Good morning, everyone. Thank you for joining us. Before moving to Q&A, I will briefly provide an update on our performance in FY 2026, as well as our growth outlook. Vodafone is now entering a new chapter as a simpler and stronger business. Simpler because we have gone through a significant transformation over the last three years, covering all aspects of our business, including portfolio, capital structure, and operating model. We are stronger because our continued operational progress with our strategic priorities of customer simplicity and growth. With these foundations and the range of opportunities across our diversified and balanced portfolio, we are in a strong position to grow in FY 2027 and beyond. As I mentioned growth, that leads me on to our financial results. We are pleased with our performance in FY 2026, as we have achieved the upper end of our expectations.
Group service revenue growth remains strong in the fourth quarter at 5.1%, with growth across both Europe and Africa. In Germany, despite the ongoing pressure in TV and the mobile market remaining competitive, our performance has improved as we are now growing in B2B and consumer broadband. These improvements are a direct result of our actions. In consumer broadband, we have continued to improve customer satisfaction and increased front book prices, and our value equation is working. In B2B, we are benefiting from the capabilities we have developed in digital services, including cloud, security, and AI. In our emerging markets, we grew service revenue in euro during the year. Our second-largest division, Africa, reported a great set of results yesterday, with strong performances across all of our markets, delivering its highest service revenue growth in almost two decades.
On profitability, we delivered 4.5% organic growth in adjusted EBITDA for FY 2026, fully in line with the upper end of our guidance. We also generated EUR 2.6 billion of adjusted free cash flow, continuing the cash growth trajectory we have been building since FY 2024. Following our announcement of a progressive dividend policy, we increased the full year FY 2026 dividend by 2.5%. For FY 2027, we are guiding for continued good growth in both adjusted EBITDA and adjusted free cash flow. Let me move beyond financials for a moment to give you an update on where we are operationally and our confidence for the medium term. As you know, we are now focusing our resources on markets with sustainable structures where we have scale and strong positions.
With our new portfolio, we are entering an exciting new era for connectivity. We are operating in a more supportive environment with sustainable pricing models embedded in more markets than ever before, increasingly pro-investment spectrum decisions, and a better understanding of the benefits of in-market scale. Now let me look at our strategic progress in each of our markets, starting with Germany. I'm particularly pleased that we continue to deliver consistent NPS improvements across all segments quarter after quarter with our highest ever levels in mobile and cable. This is supported by the customer care initiatives that we are rolling out across our markets, such as our Ask Once commitment. In terms of the year ahead, we will continue to focus on becoming the market leader in customer experience, a one-stop shop provider for fixed, mobile, and TV, and a trusted B2B partner of choice.
Whilst we currently operate in a challenging market environment in Germany, I am confident that we are taking the right actions for the long-term health of the business. Turning to the U.K., we are still less than a year ahead into our integration, but we have made significant progress. The latest independent tests have continued to show the considerable mobile network quality improvements we are delivering for our customers. We can see this feeding through to our results with step changes in both customer satisfaction and loyalty. We have also recorded our fastest ever year of home broadband customer growth with the largest gigabit footprint of any operator. This year is an important one for us in the U.K. Not only have we announced that we will be taking full ownership of VodafoneThree, but we will also deliver the first meaningful cost and CapEx synergies.
We will continue to drive revenue synergies with our multi-brand portfolio, unified store footprint, and significant cross-selling opportunities. As an example, just yesterday, we announced that we are bringing fixed wireless access to a further 3.7 million homes. Finally, on Africa, we continue to expand beyond connectivity as we run Africa's largest fintech platform with over 100 million users now and millions of merchants. We are really excited about the future in Africa with structural growth opportunities from population and customer growth, rising smartphone penetration, and growing data usage. Bringing all this back to our growth outlook. Our growth will be driven by our differentiated assets, strong market positions, and attractive opportunities across Europe, Africa, and B2B. After the transformation of the last three years, we are a simpler and stronger business.
We have a clear strategy, through continued execution of our priorities, we are well positioned for growth. Our confidence in our growth portfolio is reflected in our midterm ambition to deliver double-digit organic growth in adjusted free cash flow. With that, Pilar and I are looking forward to your questions.
Thank you, Margherita. As a reminder, please only pose one question to give all analysts a chance to speak. The first question this morning comes from Robert Grindle at Deutsche Numis. Robert, please go ahead.
Good morning, and thank you. Before we get into the full year results detail, I'd like to revisit the reinstatement after quite some time. Your midterm targets to drive double-digit free cash flow growth, which you just mentioned. In my mind, this is a step change in your confidence interval about prospects over multiple years. Why do you feel that now is the time to reinstate a longer term outlook? What is underlying your raised level of confidence? Thank you.
Thank you, Robert. I will reiterate some of what I was framing in my introduction. We think this is the right point in time because we are entering a new chapter. We have undergone in the last three years a really deep transformation. We have changed where we operate, we have changed how we operate, we have changed our capital structure. We are now opening this new chapter as I was saying, a simpler and stronger business. You mentioned this is the first time in a long time. I would like to add that it's probably the first time in a very long time that we operate in markets only from strong scaled position, and this is true for each and every one of our markets today. Just as we have this new setup, we see the world around us also evolving for connectivity.
We have, at this point in time, a more supportive environment for connectivity. If you think about demand, always strong, supply, and also regulation. Again, because of what we have done in the last few years in terms of setting our priorities and keeping driving operational momentum from customer simplicity and growth, we are stronger than ever before to take advantage of this new environment. You asked about the confidence in general. I would say when we look at our diversified and balanced portfolio and the growth opportunities that we have in each area, that's where we get our confidence for growth. Growth in FY 2027 and growth for the midterm.
Thank you.
Thank you. The next question this morning comes from Carl Murdock-Smith at Citigroup. Carl, please go ahead.
That's great. Thank you very much. I wanted to ask about the European EBITDA guidance for next year and the moving parts within that. In the U.K., you've got an extra two months of VodafoneThree and synergy delivery. Other Europe is portfolio and normally fairly predictable. The big swing factor there is Germany. Is it fair to say that the new guidance at the midpoint implies a kind of low to mid-single- digit EBITDA decline in Germany next year? What is that implied decline underlying kind of X 1&1? Thank you.
Thank you, Carl. Maybe Pilar, you cover the big picture for Europe, and then I will give you the moving parts for Germany.
Yes, definitely. Carl, thanks for the question. On the Europe outlook, our expectation reflects, to be honest, a balanced view of a range of potential outcomes and the mix of puts and takes for the different markets as you were suggesting in your question. First of all, in Germany, in FY 2027, we expect a decline. As the trends that we've seen in Q4, we expect those to continue into this year, into FY 2027. As you rightly mentioned, we expect a strong growth in the U.K. because of FY 2027 being the first year of the meaningful delivery of synergies, cost synergies in this case. Beyond that, we need to see how the competitive environment and the macro will evolve.
As you can see in the midpoint of the range of the outlook, Europe is expected to be broadly stable. Which if you allow me before I give the floor to Margherita for more on Germany. If I step back for a minute, when you look at the Europe midpoint and then take into account that Africa and Turkey will continue to grow well, we expect a good growth in adjusted EBITDA and adjusted free cash flow for the group as you've seen in the guidance for FY 2027. Margherita.
Yes, on Germany.
Over to you.
You are right. We expect EBITDA to remain under pressure in Germany in FY 2027. I can give you a sense of the key drivers for Vodafone, but also what we see from a market perspective that will determine these results. If I start from Vodafone from a top line perspective, we have exited FY 2026 as you have seen with better trends, with in particular B2B returning to growth and also consumer broadband growing. As we will move through FY 2027, we will see our top line results gradually converging to what is our retail service revenue growth. As of course we lap the wholesale migration of the prior year.
As you can see, our retail service revenue growth is still negative, and this is driven by the fact that we don't see any meaningful changes in the mobile market and therefore we are continuing to see a flow-through of the price reset that happened in the last couple of years through our base. Beyond that, beyond the top line on the cost front, we don't see any further pressure on commercial costs because as you know, our A&R has now fully annualized the past step up, so we expect this to be broadly neutral. We also expect to see the impacts of the various productivity initiatives that we are carrying through, showing up in terms of head count, in terms of automation, in terms of IT simplification.
Against that of course we will have a degree of inflation during the year. I mentioned the market earlier because I think ultimately where we sit in a range of outcomes in Germany will very much depend on the environment we are playing in and the environment we are playing in in consumer. Today we see slightly different trends as you know. In broadband we are making good progress in a supportive environment. Of course, the market is dynamic, so we will have to see how it evolves. Conversely in mobile, we talked about are there signs of changes at the beginning of the year, but effectively we see the situation fundamentally unchanged and therefore as I mentioned before, this being the biggest swing factor for our retail service revenue growth, we actually see it, see it unchanged.
Net-net, I would say what we expect for the year, we expect that we will continue to make progress on the underlying health of the business as I was mentioning earlier. EBITDA will still decline.
That's great. Thank you very much.
Thank you, Carl. The next question this morning comes from Polo Tang at UBS. Polo, please go ahead.
Morning. Thanks for taking the question. Just have a question on M&A and use of cash. How should we think about your appetite to do large deals? I think the prior commentary suggested a focus on bolt-on deals. Does the U.K. JV buyout for GBP 4.2 billion mark a change of position? Can you remind us what you're targeting in terms of your leverage corridor, and how we should think about the evolution of your leverage profile going forward, given we've got the U.K. deal, Safaricom, but also the VodafoneZiggo deals that are in the pipeline. Thank you.
Sure. Maybe I wrap it all up. M&A and leverage. If I start from leverage, as you know, we always intended to buy out the U.K., always in the plan. We had the opportunity to do it earlier than expected. We might want to talk about this more later. In essence, it was planned. In terms of impact, our target remains the same. We always want to work in the current environment in the lower half of our leverage range. The U.K. deal, as you pointed out, temporarily brings us slightly above that, but it's only a temporary effect, and by the end of FY 2027, we will be back within the lower half, and this is the result of course, the proceeds from the Netherlands as well as the growth we are guiding for today.
Actually, I think this growth point is important because we have an outlook of growth. We will grow this year, we will continue to grow beyond this year and therefore we will maintain a strong balance sheet going forward. This being said, I'm very happy with the shape of the group as it is today, and our focus is going to remain on our organic execution and driving our double-digit organic free cash flow growth as we introduced earlier.
Thank you. The next question comes from Joshua Mills at BNP Paribas Exane. Joshua, please go ahead.
Hi guys. Thank you for taking the question. As you've called out in the presentation, there's been some noticeable improvements in German Net Promoter Scores customer satisfaction levels. The financials would suggest that's come at the cost of a lot of additional investment, which you said doesn't need to increase further next year. Should we take from that message that Vodafone's comfortable to see this level of continued subscriber losses as long as you can continue to execute on the price actions you mentioned? Does your guidance assume that the subscriber losses will improve a bit throughout the year? If I could just squeeze one small one in on the Germany EBITDA outlook, a very clear answer for next year on EBITDA declining. In previous years you've talked about the ambition to stabilize Germany EBITDA growth in the medium term.
Does your new multi-year free cash flow guidance still assume that Germany EBITDA will stabilize in the next, say, two to three years? Thanks.
Maybe I start from from the end, which is the prospects for Germany, and then I go back to your point around net adds and volumes in Germany. If I look at if I look beyond FY 2027, let's position it this way, and step back, when What do we see when we look at Germany? We see the largest telco market in Europe, a market in which we have a powerful brand and scaled operations across both fixed and mobile. If you think about our P&L drivers, our TV headwind obviously will not last forever.
If you think about mobile, which is the other area of pressure that we see today, if you look backwards, the German market has a history of positive ARPU development in mobile, and this is because every single operator in Germany has large customer bases. If I look ahead, I also consider that we have some additional growth drivers. Digital services, we have talked about how this is going to support B2B. It has brought it back to growth in this quarter. We continue to grow it in the coming year, and also productivity opportunities as we have all across all across the Group. If I think about beyond the near term, I see us in Germany in a strong position in the largest market in Europe.
We are making operational progress, and we are well-placed to stabilize and grow. Now, if I move from the future back to the current position on the net adds front, I think it's very, very clear that what's happening in broadband is we are suffering from an impact on the gross adds component of the volume equation because we have increased prices. We are seeing better Net Promoter Score. The quality of our services keep being rated at the top of all the independent tests. We have taken the opportunity to do a number of price increases. We are now with a front book which is ahead of the back book in Germany. If you look at Q4 specifically, we have had for the first time the full impact of the price increases of calendar 2025.
Additionally, we have had the last price increases we did in January within the quarter. It's fair to say that also during the quarter we saw more promotional activity actually at the low end of the market in the DSL offers from the incumbent. As a result of all this, as I said, lower gross adds, but actually still happy, very happy with our churn levels. Yeah, we talked about this in previous calls. Again, highest ever level of customer satisfaction in our cable network are translating into good levels of loyalty in line with the rest of Europe, actually better than where we are in the U.K. The overall value equation is working well, and this is what we care about.
We have talked about the fact that today fixed line has been stabilized overall in Germany despite the drag of TV, and this is because it includes an improvement in the trends of consumer broadband, which is driven by inflow ARPU, growing by 30% year- on- year. Bit of an impassionate speech to say to your question around customer losses, these are only a part of the equation. What we target ultimately is revenue growth and revenue growth standing back from our 10 million customer base. I hope this helps.
Thank you.
Thank you. The next question this morning comes from David Wright at Bank of America Merrill Lynch. David, please go ahead.
Called me out there. Sorry about that. Yes, thank you very much for taking the questions, guys. Margherita, I think if I was to reread the transcript so far, you've mentioned on multiple times how critical scale is. What I wanted to understand was the market where you are most exposed, and I talk purely on numbers today is Germany, and we have reports of Telefónica interest in 1&1. I think, you know, what I would like to know is how critical is that 12 million customer base to your scale in Germany. I think Luka in the past suggested that if there was any interest from Telefónica, you guys would not counterbid. How critical is that asset to you in Germany? Thank you.
Thank you, David. As you know, we don't like to comment on hypotheticals. If I think about the scenario that you are describing, I would frame it as something which is really in the midterm for a variety of reasons that you can imagine. It's not something that would impact us until an advanced midterm. Then at that point, it would happen in the context of you're assuming a consolidation sequence, and we would have to see what that sequence looks like. As always, when there is consolidation, as you know very well, there are puts and takes. For the markets and for the players.
The final point I would like to actually mention is that if you think about how we are looking at the hypothetical scenario, keep in mind that the type of cash flow we get today from those 12 million customer has nothing to do with what you would expect to have, or we would expect in our plans to have by that point. Of course, we see continued progress in the network build. I think 1&1 has communicated a target of 50% population coverage by that time. Clearly a very different position from the one we are in today if it was to happen, and would have to be considered in the context of the puts and takes of consolidation.
See, the midterm free cash guidance assumes that the 1&1 contribution migrates away. Is that correct?
No, that's not correct in the sense that We have a number of scenarios, as you can imagine, within our range of outcomes, and we are not specific on that point. What it does assume in all scenarios is a reduction of the cash contribution as 1&1 continues to grow its coverage, as you'd imagine.
Yeah. I think, I think that's what I meant. Thank you so much.
The next question this morning comes from Akhil Dattani at JPMorgan. Akhil, please go ahead.
Hi. Morning. Thanks for taking the question. I've got a follow-up question on your adjusted free cash flow guidance and just the way we should be thinking about what you imply and mean by that. You've guided in organic terms, and you've obviously decided to give a midterm outlook with that. I guess what I'd love to understand is, given it's a guidance on organic terms and not Euro terms, should we assume therefore there's a very heavy weight of confidence around Africa vis-a-vis Europe? Can you sort of help us understand that, and how should we try and think about your perception of the translation effect into Euros? I guess just to follow up on that, I mean, within Europe specifically, how are you feeling around confidence on taking a view on the midterm?
You've referred, Margherita, before to regulation, the need for regulatory change. We've obviously got the new draft EU Merger draft rules that have come out recently or been leaked recently. Maybe you could give us your thoughts on that and to what extent you feel that can help shape a more confident and durable growth story in Europe.
Thank you, Akhil. I will take the Europe side of the equation, and Pilar.
Definitely. Yeah.
Yeah.
Okay. Oh, okay. I Yeah, no, thanks, I mean, from our guidance perspective. If I take, I mean, guidance for 2027, we are guiding for good adjusted free cash flow growth this year. This is ultimately driven by good adjusted EBITDA growth and then broadly a stable capital intensity by market. You need to take into account that CapEx will peak this year in the U.K., and then it will go down from then onwards. I leave Margherita to comment about Europe. I mentioned about Europe before. For the rest of the world, you need to take into account that we expect to continue having good growth supported by a strong performance in Africa.
You saw the Vodafone guidance, the double-digit over the midterm, also continued growth in Turkey in euros. It's important to take into account that we manage our business on emerging markets for euro growth, as you've seen in the last couple of years. If I step back, this is what we see in the rest of the world. As I mentioned, for CapEx, small CapEx moves. Important to take into account the peak in the U.K. in fiscal 2027. From then onwards, really a stable capital intensity more or less everywhere, market by market. I give the floor.
Yeah
to Margherita for the Europe comment.
Yes. You also mentioned currencies. Obviously, our guidance has to be organic because we cannot make assumptions on currencies. As Pilar has just mentioned, our focus, and we have put this also on the slide, is euro growth. Yeah, that's what we are looking at, is adjusted free cash flow growth in Europe year after year. What do we expect for Europe? FY 2026 and also implicit in the guidance of FY 2027, you see that we have now stabilized Europe. We see momentum building. We have just talked about Germany today, but also Germany in the longer term. We see in Europe another fantastic growth driver, as you know, in the U.K. U.K. had good growth in EBITDA this year. We are guiding for stronger because of the synergies in 2027.
As you know, we have GBP 700 million cost and CapEx synergies, GBP 700 million to go for by 2030. We see significant opportunity, and we are pleased with the momentum overall. Mergers and European environment. I think it's we have an opportunity now in terms of what's being discussed in Europe to create possibly the most significant shift in the industry for a couple of decades. I need to say the first reading of the draft Merger Guidelines I think is encouraging because it addresses the basics, which is broadening the assessment of the mergers from just one angle, pricing, to a broader view, which includes investments, includes innovation, and includes resilience.
The other point which I think is really important to us is that it specifically says that for sectors like ours, the assessment period has to be different because it takes time to see the evolution on these parameters. There is more to do, and we are engaged in the consultation, yeah. We have this couple of months. I think there are a couple of things that can be better. The first is being specific on these timelines and really recognize the length. You remember that the U.K. CMA led the way there with eight years. Let's be specific. The other aspect is also to address the remedies side of the equation.
Today there is this still narrow focus on a blunt instrument, which is structural remedies. We would obviously advocate, again as per the U.K., a move towards the more sophisticated behavioral remedies, which I believe are actually better also for our consumers and for investments. If I go back to Vodafone in a way, you As I said before, we have already been proactive in this space. We are proactive in our markets, and we are focused on driving in Europe and in Africa and Turkey growth going forward on an organic basis.
That's clear. One super quick follow-up. Is the guidance for the midterm cashflow pro forma for the portfolio changes that you've done, like Safaricom, or does it not capture those items?
Not yet. No, no.
Okay.
It's always or fully organic.
Always organic.
Yeah.
Very clear. Thank you.
Thank you.
The next question comes from James Ratzer at New Street Research. James, please go ahead.
Yes. Good morning. Thank you, Margherita and Pilar. Hard to keep it to one question, and I was excited to see the FWA announcement that you made in the U.K.
I was actually going to ask my question today also on the new medium term free cash flow outlook, and in particular digging in there a bit on the CapEx side of things because you are guiding there that capital intensity by market is going to remain broadly stable. Yet if I think about what we know today, you know, the U.K. CapEx is being front-loaded on the network upgrade. There should be synergies to come as well in the U.K. If I look in Germany, more of the fiber upgrade or all of your fiber upgrade is being done off balance sheet through OXG rather than at the group level, all of which would suggest CapEx over time should be coming down.
Therefore, I mean, if that's right, what are the new areas where you see incremental investment coming in, and how do you then think about the future revenue benefits from where the new investment is going? Thank you.
Thank you, James. I see the angle you're coming from, absolutely in the U.K. we will have, let's say, peak CapEx this year. We want to retain a degree of flexibility in our scenarios, to your point, for growth opportunities. For example, in the markets that have strong double-digit growth, we want to continue to always be at the forefront of our leadership position in connectivity. I'm referring, for example, to Africa, right, where we are at the top end of the sort of next generation networks position and we want to continue to grow there, our investments in line with the growth of the demand for our services, data growth, population growth, as I was mentioning earlier. We need to continuously maintain our flexibility.
If you think about investment for growth, I would just reshape the answer a little bit because I think this is broader than CapEx and not necessarily high capital intensity at all. I think the area that is top of mind for us continues to be B2B. If you think about our capabilities built in the last two years, I mentioned earlier we have stepped up investment in the last two year on customer experience and on B2B, and we have hired sales specialists for digital services, we have broadened our product presence in digital services, and we have established new partnership, and we have done M&A, yeah, like we have done in Germany with scaling on cloud. Why are we doing all this? Because there is strong demand.
You have seen, for example, we announced that we are the partner in Germany for AWS Europe Cloud coming up. We want to be in the best position to serve our customers for all these growing areas of demand. It may not imply a lot of CapEx, to be honest. It's maybe more OpEx in a way or costs in the EBITDA lines, but we will always try and make sure that we are best positioned to satisfy this demand because it's a significant growth driver for Europe and for Africa and Turkey.
Does that mean if I put that B2B angle together, do you think Europe as a whole can return to positive service revenue growth even as we lap the 1&1 contract?
you mean, without a defined timeline?
Yes.
Yes. Of course.
Yeah. Great. Okay.
Absolutely. I mean, we are growing today.
Well, that's with I was looking at excluding the 1&1.
Yeah
impact. Okay.
Yeah.
That's clear.
No, of course.
Thank you.
Absolutely.
Thank you very much.
The next question comes from Andrew Lee at Goldman Sachs. Andrew, please go ahead.
Yeah. Good morning. I had a question on U.K. organic service revenue growth. Just noting your positive commentary on revenue synergies on the buy-in of Hutch Three earlier than expected. Can we break it down into the kind of two pillars of what's gonna drive the improvement in growth? There's the revenue synergy side you say is accelerating, and then there's, I guess, market repair or hopefully market repair, that should boost the growth outlook in the future. I wonder if you could just talk about the scale and the timeline of each.
Just thinking on, well, on the market repair side, are we just gonna have to wait for the cheap MVNO deals to roll off before we get some market repair and more rational behavior in the U.K. market, given we're seeing like the Revolut, Digi all coming in to undermine that pricing rationality. Any help you can give on U.K. would be really useful.
Yes. I mean, Andrew, I think the most important point to note is that our plans are about price competition continuing in the U.K. The deal baseline was more better return on capital employed, allowing us to invest more on the back of the scale of the infrastructure, right? We need large, well-invested, and well-utilized networks. That's why the deals create value. When I talk about revenue synergies, I'm not thinking about the pricing environment is gonna change. I mean, we can have a long debate on all the drivers of competition in telecoms. I think that we should continue to assume that there will always be a high degree of competition in the market. Against that degree of competition, we will be in a market that we serve in an efficient and scaled way with our network.
Most importantly, with the largest customer base in mobile in the U.K. and the fastest-growing fixed broadband, we will have a chance to drive revenue synergies that really I mean, you have seen us outperforming the market, I think, quarter after quarter for a very long time now. This is going to be a very significant booster of the top line. How? I'll give you just two examples. There could be more. The first one is churn. Yeah. You have seen in our press release that churn is going down across all the brands in the U.K., and we felt we had a particular opportunity on the Three brand because Vodafone has always been, well, as always, has been in the last two years, customer experience leader in the market, the best net promoter scores.
We're now extending our processes also to the bases we have acquired, and we are building a network that quarter after quarter is improving at a rate which I think in our industry normally you see on years. All this is driving better customer loyalty, and obviously, customer loyalty is a fantastic driver of the value equation for a telecom operator. The second aspect is cross-selling. With this, we are selling to these 28 million customers now in the U.K., the largest fiber footprint in the country that we already had as Vodafone. We are now marketing the services to Three. James was pointing out right now that we are also a 3.7 million households footprint on FWA, which wasn't available to us before. It's now marketed also to the Vodafone customers.
I think you see in our commercial performance in the U.K. already the signs of what these revenue synergies look like. In the release, we talked about the churn. If you look at the home broadband, we have just closed the fastest growth year in customer numbers that we have ever had in the market. We have a real leadership opportunity in the U.K. by managing our customer better, offering them more products, and covering the whole market segments with the full range of the brands we have acquired. This is a fantastic potential, and I can see now we're almost a year into the integration that is a big confidence booster for us in our performance. As I said, you have seen us as Vodafone alone outperforming. We count on the opportunities of the merger to drive this even further.
Thank you. Can I just quick follow-up? Just can you give us a sense that because U.K. is not growing organic service revenue growth right now?
Yes
It will take the lumpiness. Can you give us a sense of the timeline and scale when we're actually gonna see that cross-selling, you know, in churn, you know, boost come through, and what does that look like in terms of growth?
Yeah. There was, I mean, when you look at Q4, there was a decline in U.K. service revenue. It had to do with B2B, lower project activity.
Yeah. No, understood.
There was even a change via large customer, which led to interrupting revenue in the quarter. If you look at consumer improved quarter-on-quarter due to everything Margherita was pointing to. We continue to see ARPU growth in mobile and fixed. A strong churn reduction across the brands, as Margherita was saying. You've seen the highest ever fixed product net adds in the U.K., and also the strong performance in FWA. And all of this is thanks to this market-leading customer experience.
Looking ahead into fiscal 2027, we expect the U.K. to grow in fiscal 2027. We also expect there will be a step up in B2B revenues. As we lap the effect of termination of managed service contracts that we highlighted in Q1, it has been impacting us throughout the year. We will start lapping that early into this year. Also the effect I mentioned for Q4. Definitely we expect the U.K. to grow in fiscal 2027.
Thank you.
The next question this morning comes from Paul Sidney at Berenberg. Paul, please go ahead.
Yeah. Thank you very much. Good morning, everyone. Just a follow-up on the group portfolio and capital allocation. Vodafone has executed extremely well over the past couple of years on exiting non-core businesses, investing in your core businesses, particularly the recent U.K. deal, Safaricom consolidation. My question is, are there plans to continue to simplify the group? It's still a little bit complex. There's non-core stakes and JVs here and there, and given the growth in Africa that's being delivered, I think it's around a third of your profits now at the group level. Is there an opportunity to increase your exposure to Africa? I'm just really wanting to get an idea of what's the next priority in the in tray, given the optionality, the free cash flow growth that you're delivering gives you.
Sure. With Paul, with our Safaricom transaction, that's exactly what we are doing in terms of increasing our exposure to Africa. We are essentially taking control of one of the most successful companies in telecom and financial services on the whole continent, so we look forward to it. Beyond this, you talked about simplification. This for me reads as let's talk about Vodafone Investments, right? A couple of years ago, I was very keen to change our operating model to make sure that we managed in a different way the markets that we control, the strong markets we have just talked about, and the markets which we don't control and where we have positions.
This is why we have put together a very small team of financial and operational specialists with just the mission of managing what is a page in our presentation with all the stakes we have, whether it's in infrastructure, whether it's in innovation. Since we have set up that team, I think it's fair to say they've been quite active, as you mentioned. I mean, we have completed the 50/50 in Vantage. We have simplified India with the sale of Indus. We have sold infrastructure in fixed in Australia and obviously the sale of the Netherlands, which we will be completing imminently. What you can expect is looking forward, that same team will continue to be focused on the same thing, which is with agility and discipline, manage the portfolio for value creation.
Perfect. Maybe just a quick follow-up. Maybe it's an unfair question, but should we expect Vodacom itself to again look for opportunities to expand into different markets in Africa or, you know, increase stakes in some of their existing assets?
We are very happy with our current shape in Africa in terms of geographies.
Very clear. Thank you very much for your time.
We have time for one last question this morning. This question comes from Emmet Kelly at Morgan Stanley. Emmet, please go ahead.
Yes. Good morning, Margherita. Good morning, Pilar. Thank you for taking my question. My question please is just to get your updated thoughts on AI and what it means for Vodafone going forward, please. Just wondering, are you seeing any signs of increased data volume growth from AI or any kind of AI-centric consumer applications emerge that might move the dial for you? Or is AI mainly potentially largely about the potential for cost efficiencies, or is it really maybe about the network? I know two weeks ago, T-Mobile U.S. talked at length about the relationship with NVIDIA, putting compute and inference at the edge of their network and combining standalone 5G with physical AI. Is it really consumer? Is it cost? Is it about the network? Thank you.
It's a little bit of everything, Emmet, so maybe I will take the network angle, and I can leave the productivity angle to Pilar. On the networks front, I mean, there is a fascinating two-way relationship between networks and AI because on one end, AI can make our networks more efficient. There is a slide in the presentation in which we talk about our zero touch operations and how we see not just productivity, but also speed in preventing faults and the like. On the other end, you touched on a very important point, which is AI demand for networks. AI needs good networks, and today you have an ecosystem around AI where you have, I don't know, NVIDIA building the chips, the hyperscaler building the data centers.
You have the tech company producing the software and the hardware, but none of that works without a strong network infrastructure. I completely agree with what you hinted to, which is the more AI moves into the physical world with things like vehicles and robotics, the more it will need data everywhere. Which means for us, ultra-low latency network, fast speeds, and we are preparing for that. When we look at the future in our outlook, we are thinking about the demand for uplink, for example. The usage of the network will over time change. As of now, if I think about this is all the things we need to be ready for, and I think it's a key driver for connectivity. The biggest impacts we see today are actually the impacts on the productivity front on the company.
Definitely. For us, AI is an enabler of cost efficiencies and driving productivity. In fact is one of the key drivers of the OpEx, gross and net savings targets that we have communicated and we have as a target. AI is also an enabler of capital discipline across the group. Our focus is, as we've discussed previously, is how we embed AI in our core operations, how we drive measurable savings, and, you know, as a result enhance our service and also support growth. Margherita mentioned networks. The other two key areas where AI is making a difference today is customer care, where we are delivering higher standards of customer experience.
My favorite examples there, the TOBi and SuperTOBi, the AI voice agent, for a relatively simple high-volume calls. Also on top of that, we overlay the SuperTOBi with GenAI and are able to deal with the most complex customer journeys and also achieve a higher customer experience as we deal with the most complex language and most complex journeys. The other area is shared operations. We are embedding AI at the scale. In fact, our shared operations are the perfect setup to be able to drive the benefits of AI. Favorite examples there, what we are doing in procurement. Our procurement platform, as I said, operation is the perfect setup to give us a competitive edge in terms of getting the AI benefits through our supplier network.
We also have the purchasing platform, where we are basically leveraging AI to tender in a more regular, frequent way. Margherita mentioned networks as a key area. Really for us, a key enabler. We are seeing significant savings already, but more importantly is positioning us for structural change of our cost base while delivering higher standards of customer experience, which is a key priority, the key priority for us.
Maybe just to add that all this is built on foundations that are essential for scale. I would just mention two points. One is we have a fully multi-vendor architecture. Even within the same use cases we are using different LLMs because of course, who knows where AI is going, and therefore we maintain total flexibility to make sure that at every point in time we have the best solutions for our needs. The second is that we have, I think, a unique position with a single data ocean for all our European markets, which is the ideal source, if you want, which we can leverage for all these AI use cases.
Super. Thanks. Just a very quick follow-up as well on that, Margherita. Just looking at the maybe the defensive angles on AI. Obviously, not everybody out there is a good actor, you know, read stories about a lot of fraudulent traffic emerging as a result of AI deepfakes, et cetera. I know if you look at email since it turned up in the late nineties, apparently 55%, 60% of global email traffic is now actually spam and fraudulent email.
Yeah.
Is this a big area of focus and maybe an area that you'll need to invest a lot of money in? Do you need to build significant defenses, and can you maybe differentiate yourself against other networks by building these defensive capabilities?
Yeah. It goes both ways actually. AI raises new threats for things like fraud or cyber, but AI also allows us to have better defenses. For example, you might have seen that across our markets in Europe, we are rolling out for our customers these fraud alerts. You receive a call, and you know in advance that it's a suspicious call. This is really very helpful. The same thing is actually happen on the cyber side. I think what's probably changing in these things, which are both good and bad, is mostly the speed at which we need to operate. Yeah? Everything needs to be much more flexible to react much more quickly. Again, AI helps us in doing that. Both sides.
Yeah, that's great. Thank you very much.
Thank you.
Thank you. This concludes the Q&A session, and I would now like to hand back to Margherita for any closing remarks.
Thank you very much, Vanessa, and thank you for everyone. We have done something a little bit different in these results. As we are opening this new chapter, we have a special presentation for you online. If you want to have a summary of where Vodafone is today and where Vodafone is going, you will find 10, 15 minutes for that in a separate video online. Thank you very much.