Vodafone Group Plc
⫶ News release
15 March 2024
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
Reshaped European footprint, €8bn sale of Vodafone Italy &
€4bn capital return
Vodafone Group Plc ("Vodafone")
announces today the final step of the portfolio right-sizing
announced in May 2023, with a binding agreement to sell 100% of its
Italian operations ("Vodafone Italy") to Swisscom AG ("Swisscom")
(the "Transaction").1
· Reshaped European footprint focused on growing markets, with
strong positions and local scale
· Value-creating sale of Vodafone Italy to Swisscom for €8
billion upfront cash proceeds
· Attractive valuation, representing c.26x consensus
OpFCF2 and 7.6x consensus Adjusted EBITDAaL2
for FY24
· New capital allocation framework, including dividend to be
rebased to 4.5c per share from FY25 onwards, €4 billion capital
return via share buybacks and new leverage range of 2.25x -
2.75x
"Today, I am announcing the third and final step in the
reshaping of our European operations. Going forward, our businesses
will be operating in growing telco markets - where we hold strong
positions - enabling us to deliver predictable, stronger growth in
Europe. This will be coupled with our acceleration in B2B, as we
continue to take share in an expanding digital services
market.
The sale of Vodafone Italy to Swisscom creates significant
value for Vodafone and ensures the business maintains its leading
position in Italy, which has been built through the dedicated
commitment of our colleagues to serving our customers over many
years.
Our transactions in Italy and Spain will deliver €12 billion
of upfront cash proceeds and we intend to return €4 billion to
shareholders via buybacks, as part of our broader capital
allocation review."
Margherita Della
Valle Group Chief
Executive
|
Reshaped European footprint
With the sale of Vodafone Italy and
Vodafone Spain, together with the merger of Vodafone UK and Three
UK, Vodafone will now focus its operations in Europe on growing
markets, where we hold strong positions with good local scale. All
telecom markets within the new geographic footprint have been
growing over the last 3 years and we will now accelerate our
performance where we can create value. In the near-term, the new
footprint with the sale of Vodafone Spain and Vodafone Italy, will
also result in a step-up of Vodafone Group ROCE of more than 1
percentage point.
The change in geographic footprint
will not be the only shift for Vodafone. As previously
communicated, our biggest growth opportunity is in B2B. Demand for
digital services is strong and we are particularly well positioned
to support SMEs and Public Sector customers, as their strategic
partner in transitioning to the Cloud and generative AI. Our B2B
service revenue growth already reached 5% in Q3 FY24 and we are
gaining share against all our primary competitors. We intend to
further strengthen our range of platforms and capabilities through
dedicated investments and new partnerships (e.g. Microsoft). From 1
April 2024, our new IoT company will focus
on extending our current global leadership position by entering new
markets and creating a platform-as-a-service offering to support
other telcos.
In Africa, we will continue to drive
growth at attractive returns through mobile connectivity, fixed
connectivity and financial services. In mobile, we are market
leaders across our footprint. In fixed, there is a significant
opportunity to reach a wider share of the population. Our leading
FinTech platform is already serving more than 75 million customers
with double digit growth.
Across the whole Group, we will
continue to drive operational excellence through our priorities of
Customers, Simplicity and Growth. Refocusing our resources towards
improving our customers' experience is already delivering
improvements in customer satisfaction and increasing customer
loyalty. We will also continue to simplify our operations and
execute on our cost programmes to improve productivity.
To better serve our own markets and
telecoms partners (such as Swisscom in Italy and Zegona in Spain),
from 1 April 2024, the majority of our central operations will
begin to move to a fully commercial model. This programme is
expected to complete in FY25 and allow us to respond flexibly and
efficiently to changes in demand. We are opening our platforms and
services to third parties, offering them the opportunity to access
our shared operations such as procurement, roaming, IoT and other
business platforms.
From 1 April 2024, we will also be
changing our organisation to better execute on our strategic
priorities within the new footprint. We will be organising
ourselves in five business divisions: Germany; European Markets;
Africa; Vodafone Business; and Vodafone Investments. The structure
of the Vodafone Group Executive Committee will change accordingly,
and in this context, Philippe Rogge will step down from his
position as CEO Vodafone Germany and will leave Vodafone. Further
information is provided in Appendix I.
Sale of Vodafone Italy transaction summary
Vodafone has entered into a binding
agreement to sell Vodafone Italy to Swisscom for an enterprise
value of €8 billion. The Transaction follows an extended period of
engagement with several counterparties to explore market
consolidation options in Italy. Highlights of the Transaction
include:
· values Vodafone Italy at a multiple of c.26x consensus
OpFCF2 and 7.6x consensus Adjusted EBITDAaL2
for FY24, representing a premium to the Group's trading
multiple;
· values Vodafone Italy at the highest OpFCF2
multiple of any Vodafone market transaction of the last 10
years;
· delivers the best combination of value creation, transaction
certainty and upfront cash proceeds;
and
· provides Vodafone with a full exit from Italy, where it was
not possible to achieve ROCE in excess of cost of
capital.
As part of the Transaction, Vodafone
and Swisscom have agreed that Vodafone will continue to provide
certain services (the "Group Services") to Swisscom for up to 5
years. The annual charge for the Group Services to be paid by
Swisscom to Vodafone for the first year after completion is
estimated at approximately €350 million, of which approximately
€176 million reflect charges currently reported below Vodafone
Italy's segmental Adjusted EBITDAaL.
Vodafone and Swisscom are also
exploring a closer commercial relationship to enable
collaboration across a broad range of areas, beyond Italy. The key
areas of commercial collaboration that Vodafone and Swisscom are
exploring include IoT, enterprise services and solutions,
procurement, operational shared services and roaming. This is
aligned with Vodafone's strategy to commercialise its shared
operations and broaden its partnerships.
The Transaction constitutes a Class
1 transaction for Vodafone under the current UK Listing Rules and
is, therefore, as at the date of this announcement, conditional on
Vodafone shareholders passing a resolution approving the
Transaction (the "Shareholder Approval Condition"). As the UK
Listing Rules are expected to change in the summer of 2024 in a
manner that would mean the Shareholder Approval Condition is no
longer required, the Parties have agreed that should the UK Listing
Rules be amended before 30 September 2024, then the Shareholder
Approval Condition will no longer apply. Completion is targeted in
the first half of 2025. The Board of Vodafone has unanimously
approved the Transaction and each of Vodafone's Directors who hold
shares have agreed to enter into a customary irrevocable
undertaking to vote in favour of any resolution to approve the
Transaction.
The Transaction is also conditional
on certain regulatory approvals, including clearance by the Italian
Competition Authority. The Transaction is not conditional on the
approval of Swisscom's shareholders.
Vodafone has further agreed that, if
the approval of Vodafone's shareholders is required and the
Transaction is not approved at any such General Meeting, and
Vodafone subsequently enters into an agreement for an alternative
transaction involving Vodafone Italy within 12 months, Vodafone
shall pay Swisscom a break fee of €150 million.
Capital allocation review
Vodafone has conducted a broad
capital allocation review, considering the investment profile of
the Group's strategy within its reshaped footprint. This review has
concluded the following key outcomes:
· country-level capital intensity to be broadly maintained at
existing levels;
· maintain robust balance sheet with new leverage policy of
2.25x - 2.75x Net debt to Adjusted EBITDAaL, targeting to be in
bottom half of the range;
· FY24 total ordinary dividend expected to be maintained at 9.0c
per share and ordinary dividend to be rebased to 4.5c per share
from FY25 onwards;
· targeting total return increase to €3.1 billion for FY25,
comprising €1.1 billion ordinary dividends and up to €2.0 billion
share buybacks following completion of the sale of Vodafone Spain;
and
· opportunity for further share buybacks of up to €2.0 billion
following completion of the sale of Vodafone Italy.
The total net cash proceeds from the
sale of Vodafone Spain and Vodafone Italy are expected to be
approximately €12 billion, subject to customary closing
adjustments. Following an extensive review of our capital
investment requirements, the current capital intensity will be
broadly maintained by market, which allows for appropriate
investment in networks and growth opportunities. A new leverage
policy of 2.25x - 2.75x Net Debt to Adjusted EBITDAaL will be
adopted and we will target to operate within the bottom half of
this range. The new leverage policy supports a solid investment
grade credit rating and positions Vodafone to continue to invest
for growth over the long-term. Vodafone has a debt structure with a
weighted average life of 12 years, and fixed weighted average cost
below 3%.
Reflecting the composition of the
Group for FY24, alongside re-iterating FY243,4 guidance
of Adjusted EBITDAaL of c.€13.3 billion and Adjusted Free Cash Flow
of c. €3.3 billion, the Board's intention is to maintain the final
FY24 dividend in line with the prior year at 4.5c per share (annual
total dividend: 9.0c per share). Following the right-sizing of the
portfolio as a result of the Transaction and the sale of Vodafone
Spain, the Board has determined to adopt a new rebased dividend
from FY25 onwards. The Board is targeting a dividend of 4.5c per
share for FY25, with an ambition to grow it over time. The new
dividend has been set at a sustainable level, which ensures
appropriate cash flow cover and sufficient flexibility to invest in
the business for growth.
The Board has approved the capital
return through share buybacks of up to €2.0 billion of proceeds
from the sale of Vodafone Spain. This is expected to commence
following completion of the sale of Vodafone Spain. The Board
anticipates the opportunity for further share buybacks of up to
€2.0 billion upon completion of the sale of Vodafone Italy. It is
expected that the total return to shareholders for FY25 will be up
to €3.1 billion, representing €1.1 billion in ordinary dividend
payments and up to €2.0 billion in share buybacks. This represents
a 23% increase over the expected total returns to shareholders for
FY24 of €2.5 billion.
Other information
Person responsible
The person responsible for arranging
the release of this announcement on behalf of Vodafone is Maaike de
Bie, Group General Counsel and Company Secretary (Tel: +44 (0)1635
33251).
About Vodafone Italy
Vodafone Italy is a mobile network
operator providing mobile and fixed line services to both consumer
and business customers across Italy. As at 31 March 2023, Vodafone
Italy had gross assets of €12.4 billion. For the 12-month period
ended 31 March 2023, Vodafone Italy generated a loss before tax of
€(49) million. Vodafone Italy is led by Aldo Bisio, Chief Executive
Officer, and Sabrina Casalta, Chief Financial Officer.
Valuation information
12-month period ending 31 March 2024
|
Consensus Adjusted EBITDAaL
|
€1,325m
|
Group services charges (reported
below EBITDAaL)
|
€(176)m
|
Non-cash accounting
gain5
|
€(97)m
|
Revised consensus Adjusted
EBITDAaL2
|
€1,052m
|
Consensus
Capex2
|
€(747)m
|
Revised consensus OpFCF2
|
€305m
|
Enterprise value ("EV")
|
€8,000m
|
EV / Adjusted
EBITDAaL2
|
7.6x
|
EV / OpFCF2
|
26x
|
Effect of the Transaction on Vodafone
The Transaction is expected to have
a slightly accretive impact on adjusted earnings per share and a
dilutive impact on free cash flow. However, the Board believes that
the Transaction will support the Group in driving improved
performance through a focus on customers, simplicity and growth in
the years ahead.
Advisers
In connection with the Transaction,
UBS is acting as sole financial adviser to Vodafone. Slaughter and
May and ADVANT NCTM are acting as corporate legal advisers to
Vodafone and Linklaters is acting as antitrust legal adviser to
Vodafone.
About Vodafone
Vodafone is the largest pan-European
and African telecoms company. We provide mobile and fixed services
to over 300 million customers in 17 countries, partner with mobile
networks in 45 more and have one of the world's largest IoT
platforms. In Africa, our financial technology businesses serve
more than 76 million customers across eight countries - managing
more transactions than any other provider.
Our purpose is to connect for a
better future by using technology to improve lives, businesses and
help progress inclusive sustainable societies. We are committed to
reducing our environmental impact to reach net zero emissions by
2040.
For more information, please
visit www.vodafone.com, follow us on X at @VodafoneGroup or connect with us on
LinkedIn at www.linkedin.com/company/vodafone.
About Swisscom
Swisscom is the leading ICT company
in Switzerland and, with Fastweb, a leading challenger in Italy.
The company offers mobile, Internet and TV, as well as
comprehensive IT and digital services to private and business
customers. Swisscom is listed on the Swiss Stock Exchange and is
51% owned by the Swiss Confederation.
Footnotes
1. The selling entity is
Vodafone Europe B.V, which is a 100% owned subsidiary of Vodafone
Group Plc and the purchasing entity is Swisscom Italia S.R.L which
is a 100% owned subsidiary of Swisscom AG.
2. For the 12-month period
ending 31 March 2024. Based on company compiled consensus as at
February 2024, after adjusting for approximately €176 million of
group services charges which are not included in Adjusted EBITDAaL
for the purposes of Vodafone segmental reporting and €97 million of
non-cash accounting gains related to the sale of Vodafone Italy's
towers to Inwit that are included in Adjusted EBITDAaL. OpFCF is
defined as Adjusted EBITDAaL less capital expenditure.
3. The FY24 guidance foreign
exchange rates were: €1 : GBP 0.88, €1 : ZAR 19.30, €1 : TRY 21.10,
€1 : EGP 33.38.
4. Guidance for FY24 includes
Adjusted EBITDAaL and Adjusted free cash flow for Vodafone Italy
and Vodafone Spain for the 12 months ending 31 March
2024.
5. Non-cash accounting gain
relates to the sale of Vodafone Italy's tower assets to Inwit that
are included in Adjusted EBITDAaL.
For more information, please contact:
|
Investor Relations:
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investors.vodafone.com
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ir@vodafone.co.uk
|
Media Relations:
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vodafone.com/media/contact
|
GroupMedia@vodafone.com
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Registered Office: Vodafone House, The Connection, Newbury,
Berkshire RG14 2FN, England. Registered in England No.
1833679
|
A webcast Q&A session will be held at 10:00 GMT on 15 March
2024. The webcast and supporting information can be accessed
at investors.vodafone.com
|
Appendix I
⫶ Vodafone Group Executive Committee changes
Vodafone today announces a number of changes
to its Executive Committee, to be effective from 1 April
2024.
Ahmed Essam appointed Executive
Chairman Vodafone Germany and CEO European
Markets
Ahmed
will take on responsibility for our markets across Europe,
including the UK, Albania, Czech Republic, Greece, Ireland,
Portugal, Romania and Turkey. Ahmed will also become Executive
Chairman Vodafone Germany. Ahmed joined Vodafone in 1999 and has
held a number of roles including CEO Other Europe, Chief Commercial
Operations and Strategy Officer and most recently CEO
UK.
Serpil Timuray appointed CEO Vodafone
Investments
Serpil
will take on responsibility for our investments, including: Vantage
Towers, Vodafone Ziggo, Vodafone Idea and TPG Telecom. Serpil will
also have responsibility for our partnerships with telecom
operators, including our Partner Markets. Serpil joined Vodafone in
2009 as CEO Turkey, with subsequent roles including Regional CEO
AMAP, Chief Commercial Operations and Strategy Officer and most
recently CEO Other Europe.
Other changes to Executive Committee
responsibilities
· Philippe Rogge, CEO Vodafone Germany, will
step down from his current role and as a member of the Group
Executive Committee, leaving Vodafone.
Group Executive Committee composition
from 1 April 2024
·
Margherita Della Valle, Group Chief
Executive
· Luka Mucic, Group Chief Financial
Officer
· Ahmed Essam, Executive Chairman Vodafone
Germany and CEO European Markets
·
Aldo Bisio, Chief Commercial Officer and CEO
Vodafone Italy
· Shameel Joosub, CEO Vodacom Group
· Giorgio Migliarina, Interim CEO Vodafone
Business
· Serpil Timuray, CEO Vodafone
Investments
· Scott Petty, Chief Technology
Officer
· Alberto Ripepi, Chief Network
Officer
· Leanne Wood, Chief Human Resources
Officer
· Joakim Reiter, Chief External and Corporate
Affairs Officer
· Maaike de Bie, Group General Counsel and
Company Secretary
Other Senior Leadership Team
changes
Vodafone Germany CEO
Marcel
de Groot is appointed as CEO Vodafone Germany, reporting to Ahmed
Essam. Marcel
joined Vodafone Germany in 2022 as Consumer Business Director and
has been instrumental in the recent commercial improvements in
Germany. Prior to that he was Chief Commercial Officer and Director of the
Consumer Business Unit at Vodafone Ziggo and Director of Consumer
in Vodafone Ireland. Marcel has a strong track record of leading
commercial operations in converged telecoms operators.
Vodafone UK CEO
Max
Taylor is appointed CEO Vodafone UK, reporting to Ahmed Essam. Max
is currently Chief Commercial Officer of Vodafone UK, responsible
for the commercial performance of the Consumer division including
sales and marketing, digital, brand, customer experience and
commercial operations. Max joined Vodafone in 2019 and has helped
Vodafone UK grow Consumer revenues for the last five years and
become the fastest growing UK broadband provider.