Good afternoon, everyone, and welcome to the VodafoneThree Investor Briefing. It's great to have so many of you here with us today in London, and a very warm welcome to everyone joining us online, too. I'm Kelly Barlow, Strategy and Portfolio Director at VodafoneThree, and I have the pleasure of being your host for this afternoon's briefing. The VodafoneThree leadership team and I are excited to be here to share with you our strategy, our ambitions for growth, and our plans to build the U.K.'s best network. Over the course of the afternoon, you'll hear about the fast start we've made in our first year, our ambitious network rollout plans to connect every community in every corner of the U.K., the exciting growth opportunities we see across both consumer and business, and how all of this ties into delivering significant long-term value creation.
For those of you here in person, we have a number of demo areas that bring the story to life. Colleagues from across the business will show you examples of our work in action, from our recently launched propositions to the ways we're looking to enhance our customers' journeys. So make sure you use your time in the break, that's at about 3:30 P.M., to speak to them. If you're joining us online, don't worry, we haven't forgotten about you. Alongside the main webcast, you'll have access to additional content through the portal, including case studies and video explainers. Throughout the afternoon, we'll have a number of mini Q&A sessions with our network, consumer, and business directors. During those mini Q&A sessions, we'll only be able to take questions from the room.
But at the end of the presentations, I'll be joined by the leadership team for a more fulsome Q&A session. If you're joining online, you'll be able to submit questions via Slido throughout the event, which I will read out for the team during the main Q&A. We'd ask that you limit yourself to one question at a time to ensure everyone's got the opportunity to participate. If you haven't already done so, there's a downloadable version of today's slide pack accessible on the event site or the Vodafone Investor Relations site. For those in the room, the current slide number will be displayed on the side screens throughout the afternoon, making it easy to follow along in your pack. So before we begin, I'd just like to cover a few quick housekeeping notes to help everyone feel comfortable.
Firstly, please take a quick second to silence your mobile phones. The toilets are located upstairs on the mezzanine level and are clearly signposted. Finally, in the unlikely event of an emergency, the fire exits are marked clearly at the front and back of the room. Without further ado, let's invite our first speaker to the stage. To tell us more about why VodafoneThree is such an exciting part of the group growth story, please welcome CEO of European Markets, Ahmed Essam.
Good afternoon, everyone. Great to be here. Before I start, I wanted to pass on Margherita's apologies for not being able to join us today. She had fully intended to be here, but was asked to join the U.K. Prime Minister and German Chancellor in Germany as part of the U.K.-Germany Technology Corridor Initiative. She knows that you are in excellent hands, with the VodafoneThree team this afternoon, and sends her best wishes for a productive and insightful session. Today is an exciting day for Vodafone. We are setting out for the first time in detail our strategy and growth ambitions for the U.K. We are issuing new bold targets, and we are outlining the clear execution plan we have in place.
We created VodafoneThree because we saw a clear opportunity to transform the U.K. market, to create the scale to invest, to deliver a step change in network quality and customer experience, and to build a stronger business capable of delivering good returns and sustainable long-term value. We have made a strong start. We are seeing tangible benefits for customers. The integration is progressing at pace, and our commercial momentum has accelerated. As a result, we now have even greater confidence in the opportunity ahead. That is why we chose to take full ownership earlier this year, and why VodafoneThree is set to become an increasingly important contributor to Vodafone's growth ambitions.
Before Max and his team take you through the U.K. plans in more detail, let me recap from a group perspective, why change was needed, why the merger was the right strategic course, why we are confident in VodafoneThree today, and why we chose to move to full ownership. Before turning specifically to the U.K., I want to briefly step back and place VodafoneThree in the context of Vodafone's wider transformation. At our FY 2026 results, we said Vodafone is entering a new chapter. A business that is simpler, stronger, and growing. Simpler because we have reshaped our portfolio and focused on markets and segments where we can win. Stronger because we have reset the fundamentals, customer experience, productivity, and capital discipline through our customer simplicity and growth strategy. Now Vodafone is growing.
We have attractive opportunities across Europe, Africa, and B2B, underpinning our ambition to deliver double-digit organic free cash flow growth in the medium term. VodafoneThree is an important part of that growth story. In fact, it is one of the clearest examples of our transformation strategy in action. Because when we reviewed the portfolio back in 2023, the U.K. stood out as one of the markets where structural change was needed. To understand why we are so confident in VodafoneThree today, it is worth reminding ourselves of the challenges we faced. As Margherita has consistently said since becoming CEO, Vodafone needed to change. We needed to change both where we operated and how we operated. Our strategy was based on a simple principle.
Vodafone should focus on good markets with sustainable structures, where we have scale, strong positions, and the ability to earn return above our local cost of capital. There were four markets where we believe structural action was required. The U.K. has always been an important market for Vodafone. It is our home market. It is one of Europe's largest telecoms markets, and it is a market where Vodafone has strong customer and brand positions. But the market structure was not sustainable. Vodafone U.K. and Three U.K. Were both subscale. Returns were well below the cost of capital, and that limited the ability of both businesses to invest and compete. The impact was clear. Limited investment affected our customer experience, and the market was not delivering its full potential for consumers, for businesses, and for the country. Organic action alone could not address this structural challenge.
We needed greater scale, and we needed a market structure that supports investment, competition, and attractive returns. The merger was designed to solve that challenge. By bringing Vodafone and Three together, we created a scaled operator with the assets and resources to invest for the long term. We made a clear commitment to invest GBP 11 billion over 10 years to build the U.K.'s best and most advanced 5G Standalone network. This will create better outcomes for customers, for the country, and for competition. For customers, our merger means a significantly better network experience through greater coverage, reliability, and performance. For the country, it means one of Europe's leading 5G platforms supporting productivity, innovation, and economic growth. For competition, it means a scaled operator capable of challenging the two established converged players and strengthening competition.
Our merger also marks an important milestone case in the shift towards a more investment-led approach to market structure, an approach that recognizes the importance of scale in building a next-generation network that customers and businesses deserve. The strategic rationale was clear when we announced the transaction. As you will hear today, the evidence from our execution strongly reinforces that rationale. VodafoneThree now brings together four powerful drivers for value creation. It starts with network leadership. VodafoneThree has more network assets than any other operator in the U.K. A fully funded GBP 11 billion investment program and a roadmap to building the U.K.'s best 5G Standalone network. A strong foundation for differentiation, and that creates a meaningful commercial advantage. VodafoneThree has the U.K.'s largest mobile customer base. It has a clear multi-brand strategy, an increasingly differentiated proposition portfolio, and leadership positions in customer experience.
Together, these trends enable us to serve a broad range of customers more effectively. But we are not limited to mobile. VodafoneThree is the fastest-growing broadband provider. It has a significant opportunity in convergence. Sorry. It has a significant opportunity in convergence, including Vodafone TV. More broadly, in consumer, we can monetize network quality through propositions such as SuperMobile. In business, it is well-placed to respond to growing demand for secure, resilient, and intelligent connectivity. A larger, more efficient business, significant savings opportunities, and now, as fully owned business, the ability to leverage Vodafone Group's global scale, capabilities, and expertise even more effectively. Finally, all of this translates into improved returns. Together, these create a clear path to stronger cash generation. This is why we see VodafoneThree as much more than an integration of two businesses.
It is one of the most exciting growth and value creation opportunities in the Vodafone portfolio. That brings me to our decision to take full ownership. Full ownership was always envisaged as part of the original transaction framework, with a clear pathway towards 100% ownership over time. What changed was the opportunity and the confidence to move earlier. Over the past year, the business has made a very fast start. Integration has progressed rapidly and ahead of schedule. Management has delivered against all its commitments. We are already seeing tangible benefits for customers translating into good commercial momentum. That gave us much greater visibility and confidence around the long-term value creation opportunity. Against this backdrop, two specific factors allowed us to accelerate our move to full ownership. The first was valuation.
We were able to acquire full control at an attractive value compared to the GBP 16.5 billion embedded within the original put and call framework. Second was balance sheet capacity. When we first agreed the merger, we were still working hard to reshape the Vodafone's portfolio, which we did successfully by the sale of our operations in Italy and Spain. The acquisition added just under half a turn of our group leverage while keeping us comfortably within our target range. Of course, there is an additional benefit that we are particularly pleased about. Full ownership simplifies governance. It gives the business full and easy access to Vodafone Group's scale and capabilities. It allows Vodafone shareholders to capture all the future cash flow growth and synergies. When we announced the merger, we committed to delivering GBP 700 million of annual cost and CapEx synergies by FY 2023.
Today, as you will have all read this morning, we are increasing that ambition to GBP 1 billion by fiscal year 2032. That reflects the progress already made, the clear line of sight we now have on execution, and the additional opportunities created by full ownership. Darren will take you through those in more detail later in the day. Overall, we believe this was the right opportunity at the right moment, at an attractive valuation. Let me conclude by coming back to Vodafone Group. We have set a clear ambition to deliver double-digit adjusted free cash flow growth over the medium term, and VodafoneThree will be an important contributor to that ambition. The business now combines a scaled position in one of Europe's largest telecoms markets, a leadership position in customer experience, a network commitment that will reach 99.96% 5G Standalone population coverage, the highest of any other operator.
It has significant opportunities to grow and will deliver an upgraded target of GBP 1 billion of annual cost saving by fiscal year 2032. Today is about sharing with you how the team will build the U.K.'s best network, how we will turn network quality into differentiated customer propositions, how we will grow in broadband convergence and business, how we will deliver the integration and synergy plan, and above all, how this will deliver a better experience and greater value for customers across the U.K., ultimately translating into earnings, cash flow, returns, and long-term value for shareholders. I am very pleased with the start VodafoneThree has made, and I am confident in the opportunity ahead.
And today especially is a very important day for me because it is a moment of pride for myself, for the team, who have taken this from an idea to a transaction, to CMA, to an approval, to an integration, to the moment we are in today. I want to thank you for sharing this moment with us. With that, let me hand over to Max and the VodafoneThree team, and thank you very much.
Thanks, Ahmed. Afternoon, everyone. Thanks again for joining us. It is great to see you all. 16 months ago now, we launched VodafoneThree and welcomed everyone to a new era of connectivity for the U.K. VodafoneThree, a new scaled operator, one which is to set a new benchmark for mobile connectivity. To deliver the U.K.'s best network, a world-class 5G Standalone network. A network to be proud of, and one that the country needs to realize its digital ambitions. Ahmed mentioned the fast start we have made, and whilst we are very proud of our progress to date, the team and I are super clear. Now is not the time for victory laps. We have a lot to do. Today, we are going to demonstrate the clarity of our plan and the confidence we have in delivering it.
Throughout the afternoon, you are going to hear from a committed leadership team. Andrea will outline how we are building the U.K.'s best network, the assets we have, the plans, and the progress to date. Rob will then cover how we are accelerating our leadership position in consumer, how we will monetize network quality and drive converged growth. Nick will explain similar themes in business, monetizing network quality for private sector and public sector, driving fixed and digital service growth. Finally, Darren will talk about the delivery of synergies, breaking down for you our new upgraded financial target. We are going to have time for Q&A in the plenary throughout the afternoon. Please do take the opportunity to visit the demo areas as they will help bring everything we talk about this afternoon to life. But it all starts with this, our mission, purpose, our goals.
A simple strategy slide, one which I use internally and externally every day and everyone in VodafoneThree is working towards. Our mission and purpose is simple, to connect every community in every corner of the U.K. by building the U.K.'s best network. We have a network commitment, yes, and we are leveraging this as much as we can internally. It is truly motivating for all of our teams to be working on such a clear mission and purpose that will make such a difference to all four nations of the United Kingdom. As a proud Brit, it is personally so motivating to be working on something that is so important for both this generation and the next. Our goals are simple too. We aim to be the best. Number one network. 99.96% 5G Standalone population coverage.
No one else has such a plan, and it is front-loaded in its delivery, 90% by the end of year three, 99% by the end of year five, 99.96% by year eight. That 0.96% doesn't sound like a lot, but it is very important. It is actually two and a half times the size of Wales in geographic coverage. Number 1 for customers. This means delivering the best customer experience, whether that be lowest churn, best NPS, fewest Ofcom complaints, it is all of the above. We will not take our eye off the market as many mergers do. We aim to capitalize on opportunities such as fixed growth, protect our scale in mobile through our multi-brand strategy, whilst at the same time monetizing network quality. Arguably the hardest goal and the most important, number one for people. Our people deliver the plans, the initiatives. Our people deliver the synergies.
We are integrating quickly and effectively, building a better place to work, leveraging the best of both legacy businesses to create a better, leaner organization that attracts and nurtures the best talent. How do we do it? With pace, a customer-first mindset, and acting as one team. Arguably, the most important words you would hear today, apart from the upgraded GBP 1 billion target. We are going really fast, delivering benefits to customers as quickly as possible, delivering near-term synergies, and crucially, delivering the operational milestones to unlock future synergies, especially in networks and IT. Pace is only part of the story. It is also about operating with a customer-first mindset. Every change we make to unlock cost efficiency is also an opportunity to improve customer experience. We are no longer two businesses. We think, act, celebrate, learn with humility as one team.
Finally, the critical output of all of that translates into GBP 1 billion of sustainable incremental annual value. That number is evidence that we have greater confidence. We are building a strong track record of milestone delivery. Before we talk about the progress to date, let's quickly discuss the landscape we are in, starting with mobile. For many years, the U.K. mobile market has been falling behind international peers on network quality, and at the same time, prices have fallen with increased competition. Yet quality now is becoming even more important than ever to customers. Our research shows 50% of customers will consider switching if network quality were better, and 43% of people believe where they live leaves them behind when it comes to digital connectivity. Customers now expect fast, reliable, secure connectivity wherever they are. For VodafoneThree, the opportunity is clear.
We have more assets than anyone else, the strongest spectrum holding in the country. This enables us to deliver a faster network than anyone else, and that means we can and will deliver the best quality mobile network. Monetizing network quality has been a challenge for the industry. It isn't new. We saw quality premiums in 4G launch and 5G launch, but over time, those premiums have been traded away. We have a clear plan on how to monetize network quality. We are leading the way through innovations like Vodafone SuperMobile, a completely new mobile category for customers. Our plan also includes how to position SuperMobile across our multi-brand portfolio in consumer, and monetizing quality effectively across all of our segments, in consumer, in business, and in wholesale.
For wholesale, none of our current customers sell 5G+ today, but it will be available as an add-on for an appropriate fee. Focusing on customer experience is critical, too. Removing friction, simplifying operations, lowering churn supports both mobile revenue and margin, and ultimately drives up the likelihood that customers will buy more from us. Which brings me on to fixed, the clearest growth opportunity for VodafoneThree. In consumer, we start with relatively low fixed share today of 5%. Therefore, we have significant headroom for growth. We have a strong proposition, the largest fiber footprint in the U.K., alongside a Fixed Wireless Access product that is cheaper than copper with better margins. Together, they allow us to offer fast broadband to 28 million homes and premises, more than anyone else. We then have the largest mobile customer base to cross-sell into.
It's this combination that results in us being the fastest growing home broadband provider today. There's lots of competition in the infrastructure market. I'm sure it will lead to consolidation. But as it stands, we, VodafoneThree, are an attractive partner and we're well-positioned for growth. It's also worth noting that consumer broadband is one of the clearest examples of where Vodafone Group helps us, with router procurement scale benefits, and with content partnerships for the recent Vodafone TV launch. For business, the opportunity is equally exciting. As organizations digitalize, connectivity is becoming increasingly strategic, and network quality is crucial. On top of more predictable performance, customers are demanding greater security, resilience, and sovereign capabilities, particularly across critical industries and public sector. That's where the SuperMobile portfolio for Business comes into play.
Building on the local slicing we launched earlier this year, we can now offer SLAs on both national and dedicated critical business slices. This is exactly the type of opportunity that simply did not exist before we had the scale and capabilities of VodafoneThree. In business, we're the biggest in mobile, but only have 13% share of fixed. Also, plenty of room for growth. We have the second-largest fixed network for businesses in the U.K. Complementing that, we have our partners and Fixed Wireless Access proposition. Makes us credible and well-placed in business fixed. Customers include household names such as Amazon, Scottish Power, and Standard Chartered Bank. There's one final factor shaping the market, the regulatory environment in which we operate. For our industry, this creates both opportunity and risk.
The merger of Vodafone and Three marked a turning point in U.K. regulation, with both the CMA and Ofcom recognizing that three scaled operators would deliver better outcomes for the country, customers, competition, and shareholders. But there's still more we can do. Across the industry, there's broad alignment on three priorities as part of the mobile market review. First, planning reform, so we can upgrade and deploy network infrastructure quicker. Reform of net neutrality rules, enabling greater service differentiation and innovation. Energy reform, recognizing the role telecommunications networks play as critical national infrastructure and ensuring operators can invest efficiently in resilient connectivity. Alongside those priorities, it's important that competition remains both effective and sustainable. It means avoiding market distortions, ensuring a level playing field, and maintaining investment incentives needed to deliver world-class digital infrastructure for the U.K. Ultimately, it isn't just important for the telco industry.
It is important for the long-term health of the U.K. The key takeaway is that the direction of travel is positive. Conversations have been constructive. There is increasing alignment across industry and a broad recognition of the need to support sustainable investment. We now await the legislation that will provide the framework to turn consensus into action. Our first year, we have made a fast start. On network, we have moved at pace with our network build.
We optimized our spectrum holding quickly, delivering better 4G speeds for Three and SMARTY customers. Roaming was enabled across both networks in over 10,000 sites. We selected our network partners in record time, locking in the unit costs we need to deliver the plan. We hit all our year one targets for network upgrades, which means faster speeds for our customers. As we talk today, we are exactly on track for our CMA commitments.
These network improvements, alongside best practice sharing and customer service, have delivered meaningful improvements in customer experience. Churn, for example, on Three, is down three points year-on-year. Vodafone has market-leading mobile churn. Three has climbed to be one of the best in the Ofcom complaints tables, alongside Vodafone. Vodafone has also strengthened its lead as the best in the U.K. for NPS. We are not taking our eye off the market opportunity either. We delivered a record year for home broadband growth. We moved at pace through integration. Three levels of management in place by Christmas. The fourth level was completed by the end of the summer. Property plans have been communicated, and execution is underway. Taken together, that puts us ahead of plans for people-related synergies and reinforces our confidence in the broader integration program. A fast start indeed.
The financial results are 4.5% EBITDA growth, with only a small benefit of synergies in the year. Year two. This is the really critical year for delivery. In many ways, we describe it, this is the year where we break the back of our plan. FY 2027 is the first year where you will see material synergies of over GBP 100 million being delivered, the majority of which are in sales and marketing, procurement, people, and retail-related costs. All of which are delivered or are on track. In networks, we will more than double the pace of our site upgrade program this year.
It is challenging, but going well, and Andrea will talk about that more. Reaching this level of delivery is exactly what we need to achieve the full network integration plan and then realize the network synergies in year five. This is also the year where we launch new market-leading propositions.
That includes Vodafone SuperMobile, designed to monetize the network and offer customers a completely new category of mobile connectivity. In fixed, we are leveraging our fiber footprint and Fixed Wireless Access. We have announced the upcoming launch of enhanced Pro Broadband, together with whole-home Wi-Fi and parental controls, with speeds up to 8 Gb a second. Just last week, we launched Vodafone TV, filling a gap in our broadband portfolio. We know many customers like to buy broadband and TV together, so this helps us grow our fixed share. We are focused on making it easier and simpler for customers to interact with us. Focused on fundamentals, removing customer friction in journeys, tackling root causes of complaints, ensuring right first time IT and digital delivery. This year, we will continue to roll out our single converged app, roll out the Just Ask Once promise, and AI-enabled service capabilities. Finally, retail.
We delivered the IT and digital capability to enable multi-brand in stores, which not only supports customer experience but is also the key enabler for retail synergies. We are exactly on track in the rollout of multi-brand stores and the corresponding retail consolidation program, which will complete next fiscal year. In summary, the merger was the catalyst the industry needed. We are in a much stronger position in the market than we were as two separate businesses. Year one was about building strong foundations. We delivered immediate network and customer experience improvements while maintaining good commercial momentum. Year two is about acceleration. Unlocking the full potential of our network, breaking the back of our plan. Network delivery doubles. Retail consolidation on track and accelerating. We are ahead of plan on the organization side. We are well-positioned for growth in both consumer and business fixed.
Now, we start to differentiate with our new propositions and monetize the network. We are 16 months into the integration. Our confidence in delivery has increased, resulting in, of course, upgraded targets. We have the right assets, we have the right strategy, and I have a brilliant team. With that, I will hand over to one of them, Andrea.
Thank you, Max. Building the U.K.'s best network is VodafoneThree's ambition and mission. It is the foundation for delivering the best customer experience, new market-leading products and services, and enabling us to create long-term value from our industry-leading GBP 11 billion private investment program. Let me start with giving you an overview of what I will cover today. There are four main areas.
First, we start from a position of strength, with more network assets than any other operator and a clearly funded, regulated rollout plan. Second, we have moved quickly to bring meaningful improvements to our customers from day one. Third, our next phase of this journey, covering 99.96% of the U.K.'s population with 5G Standalone as we consolidate and upgrade the IT and the network platforms. Finally, how we will deliver a world-class connectivity experience for all of our customers. Let me start with what we got from the merger.
We have more network assets than any other operator in the U.K. That starts with our site footprint. As you can see, significantly more cell sites than our competitors. That scale gives us the flexibility to design the strongest possible network footprint, retaining sites that add the greatest coverage and capacity while simplifying where the networks overlap. We will remove duplication and consolidate overlapping sites. In time, we will have a more efficient and effective footprint of around 26,000 sites. That still leaves us with more sites than anyone else. Importantly, as we rationalize these overlapping sites, those savings help to fund the next phase of our investment. We also have a very clear spectrum advantage. We hold around 20% more spectrum than any other U.K. operator, including more than half of the U.K. C-band spectrum holding.
That enables us to deploy C-band spectrum at scale, delivering what matters most to our customers, greater capacity and faster speeds. Faster speed is data quality. Combined with the scale of our network and backed by GBP 11 billion investment, these assets give us a truly unique advantage and forms the foundation of our strategy. We have a clear and ambitious plan to build the U.K.'s best network, connecting every community in every corner of the U.K. Our 5G Standalone network will significantly increase network capacity, improve speeds, reliability, and performance across the entire country. This program goes beyond just the radio network itself. It also modernizes the core and IT infrastructure. Our ambition is simple, to build the U.K.'s first AI-ready network, an intelligent and autonomous network that can dynamically adapt, improving network performance and helping us bring capabilities to the market more quickly.
We have clear milestones throughout the entire journey. We made very specific site and spectrum deployment commitments to the regulator. We promised to deliver coverage, capacity, and performance outcomes. Importantly, we are already demonstrating delivery against them. We have exceeded our target plan in year one, which I will come to in a second. Over the next year, we will accelerate this rollout by upgrading twice as many sites as we did in year one. These upgrades are in addition to the 10,000 sites we enabled Multi-Operator Core Network technology in year one. MOCN was designed to bring immediate benefits to the customers by allowing them to connect automatically to the best available coverage, VodafoneThree signal at no extra cost. The site upgrades that have been committed to the CMA, the Competition and Markets Authority, go much further.
They involve modernizing the underlying infrastructure, deploying new industry-leading equipment, and integrating the spectrum, the foundation of our 5G Standalone network. We have already begun to offer our customers the capabilities that will truly differentiate this network. Dedicated national network slices for consumers and businesses through Vodafone SuperMobile and Vodafone SuperMobile for Business, the U.K.'s first national business-only 5G+ slice. Vodafone SuperMobile provides customers access to our FastTrack with up to 4x faster speed and a minimum speed guarantee of 50 Mpbs . No one else is offering this. Next year, we will follow this up with dedicated national critical slice for blue light organizations, providing priority connectivity to first responders and critical public services. By 2029, we will have delivered 65% more network capacity than Vodafone and Three would have achieved separately. Alongside almost 90% of 5G Standalone population coverage.
By 2030, 99% of the population will have access to 5G Standalone, providing the platform for the next generation of digital services and experiences. By 2034, our network will be two and a half times today's capacity. Think about the scale of that. It is quite an incredible thing to be able to say two and a half times the capacity today. Average speeds will be up to five times faster than the separate networks would have offered, and we will have delivered our plan, 99.96% 5G SA coverage, population coverage by 2034. As Max has told you already, that 0.98% matters, as it means nearly 700,000 people across 48,000 square kilometers of the U.K.'s most remote areas. We are the only operator committing to go that far. Importantly, it is a network design not just for today's demand, but for the next decades to come.
We moved apace to bring immediate customer benefits. Within just two weeks from the merger approval by deploying previously unused 18 MHz spectrum across to the Three sites, we increased capacity, reduced congestion, and delivered up to 40% improvement in 4G speeds to seven million of our three customers. After just one month, we started enabling Multi-Operator Core Network technology across the network. As I said a moment ago, MOCN is now live in over 10,000 sites across the U.K. That enabled us to eliminate more than 16,500 square kilometers of not-spots. These are just some early examples of how using the combined scale and assets of VodafoneThree, along with innovative technology to improve coverage, increase capacity, and enhance network performance. As you will see on the next slide, these improvements are already reflected in our key network KPIs. So where are the customers seeing these improvements?
Let us start with coverage. Slide 21 shows the improvement from our baseline to the latest reported position. Coverage continues and will continue to improve as we roll out upgrades, deploy the additional spectrum, and integrate more sites into the combined network grid. We are also seeing significant improvements in speed. On Vodafone, average 5G download speeds have increased by 82%. That is according to Ookla. Reaching 313 Mbps, fast enough to load a one gigabyte file in just 30 seconds.
Network latency is also improving, which means more responsive applications, better performance, and smoother experiences for activities like gaming. Adding more capacity to the networks enables us to meet the growing demands of our customers. The rate at which Vodafone data consumption is growing has almost doubled. On Three, it is nearly tripled. Yet, notwithstanding this increase in demand, we are serving that demand with speeds that continually improve.
We have talked about what we have already achieved. Now let us talk what is next. As I mentioned, the goal is to create one single densified network of around 26,000 sites. Through our long-term partnerships, including Beacon with Virgin Media O2, and MBNL, the joint venture between EE and Three, we are able to make the most efficient use of our infrastructure. The result will be a denser network grid. That will help us eliminate areas of weak services and create a more seamless experience with fewer coverage spots, stronger signals, and more consistent experience across the country. The important thing here is that investment pays for itself. By delivering the savings from the network rationalization and simplification, we unlock those funds to deploy and invest back into the upgrade program. But sites are only part of the story. We are upgrading every layer of the network architecture.
That starts from moving from two separate radio access networks to a single upgraded network built using the latest technology from Ericsson and Nokia, including massive MIMO antennas. Massive MIMO antennas allow each site to handle far more traffic more efficiently. For customers, that means higher capacity, faster speeds, particularly in the busy areas where networks are under the greatest strain. It is just one of the key technologies behind high-performing 5G networks.
5G networks provides us with a much efficient foundation as we support growing data traffic, with evidence pointing to 90% greater energy efficient than 4G network. Without these technologies, future demand simply becomes much harder to support sustainably. We are also upgrading our transport and backhaul infrastructure and delivering intelligent voice and data networks to support our entire user base. We are building one of U.K.'s biggest data core networks with a capacity of 9 Tbps .
It will deliver scalable capacity so we can support the growing needs of our customers, not only in the medium term, but also in the long term. Taken together, these upgrades will improve performance and provide the flexibility needed to support services such as network slicing and advanced 5G applications. What I hope you take away from this is that we are using this moment to modernize the entire network and build something fundamentally market leading and future-proof. This principle does not only apply for the network, it also applies for our IT transformation. This is one of the largest transformation programs happening anywhere in Vodafone. We are taking two businesses, two technology estates, thousands of underlining systems, and moving them towards a single set of platforms, processes, and operations. We have already made a great start.
In under just one year, we have brought together Vodafone and Three systems to serve both sets of customers, laying foundation for a single business. Just last month, we supported the launch of new commercial propositions such as SuperMobile. We have enabled our multi-brand operations so contact centers and retail channels can sell to and serve all customers, allowing them to seamlessly move across the entire VodafoneThree portfolio. The next phase is about scaled migration. By autumn 2027, all consumer customers will be supported by a single platform. In 2028, enterprise customers will follow. Internally, we will bring HR functions, finance, and procurement onto a single platform. The foundations for this are already in place with Microsoft multi-tenant organization implemented for a unified employee experience. Ultimately, by the end of 2028, we will have decommissioned Three's legacy IT stack.
This all matters because simplification is what allows us to move faster, launch products more quickly, reduce complexity and cost to serve, and ultimately, deliver benefits of the merger. Moving on to AI. Our AI strategy has three pillars. First, network for AI. We have designed our network to support the most demanding AI use cases. As AI usage grows, demand for connectivity, capacity, and ultra-low latency will increase significantly. That is why we are upgrading every layer of the network, from the radio access network, transport infrastructure, through to the core. This will create the capacity needed to support the most data-intensive AI applications. The second pillar is embedding AI directly into the layers of the network itself. We are deploying AI-ready RAN, Radio Access Network equipment, into our network, as well as other enablers, which will provide a platform for dynamic network management in the future.
Finally, we will use AI to boost productivity and efficiency, automating and helping our teams make faster, better, more intelligent decisions. We are already bringing some of these use cases to life. AI, for example, will enable us to dynamically manage the energy consumed by our network. You will see a demo in the breakout area. Through software and machine learning, we can adjust the radio power based on real-time live traffic, improving energy efficiency. We are already deploying agentic AI tools to support our rollout program.
My field engineers today can use AI to assess build quality in real time, while also identifying health and safety risks. In summary, we will create a more intelligent network, a more efficient operations, and an overall better customer experience. When we talk about delivering an unparalleled network experience, we are really talking about the end state of everything I have shown you today.
A single AI-ready network with combined mobile, broadband, and global connectivity assets into one seamless customer experience. That is what we are building towards today. We will provide the best connectivity experience possible wherever customers are and however they choose to connect. It starts with the mobile network, but extends much further. Through our partnerships in broadband, we have the largest gigabit footprint in the U.K., with over 24 million marketable households within reach of our services.
This asset-light model means our approach is less capital intensive, lower risks, and enables wide reach, and it is supported by Vodafone's global connectivity assets, including subsea cables. Increasingly, it will extend beyond traditional terrestrial networks through satellite technologies designed to help us deliver connectivity in the hardest to reach locations. That is an incredibly powerful combination. Reliable, trusted connectivity that is increasingly ubiquitous, from the seabed to the star. Let me leave you with four key messages.
First, we start from a position of strength. We have more network assets than any other operator and a fully funded investment program, and a clear path to build the U.K.'s best network. Second, we have moved quickly. Customers are already seeing the benefit through better coverage, faster speeds, and improved performance. Third, we are delivering one of the most ambitious network and IT transformation program anywhere in Europe, creating a 5G Standalone AI-ready platform for the future. Finally, it is all focused on one single outcome, delivering the best experience for customers and creating the foundation for future growth and innovation. With that, I would like to welcome Kelly back on stage so I can take a few questions on networks. Thank you.
Thank you, Andrea. It is really impressive to see the progress we have already made and the clear roadmap we have in place to build the U.K.'s best network. As mentioned, we will be taking questions from the room for this session. For those of you joining online, please continue to submit your questions via Slido, and we will bring those into the discussion during the main leadership team Q&A later this afternoon. For those in the audience, if you would like to ask a question, please raise your hand and wait for a microphone. If you could please state your name and organization before your question. Thank you.
Thank you. Impressive stuff going on. It is Robert Grindle from Deutsche Bank. I would just like to ask about the network sharing you do in the U.K. You are clearly expanding, you are upgrading your network very quickly. Does that slow you down at all? How do you mitigate the fact that you have got a partner in a large part of the country? Thanks.
Very good question. Before we agreed the merger, before the merger went through, we renegotiated our terms of our active network sharing agreement with Virgin Media O2, and the contract is built in such a way that we have financial incentives to work together and move faster. There is also penalties in the contract if we under-deliver. There is a vested interest in both parties to use the available assets that the merger has brought together. And we also commit demand, multi-year demand, so we know what to expect from each other, and that demand is consistent with us hitting the CMA target. It is a good partnership that enables the CMA target, and there is a lot in it for both parties to keep investing in the sharing agreement that we have, in the Beacon active sharing agreement that we have.
Yes. Hi, it is James Ratzer from New Street Research. Thank you very much for that, Andrea. Can I ask a couple of questions? Firstly, specifically on deploying new spectrum into the network. On how many sites at the moment have you actually deployed the C-band spectrum? If you could talk about your plans on how that might evolve in future. You also talked about the network capacity going up by 2.5-fold by 2034. Does that include any plans in there for what Ofcom is talking about on the upper 6 GHz spectrum band and if it does not, maybe you could talk about how that might fold into the potential for capacity to grow as well. Thank you.
Great question. Let me start with the first one, James. When we got the approval from the CMA, the CMA prescribed a certain number of sites with a certain very specific spectrum holding for each site. We have to hit a certain number of sites, and we have to hit a certain number of configurations on those sites. And they are divided into three main areas, high band, mid band, and low band. You heard from Max, we front-loaded our plan because the CMA wanted to see, and we want to see benefits to our customers at the start of this program. So we front-loaded all of our upgrades, C-bands, in the urban areas so we can get that C-band uplift. We will not be deploying C-band in the most remote areas now, because those are going to be low band.
To answer your question specifically, today, with the upgrades so far done, and the exact number is commercially sensitive how many C-band sites I have upgraded. Just to give you a feel, of the upgrade sites that we have upgraded in C-band in the first year, we are covering 50 million people. 50 million people in the U.K. today has access to our C-band spectrum, which as you know is 200 MHz, the highest that any other operator has.
Does that answer your question?
I beg your pardon? Oh, the 6 GHz. We have consulted with Ofcom on the high band 6 GHz. Our representation to Ofcom is very simple. If you look at the projection, the data projection, and the traffic projections, we need dedicated high band 6 GHz for mobile. Being a converged player, I know how much I need more spectrum on the fixed side, I know how much I need on mobile, and I can categorically say that is valuable spectrum required for mobile and should be ring-fenced to mobile.
Is that upside from the 2.5?
It is, yeah. It is upside. Yep.
Any further questions?
This one here.
Thank you. Paul Sidney from Berenberg. Just a very big-picture question. Looking forward, you have given targets out to 2034, does it make sense for VodafoneThree to own fixed infrastructure looking forward, given it is a very fragmented market? We have obviously seen the events of the past week. Would it make sense just to improve your economics, and is that something you are thinking about?
It is important to own the right infrastructure. We have monetized our towers, and we have seen that the sharing of our mobile infrastructure in the U.K. has brought benefit. We have just shown that even though we do not own them, we can still deliver on the outcome and focus on the outcome for our customers. On the fixed, it is important to own the critical part of that infrastructure.
Owning data centers, which we do, is important because it creates opportunities for future growth, having sovereign AI capability. When I talk about AI, I often talk about AI and RAN, where if I own the infrastructure, I can offload some of my RAN workloads in the data center, and I can use the RAN capability for AI inference and when I am not using the RAN. The answer is, owning the critical infrastructure that makes a difference, that differentiate, absolutely.
Where it can be shared and does not affect your business, like RAN sharing, and you monetize it through a tower company, then probably does not make sense owning it.
Great. Thank you all for your questions. That is all the time we have got for questions now. Andrea, thank you very much.
Thank you.
We have heard how the investments we are making are helping us build the U.K.'s best network and create a stronger platform for the future. How do we translate that network leadership into better customer experiences, stronger propositions, and growth? To answer that question, please welcome VodafoneThree's Consumer Director, Rob Winterschladen.
Thank you, Kelly. Good afternoon. As you have just heard, we are building the U.K.’s best network. My focus is how we turn that into commercial success in the consumer market. VodafoneThree already has a strong position in consumer. We are the U.K.’s number one mobile operator, consistently the fastest-growing provider in fixed, and we lead the market on customer experience. The opportunity now is to keep building on those strengths. We will maintain our strong commercial momentum, which you have already seen over the last year, whilst staying laser-focused on customer experience. We will set new benchmarks for customers through the launch of new market-leading propositions, such as Vodafone SuperMobile. As the fastest-growing player in fixed, we have a huge opportunity to accelerate growth by cross-selling broadband and TV to the U.K.’s largest mobile customer base. The common thread running through all of this is value.
Creating more value from the network investments, creating more value from our customer relationships, and ultimately, creating more value for the Group. Let me start with the structure of the market. Mobile remains the largest segment of the U.K. consumer communications market. It is worth around GBP 12.5 billion, and accounts for around 40% of operators’ service revenues. It is where VodafoneThree has its strongest position. As I have said, we are the leader in mobile. Our position is different in fixed. At around GBP 10.5 billion, it is a large market, but it is one where we still have significant headroom to grow. We are already the fastest-growing broadband provider. We also have the U.K.’s largest marketable gigabit footprint, and fixed wireless access gives us an additional way to reach customers. With around 4.5 million homes in the U.K. that still cannot get full fiber broadband.
Now, with Vodafone TV, we are extending our commercial offering, facilitating our ability to drive convergence even harder across our customer base. In other words, we already lead where the market is largest, and we still have significant headroom in convergence where our growth opportunity remains strongest. Importantly, we are not just growing, we are outperforming the market. As you can see on the chart, last year, our consumer service revenue growth accelerated steadily through the year, with particularly strong growth in Q4. At the same time, the broader market moved from negative to just 0.2% growth. What that tells us is we are continuing to gain momentum and continuing to take share, and it is a really good early indicator that our strategy is working. A key strength for VodafoneThree is our portfolio of brands. Each brand has a clear role addressing different segments of the market.
Vodafone is our flagship brand, focused on premium customers and families. Three plays an important role in the mid-market, focused on youthful customers. While SMARTY, VOXI, and Talkmobile allow us to compete effectively across predominantly digital and value-conscious customer segments. We have one convergence brand, which is Vodafone. That means one destination, one stack to develop converged propositions on, and clarity for all our frontline teams on where to send customers for convergence. This clear multi-brand approach enables us to effectively target and cover all segments of the market and meet their different customer needs. That becomes increasingly important as we look to monetize network quality and drive value, not just volume. Propositions like SuperMobile will, in time, be available for customers of our other brands.
Our objective is really simple: use one leading network, The Nation's Network, support a clear portfolio of brands, and give customers a compelling reason to choose the proposition that is right for them. We have an omni-channel strategy, and we will maintain our commitment to the high street across the U.K., which, for those customers who like coming into stores, and there is still plenty of them, means we can serve them in more locations with more brands than before. We focus on using our footprint more efficiently, more effectively, consolidating overlapping stores, and transforming them into multi-brand destinations, giving customers more choice and a better experience under one roof. For example, since the merger, we have expanded the Three brand into 134 additional locations where it did not previously have a presence.
We have converted 42% of our estate to multi-brand locations, which mean they can now serve both Three and Vodafone customers. That number will continue to grow as the retail integration program progresses. Importantly, our multi-brand stores are already able to seamlessly migrate Three customers to Vodafone. That capability will be key as we move Three customers onto the Vodafone stack later in the plan. By removing overlapping sites, we are creating meaningful efficiencies and helping support the synergy benefits that Darren Purkis is going to talk about later. As part of the retail transformation, we are also investing in the in-store customer experience. That includes our flagship destinations as well as our local high street stores. We are creating modern, vibrant retail environments, stores that better showcase our brands and products.
We are building a retail estate that gives us greater reach, operates more efficiently, and delivers a better experience for our customers. Beyond retail, digital continues to become an increasingly important part of how customers interact with us to manage their accounts and get support. Today, digital journeys account for a significant proportion of both sales and service interactions across all our brands. The slides show that we have strong digital capabilities across the portfolio, but it also highlights one of the clearest opportunities from the merger. We can take what Vodafone does well in digital and apply it more consistently across Three. Vodafone has strong digital metrics. Three has made good progress, but we see clear opportunities to narrow that gap further by bringing the best of Vodafone's digital capabilities to the Three brand. One example is AI-enabled customer service.
Vodafone's AI-powered chat capability is already being used by Three. That will help us improve service quality whilst reducing friction in the customer journey. It will allow us to create a more consistent experience across both brands. At the same time, the Three digital platform is moving onto the Vodafone technology stack. That migration will give us a stronger platform for shared future innovation, and it will also support a broader and more consistent range of digital services across Vodafone and Three. Leading the way on digital today are actually our value brands. With the exception of some indirect sales, brands like SMARTY and VOXI, which offer simpler propositions, are predominantly digital. Talkmobile looks slightly different, largely because of its customer profile.
The goal is simple: make digital interactions easier, improve satisfaction, increase the digital mix across sales and service, and create a better overall customer experience. You can see examples of that work in the demos here today. This is all underpinned by our market-leading customer experience. Vodafone continues to hold the number one Net Promoter Score position in the market. Three has continued to narrow the gap to competitors, but there is still more work to do. We have a clear opportunity to apply the strongest capabilities from across the combined business and improve Three's relative position. Brand NPS is only one measure. We are also seeing our best levels of deep detractors. That reduction tells us that fewer customers are experiencing serious friction or dissatisfaction. Our latest performance also shows our best ever Ofcom complaints performance across the portfolio.
In fact, since the merger, Three has recorded its lowest level of complaints ever. Complaints are down 40% year-on-year, and Three has moved from the bottom of the Ofcom table to second place. That is translating into lower churn, stronger retention, and greater customer loyalty, which I will come on to next. That is important because customer experience is not simply a service metric. It is one of the strongest drivers of retention, of lifetime value, and ultimately, sustainable growth. We are increasingly seeing that reflected in our commercial performance. We are one of the U.K.'s most awarded customer experience brands. So when we brought Vodafone and Three together, we said we would move quickly. We wanted to capture the commercial opportunities created by the merger, and that is exactly what we have done. Over the past year, we have launched a series of new propositions and services.
They strengthen our position across mobile, broadband, and convergence. They include Vodafone Together Family, Vodafone Fixed Wireless Access, Just Ask Once, the converged My Vodafone app, and most recently, Vodafone SuperMobile and Vodafone TV. On Three, we have also introduced speed tiered propositions, including plans offering speeds of up to 100 Mbps . Our approach to the two main brands is deliberate. On Vodafone, we are continuing to build and launch new propositions. On Three, our immediate priority is the migration onto the Vodafone technology stack. We do not want to add unnecessary complexity to the Three platform before that migration, but we are continuing to make targeted commercial interventions where they add value for customers. The new speed tiers are one example. Each of our launches has a clear role. Some improve customer experience, some help us grow in broadband and convergence.
Vodafone SuperMobile allows us to monetize our network leadership, and together they strengthen our ability to grow and protect ARPU. The commercial results are encouraging. During FY 2026, we delivered more than 219,000 total consumer net adds. We achieved record fixed gross adds and net adds. As I have said, we were the fastest-growing broadband provider. We also delivered growth in both mobile and broadband ARPU. Mobile contract ARPU increased by 2% in the fourth quarter, and broadband ARPU by 5% in Q4 year-on-year. At the same time, customer retention remains a real strength. Mobile churn is at record lows across Vodafone, VOXI, Talkmobile, and SMARTY, whilst Three's churn is at its lowest level in four years. Fixed churn is also at its lowest level across broadband and fixed wireless access.
Taken together, the combination of an improved network, market-leading propositions, and enhanced customer experience is already translating into commercial momentum. I've already touched on our recent launches. They address different customer needs, and they create value in different ways. Our broadband refresh is about increasing choice and improving performance. It includes Vodafone Fixed Wireless Access, supported by a single postcode checker for fixed and fixed wireless access. We are launching the only social fixed wireless access tariffs in the country. We are also strengthening our Pro Broadband proposition with broadband speeds up to 8 Gbps on our Pro 4 router, and we're currently trialing speeds of up to 10 Gbps at the moment. The opportunity is significant. We can use our fiber and our fixed wireless access footprint to reach more households.
It now extends to over 28 million homes nationwide, more than any other provider. We can offer more choice, and we can increase broadband penetration across our existing mobile base. The second launch is Vodafone SuperMobile. This is not just a new tariff. It is a new category built around things customers value the most: speed, reliability, and security. What's exciting about Vodafone SuperMobile is that it allows us to compete on quality and innovation, not just on price. It is an important step in putting value back into mobile and creating a clearer link between network investment and commercial returns. I'll go into a deeper dive on this in a moment. The third launch is Vodafone TV. Our customers have told us they want television and entertainment as part of their connectivity relationship.
Around one in four broadband customers in the U.K. takes a TV service with their broadband. This is an established need. Vodafone TV helps us create greater value across both our home and our mobile relationships, and it gives customers another reason to choose Vodafone for their connectivity and entertainment needs. This is just the start. We will keep innovating to strengthen customer value and support growth. Together, these launches demonstrate how we are supporting the value creation framework Max outlined earlier. Let's go a bit deeper on SuperMobile, convergence, and TV. We talked a lot today about building the U.K.'s best network. SuperMobile is the first major example of how we are translating that network advantage into a differentiated customer proposition. Before I explain the commercial opportunity in more detail, let's take a look at our launch campaign.
Sorry, mate. Gridlocked. Don't worry. I am on Vodafone SuperMobile, Vodafone's fastest-ever plan. Powered by 5G+ FastTrack, you will feel unstoppable with up to 4x faster speeds. All-new Vodafone SuperMobile. Sorry. With up to 4x faster speeds.
What you have just seen is our ambition to redefine quality in the mobile market. As Max said earlier, historically, our industry has tended to compete on price and on data allowances. Vodafone SuperMobile creates a new category. The context is changing. Customers are streaming more content on the move. Their phones increasingly sit at the center of their digital lives. AI is creating new experiences that depend on fast, reliable, low-latency connectivity. In that environment, theoretical peak speed is not enough. Customers need confidence that their connection will perform when it matters most. Vodafone SuperMobile is our highest performance mobile plan, and as I have said, it is built around three elements: speed, reliability, and security. First, speed. We are building The Nation's Network, bringing together spectrum and infrastructure and technology at unprecedented scale and pace.
Our 5G+ network unlocks new slicing capabilities, which are at the heart of SuperMobile. We call it the 5G+ FastTrack. It provides a dedicated slice on the network for our SuperMobile customers, and it can deliver speeds up to 4x faster than standard plans. Second, reliability. Performance is not just about how fast the connection can be. It is about whether customers can depend on it. Vodafone SuperMobile is the U.K.'s only plan with a guaranteed minimum mobile speed, where customers who are within 5G+ coverage, we guarantee at least 15 Mbps download speed. It gives customers confidence, and it differentiates our proposition. Finally, security. SuperMobile includes advanced security features enabled by 5G+ encryption. It also includes our market-leading Secure Net Mobile at no extra cost. Secure Net helps protect customers against malware and viruses.
It provides identity protection, scam call protection, and network-level parental controls. We want all of our customers to be able to experience the best mobile connectivity available. SuperMobile has launched first on Vodafone. It will also be available through VOXI as a monthly add-on, and we plan to expand it into our other brands over time. SuperMobile introduces quality-based pricing. For Vodafone contract customers, it is available for GBP 3 more than full-speed plans on a 24-month subscription, and as a GBP 12 rolling monthly add-on. It allows us to monetize network quality and protect ARPU, and it creates a direct connection between capital investment, customer benefit, and commercial return. Our ambition is to reshape how the mobile market competes. Alongside mobile, perhaps the biggest opportunity is for growth in broadband and convergence.
Through our asset-light strategy, we now have the U.K.'s largest full fiber footprint, reaching more than three-quarters of the U.K.'s households. It also gives customers access to the fastest broadband speeds in the market, including speeds of up to 8 Gbps, which we will launch in November. Alongside fiber, Fixed Wireless Access gives us another growth lever. Today, our Fixed Wireless Access footprint covers around 16.5 million households. It allows us to bring high-quality, fiber-like broadband to customers who do not yet have access to fiber. It also helps us make better use of the investments we are already making in our mobile network. The convergence opportunity is equally important. Across Vodafone and Three, we have around 6.6 million mobile-only households, and that number does not include the further opportunity across our value brands. These are not customers we need to acquire. We already serve them.
The opportunity is to deepen those relationships. Together, broadband TV and mobile allow us to build deeper customer relationships, increase value per household, and strengthen retention over time. That is why we are so excited about the convergence opportunity ahead. Let me finish on Vodafone TV. When investors hear a telecoms operator talk about TV, the natural question is whether this means getting into the content business. The answer is no. We are not planning to own content, bid for sports rights, build studios, or make large investments. Instead, we see TV as an important component of a stronger converged proposition. Our objective is not to create a standalone TV business. Our objective is to grow and retain higher-value connectivity relationships. Today, there is more content than ever. It is spread across multiple streaming apps alongside live TV, on-demand services, games, music, and other digital applications.
Customers can find it difficult to discover what they want and can end up paying for bundles of content, with content in them that they do not use or consume. So Vodafone TV is built around an aggregated entertainment experience. It brings together live TV, streaming services, on-demand content, apps, and gaming through a single interface. Customers can create individual profiles, receive personalized recommendations, and smart voice AI search helps them find content across the platform. The hardware is compact but powerful. It supports 4K entertainment, Dolby Vision, Dolby Atmos, and it is built on Android TV. We have partnered with the best: Netflix, HBO Max, Freeview. We have over 150 additional streaming channels, more than 300 cloud console-grade games, and thousands of apps through the Google Play Store. Vodafone TV is not just TV. It is a complete family entertainment platform. It is not just a home experience.
The companion app takes content with the customer wherever they go. For the best out-of-home content streaming experience, you need the best network experience. So Vodafone SuperMobile becomes the perfect partner for Vodafone TV, giving you the speed and reliability you need to stream your favorite content uninterrupted. Importantly, we are taking a low-cost, partnership-led approach. We are not taking content ownership risk. We are using partnerships to broaden the customer proposition in a capital-disciplined way. We are bundling Vodafone TV with home broadband, Fixed Wireless Access, and mobile plans. We are increasing customer choice, and we are expanding the commercial opportunity beyond the traditional broadband TV bundles. Vodafone TV broadens our role in the home. It strengthens our converged proposition, and it can help us win and retain broadband customers. It can encourage customers to take higher-value bundles, and it gives them another reason to stay.
Ultimately, it's another way we're turning customer relationships into broader, longer-lasting engagement with our brand whilst remaining disciplined in how we invest and allocate capital. If you get the chance later today, I'd encourage you to spend some time in the demo area and experience the platform for yourselves. Let me close with four messages. One, we start from a strong position. Two, we've maintained strong commercial momentum since the merger. Three, we're creating new ways to monetize network quality through propositions such as Vodafone SuperMobile. Finally, four, we see significant growth opportunities across broadband, Fixed Wireless Access, TV, and convergence, supported by the U.K.'s largest mobile customer base and the largest marketable fiber footprint. Taken together, that gives us real confidence in our ability to drive sustainable consumer growth and create long-term value in the years ahead. With that, I'll hand back to Kelly.
Thanks, Rob. Thank you, Rob. It's great to hear more about how we're leading in the consumer market and really exciting to hear more about those new propositions you've just launched. We've now got time for just a few questions for Rob. As we say, this is a mini Q&A. We've got the full Q&A session at the end, but we'll try to take a couple of questions. Please raise your hand and wait for a microphone. Please introduce yourself and your organization before asking your question.
That's great. Thank you. Thanks for the presentation, Rob. Carl Murdock-Smith from Citi. I suppose today we're being asked to think forwards quite a long time out to 2032, and a lot of investor conversations I'm having at the moment are about agentic AI. Consumer mobile feels like one of the potentially more impacted areas. My question is, how are you adapting to engage with AI agents? In terms of on that kind of timeframe, what's your base case for the impact on pricing and churn? What kind of scenario analysis have you done?
Look, I think the first thing to say is the U.K. market is a very well-established and mature switching market. Today, customers are using search. They're using a plethora of comparison websites to do price comparisons. We've got regulated communications that have to go out at the end of the contracts. We need to do annual best tariff notifications for out-of-contract customers. The point is that the U.K. is already a very mature switching market. In terms of what we're looking at to do in the future, I think it's important to know that, first of all, it's not just all about price. Customers don't just care about price. What do they care about? They care about network. They care about care. They care about customer experience. They care about proposition. What do we do? We're building the U.K.'s best network.
We are leading on customer experience, and we continue to build innovative props like we have just talked about with Vodafone SuperMobile, which there is nothing else like that on the market. Vodafone TV to create an even stronger converged proposition. A lot of our customers do not just take mobile. A lot of our customers are converged. They are taking multiple products and services, which I think is important to note in the context of this.
When I think about the future, I also think about all the opportunity that agentic brings for us. Actually, when you go into the demo area, you will see how we are starting to harness agentic, and some of the demos that you will see is how we are going to bring that agentic capability into our digital estate to help us drive sales and help us drive service in the not too distant future.
Then there are other opportunities. So discoverability, for example. We have been doing a lot of work in GEO, so the agentic equivalent of SEO. That investment is really paying off for us. So I think about the recent iPhone 18 launch. If you look in ChatGPT, Vodafone were top ranking operator in terms of discoverability within ChatGPT. So that is working for us as well. In terms of looking further afield and to answer the rest of your question around scenario planning, et cetera, I am not going to disclose numbers in terms of what we may or may not think about where this might be in 2032. But hopefully, the other answers give you some context for how we are thinking about agentic.
Great. Next question.
Thanks. It is Josh Mills at BNP Paribas. I think one of the phrases you used earlier was reshaping how the mobile market competes in the U.K., and you talked about the capacity advantage you have at the moment, the speed advantages which are coming. To Carl's question, it sounds like going forward, speed tiering is going to be one of the differentiators between the Vodafone versus Three versus SMARTY brands. So how are you thinking about moving fully to an unlimited mobile market proposition across all of your brands in the future? Maybe moving to a more delineated speed tiering model like we see in the Swiss market, for example. Is that something that you would be looking to do in the next few years? If so, why not? Thanks.
We still see value in data allowances and finite data allowances, as you will see as you look across our brands with clear ladders. Yes, we have introduced speed tiering in some of our brands already. It is there in Vodafone, it is there in Three. The SuperMobile element is slightly different. SuperMobile is not about speed tiering, it is all about quality and actually providing a level of speed and reliability and security that you do not get outside of the proposition. It is a slightly different paradigm, I guess. Are we thinking about moving to unlimited only plans? Right now, we do not see the need for that. We think there is still a lot of value to be made from the structures that we have got in the market.
One very quick follow-up. On the SuperMobile offers and the technology that you are bringing there, is there any obligation under the CMA wholesale terms or any voluntary agreements that you have made which mean that technology goes to the MVNOs as well, or is that exclusively reserved for Vodafone-branded customers?
Max talked about it at the beginning. When we launched SuperMobile, we launched it across every segment, consumer, enterprise, and wholesale.
We have just got time for one last question.
Yeah. Hi, it's Polo Tang from UBS. Just have a question in terms of your portfolio of brands, because you actually have five major brands. Does it make sense to rationalize the portfolio or simplify the portfolio going forward? Specifically on the Three UK brand, do you have to pay a brand fee to Hutchison for its use?
Okay, so two questions. Let me take the first question first. We have a multi-brand strategy in mobile, and we have a single brand strategy in convergence. Let me start with convergence, and I think I outlined the rationale for that in the presentation. We want a single destination in convergence for our customers. We want a single stack to be able to develop convergence propositions on, and we want a single destination brand for our frontline colleagues to take our customers to. It's clean. It's simple. On mobile, we have lots of customers with many different needs. What we've effectively done is created a multi-brand strategy which allows us to serve those needs. With Vodafone, we play in the premium end of the market, targeting families and convergence. With Three, mid-market, targeting more youthful or younger customers.
Then we've got VOXI, Talk and SMARTY, which are all focused at the more value conscious end of the market, serving different segments within that. As we said at the beginning of the merger, we may rationalize our brands at some point, but we don't see it as a big strategic decision. Value brands are low cost.
Thanks, Rob. Perhaps we can pick up that final question through the IR team. Just conscious of time.
Okay.
Look, thank you everybody for your questions and your active participation in the first part of today's session. We will reconvene at 3:30, after the break. For those of you joining us here in person, refreshments are available upstairs, and the demo areas are open for you to explore if you haven't done already. For all those joining online, you will find additional content in the portal, including case studies, videos, and explainers that you can browse during the break. We look forward to welcoming you back shortly before 3:30, when we will continue the afternoon with a closer look at Vodafone Business and get more of a breakdown on the financials from Darren. Thank you, everyone.
Welcome back everybody. I hope you are all feeling refreshed and have had a chance to explore some of our demos and additional content during the break.
Before the break, you heard how VodafoneThree is building the U.K.'s best network, and how we are turning that capability into differentiated consumer propositions. But the opportunity doesn't stop there. Many of the same capabilities we have discussed today, from 5G Standalone, to network slicing, to AI-ready infrastructure, are becoming increasingly important for businesses too. As organizations across the U.K. embrace AI, embrace digitization and automation, connectivity is becoming more critical than ever. Before I hand over to VodafoneThree's Business Director, Nick Gliddon, to take us through how we are supporting and connecting businesses across the U.K., here's a video to set the scene.
Thank you, and good afternoon. Kelly, thank you very much. I had the pleasure of spending some time with some of you up in the demo area, and I was a bit risky, and I said, "What do you want to hear from me?" Well, the first person I spoke to said, "Be quick, because we want to hear from Darren Purkis, who's coming after you." So I promise to be on time. But many of you said two other things. The first said, "Can you give me an education on what business is and the business market?" Then secondly, "Can you talk a little bit about what you are in the business market and how you differentiate yourself?" The good news is, I can't change the slides, but that's what I was going to talk about. I'm really pleased with that.
I'm pleased to be here today specifically to explain why Vodafone Business is another important driver of growth and value for VodafoneThree. I know many of you spent time with the demos upstairs. I know there were lots of questions. What I'm going to do is, as I walk through, I will bring out the demos, and we will talk about how they are relevant and how they reflect the slides. At Vodafone Business, our mission is to connect businesses to their potential and power the U.K.'s next generation of business growth. I'm personally really excited about this and the opportunity in front of us. There's four reasons why. Firstly, we have great foundations, significant scale, longstanding trusted customer relationships, a broad set of capabilities that give us a platform for growth. Second, we are simplifying the business.
That means we can deliver market-leading customer experience at a lower cost to serve. We can also differentiate. We have the U.K.'s best network, fixed and mobile, and our opportunity now is to create more value from both. Finally, we can grow. We can grow by expanding beyond core connectivity into some of the fastest-growing parts of the market. Now together, these four elements help us deepen the customer relationships, run a more efficient business, and deliver long-term sustainable growth. Let's start with scale. Vodafone Business is already a large and a strategically important part of VodafoneThree. We generate GBP 1.85 billion of annual service revenue. That's about 27% of the company's total service revenue. That scale extends to customers. We power over 6.5 million mobile connections, 15 million IoT connections, and our reach spans the whole market.
We go from sole traders and small businesses to major corporations, public services, and critical national infrastructure. Many of you in this room will use the services we provide. The numbers are really striking. One in two small U.K. businesses powered by Vodafone Business. Around 70% of the Fortune 500 choose us, and our network supports 80% of the U.K.'s emergency services. That's 80%. That gives us reach across almost every part of the economy, with a truly diversified customer base and multiple routes to grow. We're particularly strong in SoHo and private. In SME and public, we've definitely got greater headroom to grow. So the opportunity is not just to win more customers, it's to do more with the customers we have. We can deepen our relationships, we can drive convergence, and we can focus our investments where we see the greatest growth potential.
As I'll come onto later, bringing these relationships under one brand, and we've made the choice to go under the business brand, the Vodafone Business brand, enables us to deliver a consistent experience and make better use of our scale. Our foundations extend well beyond core connectivity. Mobile remains our largest category, contributing just over half our service revenue today. Alongside that, we've built strong positions in fixed connectivity, unified communications, cloud, security, and IoT. Our capabilities span everything from broadband to software-defined networks, to public cloud and managed security. So we have that scale and that breadth, but the value isn't in the number of products that we have, it's how we bring them together. Today, the average customer relationship is still concentrated in a relatively small number of product categories.
The feedback I hear and we get from customers is they want fewer suppliers, but in that supplier, they want someone who can bring connectivity, cloud, security together. So our role is to make the portfolio easier to buy, easier to manage, and more valuable as an integrated solution. When we get it right, it gives us a clear opportunity to capture a greater share of their spend. So scale matters, but so does local expertise. Vodafone Business combines both. We benefit from Vodafone's global footprint. That includes a Vodafone Business presence in 75 countries, together with international infrastructure, subsea cable systems. We can draw on group platforms and capabilities at a global scale. We've got over 240 million IoT connections worldwide. So we've got that global capability, but equally important, we understand the needs of U.K. customers.
We can take those global capabilities and apply them in ways that solve U.K. challenges. Vodafone Business as a whole supports more than five million business customers, including the U.K.-headquartered organizations with multi-market and international requirements, actually, like lots of you here today. We also benefit from strategic partnerships with leading tech companies such as Microsoft, Cisco, Fortinet, AWS, and Google. They broaden our capabilities and our portfolio, and that allows us to do it in a capital-efficient manner, which gives us advantages, and these advantages are important. We combine Vodafone's scale with deep U.K. market experience, and that is a real point of differentiation that is very difficult to replicate. These foundations matter because the market's changing, and the market's changing a lot, and customers are asking more from us than ever before.
Core connectivity remains essential, but increasingly, customers need connectivity, cloud, security, and applications, and they need them to work together. As more critical workloads move to cloud and cyber risk increases, that need becomes even greater. What we do is we move into our opportunity into addressable markets, into fast-growing adjacent services. We are already the market leader in mobile, and the mobile market is worth about GBP 2.6 billion. In fixed, we are a really credible challenger in a market that is about GBP 5.6 billion, and we have grown eight out of the last 12 quarters in fixed. Just like consumer, the core connectivity market is relatively mature. Grow maybe 1%, 2% through to 2030. We can take market share there, but the adjacent markets are a different story. In adjacent markets, we talk about unified communications, cloud, security. They are all growing at double-digit rates.
Three opportunities for growth. Protect and extend what we are doing in mobile, grow our share in fixed, and we drive convergence when we do that, and then expand selectively into the faster-growing services where our connectivity assets, our customer relationships, and our wider capabilities give us the right to win. Market's changing fast. Change creates opportunity, and that is a great opportunity for Vodafone Business. The first of these is AI and digitization. Organizations are adopting more cloud. They need more automation. They need more data-intensive applications. They become increasingly dependent on high-quality connectivity and infrastructure. AI doesn't work in isolation. It needs connectivity, it needs capacity, it needs security, it needs resilience, and it needs access to compute. That is where we play a critical role. U.K. AI infrastructure market alone, GBP 6.5 billion by 2030. At the same time, customer preferences are changing.
They want technology that is easy to buy, easy to manage. When you think about that, today, 70% of small businesses manage their technology primarily through mobile. We think that is worth just over GBP 3 billion, and that is across integrated communications and the adjacent services. Finally, and some of you asked upstairs, we are seeing greater demand for differentiated services. They want assured outcomes. They want performance. They want that confidence. Our survey and our insight says 76% of businesses are prioritizing service-level compliance. They increasingly want clarity about the performance they are going to receive. That is an opportunity. Finally, security, resilience, and serenity have moved to the top of the agenda. They are fundamental business priorities. Again, market research, U.K. AI cybersecurity market, we think is going to be over GBP 8 billion by 2030.
And that creates a further opportunity across security and sovereignty and all those services and managed services around that. These trends expand the services we can deliver for customers. They play to our strengths, strong network assets and capabilities, trusted customer relationships, secure capabilities, and they give us a right to compete. Our ambition isn't simply to participate in these markets. It's to use our connectivity leadership as the platform to capture more of that value chain, that technology value chain. So what are we going to do about it? We've built our strategy around three priorities: simplify, differentiate, and grow. Simplify is about delivering a better customer experience while we reduce our cost to serve. We do that through standardization, automation, and we remove unnecessary complexity. Next is differentiate. We are monetizing our network and our investment and our customer scale through distinctive propositions.
Single business brand, greater use of our own infrastructure. Lots of conversations with many of you upstairs about using our own infrastructure and our own assets in the U.K. Then finally, grow. We're expanding beyond traditional connectivity into areas such as sovereignty, security, and AI, where we see attractive growth and a clear right to win. Play to our strengths. Outcomes we're targeting are straightforward. Drive the efficiencies, improve the returns, accelerate the growth. So let's start, and then I'll try and give some examples about how we're simplifying and the way we work with our customers. So what's the objective? Objective is to create a differentiated customer experience with a structurally lower cost base. So we've got market-leading position in customer experience. We outperform our competitors, and we significantly outperform our competitors on NPS. In SoHo, we're the clear brand NPS leader.
Our ambition is simple. We stay ahead. But at the same time, we improve the underlying economics of how we serve customers. The great thing about those two objectives is they reinforce one another. Better customer experience means simpler ways of working, translates to lower cost. Removing friction from customers also removes unnecessary activity and complexity. How do we achieve that? Four principles. Get it right first time. Make it effortless. Own the outcome. And know the customer. These are what matter most for customers. In all our customer advisory boards, in all our research, they sit behind everything we're investing in. Now, we also have a new sales and service platform that creates a simpler, faster, and more connected end-to-end experience, and that's really important because we do it for our customers, and as Max talked about, we also do it for our employees.
We deploy AI and automation. We deploy it, and we at scale. That reduces our manual activity, improves our productivity, speeds up our response times. We build a simpler operating model. Standard products and process, more consistent ways of working. By 2030, we're targeting 25% improvement in workforce productivity, 20% improvement in speed to market, and more than a 25% reduction in cost to serve. That creates for us a more efficient, scalable business model and a stronger platform for profitable growth. Lots of you talked to me upstairs about difference in enterprise and how you drive profitable growth. That's how we do it. Now, I want to talk a little bit about how we differentiate ourselves. We've got three levers to do this. Firstly, we have a set of differentiated propositions.
We want to convert our investment in the U.K.'s best network into products and services that customers are willing to value, and they're willing to pay for. In mobile, offerings such as Vodafone SuperMobile for Business turn network capacity and capability into customer value. I will come back to that in a minute. Significant opportunity in fixed wireless. We can leverage the Three footprint, we can scale 5G business broadband, and we can give more customers a high-quality alternative to traditional fixed connectivity, and we can drive convergence at the same time. In fixed and converged services solutions such as software-defined networks or SD-WAN, they help business connect and manage multiple sites, the applications, the cloud services, and they do that through a single platform. You've seen that upstairs in some of the demos with Optus and some of the things that we're talking through.
Our brand positioning is really important. We're bringing our customers together under a single Vodafone Business brand, and that creates a more consistent experience and greater scope to cross-sell, to upsell, and to drive convergence. We can do that on the Three Business. We're migrating more than one million, three Business connections to Vodafone Business. It's not just simply about migration, it's about strengthening the customer relationships. We give them access to a broader range of products and solutions, increase convergence, and we improve retention. The third area was the area I think that had most engagement upstairs, and that was improving our connectivity economics. This is about making greater use of the assets we've already built and continue to invest in.
We want to, in our fixed environment, move a greater proportion of the services that we sell onto our own infrastructure, and we want to do that through automated delivery. We've made some really good progress on that. Last year, we doubled the number of fixed services delivered on our own network. We started with a base of around 8%. We then moved to 16%. Some months, we'll get to 19%, just under 20%. Our objective is we will get to 30%. We'll achieve that through our new customer wins. As new customers come in, we put more of those assets or more of those opportunities on our assets. We've also got a series of targeted migrations, and we'll have greater automation and process improvement.
We don't have to get those new customers, we just have to move those customers onto our services and our assets. Those actions do three things for us. They improve the customer experience, the value, and the retention. They increase the proportion of higher-value connectivity revenue. They make better use of the assets we've got and continue to invest in. Let me talk about SuperMobile for Business as a specific example because I think this is quite interesting. Firstly, SuperMobile for Business is a portfolio of mobile connectivity offerings, and it's anchored to our national business slice. The national business slice doesn't have any consumer traffic on it. It's for businesses. We launched it last month. It's the only business-specific mobile network slice in the U.K.
It provides dedicated capacity for business, and it's in the places and the moments where performance really matters. That's when you'd use a national business slice. It's enterprise-grade. What does that mean? It means it's got assured performance, minimum speeds, and it turns that connectivity into confidence. For businesses, confidence means you can keep your teams working, you can stay connected, you can roll a truck and ensure that truck executes on the installation at the time. When we announce this, we're working with a range of brilliant organizations to explore what this capability can do for them, but not just for them, for their people, for their operations, and for their customers. SuperMobile, as part of the portfolio, includes 5G local slicing. Max mentioned that at the start. We launched that back in April.
That's a first time in the U.K. we've offered a guaranteed provide service level agreement-backed performance at specific locations where connectivity can't fail, and we're the first to do that in the market. We're seeing that delivered in the real world. So, example of the Principality Stadium, where the local slice delivers assured connectivity for match day. We broadcast where we did it at the King's Coronation, where we did it for ITN, and ITN didn't then need to roll a satellite truck. They just gave them the ability to stream live content directly to their news studio. So we've got real-world examples that demonstrate the potential, and we're working through with lots of customers and lots of organizations to think it. Then we talked about the future. So there's one aspect I'm really excited about, and Max touched on this a little bit.
For organizations providing essential services, depending on connectivity, it's mission-critical. That's why, and Andrea mentioned this as well, we're building a dedicated national critical slice. With reserved capacity and prioritized traffic, no consumer, no general, no business. It's for organizations where every second matters. This changes on what they can rely on mobility to do. So I'm going to try and explain that with the use of a video. So if we can play the video, please. I said at the start I was excited about some of the things we're doing, and I hope you're seeing that we're setting a new benchmark for business connectivity. For me, that's a world where mobile doesn't simply support operations.
It moves into the customer, and it becomes part of the operation itself, part of their business process, part of their systems, part of their performance, and that creates opportunities for managed services for us. It's a great example of how we think about growth, which actually brings me to the final priority that I've got, which is growth. Again, when we think about growth, we're not starting from scratch. We've got assets and capabilities that are already there. We've got customer relationships. What I'd really like to walk you through now, though, is how we build on those strengths and we expand the role we play for our customers. Firstly, I would start and we would start with infrastructure. So that's data centers, fiber, subsea cable, satellite. They're the foundations that provide enterprise-grade connectivity with the coverage, speed, resilience, low latency that business customers need.
Business customers want more, though. They want trusted partnership. They want greater responsibility for the technology that supports their business. That means you need to go to applications, to cloud, to communications, security, and managed services. From there, we can enable new technologies, AI infrastructure connectivity, AI-enabled service propositions delivered directly, or you can deliver them in partnership. Strategic direction is clear. Move further up the customer technology stack, increase our share of customer spend, but remain anchored and trusted in secure connectivity that our customers rely on. I think the opportunity is significant. The adjacent markets we have highlighted represent more than GBP 6 billion of addressable spend, and we have got several of those are growing materially faster than core connectivity. I hope I have identified a number of areas we are particularly well-positioned to grow, and I hope you would agree with that.
Areas where secure and resilient connectivity are becoming mission-critical, where our capabilities give us an advantage. I want to bring that to life with three sectors. Firstly, defense. The U.K. is undertaking a significant modernization of its defense capabilities. It requires secure and sovereign digital infrastructure. Government defense spending is increasing significantly. Connectivity is a critical part of that. Modern defense really depends on securely connecting forces, assets, and locations. We have got really strong relationships in this space. Dedicated operations exist today designed to support the unique requirements of defense and other critical organizations. Our ambition is to do more across secure connectivity, infrastructure, and managed services. The second one I want to talk to you about is energy and utilities. Here, digitization, decentralization, they are transforming critical national infrastructure. Millions of assets, across electricity, gas, water networks, they all need to be monitored, managed in real time.
It is an area where we have got real considerable experience. We provide and support with managed services across all of the U.K. electricity, gas transmission, and distribution operators, and it gives us a strong platform for growth. Then finally, public sector. Digital transformation and resilience are becoming increasingly important to the delivery of public services. Government technology spending continues to create significant opportunities for modernization, and we have got significant relationships across central, local government, healthcare, and emergency services. I hope you saw the NHS 111 upstairs. We manage a substantial part of public sector mobile market today. In public sector, our ambition is to scale our position as their trusted transformation partner, and we capture more connectivity, modernization, and the managed services spend.
Common theme across the sectors, connectivity is no longer single communication service, increasingly part of the operational infrastructure itself, plays directly to our strengths, scale, security, sovereign, resilient networks, and established customer relationships. To conclude, we start from a position of real strength, significant scale, trusted relationships, broad and differentiated portfolio, and we have got the capabilities that Vodafone Group brings and gives us global reach. I think the opportunity we have got is really exciting and greater. For that, we have got a really clear strategy, simplify, differentiate, and grow. As I have said before in the presentation, these priorities reinforce each other. Simpler business, better economics. Differentiated network, more reasons for the customers to choose us. Stronger customer relationship gives us the platform to expand and capture more share of wallet and the growth opportunities.
It now really comes down to execution, turning our scale into growth, our capabilities into customer value, because that's how we'll connect businesses to their potential and how we'll help power the U.K.'s next generation of business growth. When we deliver this, that's how we'll create long-term value for VodafoneThree and Vodafone shareholders. Thank you very much.
Thank you, Nick. It's great to hear more about Vodafone Business. It's one of the less visible parts of our story, so it's fantastic to hear about the scale of the business, the role it plays in supporting organizations of all sizes across the U.K., and the opportunities for future growth. I'll now open the floor to questions. Please do introduce yourself once you have the microphone.
Hi, it's Polo Tang from UBS. I was particularly interested in terms of your comments about the national critical slice and what you may or may not be doing with the emergency services. Is there an opportunity for you to take some of the business in terms of the Emergency Services Network from EE? Is that the plan going forward? Just on the point about taking share from BT, they're obviously switching off their legacy PSTN network, so is that providing a tailwind for you in terms of the SME and SoHo segment?
Oh, yeah. On the first one, yeah, I would hope we're going to be a real challenger, and we're going to offer alternative to government in that space, and an alternative to many customers. I think you've got ESN. Actually, we do quite a lot with ESN today. We also do a lot with other customers in that environment. I think on the PSTN switch off, I think you've got lots of opportunities. We have an at-scale business today. PSTN is being switched off. That's great when you've got things like fixed wireless access. It's great when you can do a high-gain antenna and leverage all of the 5G SA capabilities that Andrea is building. I think we can compete as we build the network out far more than we ever been in the past. We're credible across the country on that one.
Great.
Good. Sorry, I think there was a question there, was there?
Question.
Are they worried about the question you are going to ask? You see, that was just-
No, don't worry.
Okay.
Well, maybe. Your biggest competitor in fixed business is scaling back on its international footprint, selling assets, et cetera. Is that a relative advantage for you as they become less international because you can presumably pull on expertise elsewhere in Vodafone Group? On the bottom end of your competition, the alt nets are increasingly getting into, after focusing on consumer in the beginning, they are increasingly offering business services. Is that affecting your SME business at this stage or too early or not relevant?
No. I'll do the alt net one first. Not really. Partly because when you look at a lot of the services we provide, you've got to provide the managed services. You've got to provide security, or we've got a range of portfolios. As I said, the customer demand is, "Don't just give me a piece of connectivity. You need to give me a wrap around that." Often, if you're a business, you need to have a professional way of doing a really good install or a statement of work or a scope of work. So when our engineers turn up, you can't just knock on Deutsche Bank or Goldman's door and say, "Hi, I'm here to install." You can't do that in SME business or a large-scale customer. So you need a professional level of CapEx. Professional, sounds insulting. I don't mean it.
You need a business skill to be able to do that. That's the first. Then, when you talk about biggest competitor, I think you've got two opportunities or three opportunities. Firstly, I'm not sure they are internationally. I think I've done a lot of international, and I think we're pretty well-placed, and we compete really well. I expect us to scale there. I think you've also got the geopolitical complications, where if you become an American company, some companies can't actually work with you or have risk if you're now contracting on American paper. So there's other things you need to think through. But also, the U.K. is also a really exciting destination from FDI. So when you think about FDI in, often those decisions might be made around the world. That decision might be made in Germany. The decision might be made in Abu Dhabi.
That decision might be made in Johannesburg. Actually, that's where we are. So you've often had that. I don't want to sound overconfident, but I just think we're really good at this stuff, and we know how it works. That's the way we do it.
We've just got time for one final question. If there are any more questions in the room. Otherwise, we'll leave it there.
No. We are good.
Okay. Well, thank you, Nick.
Thank you very much. Thank you.
Thank you, everybody, for your questions. This afternoon, we have seen how VodafoneThree is leveraging its network leadership and scale to drive growth across both consumer and business. To bring these elements together and to explain how they translate into stronger returns, synergy delivery, and long-term value creation, please join me in welcoming VodafoneThree's Chief Financial Officer, Darren Purkis.
Thank you, Kelly. It's great to see so many familiar faces here today. You've now heard about the many opportunities created by the merger across both consumer and business. This final section is about how we now bring these opportunities, combined with the synergies we're targeting, and how that translates into strong, adjusted EBITDA and free cash flow growth, and materially better returns over time. I have to say, standing here, I am genuinely excited by what we're building. We're only 16 months into the journey, and we're making great progress, and I have real confidence in our ability to deliver. There are four messages I'd like you to take away today. Number one, the merger had a clear rationale. It addressed the structural problem in the U.K. market, and it created the scale needed to invest and compete effectively.
Second, we have a clear path to delivering GBP 700 million annual cost and CapEx synergy target by FY 2030. FY 2027 will be the first year where you'll see material synergies with more than GBP 100 million delivered. I'm extremely confident we can deliver these savings, which represent a significant midterm tailwind for the business. Third, the strong execution we've already demonstrated and the progress we've made to date have increased our confidence to the point where we're now upgrading our cost ambitions.
Together with the benefits of full Vodafone Group ownership, we're able to move at an even faster pace, enabling us to increase our annual cost and CapEx target to GBP 1 billion by FY 2032. Finally, the combination of synergy delivery, EBITDA growth, and a clear investment profile create a path to good operating free cash flow growth. They also support returns well above the cost of capital over time.
However, before discussing the merger itself, it's worth stepping back a bit and looking at the broader market context. As Max said earlier, the U.K. has been one of Europe's most competitive mobile markets for many years. The industry has consistently delivered affordable services and low prices for consumers. As a result, the U.K. has some of the most affordable mobile data relative to income globally. But that affordability has not been matched by network quality. As the charts show, the U.K. continues to lag many comparable markets on key measures of network quality and performance. It ranks behind the other G7 countries on overall network excellence. It underperforms the EU 27 on consistent quality and download speed, along with many other metrics you've all seen before.
In other words, consumers have benefited from affordability, but the industry has struggled to generate the returns needed to sustain the investments at the level seen elsewhere. The result has been a cycle of low returns, constrained investment, and lower network quality. That has increasingly impacted the U.K.'s ability to compete on the international stage. That is the backdrop against which Vodafone and Three assess the opportunity, and it helps to reiterate why structural change was required. As Ahmed highlighted earlier today, before the transaction, Vodafone and Three were the two smallest mobile network operators in the market. Both lacked sufficient scale and both generated returns materially below the cost of capital. As a result, the economics did not support the investment required to improve network quality and compete effectively. It was never a question of whether the U.K. was an attractive market.
The question was whether either business operating independently had the scale to earn the appropriate returns while funding the necessary level of investment. The merger addressed that directly. It combined two subscale positions to create one operator with the customer base, network assets, and financial capacity to invest and compete sustainably. As you can see, the merger creates a structurally stronger business on a more level playing field across the MNOs. We move from two small operators to one scaled player with approximately 27% market share today. The outcome is not less competition, it is stronger competition. An operator able to self-finance the levels of investment required to materially improve network quality. An operator that can challenge the incumbents. Prior to the merger, there was little incentive for any operator to significantly increase investment in mobile infrastructure while so much capital was being directed towards the fiber rollout.
The market lacked a scale challenger capable of changing that dynamic. VodafoneThree changes that. We now have the scale to invest meaningfully, improve quality, and compete more effectively. That scale underpins both our investment program and our synergy opportunity. Our value creation model has four connected elements. First is integration and restructuring. We set out a detailed program to deliver GBP 700 million of annual cost and CapEx synergies by FY 2030, and whose progress today underpins our increased ambition. Second, investment. These efficiencies effectively support the financing of our GBP 11 billion network investment program over the 10 years. It is deliberately weighted towards the first five years, reflecting the scale of work required. It includes IT integration, rollout of The Nation's Network sites, and the retail rationalization program. Third is network leadership. The program creates a denser, higher capacity 5G Standalone network.
As Andrea and Max have outlined earlier today, our significant investment will enable us to deliver 5G Standalone population coverage of 99.96% by 2034, more than any other operator. That significantly improves our customer experience and the commercial capabilities of the business. The final element is the financial returns. Together, these elements materially improve our EBITDA, free cash flow, and returns profile. We expect the transaction to be free cash flow accretive to the group by FY 2029, and we expect returns, including goodwill, to exceed the cost of capital by FY 2032. This is why investment and return should not be viewed as competing priorities. Scale and synergies allow us to fund better infrastructure while building a financially stronger and sustainable business. Now let me turn to wholesale. The MVNO segment is an important and growing part of the U.K. mobile market.
Our strategy is to participate in that growth, but we will do so with clear pricing discipline and without undermining value on network quality. As part of the merger, we made specific wholesale commitments to ensure continuity in the market during the early years of the network build. More specifically, for the first three years after the merger, we have an obligation to provide wholesale terms to prospective MVNOs through the wholesale reference offer. These standard terms were established to ensure that the conditions for MVNOs post-merger would not be any worse than that of pre-merger. For existing Vodafone and Three wholesale customers, there are also rollover commitments for contracts expiring within the three years immediately post-merger close. Those customers can extend their contracts for up to a further five years under the same terms.
Both conditions are clearly linked to our network commitments with clear oversight from both the CMA and Ofcom. Over time, we will monetize network quality effectively in all our segments. None of our wholesale partners sell 5G+ today, but can by taking an add-on for an appropriate fee. I want to be clear about the nature of that opportunity. We have a disciplined wholesale framework. We will pursue wholesale growth where it is incremental, profitable, and consistent with protecting network quality and value. This makes wholesale a credible additional source of value. It is not a substitute for retail growth, and it is not a volume at any cost strategy. Turning to our targets. As we have announced today, we are increasing our annual cost and CapEx ambition to GBP 800 million by FY 2030, with a clear path to GBP 1 billion by FY 2032.
The reason we can do that is simple, confidence in delivery. My confidence comes from three things, the detailed preparation work we did before the merger, the clear execution plan that is in place, and most importantly, the strong progress we have made to date. As you can see, we already have the plans in place to deliver the organizational, retail, and commercial change required. Combined, these represent 45% of the total cost and CapEx synergy target, much of which will be delivered in the first three years. Within this, organization is the largest component. We moved quickly to establish the combined business structure. All teams have now been integrated down to the fourth level of the organization. We expect half of the target to be delivered by the end of year two. Many functions will reach their end state well ahead of IT migration.
Once the IT migration is then complete, we will have everyone consolidated onto a single stack, and the full organizational changes will be implemented by year four. In retail, we will consolidate overlapping stores. That supports approximately a 30% reduction in the pre-merger retail cost base while maintaining a significant presence on the high street. The program is well underway, and we expect it to complete by the end of year three. Lease expiries have been aligned to the program plan, giving us certainty around timings for this crucial aspect. Commercial represents a further 10% of the overall synergy target. This includes the rationalization of marketing, sales, distribution, and logistics activity. Progress is ahead of the initial plan, with more than 80% of the marketing synergies and 50% of logistics synergies expected to be delivered by year two.
Turning to network integration, unsurprisingly, this is the largest individual opportunity, representing around 30% of the total synergies. It includes site rationalization, the consolidation of operating centers and field operations, and capital savings once the early investment phase is complete. Network operating cost benefits begin from this year and build over the five-year program. CapEx savings emerge later, following that main investment period. Importantly, and as Andrea has noted, we are well on track here, which gives us a high degree of confidence in the delivery of this plan. IT consolidation contributes approximately 15%. These benefits come from customer and data migration, platform consolidation, and the decommissioning of duplicated systems. The designs are now complete, and the build is well underway. Testing and business readiness activities are now being planned, and we expect delivery to be completed by year four. Procurement represents the remaining 10%.
These savings come from combining purchasing scale, eliminating duplicated contracts. I would also highlight the material savings our procurement function has already delivered through our relentless pursuit of cost optimization, both through synergy realization and ongoing cost-saving programs. These savings have helped us offset some of the inflationary cost pressures the business faces each year. The key point is this is not one large independent program. It is a portfolio of identifiable initiatives. Each has accountable owners, defined milestones, and a clear delivery profile. The plans are in place, execution is underway, and our progress to date gives us a high degree of confidence in delivery. Cost synergies, however, are only part of the story. While we are not providing a specific figure, we are also seeing meaningful revenue opportunities across four areas. Number one, creating the best network in the U.K. Better network quality improves customer retention.
It creates monetization opportunities through propositions, as you have seen with Rob and Nick on SuperMobile. It supports further upselling opportunities. As discussed earlier, each of these contributes to stronger long-term growth. In addition to upselling, we are also looking to capitalize on cross-selling opportunities, selling into the Three mobile customer base. We can strengthen retention through converged offers, supported again through the launch of new propositions, including Vodafone TV, helping us to improve lifetime customer value. The addition of Fixed Wireless Access from Three creates another meaningful revenue synergy opportunity and benefit from on-net economics. This will further strengthen our position as the U.K.'s fastest-growing broadband provider. It will allow us to offer fiber-like speeds across the entire country, regardless of the pace of fiber rollout. Finally, 5G Standalone is creating opportunities for dedicated enterprise applications. These include national, regional, and critical infrastructure network slices.
The services create opportunities to monetize assured performance, resilience, and low latency connectivity. Full Vodafone Group ownership now also adds another opportunity. It enables us to simplify further our reporting and governance structure, reduces management complexity, and supports faster decision-making. It also allows us to make full use of Vodafone Group's procurement scale, commercial platforms, and shared services. These benefits create a further GBP 100 million annual cost and CapEx opportunity over the next four years. That increases the target that will be realized by FY 2030 to GBP 800 million. Importantly, it also means that Vodafone shareholders now capture 100% of the value created through future synergy delivery and cash flow growth from the business. Slide 66 sets out how we move then from our original target to the GBP 1 billion by FY 2032.
The original GBP 700 million by FY 2030 remains the foundation of our plan, and we have a clear line of sight across each work stream. As we consistently said, FY 2027 is an important point in the profile. It represents the peak year of our investment cycle. It will therefore be the final year which we report a net dis-synergy. As cost synergies build, the CapEx dis-synergies then gradually unwind, becoming accretive by FY 2030. As I noted earlier, FY 2027 will be the first year in which we deliver material cost synergies. They will be well above GBP 100 million, and we will continue to build towards that full target by FY 2030. Looking to what is changed versus what we committed to before. Full group ownership allows us to increase the pace of delivery and add further group scale efficiencies.
As a result, our annual cost and capital expenditure ambition increases from GBP 700 million to GBP 800 million by FY 2030. The move from GBP 800 million to GBP 1 billion is driven principally by two factors. Number one, further CapEx savings as we near the completion of our network build, having front-loaded investment in the early years. Number two, further benefits as we rationalize the network to our target site footprint and optimize infrastructure across our sites. This gives us a clear path to GBP 1 billion target. On top of these targets, we will maintain our relentless focus on cost optimization across the business. That will remain a key feature of our plan in the years ahead. As I've said, the investment and integration profile is deliberately front-loaded. FY 2027 is the peak year for CapEx at approximately GBP 1.4 billion. From that point, annual investment moderates.
At the same time, we remain on track to deliver our GBP 11 billion program over 10 years and achieve 99.96% 5G Standalone coverage. Around three-quarters of the integration and restructuring costs will be incurred within the first two years. That reflects the pace at which we are integrating platforms, customers, stores, and operations. Importantly, these costs are temporary. As these costs reduce, the synergy run rate increases, and a greater proportion of earnings converts into free cash flow. FY 2027 does not represent the steady state economics of VodafoneThree. It is the peak investment year, and it is that investment that enables the structurally stronger economics that follow. Slide 68 brings together the key financial indicators over time. I've provided a lot of color on the upgraded efficiency targets. Now let me show what that means for our other key financial metrics.
We expect adjusted EBITDA to grow mid to high single digits on a compound annual growth rate basis between now and FY 2032. That growth is supported by synergy delivery, as well as the underlying commercial momentum of the business. Operating free cash flow, defined here as adjusted EBITDA less CapEx, will more than triple by FY 2032. That reflects our updated cost forecast and the group buyout benefits. Crucially, returns improve. Return on capital employed moves from negative territory on the pre-merger baseline to above the cost of capital by FY 2032. We expect further improvement as the network program matures. The improvement in return on capital employed is initially gradual, and that was always expected. It reflects the deliberately front-loaded investment profile of our plan. As the program progresses, that balance changes. Once we're through the more capital-intensive phase, profitability continues to grow.
That growth will be driven by the full delivery of our cost targets and the monetization of the U.K.'s best network. It will enable us to deliver returns well above the cost of capital. This is an exciting growth profile, and as Ahmed outlined earlier today, we will be a key contributor to the group's midterm free cash flow ambition. A business with a stronger earnings growth, materially higher cash generation, and a sustainable returns above its cost of capital. Let me finish with the same four messages I started with. First, the merger had a clear rationale. It created the scale to invest, compete, and earn sustainable returns. Second, we have a detailed plan to deliver our annual cost and CapEx target.
Third, our increased confidence in synergy delivery, combined with the benefits of full Vodafone Group ownership, has enabled us to increase the target to GBP 1 billion by FY 2032. Finally, the financial profile is clear and compelling. Taken together, this gives me and the whole management team you have heard from today tremendous confidence in what lies ahead. We have a clear plan. We are delivering against that plan, and we believe VodafoneThree can create significant and sustainable long-term value for Vodafone shareholders. The foundations are in place. Delivery is underway, and I firmly believe the best is yet to come. With that, I would like to hand back to Kelly before we wrap up with management Q&A. Thank you for listening.
Thanks, Darren. Thank you, Darren. That brings us to the end of our formal presentations. We are now going to move into our leadership Q&A. Throughout today, we have explored how VodafoneThree is turning the promise of the merger into tangible outcomes. We have seen the scale of the opportunity created by combining the two businesses, the progress being made to build the U.K.'s best network, how we are creating new opportunities for growth across consumer and business, and finally, how that all translates into synergies, value creation, and stronger returns. This is your opportunity to put your questions to the team across everything you have heard this afternoon. We are just going to take a few moments to reset the stage to allow for this, so please stay with us for a moment. Thank you for your patience.
I would now like to ask Max, Andrea, Rob, Nick, and Darren back to the stage to join me for our final Q&A. We will have around 45 minutes, and I will be taking questions both from the room and from those joining online. If you are asking a question, please keep it concise.
Forgot to take the answers.
Our first question is from our online audience. The question is: how are you ensuring that SuperMobile users actually receive the quality and speed of service they pay for? Andrea, we will start with you in terms of how the network works, and then Rob and Nick, please comment on how the customer proposition builds on that.
There are two fundamental ingredients to get SuperMobile working. First is to have 5G SA, 5G+ coverage, because that gives you the inherent 5G SA capability. Once you have got the 5G SA coverage and associated 5G SA core, you can introduce slicing. So you have got the coverage, you have got the core that is an SA native core that allows you to have slicing. Once you have got slicing, you can start prioritizing the traffic. The capacity that we are introducing into the network, I said we are putting up to 2.5x more capacity and up to 5 x speed enables you to have enough capacity and the speed to be able to differentiate on top of already raising the bar for all the other customers.
It is the combination of those three things, SA core, your slicing capability, and your prioritization with enough capacity and speeds to be able to, on top of already raising bar for performance for all the customers, to give you more differentiated service.
Thanks, Andrea. Rob, Nick, anything to add?
A couple of points. I think the first is to say we are tracking the performance of every single SuperMobile user in the country, so we know exactly what speeds people are getting, and we know exactly who is getting the minimum guaranteed speed that we talked about previously. When we made that guarantee, we made it. If a customer, for whatever reason, feels they are not getting the speed guarantee, they are welcome to call us, have a conversation with us. We have an ability to see what speeds they're getting, and as we said in our proposition, they can leave their contract for free. So far, nobody is doing that.
Take a question from the room.
Thank you. It's Andrew Lee from Goldman Sachs. I had a question, just maybe a challenging question. Are you doing enough on cost efficiencies? You've presented a growth outlook that if we strip out the synergies, I think Max, the underlying EBITDA growth is 4% in a three-player market. Just conscious of a new shareholder in Vodafone Group, we look across the rest of Europe, and we see costs being ripped out of Spain and Italy post-Vodafone's running of those assets. How confident are you that you're pushing hard enough on your cost efficiencies, and what scope is there to do more on that front? If you don't mind a second question, but I don't think I'm going to get an answer on it, but I have to ask anyway. Why didn't you have a go at taking up TalkTalk?
Darren, can we start with you on cost efficiency?
Yeah. Look, I think initially I would say it is probably not the right way to look at it to try and take it out. There is a number of things, elements within there. Firstly, you have significant inflationary impacts within the business that is going on, within the market that is going on. Inflation has run at over 3% since the merger, and for the year leading into the merger. We have had to work really hard to take additional costs out to stand still in some areas to get back to the same position. We are doing a huge amount on cost programs, and we are taking more cost out. Incrementally, as part of the synergies, there are circa 20%, which are CapEx synergies, which will not flow into the EBITDA, but obviously go into the three times cash flow. We feel we are doing a lot.
We feel we are doing as much as we can. We are going through a program, and we have very clear line of sight for all of those synergies. But we will continue to look for as hard as we can for further opportunities, and there may be further things that come as we go through that program. But we are pushing extremely hard. As I say, it is difficult because you need to strip out the CapEx element to get to a true underline, as well as the inflationary impacts that we are fighting against.
Andrew. Maybe if I just build on that. I think we are doing enough. There is obviously the opportunity with AI, and we are learning all the time. You might have seen from some of our demos what we are doing in that space. AI will definitely help within our plans and is inbuilt into the plans that we have, but there are opportunities for more. I will give you an example, and bring that to life with some color. When we look at one particular use case, we have some productivity gains from the use of AI in developing code in digital. Some of our tests have shown that that productivity gain could be up to 40%. 10% is what we would have in our plans to cover inflation. There is a delta there of a potential opportunity statement.
We are learning all the time about what we could do with that. Do we take that straight as an overlay, as a cost efficiency initiative, or do we redeploy that potential productivity gain in digital and go after all the other opportunities that we were talking about in terms of digitization of the business? We are learning all the time. We are seeing opportunities, and potentially there could be some more. But that gives you an example of how we are thinking about AI and how we are advancing that space. The other question is relatively straightforward. Hopefully, you have seen through the course of today that we believe in our organic growth opportunity, both in consumer and in business. That transaction, I do not think has any bearing on that growth opportunity.
We are now in, as you know, in an expedited process in terms of providing feedback to the regulators, and we will do so in due course.
Next question.
Hello, everyone. Thank you very much. It is David Wright from Bank of America. My first question, and I will ask who, if that is okay. I suspect it is for you, Rob. You have obviously got the Fixed Wireless Access product, but you also have wholesale fixed fiber. But it would seem that Fixed Wireless Access is a lot more profitable to you because that is on-net economics, it is network economics.
So I am just wondering, within your marketing, when customers are calling in or when you are actually speaking to customers, how you think about that. Would you rather prefer and push an FWA into a customer rather than a fixed line where you make just a lot less money? That is question one, and then question two, Darren, maybe to you. I just do not understand why you exclude goodwill from return on capital when it is an acquisition. It is transaction-based.
Can I just say, goodwill is not excluded. It is included in the calculation.
It is included.
Yes. It should say on the slide as well. If it does not, apologies, but it did.
I thought you said excluding goodwill.
No, including.
then that's my mistake. Thank you very much. So maybe.
Rob.
Yeah. We obviously have the biggest full fiber footprint in the country, 24.5 million homes, asset light strategy. What I'd say is the economics on both are attractive. They're different, but they're attractive. With Vodafone Fixed Wireless Access, as you rightly point out, we get good on-net economics, but it comes with carrying costs, whereas the profile on fiber is different. So it's lower gross margin, but it's less CapEx. So full fiber continues to be the real growth engine in broadband, and we see Vodafone Fixed Wireless Access as complementary to that, in particular, the areas where fiber is not yet available. So when it comes to the conversation with customers, there's 3.5 million homes with no fiber where we have Vodafone Fixed Wireless Access coverage.
For those customers, we are having the conversation with Vodafone Fixed Wireless Access because it's better than copper, it's faster, and in most cases it's cheaper. But for customers where we have fiber footprint, we are having conversations about fiber. Obviously, there are also other segments of customers like students, like renters, et cetera, where the customer need is actually for something easier to install that they can take with them when they move around as well, so Vodafone Fixed Wireless Access is perfect for that. But the real growth driver is still fiber, and we see Vodafone Fixed Wireless Access as complementary.
Perhaps if I just build on that as well. We look at profitability end to end, not just at EBITDA level. So there is a cost to carry, as Rob said. We see this as complementary, and then there's also an area within Vodafone Fixed Wireless Access which we are looking at. The area that we're looking at, it's obvious that it's a better product, better for us margins, it's better customer experience than in copper. Where we have capacity available at a site-by-site level, it may be better economics for us to put that on FWA. So we will be looking at that site by site. But we're very confident in our portfolio. We look at customer experience, we look at economics, and we look at lifetime value.
We will build a portfolio of solutions to connect every community in every corner of the U.K., and that is the way in which we look at things.
Next question.
Thank you. Carl Murdock-Smith from Citi. I will ask one because I am a good boy. I suppose the target that I was maybe expecting to see today that I have not seen is 4.3 million broadband customers by 2034 that you have mentioned in press interviews. My question is: Is that a target? If it is, I suppose it is partially following on from the FWA fiber question, are you expecting your broadband net adds to accelerate in a maturing market? Thanks.
I will take that. Yeah, we expect to double. We are sticking by that commitment, which our growth is exactly on that trajectory. What you can expect to see moving forward is mix, is shifting in mix. You can expect to see shifting in mix towards FWA. But yeah, that target still remains and we do not need acceleration, actually. We need to maintain some of the pace that we have already been doing, but there will be mix changes.
Great. Next question, please.
Thanks. It's Josh Mills at BNP Paribas. I wanted to come back to the CMA wholesale commitments that you made and what you were talking about earlier on stage. One of the debates we're having at the moment in the sector is about Starlink, the ability to enter different markets, and assuming that direct device mobile satellite connectivity isn't the solution near term, MVNOs look like an option. First part of the question is, under the current terms, if Starlink came to you, would you be obliged to give them an MVNO or is there any reason in the terms that that may not apply to Starlink and SpaceX or as it would to other retail partners? Secondly, some of the MVNOs on Vodafone's network, Revolut, Klarna, et cetera, are very cheap at the moment, GBP 15 global roaming, et cetera.
Is there any floor pricing structure in the terms which would prevent your future partners from undercutting you on price? I'm just trying to understand if Starlink came in, decided to charge GBP 5 a month in order to boost their conversion strategy, how disruptive that could be. Thanks.
Darren, do you want to start?
Yeah, I'll take that. The first question was around, excuse me, the wholesale reference offer. That we have an obligation to provide any prospective partner that comes along. There are certain conditions that they have to meet. They take that under an NDA, and they decide whether those terms are appropriate for them. Assuming they meet those criteria, then yes, we will be obliged to provide that connectivity for them. The second part of the question, I think you can look at the headline pricing, and people like Klarna and Revolut have introductory offers. But you look at Revolut post their introductory offer, it's aligned with where the other MVNOs and where sub-brands are actually pricing. So it's not that dissimilar. I don't think it's a massive undercut from others.
People like Klarna, they've got a big headline, but you've got to pay GBP 45 to get what they're offering on their premium membership service. So it's all linked in with other areas. So it's not as easy just to underplay those. But I think we have a contract with the aggregator. The aggregator then has a contract with the onward partner, and we have no influence, and we can't have any influence on the onward partner's pricing.
There are speed caps within those offers as well.
Yeah. You'll see the MVNOs come into market. They're on speed cap. They're very simple MVNO plans, simple SIM-only plans. What we're trying to, and we've talked a lot about today, is the quality that we're selling into the market now and the differentiation that we want to bring, not just the SuperMobile speed, but Secure Net. The wraparound services on business or on consumer that provides the whole end-to-end connectivity that consumers want now and are willing to pay for.
Next question.
Hi. Hello. It is Polo Tang from UBS. Maybe a question for Darren Purkis, just in terms of clarifying the net synergy profile from here, because you have obviously got three different buckets in terms of you have outlined OpEx synergies, you have got your CapEx profile, and then on top of that, you have got restructuring. When will the deal synergies be net accretive? Can you maybe just talk through the profile?
Yeah. When we talk about the GBP 700 million-GBP 800 million, they are net of dis-synergies, so that is excluding integration and restructuring costs. However, as I said, 75% of those are spent within the first two years. So actually, you are through the majority of that profile by the end of this year. We are net accretive next year on total. But as I say, we are starting to see the material cost synergies come through this year, and they build over time. We have the peak CapEx year, and then that starts to moderate. So next year, you see a net positive position in synergies.
Question.
Hi. Matt Howett from Assembly. Max, I just wanted to pick up on your point about net neutrality reform for innovation. You pointed out that the mobile market review was quite encouraging in that respect. Do you have the same sense from what is a new government, new administration, new department, for that to continue? Are you any clearer on what that would look like, what it would enable, and also how your partners might feel about that? People like Netflix, who obviously sometimes can sit on a very different side of the fence.
Great question, Matt. Yes, very encouraged by the conversations on net neutrality reform, energy reform, and planning reform. As I mentioned earlier, lots of alignment across the industry, lots of alignment with regulators, lots of alignment with government. But we need to see now consensus turn into action and legislation. On net neutrality reform in particular, we are looking for reform around application slices or category level slicing, where we think there is a great opportunity for enhanced customer experience and also monetization of the network, particularly in B2B.
Now we are going to take a question from our online audience. I think this is one for you, Andrea. Is Open RAN still considered strategic in the future of VodafoneThree's radio modernization plans?
It is a very good question. Because the CMA have imposed very strict deadlines in terms of number of sites and in terms of spectrum solutions on those sites by certain clear deadlines, unfortunately, the current technology Open RAN roadmap did not enable us to meet those deadlines. That is why we took the difficult decision to abandon Open RAN for now in the U.K. network. We doubled down on two main suppliers with a GBP 2 billion contract, Nokia and Ericsson. They developed specific radios that meet our spectrum holding that were not available. They are developing that specifically for us, something that unfortunately, the Open RAN vendors could not meet. So it was a forced decision based on the strict deadlines we got from the CMA to meet those requirements.
Another question in the room.
Yes. Good afternoon. It is Emmett Kelly from Morgan Stanley. I got a couple of questions, please. The first question is for Andrea on the network, please. You have laid out some very compelling plans about building best network here in the U.K. I guess if I look at other examples of companies that have tried to do this, like Odido in the Netherlands or T-Mobile USA, it obviously takes a while to catch up with the market leaders. OpenSignal suggests that EE has quite a lead at the moment. How should we think about the timing on best network? When do we really see it in terms of OpenSignal surveys, people are talking about it, your consumers talking about it in the pub or whatever? That would be the first question.
The second question is for Darren. If I rewind the clock quite a few years ago, subscriber acquisition and retention costs is a KPI that Vodafone used to give, kind of showing my age here, but going back many, many years. Can you maybe say a few words on acquisition retention costs, where they are in the U.K. market? It has always been quite a heavy acquisition retention cost market. Are these going up? Are they going down? Are there any benefits from the merger on acquisition and retention costs? Thank you.
Maybe I will start with the question you posed to me. We are already demonstrating network leadership in the areas where we have completed our plans. If you look at London, for example, NET CHECK has already declared us as the best network in London. Ookla has declared us the fastest 5G+ network nationally. When we look at the other benchmarking companies and other statistics, the gap with EE is closing, and it is directly linked to the areas where we are completing our plans. I showed you earlier how we are bringing C-band 200 MHz that no one else has to 50 million subscribers, adding 82% increase in speeds. What we see is where we are completing our plans, we are superior.
Once we complete the plans, we will be superior, and you can see that there is a very clear roadmap to get there in terms of timescales, in terms of deadlines and outputs. 99% population coverage, 99.96. Once you have got that coverage, once we deliver the capacity in the core, that will give us superiority. We are already seeing that superiority when we have completed our plans in particular areas.
Darren?
Sorry, I think that was the second part of the question first, as all the hands fly up. The second part of the question, let me start with that and Max, jump in if you want to. But acquisition and retention costs remain a material cost into the business. What I would say, however, is that the merger has created real opportunities for synergies within there. If you think of some of the items that go into those acquisition retention costs, you've got channel mix. We've already spoken today about Vodafone leading the way on digital. That is a much more cost-effective channel. By moving the way that Vodafone go with the Three side of things, we get a significant synergy. So we are pushing and learning all the time and synergizing.
Cost center costs that go through on acquisition retention as well, we've synergized on those, part of the organizational structure piece. So third-party costs, overseas costs, we are synergizing on all of those. So big opportunities, and there's a number of other areas. Big opportunities. Wherever we've got an opportunity, we're looking to synergize on those. We're looking to learn from the best of both brands and taking that into what we do going forwards. We've done a lot of that already. We've learned a lot in 16 months, and we're continuing to push that quite hard going forwards. Anything you want to add?
Yeah. Look, building, it's all about the digital costs are, and as Rob's charts pointed out, there's clear opportunities for us to improve digital mix, which would improve costs across all of our brands. Then there are some things happening in the market at the moment. Home broadband is particularly competitive, and we've seen BT go back into affiliates, which is quite a reversal of strategy, which has pushed some of the costs up there. So it's really important that you have multi-channel and omni-channel approach, and that you try to push the digital mix. So, just to give you a sense of some trends, what we're seeing in the market, but also the overall opportunity that we see in terms of cost efficiency coming from acquisition retention costs.
We've got another question from the online audience. The question is, please can you expand on the AI-related benefits, both on cost and revenue over the next three to five years? Maybe start with you, Darren, if there is anything you can expand on. But then it'd also be great to hear from Nick about how he's thinking about AI driving that simplicity and growth in the business space as well.
Yeah, look, I think AI gives us two opportunities. One, there is cost efficiencies that we are looking through, and Max has already talked on one of the previous questions about where we have got an opportunity we are starting to utilize, and we are closing gaps, but we have got more that we can do. There is a lot we are doing on the cost side, but it also gives us opportunities in growth. It is not just in cost optimization, it is in growth opportunities.
Certainly, how we serve our customers could be a cost, but it could be an efficiency in how we best serve our people, how we get the best service, how we get the quicker service, cost optimization on networks, AI will be self-optimizing on the network. There are many, many facets to how AI will play into our business. Cost is one, growth is one, efficiency.
We are looking at all of those, and we are taking them as we can. They are not all switches that you flick overnight. You have to invest in them, you have to build them properly, and you have to do it with care as well, especially when you are dealing with consumers and businesses. We are doing the balance, and we are working hard on that, but AI is definitely a focus for us now and going forwards as well.
Nick.
Yeah, let me do one internal, one external. External, unified communications. We are seeing 20% of our customers already deploy AI on the services we use for transcribing and building on that. Then internally, proposal work, bid work. BidBuddy is something we use internally. It is quite extensive, really sophisticated in the way you do it. There are lots of opportunities. I know there is loads in consumer as well. It is a good balance.
Yeah, look, I think there is monetization opportunities here as well. We have talked a lot about the network. We have talked a lot about SuperMobile. SuperMobile will be the plan that allows AI to perform best. It is low latency, it is on a slice, it is reliable. As those AI and agentic workloads and those use cases get more and more complex, more and more demanding on the network, we have got the connectivity solution for that. That brings monetization opportunities.
The very profile of a customer who would use an AI agent is a perfect candidate for SuperMobile.
Yeah.
Great. Another question in the room.
Karen Egan from Enders Analysis. Probably a question for Rob really, about consumer propositions. The first one is, you recently introduced speed tiering on Three, and then you also introduced SuperMobile. Is the consumer proposition getting a little bit complicated? It sounds like you may be confusing even some telecoms analysts about the difference between them. By the time they choose their gigabytes, they choose which speed, they choose whether they want SuperMobile and various other things. Are you starting to think about it differently now that it's on Three and that you've introduced SuperMobile? Because it looks like you have been changing some of the pricing around there. The second question is quite a simple one about Just Ask Once. I think when you launched Just Ask Once on mobile, you pointed towards it being launched on broadband.
Is that something that is in the near-term horizon, and would it be on the same terms with the right to cancel?
Let me start in reverse order because the answer is easier. It is done. It is live. It is across all the Vodafone products. In terms of your first question, effectively, if you look at what we have done in Vodafone, you have 100 Mbps, you have full speed, and then you have SuperMobile. You look at what we have got in Three, you have 100 Mbps, you have a full speed add-on. As we have talked about, in the future, we will be launching SuperMobile across all our brands. You can see the strategy, you can see how we are starting to use network and network quality to monetize, to drive more value out of the plans that we sell. I think if you simplify it down to 100 full speed SuperMobile, that kind of simplifies the structure that you see and the strategy.
Next question.
Thanks. It is Brian Potterill from Enders Analysis. A question for Darren. You mentioned about the wholesale commitments, one of which was the rollover obligation. You have two big MNOs who are pricing aggressively and growing. Has that taken effect? Has the rollover obligation happened, or have we still got something down the road? Have you recontracted with them?
Clearly, I cannot talk about individual companies' commercials, contracts. All I would say is that all of the partners that both Vodafone and Three have opportunities to roll over on the existing contract that they had at the prevailing rates. Clearly, I am not going to talk about whether people have recontracted or what they have asked for. That is commercially sensitive information.
Next question.
Yeah. Hi. It's James Ratzer from New Street. So two questions, please. The first one was about TalkTalk. We've just lived through an interesting two or three years where they're very generously donating probably 300,000 to 350,000 of their customer base back into the market every year. I would suggest Vodafone has probably been quite a beneficiary of them losing customers. Now, maybe under new ownership, that rate of customer loss is going to diminish. If that is the case, and they hold onto their customers now under BT ownership, what does Vodafone do to maintain its broadband growth in the consumer segment? Do you need to change strategy to become actually more price aggressive than you have been in the past?
The second question is, one of your other competitors, Sky, has the slogan, "Believe in better," but they're not on the best mobile network in the U.K. at the moment, if we're to believe the pitch you're making. So what are you doing, or are you interested in trying to get them onto the best mobile network in the U.K.?
Do you want to start?
Do you want to take the first one?
Yeah.
I can pick the first one up. Let me take the Sky question quickly talk about the wholesale point. Let me take the Sky question first. Look, we're building the best network, and we're building the capacity and capability to offer services to partners. That said, as I said in my presentation, we have a clear pricing discipline. We will only take people on where it is incremental for us, in both profit and cash flow, where it protects the network integrity, and where it protects SuperMobile. We will not do anything that diminishes what we have in our own business, and we will look after our own brands before we take anyone on. Does that mean we're interested or not interested? It's not about Sky or anybody else.
We're building the capability and capacity, but we would follow those pricing principles and those core fundamentals around the framework before we decide to take anybody on in the market. And I'm afraid that the answer on is exactly the same. I think you will have demonstrated today the opportunities we have for organic growth, both in consumer and in business. We believe in our propositions. We're improving our propositions all the time in consumer and in business, and we don't believe that that transaction would have an impact on those growth ambitions. I'm afraid it's the same answer I gave earlier.
Next question.
Thank you. It's Robert Grindle from Deutsche Bank. The first question is, you've got big fixed broadband ambitions, a bit more FWA in the mix, but fiber's still the main gig. You're offering 8 Gb soon. Are your customers asking for higher speeds? And the question is, your footprint for fiber, only part of it has got XGS-PON type speeds. Do you need to increase, effectively, your alt net coverage, going forward? And the second question is on the guidance for EBITDA. You've got a range from mid to high single digit. What are the outcomes which affect that range? Is it mainly a revenue thing, because the costs and the synergies are all kind of fixed, or something else? Thanks.
Shall I talk about, as I have been on record saying before, we are open to new partnerships. I think what is really important is what do we look for in the partnerships, and that is economics and also customer experience, and we do not talk about customer experience enough. As a reseller of home broadband, we need to ensure that our customer experience is excellent, because churn is a key KPI, and the first life economics are low, and then we need customers to stay.
The failure rates on installs, complaints in life, fault rates, these are all critical metrics that measure customer experience and are vital for us. Having partners who are pushing the boundaries around customer experience, that is all part of what we look for in a great partner. A fantastic example is Community Fibre, one of our partners. A smaller footprint, fantastic customer experience metrics, great for lifetime value.
To your question, sorry, Kelly. To your question about the EBITDA range. There is a range for a reason. There is the cost side of it, very, very confident. We have got the plans, and they will be delivered. The other side, on the revenue side, it comes down to a mix. It could be a mix of the products we are selling. If there is a higher broadband over FWA, that will slightly impact that. It could be how much of the SuperMobile we deliver. We are very confident in our revenue growth. We are very confident in the opportunities, but the range reflects the mix of what will be delivered. Your question, which was, are customers asking for faster speeds?
The answer is yes, and if you look at where the market share is, and you look by speed, right now, over 45% of new market additions are taking over 900 Mbps, and that is increasing and has increased year-on-year. They are demanding faster and faster speeds.
More questions from the room.
Oh, thank you very much. It is Paul Sidney from Berenberg again. Just a couple of quick questions, please. We have heard all about Vodafone SuperMobile today, and I just wondered, do you think there is any merits in moving towards a different way of selling mobile products to consumers and enterprises? I mean, is 5G Vodafone SuperMobile just the start, where consumers can look at a list of optional extras, almost like buying a car if you take alloy wheels or a sports package, whatever it may be, to get them to pay an extra GBP 3, GBP 4, GBP 5 a month? Then just a quick one. What is the most important financial metric Vodafone UK looks at internally to monitor its success? Is it revenue growth, EBITDA growth, free cash flow, ROCE, or all of the above? What is the most important thing?
Rob, Nick, do you want to comment on?
Yeah. I will leave that second part for Darren, I think. In terms of the first one, effectively, what we are trying to do is change the market, and we are trying to change the way mobile trades in the market. We are trying to add a new dimension, which has never been there before, which is quality. In essence, that is what we are trying to do, and we have got it in a subscription or you can, as you say, a little bit like the cars, you can take it as a monthly add-on along with lots of other monthly add-ons we have got. Yeah, we are trying to change the way mobile trades.
I think from an enterprise perspective, when you think about that, you have got to think about the output. I was talking about how you put various products together. As a business, you will have a persona, and you will have a policy for that persona. What you give to your field engineers, because if they miss an appointment or they cannot complete the appointment, the cost of that is pretty high if you have got to roll that truck twice. A lot of what we do when we talk to big enterprise customers or even medium enterprise customers, you talk about what is the application, what are you trying to achieve, and why are you giving that person mobility? The second thing is, you think about that mobility with a bit smaller businesses, it can be even more critical.
Because you don't have a procurement function, or you don't have other functions. So that element and that level of trust and that ability to link those personas and portfolio together, I think it's really powerful, and I think that's what we're seeing. That's why I had some of that integration in the slide. So yeah, I agree with the question and actually, in terms of trying to do it, actually, we're doing it now, and it works really well. When you do that, you really have a substantially lower churn as well.
The second part of the question around key metrics, Darren?
Yeah. I'll start. For me, they go hand in hand. We are very focused in VodafoneThree on driving revenue growth, driving EBITDA growth. But ultimately, we need to drive free cash flow, and we need to drive returns for shareholders. So yes, we're very focused as a management team on execution in the business, driving our business, getting revenue and EBITDA growth. They translate, though, into the free cash flow and the return on capital. So I don't see them as being independent. I see them one leading to the other. We're very focused on all of them. Clearly, going up to the shareholders, the cash flow, the returns are very important.
This is our final question. If anyone's got a last question before we close.
Hi. It's Georgios from Z/Yen Research. Firstly, given my Vodafone affiliation, I wanted to say thank you. I know there's a lot of effort that goes into this event, so well done, and I think it was very informative. I have two questions. The first one is on the 200 million additional synergies in the latter years. I think, Darren, you mentioned mainly network-related CapEx and leases. If it's possible to give us a split between them, or whether you can give us an indication of how much MBNL affects this journey to 26,000 sites at the end. My second question is on the network remedy with Ofcom and the CMA. We have the capacity side, which is fine, but then I would challenge the merits of the coverage in a world of direct-to-device.
The world has changed in the last two years and may change more in the next couple of years. My question will be, can you divert some of these investments somewhere else? Is it a discussion you can have? If you can give us an indication of the amount out of the GBP 11 billion that's really dedicated towards these coverage targets. Thank you.
Darren, do you want to comment on the first question?
Yeah. I'm trying to remember. The first one was the split between the extra 200 million at the back end. It's broadly half and half between site rationalization and CapEx. The CapEx is the natural progression that we see, and that is where we come to the end or more towards the end of our network rollout program. As we've mentioned, it's more front-weighted. The second part of it, the site rationalization, isn't specifically MBNL, it's general site rationalization. As we're starting to decommission sites, we start to see those benefits come through.
I think the second part of the question is certainly for Andrea.
On the CMA, when we discussed the merger, we had a long debate about how do you measure the success and the behavioral remedies that go with the approval. Radio is non-deterministic, so trying to get a very clear measurement on the output of what this merger was going to deliver in terms of coverage and speeds is very hard. It is not deterministic, and it is statistical. You would always have an edge case where you are not actually achieving the output. We had this great agreement to say, "Why don't you focus on the input?" Because the input is deterministic. If you put a certain number of frequencies and a certain amount of bandwidth on a prescribed number of sites by a certain date, you know you will get something out of it. There are no ifs and buts.
That is really clear, really simple, and we do not create an industry of measurements and subjective review. The beauty of that, it is simple, it is measurements, and you know that if you do that, you are going to get an output. As I said earlier in my presentation, we have made commitments on specific number of sites with specific number of configurations, high, medium, and low, by certain dates that give you an output. We measure the input that knows. The monitoring trustee and Ofcom measure us on both. We are held to the input.
Perhaps I will build on that as well. Actually, it goes back to the very start of the day. What is our purpose? Our purpose is to connect every community in every corner of the U.K., and we see satellite as a fantastic opportunity to do the remaining 0.04% that will not be covered by Andrea's fantastic world-class 5G SA network.
Thank you for all your questions, everybody. Now I'd like to hand over to Max for final remarks.
Thank you, Kelly. Thank you all for joining us today, whether it been online, out there, or here in the room, and for your attention and excellent questions throughout the afternoon. For those of you who are staying, please, we will be here. The management team will be here. Please do stay behind for a drink. But a few thank yous. I'd like to thank my brilliant team. A lot of effort's gone in today. You've heard today from Kelly, from Andrea, Rob, Nick, and Darren. But supporting us, of course, there is a huge team behind us that have worked incredibly hard over the past 16 months to deliver this fast start that we've shared with you today. As we close, I hope you take away two key conclusions. Firstly, the scale of the opportunity that is in front of us.
Secondly, the clarity and confidence we have in delivering it. The new era of connectivity is well underway. Thank you