Good morning, welcome to our H1 financial results. I'm joined with Margherita. You will, of course, had the chance to read our results and see the videos on our website. If you've not had the chance, please do so. Hope it gives you a very good detailed summary of how we're performing. We're gonna go to Q&A. Maybe before we do, I just thought I would just cover really four key points. The first is the financial performance in the half demonstrates the sustainable growth engine that we're building at Vodafone. Our results are in line with our expectations for the year and the medium-term financial ambition. Service revenue grew 2.8% in the first half. We had EBITDA growth of 6.5%.
I think importantly, return on capital, which is very important to us, moved up 80 basis points to 6.3%. That combination gave us confidence to move up guidance to the upper half of the range for EBITDA between EUR 15.2 billion and EUR 15.4 billion and move up our adjusted free cash flow expectation to at least EUR 5.3 billion. Second, we're regaining commercial momentum across our European consumer business, obviously in light of some of the negative pressure that we had given the pandemic over the last 18 months. Importantly, we've seen our gross ad performance reach about 90% of the pre-pan-pandemic levels that we were experiencing before. Third, we've delivered broad-based growth. We continue to make good progress on our strategic execution.
We're obviously always focused on a number of priorities, and we single out three priorities, operational priorities that we're focused on. First is strengthening our commercial momentum in Germany. Secondly, accelerating our operational transformation in Spain. Third is positioning Vodafone Business to ensure that it really captures the maximum opportunity from the EU recovery funds. Then fourth and final point, we're committed to improve shareholder returns through ongoing and sustainable growth alongside targeted portfolio actions. I really think we've done a lot of heavy lifting over the last three years to structure Vodafone to capture value creation moving forward. We see a number of opportunities, both medium-term, but also near-term, in terms of our portfolio. On that, I will open up for Q&A. I have to say, please, can we have one question per analyst?
I know you love to do these three-part questions, but we wanna make sure we get through everyone. Thank you.
Thank you very much, Nick. Our first question today comes from Polo Tang from UBS. Polo, please go ahead.
Hi. Thanks for taking the question. I have one question. Can you maybe just talk about the trajectory of service revenue growth into the second half? Specifically, are there any headwinds or tailwinds to call out? Can you maybe talk about what you're seeing in terms of commercial trends and competitive dynamics for the different European markets? Thanks.
One question, but quite broad. I'll start on the trends. In terms of what we see for the coming quarters, I'd say probably a couple of more technical headwinds to keep in mind. In particular, as we move into Q3, we are now lapping a price increase we did last year in November in Spain. As we get into Q4, we will have further MTR reductions. You know, we are on a new glide path from the EU. We had MTR reductions drag in this quarter. They will roughly double in Q4, but of course, as we're talking about MTRs, this won't have any impact in terms of EBITDA and cash. On the other end, a couple of tailwinds.
We will still have some benefits in Italy from the recent MVNO migrations into Q3, and then you have seen our commercial momentum re-accelerating, and that will also obviously flow into the service revenue performance. Admittedly, these puts and takes are all relatively small if you think about it in the near term. As we move into the next financial years, it's important to talk about two aspects. In consumer, we should start to see some support from the new pricing models we are embedding into our European contracts. You know, we discussed those CPI plus investment-linked pricing, so on one end. Then on business, as Nick was mentioning, we will start to see really the European recovery fund come into its own in terms of support to business demand.
Generally speaking, I would say on the service revenue front, we are well on track with our midterm guidance of sustainable growth in Europe as well as in Africa. Then I focused on revenues because that was the angle of your question. Before moving maybe to the commercial trends into the markets, let me also emphasize the points that Nick was making earlier on the financial performance more broadly. We are also pleased to be already on track with the mid-single-digit EBITDA growth and having had the chance to bring both our EBITDA margins and our return on capital today after six months ahead of where we were pre-pandemic. I would say good financial progression overall.
Yeah, Polo, maybe if I could just build. I mean, it's sort of stepping up a level rather than getting down into quarters. You know, why do I think Vodafone is uniquely placed to drive sustainable growth in a sector that frankly has been flat to declining? You know, I really think we have a structural advantage, and it really is in three elements. I mean, European consumer, and Margherita has touched on a number of these. I mean, we are the challenger in fixed and convergence, so we see that as a growth engine for us. We also see that, you know, we've got opportunities in wholesale, and we're driving device lifecycle management, which I think will become more of a service going forward. How do you finance handsets and devices, insurance, et cetera?
We're really ramping up the science behind that, and you're seeing a little bit of that execution in the U.K. for us, and that's why we're doing so well with the iPhone, where we're having a disproportionate market share gain versus their natural share gain and of course the CPI. You take Vodafone Business, 30% of our business. You know, we have a really good digital services roadmap that's growing at double-digit growth rates, and we have the EU recovery funds flowing into that, so we should see that as an accelerator. Of course, Vodacom continues to do very strongly. We're obviously moving Egypt into Vodacom as well, which is also strongly performing. We have obviously financial services, which I really think is a standout opportunity within Africa. You've seen what we're doing with M-PESA, VodaPay.
I mean, financial services for Vodacom is growing at over 20%. You take a number of these structural aspects that maybe are a little bit different from maybe some of our traditional competitors.
Yeah. Thank you.
As a result of that, we're taking market share in U.K., we're taking market share in Italy, we're holding in Spain. Slight loss in Germany because of that sort of pandemic lockdown. Really good performance across Africa, really good performance across other Europe. You know, we're got good momentum.
Thanks.
Thank you very much, Polo. Our next question today comes from Akhil Dattani from J.P. Morgan. Akhil, please go ahead.
Hi. Morning, Nick. Morning, Margherita. I've got a question around Vantage Towers. You've outlined two key messages today. One is around eventually deconsolidating the business. I guess I'd love to understand the thoughts behind that. Is that about a view that the asset's not being fully reflected in your price or is it a bit more strategic? The second piece to that is you've also talked about an industrial deal with co-control. Is it fair to say an industrial deal would be with another telco? I guess there's only two major partners out there that would be big enough to drive co-control. If you do a deal like that, is that about scale? Is it synergies or is it something else? If you could just elaborate on that, please. Thanks a lot.
Yeah. Akhil, what I would say is I think we made a good early decision about separating out our towers and forming Vantage Towers ahead of the 5G cycle. The first priority is capture organic growth. They went out with the results. They're showing progress on that. We wanna drive higher utilization of our assets, and they're adding new tenancies and growing well, and I think there's further opportunities to come in that direction. I'd say the second aspect is I really see bolt-on acquisition opportunities, whether in-market to drive more synergies or whether that's new footprint. I really think that they have a good pipeline of opportunity ahead of them. The third aspect for us is to say, well, actually, I think there's an opportunity to do an industrial merger, as you say.
I think an industrial merger has two aspects to it, or maybe three aspects, I would say. First of all, yes, there are synergies to be had with. They can vary depending on maybe who the partner is. I'd say second aspect is it can widen out your footprint so that you're covering more territories, more opportunities, going forward. The third thing for me is the deconsolidation because though we're not holding back Vantage Towers at all, you go on a couple more years, I think that, you know, we would not want any balance sheet constraint for Vantage Towers, and it can optimize its capital structure once deconsolidated, and we would want co-control with a like-minded, industrial player. You highlight two players. Yes, there's Orange with TOTEM, there's Deutsche Telekom.
These are two really credible, really high-quality operators that we have a very strong relationship with. Of course they are opportunities. Of course, we don't discount others. I think importantly, we want to really look at the landscape and shape the landscape across Europe now. Now, we did all the hard work to do the separation with a view to really move at pace to shape the landscape. It will consolidate. There will probably be, let's call it three large players across Europe. We are definitely gonna be one of those players to capture that 5G opportunity coming through.
Great. Thank you.
Thank you very much, Akhil. Our next question today comes from James Ratzer from New Street Research . James, please go ahead. Your line is now open.
Great. Good morning, Nick and Margherita. Can you hear me okay?
Yeah. Morning.
Hello.
Great. Yes.
It's actually sunny where you are.
Yes, for the time being, exactly. Let's hope it stays that way. Question please just regarding your potential network upgrade plans, you know, particularly in Germany, is an area we have a lot of discussions with investors on. Nick, thank you for the materials and the presentation you gave. I heard some of the comments you had there, so it'd be great to explore those in a little bit more detail, in particular around comments on upgrading to fiber in Germany. You suggested that you might now look at some opportunities with MDUs with a new business model. How big of an opportunity could that be? How much of the footprint would that be? You talked a bit about wholesale. Again, I'm just intrigued what new opportunities there might be in Germany with wholesale. You hinted at off-balance sheet financing, I think for the first time.
Again, I'd be interested to hear what you see as the benefits from that. Is that something that is just to kind of potentially keep CapEx at current levels if there is any incremental investment? I'd love to hear more thoughts and commentary around all those initiatives. Thank you.
Yeah, James, this is an important subject to us, and we invest a lot of time in terms of how we're gonna evolve our networks generally and Germany in particular. You know, every network, especially every fixed network is very different country to country in terms of the model. You can't read across just because, you know, there's a trend in one particular market that's gonna happen in another. If we go to Germany specifically, what I would say is look at Germany as in two parts. Yeah. You've got our own footprint, our own cable footprint area, and in that area we encourage fiber to the home builds. Now that can be us as an anchor wholesale tenant.
I mean, obviously bringing a Vodafone brand to a build and committing volumes is very attractive to investors or we could be part of consortiums and make investments in that infrastructure if we think the returns are attractive and if it's targeted in the right way. We remain very actively engaged in options in the off cable footprint. You go on cable footprint. In other words, our 25 million homes. What I'd say is it breaks then again into sort of two areas. You've got the housing associations, which is, let's call it two-thirds of our sort of cable customer base. Then you've got one-third, which is single dwelling units. We've been going through, obviously, an upgrade cycle on our network that we are very committed to. We're very excited about.
We've obviously been very quick as part of the integration to prioritize the upgrade to one gigabit speed. We're now at 23 million households. Just to make sure that everyone understands, when we're upgrading and adding capacity, we're effectively taking fiber closer and closer to every home, every housing association as we do node splitting. That is just what we do generally. That's why it's our hybrid fiber network, is because fiber is getting increasingly deeper. We've been doing that execution. We've been increasing the amount of node splitting we've been doing through the country. Then next year we start the cycle of high-split. High-split starts to provide you one gigabit upstream capability as well as increasing downstream to three gigabit speeds. Frankly, as a customer, you don't need anything more than that.
Therefore it gives us a really good runway of capability moving forward. Of course, further out you've got DOCSIS 4.0, et cetera. I think we've got a very good roadmap of upgrading our capability. Now clearly as part of the new regulation around TV, which comes in at 2024. In other words, rather than bulk contracts, you go into single contracts. We have been going through an engagement with those housing associations, and we've had an engagement, let's say, of about half of them. In that engagement it's been really interesting because that engagement's really fallen into, I'd say, three buckets of reaction. 'Cause what we've been doing is explaining the roadmap for TV, but we've also been explaining the roadmap for our cable upgrade.
What we found is there's bucket number one, which is the housing associations that are saying they could be interested, not definite, but could be interested in fiber to the building. One of the things they have specifically said is, "We are not interested in taking fiber through the building. We would only do that through the natural refurbishment upgrade of the building," which is every, let's call it five, ten years. They don't want the disruption in the building, but they quite like the idea that maybe fiber goes to the basement. Of course, connecting fiber to your cable network, we are excellently placed to be able to do that as the natural partner. Then I'd say the second bucket of housing associations are ones where they've said, "I really like the upgrade path. It seems to provide everything we need.
Thank you very much. Then the third bucket are, "Do you know what? This isn't even on my roadmap or thought process at the moment. I don't consider it a priority. No one's talking about the need for any upgrade." I would say these are the three buckets. We have to continue to engage with the housing associations and just get an idea of demand as we move forward. I see this as something that evolves. It's not a rush. It's just something that we need to engage, understand demands, and then obviously, as we understand more, we can come back and give you more color. I don't know if you want to talk a bit more about CapEx and
Sure. From a funding perspective, our CapEx envelope within the midterm guidance doesn't include any fiber investment as such. I'm talking about FTTH or FTTB. Our CapEx envelope includes the natural upgrade cycle of the cable network that Nick was just describing. Gradually fiberizing the network as we add capacity and following the natural technology evolution of cable. That's what's in our midterm guidance. As we have these conversations, it is possible that fiber to the building business cases become attractive in certain circumstances. From that perspective, as you were mentioning earlier, we see also the possibility of infrastructure investment through JV being attracted to the opportunity. We see this a lot at the moment across Europe, and clearly Vodafone could be considered a very interesting partner for infrastructure capital for these type of builds.
Being absolutely clear, if these business cases were to become material at scale, you should not expect us to use our balance sheet to fund this. However, it's really early days, and frankly, today, we are really focused on effectively marketing our current 23 million gigabit households, and the cable evolution is giving us options as we've just discussed. If something was to change, then we would update you on it, but that's our focus at the moment.
Great. Thank you. Really appreciate that.
Thank you very much, James. Our next question today comes from David Wright from Bank of America Merrill Lynch. David, please go ahead.
Okay, guys. Hopefully, you can see and hear me. It's nice to be on video instead of that picture from, I think it was 2005. I'm-
That was a while ago.
I'm gonna ask a slightly different question. I always get very nervous, Nick, when anyone says that's all the speed you need. But I'm gonna stay away from the fiber questions for now. The other thing you have mentioned in your presentation is the potential for pursuing strategic and market consolidation. I guess the question there is, could you also consider that off-balance sheet? Or for instance, do you when you look at the actual service revenues, is it a priority for you to keep the service revenues consolidated? Or could you actually consider an off-balance sheet solution in an in-market consolidation opportunity? Thank you.
Well, David, I think we have demonstrated, you know, that we have always been pragmatic when it comes to in-market consolidation. Because ultimately, the most important thing is you unlock the synergy, you unlock the scale required, and I think we demonstrated that in Netherlands, we have demonstrated that in Australia. I think we are always pragmatic. I think the important thing, if I sit back, because you could say, "Well, look, we have been here before on in-market consolidation as a topic. You know, why is—why are you dialing into this?" I think it is really important to understand, we have just been through a pandemic. In that pandemic, the engagement I have had with governments, with regulators has been super high compared to ever before.
In terms of them really saying, "Well, you know, thank you, Vodafone, for being there for us, helping society remain connected." Of course, our peers were doing that as well. The sector was more appreciated, I would say. At the same time, they're really understanding we are critical national infrastructure. For them to truly compete on a global basis by market, they know that they need inward investment in next generation technology. Whether it's the upgrades we were talking about on our fixed or 5G, they wanna see that as fast as possible. In that conversation, I'd say what holds back investment is the return on capital within some of these markets. We need to accelerate return on capital to an acceptable level, and then inward investment would come into the sector.
When you start to have that conversation, they say, "Well, what are the levers that you need to see improved?" I said, "Well, you know, there's 4." There was spectrum, and we've seen significant progress in spectrum recently. Whether it's Spain, Greece, U.K. Taxes, we're seeing taxes come down on the industry, so you're seeing that in Spain again. Whether it's network sharing and deployment. I can go through lots of examples. I won't do it now unless you want me to. Yeah, lots of examples of progress being made. The fourth topic is consolidation. What I point to is, America sits there with three scale players on average with 95 million customers each. China. Three players at scale, 400 million customers each. India, three players. Netherlands, three players. Some of our markets in Southern Europe are at 5 players plus.
What I'm saying is, this is why return on capital is so low, and what we need to do is consolidate going forward without punitive remedies. I think that there's a real understanding now of returns, the importance of returns linked to investment, which is what they want from a policy perspective. Therefore, I think there's a more openness to engage on the topic of consolidation.
It feels like you're gonna have the regulators never gonna say, "Hey, guys, come on. Doors are open. Go do your best." You're gonna have to provoke the regulation of that, right? It's gonna need a brave telco to say, "Okay, we wanna do this. We wanna go four to three," whatever it might be. You're gonna have to kind of provoke that reaction, if that makes sense.
Look, you know, we're brave telcos. We're going out with a very strong message because I think the climate is there to have a real conversation, an honest conversation with governments and regulators and the European Commission. I think that there are other players suffering out there. Let's face it, the market cap of the whole sector is down. I think that there are a number of players that would say, "We would like to find a solution to drive shareholder value." Now, of course, I can say we're pragmatic, I can say we're reasonable. I need the other side to be pragmatic and reasonable, and that means reasonable on valuations, et cetera, to try and unlock the synergies and the potential going forward. We will actively engage on that basis.
Thank you very much, guys.
Thank you very much, David. Our next question today comes from Andrew Lee from Goldman Sachs. Andrew, please go ahead. Yeah, in between-
Yep. Morning, Nick and Margherita. I had a question on operational gearing. You obviously delivered 30 basis points of European organic service revenue growth and 1% of German organic service revenue growth. You delivered 5% of underlying European EBITDA growth, ex the Italian one-off, and 7%+ of German EBITDA growth. I know there are some German synergies in there. I wonder if you can talk us through the steps between revenue and EBITDA growth and how sustainable this seemingly, you know, high and attractive operational gearing is. Thank you.
Copy some.
If I maybe start from the end, Andrew. In terms of sustainability, you know that we have consistently delivered pre-pandemic margin expansion and significant operational leverage. You have seen our midterm guidance, which is effectively predicated upon exactly the same type of equation going forward. As you pointed out, we have already started delivering this in the first half of this fiscal year. In terms of moving parts between revenues and costs, this is a little bit of a special year because we are lapping the COVID crisis of last year. There are a number of moving parts that affect half one that will look different in terms of how the second half of the year will look like.
If I try to paint a little bit the picture for you of how this translates, clearly in half one, we had the benefit of higher revenue growth, good margin revenue growth because we were lapping the COVID crisis last year in Q1. We called out there were a number of one-offs, so this was supportive to service revenue growth. We also had a roaming tailwind that, to be fair, will last for years to come, but stronger in half one because of the roaming seasonality. We had the benefit of the Italian settlement in the numbers, which is EUR 100 million of effectively straight EBITDA, with no, obviously no revenue implication.
As we move forward, what you will see in half two is you won't have the same push in terms of revenue growth and roaming margin in particular. You won't have the recurrence of the settlement, which of course was a one-off. On the other hand, what you will start seeing playing through in the second half is our operating cost reductions. We have seen that in half one; we have not had any incremental OpEx reduction year-on-year. This is because last year, clearly, we intervened very quickly on cost as COVID struck, and we had a big step down of EUR 300 million in half one. Some of this has reversed actually this year because we have spent more clearly than last year in things like advertising, sales and the like.
We are well on course to deliver our target of over EUR 200 million OpEx reductions for the full year, but this is now going to be all geared towards the second half. A different make in terms of revenues and cost element, but still starting from your earlier point, good operational leverage to continue into the second half and into the future year according to the guidance. I think you have seen our EBITDA growth profile implicit in the guidance we have just restated this morning. You will have seen that we will continue with good EBITDA growth into the second half and again, beyond, according to our midterm ambition. Operational leverage will continue to be a significant feature.
Thank you.
Thank you very much, Andrew. Our next question today comes from Sam McHugh from Exane BNP Paribas. Sam, please go ahead.
Yeah, morning, everyone. Just wanted to follow up on the M&A stuff, if I can, please. I think, Nick, you called out the U.K. in the press over the weekend, and given you've all implemented CPI plus price increases, to a degree, you've all reintroduced roaming charges in the space of about a month of each other, and the industry still has 10%-20% free cash flow margins. You know, in that context, how do you convince the competition authorities that you need consolidation with no remedies when you've got this such tight oligopolistic characteristic? Is there anything in the discussions you've had that would suggest that they'd be more open with that kind of market structure? Thanks very much.
Well, Sam, I feel very strongly against the oligopoly comment. I think it's a super competitive environment. It remains a super competitive environment. I mean, you've got some massive brands, BT, EE, Virgin, O2, Sky, Vodafone, TalkTalk, Three. I mean, that's a big market of players. I think, look, in the end, what's really important is that you have to have scale locally, and then we have the additional benefit of scale on a regional basis. I think if we can bring the two together, we earn decent returns, and those returns mean that we can continue to invest and provide the infrastructure that governments are looking for. I mean, the case is clear. Returns are below market WACC in the U.K. and therefore need to improve, and therefore they understand that.
I think that they understand there is enough competition, even if there were one or two players less in the marketplace. I don't think it's a difficult narrative.
Great. Thank you.
Thank you very much, Sam. Our next question today comes from Emmet Kelly from Morgan Stanley. Emmet, please go ahead.
Morning, Emmet.
Hello.
You're on mute.
I am indeed. One of the great expressions from the COVID pandemic.
It has to be you were that one person.
I'm on mute. What are you gonna do? Absolutely. I have a question, please, on Vantage Towers, just as a follow-up on Akhil's question earlier on. If I look at the statement that you made on the presentation, you talked about monetization over time. Could you maybe just say a few words about how we should think about that monetization, how that might manifest itself, and also maybe some of the lessons that you learned from the Verizon Wireless asset sale back in 2014 in terms of how that monetization happened and how that was for shareholders and for the group? Thank you.
Well, look, in terms of Vantage Towers itself, I think we are really well placed at this moment in time to really explore an industrial merger, and that is our preference. Through an industrial merger, of course, you always, let's say equalize size with co-control. Obviously, if we start at 82%, there is a monetization opportunity because we can bring down our stake, equalize with someone else, and still have co-control of Vantage Towers. We did something similar, if you remember, with INWIT in Italy. Imagine that sort of model is an opportunity for us. Of course, an industrial merger might not happen, and in that case, we do have the ability at 82% to bring down our stake further.
We would obviously want to stay in control of Vantage Towers for a moment in time, and we can bring a degree of monetization. We would definitely do some. We have a lot of interest from strategics. We have a lot of interest from infra funds. There's the demand is definitely there. It's just us sequencing the right actions, and we have an order of priority of what we would really ideally like to do. Of course, proceeds of that we receive in, if you're comparing with a Verizon experience, our focus by far, number one is deleveraging. We would use those proceeds to delever. We always said that from a capital prioritization perspective, number one, we wanna invest in our networks and growth platforms.
We went out in May, we told you where we wanted to invest, so you all know where we're investing. The second is deleveraging, and then the third is return to shareholders.
Super. Very clear. Thank you so much.
Thank you very much, Emmet. Our next question today comes from Georgios Ierodiaconou from Citigroup. Georgios, please go ahead. Your line is now open.
Yes, good morning, and thank you for taking my question. It's also Vantage. I-
Sorry.
Yep. Georgios, do you have the-
Uh-
Yep.
Yeah, I hope you can hear me.
Yep.
I wanted to maybe hear from you what your plans will be medium term in an ideal scenario on the structure of the asset. You highlight on slide six that you have a lot of radios that are now being run by Vodafone. There's obviously edge cloud capabilities and other things that perhaps belong more to Vantage than the Vodafone Group. I'm curious to understand from your perspective in the event of the consolidation, whether you see more opportunities for those kind of predictable investments to be done on your behalf by Vantage instead of the communications operation itself. If I could just ask a clarification on some of your previous comments on whether any consolidation you see there is a preference between in-market or footprint expansion.
I guess you could get both, but what would be your preference in seeking a partner for Vantage? Thank you.
Yeah. What I would say, unless I've misunderstood the first part of the question, I mean, Vantage Towers is about passive infrastructure. It doesn't own the radio. We own the radio of our equipment. We have no plans to change that model. One of the things Vantage Towers could do is obviously fiber to the site. Previously, we would have done fiber to the site. They could obviously do fiber to the site. We would be open to those type of opportunities. Of course, you've got small cells and other types of models that Vantage Towers would be open to going forward that maybe we might have done in the past and now Vantage Towers can do. I think there's a number of things that we could explore with Vantage.
It's another reason why co-control with another industrial partner we think is a good long-term model for us for all of these reasons. I would say in terms of the right partner, I think it's finding a partner that shares your vision of what the growth opportunity is for Vantage Towers going forward. It might be a partner that has in-market synergies, in which case that's great. I think what's more important is do we share the same vision of the opportunity and the expansion opportunity? We believe in growth. We think there's a lot of value to be created through Vantage Towers, and we want that exposure to that growth. I think the most important thing is shared vision.
Secondly, fine, if it brings new markets, then as we develop new platforms and new opportunities for Vantage, of course, you have a bigger geographical platform on which to do it.
Thank you.
Thank you very much, Georgios. Our next question today comes from Stan Noel from Bernstein. Stan, please go ahead.
Hello. I've got a question about Germany. So this quarter, you added a large number of conversion customers. I think it's more than 300,000 net adds in Q2. That's probably 6-10 times more than in any quarter over the past couple of years. What specific commercial activities have been driving these numbers? What level of discounts are these new conversion customers getting? Thank you.
Margherita?
Just a telegraphic answer. No discounts, and what we are doing is simply adding benefits to the customers who have both fixed and mobile with us, and it's additional traffic that they can enjoy. Of course, we are protecting the ARPU without any discounts. A classic, I would say, of the convergence playbook. You will see further growth in the coming quarters. We are taking the opportunity of the post-pandemic normalization of the market to really drive convergence now at scale, again, without discounting.
Thank you.
Thank you very much, Stan. Our next question today comes from Maurice Patrick from Barclays. Maurice , please go ahead.
Yeah. Hi, guys. Hopefully, you can hear me okay. Just a question about the level of your ambition in U.K. broadband. I noticed you only had added 22,000 net adds in the quarter despite being a challenger, but you have announced a deal with CityFibre and Openreach to extend your fiber reach. I believe in an article at the weekend, you talked about maybe a desire to co-finance or co-invest or invest in fiber with Virgin Media. Maybe a few thoughts in terms of your level of ambition to actually invest in U.K. fiber infrastructure despite the plethora of networks out there, and maybe sort of linked to that, do you have plans to accelerate your broadband net adds in the quarters and years to come?
Yeah, look, what I would say is, I think there's a little bit of a phenomenon where the pandemic happened, it accelerated a lot of people making choices on their fixed broadband. There may be a degree of, if you like, pull forward of activity. Therefore, as we've come out of the immediate pandemic, you're sort of seeing a lower switcher market. In the U.K. specifically, it's down about 15% from what it was before. I'd say generally, when we look at the statistics around our gross add performance, our market share is where it was before. We're pleased with the gross adds. It's just slightly smaller market at the moment. I don't know if that's temporary and then starts to expand again.
I think you're right to say I'm very pleased we have leveraged the wholesale market and have struck a deal with Openreach and also CityFibre. Now we have the largest footprint of fiber to the home in the U.K. We are more than happy to add to that in terms of other people if they were happy to wholesale. If Virgin wanted to wholesale and the terms were attractive enough for us to do some volume on them, then, of course, we would do that. We're always open. As I've said before about Germany, our footprint, you know, if there's opportunity for fiber builds that have good economic return for our shareholders, of course, we'll think about it.
If I look at the U.K., though, I think there's quite a lot of infra fund money coming in very cheaply, and therefore whether our equity is really required, I'd question mark. What people are really attracted to is having the Vodafone as an anchor tenant to some of these builds to ensure they're protecting the IRR. You know, that's an opportunity for us. Of course, what we want is multiple opportunities and therefore we get the right economic terms so that we can drive convergence in the market. At the moment, we're really pleased. I mean, if you take the U.K. performance, we are taking revenue market share both on consumer and enterprise. Excellent iPhone launch, great proposition in Flex, if you haven't seen it. Very creative.
Something that we really think has many benefits, including increasing the tenure of customers on our contracts.
If I may add one point, you have seen us presenting the latest edition of the usual industry benchmarking that we share, and the U.K. position.
Yeah.
Our relative efficiency is now one of the top three operators across the whole of Europe. We have two operators in the top three now. One is Italy and the other is the U.K. They've done a fantastic job on efficiency in the last couple of years.
Yeah. Maurice , your budget will still be challenging.
Oops.
Okay. Thank you very much, Maurice. Our next question today comes from Nick Delfas from Redburn. Nick, please go ahead.
Thanks very much indeed. Just a quick question on M&A, again, so you've talked about bolt-ons or mergers, you've talked about off-balance-sheet joint ventures. Could you just specify in a relatively large deal for 4 to 3, are we definitely talking merger or are we talking acquisition, possibly running into EUR multiple billions? If you could just clarify that. Thanks very much.
Look, I think I would tend to look at merger opportunities of different varieties, because, you know, merger opportunities takes away some of the complexities of relative valuations, synergies, et cetera. You tend to get more focus on the size of the prize, if you like, the synergies and building a stronger business. Doesn't always have to mean it's a 50/50. It's combinations. As I say, we're pragmatic.
In terms of overall M&A war chest, if you like, for bolt-ons, what kind of size are we talking about within your deleverage plans?
No. Don't get carried away. I mean, we're talking. Let me give you an example of a bolt-on could be IoT, a small business that gives us capability that maybe would take us 2 years to build ourselves, accelerates the ability. If I use IoT as an example, you know, we're globally number one on connectivity, 136 million devices connected, growing at 2 million a month. It's a really strong connectivity platform that we wanna scale. But then what we wanna do is develop end-to-end services by sector. Yeah. So we want to build capability, and sometimes there's a small player out there that gives us capability in a sector that then we build onto our platform and suddenly we get, if you like, a turbocharged position.
It's those type of things that we would be talking about.
Just to add that all this is happening obviously within a context for capital allocation, where, as Nick was reminding earlier, our number one priority is to continue to progress on deleveraging. You know that we are not yet at the bottom end of our desired leverage range, and therefore that remains top of mind.
Great. Thanks very much.
Thank you very much, Nick. We have time, apologies. Our next question today comes from Adam Fox-Rumley from HSBC. Adam, please go ahead.
Thank you. Yes. I had a question on the Spanish restructuring and some of the wider implications. The Spanish restructuring that you referred to, I think is mostly within the commercial channels, and it was interesting to also hear Margherita's comments in the prepared presentation around the structural changes in which the stores are being used post-COVID. I was wondering if in kind of combination, that changes your view on the European store footprint, and in particular, the primacy of, or otherwise of owned versus third-party channels. I seem to recall that the Spanish closing was reported as being more owned stores, but those are usually held up as the ones the operators are more interested in keeping. Any comments around that would be helpful. Thank you.
Adam, let me maybe say a few comments, and then if there's something specific there. Look, when we're looking at channels, clearly our starting point is digital. Our app and then obviously our online channels, et cetera. We wanna make the very best digital experience. That's number one. What we do is on the retail estates, we're constantly modeling through big data analytics how an online execution is complemented with retail. What I mean by that is store sizes change, locations change. They could be express kiosks rather than standard format. We're constantly evolving the retail estate. Over the last three years, we've reduced the estate by 15%, but we're also reconfiguring the estate so it's more effective. We're not really losing volume when we do that.
When we look at other channels, like Spain as an example, there can be other, let's say, door-to-door or other types of channel, push channels that are more supportive of, let's say, fixed broadband penetration or convergence penetration. We look at, obviously, customer lifetime value. We look at paybacks by channel, optimize depending on the need of the market. That's what we've been doing in Spain, more digital, optimizing retail, maybe widening some specific channels for commercial performance. What we also did in Spain was introduce Lowi, our second brand, into our retail estate, which has given an increase in footfall within our stores and conversion both on Lowi but also on the Vodafone brand as well. We've seen a good performance off the back of that. I don't know if there was-
Nothing specific.
Sorry, Adam, did I ask it?
No.
Answer everything you wanted on that?
Yeah. Thank you. I suppose it.
Okay.
Yeah. Thank you.
Okay. Thank you very much, Adam. I'm afraid that's all we've got time for today, so I will hand back to Nick and Margherita to wrap up.
Well, look, on behalf of Margherita and myself, thank you very much for taking the time to join us. Hopefully, you've seen in the H1 results that we are very much demonstrating sustained growth and driving shareholder value in the structure that Vodafone has. We look forward to seeing everyone on the roadshow or at the next event. Take care.