You'll see on our website that you have the full detailed presentation and now we will go into Q and A. But before we do, I just thought I'd just take a couple of minutes to just go through the key highlights. I'm pleased with our resilient performance in FY 2021 despite a very challenging period for everyone. We met all of our guidance, generated €5,000,000,000 of free cash flow pre spectrum and confirmed a stable dividend of €0.09 we've delivered 10 consecutive quarters of lower churn and added over 1,400,000 NGN fixed broadband customers this year, exiting this year with growth. We'll also continue to drive it and we're ahead of our plan want to integrate in Liberty assets and have successfully IPO'ed Vantage Towers.
So I would say have strong delivery across our strategic priorities. But the world has changed around us in many you have the EU recovery funds are going directly to digital, further accelerating these trends. I feel the hard work and the focus that we've had as a management team over the last 3 years has really captured that demand. And our focus is being a new generation connectivity and digital services provider. Now today, for the first time, we've provided mid term ambition targets, growth in service revenue, importantly in Europe as well as Africa, growth in EBITDA and free cash flow and growth in return in capital, ultimately above WACC over the medium term.
We have a win to invest more. Whilst our incremental investment in 5 gs will continue to be funded through internal efficiencies, we do plan to step up investment in high return opportunities, particularly Vodafone Business and Vantage Towers. Underpinning all of this is a firm commitment to our dividend. And with that, Margarita in Vodafone Red Colors and myself will take your questions.
Thank you, Nick. Our first question comes from and please go ahead.
Great. Maybe if I just pick up on that final point around CapEx and investments. I guess the CapEx is the main reason today that the free cash flow guidance is a bit below consensus. I think if we include the Vantage Growth Investments, Your CapEx would be around 5% above consensus for FY 'twenty two. I was hoping you could maybe just expand a little bit on the CapEx, Where is it going?
If we look at FY 'twenty one in particular, you had a sort of quarterings or will you see it continuing to rise from here? Thank you.
Well, Jacob, maybe Margarita, you want to go through where we're investing in the CapEx? And then maybe I'll return to the important subject of growth.
Sure. Jacob, I will, for simplicity, to FY 'twenty and where we are planning to go post pandemic. And you have seen in my Presentation, a slide that was effectively doing the bridge to FY 'twenty two. So if you look at the increase between pre pandemic and post pandemic, different areas. The first one, which you mentioned, is network performance.
It's connectivity. We have seen our customers' behaviors changing significantly this year, and it's a change that we now see in a number of areas. I mentioned earlier in the presentation that fixed traffic is growing at a rate which is 50% higher Today than it was before. So we are spending more to service our network performance, which in turn We support our commercial momentum at a point in time in which customers have never been as focused, I would say, on quality. Increasing CapEx, I would say about onethree goes into this network performance investment.
The remaining twothree are going into new growth areas. The first third is going to be focused on digital platforms and services Because we believe we are in the background. Mostly see these areas such as Vodafone Business were we not explained in the Capital Market Day that we have recently had what type of opportunities that we believe we have. The second growth area, so the final third of the spend is going into Vantage growth CapEx. And again, another area that As business is going to give us returns in excess of our cost of capital and therefore support our target to deliver returns above WACC in the midterm.
You also asked Where are you spending in the networks? Is it capacity? You have seen a step up in FY 'twenty one. As we move into FY 'twenty two, The capacity investments will go back down, but also we will have an acceleration of the 5 gs Investment that will sort of compensate for that. So that's why also in the midterm, I see this third Additional CapEx going to network performance.
And maybe just building on the growth and sort of confidence in growth. I think it's really important to understand we are exiting in growth. And actually excluding roaming, quarter 4 is a 1.7% growth rate, which of course will come through as we move into quarter 1 and start lapping the roaming impact. So we have momentum. We are growing.
This is not CapEx to create growth, it's CapEx to accelerate our growth profile. And I look at it in 3 ways. First of all, Vodafone Business is up 30% of the group. Vodafone Business, excluding roaming, growing at, let's call it, around 2% and accelerating. I really think Bernard highlighted that we have a very unique position.
It's really important to understand that there's only 2 players in the business segment in each of the market, us and the incumbent, and we are taking market share. And we're taking market share because we have a unique scale. We have a unique scale in terms of footprint, in terms of platform, in terms of strategic partners into e government initiatives, Smart Cities and various others, eHealth. And therefore, we can also play a significant role in that. Then you go into what is just over 50%, which is which is European consumer.
We see that moving into growth. We see it moving into growth because we have effective second brand strategy on top. Were also looking to the UK change, which has moved to a CPI RPI model. And we are taking that model and putting that condition into our contract through Europe to provide us optionality to move towards a more investment led pricing model, but just over 15%, which is emerging consumer. And here we're obviously going through a path of upgrading from 2 gs, 3 gs, 4 gs penetration, that moves ARPUs up through higher usage of data.
And of course, we've got financial services, which is already over 10% of well, digital services and financial services combined, over 10% of the service revenue of our emerging markets and growing in double digits, which we see as a really differentiated position versus other players in the market. And then, of course, you've got roaming, which we lap and then we'll start to contribute to grow Secure. So we have many drivers of that top line growth that gives us confidence. Thank
you. Thank you, Jacob. Our next question Comes from David Wright from Bank of America Merrill Lynch. David, please go ahead. Your line is now open.
Thank you very much, guys, for taking the call. I might just have to follow a little on Jacob So if we think about those moving parts, the Vantage growth CapEx on the DTS is obviously there's a hump to that. You've got the build of the towers maybe sort of coming through full year 'twenty four full year 'twenty three, 'twenty four, but then that should slow. I guess the question is then whether the digital services and platforms investment is a little more accelerated upfront. Ultimately, the answer I'm trying to find is whether this kind of €8,000,000,000 CapEx that seems to be broadly baked into the midterm guidance.
Is now the levels are all within that that we could see that CapEx level sort of dipping beyond there. And I guess just the obvious follow on on your comments on the fixed line CapEx. That then is surely quite focused in Spain. And I'm still struggling to understand how Spain looks like it's going to meet your return on capital Framework. And obviously, any comments on what may or may not have happened with Massimo Ville would be super interesting.
So thank you.
Well, maybe I'll cover the latter Spain points. And you want to cover the formal?
Sure. In terms of the 2. As we look to the midterm, we have been giving you 2 important reference points: our expectation of EBITDA growth, Mid single digit and free cash flow growth, also mid single digit. The CapEx that we are investing into growth. Growth CapEx for Vantage, which, of course, will be lumpy by nature and also the growth opportunities in the digital services, which In turn, will depend on our business cases.
But if you want to sort of work out a little bit the financial equip mid Single digit EBITDA growth and you bridge it to the free cash flow growth, you will realize that once you take into account tax, Of course, as EBITDA grow, it will be tax. And then also the gradual unwind of the working capital that we have had in the year just gone. You will say so maybe what we can call out today is yes, there could be scenarios are going in this direction. I would say mainly for two reasons. 1 is, again, the business cases of the growth.
I mean, we will invest For as long as we see this significant opportunity, and as Nick mentioned, I think this is a really important point in time for that. So we will have to see In the long term, what happens and also in terms of technology cycles, I suppose at some point, we will move over The 5 gs cycle and we will need to see what's the next technology there. But again, it's a bit of a long way away. And I think It's worth noting that we have been, for the first time, detailing quite clearly what our overall midterm ambition is. And I This gives you some pretty clear goalposts overall.
Just maybe David just turning to Spain. I mean, look, I'm not going to engage in a narrative around market speculation. I don't think you would expect us to. What I would say is that we have made it very clear that we are always shareholders and we actively engage with players throughout the whole of Europe and our markets. What I would say is that obviously, MasMovil has gone for a, let's say very logical, very safe option in terms of consolidation with another value player I see in Spain.
We work very hard with the team in terms of always going through the local plan. And what I would say is it's a number of elements. First of all, we will be accelerating Vodafone Business. We see it as much as you see that in one of the charts in the presentation. And that plays very much squarely into our advantages as a company.
I would say we've got a very effective dual brand strategy in consumer. Low E has been very effective at the low end. And what we've done at the higher end with the Vodafone brand is really drive unlimited into the base and in commitment into the base and convergence. So I mean we have a very resilient position. I think that's showing in our commercial performance.
I'd say the other added extras that we've been working on is engagement with government. I went to see the President, the Economy Minister, very good meeting. They really understand the criticality and importance of our sector and our business. And they've been very proactive in terms of coming up with initiatives. You will have heard discussions around extending spectrum from 20 years to 40 years, also some tax concessions to support the sector.
So I think these are really positive moves to improve returns. And that was my point to the President. We need to improve returns for the sector. You need our services to be competitive as a country. Then finally what I'd say is network sharing.
We've yet to see the benefits of network sharing. We continue to look at ways we can share more and accelerate our digital capabilities so that we drive more efficiencies in channel mix and various other things.
Just maybe, David, coming back to a point you made just to reposition. You said we may invest significantly more into Spain on the back of this additional envelope. And I think it's important to point out that's not the case. Our capital allocation is clearly a process very much driven forensically by returns. And The majority of the additional investment is essentially going to 2 areas.
1 is Germany, As it should, of course. And then the other for platforms and of course for Vantage is central Activities. You will have seen that we have recently changed our operating model in technology to have a single team driving Europe And we want to make sure that these new development, these new investments are done once for the benefits of all the markets. So just wanted to point out it's really Germany and Central Development.
That's super good. I mean, you've kind of been lagging Sort of 2, 3 years since you really made ROCE a kind of a core hurdle for these regions. Do you think Spain is a cost of capital plus business on a 2 year view if you're kind of putting a 5 year envelope Around this kind of return on capital ambition, is Spain there? Or do you need to does it need some kind of additional restructuring, do you think, to make the grade?
I think it needs 3 things. It needed, 1st of all, digital acceleration. We're going to get that post pandemic. So we've revised our plans in terms of the pace at which we're moving on digital. It needed network sharing and deeper sharing and we're engaged on that.
And the third, it needed a little bit more support from the government and funding and we're getting both of those things. So what I'd say is we're tracking well for the plan.
Very good. Thank you.
Thank you very much, David. Our next question comes from James Ratzer at New Street. Sorry, James. There you go. Your line is now open.
Great. Yes. Thank you. Good morning, Nick. Good morning, Margarita.
So I have two questions, please. The first one was just regarding your
medium term growth ambition, mid single digit and
tying that in with the mid single digit and tying that in with the accelerated investment you're making at the moment. I mean, I think your guidance for this year would imply around 3% to 5% organic EBITDA growth. So to hit mid single digit Growth and tying in with the incremental investment you're making, is it fair to assume you're baking in EBITDA growth beyond FY 2022 going above 5% to start seeing the return from these new investments You're making. And then secondly, just on a point of detail around the Vantage growth CapEx for this year that you're Taking out of the free cash flow guidance, I mean, I'm thinking that should be around €200,000,000 Could you just give us some steer if you think that's a sense or number for this year. And could you explain to us what's the logic for taking out the build to suit CapEx Out of the free cash flow guidance, given Vantage, I think, is doing all of its build to suit for Vodafone.
I would
have thought you'd have been making that investment anyway Whether Vantage had been an independent company or not. So just keen to understand the logic for stripping that out of the official free cash flow guidance. Thank you.
James, I'll let Margarita handle your 3 part question.
So if we start from maybe the last question. And actually, thank you for asking about this today because I think It's an important point. It's a change of perimeter on our free cash flow guidance. So it's helpful that we have a full discussion. First of all, the reason why we are doing this is because clearly, we now have a tower company in our midst and we need to adopt the standards of the sector of the tower companies because The growth CapEx are, by nature, lumpy in the towers world, and we can have new opportunities of build to suits Or ground lease buyout programs.
Clearly, this will vary over time. And in that sense, it is appropriate To give a guidance before this variability. Now I'm specifying guidance or ambition in this case Before Vantage Growth CapEx because clearly, as we will publish our results in actuals, you will always Find our free cash flow net of everything to the bottom line. So clearly, full transparency there. But we want the flexibility for Vantage Towers to invest when the good business cases come Essentially.
You also asked about why do you include build to suit In the growth CapEx, given it's mostly dedicated to Vodafone. Again, following in the slide that in our guidance And in our targets. What is out is, again, it's project activities and typically it's build to suit and ground lease, buyout and Lease renegotiation, see these as the sort of 3 big buckets. And if you think about it, as I think I already mentioned previously, When Vantage will make its investment choices, it will prioritize areas where Vodafone would have behaved differently. I think it's perfectly clear when we talk about ground lease buyouts.
We would never have prioritized this in our CapEx envelope. But also when you think about Vantage is now doing for Vodafone, in the pre Vantage world, we would have chosen A different type of mix on delivery of the coverage expansion, which would not be just build new sites, But would also, of course, include and I think you have seen us doing that, include third party approach now that Vantage is there. And I think you will also see it when you look at FY 'twenty one where Vantage started operating but Still didn't accelerate. And the growth CapEx, the similar definition were effectively immaterial in FY 2021. But we see this as clearly positive and we want to advantage to invest because it allows us to take a greater share.
I want to take that opportunity. And I think you said what number should we expect. Here may be two reference points. At the Capital Market Day, Vinod, I think, showed a very clear slide on the plans That he was foreseeing on bid to suit, GLDO and the like. And I think if you take the numbers in that slide in aggregate, You come to a conclusion of around EUR 300,000,000 per year of run rate.
Please keep in mind that on top of that, we have given Vantage the ability to within its leverage have another €1,000,000,000 of additional Investment part that can be either dedicated to inorganic, so M and A, but equally could go if the right opportunities come up For build to suit for many other operators to go towards organic. Of course, this will be phased over time. Going back to your previous question then, I think it was around how do we read the midterm, mid single digit EBITDA are phasing. On the 1st year where we have the traditional guidance, actually, the growth rates Are slightly higher than the one you mentioned. The lower end of the range is 3%.
The higher end of the range It's above 5%. It's around 5.5% if you work out the math. So I would say we are getting are clearly into the trajectory. How you read the trajectories, we're not giving annual guidance With this midterm ambition, we are rather setting if you want the view, you should have if you come to maybe a little bit lower. I think We have already given quite a lot of visibility in these numbers around how we see the trajectory unfolding.
I think that's just going to be given the new investments you're making, you'd have, I mean, high levels of confidence we could hopefully get up towards the Higher end of that range over the medium term.
I think actually you're right. I wasn't sort of completing your question. I think in terms of phasing, you were right when you were explaining how you imagine in terms of sequence in the sense that we We are growing to invest to grow in a way in our plan. So we have high confidence on the short term growth because It's happening now on the back of the execution of the strategy. And we will use some of this growth to invest, As we have just described.
And in turn, these investments will drive further growth, which, of course, will come in 2, 3 years' time depending on the time.
Your line is open. Please go ahead.
Great. Thanks. Two questions, sorry. One is very short. Just on tax, I don't know if you are planning to make use of these goodwill amortization schemes in Italy, whether that what you're assuming for cash tax in FY 'twenty two and then maybe next year as well?
And then secondly, just big picture on Vantage. Now the IPO is done with the growth CapEx. How do you feel about being the majority owner still at Vantage? It does feel like deconsolidating it, it could be more levered. You wouldn't have to recognize the growth CapEx.
Has your views changed at all in the last 6 months around
For tax reasons, restart the depreciations of assets which have been fully amortized Already. And we are looking into it. The only thing I would say at this stage is as very material as an opportunity. I think the best way to look at our CapEx projection sorry, tax projections is You start from this year, you have seen EUR 1,000,000,000 of cash tax in our free cash flow And see this as growing over time together with our EBITDA growth. We've been quite specific in the press release in terms of our expectation on effective tax rates, and we see these in the sort of high 20s going forward.
So I think you can easily do the math from there.
Vantage Towers, I think it's a short answer really. Look, whether it's control or co control like we have down in Italy or what we've done in Spain, we see the towers and Vantage Towers as being an important strategic asset for us, mainly because of 2 things, I would say, look, this is still a fairly immature market in terms of towers, mainly owned by other creators of course that will change over time. And then the second thing is obviously technology visibility past 5 gs. We would like a little bit of clarity. Again, it's a matter of time.
So what I would say is, look, we're focused on ensuring we don't miss any growth opportunities for Vantage Towers, we're firmly behind them. I don't think we're concerned.
And it's because we see the opportunity of these business cases, which will deliver good returns that we are doing what we are doing in terms of, obviously, guidance And midterm ambition.
Thank you, Sam. Our next question comes from Robert Grindle at Deutsche Bank. Robert, please go ahead. Your line is open.
Thank you. Good morning both. In your presentation, Nick mentioned shareholder returns are a key focus On your next strategy phase, are you thinking about the bottom of your leverage range as to be when to start talking about raising the dividend? And second question is Airtel Mobile Commerce did an interesting deal with Mastercard, which put a big value on their African payments business. Could you look at doing something similar with M Pesa?
Thank you. You
covered the first and I'll cover the last one.
I'll take the first, yes. In terms of relationship between leverage and dividend, in the near term, You will see us very focused on deleveraging. As you know, it's one of our 3 capital allocation priorities. And The thing is evolution through growth. You have seen us maintaining leverage stable at 2.8 times net debt to EBITDA In FY 2021, clearly, we have had the COVID affecting our EBITDA, but we have been able to maintain the leverage ratio So stable and looking forward, we see opportunities to deleverage to growth as we deliver on the mid single digit EBITDA growth ambition.
This will be the near term priority in terms of 0.09 dollars in the near term. As we move beyond this phase and to your point, we progress on the deleveraging, Then of course, we will reconsider our dividend distribution, again, in the context of our capital allocation priorities, invest in infrastructure, So deleverage and deliver attractive returns to shareholders.
Yes. I think in terms of mobile money or fintech in Africa, Richer, I think you're right to point out it's a huge opportunity. We believe in this for now a good 10 plus years and we are a clear number 1 in the African market. We have a base, if you can include all of our markets on mobile money of over 60,000,000 active customers. So we're about 3 times the size of Airtel.
What I would say is that we are absolutely focusing on investment in the platform. So that's the M Pesa platform. But how the M Pesa platform evolves from what I would say is a feature phone world into a smartphone. Binney app would deal with, for instance, loans or insurance. So in other words, how do we build additional financial services.
And you're going to see from Vodacom the launch of Vodapay as a brand in South Africa. And ultimately, we want to evolve a super app strategy and I will leave Shamil to talk about that a little bit more. So it's a we're scaled priority investment unconstrained at the moment. We are separating those assets out into separate legal entities because we think that the business will grow at a significant pace. But at this point in time, we are funding that expansion of the business.
Clearly, there's intrinsic benefits between the FinTech and the Telecom business because things like distribution, churn, etcetera. But look, let's see how it evolves over the coming years. Super exciting space.
Thank you.
Thank you, Robert. Our next question comes from Carl Murdock Smith at Berenberg. Carl, your line is open. Please go ahead.
Morning. I just wanted to give you a bit more chance to talk again about the social contract, Particularly with regards to the UK spectrum auction, which yielded a very good result, largely due to your decision that you were comfortable with 3 gaining Sub gig, 1 gig spectrum. Can you talk through your approach to that auction and spectrum more broadly and the thought process That caused you to take your foot off the gas so early within the auction process. Thanks.
Yes. I would explain it, if you don't mind slightly differently for that strategy because actually you have to back up what was nearly 18 months, 2 years of a process. Originally, when that auction was designed, it was going to be bundles of spectrum. So you were going to have the low band bundled with the higher band. So the 700 with the past that was an artificial construct that would have driven up the auction pricing and the capital commitment for us and was not optimal for the industry.
To what we did, we did actually show leadership here. We went to the rest of the industry and we said, look, really what we want is the bans to be auctioned separately, but we understand what the government want from a policy perspective. Believe, but we understand what the government want from a policy perspective, which is coverage. So why don't we come together and offer proactively coverage? And if we offer the coverage, what we're asking in return was to separate the bans out and drop the coverage obligations against the bans.
We engaged with Ofcom on that basis and the industry and everyone was supportive. And I think that's what as a sector, you government your policies. But I think this is a way of achieving the goal in a more efficient way for the industry and allowing us to optimize and improve our returns. And so as a result of that, they were deaggregated. We could bid on individual bands.
We already had a lot of low bands between €800,000,000 €900,000,000 We didn't need the €700,000,000 if it had been combined together, we would have had to have bid for the GBP 700,000,000 which would have been suboptimal. So really what we did was we optimized our ability to go into auction and get exactly what we wanted. So now we have the 2nd largest spectrum holding in the country, both high and low band will launch 5 gs on 900 very effectively. And at the same time, it meant that the auction didn't get overheated. So I think that's a really good outcome.
I could also say Greece has been a really great outcome. Netherlands has been a good outcome. Hungary has been a good there's only one country this year that I've been unhappy with and that's Portugal. We're at around 5.15 or whatever it is. Of course, it's still about half have the European benchmark on pricing for.
But generally, every other European country is heading in a good direction in its conversation with the industry.
That's great. Thank you.
Thank you very much, Carl. Our next question comes from Nick Dalfos and Fred Byrne. Nick, please go ahead. Your line is now open.
Thanks very much. Two questions, please. The first one is on net promoter scores and customer engagement. So you haven't been publishing those recently. And obviously, the KPIs In Q4, we're a little bit on the weak side.
So could you talk to us a little bit about how you're seeing customers and their how they look at the Vodafone brand. And the second question I had was thinking about Other ways for you to spend CapEx. What about out of area spending in Germany to your network into new areas. Is that something you've been thinking about or something you might do with a partner? Thanks very much.
Yes. Thanks, what I would say is in terms of NPS, actually what we are increasingly doing is NPS has got a lot more sophisticated now. As relationship NPS for large corporate, we're doing journey NPS, which I'm really excited about, point in time questionnaire whereas now Journey NPS is measuring end to end journey of a customer. So I would say the reason why we don't report because we have lots of clinicians that we're trying to target different outcomes. If I was aggregating a picture, what I would say is Vodafone Business MPS, really good performance, strong across the board.
I think people have really seen us really help in the pandemic. We were proactive, supportive and available with great products. So really good. I'd say our 2nd brand NPSs are really competing very strongly across the board, the pandemic has been a bit flattish over the rest of the year. Obviously, we continue to work.
I wouldn't say it's either positive or negative. I'd just say it was in a solid position. If I stand back so I would say build a community view Vodafone. And that has positively lifted throughout the year because of the way we dealt with the crisis and the way we've lent into our social contract with society. So I would say positive trajectory on the brand.
And of course, we did Together Weekend. I think you see it here, I think again resonated well tonality wise with the mood, money and CapEx. We are looking off footprint add various opportunities, whether that's, as I said before, consortiums is something that we look at are doing fiber builds. Obviously, that can either be as a strong anchor customer or it can be as Okay.
Thanks very much, Adi.
Thank you, Nick. Our next question comes from Georgios at Citigroup. Georgios, your line is now open.
Good morning. Thank you for taking my question. It's on German, just in the cost and privilege and also are ramping up of fiber deployment. So my question has 2 parts. The first one is there will be some headwinds So if you can talk us through what other things and options you are taking to offset those in the coming years.
And then The second element is you are probably the you are the only player that's bought an infrastructure owner and occasionally reseller of Deutsche Telekom's Fiber. So I'm interested to hear your views about the commitment model that Deutsche Telekom has put forward And whether you believe it balances the protections to infrastructure ownership in the way the wholesale rates are designed. Thank you.
Or maybe you want to in terms of the actions we're taking, I mean clearly the priority for us was always to turbocharge our network. So we have now got gigabit network to 22,000,000 households over 90% of our footprint. It's really important to understand that, that is fiber. It's like a hybrid fiber network. It's getting closer and closer in terms of fiber builds as roadmap.
The next step for us is high split DOCSIS 3.1. High split delivers a 1 gig up speed upload speed, 3 gig down, so we have a differentiated network. And as I said to Nick's question, outside our cable footprint, were open to consortiums either as a customer or as an investor to accelerate fiber builds. I'd say on top of that, we're also working on strengthening our TV proposition. You know we've launched Apple TV.
We've launched Vodafone TV. So I think we've got a good road map for the rest of the year coming through in terms of what we can offer on the TV front. And of course
In particular area of focus, I think it's a model we are familiar with and which was fully expected From a wholesale perspective, clearly, our focus today is in penetrating our own infrastructure. We have added 1 percentage point of penetration there. As you know, we have put in place a number of measures, specifically in terms of integration of the Unitymedia footprint That we couldn't see the impact of because of the lockdown, that our ARPU growth in cable in Germany has hit 4.5% In Q4. And this is really driven by our approach to drive the mix of value in fixed broadband in Germany is really penetration of our own structure with the best possible value mix.
Thank you. Thank you, Georgios. The next question comes from Polo Tang at UBS. Polo, your line is open. Please go ahead.
Yes. Hi. Thanks for taking the question. I've actually got 2 quick ones. First one is, can you remind us what the key triggers are for your LTIP going forward?
And have they been changed Given that you've got new medium term guidance, do you think you have sufficient scale in Ireland?
Well, 2 fast answers to your 2 fast questions. First of all, in terms of our LTIP, essentially it's this high convergence mix and importantly, stable leverage and then bring in dividends, excess cash back to shareholders. So look, we really love the business. We launched our 2nd brand and immediately the response was pricing moved up on 2nd brands, which is a healthy development, I would say.
Thanks.
Thank you, Polo. Our next question comes from Andrew Lee from Goldman Sachs. Andrew, please go ahead. Andrew, please go ahead. Andrew, please
go ahead.
I'll look
as a context, but you're also guiding to revenue growth in Europe for the first time that certainly I can remember. I was wondering if you could talk a bit more about the opportunity from network investment linked pricing with a note maybe to or a nod to the inflation linked pricing in the U. K. And whether there's scope for that elsewhere. And then the second question, just had a bit of from Certainly, the investors have been around for a while today on CapEx.
I know that your it's based about your outlook or confidence in your outlook on CapEx or visibility. Know there's some success, but the same growth outlook is limited.
Maybe I'll handle the first and you'll handle the second. I think just on pricing, I think the important thing here is it goes a little bit back to the either earn the right returns that we can start to have a conversation with policymakers and regulators to say this is a constructive way to move forward. And so I think it's landed well in the U. K. You get a lot of value for money compared to any other industry.
So I think it's about the service that's being provided now going forward. And so what we've said is, okay, given that, why don't we go through competitive environment and sponsors. But we think that the industry really should reflect on this moment as an opportunity to go in this direction.
And on the CapEx point, let me say that this is really very, very different from Spring. We are not talking about An exceptional program to establish a different positioning in terms of network leadership. We are very, very happy about Europe. The reason why we are investing more, as I was saying in the beginning, is to respond to the changes That we have seen in our environment and to take the opportunities that we have from that. You have heard me say that 2 thirds of the extra spend that delivers strong returns.
And therefore, as such, clearly, we also have optionality. It's again the equation of we grow, we invest deliver and deliver attractive returns for shareholders. So you will always see us taking the opportunities of growth have the option to accelerate growth. Very, very different set of circumstances.
Okay. Thank you.
Thank you, Andrew. The next question comes from Maurice Patrick from Barclays. Maurice, your line is open. Please go ahead. Yes.
Hi, guys. Thanks for taking the question. It's a question on just maximizing returns From your existing assets in Germany. I mean, if I'm not wrong, you have one of the lower in footprint market shares in cable in Europe and Germany. And looking at the numbers, it seems like operational momentum is slowing, such as if you look at broadband net adds on cable ex migration, that's a bit hard In the last 12 months, I mean, Deutsche has talked a bit about improved momentum because of the IP migration and maybe some thoughts in terms of why that sort of ex migration momentum is slowing.
And does that impact your thoughts towards wholesale for the platform? I know you've got a wholesale deal with Telefonica, but is your attitude towards wholesale shifting? Thanks.
Maurice, I think the simple answer is look, we've had a bit of an exceptional year with the pandemic and a very exceptional lockdown situation. And of course, we are the challenger in the market and therefore we need retail presence to keep the engine of are going. So we're very much looking for retail opening back up again in Germany and regaining the sort of momentum and numbers we were doing before. Clearly lockdowns and shut retail the lockdown. So we look forward to them contributing.
Clearly, this is always something that is open to us and clearly, we will always assess the opportunity.
Yeah. Hi, good morning. Thanks for taking the question. So 2 please for me as well. First is on return on capital.
If you could maybe just disclose for us what the return on capital in the finance and I'm sure there's some P and L versus cash flow elements to that as well. And then the second piece is just you talked to Nick earlier about potentially being interested in on infrastructure or even other Partners. Can you just help us understand what the merits of that might be? Because in a lot of cases, that doesn't give you preferential wholesale terms. So it could create a lot of long why you might want to do those sorts of deals.
That would be interesting as well.
Yes. Kjell, maybe I'll just cover the last one first and then you so the reason why you would entertain them is number 1 so that's why I talk about an anchor tenant or an anchor customer, we don't have to invest in this. If there's enough infra funds coming in and they just want us as an anchor customer to drive the penetration. We're very happy to do that because we want penetration outside of our cable foot privity. So I agree with you.
If we can go that route, we will go that route. We did City Fiber on that basis as an example in the UK. I'm just saying there may be examples where people would like us to invest something, yes? And we would be happy to do that
are at 3.9%. So clearly, obviously, still very much below cost of capital in terms of dynamics In the last year, if I take the pretax control, we went down around 80 basis points, 6.3 to 5 points In EBIT and therefore changes of perimeter really affecting us. And this was the 1st 12 months in which we consolidated Liberty in full as well as we moved some assets into INWIT, which is obviously not in the control perimeter. So that explains the trend. Looking forward, our midterm ambition has really been built around return on capital and the need And the possibility now to deliver return on capital above WACC.
And with trend, I would say, for four reasons. So first of all, service revenue growth, clearly, in Europe as well as in Africa, accompanied, number 2, by continued work on our Digital transformation and cost efficiency. And you can see clearly from our midterm ambition that we are talking about margin expansion on the back of that. Really, how can I say, obsessed internally in finding opportunities of business cases that give us A leg up in terms of returns? And this is where the 2 thirds of new CapEx investment we are talking about are coming from.
So really support From the capital, we get a little bit of benefit from that. But really significant opportunity, Plan built around returns and not just at total level, but as usual, you hear us saying this a lot, also Initiative to drive that. This is really our key objective.
And on that, can I say thank you very much? Always thoughtful questions. Thank you for taking the time invested in us to understand EDLA. And I look forward, along with Margaritas, to seeing all our investors over the next couple of weeks. Take care.
Bye.
Thank you.