Thesis Overview

BUY • FY23 Revenue: EUR 45.7bn Vodacom Turkey

14% 3%
• Market Cap: EUR 19.2bn
1) Opportunities arising from Price target:
• Dividend yield: 10.97% Germany
potential Vodafone Spain
GBP 0.91 28%
divestment. • Trading at 52 week low. Down Other
Current Price: 15.4% YTD. Europe
2) 1&1 roaming deal offsetting
21%
impact from German cable GBP 0.71 • British multinational company UK
unbundling. supplying fixed broadband Italy
Implied upside: 14% 11%
and mobile services. Spain
3) Growth potential from Three
28.2% 9%
UK JV. • 104,000 employees
Service Revenue by Geography

Poor FCF/Dividend coverage estimated over next few years… Management & Ownership

1.05 1.02 Margherita Della Valle, CEO & CFO

0.99
1.00 Since January 2023 Liberty
0.94 e& Global
0.95 Luka Mucic, Incoming CFO 15% 5%
0.90 0.86 From September 2023 Other
0.85 insiders
Jean-François van Boxmeer, Chairman 2%
0.80
Since November 2020 Other
0.75
0.68 Phillipe Rogge, CEO Vodafone Germany 58%
0.70
Since July 2022 Top 15
0.65 institutions
0.60 Ahmed Essam, CEO Vodafone UK 20%
FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 Since February 2021

Source: Company Reports, FactSet, Berenberg Estimates

 New CEO not off to the best start but assures that change is coming…

1.5 Q1 trading
update

1.4

1.3
Vantage towers
JV announced
1.2
Ms. Della Valle
Mr Nick Read appointed
steps down as permanent CEO.
1.1
CEO
FY23 results
e& purchases announced,
1 bearish tone
9.8% stake
Robust H1 FY22
1&1 roaming
0.9 deal announced.

0.8 H1 results,
guidance cut

0.7
Vodafone-Three
JV announced
0.6
27/8/2021 13/12/2021 31/3/2022 21/7/2022 7/11/2022 23/2/2023 15/6/2023

Source: FactSet
 Competitive landscape in Spain Depressed margins relative to group & decline in user base

1,200 2.0
1,000 –
Masmovil Masmovil Vodafone
Vodafone 17% 800
19% 19% (2.0)
22%
600
(4.0)
400
Orange (6.0)
Telefonica Orange 200
29%
31% 28% Telefonica – (8.0)
35%
(200) (10.0)
Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23
Spain mobile contract net adds Group mobile contract net adds
Mobile Market Share by Accesses Broadband Market Share by Accesses Spain organic revenue growth

FCF/Dividend coverage after 77% of proceeds used for buyback* Commentary

1.20
• Current review of proposed Orange-Masmovil merger will dictate any
1.10 inorganic action in Spain.

1.00 • Vodafone will be the smallest of the 4 major operators in both markets.

0.90 • Spanish operation currently suffering relative to rest of the group given
intense competition.
0.80
• Estimated value of Vodafone Spain is EUR 3.9bn.
0.70
• Accounts for 6.6% of Group OpFCF.
0.60
FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 • Can achieve healthy dividend coverage through extensive buyback
programme.
Pre Spain Divestment Post Spain Divestment

*Assuming deal is cleared end of FY23/24 and buyback occurs at the end of FY24/25 Source: Berenberg Estimates, Company reports
 Exposure to MDU cable TV unbundling Market share progression since 1&1 entered…

800 45.0%

600 40.0%

400 35.0%
200 30.0%
0 25.0%
-200 20.0%
-400 15.0%
-600 10.0%
-800 5.0%
-1000 0.0%
Revenue EBITDA(aL) OpFCF* 2017 2020 2022
MDU cable TV unbundling 1&1 deal Net impact 1&1 O2D DT Vodafone

Adjusted EBITDAaL consensus progression Commentary

6,200.0

6,000.0 • Vodafone has significant exposure to new MDU cable TV unbundling law.

5,800.0 • Recent Vodafone retention trials have not been promising.

5,600.0 • 1&1 roaming agreement can partially offset these losses.
5,400.0 • Although 1&1 has been claiming market share from Vodafone, it is an
overall value add due to higher margins.
5,200.0

5,000.0
• Market concerned about aggressive reaction from O2D
• Consensus yet to reflect this offsetting impact due to little official
information around the roaming agreement
FY25 FY26 FY27

*Using 25% Capex/Sales for Cable TV Source: Company Reports, FactSet, Visible Alpha
 Vodafone and Three lagging in mobile network capex Vodafone gaining mobile customers from cost of living crisis…

3,000 18,000

2,500 17,800

17,600
2,000
17,400
1,500
17,200
1,000 17,000

500 16,800

16,600
-
2018 2019 2020 2021 2022 16,400
Q4 20/21 Q2 21/22 Q4 21/22 Q2 22/23 Q4 22/23
VMO2 BT/EE Vodafone Three

Merger provides vital synergies to facilitate boost in Capex Commentary

• Vodafone and Three are currently the 3rd and 4th largest MNOs in the UK,
with the combined entity to form the largest operator.
• Although, Vodafone and Three are currently reporting strong net adds, this
is due to customers seeking value over quality in current climate.
• With weak network capex currently, Vodafone and Three will not be able
to compete with 5G offerings from VMO2 and BT/EE.
• Merger is likely to go through given Government push to expand 5G, but
with significant remedies (likely in terms of front-book price freezes)
• Merger also protects against any Labour government intervention on
CPI+3.9% through cost synergies.

Source: Company Reports, CK Hutchinson Presentation (15/5/2023)

 FCF/Dividend coverage consensus unreactive to 1&1 deal… Slowing expectations for net debt to EBITDAaL deleveraging…

2.3 2.9
2.1 2.8
1.9 2.7
1.7 2.6
1.5 2.5
1.3 2.4
1.1 2.3
0.9 2.2
0.7 2.1
0.5 2.0

FY24 FY25 FY26 FY27 FY24 FY25 FY26 FY27

Revenue expectations recovering slightly for Europe in FY26 and FY27… Group capex expectations bottoming out…

36,500 8,500
8,400
36,000
8,300
35,500 8,200
35,000 8,100
8,000
34,500
7,900
34,000 7,800
33,500 7,700
7,600
33,000
7,500

FY24 FY25 FY26 FY27 FY24 FY25 FY26 FY27

Source: Visible Alpha

 Offsetting tailwinds should position Vodafone to re-rate… Commentary

EV/Capital Dividend • Vodafone trades at an unfairly high

Price EV/EBITDA EV/EBIT P/E adjusted EV/OPFCF dividend yield to other incumbents.
Company Employed yield
2023 2024 2024 2024 2024 2024 2024 • Despite the numerous headwinds,
Vodafone is able to offset many of
BT Group plc GBP 1.12 5.2x 12.8x 7.2x 14.9x 1.1 6.9% the key risks to cover its dividend
Deutsche Telekom AG EUR 19.26 4.4x 7.3x 10.0x 7.0x 0.69 4.8% and provide some strong long term
Elisa Oyj growth prospects.
EUR 44.38 10.8x 16.1x 17.3x 16.7x 3.3 5.5%
KPN NV EUR 3.18 6.8x 13.9x 15.9x 14.1x 1.76 5.2% • Even with a healthy dividend yield
premium to the median at 8.5%,
Liberty Global plc USD 17.47 12.4x 166.0x 147.7x 32.0x 0.76 0.0% there is still scope for significant
Orange SA EUR 10.26 5.7x 12.9x 9.3x 11.9x 1.02 7.3% upside.
Swisscom AG CHF 530.4 8.2x 16.8x 16.6x -106.4x 1.73 4.1%
Telefónica SA EUR 3.69 5.4x 16.6x 11.0x 9.2x 0.54 8.1%
Key Risks
Tele2 AB SEK 75.74 6.8x 14.7x 14.5x 10.2x 1.58 9.2%
Telenor ASA NOK 108.9 6.8x 13.7x 16.4x 12.8x 2.04 8.8%
• Aggressive reaction from O2D in
Telia Company AB SEK 21.48 5.8x 13.2x 10.5x 10.1x 1.25 9.3% Germany.
• Delays in executing Spain sale
Vodafone Group plc GBP 0.71 5.9x 15.7x 8.5x 14.4x 0.65 10.9% leading to buyback being delayed
Median 6.4x 14.3x 12.8x 12.4x 1.2 7.1% and dividend left uncovered, for
FY25/26 as well.
Mean 7.1x 26.8x 24.2x 3.7x 1.4 6.7%
• German MDU retention rates
surprising to the downside in
Assumed multiple 8.5% FY23/24 results after bulk re-
Implied price target 0.91 negotiations in January
Potential upside 28.2% • Blocked UK merger by CMA or NSIA

Source: Berenberg Comps