Good afternoon, everyone, and thank you for joining our live Q and A on digital services. I'm Alex, Vodafone Group Chief Commercial Officer, and I'm joined today by Shamil, the CEO of Vodacom Vinod, the CEO of Vodafone Business and Erik, our IoT Director in Vodafone Business. I hope you've had some time this morning to review some of the presentation We have published earlier on today giving an overview of our digital services strategy. Let me just highlight and recap the 4 the main messages we have given out. The first is that we've systematically been improving loyalty in our customer base through a program of work centered around our digital expertise.
The second is that in Europe, we are building digital services for our consumer customers. These services have in their own right attractive economic models, but most importantly, we can see that they drive loyalty, higher satisfaction and engagement of our customers that is core for the connectivity business. The third message is that in Africa, we have built the largest fintech capabilities and we believe that we will go from strength to strength in Africa. And finally, we have built the world's biggest and largest IoT connectivity Vodafonellitti. And once again, we do see significant growth opportunities in this side.
The video we kicked off with a few minutes ago showed do some extracts of some of the case study videos we have put up on our website, and I'd just like to maybe highlight a few which I think are particularly Interesting, the one around Vodopay, our super app has just launched in Africa. A couple of use cases around real use cases from IoT business. The evolution of TOBI, our digital AI assistant. And finally, how does Vodafone do digital first marketing. So a lot of material for you to digest and go through.
We would now be delighted to answer some of your questions?
Lovely. Thank you very much. So our Our next question today comes from Nick Delphos from Redburn. Nick, please go ahead. Your line should now be open if you just accept The pop up message.
Yes. Thanks very much indeed. Just got a couple of questions. One for Shamil first and then one for Vinod. First one for Shamil It's really around Slide 50, where you talk about the various structures of the African fintech business, the legal structures that is.
The question is how do you see that developing and how do you think about valuation or realizing the valuation of those assets? And then a question for Realizing the valuation of those assets. And then a question for Vinod is on the EU recovery funds, which I understand that
Okay. So let me take the first question. So firstly, I think what we've done in each of the countries is made sure that we can separate the different legal separated into legal entities, some Because of regulatory reasons and others just proactively, so that gives us optionality. What we are doing in terms of Firstly, the first part for us is to grow the business a lot more significantly. And that's why we've created M Pesa Africa, where We have a co build where we're building the platform once and then replicating in the different markets or building in the cloud and then the different the markets plug into it?
That allows us we're now building an international money transfer hub. We're building out our merchant play We're building out more of our lending products, investment products. We see a big opportunity as an example on investments where we're sitting on 1,000,000,000 of dollars at any point in time in float. If we can move some of that into investments that opens up a big opportunity, an untapped opportunity Mobile money in general. So that's one of the opportunities.
And then what we're doing is so We run them as separate businesses and that's one of the prerequisites of creating the focus within financial services, making sure we're properly scaled up and so on. But it services, making sure we're properly scaled up and so on. But it also gives us optionality later on, should we decide to I'm Alex. And we more would like the market to give us more credit for what we've built. And so we're doing a lot more disclosure actually on the assets and providing a lot Actually on the assets and providing a lot more insights into the different services, the product makeups, the growth, the transaction values.
So you can see a lot more Of the detail in there, I mean, we do know that these assets trade at different multiples and we do hope that it does become
Any view on timing towards any further
No, I think more what we've done is just build optionality for ourselves. I think At this stage, what we're trying to do is to build it up. We want to get north of 100,000,000 customers in the next Yes. We currently sitting on 64,000,000 active financial service customers across the continent and get the super apps implemented We grow out the product lifecycle and so on. And yes, I think that will also become is reflected into our growth rates and so on as well?
Thanks very much.
Hi, Thank you for your question. Firstly, just to give the contours, EU Recovery Funds, it's 7 $50,000,000,000 that will be spent on improving national infrastructure as well as the underlying The most important thing to note is the $750,000,000,000 needs to be spent Well, the national plans are being developed and we are seeing a lot of progress in this area in countries like Spain Preparing really hard over the last 6 to 9 months to gear up for these various Vodafone. And we'll be focusing on a few areas as Vodafone. Obviously, one is on the infrastructure side. What I'm driving is getting our capabilities ready in terms of our products and propositions around SME digitization, it's our top priority, very aligned with our VISTA 2025 strategy.
2nd is around E health, there's a real demand on governments across Europe to make sure that the health systems upgraded and have the capacity to meet both the needs of any surges in demand like what we saw, but also to have the capability leveraging Technology to cater to all sections of the population. So we're really well suited in that area as we'll cover The third one is around smart cities where our IoT leadership positions us well with many different offerings. The There's a broader bucket called Digital for Green, again, which is the climate change agenda is really high on the are you priorities now and therefore how can we use technology to lessen the impact on the planet is Again, an area of focus. And then the last one we are focusing on is connected education, which again is a need that surfaced during COVID. But Again, it's not just about connectivity, it's also about making sure populations get the skills that are required to remain competitive.
So these are the 5 Yes, that we are very focused on. And the good news is we're beginning to see programs being defined and funds being allocated early days yet, but in these And to answer your question specifically, we should start seeing the Results show up in our numbers by early next year. We're beginning to see tenders come out now. We're bidding for them. We're shaping some of the helping Some of the policies on SME digitization, for example, that are then being adopted in multiple countries.
So early
Okay. Thank you very much, Nick. Our next question today comes from Maurice Trick from Barclays. Morris, please go ahead. I'm requesting to unmute you now.
Great. I hope you hear me okay. Question for Shamil really. You made reference in the presentation, Shameel about leveraging AI and big data in the low money FinTech business, and you showed the impressive transaction volume growth. I'd love you to elaborate a bit more on Vodafone's Vodafone's system advantage, which you talk about on Slide 42.
You talk about the growth opportunity from M Pesa itself from the super app, but you also talk about the impact on cold churn and loyalty metrics. Just curious to know you've been managing to move that customer conversation away from just price and more towards what fintech can bring from the consumer perspective.
Perfect. I think the big part for us With the system of advantage both in enterprise and consumer, it's really how can we embed our lives and embed ourselves Going to the lives of the consumer, where you're doing multiple activities from us and where you pay, land, shop, save, get your Activity from both mobile and fixed. So that's really the intent of what we're trying to build And then similar in the enterprise segment as well, how can we enhance the lives of a corporate or a SME Or not the lives, but essentially give them an ability to change their businesses, sell more of their product and so on. So that was an important ingredient for us. What What we built as well is you've got the mobile connectivity, we're now expanding into fixed and then of course the normal growth in data and data Usage and so on.
But I think what we've done really, really well is this personalization part, which is our a platform call just for you, where we've been using machine learning and artificial intelligence to present So what we've done really well is nano ized as I call it everything. So you My data for the hour, for the day, for the weekend, for the week, for the month, you can do it on music, you can do it on games, you can do it On loans, and so that ability to be able to do this Now with the financial services part, we also creating more and more transactions that the customers engage And I think the Super App gives us the ability to deepen those relationships and effectively create an Being a hold on the customer because now you're shopping, you're using a single app to shop, you're using a single app to pay, you're doing money transfers from it, you're doing international money transfers, Investing through the app. You're ensuring through the app. So it has this ability of creating marketplaces for different products. So I think that Then separately in the Alipay platform is Both certain AI capabilities and machine learning capabilities that you're learning from the behavior of the customer And then of course directing better offers and promotional activities to each individual customer.
Separate to that, we've been building Our own big data platform and the view that we've taken is how do we build a 360 view of the customer. So today on each of Our customers, we know 760 things about each of our customers. And that then helps us To drive what we call next best activities and we feed that into a global recommender. So to give you an example, we We extend credit to people on airtime. So 47% of the time now, people lend airtime from us before they buy airtime from us.
And this is very lucrative product for us because it increases active base, but we're also seeing as much as a 5 times uplift on customers that are engaged in the product versus customers that are not. So that becomes that's really, Really become very compelling. But using behavioral data analytics, we're able to extend credit to customers. So an Example would be, if you wake up between 5 and 7 in the morning, you're more creditworthy sorry, if you wake up between 5 and 6 in the morning, you're more credit worthy than if you wake up at 7. Now this is a proven fact.
And Based on that, we can give you credit or the amount of base stations you drive through in a day is a lead indicator for insurance risk. Now if you you think about it, the more base stations you drive through, the further you are away from home, so the more likely you are to crash your car or to So based on those, we can now provide personalized insurance offers That gives it. So we're doing that with our own products like device insurance. And that's why we run the highest EBITDA margin and with the 5th largest insured in South Africa already, right. So those behavioral economics Helps us to be able to drive a system advantage.
And on top of that, we've built a behavioral loyalty program, which rewards behavior. To give We launched it in October last year. By December, we did 23,000,000 active users. And basically, we're incentivizing different activities. If you do this, we'll give you free data.
If you do that, we'll give you free we'll I'll give you a coupon to use on Vodafay and so on and so on. So it's all of these activities together comes together Quite nicely in building a ring around the customer with the logic that if you're doing multiple products from us, the likelihood of you churning because someone comes at 5%
Thank you very much, Maurice. Our next question today The next
question comes
from Andrew Lee from Goldman Sachs.
Hi, guys. Thanks for doing the event today. I have a couple of questions. Just firstly,
one of the
things analysts and investors a grappling with at the moment is the acceleration in German net add trends. So I had a question from your digital go to market perspective, what are the obstacles to you not being able to overcome the need for footfall To win customers in Germany and how do you overcome them? And then the second question was just On customer net promoter scores, so I'm sure that there are all sorts of anecdotal evidence that lots of Online system, I understand that it saves money, but how do you track the quality of the client The customer interaction with TOBI on an absolute basis and the quality of your customer interactions
Thank you, Andrew. Let me maybe first focus on your question around Germany. So in Germany, we've had over the last 3 years, a continuous decline in churn and a very compelling NPS progress. Now as you can going on in our fixed line business across the world as people are working from home? We have been really investing on the capacity of our network, particularly in Germany, to be able to cope with that surge in traffic?
We're now confident because we're seeing declining calls from customers, declining tickets that the situation is very much under control. So the focus for us has really been on our own existing customers, keeping them happy during these really tough times. We now need to We gained our commercial momentum. And indeed, as you've seen in our Q1 results, the closure of shops in Germany has been a challenge. During this Q4, Q1 period, footfall in Germany was down 70% year on year, so really dramatic.
Things have reopened since During the last couple of months, we're still roughly at 40% lower traffic than pre COVID. So a different dynamic in terms of how customers are shopping Nevertheless, we see opportunities to indeed regain that net add commercial momentum in Germany. So The retail reopening has helped us during summertime as we went into the back to school period. Definitely, our marketing strategies have helped and for those of you who are maybe in Germany, you have seen in Germany, we have been very focused on our Cable Max proposition with some clever marketing to customers take that step forward and switch upgrade from DSL to cable? But finally, we are definitely leveraging our customer And I think this is really something which is going to be important for us going forward.
It is the ability for us to look at our mobile customer base and really we talk to them about our fixed capabilities and vice versa, take our fixed customer base and talk to them about our mobile capabilities? So this is a lever which I I think, is very much ahead of us. It is a lever that we control. It is an internal lever, if you wish. So we have a really good focus on this for the
next quarters.
I just sorry, just to push, but the question was really on why haven't you been able to use digital to take The middle man of shops, given that it's clearly a bigger challenge for you guys in your More commercial momentum than you're certainly than Deutsche Telekom.
So we've definitely pushed digital strongly across all of our markets, of which Germany, and our digital share keeps on increasing. Over the last couple of Of course, COVID helping, we've seen really a significant boost to digital. I think it's important for us to digital to differentiate what we mean by organic digital traffic, so demand that is latent in the market and we capture that demand and serve them through digital means versus what I would call indirect traffic, I would say paid for traffic, which maybe are through comparison sites, etcetera. We are very careful to grow digital in an economical way. An economical way is about really making sure that in digital, our CPA is relevant and less I say in other channels?
We are not going after digital for digital sake, we want to do it in a cost economic approach. And so We're very focused on that piece of the puzzle. Now in Germany, but it's true actually in most of European markets, the search trends for Mobile and fixed broadband and so organic search, if you wish, have significantly declined since January. And so we are monitoring that trend and trying to convert the maximum volume that comes to us on our channels. So we are focused on digital.
We've got teams in every market with Germany to really focus on that funnel capture, but nevertheless, we're trying to do this in the most economic aspect. You've mentioned a second question around NPS and anecdotal evidence, I if I guess of and you specifically mentioned Tobi, what's going on with the So we're
all guys
together. Yes.
No, no, that's absolutely fine. So listen, I think If you had not had the chance, I'd just encourage you to have a look at our case study video on the evolution of Tobi. Tobi started if I had 4 years ago as an FAQ chatbot? And actually, Tobi is not yet consistently executed across all our markets. So depending on where you're calling us from, maybe you have that feeling that, hey, this is just an FAQ chatbot, what's going on?
In our most advanced markets, Tobi is really a full blown digital assistant, where you have cognitive conversations either on chat or over the through voice and it's really a fluent conversation that you have with Toby. As we move into the digital assistant, our vision is very clear, we want 100 percent of our contacts to go through Tobi. Now that only makes sense if Tobi is a high quality customer service agent. The way we monitor that is twofold. First of all, in the a resolution rate.
So when Tobi gets an interaction from a customer, are we resolving the customer question, the customer issue or are we passing it on to a Live Agent, and we want to make sure we're resolving the issue. That is, for us, the first sign of quality. The second way we really monitor it is through classic touchpoint PS surveys to make sure that the quality of the customer feedback costs the transaction with the customer satisfied and happy. We now have the evidence in our more mature market that a conversation with Tobia, typically on chat, is actually a higher TNPS a customer in a conversation with an agent, a live agent. So that gives us the confidence that we've reached certain level of quality on Tobi.
Now customers call us for millions of different reasons. And from day 1, Tobi doesn't cover those million reasons? So we really over time, I would say cover more and more journeys with Tobi and we want to make sure each journey that we can actually complete with and resolve with is of high quality before we open up to the next. So depending on the country you're in, we are on that journey. We're moving as fast as we can away from FAQ chatbotter, moving as fast as we can to really proper cognitive interaction on voice and chat, but we want to do it in a way that when we are opening journeys, they are of high quality.
What's interesting actually in those most more mature markets, more advanced a sales happening through TOBI. Classic example would be you ask for your bill to TOBI and at that point we would recommend a data add on or you're coming at the end of your contract? Toby will renew your contract, not an expensive indirect channel. Toby will do it. I hope that gives you a is how we're
approaching it. Thank
you.
Okay. Thank you You should now be able to unmute yourself.
Thank you very much, Sean.
Hi, guys. Two questions, if I can. Just first on Slide 12, you got some great NPS data splits and give some insights. I've always thought that there's a lot of confirmation bias in these though. Obviously, happy customers are maybe more I need to take more products from you.
So I guess can you kind of back test or have you back tested this to see if kind of underlying customer NPS is improving for those who don't take more services necessarily. And then secondly, on the global IoT business, we've obviously seen supply chain issues this year. There's a huge push for green and energy and emission reductions across the world. So in my mind, do you think that there might be some structural acceleration in IoT demand in the next 5 years. Then just looking on Slide 65, I think the incremental dollar amounts of growth each year are forecast to be pretty stable.
Do you think that could conservative and is there kind of a lot more upside maybe in global IoT and should Vodafone be doing more in this space? Thanks very much.
On your first question, we are indeed cutting the data in thousands of ways firm that as customers engage with us in multiple products, it is driving NPS and vice versa. When we have happy customers, we approach them to ensure that they will have a stronger relationship across It's a two way street, if you wish. But the street, there's not a one way street, as you mentioned. We can see indeed that when we engage customers on a multiple array We are managing to move customers from a neutral to promoter, for example. I'll pass on to another
Yes. So regarding the IoT market, what you see on Page 65, the 16% is the consensus of industry You're absolutely right. There is the potential to do more. Let me maybe just give you one example for the tracking of vaccines. Nobody thought 2 years ago that this would be coming and we have delivered 500,000 SIM cards just for the tracking of vaccines at At the moment in the world, the other another thing which will probably happen is that as the hardware cost for tracking solutions It will be worth, for example, tracking parcels more on an individual basis Then I'm just tracking the containers, and that also brings many benefits with itself.
So it's hard to forecast, but yes, we believe there there is potential in the numbers becoming even higher?
And then if I can just add to that, I think you're talking about larger structural So supply chain resilience and the need for tracking exactly what's happening is what Eric spoke about. But equally, We're seeing changes in the automotive sector, for example, where Vodafone is already very strong providing connectivity to cars, but now it's moving just Beyond traditional tracking of the cars to increasing softwareization of the cars and therefore software Upgrades is really the way that every manufacturer is going. We're seeing B2X business picking up and the number of I'll give an extension of that is the EV charging opportunity, which again requires machine to machine or IoT Connectivity, so that's another structural shift that is taking place in the industry in the automotive industry, which is playing to our favor. And then we spoke about healthcare, Where now remote medicine, connected surgery, so on and so forth are becoming more mainstream. And these are areas that Vodafone has been working on for quite some time, not only delivering connectivity, which Eric spoke about, but also through some of our I'm Alex.
So, we're really bullish about the environment around us and the structural changes across multiple industries that will
You mentioned V2X there. I mean, is your ability to kind of address the value chain in V2V and V2X in the kind of automotive industry, can you do that based off what you're already serving to your existing customers? So obviously, there's a huge opportunity Driverless cars, I think, have maybe been pushed back a few years, but V2V communication could still be a pretty meaningful thing.
Listen, I think complete autonomous cars is technically it's possible, but many other things have to fall into Including regulations, safety considerations and so on, that will eventually happen. But if you talk to the major Automotive OEM providers, they are they have more phased rollout, which we are experiencing in our personal vehicles as well With certain features being autonomous and then there'll be fleet of platooning and then eventually they'll at some point they'll be truly autonomous cars. But the need for B2B communications is already growing and the big and in fact, we have a few trials underway right now in In the B2B space, which we potentially even build as a platform and monetize in the future. Maybe Eric is quite the expert on this, he can add a little bit?
Yes. Look, also V2X or the communication between cars is kind of an extension of the communication The For breakdown calls now, the cars are very often already connected to a so called car cloud With the sensors, which actually also make autonomous driving possible, we believe that this will significantly drive the data Over the next years, which cars are consuming. And we have actually seen that the average data consumption of a car has actually Multiplied significantly in the last 3 years alone. 5 years ago, there were no software updates for the car over the Now there are a lot of car manufacturers already doing this. Also multimedia applications are running in Over the connection in the car for passengers and so on.
So all these things are
Thank you very much, Sam, our next question today comes from Stan Noelle from Bernstein. Stan, I'm unmuting you Yes, loud and clear.
Okay, great. Hi, guys. I've got a question for Shamil. Thinking about the let's say the potential or the opportunity in terms of financial Services penetration in your markets. So I'm referring to the chart on Page 48.
So clearly, in Kenya Safaricom has reached a very high level. We're probably the market is a bit special in the sense that they have a very large mobile market share, which will Give them a scale advantage to grow the service to this level. Do you really think that this is reaching this level Are the markets realistic or Safaricom is a bit of a North Ireland?
Yes. I think where we In all our markets is that effectively we have market leadership in every market that we operate in, as Vodafone and of Vodafone in Egypt as well. So I think it puts us into a very, very strong position to be able to grow The financial service penetration. And I mean, if you take a market like Mozambique, we have 65% plus market share on mobile money. If you go into Lesotho, we've got an 80% market share.
If you
I see we've got a greater than 50% market share. So every market, the financial services part is taking I think the big question is the maturity of the products. So that's why we've created M Pesa Africa so We can build once and replicate. What we were doing before is we had a common platform, but we're building a lot of products in each Now what we do is we build it from the center. We launch in Kenya first and then take it to the rest of the markets.
But also hubs for Relationships, international money transfer hub, lending where we create 1 lending platform, Different relationships, creating the products once. I think that's creating a lot more synergies going forward. So now we're trying to get all the markets to the Same level as Ken here in terms of products. Person to person payments and money transfers, I'd say is It's now growing the ecosystem of products, but at the same time also growing the ecosystem of products in Subarico. So We don't do anything in investments.
So we see that as an opportunity to create investment products like the other Like the other super apps are doing around the world, then that creates new opportunities. So example, with Paytm in India, you can do fractional ownership of gold and you can invest as little as a rupee in gold. Now think about the customer base and if we can get people to invest as little as a dollar, banks don't want your dollar. They don't I did. If you have $100 and if we can get a lot of this nano investments in and even if 20% of our customers adopt these products.
It's material in terms of growth rates.
Okay. Thank
Thank you very much, Stan. So our next question, we have a question from the The online audience. So the question is Africa has seen record M and A and investment in OTT
Do you mind repeating it, please?
Yes, absolutely. I can repeat the question. Can you hear me okay?
I can now.
Okay. So the question from the online audience The M PISA Ecosystems created by heavily discounting fees on withdrawals, payments and P2P
So I think, so my inclination is no, is no, they can't. I mean, of course, they can always try. But I think what we've built and what we're continuing to build and evolve gives us a certain level So, firstly, across our footprint, we have 450,000 outlets. So, In terms of being able to receive M Pesa and to make payments. So that is very difficult to replicate.
So when you're the telco, it's easier how we created success as well is we do use Alco is an anchor onto some of it by giving offers, but also to incentivize behaviors. Do bill payments for us and we'll give you some And we do that until we've created a behavioral change. So I think we have certain strategic advantages, but also I think the big data analytics that we've built up, the merchant play that we're building and the merchant ecosystem that we're growing And the depth of that offering, including invoice financing, payments, all of that, Merchant advances in loans, ordering. So all of these improve the ecosystem of products. So there's attractiveness And from a customer perspective, they can pay with M Pesa anywhere, but they can also do all their different services And you're building these marketplaces that creates a very, very strong part, which is very difficult for new players to come in and replicate.
And that's why we consider it a system of advantage. If I were some of these FinTech players, I I wouldn't be looking to challenge us. I'd be looking to partner with us. And I would be coming on to our marketplaces and bringing my products So example would be if I'm doing student loans, I would do it through the platform as opposed to trying to disrupt the platform. And I think that's where the We're also talking to a lot of the OTTs about partnering.
And you'll be surprised, I mean, recently One of the big financial institutions came to us and gave us a lot of money just to partner with us. And what we suddenly realized is actually we have a lot of leverage given the scale when you 64,000,000 customers and you're moving $25,000,000,000 a month through your platforms. There's a lot of people who want to talk to you and you can almost charge them for Partnerships.
Okay, thank you. Our Our next question today comes from James Ratzer from New Street. James, please go ahead.
I have two questions, please. The first one was just regarding Germany. I mean, on Slide 15, you showed some of the convergence data. You showed some of the convergence data, which showed Germany is at the lower end of your big four Markets, in particular on broadband. So I was interested in terms of why you think convergence in Germany remains And then the second question I had was regarding IoT.
I mean, you make a kind of very compelling case about the success you're having in IoT, but I was really interested in then the ability to cross sell Your success from IoT into other business products, and I think IoT today represents around 9% of your business revenues. So are you seeing examples where you bring on a new customer with IoT, you're able to upsell
Thank you, James. So in Germany, as you know, we've acquired 2 large cable assets in the last couple of years. And our focus Energy is both OpEx and CapEx for these activities. That has been our focus over the last 2 years, the integration of those businesses. And as we have announced we've achieved that and really got the people together, the processes together, the technology platforms together for our customers and of course, one single brand.
I think now we have fantastic assets. So in case of Germany, we have 22,000,000 home passed by a next generation network. This is the moment indeed to leverage this great asset and our mobile assets. And so now our focus is really switching and focusing on will not be comparable to Italy, will not be comparable to Spain. Each market has its own dynamics.
What we are doing in Germany is following our experience from the Vodafone Ziggo integration in our Dutch model. This is a convergence that is is not on price reduction and discounting, it's convergence based on bringing 2 products together and getting a benefit out of it. For example, You bring 2 products together and we will give you higher speeds. You bring 2 products together, we will upgrade tariff in one level up. So it's really about for Convergence' sake.
We want to do it in a way that is really delivering on one of our objectives, which is really to get that ARPA, household ARPA up to make sure we lower our commission intensity, to make sure that the lifetime value of the customer has increased and the churn goes down. So we want to do it in a very thoughtful way. And the approach we've followed in lens has been working out for us and that's why we're taking that approach and now rolling out in Germany and you will see that coming through the next quarters.
So when you do assign a customer up in Germany to Convergent, what kind of ARPU uplift are are you actually seeing at the moment, please?
Well, it's very straightforward. I'm taking a converged customer from take my CableMax product, which is a €40,000,000 to €50 fixed line customer and very straightforward, I'm bringing on top mobile I put to it, not only 1, maybe 23 depending on the customer household. So we really look at it as is a building from the base one more product up and taking that ARPU on. That is The phenomenon that is happening, it is not necessarily about setting convergence in one go, if you see what I mean. So it's very much a step by step, one bring 2 things together, we will discount by 30%.
That is not the approach we're taking.
Got it. Thank you.
Hi, James. If I can The first part of the answer on your IoT questions. If we look at IoT historically, those Making decisions related to an IoT purchase are quite different from those who are making a mobile purchase within the same organization. And so you Mobile, it could be within the CIO's organization or could be in HR admin, very different area of the business from IoT typically are working with the product organization or you're working with the manufacturing organization or the Chief Digital Officer. More embedded in the business of the customer, right?
What that enables though is a much deeper relationship With them, you're talking at a strategic level, you're getting involved in their product design, you're getting involved in their strategy, which you don't get through a mobile, let's Traditional mobile conversation. So the downside of this is in a way the 2 don't come together. However, IoT quite often once you have a relationship with those driving the business, then they open doors for us to sell other services. And frankly, The more interesting things that open up for us are fixed cloud and others opportunities and we're beginning to see that now. So It's not necessarily the ability to cross sell IoT and mobile, but we see IoT being a door opener through The strategic tariff the conversation has from day 1 and typically IoT relationships are 10, 15 year long One, you're it.
Once your SIEMs are in a vehicle and you're doing analytics on top of it, you're looking to add more and you don't get swapped out that easily. So that it's Great platform to do other things. Our IoT business, for example, is moving into mobile private networks. I'll give you a really good example Our mobile private network immediately takes along with it a dedicated edge computing solution in order for the solution for The applications to work effectively. So it takes our cloud business along with it.
And then if they're connecting 2 factories or 2 So, 2 warehouses together, then our fixed connectivity will come along with it. So that's the progression that we're beginning to see more and more, especially as we get into the solutions Eric can give an example of a real customer where we've seen the revolution happening.
Yes. So take the Volkswagen Group, for example, and I go back 5 years in time. Back then, Volkswagen actually said we have 3 big challenges to face. 1 is the electric vehicle. We need
to develop really good electric vehicles
and they need to Really good electric vehicles and they need to be better connected than classic vehicles because you need to know where can you actually charge the car and so on. 1 was already preparing for autonomous driving, vehicle to vehicle communication and so on. And the third one was also the connected car so that the car also becomes kind Smartphone on wheels, and they actually understood that they can't address all these challenges just And they also understood that they can't address these challenges in the classic way how they do business, which is you write a request for quotation, we need this component, that Please give us the price and we'll select. So they were looking for strategic development partners and formed the strategic development partnership With us and since then, we've been their development partner for the connectivity part of the cars. That has actually led to Any cars being connected, that has also led to us connecting a few factories and also test circles of the Volkswagen Group with Mobile Private Networks and we've also significantly through this relationship we built with them, we have managed to expand our share And that we have with them in mobile and fixed business.
So that's a good example where you use the close relationship you
And where I see more cross sell, upsell happening is when we launch as we are launching Plug and play solutions or end to end solutions into the SME space, right, there there's an opportunity to much more easily Cross sell, up sell. When it comes to large organizations, they're very specialized in the way they buy and engage.
That's fair. Thank you.
Okay. Thank you very much, James. Our next question today comes from Robert Grindle from Deutsche Bank. Please go
ahead.
Yes, hopefully you can hear me.
Yes, we have.
I've got one question on IoT And another on FinTech, please. On the IoT front, the split of CapEx was interesting with more than a third on platform evolution. Is that spend Predominantly the upfront CapEx for the E2E solutions opportunity, where you build once and deploy Where or is it something else? Will platform evolution CapEx be ongoing? And with regard FinTech in Africa, how does the etcetera.
Thank you.
Okay. Robert, I'll take the IoT question. So the we've called out, if Essentially is adding features and capability in order to make improve the user experience, do that provide more analytics and so on. And many of Those things are actually paid for features and enhancement by customers and we're working a lot to add analytics to our IoT solutions and that's actually monetizing the And we provide customers additional insights for an additional fee. So there's a correlation there between In our spend and revenue streams, there's also platform evolution in order to connect our IoT Connectivity platform, which we call GDSP onto other ecosystems such as the hyperscale ecosystems, other IoT marketplaces and so on, Where those are one time establishment costs, but then they significantly increase our channels But those will be one time per ecosystem, but our goal is to keep expanding those.
But then again, the paybacks are Clearly, there's fairly small frankly on a unit basis, but we can we have pretty good line of sight into when That will translate to customers and more traffic on our platform. So I'd say platform evolution will continue. It's not going to stop, There's very strong business cases with clear line of sight on when paybacks will occur against each of those investments.
Okay. So on the Alipay platform, effectively What it is is an IT platform. So they're an IT supplier. So we basically pay them a one stop fee and then an annual maintenance For the base platform and if we want to add more modules, we pay for that. What they give you is a container And basically you build your services on top of that.
So the IP that sits on top is ours. I think what we've done really, really well is the UX part and the UX and CX parts of how we build the platform is really, really cool. If you have the opportunity and you're on the U. S. Store All you are on the South African store for Android or iOS.
The Super App is live. It's in It's a below the line launch. It will officially launch in October, but it's really interesting Just to give you an idea, someone like Walmart has taken their South African brands and anchored it onto Also in terms of data protection, because that question always comes up. All the data resides locally And is sitting on the AWS platforms locally in South Africa. And further to that, if there is any issues around any political parts and we have to move up the platform?
We, of course, retain the IP, but we also have an agreement with them of how we could take
Our next question today comes from Ottavio Adarizio from Societe General, Otavio, please go ahead.
Hi, good afternoon. Could you hear me? Hello? Perfect. I have a quick follow-up question for Shamil and a couple of questions for Alex.
The follow-up Another question is for Shamil. It's specifically on the feedback you gave to an early question. You said at In order to tailor offering to customer, they actively collect personal information. And I was wondering how A lot of data that we didn't see before and that's pretty useful. Thanks for that.
Can We see a lot of encouraging trends in terms of the active value brands customers almost doubling over the last three Sharon coming down. However, during that period, revenues in Europe have dropped by more than 5%. So The question is, how much of the how many of the value brand customers are represented by customer We migrated from premium brands, including the customer that will be moving to new entrants such Iliad to take advantage of And how much of the pricing can that help the reduction in churn? The second question is on Page 15. Convergence is a very key priority and you articulate However, as you show in the best in the market with the highest convergence Spain, The problem with convergence is that it's not in a silos.
As you try to be Also your competitors try to do the same. So what makes confident that customers will Vodafone is not willing to use pricing, but in case your competitor We'll do it, like happened in Spain. What will be the strategy? You will be sitting there and see the customer leaving or
Yes. Let me start off with personal data part. So firstly, we We comply with GDPR. Across the Vodafone Group, we implemented, of course, compliance to GDPR. So we being held to a much higher level on personalized data then is actually Mandated in our local markets, because we think it's important and so we've essentially adopted So GDPR to put into perspective is more stringent than South Africa's Poppy rules, which is So that's the first part.
Secondly, the customer has to give permission. So when you join the super app world or For any one of our apps and so on, we do specifically request customer permission and the data Yes, used within the platform to enhance your experiences and your journeys. Very important that we do not sell And we do not we have no intention of selling data. We think, although you can make money selling We don't want to do that because we believe that firstly, it's a strategic advantage. And secondly, if you go down that route, you
Thank you, Otavio. Let me comment a bit on your multiple questions around the value brands and performance. So why are in having value brands in the 1st place. It's a recognition that the Vodafone brand, which really stands for quality, trust, premium, sits is why in many markets, we have introduced value brands, not necessarily to create the market, but to follow a specific consumer segment or follow a competitive dynamic and be present in that part of the market. Our objective is very straightforward, is to really have our fair share of dynamic when the market opens up in a lower When it comes to the lower end of the market, we really want to be competitive, but in a sense following our reference competitors in those markets.
And the reference competitors do evolve over time in those lower end of the markets, but we we extremely regularly re review our focus around who should we align to in order to maximize the value? Can we go €1 extra in the case of in Italy to be closer to our reference competitors? Do we have to adapt in the case of Spain in order to make sure we gain our fair share of gross adds? So these are the dynamics we we're playing all the time? I think one interesting example of that, for example, is during summertime in Spain, we have readjusted our positioning with and we have seen month over month since April that we have been regaining share, gross adds share in that part of the market.
So that's a bit how we think about the low end of the market, what if I look at where we put our energy as a business, we put a lot of our energy, of course, in the premium part of the market and the game for us here is to make sure we can continue and justifying our positioning. We do that in many different ways. We do that first by making sure we offer a range of differentiated services. So in connectivity, in some markets, it can be higher speeds, it can be more data, bring unlimited to market in our Vodafone brand. So different connectivity benefits is something we can do.
Very often, we bring digital services and this is the case, for example, in Spain, where we have TV as a key anchor point of of the Vodafone brand. So in the case of Spain, for example, Vodafone TV is an aggregator, it's the home of series and Film. We aggregate and distribute over 100 TV channels. We have recently launched HBO and Disney Plus and Amazon Prime actually, Amazon Prime Vodafone TV, so really the best for families in home and entertainment. And that positioning, if I then If I then even add other digital services like OneNumber, the ability to share your number on a watch and a smartphone, these are all the digital services we've been talking about in our presentations this morning that help us capture that customer and keep them really on the Vodafone brand.
And so The natural impact of that, if you wish, is that in the case of Spain, whilst maybe the lower value brands are trading at €30, In the case of Vodafone with our Hogar Immutable proposition, we are retailing at €100,000,000 and we have churn levels Half of what is happening in the lower end of the market. So our focus is on protecting that premium segment and that is what we do continuously. What we've seen is indeed as you move customers onto fixed, onto 1 SIM, 2 SIMs, TVs, etcetera, etcetera, Now let me just answer maybe one of your last question around how do we compete, are we going to be sitting on the side in our convergence strategy. So we are competitive business. Vodafone has been built out of being a challenger in every market and so we have that in our blood to compete properly in every market.
But we are also a rational player and that is very much our approach to pricing in the market, rational pricing, smart promotions, value creation. And that's very much how we're approaching the market with regards to convergence? So in the case of Spain, the market converge, we have participated in that trend. We have not diluted the value proactively, we have participated in a trend to make sure we are present. In the case of Germany, conversion is very low in the market?
We're taking the right steps and I would say the smart commercial steps in order to get the benefits of convergence, but not drive into irrationality and that is really
Thank you, Alex. Just a very quick one. And this one, if you can share data. Of your value customers, how many are generally new
This is not a specific piece of information we do share, but what I can tell you is that this is the key metric when we actually launched a second brand, is to measure the migration of Vodafone customers to value brands, and we have a very strict floor to make sure that doesn't happen?
Thank you.
Okay. Thank you very much, Itavio. Our next question today comes From Carl Murdock Smith from Berenberg. Carl, please go ahead.
There I am. Can everyone hear me? I'm afraid I've got some more follow ups on value brands, so brace yourself. In terms of building on the case study video that you provided us with today and also just building on Atavio's question. So picking up on the data that you provided on Slide 11 in terms of the fact that you have almost 6,000,000 customers On value brands, that's about 5% of your European mobile customer base.
So first, In what market is the proportion of value brand customers the highest and roughly how high is that today in terms of as a percentage of your overall base? 2nd, in the longer term, how big do you think that low end market is? So what do you expect as the rough split Between the main Vodafone brands and the secondary value brands from that roughly 5% figure today. And then third, A lot of the secondary brands are largely targeting the youth demographic. How much do you worry that by targeting that youth demographic With the secondary brands, but as those youth customers get older, simply that they won't progress up to the main brands, But instead, secondary brands and pricing will become more mass market over time.
Thanks.
Thank you very much. So you're referencing Page 11, where we have indeed announced magnitude of 6,000,000 customers on our value brand. This is primarily in our 2 brands, Lowy and Hope, if I look at the majority of these numbers? When you say those value brands represent 5% Vodafone of our EU base. What I find is really important to understand as well is, if you look at the European value in the market, second brands and value brands are actually maybe large numbers, but actually reasonably small in terms of value.
And that's why I want to really make sure you understand that for us, The Vodafone brand focus and that churn on the core Vodafone brand, building the ARPU of that brand is fundamental, the differentiation. So the digital services we've been talking about today are really important to anchor the differentiation on the Vodafone brand. These digital services are not available to value brands and are not available in our competitors' value brands. So this is very much our commercial strategy to protect and really grow the loyalty of our Vodafone base. And that we believe is really where the core value is.
In many cases, indeed, we're seeing that youth market is particularly attracted by value brands, either because we focus on it as a brand focus because there's a natural attraction. If I then again look at our consumer segments across Europe, In a typical market, let me take the UK as an example, the youth segment represents Roughly 11% or 10%, 11% of the UK macro market. The bulk of the customers and the value is definitely in families. So it already gives you an indication of once again where do we want to play and put our focus on, not neglecting but where the value is today. As time progresses, those customers will evolve, I understand that, Where their needs will evolve as well.
And our job is when their needs evolve, for example, settling down in a house, for example, wanting to have entertainment, may be Internet with security for their kids. That is the time when we need to convince them to move on to a more trusted and reliable environment with Vodafone.
That's great. Thank you.
Okay. Thank you very much, Karl. Our next question today comes from Jacob Bluestone at Credit Suisse. Jacob, please go ahead.
Hi. Hopefully, you can hear me okay. Thank you for the presentation. It's very interesting. I had a question about the pace of your digitization.
In your annual report, you give the sort of key metrics by which you measure the pace of your digital transformation To show, for example, that the digital channel sales mix has gone from 17% to 26% over the last 2 years, Customer contacts gone from 1.5 to 1.4 contacts per year. And interestingly, actually, your My Vodafone app penetration fell last year. So my question is, is your message today that the pace of that digital transformation is going to accelerate? I mean, it still seems like you're a fairly long way off some of your targets, for example, 40% plus Digital channel sales mix that I think you guided for at your open office day 2 years ago, and I think your guidance is for customer contact Per annum to go to 0.9, so it'll take you about 5 years to get there or so, maybe a little longer. So just interested in hearing, Is that sort of the message you're trying to give today that things are going to speed up from here?
Thank you.
With the message we're giving out today that we're definitely focused and on track in terms of our digital execution. So indeed, you've noted that we've closed last 26% of our sales being on digital. This number is, of course, the group average. It varies quite widely per market. And in some of the more mature markets, digitally mature markets, for example, the UK, we are above 40% already.
So we are very much pacing with the maturity of the different markets In terms of our evolution and transformation, it also varies, of course, by segment and by product types. So we're very much on track and we believe that we will continue accelerating both the sales side, but you also mentioned the service side, which I think is very important. On the service side, I briefly shared earlier on Our vision, which is 100% of our customers, will be engaging with Tobi. Tobi is a platform we are building pan European, one single platform To be able to have one brain, one intelligence to serve customers with chat and voice, I think this common capability across Europe It is quite fundamental because it really gives us that learning optimization at speed of learning. So, Tobey gets better every day Because of the volume of contacts we're having, if I give you a sense of it, in Italy, it's 6,000,000 Tobi contacts a month.
So it's really an operation at scale. So So we believe that will continue. In the same way, when we look at the frequency of contact that you're referring to, We believe that that frequency of contact is dropping very, very fast. We've differentiated between mobile and fixed and, of course, the infrastructure we own and we don't own. And what we see is that in mobile, it's dropping very fast.
In the fixed infrastructure, which we own and control, the frequency of call is dropping very fast. More challenging, to be frank, when we have wholesale agreements where we do not control the end to end value chain in terms of the fixed environment. So this is the effort we're putting and we believe that these capabilities, Tobi, our digital marketing platform, our core capabilities to drive These KPIs are strong, and so we are definitely confirming our ambition in the midterm to be at that 45% on acquisition 65% in terms of retention on digital share.
Thank you. That's helpful. Okay. Thank you very much, Jacob. We have time for one more question today From Georgios Ierodacanu from Citigroup.
Georgios, please go ahead.
Yes. Hi, good afternoon and thank you for taking my questions. I have a couple of questions from Shmuel actually. The first one is, earlier you commented about why you wouldn't expect some of the Independent apps to be able to aggregate your product. I was wondering if you can also comment a bit on what some of your other Competitors are doing in the markets you operate.
And also when you're talking about the super app, how did you decide on the range of products because there's always Too much can be a bad thing sometimes with super apps. So it will be interesting just to hear your thoughts on that. And then my second question is related to The rest of the Vodafone footprint, Ghana and Egypt. And I think you commented on Ghana in the past that it's a distant number And therefore may not fit and be interesting for Vodafone.com. But clearly, these services improve returns on capital employed For scaled players in the market.
So I was wondering from your perspective whether this changes the way you see Egypt perhaps And maybe has more potential over time as you develop the services. Thank you.
Okay. So I think on the what our competitors doing in terms of To be honest, I think we have a clear lead in terms of thinking and also scale Being the dominant platform in every country that we operate in, so we do have an advantage there. And I think What we're trying to do is to make sure that we develop products and services that always keep us abreast of competition. And I think what you do have is once competition see you doing a product and the kind of time replicate those products and offerings. I can't really think of any unique differentiators that any of the competitors have against us in this space.
In terms of the super app, I think what it does is it gives you the ability firstly, If you go through the journeys and you see our Symbilities to Pay, it also creates an online and offline experience. So basically, you walk into a store, scan a QR code. And in China, as an example, when you walk into a store, there's 2 QR codes, Want to pay and want to see what the personalized offer is for you. So now I can also personalize an offer for you not just on the Super App, That same personalized offer could be in the physical retail store. So if we know, for instance, that you like 2 for 1 offers, I can present you with a 2 for 1 offer nearly by scanning the QR code.
One of the things we're looking at is also opportunities around telco, Where we can leverage this capability. So example is I walk into a store, I've checked your profile. I know if I upgrade you to a smartphone, I'm going to get a much bigger upload. So if you scan the QR code, UP pops an offer that's personalized where we've already done the data analytics and present you with either handset finance deal or a subsidized deal because I know I'm going to make it back in a short space of time. So this is the kind of offers that you have the capability to do.
The second part is what do you range? I think what's extremely important is that it's a marketplace. So you're allowing different parties to bring their products on, but you also got to arrange it by category. And sometimes you have your own products in a particular category and then non competitive products you bring on. So example, We're never going to do car insurance.
So we would bring on a 3rd party to do car insurance, but we always take our commission On the sales of that, what we do have is we're very stringent about who we bring on, The quality of the service, the quality of the offering and all of that becomes extremely important, especially when you get into Things like micro lending and these type of things, it's very important that you set a very strong governance piece of who comes on board, what's the quality of the product and what's the quality of the service? Otherwise, you we don't want it to reflect But the product mix is also important because you also want to make sure you're covering electronics, you're covering clothing, you're covering Sneakers, you're covering. So you do need the breadth of the products. I think the next phase once you so this phase is bring everybody onto the Super App. The next phase for me is now going partner by partner and zone in the products, whether it's our blending products, Our and different offerings, the personalization pieces and so on, so that we can predict You know that when you come onto the app that the most lucrative thing for you to do is to offer you a pair of sneakers because we know you're in the market for a pair of sneakers.
So that's where we're going And that will be shortly after the launch. So working with each partner like the Walmart ones as an example And creating different offers or even pay by installments, all of those type of things. But again, the quality of the lenders, The quality of what you're doing has to come together. And that's where I think we're being quite deliberate in terms of what we're doing.
Thank you very much. I think that was our last question for today. So thank you to all our participating analysts and to those of you who are watching the webcast. If you do have any other questions, please reach out to our Investor Relationships team, and they will make sure that we cover your follow-up questions.