? We are a strong number 2 in mobile. And in fixed, we continue to be rated there was another test coming out even in the last quarter as the best fixed broadband network in the country.

Now as you know, it wasn't like this. If you go back 3 years, our cable network required investment, but now with the run rate of investment that we have within our capital intensity, which is this ongoing fiberization we talked about many times in the past. The The ratings, the tests, I would say, speak for themselves, and our intention is to continue to maintain this strong position because they are a core part of our positioning in Germany within broadly similar capital intensity. Okay.

And Luca, just on the U. K. Maybe quickly. Yeah, am I right on that accounting differential?

Yes. As I said, there will be differentials but to what extent they are plosing and minusing up that's really we have to go through the final alignments. But there are Doesn't change the cash.

No.

Very good. Thanks so much guys.

Thank you.

The next question this morning comes from Mills at You can go ahead. [indiscernible] You. And my question is again coming back to Germany.

Marguerite, you mentioned a couple of times during the call that you still see the mobile market structurally sound. I maybe want to challenge that a little bit. If we step back and look at the market today, you've got Telefonica Deutsche with a 20% gap in the network as a result of losing the 1 on 1 contract. We've got 1 on 1 fighting to prove that their network strategy is going to work and probably taking advantage of some of the better terms you've offered them. And then the recent changes from Deutsche Telekom cutting mobile [indiscernible] [indiscernible] percent. Those discounts have been extended now in [indiscernible] So I think my my main question here is what are we missing? Why do you think this is a structurally sound market? And who needs to take the first step to make this more rational again?

Perhaps if I can tack on the second question as some of the other guys have. I look at your guidance in Germany EBITDA for the second half, I know you haven't specified how much lower it will be. Let's say it's a $100,000,000,000 That looks like a number which is not just driven by price competition. It will also be driven by reinvestment in marketing handset subsidies and other things.

Perhaps you could give us a bit more detail about what that additional investment is going into. Because if you're saying you want to remain rational and not cut price this guidance, it looks like, would be suggesting you're investing elsewhere to reenergize your net adds.

Thank you.

I'll hand over to Luca for the EBITDA. But if I go back to the pricing environment, there is one point that I think needs to be made, which is around the 1 in 1 [indiscernible] said at the time, and I think it was very clear that we didn't have any competition on pricing. In terms of our wholesale. Points, and so that wouldn't make a difference. What we have offered at the time to 1 and 1 was the visibility of long term partnership that was giving them optionality. And that's an important point. In terms of what's happening on the ground now, and why I insist that it's a structurally sound market? I will just reiterate what I was saying earlier. There are promotions going on. And again, I don't want and I can't forecast in which direction this is going to go, which is why I was saying to Andrew earlier, we cannot exactly be precise because there is always going to be variability on pricing and we can't do predictions. However, All players have some substantial customer bases to manage and take care of. And I think this is the fundamental reason Why I'm saying what I'm saying?

On the alpha?

Yes. So first of all, this has nothing to do with a further step up in investment. We have said that we are investing and doubling down on the investment in CX in the brand and into B2B, but that is happening at the pace that we had projected at the half year.

No difference between the There is no difference in this respect.

We don't cut.

No. So it's a combination. It's on the one hand side, the more challenging market environment but don't forget the one offs that we have flagged I think you should not underestimate the aggregate size of them. We have 3 factors here. 1 is the the delay in the ramp up of our wholesale revenues. That's the smaller one, I would say, but still should be called out. The other one is this B2B project delay that I've been talking about. This is a very significant project, so it's having a sizable 2 performance. And then we also took some additional accounting provisions, and it all adds up in addition to the market conditions and therefore you shouldn't be surprised.

Thank you. We have time for one last question this morning which comes from Emmet Kelly, at Morgan Stanley. Emmet, your line is open. Please go ahead.

Excellent. Thank you very much for taking the last question.

So I think just in the interest of variety, my question will not be on Germany. I think just like last quarter, I'll ask a question on Turkey. If that's okay. So just looking at the service revenue growth in euros the group, I think it's about €420,000,000 year on year. And looking at the euro increase in Turkey, it's about 380,000,000. Year on year. So it looks like Turkey basically accounts for about 90% of the euro denominated service revenue growth for the group. So a pretty important component of the pie right now. So can you maybe just say a few words on the outlook for the Turkish business in terms of top line, what you're doing on the ground in terms of price increases, remember in the last call, you said that you were increasing costs lower than inflation. And how we should think about your denominated growth? Thank you very much.

Sure. And just to your totals, I would add that the other swing factor that you have in our service revenue growth is the €400,000,000 per year loss MDU load change, yes, which add to the swings. But if I take Turkey, specifically, and I think it's it's a very important point that we also need to cover because we are really outperforming in Turkey today. And it's not just about prices and in [indiscernible] growing in euro terms significantly. Actually, Turkey this year in EBITDA terms will be €300,000,000 higher in Europe. Than it was pre devaluation. So we are building real growth at very respectable CAGR there. And the reason why it's not just management of pricing and management of inflation, but it goes much deeper than that. We are quarter after quarter posting record high market shares. In Turkey, we have the lowest churn in the [indiscernible] And I would say, this is down to the outstanding commercial execution of our Turkish team, whether you look at marketing, sales, CVM, I think have a particularly strong formula around loyalty. They actually have a [indiscernible] connected also to a very strong e commerce business in Turkey. And on top of that, they are managing digital very well, which helps significantly with profitability.

So it's not just top line, 40% of our sales in Germany are now through digital channels, which is the highest number that we have. So in general, they are managing a very, very good performance overall And maybe Luca can add some sort of shape of the growth.

Very happy to Perhaps the last point as well, there are some very specific growth opportunities in the Turkish market that come along also from regulatory constraints for telcos. The most important one is the data residency laws that require data to stay in country and therefore the telcos including Vodafone, have a great opportunity in B2B to have a very healthy data center business. So that adds further to the growth of opportunities in a way that could not be replicated in, let's say, Western Europe So that's just on the the strategic levers perspective in terms of how this will play out. We remain absolutely bullish about the Turkish market. I think it will continue to show very positive growth contributions in hard currency in euro. Of course, in Q4, but then also going into next year and into the midterm, what we will certainly see is a moderation of the growth rates within that, because inflation was in Turkey is starting to come down. We will continue to grow above it. But with it coming down, certainly, the growth rates will moderate. However, as the absolutes have become such a significant piece, even a slightly lower growth rate will still translate into a very strong absolute contribution in euros.

And therefore, we fully expect that Turkey will remain a strong growth engine for the group overall. Also in FY 'twenty six, even at lower growth rates. But it's not only Turkey. I think we have an opportunity to replicate what we have shown in Turkey in Egypt in particular, where we're starting to see a similar very helpful trajectory where we're growing significantly above inflation rates where now new price floors have come into place in December 30 percent higher price floors, which allow us also to reset our price points and where we also have a very strong position in the market. In fact, we are the market leader in Egypt and can further expand on that lead So I think Turkey is a good precursor what we can drive in our emerging markets in a broader sense.

Super. Thank you for the color.

Thank you.

This was the last question. And I would now like to hand back to Margarita for any closing remarks.

Thank you very much, everyone, and look forward to see you in May when we will communicates the new guidance with our new reshaped Borderphone playing from strong positions in every market. Thank you.

Thank you. Bye bye.