Good afternoon, everyone, and thank you for joining our live Q&A on digital services. I'm Alex, Vodafone Group Chief Commercial Officer, and I'm joined today by Shameel Joosub, 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 video materials we have published earlier on today, giving an overview of our digital services strategy. Let me just highlight and recap the four 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.
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. Finally, we have built the world's biggest and largest IoT connectivity capability. Once again, we do see significant growth opportunities in this side. The video we kicked off with a few minutes ago showed you some extracts of some of the case study videos we have put up on our website. I'd just like to maybe highlight a few, which I think are particularly interesting. The one around VodaPay, our super app, has just launched in Africa. A couple of use cases around real use cases from our IoT business.
The evolution of TOBi, our digital AI assistant. Finally, how does Vodafone do digital-first marketing? 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. Our next question today comes from Nick Delfas from Redburn. Nick, please go ahead. Your line should now be open if you just accept the pop-up message.
Yeah. Thanks very much indeed. Just got a couple of questions. One for Shameel first, and then one for Vinod. First one for Shameel is 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? A question for Vinod is, on the NextGenerationEU, which I understand that you're in charge of heading up the Vodafone push, when should we expect some kind of financial benefit from that fund for the group? Thanks very much.
Okay. Let me take the first question. Firstly, I think what we've done in each of the countries is made sure that we can separate it into legal entities. Some because of regulatory reasons, and others just proactively. That gives us optionality. What we aren't doing in terms of firstly, the first part for us is to grow the business a lot more significantly. 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 markets plug into it. That allows us. We're now building an international money transfer hub. We're building out our merchant play more. 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 tens of billions 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 on mobile money in general. That's one of the opportunities. 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. It also gives us optionality later on, should we decide to monetize a portion of the assets. However, we're not yet in that space. We still want to grow the asset base and so on, and we more would like the market to give us more credit for what we've built.
We're doing a lot more disclosure, actually, on the assets and providing a lot more insights into the different services, the product makeups, the growth, the transaction values. 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 that does become reflective in our share prices.
Any view on timing towards any further structural change?
No, I think more what we've done is just built 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 million customers in the next few years. We're currently sitting on 64 million active financial service customers across the continent. Get the super apps implemented everywhere, grow out the product life cycle, and so on. I think that will also become reflective into our growth rates and so on as well.
Thanks very much.
Hi, Nick. Thank you for your question. Firstly, just to give the contours, the EU recovery funds, it's EUR 750 billion that will be spent on improving national infrastructure as well as the underlying skills and competencies of countries across Europe. The most important thing to note is the EUR 750 billion needs to be spent by 2026, and 70% of these funds need to be distributed by next year.
The stage we are at right now is we're beginning to see, well, the national plans are being developed, and we are seeing a lot of progress in this area in countries like Spain and Italy, where we are seeing where the funds will be allocated, at least the first tranche of it. We've been preparing really hard over the last 6 to 9 months to gear up for these various programs. 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 Vodafone 2025 Strategy. Second is around e-health. There's a real demand on governments across Europe to make sure that the health systems are 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. We're really well-suited in that area as we'll cover later. The third one is around smart cities, where our IoT leadership positions us well with many different offerings. The fourth is a broader bucket called digital for green.
Again, which is the climate change agenda is really high on the EU priorities now, therefore, how can we use technology to lessen the impact on the planet is, again, an area of focus. The last one we're focusing on is connected education, which again, is a need that surfaced during COVID. Again, it's not just about connectivity, it's also about making sure populations get the skills that are required to remain competitive. These are the five areas that we are very focused on. The good news is we're beginning to see programs being defined and funds being allocated. Early days yet, but in these areas of our focus. 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 helping shape some of the policies on SME digitization, for example, that are then being adopted in multiple countries. Early next year, we'll start seeing the results.
Brilliant. Thanks very much indeed.
Pleasure.
Thank you very much, Nick. Our next question today comes from Maurice Patrick from Barclays. Maurice, please go ahead.
Great. Hopefully you can hear me okay. Question for Shameel, really. You made reference in the presentation, Shameel, about leveraging AI and big data in the Mobile Money Fintech business, and you showed the impressive transaction volume growth. I'd love you to elaborate a bit more on Vodafone's, Vodacom's system advantage, which you talk about on slide 42. You talk about the growth opportunity from M-PESA itself and the super app, but you also talk about the impact on culture and on loyalty metrics. Just curious to know that you managed to move that customer conversation away from just price and more towards what fintech can bring from the consumer perspective. Thanks.
Perfect. I think, a big part for us is really with the system of advantage, both in enterprise and consumer. It's really how can we embed ourselves more into the lives of the consumer. Where you're doing multiple activities from us, and where you pay, lend, shop, save, get your connectivity from both mobile and fixed. That's really the intent of what we're trying to build and achieve. 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 business, to sell more of their product, and so on. That was an important ingredient for us.
What we built as well is you have the mobile connectivity, we are now expanding into fixed, and of course the normal growth in data and data usage and so on. I think what we have done really, really well is this personalization part, which is our platform called Just For You, where we have been using machine learning and artificial intelligence to present customers with personalized offers. What we have done really well is nano-nized, as I call it, everything. You can buy 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.
That ability to be able to do this has created an advantage for us. Now, with the financial services part, we're also creating more and more transactions that the customer is engaging with us on. I think the super app gives us the ability to deepen those relationships and effectively create an even bigger 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, you're investing through the app, you're insuring through the app. It has this ability of creating marketplaces for different products. I think that becomes really exciting.
Separately, in the Alipay platform is built 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? Today on each of our customers, we know 760 things about each of our customers. That then helps us to drive what we call next best activities, and we feed that into a global recommender. To give you an example, we extend credit to people on airtime. 47% of the time now, people lend airtime from us before they buy airtime from us. This is a very lucrative product for us because it increases active days.
We're also seeing as much as a 5x uplift on ARPU on customers that are engaged on the product versus customers that are not. That's really become very compelling. Using behavioral data analytics, we're able to extend credit to customers. An example would be if you wake up between 5:00 and 7:00 in the morning, you're more creditworthy. Sorry, if you wake up between 5:00 and 6:00 in the morning, you're more creditworthy than if you wake up at 7:00. This is a proven fact. Based on that, we can give you credit. The amount of base stations you drive through in a day is a lead indicator for insurance risk.
If you think about it, the more base stations you drive through, the further you are away from home, the more likely you are to crash your car or to drop your phone. Based on those, we can now provide personalized insurance offers to you that gives it. We're doing that with our own products like device insurance, and that's why we run the highest EBITDA margin and we're the fifth largest insurer in South Africa already. Those behavioral economics helps us to be able to drive a system advantage. On top of that, we've built a behavioral loyalty program which rewards behavior. To give you an idea, we launched it in October last year. By December, we did 23 million active users. Basically we're incentivizing different activities. If you do this, we'll give you free data.
If you do that, we'll give you a coupon to use on VodaPay and so on. 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 with 5%-10% more discount is very remote.
Thank you. Thank you very much, Maurice. Our next question today comes from Andrew Lee from Goldman Sachs. Andrew, please go ahead. Your line should now be open.
Yeah. Hi, guys. Thanks for doing the event today. I had a couple of questions. Firstly, one of the things analysts and investors are grappling with at the moment is the acceleration in German net add trends. 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? How do you overcome them? The second question was just on customer net promoter scores. I'm sure that there are all sorts of anecdotal evidence that lots of people on this call get from their sales force or friends about difficulties in dealing with TOBi or the online system.
I understand that it saves money, but how do you track the quality of the customer interaction with TOBi on an absolute basis, and the quality of your customer interactions versus competitors? Thank you.
Thank you, Andrew. Let me maybe first focus on your question around Germany. In Germany, we've had, over the last three years, a continuous decline in churn and a very compelling NPS progress. As you can know, during the pandemic, we've had a surge of traffic going on in our fixed line business across the world as people were 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. The focus for us has really been on our own existing customers, keeping them happy during these really tough times.
We now need to regain our commercial momentum. 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-over-year, so really dramatic. Things have reopened since then, during the last couple of months. We're still roughly at 40% lower traffic than pre-COVID. A different dynamic in terms of how customers are shopping with us. Nevertheless, we see opportunities to indeed regain that net add commercial momentum in Germany. The retail reopening has helped us during summertime as we went to the back-to-school period. Definitely, our marketing strategies have helped us.
For those of you who are maybe in Germany, or have seen in Germany, we've been very focused on our CableMax proposition with some clever marketing to help customers take that step forward and switch, upgrade from DSL to cable. Finally, we are definitely leveraging our customer base. 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 talk to them about our fixed capabilities and vice versa, take our fixed customer base and talk to them about our mobile capabilities. This is a lever which I think is very much ahead of us. It is a lever that we control. It is an internal lever, if you wish. We have a really good focus on this for the next quarters.
Sorry, just to push, but the question was really on why haven't you been able to use digital to take out the middleman of shops, given that it's clearly a bigger challenge for you guys in your commercial momentum than certainly, than Deutsche Telekom. What are you doing to overcome that?
Yeah. We definitely push digital strongly across all of our markets, of which Germany. Our digital share keeps on increasing. Over the last couple of years, of course, COVID helping, we've seen really a significant boost to digital. I think it's important for us to differentiate what we mean by organic digital traffic. 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 may be are through comparison sites, et cetera. We are very careful to grow digital in an economical way. Economical way is about really making sure that in digital, our CPA is relevant and less than other channels. We are not going after digital for digital's sake. We want to do it in a cost economic approach.
We're very focused on that piece of the puzzle. In Germany, but it's true actually in most of European markets, the search trends for mobile and fixed broadband, organic search, if you wish, have significantly declined since January. We are monitoring that trend and trying to convert the maximum volume that comes to us on our channels. We are focused on digital. We've got teams in every market, of which Germany, to really focus on that funnel capture. Nevertheless, we're trying to do this in the most economic aspect. You've mentioned in a second question around NPS and anecdotal evidence, I guess, and you specifically mentioned TOBi. What's going on with TOBi?
The last little guide. Yeah.
No, that's absolutely fine. Listen, I think, if you've not had the chance, I just encourage you to have a look at our case study video on the evolution of TOBi. TOBi started four years ago, as an FAQ chatbot. Actually, TOBi is not yet consistently executed across all our markets. 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 phone through voice, and it's really a fluent conversation that you have with TOBi. As we move into the digital assistant, our vision is very clear. We want 100% of our contacts to go through TOBi. 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 resolution rate. 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? 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 NPS surveys to make sure that the quality of the customer feedback, post-transaction, that the customer is satisfied and happy. We now have actually evidence in our more mature markets that a conversation with TOBi, typically on chat, is actually a higher tNPS than a customer in a conversation with an agent, a live agent. That gives us the confidence that we've reached a certain level of quality on TOBi.
Customers call us for millions of different reasons. From day one, TOBi doesn't cover those million reasons. 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 TOBi is of high quality before we open up to the next. Depending on the country you're in, we are on that journey. We're moving as fast as we can away from FAQ chatbot, moving as fast as we can to really proper cognitive interaction on voice and chat. 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 more, let's say, mature markets, more advanced markets is that we're now confident enough to move from a service model to a sales model.
We're now seeing high volume of sales happening through TOBi. Classic example would be, you ask for your bill to TOBi. At that point, we would recommend a data add-on. You're coming at the end of your contract, TOBi will renew your contract. Not an expensive indirect channel. TOBi will do it. I hope that gives you a sense of how we're approaching it.
Thank you.
Okay. Thank you very much, Andrew Lee. Our next question today comes from Sam McHugh from Exane. Sam, please go ahead. [Inaudible]
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 likely to take more products from you. 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? Then secondly, on the global IoT business, we've obviously seen supply chain issues this year. There's a huge push for green energy and emission reductions across the world. In my mind, you'd think that there might be some structural acceleration in IoT demand in the next five years.
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 be conservative, and there's a lot more upside maybe in global IoT? 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 to confirm 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 multiple products. It's a two-way street, if you wish, but it's not a one-way street, as you mentioned. We can see indeed, that when we engage customers on a multiple array of services, we are managing to move customers from a neutral to promoter, for example. I'll pass on to another Erik.
Yes. Regarding the IoT market, what you see on page 65, the 16% is the consensus of industry analysts. You're absolutely right, there is the potential to do more. Let me maybe just give you one example. For the tracking of vaccines, actually, nobody thought two years ago that this would be coming, and we have delivered 500,000 SIM cards just for the tracking of vaccines at the moment in the world. Another thing which will probably happen is that, as the hardware cost for tracking solutions goes down significantly, it will be worth, for example, tracking parcels more on an individual basis than just tracking the containers. That also brings many benefits with itself. It's hard to forecast. Yeah, we believe there is potential in the numbers becoming even higher.
If I can just add to that, I think you're talking about larger structural issues. Supply chain resilience and the need for tracking exactly what's happening is what Erik spoke about. Equally, we're seeing changes in the automotive sector, for example, where Vodafone is already very strong, providing connectivity to cars. Now it's moving just beyond traditional tracking of the cars to increasing softwarization of the cars, and therefore software upgrades, is really the way that every manufacturer is going. We're seeing V2X business picking up and the number of use cases around that. I'll give an extension of that is the EV charging opportunity, which again requires machine-to-machine or IoT connectivity. That's another structural shift that is taking place in the industry, in the automotive industry, which is playing to our favor.
We spoke about healthcare, where now remote medicine, connected surgery, so on and so forth, are becoming more mainstream. These are areas that Vodafone has been working on for quite some time, not only delivering connectivity, which Erik spoke about, but also through some of our subsidiaries that focus only on IoT. We have solutions which have been developed, matured, being deployed in single countries, but now we're beginning to scale them across markets. We're really bullish about the environment around us and the structural changes across multiple industries that will need things and devices to always be connected, and for exchange of data between different islands that operated separately before.
You mentioned V2X there. 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? Obviously, there's a huge opportunity if driverless cars, I think, have maybe been pushed back a few years. V2V communication could still be a pretty meaningful thing.
Listen, I think complete autonomous cars is. Technically it's possible, many other things have to fall into place, including regulations, safety considerations, and so on. That'll eventually happen, if you talk to the major automotive OEM providers, they have more phased rollout, which we're experiencing in our personal vehicles as well, with certain features being autonomous, there'll be a fleet of platooning, eventually, at some point, there'll be truly autonomous cars. The need for V2V communications is already growing, in fact, we have a few trials underway right now in the V2V space, which we'll potentially even build as a platform and monetize in the future. Maybe Erik is quite the expert on this. He can add a little bit.
Yeah. Look, also, V2X or the communication between cars is kind of an extension of the communication capabilities that the car has today. Yeah. We have a lot of cars connected already. Initially, it was for emergency call purpose, for breakdown calls. Now, the cars are very often already connected to a so-called car cloud, that they send messages up and distribute it to other cars. V2X is a natural extension of this, which will come. In combination with the sensors, which actually also make autonomous driving possible, we believe that this will significantly drive the data volume over the next years, which cars are consuming. We have actually seen that the average data consumption of a car has actually multiplied significantly in the last three years alone. Five years ago, there were no software updates for the car over the air.
There are a lot of car manufacturers already doing this. Multimedia applications are running in the car over the connection in the car for passengers, and so on. All these things are booming.
Interesting. Thank you, guys.
The issue with the deployment pace.
Thank you very much, Sam. Our next question today comes from Stan Noel from Bernstein. Stan, I'm unmuting you now. Please go ahead.
Hi, guys. Can you hear me?
Yes, loud and clear.
Okay, great. Hi, guys. I've got a question for Shameel. Thinking about the, let's say, the potential or the opportunity in terms of financial services penetration in your markets. I'm referring to the chart on page 48. Clearly, in Kenya, Safaricom has reached a very high level. 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 reaching this level in other markets is realistic or Safaricom is a bit of an outlier on this?
Yeah, I think where we are in all our markets is that effectively we have market leadership in every market that we operate in, as Vodacom and, of course, Vodafone in Egypt as well. I think it puts us into a very, very strong position to be able to grow the financial service penetration. If you take a market like Mozambique, we have a 65%-plus market share on mobile money. If you go into Lesotho, we've got an 80% market share. If you go to DRC, we've got a greater than 50% market share. Every market, the financial services part is taking off. I think the big question is the maturity of the products. That's why we've created M-PESA Africa, so that we can build once and replicate.
What we were doing before is we had a common platform, but we were building a lot of products in each market. 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. Also hubs for relationships. International money transfer hub. Lending, where we create one lending platform, different relationships, creating the products once. I think that's creating a lot more synergies going forward. Now we're trying to get all the markets to the same level as Kenya in terms of products. Person-to-person payments and money transfers, I'd say, is already there. It's now growing the ecosystem of products, but at the same time, also growing the ecosystem of products in Safaricom. Example, we don't do anything in investments.
We see that as an opportunity to create investment products like the other super apps are doing around the world, then that creates new opportunities. 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 want it if you have $100. If we can get a lot of these nano investments in, and even if 20% of our customers adopt these products, it's material in terms of growth rates.
Okay. Thank you.
Thank you very much, Stan. Our next question, we have a question from the online audience. The question is: Africa has seen record M&A and investment in OTT Fintech players in 2021. Can these players use this capital to disrupt the M-PESA ecosystems created by heavily discounting fees on withdrawals, payments, and P2P transfers?
Shameel, I don't know if your connection is good. You might have not heard this question if the connection wasn't good enough. Do you mind repeating it, please?
Yes, absolutely. I can repeat the question. Can you hear me okay?
Again now.
Okay. The question from the online audience is: Africa has seen record M&A and investment in OTT Fintech players in 2021. Can these players use this capital to disrupt the M-PESA ecosystems created by heavily discounting fees on withdrawals, payments, and P2P transfers?
My inclination is no, they can't. 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 of strength. Firstly, across our footprint, we have 450,000 outlets. In terms of being able to receive M-PESA and to make payments. That is very difficult to replicate. When you're the telco, it's easier. How we created success as well, is we do use telco as an anchor onto some of it by giving offers, but also to incentivize behaviors. Do mobile payments through us, and we give you some free data. We do that until we've created a behavioral change.
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 and loans, ordering. All of these improve the ecosystem of products. There's attractiveness for the merchant. From a customer perspective, they can pay with M-PESA anywhere, but they can also do all their different services through M-PESA. If you bring that into an e-com world, and on top of the M-PESA platform, you put the Alipay capabilities, and you're building these marketplaces. That creates a very strong path, which is very difficult for new players to come in and replicate. That's why we consider it a system of advantage.
If I were some of these Fintech players, I wouldn't be looking to challenge us. I'd be looking to partner with us. I would be coming onto our marketplaces and bringing my products into it. Example would be, if I'm doing student loans, I would do it through the platform as opposed to trying to disrupt the platform. I think that's where the opportunity lies. We're also talking to a lot of the OTTs about partnering. You'll be surprised, recently, one of the big financial institutions came to us and gave us a lot of money just to partner with us. What we suddenly realized is actually, we have a lot of leverage given the scale.
When you have 64 million customers and you're moving $25 billion a month through your platforms, there's a lot of people who want to talk to you, and you can almost charge them for partnering and create some lucrative mutual partnerships.
Okay, thank you. Our next question today comes from James Ratzer from New Street Research. James, please go ahead.
Great. Can you hear me okay?
Yep.
Great. Thank you. Yes. Thank you very much for all the materials you've produced today. I have two questions, please. The first one was just regarding Germany. On slide 15, you showed some of the convergence data, which showed Germany's at the lower end of your Big 4 markets, in particular on broadband. I was interested in terms of why you think convergence in Germany remains lower than the other Big 4 markets, and specifically, what initiatives you're doing in Germany at the moment to try to increase that. The second question I had was regarding IoT. You make a very compelling case about the success you're having in IoT, I was really interested in then the ability to cross-sell your success from IoT into other business products. I think IoT today represents around 9% of your business revenues.
Are you seeing examples where you bring on a new customer with IoT, you're able to upsell them to, say, mobile or fixed connectivity that can tend to be bigger contracts? Thank you.
Thank you, James. In Germany, as you know, we've acquired two large cable assets in the last couple of years, and our focus has been to deliver on our M&A case. Our M&A case was very much about consolidating these businesses and delivering the synergies, both OpEx and CapEx for these activities. That has been our focus over the last two years, the integration of those businesses. As we have announced in our latest calls, we're eight months ahead of our plan in terms of delivering those synergies. We feel proud that we've achieved that and really got the people together, the processes together, the technology platforms together for our customers. Of course, one single brand. I think now we have fantastic assets. In the case of Germany, we have 22 million home passed by a next-generation network.
This is the moment indeed, to leverage this great asset and our mobile assets. Now our focus is really switching and focusing on this opportunity to converge the base. We still expect that the convergence of the base will not be comparable to the U.K., 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 VodafoneZiggo integration and our Dutch model. This is a convergence that is based not on price reduction and discounting. It's convergence based on bringing two products together and getting a benefit out of it. For example, you bring two products together, and we will give you higher speeds. You bring two products together, we will upgrade tariff in one level up. It's really about ARPU creation, ARPU accretive activities.
I think that's very important because our target is not now to converge for convergence's sake. We want to do it in a way that is really delivering on one of our objectives, which is really to get that household ARPU up to make sure we lower our commission intensity, to make sure that the lifetime value of the customer is increased, and the churn goes down. We want to do it in a very thoughtful way, and the approach we've followed in the Netherlands 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.
When you do sign a customer up in Germany to convergence, what kind of ARPU uplift are you actually seeing at the moment, please?
It's very straightforward. I'm taking a converged customer from Say I'm taking my CableMax product, which is a EUR 40-50 fixed line customer, and very straightforward, I'm bringing on top a mobile ARPU to it. Not only one, maybe two and three, depending on the customer household. We really look at it as a building from the base, one more product, and taking that ARPU on. That is really the phenomenon that is happening. It is not necessarily about selling convergence in one go. Do you see what I mean? It's very much a step-by-step, one more product approach. Purposefully, I mention this because we are not going down the route of saying, "If you bring two things together, we will discount by 30%." That is not the approach we're taking.
Got it. Thank you.
Hi, James. I can take the first part of the answer on your IoT questions. 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. You'd have mobile, could be within the CIO's organization or could be in HR or admin, very different area of the business from IoT. IoT typically you're working with a 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 traditional mobile conversation.
The downside of this is, in a way, the two 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. Frankly, what's the more interesting things that open up for us are fixed cloud and others opportunities. We're beginning to see that now, right? It's not necessarily the ability to cross-sell IoT and mobile, but we see IoT being a door opener through the strategic tilt the conversation has from day one. Typically, IoT relationships are 10, 15-year-long relationships. Once your SIMs are in a vehicle and you're doing analytics on top of it, you're looking to add more in, you don't get swapped out that easily. That it's a 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 of pull-through. A mobile private network immediately takes along with it a dedicated edge computing solution in order for the applications to work effectively. It takes our cloud business along with it. If they're connecting two factories or two ports or two warehouses together, then our fixed connectivity will come along with it. That's the progression that we're beginning to see more and more, especially as we get into the solutions area. Erik can give an example of a real customer where we've seen that evolution happening.
Yeah. Take the Volkswagen Group, for example, and go back five years in time. Back then, Volkswagen actually said, "We have three big challenges to face. One is the electric vehicle. We need to develop 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." Second one was already preparing for autonomous driving, vehicle-to-vehicle communication, and so on. The third one was also the connected car, so that the car also becomes kind of a smartphone on wheels. They actually understood that they can't address all these challenges just themselves, 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 component. Please give us the price, and we'll select.
They were looking for strategic development partners and formed this strategic development partnership with us. Since then, we've been their development partner for the connectivity part of the cars. That has actually led to many 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. We've also significantly, through this relationship we built with them, we have managed to expand our share that we have with them in mobile and fixed business. That's a good example where you use the close relationship you build with IoT in order to sell all kinds of other products.
Where I see more cross-sell, up-sell happening is as we're launching our plug-and-play solutions or end-to-end solutions into the SME space. 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. Robert, please go ahead.
Yeah. Hopefully, you can hear me.
Yes, we can.
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 everywhere, or is it something else? Will platform evolution CapEx be ongoing? With regard to fintech in Africa, how does the relationship with Ant Group Alipay work for the super app? Is there a license payment, revenue share arrangement, et cetera? Thank you.
Robert, I'll take the IoT question. We've called out, if you see on slide 69, end-to-end solutions as a separate item of 17% of the CapEx that we spent. Platform evolution essentially is adding features and capability in order to improve the user experience, do that, provide more analytics, and so on. Many of those things are actually paid-for features and enhancement by customers. We're working a lot to add analytics to our IoT solutions, and that's actually monetizing the data. We provide customers additional insights for an additional fee. There's a correlation there between 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 hyperscaler ecosystems, other IoT marketplaces, and so on, where those are one-time establishment costs, but then they significantly increase our channels to market. Those will be one time per ecosystem, but our goal is to keep expanding those. There again, the paybacks are fairly clear. They're fairly small, frankly, on a unit basis, but we have pretty good line of sight into when that will translate to customers and more traffic on our platform. I'd say platform evolution will continue. It's not going to stop, but there's very strong business cases with clear line of sight on when paybacks will occur against each of those investments. Shameel.
Okay. On the Alipay platform, effectively what it is is an IT platform. They're an IT supplier, we basically pay them a once-off fee and then an annual maintenance fee for the base platform. 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. 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've built the platform is really, really cool. If you have the opportunity and you're on the U.S. store or you're on the South African store for Android or iOS, the super app is live. It's a below the line launch. It will officially launch in October, but it's really interesting to play with.
Just to give you an idea, someone like Walmart has taken their South African brands and anchored it onto the platform itself. 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. Further to that, if there is any issues around any political parts and we have to move off the platform, we of course retain the IP, but we also have an agreement with them of how we could take the source code.
Thank you.
Okay. Thank you very much, Robert. Our next question today comes from Ottavio Adorisio from Société Générale. Ottavio, please go ahead.
Hi. Good afternoon. Could you hear me? Hello?
Yes, lovely.
Can you hear me? Perfect. I have a quick follow-up question for Shameel and a couple questions for Alex. The follow-up question is for Shameel. It's specifically on the feedback you gave to an early question. You said at Vodacom in order to tailor offering to customer, they actively collect personal information. I was wondering how the collection and usage of this personal data square with privacy law in the different countries where you operate. To the couple question for Alex, I'm referring to slide 11 and slide 15. On slide 11, you provide a lot of data that we didn't see before. They're pretty useful. Thank you for that. I can see a lot of encouraging trends in terms of the active value brands customers almost doubling over the last 3 years. Churn coming down.
However, during that period, revenues in Europe have dropped by more than 5%. The question is, how many of the value brand customers are represented by customers that we migrated from premium brands, including the customer that have been moving to new entrants such as Iliad to take advantage of your win-back offers? How much of the pricing discount have helped the reduction in churn? The second question is on page 15. Convergence is a very key priority, and you articulate the benefits of it. However, as you show in the market with the highest convergence, Spain, Vodafone itself recorded one of the weakest trends. The problem with convergence is that it's not in a silos. As you're trying to be convergent, also your competitors try to do the same.
What makes confident that customers will bring their mobile or broadband contract to you rather than the other way around? I also appreciate that Vodafone is not willing to use pricing. In case your competitor will do it, like happened in Spain, what will be the strategy? You will be sitting there and see the customer leaving, or you will use pricing to retain customer and possibly to foster convergence. Thanks.
Okay. Let me start off with.
Yeah.
Yeah. Let me start off with personal data part. Firstly, we comply with GDPR. Across the Vodafone Group, we implemented, of course, compliance to GDPR, so we're being held to a much higher level on personalized data than is actually mandated in our local markets, because we think it's important, and so we've essentially adopted GDPR across the markets. GDPR, to put into perspective, is more stringent than South Africa's POPI Act, which is the protection of personal information. That's the first part. Secondly, the customer has to give permission. When you join the super app world or any one of our apps and so on, we do specifically request customer permission, and the data gets used within the platform to enhance your experiences and your journeys. Very important that we do not sell data, and we have no intention of selling data.
We think although you can make money selling data, 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'll very quickly lose the customer trust.
Thank you, Ottavio. Let me comment a bit on your multiple questions around the value brands and performance. Why are we having value brands in the first place? It's a recognition that the Vodafone brand, which really stands for quality, trust, premium, sits in our different markets at different price points. Can the brand stretch across the whole range? Not always. In some cases it does, but not always. That 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 value segment.
We have done this in the case of Italy with ho., in the case of Spain with Lowi, and here and there with other second brands across Europe. When it comes to the lower end of the market, we really want to be competitive, but in a sense of following our reference competitors in those markets. The reference competitors do evolve over time in those lower end of the markets. We extremely regularly re-review our focus around who should we align to in order to maximize the value. Can we go EUR 1 extra in case of ho. 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 growth side?
These are the dynamics we are playing all the time. I think one interesting example of that, for example, is during summertime in Spain, we have readjusted our positioning with regards to our reference competitors, and we have seen month-over-month since April, that we have been regaining share and gross add share in that part of the market. That's a bit how we think about the low end of the market, being present when necessary and competing properly. If you 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. The gain for us here is to make sure we can continue differentiating 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.
In connectivity, in some markets, it can be higher speeds, it can be more data, bring unlimited to market in our Vodafone brand. 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 the Vodafone brand. 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+ and Amazon Prime. Actually, Amazon Prime Video on Vodafone TV. Really the best for families in home and entertainment. That positioning, 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 that we've been talking about in our presentations this morning that help us capture that customer and keep them really on the Vodafone brand. The natural impact of that, if you wish, is that in the case of Spain, whilst maybe the lower value brands are trading at EUR 30, in the case of Vodafone, with our Hogar Ilimitable proposition, we are retailing at EUR 100 and we have churn levels that are half of what is happening in the lower end of the market. Our focus 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, et cetera, the more they engage with us, the more loyal they become.
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? We are a competitive business. Vodafone has been built out of being a challenger in every market. We have that in our blood to compete properly in every market. We are also a rational player, and that is very much our approach to pricing in the market. Rational pricing, smart promotions, value creation. That's very much how we're approaching the market with regards to convergence. In the case of Spain, the markets 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, convergence is very low in the market.
We are 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. That is really our approach here.
Thank you, Alex. Just a very quick one. This one, if you can share data. Of your value customers, how many are generally new customers and how many were existing Vodafone customer in the premium brand?
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 launch a second brand, is to measure the migration of Vodafone customers to value brands. We have a very strict floor to make sure that doesn't happen.
Thank you.
Okay. Thank you very much, Ottavio. Our next question today comes from Carl Murdock-Smith, from Berenberg. Carl, please go ahead.
There I am. Can everyone hear me?
Yes, we can.
That's brilliant.
Yes, loud and clear.
I'm afraid I've got some more follow-ups on value brands, so brace yourselves. In terms of building on the case study video that you provided us with today, and also just building on Ottavio's question. Picking up on the data that you provided on Slide 11 in terms of the fact that you have almost 6 million customers on value brands, that's about 5% of your European mobile customer base. 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? Second, in the longer term, how big do you think that low-end market is? What do you expect is the rough split between the main Vodafone brands and the secondary value brands from that roughly 5% figure today?
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, that 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. You're referencing page 11, where we have indeed announced an order of magnitude of 6 million customers on our value brand. In our two brands, Lowi and ho., as a majority of these numbers. When you say those value brands represent 5% 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. 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 arc of that brand is fundamental, the differentiation. 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. This is very much our commercial strategy to protect and really grow the loyalty of our Vodafone base. 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 or because there's a natural attraction. If I then again look at our consumer segments across Europe, in a typical market, I'm going to take the U.K. as an example. The youth segment represents roughly 11%, or 10%-11% of the U.K. micro market. The bulk of the customers and the value is definitely in families. It already gives you an indication of, once again, where do we want to play and put our focus on.
Not neglecting the youth segment, 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, maybe 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, Carl. Our next question today comes from Jakob Bluestone at Credit Suisse. Jakob, 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 two years. Customer contacts gone from 1.5 to 1.4 contacts per year. Interestingly, actually, your My Vodafone app penetration fell last year. My question is your message today that the pace of that digital transformation is going to accelerate?
I mean, it still seems that 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 two years ago. I think your guidance is for customer contact per annum to go to 0.9. It takes you about five years to get there or so, maybe a little longer. 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.
The message we're giving out today is that we're definitely focused and on track in terms of our digital execution. Indeed, you've noted that we've closed last year with 26% of our sales being on digital. This number is, of course, the group average. It varies quite widely per market. In some of the more mature markets, digitally mature markets, for example, the U.K., we are above 40% already. 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. 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 is quite fundamental because it really gives us that learning optimization, that speed of learning. TOBi 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 million TOBi contacts a month. It's really an operation at scale. 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. 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. This is the effort we're putting, and we believe that these capabilities, TOBi, our digital marketing platform, are core capabilities to drive these KPIs strong. We are definitely confirming our ambition in the mid-term to be at that 45% on acquisition and 65% in terms of retention on digital share.
Thank you. That's helpful.
Okay. Thank you very much, Jakob. We have time for one more question today from Georgios Ierodiaconou from Citigroup. Georgios, please go ahead.
Yes. Hi, good afternoon, and thank you for taking my questions. I have a couple of questions for Shameel, actually. The first one is, earlier you commented about why you wouldn't expect some of the independent apps to be able to disaggregate 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. Also, when you are 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. It would be interesting just to hear your thoughts on that. Then my second question is related to the rest of the Vodafone footprint, Ghana and Egypt.
I think you commented on Ghana in the past that it's a distant number two and therefore may not fit and be interesting for Vodacom. Clearly, these services improve returns on capital employed for scaled players in the market. 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 these services. Thank you.
Okay. I think on the, what are competitors doing in terms of product offerings? To be honest, I think we have a clear lead in terms of thinking. Also scale, being the dominant platform in every country that we operate in. We do have an advantage there. I think what we're trying to do or is to make sure that we develop products and services that always keep us abreast of competition. I think what you do have is once competition see you doing a product, then they kind of try and 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 how simple it is to pay, it also creates an online and offline experience. Basically, you walk into a store, scan a QR code, and in China as an example, when you walk into a store, there's two QR codes. One to pay and one to see what their personalized offer is for you. Now I can also personalize an offer for you not just on the super app, but that same personalized offer could be in a physical retail store. If we know, for instance, that you like two for one offers, I can present you with a two for one offer merely by scanning the QR code.
One of the things we're looking at is also opportunities around telco, right? Where we can leverage this capability. Example is, I walk into a store, I've checked your profile, I know if I upgrade you to a smartphone, I'm gonna get a much bigger uplift. If you scan the QR code, up pops an offer that's personalized, where we've already done the data analytics for you and presents you with either a handset finance deal or a subsidized deal, because I know I'm gonna make it back in a short space of time. 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. You're allowing different parties to bring their products on, but you also got to range it by category.
Sometimes you have your own products in a particular category and then non-competitive products you bring on. Example, we're never gonna do car insurance. We would bring on a third 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, we don't want it to reflect badly on us.
The product mix is also important because you also wanna make sure you're covering electronics, you're covering clothing, you're covering sneakers. You do need the breadth of the products. I think the next phase. 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 lending products, and different offerings, the personalization pieces and so on, so that we can predict 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. That's where we're going. That will be shortly after the launch.
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. Again, the quality of the lenders, the quality of what you're doing, has to come together. That's where I think we're being quite deliberate in terms of what we're doing.
Excellent. Thank you very much. I think that was our last question for today. 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. It was a pleasure talking to you, and I hope we will meet again soon.