Vodafone (VOD) Q2 2027 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Margherita Della Valle
• Chief Financial Officer - Pilar Lopez

TAKEAWAYS

• Group Service Revenue -- 6.4% growth in the second quarter, representing the highest growth rate in three years.
• Adjusted EBITDAaL -- 6.4% organic growth in the first half of the year, driven by top-line expansion and margin improvement.
• Adjusted Free Cash Flow Guidance -- Upgraded to 21% organic growth at the midpoint of the revised range.
• Adjusted EBITDAaL Guidance -- Raised to 7% organic growth at the midpoint for the full fiscal year.
• Vodafone Business Revenue -- 6.6% growth, supported by a record performance from the digital services portfolio.
• Digital Services Revenue -- Exceeded 2 billion euros, reflecting a strategic shift beyond core connectivity into cloud, security, and AI.
• Germany Digital Services -- 30% growth in the first half of the year.
• Cost Savings Progress -- 200 million euros in gross savings delivered in the first six months of the fiscal year.
• Net OpEx Savings Target -- Over 200 million euros in net reductions projected for the full year.
• Headcount Reductions -- 3,000 role reductions completed in the first half, with an additional 2,300 announced for the German business.
• German Workforce Transformation -- 40% total reduction in headcount since the start of the current transformation program.
• Germany EBITDAaL -- Decreased 3.2% in the first half, primarily due to regulatory and noncore impacts.
• ECJ Ruling Impact -- 100 million euros, which accounted for 2 percentage points of the decline in German EBITDA.
• UK Synergy Delivery -- 50 million euros in gross synergies captured during the first half.
• UK Cash Flow Outlook -- Operating cash flow in the United Kingdom is expected to more than triple by fiscal year 2032.
• OXG Fiber Joint Venture -- 1.1 million households reached, with a target of 1.4 million by the end of the fiscal year.
• M-Pesa User Base -- Exceeded 100 million users across the African fintech platform.
• German Asset Impairment -- Non-cash charge driven by an increase in German government bond yields from 7.5% to 8%.
• European Net Savings Target -- 1 billion euros in annual net OpEx savings targeted by fiscal year 2030, representing 13% of European EBITDA.
• Africa and Turkiye Performance -- Double-digit organic growth reported in both markets during the first half of the year.
• Addressable Cost Reduction -- Management aims to remove more than 30% of the company's addressable cost base through wave three of its transformation program.

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RISKS

• Pilar Lopez stated, "the impairment has to do with the higher interest rates and the impact of the ECJ," referring to the drivers of the non-cash charge in Germany.
• Margherita Della Valle noted that the company has faced "local legal challenges in the Kenyan court" regarding the acquisition of a 15% stake in Safaricom.

SUMMARY

Vodafone Group Public Limited Company (NASDAQ:VOD) reported accelerated service revenue growth of 6.4% in the second quarter and upgraded its full-year organic growth guidance for adjusted EBITDAaL and free cash flow. Management reported that the company is entering a new chapter focused on simplification and digital services expansion, supported by a 1 billion euro net cost-saving target by fiscal year 2030. The company completed strategic transactions to gain full ownership of its United Kingdom operations and increased its stake in Safaricom to strengthen its position in African fintech and connectivity markets. While growth accelerated in most segments, the company reported ongoing restructuring in Germany, including significant headcount reductions and an asset impairment driven by rising interest rates.

• CEO Della Valle noted that the company achieved leadership positions in customer satisfaction in 12 markets, driven by the removal of service friction and the use of AI.
• Management reported that the digital services portfolio now generates over 2 billion euros in revenue, moving the business beyond core connectivity into cloud and cybersecurity.
• The company is on track to deliver over 200 million euros in net OpEx savings during the current fiscal year as part of its wave three cost transformation.
• In the United Kingdom, management expects operating cash flow to more than triple by fiscal year 2032 following the full ownership of VodafoneThree.
• The OXG fiber joint venture in Germany has reached 1.1 million households, with plans to reach 1.4 million by the end of the fiscal year.

INDUSTRY GLOSSARY

• EBITDAaL: Earnings before interest, taxes, depreciation, and amortization after leases, a key profitability metric for telecommunications companies.
• M-Pesa: A mobile phone-based money transfer, financing, and microfinancing service operating primarily in Africa.
• OXG: A fiber-to-the-home joint venture in Germany between Vodafone and Altice (now supported by SocGen).
• ECJ: European Court of Justice, the highest court in the European Union in matters of European Union law.
• MDU: Multi-dwelling unit, a classification of housing where multiple separate housing units are contained within one building.
• Safaricom: The leading telecommunications provider in Kenya, in which Vodafone holds a significant stake.

Full Conference Call Transcript

Margherita Della Valle: Good morning, everyone, and thank you for joining us. Before moving to Q&A, I'll provide an update on the actions we are taking as we begin our new chapter as a simpler, stronger and growing business. We made a strong start to our new growth chapter with good financial performance, growing customer satisfaction and a fast start with our cost program that we announced in May. This underpins my confidence to upgrade our financial guidance for the year. As I mentioned, simpler, it's worth highlighting that we have continued to simplify our portfolio during the first half of the year, completing two important transactions in the U.K. and with Safaricom in Kenya.

In June, we announced that we increased our stake in Safaricom, strengthening our exposure to one of Africa's leading operators and our world-class financial services platform, M-Pesa. In July, we took full ownership of VodafoneThree in the U.K., giving us greater flexibility to move faster and capture 100% of the value created by the largest mobile operator and the fastest-growing broadband provider in the market. As you heard from us last month at our VodafoneThree investor briefing, we are already seeing the benefits of our 100% ownership reflected in our plans.

We raised our annual cost and CapEx synergy targets and provided a confident midterm outlook with operating cash flow in the U.K. expected to more than triple by FY '32. These transactions are a great example of how we are building a more focused Vodafone with even more exposure to attractive long-term growth opportunities. And that leads me on to talk about our good growth momentum and the strong start we have made in our multiyear growth outlook. I'm very happy with our overall group performance in the first half of FY '27 as we continue to see improvements across all group's key metrics.

Group service revenue growth accelerated to 6.4% in Q2, the highest in 3 years, with both Europe and Africa growing. We also delivered the best ever growth in Vodafone Business at 6.6%. This was supported by a record performance from our digital services portfolio as we continue to enhance our propositions with the smart, secure and sovereign solutions that our B2B and public sector customers need. In our emerging markets, once again, we reported double-digit organic growth in both Africa and Turkiye, which continues to translate into strong growth in euro terms. Growth in adjusted EBITDAaL for the group also accelerated to 6.4% in the first half, supported by strong top line growth and margin expansion.

And most importantly, we are on track to deliver very strong growth in adjusted free cash flow. And this is just the first year of our multiyear double-digit cash flow growth trajectory. Looking at our FY '27 outlook, we said in our Q1 update in July that we were tracking towards the upper end of the group guidance ranges. And this was after only 3 months of our financial year. I'm really pleased that with such a strong first half, I'm confident to upgrade our outlook. To translate what this means in percentage terms, the midpoint of our upgraded guidance range implies organic growth just above 20% in adjusted free cash flow.

Whilst I'm very happy with the group overall performance, I'm under no illusion that we still have much more to do in Germany. But if you look beyond the headlines, you can see that we have turned the corner in important parts of our business with consistent growth in consumer broadband and in B2B. We also see continued improvements in customer satisfaction across all our products. We continue to invest in our scale, mobile and fixed networks and simplify our customer journeys. We are also taking action to further step up our productivity in Germany with the next phase of our headcount reduction program. Yesterday, we announced 2,300 role reductions.

This means that we will have reduced headcount in Germany by 40% since we began our transformation. Looking now to the rest of the group, we have continued to make good progress in improving our customer experience, simplifying our business and driving sustainable growth. Starting with our #1 priority, our customers. We are improving customer experience by removing friction, resolving issues faster, often with the assistance of AI and offering new propositions such as SuperMobile in the U.K. And we can see it in our results. We hold leadership positions now in customer satisfaction in 12 of our markets. Sentiment within our customer base is improving across all our segments. And most importantly, our mobile customer loyalty continues to grow.

From a simplicity perspective, we have started the next phase of our cost transformation journey, building on a long track record of driving change inside Vodafone. As you will remember, in May, we announced that we will deliver over EUR 2 billion annual gross savings by FY '30 across Europe and our shared operations. This will translate into over EUR 1 billion in annual net OpEx savings. This is a comprehensive program. We will remove more than 30% of our addressable costs. We have made a fast start, delivering over EUR 200 million of gross savings in the first 6 months, supported by 3,000 role reductions as well as the first EUR 50 million synergies in the U.K.

We now have clear line of sight on a net reduction in OpEx of over EUR 200 million for the full year. The delivery of this program will have meaningful impact on our results. The net savings target is equivalent to more than 10% of our adjusted EBITDAaL in Europe, driving margin expansion in the years ahead. And that takes me to our third strategic pillar, growth. You heard me talk about Europe. We are taking structural actions in Germany, see unique opportunities in the U.K. and will deliver the next wave of productivity growth and margin expansion. There are two other important growth levers within our portfolio, Africa and B2B.

In Africa, the growth drivers remain attractive, growing customer base underpinned by population growth, increasing data usage, expanding next-generation connectivity and Africa's largest fintech platform with over 100 million users and millions of merchants. And in B2B, we are one of Europe's leading platforms for businesses with 5 million customers. We continue to gain share in growing markets as we expand our range of products and services, bringing the best of connectivity, but also cloud, security, AI and other digital solutions together to help businesses and the public sector accelerate their digital transformation and adoption of AI.

And with our sustained digital services growth, we now have a portfolio with revenue in excess of EUR 2 billion, meaning we have moved firmly beyond core connectivity into nonlinear growth opportunities such as cloud, IoT and security. Taking this all together through the continued execution of our strategic priorities of customer, simplicity and growth, we are well positioned for the future. Our growth will be driven by our strong market positions and the full breadth of opportunities across Europe, Africa and B2B. It is the strong foundations that underpin my confidence in our medium-term ambition to deliver double-digit organic growth in adjusted free cash flow.

This year, we have made a strong start, which enables us to upgrade our FY '27 group guidance. And just to recap, the midpoint of our new group ranges imply that our organic growth will be accelerating to 7% for adjusted EBITDAaL and 21% for adjusted free cash flow. And with that, Pilar and I are looking forward to your questions.

Operator: [Operator Instructions] Our first question today comes from Akhil Dattani at JPMorgan.

Akhil Dattani: I've got a question, Margherita, on the guidance upgrade that you talked us through just now. There's two quick parts to it. The first is that you were previously guiding to the upper end of your former ranges and the upper end of your former range is now the midpoint of your new ranges. So I guess I'd love to understand what the messaging is here. Is it optimism that it's the upper half of this range? And can you sort of talk us through specifically where the greater optimism is in the business as a whole? And the second piece of it is in the mix, you've left the European guidance unchanged. H1 EBITDAaL was down 1%.

The implied H2 is anywhere from minus 2% to plus 6%. So it's quite a big range implied for H2. Maybe you could help us understand what are the key swing factors for H2 that determine where you come out for Europe?

Margherita Della Valle: Thank you, Akhil. And maybe, Pilar, you can build on where is the optimism coming from?

Pilar Lopez: Thank you, Akhil. Thank you for the question. And I mean, as you rightly said, in July, we were already expecting to deliver at the upper end of the previous ranges. And since then, we've really seen a strong momentum in our execution. We've seen it in the U.K., which is performing strongly with top line delivery and the synergy delivery. We are seeing in Germany consistent growth in consumer broadband and in B2B. And this has allowed us to absorb the impact of the European Court of Justice ruling, remember earlier in the quarter, which has had an impact of EUR 100 million on our EBITDA, and that has allowed us to reconfirm the Europe outlook.

Beyond Europe, you've seen the strong performance in Africa and Turkey in the first half, and we are expecting that good growth to continue. And you've also seen the fast start we've made to the efficiency program overall. So with that, we now expect that acceleration in growth that Margherita was referring to. And at the midpoint of the guidance -- of the new guidance range, we are expecting to grow organically adjusted EBITDAal at 7% and adjusted free cash flow over 20%. You mentioned the European guidance. We are very confident at the midpoint of the guidance, where Europe is stable.

And in fact, we were able -- as I mentioned, we were able to stay in the outlook because the U.K. and Germany were performing better, and they allow us to -- again, as I said, to reconfirm and absorb the impact of the ECJ.

Margherita Della Valle: Maybe if I can build on that, Akhil, I think the key word for us is acceleration. In May, as a result of all the changes we have been driving and we are driving in the group, whether it's portfolio or whether it's investment on customer and simplicity, I talked about we are opening a new growth chapter. And by that, that's what we mean. We mean acceleration of growth. And this is where we see very much the 7% and the 20% or 21% that we are announcing today as a good first step, but the optimism is coming really from the midterm.

In May, we said we were expecting to have double-digit growth from now on in our organic cash flow generation. And again, this is the result of the changes. I will reiterate what I just said earlier, right? We have structural actions in Germany with progress quarter after quarter, unique opportunities in the U.K. We now have a cost reduction program that is worth net to the bottom line, 13% of European EBITDA. So a very nice push that makes us confident on Europe. And whether it's in Europe or beyond Europe, I think you will agree that now across our markets, we are in strong position.

I talked earlier around breadth of opportunities because wherever you look, you see reasons to expect growth in Europe, growth in Africa, growth in B2B. So pleased to have done a strong start. Guidance upgrade today, but our focus is all around acceleration for the midterm.

Operator: Our next question today comes from Carl Murdock-Smith from Citigroup.

Carl Murdock-Smith: I'd like to ask about Germany, please. You made the comment this morning that you have much more to do in Germany. You've had to make the noncash impairment to the German business today. You're facing the impact of the recent ECJ ruling that you've mentioned and Deutsche Telekom was making some positive comments last week about its ability to take further share in the MDU market as some access bottlenecks get resolved going forward. Can you expand a bit more on your earlier comments about what you're doing to turn the business around, but also to protect your MDU business in the face of potentially greater pressures going forward?

Margherita Della Valle: Thank you, Carl. Maybe one liner from Pilar on the accounting, and then I'll talk about the business.

Pilar Lopez: Yes. And I mean, you mentioned noncash. And as you know, we regularly review the carrying value of all of our assets. And now in the context of higher interest rates, the mechanics of the impairment, close to 3/4 of the charge have to do with higher government -- German government bond yields, and that impacts the discount rate. You've seen in the release the discount rate we are applying is 8% now versus 7.5% in the last disclosure. So really, the impairment has to do with the higher interest rates and the impact of the ECJ, as you mentioned in the introduction.

Margherita Della Valle: On Germany more broadly, I think beyond the headlines, you will see in all the data points that we are giving that quarter after quarter, we continue to see structural progress. And in the last year, this has been exemplified by the fact that we are now consistently growing in business and we are also consistently growing in consumer on the broadband part of our business. These for us were really important shifts. And as we just mentioned, actually, if it had not been for the ECJ ruling, Germany like the U.K. were both tracking ahead, which is why we have completely reconfirmed our European guidance for the year, absorbing EUR 100 million impact.

So we are taking the right actions for sustainable growth in what we said this previously is the largest market in Europe. We are operating at scale in both fixed and mobile, and we have a strong brand. Now you mentioned -- I said there is more to do, and I'm under no illusion. Our financial performance in the last few years in Germany has been disappointing. But we have not been sitting still. Step by step, we have continued to look resolutely on the midterm sustainable growth objective, which is why we have continued to invest on our long-term health of the business, and we have simplified our operations. The simplification is ongoing.

You know that in March, we completed the first wave of our headcount reductions in Germany and across Europe. In Germany, specifically, that first wave reduced the headcount by 20%. And now we have just announced yesterday another 2,300 headcount reductions. But the important point is that we are simplifying, we are getting leaner as we should. But at the same time, we have two, I would call them growth -- significant growth drivers that we are pushing in Germany. The first one is, as everywhere else, customer experience. You hear us saying and it may be a bit boring at this point, but quarter after quarter, our NPS, which we track obsessively across all our products continues to improve.

And this is because we are simplifying our journeys. We're investing in our network to become better and broader every single day. And the second growth driver is we can now say that we have developed real assets in Germany and more broadly on B2B digital services. You heard me in my introduction, I talked about cloud, I talked about AI, I talked about cybersecurity, all things that our customers are really demanding from us. And it's the investments we have done and we will continue to do in that space that have driven, for example, in Germany, 30% digital services growth in half 1.

So I stand by what I said, we are not yet where we need to be. I think this is clear. But again, as I said, I think we are building a very different Vodafone Germany, which is fit for the future.

Carl Murdock-Smith: And any comments on the point about MDU going forward and the ability to protect that?

Margherita Della Valle: Sure. We actually didn't see any significant movements in MDUs, but perhaps it's because the fiber penetration in MDUs and particularly in what I would call the cable MDUs, which are not all the MDUs of Germany, the fiber penetration is still very low. So we didn't see it. The impact on our net adds that we may want to talk about later is if we have negative net adds, it's gross adds. It's not coming from churn. And also when you look at the numbers we published, you will find that a disproportionately high amount of these negative net adds are in the DSL areas. So nothing to do with the cable MDUs.

Operator: Our next question today comes from Andrew Lee at Goldman Sachs.

Andrew Lee: Question on cost efficiencies for both of you. It seems you're more confident in achieving those cost efficiencies today than you were 6 months ago. So I just wanted to ask, is that simply just the pace of achieving cost efficiencies? Or have you gained in confidence in the scope to maybe even raise those ambitions at a gross and net basis? That's the question. And if you can give any color on what you're seeing that's giving you the confidence here, that would be helpful.

Margherita Della Valle: Sure. I was mulling Andrew, when you were asking me about cost because it reminded me of when we started working together, we at the beginning of the first wave a few years ago of our cost transformation programs. And now we are on wave 3. I would say Pilar can give us an update of what we see in terms of action, but -- we are just at the beginning of the wave 3, and we are effectively executing on what we presented to you in May, which is what we are very simply working on. And from this half year onwards, we will keep updating you on the progress. Pilar?

Pilar Lopez: No, definitely. And just maybe to put in context the targets we set, we committed in May, which Margherita had in her introduction, the over EUR 2 billion annual cost savings, this is effectively a 30% reduction of our addressable cost base across Europe and operations. And this will translate into over EUR 1 billion of net OpEx savings. We like to set net targets that we can track -- you can track on our EBITDA. And effectively, this is 13% of our Europe EBITDA. So that's just to put in context.

And then in terms of the confidence, well, it's the first 6 months, you've seen there is a fast start with EUR 200 million of gross savings delivered in this first half. Where are we delivering those savings? It's a combination of the U.K. synergies, EUR 50 million gross savings this half, simplification. And you've heard about the 3,000 role reduction in the first half after the 11,000 we reduced in the past and the announcement we made in Germany yesterday, another 2,300 over the next couple of years. There are a number of examples of how we are simplifying with our shared operations across the board. And then the third lever is AI.

And there it's great to see how the scaled platform that we have built is already delivering savings. And there are a number of areas where we are being pretty innovative. I mean you have some of the examples in the presentation, and those are already delivering real savings and contributing to the net target that we set. And I think what else to say there? Well, there are headwinds, and we also need to be very aware of those in terms of inflationary pressures on payroll, on energy, on the cost of the tower leases.

But despite the headwinds, we have made a fast start in the first half, and we will continue accelerating in the delivery, and we expect to deliver over EUR 200 million of net cost reduction already this fiscal. And as Margherita said, I mean, there is a long track record of delivering against targets. And as we have more visibility and progress on our delivery, we will update on progress, of course. And also, we will update on further opportunities as we've done in the past.

Margherita Della Valle: But the short summary is EUR 1 billion to the bottom line in Europe and roughly 1/4 of that will be delivered on the first year of the plan. So very sort of logical phasing.

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

Joshua Mills: I'm going to dig into Germany in a bit more detail. So firstly, on the service revenue trends, you talked about strong B2B growth. Could you just give us an update on what percentage of German service revenue is coming from B2B at the moment? And then within the mix, it looks like the digital services business has been a big driver of that. So perhaps you could give maybe a bit of flavor on whether it's much better digital service revenue growth that is driving this, whether the connectivity side of things has really changed as well. That would be the first question.

And then secondly, on competition, with results last week, I think DT were commenting a bit on mobile competition, and we've seen the launch of the new Simsalasim MVNO and also Revolut in the German mobile market. So are you seeing any change on mobile competition going forward?

Margherita Della Valle: Maybe in a nutshell, I start from the second part, which is not really. I would say we have seen a few moves in this quarter, some up, some down. Net-net, I think nothing is materially changing in the pricing environment in Germany. And all the MVNOs, you're talking about MVNOs are not new in any of our markets. And so I would say, generally speaking, very much more of the same. On B2B, turning around B2B was one of our key priorities in Germany. And as I was mentioning earlier, you see now the consistent growth. So maybe I can give you a bit more data points behind this.

In terms of sizing, roughly, roughly, IR can help with the precision, but imagine roughly 25% of the revenues in Germany from B2B and 25% or a little bit more of the B2B revenues coming from digital services. Now this last percentage is moving very fast. So we need to update it. But our strategy in Germany has really been to focus on gaining share on the new growth areas, cloud, AI, security. And we're also improving our connectivity, by the way, to your point, but all the growth, the real growth is coming from digital services. Three things have made a difference to us in the last year.

The first is we have -- you might have remembered me saying it for across the group, we have spent quite a bit of time and investment in expanding our portfolio in digital services. And so if I take the things that maybe are more relevant to Germany in the near term, just to give you a sense, we have launched an AI concierge service to support SME in driving their productivities. We are seeing a great success from our German cybersecurity operations center to serve our B2B customers. And then we have launched the sovereign AI proposition also in the last 6 months. Now this is, I would say, the organic side.

But second driver, we have also been investing inorganically. You might remember, we have acquired, maybe it's a year ago now, Skaylink, a company that is helping customers, particularly in the Mittelstand in Germany moving to the cloud. And again, if I look at, I don't know, the last 2 quarters, we have already signed over 100 contracts with Vodafone customers. So significant synergies. We bring together all our range of services. And last but not least, I would call out our team in Germany. It's fair to say that we have gone through, again, a lot of change, sale processes, effectiveness.

The team has been great at building a strong pipeline, and we see the momentum, and we will see the momentum continuing in the quarters to come. So expect this to be a good growth opportunity for us in Germany, absolutely one of our best growth opportunities ahead of us. By the way, I say Germany, not just in Germany.

Operator: Our next question this morning comes from David Wright at Bank of America Merrill Lynch.

David Wright: Yes, on Germany again, there's obviously been a lot of discussion around bringing the costs down. I wondered to what extent you think about bringing the CapEx down, decapitalizing the business and whether that could be more network sharing agreements, whether it be on the mobile side or even the fixed line side. Deutsche Tel, I think, indicated a potential willingness to share in fiber. Is that a route that you could pursue? And I say that within a sort of a general framework of cable infrastructure operators moving in that direction? And then just a super quick add-on Germany, which is just on the accounting side, maybe to confirm. You mentioned a provision taken against the ECJ ruling.

Is that a cash flow out item this fiscal year? And is that provision included in the cash flow guidance?

Margherita Della Valle: Thank you, David. Maybe, Pilar, you can take the provision.

Pilar Lopez: I mean we've taken a provision, a small provision related to the ongoing class action. We don't expect the class action to conclude at best at late calendar '27. So again, a small provision. And again, from a cash -- potential cash timing perspective, we don't expect the action to conclude again at best. late '27. So I hope that helps.

David Wright: So that's not in this year's cash flow guidance.

Pilar Lopez: Absolutely not.

Margherita Della Valle: The process will last well into 2027, the court process. But we said it's small. It's worth saying that when you look at the EBITDA trends in half 1 in Germany, it's worth 2 percentage points, yes. So we have done minus 3.2% and minus 2% of that was this provision.

David Wright: Really sorry. So just to confirm, the EBITDA is adjusted for the EUR 100 million or so.

Margherita Della Valle: Yes.

David Wright: But the cash flow guidance is only adjusted for the derecognition, which is more like EUR 60 million, EUR 65 million.

Margherita Della Valle: Correct.

David Wright: And then on to the infra piece, Margherita.

Margherita Della Valle: On to the CapEx, I would say, David, I wouldn't guide to any material reduction of our capital intensity in Germany. And this is because -- if you think about you were going on our fixed line strategy, obviously, we will continue to invest on mobile, digital services and the like. But specifically, as a recap of our strategy in fixed in Germany, we have three pillars, as you know. One is continuing to invest in our cable network. And our cable network performance will continue to grow for years to come. Within our CapEx envelope, we are continuing to fiberize the cable network, and it's getting closer and closer to the buildings in Germany meter by meter.

On top of that, as you know, we reallocate frequencies and all the things that are strengthening the cable performance. We have just increased the uplink speeds, for example, for all our business customers in Germany. The cable road map has its own evolution, positive evolution. In parallel with that, we are building fiber within OXG. And this always happy to do in partnerships, as you have seen. We have now reached 1.1 million households. We expect to be at 1.4 million at the end of the fiscal year. We are probably the second biggest fiber builder in the country now. We are building across more than 75 cities. So this is progressing well.

And then last but not least, our objective in every market in Vodafone is to give to our customers the broadest possible choice in making sure they access gigabit products, which is why in the DSL areas, we are also wholesaling fiber in Germany where it's available. And therefore, that gives us the possibility to essentially sell gigabit speeds to more than 3/4 of German households, and we will continue to do so. Anyway, back to where we started, you should continue to expect the cable network to evolve, and you should continue to expect our portfolio of CapEx initiative in Germany to be broadly similar. We will continue to build fiber through partnerships.

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

James Ratzer: So, Margherita, I think my question really builds a bit more on the question from Andrew earlier around cost reduction. I don't want to kind of underestimate the difficulty in the kind of challenge you have in terms of the cost reduction and the magnitude of what you've announced. But it seems like since you announced it back in May, we've obviously had one very big change, which was that Xavier Niel announced that he is coming on to your shareholder register, and he has obviously a kind of very kind of strong and successful reputation on being very aggressive around cost reduction. So is presumably you've had preliminary discussions with him and his team.

Do you think your kind of EUR 2 billion target is you going absolutely flat out on cost reduction from here? I mean, is there any scope at all given the kind of maybe the fresh eyes his team might have bought your business that there can be any scope for that to be increased? And what can you say at this stage also about what we should expect around Board representation? I think the voting rights now are just a fraction below 20%. I mean if we use the Etisalat framework, that might allow in 1 Board seat. Is that what we should expect? Or do you think he could end up taking two Board seats?

Margherita Della Valle: James, on Vega, I think it's important to say that we never comment on engagement with individual shareholders. But in this particular case, the share transfer is still not approved. So the effects are not completed. There is a number of regulatory processes still open, particularly the NSIA process in the U.K. And this is about national security. I think Vega's expectations were for a conclusion of all these processes by the end of this calendar year, but that's not where we are. And it would really not be appropriate for me to comment or speculate on behalf of a future shareholder.

If I instead answer around our own plans, again, you have been with us for a long time, so you are familiar with all the cost transformation programs that we have also run in the past. I need to say there is one characteristic. You may have heard me say this before that I do care about when we announce cost transformation, which is to be able to commit to net OpEx reduction that effectively can be really directly visible in the P&L. I think you are used to that with us. And that's how -- as we started our new growth chapter in May, we shaped our forecast for the future.

As Pilar was saying earlier, this plan comes from if you want, the various opportunities that we have today as we update every 3 years or so into a new plan, and it's a combination of overall simplification continuing, U.K. synergies and the very significant contribution that AI is making into our operations. As we look at all this, we look at what's possible and we benchmark as much as we possibly can. We have just started. And so in terms of the future, as Pilar was mentioning, we will continue to update you, and we'll see what the opportunities are exactly as we used to do in previous occasions.

Operator: Our next question this morning comes from Robert Grindle from Deutsche Numis.

Robert Grindle: I'm going to follow up on the cost, I'm afraid. It's not about your cost out. It's about the cost of taking those costs out because you've had a fast start and you plan to do more in H2, including the German headcount reduction. But there doesn't seem to be any increase in the restructuring costs that you're talking about, the EUR 700 million or so. So were the German headcount reductions always in the plan for that? Or did you get better value elsewhere? Maybe it's AI, maybe you're just getting good at this. Some color there would be helpful.

Margherita Della Valle: The short answer, Rob, I will give it is that it was already in the plan. We announced these plans back in May. And by definition, the impact were included in our May guidance. So no change, no surprises. It's interesting how many questions on costs we get today, and we didn't get in May. We have probably a lot to say then.

Robert Grindle: Nevertheless, you seem to be going ahead of plan, whereas you're meeting your targets. So good going.

Operator: Our next question today comes from Polo Tang from UBS.

Polo Tang: I just have one question in terms of OXG. So you have a new partner for the fiber JV with SocGen replacing Altice in Germany. However, this means that Vodafone will now have to fund equity injections of up to EUR 1.2 billion. Can you clarify how these equity injections will be accounted for and will it impact adjusted free cash flow?

Margherita Della Valle: I think the situation is a little bit different. But let me tell you where we stand. So First of all, we have been pleased to welcome a new partner in OXG. SocGen knew OXG well because they were involved from the very start. And their presence essentially gives us an enhanced funding position together with full strategic flexibility as we look into the future. The governance of the JV is unchanged. The objectives of the JV are unchanged. Now SocGen comes in with different terms from Altice, and this is because we are at a different stage of the rollout.

They are a financial investor, not a strategic investor, but perhaps the most important point is we should face it. The conditions in the fiber market in Germany today are very different from where they were 4 years ago now. So that's where we are. In terms of funding and equity contribution, the funding of the JV will be a mix of debt and equity. And exactly what proportion, I think that also evolves over time, depending on the rollout, again, overall conditions and the strategy that the JV will want to adopt.

But from a Vodafone perspective, keep in mind that any equity that will come out from the mix of debt and equity will be very much phased over the duration of the build. And I think you have seen this very clearly in the last 2 to 3 years, we have built 1.1 million households and equity contributions from both partners have been very much phased. So they will continue to be phased, and we will see the impact as we go along.

Operator: We have time for one last question this morning, and this question comes from Emmet Kelly at Morgan Stanley.

Emmet Kelly: My question is on Africa, please. So you have been consolidating the extra 15% equity stake in Safaricom since the 1st of July. Obviously, the acquisition takes you to a majority, gives you consolidation of Kenya, Ethiopia and the tech business. However, I think most of us know that in September, Kenya's high court declared the 15% stake sale void. Might be a question maybe more for Vodacom, but I'd be keen to get your opinion on this. Can you give us an update on where we stand today and how this situation might evolve going forward? What's your expectation there?

Margherita Della Valle: Thank you, Emmet. Absolutely. I mean, consistently with our strategy, it was a very natural step for us to add this 15% stake into Safaricom that we have been working with for a very long time. as you know, leading telco, strong positions and strong growth opportunities also between connectivity and financial services. We have had local legal challenges in the Kenyan court, as you say, that process is now going through the appeals court. And the appeal has been fast tracked for urgent resolution. So we look forward to that. In the meantime, as we wait for the conclusion of the appeal, you will have seen the court has indicated that the status quo is maintained.

So we keep going and look forward to the conclusion of the legal process.

Operator: This concludes our Q&A session this morning. I'd now like to hand back to Margherita for any closing remarks.

Margherita Della Valle: Just want to say thank you for your time. Thank you for following us and looking forward to see you again when we have the results of our full year. Thank you.

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