Vodafone Group (VOD) CEO Vittorio Colao on Q1 2015 Results – Earnings Call Transcript

Source: Seeking Alpha

 

Vodafone Group (NASDAQ:VOD)

Q1 2015 Earnings Conference Call

July 25, 2014 4:30 a.m. ET

Executives

Vittorio Colao – Chief Executive

Nick Read – Chief Financial Officer

Steve Pusey – Chief Technology Officer

Philipp Humm – Regional CEO Europe

Analysts

Akhil Dattani – JPMorgan

Tim Boddy – Goldman Sachs

Nick Delfas – Redburn Partners

Justin Funnell – Credit Suisse

James Ratzer – New Street Research

David Wright – Bank of America

James Britton – Nomura

Simon Weeden – Citigroup

Robert Grindle – Deutsche Bank

Andrew Beale – Arete Research

Jerry Dellis – Jefferies

Lawrence Sugarman – UBS

Adam Rumley – HSBC

Paul Marsch – Berenberg Bank

Ottavio Adorisio – Societe Generale

John Karidis – Oriel Securities

Operator

Welcome to the Vodafone Group analyst and investor conference call. Your host today is Vittorio Colao, CEO of the Vodafone Group. Please go ahead, Mr Colao.

Vittorio Colao – Chief Executive

Good morning everybody. Welcome to our interim management statement for the first quarter of ’14-’15. I will take you through the highlights and update you on our strategic and commercial developments and our views on the current regulatory environment, then Nick will update you on our financial performance and take you through the trends in our six key markets. He will also provide some country by country detail on the progress of Spring. We’ll then close and move to Q&A for which Nick and I will be joined by Philipp and Steve who are here with us.

So I will start with Slide 4: highlights for the quarter. Group organic service revenue was down 4.2% compared to 4% in the previous quarter, excluding mobile termination rates, was 2.9% in Q1. We continue to see strong growth in our emerging markets driven by continued customer growth and data usage.

Growth in AMAP was 4.7% or 6.2% excluding MTRs. This growth rate was, as expected, slightly down on the previous period due to the lapping of prior year prices rise in India and the impact of MTRs in South Africa.

In Europe, conditions remained challenging due to continued competitive and regulatory pressure. As a result, service revenue fell 7.9% year-on-year. However we are beginning to see encouraging signs of stabilization quarter on quarter due to our commercial actions on Red and 4G and investment in the network. Our actions are attracting a higher quality of customers. We now have 6.7 million customers with 4G and 14 million with Red. Our 4G and Red plans to continue to drive strong data usage. Data traffic growth accelerated to 73% year on year across the group and 53% in Europe.

Project Spring. Our Project Spring program is gaining speed. Our European 4G coverage increased that to 52%. This is up 20 percentage points since September. Our network performance is also improving. In the last nine months, we have reduced dropped calls in Europe by 1.2 million per day. In this quarter, we have made further progress also in our unified communications strategy across Europe.

Integration of Kabel Deutschland has begun and is on track. We have announced fiber alliances in Ireland and in Portugal this week, and just this week, we had also two further steps – the completion of the acquisition of Ono and the revised agreement with Orange to build fiber and give them access to 1 million homes from Ono.

Finally, we have made some smaller moves on the M&A front, including the planned purchase of Cobra, a leading machine to machine provider to enhance our capabilities in this space and we sold our business in Fiji.

Free cash outflow was £0.6 billion in the quarter. This is £1.5 billion lower than the last year due to the phasing of CapEx spend associated with Spring. Net debt at the end of the quarter was £14.1 billion.

So Nick will be talking later about the performance of each of the main countries in more detail. I would like now to give you an overview of the broader

Chart on page 5 shows revenue service growth, excluding termination rates with AMAP countries in blue and Europe countries in red. As you can see, AMAP is strong and growing with service revenue up 6.2 points. Our high quality network and customer service continues to attract customers with the base up 10% in the year driving usage.