Vodafone Group Plc
Annual Report 2022
Contents
Strategic report
01
S
Our strategic framework
02
S
About Vodafone
04
S
Financial and non-financial performance
06
Chairman’s message
07
Chief Executive’s statement
08
S
Market and strategy
10
S
Business model
12
Mega trends
14
Stakeholder engagement
16
Strategic review
21
Our people strategy
24
Our financial performance
34
S
Purpose, sustainability and
responsible business
36
Our purpose
36
–
Inclusion for All
41
–
Planet
44
–
Digital Society
46
Contribution to Sustainable Development Goals
47
Responsible business
47
–
Protecting data
52
–
Protecting people
56
–
Business integrity
58
Non-financial information
59
Risk management
65
–
Long Term Viability Statement
66
–
TCFD disclosure
Governance
68
S
Governance at a glance
70
Chairman’s governance statement
72
Our Company purpose, values, and culture
73
Our Board
75
Our governance structure
76
Division of responsibilities
77
Board activities and principal decisions
79
Board effectiveness
80
Nominations and Governance Committee
83
Audit and Risk Committee
89
ESG Committee
91
Remuneration Committee
93
Remuneration Policy
99
Annual Report on Remuneration
113
US listing requirements
114
Directors’ report
Financials
116
Reporting on our financial performance
117
Directors’ statement of responsibility
119
Auditor’s report
129
Consolidated financial statements and notes
215
Company financial statements and notes
Other information
223
Non-GAAP measures
234
Shareholder information
240
History and development
240
Regulation
249
Form 20-F cross reference guide
252
Forward-looking statements
253
Definition of terms
Welcome to our
2022 Annual Report
We have adopted a digital first approach to our reporting reflecting how we operate as a business.
Whilst the Annual Report continues to be a core part of our reporting suite, we use
{
a
{
simplified
format and include links to interactive online content, such as videos. This
{
online{
material brings
to
{
life what we do and how we do it, and provides you with a better overall{
understanding of
our
{
business. We also provide summaries at the start of each key section{
denoted by an S
in
{
the{
contents to the left
.
We continue to publish a separate report that summarises our progress towards meeting the
recommendations of the Task Force on Climate-related Financial Disclosures
n
TCFD’
, as well as
{
a
comprehensive addendum that includes data on Environmental, Social and Governance
n
ESG’
topics.
ESG reporting
We have also reported against a number of voluntary reporting frameworks to help our
stakeholders understand our sustainable business performance. Disclosures prepared in
accordance with the Global Reporting Initiative
n
GRI’
or Sustainability Accounting Standards Board
{n
SASB’
guidance can be found in our ESG Addendum or on investors.vodafone.com.
vodafone.com investors.vodafone.com
investors.vodafone.com/tcfd investors.vodafone.com/
esgaddendum
investors.vodafone.com/sasb investors.vodafone.com/ESG
References
The Annual Report has been designed to aid navigation. We have cross-referenced relevant
material and included navigation buttons that are
n
clickable’ when using the digital version of
{
the{
Annual
{
Report. Online content can be accessed by clicking links on the digital version of this
{
Annual{
Report,
copying the website address into an internet browser, or scanning the
4
R code on
{
a
{
mobile device.
Read more
page reference
Click to see related
content online
Scan or click to watch
related video content online
This document is the Group’s U
.
Annual Report{
and is not the Group’s Annual Report on
{
Form 20-F that will be filed separately with the US SEC at a later date.
This report contains references to Vodafone’s website, and
{
other{
supporting disclosures located thereon such as videos,
our
{
ESG{
Addendum and our TCFD report, amongst others. These references are for readers’ convenience only
{
and information
{
included on{
Vodafone’s website is not incorporated in, and
{
does not form part of, this Annual Report.
FY22 results
summary:
Nick Read,
Chief
b
E
[ecutive
FY22 results
detail:
Nick Read,
Chief
b
E
[ecutive
FY22 financial
results:
Margherita
'
ella
b9
alle, Chief Financial Officer
9
odafone
%usiness Digital Services
E
[periences
9
odafone
Technology
Digital inclusion
Jean-François
van
%
o
[meer,
Chairman
Net zero
9
alerie Gooding,
Senior Independent
Director, Workforce
Engagement Lead
and Chair of the
Remuneration
Committee
Data privacy Cyber security Human rights
Watch our video content
Our performance Our digital investor briefings
Purpose pillars Responsible business
Responsible
ta
[
ationDavid Nish,
Chair of the
b$
udit and
b
Risk Committee$
mparo Moraleda,
Chair of the
ESG
b
CommitteeOur governance
Strategic report
Governance Financials Other information
1
Vodafone Group Plc
Annual Report 2022
Reducing our
environmental
impacts and
{
helping society decarbonise
Planet
Connecting
people
{
and things and
{
digitalising critical
{
sectorsDigital Society
Ensuring everyone has
access to the benefits
of a digital society
Inclusion for All
Our vision:
A new generation connectivity and
digital services provider for Europe & Africa
Leading innovation
in digital services
Our strategy:
Customer commitments
Best connectivity
products and services
Outstanding digital
experiences
Our strategy:
Enabling strategies
Simplified and most
efficient
{
operatorLeading gigabit
networks
Social contract
shaping the
digital
{
society Our advantage:
Leading connectivity provider
Read more on
pages 16 to 20
Two attractive regions
with scale
Europe
& Africa
Read more on
pages 59 to 115
Strong frameworks
in place
Governance and
risk management
Read more on
pages 21 to 23
The
n
Spirit of Vodafone’
Our people
and culture
Our strategic framework
Our strategy is focused on sustainable growth
to drive returns
FY22 Adjusted FCF
ahead of guidance
€5.4bn
Full year dividend
per share
9.0
eurocents
Read more on
pages 41 to 44
Read more on
pages 44 to 45
Read more on
pages 36 to 40
FY22 highlights
Our financial performance demonstrates our sustainable growth,
despite broader macroeconomic challenges. Our results are in line
with
{
our expectations for the year and our medium-term ambitions.Organic service revenue growth
–
Good growth throughout FY22 in both Europe and Africa
–
Improving YoY trend in 10 out of 11 European markets
Our purpose:
We connect for a better future
Read more
on pages 24 to 33
ROCE inflection
–
Significant ROCE step-up on pre-pandemic level
–
EBITDAaL growth driving sustainable ROCE improvement
Adjusted EBITDAaL growth
–
Our highest EBITDAaL margin of last decade
–
Good improvement on pre-pandemic levels
3.3%3.3%
0.8%0.8%
2.4%2.4%
2.7%2.7%
2.0%2.0%
FY22 +2.6%FY22 +2.6%
Q4 FY22Q3 FY22Q2 FY22Q1 FY22Q4 FY21
€13.9bn€13.9bn
€14.9bn€14.9bn
€14.4bn€14.4bn
€15.2bn€15.2bn
+5.0%
1
+5.0%
1
31.9%31.9%
33.1%33.1%
32.8%32.8%
33.4%33.4%
FY22FY21FY20FY19
5.1%5.1%
5.5%5.5%
6.3%6.3%
7.2%7.2%
+170bps+170bps
H2 FY22H1 FY22H2 FY21H1 FY21
Pre-tax ROCE (LTM)
Note:
1. Organic growth. See page 223 for more information.
Governance Financials Other information
2
Vodafone Group Plc
Annual Report 2022
Strategic report
About Vodafone
How we are structured
A new generation connectivity
and digital services provider
Where we operate and what we sell
Europe
Consumer
52%
Vodafone
Business
27%
African
Consumer
16%
Europe Consumer
We provide a range of market leading mobile and fixed-line connectivity
services in all of our European markets, enabling customers to reliably call,
text and access data on their mobile devices, or access broadband, TV and
voice services at home.
Our converged plans combine these offerings, providing simplicity and
better value for our customers. Other value added services include our
Consumer IoT propositions, as well as security and insurance products.
Vodafone Business
We serve private and public sector customers of all sizes with a broad
range of connectivity services, supported by our dedicated global network.
We have unique scale and capabilities, and are expanding our portfolio of
products and services into growth areas such as unified communications,
cloud & security, and IoT.
African Consumer
We provide a range of mobile services, enabling customers to call, text
and access data. The demand for mobile data is growing rapidly driven by
the lack of fixed broadband access and by increased smartphone penetration.
Together with Vodacom’s VodaPay super-app and the M-Pesa payment
platform, we are the leading provider of financial services, as well as
business and merchant services in Africa.
Our products and services
Core connectivity products and services in fixed and mobile account
for
{
the maM
ority of our revenue. However, we are constantly expanding
our
{
portfolio into high return growth areas, such as digital services, the
{
Internet of Things (n
IoT’) and financial services, that leverage and
complement our core connectivity business.
Service revenue
Core connectivity
87%
Growth platforms
13%
Digital services 10%
IoT 2%
Financial services 1%
Core connectivity
87%
Growth platforms
13%
Digital services 10%
IoT 2%
Financial services 1%
Service revenue
€38.2bn
Retail & service
Europe
Consumer
€20bn
service revenue
Vodafone
Business
€10bn
service revenue
Africa
Consumer
€6bn
service revenue
Growth platforms
Digital services
>50m
Customers subscribed
to a digital service
Internet of Things
150m
IoT SIM connections
(FY21: 123 million)
Financial services
52.4m
M-Pesa customers
4
(FY21: 48.3 million)
Shared operations
Supplier
management
>€600m
savings p.a.
Network & digital
operations
>€400m
savings p.a.
Inter-network
operations
>€250m
revenue and
savings p.a.
Infrastructure assets
Passive mobile
€16.2bn
market capitalisation
1
Active mobile
>180,000
radios
2
Fixed network
1.6m
kilometres of fibre
and coa
[
ial3
Notes:
1. Market capitalisation at 31 March 2022.
2. Group including VodafoneZiggo and Safaricom.
3. Group including Safaricom.
4. Africa including 100% Safaricom.
Share of service revenue
We recognise the importance of local, in-market scale
and capabilities, but also drive further value from our
Group scale and breadth of our footprint.
Our retail and service operations are split across
three
b
broad business lines: Europe Consumer, 9
odafone
%usiness and
$
frica Consumer.
Our
b
biggestb
market is Germany.
Strategic report
Governance Financials Other information
3
Vodafone Group Plc
Annual Report 2022
How we govern How we measure success
Governance
The Board held seven scheduled meetings this year to discuss key strategic
matters, our purpose and culture, our
{
people and stakeholder interests.The
Nominations and Governance Committee
evaluates the composition and performance of
{
the Board and ensures an appropriate balance of independence, skills, knowledge, experience and diversity.
The
Audit and Risk Committee
provides effective governance over
{
the{
appropriateness of financial reporting of the Group, including
the
{
adequacy of related disclosures, the performance of the internal audit function and the external auditor and oversight of the Group’s systems of
internal control, risk management framework and compliance activities.
The
Remuneration Committee
advises the Board on policies for executive remuneration and reward packages for individual Executive
{
Directors. The
{
Committee also oversees general pay practices across the Group.The
Environmental, Social and Governance (‘ESG’) Committee
oversees our ESG programme, including our purpose pillars, sustainability
and responsible business practices, and our contribution to the societies
we operate in under our social contract.
Read more on
pages 80 to 92
Financial targets
The Group provides guidance on Ad
M
usted EBITDAaL1
and Ad
M
usted free cash flow
1
.
Senior management incentive plans include the following measures:
organic service revenue
adM
usted EBIT
adM
usted free cash flow
customer appreciation metrics; relative total shareholder return; and ESG measures.
Read more on
pages 110 to 112
Return on capital employed (‘ROCE’)
This is a key focus for the Group and reflects how efficiently we are
generating profit with the capital we deploy. Our goal is for ROCE to
exceed our cost of capital through consistent revenue growth, ongoing
margin expansion, strong cash flow conversion, and disciplined allocation
of capital.
Read more on
page 32
Operational metrics
We have a number of commercial metrics that are used to monitor
our
{
progress against our key strategic priorities and reflect the strong underlying momentum across the business.
Read more on
page 16
Social contract
We monitor the success we have in shaping a healthier industry structure
that is pro-investment, supportive of returns, and helps build a resilient,
inclusive and sustainable digital
{
society.Read more on
pages 6 and 9
Sustainability metrics
Our metrics are aligned to the three pillars of our purpose and the
individual initiatives that underpin each pillar.
–
Inclusion for All
: Rural connectivity, our commercial propositions for
equality, and workplace equality.
–
Planet
: Our carbon footprint across our full value chain, enabling our
customers to reduce their own emissions, and e-waste.
–
Digital Society
: Supporting SME and the digitalisation of critical
sectors, such as agriculture and healthcare.
Read more on
pages 34 to 45
Click or scan to watch our Chairman and Non-E
[
ecutive
Directors speak about their roles in short video
interviews:
investors.vodafone.com/videos
Click
b
or
b
scan to watch our privacy and
cyber e
[
perts e
[
plain
b
how we protect
customer data and our
b
networks:
investors.vodafone.com/videos
Click or scan to watch short videos showing
how
b
we help improve digital inclusion and
how we plan to reach net zero by 2040:
investors.vodafone.com/videos
Risk management
Risks are not static and as the environment changes, so do risks – some
diminish or increase, while new risks appear. We continuously review and
improve our risk processes in order to ensure that the Company has the
appropriate level of support in meeting its strategic ob
M
ectives.Our risk framework
clearly defines roles and responsibilities, and
{
sets out a consistent end-to-end process for identifying and managing risks.
We have embedded the risk framework across the Group as this allows
us
{
to take a holistic approach and to make meaningful comparisons. Our
{
approach is continuously enhanced, enabling more dynamic risk detection, modelling of risk interconnectedness and the use of data,
all
{
of{
which are improving our risk visibility and our responses.
Our Board oversees principal and emerging risks
, which are reported
to the various management committees and the Board throughout the
year. Additionally, risk
{
owners are invited to present in-depth reviews to ensure that risks are managed within the defined tolerance levels.
Read more on
pages 59 to 67
Note:
1. Ad
M
usted EBITDAaL and Ad
M
usted free cash flow are non-GAAP measures. See
{
’Non-GAAP measures’ on page 223 for more information.Our business model is underpinned by our strong
governance and risk management framework.
We track a range of measures that reflect our financial,
operational and strategic progress and performance.
Governance Financials Other information
4
Vodafone Group Plc
Annual Report 2022
Strategic report
Financial results summary
2022
2021 2020
Group revenue 44,974
€m
45,580
43,809Group service revenue 37,871
€m
38,203
37,141Operating profit/(loss) 4,099
€m
5,664
5,097Adjusted EBITDAaL
1
€m
15,208
14,386 14,881
Profit/(loss) for the financial year (455)
€m
2,624
536Basic earnings/(loss) per share (3.13)
€c
7.20
0.38Adjusted basic earnings per share
1
€c
11.03
8.08 5.60
Cash inflow from operating activities 17,379
€m
18,081
17,215Adjusted free cash flow
1
€m
5,437
5,019 5,700
Borrowings less cash & cash equivalents (61,368)
€m
(62,596)
(61,939)2
Net debt
1
€m
(41,578)
(40,543) (42,047)
2
Total dividends per share 9.00
€c
9.00
9.00Customer commitments
2022
2021 2020
Best connectivity products and services
Europe mobile contract customers
3
million
66.4
65.4 64.4
Europe broadband customers
3
million
25.6
25.6 25.0
Europe Consumer converged customers
3
million
9.0
7.9 7.2
Europe mobile contract customer churn 14.6
%
13.6
13.74
Africa mobile customers
5
million
184.5
178.0 168.4
Africa data users
5
million
89.9
84.9 82.6
Business service revenue growth
6
%
0.8
(0.6) 0.8
Leading innovation in digital services
Europe TV subscribers
3
million
21.9
22.2 22.1
IoT SIM connections 102.9
million
150.1
123.3Africa M-Pesa customers
5
million
52.4
48.3 41.5
Africa M-Pesa transaction volume
5
billion
19.9
15.2 12.2
Outstanding digital experiences
Digital channel sales mix
7
%
25
26 21
End-to-end TOBi completion rate
8,9
%
42.9
34.6 –
Enabling strategies
2022
2021 2020
Leading gigabit networks
5G available in European cities
3
#
294
240 97
Europe on-net gigabit capable connections
3
million
48.5
43.7 31.9
Europe on-net NGN broadband penetration
3
%
30
30 30
Simplified and most efficient operator
Pre-tax return on capital employed
1,10
%
7.2
5.5 6.3
Post-tax return on capital employed
1,10
%
5.0
3.9 3.9
Europe markets where 3G switched off
3
#
4
31
Our progress
Key Performance Indicators
Financial and non-financial performance
Notes:
1. These line items are alternative performance measures which are non-GAAP measures.
See
{
’Non-GAAP measures’ on page 223 for more information.2. FY20 borrowings and net debt has been aligned to the FY21 presentation which excludes
derivative movements in cash flow hedging reserves.
3. Including VodafoneZiggo.
4. Excluding the impact of inactive data only SIM losses in Italy during Q3 and Q4 FY20.
5. Africa including Safaricom.
6. Organic growth. See page 223 for more information.
7. Based on Germany, Italy, UK and Spain only.
8. Group excluding Egypt.
9. Defined as percentage of total customer contacts resolved without human interaction
through
{
TOBi.10. We calculate two ROCE measures: i) Pre-tax ROCE for controlled operations only, and ii) Post-tax
ROCE which also includes our share of adjusted results in equity accounted associates and joint
ventures. See pages 230 and 231 for more information.
We measure our success by tracking key performance indicators that reflect
our strategic, operational and financial progress and performance.
Strategic report
Governance Financials Other information
5
Vodafone Group Plc
Annual Report 2022
Our people
2022
2021 2020
Average number of employees and contractors
1
thousand
104
105 104
Employee engagement index
2
%
73
74 77
Employee turnover rate (voluntary)
%
14
812
Women on the Board 42
%
50
45Women in management and senior leadership roles 31
%
32
32Women in total workforce 39
%
40
40Inclusion for All
2022
2021 2020
4G population coverage (outdoor 1Mbps) – Europe
%
98
3
98
4
97
4
4G population coverage (outdoor 1Mbps) – Africa
5
%
65
62 53
6
Estimated number of additional female customers in Africa
7
& Turkey since 2016 9.6
million
21.6
15.9Planet
8
2022
2021 2020
Energy use
Total electricity cost –
€m
846
760Total energy use 5,897
GWh
5,926
5,997Energy use on base stations & technology centres 95
%
96
96Purchased electricity from renewable sources (Group) 23
%
77
55Purchased electricity from renewable sources (Europe) 33
%
96
79Greenhouse gas emissions (‘GHGs’)
Total Scope 1 and Scope 2 GHG emissions (market-based method)
m tonnes CO
2
e
1.09
1.42 2.01
Total Scope 3 GHG emissions
m tonnes CO
2
e
9.2
9.4 9.5
Total customer emissions avoided due to our IoT platform
m tonnes CO
2
e
15.6
7.1 6.9
Waste
Total waste (including hazardous waste) 9,500
metric tonnes
8,800
7,900Network waste recovered and recycled 99
%
99
99Digital Society
2022
2021 2020
Cumulative V-Hub unique users –
million
3.6
1.1Connected Farmer users –
million
2.9
2.1Responsible business
2022
2021 2020
Code of Conduct
Completed 92
n
Doing What’s Right’ employee training %
89
84Number of 602
n
Speak Up’ reports#
642
623Health & safety
Number of lost-time employee incidents
#
12
733
Lost time incident rate per 1,000 employees 0.35
#
0.11
0.06Responsible supply chain
Total spend 24
€bn
24
24Direct suppliers 11
thousand
9
11Number of site assessments (conducted by Vodafone or Joint Audit Cooperation) 74
#
71
76Tax and economic contribution
Total tax and economic contribution
9
€bn
– 9.6
9.4
Notes:
1. Calculation considers employee pro-rated headcount.
2. Our employee engagement index is based on a weighted average index of responses to
three
{
questions: satisfaction working at Vodafone, experiencing positive emotions at work, and
{
recommending us as an employer.3. Excluding Vodafone Ziggo and including Turkey.
4. Includes Vodafone Ziggo.
5. Based on coverage in Africa, including Egypt and Ghana. Excludes Safaricom.
6. Excludes Ghana.
7. Africa including Egypt, Ghana and Safaricom.
8. Data calculated using local market actual or estimated data sources from invoices, purchasing
requisitions, direct data measurement and estimations. Carbon emissions calculated in line with
GHG Protocol standards. Scope 2 emissions are reported using the market-based methodology.
For full methodology see our ESG Addendum 2022.
9. Includes direct taxes, non-taxation based revenue mechanisms, such as payments for the
right
{
to use spectrum, and indirect taxes collected on behalf of governments around the world, excludes joint ventures and associates. Our tax report for 2022 will be published in the next
year
{
following the submission of our tax returns and payment of all applicable taxes. For more information, refer to our Tax and Economic Contribution reports, available at: vodafone.com/tax.
Purpose, sustainability and responsible business
We want to enable an inclusive and sustainable digital society. To underpin the delivery of our purpose,
we
b
ensure that we operate in a responsible way. $
cting lawfully and with integrity is critical to our
long-term success.
Strategic report
Governance Financials Other information
6
Vodafone Group Plc
Annual Report 2022
Enabling a digital society in Europe and Africa
As society begins to recover from the COVID-19 pandemic
and with the backdrop of the war in Ukraine very much in
our minds, it is more important than ever to bring people
together, and to work together to advance and
b
improve
the world we live in. This is at
b
the heart of our purpose Ǿ
ȁ
we
b
connect for a better futureȂ
with our networks,
services and platforms increasingly being at the heart
of
b
global society. As I reflect back on my first full year as the Chairman of your Vodafone Board,
I
{
am proud of how our colleagues have navigated the pandemic and supported
the societies in which we operate. It is also clear that our growth strategy
is
{
working, notwithstanding the overall economic impacts of COVID-19. I
{
am
{
confident that we are in a strong position to meet the challenges and opportunities ahead. The key is that we continue to execute consistently and
improve returns for our shareholders at pace. This is a main area of focus for
your Board and I’m pleased with the progress we have made this year.
Consistent financial performance
Our FY22 financial results demonstrate the sustainable and broad-based
growth engine that we are building at Vodafone. We reported growth
in
{
revenue, profits, cash flow and return on capital this year – therefore
already
{
delivering against our medium-term financial ambitions.Total revenue increased by 4% to €45.6 billion, with Group organic service
revenue growing by 2.6% this year. This was driven by consistent growth
across both Europe and Africa. Combined with our ongoing cost efficiency
measures, as we continue to leverage the benefits of our Group scale,
this
{
drove a 5% increase in Adjusted EBITDAaL. I’m also encouraged to see
{
a
{
marked improvement in return on capital employed (
nROCE’), a key
metric for the Group, which improved by 1.7 percentage points to 7.2% on
a
{
pre-tax basis. Group operating profit increased by 11% to €5.7 billion and
basic earnings per share increased to 7.20 eurocents.
This good financial performance and our robust financial position lead us to
declare a total dividend per share of 9.0 eurocents for the year, implying a
final dividend per share of 4.5 eurocents which will be paid on 5 August 2022
following shareholder approval at our Annual General Meeting (
n
AGM’). Board diversity
I strongly believe that diversity in all its forms leads to more productive
and
{
balanced Board discussions. I am therefore delighted to welcome Deborah Kerr as a Non-Executive Director. A further three Non-Executive
Directors, Stephen Carter, Delphine Ernotte Cunci and Simon Segars, will
also be appointed to the Board following our AGM, subject to shareholder
approval. These appointments further improve the composition of our Board.
Deborah has
{
extensive experience of the technology sector and a track record of
{
successfully transforming global enterprise software and service
companies
{
across various industries. Stephen has a track record of value creation across a variety of industries and he has extensive commercial and
regulatory experience in the telecoms sector. Delphine has considerable
experience
{
in the telecommunications sector and, more recently, in media
{
and
technology. Simon brings significant experience and insights on
{
technology trends and how these are reshaping industry landscapes.
Over the next 18 months there will be a number of scheduled retirements
from the Board. As part of this natural refresh, my ambition is to further
enhance the Board’s experience within the telecommunications and
technology sectors, reflecting the strategic priorities of the Group. I look
forward to updating you on our progress over the next year.
ESG Committee
ESG is at the core of our purpose and is central to everything that we do.
Last
{
year, I announced our intention to create a new ESG Committee to oversee our strategy and monitor our progress in this key area. I am delighted to
say the Committee has now been established and held its first two meetings
during FY22, as well as meeting jointly with the Audit and Risk Committee
to
{
review our ESG disclosures in this Annual Report. I believe this enhanced
oversight of ESG matters will support the long-term success of Vodafone.
Supporting Europe and Africa’s digital ambitions
Digital connectivity, services and technologies are transforming the way
our economies and societies function. Increasingly, digitalisation does
not
{
only determine the competitiveness of companies, but also of nations
{
and continents. Europe is at the cusp of embracing next-generation digital connectivity,
such as 5G, to remain globally competitive and maintain its leadership
in
{
key industrial sectors. We are ready to play our part. Europe’s success on its digital transition
will
{
be our success. We also believe more can and should be done in partnership with governments, in line with our social contract. Such
partnerships should build on our collective strengths, but also be honest
about our starting point. Despite the ever-growing importance of fast and
reliable connectivity, Europe is increasingly lagging behind other regions
on 5G, not only pioneering nations like South Korea, Japan and US but
also Australia and China. In fact, Europe is at risk of missing its own
Digital
{
Decade targets. Vodafone is firmly committed to delivering Europe’s digital ambitions,
ensuring it remains truly competitive for the future. However, if Europe is
to avoid being left behind, modernising and investing in its critical digital
connectivity infrastructure must be a top priority. All policies should now
be tuned to serve this overarching objective.
We see encouraging signs of improving policy in some of our markets,
which is most welcomed. EU Recovery Funding (
n
ERF’) is also providing an
{
important stepping-stone to accelerate digital investments in Europe. However, in the absence of a comprehensive policy approach to promote
digital connectivity, any such government funding will only partially
address the growing investment gaps.
Meanwhile, in Africa, smartphone penetration, 4G connectivity and financial
inclusion through mobile technology will accelerate its sustainable
development and help diversify its economies. However, most African
countries have yet to begin the rollout of 5G and fibre broadband. Investment
in next-generation connectivity and digital services can act as
{
the springboard
for further economic development, to help close the economic divide
with Europe, North America and East Asia. As Europe is
{
set to benefit from
{
the ERF, we are exploring partnerships with international financial
institutions to identify similar co-funding opportunities in Africa.
Our social contract underpins our approach to partner with governments
across Europe and Africa to ensure our societies are truly fit for the
digital
{
age. This will enable the conditions that support a more sustainable,
pro-investment environment, in turn safeguarding our economies’ global
competitiveness in an increasingly 5G world.
Outlook
On behalf of the Board, I would like to thank all of our colleagues who
have continued to work tirelessly to support our customers and society
– ensuring they remain reliably connected, as well as our shareholders
for
{
their continued support. As we enter FY23, we will continue to execute on our strategy at pace, building on the good momentum we achieved
this year. While the external environment remains uncertain, we are
well
{
equipped to respond to the challenges that may come, and we will continue to play a key role in supporting the development of the societies
in which we operate.
Jean-François van Boxmeer
Chairman
Scan or click to watch our Chairman, Jean-François
van
%
o
[
meer, share his views on
b
Vodafone:
investors.vodafone.com/videos
Chairman’s message
7
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Chief Executive’s statement
Good financial performance with growth
in
{
revenues, profits and cash flows
We delivered a good financial performance in the
year
b
with growth in revenues, profits and cash flows, in line with our medium-term financial ambitions.
Our
b
organic growth underpinned a step-change in our
return on capital, which improved by 170bps to 7.2%.
Whilst we are not immune to the macroeconomic challenges in Europe
and Africa, we are positioned well to manage them and we expect to
deliver a resilient financial performance in the year ahead.
Our near-term operational and portfolio priorities remain unchanged from
those communicated 6 months ago. We are focused on improving the
commercial performance in Germany, actively pursuing opportunities
with Vantage Towers and strengthening our market positions in Europe.
These actions, together with the simplification of our portfolio and the
ongoing delivery of our organic growth strategy, will create further value
for our shareholders.
Nick Read
Chief Executive
Clear near-term operational priorities
Strengthen commercial
momentum in Germany
The largest
Gigabit footprint
in Germany with
23.8m
homes reached with
1Gb
b
per second speed fi
[
edb
line connectivity
Compelling
convergence
opportunity with only
16%
of our fixed connectivity
customers also taking a
mobile product
Our 5G network
is now available to
>45m
customers across
the country
Accelerate operational
transformation in Spain
Effective second brand
Lowi, with
1.5m
mobile customers
Strong Business
position
b
with c.32%
mobile customer
market share
Structural
opportunities
b
with€0.2bn
reduction in customer
costs over three years
Position Vodafone
Business to maximise
E
8{
recovery funding
opportunities
Market-leading
position in
b
Business connectivity
>30%
mobile revenue market
share across our three
largest European markets
Strong track record
in
b
Business digital services
b
with>15%
growth in IoT and cloud &
security product revenues
Invested in new
products
b
and digital services, with
€1.5bn
capex investment in
growth
b
areas in FY22Scan or click to watch our Chief Executive,
Nick Read, summarise
b
our performance this year:
investors.vodafone.com/videos
Governance Financials Other information
8
Vodafone Group Plc
Annual Report 2022
Strategic report
Operating in a rapidly changing industry
Market and strategy
The long-term trends that are shaping our industry
and driving new growth opportunities.
Mega trends
The demands of our stakeholders are
continuously
b
evolving. Engaging with them regularly
b
is fundamental to how we operate.Our stakeholders
Our customers
1
We are focused on deepening our
engagement with our customers to
develop
{
long-term valuable and sustainable
relationships. Vodafone is one of the largest
mobile and fixed network operators in Europe
and a leading global IoT connectivity provider.
We have millions of customers across Europe
and Africa,
{
ranging from individual consumers
to
{
large multinational corporates.323m
mobile customers
28m
broadband customers
22m
TV customers
Our people
Our people are critical to the successful
delivery of our strategy. It is essential they
are engaged and embrace our purpose
and
{
values. 104,000
employees and
contractors
Our suppliers
Our suppliers provide us with the products
and
{
services we need to deliver our strategy and connect our customers. In total we have
around 9,000 suppliers who partner with us,
ranging from start-ups and small businesses
to large multinational companies.
9,000
suppliers
Our local communities
and
{
non-governmental organisations (‘NGOs’)
We believe the long-term success of our
business is closely tied to the success of
the
{
communities in which we operate. We interact with local communities and NGOs,
seeking to be a force for good wherever
we
{
operate.€3m
donated in
contributions and
services in-kind in
response to the war
in Ukraine
Government and regulators
Our relationship with governments and
regulators is important to ensure policies are
developed in the interests of our customers
and the industry, while also enabling them
to
{
better understand the positive impact we
{
can have on the environment and communities
{
we operate in.€9.6bn
total tax and
economic
contribution
in
b
2021Our investors
Our investors include individual and
institutional
{
shareholders, as well as debt investors. We maintain an active dialogue
with
{
our investors through our extensive investor relations programme.
1,400
interactions
with
b
institutionalinvestors in FY22
Digital services and next-generation connectivity are increasingly central
{
to
everything we do – and will be the driving forces that redefine
{
relationships
between sectors, employers, employees, customers,
and friends and
family. There are a number of mega trends which we believe will shape
our industry in the years ahead.
Hybrid working
Last year’s trend of remote working has seen a subtle shift and
hybrid
{
working is now becoming a permanent feature of the modern working environment. The continued investment in reliable, high-speed
connections for both businesses and consumers has proved to be a key
factor in this transition.
Connected devices
The demand for connected devices, beyond smartphones, is growing
rapidly. The Internet of Things (
n
IoT’) is expected to drive huge operational efficiencies, deliver real-time information, and can be applied to a broad
range of use cases. An increasing number of connected devices are also
communicating and trading with each other, which presents businesses
with exciting opportunities to compete in new online markets (the
n
Economy of Things’).
Adoption of cloud technology
Businesses and consumers are increasingly moving away from using
their own hardware and device-specific software and instead using more
efficient, shared capacity and services over the cloud.
Digital and green transformation for the private and public sector
The European Union has launched a series of funding programmes with
€723.8 billion available under the banner
n
NextGenerationEU’. This includes
a Recovery and Resilience facility, which combines €385.8 billion
of loans
and €338 billion of grants available to European Union Member States.
Of these grants, approximately 70% are being allocated to European
Union Member States in which Vodafone has an operating presence.
These grants are planned to be 70% committed by the end of
{
2022.
The
{
range of funding presents a direct and indirect opportunity given
that at least 20% of the total funding is planned to support the
European
Commission’s digital transformation agenda. In order to remain
competitive
and fulfil their social and environmental commitments, companies are
also increasingly looking to digitalise their operations to
{
become more efficient and reduce their environmental impact.
Digital payments and financial services
The trend towards more digital forms of payment is growing, with a
broader range of financial services now being delivered through apps
and online. In Africa, the growth in smartphone penetration is allowing
consumers to access digital financial services for the first time, enabling
money transfers, loans, insurance and even merchant payments.
Read more
on pages 14 to 15
Read more
on pages 12 to 13
Note:
1. Includes VodafoneZiggo and Safaricom.
Click or scan to watch our digital services
and experiences
b
investor brie
ȣ
ng:
investors.vodafone.com/digital-services
Strategic report
Governance Financials Other information
9
Vodafone Group Plc
Annual Report 2022
Our strategy focuses on driving shareholder returns through growth. This will be delivered through three
customer commitments and three enabling strategies, all of which work together towards realising our vision
to
b
become a new generation connectivity and digital services provider for Europe and Africa, enabling an inclusive and sustainable digital society. We have made strong progress and executed at pace during the year.
Our progress
Scan or click to watch our Chief Executive,
Nick Read, summarise our performance this year:
investors.vodafone.com/videos
Our customer commitments
Best connectivity products and services
Grow revenue through providing the best core connectivity products and
services in each of our markets for both consumers and businesses.
Flexible contract
pricing structures in
3
markets
5G launched
and live in
>300
cities across
14 markets
1
Leading innovation in digital services
Leveraging our unique platforms and partnering with leading technology firms
to provide customers with a
n
best on Vodafone’ user experience.VodaPay ‘super-app’
now with
1.6m
registered users
V-Hub
supported
2.5m
unique visitors
with digital tools
Outstanding digital experiences
Using our leading digital architecture to provide a seamless customer experience
across all channels – app, online, retail and physical delivery at home.
MyVodafone app
used by
52m
customers
Super-WiFi
launched in
4
countries
Read more about our people strategy
on pages 21 to 23
Our people strategy
Our people strategy accelerates our transformation, by seeking to create an inclusive environment for growth, where everyone ha
s the opportunity
to
{
thrive. It is based on four pillars:The Spirit of Vodafone Diverse talent and future ready skills
Agile and efficient operating model Digital and personalised experience
Notes:
1. Group including VodafoneZiggo and Safaricom.
2. Net OpEx savings Europe, Common Functions and Vantage Towers.
Our enabling strategies
Simplified and most efficient operator
Delivering further efficiencies through digital transformation, standardisation
of products and procedures, and automation of processes at scale.
Pre-tax ROCE
increased by
170bps
to 7.2%
Cumulative European
net opex savings
2
€1.5bn
between FY19 and FY22
Social contract shaping digital society
Influencing policy and regulation to shape a more healthy industry structure,
and build a resilient, inclusive and sustainable digital society.
Rational spectrum
auctions in
3
markets during FY22
Encouraging start
in accessing
EU Recovery
Funding
Leading gigabit networks
Maintaining our leading gigabit networks as we provide our
{
customers
with the best connectivity products and
n
best{
on Vodafone’ user experience.
Best/co-best
network quality
3
in
13
markets
Marketable
NGN homes of
145m
across our footprint
4
3. Data lead/co-lead mobile network quality.
4. Europe including VodafoneZiggo.
Governance Financials Other information
10
Vodafone Group Plc
Annual Report 2022
Strategic report
Structured for value creation
Business model
Infrastructure assets
Retail and customer service
Europe Consumer
1
We are a leading converged connectivity provider in Europe, with nearly
9
{
million converged customers, 114 million mobile connections and
145
{
million marketable NGN broadband homes.Vodafone Business
We serve over 6 million private and public sector customers of all sizes.
We offer core connectivity services, as well as new technologies such as
IoT, cloud & security, and unified communications.
African Consumer
2
We are a leading provider of mobile data and financial services in Africa.
We have 185 million mobile customers and enable access to financial
services for 66 million people via our financial services platforms.
€20 billion
Europe Consumer service revenue
€10 billion
Business service revenue
€6 billion
African Consumer service revenue
Shared operations
1.
We have consolidated our supplier management functions into a
single
{
unit, the Vodafone Procurement Company
.
2.
Our
integrated IT operations, network operating centres
andback-office activities
provide standardisation across our markets.
3.
Vodafone Roaming Services
manages our global roaming
relationships,
Vodafone Carrier Services
provides wholesale connectivity services, and our
Partner Markets
team extends our reach and builds strategic alliances with operators in 48 countries.
2. Network
& digital
operations
3. Inter-
network
operations
1. Supplier
management
Growth platforms
Our converged connectivity infrastructure is largely managed through
three components: passive mobile, active mobile, and fixed and transport.
Passive mobile:
We manage over 100,000 towers across markets
in Europe and Africa. Our European towers are primarily held and
operated through Vantage Towers.
Active mobile:
We own and operate our own active mobile network,
which includes more than 180,000 radios in Europe and Africa.
We
{
also have spectrum licences in all of our markets.Fixed and transport:
Our infrastructure comprises connectivity
networks, mobile backhaul, and international terrestrial and submarine
connections. The majority of our fixed connectivity networks are
based on fibre infrastructure, particularly high-demand nodes.
2
3
We have evolved our business model and organisational structures to operate in a more streamlined and agile
matrix, recognising the importance of local, in-market scale and capabilities, as well as driving further value from
the scale and breadth of our footprint. We manage our Group through four Group-wide operational layers.
2
2
3
1
150 million
IoT SIM connections (FY21: 123 million)
52.4 million
M-Pesa customers
1
(FY21: 48.3 million)
Digital services
We deepen our customer relationships through our growth platforms
which include Vodafone TV, home services, device lifecycle services and
loyalty applications.
Internet of Things
Our IoT service was established in 2008 and has grown to be the largest
IoT connectivity provider globally.
Financial services
Together with Vodacom’s own platform and our African payment
platform M-Pesa, we provide a range of financial services, as well as
business and merchant payment services.
>50 million
Customers subscribing to a digital service
1
Notes:
1. Including VodafoneZiggo. 2. Africa including 100% Safaricom.
Strategic report
Governance Financials Other information
11
Vodafone Group Plc
Annual Report 2022
In-market autonomy and agility
Our local in-country teams are best placed to understand the needs of
their local market and make appropriate decisions.
Full P&L
accountability
–
In-country finance, HR and legal teams
–
Local capital allocation and people decisions
Commercial
and marketing
–
In-country control of pricing, product and marketing
–
Each country operation remains agile in
competitive markets
–
Local markets share best practices around
the
{
Group, for example: –
Investment-linked pricing structures in
five
{
markets
–
Localised second-brands in six markets
Customer
operations
–
Local control of channel and customer journeys
–
Respond to local market characteristics and
customer preferences
–
Local markets share best practices around
the
{
Group, for example: –
Optimising local digital/traditional channel mix
–
Localisation of MyVodafone App in 12 markets
Corporate oversight
In-market operations and regionally-scaled standardisation
overseen by lean and efficient corporate team.
Regional standardisation
delivering scale benefits
We are structured to deliver efficient operational support through
regionally-scaled services as the connectivity value chain has a high
degree of replicable and repeatable services across our markets.
Networks
–
Integrated European network and IT/digital teams
drive efficiency, increase speed of execution,
standardise key processes, and codify the best
solutions for implementation across our markets
–
Improvement in network test results
–
42% reduction in network incidents
Procurement
–
Combined €24 billion purchasing power of our
operations in Europe and Africa
–
Independent operators paying to access our
pooled procurement through our Partner
Markets business
–
Double-digit savings on Liberty procurement
post-acquisition
Shared
services
–
Four shared service centres in Egypt, India and
Central and Eastern Europe
–
Approximately 32% of our people work in
shared
{
operations –
Automating processes through digitalisation
–
8,200 role efficiencies over the last four years
Our medium-term ambition
Value model Medium-term ambition
Consistent revenue
{
growthGrowth in both Europe & Africa
Ongoing
margin
expansion
Mid-single digit adjusted
EBITDAaL
2
growth
Good cash
conversion
Mid-single digit adjusted
FCF
2
{
growth
Disciplined
capital allocation
Net debt to adjusted EBITDAaL
2
2.5-3.0x
Sustainable
value
creation
ROCE
2,3
greater than WACC
A minimum dividend of 9.00
eurocents per share per annum
Notes:
1. Excludes Vantage Towers’ growth capital expenditure.
2. These line items are non-GAAP measures. See
{
’Non-GAAP measures’ on page 223 for
{
more{
information.3. Pre-tax return on capital employed (controlled).
+
+
+
=
1
€8 billion
cash capital additions
1
in
b
FY222
2.7x
net debt/adjusted EBITDAaL
3
9.0 eurocents
dividends per share in FY22
Capital allocation
Our capital allocation framework enables us to balance our three capital
allocation priorities.
Maintain a robust balance sheet
Shareholder distribution
We are organised to ensure the optimal balance
between local agility and regional scale, which
delivers significant benefits through standardisation.
Our disciplined approach to capital allocation
and
b
portfolio optimisation supports our mid-term ambitions.
Balancing regional scale and local agility Our approach
Portfolio optimisation
We continue to follow our three principles when managing our portfolio:
1
We focus on the converged connectivity markets in
Europe, and mobile data and payments in Africa
2
We aim to achieve returns above the local cost of capital
in all of our markets
and3
We consider whether we are the best owner and whether
there are any pragmatic and value-creating alternatives.
Invest in critical infrastructure
Strategic report
Governance Financials Other information
12
Vodafone Group Plc
Annual Report 2022
Note:
1. GSMA Mobile Economy Report 2022.
Digital services and next-generation connectivity are
increasingly central to everything we do – and will be
the driving forces that redefine relationships between
sectors, employers, employees, customers, and
friends and family.
There are five
ȁ
mega trendsȂ
that we believe will
shape
b
our industry in the years ahead: hybrid working, connected devices, adoption of cloud technology,
the digital and green transformation of public and
private sectors, and digital payments.
Hybrid working
Over the last couple of years we have seen a dramatic shift in working
patterns. Post the pandemic companies are now moving from largely
office based environments to more
n
hybrid’ working models, thereby providing their employees with much greater flexibility as to how and
where they work, whilst still ensuring high or even increased levels
of
{
productivity. This change in working patterns is driving increased demand
{
for fast and reliable fixed and mobile networks, as well as a range
{
of supporting services such as cloud-based productivity and communication platforms.
The majority of large multinationals already have remote working
capabilities, however they are now moving to more efficient technologies.
Smaller companies, ranging from corporates to small and medium-sized
offices, rely on network operators such as Vodafone to provide secure
remote working solutions. These solutions include virtual private
networks, unified communication services and the migration of
enterprise
{
applications to the cloud. This is vital for business continuity, and it provides network operators with an opportunity to further deepen
their customer relationships by offering a broad range of services.
Connected devices
The world is becoming ever more connected, and it is not just driven
by
{
smartphones. A wide range of new devices, across all sectors and applications, are increasingly being connected to the internet. These
connected devices, known as the Internet of Things (
n
IoT’) are expected
to
{
increase by around 55% to over 23 billion devices by 20251
. This is
driven by continued reductions in the cost of computing components,
advances in cross-device operability and software, and the
{
near-ubiquity of networks.
For consumers, there is a growing range of applications such as
smartwatches, tracking devices for pets, bags and bicycles, and
connected vehicles – which can lower insurance premiums and
enable
{
a
{
range of advanced in-vehicle solutions.
For businesses, the demand for IoT and potential use cases is even more
evident. These include solutions such as automated monitoring of energy
usage across national grids, tracking consumption in smart buildings and
detecting traffic and congestion in cities.
Mega trends
Long-term trends shaping our industry
In environments that are more localised, such as factories and ports,
network operators are building and running Mobile Private Networks
(
n
MPNs’). MPNs offer corporate customers unparalleled security and
bespoke network control. As an example, MPNs enable autonomous
factories to connect to thousands of robots, enabling them to work
in
{
a
{
synchronised way. Once a product leaves the factory it can also
be
{
tracked seamlessly through global supply chain management applications, whether it is delivered through the post, a vehicle or
even
{
via{
drones.
In areas where the same solution can be deployed across multiple
sectors, network operators are moving beyond connectivity to
provide
{
complex end-to-end hardware and software solutions such as
{
surveillance, smart metering and remote monitoring; and it is often more efficient for these solutions to be created in-house. Scaled operators
can leverage their unique position to co-create or partner with nimble
start-ups at attractive economics.
As the number of IoT devices increases, physical assets are also
communicating with each other in real-time and new digital markets
are
{
being established. This is leading to the Economy of Things, where connected devices securely trade with each other on a user’s behalf,
without human intervention. This presents businesses across multiple
industries with exciting opportunities to transform goods into tradeable
digital assets which can compete in new disruptive online markets.
Adoption of cloud technology
Over the last decade, large technology companies have invested heavily
in advanced centralised data storage and processing capabilities that
organisations and consumers can access remotely through connectivity
services (commonly termed
n
cloud’ technology). As a result, organisations and consumers are increasingly moving away from using their own
expensive hardware and device-specific software to using more efficient
shared hardware capacity or services over the cloud. This is popular as it
allows upfront capital investment savings, the ability to efficiently scale
resources to meet demand, systems that can be easily updated and
increased resiliency. This is driving demand for fast, reliable and secure
connectivity with lower latency.
Many small businesses increasingly understand the benefits of
cloud
{
technology, however, they lack the technical expertise or direct relationships with large enterprise and cloud specialists. This presents an
opportunity for network operators, particularly those with strong existing
relationships, as they can effectively help customers navigate their move
to the cloud at scale.
Click or scan to watch our digital services and
experiences
b
investor brie
ȣ
ng:
investors.vodafone.com/digital-services
13
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Note:
1. GSMA State of the Industry Report on Mobile Money 2022.
Click or scan to watch our digital services
and experiences
b
investor brie
ȣ
ng:
investors.vodafone.com/digital-services
Digital and green transformation of the
public
{
and private sectorsAs part of the fiscal response to the COVID-19 pandemic, the
European
{
Union has launched a series of funding programmes with
{
€723.8 billion available under the banner
n
NextGenerationEU’.
This
{
includes
{
the Recovery and Resilience facility, which combines
€385.5
{
billion of loans and €338 billion of grants available to European Union Member States. Of these grants, approximately 70% are being
allocated to European Union Member States in which Vodafone has
an
{
operating presence. These grants are planned to be 70% committed by the end of
{
2022. The{
range of funding presents a direct and indirect
opportunity given that at least 20% of the total funding is planned to
support the European Commission’s digital transformation agenda.
The UK and many of our African markets have similar stimulus measures
in place. These support measures will help connect schools, hospitals and
businesses to gigabit networks and provide hardware, such as tablets, to
millions of school children.
Similarly, the European Union has committed to be carbon-neutral by
2050. Mobile network operators across Europe will be able to benefit
from these funds as they seek to limit their impact on the climate, and
help their customers from across the private and public sectors reduce
their own energy use and carbon emissions.
Small and medium-sized enterprises (
n
SMEs’) in Europe can often lag behind in terms of digital adoption. However, under various government-
led support mechanisms, SMEs will be eligible for vouchers, grants
and
{
loans to transition to eCommerce, upskill employees, and move to
{
cloud-based solutions whilst ensuring they are secure as they do so. SMEs
{
will look to trusted and experienced network operators which can offer a full suite of solutions, whilst also help them navigate technical and
regulatory processes. Finally, to ensure the benefits of these projects are
spread equitably, funding is also being allocated towards rural inclusion
to
{
subsidise the building of network infrastructure where it is currently uneconomical for operators to do so.
Read more about our purpose to enable an inclusive
and
b
sustainable digital society on pages 41 to 45Digital payments
Businesses in Europe continue to expand and migrate sales channels
from physical premises to online channels such as websites and
mobile
{
applications. As a result, businesses increasingly transact through
{
mobile-enabled payment services which remove the need
{
for{
legacy fixed
{
sales terminals. Consequently, businesses demand
{
reliable and secure mobile connectivity. Consumers are also increasingly
{
transitioning away from using cash, to digital payment methods conducted directly via mobile phones or smartwatches,
further
{
increasing the importance of mobile networks. In Africa, digital payments are primarily conducted via mobile phones
through payment networks owned and operated by network operators,
and the annual value of mobile money transactions has reached a key
milestone in 2021 with one trillion transactions globally
1
. Consumers
are
{
also moving beyond peer-to-peer transactions as rising smartphone penetration drives the adoption of mobile payment applications. Network
operators and a range of FinTech startups are using these applications to
sell additional financial services focused products, ranging from advances
on mobile airtime and device insurance to more complex offerings
such
{
as life insurance, loans and e-commerce marketplaces. This plays a
{
critical role in improving financial inclusion for millions of people across
Africa where the traditional banking sector has not been able to reach.
Businesses are also increasingly reliant on operator-owned payment
infrastructure for consumer-to-business payments, but also for large
business-to-business transfers. These payment networks drive scale
benefits for the largest operators by allowing customers to save on
transaction fees whilst also driving both business and consumer
customers to seek reliable and secure networks.
Click or scan to learn more about our IoT leadership and
evolution in our Vodafone Business investor brie
ȣ
ng:
investors.vodafone.com/vbbrie
ż
ng
Larger corporates, which may already use the cloud today, are
progressively moving away from complex systems based on their own
servers or single cloud solutions, to multi-cloud offers, sold by network
operators and their partners. This approach reduces supplier risk and
increases corporate agility and resilience. Large corporates continue to
drive higher demand for robust, secure and efficient connectivity services
as they transition from their own legacy hardware and services. Cloud
providers also recognise the criticality of telecommunications networks.
Many cloud providers are partnering with the largest network operators,
sometimes through revenue sharing agreements, to develop edge
computing solutions which integrate data centres at the edge of
telecommunication networks to deliver customers reduced latency.
The
{
opportunity is significant as the total addressable market in
business-to-business cloud & security is expected to reach €63 billion
by
{
2025 compared to €45 billion today. Consumers use cloud solutions for a variety of reasons, including digital
storage, online media consumption or interacting through the metaverse.
Consumer hardware is also now being replaced by cloud-first solutions.
For example, new cloud-based gaming services allow consumers to
stream complex, bandwidth-heavy computer games directly to their
phones or tablets, without the need for expensive dedicated hardware.
Fast and reliable connectivity will act as a catalyst for further innovation
and consumer applications, many of which do not currently exist today.
Read more about how Vodafone
Ȃ
s leading gigabit connectivity infrastructure supports to the digital society on pages 44 to 45
Strategic report
Governance Financials Other information
14
Vodafone Group Plc
Annual Report 2022
Regular engagement ensures we operate in a
balanced and responsible way, both in the short
and
b
longer term. We are committed to maintaining good communications and building
positive relationships with all of our stakeholders, as we see this as essential
to strengthening our sustainable business. We have summarised our
interactions with key stakeholders during the year below.
Vodafone is required to provide information on how the Directors have
performed their duty under section 172 of the Companies Act 2006 to
promote the success of Vodafone, including how those matters and the
interests of Vodafone’s key stakeholders have been taken into account
by
{
the Directors. The engagement mechanisms directly involving the
Directors are indicated below with a
B
symbol.
Our customers
We are focused on deepening our engagement with our customers
to
{
develop long-term valuable and sustainable relationships. We have hundreds of millions of customers across Europe and Africa, ranging
from
{
individual consumers to large multinational corporates.How did we engage with them?
–
Digital channels (MyVodafone app, TOBi chatbots, social media
interaction and the Vodafone website)
–
Call centres
–
Branded retail stores
What were the key topics raised?
–
Better value offerings
–
Faster data networks and wider coverage
–
Making it simple and quick to deal with us
–
Managing the challenge of data-usage transparency
–
Converged solutions for consumer and business customers
–
Prompt feedback/resolution on service-related issues
B
How did the Board engage?
–
The Board participated in a dedicated review of the Group’s Net
Promoter Scores, facilitated by Executive Committee members
How did we respond?
–
Launched 5G in 14 markets and expanded our 4G coverage
–
Leveraged our digital channels to support easy access for all of
our
{
customers during the COVID-19 crisis –
Improved efficiency and functionality on MyVodafone app
–
Moved TOBi to a scaleable platform to improve speed to market
–
Continued to apply the highest safety standards possible in our
stores
{
in order to keep our customers and colleagues safe during the
{
COVID-19 crisis –
Added content deals to integrated internet, TV and mobile packages
–
Launched initiatives to tackle social issues such as digital poverty,
domestic violence, and loneliness
–
Established Europe’s largest network powered by renewable energy
and launched initiatives to help customers go green, including
introducing SIMs made out of recycled plastic
–
Donated SIMs and handsets, provided free connectivity, charging and
WiFi in response to the war in Ukraine
Our people
Our people are critical to the successful delivery of our strategy. It is
essential that they are engaged and embrace our purpose and values.
Throughout the year we focused on a number of areas to ensure that
everyone is highly motivated and we remained focused on wellbeing.
Stakeholder engagement
Engaging regularly with our stakeholders is
fundamental to the way we do business
How did we engage with them?
–
Regular meetings with managers
–
B
European Employee Consultative Committee
–
B
National Consultative Committee (South Africa)
–
B
Internal website and live webinars
–
B
Executive Committee discussions
–
B
Newsletters and electronic communication
–
B
Employee Speak Up channel
–
B
Global Pulse and Spirit Beat surveys
What were the key topics raised?
–
Opportunities for personal and career development
–
Communication and knowledge sharing across the Group
–
Enhancing leadership coaching capacity
–
Deepening digital skills
–
Impacts of COVID-19
–
Hybrid ways of working and return to office
–
Progress on Vodafone’s Fair Pay agenda
–
Global Pulse and Spirit Beat survey actions
B
How did the Board engage?
–
Valerie Gooding, in her capacity as Workforce Engagement Lead,
updated the Board on employee voice engagements, and the
Chief
{
Human Resources Officer provided updates on culture and the
{
Vodafone Spirit and the delivery against people strategy (including operating model transformation, inclusion, and hybrid ways of working)
How did we respond?
–
Provided training courses to develop new skills such as software
engineering, cyber security, data science and customer experience
–
Internal communication to staff on the impacts of COVID-19
–
Provided a range of physical and mental wellbeing services
–
Introduced hybrid ways of working and created a global office design
–
Implemented survey actions and monitored progress at Executive
Committee and Board level
–
Introduced quarterly
n
Spirit of Vodafone’ days to support personal growth, wellbeing and connection
–
Launched a global senior leadership programme and leadership
standards for all managers
–
Raised standards for learning, talent, leadership and skills
–
Launched an integrated skills and learning platform
–
Set ethnic diversity targets, and a related action plan, including a range
of training for diversity and inclusion topics
Our suppliers
Our business is helped by around 9,000 suppliers who partner with us.
These range from start-ups and small businesses to large multinational
companies. Our suppliers provide us with the products and services we
need to deliver our strategy and connect our customers.
How did we engage with them?
–
Safety forums, events, conferences and site visits
–
Purpose criteria in tenders
–
Supplier audits and assessments
What were the key topics raised?
–
Improving health and safety standards
–
Promoting diversity and inclusion
–
Driving towards net zero emissions in supply chains
–
Supplier/product innovation
B
How did the Board engage?
–
The Board, through the Audit and Risk Committee, received updates on
the risk and resilience of our global supply chains
15
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
How did we respond?
–
Held safety forums every quarter
–
Recognised our suppliers with awards for health and safety, diversity
and inclusion and planet efforts
–
Collaborated with industry peers and suppliers through the Joint
Alliance for CSR (
n
JAC’), formerly known as the Joint Audit CooperationOur local communities and non-governmental
organisations (‘NGOs’)
We believe that the long-term success of our business is closely tied to
the success of the communities in which we operate. We interact with local
communities and NGOs, seeking to be a force for good wherever we operate.
How did we engage with them?
–
Through our products and services
–
Community and NGO interaction on education, health, agriculture and
inclusive finance projects, and on our humanitarian response to global
issues including the COVID-19 pandemic and war in Ukraine
–
Participation in multi-stakeholder working groups on policy issues at
the national and international level
What were the key topics raised?
–
Increasing access to connectivity and digital services, by closing the
digital divide, closing the rural gap and connecting SMEs
–
Human rights topics including child rights
–
Environmental topics including net zero and the circular economy
–
Delivery of global and national development goals including
UN
{
Sustainable Development GoalsB
How did the Board engage?
–
A comprehensive update on Vodafone’s purpose and social contract,
and presentation of Vodafone Foundation activities and progress
–
The new ESG Committee provides the Board with enhanced oversight
of ESG topics, including engagement with communities and NGOs
How did we respond?
–
Launched, and our Chief Executive chaired, a UN Broadband
Commission working group on increasing smartphone access and
co-chaired a pillar of the International Telecommunication Union’s
Partner2Connect initiative
–
Participated in partnerships and working groups on human rights
–
Participated and engaged with key environmental initiatives, including
the Science Based Targets initiative and CDP
–
Launched a response to the war in Ukraine with NGOs and charities
Governments and regulators
Our relationship with governments and regulators is important and we
hope to work together on policies impacting our industry and customers,
while also enabling them to better understand the positive impact we can
have on the environment and communities we operate in.
How did we engage with them?
–
B
Participation and attendance at company and industry meetings
with government and regulators, EU institutions, public forums and
parliamentary processes
–
B
Meetings with commissioners, ministers, elected representatives,
policy officials and regulators
–
Hosting and participating in workshops and events to improve sector
understanding on connectivity and digitalisation
–
B
Our Chairman is a member of the European Round Table for
Industry, which promotes competitiveness and prosperity and
engages
{
with European and global institutions, and governments What were the key topics raised?
–
Regulatory and policy environment and compliance
–
Responses to COVID-19 and the war in Ukraine
–
Security and supply chain resilience
–
The digital economy and society
–
Digital society and the European Green Deal
–
Data protection and privacy
B
How did the Board engage?
–
Management updated the Board on how Vodafone worked with
governments and regulators during the COVID-19 pandemic
–
Management provided regular updates on legal and regulatory matters
How did we respond?
–
Engaged on the digital and green transformation of the EU
–
Engaged on the Digital Decade targets including the digitalisation of
industries and SMEs
–
Communications on the impact of electromagnetic fields (
n
EMF’) –
Engaged on network investments, design and deployment
(e.g.
{
Open{
RAN, 5G)
–
Engaged on issues such as the allocation of spectrum and the
protection of consumers
–
Discussed policy and regulatory environment that facilitates
investment in technology
–
Engaged with the EU with respect to the data economy, including data
protection, digital principles, and data sharing
Our investors
Our investors include individual and institutional shareholders as well as
debt investors. We maintain an active dialogue with our investors through
our extensive investor relations programme.
How did we engage with them?
–
B
Personal meetings, virtual roadshows, conferences
–
B
Annual & interim reports and presentations
–
B
Investor relations website used as primary digital communications
tool and is available to all shareholders (institutional and retail)
–
Four virtual investor briefings arranged since November 2020 and a
number of video interviews with Directors, with 11 hours of on-demand
video content available on our website
–
Stock Exchange News Service (
n
SENS’) announcements –
B
Annual General Meeting (
n
AGM’) –
B
Three investor perception studies and regular feedback survey
–
Our Registrar, Equiniti, operates a portfolio service which provides
shareholders with the ability to manage their holdings
What were the key topics raised?
–
Strategy to deliver sustained financial growth
–
Operational priorities
–
Allocation of capital
–
Portfolio optimisation
–
Corporate governance practices
–
ESG strategy, targets and reporting
–
Dividend policy
–
Deleveraging strategy
B
How did the Board engage?
–
AGM with a live webcast available to all shareholders, including the
ability to submit questions to the Board
–
The Chairman and a number of Non-Executive Directors participated in
video interviews, where they explained their roles
–
Investor roadshows are attended by the Chairman and Executive
Directors for direct Q&A sessions
How did we respond?
–
We conducted almost 1,400 investor interactions through meetings
with major institutional shareholders, debt investors, individual
shareholder groups and financial analysts, and attended conferences
–
Meetings were attended by Directors and senior management,
including our Chairman, Senior Independent Director, Chief Executive,
Chief Financial Officer, and Executive Committee members
–
Virtual investor briefings covering technology and digital services
presented by Executive Committee members and senior management
Strategic report
Governance Financials Other information
16
Vodafone Group Plc
Annual Report 2022
A new generation connectivity
and digital services provider
Strategic review
In May 2021, we set our ambition to reshape the
Group as a new generation connectivity and digital
services provider. Our strategy focuses on driving
shareholder returns through growth. This is being
delivered through three customer commitments
and
b
three enabling strategies, all of which work together towards realising our
b
vision to become a
b
new generation connectivity and digital services
provider for Europe and Africa, enabling an inclusive
and sustainable digital society.
We have made good progress with our strategy during FY22 and the table
below includes a selection of KPIs that illustrates progress in our key areas
of focus. In this section we outline:
1.
We are systematically executing our long-term organic growth strategy,
and clear plan to deliver our operational priorities;
2.
We have actions underway to balance challenging macroeconomic
conditions; and
3.
We are committed to improving shareholder returns.
Notes:
1. Including VodafoneZiggo.
2. Excluding the impact of inactive data only SIM losses in Italy during Q3 and Q4 FY20.
3. Africa including Safaricom.
4. Organic growth. See page 223 for more information.
5. Based on Germany, Italy, UK and Spain only.
6. Group excluding Egypt.
7. Defined as percentage of total customer contacts resolved without human interaction
through
{
TOBi.8. These line items are alternative performance measures which are non-GAAP measures.
See
{
’Non-GAAP measures’ on page 223 for more information.9. We calculate two ROCE measures: i) Pre-tax ROCE for controlled operations only, and
ii)
{
Post-tax{
ROCE which also includes our share of adjusted results in equity accounted associates and joint ventures. See pages 230 and 231 for more information.
Scan or click to watch our Chief Executive, Nick Read,
outline our progress with our strategy:
investors.vodafone.com/videos
Executing our long-term organic growth strategy
During the year, a number of strategic initiatives enabled the progress in
our strategic KPIs, including:
–
We launched flexible contract structures in three markets, which
enable customers to select the optimal contract length and monthly
payments for their own needs;
–
We have now launched, and have next generation 5G mobile
connectivity services in 294 cities, across 11 markets in Europe, which
delivers up to gigabit downloads speeds;
–
We have launched investment-linked pricing contractual options in five
markets, and activated this option in two markets;
–
We launched the VodaPay financial services
n
super-app’ in South Africa, which has already attracted 2.2 million downloads;
–
Our IoT and cloud & security digital services within Vodafone Business
grew by 15.3% in FY22;
–
The MyVodafone app, which enables real-time account management is
used by 52 million customers, across 12 countries;
Strategic progress summary
Customer commitments
2022
2021 2020
Best connectivity products and services
Europe mobile contract customers
1
million
66.4 65.4 64.4
Europe broadband customers
1
million
25.6 25.6 25.0
Europe Consumer converged customers
1
million
9.0 7.9 7.2
Europe mobile contract customer churn 13.7 14.6
%
13.62
Africa mobile customers
3
million
184.5 178.0 168.4
Africa data users
3
million
89.9 84.9 82.6
Business service revenue growth
4
%
0.8 (0.6) 0.8
Leading innovation in digital services
Europe TV subscribers
1
million
21.9 22.2 22.1
IoT SIM connections 123.3 102.9
million
150.1Africa M-Pesa customers
3
million
52.4 48.3 41.5
Africa M-Pesa transaction volume
3
billion
19.9 15.2 12.2
Outstanding digital experiences
Digital channel sales mix
5
%
25 26 21
End-to-end TOBi completion rate
6 7
%
42.9 34.6 –
Enabling strategies
Leading gigabit networks
5G available in European cities
1
#
294 240 97
Europe on-net gigabit capable connections
1
million
48.5 43.7 31.9
Europe on-net NGN broadband penetration
1
%
30 30 30
Simplified and most efficient operator
Pre-tax return on capital employed
8 9
%
7.2 5.5 6.3
Post-tax return on capital employed
8 9
%
5.0 3.9 3.9
Europe markets where 3G switched off
1
#
431
17
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
–
Our artificial intelligence enabled assistant
n
TOBi’ is now having 32 million conversations per month, in 14 languages, across 16 countries;
–
Our
n
V-Hub’ online portal supported 2.5 million unique visitors with digital tools in 13 countries during FY22;
–
We have launched
n
Super-WiFi’ in 4 countries, helping deliver superior
{
in-home WiFi performance and the option of built-in back-up
{
4G connectivity; –
We have decommissioned 3G mobile connectivity in four markets,
which reduces costs and enables us to reallocate spectrum to 4G
and
{
5G connectivity; and –
Our network performance benchmarking demonstrates we have a
co-leading data position in 13 out of our 19 markets.
Operational priorities
In addition to the ongoing, systematic execution of our strategy,
we
{
have{
three operational areas that are currently being prioritised:
i.
strengthening commercial momentum in Germany;
ii.
accelerating operational transformation in Spain; and
iii.
positioning Vodafone Business to maximise EU recovery
funding
{
opportunities. Strengthening commercial momentum in Germany
Germany is both the largest connectivity market in Europe and
Vodafone’s biggest market, representing 37% of Group Adjusted
EBITDAaL in FY22. Germany has benefited from a more sustainable
competitive environment compared to many other markets in Europe
and is the only top five European market to have experienced ARPU
growth for both mobile and fixed connectivity since 2017. Alongside the
scale and sustainable market structure, Germany also presents the most
significant converged connectivity opportunity of our larger markets,
with
{
only 20.4% of our mobile customers taking a fixed connectivity product, compared with 53.5% in Spain. Similarly, only 16.3% of our fixed
connectivity customers in Germany take a mobile connectivity product,
compared with 90.7% in Spain.
We are focused on taking advantage of this significant opportunity
through the structural advantage we have created with our fixed
connectivity services. Following the acquisition and commercial
integration of the former Unitymedia assets, we can now reach over
23.7
{
million homes in Germany with 1 gigabit per second fixed line connectivity. Beyond this, we have clear upgrade plans for our hybrid
network that include a mix of demand-driven node-splitting – bringing
fibre closer to our customers – and options for upgrading the last stretch
of cable into customers’ homes.
However, our short-term commercial performance in Germany in
the
{
second half of FY22 has not been satisfactory. In the fourth quarter of
{
FY22 we lost 105,000 net mobile connectivity contract customers and
{
125,000 net fixed connectivity customers. There were a number of contributing factors to this performance including the ongoing impact
of
{
lower retail footfall and specific short-term operational matters related to
{
new customer journeys that were implemented in December 2021, to ensure compliance with new legislation in Germany. A series of initiatives
is already underway to improve our commercial performance including:
–
We are implementing necessary changes and enhancements to our
customer journeys;
–
We are accelerating the shift from our more traditional retail store
model to
n
digital first’ sales and customer care channels; –
We are investing in our existing network infrastructure;
–
We have started discussions with potential joint venture partners to
enable further investment in our fixed network infrastructure, including
full fibre-to-the-premises where there is demand from our housing
association customers, and nearby locations that are not currently
covered by our network; and
–
We have strengthened the Vodafone Germany management team
with the addition of a Chief Strategy and Transformation Officer (CSTO)
already in place, and a new CEO joining in July 2022.
We plan a further update of our progress and plans to be provided by
the
{
new Vodafone Germany CEO, Philippe Rogge, in November 2022,
alongside our H1 FY23 results.
Accelerate operational transformation in Spain
Over the last four years, the competitive environment in Spain has
intensified as the number of customer-facing brands has increased from
around 60 in 2017 to almost 80 in 2022. This has resulted in significant
price deflation, with mobile contract ARPU across the market declining
by
{
18% since 2017. Given the relatively high operating leverage within the sector, this price deflation has had a significant impact on our financial
performance in Spain.
Following a series of measures conducted between FY19 and
FY22
{
we{
have stabilised our financial performance and are working
to
{
further{
improve return on capital employed. We have recently
concluded
{
a restructuring plan, mainly affecting owned retail stores as a
{
part of our operational transformation and announced a reorganisation
of the local executive committee, with new operational units focused on
competitiveness and digitalisation in the consumer segment.
Given the market backdrop, we have also conducted extensive interaction
with policymakers and regulators at both the national and European level.
We are pleased that a series of spectrum and taxation reforms are being
pursued, including a well-structured spectrum auction, with an outcome
below European benchmark levels and longer duration for new licences
with an extension of 20 years after the initial 20-year term.
In addition to these improvements, we are also actively pursuing further
opportunities, including enhancing strategic network partnerships. We
are
{
also working to maximise the opportunities available for Vodafone Business from EU recovery funding programmes, which will be particularly
significant in Spain.
Position Vodafone Business to maximise EU recovery
funding
b
opportunitiesThe European Commission has launched a series of funding programmes
with €723.8 billion available under the banner
n
NextGenerationEU’. These include the Recovery and Resilience facility, which combines €385.8 billion
of loans and €338 billion of grants available to European Union Member
States. Of these grants, approximately 70%
are being allocated to Euro
pean
Union Member States in which Vodafone has an operating presence.
These grants are planned to be 70% committed by the end of 2022.
The
{
range of funding presents a direct and indirect opportunity given that
{
at least 20% of the total funding is planned to support the European Commission’s digital transformation agenda. We are tracking the progress
of funding applications and approvals at the project level.
Scan or click to watch our Chief Executive giving
a
b
more detailed review of our strategic progress
within
b
an
b
accompanying video presentation:
investors.vodafone.com/videos
Strategic report
Governance Financials Other information
18
Vodafone Group Plc
Annual Report 2022
Well placed to manage challenging
macroeconomic conditions
The macroeconomic climate presents specific challenges for our sector
to navigate and we are organised to effectively balance our regional
scale
{
and local agility. We are prioritising a series of actions to mitigate the
{
current macroeconomic challenges. Macroeconomic challenges for our sector
Whilst Vodafone and the broader telecommunications sector are well
positioned to deliver relatively resilient financial performance during
periods of macroeconomic uncertainty, there are specific challenges
to
{
be managed. Firstly, rising energy costs will have an impact on our financial performance in the year ahead. In FY22, our total electricity
usage was 5.9 TWh, with a total cost of €846 million.
Energy price increases are feeding through into a broader inflationary
environment, with the European Central Bank forecasting the Harmonised
Index of Consumer Prices to be in the range of 1.9% to 5.1% during
2022-2024. These inflationary pressures are beginning to impact
customer confidence, both consumers and businesses.
Our sector and many others have experienced increased volatility in
supply chains and an increase in logistics costs. Also, across Europe
many
{
organisations have experienced an increase in the both the volume
{
and sophistication of cyber-attacks. This is leading to an
increase
{
in the expectations of governments to ensure organisations’ cyber defences are secure and resilient.
Balancing regional scale and local agility
We believe that we are well-positioned within the sector to navigate
the
{
current macroeconomic environment. We are organised to ensure the optimal balance between ensuring local agility, whilst delivering
significant benefits of scale through standardisation at a regional level.
In-market autonomy ensures local agility
Our local in-country teams are best placed to understand the needs
of
{
their local market and make appropriate decisions, with end-to-end accountability. Our in-country leadership teams have full control over
their P&L and capital allocation, as well as ensuring they have the optimal
local team structures.
This end-to-end accountability is matched by full autonomy over product,
pricing and marketing decisions for their market. This ensures each country
operation can remain agile in highly dynamic and competitive markets. Our
local markets also benefit from sharing best practice and, when decided
locally, adopting best practices developed in other markets. For example,
Vodafone UK developed investment-linked pricing structures, which
have
{
now been implemented in four other European markets. Similarly, Vodafone Spain developed a second brand,
n
Lowi’, to compete more effectively in the value segment. This approach has now been adopted
in
{
a localised manner in the majority of our other European markets.Each local country operation also has full control over its channel and
customer journeys. Again, each market often chooses to benefit from
best practices developed in other markets. For example, the MyVodafone
app, which has chosen to be taken and adopted by 12 markets and is
enjoyed by 52 million customers.
Regional standardisation delivers scale benefits
To ensure our country operations receive the full benefits of being part of
a larger Group, we are structured to deliver efficient operational support
through regionally scaled services. The connectivity value chain has a
high degree of replicable and repeatable services across each of our
markets. This is essential to compete against the local incumbent
operators who benefit from historically derived local scale.
We continue to simplify our approach to networks and technology
through integrating our European network, IT and digital teams. The
aim
{
was to drive efficiency, increase speed of execution, standardise key
{
processes, and codify the best solutions for implementation across all
{
of our markets. Through standardisation of what equipment and software we
{
use, we can then in turn standardise how our networks are constructed and operated. This standardisation delivers both cost and
capital efficiencies, together with enhancements in network quality. For
example, we reported a 42% year-on-year reduction in incidents across
our networks and a significant step-up in network testing results.
Secondly, through combining the purchasing power of our business
across Europe and Africa we improve both the efficiency and resilience
of
{
our supply chains. We have consolidated our supplier management function into a single procurement company. The Vodafone Procurement
Company manages global tenders and allows us to generate over
€600
{
million in annual savings compared to standalone operators. For example, following the acquisition of the Liberty assets in Germany and
Central and Eastern Europe, we have delivered a double-digit percentage
saving. The efficiency of our procurement is further demonstrated by
independent operators paying to access our pooled procurement,
alongside other services, through our
n
Partner Markets’ business. Thirdly, we manage our IT operations, network operating centres and
back-office activities through four Shared Service Centres (
nB
VOIS’) in
{
India, Egypt and Eastern Europe. Over a third of the cumulative €1.5
{
billion net opex savings made between FY19 and FY22 in Europe and Common Functions were generated through integrating activities
into _VOIS and driving digitisation at speed. Approximately 30% of the
Group’s team members work in _VOIS and other shared operations,
and
{
over the last four years, we have delivered 8,200 role efficiencies. Actions underway to mitigate macroeconomic challenges
Through further optimisation of the balance between in-market agility
and efficient regional standardisation we have a number of initiatives
underway to effectively manage the macroeconomic challenges in our
sector. Key areas of focus are improving our commercial agility at a local
level and further enhancing our operational efficiency at a regional level.
Initiatives to improve our commercial agility include expansion of our
investment-linked pricing programme and expansion of our flexible
contract pricing structures, which enable consumers to
n
flex’ the length
{
of{
contracts and monthly payments. We are also extending the
attractiveness of converged connectivity products, which increase the
loyalty rates of our consumer customers.
Initiatives underway to further enhance our operational efficiency
include
{
expanding the use of power purchase agreements to lock-in electricity supply and pricing over longer periods and remaining agile
in
{
the re-deployment of tasks to regional centres of excellence, in lower cost
{
locations.Strategic review (continued)
19
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Committed to improving shareholder returns
Following the launch of the second phase of our strategy to be the
new
{
generation connectivity and digital services provider for Europe and Africa, we conducted an extensive portfolio review to assess the optimal
structure to execute our strategy and create value for our shareholders.
Historically, our Group has been managed as a combination of
geographically focused operating companies, which draw from a range
of
{
shared services. Over the last three years, we have been evolving our
{
business model and organisational structures to operate in a
more
{
streamlined and agile matrix, recognising the importance of local, in-market scale and capabilities, as well as generating further value from
the scale and breadth of our footprint.
We manage our Group through four group-wide operational layers:
A.
infrastructure assets;
B.
shared operations;
C.
growth platforms; and
D.
retail and customer service.
Infrastructure assets
Our converged connectivity infrastructure is largely managed through
three components: passive mobile, active mobile and fixed.
Our passive mobile infrastructure is now primarily held and operated
through Vantage Towers’ network of around 83,000 towers across
10
{
European markets. The Vantage Towers IPO was completed successfully in March 2021 and the company has a current market
capitalisation of €16 billion. We continue to own and operate our active
mobile infrastructure in Europe directly, which includes 117,000 radios.
In
{
addition, our African operations operate a further 42,000 radios and 22,000 towers. We reached network sharing partnerships in 10 markets
between FY19 and FY22 and are committed to enhancing asset utilisation
through further network sharing. By separating and listing Vantage Towers
at pace, it is now in a prime position to drive further consolidation within
the European sector, which in turn will provide Vantage Towers further
strategic flexibility. We are actively pursuing accretive bolt-on transactions
and industrial merger opportunities, which could lead to the deconsolidation
of Vantage Towers from the Group and monetisation of our holding
over
{
time.Our fixed connectivity infrastructure comprises consumer connectivity
networks, mobile backhaul, and international terrestrial and submarine
connections. Across the Group, our fixed connectivity networks include
1.6 million kilometres of fibre and coaxial cable infrastructure. Our
approach to operating our connectivity infrastructure was discussed at a
recent investor briefing, in which we outlined our unified pan-European
technology organisational structure. We are actively exploring further
opportunities for our fixed network assets to improve asset utilisation,
including a joint venture in Germany to support investment in full
fibre-to-the-premises where there is demand from our housing
association customers and expand the reach of our network.
The leading FinTech in Africa
Since formation in 2007 as a money transfer service, Vodafone’s
financial
{
services businesses in Africa – encompassing Vodacom Group,
Safaricom and Vodafone Egypt – have collectively grown to be the
leading FinTech in Africa. Including Safaricom, the Vodacom Group has
52.4 million customers, transacting €24.8 billion per month. In FY22 we
generated €336 million service revenue from M-Pesa and other financial
services, excluding Safaricom. Our African FinTech business has significant
growth opportunities through penetration growth in existing markets,
expanding into new markets and scaling new products, including the
recent launch of the VodaPay
n
super-app’ in South Africa. The Vodacom Group has clear
{
financial ambitions to grow its new services, which include
financial services, at or above 20% CAGR. We have completed the legal
separation of our FinTech business at a local country level, which enables
us to accelerate the pace of growth, supporting a pathway of monetisation
over time.
The global IoT connectivity leader
Vodafone’s IoT service was established in 2008 and has grown to
be
{
the{
largest IoT connectivity provider globally, with 150 million
devices
{
connected. Vodafone IoT has been recognised as a leader in managed connectivity by Gartner every year since 2014. Vodafone IoT
currently generates €0.9 billion annual revenue with double-digit revenue
growth and a strong double-digit ROCE. The total addressable market is
€10
{
billion and expected to grow 16% p.a., with further stimulus from the NextGenerationEU recovery plan funding, supporting Vodafone’s further
expansion into end-to-end IoT services. We are currently in the process
of
{
enabling a separation of Vodafone IoT, as greater independence from Vodafone will help to accelerate the platform’s growth and attractiveness
to both new customers and connectivity partners.
Shared operations
As discussed on earlier, the connectivity value chain involves a
high
{
degree of repeatable processes across all our markets, such as procurement, network deployment, network operations, sales activities,
customer support operations, and billing and transaction processing.
As
{
one of the largest global connectivity providers, we have a significant
opportunity to standardise processes across markets, relocate operations
to lower cost centres of excellence and apply automation at scale,
delivering best-in-class efficiency levels. Our shared operations are
delivering over €400 million of operating cost savings per annum.
Scan or click to watch our case study
on leading gigabit networks:
investors.vodafone.com/videos
Scan or click to watch our case study on FinTech:
investors.vodafone.com/videos
In addition to the regional standardisation of networks, procurement and
shared services, our Vodafone Roaming Services operation manages our
global roaming relationships with other operators, our Vodafone Carrier
Services business provides wholesale connectivity services, and our
Partner Market’s team works with 30 local operators in building strategic
alliances and extending our reach into different markets. These functions
generate over €250 million revenue and cost savings annually.
We have made good progress over the last four years, however there
is
{
still scope for further efficiencies, particularly with respect to network operations and digital services platforms.
Growth platforms
Over the last few years, we have invested in digital capabilities and
scalable technology to build three digital growth platforms, which were
discussed at a recent investor briefing.
Leading digital consumer services
Complementary digital services play a crucial role in deepening
relationships with consumers, in addition to having attractive economic
models. We now have over 50 million customers subscribing to a digital
service, which leads to higher ARPU, improved distribution efficiency,
higher NPS and lower churn. We are focused on further developing our
strong positions in consumer IoT, Vodafone TV, home services, device
lifecycle services and loyalty applications.
Scan or click to watch our case study
on digital consumer services:
investors.vodafone.com/videos
Scan or click to watch our case study on IoT:
investors.vodafone.com/videos
Strategic report
Governance Financials Other information
20
Vodafone Group Plc
Annual Report 2022
Strategic review (continued)
To summarise, we have three priority areas to optimise
our business structure during FY23, with a further three
value-creating structural enhancements underway.
FY23 portfolio priorities:
–
We are pursuing options for Vantage Towers that will enable it to increase
its pan-European industrial scale, whilst also realising value for Vodafone’s
shareholders and enabling deconsolidation from Vodafone, to further
simplify the Group’s structure;
–
We are in the final steps of completing the transfer of Vodafone’s
holding in Vodafone Egypt to Vodacom, which creates value for
Vodafone shareholders, enhances the diversification and growth
profile
{
of Vodacom and further simplifies the Group’s structure; and –
We continue to pursue pragmatic in-market mobile consolidation
opportunities in Europe that will strengthen our market position and
create value for our shareholders.
Additional value-creating structural enhancements
–
We have started discussions with potential joint venture partners to
enable further investment in our fixed network infrastructure, including
full fibre-to-the-premises where there is demand from our housing
association customers, and nearby locations that are not currently
covered by our network;
–
We are currently in the process of enabling a separation of Vodafone
IoT, which will enable greater independence from Vodafone to
accelerate its growth and attractiveness to both new customers
and
{
connectivity partners; and –
We have completed the legal separation of our FinTech business at a
local country level, which enables us to accelerate the pace of growth,
supporting a pathway towards monetisation over time.
Successful execution of these portfolio actions will further simplify
Vodafone’s operations, enhance the visibility of value to equity markets
and most importantly, ensure we are organised in the optimal structure
to
{
deliver our long-term organic growth strategy as a next-generation connectivity and digital services provider in Europe and Africa.
Outlook for FY23
Our performance during FY22 has been in line with our expectations and
demonstrates the relative resilience of our operating model. We remain
focused on the delivery of the next phase of our strategy.
The current macroeconomic climate presents specific challenges, and
is
{
likely to have an impact on our financial performance in the year ahead.
Whilst
our business model is relatively more resilient than many others, there are
specific challenges to be managed. The war in Ukraine and
{
energy price increases are contributing to a broader inflationary environment, and these
inflationary pressures are beginning to impact customer confidence. Our
sector and many others have also experienced increased volatility in
supply chains and an increase in logistics costs. We have a number of
initiatives underway to mitigate these macroeconomic challenges.
Based on this assessment of the global macroeconomic outlook:
–
Adjusted EBITDAaL
1
is expected to be between €15.0 - €15.5 billion
in
{
FY23; and –
Adjusted free cash flow
1
is expected to be c.€5.3 billion in FY23.
Africa Consumer
In Africa, we are the leading provider of mobile data and mobile payment
services. We have 185 million mobile customers in eight markets and we
are the leading mobile connectivity provider by revenue market share in
seven markets.
On 10 November 2021, we announced that we have agreed to
transfer
{
our 55% shareholding in Vodafone Egypt to Vodacom Group, our
{
African subsidiary, for €2,722 million on a debt free, cash free basis. The integration of Vodafone Egypt into Vodacom follows a series of other
portfolio simplification transactions which have helped Vodacom become
a pan-African connectivity and financial services powerhouse. Including
Egypt, Vodacom will have number 1 market positions in seven countries
with combined populations over more than 500 million people. We will
move at pace with the imminent integration of Vodafone Egypt, which will
benefit from closer cooperation with Vodacom, enabling it to accelerate
growth in financial services and IoT.
Click or scan to watch our digital services
and experiences investor brie
ȣ
ng:
investors.vodafone.com/digital-services
Click or scan to watch our Vodafone Business
investor brie
ȣ
ng:
investors.vodafone.com/vbbrie
ż
ng
Vodafone Business
Vodafone Business is a key growth driver for the Group, representing
27%
{
of service revenue in the period. We operate in attractive markets
with a compelling structural opportunity, with expected addressable
market growth of c.8% per annum. Our strategy is grounded in our
purpose to connect for a better future and is focused on three core
elements. Firstly, to be the trusted partner for small and medium-sized
enterprises. Secondly, to be the gigabit connectivity provider of choice
to
{
large enterprises. Thirdly, to be the leading end-to-end provider of IoT solutions
{
for every organisation. Click or scan to watch our digital services
and
b
experiences
b
investor brie
ȣ
ng:
investors.vodafone.com/digital-services
Retail and customer service
Europe Consumer
In Europe, we are a leading converged connectivity provider with
almost
{
9
{
million converged customers, 114 million mobile connections,
145
{
million marketable NGN broadband homes, and we have launched 5G in 294 cities in 11 markets in Europe.
Over the last decade, the performance of the European telecommunications
industry has been weaker than other regions, which market commentators
largely attribute to its regulatory environment. European regulation
has
{
been driving increasingly fragmented market structures, compared with North America or Asia. Sustained price deflation and the inability
to
{
derive{
cost synergies from scale have impacted sector returns, which
in
{
turn limits the sustainability of capital investment in critical national infrastructure. As noted above, Germany has benefited from a more
sustainable competitive environment compared to many other
markets
{
in Europe and those markets would benefit from further in-market consolidation. We are pragmatically pursuing value accretive
in-market consolidation to deliver sustainable market structures in our
major European markets.
Note:
1. These line items are alternative performance measures which are non-GAAP measures.
See
{
’Non-GAAP measures’ on page 223 for more information.
21
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
We are transforming to become a new generation
connectivity and digital services provider for Europe
and Africa. Our people strategy accelerates this
transformation, by seeking to create an inclusive
environment for growth, where everyone has the
opportunity to thrive.
The Spirit of Vodafone
Our culture – the ‘Spirit of Vodafone’ – outlines the beliefs we stand for
and the behaviours that enable our strategy and purpose.
This year we have continued embedding Spirit throughout the
organisation, focusing on transforming our culture through addressing
habits, leadership, systems and processes. In May 2020, we introduced
a
{
bi-annual employee survey called ‘Spirit Beat’ to measure culture
and
{
its{
impact. The results demonstrate how Spirit behaviours are being
embedded in the employee experience and confirm the positive impact
of these behaviours in driving performance.
Spirit Beat surveys
Behaviour
Sept 2021
Jan 2021Earn customer loyalty 74 72
Experiment, learn fast 78 77
Create the future 75 75
Get it done, together 77 76
Overall Spirit index
1
76 75
Response rate 80% 86%
Note:
1. The overall Spirit index reflects the average of the four Spirit behaviour scores.
Following each survey, employees receive personalised and artificial
intelligence-driven ‘nudges’ based on their confidential responses over
a
{
20-week period. These nudges support behaviour change, consolidate
new habits, and create a continuous feedback loop, with over two million
nudges deployed since May 2020. Based on responses from the latest
survey, 68% of colleagues found nudges useful, and analysis has shown
that teams with managers who embraced Spirit and took action had
a
{
higher Spirit Index (+8) and engagement score (+9) compared to
managers who did not.
Improvements in team Spirit index results are also associated
with
{
better{
business outcomes in customer operations centres.
For
{
example, we have identified a positive relationship with First Call Resolution (‘FCR’) and Transactional Net Promoter Score (‘tNPS’) metrics.
Each point increase in the Spirit Index consistently predicts an increase
in
{
both FCR{
and tNPS.
In addition to Spirit Beat, we ran three pulse surveys to listen to
employee
{
feedback during the pandemic across the year. We continued
{
to observe high scores with employees feeling connected to
{
their team (80 in April 2021, 81 in both July and November 2021) and
{
expressing positivity about the future in how we work at Vodafone (79
{
in{
April 2021, July and November 2021). We have also seen an
increase in
{
how employees are feeling (72 in April, 75 in both July
and
{
November 2021). The results have informed our response to COVID-19 and the formation of new ways of working post-pandemic.
They
{
also demonstrated employees’ pride in Vodafone’s response to the
pandemic and praise for the hybrid working policy. We
{
will continue to listen to our employees through Spirit Beat and pulse surveys to inform
how we design and improve the employee experience.
Leadership at Vodafone
Senior leadership are accountable for our culture transformation.
The
{
Board reviews progress on employee engagement and Spirit on a regular basis, and the Executive Committee monitors key achievements
in
{
embedding Spirit and considers further opportunities to drive growth and transformation.
Leadership is essential for driving transformation, and we have invested in
developing inclusive leaders who drive growth and innovation, act as role
models, coach and empower teams, and lead with Spirit. In October 2021,
we launched the Vodafone Leadership Standards to create a consistent
understanding of what it takes to successfully lead with Spirit.
The Vodafone Leadership Standards are being embedded throughout
the
{
leadership development journey and the new ‘Spirit Accelerator’ programme. From April 2022, over 300 senior leaders will experience
‘Spirit Accelerator 2.0’, which will focus on enhancing their leadership
capability to drive growth and transformation, deliver operational
excellence, amplify customer experience and loyalty, and continue to
create a culture of inclusion. Our newly introduced 360 feedback tool
will
{
further support our leaders’ development.We continue to embed Spirit in Company policies, employee journeys
and
{
organisational rituals. We are supporting managers to demonstrate Spirit as they transition with their teams into hybrid working and are
using
{
updated leadership assessment methodologies to reflect Spirit behaviours. We introduced quarterly ‘Spirit of Vodafone Days’ to provide
dedicated space for personal growth, wellbeing, and connection across
all
{
markets and we run a global recognition programme that celebrates those who demonstrate Spirit behaviours. We also continue to develop
‘LaunchPad’, our global employee-led innovation platform which helps
‘Create the Future’. In the two years since it has been operational, our
employees have submitted over 2,000 ideas, ranging from e-waste
recycling, Internet of Things (‘IoT’) marketplaces to cloud smartphones.
We are seeing the value from ideas that have come through the process,
for example ‘Scam Signal’ is a Vodafone application that helps businesses
combat fraud and cyber crime while improving customer experience by
utilising our network to identify bank transfer scams in real time.
Agile and efficient operating model
Our Group operating model is designed to maximise the effectiveness
of
{
the local market operations by enabling them to benefit from the Group’s scale across Europe and Africa, whilst at the same time being
able
{
to respond quickly and effectively to market conditions and customer needs.
Read more about how we balance regional scale
and
b
localb
agility on pages 11 and 18
Read more about our headcount
on page 38
Our people strategy
Our people strategy
Strategic report
Governance Financials Other information
22
Vodafone Group Plc
Annual Report 2022
Our people strategy (continued)
Diverse talent and future ready skills
As we evolve our operating model and execute our strategy, we are
focused on developing diverse talent for the future and building future
skills by accelerating reskilling and upskilling at scale.
During the year, we reviewed our talent and succession pools across
senior roles. These are ultimately discussed and approved at the annual
Executive Committee talent review and are also shared with the Board.
Gender diversity of the executive succession pools increased to 38%
from
{
31% in the prior year. We have also adopted a consistent set of
{
assessment tools to support the selection and development of senior
{
leaders.Read more about workplace equality
on pages 38 to 40
Our transformation into a new generation connectivity and digital services
provider requires new skills and capabilities in the organisation, such as
software engineering, automation and data analysis. In October 2021,
we
{
announced our ambition to hire 7,000 software engineers by 2025,
{
through a combination of recruitment, reskilling and insourcing. In
{
support, we launched a global recruiting playbook, invested in
recruitment campaigns across nine markets and redesigned the global
careers site. In June 2021, we also introduced a ‘Technical Career Path’
to
{
allow engineering experts to grow and develop their careers by
leveraging their deep expertise.
Local markets are also focused on developing key strategic skills
to
{
execute our strategy. For example, in FY19 the Vodacom Group introduced the ‘#1MoreSkill’ digital development initiative that allows
employees to develop new critical skills in agile, software engineering,
cyber security and IoT. In FY22, 21% of Vodacom South Africa
employees
{
completed training in one of these skills and 55% of employees redeployed to new roles in Vodacom had been reskilled
or
{
upskilled through this initiative. In FY21, Italy launched a skills transformation pilot, involving 10 functions and covering more than
4,600
{
employees. To date 1,350 have been upskilled and 1,329 reskilled. Of those reskilled, 271 have been redeployed to new roles. As a further
example, Turkey has launched seven reskilling initiatives whereby
employees receive training in emerging skills such as cyber security,
DevOps, data
{
science and customer experience. By the end of FY22, 29%
{
of{
participating employees had been redeployed to new roles.
We continue to support the personal and professional growth of people
through online learning initiatives. During the year, 85% of employees
completed non-mandatory training, with an average of 1.25 hours
per
{
month. We invested an average of €542 for both mandatory and non-mandatory training for each employee to build future capabilities
and issued 96,550 LinkedIn Learning and 14,000 O’Reilly licences.
Spirit
{
of{
Vodafone Days also had a positive impact with a 287% increase
in
{
formal online learning with over 24,000 hours of learning taking place on those two days alone.
To execute the strategy and bring purpose to life, we continued to
invest
{
in youth hiring (6,430 hires, of which 771 graduates) whilst providing digital learning experiences to 95,664 young people, through
local work experience programmes and initiatives. During the year, we
also hired 346
{
apprentices with local programmes that aim to grow future talent and skills in areas such as cyber security, network engineering and
software engineering through work-based learning and qualifications.
To accelerate skills transformation and create a learning culture, we are
introducing a new operating model for learning, talent, leadership, and
skills – the global Vodafone Learning Organisation (‘VLO’). The VLO will
deliver a higher-quality, consistent and more impactful development
experience for all of our employees. It will also help us to be recognised
as
{
a workplace where growing never stops and learning is a fundamental part of every individual’s experience at Vodafone.
In March 2022, we launched a campaign offering fast-track employment
and relocation support for Ukrainians and other nationals seeking work
outside of their home country due to the war or other humanitarian
crisis.
{
We received over 1,000 applications by the end of April 2022 and hired new employees in Luxembourg, the UK, Romania and Germany at
specialist, manager and senior manager levels in areas such as networking
engineering, logistics, financial analytics and quality assurance testing.
Digital and personalised experience
Future ready ways of working
Based on knowledge gained through the pandemic and external
research,
{
in March 2021 we launched Future Ready Vodafone, a global
{
policy providing flexibility on how and where employees work.
The
{
new policy sets global standards for hybrid working including an expected average of two to three days a week working from the office
(depending on the role) and the support for home office equipment. In
September 2021, the option to work from another country during the
year for a maximum of 20 days was added to the same policy. We will
continue to keep our flexible working policies under review as we learn
from our experience in this area.
Hubs for talent and innovation
Where appropriate, the remote hiring policy allows teams to source skills
across our footprint. This year, a new centralised European Research and
Development (‘R&D’) centre opened in Malaga, Spain. A second centre
will
{
open in Dresden, Germany, later this year. These hubs specialise in developing new technology solutions and digital services such as unified
communications and Internet of Things (‘IoT’) and will create more than
600 highly skilled jobs.
Office space
The shift to hybrid working has redefined the role of the office and
inspired us to create a new global office design primarily for collaboration
and connection. We experimented in Spain, South Africa and the UK, and
based on pilot feedback, offices in the Czech Republic, Luxembourg and
_VOIS Hungary have been redesigned.
Last year, a new booking system for desks and collaboration spaces was
implemented to help transition to the new ways of working and gather
information about employees’ behaviours in the hybrid model. A new
initiative called ‘Office in a Box’ was implemented to support employees’
wellbeing while working from home, providing an adequate virtual office
setup at home following a self-assessment.
Mental health and wellbeing
We remain focused on physical and mental wellbeing, with a variety of
training and services available in each market. Provision of employee
assistance programmes and psychological support services continued
to
{
grow. Many markets now have mental health first aiders, wellbeing ambassadors, mental health champions or the local equivalent; in the UK
we have around 250, alongside 700 managers who are trained in mental
health awareness.
We also launched a standardised mental health toolkit across all
markets.
{
The toolkit provides a better understanding of mental health
and
{
support to anyone going through challenges or those helping a colleague, family member or friend. In June 2021, for Men’s Health Week
we ran a dedicated session on Men’s Mental Health. In October, for World
Mental Health Day we ran a series of global sessions ranging from dance
sessions, leaders’ mental health training and supporting young people
through grief and loss. In February 2022, the annual Global Wellbeing
Week sessions were attended by over 6,000 employees and our Senior
Leadership Team, covering mental health and cancer awareness.
Click to read more about mental health and wellbeing:
vodafone.com/wellbeing
23
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Employee forums
We have a number of employee forums where elected employee
representatives represent the views of their colleagues. During the
year,
{
the European employee forum met twice, and the South African employee forum met four times. The Board’s Workforce Engagement
Lead, Valerie Gooding, attended one of each forum during the year to
gather employee views, with the key discussion topics from the meetings
including Future Ready ways of working, our response to COVID-19 and
progress on our Fair Pay agenda.
Read more about the Board’s engagement with the
employee voice on page 91
Pay and benefits
As part of the people experience, we continue to ensure pay, benefits,
and
{
wellbeing propositions are competitive and fair. Pay is typically reviewed on an annual basis, with increases aligned to an individual’s
level
{
of skills and experience as well as external factors like market competition and
{
inflation. Our total reward approach also encourages collective performance and ‘in the moment’ recognition. For example
21,117 peer to peer ‘Thank You’s’ and 60,196 cash Star awards were
issued through a recognition tool during the year.
We continue to apply Fair Pay principles across all markets, working with
the Fair Wage Network to ensure a good standard of living in each market.
In the UK, our commitment to these principles is reflected in how the
Living Wage Foundation has recently certified us as an Accredited Living
Wage employer.
Read more about our Fair Pay principles
on page 106
Click to read more about Fair Pay at Vodafone:
vodafone.com/fair-pay
Digital experience
Our people experience is informed by employee insights and guided by
our culture. This year we worked on providing a more digital employee
experience by establishing ‘Grow with Vodafone’, an integrated talent
acquisition, skills and learning platform. This significantly enhances
the
{
recruiting and learning experience, whilst giving employees greater ownership of their individual learning and career development. The
platform provides three main features:
–
Grow your Skills:
Enables individuals to build a unique skills profile
enabling personalised learning and career recommendations, as well
as
{
supporting upskilling opportunities. –
Grow your Learning:
Smart technology drives personalised learning
recommendations to help each employee achieve their career goals
whilst also driving a culture where growing never stops.
–
Grow your Career:
Provides role recommendations based
on
{
skills{
and experience to candidates. It also offers optimised
recruiter
{
and hiring manager experience by prioritising the most suitable applications.
By the end of March 2022, over 13,000 unique users had accessed all
features of the platform and approximately 24,000 employees accessed
learning content.
A new digital onboarding tool was also deployed in a number of our
markets and shared service centres and global deployment will be
complete by October 2022. So far the tool has received an encouraging
Net Promoter Score (‘NPS’) of 85.1 from employees who experienced the
new process.
Next year a global workforce planning system will be launched, delivering
data driven workforce plans and insights. It will allow better identification
of future workforce requirements using business drivers and modelling
through scenario planning. The system will impact how we approach
resourcing, talent management and learning strategies, empowering us
to
{
plan effectively. Pilots will launch in early 2022 before being expanded later in the year.
In FY23, we will also deploy new people analytics capabilities, supported
by Google Cloud platform across some of our markets.
Workers’ councils and union engagement
We respect freedom of association and recognise the rights of employees
to join trade unions and engage in collective bargaining in accordance
with local law. We continue to maintain strong relationships with the
workers’ councils and unions and we have approximately 22,250 people
covered by collective bargaining agreements across our global footprint.
This year, we reached several agreements with the unions as we
continued to shape the future of work. In Spain, all employees can work
up to 60% remotely. In Italy, 60% to 80% of employees will work remotely
post-pandemic (depending on role) and both markets have guaranteed
rights to disconnect outside working hours. In June 2021, Italy also
committed to reskilling call centre employees, with government support.
Strategic report
Governance Financials Other information
24
Vodafone Group Plc
Annual Report 2022
–
Group revenue increased by 4.0% to
Ȑ
45.6 billion mainly driven by service revenue growth in Europe and
b
Africa.
–
Adjusted EBITDAaL growth of 5.0%
to
Ȑ
15.2 billion and margin expansion of 0.5
percentage points
year-on-year to 33.4%.
–
Ongoing delivery of our efficiency programme leading to a net
Ȑ
1.5 billion of savings during FY19-22
–
Operating profit increased by 11.1% to
Ȑ
5.7 billion, reflecting the growth in Adjusted EBITDAaL and
reduction
b
inb
depreciation and amortisation on owned assets.
–
Significant increase in profit for the financial year and basic earnings per share, due to higher Adjusted EBITDAaL,
and lower income tax
b
expense.
–
Returns continued to improve and pre-tax ROCE increased by 1.7 percentage points to 7.2%.
Continued growth in both Europe and Africa
Our financial performance
Scan or click to watch our Chief Financial Of
ȣ
cer, Margherita Della Valle, summarise our
ȣ
nancial performance in FY22:
investors.vodafone.com/videos
Group financial performance
FY22
1
€m
FY21
€m
Reported
change %
Revenue 45,580 43,809
4.0
– Service revenue 38,203 37,141 2.9
– Other revenue 7,377 6,668
Adjusted EBITDAaL
2,3
15,208 14,386
5.7
Restructuring costs (346) (356)
Interest on lease liabilities
4
398 374
Loss on disposal of property, plant and equipment and intangible assets (28) (30)
Depreciation and amortisation of owned assets (9,858) (10,187)
Share of results of equity accounted associates and joint ventures 211 342
Other income 79 568
Operating profit 5,664 5,097
11.1
Investment income 254 330
Financing costs (1,964) (1,027)
Profit before taxation 3,954 4,400
Income tax expense (1,330) (3,864)
Profit for the financial year 2,624 536
Attributable to:
– Owners of the parent 2,088 112
– Non-controlled interests 536 424
Profit for the financial year 2,624 536
Basic earnings per share 7.20c 0.38c
Adjusted basic earnings per share
2
11.03c 8.08c
Notes:
1. The FY22 results reflect average foreign exchange rates of €1:£0.85, €1:INR 86.59, €1:ZAR 17.25, €1:TRY 12.16 and €1: EGP 18.35.
2. Adjusted EBITDAaL and Adjusted basic earnings per share are non-GAAP measures. See page 223 for more information.
3. Includes depreciation on leased assets of €3,908 million (FY21: €3,914 million).
4. Reversal of interest on lease liabilities included within Adjusted EBITDAaL under the Group’s definition of that metric, for re-presentation in financing costs.
Organic growth
All amounts marked with an ‘*’ in the commentary represent organic growth which presents performance on a comparable basis, excluding the impact of foreign
exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results between periods. When calculating organic growth, the FY21
results for Vantage Towers and relevant operating entities have been adjusted to reflect a full year of operation on a pro forma basis in order to be comparable to FY22.
Organic growth figures are non-GAAP measures.
Segmental reporting
Following the IPO of Vantage Towers A.G. in March 2021, the business is a new reporting segment for the year ended 31 March 2022 (‘FY22’). Comparative information for
the year ended 31 March 2021 has not been re-presented. Total revenue is unaffected because charges from Vantage Towers A.G. to operating companies are eliminated
on consolidation. Adjusted EBITDAaL and Adjusted EBITDAaL margin are both impacted by this change which does affect year-on-year comparisons. The segmental
results of Vantage Towers A.G. include the contribution from Cornerstone Technologies Infrastructure Limited as a joint operation with Telefonica in the UK.
Adjusted EBITDAaL
Adjusted EBITDA is now referred to as Adjusted EBITDAaL for FY22, with no change in the underlying definition. Adjusted EBITDAaL is a non-GAAP measure.
Read more about non-GAAP measures
on page 223
25
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Geographic performance summary
FY22
Germany
€m
Italy
€m
UK
€m
Spain
€m
Other Europe
€m
Vodacom
€m
Other
Markets
€m
Vantage
Towers
€m
Common
Functions
1
€m
Eliminations
€m
Group
€m
Total revenue (€m) 13,128 5,022 6,589 4,180 5,653 5,993 3,830 1,252 1,414 (1,481) 45,580
Service revenue (€m) 11,616 4,379 5,154 3,714 5,001 4,635 3,420 – 522 (238) 38,203
Adjusted EBITDAaL (€m) 5,669 1,699 1,395 957 1,606 2,125 1,335 619 (197) – 15,208
Adjusted EBITDAaL margin (%
)
43.2% 33.8% 21.2% 22.9% 28.4% 35.5% 34.9% 49.4% 33.4%
Service revenue growth %
Q1 Q2 H1 Q3 Q4 H2
Total
Germany 1.1 0.8 0.9 0.8 0.6 0.7 0.8
Italy (3.9) (1.6) (2.8) (1.6) 0.1 (0.8) (1.8)
UK 5.3 4.7 5.0 6.3 8.9 7.6 6.3
Spain 0.5 (2.0) (0.7) (1.8) (4.5) (3.1) (2.0)
Other Europe 4.9 2.7 3.8 3.5 0.7 2.1 2.9
Vodacom 18.5 14.6 16.5 11.0 10.6 10.8 13.5
Other Markets (1.3) 10.0 4.3 7.6 (3.1) 2.1 3.3
Vantage Towers
–––––––
Group 3.1 3.4 3.2 3.1 1.9 2.5 2.9
Organic service revenue growth %*
2
Q1 Q2 H1 Q3 Q4 H2
Total
Germany 1.4 1.0 1.2 1.1 0.8 1.0 1.1
Italy (3.6) (1.4) (2.5) (1.3) (0.8) (1.0) (1.8)
UK 2.5 0.6 1.2 0.9 2.0 1.4 1.3
Spain 0.8 (1.9) (0.6) (1.6) (5.1) (3.4) (2.0)
Other Europe 4.2 2.4 3.3 2.9 2.7 2.8 3.0
Vodacom 7.9 3.1 5.4 4.4 3.1 3.7 4.6
Other Markets 18.4 19.7 19.1 19.8 19.8 19.8 19.4
Vantage Towers
–––––––
Group 3.3 2.4 2.8 2.7 2.0 2.3 2.6
Notes:
1. Common Functions Adjusted EBITDAaL includes a non-recurring charge in relation to the impairment of prior year receivables.
2. Adjusted EBITDAaL, Adjusted EBITDAaL margin and organic service revenue growth are non-GAAP measures. See page 223 for more information.
Strategic report
Governance Financials Other information
26
Vodafone Group Plc
Annual Report 2022
Our financial performance (continued)
Germany: 30% of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 13,128 12,984
1.1
Service revenue 11,616 11,520
0.8 1.1
Other revenue 1,512 1,464
Adjusted EBITDAaL
1
5,669 5,634
0.6 6.5
Adjusted EBITDAaL
margin
43.2% 43.4%
Note:
1. When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for
Vantage Towers A.G. on a pro
{
forma basis to be comparable to FY22.Total revenue increased by 1.1% to €13.1 billion, driven by service
revenue and equipment revenue growth.
On an organic basis, service revenue grew by 1.1%* (Q3: 1.1%*, Q4:
0.8%*), driven by broadband ARPU growth, good growth in Business, and
higher roaming and visitor revenue. This was partially offset by a reduction
in mobile termination rates, and lower variable call usage revenue. Retail
service revenue grew by 1.6%* (Q3: 1.7%*, Q4: 1.2%*).
Fixed service revenue grew by 0.5%* (Q3: 0.7%*, Q4: -0.4%*), as
continued
{
broadband ARPU growth was partially offset by lower variable
{
call usage revenue compared to the prior year, as usage began
{
to{
normalise post-pandemic, and a lower TV customer base.
The
{
decline in fixed service revenue in Q4 FY22 was primarily driven by
{
a
{
lower customer base, partly impacted by specific operational
challenges related to the implementation of policies to comply with a
new telecommunications law, which came into effect in December 2021.
We
{
added 20,000 cable customers during the year, including 66,000 migrations from legacy DSL broadband. Half of our cable broadband
customers now subscribe to speeds of at least 250Mbps, and gigabit
speeds are available to 23.8 million households across our hybrid fibre
cable network.
Our TV customer base declined by 309,000, as reduced retail activity
during the COVID-19 pandemic led to fewer gross customer additions,
and was also impacted by broadband customer losses due to challenges
related to compliance with the new telecommunications law. During the
year, we accelerated convergence penetration as a result of successful
campaigns and our converged customer base increased by 718,000 to
2.4 million Consumer converged accounts. Our converged propositions,
led by the ‘GigaKombi’ products, allow customers to combine their
mobile, landline, broadband and TV subscriptions for one monthly fee.
Mobile service revenue increased by 1.8%* (Q3: 1.7%*, Q4: 2.4%*),
reflecting a higher customer base in both the Consumer and Business
segments, as well as higher roaming and visitor revenue, which more than
offset the impact of a reduction in mobile termination rates. The increased
rate of service revenue growth in Q4 FY22 also benefited from some
small non-recurring year-end adjustments. We added 19,000 contract
customers during the year and contract churn remained broadly stable
year-on-year at 12.3%, despite the impact of operational challenges
related to compliance with the new telecommunications law. In June, we
successfully launched our digital-only second brand, SIMon mobile. We
added a further 6.4 million IoT connections during the year, supported by
strong demand from the automotive sector.
Adjusted EBITDAaL grew by 6.5%*, supported by higher service
revenue,
{
cost synergy delivery, and some one-off settlements. The Adjusted EBITDAaL margin was 2.1* percentage points higher year-on-
year at 43.2%.
We have now achieved our €425 million cost and capital expenditure
synergy target for the integration of the Unitymedia assets acquisition,
over two years ahead of plan. We see further opportunities for cost
reduction including through the planned termination of our Transitional
Service Agreements (TSAs) with Liberty Global.
We switched off our 3G network on 1 July 2021, with spectrum
re-assigned to increase the capacity, speed and coverage of our
4G
{
networks. Our 5G network is now available to more than 45 million people. We launched Europe’s first 5G standalone network in April 2021.
Standalone 5G enables higher speeds, enhanced reliability and ultra-low
latency, in addition to using 20% less energy on customers’ devices.
Italy: 11 % of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 5,022 5,014
0.2
Service revenue 4,379 4,458
(1.8) (1.8)
Other revenue 643 556
Adjusted EBITDAaL 1,699 1,597
6.4 6.4
Adjusted EBITDAaL
margin 33.8% 31.9%
Total revenue was stable at €5.0 billion as lower service revenue was
offset by higher equipment revenue.
On an organic basis, service revenue declined by 1.8%* (Q3: -1.3%*,
Q4:
{
-0.8%*) as good growth in Business digital services revenue, higher MVNO revenues, and higher roaming and visitor revenue was offset by
continued price pressure, and a reduction in mobile termination rates.
Mobile service revenue declined by 3.2%* (Q3: -2.9%*, Q4: -3.1%*)
reflecting greater competition in the value segment and a lower active
prepaid customer base. This was partly offset by targeted pricing actions
and the positive contribution from PostePay MVNO customer migrations
onto our network, which completed in early August. The decline in
mobile
{
service revenue in Q4 FY22 was impacted by a reduction in mobile termination rates. Market mobile number portability volumes
continued to improve versus prior year levels. Our second brand ‘ho.’
continued to grow, with 342,000 net additions, supported by our
best-in-class net promoter score, and now has 2.8 million customers.
Fixed service revenue increased by 2.0%* (Q3: 3.1%*, Q4: 5.3%*) driven by
broadband customer base growth in Consumer, as well as good demand
for our Business digital services, such as cloud & security. The acceleration
in fixed service revenue growth in Q4 FY22 was driven by new Business
customer additions, supported by a strong share of EU recovery funding
voucher customers, as well as our pricing actions. We added 73,000
fixed-wireless access customers during the period, which are included
in
{
our mobile customer base. We now have 3.1 million broadband customers, and 52.6% of our broadband base is converged. Our
total
{
Consumer converged customer base is 1.3 million, an increase of
{
163,000{
during the period. Through our own next generation
network
{
and partnership with Open Fiber, our broadband services are
{
now{
available to 9.0 million households. We also cover 3 million
households with fixed-wireless access, offering speeds of up to 100Mbps.
Adjusted EBITDAaL increased by 6.4%*, reflecting a 6.6 percentage point
benefit from a €105 million legal settlement, partially offset by lower
service revenue. Excluding the impact of the one-off legal settlement,
Adjusted EBITDAaL was stable* year-on-year. The Adjusted EBITDAaL
margin was 1.9* percentage points higher year-on-year at 33.8%.
27
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
UK: 13% of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 6,589 6,151
7.1
Service revenue 5,154 4,848
6.3 1.3
Other revenue 1,435 1,303
Adjusted EBITDAaL
1
1,395 1,367
2.0 3.3
Adjusted EBITDAaL
margin 21.2% 22.2%
Note:
1. When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for
Vantage Towers A.G. on a pro
{
forma basis to be comparable to FY22.Total revenue increased by 7.1% to €6.6 billion, due to higher service
revenue and equipment revenue, and an appreciation of the pound
sterling versus the euro.
On an organic basis, service revenue grew by 1.3%* (Q3: 0.9%*, Q4:
2.0%*), driven by strong Consumer segment growth, and supported
by
{
higher MVNO, roaming and visitor revenue. This was partially offset by
{
a slowdown in Business, and a reduction in mobile termination rates.Mobile service revenue grew by 2.8%* (Q3: 2.6%*, Q4: 5.9%*) driven
by
{
strong commercial momentum in Consumer, partially offset by the
post-pandemic normalisation of Business connections. The increase in
mobile service revenue growth rate in Q4 FY22 was partially due to higher
wholesale MVNO revenue. During the year, we added 338,000 mobile
contract customers, supported by our ‘Vodafone EVO’ proposition, which
offers customers a combination of flexible contracts, trade-in options,
and
{
early upgrades. We also benefited from good iPhone demand and improved customer loyalty. Contract churn improved by 0.5 percentage
points year-on-year to 12.5%. Our digital sub-brand ‘VOXI’ also continued
to grow, with 104,000 customers added in the year. Our digital sales
remained strong during the year, and now account for 33% of total
sales.
{
We also announced an exclusive retail partnership with the Dixons
{
Carphone Group, covering 300 stores and digital channels, with
{
improved terms compared to our previous arrangement. Fixed service revenue declined by 2.3%* (Q3: -3.3%*, Q4: -7.0%*),
impacted by lower Business revenue, with a further slowdown in the
segment in Q4 FY22. Our performance was also driven by the decision
to
{
end a large but unprofitable multinational contract, and a reseller entering into administration in the first half of the year. Our commercial
momentum in Consumer remained strong, with good demand for
our
{
Vodafone ‘Pro Broadband’ product. With 139,000 broadband net additions during the year, we now have over one million customers,
of
{
which 527,000 are converged. In November 2021, we announced the
{
expansion of our long-term strategic partnership agreement with
CityFibre. In conjunction with our existing partnership with Openreach,
our
{
NGN broadband services are now available to 29.3 million households.
Adjusted EBITDAaL increased by 3.3%*, driven by growth in service
revenue, and continued strong cost control. Our Adjusted EBITDAaL
margin was 0.3* higher year-on-year at 21.2%.
Spain: 10% of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 4,180 4,166
0.3
Service revenue 3,714 3,788
(2.0) (2.0)
Other revenue 466 378
Adjusted EBITDAaL
1
957 1,044
(8.3) (1.1)
Adjusted EBITDAaL
margin 22.9% 25.1%
Note:
1. When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for
Vantage Towers A.G. on a pro
{
forma basis to be comparable to FY22. Total revenue was stable at €4.2 billion, as higher equipment revenue was
offset by lower service revenue.
On an organic basis, service revenue declined by 2.0%* (Q3: -1.6%*,
Q4
{
-5.1%*) as the impact of continued price competition in the value
segment, and a reduction in mobile termination rates, were partially offset
by higher roaming and visitor revenue. The quarterly slowdown in service
revenue in Q4 was largely driven by a tougher prior year comparative, due
to the full quarter impact of our more-for-more pricing actions in the prior
year, and a reduction in mobile termination rates in FY22.
The market remained highly competitive in the Consumer value
segment.
{
In mobile, our contract customer base remained stable in
the
{
year, supported by strong public sector demand, and a gradual improvement in our commercial performance towards the end of the
year, reflecting our continued focus on improving customer loyalty.
Mobile contract churn increased by 0.5 percentage points year-on-year
to
{
20.7% due to an exceptionally low churn in the prior year as a result of portability restrictions. Our second brand ‘Lowi’ added 310,000 customers
during the period and now has a total customer base of 1.5 million.
Our broadband customer base declined by 164,000 as a result of
higher
{
competitive intensity in the Consumer value segment, and the temporary impact of our retail channel optimisation. Our TV customer
base decreased by 88,000, impacted by continued competitive intensity.
We have renewed our exclusive agreement with HBO Max, and through
our partnerships with other content providers such as Disney, we have
the
{
most extensive library of movies and TV series in the market.During the year, a digital toolkit platform for small and medium sized
enterprises was launched by the Spanish government as part of the
EU
{
recovery funding initiatives. This scheme enables businesses to access
{
fully subsidised digital services on a single platform. We have
already received a significant number of registration requests from
customers and will achieve an attractive Adjusted EBITDAaL margin on
this incremental revenue. A second phase of this scheme is expected to
launch in June 2022.
Adjusted EBITDAaL declined by 1.1%* and the Adjusted EBITDAaL margin
was 0.3* percentage points lower year-on-year at 22.9%. The marginal
decrease in Adjusted EBITDAaL reflects lower service revenue, largely
offset by further efficiency savings.
During the year we announced a restructuring plan, mainly affecting
owned retail stores, as part of our operational transformation. In
November, we completed the optimisation of our retail footprint,
with
{
all{
branded stores now operating under a franchise model.
Strategic report
Governance Financials Other information
28
Vodafone Group Plc
Annual Report 2022
Our financial performance (continued)
In South Africa, service revenue grew year-on-year, supported by
sustained demand, incremental wholesale services, good Business
demand and financial services growth. We added 1.8 million mobile
prepaid customers and 272,000 mobile contract customers, with
the
{
latter supported by our new more-for-more ‘Vodafone Red’ proposition introduced in June. Financial services revenue in South
Africa
{
increased by 12.4%* to €155 million, reflecting the expansion of
{
our service offerings, and 69.4% of our mobile customer base now uses
{
data services. In October 2021, we launched our new ‘VodaPay’ super-app in
South
{
Africa, bringing consumer and business capabilities under one
{
platform. The application enables customers to access financial, insurance
{
and eCommerce services and supports businesses with additional resource planning and ‘business-to-business’ functionalities.
We
{
now have 1.6{
million registered users on the platform, and over
2.2
{
million downloads of the application. In March, we announced that Vodacom South Africa had acquired
2x10MHz of 700MHz, 1x80MHz of 2600MHz and 1x10MHz of 3500MHz
spectrum, with a 20-year licence through to 2042. The spectrum will
enable us to significantly expand network capacity and coverage, and
help accelerate post-pandemic economic recovery and digital inclusion.
In Vodacom’s international markets, service revenue increased during
the
{
year. Growth was supported by an increase in M-Pesa transaction volumes and data revenue. This benefit was partially offset by the
introduction of mobile money levies in Tanzania, and a stronger
prior
{
year{
comparative in Mozambique and the DRC, reflecting the
reinstatement of fees on person-to-person M-Pesa transfers in the prior
year. M-Pesa transaction value increased by 10.9%, while M-Pesa revenue
as a share of total service revenue increased by 2.0 percentage points to
22.7%, and 65.1% of our customer base is now using data services.
Vodacom’s Adjusted EBITDAaL increased by 3.4%* supported by
{
good
revenue growth, and positive operational leverage in Vodacom’s
international operations. This was partially offset by an increase in
technology operating expenses in South Africa, as we invested in further
improving the resilience of our network. The Adjusted EBITDAaL margin
decreased by 1.0* percentage point and was 35.5%.
On 10 November 2021, Vodacom Group announced it had entered
into
{
an agreement to acquire Vodafone Egypt from Vodafone for a total consideration of €2.4 billion. The proposed acquisition presents a unique
opportunity to advance Vodacom Group’s strategic connectivity and
financial services ambitions in one of Africa’s premier telecom operators.
Vodafone Egypt is a clear market leader that will diversify and accelerate
Vodacom Group’s growth profile. The transaction is expected to receive
Egyptian regulatory approval in the near term.
Vodacom also announced that it had agreed to acquire a co-controlling
30% interest in the fibre assets currently owned by Community Investment
Ventures Holdings (Pty) Limited (‘CIVH’). CIVH owns Vumatel and Dark
Fibre Africa, which are South Africa’s largest open access fibre operators.
Vodacom’s investment and strategic support will further accelerate the
growth trajectory of fibre roll-out in South Africa helping close the digital
divide. The transaction is subject to regulatory approvals in South Africa.
Other Europe: 13% of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 5,653 5,549
1.9
Service revenue 5,001 4,859
2.9 3.0
Other revenue 652 690
Adjusted EBITDAaL
1
1,606 1,760
(8.8) 1.4
Adjusted EBITDAaL
margin 28.4% 31.7%
Note:
1. When calculating organic growth for Adjusted EBITDAaL, the FY21 results are adjusted for
Vantage Towers A.G. on a pro
{
forma basis to be comparable to FY22.Total revenue increased by 1.9% to €5.7 billion, primarily reflecting service
revenue growth, also supported by the appreciation of local currencies
versus the euro.
On an organic basis, service revenue increased by 3.0%* (Q3: 2.9%*,
Q4:
{
2.7%*), with all markets other than Romania growing during the year.
The
{
growth in service revenue was supported by customer base growth, higher roaming and visitor revenue, partially offset by a reduction
{
in mobile termination rates.
In Portugal, service revenue grew due to strong fixed line revenue growth,
higher mobile ARPU, and roaming and visitor revenue growth. During the
period, we added 161,000 mobile contract customers and 64,000 fixed
broadband customers. In October, we announced that Vodafone Portugal
had acquired 90MHz of 3,600MHz and 2x10MHz of 700MHz spectrum,
with a 20-year licence through to 2041. The spectrum will enable us to
significantly expand network capacity to meet growing demand for
reliable, high-quality voice and data services.
In Ireland, service revenue increased, reflecting good mobile contract
customer growth, and higher roaming and visitor revenue, partially
offset
{
by a reduction in mobile termination rates. During the period, our mobile contract customer base increased by 77,000 and mobile contract
customer loyalty rates improved, with churn reducing 1.5 percentage
points year-on-year to 8.4%.
Service revenue in Greece increased, reflecting higher roaming and visitor
revenue as international tourism grew year-on-year, partially offset by a
reduction in mobile termination rates. During the year, we added 38,000
mobile contract customers and 145,000 prepaid customers.
Adjusted EBITDAaL increased by 1.4%*, supported by good revenue
growth and further efficiency savings, partially offset by a one-off
provision in Greece, and higher direct cost. The Adjusted EBITDAaL
margin
{
decreased by 0.2* percentage points and was 28.4%. We continued to make good progress on integrating the assets acquired
from Liberty Global in Central and Eastern Europe and we have now
delivered 60% of our cost and capital expenditure synergy target.
Vodacom: 12% of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 5,993 5,181
15.7
Service revenue 4,635 4,083
13.5 4.6
Other revenue 1,358 1,098
Adjusted EBITDAaL 2,125 1,873
13.5 3.4
Adjusted EBITDAaL
margin 35.5% 36.2%
Total revenue increased by 15.7% to €6.0 billion and Adjusted EBITDAaL
increased by 13.5%, primarily due to the strengthening of the local
currencies versus the euro.
On an organic basis, Vodacom’s total service revenue grew by 4.6%*
(Q3:
{
4.4%*, Q4 3.1%*) with growth in both South Africa and Vodacom’s international markets.
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29
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Other Markets: 9% of Group service revenue
FY22
€m
FY21
€m
Reported
change
%
Organic
change*
%
Total revenue 3,830 3,765
1.7
Service revenue 3,420 3,312
3.3 19.4
Other revenue 410 453
Adjusted EBITDAaL 1,335 1,228
8.7 23.0
Adjusted EBITDAaL
margin 34.9% 32.6%
Total revenue increased by 1.7% to €3.8 billion, as higher service revenue
was partially offset by the depreciation of local currencies versus the euro.
On an organic basis, service revenue increased by 19.4%* (Q3: 19.8%*,
Q4: 19.8%*) as a result of higher customer base and ARPU growth across
our markets.
Service revenue in Turkey accelerated as a result of strong mobile
customer base and ARPU growth, with ongoing repricing actions to
reflect
{
increasing inflation in a difficult macroeconomic environment. Mobile contract customer additions were 1.3 million including migrations
from prepaid customers. We also added 120,000 broadband customers
during the year. Mobile contract churn improved by 3.9 percentage points
year-on-year to 15.4%.
We expect Turkey to be designated as a hyper-inflationary economy
under IFRS during the first quarter of FY23, in which case Vodafone
Turkey’s results will be presented on a revised basis. See note 1 of the
condensed consolidated financial statements for further information.
Service revenue in Egypt grew ahead of inflation, supported by customer
base growth and increased data usage. During the year, we added 237,000
mobile contract customers and 877,000 prepaid mobile customers.
Adjusted EBITDAaL increased by 23.0%* and the Adjusted EBITDAaL
margin increased by 1.1* percentage points, despite the inflationary
pressure on our cost base due to worsening macroeconomic conditions.
The Adjusted EBITDAaL margin was 34.9%.
Vantage Towers: Delivering on our plan
FY22
€m
FY21
1
€m
Reported
change
%
Organic
change*
%
Total revenue 1,252 –
–
Service revenue – –
––
Other revenue 1,252 –
Adjusted EBITDAaL 619 –
––
Adjusted EBITDAaL
margin 49.4% –
Note:
1. Vantage Towers is a new reporting segment for the year ended 31 March 2022 and hence no
comparative information is presented. See page 24 for more information.
Total revenue increased to €1.3 billion, with 1,700 new tenancies added
during the year, bringing the tenancy ratio to 1.44x. Vantage Towers
concluded a number of new partnership agreements during the year,
including an agreement with 1&1 in December 2021 for the provision
of
{
passive tower infrastructure access to at least 3,800 sites throughout
Germany by the end of 2025, and potentially up to 5,000 sites, for the
next 20 years, with an option to extend until 2060. Vantage Towers
reported its results on 16 May 2022.
Further information on Vantage Towers can be accessed at:
vantagetowers.com
Associates and joint ventures
FY22
€m
FY21
€m
VodafoneZiggo Group Holding B.V. (19) (232)
Safaricom Limited 217 217
Indus Towers Limited – 274
Other 13 83
Share of results of equity accounted
associates and joint ventures 211 342
VodafoneZiggo Joint Venture (Netherlands)
The results of VodafoneZiggo, in which Vodafone owns a 50% stake,
are
{
reported here under US GAAP, which is broadly consistent with Vodafone’s IFRS basis of reporting.
Total revenue grew by 1.4% to €4.1 billion, primarily driven by mobile
contract customer base and ARPU growth, supported by higher roaming
and visitor revenue. This was partially offset by a slowdown in Consumer
fixed revenue growth in the second half of FY22.
During the year, VodafoneZiggo added 196,000 mobile contract
customers, supported by our best-in-class net promoter score, mainly
driven by higher Consumer demand. Strong Business fixed performance
was due to an increase in the customer base, as well as higher demand for
unified communications. The number of converged households increased
by 25,000, with 45% of broadband customers now converged, delivering
significant NPS and customer loyalty benefits. VodafoneZiggo now
offers
{
1 gigabit speeds to 5.8 million homes and is on track to provide nationwide coverage in 2022.
During the year, Vodafone received €350 million in dividends from
the
{
joint venture, as well as €49 million in interest payments. The joint venture also drew down an additional loan from shareholders to fund
an
{
instalment arising from spectrum licences acquired in July 2020, with
{
Vodafone’s share being €104 million.Safaricom Associate (Kenya)
Safaricom service revenue grew to €2.2 billion due to strong Business
fixed demand, and a recovery in M-Pesa revenue as transaction volumes
increased and peer-to-peer transaction fees normalised.
Indus Towers Associate (India)
The Group’s interest in Indus Towers has been provided as security
against certain bank borrowings secured against Indian assets and partly
to the pledges provided to the new Indus Towers entity (‘Indus’) under the
terms of the merger between erstwhile Indus Towers and Bharti Infratel.
Indus has been classified as held for sale in the condensed consolidated
statement of financial position since 31 March 2021 and the Group’s
share of Indus’ results is not reflected in the Group’s consolidated income
statement for the year ended 31 March 2022.
Vodafone Idea Limited Joint Venture (India)
See note 29 ‘Contingent liabilities and legal proceedings’ in the
consolidated financial statements for further information.
TPG Telecom Limited Joint Venture (Australia)
In July 2020, Vodafone Hutchison Australia Pty Limited (‘VHA’) and
TPG
{
Telecom Limited (‘TPG’) completed their merger to establish a fully
{
integrated telecommunications operator in Australia. The merged
entity
was admitted to the Australian Securities Exchange (‘ASX’) on
30
{
June
{
2020 and is known as TPG Telecom Limited. Vodafone and
Hutchison Telecommunications (Australia) Limited each own an
economic interest of 25.05% in the merged unit.
Strategic report
Governance Financials Other information
30
Vodafone Group Plc
Annual Report 2022
Our financial performance (continued)
Net financing costs
FY22
€m
{
FY21
€m
{
Reported
change %
Investment income 254 330
Financing costs (1,964) (1,027)
Net financing costs (1,710) (697)
(145.3)
Adjustments for:
Mark-to-market gains (256) (1,091)
Foreign exchange losses 284 23
Adjusted net financing costs
1
(1,682) (1,765)
4.7
Note:
1. Adjusted net financing costs is a non-GAAP measure. See page 223 for
{
more information. Net financing costs increased by €1,013 million, primarily due to
lower
{
mark-to-market gains on options held relating to the Group’s mandatory convertible bonds and increased foreign exchange losses
on
{
intercompany funding arrangements. Adjusted net financing costs remained broadly stable year-on-year, reflecting consistent average net
debt balances and weighted average borrowing costs for both periods.
Taxation
FY22
%
{
FY21
%
{
Change
pps
Effective tax rate 33.6% 87.8%
(54.2)
Adjusted effective tax rate
1
27.9% 26.9%
1.0
Note:
1. Adjusted effective tax rate is a non-GAAP measure. See page 223 for more information.
The Group’s effective tax rate for the year ended 31 March 2022
was
{
33.6%. The effective tax rate includes a €1,468 million charge (2021:
{
€2,128 million*
) for the utilisation of losses in Luxembourg which
arises from an increase in the valuation of investments based upon local
GAAP financial statements and tax returns. The current year charge was
principally driven by increases in the value of our listed investments. The
effective tax rate also includes €327 million (2021: €320 million) relating
to the use of losses in Luxembourg and a credit of €699 million relating
to
{
the recognition of a deferred tax asset in Luxembourg because of higher interest rates increasing our forecasts of future profits. The year
ended 31 March 2021 included a charge of €699 million
*
relating to
the
{
de-recognition of a deferred tax asset in Luxembourg. These items change the total losses we have available for future use against our
profits
{
in Luxembourg and neither item affects the amount of tax we pay
{
in other countries.The effective tax rate also includes an increase in our deferred tax
assets
{
in the UK of €593 million (2021: €nil) following the increase in the
{
corporate tax rate to 25% and €273 million (2021: €nil) following the
{
revaluation of assets for tax purposes in Italy. The Group’s Adjusted effective tax rate for the year ended 31 March 2022
was 27.9% (2021: 26.9%). This is in line with our expectations for the year.
The adjusted effective tax rate excludes the amounts relating to Luxembourg,
the impact of the UK tax rate change and revaluation of assets in Italy
which are set out above.
Earnings per share
FY22
eurocents
FY21
eurocents
Reported
change
eurocents
Basic earnings per share 7.20c 0.38c
6.82c
Adjusted basic earnings
per
{
share1
11.03c 8.08c
2.95c
Note:
1. Adjusted basic earnings per share is a non-GAAP measure. See page 223 for more information.
Basic earnings per share was 7.20 eurocents, compared to 0.38 eurocents
for the year ended 31 March 2021.
Adjusted basic earnings per share was
{
11.03 eurocents compared to
8.08
{
eurocents for the year ended 31{
March
{
2021.Consolidated statement of financial position
The consolidated statement of financial position is set out on page 130.
Details on the major movements of both our assets and liabilities in the
year are set out below.
Assets
Goodwill and other intangible assets decreased by €0.3 billion between
31 March 2021 and 31 March 2022 to €53.2 billion. This primarily reflects
the amortisation of computer software and licence and spectrum fees,
partially offset by additions in the year.
Property, plant and equipment decreased by €0.4 billion between
31
{
March 2021 and 31 March 2022 to €40.8 billion. This reflects a net decrease in the carrying value of leased assets by €0.6 billion, partially
offset by an increase in the carrying value of owned assets.
Other non-current assets decreased by €0.6 billion between
31
{
March{
2021
{
and 31 March 2022 to €31.4 billion, primarily due to
{
a
{
€2.5
{billion decrease in deferred tax assets offset by a €1.6 billion
increase in trade and other receivables.
Assets held for sale at 31 March 2021 and 31 March 2022 comprise the
Group’s interest in Indus Towers Limited. Further detail is provided in note
7 ‘Discontinued operations and assets held for sale’ to the consolidated
financial statements.
Current assets increased by €0.6 billion between 31 March 2021 and
31
{
March 2022 to €27.6 billion, primarily due to an increase of €1.7 billion in cash and cash equivalents, a €0.2 billion increase in inventory, offset by
a €1.2 billion decrease in other investments.
Total equity and liabilities
Total equity decreased by €0.8 billion between 31 March 2021 and
31
{
March 2022 to €57.0 billion, due to comprehensive income for the period of €5.0 billion, share-based payments of €0.1 billion, an increase
of
{
€0.2 billion arising from transactions with non-controlling interests
in
{
subsidiaries, offset by €3.0 billion of dividends paid to the Group’s shareholders and the purchase of treasury shares of €3.1 billion.
Non-current liabilities decreased by €5.2 billion between 31 March 2021
and 31 March 2022 to €63.3 billion, primarily due to a €2.4 billion decrease
in trade and other payables, a €1.6 billion decrease in deferred tax liabilities,
a €1.1 billion decrease in borrowings and a €0.2 billion decrease in post
employment benefits.
Current liabilities increased by €4.9 billion between 31 March 2021 and
31 March 2022 to €33.6 billion, primarily due to a €3.5 billion increase in
borrowings, a €1.6 billion increase in trade and other payables, offset by a
€0.2 billion decrease in provisions.
Inflation
Inflation did not have a significant effect on the Group’s consolidated
results of operations and financial condition during the year ended
31
{
March 2022.Note:
* During the year ended 31 March 2022, we revised the calculation of certain impairment reversals
recognised by our Luxembourg holding companies for the year ended 31 March 2021; this had no
impact on the amount of deferred tax assets recognised at that date but has changed
the amount
of our unrecognised deferred tax assets by €0.7 billion (unrecognised losses of €2.8 billion).
31
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Cash flow, capital allocation and funding
Analysis of cash flow
FY22
€m
{
FY21
€m
{
Reported
change %
Inflow from operating activities 18,081 17,215 5.0
Outflow from investing activities (6,868) (9,262) 25.8
Outflow from financing activities (9,706) (15,196) 36.1
Net cash inflow/(outflow) 1,507 (7,243)
120.8
Cash and cash equivalents at
beginning of the financial year 5,790 13,288
Exchange gain/(loss) on cash and
cash equivalents 74 (255)
Cash and cash equivalents at
end of the financial year 7,371 5,790
Cash inflow from operating activities increased by 5.0% to €18,081 million,
primarily due to higher operating profit.
Outflow from investing activities decreased by 25.8% to €6,868 million,
primarily due to a decrease of €2,409 million (2021: €1,993 million
increase) in collateral assets held against derivative liabilities, partially
offset by purchases of other short-term investments and property, plant
and equipment.
Outflows from financing activities decreased by 36.1% to €9,706 million,
driven by an increase of €1,952 million (2021: €4,330 million decrease)
in
{
collateral liabilities held against derivative assets and lower borrowing repayments compared to the previous year, partially offset by the
purchase of treasury shares of €2,087 million in the current year.
FY22
€m
FY21
€m
Reported
change %
Adjusted EBITDAaL
1
15,208 14,386
5.7
Capital additions
2
(8,306) (7,854)
Working capital (31) 564
Disposal of property, plant and
equipment and intangible assets 27 42
Restructuring costs (267) (356)
Integration capital additions
3
(314) (329)
Restructuring and integration
working capital (213) (3)
Licences and spectrum (896) (1,221)
Interest received and paid
4
(1,254) (1,553)
Taxation (925) (1,020)
Dividends received from associates
and joint ventures 638 628
Dividends paid to non-controlling
shareholders in subsidiaries (539) (391)
Other 181 217
Free cash flow
1
3,309 3,110
6.4
Acquisitions and disposals 138 447
Equity dividends paid (2,474) (2,427)
Share buybacks
4
(2,029) (53)
Foreign exchange loss (378) (219)
Other movements on net debt
5
399 646
Net debt (increase)/decrease
1
(1,035) 1,504
Opening net debt
1
(40,543) (42,047)
Closing net debt
1
(41,578) (40,543)
(2.6)
Free cash flow
1
3,309 3,110
Adjustments:
– Licences and spectrum 896 1,221
– Restructuring costs 267 356
– Integration capital additions
3
314 329
– Restructuring and integration
working capital 213 3
– Vantage Towers growth
capital expenditure 244 –
– Special dividend in Egypt 194 –
Adjusted free cash flow
1
5,437 5,019
Notes:
1. Adjusted EBITDAaL, Free cash flow, Adjusted free cash flow and Net debt are non-GAAP
measures. See page 223 for more information.
2. See page 233 for an analysis of tangible and intangible additions in the year.
3. Integration capital additions comprises amounts for the integration of acquired Liberty Global
assets and network integration.
4. Interest received and paid excludes interest on lease liabilities of €361 million outflow
(FY21:
{
€307 million) included within Adjusted EBITDAaL and €58 million of cash inflow (FY21: €9
{
million) from the option structures relating to the issue of the mandatory convertible bonds which is included within Share buybacks. The option structures were intended to ensure that the
total cash outflow to execute the programme were broadly equivalent to the amounts raised on
issuing each tranche.
5. ‘Other movements on net debt’ for the year ended 31 March 2022 includes mark-to-market
gains recognised in the income statement of €256 million (FY21: €1,091 million gain). The year
ended 31 March 2021 also included payments in respect of bank borrowings secured against
Indian assets of €83 million and payments to Vodafone Idea Limited of €235 million in respect
of the contingent liability mechanism.
Adjusted free cash flow increased by €418 million to an inflow
of
{
€5,437{
million, resulting from an increase in Adjusted EBITDAaL
and
{
lower{
interest received and paid, partially offset by an increase in
capital
{
additions and neutral working capital movements for the year.Borrowings and cash position
FY22
€m
FY21
€m
Reported
change %
Non-current borrowings (58,131) (59,272)
Current borrowings (11,961) (8,488)
Borrowings (70,092) (67,760)
Cash and cash equivalents 7,496 5,821
Borrowings less cash and
cash (62,596) (61,939)
{
equivalents(1.1)
Borrowings principally includes bonds of €48,031 million (FY21:
€46,885
{
million) and lease liabilities of €12,539 million (FY21: €13,032 million).
The increase in borrowings of €2,332 million is principally driven by
an
{
increase of €1,952 million on derivative collateral positions, which impacts both cash and short-term borrowings.
Strategic report
Governance Financials Other information
32
Vodafone Group Plc
Annual Report 2022
Return on capital employed
Return on capital employed (‘ROCE’) reflects how efficiently we are
generating profit with the capital we deploy.
FY22
1
€m
{
FY21
€m
{
Change
bps
Pre-tax ROCE (controlled)
1
7.2% 5.5%
1.7
Post-tax ROCE (controlled and
associates/joint ventures)
1
5.0% 3.9%
1.1
ROCE calculated using GAAP
measures
2
5.0% 4.4%
0.6
Notes:
1. Pre-tax ROCE (controlled) and Post-tax ROCE (controlled and associates/joint ventures)
are
{
non-GAAP measures. See page 223 for more information. 2. ROCE is calculated by dividing Operating profit by the average of capital employed as
reported
{
in the consolidated statement of financial position. See pages 230 and 231 for
{
the{
detail of the calculation. We calculate two ROCE measures: i) Pre-tax ROCE for controlled
operations only and ii) Post-tax ROCE including associates and
joint
{
ventures.Pre-tax ROCE increased to 7.2% % (FY21: 5.5%). The increase reflects
a
{
strong increase in adjusted operating profit, lower amortisation on
licences and spectrum fees and a small decrease in average capital
employed. Similarly, post-tax ROCE increased to 5.0% (FY21: 3.9%).
ROCE using GAAP measures increased to 5.0% (FY21: 4.4%). The increase
reflects a higher operating profit during the year-ended 31 March 2022
coupled with a slight decrease in average capital employed.
Funding position
FY22
€m
FY21
€m
Reported
change %
Bonds (48,031) (46,885)
Bank loans (1,317) (1,419)
Other borrowings including
spectrum (3,909) (4,215)
Gross debt
1
(53,257) (52,519)
(1.4)
Cash and cash equivalents 7,496 5,821
Short-term investments
2
4,795 4,007
Derivative financial instruments
3
1,604 3
Net collateral (liabilities)/assets
4
(2,216) 2,145
Net debt
1
(41,578) (40,543)
(2.6)
Notes:
1. Gross debt and Net debt are non-GAAP measures. See
{
page 223 for more information. 2. Short-term investments includes €1,446 million (FY21: €1,053 million) of highly liquid
government and government-backed securities and managed investment funds of
€3,349
{
million (FY21: €2,954 million) that are in highly rated and liquid money market investments with liquidity of
{
up{
to 90 days. 3. Derivative financial instruments excludes derivative movements in cash flow hedging reserves
of
{
€1,350 million gain (FY21: €862 million loss). 4. Net collateral (liabilities)/assets on derivative financial instruments result in cash being (held)/
paid
{
as{
security. This is repayable or receivable when derivatives are settled and is therefore deducted from
{
liquidity. Net debt increased by €1,035 million primarily as a result of Free cash
flow of €3,309 million, offset by equity dividends paid of €2,474 million
and share buybacks of €2,029 million (1,441 million shares) used to offset
dilution linked to mandatory convertible bonds.
Other funding obligations to be considered alongside net debt include:
–
Lease liabilities of €12,539 million (FY21: €13,032 million)
–
Mandatory convertible bonds recognised in equity of €nil
(FY21:
{
€1,904 million) –
KDG put option liabilities of €494 million (FY21: €492 million)
–
Guarantees over Australia joint venture loans of €1,573 million
(FY21:
{
€1,489 million) –
Pension liabilities of €281 million (FY21: €513 million)
The Group’s gross and net debt includes €9,942 million (FY21:
€7,942
{
million) of long-term borrowings (‘Hybrid bonds’) for which a
{
50%
{
equity characteristic of €4,971 million (FY21: €3,971 million) is
{
attributed by credit rating agencies.The Group’s gross and net debt includes certain bonds which have been
designated in hedge relationships, which are carried at €1,316 million
higher value (FY21: €1,390 million higher) than their euro equivalent
redemption value. In addition, where bonds are issued in currencies other
than euros, the Group has entered into foreign currency swaps to fix the
euro cash outflows on redemption. The impact of these swaps is not
reflected in gross debt and if it was included would decrease the euro
equivalent value of the bonds by €1,456 million (FY21: €127 million).
.
Our financial performance (continued)
33
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Share buybacks
In March 2021, Vodafone started a series of irrevocable and non-discretionary
share buyback programmes, announced on 19 March 2021, 19 May 2021,
23 July 2021 and 17 November 2021 (the ‘programmes’). The sole purpose
of the programmes was to reduce the issued share capital of Vodafone to
offset the increase in the issued share capital as a result of the maturing of
the first tranche of the mandatory convertible bond (‘MCB’) in March 2021.
On 9 March 2022, Vodafone announced the
{
commencement of a new irrevocable and non-discretionary share buyback programme, the sole
purpose being to reduce the issued share capital of Vodafone to partially
offset the increase in the issued share capital as a result of the maturing
of
{
the second tranche of the MCB in March 2022. In order to satisfy the first tranche of the MCB, 1,426.8 million shares
were
{
reissued from treasury shares in March 2021 at a conversion price
{
of{
£1.2055. This reflected the conversion price at issue (£1.3505)
adjusted
{
for the pound sterling equivalent of aggregate dividends paid in
{
August 2019, February 2020, August 2020 and February 2021. In order
{
to satisfy the second tranche of the MCB, 1,518.6 million shares were reissued from treasury shares in March 2022 at a conversion
price
{
of{
£1.326. This reflected the conversion price at issue (£1.3505)
adjusted
{
for{
the pound sterling equivalent of aggregate dividends
paid
{
in{
August 2019, February 2020, August 2020, February 2021,
August
{
2021 and February 2022.The current programme started on 17 March 2022 and is due to
complete on 15 November 2022. Details of the shares purchased
under
{
the programmes, including those purchased under irrevocable instructions, are shown below.
Date of share purchase
Number of shares
purchased
1
000s
Average price
paid
{
for shares inclusive of
transaction costs
{
Pence
Total number of
shares purchased
under publicly
announced
share
{
buyback programmes
2
000s
Maximum number
of shares that may
yet be purchased
under the
programmes
3,4
000s
March 2021 52,682 134.60 52,682 204,141
April 2021 131,704 135.34 184,386 72,437
May 2021 118,095 135.71 302,481 222,580
June 2021 125,558 128.59 428,039 97,022
July 2021 125,558 118.35 553,597 439,452
August 2021 119,851 120.78 673,448 319,601
September 2021 125,558 118.04 799,006 194,043
October 2021 119,851 111.94 918,857 74,192
November 2021 125,548 113.18 1,044,405 382,307
December 2021 116,983 112.93 1,161,388 265,324
January 2022 116,966 120.70 1,278,354 148,358
February 2022 114,122 136.33 1,392,476 34,236
March 2022 101,056 126.41 1,493,532 953,699
April 2022 115,416 128.71 1,608,948 838,283
May 2022
(to 13 May) 54,671 120.98 1,663,619 783,612
Total
5
1,663,619 123.47 1,663,619 783,612
Notes:
1. The nominal value of shares purchased is 20
20/21
US cents each.
2. No shares were purchased outside the publicly announced share buyback programmes.
3. In accordance with shareholder authority granted at the 2021 Annual General Meeting.
4. The total shares repurchased under each programme were 256,822,895 shares completed on
18 May 2021, 268,237,246 shares completed on 23 July 2021, 467,988,432 shares completed
on 17 November 2021, and 433,662,325 shares completed on 8 March 2022.
5. The total number of shares purchased represented 5.9% of our issued share capital, excluding
treasury shares, at 13 May 2022.
Dividends
The Board is recommending total dividends per share of 9.0 eurocents
for
{
the year. This includes a final dividend of 4.5 eurocents which compares to 4.5
{
eurocents in the prior year.Nick Read
Chief Executive
17 May 2022
Margherita Della Valle
Chief Financial Officer
17 May 2022
This year’s report contains the Strategic Report on pages 1 to 67,
which includes an analysis of our performance and position, a review
of
{
the business during the year, and outlines the principal risks and
{
uncertainties we face. The Strategic Report was approved by
{
the{
Board and signed on its behalf by the Chief Executive and
Chief
{
Financial Officer.
Governance Financials Other information
34
Vodafone Group Plc
Annual Report 2022
Strategic report
We connect for a better future
Purpose, sustainability and responsible business
Our approach to ESG (Environmental, Social and Governance topics) is an integral part of our purpose
and
b
strategy to be a new generation connectivity andb
digital services provider for Europe and Africa,
enabling
b
anb
inclusive and sustainable digital society.
Our approach to ESG
Our purpose pillars
Below we have set out the main elements through which our approach to ESG is delivered. Our strategy helps to deliver our targets across three purpose
pillars: Inclusion for All, Planet, and Digital Society and ensures Vodafone acts responsibly and ethically, wherever we operate. We are also committed to
supporting the delivery of the UN Sustainable Development Goals (‘SDGs’).
Essential to our approach is transparency and measurement
Social contract: Activation and acceleration of our purpose initiatives
Read more
on pages 36-40
Read more
on pages 47-51
Read more
on page 56
Read more
on pages 41-44
Inclusion for All
Ensuring everyone has access to the benefits of a
digital society.
Access for all
Finding new ways to roll-out our network to rural
locations in our markets.
Propositions for equality
Providing relevant products and services to address
societal challenges such as gender equality and
financial inclusion.
Workplace equality
Developing a diverse and inclusive global workforce
that reflects the customers and societies we serve.
Planet
Reducing our environmental impact and helping
society decarbonise.
Climate change
Working to reduce our environmental impact to
reach net zero emissions across our full value chain
by 2040.
Carbon enablement
Helping our customers reduce their own carbon
emissions by 350 million tonnes by 2030.
E-waste
Driving action to reduce device waste and
progressing against our target to reuse, resell or
recycle 100% of our network waste.
Digital Society
Connecting people and things and digitalising
critical sectors.
Digitalising business
Providing products and services to support
business, particularly SMEs.
Digitalising agriculture
Supporting the digitalisation of agriculture with
specific products and services.
Revolutionising healthcare
Using our products, services and technology to
support the digitalisation of healthcare.
Read more
on pages 44-45
Protecting data
Customers trust us with their data and maintaining
this trust is critical.
Data privacy
We want to respect the privacy preferences of our
customers and help improve society through the
responsible use of data.
Cyber security
As a provider of critical national infrastructure and
connectivity that is relied upon by millions
{
of customers, we prioritise cyber and
{
information security across everything that we do.
Protecting people
Health and safety
Creating a safe working environment for everyone
working for and on behalf of Vodafone.
Mobiles, masts and health
Operating our networks within national regulations.
Human rights
Contributing to the protection and promotion of
human rights and freedoms.
Responsible supply chain
Managing relationships with our direct suppliers,
and evaluating their commitments to diversity,
inclusion and the environment.
Business integrity
We are committed to ensuring that our business
operates ethically, lawfully and with integrity
wherever we operate.
Tax and economic contribution
As a major investor, taxpayer and employer, we
make a significant contribution to the economies
of
{
the countries in which we operate.Anti-bribery and corruption
We have a policy of zero tolerance towards bribery
or corruption. Our policy provides guidance on what
constitutes a bribe and prohibits giving or receiving
any excessive or improper gifts and hospitality.
Learn more about how we
help improve digital inclusion:
investors.vodafone.com/videos
Learn more about our approach
to cyber security:
investors.vodafone.com/videos
Learn more about our
net zero goal:
investors.vodafone.com/videos
Learn more about our
human rights approach:
investors.vodafone.com/videos
Learn more about our
approach to data privacy:
investors.vodafone.com/videos
Learn more about our
approach to tax:
investors.vodafone.com/videos
Our approach is underpinned by responsible business practices
Read more
on pages 52-53
Strategic report
Governance Financials Other information
35
Vodafone Group Plc
Annual Report 2022
Over the last year we have made progress against many of our key purpose targets. We also established
a new Board Committee to provide oversight of our ESG programme.
Our targets and achievements
Governance
The Executive Committee has overall accountability to the Board for
our
{
sustainable business strategy and regularly reviews progress. In addition, each pillar of our purpose has an executive-level sponsor.
The
{
ESG Committee held its first two meetings this year and the Board now benefits from dedicated oversight of our ESG programme. We also
continue to include ESG measures in the long-term incentive plan for
our senior leaders.
100%
renewable
electricity in
European markets
9
Target achieved
from July 2021, four
years ahead of our
original 2025 target.
23%
reduction in
Scope 1 and 2
emissions
By 2030 we will
fully abate all
carbon emissions
from Scope 1
and 2 activities and
halve our Scope 3
emissions.
32%
women in
management
and
b
senior leadership roles
We aim to have
40%
{
women in management roles
by 2030.
21.6
million additional
female customers
(Africa and Turkey)
since 2016
9
Target achieved,
four years ahead of
our original target.
52.4
million M-Pesa
customers
9
Target achieved
four years ahead of
our original target.
This year we set a
new target, aiming
to connect 75 million
customers to financial
services by 2026.
3.6m
V-Hub users
We aim to support
seven
{
million users to
{
digitalise using V-Hub by 2025.
2.9m
smallholder
farmers
registered on our
Connected Farmer
platform, supporting
them to digitalise.
Materiality
We have conducted a materiality assessment to identify the material and
emerging ESG issues relevant to our business, our stakeholders and the
societies in which we operate.
Click to read our materiality matrix –
vodafone.com/sustainable-business
Reporting frameworks
Vodafone reports against a number of voluntary reporting frameworks to
help stakeholders understand our sustainable business performance.
The Global Reporting Initiative (‘GRI’) is the most widely accepted
global standard for sustainability reporting. The GRI Standards
allow companies to report their material impacts for
{
a range of economic, environmental and social issues. Our
{
2022 disclosure is included in our 2022 ESG Addendum.
Click to download our ESG Addendum:
investors.vodafone.com/esgaddendum
Due to increasing demand for sustainability information that
is
{
comparable, consistent and financially material, we have published disclosures in accordance with the Sustainability
Accounting Standards Board’s (‘SASB’) Standards.
Click to read our SASB disclosures:
investors.vodafone.com/sasb
Vodafone is a participant in the United Nations Global Compact
(‘UNGC’). As part of this, Vodafone supports the Ten
{
Principles
of the United Nations Global Compact on human rights, labour,
environment and anti-corruption. Our 2022 Communication on
Progress can be found in our 2022 ESG Addendum.
Vodafone participates in the CDP’s annual climate
change questionnaire.
Click to read our CDP response:
vodafone.com/sustainbility-reports
GRI
SASB
UNGC
CDP
Read more on
page 44
Read more on
page 45
Read more on
pages 42-43
Read more on
page 39
Read more about the Board’s oversight of material
ESG
b
topics on page 89Read more about the governance underpinning our
responsible business practices on pages 47-57
ESG governance structure
The role of the ESG Committee is to provide oversight of our
ESG
{
programme, sustainability and responsible business practices as
{
well as our contribution to the societies we operate in under our social contract.
Purpose and Reputation Steering Committee
ESG Committee
Executive Committee
Board
Read more on
pages 42-43
Read more on
page 37
Read more on
pages 37-38
Digital
Society
Executive-level
sponsor:
Vinod Kumar
Inclusion
for All
Executive-level
sponsor:
Serpil Timuray
Planet
Executive-level
sponsor:
Joakim Reiter
Strategic report
Governance Financials Other information
36
Vodafone Group Plc
Annual Report 2022
Our purpose
Our purpose is to connect for a better future
by
b
usingb
technology to improve lives and
enable
b
inclusive and sustainable digital societies.
b
Web
achieve this by focusing on three
pillars:
b
Inclusionb
for All, Planet and Digital Society,
which
b
serve as the framework for everything we do
b
atb
Vodafone. Our purpose is underpinned by
our
b
responsible business practices: protecting data,
b
protecting people and business integrity.Our three purpose pillars are focused on integrating environmental and
social considerations into our business strategy and priorities. To further
embed this approach, this year we established a new ESG Committee as
a
{
formal committee of the Board. This will provide strategic support for
our ESG ambitions, and ensure effective oversight of our ESG strategy.
Read more on our ESG Committee
on page 89
The role of business in society is changing, accelerated by the COVID-19
pandemic. Recognising this, we continue to evolve our social contract,
which is the partnership we wish to develop with governments, policy
makers and civil society. We use the social contract to understand what
matters the most to the societies and economies we work in, and activate
our purpose around these. This year we transitioned our social contract
focus to ‘BuildBackBetter’ by deploying initiatives to address societal
challenges created by the pandemic.
For example, aligned to the EU’s focus on a green recovery from
COVID-19, we accelerated the delivery of our target on renewables,
and
{
achieved 100% renewable electricity use in Europe and Turkey from
{
July 2021, four years ahead of our 2025 target date. Our response to the war in Ukraine
In response to the war in Ukraine, we have been offering support to our
customers and communities. The humanitarian part of our comprehensive
response is coordinated through the Vodafone Foundation, in line with
our policy for all charitable activities to be led and funnelled by our
Foundations. The situation is fast evolving at the time of writing, but we
have donated over €3 million in contributions and services in-kind in
response, including:
–
Free roaming, calls and texts in our European markets for Vodafone
Ukraine’s customers who have left Ukraine (we have a partner market
agreement with Vodafone Ukraine);
–
Free calls and text messages to Ukraine;
–
Offering fast-track employment opportunities for those displaced by
the crisis (Ukrainians, or other nationals, who have fled the country to
find safety);
–
Vodafone Group Foundation has donated €500,000 from its
Humanitarian Fund to UNHCR and local Vodafone Foundations in
Czech Republic, Romania and Hungary; and
–
Vodafone employee volunteers travelled to Romania and Hungary
to
{
help install free-to-use instant WiFi and charging points for mobile phones to help refugees crossing the border.
Further to these voluntary measures, on 8 April 2022 Vodafone signed
a
{
joint statement with other telecom operators in the EU, with the aim of
establishing a coordinated approach to ensuring connectivity to refugees
from Ukraine. In particular, Vodafone has committed to continuing to
implement voluntary measures, namely to maintain lower wholesale
charges for roaming and termination rates.
The following sections provide an overview of our purpose pillars and
targets, as well as the achievements over the past year.
Purpose
Our Inclusion for All strategy seeks to ensure no one
is
b
left behind. It focuses on access to connectivity, digital
b
skills and creating relevant products and services, such as access to education, healthcare
and
b
finance. Web
are also committed to developing
a
b
diverse and inclusive global workforce that reflects
the customers and societies we serve.
With more than 4.9 billion
1
people now online, the internet has
become
{
a
{
vital part of our lives by enabling us to keep in touch
and
{
access government services, health information, banking and entertainment. However, 2.9 billion people remain offline
1
, 96% of
whom
{
live in developing countries. We operate in four countries2
that are
designated by the United Nations as Least Developed Countries (‘LDCs’)
where just 27%
1
of people are online, and the challenges facing the
unconnected are even more pronounced.
Our Inclusion for All strategy focuses on overcoming the five key barriers
that create the digital divide – coverage, access to devices, affordability,
digital skills, and creating relevant products and services for those most
at
{
risk of being unconnected, such as the elderly and women. This year we have made significant progress across a number of areas,
increasing coverage, supporting customers to afford 4G devices, and
developing new services that help customers unlock more opportunities.
We have also pushed ourselves to set new targets and create new
partnerships across a number of inclusion areas, for example setting
a
{
new financial inclusion target this year.
Closing the digital divide
Connecting everyone to digital services, particularly across Africa,
is
{
a
{
significant challenge. Fixed and mobile services are increasing
globally,
{
with 4G networks reaching 88%3
of the world’s population.
We
{
recognise that internet access is transformational, empowering people to meaningfully contribute and connect, and so we
must
{
continue{
to upgrade and expand our networks to achieve
meaningful
{
connectivity. Expanding coverage to rural networks remains a focus for us with 25%
4
of
the EU population and 59%
4
of the population in Sub-Saharan Africa living
in rural areas. Expansion of rural networks can often be more challenging
and have a lower return on investment due to lower population densities.
New approaches, partnerships and a blend of technologies will help us to
overcome some of these barriers and help deliver universal coverage.
We have also continued to work with our partners AST & Science LLC
to
{
develop the first space-based mobile network to connect directly to
{
consumer 4G and 5G smartphones without the need for specialised hardware. This partnership aims to provide mobile coverage in the
Democratic Republic of the Congo, Ghana, Mozambique, Kenya and
Tanzania. The AST mobile network will ultimately reach an estimated
1.6
{
billion people across 49{
countries.
In Europe we are working to raise investment to boost high-speed
connectivity in rural areas, creating Smart Villages and Cities that
support
{
businesses, citizens and the environment. We are also increasing investment in rural areas, helping farmers and other rural small businesses
overcome barriers to connectivity.
Inclusion for All
Notes:
1. ITU, 2022.
2. Markets designated as LDC’s – DRC, Mozambique, Lesotho and Tanzania.
3. ITU, 2021.
4. World Bank, 2020..
37
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
The digital divide goes beyond just being connected and unconnected.
4G is now available to more than half of Africa’s population, but accounts
for just 15% of connections, on average, compared to 57% globally. There
are strong economic benefits from increased 4G connectivity. Research
from the World Bank shows that it can reduce the number of households
in extreme poverty by 4.3 percentage points, mainly due to increases
in
{
labour force participation, particularly among women1
. Furthermore,
expanding mobile broadband penetration across Africa by 10% could
boost GDP per capita by 2.5%
2
.
There are many barriers preventing the use of 4G, including lack of awareness,
digital skills, and the prohibitive upfront cost of smartphones. We know that
the vast majority of those offline, 2.5 billion of the 2.9 billion unconnected,
live within mobile broadband coverage. Given that smartphones are
increasingly the main gateway to digital services, lowering the cost
of
{
devices is key to addressing the digital divide. We run a number of
{
programmes designed to reduce the cost of a smartphone, from applying
{
subsidies, to offering financing to customers to shift from 2G to
{
4G handsets. Last year in partnership with Google, Safaricom launched a device-
financing initiative called Lipa Mdogo Mdogo (Pay Little by Little). Lipa
Mdogo Mdogo offers a flexible payment plan with an 85% reduction in
the
{
upfront cost (a customer pays 500Kshs upfront) and an affordable daily fee of 20Kshs. So far, 600,000 4G devices have been connected
through the Lipa Mdogo Mdogo initiative.
This year, in his role as commissioner to the UN Broadband Commission
for Sustainable Development, our Chief Executive, Nick Read, chaired
a
{
new working group to forge multi-stakeholder action to connect
3.4
{
billion people with smartphones by 2030.In order to drive digital inclusion to the hardest-to-connect communities,
we also announced in March 2022 that Vodafone will invest US$190 million
over the next five years to increase our 4G population coverage to an
additional 80 million people in Sub-Saharan Africa
3
. This means that
we
{
have committed to increase our 4G population coverage from 54% (higher than the African average of 49%) to approximately 85% across six
Sub-Saharan African countries. This targeted intervention includes four of
the least developed counties (‘LDCs’) – Mozambique, Tanzania, Lesotho
and the Democratic Republic of the Congo – and will help to close a
particular gap in internet usage between urban communities and rural
communities. This pledge was made as part of the ITU Partner2Connect
digital coalition and we will continue to develop other partnerships to help
us achieve this goal.
FY22 network deployment
4G sites deployed
(000s)
4G population
coverage
Europe
1
131.2 98.2%
Africa
2
29.5 64.8%
Group
1,2
160.7 81.6%
Notes:
1. Excluding Vodafone Ziggo and including Turkey.
2. Excluding Safaricom.
Read more on our approach to closing the digital
divide
b
through partnerships here: vodafone.com/
closing-the-digital-divide-through-partnership
Addressing the digital gender gap
Goal: To connect an additional 20 million women living in Africa
and
b
Turkey to mobile by 2025Despite efforts to close the gender digital divide, the majority of those
still
{
unconnected are women. The latest data from the GSMA4
indicates
progress to close this gender gap has stalled. Research indicates that
women who have access to mobile internet via a smartphone have
9%
{
higher levels of wellbeing than women who have access via a basic
or
{
feature phone5
. However, across low and middle-income countries
women are 18% less likely than men to own a smartphone and 16%
less
{
likely to use mobile internet5
.
Key barriers preventing women in emerging markets from using the
internet include relevance of services, cost and adequate digital skills. We
focus on the first, relevance of services, as a strategy to increase women’s
access. For example, in many African markets gaining access to quality
health information and antenatal care can be very difficult. Information
delivered by mobile can help to bridge some of the gaps in crucial, basic
information. Responding to this, our Mum & Baby service continues
to
{
grow, giving customers free access to maternal, neonatal and child health
{
information in South Africa and DRC. The service has over 2.1 million
registered users in South Africa, helping parents and caregivers to take
positive actions to improve their children’s health.
In part thanks, to services such as Mum & Baby, since 2016 we
estimate
{
we have connected to our network an additional 21.6 million female customers in Africa and Turkey. The increase of women in our
customer base also makes good business sense; women have a higher
Net Promoter Score (+4 percentage points compared to men).
Female customers (million)
2016 (baseline) FY21
FY22
Africa
1
38.1 52.9 58.3
Turkey 7.2 8.4 8.6
Total
1
45.3 61.3 67.0
Note:
1. Including Safaricom.
Building platforms for financial inclusion
Goal: To connect 50 million people and their families to mobile
money
b
services by 2025 Two billion people remain unbanked globally
4
. Digital services are key to
helping people access safe, secure financial services. Without the ability
to
{
transfer money, people are limited in their ability to save, access loans, start a business and even be paid.
Together with Safaricom, we developed the first mobile money platform,
M-Pesa, which provides financial services to millions of people who have a
mobile phone but limited access to a bank account. It is also widely used
to manage business transactions and to pay salaries, pensions, agricultural
subsidies and government grants, and reduces the associated risks of
robbery and corruption in a cash-based society.
Over 19 billion transactions were made in the year using M-Pesa, the
equivalent of around 2 million per hour on average through a network
of
{
more than 600,000 agents. As of the end of March 2022, 52.4 million customers were using M-Pesa
(or equivalent). This marks a significant milestone and we have exceeded
our goal to connect 50 million people and their families to mobile financial
services four years ahead of our original target date. The breakdown of
customers per market is detailed in the table on the next page.
Notes:
1. World Bank, 2020.
2. ITU, 2019.
3. Covering Mozambique, Lesotho, Tanzania, DRC, Ghana and South Africa.
4. GSMA, 2021.
5. GSMA, 2022.
Scan or click to watch a video summarising how our
products and services help close the digital divide:
investors.vodafone.com/videos
Strategic report
Governance Financials Other information
38
Vodafone Group Plc
Annual Report 2022
To deepen our commitment to financial inclusion, and building on the success
to date, we have created a new target to connect 75
{
million customers to
{
mobile money and financial inclusion services by{
31 March 2026.
As
{
we
{
committed last year, this target includes multiple financial service platforms and products and sets our path to help close the financial divide.
This new target will include not just M-Pesa customers, but customers
of
{
other services that contribute to financial inclusion. For example, Vodacom launched our new VodaPay super-app in October 2021 and
this will be a key part of delivering this target. The VodaPay super-app for
smartphone users in South Africa offers access to digital financial services
as well as online shopping and lifestyle tools. The introduction of this
platform allows users to securely upload and store their money in a digital
wallet, pay bills, send money or make purchases without the registration
delays typically associated with setting up a traditional bank account in
Africa. The VodaPay super-app has 1.6 million current registered users.
Mobile money services adoption
Number of
mobile money
customers (million)
% of
service revenue
% penetration
of base
Kenya (Safaricom) 30.5 38% 93%
Tanzania 6.8 34% 56%
Mozambique 5.2 24% 71%
Democratic Republic of
the Congo 3.5 15% 30%
Lesotho 1 12% 82%
Egypt 3.5 2% 10%
Ghana 1.9 4% 53%
Total 52.4 22% 57%
Enabling quality education and digital skills
Even before the COVID-19 crisis, an estimated 258 million children around
the world were not in school
1
. More than half of all children globally were
not meeting the minimum expected standards in reading and mathematics
1
.
The COVID-19 pandemic highlighted the need to adapt teaching to the
new realities of increasingly digital societies. We have continued to grow
our Connected Education programme, providing access to our ready-
made classroom which includes connectivity, devices, and collaboration
software for students and teachers across the world. To date, around
1.5
{
million students and teachers in 4,500 educational institutions across 10
{
countries have benefited from this digital learning solution, helping to
{
bridge the digital divide. In South Africa, the Vodacom e-School solution allows learners to access
curriculum-aligned content and educators to access learning materials on
their smartphone with no data charges. We currently have over 1.3 million
users on the platform.
Vodafone Foundation previously committed to invest €20 million to
expand digital skills and education programmes across Europe, aiming
to
{
reach over 16 million learners by 20252
. To date, the programme has
reached 1.2 million students and teachers.
In June 2021, Vodafone Foundation and UNHCR expanded their Instant
Network Schools programme which has helped to support over 94,000
refugee students and communities in four African countries. Two new
Instant Network Schools have been established in Mozambique, located
in the Maratane Refugee Settlement and the city of Nampula. These
will
{
transform existing classrooms into multimedia hubs for learning, complete with internet connectivity, sustainable solar power and a
robust
{
teacher training programme. Together this will benefit nearly 9,000
{
students, 25,000 family members and over 200 teachers.Purpose (continued)
Workplace equality
As part of our purpose, we are committed to making the world more
connected, inclusive and sustainable, where everyone can truly be
themselves and belong. We bring the human touch to our technology
to
{
create a better digital future for all, starting with our people.Our people
We are developing a diverse and inclusive global workforce that reflects
the customers and societies we serve.
Key information
2022
2021
Average number of employees
1
95,008 94,274
Average number of contractors 8,784 10,481
Employee contract types
Permanent 87% 87%
Fixed term contracts 13% 13%
Full-time 93% 93%
Part-time 7% 7%
Number of markets where we operate 19 19
Employee nationalities 134 137
Employees and contractors across
the Group
Germany
2
14% 14%
UK
2
9% 9%
Italy
2
5% 5%
Spain
2
4% 4%
Vodacom Group
2
11% 11%
Other Markets
3
25% 26%
Vantage Towers
2
0% 0%
_VOIS and Shared Operations
4
32% 31%
Employee experience
Employee engagement index
5
73 74
Alignment to purpose
5
93% 93%
Voluntary turnover rate
6
14% 8%
Involuntary turnover rate
6
3% 3%
Notes:
All headcount figures exclude non-controlled operations such as in the Netherlands, Kenya,
Australia and India.
1. Calculation considers employee pro-rated headcount.
2. The percentages reflect headcount in each operating company or group of operating
companies, such as the Vodacom Group.
3. Other Markets includes employees based in all other operating companies (Albania,
Czech
{
Republic, Egypt, Ghana, Greece, Hungary, Ireland, Portugal, Romania, Turkey) and other
{
countries.4. _VOIS and shared operations constitute a significant number of employees. The figures
presented above include _VOIS headcount across our footprint (India, Romania, Hungary,
Egypt
{
and Albania), as well as headcount in our global Group entities.5. More detail on the employee survey is included on page 21. The employee engagement index
is
{
based on a weighted average index of responses to three questions: satisfaction working at
{
Vodafone; experiencing positive emotions at work; and recommending us as an employer. Alignment to purpose is based on a single question that asks whether employees feel their daily
work contributes significantly to Vodafone’s purpose. Employee engagement index and purpose
alignments scores reflect September 2021 data.
6. The pandemic saw voluntary attrition levels fall in 2021. However, as vaccine programmes
progress and restrictions lift, we are seeing turnover return to slightly higher than pre-pandemic
levels. We are monitoring the situation closely through exit interviews and also introducing
specific and proactive retention approaches in place where required. The voluntary turnover
rate includes retirements and death-in-service.
Notes:
1. UNESCO, 2018.
2. Beyond digital training, the Vodafone Foundation builds programmes around the world that
combine Vodafone’s charitable giving and technology to deliver public benefit and improve
people’s lives. The total amount donated by Vodafone to Vodafone Foundation in 2022 was
€47.4
{
million.
39
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Diversity and inclusion
Our focus is on removing barriers to workplace equality. This year we
have
{
accelerated momentum on gender equality, sustained focus on embedding inclusion, set solid foundations on race and ethnicity, and
began ensuring the physical and digital workplace is fully accessible.
An
{
expanded focus on practising inclusion supports our ambition to create a
{
global workforce that reflects the customers, communities and
{
colleagues we serve, and the wider societies in which we operate. Embedding inclusion to enable diversity is critical to achieving these
goals
{
in a sustainable way.Gender diversity
Goal: We aim to have 40% women in management roles by 2030
We have reached 32% which is on track towards our ambition.
We
{
continue to drive progress through programmes, policies and leadership
{
incentives. 2022
2021
Women on the Board 50% 45%
Women on the Executive Committee 29% 29%
Women in senior leadership positions
1
31% 30%
Women in management and senior leadership roles
2
32% 32%
Women as a percentage of external hires 42% 43%
Women as a percentage of graduates 53% 53%
Women in overall workforce 40% 40%
Notes:
1. Percentage of senior women in our top 191 positions (FY21: 178).
2. Percentage of women in our 6,727 management and leadership roles (FY21: 6,609).
Women in management and diversity
We work to ensure there is gender diversity when resourcing for senior
leadership roles and our leadership team is accountable for maintaining
diversity and inclusion amongst their teams. Women in management
targets are also embedded in our long-term incentive plans. Our progress
and achievements to increase diversity have been recognised externally
as Vodafone has been included in the Bloomberg Gender Equality Index
for the fourth consecutive year.
Across youth programmes, 51% of hires were women, including 53%
of
{
all graduate hires, 53% of all internship hires and 39% of all hired apprentices. We have also now connected with over 6,000 girls via the
digital skills programme ‘Code Like a Girl’ since 2017, including 994 this
year as we continued this programme during the pandemic by launching
a digital coding classroom experience, available to all markets.
Domestic violence
In 2019, Vodafone launched the first global domestic violence policy
in
{
the workplace, which set out comprehensive workplace resources, security and other measures for employees at risk of experiencing,
and
{
recovering from, domestic violence and abuse. As most of the global
{
workforce shifted to home working following the outbreak of
{
COVID-19, reports of a ‘shadow pandemic’ of domestic violence intensified worldwide.
We continue to provide support in this area through global training,
‘Apps
{
Against Abuse’, and a publicly available toolkit to support survivors. ‘Apps Against Abuse’ includes the Bright Sky app, which provides support
and information to anyone in an abusive relationship or those concerned
about someone they know. To date, the Vodafone Foundation’s portfolio
of ‘Apps Against Abuse’ has connected 1.6 million people to information,
advice and support.
Menopause
Our research identified that 62% of women with symptoms of
menopause found it impacted their work. In March 2021, we made
a
{
global commitment to support women experiencing menopause,
including the release of a global toolkit. For World Menopause Day in
October 2021, Vodafone’s menopause toolkit became freely available
to
{
download externally. In March 2022, we launched a menopause e-learning – a short course introducing the menopause, common
symptoms and the impact on work with tips for managers, colleagues,
family and friends.
Maternity and parental leave
Our global maternity and parental leave policies are available across
markets, providing 16 weeks of fully paid leave with a phased return to
work over six months, where parents work the equivalent of four days and
are paid for five days. This policy is open to all employees regardless of
gender, sexual orientation, length of service, and whether their partner
is
{
having a baby, or they are welcoming a child through surrogacy or adoption. This year, over 1,900 women have utilised our maternity leave.
Over 1,300 men have taken parental leave, with 53% of the latter taking
four or more weeks of leave.
Embedding inclusion
Alongside gender equality, we retained our focus on supporting the
LGBT+ community with over 3,800 allies and active support from senior
executives. We continued to be recognised as a Top Global Employer
by
{
Stonewall.Multiple employee networks operate across Vodafone including Women,
VodAbility, Carers and Multicultural Inclusion. We support them actively
and provide Network Chairs with specific leadership development
focused on effectively setting up and running an employee network.
Global Withstander training has been rolled out in 10 languages to
upskill
{
employees on how to become active allies by challenging negative and inappropriate behaviours when they witness them, with
over
{
33,000 employees completing it during the year. In March 2022, we
{
launched a{
global allyship ‘train-the-trainer’ programme to sustain
the
{
focus across all areas of inclusion.We continued to engage with colleagues and raise awareness on why
inclusion matters. During the year, we held global webinars focused on
gender and ethnic diversity, the LGBT+ community, and disabilities. These
were hosted by Vodafone’s CEO and Executive Committee members, with
over 16,500 viewers across all webinars.
Strategic report
Governance Financials Other information
40
Vodafone Group Plc
Annual Report 2022
Purpose (continued)
Race, ethnicity, and cultural heritage (‘REACH’)
We continue to improve workforce capability in holding conversations
on
{
race in the workplace. To better understand representation across the
{
organisation and inform our diversity and inclusion programmes, in
{
November 2020 we launched the ‘#CountMeIn’ initiative which encourages employees to voluntarily self-declare their diversity
demographics. These include race, ethnicity, disability, sexual orientation,
gender identity and caring responsibilities, in line with local privacy and
legal requirements. On this basis we were able to set ethnic diversity
targets, which are summarised below.
Ethnic
category
31 March
2022
Long-term
ambition Population
Global
Ethnically
diverse
background
18%
2030:
25%Global Senior
Leadership Team
(163 positions)
UK
Black, Asian,
other diverse
ethnicities
15%
2025:
20%UK-based senior
leadership
{
and management
(1,452
{
positions)UK
Black
1%
2025:
4%South Africa
Ethnically
diverse
background
64%
2030:
75%South African-
based senior
leadership and
management
(416 positions)
In addition to the above, 29% of our Executive Committee members
are
{
from ethnically diverse backgrounds. The plan is to expand ethnicity
{
disclosure throughout our markets as we collect more globally
{
consistent{
data.
Our new REACH targets are supported by an action plan to achieve
greater workplace inclusion through allyship and anti-racism. REACH
fluency training was introduced to increase confidence and capability
to
{
talk about race and completed by all members of the Executive Committee, as well as their direct reports. The plan also includes
reciprocal mentoring, external cross-company mentoring and
McKinsey
{
Black Leadership Academy participation.Physical and digital accessibility in the workplace
We have joined the ‘Valuable 500’ – a group of 500 companies
committed to disability inclusion in business. The commitments are
focused on creating a physically and digitally accessible environment.
We hosted a global event on ‘International Day of People with
Disabilities’,
{
attended by 4,600 employees, which featured initiatives that
{
help create an inclusive workplace for customers and employees with visible and
{
invisible differences. We also hosted a neurodiversity training for employees to ensure awareness of accessibility features in
the
{
digital workplace.During the year, we delivered six accessibility workshops focused on
disability inclusive technology, covering all of the existing tools within
Office 365 which support accessibility in a hybrid working environment.
We have also embedded disability assistive technology standards (WCAG
AA standard) into procurement and internal development processes,
ensuring compatibility of all new platforms, products or tools procured
with assistive technology.
Policies, initiatives and targets
Our commitment to diversity and inclusion is reflected across our
global
{
policies and principles, such as the Code of Conduct and our Fair
{
Pay principles. Read more about these Fair Pay principles
on page 106
Click to read more about Fair Pay at Vodafone:
vodafone.com/fair-pay
The achievement of our diversity targets is dependent on the attraction,
engagement and retention of diverse talent and skills. To support this,
we
{
have inclusive initiatives such as: hybrid and flexible working, parental leave, mental health toolkit, learning and development programmes
(e.g.
{
Black Leadership Academy), allyship training and menopause support, reinforced by the work of employee networks and executive
sponsors. Programmes are designed to help employees through all life
stages and challenge societal norms so everyone can be themselves at
work and belong.
Read more about diverse talent, future ready skills
and
b
personalised employee experience on pages 22 to 23
41
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
As the COP26 UN Climate Change Conference in
Glasgow highlighted, urgent and sustained action
is
b
required to address the climate emergency. We
b
believe business success should not come at a cost to the environment, and we are committed to
reducing the impact of our activities. We also see a
key role for our digital networks and technologies in
helping to address climate change. Digitalisation is
key to saving energy, using natural resources more
efficiently and creating a
b
circular economy.COP26 in Glasgow marked a step forward in global efforts to address the
climate emergency, including a material increase in ambitions to reduce
emissions, finalisation of rules on reporting emissions and international carbon
trading, and the launch of a range of new initiatives and sector commitments.
In July 2021 we reached a key milestone in our journey to net zero by
2040, achieving our goal to purchase 100% renewable electricity in all
of
{
our European markets. We are working to achieve the same in our
African markets by 2025. As part of this commitment we are also placing
significant focus on innovative sustainable power solutions that can be
deployed at scale, for example, working with external organisations to
develop self-powered mobile masts and install micro turbines.
To help deliver a twin digital and green transformation, in February 2022
we announced our circular economy plan to help extend the life of mobile
phones and increase the reuse and responsible recycling of handsets. Starting in
our European markets, our customers will be offered circular economy services
such as
insurance, support and repairs for their devices, supported by a digital
platform making it straightforward for customers to agree trade-in options.
We also continued our work to identify climate change risks and opportunities
through conducting Task Force on Climate-related Financial Disclosures
(‘TCFD’) scenario-based risk and opportunity assessments across key markets.
We are using the insights to create mitigating controls and identify ways to
embed climate risk into our risk management system and processes.
Read more on Vodafone’s approach to climate change
risk
b
aligned to the TCFD on page 66 Our Planet goals
2025
–
Purchase 100% of the electricity we use globally from
renewable sources
–
Reuse, resell or recycle 100% of our network waste
2030
–
Fully abate all carbon emissions (‘net zero’) from our own
activities and from energy we purchase and use (Scope 1 and
{
2)
–
Halve carbon emissions from our carbon footprint (against
{
a
2020 baseline), including joint ventures, all supply chain
purchases, the use of products we have sold
{
and business travel (Scope 3)
–
Enable our business customers who use our services to
reduce
{
their own carbon emissions by a cumulative total of
{
350 million tonnes between 2020 and 20302040
–
Fully abate Scope 3 emissions to reach ‘net zero’ across our
full carbon footprint
Reducing carbon emissions
Goal:
To reduce our own carbon emissions to
ȁ
net zero’ by 2030 and
b
across the full value chain by 2040In 2020 we set an approved 2030 Science-Based Target in line with
reductions required to keep warming to 1.5°C, becoming the first major
telecoms operator to follow the emission reduction pathway developed
for the ICT
{
sector (setting out specific emissions reduction trajectories for mobile, fixed and data centres).
Planet
We also committed to reaching full value chain ‘net zero’ emissions
by
{
2040. We are currently in the process of validating our targets with the recently updated Net Zero Standard issued by the Science-Based Targets
initiative (SBTi) and expect this to be completed during 2022.
As part of our transition towards net zero we are committed to improving
our own generation of renewable energy through rolling out on-site
solutions such as solar panels. We are also working on new innovative
solutions. In January 2022, Vantage Towers committed to installing over
750 micro wind turbines across 52 sites in Germany, working in partnership
with the energy startup MOWEA. It is estimated that the green energy
generated on site in average wind conditions will cover 100% of each
tower’s energy requirements. In 2021, Vodafone UK also began a trial of
Eco-towers, working with Crossflow Energy and Cornerstone to deploy
self-powered mobile masts utilising wind turbines, solar power and battery
technology. Eco-towers will enable new mobile sites to be deployed in
remote locations across the UK, overcoming the major rural challenge of
connecting to the grid.
Click to read more about our self-powered mobile
masts – vodafone.com/self-powered-mobile-masts
Driving energy efficiency
Despite the ever-growing use of data and expansion of our networks,
this
{
year our total Scope 1 and 2 GHG emissions decreased by 23% to
{
1.09 million tonnes of CO2
e (carbon dioxide equivalent), due to our
ongoing focus on energy efficiency and an increase in the proportion
of
{
renewable electricity purchased. We are committed to continually improving the energy efficiency of our
base station sites and in our technology centres, which together account
for 96% of our total global energy consumption.
We continue to implement the ‘best in class’ ISO 50001 Energy
Management Standard globally. To date, 11 operating companies and
Safaricom have been awarded certification, with further markets due to
implement the framework in the next year.
As part of the implementation of ISO 50001, we engage with suppliers
on
{
energy efficiency improvements in both hardware and software solutions. Key suppliers are benchmarked biannually, with energy
efficiency included within the evaluation criteria. The supplier
engagement has also been supported and reinforced by the inclusion
of
{
energy efficiency as a key requirement in the ‘Request for Quotation’ (‘RFQ’) processes.
In addition to working with suppliers, we collaborate with others in the
industry and trial new modes of operating. In Spain, our active sharing
programme has led to reduced hardware requirements and energy
savings of 12 GWh.
Whilst we focus on energy efficiency, we are also focused on increasing
our renewable supply. We have been deploying further solar photovoltaic
(‘PV’) cells and increasing our annual renewable generation to 13 GWh p.a.,
a
{
year-on-year increase of 68%.
All these programmes are underpinned by our energy data management
and analytics system which collects and stores data feeds from our
electricity suppliers and from smart meters. This system is now live
across
{
11 markets in Europe, with smart meters installed at over 45,000
{
sites. This year we have developed new energy modelling capabilities for active mast equipment and data centres.
Scan or click to watch a video summarising
how we plan to reach net zero by 2040:
investors.vodafone.com/videos
Strategic report
Governance Financials Other information
42
Vodafone Group Plc
Annual Report 2022
Purpose (continued)
Our performance
1
Unit
2022
2021Total Scope 1 and Scope 2 emissions
Million tonnes of CO
2
e
1.09 1.42
Scope 1 emissions Million tonnes of CO
2
e 0.28 0.30
Scope 2 emissions Million tonnes of CO
2
e 0.82 1.12
Scope 3 emissions
Million tonnes of CO
2
e
9.2 9.4
Joint ventures and associates Million tonnes of CO
2
e 2.6 3.2
Purchased goods and services Million tonnes of CO
2
e 3.9 4.0
Use of sold products Million tonnes of CO
2
e 1.7 1.5
Fuel and energy-related activities Million tonnes of CO
2
e 0.8 0.6
Other (business travel, upstream leased assets, waste) Million tonnes of CO
2
e 0.2 0.1
Renewable electricity
Percentage of purchased electricity from renewable sources % 77 55
Percentage of purchased electricity from renewable sources in Europe % 96 79
GHG emissions intensity
Scope 1 and 2 GHG emissions per EURm revenue Tonnes of CO
2
e 23.9 32.4
Vodafone energy use
Base stations and technology centres Gigawatt hours / % 5,686 / 96 5,750 / 96
Offices and retail stores Gigawatt hours / % 239 / 4 246 / 4
Total 5,997 / 100
Gigawatt hours / %
5,926 / 100Note:
1. Data calculated using local market actual or estimated data sources from invoices, purchasing requisitions, direct data measurement and estimations. Carbon emissions calculated in line with GHG Protocol
standards. Scope 2 emissions are reported using the market-based methodology. For full methodology see our ESG Addendum 2022.
Purchasing renewable electricity
This year we reached our target of powering our entire European
operations with electricity from 100% renewable sources. This was
achieved from July 2021, a significant acceleration of our original target of
2025 and a major milestone towards our ‘net zero’ goal. This achievement
was shared across our European markets with a consumer campaign
which turned Vodafone’s recognised brand green across digital and
social
{
channels.We are committed to making the same step-change in Africa by 2025.
For
{
example, installing solar PV solutions in Egypt and South Africa, whilst working with local governments to facilitate development of renewable
energy infrastructure.
We currently have Power Purchase Agreements (‘PPAs’) in Spain, Greece
and the UK, and have agreed a new PPA in the UK which will go live later
in 2022. PPAs trade at a discount to current wholesale electricity prices
and provide us with more economic certainty against current volatile
wholesale electricity prices, as well as helping to create new capacity
within the markets.
Following our energy purchasing hierarchy approach, we prioritise energy
efficient practices before considering on-site generation of renewable
energy, PPAs and Renewable Electricity Certificates (‘RECs’). Whilst on-site
generation of renewable electricity currently accounts for less than 1% of
our overall renewable energy consumption due to space constraints on
our infrastructure, we continue to trial innovative solutions, such as the
micro wind towers in Germany. The remainder of our renewable energy
consumption is split between PPAs 5% and RECs 94%. Most RECs are
bundled either via green electricity tariffs or provided by our electricity
suppliers, however a small amount are considered ‘unbundled’ for
example, to cover our consumption on third party sites. The purchase of
unbundled RECs is our least favoured approach, however it is necessary in
certain circumstances. For example, where we are tenants and electricity
is procured by a landlord, or where our preferred options are not available
due to limitations in a particular market. The incremental cost of RECs
(or
{
their equivalent) is small in the context of our overall energy spend. This year, we spent approximately €846 million on purchasing electricity.
This is a year-on-year increase of 11% and approximately three quarters
of our electricity we directly purchase is forward hedged for FY23. The
increases in commodity prices (oil, gas and CO
2
) as a result of a strong
post COVID-19 economic recovery were the main drivers for our energy
costs. This year, 77% of our electricity purchased was from renewable
sources (FY21: 55%).
Read more about our renewable electricity purchasing
strategy here –
vodafone.com/renewables
Working with our partners to reduce Scope 3 emissions
Scope 3 emissions are indirect GHG emissions which we cannot control
but may be able to influence. As part of our Science-Based Target, we
{
have
committed to halve our Scope 3 carbon emissions by 2030 (against a
2020 baseline) and fully abate them by 2040, as part of
{
our ‘net{
zero’
target. The main sources of Scope 3 emissions are investments (joint
ventures and associates), purchased goods and services, and the use
{
of sold products. This year, our estimated Scope 3 emissions were 9.2 million
tonnes of CO
2
e. We have worked with the Carbon Trust to analyse our
Scope 3 emissions and prioritise reduction opportunities.
In 2020, we introduced a 20% weighting for environmental and
social
{
criteria in our supplier evaluation RFQ processes. The assessment awards positive scoring for suppliers that have set (or are willing to set) a
Science-Based Target. In addition, suppliers which offer product-specific
CO
2
data and pathways for reduction over the contract period are
positively scored.
Our supplier performance management programme also covers
environmental factors, and suppliers’ GHG performance is one of the
factors evaluated in our annual assessment process. We ask selected
suppliers to provide details of their GHG emissions and management
programmes through CDP. This year, 90% of those suppliers responded,
with 88% reporting that they had set a target for GHG emissions.
This year we introduced a new CO
2
analytics dashboard allowing our
supply chain teams to view and track progress against our reduction
targets. The dashboard tracks the impact of purchased products and
services on our targets. It also helps our procurement team to identify
suppliers, markets and categories which contribute higher emissions
and
{
helps us subsequently work on efficiencies with our partners.
43
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
FY22 carbon enablement overview
GHG emission saving
(million tonnes CO
2
e)
Smart meters 1.6
Fleet management 10.7
Healthcare 2.6
Other (e.g. cloud/street lighting/EV charging) 0.6
Total 15.6
Enablement ratio
2022
2021
Total GHG enablement saving
(Million tonnes of CO
2
e) 15.6 7.1
Scope 1 and Scope 2 emissions
(Million tonnes of CO
2
e) 1.09 1.42
Enablement ratio 14.3 5.0
Vodafone Business is increasingly integrating environmental credentials
into sales and bidding processes. For example, to demonstrate the savings
potential for connected systems we have developed a carbon calculator
tool which provides customers with a view of potential carbon savings.
This year we established a Vodafone Business Sustainability Steering
Group. This group is working to raise awareness, to include sustainability
in
{
our external marketing content and to educate and train sales teams across Vodafone Business on sustainability and how to engage customers
and position Vodafone as the partner of choice for a sustainable future.
Reducing waste
Goal:
To reuse, resell or recycle 100% of our network waste by 2025
Aside from carbon emissions, electronic waste is the largest material
environmental issue for our business. We consistently seek to manage our
own impact in a responsible manner and also support our customers with
their efforts.
Our global policy on waste management prioritises the reuse, resale or
recycling of unwanted equipment. We aim to keep resources in use for as
long as possible, extracting the maximum value from equipment while in
use and then recovering and reusing materials responsibly.
We implement resource efficiency and waste disposal management
programmes in all our markets to minimise environmental impacts
from
{
network waste and IT equipment waste. This year, we generated an estimated 8,800 tonnes of waste (which includes hazardous waste) and
we recovered and recycled 95%. Globally, 98.6% of our network waste
was sent for reuse and recycling (excluding hazardous waste).
To support the delivery of our 2025 goal to reuse, resell or recycle 100%
of our network waste, we have launched an internal asset marketplace,
a
{
business-to-business solution within Vodafone that allows us to re-sell
and re-purpose excess stock or large decommissioned electrical items
like masts and antennae. This year, we estimate
{
that we have saved €10.8
{
million of spend and avoided over 2,500 tonnes of CO2
e. We are
assessing the possibility of expanding the solution to partner markets and
other operators.
Network waste management (excluding
ha
]
ardous{
waste)
2022
2021
Reused 9% 20%
Recycled 90% 79%
Landfilled 1% 1%
Total network waste (metric tonnes) 8,483 6,307
Looking forward, we are planning to expand the categories of Scope 3
data we report. We are moving towards a hybrid model for Scope 3 data
collection, which will improve the accuracy of carbon emissions data and
help identify areas to improve efficiency, whilst ensuring we successfully
measure our progress against our targets. Our new approach will also
incorporate product-specific data and use data submitted to the Carbon
Disclosure Project (‘CDP’) by our suppliers.
In addition to suppliers, we also work with our joint ventures and associates,
which represent the most significant proportion of our Scope 3 emissions.
Notable actions from last year include:
–
In the Netherlands, VodafoneZiggo issued its first sustainability
bonds
{
worth €2.1 billion and had its Science-Based Target approved by
{
SBTi; and –
In Australia, TPG Telecom launched a new sustainability strategy, which
includes a commitment to set a Science-Based Target.
Another significant source of our Scope 3 emissions is the use of sold
products (e.g. charging devices). As countries decarbonise their electricity
grids, these associated emissions will also reduce.
Enabling our customers to reduce their emissions
Goal: To help our business customers reduce their own carbon
emissions by 350 million tonnes between 2020 and 2030
For Vodafone, our most important contribution to tackling climate change
is through enabling our customers (which include both businesses and
governments) to reduce their environmental footprint using our digital
technologies and services.
In alignment with the recent Intergovernmental Panel on Climate
Change
{
(‘IPCC’) report, digital technologies have significant potential to contribute to de-carbonisation due to their ability to increase energy and
material efficiency
1
.
In 2020, we committed to helping our business customers reduce
their
{
own carbon emissions by a cumulative total of 350 million tonnes globally over 10 years between 2020 and 2030.
Since setting this target, we estimate to have saved our customers
22.7
{
million tonnes of carbon emissions. Our IoT service offer, including logistics and fleet management and smart metering, has been central in
delivering these savings so far.
Our enablement target is underpinned by a strong commercial rationale.
We believe our IoT and Digital for Green solutions represent three main
opportunities for customers:
1.
Increased efficiency and reduced wastage
. IoT enables
organisations to monitor operational processes, identify waste and
address the cause, an example being energy loss. This improves cost
efficiency, as well as carbon savings;
2.
To use IoT to deliver cost-efficiency.
Connectivity can allow
products and services to be automated and shared, reducing the
cost
{
and carbon impact. For example, shared distribution networks and
{
vehicle sharing; 3.
Changing customer behaviour to promote long-term
sustainability.
IoT products can enable a direct connection to
each
{
customer allowing trends to be monitored, for example shifting demands for public transport or energy.
We are continuing to work with the Carbon Trust to calculate the total
GHG emissions avoided as a consequence of our IoT technologies and
services. We estimate that 49% of our 150.1 million IoT connections
directly enabled customers to reduce their emissions in the past year.
During the year, we estimate to have enabled an avoidance of 15.6 million
tonnes CO
2
e, which is over 14 times the emissions generated from our
own operations (Scope 1 and 2).
Note:
1. IPCC, 2022.
Strategic report
Governance Financials Other information
44
Vodafone Group Plc
Annual Report 2022
Purpose (continued)
We believe in the power of connectivity and digital
services to strengthen the resilience of economies.
Through our mobile and fixed networks, data flows
at
b
speed, connecting people and communities. As the last two years have demonstrated, connectivity and digital
services
{
can be a lifeline allowing people to work, learn, stay in touch with
friends and family, access healthcare and more. Currently, we have over
351 million customers connected to our next-generation mobile and
fixed networks.
This year, informed by our social contract, we continue to focus
the
{
Digital{
Society pillar towards digitalising critical sectors. We have
specifically focused on small and medium-sized enterprises (‘SMEs’),
agriculture and health. We have also continued to invest in our network
infrastructure and coverage.
Aligned with our Planet pillar, our products and services enable customers
to become more efficient and in many cases reduce their emissions.
Read more about our carbon enablement approach
on page 43
Supporting small businesses
Goal: Support seven million users to digitalise using V-Hub by 2025
SMEs are a critical part of the economy and provide opportunities for
socio-economic participation and social mobility for women, young
people, and ethnic minorities.
Through Vodafone Business, we provide products and services which
are
{
specifically tailored for SME and small-office home-office (‘SOHO’)
businesses, helping guide them through technology choices and
improving their digital readiness. These segments also represent a
significant commercial opportunity for Vodafone. We estimate to have
over six million SME customers and expect the overall market to grow a
combined €6 billion over three years.
1
To better support SMEs across Europe, Vodafone Business launched
V-Hub in 2020. This free service provides access to online information and
connects SMEs with experts who provide one-to-one advice and support
on developing business in an ever-changing digital world.
As of the end of March 2022, V-Hub has been used by over 3.6 million
unique users across 12 European countries, as well as South Africa. Since
its launch V-Hub has achieved a strong return visitor rate of 23% and has
hosted over 8,500 conversations between SMEs and Vodafone experts.
We have set a target to support seven million users digitalise their
business through V-Hub by 2025. Over the next year we plan to improve
our V-Hub offer. For example, SMEs will be able to sign-up as ‘V-Hub
members’ and access a secure private portal for ongoing personalised
advice and tailored content.
Beyond customers, we are working to support SMEs in our supply
chain.
{
This year, over 1,500 small businesses are Tier 1 suppliers. We also offer
{
optional supply chain financing which allows suppliers to leverage Vodafone’s credit position to access cheaper funding and liquidity. This
has no impact on Vodafone’s commercially negotiated payments terms.
In South Africa, Vodacom Financial Services has built a supplier portal
called VodaTrade, where small suppliers can connect with bigger business
partners. Currently, there are 88 SMEs registered on the VodaTrade portal,
which provides them access to procurement opportunities with seven
large retailers.
Digital Society
Building a circular economy
We recognise that to build a circular economy we need to tackle not only
our network waste, but also device waste.
To begin the shift towards a circular economy of devices, we are taking a
life-cycle management approach, which includes extending the lifespan
of devices through repair, refurbishment and resale. We estimate that
more than 50,000 tonnes of CO
2
e could potentially be avoided for every
million smartphones Vodafone receives via trade-in that are subsequently
refurbished and resold.
In May 2021, we launched a new Eco Rating labelling scheme jointly
with
{
other major European operators. This is a pan-industry initiative to
{
help consumers identify and compare the most sustainable mobile phones on the market, whilst also encouraging suppliers to reduce the
environmental impact of devices. Eco Rating evaluates the environmental
impact of the entire production process, transportation, use and disposal
of a handset, resulting in an overall score. The Eco Rating scheme was
initially launched in 24 European countries and has since been rolled
out
{
in several countries in Latin America and by Vodacom in South Africa. More than 150 mobile phones from 15 manufacturers are now assessed
by the Eco Rating initiative, nearly doubling the range of devices rated
at
{
launch. Find out more about Eco Rating at
ecoratingdevices.com
In addition, in November 2021 we launched our ‘Bring Back Friday’
initiative to coincide with Black Friday. Across several markets including
Italy, Spain, Czech Republic and Greece, we encouraged customers to
return old devices to be recycled or refurbished and in return customers
received credit towards a purchase.
This year, we announced a new initiative to extend the life of new mobile
phones and encourage customers to trade in or recycle their old devices,
in partnership with Recommerce. Starting in European markets from
Spring 2022, our customers will be able to access a comprehensive and
convenient suite of services, including insurance, support and repairs for
their device. We will also launch a new digital platform enabling customers
to agree trade-in options for their existing phones. As well as encouraging
customers to return their phones, we will begin to offer a wider range of
high-quality, competitively priced refurbished smartphones at retail.
We are part of the Circular Electronics Partnership to drive industry
action
{
on circularity, bringing together leaders across the value chain from manufacturing, reverse logistics, material recovery, to e-waste
management. This year the partnership has extended to 22 members,
working to scale solutions across industries.
Beyond what we can directly and indirectly influence we also support
societal change to more circular economy models. Digital and connected
solutions are an essential part of the solution towards lower resource
use
{
and improved reuse and recycling. For example, through enabling material tracing or shifting from product-based business models to
service-based ones.
We strive to refurbish and reuse fixed-line equipment multiple times,
with
{
significant associated environmental and cost savings. We are also
eliminating all unnecessary plastics and other disposable single-use items
where there are lower impact alternatives across all our retail stores and
offices. From October 2021, we committed to roll out SIMs made out of
recycled plastic and half the size of a traditional SIM card holder. The
global roll out of the new SIMs will result in a 340 tonne reduction in
plastic per year, an equivalent to 1,760 tonnes of CO
2
e.
Engaging our people
More than 13,000 colleagues are currently members of our
‘#RedLovesGreen’ employee engagement initiative, which aims to
raise
{
awareness of the individual actions that employees can take to reduce energy and other resource uses.
Note:
1. Vodafone Business investor day, 2021.
45
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Digitalising agriculture
Agriculture is a pressing issue for society with the need for sustainable
and
{
affordable sources of food increasing. According to the Food and Agriculture Organization, by 2050, the world will need to produce 50%
more food than current levels
1
. There is also a growing need to address
the environmental impact of agriculture. In Europe, agriculture accounts
for 10% of the EU’s total greenhouse gas emissions and over 40% of EU
land use
2
, in many cases leading to habitat loss and deforestation.
Through Vodafone Business, we are working with partners across the
value chain, including equipment manufacturers, suppliers and research
institutes, to introduce new applications and IoT platforms – helping
to
{
increase the amount of information farmers have available to them and
{
enabling farms to efficiently operate and use resources. This allows a
{
farmer to reduce the use of pesticides and fertiliser (which reduces
emissions), water use and resource consumption, as well as improving
the
{
protection of biodiversity and increasing yields. Through Vodacom’s subsidiary, Mezzanine we have developed MyFarmWeb
to support larger commercial farms. Over 8,000 farms across four continents
use MyFarmWeb.
The cloud-based web platform allows producers to capture key
agriculture data (physical, chemical, and microbial soil analysis, pest
presence, satellite and remote sensing information along with data
from
{
various internet connected farming sensors) into a system that
aggregates and calibrates the information to assist in decision-making.
This helps to increase yields whilst not damaging the environment
and
{
reduce losses – all of which contribute to carbon savings along the
{
production process. MyFarmWeb also provides farmers with a platform that will allow them to use more productive and sustainable farm
operation practices, which is becoming increasingly important to comply
with the changing legislation to qualify for subsidy funding in the future.
This year, we expanded MyFarmWeb to Europe, accelerating
digitalisation
{
across the agricultural industry and collaborating with the
{
farming community to meet targets set out in the EU Farm to Fork strategy. Five
{
pilot farms in Europe will provide the platform with valuable
region-specific data points to calibrate the MyFarmWeb data to local
farming practices and regional regulations. The five selected farms are:
Dairygold in Ireland, Llusar and Grima both based in Spain, Laporta in
Italy
{
and Agrar-Betriebsgemeinschaft Leine-Solling GbR in Germany.Mezzanine is also helping to digitalise agriculture in Sub-Saharan Africa
through its Connected Farmer platform. This gives smallholder farmers
access to agricultural inputs, financial services like insurance, logistics
suppliers, buyers and markets and knowledge. With around 2.9 million
smallholder farmers registered, the platform allows an ecosystem of
partners to register, profile, communicate and transact (using M-Pesa in
some cases) with each other.
This year, Mezzanine supported both the Department of Agriculture, Land
Reform, and Rural Development (‘DALRRD’) and also the Solidarity Fund
in South Africa to disburse subsidies to smallholder farmers across the
country. Mezzanine also distributed vouchers to DALRRD registered
farmers breeding small or large livestock or those growing vegetables
and
{
grain on behalf of the Solidarity Fund. In total, both programmes issued over 260,000 vouchers to smallholder farmers in South Africa
worth a
{
combined value of €27 million. Women and youth were focus demographics for the programmes, with the Solidarity Fund reporting
that
{
more than 65% of the beneficiaries were women. More than 350 suppliers participated in the voucher programmes, resulting in more
{
than
1,000 outlets redeeming farmers’ vouchers, receiving a welcome cash
injection from outside the community.
Mezzanine has also supported Safaricom and the Kenyan Ministry of
Agriculture, Land, and Fisheries (‘MoALF’) with the rollout of vouchers
to
{
smallholder farmers in around 40 counties throughout Kenya. These
{
vouchers can be used to buy inputs to support maize, rice, and
{
coffee cultivation.Find out more about digitalising agriculture at
vodafone.com/agriculture-digitalisation
Revolutionising healthcare
The COVID-19 pandemic highlighted the importance of digital
connectivity to deliver critical services, in particular healthcare. During
the
{
last two years, healthcare resources across the world have become
stretched and significant backlogs of diagnostic tests and elective
procedures have grown for non-COVID related conditions.
Even before this, many countries were facing a health crisis, with
increasing demands for healthcare from ageing populations and
decreasing capacity to provide treatment due to staff shortages and
supply constraints.
We believe that technology can be used to make the delivery of
healthcare services more efficient for providers and more inclusive for
patients. A recent survey by the Vodafone Institute revealed that 92% of
European citizens think the health sector needs urgent support through
the EU’s Recovery and Resilience Facility (‘RRF’)
3
.
Against this backdrop, in October 2021, we launched the Vodafone
Centre for Health in partnership with Deloitte, a new strategic alliance
to
{
accelerate the adoption of connected healthcare. This virtual centre brings together our connected health solutions with Deloitte’s healthcare
consulting experience to enable many more people to access healthcare.
Working together, we are committed to using our networks and
capabilities to improve access and quality of care worldwide, utilising
our
{
experience of developing new technologies like 5G, edge computing and artificial intelligence to make healthcare more accessible.
In addition, we have continued to deliver other digital healthcare
solutions
{
during the last year, developing 5G technology to enable remote procedures and surgeries with our partners in Europe. These
solutions could deliver improvements to the training of doctors and
nurses and enable more procedures, removing the need for specialists
to
{
travel between hospitals. For example: –
We are working with Proximie and Cardiff University Hospital in the UK
to pilot 5G virtual surgery. This technology allows healthcare experts
to
{
virtually ’scrub-in’, record and interact with operating rooms across the world to help accelerate and improve workforce training and more
efficient delivery of surgical care, at scale; and
–
Vodafone Italy in partnership with Artiness conducted a clinical trial
at
{
IRCCS San Raffaele hospital in Milan to perform intrusive heart surgery
using a remote proctoring system. Proctoring is the support provided
to doctors by experts from the medical device companies, who guide
{
them
in the correct implant of medical devices during surgical
{
procedures. This solution means proctors can supervise more procedures every day
without needing to travel to each hospital.
Notes:
1. Food and Agriculture Organisation, 2017.
2. Eurostat, 2021.
3. Vodafone Institute for Society and Communications, 2021.
Strategic report
Governance Financials Other information
46
Vodafone Group Plc
Annual Report 2022
Purpose (continued)
Connectivity:
We want
everyone – whoever they
are and wherever they live –
to have access to reliable
and affordable internet.
Digital innovations:
We will
build digital innovations such
as IoT solutions and digital
platforms like M-Pesa to
contribute to the sustainable
development across a
range
{
of sectors including manufacturing, transport,
health, agriculture, education
and energy.
{
Partnerships:
We are
building new models
of cooperation between
business, governments,
international organisations
and civil society to deliver
process and scale, for example
to connect the unconnected.
Through connectivity infrastructure, digital innovations and
partnerships, we deliver impact across many of the SDGs.
We enable inclusive and sustainable digital societies
Vodafone is committed to accelerating connectivity and
digitalisation in order to meet the SDGs by 2030. We have
identified two priority SDGs (SDG 9 build resilient infrastructure and
innovation, and SDG 17 strengthen the means of implementation
and partnerships for sustainable development) that will enable us
and our partners to find lasting solutions to social, economic and
environmental challenges and thereby accelerate the delivery of
many other SDGs.
The UN Sustainable Development Goals (
ȁ
SDGs’) provide a blueprint for human progress and a clear
call to action for businesses to contribute to a
better
b
future.The COVID-19 crisis continues to create huge challenges for society,
particularly in developing countries, and has led to a reversal of progress
on a number of SDGs. For example, we have seen the first rise in extreme
poverty in a generation, with around 120 million people pushed back
into
{
extreme poverty1
. Furthermore, the UN estimates that COVID-19
has
{
wiped out 20 years of educational gains, with secondary school completion rates at just 53% and this is predicted to decline
1
.
Digital technology will be essential in reducing these impacts, and help
progress towards delivering the SDGs as society builds back better. We
are
{
committed to playing our role and believe we can increase the speed and scale of delivery across a wide number of SDGs through leveraging
our technology and services, and through partnering with others.
Simultaneously, we can drive significant growth. For example, our M-Pesa
mobile money platform, designed to enable financial inclusion, has
52.4
{
million active customers. Excluding Safaricom, M-Pesa generated revenue this year of €336 million.
Note:
1. UN, 2021.
We contribute to the
{
Sustainable Development Goals
UN Young SDG Innovators
This year, a small group of Vodafone colleagues participated in the
2021
{
UN Young SDG Innovators programme, run by the United Nations Global Compact. The programme helps to accelerate business innovation
towards the SDGs. The team worked on a concept to tackle inequality
(SDG 10) by addressing the digital divide through big data and was
selected to showcase its idea at the 2021 SDG Innovators Summit.
Examples of our projects and initiatives supporting
the SDG’s over the last year
Read more about our contribution to the SDGs:
vodafone.com/sdgs
Click here to read more about the
{
launch of VodaPay vodafone.com/vodapay-launch
Click here to read more on how our #ChangeTheFace
Alliance is driving increase participation and equal
opportunities for leadership in our industry
vodafone.com/change-the-face-alliance
Click here to read more about self-powered mobile masts
providing sustainable solutions for rural communities
vodafone.com/self-powered-mobile-masts
Click here to read more about Greece’s first
p
green{
island
q
vodafone.com/first-green-island
Click here to read more about the new pan-industry
Eco
{
Rating scheme launched for mobile phones vodafone.com/eco-rating
Scan to watch how our
{
Mum{
& Baby service in
Mozambique is helping mothers to
{
access healthcare expertise
Scan to watch how Vodafone is
{
bringing digital learning to students, teachers and schools
worldwide through
{
Connected Education and other
{
programmesNo poverty
Gender equality
Affordable and clean energy
Sustainable cities and communities
Responsible consumption
Good health and wellbeing
Quality education
47
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
To underpin the delivery of our purpose, we ensure that
we operate in a responsible way. Acting ethically, lawfully
and with integrity is critical to our long-term success.
Our Code of Conduct sets out what we expect from every single person
working for Vodafone, regardless of location. We also expect our suppliers
and business partners to uphold the same standards and to abide by our
Code of Ethical Purchasing.
Click here to read our Code of Conduct:
vodafone.com/code-of-conduct
Our ‘Doing What’s Right’ training and communication programme is key
to embedding a shared understanding of the Code of Conduct across
Vodafone. Throughout the year, the Doing What’s Right communication
programme promoted different areas of our Code of Conduct, including
Speak Up, anti-bribery, privacy, competition law, security, and health
and
{
safety. Training on our Code of Conduct is included in our standard
induction process for new employees. We expect every employee to
complete refresher training when assigned, and this is typically every two
years. Of those employees assigned induction or refresher Doing What’s
Right training during the period, 89% had completed the training as at
31
{
March 2022.During the year, we rolled out a translated version of our Code of
Conduct
{
module in 10 non-English-speaking markets. We also produced and launched new anti-bribery training globally and introduced a new
security
{
module to English-speaking markets; a translated version will
{
follow in the{
next year. The refreshed modules followed the same
approach taken in
{
the Code of Conduct module by engaging learners with interactive video-based scenarios aimed at encouraging the right
behaviours. The new training materials were positively received and
were
{
consistently rated with five stars in the Vodafone learning platform. We also strive to make compliance easy for our employees and
continue
{
to improve our digital Code of Conduct and Global Policy portal,
{
the internal platform where employees can find information about
{
our policies and procedures. We have seen a significant increase in
{
traffic on both sites, with a 55% increase in views of the Policy Portal and a 45% increase in views of the digital Code of Conduct, showing
that
{
our employees are engaging with our policies. Our Code of Conduct is well understood throughout Vodafone. In our
January 2021 Spirit Beat employee survey, 96% of respondents agreed
with the
{
statement ‘Our team lives by the Code of Conduct’. Speak Up
Everyone who works for or on behalf of Vodafone has a responsibility to
report any behaviour at work that may be unlawful or criminal, or could
amount to an abuse of our policies, systems or processes and therefore
a
{
breach of our Code of Conduct. Employees are able to raise concerns
with a line manager, with a colleague from human resources or through
our confidential third-party hotline, Speak Up, accessible online or
by
{
telephone. Speak Up operates under a non-retaliatory policy, meaning that everyone
who raises a concern in good faith is treated fairly, with no negative
consequences for their employment with Vodafone, regardless of the
outcome of any subsequent investigation.
All Speak Up reports are confidentially investigated by local specialist
teams, with a senior team in place to triage reports. Each grievance is
formally and robustly investigated and is monitored to verify that any
corrective action plan or remediation has been conducted. Our Group
Risk and Compliance Committee reviews the effectiveness of the Speak
Up process and trends twice a year, and the Audit and Risk Committee
receives an annual update, with additional ad hoc reviews also carried out
where appropriate.
Our employees trust our Speak Up process, as evidenced by our
January
{
2021 Spirit Beat survey, with 87% of respondents agreeing that they believe appropriate action would be taken as a result of using the
process. We also track the proportion of ‘named’ versus ‘anonymous’
reports as a higher number of named reports suggests higher levels
of
{
trust in the Speak Up process. During the year, 64% (FY21: 64%) of
{
reports were ‘named’ and this was higher than available industry
{
benchmarks. This year, 642 (FY21: 623) separate concerns were reported using
Speak
{
Up. Speak Up reports could relate to matters of unlawful behaviour
{
or matters of integrity, such as bribery, fraud, price fixing, a conflict of interest, or a breach of data privacy. Reports could also relate
to
{
people issues such as discrimination, bullying or harassment, danger to
{
the health and safety of employees or the public, or potential abuses of
{
human rights.If we decide to proceed with an investigation, a qualified expert will
investigate, keeping the person who raised the concern informed
throughout the process. Where reports made to Speak Up require
remedial action, this could include consequences at the individual
level,
{
or changes to internal processes and procedures.Speak Up topics raised during the year
Topic
1
Speak Up
reports
Requiring
remedial action
People issues
2
55% 24%
Integrity 33% 39%
Other 11% 84%
Health and safety 1% 33%
Notes:
1. There were no reports relating to modern slavery concerns reported during the period
(FY21:
{
zero reports).2. Diversity & Inclusion topics accounted for 4% of the People issues reported during the year.
Speak Up is also made available to our suppliers and is communicated
through our Code of Ethical Purchasing. For suppliers that decide
to
{
maintain their own grievance mechanisms, we require that they inform
{
us{
of any grievances raised relating to work done on behalf of
Vodafone
{
directly.Protecting data
Millions of people communicate and share
information over our networks, enabling them to
connect, innovate and prosper. Customers trust us
with their data and maintaining this trust is critical.
Data privacy
We believe that everyone has a right to privacy wherever they live in
the
{
world, and our commitment to our customers’ privacy goes beyond legal compliance. As a result, our privacy programme applies globally,
irrespective of whether there are local data protection or privacy laws.
Our privacy management policy is based on the European Union General
Data Protection Regulation (‘GDPR’) and this is applied across Vodafone
markets both inside and outside the European Economic Area. Our
privacy management policy establishes a framework within which local
data protection and privacy laws are respected and sets a baseline for
those markets where there are no equivalent legal requirements.
Responsible business
Responsible business
Strategic report
Governance Financials Other information
48
Vodafone Group Plc
Annual Report 2022
Privacy risks
As data volumes continue to grow and regulatory and customer scrutiny
increases, it is important to be clear on the privacy risks we face, as well as
how our policies and programmes can mitigate these risks. We categorise
data privacy risk into three main areas:
–
Collection:
collection of personal data without permissions or
excessive collection of data;
–
Access & use:
use of personal data for unauthorised purposes,
excessive data retention or poor data quality; and
–
Sharing:
unauthorised disclosure of personal data, including supplier
non-compliance with the law or our own policies.
To help us identify and manage evolving risks, we constantly evaluate
our
{
business strategy, new technologies, products and services as well
as
{
government policies and regulation. Privacy principles
Our privacy programme governs how we collect, use, and manage our
customers’ personal data to ensure we respect the confidentiality of their
communications and any choices that they have made regarding the use
of their data. Our privacy programme is based on the following principles:
accountability; privacy by design; fairness and lawfulness; openness and
honesty; choice and access; security safeguards; and balance.
Click to read more about our privacy principles and how
they
b
guide the way our products are designed and built: vodafone.com/privacy
Using customer data
We want to enable our customers to get the most out of our products
and
{
services. To provide these services, we need to use our customers’ personal information. We are committed to protecting our customers’
data, using it for a stated and specific purpose, and we are always open
about what customer data we collect, and why we collect it.
Click to read more about uses of customer data:
investors.vodafone.com/sasb
Each local market publishes a Privacy Statement to provide clear,
transparent and relevant information on how we collect and use
personal
{
data, what choices are available regarding its use and how customers can exercise their rights. Our product specific privacy notices
include details relating to a particular product. These statements and
notices are available to customers online, in the MyVodafone app and
in
{
our retail{
stores.
Our businesses provide our customers with access to their data
through
{
online and physical channels. These channels can be used also
{
to request deletion of data that is no longer necessary, or for correction of outdated or incorrect data, or for data portability. Our
customer privacy statements and other customer facing documents
provide comprehensive information on how these rights can be
exercised
{
and how to raise complaints or contact the relevant data protection authority. Our frontline retail and customer support staff
are
{
trained to respond to the customers’ requests. Our state-of-art, multi-channel permission management approach was
deployed across our channels (MyVodafone app, website, call centres
and
{
retail stores) in 2018. This approach allows our customers to control
how we use their data for marketing and other purposes at any time
and
{
the permissions are synchronised across our channels. For example, customers can:
–
Opt-in for processing of special categories of data;
–
Choose what data we collect through the MyVodafone app and how it
is used;
–
Opt-out from marketing across different channels (call, SMS,
notifications), or opt-in to the use of their communications metadata
for marketing purposes or for receiving third-party marketing
messages; and
–
Opt-out from the use of anonymised network and location data
(‘Vodafone Analytics’).
Click to read more about our privacy policies:
vodafone.com/privacy
Operating model
We have an experienced team of privacy specialists dedicated to ensuring
compliance with data protection laws and our policies in the countries
where we operate.
We apply a process-based approach to managing privacy risks across
the
{
data life cycle and teams from across Vodafone ensure end-to-end coverage. Dedicated security teams ensure appropriate technical and
organisational information security measures are applied to protect
personal data against unauthorised access, disclosure, loss or use during
transit and at rest.
Read more about cyber security
on pages 49 to 51 and 60
All products, services and processes are subject to privacy impact
assessments as part of their development and throughout their life
cycle.
{
We maintain personal data processing records, supplier privacy compliance, data breach management and individual rights processes,
as
{
well as internal and international data transfer compliance frameworks,
and training and awareness programmes.
Our teams monitor and influence regulatory and industry developments
and work to build and maintain relationships with local data protection
authorities and other key stakeholders.
Our privacy control frameworks are subject to continuous risk-based
improvements. In addition to introducing updates to our global privacy
controls, we also require every employee, and where possible contractors,
to complete Doing What’s Right privacy training within six weeks of joining
and then every two years. We also have targeted training for high-risk
roles which is aimed at teams with a key role in personal data processing.
With this approach we aim to achieve a 90% completion rate on both
types of training across all target groups across our global footprint. In
FY22, 91% of assigned employees completed Doing What’s Right
privacy
{
training. The effectiveness of control implementation is subject to quarterly
reporting, annual evidence-based testing by the privacy teams, as well as
internal audit. Control implementation is also reviewed by local market
CEOs, the Group Risk and Compliance Committee and the Audit and
Risk
{
Committee. Any findings are subject to remedial actions by the responsible control operator, and completion is monitored.
Governance
The General Counsel and Company Secretary, a member of the Executive
Committee, oversees the global privacy programme. The Group Privacy
Officer, reporting to the General Counsel, is responsible for managing
and
{
overseeing the privacy programme on a day-to-day basis across the
{
markets and provides regular status reports to the General Counsel and
Company Secretary and an annual update to the Audit and Risk Committee.
Responsible business (continued)
We always seek to respect and protect the right to privacy, including
our
{
customers’ lawful rights to hold and express opinions and share information and ideas without interference. At the same time, as a
licensed national operator, we are obliged to comply with lawful orders
from national authorities and the judiciary, including law enforcement.
Scan or click to watch our privacy experts summarise
our
b
approach to data privacy:
investors.vodafone.com/videos
49
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Whilst each employee is responsible for protecting personal data they
are
{
trusted with, accountability for compliance sits with each operating
company. A member of the local executive committee oversees the local
implementation of our privacy programme. Each operating company also
has a dedicated privacy officer, privacy legal counsel and other privacy
specialists. Local privacy officers report to the Group Privacy Officer
throughout the year.
The Privacy Leadership team approves new standards and guidelines
and
{
monitors the implementation of global privacy plans. Operating companies also maintain privacy steering committees that bring
together
{
privacy and security teams and senior management from relevant business functions.
Privacy incidents
We have a strong culture of data privacy and our assurance and
monitoring activities are designed to identify potential issues before
they
{
materialise. However, during the financial year, Vodafone was
fined
{
€2{
million (FY21: €20 million) for data privacy issues, primarily
relating to telesales and customer authentication practices in Spain.
In response to the incidents in Spain, we have established a dedicated
taskforce that reports directly to the Vodafone Spain Executive
Committee. The taskforce also contributed to a new industry code of
conduct on telesales published in July 2021. Fines relating to telesales
arose as some of our third-party marketing agencies had conducted
direct marketing activities towards people who had opted-out. These
activities were in violation of existing supplier agreements. In response
to
{
these incidents, our rules on telesales have been reviewed and compliance with these rules is subject to increased assurance and
monitoring. Where necessary, improved controls have been introduced
to
{
monitor and enforce suppliers’ compliance. Such measures include, for
{
example, the routing of third-party telesales through Vodafone’s systems which ensures that calls to opted-out customers are detected
and blocked, verification to ensure that commission is only paid for
authorised calls, strict enforcement of contractual penalties for non-
compliance, and the discontinuation of contracts with several suppliers.
Third parties are increasingly using mobile devices to verify the identity
of
{
their customers. For example, banks or websites may issue one time
{
access codes sent via SMS to verify an individual’s identity. As a result, there has been an increase in attackers attempting to exploit
telecommunication authentication processes for fraudulent purposes.
One method involves attackers using social engineering to access
customers’ telecommunications accounts with the aim of swapping
SIMs
{
to new devices or setting up call forwarding. In response to these trends, the Spanish data protection regulator has
issued penalties to the main telecommunications companies operating
in
{
the country, including Vodafone, for not having stronger levels of authentication processes to prevent such fraudulent activities from
occurring. We have been actively collaborating with other local
telecommunications operators, the banking sector, law enforcement
authorities and the local data protection regulator through a cross-
industry taskforce, with the aim of resolving fraudulent customer
authentication practices. We have also implemented new technology
tools to minimise the risk of further fraudulent activities in Spain, updated
our global security policies and are in the process of implementing new
tools in our markets.
In addition to the fines in Spain, our businesses in Hungary, Romania,
Ireland and Turkey received immaterial fines for data privacy issues. These
fines arose
{
as a result of a delayed response to a subject access request, direct
{
marketing towards people who had opted-out of being contacted, and an issue relating to notifying customers about how their personal
data was processed. These cases were isolated incidents and we have
implemented additional controls, such as stricter access restrictions and
increased monitoring in response.
For detail on how we respond to a data breach,
refer to the cyber
b
security section on page 51Cyber security
Our role is to enable connectivity in society. As a provider of critical
national infrastructure and connectivity that is relied upon by millions of
customers, we prioritise cyber and information security across everything
we do. Our customers use Vodafone products and services because of
our next-generation connectivity, but also because they trust that their
information is secure.
Cyber attacks are part of the technology landscape today and will be
in
{
the future. No organisation, government or person will ever be fully
immune to the effect of cyber attacks and the telecommunications
industry is faced with a unique set of risks as we provide connectivity
services and handle private communication data. Our approach to
managing cyber risk is based on international best practice, a good
understanding of the threat landscape and leverages our global scale.
Identification of vulnerabilities and risks
Cyber security is a principal risk. We understand that if not managed
effectively, there could be major customer, financial, reputation or
regulatory impacts. Risk and threat management are fundamental
to
{
maintaining the security of our services across every aspect of our business. We separate cyber security risk into three main areas of risk:
–
External:
Attackers and criminals targeting our systems, networks,
or
{
people to conduct malicious attacks; –
Insider:
Accidental leakage of information or malicious misuse of
access privileges by our employees; and
–
Supply chain:
A supplier is breached or used as a conduit to gain
access to our systems, data or people.
To help us identify and manage emerging and evolving risks,
we
{
constantly evaluate and challenge our business strategy, new technologies, government policies and regulation, and cyber threats.
We
{
conduct regular reviews of the most significant security risks affecting our business and develop strategies and policies to detect, prevent and
respond to them. Our cyber security strategy focuses on minimising the
risk of cyber incidents that affect our networks and services.
Understanding the threat landscape is key to managing cyber risk.
The
{
war in Ukraine has led to an increased cyber threat for organisations across all industries. State-backed or state-supporting threat groups may
conduct attacks on companies to cause disruption, in retaliation against
sanctions or as a spillover from the conflict. In the telecoms sector,
espionage, disruption and destruction are likely objectives for threat
actors. We have taken a multi-step approach to managing the heightened
risk and we have:
–
Increased threat monitoring for specific threats or insight distributed by
security authorities;
–
Heightened internal monitoring to track indicators that are related to
the war and immediately escalated them for action and review; and
–
Bolstered specific areas of security and reinforced good practice,
including changes to make user compromise less likely, and ran an
awareness campaign led by the Chief Executive.
More broadly, ransomware remains a significant threat to all companies.
Threat actors are changing their tactics to include data extortion or
destruction without using malware. In these cases, the cyber criminals
compromise internal accounts and tools and then use these to perform
their criminal activities. User awareness and good security hygiene, such
as that required by Vodafone’s Cyber Code, are critical to managing
these
{
threats. Scan or click to watch our cyber security experts
summarise our approach to cyber security:
investors.vodafone.com/videos
Strategic report
Governance Financials Other information
50
Vodafone Group Plc
Annual Report 2022
Responsible business (continued)
In December 2021, a new critical vulnerability in widely used log4j software
code was identified. This vulnerability could be used to steal data, introduce
malware or take over systems. The log4j software is used as a building
block within many applications and services, and as a result almost all
companies were impacted. Our response has included blocking over two
million attacks which were attempting to exploit this vulnerability, as well
as scanning and patching our own systems and those supplied to us by
third parties to rule out compromise and reduce the risk level.
Controls
Controls can prevent, detect or respond to risks. Most risks and threats are
prevented from occurring and most will be detected before they cause
harm and need a response. A small minority will need recovery actions.
We use a common global framework called the Cyber Security Baseline
and it is mandatory across the entire Group. The baseline is based on an
international standard and includes key security controls which significantly
reduce cyber security risk, by preventing, detecting or responding to events
and attacks. We have effectiveness targets for the key controls that are
monitored and reported to senior management on a monthly basis. Each
year, we review the framework in the light of changing threats and create
new or enhanced controls to counter these threats. During FY22, we
have
{
introduced new controls to strengthen protection against phishing and ransomware, increased requirements for privileged access and
authentication, and defined stronger security controls in our agile
development lifecycle.
A dedicated assurance team reviews and validates the effectiveness of
our security controls, and our control environment is subject to regular
internal audit. The security of our global networks is also independently
tested every year to assure we are maintaining the highest standards and
our controls are operating effectively. We maintain independently audited
information security certifications, including ISO 27001, which cover our
global technology function and 15 local markets.
We do more than just comply with local requirements or certifications; we
actively contribute to consultations and debates on laws and regulations.
We support level playing fields across regions and seek harmonised
regulatory environments that provide strong security and societal benefits
at a reasonable cost.
Read more about our identi
ȣ
cation of cyber threat as a principal risk on page 60
New technologies
We adopt new technologies to better serve our customers and gain
operational efficiency. For every technology programme, new or existing,
we follow our Security by Design process, evaluating suppliers’ hardware
and software, modelling threats and understanding the risks before
designing, implementing and testing the necessary security controls.
Every new mobile network generation has brought increased
performance and capability, along with new opportunities in security.
During the year, we began deploying 5G core networks alongside
our
{
5G{
radio networks, often described as 5G Standalone; with
these
{
networks already live in the UK and Germany. As we roll out 5G standalone, we have updated our security standards to implement the
latest 5G features in our core networks. We also test security in our radio
networks using independent testing companies.
Open RAN is a new way of building and managing Radio Access Network
(‘RAN’) components within telecommunication infrastructure. Instead of
purchasing all the components from one supplier, we rely on software to
implement many of these functions which are connected through open
interfaces. Over time, this will create a more competitive landscape for
telecoms equipment. We mitigate security risks by following our Security
by Design process, identifying and mitigating threats with secure design
and configuration. We also participate in the O-RAN Alliance and security
working groups to standardise and strengthen the industry approach.
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Assess
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Respond
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Select &
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Deploy
controls
Maintain
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Business customers
We also provide cyber security support to our business customers
through Vodafone Business. Our products and services help our
business
{
customers of all sizes protect themselves from the evolving cyber security threat landscape and adapt to a new model of security
necessitated by the adoption of hybrid working. Our portfolio of cyber
security solutions for businesses is available in 16 markets and has over
one million users. Our products and services leverage our global network
and partnerships, such as those with Accenture, Palo Alto Networks, Trend
Micro, and VMWare, to make enterprise-grade security services accessible
to organisations of any size.
For SOHO and SME customers our focus is on click-to-buy services
covering mobile, endpoint and network security. We are also expanding
our services to cover emerging challenges such as human risk mitigation,
risk assessment and certification.
For mid-market business customers, we offer a range of professional
and
{
managed services that provide support across the full spectrum of an
{
organisation’s cyber security needs – assessing risk with vulnerability assessments; penetration testing and cyber exposure diagnostics;
protecting the organisation with firewall management and phishing
awareness campaigns; through to full scale managed detection and
response, and breach response and forensics services.
For larger and multinational organisations, Vodafone Business offers a
range of network, endpoint and managed security solutions to enhance
mobile and fixed portfolios in this segment.
Operating model
We have implemented an operating model based on the leading industry
security standards published by the US National Institute of Standards and
Technology (‘NIST’). We have an international team of over 1,000 people
who are focused on constantly monitoring, protecting and defending
our
{
systems and our customers’ data. We also work with third-party experts and consultants to maintain specialist skills and continue to follow
leading practice. Our scale means we benefit from global collaboration,
technology sharing, deep expertise and ultimately have greater visibility of
emerging threats. Although the cyber team leads on detect, respond and
recover, preventative and protective controls are embedded across all of
our technology and throughout the entire business.
51
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Every employee has responsibility for cyber security and must follow
the
{
Vodafone Cyber Code, be sensitive to threats and report suspicious activity. Embedded in our Code of Conduct, the Cyber Code is the
cornerstone of how we expect all employees to behave when it comes to
best practice in cyber security. It consists of seven areas where employees
need to follow security good practice.
Our cyber security awareness programme is delivered digitally via our
internal social media platform, videos and webinars. In addition, we
perform regular phishing simulations across all markets and functions
to
{
raise awareness and train employees. Cyber security is included within our Doing What’s Right training programme and our latest module was
launched to all English-speaking markets during the year, with translations
for other markets planned during FY23. Of those assigned the English
language training, 89% had completed it by 31 March 2022.
We continued to run incident simulation training for our local
markets
{
during the year. The simulations used a common platform to
{
provide CEOs and their teams a realistic experience of managing a cyber incident and exercising their responsibilities in accordance with
our
{
common approach.Click to read more about Vodafone’s Cyber Code in our
Code of Conduct:
vodafone.com/code-of-conduct
Governance
The Chief Technology Officer is the Executive Committee member
responsible for managing the risks associated with cyber threats and
information security. The Cyber Security Director is responsible for
managing and overseeing the cyber security programme on a day-to-day
basis and reports to the Chief Technology Officer. Reporting to the Cyber
Security Director are the heads of the global cyber security functions and
markets or regions. The local cyber security leads are part of their local
management teams and responsible for the cyber agenda in their market
or region.
The Cyber Risk Council (‘CRC’) meets on a monthly basis, is attended
by
{
the leads from each market and function and is chaired by the Cyber Security Director. The CRC approves policies and standards, monitors
cyber risk and threat and oversees key programmes. The CRC is part of a
wider governance structure which includes the Group Technology Audit
and Risk Committee and ultimately the Board’s Audit and Risk Committee.
Key risk indicators for our most important controls and our security
baseline are reported to senior management and the Executive
Committee on a monthly basis. This reporting provides a granular view of
progress and risk reduction. The reports also include detail on the threat
landscape, policy and risk updates, vulnerability and incident data, and
programme status.
Cyber threats and information security are a major area of focus for the
Board’s Audit and Risk Committee and detailed updates including threat
landscape, risk position and security programme progress are provided
at
{
least twice a year, most recently in March 2022. The Audit and Risk Committee does deep dives into significant incidents, such as the security
incident in Portugal during the year.
Read more about the Audit and Risk Committee’s oversight
of
b
cyber security on pages 83 to 88Cyber incidents
As a global connectivity provider, we are subject to cyber threats,
which
{
we work to identify, block and mitigate with our robust control environment without any impact. Where a security incident occurs, we
have a consistent incident management framework and an experienced
team to manage our response. The focus of our incident responders is
always fast risk mitigation and customer security.
We actively engage with stakeholders, including academic institutions,
industry and government, in order to protect Vodafone, respond to cyber
threats and work together to share best practice. Given our expertise and
extensive experience, we also engage with a wide range of organisations
to help improve the understanding of cyber security thinking and practice,
and contribute to public policy, technical standards, information sharing
and analysis, risk assessment, and governance.
In the event of a cyber breach, disclosure is made in line with local
regulations and laws, and based on a risk assessment considering
customers, law enforcement, relevant authorities and our external auditor.
The European Union’s GDPR provides a framework for notifying customers
in the event there is a loss of customer data as a result of a data breach
and this framework is a baseline across all our markets.
Vodafone holds cyber liability and professional indemnity insurance
policies and these policies may cover the costs of an information security
breach, in whole or in part.
In February 2022, Vodafone Portugal experienced a network outage
that
{
was caused by a deliberate cyber attack that was intended to
cause
{
disruption. No malware or malicious software was installed, and
{
the{
attack method would be described as a ‘living off the land’
attack
{
because it did{
not use any specialist tools. The attack relied
on
{
sophisticated social engineering, and a deep understanding of IT systems and networks. Investigations revealed that no customer data
was
{
accessed or compromised. No other Vodafone markets experienced any disruption from this incident.
The outage affected the data network in Portugal. The impact was loss of
some voice and data services, some TV services and enterprise and business
applications across the country, as well as international connections. Home
broadband and linear TV were unaffected by the
attack.
On detecting the
incident, we utilised our global incident management framework and
immediately took action to
{
identify, contain further risk and restore services quickly. Mobile data services and interconnections with other
operators were resumed within eight hours of the attack, with other
services being recovered during the next 48 hours. The Vodafone
Portugal CEO immediately and proactively communicated with
customers, and the team used widespread online, social media and
press
{
information and articles to keep customers aware{
of our recovery
progress. Our cyber security team is continuing the investigation of this
incident and working with local law enforcement and security agencies.
Vodafone classifies security incidents according to severity, measured
by
{
business and customer impact. The highest severity category corresponds to a significant data breach or loss of service caused
by
{
the{
incident. In the past financial year, the only such incident was
the
{
Vodafone Portugal incident discussed above. During the incident, 4.7
{
million mobile and one million fixed line customers were impacted, with some customers having both services. While the network outage
was
{
significant, it was only classified as a severe network incident for 48
{
hours. The{
direct costs of the incident are estimated in the range
of
{
€5{
million and are financially immaterial in the context of Vodafone
Portugal’s operations and the wider Vodafone Group.
We also track incidents at our suppliers and third parties. The frequency
of
{
such incidents is increasing. We contractually require our suppliers to report incidents and we manage these incidents as if they were internal.
In
{
the last financial year, one such supplier incident has been reported to
{
the Luxembourg regulator due to its potential scope to impact the entire telecommunications industry. The supplier in question manages
the netting of roaming charges between operators and reported a
cyber
{
incident in September 2021. There was a minor direct impact on
{
Vodafone based on the investigation carried out by Vodafone and
{
the{
supplier.
Click to read more about how we manage risks from
technology disruptions in our SASB disclosure:
investors.vodafone.com/sasb
Strategic report
Governance Financials Other information
52
Vodafone Group Plc
Annual Report 2022
Responsible business (continued)
Protecting people
Wherever we operate, we have an opportunity to
contribute to the advancement of fundamental
rights
b
for our customers, colleagues and communities.
We are
b
also conscious of the risks associated with our
b
operations and we work hard to mitigate negative impacts, ensuring we keep people safe.
Health and safety
Keeping people safe is one of the most important responsibilities we
hold
{
as an employer. Our ongoing focus is to provide a safe working environment for everyone working for and on behalf of Vodafone and
the
{
communities in which we operate. We want everyone working with Vodafone to return home safely every day.
Our health and safety framework provides a consistent approach to safety
leadership, planning, performance monitoring, governance and assurance.
Our commitment to safety does not differentiate between employees,
contractors and suppliers, all of whom benefit from the same focus
on
{
preventing harm, both on worksites and when working or moving between sites.
Health and safety risks
We continue to focus on our key health and safety risks, which account
for the majority of reported incidents and remain a focus area globally:
occupational road risk, falls from height, working with electricity, and
fibre
{
operations. Road traffic incidents continue to be the primary cause of major injuries
and fatalities reported globally, accounting for 41% of all reported high
potential incidents within Vodafone during the year. As a result, we have
maintained a specific requirement to focus on road safety and driver
behaviour within our health and safety strategy and annual objectives.
In
{
addition, local market road risk controls are reviewed as part of our internal assurance plans.
In recognition of our key risks, we have established the ‘Vodafone
Absolute Rules’. These rules focus on risks that present the greatest
potential for harm for anyone working for or on behalf of Vodafone. The
Absolute Rules are clear and underpinned by a zero tolerance approach
to unsafe behaviours in all of our businesses. The Absolute Rules must
be
{
followed by all Vodafone employees and contractors, as well as our
suppliers’ employees and contractors. In the January 2021 Spirit Beat
survey, 96% of employees agreed that the Absolute Rules are taken
seriously at Vodafone.
Leadership engagement
The importance of senior leadership and commitment to health and
safety remains key to our approach. Our senior leaders are actively
engaged, carrying out regular site tours throughout the year. Despite the
restrictions imposed by COVID-19, our senior leaders have continued to
maintain their visibility and engagement by carrying out tours virtually,
recognising the importance of connecting with teams and critical workers
as they continued to maintain our networks, work in our retail stores and
on customer sites.
Health and safety governance
Health and safety is managed through a global health and safety
framework, which includes the monitoring and assessing of risks, setting
targets, reviewing progress and reporting performance. Our global safety
framework is based on international standards for occupational health
and safety, is aligned to internationally recognised best practice, and
always meets or exceeds local requirements. In addition, some of our
local markets have chosen to undergo independent external certification
to ISO 45001, the international standard for occupational health and
safety; 49% of our business is externally certified to ISO 45001.
All incidents relating to key risks and breaches of the Vodafone
Absolute
{
Rules are reported and investigated in adherence with timescales contained within our Incident Reporting Standard. We
ensure
{
that incidents are investigated in accordance with their severity, and appropriate remedial actions and improvements are identified
and
{
implemented. We strongly believe in the importance of prevention, however we also believe that every incident should be treated as an
opportunity for learning and improvement.
Health and safety is a high-risk policy and included within our risk and
compliance governance programme. Due to restrictions introduced as
a
{
consequence of the COVID-19 pandemic, in-country audits have not
been possible again this year. However, we have updated our risk control
matrix to help enhance the effectiveness of the assurance programme,
ensuring a single set of standards and mandatory controls that local
markets self-assess against. This self-assessment process has been
completed with independent oversight and quality review to ensure
consistency and effectiveness.
Employee engagement and consultation in arrangements for health and
safety is a foundation of our approach and all markets have Health and
Safety consultative committees that meet on a regular basis.
Training
We continue to include a health and safety module as part of our mandatory
‘Doing What’s Right’ training. The training module includes a
{
video from our
Chief Human Resources Officer demonstrating seni
or-level support for the
Vodafone Absolute Rules. Every employee must complete the training
within six weeks of joining and then typically every
{
two years. During FY22, 90% of assigned employees working for Vodafone completed the
health and safety module. Contractors are required to complete separate
training relevant to their role and position.
Each local market is also responsible for delivering health and safety
training which supports the development of appropriate safety leadership
skills, behaviours and identification of health and safety risks. Additional
training is specific to an individual’s role and aligned to each market’s local
safety legislation.
Key performance indicators
We have a global set of key performance indicators as part of our safety
framework, which are reported monthly to the Executive Committee, and
bi-annually to the Board:
–
Number of fatalities;
–
Number of employee lost time incidents; and
–
Number of top safety risks, including breaches of our Absolute Rules.
After a thorough investigation, we record all fatal incidents related to
our
{
operations where we conclude that our controls were not operating as effectively as required and may have prevented the incident from
occurring. We also consider circumstances where, if controls could have
reasonably been enhanced, the outcome could have been different. Each
fatality is presented for review at a Fatality Review Board chaired by the
Chief Human Resources Officer and supported by the Global Head of
Health and Safety. The presentation is led by the local market’s CEO.
We
{
also share any lessons learned from each fatality across the relevant Group functions.
Any injury is one too many and any loss of life related to our operations
is
{
unacceptable. It is therefore with great regret that we record three fatalities in the year that have been determined to be within Vodafone’s
control. In Vodacom Mozambique a road traffic collision between a Vodacom
subcontractor’s vehicle and a third-party vehicle resulted in the deaths of two
passengers in the third-party vehicle who were members of the public.
In
{
Vodafone Egypt an 18-metre mast collapsed during construction ca
rried out by a Vodafone subcontractor and resulted in the death of one of the
subcontractors. In each case, a thorough investigation was overseen by
the respective local market CEO, who is responsible for ensuring that
the
{
causes of the incident are widely understood and that any necessary corrective actions are implemented. These incidents further reinforce our
53
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
During the year, our focus has shifted to support Future Ready Vodafone,
ensuring our hybrid working plans are safe and effective, and mental
health and wellbeing is supported. We recognise that there will be a range
of perspectives towards the risks as we shift to the endemic phase and
the
{
need to ensure those at greatest health risk have the support and protection they need. Going forward, we will continue to listen and adjust
as we embed hybrid working and the Future Ready Vodafone strategy.
Read more about our Future Ready Vodafone strategy
on page 22
We are confident that our flexible approach remains appropriate to ensure
the health, safety and wellbeing of our people and suppliers who work
with us, however we will continue to assess and monitor the risks and
adjust our approach in light of any material changes. We are capturing the
lessons learned from our response to the pandemic phase and building
them into our plans for future pandemic response teams and to maintain
our overall business resilience capability.
Read more about employee wellbeing
on page 22
Mobiles, masts and health
The health and safety of our customers and the wider public has
always
{
been, and continues to be, a priority for us. Our masts fully
comply
{
with national guidelines, which are typically based on, or go
beyond, international guidelines set by the independent scientific body,
the International Commission for Non-Ionizing Radiation Protection
(‘ICNIRP’). There has been scientific research on mobile frequencies
for
{
decades, including those used by 5G. If exposure is within national
guidelines, the scientific consensus is that there is no adverse impact
on
{
health.We continually monitor and evaluate our mobile networks to make sure
we meet all regulations. In addition, all the products we sell are rigorously
tested to ensure they comply with international safety guidelines.
As well as complying with national regulations, where our markets have
rolled out 5G, we have implemented a ‘Smart PowerLock’ (‘SPL’) feature.
This innovative technology, designed for use with adaptive antennas
used
{
for 5G, ensures that the transmitted radio frequency power{
of the
antenna is always below a threshold when averaged over
{
a
{
predefined
time window. This guarantees compliance with electromagnetic field
(‘EMF’) regulations under all possible operating conditions for 5G sites.
This is now one of many software features that are routinely activated
when a new 5G site is commissioned. SPL also includes counters, so it is
possible to retrieve them to build evidence of compliance over several
past days/weeks for a given site if needed by regulators. The feature has
been accepted by regulators as effective.
Science monitoring
Scientific reviews have made a vital contribution to establishing industry
guidelines and standards. We follow the results of these independent
expert reviews to understand developments in scientific research related
to mobile devices, base stations and health.
In February 2022, an EU-funded scientific study into the effect of mobile
phone use on children and young people was published. The case study
was conducted between 2010 and 2015 across 14 countries with more
than 2,000 participants aged 10-24 years. The study found no evidence
of
{
a causal association between wireless phone use and brain tumours. We fund research into mobile devices, base stations and health through
funding bodies such as national governments to ensure that the research
remains independent of industry influence, including our own. We also
respond to requests from bodies conducting research by providing
technical advice and information on the use of mobile devices. This helps
to ensure scientists have access to the best-quality information available.
ongoing focus to reduce the number of road risk and work at height
related incidents, with a focus on Vodafone’s Absolute Rules and
awareness campaigns within our local communities.
We track and investigate incidents relating to our top risks and breaches
of the Vodafone Absolute Rules. During the year, 656 breaches of
Vodafone Absolute Rules and 476 incidents relating to our key risks were
recorded. Each incident is investigated and we seek to identify the root
cause and ensure suitable corrective action is taken where necessary.
An
{
investigation into each incident is conducted at a scale proportionate to the indicative level of risk.
Lost-time incident (‘LTI’) is the term we use when an employee is injured
while carrying out a work-related task and is consequently unable to
perform regular duties for a complete shift or period of time after the
incident. During the year, 12 LTIs were reported, five of these occurred
whilst working from home, four occurred in Vodafone offices, and two
occurred on work sites. In total these incidents account for 103 lost work
days. In response to the occurrence of injuries whilst working in the home,
we have reinforced the requirements of our safe home working policies
and guidance across all locations.
Key performance indicators
2022
2021
Work-related injuries or ill health
(excluding fatalities)
Employees 12 7
Contractors and suppliers 30 24
Lost-time incidents (‘LTI’)
Number of lost-time employee incidents
1
12 7
Lost-time incident rate per 1,000 employees 0.11 0.06
Total recordable fatalities
Employees 0 0
Suppliers’ employees/contractors 1 0
Members of the public 2 1
Note:
1. Lost Time Incident means the loss of one or more work day as a result of injury.
COVID-19
Our response to the COVID-19 pandemic has prioritised the safety and
wellbeing of our people from the outset and has continued throughout
the pandemic as we responded to the emergence of new variants and
the
{
impact of cases varying across our footprint. An agile approach to the
{
changing situation was coordinated by the COVID-19 Business Continuity Plan programme management team, in line with World Health
Organization Guidance and industry best practice, chaired by the Chief
Human Resources Officer.
Whilst the global reporting of positive employee cases is no longer a
requirement across all countries, we continue to review incidence rates
with local teams, to identify any locations or functions requiring focus
and
{
ensuring controls are adequate or if they require strengthening. During the pandemic, we supported employees by ensuring:
–
Local plans were in place to ensure all employees had a safe place
to
{
work, whether they are working on site or at home. We supported employees with access to offices whenever possible, for instance
when
{
it was required to better protect their personal safety. We also maintained guidance for employees with underlying health conditions,
where we ensured they were able to engage and connect with their
teams productively.
–
Access to physical, mental health and wellbeing support.
–
Digital learning was available to all employees and their families.
–
We continued to support Future Ready Vodafone and return to our
office plans.
–
We continued to be flexible with policies as required by local conditions
while exploring other policies that we could adjust/implement.
Strategic report
Governance Financials Other information
54
Vodafone Group Plc
Annual Report 2022
Responsible business (continued)
COVID-19
In the past year, we have not seen any further instances of damage to
masts and base stations incited by unproven, unsubstantiated theories
alleging links between COVID-19 and 5G. Our markets used a common
strategy to rebut the misinformation and condemn arson attacks on
our
{
base stations. In partnership with other operators, we have provided clear
{
messages that there is no scientific evidence to link the spread of COVID-19 to 5G.
Operating model
We have robust governance mechanisms in place and conduct regular
compliance assessments to ensure that our masts and devices meet
the
{
standards set by the Group policy and national regulations. During the
{
year, the Group EMF leadership team met four times and reported directly to the Executive Committee and the Board.
We conduct network measurements and calculations of EMF exposure
from the network masts and review the test reports we receive on EMF
testing on devices.
During the year, end-to-end compliance reviews in two of our European
markets demonstrated robust and optimised EMF risk management,
with
{
examples of best practice to share across our footprint. All Vodafone markets also participated in a compliance self-assessment programme
with assurance provided through our compliance team.
Human rights
We want to make sure that we have a positive impact on people and
society, which includes respecting human rights in all our operations.
We
{
are a long-standing member of the UN Global Compact and follow the United Nations Guiding Principles on Business and Human Rights,
which guide our approach.
Click to read more about our human rights approach:
vodafone.com/human-rights
The risks to people working in our supply chain are another area of focus
for us. We manage these risks through our supply chain management
programme which assesses our suppliers for indicators such as forced
labour and other risks to human rights, such as health and safety. We
also
{
believe in supporting the responsible sourcing of minerals globally. Although we do not source minerals ourselves, we follow the best
practice of the OECD Due Diligence Guidance to understand whether
our
{
manufactured products include minerals which have been sourced from smelters taking a responsible approach to sourcing.
Click to read more about our
Con
Ȥ
ict Minerals Reports and Statement: vodafone.com/responsibleminerals
Our human rights programme also addresses a broader range of
human
{
rights risks, such as those relating to the design and deployment of artificial intelligence, children’s rights, data ethics and risks we may
become connected with through our broader value chain, such as
enterprise customers or partner markets.
Our approach
We conduct due diligence to help make sure that we respect human
rights. Due diligence comes in various forms and at different moments in
our operations: it may be an independent human rights risk assessment
for a new market entry as we did for Ethiopia during the year, a thematic
impact assessment such the child rights assessment completed in FY21
and actioned this year, or it may be the ongoing assessments we do when
considering new markets.
The nature of our business also means that we often grapple with novel
issues concerning data ethics: for example, this year our Purpose and
Reputation Steering Committee considered the right balance between
our GDPR obligations to safeguard customer information, and our
responsibility to respect our employees’ privacy when working with such
data from home. The committee also approved principles to underpin our
Artificial Intelligence Framework which helps to determine which uses of
artificial intelligence require higher levels of approval within Vodafone.
Click to read more about our Arti
ȣ
cial Intelligence Framework:
vodafone.com/ai-framework
We follow up assessments with mitigating actions, such as contractual
commitments to respect human rights in our partner market agreements,
and in our enterprise customer contracts.
Last year we reported that we had conducted a child rights assessment.
This year we have started to implement the recommendations focusing
first on updating our child protection policy for the digital world, to a
broader children’s rights policy.
Anyone who works for us can use Speak Up to raise concerns about
human rights issues. For example, this year we received a query relating to
our use of suppliers and their reputation for responsible business conduct
with respect to their work with customers other than Vodafone. The case
was investigated and discussed by our Purpose and Reputation Steering
Committee, and as a result contractual assurances to respect human
rights were put in place with the supplier.
Governance
The Chief External and Corporate Affairs Officer oversees our human
rights programme and is a member of the Executive Committee. The
senior human rights manager manages our programme, with the support
of a cross-functional internal Human Rights Advisory Group, comprising
senior managers responsible for: privacy, security, responsible sourcing,
and diversity and inclusion, amongst others. We report regularly on our
progress to the Purpose and Reputation Steering Committee, which
assists the Executive Committee in fulfilling duties with regards to our
purpose, reputation management and policy.
Our Human Rights Policy Statement details how we do this, and is backed
up by our internal Human Rights Policy which sets out how our people
must ensure we respect human rights, including steps to take through
our
{
other aligned policies, such as those covering child protection, conflict
{
minerals, health, safety and wellbeing, human resources, privacy
{
management and law enforcement assistance. Click to read our Human Rights Policy Statement:
vodafone.com/human-rights-policy-statement
Human rights risks
As a global telecommunications operator, we connect people.
This
{
means{
that our most significant human rights risks relate to our
customers’ rights to privacy (concerning their data that we safeguard)
and
{
freedom of expression (in terms of their access to information, through the connections we provide). Local laws and regulations can
mandate that telecommunications operators must provide assistance
to
{
governments, and we must comply with lawful government requests as part of our operating licences. This might include the disclosure of
customer information, or limiting access to digital networks and services.
However, our internal law enforcement assistance policy guides us on
how to do this in a rights-respecting way. We also publicly advocate for
these powers to conform to international human rights standards both
through our own transparency reporting and our membership of the
Global Network Initiative (‘GNI’).
Click to read more about how we handle law
enforcement
b
demands: vodafone.com/
handling-law-enforcement-demands
Click or scan to watch a video summarising
our human rights approach:
investors.vodafone.com/videos
55
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Our approach
When new suppliers tender for work, they are asked to demonstrate
policies and procedures that support safe working, diversity in the
workplace and to address carbon reduction, renewable energy, plastic
reduction, circular economy and product life-cycle which account for
up
{
to 20% of the overall evaluation criteria. Commitments made by our
suppliers are assessed against our own purpose strategy with respect
to
{
diversity & inclusion (5%), the environment (5%) and health & safety
(10%) in categories where there is a safety risk. We have included purpose
criteria in all FY22 tenders.
Our requirements are backed up by risk assessments, audits and operational
improvement processes, which are included in suppliers’ contractual
commitments. Some site audits are conducted by the Joint Alliance for
CSR (‘JAC’), formerly known as the Joint Audit Cooperation, an association
of telecommunications operators established to improve ethical, labour
and environmental standards in the
{
technology supply chain, which Vodafone chairs. This year, 71 site assessments were conducted
(either
{
by{
Vodafone or through JAC).
This year we have launched an improved supplier qualification process
which uses a risk based assessment to review compliance for any new
suppliers across 13 countries. The roll-out to remaining operations is
subject to consultation with the respective workers’ councils.
We report on our approach to preventing modern slavery and human
trafficking in our business and supply chain in our annual Modern
Slavery
{
Statement. Click here to read our Modern Slavery Statement:
vodafone.com/modern-slavery-statement
Governance
The Chief Financial Officer oversees our supply chain and is a member
of
{
the Executive Committee and Board. Reporting to the Chief Financial Officer, the Chief Executive Officer of the VPC is responsible for the
implementation of our Code of Ethical Purchasing. Progress is reported
regularly to the Vodafone Procurement Company Board. Procurement is
a highly centralised function within the business, with the majority of our
external spend managed by VPC. This enables us to maintain a consistent
approach to supplier management and makes it easier to monitor and
improve supplier performance across our markets.
Collaboration
We play our part in developing the global understanding of what
businesses should do to respect human rights. We are a member of
the
{
Global Network Initiative, alongside other initiatives such as the United
{
Nations B-Tech Project which convenes business, civil society and government to advance implementation of the UN Guiding Principles in
the tech sector. This year, we were recognised in the Global Child Forum
Benchmark, the State of Children’s Rights and Business 2021, as a leader
and the top scoring company in the Technology and
Telecommunications sector.
Responsible supply chain
We spend approximately €24 billion a year with around 9,000 direct
suppliers around the world to meet our businesses’ and customers’
needs
{
across network infrastructure, IT and services related to fixed lines,
{
mobile masts and data centres that run our networks. The majority of our external spend is managed by our Vodafone
Procurement Company (‘VPC’), based in Luxembourg, and our shared
services (‘_VOIS’), based in Ahmedabad, India. Our next largest area of
spend is on the products we sell to our customers, including mobile
phones, tablets, SIM cards, broadband routers, TV set-top boxes and IoT
devices. This centralised approach helps to ensure that we maintain a
consistent approach to supplier management across Vodafone, from on
boarding and vetting a supplier, to raising orders and paying for delivered
goods and services.
Supply chain risks
The main risks in our supply chain relate to three key areas: health and
safety matters related to non-compliant fire safety measures; excessive
working hours compounded by COVID-19 disruption and environmental
matters related to non-compliant chemical storage and lack of carbon
reduction programmes. This year, these three risks made up 77% of all
non-compliances found in our supply chain through our assessments.
Suppliers that do not meet our standards are provided with a corrective
action plan to address any areas for improvement and are required to
submit evidence that this has been completed.
Policy
Every supplier that works for Vodafone is required to comply with
our
{
Code of Ethical Purchasing. These commitments extend down through the supply chain so that a supplier with which we have a direct
contractual relationship (Tier 1 supplier) in turn is required to ensure
compliance across its own direct supply chain (Tier 2 supplier from
Vodafone’s perspective) and beyond. The Code of Ethical Purchasing is
based on international standards, including the Universal Declaration of
Human Rights and the International Labour Organization’s Fundamental
Conventions on Labour Standards. It stipulates the social, ethical, and
environmental standards that we expect, including areas such as child
and
{
forced labour, health and safety, working hours, discrimination and disciplinary processes.
Click here to read our Code of Ethical Purchasing:
vodafone.com/code-of-ethical-purchasing
Strategic report
Governance Financials Other information
56
Vodafone Group Plc
Annual Report 2022
Responsible business (continued)
Anti-bribery and corruption
At Vodafone, we support and foster a culture of zero
{
tolerance towards
bribery or corruption in all our
{
activities.Our anti-bribery policy
Our policy on this issue is summarised in our Code of Conduct and
states
{
that employees or others working on our behalf must never offer or accept any kind of bribe. Our anti-bribery policy is consistent with the
UK Bribery Act and the US
{
Foreign Corrupt Practices Act, and provides guidance about what constitutes a bribe and prohibits giving or receiving
any excessive or improper gifts and hospitality. Any policy breaches can
lead to dismissal or termination of contract.
Click here to read our Code of Conduct:
vodafone.com/code-of-conduct
Facilitation payments are strictly prohibited and our employees are
provided with practical training and guidance on how to respond to
demands for facilitation payments. The only exception is when an
employee’s personal safety is at risk. In such circumstances, when a
payment under duress is made, the incident must be reported as soon
as
{
possible afterwards.To support our approach, Vodafone is also a member of Transparency
International UK’s Business Integrity Forum.
Governance and risk assessment
Our Chief Executive and Executive Committee oversee our
{
efforts to prevent bribery. They are supported by local market Chief Executive
Officers, who
{
are responsible for ensuring that our anti-bribery programme is
{
implemented effectively in their local market. They in
{
turn{
are supported by local specialists and by a dedicated Group
team
{
that is solely focused on anti-bribery policy and compliance. The Risk and
{
Compliance Committee assists the Executive Committee in fulfilling
{
duties with regards to risk management and policy compliance. As part of our anti-bribery programme, every Vodafone business must
adhere to minimum global standards, which include:
–
Ensuring there is a due diligence process for suppliers and business
partners at the start of the business relationship;
–
Completion of the global e-learning training for all employees, as well
as tailored training for higher risk teams; and
–
Using Vodafone’s global online gift and hospitality registration platform,
as well as ensuring there is a process for approving local sponsorships
and charitable contributions.
The risks we face evolve constantly but broadly fall into the areas
summarised in the table below, which outlines the principal risk categories
and the mitigation measures adopted.
Business integrity
We are committed to ensuring that our business
operates ethically, lawfully and with integrity
wherever we operate as this is critical to our
long-term success.
Tax and economic contribution
As a major investor, taxpayer and employer, we make a
{
significant contribution to the economies of the countries where we operate.
In
{
addition to direct and{
indirect taxation, our financial contributions
to
{
governments also include other areas such as radio spectrum fees
and
{
spectrum auction proceeds. Scan or click to watch our Group Head of Tax
summarise our approach to taxation:
investors.vodafone.com/videos
Tax transparency
Our most recent tax report sets out our total contribution to public
finances on a cash-paid basis for both 2019 and 2020. In 2021, we
contributed, directly and indirectly, more than €9.6 billion to public
finances worldwide, compared with €9.4 billion in 2020. The year-on-year
increase was due to higher spectrum payments in 2021. In 2021, we paid
€2.4 billion in direct taxes, including more than €1.1 billion in corporate
income taxes, nearly €1.5 billion via non-taxation based revenue
mechanisms, such as payments for the right to use spectrum, and
collected nearly €5.7 billion of indirect taxes for governments around
the
{
world.Acting with integrity in the creation and execution of our tax strategy,
policies and practices is absolutely core to our approach to tax, as is our
commitment to transparency. We disclose our financial contributions to
governments at a country level, as we believe this is an important way to
demonstrate that it is possible to achieve an effective balance between
a
{
company’s responsibilities to society as a whole, through the payment
of taxes and other government revenue-raising mechanisms, and its
obligations to its shareholders. The information we share aims to help
our
{
stakeholders understand our approach, policies and principles. We also share our views on key topics of relevance, including the latest
on
{
the taxation of the digital economy, as well as publishing our OECD country-by-country disclosure, as submitted to the UK’s tax authority
(HMRC), as well as how our disclosures compare to the B Team tax
principles and the requirements of the Global Reporting Initiative.
Our tax report for 2022 will be published by the end of the year,
{
following the submission of our tax returns and payment of all applicable
{
taxes.Click here to read more about our tax and
economic
b
contribution to public ȣ
nances:
vodafone.com/tax
57
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Risk Response
Operating
in
{
high-risk markets
We undertake biennial risk assessments in each of our
local operating companies and at Group, so we can
understand and limit our exposure to risk.
Business
acquisition
and
integration
Anti-bribery pre and post acquisition due diligence is
carried out on a target company. Red flags identified
during the due diligence process are reviewed and
assessed. Following acquisition, we implement our
anti-bribery programme.
Spectrum
licensing
To reduce the risk of attempted bribery, a specialist
spectrum policy team oversees our participation in
all
{
negotiations and auctions. We provide appropriate training and guidance for employees who interact with
government officials on spectrum
{
matters.Building and
upgrading
networks
Our anti-bribery policy makes it clear that we never
offer
{
any form of inducement to secure a permit, lease or
access to a site. We regularly remind all employees and
contractors in network roles of this prohibition, through
tailored training sessions and
{
communications.Working with
third parties
Suppliers and other relevant third parties working for or
on behalf of Vodafone, must comply with the principles
set out in our Code of Conduct and Code of Ethical
Purchasing, as well as
{
have programmes in place to ensure
suppliers’ employees and contractors are aware of these
policies. Third-party due diligence is completed at the
start of our business relationship with suppliers, other
third parties and partners. Through their contracts with
us, our suppliers, partners and
{
other third parties make a
commitment to implement and
{
maintain proportionate
and effective anti-bribery compliance
{
measures. We regularly remind current suppliers of our policy
requirements and complete detailed compliance
assessments across a sample of higher-risk and
higher-value suppliers. Select
{
high-risk third parties are trained to ensure awareness of
{
our zero-tolerance policy.External assurance
KPMG LLP has provided independent limited assurance over selected data within our ESG Addendum, using the assurance standard ISAE (UK) 3000,
and for selected Greenhouse Gas Data, ISAE 3410. KPMG has issued an unqualified opinion over the selected data and their full assurance statement,
along with the reporting criteria, is available on our website at investors.vodafone.com/esgaddendum.
The data subject to KPMG LLP’s assurance is detailed below;
Pillar Metric Unit 2022 Page
Inclusion for All
Percentage of women in management and senior leadership roles % 32 39
Number of M-Pesa customers million 52.4 37
4G population coverage % 81.6 37
Planet
Total Scope 1 emissions million tonnes CO
2
e 0.28 42
Total Scope 2 emissions (location-based) million tonnes CO
2
e 1.98 –
Total Scope 2 emissions (market-based) million tonnes CO
2
e 0.82 42
Total GHG emissions: Scope 1 and Scope 2 (location-based) million tonnes CO
2
e 2.26 –
Total GHG emissions: Scope 1 and Scope 2 (market-based) million tonnes CO
2
e 1.09 42
Percentage of total purchased electricity that comes from renewable sources % 77 42
Scope 3 emissions (air travel) million tonnes CO
2
e 0.003 –
Total emissions avoided as a consequence of IoT technologies and services million tonnes CO
2
e 15.6 43
Digital Society
Number of unique users accessing Vodafone’s V-Hub service (cumulative) million 3.6 44
With the exception of the metrics outlined above, the information contained within the purpose and responsible business sections (pages 34 to 58)
has
{
not been independently verified or assured. All the information included within these pages, including the metrics outlined in the table above, has
{
been taken from sources which we deem reliable. While all reasonable care has been taken to ensure the accuracy of the data, Vodafone has not arranged for independent verification of the data with respect to its accuracy or completeness. Our ESG Addendum includes further information with
regard to methodologies for certain metrics.
Winning and
retaining
business
We provide targeted training for our Vodafone Business
and Partner Markets sales teams. In addition, we also
maintain and
{
monitor a global register of gifts and hospitality to ensure that inappropriate offers are
not
{
accepted or extended by our{
employees.
Engaging employees to raise awareness of
{
bribery{
risk
We run a multi-channel high-profile global communications programme,
‘Doing What’s Right’, to engage with employees and raise awareness and
understanding of the policy. The ‘Doing What’s Right’ programme features
e-learning training, including a specific anti-bribery module. The latest
anti-bribery module, DWR 3.0, was launched in September 2021 and
is
{
a
{
video-based module requiring employees to identify risks they see
playing out in the conversations on screen. Currently approximately 80%
of the employees that were assigned the training have completed it and
the training has received a five star rating from employees. For higher-risk
employees, additional tailored training programmes are used to cover
relevant scenarios for those employees.
Assurance
Implementation of the anti-bribery policy is monitored regularly in
all
{
local markets as part of the annual Group assurance process, which reviews key anti-bribery controls. Due to the challenging travel conditions
during the year, self-assessments and quality reviews were undertaken
instead of local market visits in Egypt, Lesotho, Vodafone Procurement
Company and Vodafone Roaming Services. We also conducted a
thematic review across the key areas of high-risk sales intermediaries
and
{
representatives, and provided training to high-risk employees in Czech Republic, Ireland, Portugal and Romania. Further to this, Internal
Audit completed audits of the anti-bribery programme in a number of
local markets in Europe and Africa.
The reviews demonstrate good implementation of the anti-bribery
programme. Some areas for improvement relating to third-party risk
management and training of high-risk employees were identified and
appropriate action plans to improve the control environment were put
in
{
place. 
Strategic report
Governance Financials Other information
58
Vodafone Group Plc
Annual Report 2022
Reporting requirement Vodafone policies and approach Section within Annual Report Page(s)
Environmental matters
Planet performance Planet 41-44
Climate change risk Risk management 59-67
Employees
Code of Conduct Responsible business and
anti-bribery and
{
corruption47, 56
Occupational health and safety Health and safety 52-53
Diversity and inclusion Workplace equality 38-40
Social and community matters
Driving positive societal
transformation performance
Inclusion for All 36-40
Digital Society 44-45
Stakeholder engagement Stakeholder engagement 14-15
Mobiles, masts and health Mobiles, masts and health 53-54
Human rights
Human rights approach Human rights 54-55
Code of Ethical Purchasing Responsible supply chain 55
Modern Slavery Statement Responsible supply chain 55
Anti-bribery and corruption
Code of Conduct Responsible business 47
Anti-bribery policy Anti-bribery and corruption 56
Speak Up process Responsible business 47
Policy embedding, due diligence and outcomes
Purpose, sustainability and
responsible business
36-57
Risk management 59-67
Description of principal risks and impact
of business
{
activityRisk management 53-67
Description of business model
Business model 10
Non-financial key performance indicators
Financial and non-financial performance
Purpose, sustainability and
responsible business
4-5
36-57
UK Streamlined Energy and Carbon Reporting (‘SECR’)
In accordance with SECR requirements, this provides a summary of GHG emissions and energy data for Vodafone UK, in comparison with
global
{
performance.Group
(excluding
Vodafone UK) Vodafone UK
Vodafone UK %
proportion of
Group data
Scope 1 GHG emissions (million tonnes CO
2
e) 0.26 0.01 4
Scope 2 market-based GHG emissions (million tonnes CO
2
e) 0.78 0.03 4
Scope 2 location-based GHG emissions (million tonnes CO
2
e) 1.85 0.13 7
GHG emissions per EUR million of revenue (tonnes of CO
2
e) 26.77 7.35 –
Total energy consumption (GWh) 5,261 664 13
Non-Financial information
Non-financial information statement
The table below outlines where the key content requirements of the
{
non-financial information statement can be found within this document
(as
{
required by{
sections 414CA and 414CB of the Companies Act 2006).
Vodafone’s sustainable business reporting also follows other international reporting frameworks, including the Global Reporting Initiative,
the
{
SASB{
Standards, CDP and GHG Reporting Protocol.
Click to download our ESG Addendum:
investors.vodafone.com/esgaddendum
Click to read our SASB disclosures:
investors.vodafone.com/sasb
59
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Overview of risk governance structure
Risk management
Board/Audit and Risk Committee
–
Provide oversight for the Vodafone Group
–
Discuss, challenge and make a robust assessment of principal and emerging risks
–
Ensure appropriate risk culture is embedded throughout the organisation
Local oversight committees
Provide oversight for the local risk management programme
Local risk managers
Contact point for each market/entity on risk, facilitate all activities as defined by the
global
{
risk management frameworkLocal market CEOs
Set local objectives, identify priority risks and align tolerance levels with the
Vodafone
{
Group guidanceLocal risk owners
Senior managers in local management teams are responsible for local risks and the
local
{
risk programme to manage, measure, monitor and report on the risks
Risk and Compliance
Committee
–
Reviews principal,
watchlist and
emerging risks
–
Reviews
effectiveness of
risk
{
management across the Group
Group risk team
–
Responsible for the
application of the global risk
management framework
–
Supports the Board/ExCo
by
{
creating programmes to strengthen our risk culture
Group risk owners
–
ExCo risk owners
have responsibility
for management
of
{
the risk assigned to
{
them–
Senior executive risk
champions identify
and implement
mitigating actions
g
Assurance
Business assurance
functions
Review and provide
assurance over business
controls for the Group
and local markets
Internal Audit
Supports the Audit
and
{
Risk Committee in
{
reviewing the effectiveness of the
global risk management
framework and
management of
individual
{
risksVodafone Group
Local markets or
Group entities
Managing risks and uncertainties is an integral part
of
b
successfully executing our strategic objectives and
b
delivering our long-term success. Risks are not static and as the environment changes, so do risks
– some diminish or increase, while new risks appear.
Identifying our risks
The objective of the risk management function is to make risk meaningful
and relevant to the delivery of the Vodafone strategy, acting as an enabler
that helps make informed decisions across both the Group and our
local
{
markets.We take an end-to-end approach to risk management within Vodafone.
We start by identifying and assessing risks which could affect the local
strategy and operations in all local markets and Group entities. A consolidated
list of these risks is then presented to a selection of Group senior leaders
and executives, alongside the outputs from our external risk scanning
exercise. Applying a Group-wide perspective, these executives evaluate
and determine the top risks warranting further exploration. The proposed
principal risks (pages 60 to 63), emerging risks and risk watchlist (page 64)
are agreed by our Executive Committee (‘ExCo’) before being submitted
to the Audit and Risk Committee and the Board for scrutiny and approval.
Managing uncertainty
in our business
Managing our risks
We assign each of our risks to a category (strategic, operational or
financial – see next page) and identify the source of the threat (internal
or
{
external). This approach enables a better understanding of how we should treat the risk and provide the right level of oversight and assurance.
Executive risk owners are accountable for confirming adequate controls
are
{
in place and that the necessary treatment plans are implemented to
{
bring the risk within an acceptable tolerance level. We continue to
{
monitor the status of our risk treatment plans across the year and
{
perform{
in-depth reviews of our risks which are presented to
the
{
relevant{
oversight committees.
Read more about the Audit and Risk Committee
on pages 83 to 88
We also develop severe but plausible scenarios for each principal risk,
which provide additional insights into possible threats and enable a
better
{
risk treatment strategy. Scenarios are also used for the purpose of
{
assessing our viability.Read more about our viability statement
on page 65
The diagram below shows a simplified, high-level governance structure
for risk management.
Strategic report
Governance Financials Other information
60
Vodafone Group Plc
Annual Report 2022
Principal risks
Mitigation activities
We have a risk-based approach to managing
cyber security. We actively identify risks and
threats, design layers of control and implement
controls across all parts of the Group. The
approach balances controls that prevent the
majority of attacks, detect events and respond
quickly to reduce harm.
Scenario
Each year we model a severe but plausible
scenario. These have included attacks on core
infrastructure, a bulk data breach and loss of
major customer facing systems. We perform
regular cyber crisis simulations with senior
management in our markets and Group
functions using a tailored set of scenarios.
Emerging threats
Cyber risk is constantly evolving in line with
technological and geopolitical developments.
We anticipate threats will continue from existing
sources, but also evolve in areas such as 5G, IoT,
vendor
software integrity, quantum computing
and the use of AI and machine
{
learning.Read more about cyber and an
incident that affected Portugal
on
b
pagesb
49 to 51
Cyber threat
Risk ranking
movement
Risk owner
Group Technology Officer
Our strategy
Strategic
Risks affecting the execution of our strategy:
A Adverse political and policy environment
B Strategic transformation
C Disintermediation
D Infrastructure competitiveness
E Portfolio transformation
F Adverse market conditions
Financial
Risk related to our financial status, standing and continued growth:
G Adverse changes in macroeconomic conditions
Operational
Risks impacting our operations:
H Cyber threat
I Supply chain disruption
J Technology resilience and future readiness
Risk order is based on the category and not risk ranking
Year-on-year risk ranking movement
Increasing
Decreasing
No change
New risk
NEW
Customer commitments
Best connectivity products & services
Leading innovation in digital services
Outstanding digital experiences
Our strategy
Enabling strategies
Simplified & most efficient operator
Social contract shaping digital society
Leading gigabit networks
Risk management (continued)
Risk categorisation and interdependencies
Description
An external attack, insider threat or supplier
breach could cause service interruption or
confidential data breaches.
O
p
e
r
a
t
i
o
n
a
l
S
t
r
a
t
e
g
i
c
F
i
n
a
n
c
i
a
l
J
H
I
B
C
E
D
F
G
A
By analysing the correlation between risks, we can identify those that have the potential to
impact or increase other risks and ensure they are weighted appropriately.
This exercise also informs our scenario analysis, particularly the combined scenario used in the
long-term viability statement.
Read more about our viability statement
on page 65
Key:
External
Internal Bidirectional
Unidirectional
61
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Year-on-year risk ranking movement
Increasing
Decreasing
No change
New risk
NEW
Supply chain disruption
Adverse political and
policy environment
Strategic transformation
Mitigation activities
We are closely monitoring the evolution of
the
{
geopolitical environment. This enables us
{
to respond to emerging challenges and
{
to{
comply with regulations, economic
sanctions and trade rulings. We also mitigate
our exposure through having multi-year
contracts
{
with key suppliers, forecasting and forward ordering our inventory requirements
in
{
anticipation of extended lead-times as well
{
as continuing to execute our logistics optimisation strategy.
Scenario
Political decisions or environmental disasters
affecting our ability to use equipment from
specific vendors could cause trade and supply
chain disruptions.
Emerging threats
We are reliant on a number of key suppliers,
capable of providing infrastructure needed
to
{
run our network or products needed to sell to our customers, who in turn require critical
components such as chipsets, which could be
adversely impacted by global supply disruption
factors. Changes in political landscape, outside
of Vodafone’s control, for example, between
US and China or long-term impacts from
the
{
war in Ukraine may significantly impact upgrading and maintaining our network or
impact product availability when requested
by
{
our customers. Disruption may lead to an increase in our costs from areas such as higher
raw material prices, energy and shipping costs.
Risk ranking
movement
Risk owner
Chief Financial Officer
Our strategy
NEW
Mitigation activities
We actively address issues openly with
policy
{
makers and regulatory authorities to find mutually acceptable ways forward. As
a
{
last resort we uphold our rights through
legal
{
means.Scenario
Exposure to additional liabilities and
reputational damage, triggered by
policy
{
maker and/or regulatory authority interventions, or if tax laws were to adversely
change in the markets in which we operate.
Emerging threats
Regulations are becoming geographically
more
{
diverse and fragmented with increases in
{
protectionist behaviours, re-emergence of
{
preference for national champions, tax increases and heightened demands from
an
{
ESG perspective.Risk ranking
movement
Risk owner
Chief External and
Corporate Affairs Officer/
Chief Financial Officer
Our strategy
Mitigation activities
We have specialist teams executing our
organisational and digital transformation
activities. We have robust investment and
governance structures in place, such as our
Digital Steering Committee and Global Product
Board, dedicated to steering the transformation
efforts and ensuring we execute at scale. We
have also established our Products Operating
Model to transform our global product
management approach.
Scenario
The inability to achieve the expected benefits
through transformation activities whilst evolving
to a new generation connectivity and digital
services provider for Europe and Africa.
Emerging threats
The increased pace of change in the
organisation means we have to monitor
and
{
maintain the required culture and skillset
{
to{
support our transformational
initiatives. Competitors in the new service
categories are
{
digital native, so transforming our agile delivery capabilities will be critical.
Externally, as customer behaviours and their
preferences change, we might have to adapt
our transformation programmes accordingly.
Risk ranking
movement
Risk owner
Chief Commercial Officer/
Chief Human Resources Officer
Our strategy
Customer commitments
Best connectivity products & services
Leading innovation in digital services
Outstanding digital experiences
Our strategy
Enabling strategies
Simplified & most efficient operator
Social contract shaping digital society
Leading gigabit networks
Description
Disruption in our supply chain could mean that
we are unable to execute our strategic plans,
resulting in increased cost and reduced choice
as well as service quality.
Description
An adverse political and policy environment
could impact our strategy and result
in
{
increased costs, create competitive disadvantage or have negative impact
on
{
our{
return on capital employed.
Description
Failure to effectively execute the
transformational activities to deliver on
our
{
strategy could result in loss of business value and/or additional cost.
Strategic report
Governance Financials Other information
62
Vodafone Group Plc
Annual Report 2022
Mitigation activities
We continually strive to introduce innovative
propositions and services which enable us
to
{
deepen customer engagement beyond connectivity. We are focused on simplifying
our
{
product portfolio, building capabilities and partnering to create value beyond connectivity,
improving our operating model and processes,
and accelerating our digital transformation, in
order to offer the best customer experience.
Scenario
Large technology players invest in products
impacting our customer relationships,
cannibalising existing revenues and limiting
future growth opportunities in digital services
in Vodafone Business.
Emerging threats
Emerging risks span both Consumer and
Business
{
segments. In the Consumer segment,
the growing choice of communication solutions
could threaten our core business, while streaming
services could threaten our TV
{
business. In the Business segment, large technology players
could attempt to move further along the
telecommunication sector’s value chain.
Mitigation activities
We have a relatively resilient business model.
Our offers are competitive in the markets
in
{
which we operate. We are supporting our business customers’ efficiencies through our
innovative products. We have a long average
life of debt which minimises refinancing
requirements, and the vast majority of our
interest costs are fixed.
Scenario
A severe contraction in economic activity leads
to lower consumer spending and lower cash
flow generation for the Group and disruption
in
{
global financial markets impacts our ability to refinance debt obligations as they fall due.
Emerging threats
Because this is an externally driven risk, the
threat environment is continually changing.
External factors such as the war in Ukraine or
a
{
potential sovereign debt crisis could have
future impacts on economic activity across our
markets. The financial markets are currently
experiencing high levels of volatility, and both
sovereign debt and inflation have reached
record levels. These could lead to a significant
change in the availability and cost of capital.
Disintermediation Infrastructure competitiveness
Description
Failure to meet customers’ expectations
with
{
best available broadband technology in our fixed and mobile networks could lead to
loss of revenue.
Description
Failure to effectively respond to threats from
emerging technology or disruptive business
models could lead to a loss of customer
relevance, market share and new/existing
revenue streams.
Description
Adverse changes to economic conditions
could result in reduced customer spending,
higher interest rates, adverse inflation, or
foreign exchange rates. Adverse conditions
could also lead to limited debt refinancing
options and/or increase in costs.
Risk ranking
movement
Risk owner
Group Technology Officer
Our strategy
NEW
Risk ranking
movement
Risk owner
Chief Commercial Officer/
CEO Vodafone Business
Our strategy
Risk ranking
movement
Risk owner
Chief Financial Officer
Our strategy
Mitigation activities
Our Tech2025 Strategy incorporates fixed
and
{
mobile network evolution steps to enhance
broadband coverage and network performance.
In collaboration with our strategic suppliers,
we
{
are testing and deploying new technologies
which provide higher connection throughput,
lower latency and increased capacity.
Scenario
Competitors target our customers by
overbuilding our fixed connectivity network
or
{
accelerating their deployment of 5G mobile connectivity network or data usage growth
accelerates, requiring us to accelerate the
rate
{
of investment or become uncompetitive through underinvesting
Emerging threats
New and emerging applications require not
just low latency but also low jitter (no variation
in latency). High-end gaming, Augmented
reality/Virtual reality and future Metaverse
applications using holographic displays
and
{
haptic feedback sensors for immersive experiences may require higher upstream
speeds with low latency and low jitter which
is
{
a
{
challenge today for both fixed and
mobile
{
networks.Adverse changes in
macroeconomic conditions
Risk management (continued)
Year-on-year risk ranking movement
Increasing
Decreasing
No change
New risk
NEW
Customer commitments
Best connectivity products & services
Leading innovation in digital services
Outstanding digital experiences
Our strategy
Enabling strategies
Simplified & most efficient operator
Social contract shaping digital society
Leading gigabit networks
63
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
Portfolio transformation Adverse market conditions
Description
Failure to effectively execute on plans to
transform and shape the portfolio could result
in failure to deliver growth in revenue and
improved returns.
Description
Increasing competition could lead to price
wars, reduced margins, loss of market share
and/or damage to market value.
Technology resilience
and future readiness
Description
Network, IT or platform outages and/or
any
{
delays delivering our IT modernisation programme could lead to dissatisfied
customers and/or impact revenue.
Risk ranking
movement
Risk owner
Chief Executive/
Chief Financial Officer
Our strategy
Risk ranking
movement
Risk owner
Chief Commercial Officer
Our strategy
Mitigation activities
We monitor and pursue opportunities to
optimise our portfolio to deliver value for our
shareholders and improve returns. We actively
assess opportunities to, i) generate and realise
value from our assets, ii) deliver value accretive
in-market consolidation to deliver sustainable
market structures, iii) streamline and simplify
our portfolio.
Scenario
We are not an active participant of in-market
consolidation in key markets and do not
benefit from the resulting synergies.
Emerging threats
Regulatory approach to in-market
consolidation may not change in the
direction
{
expected, limiting opportunities for
{
value accretive in-market consolidation. The cost of financing transactions could also
be impeded by a higher cost of capital with
the
{
current inflationary environment resulting in increased interest rates.
Mitigation activities
We closely monitor the competitive
environment in all markets and react
accordingly to consumer and business
needs.
{
In many consumer markets, we have launched ‘second’ brands in order to compete
effectively and efficiently in the value segment.
Additionally, we evolve our offers and tariff
plans and aim to provide a differentiated
customer experience.
Scenario
Aggressive pricing, accelerated customer
losses to aggressive low value players on
mobile and fixed, and disruptive new market
entrants in key European markets result in
greater customer churn and pricing pressures
impacting our financial position.
Emerging threats
While emerging threats often depend
on
{
individual market structures and the competitive landscape, external factors such as
the war in Ukraine and the pandemic present
common global trends. The global sanctions,
global energy prices, and record high inflation
levels could potentially threaten disposable
income available for connectivity.
NEW
Mitigation activities
Recovery targets are set for critical assets
to
{
limit the impact of service outages. A
{
global
{
policy outlines the controls required
{
to{
ensure that technology
services
{
are resilient{
and in
{
alignment with
{
these targets.{
We
{
identify the{
risks for
the
{
relevant IT{
programmes to determine
whether they are
{
being effectively mitigated. Where gaps are
{
identified, recommendations for mitigation are raised and
{
the programmes are effectively de-risked.
Scenario
A major outage in a critical data centre could
reduce service to customers, affecting revenue
and reputation.
Emerging threats
Extreme weather events may
{
increase the likelihood or frequency of technology failure.
Additionally, deliberate attacks on national
critical infrastructure could increase during
war
{
or volatile periods. For IT transformation the increasing pace of change of customer
needs and the market environment may
have
{
an impact on the scope and timeliness of
{
the transformation programmes, thereby increasing the likelihood that they do not
deliver the benefits they set out to achieve.
Risk ranking
movement
Risk owner
Group Technology Officer
Our strategy
NEW
Year-on-year risk ranking movement
Increasing
Decreasing
No change
New risk
NEW
Customer commitments
Best connectivity products & services
Leading innovation in digital services
Outstanding digital experiences
Our strategy
Enabling strategies
Simplified & most efficient operator
Social contract shaping digital society
Leading gigabit networks
Strategic report
Governance Financials Other information
64
Vodafone Group Plc
Annual Report 2022
Key changes to our principal risks:
–
The scope of the
Strategic transformation
principal risk has been
{
clarified to focus on sub-risks that are more within our control internally. We have included product innovation and delivery as a
sub-risk, which was previously reported in the Disintermediation
principal risk. The
Portfolio transformation
element has been removed and now forms a standalone risk.
–
A new risk
Supply chain disruption
has been introduced. This risk expands on the geopolitical elements, (previously covered within
Geopolitical risk in supply chain principal risk) and covers a broader
range of supply chain risks.
–
Technology failure has been combined with IT transformation in a
new risk
Technology resilience and future readiness
.
–
Global economic disruption has been renamed
Adverse changes
in macroeconomic conditions
. The risk includes inflation,
interest rates and exchange rates, in addition to liquidity and market
access which were included in previous years.
–
A new risk,
Infrastructure competitiveness
, was included as a principal risk.
–
Legal and regulatory compliance
has been removed from
the
{
principal risk list, however, it will still be tracked through our risk
{
watchlist (see section below).Watchlist risks
Our watchlist risk process enables us to monitor material risks to
Vodafone Group which fall outside of our top principal risks list.
These
{
include, but are not limited to: Legal compliance
The legal compliance risk is made up of multiple sub-risks (sanctions and
trade controls, competition law, anti-bribery and anti-money laundering).
Controls are in place to monitor and manage these risks and for
compliance with the relevant regulations and legislation.
Read more about
ȁ
Doing What’s Right’ training on page 47
Data management and privacy
As data volumes continue to grow and regulatory and customer scrutiny
increases, it is important that we manage our privacy risks effectively.
Read more about privacy
on pages 47 to 49
Electromagnetic field (‘EMF’)
The health and safety of our customers and the wider public has always
been, and continues to be, a priority for us. We know that some people are
concerned about whether there are risks to health from mobile phones
and radio masts. We refer to the current body of scientific evidence so
that the services and products we provide are within prescribed safety
limits and adhere to all relevant standards and national laws.
Read more about EMF
on page 53
Climate change
As part of our commitment to operate ethically and sustainably, we are
dedicated to understanding climate-related risks and opportunities and
embedding responses to these into our business strategy and operations.
Read more about the Task Force on Climate-related
Financial
b
Disclosures (ȁ
TCFD’) on pages 66 to 67
Emerging risks
We face a number of uncertainties where an emerging risk may
potentially impact us in the
{
longer term. In some cases, there may be
insufficient information to understand the likelihood, impact or velocity
of
{
the risk. We also might not be able to fully define a mitigation plan until
{
we have a better understanding of the{
threat.
We continue to identify new emerging risk trends, using the input from
analysis of the external environment. Furthermore, we have strengthened
the identification process by involving our functional experts and our
global risk community in this emerging risk scanning exercise.
Once the emerging risks are prioritised by the functional experts, scenarios
are created to assist in the analysis of each risk. These emerging risks and
scenarios are provided to the Risk and Compliance Committee and the
Audit and Risk Committee for further scrutiny.
During the year, three additional emerging risks were added to our list:
–
Inflation (beyond a three-year period);
–
Generation Z as customers; and
–
Disintermediation (beyond a three-year period).
Macro factors affecting the risk profile
We continue to closely monitor the ongoing effects on the economy
and
{
operations brought on by the turmoil from the COVID-19 pandemic. We continue to implement treatment plans throughout our business to
reduce the impact.
Given that the current geopolitical environment is evolving and continues
to develop we continue to consider the consequential impacts for the
Group and its operations. Multiple scenarios have been evaluated to
identify consequential risks and what management actions would
be
{
required. Read more in the mega trends section
on pages 12 and 13
Strengthening our framework
We continue to enhance and embed the global risk management
framework which aims to mature our process. This improves consistency
across the markets where we operate and provides the appropriate level
of oversight for the different risk types.
Over the course of the year, we have:
–
Improved our process for the identification and assessment of
emerging risks
(see section above);
–
Updated our approach in determining
risk tolerance
and the process to manage risks which are outside of our tolerance level;
–
Increased the frequency of
reporting
to our governance committees using a more agile approach, so that risks can be better monitored
and
{
appropriate treatment actions can be implemented; and –
Continued to align with the TCFD recommendations for
climate-related
risks and opportunities.
Risk management (continued)
65
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
The preparation of the LTVS includes an assessment of the Group’s
long-term prospects in addition to an assessment of the ability to meet
future commitments and liabilities as they fall due over the three-year
review period.
Assessment of viability
The Board has chosen a three-year period to assess Vodafone
Group’s
{
viability, a period in which we believe our principal risks tend
{
to{
develop. This time horizon is also in line with the structure of
long-term management incentives and the outputs from the long range
business planning cycle. We continue to conduct financial stress testing
and sensitivity analysis, considering revenues at risk as well as the impact
of our response plan to the crisis.
The assessment of the viability started with the available headroom as
of
{
31 March 2022 and considered the plans and projections prepared as
{
part of the forecasting cycle, which include the Group’s cash flows, planned commitments, required funding and other key financial ratios.
We also assumed that debt refinance will remain available in all plausible
market conditions.
Finally, we estimated impact of severe but plausible scenarios for
all
{
of{
our principal and emerging risks on the three-year plan and,
in
{
addition, stress tested a combined scenario taking into account the risk
{
interdependencies as defined on the diagram on page 60, where the
{
following risks were modelled as materialising in parallel over the
three-year period:
Cyber threat:
A cyber-attack exploits vulnerabilities allowing access to
IT
{
and network systems, leading to breach in information and a GDPR
fine. The cyber threat level increased as a result of geopolitical tension.
Supply chain disruption:
Disruptions brought on by logistic challenges
and supplier price increases, due to the volatile geopolitical environment
(including the war in Ukraine).
Adverse changes in macroeconomic conditions:
A global
economic crisis resulting in reduced telco spending from businesses
and
{
consumers, increased inflation, as well as limited access to financial markets and availability of liquidity.
Assessment of prospects
Assessment of viability
Outlook, strategy & business model
Outlook of possible long-term scenarios expected in the sector and the Group’s current position to face them
Assessment of the key principal risks that may influence the Group’s long-term prospects
Articulation of the main levers in the Group’s strategy and business model ensuring the sustainability of value creation
Long Range Plan
is the three-year forecast approved by the Board on an annual basis, used to calculate cash position and headroom
Headroom
is calculated using cash, cash equivalents and other available facilities, at year end
Sensitivity analysis
to assess the level
of
{
decline{
in performance that the Group
could
{
withstand, were a black swan
event
{
to{
occur
Severe but plausible scenarios modelled
to
{
quantify the cash impact of an individual
{
principal risk
materialising over
{
the{
three-year period
Quantification of the cash impact of
combined
{
scenarios where multiple risks
materialise across one or more markets,
over
{
the{
three-year period
Viability
results from comparing the cash impact of severe but plausible scenarios on the available headroom, considering additional liqu
idity options
Long-term viability statement
Disintermediation:
A continued and uninterrupted growth of technology
giants and new entrants could impact our business revenue and overall
financial performance.
Assessment of long-term prospects
The Board undertakes a robust review and challenge of the strategy and
assumptions. Each year the Board conducts a strategy session, reviewing
the internal and external environment as well as significant threats and
opportunities to the sustainable creation of long-term shareholder value
(note that known emerging threats related to each principal risk are
described on pages 60 to 63).
As an input to the strategy discussion, the Board considers the principal
risks (including Cyber threats, Supply chain disruption, Adverse changes
in macroeconomic conditions, and Disintermediation) with the focus
on
{
identifying underlying opportunities and setting the Group’s future strategy. The output from this session is reflected in the strategic section
of the Annual Report (pages 10 to 13), which provides a view of the
Group’s long-term prospects.
Conclusions
The Board assessed the prospects and viability of the Group in
accordance with provision 31 of the UK Corporate Governance Code,
considering the Group’s strategy and business model, and the
{
principal risks to the Group’s future performance, solvency, liquidity and reputation.
The assessment takes into account possible
{
mitigating{
actions available
to management were any risk
{
or{
combination of risks to materialise.
Cash and cash equivalents available of €7.5bn (page 176) as of
31
{
March{
2022, along with options available to reduce cash outgoings
over the period considered, provide the Group with sufficient positive
headroom in all scenarios tested. Reverse stress testing on revenue and
EBITDA over the review period confirmed that the Group has sufficient
headroom available to face uncertainty. The Board deemed the stress
test conducted to be adequate and therefore confirm that they have a
reasonable expectation that the Group will remain in operation and be
able to meet its liabilities as they fall due up to 31 March 2025.
Long-term viability statement
Directors confirm that they have reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over the three-year period
Sensitivity analysis Principal risks Combined scenario
Strategic report
Governance Financials Other information
66
Vodafone Group Plc
Annual Report 2022
We recognise that climate change poses a
number
b
ofb
physical (i.e. extreme weather events)
and
b
transition-related (i.e. related to moving to a greener economy) risks and opportunities for our
business. As part of our commitment to operate
ethically and sustainably, we
b
strive to understand climate-related risks and opportunities and embed
responses to these into our
b
business strategy and operations. We have been
b
aligning our internal processes with the recommendations of the
Task
b
Force on Climate-related Financial Disclosures (
ȁ
TCFD’) for the last three
b
years and will continue
to
b
enhance our policies,b
processes and reporting
with
b
respect to theb
TCFD recommendations.
Our
b
progress is summarised in this section. TCFD recommendations
We are fully compliant with eight out of 11 TCFD recommendations for
the year ending 31 March 2022. There are certain recommendations,
listed below, where we are currently only partially compliant:
–
Strategy (financial planning):
The majority of the identified
material
{
climate-related risks could impact us most significantly in the
{
medium to long term, whereas our current financial planning cycle extends out to five years. As a result, we do not currently fully disclose
impacts of climate-related risks and opportunities in the context of
financial planning.
–
Metrics and targets (physical risks):
We currently disclose metrics
and targets related to the climate-related transition risks as Planet is
one of three purpose pillars. The physical climate-related risks that we
have identified are more likely to materialise over the longer term and
are therefore more difficult to model. As a result, we do not currently
disclose metrics and targets related to physical risks but we continue to
work on improving the quality and quantity of data to address the gaps.
As industry practices evolve and our internal programme matures we will
address the gaps in our climate-related risk management approach.
TCFD reporting
Similar to last year’s disclosure, we have once again published our
comprehensive TCFD disclosure in a standalone report. This enables us
to
{
provide more detailed information for investors and other interested stakeholders in a more accessible format.
Click to read our TCFD report:
investors.vodafone.com/tcfd
Governance
Our strategy is approved by the Board which has reviewed Vodafone’s
purpose and Planet commitments to reduce our environmental impact,
such as reaching ‘net zero’ emissions by 2040. The Board’s Audit and Risk
Committee has oversight of our climate-related risks and opportunities.
In
{
addition, the Board established an ESG Committee in 2021 to provide
oversight of the broader ESG strategy.
Read more about the ESG Committee
on pages 89 to 90
The Chief External and Corporate Affairs Officer, a member of the
Executive Committee, is the sponsor for the Planet agenda as part of our
purpose-led strategy and has overall accountability for climate change
action within the Group. This includes providing updates to the Board on
the progress towards our climate-related goals. The Chief Technology
Officer is responsible for the overall management of the physical risks
to
{
Vodafone due to the nature of our business. TCFD disclosure
Task Force on Climate-related Financial Disclosures
Progress
Governance
a.
Describe the board’s oversight of climate-related risks
and opportunities
b.
Describe management’s role in assessing and
managing climate-related risks and opportunities
Strategy
a.
Describe the climate-related risks and opportunities
the organisation has identified over the short, medium
and long term
b.
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning
c.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
Risk Management
a.
Describe the organisation’s processes for identifying
and assessing climate-related risks
b.
Describe the organisation’s processes for managing
climate-related risks
c.
Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation’s overall risk management
Metrics and Targets
a.
Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process
b.
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks
c.
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets
Key
Compliant with the TCFD recommendations
Partially compliant with the TCFD recommendations
C
PC
TCFD recommendations
We have considered our ‘comply or explain’ obligation under the UK’s
Financial Conduct Authority Listing Rules and have detailed in the
table below the 11 TCFD recommendations with which we fully or
partially comply with.
Progress
Progress
Progress
C
C
C
C
C
C
C
C
PC
PC
PC
67
Vodafone Group Plc
Annual Report 2022
Strategic report
Governance Financials Other information
In addition, at the 2020 AGM shareholders approved the current
Remuneration Policy which incorporates our ESG priorities in the
executive long-term incentive plan. For FY22, this measure included a
specific greenhouse gas reduction ambition linked to our 2025 target
of
{
reducing our emissions by 50% from a FY17 baseline. Read more about the Remuneration Report on
pages 99 to 112
Strategy
This year, we undertook an exercise to refresh the top climate-related
risks and opportunities assessment to ensure we are incorporating
any
{
changing climate trends or science, as well as new risks and opportunities. The exercise confirmed that the identified risks and
opportunities remain largely unchanged from the previous assessment,
although some require more attention in the short term due to the
macroeconomic environment.
In 2020, we adopted three scenarios in line with the Bank of England’s
reference climate scenarios, as outlined in their consultation document
released in December 2019. We used the outputs of the high-level
impact
{
analysis for all material climate-related risks identified in the three
{
different scenarios and over different time horizons to better understand the potential impact on our business.
This year, we built on our previous climate scenario work and considered
our resilience against key climate-related risks and opportunities. We
engaged the relevant stakeholders from across the business to understand
and/or monitor the current processes and policies which enable us to
mitigate or monitor climate-related risks and capture climate-related
opportunities. For each material risk and opportunity, we mapped the
current controls in place and the strength of those controls. Overall,
we
{
have controls in place for all identified key risks and this helps build resilience against the potential impacts on the business.
Physical risks are assessed and considered throughout the critical
stages
{
of the asset lifecycle. Environmental risks are assessed ahead of
{
the acquisition of buildings and network equipment. We have teams
and processes dedicated to disaster recovery and business continuity.
In
{
addition, we mitigate the financial impact of physical risks through insurance and damage response. Our broader Planet strategy, targets
and
{
external communications are designed to manage and mitigate the
{
potential impacts of transition risks on the Group. We have specialist teams who monitor and drive progress to maintain and meet expectations
from key stakeholders such as customers, suppliers and broader society.
Similarly, harnessing our current climate and ESG strategy and monitoring
market trends will enable us to also capture opportunities arising from the
low-carbon transition.
Read more about how our products and services help
our
b
customers reduce their emissions on page 43To continue our TCFD programme, we will conduct a pilot study looking
at our physical climate risk for a number of our key assets to allow for a
better understanding and quantification of our exposure to physical risks.
Risk management
Continued alignment of our climate-related risk management
process
{
with our global risk management framework is a priority activity.
{
Climate{
change was discussed and considered during the
principal risk assessment process and it was placed on our risk watchlist.
Read more about our risk management framework
on pages 59 to 60, 64
To ensure a robust assessment of climate-related risks and opportunities
we used the following data sources:
–
Climate-change publications and data;
–
Guidance from the TCFD on potential risks and opportunities;
–
Previous year’s assessments; and
–
Key stakeholders’ inputs via a survey.
We evaluated the materiality of the identified risks and opportunities by
assessing their likelihood and impact using our global risk management
framework. This process helped us determine the relative significance of
the climate-related risks in relation to other risks.
Due to the nature of the topic, there are many teams across Vodafone
that are responsible for managing climate-related risks and we have
multiple processes and policies in place to ensure we are managing them
effectively. This year, we mapped the key risk and control owners for the
material climate-related risks and opportunities.
Metrics and targets
We use a wide variety of metrics to measure the current and potential
impacts of climate-related risks. We have been measuring and reporting
on energy and carbon emissions since 2001 and have been responding
to CDP’s climate change questionnaire since 2010. Our main carbon
emissions metrics are also subject to independent limited assurance. In
addition, we have set a number of targets to manage climate-related risks
and reduce our impact on the environment, such as reaching ‘net zero’
emissions across our full value chain by 2040 and purchasing 100%
renewable electricity in all markets by 2025. From July 2021, our
European network is already 100% powered by electricity from
renewable sources.
Click to download our ESG Addendum:
investors.vodafone.com/esgaddendum
We constantly seek to refresh and improve our metrics and key risk
indicators to better measure and manage climate-related risks and
opportunities. We recognise that we need to further mature in this
area
{
as{
industry practices and good-quality data become available.
Read more about our existing environmental KPIs
on pages 5, 41 to 43
Material climate-related risks and opportunities
Physical risks:
–
Damage to infrastructure caused by increasing frequency and severity
of extreme weather events, including wildfires, flooding, and storms
–
Damage to infrastructure caused by sea level rise
–
Interruption or reduction in the quality of our wireless services due
to increased precipitation
Transition risks:
–
Changing consumer preferences impacting our revenues and
market share
–
Increasing energy consumption due to increased global temperatures
–
Changing cost of carbon impacting costs to meet our net zero target
–
Increasing risk of litigation around climate action
–
Increase in carbon taxation
–
Changes in regulation over infrastructure efficiency
–
Increasing scrutiny from investors and failure to meet
environmental targets impacting reputation
–
Third-party dependency impacting our ability to meet carbon
targets and improve efficiencies
Opportunities:
–
Improvement in market valuation as a result of changing investor
expectations with regard to climate change and our broader
ESG
{
performance
–
Improvement in
access to capital due to our sustainability performance
–
Increasing consumer attractiveness and ability to meet net zero
targets through increased energy efficiency and enablement
qualities of products and services
–
Reduced costs through sustainable procurement
Strategic report Financials Other information
68
Vodafone Group Plc
Annual Report 2022
Governance
Our Board
Leadership, governance and engagement
Governance at a glance
Membership and attendance
The table below details the Board and Committee meeting attendance
during the year to 31 March 2022. The number of attendances is shown
next to the maximum number of meetings the Director was entitled to
attend. Ad hoc meetings of the Board and its Committees were also held
as required during the year.
Name Board
Nominations and
Governance
Committee
Audit and Risk
Committee
Remuneration
Committee
ESG
Committee
Sanjiv Ahuja 1/1 – 1/1 – –
Sir Crispin Davis 6/7
1
4/4–––
Margherita
Della 7/7 – – – –
{
ValleMichel Demare 7/7 2/2 5/5 5/5 –
Dame Clara Furse 7/7 – – 5/5 2/2
Valerie Gooding 7/7 4/4 – 5/5 2/2
Renee James 2/2 2/2 – 2/2 –
Deborah Kerr 1/1 – 1/1 – –
Amparo Moraleda 7/7 – 5/5 – 2/2
David Nish 7/7 – 5/5 – –
Nick Read 7/7 – – – –
Jean-François
van 7/7 3/3 – – –
{
BoxmeerNote:
1. Sir Crispin Davis was unable to attend one scheduled meeting of the Board due to ill health.
Board evaluation
Progress in the year
The 2022 Board evaluation reported
improvements had been achieved in:
–
Review of strategy and focus on
strategic
{
priorities; –
Better aligned metrics and reporting; and
–
Improved discussion of people and culture.
Actions for coming year
–
Recruit Non-Executive Directors with
telecoms and technology experience.
–
Use small Board groups to focus on
particular topics.
–
Track progress on project execution with
timelines and milestones.
Read more
on page 79
Tenure
3
4
3
7-10 years 37-10 years 30-3 years 4
4-6 years 3
0-3 years 4
4-6 years 3
Gender diversity
50%
Female 5Female 5
Male 5Male 5
Independence
1
7
2
Independent 1
NED Chair
Independent 1
NED Chair
Independent 7
Executive 2
Independent 7
Executive 2
4
5
4
1
4
2
Political/
Regulatory
Technology/
Telecom
Media
Emerging
markets
FinanceConsumer
goods and
services/
Marketing
Skills and expertise of Non-Executive Directors
Scan or click to watch our Chairman, Jean-François
van Boxmeer, share his views on
b
Vodafone:
investors.vodafone.com/videos
1
1
202120202019201820172016201520142013 2022
1
Ethnically diverseEthnically diverseWhiteWhite
Ethnicity
11
10
11
10
11
13
12
11 11
10
2
1
1
11
1
2
Senior Board positions
Chair
Chief
Executive
Senior
Independent
Director
Chief Financial
Of
ż
cerNote:
As at 31 March 2022
Note:
1. Following an unexpected resignation during the year, it is disappointing that we do not currently
meet
{
the Parker Review target, however this does not fairly reflect our long-standing commitment to diversity. We continue to take practical and purposeful steps towards enhancing the Board’s diversity.
The Nominations and Governance Committee regularly reviews the Board’s composition
with a view to
b
ensuringb
a diverse mix of
b
backgrounds, skills, knowledge and experience as well
as deep expertise in
b
technology and telecommunications. Each year, the Board monitors and improves its performance by
b
conducting an annual performance review.
Strategic report Other information
Governance
Financials69
Vodafone Group Plc
Annual Report 2022
Audit and Risk Committee
The Committee oversees the Group’s financial reporting, risk
management, internal control and assurance processes and the
external
{
audit. This includes in-depth reviews of our principal risks, the
{
review of{
our Annual Report and a programme of deep-dives across
multiple business units with a focus on the risk and control environment.
The Committee also monitors the activities and effectiveness of the
Internal
{
Audit function and has primary responsibility for overseeing the
{
relationship with the external auditor. Deep-dive topics this year were undertaken in cyber threats and information security, privacy and supply
chain resilience. Entity deep-dives included Vodafone Business, Vantage
Towers, Vodafone Germany, Vodafone Egypt and our shared services
centres (_VOIS).
Read more
on pages 83-88
Recent and prospective appointments
Deborah Kerr was appointed to the Board as a Non-Executive Director
on
{
1 March 2022. Deborah brings a wealth of technology expertise across
{
a range of sectors and her knowledge and strategic insights on the
{
technology market provide invaluable experience to the Board as Vodafone continues its evolution into a new generation connectivity
and
{
digital services provider. MWM Consulting was engaged as search consultants and an overview of the appointment process is shown below.
STEP
1
A detailed role specification was formulated with strong
experience in the technology sector a key focus following
the
{
departure of a long standing Board memberSTEP
2
A list of potential candidates from diverse backgrounds
was
{
producedSTEP
3
Interviews took place with Committee members and the
Chief
{
Executive, Nick ReadSTEP
4
The Committee agreed the preferred candidate for
recommendation to the Board
In May, we announced that Stephen Carter, Delphine Ernotte Cunci
and
{
Simon Segars will be joining the Board as Non-Executive Directors following the Company’s AGM on 26 July 2022, subject to shareholder
approval. Stephen brings a track record of value creation and has
extensive commercial and regulatory experience in the telecoms and
media sectors. Delphine has considerable experience
{
in the telecoms sector and, more recently, in media and
{
technology. Simon brings significant experience and insights on technology trends and how these
are reshaping industry landscapes.
Scan or click to watch the Senior Independent Director
and Chair of the Remuneration Committee explain her
role:
investors.vodafone.com/videos
Committee activities
Nominations and Governance Committee
In addition to keeping under review developments in corporate
governance and the Company’s responses to them, the Nominations
and
{
Governance Committee makes recommendations to the Board about Board composition and ensures Board diversity and the necessary
balance of skills. The Committee recognises the need to anticipate the
skills and attributes that will be needed on the Board as the Company
develops. In light of several Board changes in recent years and the
scheduled retirement of a number of Directors in the next several years,
the Committee is currently undertaking a process to find and appoint
directors with telecoms and technology sector experience.
Read more
on pages 80-82
Scan or click to watch the Chair of the ESG Committee,
Amparo Moraleda, explain her role:
investors.vodafone.com/videos
ESG Committee
The Committee provides oversight of Vodafone’s ESG programme:
Purpose (Inclusion for All; Planet; and Digital
{
Society), sustainability and responsible business practices as well as Vodafone’s contribution to the
societies we operate in under the social contract. The Committee also
monitors progress against key performance indicators and external
ESG
{
index results. Focus this year centred on establishing the governance
arrangements for the Committee, including the Terms of Reference and
standing agenda items to reflect the Committee’s purpose. Key discussion
topics included carbon enablement, Digital4Green, device lifecycle
management and the external ESG context.
Read more
on pages 89-90
Scan or click to watch the Chair of the
Audit Committee, David Nish, explain his role:
investors.vodafone.com/videos
Remuneration Committee
The Remuneration Committee sets, assesses and recommends for
shareholder approval the Remuneration Policy for Executive Directors,
sets the remuneration of the Executive Directors and approves the
remuneration for the Chair of the Board and members of the Executive
Committee. It also reviews remuneration arrangements across the Group
to ensure they are aligned with our strategy, support our purpose and
celebrate the ‘Spirit of Vodafone’.
Fair pay principles:
1. Market competitive 4. Share in our successes
2. Free from discrimination 5. Provide benefits for all
3. Ensure a good standard of living 6. Open and transparent
96%
shareholder support for the current Remuneration Policy
Read more
on pages 91-112
To operate efficiently and to ensure matters are given the right level of focus, the Board delegates
some
b
ofb
its
b
responsibilities to its Committees. These provide focused oversight on: Board composition,
performance, and
b
succession planning
financial reporting, internal processes and controls
remuneration
b
practices
and
b
environmental, sustainability and governance topics.
Strategic report Financials Other information
70
Vodafone Group Plc
Annual Report 2022
Governance
Strong and robust corporate governance is integral
to
b
supporting our continued strategy execution, business resilience and contribution to the societies
in
b
which we operate.Dear shareholders,
I am pleased to present the Corporate Governance Report for the year
ended 31 March 2022 on behalf of the Board.
The year in review
The restrictions imposed by the COVID-19 pandemic have continued to
impact the societies in which we operate this year and, with the backdrop
of the war in Ukraine, reinforced the immense value of connectivity that
Vodafone provides. We take seriously our commitment to strong and
robust corporate governance to support the creation of long-term
sustainable value for the benefit of all our stakeholders. Although Board
and Committee meetings have taken place both in person and virtually
this year in accordance with the government guidance in place at the
time, we have continued to adapt quickly to the hybrid world to ensure
the highest standards of corporate governance remain embedded
throughout the Company.
I am grateful to my fellow Directors, the executive team, and the people of
Vodafone for their support, flexibility, and strong spirit throughout another
disrupted year.
This report provides an insight into the activities of the Board and
Committees over the year and how corporate governance underpins
and
{
supports our business and the decisions we make. Digital ambitions
As described in the Strategic Report, digital connectivity infrastructure and
technologies continue to revolutionise the way in which our economies
and societies function. The Board remains committed to driving forward
these digital ambitions as part of our strategy to enable the societies we
operate in to remain competitive for the future.
Read more about our digital ambitions
on pages 6, 44-45
Board succession and diversity
This year, the Board, together with the Nominations and Governance
Committee has continued to focus on succession planning. We reported
last year that Renee James would not be seeking re-election as a
Non-Executive Director at the 2021 Annual General Meeting (‘AGM’)
having reached the recommended tenure threshold. Sanjiv Ahuja also
stepped down as a Non-Executive Director with effect from the same date
having decided to pursue other business interests. In September 2021,
Olaf Swantee stepped down as a Non-Executive Director when a potential
conflict of interest arose. Following these Director changes, we have
actively engaged with two search consultancies to ensure the Board
has
{
the necessary skills, knowledge, experience and diversity to deliver superior performance and enhance the success of the Company.
I am delighted that following a thorough search process Deborah Kerr
joined the Board on 1 March 2022 as a Non-Executive Director. Deborah’s
knowledge and strategic insights on the technology market will be an
excellent addition to the Board and Audit and Risk Committee.
Read more about the appointment process
on page 69
A full induction programme is underway for Deborah, including meetings
with executives leading our businesses and functions. The programme will
run throughout FY23.
In May, we announced that Stephen Carter, Delphine Ernotte Cunci and
Simon Segars will be joining the Board as Non-Executive Directors following
the Company’s
AGM on 26 July 2022, subject to shareholder approval. They
are well-respected leaders who bring extensive experience and track records
of value creation across the telecoms, technology and media sectors.
A
{
full
{
induction programme will also be{
implemented during FY23.
We are anticipating several scheduled retirements from the Board over
the next two years. We expect to bring on to the Board new Directors with
telecoms or technology sector experience. I look forward to updating you
on our progress in my report next year.
We remain committed to having a Board that is diverse in all respects. We
meet the FTSE Women Leaders Review targets in that at least 40% of the
Board is composed of women and our Senior Independent Director and
our Chief Financial Officer are women. Having had a non-white Director
on
{
the Board for 18 consecutive years until July 2021 when Sanjiv Ahuja
stepped down, it is disappointing that currently we do not meet the
Parker
{
Review target to have at least one Director from a non-white ethnic minority. We strongly believe that these diversity targets are
not
{
just an end goal, but a continuous journey. Our long-term ambition is
{
to{
increase diversity on our Board, in all its forms, to ensure a wider
representation of the society in which we operate.
Read more about our refreshed Board Diversity Policy
on page 81
We have also introduced a new ethnic diversity target that 25% of the global
senior leadership will come from ethnically diverse backgrounds by
{
2030. Read more
on pages 39-40
Stakeholder engagement
We recognise that Vodafone’s success is dependent on the Board taking
decisions for the benefit of our shareholders and in doing so having regard
to all our stakeholders.
Throughout the year, our Directors have interacted with institutional
shareholders and received updates on the three investor perception
studies completed during the year.
Read more
on pages 14-15
The 2021 AGM was held at Vodafone UK’s headquarters in Newbury,
Berkshire and was also available to watch live via a webcast for
{
those shareholders who were unable to attend in person due to the COVID-19
government guidance. Shareholders were also able
{
to pre-submit questions for consideration by the Directors at the meeting.
Click to read more about the AGM:
vodafone.com/agm
This year we have continued with our chosen workforce engagement
approach, with Valerie Gooding serving as our designated Workforce
Engagement Lead. Valerie met with a number of employee consultative
committees across our European and African markets. Key discussion
topics from the meetings this year included Future Ready ways of working,
response to COVID-19 and the progress on Vodafone’s Fair Pay
{
agenda.
The Board is committed to understanding the views of all of Vodafone’s
stakeholders to inform the decisions that we make.
Read more
on pages 14-15
We remain committed to the highest standards
of
{
corporate governance
Chairman’s governance statement
Strategic report Other information
Governance
Financials71
Vodafone Group Plc
Annual Report 2022
Compliance with the 2018 UK Corporate
Governance
{
Code (the ‘Code’)In respect of the year ended 31 March 2022 Vodafone Group Plc
was
{
subject to the Code (available from www.frc.org.uk). The Board is pleased to confirm that Vodafone applied the principles and complied
with all the provisions of the Code throughout the year. Further
information on compliance with the Code can be found as follows:
Board leadership and Company purpose
Long-term value and sustainability
Culture
Shareholder engagement
Other stakeholder engagement
Conflicts of interest
Role of the Chairman
Division of responsibilities
Non-Executive Directors
Independence
Composition, succession and evaluation
Appointments and succession planning
Skills, experience and knowledge
Length of service
Evaluation
Diversity
Audit, risk and internal control
Committee
Integrity of financial statements
Fair, balanced and understandable
Internal controls and risk management
External auditor
Principal and emerging risks
Remuneration
Policies and practices
Alignment with purpose, values and long-term strategy
Independent judgement and discretion
Purpose and the ‘Spirit of Vodafone’
Our purpose ‘We connect for a better future’ is at the core of our strategy,
enabling inclusive and sustainable digital society. It has guided actions at
every level throughout the year.
Read more
on pages 36-58
The Board understands the importance of culture and setting the tone
of
{
the organisation from the top and embedding it throughout the Group. We refer to our culture as the ‘Spirit of Vodafone’. It is a key component
for our strategic, organisational and digital transformation. The aim of our
people strategy is to create an environment where growing never stops
and everyone can truly belong, innovate, and fulfil their potential. Our
first
{
quarterly ‘Spirit of Vodafone’ day took place in October 2021 and
was
{
designed to provide dedicated space for personal growth, wellbeing and connection. Following the success of this initiative, further ‘Spirit of
Vodafone’ days have been scheduled.
Read more about our culture and people strategy
on pages 21-23
The Board receives regular updates on employee engagement and the
‘Spirit of Vodafone’, which enables it to make more informed decisions
where appropriate.
Board evaluation
This year the Board undertook an external evaluation in order to build on
the recommended actions from last year. I am pleased the report shows
that your Board continues to operate effectively.
Read more
on page 79
ESG Committee
In 2021, the Board established an ESG Committee which met twice in the
year. The Committee has noted that Vodafone’s approach to ESG is part
of its growth strategy and a driver of commercial success. The approach
is
{
forward-looking, focused on long-term value and brings together five
{
elements: 1.
Vodafone’s purpose and the actions Vodafone takes to fulfil its Digital
Society, Inclusion and Planet agenda;
2.
Vodafone’s social contract work;
3.
Responsible business practices which ensure Vodafone operates to the
highest standards of integrity and ethics;
4.
Transparency, including providing correct disclosures and reporting on
all aspects of ESG; and
5.
Measurement, so that Vodafone’s performance is measured in ways
that meet the information requirements of various stakeholders.
The year ahead
The Board will continue to drive for better returns for shareholders and
will monitor the Company’s progress on the execution of Vodafone’s
strategy. It will keep the Group’s strategy under review, adapting it to
anticipate or respond to opportunities and risks in the markets in which
we operate. Also, through the work of the Board’s Committees, the Board
will develop the Board’s composition, will continue to oversee financial
reporting and the effectiveness of internal controls, will review the
Company’s remuneration policy and will track progress on ESG strategy.
Jean-François van Boxmeer
Chairman of the Board
Scan or click to watch our Chairman, Jean-François
van Boxmeer, share his views on
b
Vodafone:
investors.vodafone.com/videos
Disclosure Guidance and Transparency Rules
We comply with the Corporate Governance Statement requirements
pursuant to the FCA’s Disclosure Guidance and Transparency Rules
by
{
virtue of the information included in this p
Governance
q
section of
{
the Annual Report together with information contained in the ‘Shareholder information’ section on pages 234 to 239.
14-15 70-71
14-15
81
76
68
69
68
73-74
68
73-74
7968
8168
38-39
83-84
118
84-85
65
117-118
84
86-87
87
86
59-67
91-95
91-112
101
92
65
34-55
21-22
47
Read more
Read more
Read more
Read more
22
76
73-74
80
Read more
Strategic report Financials Other information
72
Vodafone Group Plc
Annual Report 2022
Governance
Our Company purpose, values, and culture
Purpose
At Vodafone, our purpose is to connect for a better future by enabling
inclusive and sustainable digital societies and it is supported by our three
purpose pillars: Inclusion for All, Planet and Digital Society. Our purpose
is
{
championed by our Board, which is collectively responsible for the oversight and long-term success of the Company. It is aligned with
our
{
culture and strategy, placed at the forefront of our decision-making and
{
strategy development, and the Board considers how the initiatives progressed by management throughout the year have advanced our
purpose. Board oversight ensures that continued product development
realises our ambition to connect for a better future.
Read more about our purpose
on pages 36-40
Strategy
The Board monitors the Company’s progress against established strategic
objectives and performance against competitors. Board meetings are
planned with reference to the Company’s strategic priorities and meeting
agendas are constructed to deliver information at appropriate junctures,
and from a broad range of management, to enable the Board to
effectively review and challenge.
Read more on the evolution of our strategy
on pages 16-23
Values and culture
The Board has a critical role in setting the tone of our organisation
and
{
championing the behaviours we expect to see throughout the Group.
{
The ‘Spirit of Vodafone’ aligns with our purpose and strategy, which ultimately leads to a more motivated and productive workforce.
The Board has continued to influence and monitor culture throughout
the year and receives regular updates on the Spirit of Vodafone initiatives,
including the Spirit Beat survey and additional pulse surveys. The Chief
Executive, Nick Read also provides regular updates to our people on the
outcomes of the surveys.
The cultural climate in Vodafone is measured through a
{
number of
mechanisms including policy and compliance processes, internal
audit
{
and formal and informal channels for employees to raise
concerns
{
(including our bi-annual people survey and our whistleblowing programme, Speak Up, which is also available to the contractors and
suppliers working with us). The Board is appraised of any material
whistleblowing incidents.
Alongside these mechanisms, the Board remains committed to
engagement with the workforce and these opportunities continue to
shape how the Board influences and understands culture. The Board
receives regular updates from Valerie Gooding, the designated Workforce
Engagement Lead.
Read more about Speak Up
on page 47
Governance
The Board ensures the highest standard of corporate governance is
maintained by regularly reviewing developments in governance best
practice and ensuring that these are adopted by the Company.
The Board dedicated time during the year to thoroughly consider the
independence and time commitment of all Directors, the arrangements
in
{
place to monitor conflicts of interest, as well as evaluating the effectiveness of the
{
Board and each of the Directors.All Directors have access to the advice of the Company Secretary,
who
{
is{
responsible for advising the Board on all governance matters
and
{
ensuring the Board has access to the necessary policies, processes and resources required to operate efficiently and effectively.
Read more about our governance structure and roles
and
b
responsibilities on pages 75-76Governance
Employee engagement
Throughout the year we have used several employee engagement
methods and communication channels between the Board, the Executive
Committee, and our workforce. This enabled meaningful engagement to
continue this year throughout periods of COVID-19 restrictions.
Examples of our workplace interactive sessions include:
Interactive session Topic
Stay Connected: Chief Executive,
Diversity
{
&
{
Inclusion (D&I) Initiatives
D&I
Discussion focus:
The Chief Executive was joined by the Head of Network
Engineering Spain and the Group’s Head of Culture and Inclusion to hear
about
{
diversity initiatives underway in and outside of Vodafone in the lead up
{
to{
International Women’s Day 2022.
We Connect: Chief Executive and
Executive
{
CommitteeOur business
Discussion focus:
The Chief Executive was joined by his Executive Committee
colleagues to discuss the Company’s future as a new generation connectivity
and
{
digital services providers.We Connect: Together We Can, brand repositioning
Brand
Discussion focus:
The Chief Executive was joined by the Group Chief
Commercial
{
Operations & Strategy Officer to announce the launch of our new brand positioning, combining the human spirit with the power of technology
to
{
find out what that really means for society. As the financial year came to a close, the Chief Executive and the Executive Committee thanked employees for
the their efforts in keeping our customers connected, and in helping us to enable
an inclusive and sustainable digital society.
Chief Executive and Chief Financial Officer
financial year
{
resultsOur business
Discussion focus:
The Chief Executive was joined by the Chief Financial Officer to
discuss Financial Year
{
Results, with links to the press release as they talk to our investors. The Chief Executive also thanked employees for their continuous hard
work and support through such an unprecedented year.
Stay Connected with the Chief Executive
and
{
Chairman Our business
Discussion focus:
The Chief Executive was joined by the Chairman of Vodafone.
The session delved into his previous experience, what he has learned about
Vodafone and his views on our strategy.
Global Pride Webinar
D&I
Discussion focus:
The Chief Executive, the Chief Human Resources Officer and
the
{
rest of the{
Executive Committee were joined by our Global LGBT+ Executive
Sponsor and a number of guest speakers as we celebrated Pride with
{
our{
Global
Pride Webinar. The session covered a range of topics including the decriminalising
of same sex relationships in India, the #holdinghands initiative in the Czech Republic,
being accepted for who you are, active allyship, and advertisements introducing
LGBT+ couples.
Black History Month
D&I
Discussion focus:
The Chief Human Resource Officer was joined by external
speakers and our colleagues to celebrate Black History Month, where we
recognised Black history and the achievements of Black people past and present.
Discussion included how employees can take this opportunity to see how they
can get involved in working towards Race, Ethnicity, Culture and Heritage (REACH)
inclusion and creating an anti-racist workplace – learning more and becoming an
ally, or completing our Withstander Training.
We Connect with the Chief Executive,
the
{
Chief{
Human Resources Officer and
the
{
Group{
Strategy Director
Strategy/
transformation
Discussion focus:
The Chief Executive was joined by the Group Chief HR Officer
and Group Strategy Director to discuss strategy.
Strategic report Other information
Governance
Financials73
Vodafone Group Plc
Annual Report 2022
Our Board
Our business is led by our Board of Directors.
Biographical details of the Directors as at
17
b
Mayb
2022 are provided below.
Click to
ȣ
nd full biographical information for the Directors: vodafone.com/board
External appointments listed are only those required to
{
be disclosed pursuant to Listing Rule 9.6.
Jean-François van Boxmeer
N
Chairman – Independent on appointment
Tenure:
1 year
Skills and experience:
Jean-François brings to the Vodafone Board his extensive international
experience in
{
driving growth through both business-to-business and
business-to-consumer business models and in-depth knowledge of the
countries in which Vodafone operates. Jean-François is highly regarded
as
{
having been one of the longest standing and most successful CEOs
in
{
Europe. He was the Chief Executive of Heineken for 15 years, having been with the company for 36 years. Jean-François held a number of
senior roles in Africa and Europe before joining Heineken’s Executive
Board in 2001 with worldwide responsibility for supply chain and
technical services, as well as regional responsibility for the operating
businesses in North-West Europe, Central and Eastern Europe and
Sub-Saharan Africa.
External appointments:
–
Heineken Holding N.V., non-executive director
Note:
Jean-François is currently non-executive lead at Mondelez International Inc., but will not stand for
re-election as a director at the AGM on 18 May 2022.
Nick Read
Chief Executive – Executive Director
Tenure:
3 years (as Chief Executive)
Skills and experience:
As Chief Executive, Nick combines strong commercial and operational
leadership with a
{
detailed understanding of the telecoms sector and its opportunities and challenges.
Prior to becoming Chief Executive in October 2018, Nick served as Group
Chief Financial Officer from April 2014, and held a variety of senior roles
including Chief Executive for Africa, Middle East and Asia-Pacific for five
years and Chief Executive of Vodafone UK. Prior to joining Vodafone, he
held senior global finance positions with United Business Media Plc and
Federal Express Worldwide.
External appointments:
–
Booking Holdings Inc., non-executive director and member of the
audit
{
committee Margherita Della Valle
Chief Financial Officer – Executive Director
Tenure:
3 years
Skills and experience:
Margherita brings considerable corporate finance and accounting experience
to the Board. She was Deputy Chief Financial Officer from 2015 to 2018,
Group Financial Controller from 2010 to 2015, Chief Financial Officer
of
{
Vodafone’s European region from 2007 to 2010 and
{
Chief Financial Officer
of Vodafone Italy from 2004 to 2007. Margherita joined Omnitel Pronto Italia
in Italy in 1994 and held various consumer marketing positions in business
analytics and customer base management before moving to finance.
Omnitel was acquired by Vodafone in 2000.
External appointments:
–
Reckitt Benckiser Group plc, non-executive director and member of the
audit committee
Valerie Gooding CBE
Senior Independent Director and Workforce Engagement Lead
Tenure:
8 years
Skills and experience:
Valerie brings a wealth of international business experience obtained at
companies with high levels of customer service including British Airways
and as chief executive of BUPA which, together with her focus on leadership
and talent, is valuable to Board discussions.
Sir Crispin Davis
N
Non-Executive Director
Tenure:
7 years
Skills and experience:
Sir Crispin has broad-ranging experience as a business leader within
international content and technology markets from his former roles as
chief executive of RELX Group (formerly Reed Elsevier) and the digital
agency, Aegis Group plc, and group managing director of Guinness PLC
(now Diageo plc). He was knighted in 2004 for services to
{
publishing and
{
information. He brings a strong commercial perspective to Board
{
discussions.Michel Demaré
A
N
R
Non-Executive Director
Tenure:
4 years
Skills and experience:
Michel brings extensive international finance, strategy and M&A
experience to the Board, gained during his 18-year career at Dow
Chemical as CFO – Global Polyolefins & Elastomers Division, as CFO
of
{
Baxter International (Europe), and as CFO and head of global markets of
{
ABB Group. He was the non-executive chairman of Syngenta until the company was sold to ChemChina in 2017 and was the vice chairman of
UBS Group AG for 10 years.
External appointments:
–
AstraZeneca PLC, non-executive director and chair of the remuneration
committee
{
and member of the nomination and governance committee and
{
the{
audit committee
R
N
E
Committee key
Audit and Risk Committee ESG Committee Nominations and
Governance Committee
Remuneration Committee
Solid background signifies
Committee Chair
A E N R
Strategic report Financials Other information
74
Vodafone Group Plc
Annual Report 2022
Governance
Dame Clara Furse DBE
RE
Non-Executive Director
Tenure:
7 years
Skills and experience:
Dame Clara brings to the Board a deep understanding of international
capital markets, regulation, service industries and business transformation
developed from her previous roles as chief executive officer of the
London Stock Exchange Group plc and Credit Lyonnais Rouse Ltd.
Her
{
financial proficiency is highly valued. In 2008 she was appointed Dame Commander of the Order of the British Empire.
External appointments:
–
Assicurazioni Generali S.p.A, non-executive director
Note:
Dame Clara Furse is currently non-executive director and chair of the nominations and remuneration
committees at Amadeus IT Group SA, but will not stand for re-election as a director at the AGM on
23
{
June 2022. Deborah Kerr
Non-Executive Director
Tenure:
<1 year
Skills and experience:
Deborah brings to the Board a wealth of technology expertise having held
senior executive roles and non-executive appointments across a range
of
{
sectors. She was previously Managing Director of Value Creation at Warburg Pincus, Chief Product and Technology Officer at Sabre, and Chief
Technology Officer for Hewlett-Packard’s Enterprise Services operations.
Deborah has a deep understanding of complex digital transformations.
External appointments:
–
NetApp INC, non-executive director and member of the
audit
{
committee –
Chico’s FAS, Inc., non-executive director and member of the human
resources, compensation and benefits committee, the corporate
governance and nominating committee and the environmental,
social
{
and governance committeeAmparo Moraleda
Non-Executive Director
Tenure:
4 years
Skills and experience:
Amparo brings strong international technology experience to the Board
from her previous role as chief executive officer of the international
division of Iberdola and a career spanning 20 years at IBM, where she
held
{
a number of positions across a range of global locations.External appointments:
–
Airbus Group, senior independent director, chair of nominations and
governance
{
committee and remuneration committee and member of ethics & compliance committee
–
CaixaBank, non-executive director and chair of remuneration committee
–
A.P. Moller-Maersk, non-executive director and member of the
audit
{
committee, remuneration committee and transformation and innovation committee
A
A
E
Governance (continued)
David Nish
A
Non-Executive Director
Tenure:
6 years
Skills and experience:
David has wide-ranging operational and strategic experience as a senior
leader and has
{
a strong understanding of financial and capital markets
through his previous directorships which include chief executive officer
and chief financial officer of Standard
{
Life plc and chief financial officer of
{
Scottish Power plc.External appointments:
–
HSBC Holdings plc, senior independent director, chair of the audit
committee
{
and{
member of the risk committee and
{
the nomination and corporate governance committee
Prospective Non-Executive Directors
subject to shareholder approval
Stephen Carter CBE
Skills and experience:
Stephen brings a track record of value creation and has extensive
commercial and regulatory experience in the telecoms and media
sectors. Since becoming CEO of Informa in 2013, the company
has
{
become a global leader in B2B Events and Digital Services and Academic markets and Digital Services. Prior to Informa, Stephen held
various senior executive positions at Alcatel-Lucent, where he played
a
{
key role in restructuring the business, taking out significant cost,
and
{
investing in next generation mobile network equipment product development. Stephen’s successful commercial track record is combined
with deep experience of public policy and regulation having served
as
{
the first CEO of Ofcom, where he brought together five different regulatory authorities. After Ofcom, Stephen served as Chief of
Strategy for the UK’s Prime Minister, and then served as Minister,
Communications, Technology & Broadcasting. Stephen was also a
non-executive director for the Department for Business, Energy and
Industrial Strategy.
External appointments:
–
Informa PLC, group chief executive
Note:
Stephen is currently non-executive director and chair of the corporate responsibility committee
and member of the audit and nomination committees at United Utilities but his term on the board
will complete in July 2022.
Delphine Ernotte Cunci
Skills and experience:
Delphine has considerable experience in the telecoms sector and,
more recently, in media and technology. Since 2015, Delphine has
been President of France Télévisions, the French national public
television broadcaster. Prior to that, Delphine spent 26 years at
Orange, where she became Deputy CEO in 2010 and led the
successful turnaround of Orange France.
Simon Segars
Skills and experience:
Simon brings significant experience and insights on technology trends
and how these are reshaping industry landscapes. Simon has recently
stepped down as CEO of ARM, the global leader in the development
of
{
semiconductor technology. He successfully led the business since 2013 and generated significant value for investors during his tenure.
Prior to that, he was an engineer at Standard Telephones and Cables.
External appointments:
–
Dolby Laboratories, Inc., non-executive director
Committee key
Audit and Risk Committee ESG Committee
Nominations and
Governance Committee
Remuneration
Committee
Solid background signifies
Committee Chair
A E
N R
Strategic report Other information
Governance
Financials75
Vodafone Group Plc
Annual Report 2022
Our governance structure
Audit and Risk Committee
Reviews the adequacy of the
Group’s system of internal
control, including the risk
management framework and
related compliance activities.
Monitors the integrity of financial
statements, reviews significant
financial reporting judgements,
advises the Board on fair,
balanced and understandable
reporting and the long-term
viability statement.
Nominations and
Governance Committee
Evaluates Board composition
and ensures Board diversity
and
{
a
{
balance of skills.
Reviews Board and Executive
Committee succession plans
to
{
maintain{
continuity of
skilled
{
resource.Oversees matters relating to
corporate governance.
Remuneration Committee
Sets, reviews and recommends
the
{
policy on remuneration of the
{
Chairman, executives and senior management team.
Monitors the implementation
of
{
the{
Remuneration Policy.
Oversees general pay practices
across the Group.
The Board
Responsible for the overall conduct of the Group’s business including our long-term success; setting our purpose; monitoring cu
lture,
values, standards and strategic objectives; reviewing our performance; and maintaining positive dialogue with our stakeholders.
ESG Committee
Oversees the ESG programme,
purpose (Inclusion for All,
Planet
{
and{
Digital Society)
and
{
the{
social
{
contract.Monitors progress against
key
{
performance indicators and
{
external{
ESG index results.
Oversees progress on ESG
commitments and targets.
Chief Executive
Purpose and Reputation
Steering Committee
Assists the Executive Committee with the effective
coordination of purpose activities and advises on
reputational risks and policy matters.
Global Products Board
Supports the Executive Committee by providing
visibility of global product strategy and life-cycle
and identifies capital allocation opportunities
Executive Committee
Focuses on strategy implementation, financial and competitive
performance, commercial and technological developments,
succession planning and organisational development.
Chief Financial Officer
The Board
The Board is comprised of the Chairman, Senior Independent Director,
Non-Executive Directors, the Chief Executive, and the Chief Financial
Officer. Our Non-Executive Directors bring independent judgement, and
wide and varied commercial and financial experience to the Board and
Committees. A summary of each role can be found on the page 76.
Board meetings are structured to allow open discussions. At each meeting
the Directors are made aware of the key discussions and decisions of the
principal Committees by the respective Committee Chairs. Minutes of Board
and Committee meetings are circulated to all Directors after each
{
meeting.
Read more about the Board’s activities during the year
on pages 77-78
The Board is collectively responsible for ensuring leadership through
effective oversight and review. It
{
sets{
the strategic direction with the goal
of delivering sustainable stakeholder value over the longer term and
{
has oversight of cultural and ethics programmes.
The Board also oversees the implementation of risk assessment systems
and processes to identify, manage and mitigate Vodafone’s principal risks.
It is also responsible for matters relating to
{
finance, audit and internal control, reputation, listed company management, corporate governance,
remuneration and effective succession planning,
{
much of which is overseen through its principal Committees.
The Executive Committee
The Executive Committee is comprised of Nick Read, Chief Executive,
Margherita Della Valle, Chief Financial Officer, a number of senior
executives responsible for
{
global commercial operations, human resources, technology, external affairs and legal, as well as the
Chief
{
Executive Officers of our largest operating companies in Germany,
{
the UK, Italy, Spain, Europe{
Cluster and Vodacom Group.
Led by the Chief Executive, the Executive Committee and other management
committees are responsible for making day-to-day management and
operational decisions, including implementing strategic objectives and
empowering competitive business performance in line with established
risk management frameworks, compliance policies, internal control
systems and reporting requirements.
The Committee members have a broad range of experience, skills, and
expertise. Some members also hold external non-executive directorships,
giving them valuable board experience.
Click to read more about the Executive Committee:
vodafone.com/exco
Full details of the Committees’ responsibilities are provided within the respective Committee reports
starting on pages 80, 83, 89 and 91
Disclosure Committee
Oversees the accuracy and timeliness of Group disclosures
and
{
approves controls and procedures in relation to the public
{
disclosure of financial information.Risk and Compliance Committee
Assists the Executive Committee in fulfilling
its accountabilities with regard to
risk management and policy compliance.
Strategic report Financials Other information
76
Vodafone Group Plc
Annual Report 2022
Governance
Division of responsibilities
Governance (continued)
Chairman
Jean-François van Boxmeer
–
Leads the Board, sets each meeting agenda and ensures the Board
receives accurate, timely and clear information in order to monitor,
challenge, guide and take sound decisions;
–
Promotes a culture of open debate between Executive and Non-
Executive Directors and holds meetings with the Non-Executive
Directors, without the Executive Directors present;
–
Regularly meets with the Chief Executive and other senior
management to stay informed;
–
Ensures effective communication with shareholders and
other
{
stakeholders; –
Promotes high standards of corporate governance and
ensures
{
Directors understand the views of the Company’s shareholders
{
and{
other key stakeholders, and the section
{
172 Companies Act 2006 duties;
–
Promotes and safeguards the interests and reputation of the
Company;
{
and –
Represents the Company to customers, suppliers, governments,
shareholders, financial institutions, the media, the community and
the
{
public.Senior Independent Director and Workforce
Engagement Lead
Valerie Gooding, CBE
–
Provides a sounding board for the Chairman and acts as a trusted
intermediary for the Directors as required;
–
Meets with the Non-Executive Directors (without the Chairman present)
when necessary and at least once a year to appraise the Chairman’s
performance and communicates the results to the Chairman;
–
Together with the Nominations and Governance Committee, leads
an
{
orderly succession process for the Chairman; and –
Engages with the workforce in key regions where we operate,
answers
{
direct questions from workforce-elected representatives, and
{
provides the Board with feedback on the content and outcome of
{
those discussions.Non-Executive Directors
–
Monitor and challenge the performance of management;
–
Assist in development, approval and review of strategy;
–
Review Group financial information and provide advice
to
{
management; –
Engage with stakeholders and provide insight as to their views,
including in relation to workforce and the culture of Vodafone; and
–
As part of the Nominations and Governance Committee,
review
{
the{
succession plans for the Board and key members
of
{
senior{
management.
Company Secretary
Rosemary Martin
–
Ensures the necessary information flows between the Board,
Committees and between senior management and Non-Executive
Directors in a timely manner;
–
Supports the Chairman in ensuring the Board functions efficiently and
effectively, and assists the Chairman with organising Director induction
and training programmes;
–
Provides advice and keeps the Board updated on all corporate
governance developments; and
–
Is a member of the Executive Committee.
Chief Executive
Nick Read
–
Provides leadership of the Company, including representing the
Company to customers, suppliers, governments, shareholders, financial
institutions, employees, the media, the community and the public and
enhances the Group’s reputation;
–
Leads the Executive Directors and senior management team in running
the Group’s business, including chairing the Executive Committee;
–
Develops and implements Group objectives and strategy having regard
to shareholders and other stakeholders;
–
Recommends remuneration, terms of employment and succession
planning for the senior executive team;
–
Manages the Group’s risk profile and ensures appropriate internal
controls are in place;
–
Ensures compliance with legal, regulatory, corporate governance,
social, ethical and environmental requirements and best practice; and
–
Ensures there are effective processes for engaging with, communicating
with, and listening to, employees and others working for the Company.
Chief Financial Officer
Margherita Della Valle
–
Supports the Chief Executive in developing and implementing the
Group strategy;
–
Leads the global finance function and develops key finance talent;
–
Ensures effective financial reporting, processes and controls are
in
{
place; –
Recommends the annual budget and long-term strategic and
financial
{
plan; –
Oversees Vodafone’s relationships with the investment community;
–
Oversees shared services organisation (_VOIS); and
–
Leads on supply chain management, including the Vodafone
Procurement Company.
Click to read more about the Board’s role and
responsibilities,
b
matters reserved and the terms of
b
referenceb
for each Board Committee:
vodafone.com/board
Read more about our Board Committees, together
with
b
detailsb
of their activities on pages 80-112
Strategic report Other information
Governance
Financials77
Vodafone Group Plc
Annual Report 2022
Board activities and principal decisions
Board activities and discussion during the year were
structured to develop the Group’s strategy and to
enable the Board to support executive management
on the delivery of the strategy within a transparent
governance framework. The key topics discussed are
set out below.
Read more about Vodafone’s key stakeholders and how the
Board has engaged with them during the year on pages 14-15
Strategy and business developments
Strategy continued to be a key focus throughout the year. In addition to
the
{
usual Board meeting cadence, the Board attended a strategy away day. A key focus for the away day was to consider the competitive landscape
and agree the strategic priorities for the next 12 months.
Strategic plan
Following completion of the first phase of the strategic plan, the Board
considered how the next phase would be executed and potential new
areas for high growth and shareholder return.
Enabling a digital society
The Board continued to focus on supporting digital connectivity,
infrastructure and technologies in Europe and Africa and regular
updates
{
were received on the progress made. Digital and innovation
Digital technology remained a key focus this year following the launch of
the new technology operating model on 1 April 2021. The Board received
updates on the strategy for, and pace of, change within the business as we
digitalise our processes and promote a digital culture.
During the year the Board received presentations on the Company’s IT
transformation programmes that are designed to make the delivery of
technology for use in the Company faster and more efficient.
Innovation in future growth initiatives
Throughout the year the Board discussed several future growth initiatives
including the IoT connectivity strategy, the new VodaPay super-app
launch by Vodacom and future digital marketing initiatives.
Connected by Vodafone South Africa platform
At its September 2021 meeting, the Board considered the Connected by
Vodafone platform which seeks to ensure seamless connectivity and to
provide customers with ‘always connected’ experiences. A vision for the
platform was presented alongside proposed technology developments.
Business Plan and financial performance
Business Plan
At each Board meeting Nick Read provided an update on the execution
of
{
the Company’s business plan. A half-year progress report on execution
of the plan was considered by the Board at its November 2021 meeting.
The Board agreed that the Business Plan remained in alignment with the
Company’s purpose, vision and values.
Portfolio
At each Board meeting Nick Read informed the Board about progress
on
{
the strategy to optimise the Group’s portfolio of assets and provided updates on merger and acquisitions activity.
Financial performance
The Board received regular updates on the financial performance of the
Group, market trends, strategic KPIs and taxation.
US bonds
As part of the Board’s oversight of the long-term funding requirements
of
{
the Group, annual updates are provided on activity related to our two bond programmes: the US shelf programme listed on NASDAQ and the
Euro Medium Term Note programme listed in both London and Dublin,
to
{
ensure cost efficient and dependable financial resources are available to the business.
Mandatory convertible bonds
In January 2022, the Board approved the commencement of a new
irrevocable and non-discretionary buyback programme following
maturity of the second tranche on 12 March 2022.
Investor relations
The Board received quarterly updates on market share information
and
{
updates on the results of three investor perception studies. Annual
{
roadshow feedback was also provided during the year. Read more about how the Board engaged with investors
during the year on page 15
Dividend
In its deliberations on the dividend, the Board considered the key
stakeholders and the decision to approve the dividend was supported
by
{
a robust assessment of the position, performance and viability of the business carried out by management. The Board was mindful that the
Directors had continued to adopt the going concern basis in preparing the
annual report and accounts and was also cognisant of available reserves
to support the dividend.
On 16 November 2021, we announced a dividend of 4.50 eurocents per
share and have recommended a dividend of 4.50 eurocents per share to
be paid on 5 August 2022. This was consistent with dividends declared
during FY21 and the expectations of our shareholders.
Strategic report Financials Other information
78
Vodafone Group Plc
Annual Report 2022
Governance
Our people
Spirit, inclusion and diversity
The Board was kept updated on the success of the ‘Spirit of Vodafone’
programme. It was important for the Board to capture the sentiment of
our employees and measure the success of the programme.
Read more
on page 21
The Board received updates on the work being done to embed inclusion
to support the expansion of key diversity areas and endorsed the
programmes in place.
Read more about inclusion
on page 36
The Board reviews the Board Diversity Policy on an annual basis and
following input from the Nominations and Governance Committee,
the
{
Board approved the addition of ‘race and ethnicity’ to the Policy
in
{
November 2021. Read more
on page 40
The Board considered the results of the
employee surveys. Read more on page 21
Talent and succession
The Board received an update on talent and succession within the Group
at its November 2021 meeting.
Modern slavery
The Board monitors our compliance with the requirements of the
UK
{
Modern Slavery Act 2015 and approved our Modern Slavery Statement in May 2022.
Customers
The Board regularly received updates on the goal to drive systematic
improvement to the customer experience. Understanding our customer
response to our revised commercial offerings, which vary across markets,
is crucial. The Board regularly considered the Net Promoter Scores
focused on the drivers of satisfaction for consumers and business
customers, performance against KPIs and the overall success of
strategic
{
initiatives. Information in relation to the evolving needs of consumers and business
customers is regularly provided to the Board by the Executive Committee
members and senior managers. The Board also considered how COVID-19
had accelerated the shift to digital interactions with customers.
Risk
The Board reviewed the principal risks and their impact on strategy and
commercial initiatives. An update on the operation of our internal risk and
compliance processes was also provided.
Read more about our system of internal controls and
risk
b
management on page 86The war in Ukraine
The Board received updates from Nick Read and the Chief External and
Corporate Affairs Officer on the war in Ukraine and the support provided
by the Company and by Vodafone Foundation to those people and
organisations impacted.
Read more about the support provided
on page 36
Other
The Board has also spent time this year considering the following matters:
–
Health and safety;
–
Regulatory landscape; and
–
Climate and sustainability.
Looking forward
The Board’s focus for next year is expected to include:
–
Continuing focus on execution of our strategy and delivery of growth;
–
Overseeing the transformation of the Group into a new generation
connectivity and digital services provider;
–
Monitoring risks and ensuring they are managed effectively; and
–
Keeping under review the Company’s execution of its purpose strategy
and monitoring the Group’s culture.
Governance (continued)
Strategic report Other information
Governance
Financials79
Vodafone Group Plc
Annual Report 2022
The Board recognises that it needs to continually
monitor and improve its performance. Our annual
performance evaluation provides the opportunity for
the Board and its Committees to consider and reflect
on the effectiveness of its activities, the quality of
its
b
decision-making, and the collective contribution made by each Board member.
Process undertaken for our Board evaluation
The 2022 Board evaluation was externally facilitated by Raymond Dinkin
of Consilium Limited (‘Consilium’), an independent board review firm. Both
Raymond Dinkin and Consilium are considered fully independent as they
do not have a relationship with the Board or any Director.
Following previous recommendations made by Consilium in 2021, the
Board requested that an assessment be made this year as to whether
previous recommendations had been implemented effectively and to
consider further recommendations to support the Board’s continued
development and effectiveness. The evaluation focused on strategic
stewardship and Board composition to gain further insight on participation
and how the Board was working as a whole.
In order to gather and distil feedback, members of senior management
and all Directors completed a tailored questionnaire and were interviewed
by Raymond Dinkin in early 2022. To support the evaluation of the
effectiveness of the Board as a whole, its Committees and individual
Directors’ contributions to discussions and decision-making, Raymond
Dinkin observed several Board and Committee meetings and reviewed
the meeting documentation.
Consilium collated the input received from individual Director
meetings
{
and the questionnaire to create a report which provided an
{
independent assessment of the effectiveness of the Board. The findings and recommendations were considered by the Board and
Board
{
Committees at the March and May 2022 meetings. Summary of findings
The conclusions of this year’s review have been positive and confirmed
that the Board
{
remains effective. Areas identified to enhance the Board’s effectiveness for FY23 include:
–
Refresh the composition of the Board to bring on more Directors
with
{
technology and/or telecommunications sector experience; –
Devote more time to strategy sessions to enhance free-flowing
discussions and allow for additional topics to be discussed
where
{
required; –
Topics requiring additional deep dives could be bolstered by using
smaller groups of the Board with specific expertise in the matter; and
–
More effective use of management tools to enable the Board to
engage with and join-up numerous initiatives.
Details of the next Board evaluation and progress made on the above
actions will be reported in the FY23 Governance Report.
Progress against actions identified following
the
{
2021{
external evaluation
Action Progress made
More and different forms
of
{
engagement between Directors,
{
with and without the
{
Executive Directors.The Board was able to meet
in
{
person during the year in Germany and the UK. The
Chairman held some sessions
with
{
the Non-Executive Directors alone. A number of meetings
were
{
held that were not formal Board meetings.
Refreshing the Board’s composition
and reviewing the mix
{
of skills and experience on the Board in light of
the next phase of the strategy.
Since the end of FY22, the
Company has announced
the
{
appointment of three new Non-Executive Directors.
Continue to ensure Board agendas
concentrate on the specifics of
organic improvement and growth
and their underlying drivers.
The Board agendas cover both
inorganic opportunities for growth
and organic improvement and
growth initiatives.
Understanding closely
the
{
organisation’s capacity, capabilities
{
and cultural change and monitoring progress on
new
{
proposition developments, ESG
{
and culture change.During the year the Board
considered these matters. An
ESG
{
Committee was established in
{
November 2021.Board effectiveness and improving
our performance
Strategic report Financials Other information
80
Vodafone Group Plc
Annual Report 2022
Governance
The Nominations and Governance Committee
(
ȁ
the
b
Committee’) continues to ensure that
the
b
Boardb
has an appropriate balance
b
of skills,
knowledge, experience and diversity so that
it
b
isb
effective in discharging its responsibilities
and
b
inb
having oversight of all matters relating
to
b
corporateb
governance.
Chairman
Jean-François van Boxmeer
Members
Sir Crispin Davis
Valerie Gooding
Michel Demaré (appointed as a member on 22 November 2021)
Renee James (stepped down from the Board on 27 July 2021)
Key responsibilities
–
Assessing the composition, structure and size of the Board and its
Committees and making recommendations on appointments to
the
{
Board; –
Succession planning for the Board and Executive Committee;
–
Overseeing the performance evaluation of the Board, its Committees
and individual Directors; and
–
Monitoring developments in all matters relating to corporate
governance, bringing any issues to the attention of the Board.
The Committee is comprised solely of independent Non-Executive
Directors. The Committee had four scheduled meetings during the
year
{
which were fully attended by all members. Click to read the Committee’s terms of reference:
vodafone.com/board-committees
Letter from Committee Chairman
On behalf of the Board, I am pleased to present the Nominations and
Governance Committee Report for the year ended 31 March 2022. This
year, the Committee has spent time focusing on changes to the Board’s
composition. The Committee’s current priority is the search for new
Non-Executive Directors following the departures of Renee James and
Sanjiv Ahuja. I want to extend our gratitude for their dedicated service
to
{
Vodafone.In September 2021 we announced the appointment of Deborah Kerr
as
{
a
{
Non-Executive Director who joined the Board on 1 March 2022.
In
{
May{
2022, we also announced the appointments of Stephen Carter,
Delphine Ernotte Cunci and Simon Segars who will be appointed as
Non-Executive Directors following the Company’s AGM, subject to
shareholder approval.
We continue to focus on our commitment to diversity which extends
beyond the Board and the Executive Committee and towards developing
the talent pipeline through the review of initiatives to enhance diversity,
including gender and ethnic diversity and disability inclusion.
I look forward to reporting on further progress as we continue our work
across the following financial year.
Read more about our programmes to manage talent
on pages 21 and 22
Highlights from the year
–
Recommendation of the establishment of an ESG Board
Committee;
{
and –
Appointment of Deborah Kerr to the Board with her induction
programme currently underway.
Key focus for the next year
The key areas of focus for the next year are:
–
The implementation and completion of inductions for Stephen Carter,
Delphine Ernotte Cunci, Simon Segars and Deborah Kerr respectively;
–
Continuation of the search for Non-Executive Directors who enhance
the skill, knowledge, experience and diversity of the Board;
–
Board and Executive Committee succession planning in order to
maintain the necessary balance of skills, knowledge, experience and
diversity to
{
remain effective; –
Continuing to review Board independence and ensuring Directors
have
{
sufficient time to fulfil their Board responsibilities; and –
Continuing to monitor compliance with the Code and future
regulatory
{
updates.Changes to the Board and Committees
On 27 July 2021, Sanjiv Ahuja and Renee James stepped down from
the
{
Board. Upon stepping down from the Board, Renee James also left
the
{
Nominations and Governance Committee and the Remuneration Committee and Sanjiv Ahuja left the Audit and Risk Committee.
Over the next 18 months there will be a number of scheduled retirements
from the Board. In line with these departures, the Committee has been
focused on finding suitable successors to further enhance the Board’s
experience within the telecommunications and technology sectors, and
to ensure that the Board and its Committees can continue to effectively
discharge their responsibilities.
I am pleased to welcome Deborah Kerr to the Board who was appointed
as a Non-Executive Director on 1 March 2022. Deborah brings a wealth
of
{
technology expertise across a range of sectors, as well as extensive non-executive board experience. I am also delighted to welcome Stephen
Carter, Delphine Ernotte Cunci and Simon Segars to Vodafone’s Board
as
{
Non-Executive Directors, subject to shareholder approval at the 2022
AGM. They are well-respected leaders who bring extensive experience
and track records of value creation across the telecoms, technology and
media sectors.
At the 2021 AGM, Olaf Swantee was appointed by the shareholders as
a
{
new Non-Executive Director. However, in light of a potential conflict of
interest, Olaf decided to step down with effect from 25 September 2021.
An ESG Committee was established during this financial year with the
role
{
to provide oversight of Vodafone’s ESG programme, sustainability and responsible business practices as well as Vodafone’s contribution to
the societies we operate in under the social contract.
Read more about the ESG Committee
on page 89
The Committee is regularly informed of succession planning and changes
to the membership of the Executive Committee.
In April, we announced that Hannes Ametsreiter will step down as Chief
Executive Officer of Vodafone Germany and as a member of the Group
Executive Committee on 30 June 2022. Philippe Rogge will become
Chief
{
Executive Officer of Vodafone Germany and a member of the Group
{
Executive Committee on 1 July 2022. There were no changes to the membership of the Executive Committee
during the year.
Succession planning
The Committee monitors the length of tenure and the skills and experience
of the Non-Executive Directors to assist in succession planning.
Read more about the details of the length of tenure of each
Director and a summary of the skills and experience of the
Non-Executives on pages 73 and 74
Nominations and Governance Committee
Governance (continued)
Strategic report Other information
Governance
Financials81
Vodafone Group Plc
Annual Report 2022
In light of recent and anticipated changes to the Board membership,
MWM Consulting, an independent search firm, was appointed to lead
a
{
search for new Non-Executive Directors who have relevant experience
in the telecommunications and technology sectors, who will make
valuable contributions to the Board’s work and who will contribute
to
{
the{
Board’s diversity.
The Committee is confident that the Board currently has the
necessary
{
mix of skills and experience to contribute to the Company’s
{
strategic objectives.Appointment process for Non-Executive Directors
To begin the appointment process, Vodafone engages with a search
consultancy and provides the agency with a search specification.
The
{
results of the search consist of individuals from a diverse range of
{
backgrounds and characteristics. Capturing the clear benefits of diversity
{
of background and opinion, and identifying candidates with the requisite experience and capabilities, is at the forefront of this search. The
shortlisted candidates are interviewed by the Committee members and
the Chief Executive. A recommendation is made to the Board on the
chosen candidate. Once a candidate is selected, appointment terms
are
{
drafted and agreed with the selected candidate. Assessment of the independence of the Non-Executive Directors
All Non-Executive Directors have submitted themselves for election
or
{
re-election, as applicable, at the 2022 AGM.In accordance with the Code, the independence of all the Non-Executive
Directors was considered by the Committee.
All Non-Executive Directors are considered independent and they continue
to make independent contributions and effectively challenge management.
The Executive Directors’ service contracts and Non-Executive Directors’
appointment letters are available for inspection at our registered office
and will be available on display at the 2022 AGM.
Management of conflicts of interest
The Companies Act 2006 provides that directors have a duty to avoid a
situation in which they have or may have a direct or indirect interest that
conflicts or might conflict with the interests of the Company. This duty is
in addition to the existing duty owed to the Company to disclose to the
Board any interest in a transaction or arrangement under consideration
by
{
the Company.Our Directors must report any changes to their commitments to the
Board, immediately notify the Company of actual or potential conflicts
or
{
a change in circumstances relating to an existing authorisation and complete an annual conflicts questionnaire. Any conflicts or potential
conflicts identified are considered and, as appropriate, authorised by the
Board in accordance with the Company’s Articles of Association. A register
of authorised conflicts is also reviewed periodically.
The Committee and the Board are satisfied that the external commitments
of the Non-Executive Directors and of me, your Chairman, do not conflict
with our duties and commitments as Directors of the Company, and that
each Non-Executive Director is able to dedicate sufficient time to the
Company’s affairs. The Committee is comfortable that it has adequate
measures in place to manage and mitigate any actual or potential
conflicts of interests that may arise in the future.
Board evaluation
In accordance with the Code, Vodafone conducts an annual evaluation of
Board and Board Committee performance, which every Director engages
in and which is facilitated by an independent third party at least once
every three years. This year, an external evaluation of the performance
of
{
the Board and Committees was facilitated by Raymond Dinkin of Consilium Limited which has no other connection with Vodafone. The
Committee oversaw the evaluation process and was involved in the
selection of the external provider for review.
Read more about the outcome of
b
this review on page 79
Time commitment
In accordance with the Code, the Committee actively reviews the time
commitments of the Board. All Directors are engaged in providing their
external commitments to establish that they have sufficient time to meet
their Board responsibilities. The Committee is satisfied that the Board does
meet this requirement and all Directors provide constructive challenge,
strategic guidance and hold management to account.
Diversity
In line with Vodafone’s Board Diversity Policy, the Committee is firmly
committed to supporting diversity and inclusion in the boardroom in
compliance with the Code and acknowledges the importance of diversity
and inclusion to the effective functioning of the Board.
As set out in our Board Diversity Policy, Vodafone’s long-term ambition is
to increase diversity on our Board in all its forms. The Committee annually
reviews and agrees the Board Diversity Policy and monitors the progress
made at Board and senior management levels during the financial year.
The Committee continues to monitor requirements as set by the FTSE
Women Leaders Review and NASDAQ listing rules in terms of gender
diversity and the Parker Review in terms of ethnic diversity. Vodafone
acknowledges that these targets are not just an end goal, but rather
steps
{
towards a drive for further progress. Commitment to diversity at
{
Vodafone extends beyond the Board to the
{
global workforce. For the fourth year in a row, Vodafone has been included in the Bloomberg Gender Equality Index, a list of 418 companies
committed to gender equality, highlighting our commitment to fostering
an inclusive workplace. Our Diversity and Inclusion activity includes
our
{
market-leading parental policies, our award-winning ReConnect programme, our global Domestic Violence and Abuse Policy, and our
dedicated and passionate employee networks.
The Securities and Exchange Commission has approved the updates to
the NASDAQ listing rules to incorporate new board diversity requirements,
which Vodafone will be subject to as a foreign issuer. As a foreign issuer,
Vodafone satisfies these requirements.
In line with the Hampton-Alexander Review recommendation that by
2020
{
there would be at{
least 33% female representation at the Board,
Executive Committee positions and direct reports of the Executive
Committee (the
{
‘Senior Leadership Team’), we are pleased to report that
{
as at 31 March 2022, 50% of our Board were female. Both our Senior Independent Director and Chief Financial Officer positions also continue
to be held by women.
Our Executive Committee has four positions held by women (28.6%).
In
{
the Senior Leadership Team,{
56 roles are held by women (31.8%).
In line with these targets and recommendations, we have developed
and
{
introduced a series of pioneering global programmes. Vodafone has
{
made a global commitment to support its employees during the menopause, an initiative that forms part of Vodafone’s broader strategy
of
{
supporting all employees through every life stage to create a culture
of
{
inclusion. The initiative has rolled out a training and awareness programme to all employees globally, including a toolkit focused
on
{
raising understanding of the menopause and providing guidance on
{
how{
to support employees, colleagues and family members.
Additionally, Vodafone has a global Domestic Violence and Abuse Policy
which sets out a comprehensive range of workplace supports, security
and other measures for employees at risk of, experiencing, and recovering
from, domestic violence and abuse. There is also the global parental leave
policy which offers 16 weeks fully paid leave to all employees.
Strategic report Financials Other information
82
Vodafone Group Plc
Annual Report 2022
Governance
Governance (continued)
Board Diversity Matrix
1
As of 31 March 2022
Country of Principal Executive Offices United Kingdom
Foreign Private Issuer Yes
Disclosure Prohibited under Home Country Law No
Total Number of Directors 10
Part I: Gender Identity
Female Male Non-Binary
Did Not
Disclose
Gender
Directors
5500
Part II: Demographic Background
Under-represented individual in
Home Country Jurisdiction 0
LGBTQ+ 0
Did Not Disclose Demographic
Background 1
Note:
1. Prepared in accordance with guidance issued by NASDAQ. More information can
{
be found here: listingcenter.nasdaq.com/home.aspx
Read more about how we build a diverse and inclusive
organisation on pages 39 and 40
This year, the CEO of Vodafone Ireland and the CFO of Vodafone Germany
were also recognised at the EMEA 2022 WeQual Awards for driving greater
equality and innovation. Attracting, retaining and promoting diverse leaders
drives greater inclusion within the organisation, and we are confident that
the additional initiatives detailed on page 39 will
{
support us to reach the
FTSE Women Leaders Review target to have at least 40% of women
holding management and
{
leadership roles by{
2025.
The Committee is mindful of the recommendation of the Parker
Review
{
to have at least one Director from a non-white ethnic minority by
{
2021. Whilst it is disappointing not to continue to meet this target from
{
28 July 2021, this is the first time in 18 years where we have not
been able to confirm that at least one ethnic minority Director sits on our
Board and we continue to take practical and purposeful steps towards
enhancing the Board’s diversity. Vodafone has introduced new ethnic
diversity targets to ensure that by 2030, 25% of the global senior
leadership will come from ethnically diverse backgrounds. Based on
self-declaration, currently 18% of Vodafone’s global Senior Leadership
Team are from ethnically diverse backgrounds. Vodafone UK also
confirmed that by 2025, 20% of its UK-based senior people will come
from Black, Asian, or other diverse ethnicities, with 4% of those to be
Black. Vodafone’s UK-based senior management and leadership are
currently 15% Black, Asian or other diverse ethnicities, of whom 1%
are
{
Black. These commitments build on Vodafone’s Race, Ethnicity and
{
Cultural Heritage (‘REACH’) action plan, a wider programme launched
{
in{
2020 to achieve greater workplace inclusion through
allyship
{
and anti-racism.Read more about our workplace inclusion programme
on page 39
We continue to challenge our external search consultants to ensure that
all forms of diversity, in particular ethnicity and gender, are considered
when drawing up candidate shortlists.
Governance
The Committee continues to review action taken to comply with the
Code and other legal and regulatory obligations during the year. The
Committee received regular governance updates and is satisfied that
Vodafone has complied with the Code in full during the year.
The Matters Reserved for the Board and the terms of reference of the
Nominations and Governance Committee, the Audit and Risk Committee,
the ESG Committee and the Remuneration Committee were reviewed in
March 2022.
Jean-François van Boxmeer
On behalf of the Nominations and Governance Committee
17 May 2022
Strategic report Other information
Governance
Financials83
Vodafone Group Plc
Annual Report 2022
The Committee plays a key role in the governance
of
b
theb
Group’s financial reporting, risk management,
internal control and assurance processes and the
external audit. During the year, the Committee
performed a series of business unit reviews and
completed a schedule of risk deep dives, with a
continued focus on cyber security given the high
level of external threat.
Chairman and financial expert
David Nish
Members
Michel Demaré
Deborah Kerr
Amparo Moraleda
Key responsibilities
The responsibilities of
{
the Committee are to: –
Monitor the integrity of the financial statements, including the review
of
{
significant financial reporting judgements; –
Monitor the Group’s risk management system, review of the principal
risks and the management of those risks;
–
Provide advice to the Board on whether the Annual Report is fair,
balanced and understandable and on the appropriateness of the
long-term viability statement;
–
Review and monitor the external auditor’s independence and
objectivity and the effectiveness of the external audit;
–
Review the system of internal financial control and compliance with
section 404 of the US Sarbanes-Oxley Act;
–
Review and provide advice to the Board on the approval of the Group’s
US Annual Report on Form 20-F; and
–
Monitor the activities and review the effectiveness of the Internal
Audit
{
function. Click to read the Committee’s terms of reference:
vodafone.com/board-committees
Letter from the Committee Chair
I am pleased to present our report to you as Chair of the Audit and Risk
Committee. This report provides an overview of how the Committee
operates, an insight into the Committee’s activities during the year
and
{
its{
role in ensuring the integrity of the Group’s published financial
information and the effectiveness of its risk management, controls and
related processes.
The membership of the Committee changed during the year. Sanjiv Ahuja
stepped down from the Board and therefore the Committee in July 2021.
I would like to thank Sanjiv for his contribution to the work of the Committee.
We welcomed Deborah Kerr to the Committee following her appointment
to the Board on 1 March 2022.
The Committee met five times during the year. The attendance by members
at Committee meetings can be seen on page 68. Each meeting agenda
included a range of topics across the Committee’s areas of responsibility.
–
Cyber threat is the Group’s top principal risk and an area where we
remain vigilant given that external threats remain at a very high level.
This manifested itself in February 2022 when Vodafone Portugal was
the target of a deliberate cyber attack which impacted our services in
that market. The preparedness and skill of our technology team ensured
that most services were recovered very quickly. During the year, the
Committee regularly met with the Chief Technology Officer and Cyber
Security Director to assess how the risks were being managed and how
we can further reinforce our cyber security (see pages 49 to 51);
–
We completed a series of reviews across multiple business units,
typically with a focus on the risk and control environment. During the
year the Committee met with the CEO and CFO of Vantage Towers,
the
{
Director of the Group’s shared service centre organisation and the
market CEOs in Germany, the UK, Italy, Spain, Egypt and Other Europe;
–
At the September and March meetings we considered the anticipated
financial reporting matters, in addition to the review of the half-year
results announcement at our November meeting and of the Annual
Report and accompanying materials at our May meeting, prior to
the
{
Group’s results release. Our work included reviews of goodwill impairment testing, taxation judgements, legal contingencies and
the
{
Company’s work on going concern and the long-term viability statement; and
–
We performed deep dive reviews on certain other principal risks,
including supply chain disruption with the Global Supply Chain Director
and adverse political and policy environments with the Chief External
and Corporate Affairs Officer.
We welcome the enhanced disclosures on pages 66 and 67 to comply
with the framework provided by the Task Force on Climate-related
Financial Disclosures (‘TCFD’). In addition, we assessed with management
the potential impact of climate change on the consolidated financial
statements (see note 1 ‘Basis of preparation’ in the consolidated financial
statements on page 133 for further information).
Our external auditor, Ernst & Young (‘EY’), continues to provide
robust
{
challenge to management and provides its independent view to
{
the Committee on specific financial reporting judgements and the control environment.
Every three years the Board appoints an external organisation to perform
an independent review of the Committee to evaluate its performance.
The last review concluded that the Board members considered the
Committee to be thorough and fully effective in meeting its objectives.
Furthermore, a finding of the Vodafone Board effectiveness review
conducted in 2022 by an external third party concluded that the
Committee was operating effectively.
David Nish
On behalf of the Audit and Risk Committee
Audit and Risk Committee
Objective
The Committee’s objective is the provision of effective governance
over
{
the appropriateness of financial reporting of the Group, including the
{
adequacy of related disclosures, the performance of both the Internal
{
Audit function and the external auditor and oversight of
the
{
Group’s systems of internal control, business risks and related compliance activities.
Committee governance
Committee meetings normally take place the day before Board
meetings.
{
The Committee Chair reports to the Board, as a separate agenda item, on
{
the activity of the Committee and matters of particular relevance. The
{
Board has access to the Committee’s papers and receives copies of
{
the Committee minutes. The Committee regularly meets separately with the external auditor,
the
{
Chief Financial Officer, the Group Audit Director and the Group Head of
Risk and Compliance without others being present. The Chair also meets
regularly with the external lead audit partner during the year, outside of
the formal Committee process.
Scan or click to watch the Chair of the
Audit
b
and
b
Risk
b
Committee explain his role:
investors.vodafone.com/videos
Strategic report Financials Other information
84
Vodafone Group Plc
Annual Report 2022
Governance
The Chair is designated as the financial expert on the Committee
for
{
the{
purposes of the US Sarbanes-Oxley Act and the 2018 UK
Corporate
{
Governance Code (‘Code’). The Committee continues to have
{
competence relevant to the{
sector in which the Group operates.
The
{
skills{
and experience of Committee members are detailed on
pages
{
73 and 74.Read more
on pages 73 and 74
War in Ukraine
Whilst the Group does not have significant operations in either Russia
or
{
Ukraine, a review was undertaken by management to assess any consequences on the financial statements arising from the conflict
or
{
from the resulting sanctions imposed on Russia and Belarus. It was
concluded there are no material impacts on the consolidated financial
statements for the year ended 31 March 2022.
The impact on the Group’s principal risks was also assessed as set out in
the ‘Risk management’ section.
Long-term viability statement and
going concern assessment
The Committee provides advice to the Board on the form and basis of
conclusion underlying the long-term viability statement and the going
concern assessment.
Read more about the long-term viability statement
on page 65
Read more about the going concern assessment
on page 118
The Committee challenged management on its financial risk assessment
as part of its consideration of the long-term viability statement. This
included scrutiny of forecast liquidity, balance sheet stress tests,
the
{
availability of cash and cash equivalents through new or existing financing
{
facilities and a review of counter-party risk to assess the likelihood of third parties not being able to meet contractual obligations.
This comprehensive assessment of the Group’s prospects made by
management included consideration of:
–
The review period and alignment with the Group’s internal long-
term
{
forecasts; –
The assessment of the capacity of the Group to remain viable after
consideration of future cash flows, expected debt service requirements,
undrawn facilities, and access to capital markets;
–
The modelling of the financial impact of severe but plausible risk
scenarios materialising, including the impact of energy price inflation,
exacerbated by the war in Ukraine;
–
Ensuring clear and enhanced disclosures in the Annual Report
as
{
to{
why the assessment period selected was appropriate to
the
{
Group,{
what qualifications and assumptions were made and
how
{
the{
underlying analysis was performed, consistent with
FRC
{
pronouncements; and –
Comprehensive disclosure in relation to the Group’s liquidity provided
in the consolidated financial statements. See note 22 ‘Capital and
financial risk management’.
Financial reporting
The year ended 31 March 2022 is the third financial year that has
been,
{
at{
least partially, impacted by the COVID-19 pandemic. Restrictions
regarding social distancing and travel eased during the year and most of
our offices were open for part of the year. Many of the Group’s employees
involved with financial reporting now split the working week between
office working and remote working, and this approach is fully embedded
and works effectively. The controls we implemented last year to support
remote working remain in place.
The Committee’s primary responsibility in relation to the Group’s
financial
{
reporting is to review, with management and the external auditor,
the appropriateness of the half-year and annual consolidated financial
statements. The Committee focuses on:
–
The quality and acceptability of accounting policies and practices;
–
Providing advice to the Board on the form and basis underlying
the
{
long-term viability statement; –
Material areas in which significant judgements have been applied or
where significant issues have been discussed with the external auditor;
–
An assessment of whether the Annual Report, taken as a whole, is fair,
balanced, and understandable and whether our US Annual Report
on
{
Form 20-F complies with relevant US regulations; –
The clarity of the disclosures and compliance with financial
reporting
{
standards and relevant financial and governance reporting
{
requirements; and –
Any correspondence from regulators in relation to our
financial
{
reporting. Accounting policies and practices
The Committee received reports from management in relation to:
–
The identification of critical accounting judgements and key sources
of
{
estimation uncertainty, including the impact of climate change on the consolidated financial statements;
–
Significant accounting policies; and
–
Proposed disclosures of these in the 2022 Annual Report.
Following discussions with management and the external auditor, the
Committee approved the disclosures of the accounting policies and
practices set out in note 1 ‘Basis of preparation’ and within other notes
to
{
the consolidated financial statements. Fair, balanced and understandable
The Committee assessed whether the Annual Report, taken as
a
{
whole,
{
is{
fair, balanced and understandable and provides the
information
{
necessary for shareholders to assess the Company’s position
{
and performance, business model and strategy. This assessment
{
is supported by the Group’s Disclosure Committee which is
{
chaired by the Group General Counsel and Company Secretary who briefs the Committee on the Disclosure Committee’s work and findings.
The Committee reviewed the
{
processes and controls that underpin the
{
Annual Report’s preparation, ensuring that all{
contributors and
senior
{
management are fully{
aware of the requirements and their
responsibilities. This included the
{
financial reporting responsibilities of the
{
Directors under section 172 of the Companies Act 2006 to promote the success of the Company for the benefit of its members as well as
considering the interests of other stakeholders which will have an impact
on the Company’s long-term success.
The Committee reviewed an early draft of the Annual Report to
enable
{
input and
{
comment. In conjunction with the ESG Committee, this
{
included the review of ESG-related disclosures, including TCFD.
The
{
Committee also reviewed the results announcement, supported by
{
the{
work of the Group’s Disclosure Committee, which also reviews
and
{
assesses the appropriateness of investor{
communications.
This work enabled the Committee to provide positive assurance to the
Board to assist it in making the statement required by the Code.
Significant financial reporting judgements
The areas considered and actions taken by the Committee in relation
to
{
the 2022 consolidated financial statements are outlined overleaf. For
{
each area, the Committee was satisfied with the accounting and
disclosures in the consolidated financial statements.
Governance (continued)
Strategic report Other information
Governance
Financials85
Vodafone Group Plc
Annual Report 2022
Area of focus Actions taken
India accounting matters
The disclosure and accounting judgements in relation to:
–
The impact on the Group’s conditional and capped obligations to
make certain payments to Vodafone Idea Limited (‘VIL’) under a
payment mechanism agreed at the time of the merger between
Vodafone India and Idea Cellular in 2017.
–
The valuation of the security package provided by the Group to
Indus
{
Towers (‘Indus’) in respect of commitments of VIL to Indus and the obligation to the TRS lenders, considering the referenced assets.
–
The classification of the Group’s investment in Indus as held for sale.
See note 29 ‘Contingent liabilities and legal proceedings’ in the
consolidated financial statements.
The Committee reviewed the appropriateness of the Group’s
accounting
{
judgements in relation to{
potential liabilities under the
payment mechanism agreed with VIL, considering VIL’s
{
ability to make any further material payments. The review considered the implications of
the telecommunication relief package published by the Government of
India in September 2021 and the anticipated debt for equity conversion,
as well as VIL’s indebtedness, cash flows and need for additional funding.
The Committee also reviewed accounting matters relating to Indus
Towers, notably (i) the terms of the pledges contained in the security
package, (ii) the disposal of primary pledge shares during the year and
(iii)
{
the continued classification as held for sale in the consolidated financial statements.
These
{
reviews occurred at the September 2021, November 2021, March
{
2022, and May 2022 Committee meetings. Impairments
Judgements in relation to impairment testing relate primarily to the
assumptions underlying the calculation of the value in use of the Group’s
businesses, being the achievability of the long-term business plans and
the macroeconomic and related valuation model assumptions.
See note 4 ‘Impairment losses’ in the consolidated financial statements.
The Committee met with the Group Head of Financial Planning &
Analysis in May 2022 to discuss the impairment exercise undertaken
and
{
to challenge the appropriateness of assumptions made, including: –
The consistent application of management’s valuation methodology;
–
The achievability of the Group’s five year business plans;
–
The potential impacts of (i) rising energy cost, (ii) the war in
Ukraine
{
and (iii) climate change on the Group’s businesses and valuation assumptions;
–
The long-term growth assumed for the Group’s businesses at the end
of the plan period; and
–
The discount rates assumed in the valuation of the Group’s businesses.
During the year, the Group recorded no material impairments of asset
carrying values.
Taxation
The Group is subject to a range of tax claims and related legal actions
in
{
several jurisdictions where it operates. Furthermore, the Group has extensive accumulated tax losses, and a
key
{
management judgement is whether a deferred tax asset should be
{
recognised in respect of those{
losses.
See note 6 ‘Taxation’ and note 29 ‘Contingent liabilities and legal
proceedings’ in the consolidated financial statements.
The Committee met with the Group Tax Director in November 2021
and
{
May 2022 in{
advance of the half-year and year-end reporting,
respectively. The Group Tax Director also provided a briefing on
international tax reform and its consequences for the Group.
The Committee challenged the judgements underpinning tax
provisioning, deferred tax assets and related disclosures.
Liability provisioning
The Group is subject to a range of claims and legal actions from
a
{
number of sources, including, but not limited to, competitors,
regulators,
{
customers, suppliers and, on occasion, fellow shareholders in
{
Group subsidiaries.See note 16 ‘Provisions’ and note 29 ‘Contingent liabilities and legal
proceedings’ in the consolidated financial statements.
The Committee met with the Director of Litigation in November 2021 and
May 2022 in
{
advance of the half-year and year-end reporting, respectively.
The Group Litigation Director updated the Committee on legal
contingencies and key investigations.
The Committee reviewed and challenged management’s assessment
of
{
the status of the most significant claims, together with relevant legal advice received by the Group, to form a view on the level of provisioning
and appropriateness of disclosures in the financial statements.
Revenue recognition
Revenue is a risk area given the inherent complexity of IFRS 15
accounting requirements and the underlying billing and related
IT
{
systems. See note 1 ‘Basis of preparation’ in the consolidated financial statements.
The accounting policy for, and related disclosure requirements of
IFRS
{
15 that have been presented in the Annual Report, were reviewed in
{
March and May 2022. The Committee considered the scope of EY’s planned revenue audit
procedures, and their related audit findings and observations at its
meetings in November 2021 and May 2022.
Strategic report Financials Other information
86
Vodafone Group Plc
Annual Report 2022
Governance
Regulators and our financial reporting
The FRC publishes thematic reviews and other guidance to help
companies improve the quality of corporate reporting through the
provision of guidance and reviews of the quality of reporting across
public
{
companies. The Group routinely reviews FRC publications, the
{
most relevant publications for the 2022 Annual Report being: –
Key matters for 2021/22 reports and accounts;
–
Annual review of corporate reporting 2020/21; and
–
Thematic review on existing disclosure requirements for
(i)
{
alternative{
performance measures, (ii) viability and going concern
and (iii) provisions, contingent liabilities and contingent assets.
The Group already complied with the majority of the recommendations
and the 2022 Annual Report has been updated to adopt best practice
where appropriate.
In addition, the FRC published a thematic review on interim reporting. Its
recommendations were reviewed during the Group’s half-year reporting.
The Task Force on Climate-related Financial Disclosures (‘TCFD’) sets out
four core areas of recommended climate-related disclosures, which the
Group disclosed on a voluntary basis in the 2021 Annual Report. The Risk
management section in the 2022 Annual Report has been expanded to
include enhanced disclosures. This is an evolving topic which the Group
will monitor closely.
Internal control and risk management
The Committee has the primary responsibility for the oversight of the
Group’s system of internal control, including the risk management
framework, the compliance framework, and the work of the Internal
Audit
{
function.Internal Audit
The Internal Audit function provides independent and objective assurance
over the design and operating effectiveness of the system of internal
control, through a risk-based approach. The function reports into the
Committee and, administratively, to the Group Chief Financial Officer. The
function is composed of teams across Group functions and local markets.
This enables access to specialist skills through centres of excellence and
ensures local knowledge and experience. Cooperation with professional
bodies and an information technology research firm has ensured access
to additional specialist skills and an advanced knowledge base.
Internal Audit activities are based on a robust methodology and the
internal quality assurance improvement programme ensures conformity
with the International Professional Practices framework, which includes
the IIA Standards and Code of Ethics, and the continuous development of
the audit methodology applied. The conformity was reviewed and verified
through an External Quality Assessment by an independent consultancy
firm. The function has invested in several initiatives to improve its
effectiveness, particularly in the adoption of new technologies. The
innovative use of data analytics has provided broader and deeper audit
testing and driven increased insights.
The Committee has a standing agenda item to cover Internal Audit related
topics. Prior to the start of each financial year, the Committee reviews
and
{
approves the annual audit plan, assesses the adequacy of the budget and resources, and reviews the operational initiatives for the continuous
improvement of the function’s effectiveness. The audit plan’s rolling
review framework, and the data driven risk assessment used to identify
emerging risks is considered and amendments to the audit programme
reviewed during the financial year.
The Committee reviews progress against the approved audit plan and
the
{
results of our audit activities, with a stronger focus on unsatisfactory audit results and ‘cross-entity audits’, which are audits that are performed
across multiple markets with the same scope. Audit results are analysed
by process and entity (local markets/Group functions) to highlight both
changes in the control environment and areas that require attention.
During the year, Internal Audit coverage focused on principal risks, which
included: Cyber threat and Strategic transformation. Relevant audit results
are reported before the Committee’s in-depth review with the risk owner,
which allows the Committee to have an integrated view on the way the
risk is managed.
Assurance was also provided across a range of areas, including digital
customer journeys, technology controls in financial systems, data
privacy,
{
access to commercial systems, compliance with anti-bribery and
{
economic sanctions policies, Vodafone Business application/portal security, secured engineering access to networks, sustainability, and
M-Pesa. The activities performed by the shared service organisation also
received attention due to their significant bearing on the effectiveness of
global processes.
Management is responsible for ensuring that issues raised by Internal
Audit are addressed within an agreed timetable, and the Committee
reviews their timely completion.
An independent review of the effectiveness of the Group’s Internal Audit
function was performed by Deloitte LLP and the findings presented to the
Committee at the January 2022 meeting. The review concluded that the
Internal Audit function operated in accordance with the Global Institute of
Internal Auditors’ International Professional Practices Framework, is at the
top of its peer group range and demonstrates areas of innovative practice.
It was also recommended that the Internal Audit function could reach the
top end ‘world class’ assessment with some additional innovation and a
more strategic role.
Assessment of the Group’s system of internal control,
including
{
the{
risk management framework
The Group’s risk assessment process and the way in which significant
business risks are managed is an area of focus for the Committee.
The
{
Committee’s activity here was led primarily, but not solely, by the Group’s
{
assessment of its principal and emerging risks and uncertainties, as set out
{
on pages 60 to 64. Cyber threat remains a major focus for the Committee given the ever-increasing risks in this
{
area and cyber attacks in
{
the year. The Group has an internal control environment designed to protect the
business from the material risks which have been identified. Management
is responsible for establishing and maintaining adequate internal controls
and the Committee has responsibility for ensuring the effectiveness of
those controls.
The Committee reviewed the process by which Group management
assessed the control environment, in accordance with the requirements
of the Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting published by the FRC. This activity
was
{
supported by reports from the Group Audit Director and the Head
of
{
Risk{
and a range of functional specialists covering areas such as privacy
compliance, treasury policy and the review of internal controls.
As part of the Committee’s recurring agenda items, the Group Security
Director provided a fraud update, the scope of which would include
incidents of fraud involving management or
{
employees with a significant role in internal controls.
The Group operates a ‘Speak Up’ channel that enables employees to
anonymously raise concerns about possible irregularities. The Committee
received an update on the operation of the channel together with the
output of any resulting investigations.
The Committee has completed its review of the effectiveness of the
Group’s system of internal control, including risk management, during
the
{
year and up to the date of this Annual Report. The review covered all
{
material controls including financial, operating and compliance controls. The Committee confirms that the system of internal control
operated effectively for the 2022 financial year. Where specific areas
for
{
improvement were identified, mitigating alternative controls and processes were in place. This allows us to provide positive assurance
to
{
the Board to help fulfil its obligations under the Code. Governance (continued)
Strategic report Other information
Governance
Financials87
Vodafone Group Plc
Annual Report 2022
Compliance with section 404 of the US Sarbanes-Oxley Act
Oversight of the Group’s compliance activities in relation to section 404
of
{
the US Sarbanes-Oxley Act and policy compliance reviews also fall within the Committee’s remit.
Management is responsible for establishing and maintaining adequate
internal controls over financial reporting and we have responsibility for
ensuring the effectiveness of these controls. The Committee received
updates on the Group’s work in relation to section 404 compliance and
the Group’s broader financial control environment during the year. We
continue to challenge management on ensuring the
{
nature and scope of
{
control activities evolve to ensure key risks continue to be adequately mitigated. The ongoing and deeper use of automated controls embedded
within our systems and data analytics is part of the evolution of the
Group’s control
{
environment and was reviewed and discussed by the Committee at the January 2022 meeting.
The Committee also took an active role in monitoring the Group’s
compliance activities, including receiving reports from management in
the year covering programme-level changes, the scope of compliance
work performed and the results of controls testing. The external auditor
also reports the status of its work in relation to controls in its reports to
the
{
Committee.External audit
The Committee has primary responsibility for overseeing the relationship
with the external auditor, EY. This includes making the recommendation
on the appointment, reappointment, and removal of
{
the external auditor,
assessing its independence on an ongoing basis, and approving the
statutory audit fee, the scope of the statutory audit and the appointment
of the lead audit engagement partner. Alison Duncan has held this role
for
{
three years since the appointment of EY as external auditor for the year ended 31 March 2020.
EY presented to the Committee its detailed audit plan for the 2022
financial year, which outlined its audit scope, planning materiality and its
assessment of key audit risks. The identification of key audit risks is critical
in the overall effectiveness of the external audit process and these are
outlined in the Auditor’s report on pages 119 to 128.
The Committee also received reports from EY on its assessment of
the
{
accounting and disclosures in the financial statements and financial
{
controls.The Committee will continue to review the auditor appointment and
anticipates that the audit will be put out to tender at least every 10 years.
The Company has complied with the Statutory Audit Services Order 2014
for the financial year under review. The last external audit tender took
place in 2019 which resulted in the appointment of EY.
Independence and objectivity
In its assessment of the independence of the auditor, and in accordance
with the US Public Company Accounting Oversight Board’s (‘PCAOB’)
standard on independence, the Committee received details of all
relationships between the Company and EY that may have a bearing
on
{
its independence and received confirmation from EY that it is independent of the Company in accordance with US federal securities
law
{
and the applicable rules and regulations of the Securities and
Exchange Commission (‘SEC’) and the PCAOB.
Effectiveness of the external audit process
The Committee reviewed the quality of the external audit process
throughout the
{
year and considered the performance of EY. This comprised the Committee’s own assessment and the results of a detailed
feedback survey of senior personnel across the Group. Based on these
reviews, the Committee concluded that there had been appropriate
focus
{
and challenge by EY on the primary areas of the audit and that EY
{
had applied robust challenge and scepticism throughout the audit. EY audit and non-audit fees
Total fees payable to EY for audit and non-audit services in the year
ended
{
31 March 2022 amounted to €25 million (2021: €32 million). Non-audit fees for the year ended 31 March 2021 included an amount of
€11 million in relation to the IPO of
{
Vantage Towers A.G. in March 2021. Audit fees
The Committee reviewed and discussed the fee proposal, was engaged
in
{
agreeing audit scope changes and, following the receipt of formal assurance that its fees were appropriate for the scope of the work
required, agreed an audit fee of €23 million for statutory audit services
in
{
the year (2021: €21 million). Non-audit fees
To protect the independence and objectivity of the external auditor, the
Committee has a policy for the engagement of the external auditor to
provide non-audit services. The policy prohibits EY from playing any part
in management or decision-making, providing certain services such as
valuation work and the provision of accounting services. The Group’s
non-audit services policy incorporates the requirements of the FRC’s
Ethical Standard, including a ‘whitelist’ of permitted non-audit services
which mirrors the FRC’s Ethical Standard.
The Committee has pre-approved that EY can be engaged by
management, subject to the policies set out above, and subject to:
–
A €60,000 fee limit for individual engagements;
–
A €500,000 total fee limit for services where there is no legal
alternative; and
–
A €500,000 total fee limit for services where there is no practical
alternative supplier.
For those permitted services that exceed these specified fee limits,
the
{
Committee Chair pre-approves the service. Non-audit fees were €2 million (2021: €11 million) and represented
9%
{
of{
audit fees for the 2022 financial year (2021: 52%). See note 3
‘Operating profit’ in the consolidated financial statements.
Strategic report Financials Other information
88
Vodafone Group Plc
Annual Report 2022
Governance
In-depth reviews
The Committee requested management to provide in-depth reviews as part of the meeting agendas. These reviews are summarised bel
ow, together
{
with the Group’s principal risk to which the review relates.
Subject of in-depth review Principal risk
Cyber threat and information security review with the Chief Technology Officer and the Cyber Security Director. Cyber threat
Ransomware review with the Chief Technology Officer and Cyber Security Director. Cyber threat
Deep dive on the remit of the Technology Assurance team with the Chief Technology Officer. Cyber threat
Technology resilience
and
{
future{
readiness
Principal risk deep dive with the Global Supply Chain Director. Supply chain disruption
Principal risk deep dive with the Chief External and Corporate Affairs Officer. Adverse political and
policy environments
Deep dive into privacy compliance and governance at Vodafone from the Group Privacy Officer. Adverse political and
policy environments
Update on the European Electronic Communications Code by the Chief External and Corporate Affairs Officer. Adverse political an
d
policy environments
Review of the opportunities presented by data analytics and digital enablement provided by the Group Financial
Controlling and Operations Director and the Group Internal Audit Director.
Strategic transformation
Updates on the strategic transformation in Germany and partner agencies from the market CEO. Strategic transformation
Market review of Italy provided by the market CEO. Strategic transformation
Market review of Spain provided by the market CEO. Strategic transformation
Market review of the UK provided by the market CEO. Strategic transformation
Business deep dive of Vantage Towers provided by the CEO and CFO. Strategic transformation
Market review of Lesotho provided by the market Managing Director. Strategic transformation
Update on the ‘Trust by Design’ programme from the Group General Counsel and Company Secretary. Strategic transformation
Deep dive into Vodafone Business provided by the CEO and Legal Director of Vodafone Business. Strategic transformation
Report from the Europe Cluster CEO and CFO on the controls and risk landscape in the Europe cluster markets. Strategic transfor
mation
Deep dive of the control environment and compliance from the CEO of Vodafone Egypt. Strategic transformation
Deep dive into the risk and control environment at _VOIS, the Group’s shared services organisation.
This was provided by the Group’s Director of _VOIS.
Strategic transformation
Review of the long-term viability statement and the going concern assessment with management. Adverse changes in
macroeconomic conditions
Governance (continued)
Strategic report Other information
Governance
Financials89
Vodafone Group Plc
Annual Report 2022
This year, the Board formally approved the
establishment of a new Committee of the Board,
the
b
ESG Committee. The role of the Committee is to
b
provide oversight of Vodafone’s Environmental, Social and Governance (
ȁ
ESG’) programme, of sustainability and responsible business practices,
as
b
well as Vodafone’s contribution to the societies that we operate in under the social contract.
Chair
Amparo Moraleda
Members
Valerie Gooding
Dame Clara Furse DBE
Key responsibilities
The responsibilities of the Committee are to:
–
Oversee the ESG programme, including the purpose strategy
(Inclusion
{
for All, Planet and Digital Society), sustainability and responsible business practices, and the social contract;
–
Approve the ESG strategy, including related targets and KPIs, and
monitor progress against key performance indicators and external
ESG
{
index results; –
Oversee execution of the ESG strategy and related policies and
programmes required to implement the ESG strategy, as well as
the
{
Group’s progress on ESG commitments and targets; and –
Provide advice and direction to management on implementation of
the
{
ESG strategy, the opportunities and risks to the Group’s operations and reputation and its corporate responsibility.
Click to read the Committee’s terms of reference:
vodafone.com/board-committees
Letter from Committee Chair
On behalf of the Board, I am pleased to present Vodafone’s first ESG
Committee Report for the year ended 31 March 2022. ESG is at the
core
{
of our purpose and is a key element in the execution of our strategy. Reflecting the criticality of ESG and Vodafone’s commitment to this topic,
this year the Board approved the creation of the new ESG Committee to
provide the Board with enhanced oversight of ESG matters. We believe
the ESG Committee will contribute to the long-term success of Vodafone,
for the benefit of our customers, key stakeholders, and the societies in
which we operate.
Some key stakeholder interests considered as part of the Committee include:
–
Investors
: Strong, Board-level ESG governance is a key requirement of
an effective ESG programme;
–
Governments and regulators
: Local and international legal and
regulatory obligations on ESG topics continue to increase;
–
Local communities and NGOs
: ESG topics affect the day-to-day lives
of the people in the communities that we serve;
–
Suppliers and customers
: Upholding high ethical standards
throughout our value chain is critical for stakeholders when deciding
whether they should do business with Vodafone;
–
Employees
: Employees take pride in working for a purpose-driven
organisation that is enabling an inclusive and sustainable digital society.
When establishing the Committee, the Board worked to ensure that
members brought a range of experience on ESG-related topics that fall
within the Committee’s remit. As Chair, I have extensive experience in
this
{
area, and have also been a member of the Board of Trustees of the
{
Vodafone Foundation since 2020. I’m delighted to be joined on
the
{
Committee by Dame Clara Furse and Valerie Gooding. Dame Clara Furse is the Chair of the UK Voluntary Carbon Markets Forum and also
provides a valuable investor perspective given her previous executive
and non-executive career. Valerie Gooding serves as the Workforce
Engagement Lead for the Board and regularly engages with employees
throughout the organisation. Valerie is also the Chair of the Remuneration
Committee which introduced ESG measures into our long-term incentive
plan two years ago, following approval by shareholders.
During the year, the Committee met twice. The first meeting in
November
{
2021 focused on reviewing Vodafone’s overall approach to
ESG. This included presentations from Joakim Reiter, Vodafone Group’s
Chief External and Corporate Affairs Officer, as well as the Director of
Investor Relations. The Committee was encouraged by the extent to
which ESG is being integrated into Vodafone’s corporate strategy. It
was
{
also noted that there has been a significant increase in expectations on ESG performance from key stakeholders in recent years, notably
accelerated by the COVID-19 crisis.
Read more on Vodafone’s approach to ESG
on page 34
The Committee’s second meeting in March 2022 focused on reviewing
Vodafone’s Planet strategy, as we are focused on understanding
climate-related risks and opportunities, and embedding responses to
these into our business strategy and operations. The Committee works
alongside the Audit and Risk Committee in overseeing matters relating
to
{
climate change risk management.The deep dive into Vodafone’s Planet agenda included an update on
performance, as well as discussion of key challenges and opportunities
relating to Vodafone’s ambitions of becoming net zero by 2040. We
also
{
discussed our programmes enabling our customers to reduce their
carbon emissions, and building more of a circular economy to reduce
network and device electronic waste. The Committee was also given
an
{
insight into how Vodafone’s global strategy is operationalised locally,
{
through a presentation from Vodafone Germany’s CEO, Hannes
{
Ametsreiter.Read more on Vodafone’s Planet strategy and targets
on page 41
On behalf of the Committee, I have reported the Committee’s work to the
Board. Over the next year, I look forward to the Committee’s continued
oversight and scrutiny of Vodafone’s ESG agenda, including further
presentations from senior executives and experts from across the Group.
During FY23, the Committee will review Vodafone’s Inclusion for All and
human rights agendas, and will consider how the Vodafone’s ESG strategy
is implemented across Africa through the Vodacom Group.
As Committee Chair, I will also be available to engage with shareholders
who have questions or comments about the work of the Committee at
our 2022 AGM.
Amparo Moraleda
On behalf of the ESG Committee
17 May 2022
ESG Committee
Scan or click to watch the Chair of the
ESG Committee explain her role:
investors.vodafone.com/videos
Strategic report Financials Other information
90
Vodafone Group Plc
Annual Report 2022
Governance
Read more
Read more
Read more
Environment
Energy consumption and GHG
{
emissions Including energy sources, uses and targets
E-waste and other environmental topics
Including device and network waste, water and plastics
Environmental benefits from
products & services
Including carbon & resource efficiency enablement
Climate change risk management
Including alignment with TCFD recommendations
Social
Health and safety
Diversity & inclusion and
employee experience
Employee rights
Including collective bargaining, grievance mechanisms,
Speak Up, Fair Pay, and labour standards
Responsible supply chain
Including labour standards and sourcing of minerals
Human and digital rights
Including privacy regulations, right to privacy and
freedom of expression, and other human rights
Socio-economic benefits from
products & services
Including digital inclusion
Governance
Mobile, masts and health
Security
Including cyber and other security topics
Anti-bribery and corruption
Business conduct & ethics
Including taxation, business conduct and compliance
Corporate governance
Reporting
Including Annual Report and Accounts, Modern Slavery
Statement and other voluntary ESG disclosures
Focus during the year
The ESG Committee met twice during the year ended 31 March 2022.
The following provides a summary of the topics covered.
November 2021
–
Approval of the Committees Terms of Reference, along with a
discussion on the purpose and expected remit of the ESG Committee.
–
Joakim Reiter, Vodafone Group’s Chief External and Corporate Affairs
Officer, presented a paper on the annual overview of political, policy
and regulatory trends which had been provided to the Board of
Vodafone Group Plc at its July 2021 meeting. The paper outlined the
key impacts of the COVID-19 pandemic on the political and regulatory
environment and the accelerated changes in expectations on
businesses post-pandemic.
–
Joakim Reiter and Vodafone Group’s Investor Relations Director
presented on Vodafone’s ESG approach. This outlined how Vodafone’s
approach to ESG was a core part of the corporate strategy and a driver
of commercial success. The discussion outlined how Vodafone’s ESG
approach brings together five key programmes:
1.
Purpose
and the actions Vodafone takes as part of the three
purpose pillars (Digital Society, Inclusion for All and Planet);
2.
Social contract
, which was a key growth lever for the Company
as
{
a whole;3.
Responsible business practices
, to ensure Vodafone operates
to
{
the highest standards of integrity and ethics, ensuring that Vodafone is ’Doing What’s Right’ towards employees, customers,
society and suppliers;
4.
Transparency
, including providing correct disclosures and
reporting as well as external positioning, engagement and
communication on all material ESG aspects; and
5.
Measurement
, as Vodafone’s performance is measured in
various
{
ways covering different audiences and target groups.March 2022
–
Presentation to the Committee on Vodafone’s Planet approach and
performance. This included an outline of how Vodafone activates
the
{
strategy for different stakeholder groups, including consumers, regulators and investors. Joakim Reiter presented on Vodafone’s
approach to reaching net zero carbon emissions by 2040, including
progress to date and some of the challenges.
–
The Committee was joined by relevant senior representatives from
within Vodafone (Vodafone Group’s Marketing and Brand Director
and
{
Device Operations Director and Vodafone Business’ Legal Director).
The
{
discussion focused on Vodafone’s approach to building more of
a
{
circular economy for devices and activating its Planet strategy for
consumers. The Committee were also updated on Vodafone’s carbon
enablement and ‘digital for green’ strategy.
–
Hannes Ametsreiter (Vodafone Germany CEO) provided the
Committee with an overview of how Vodafone’s global Planet strategy
is implemented locally in Germany, through Vodafone Germany’s
‘GigaGreen’ programme.
–
The ESG Committee discussed Vodafone’s approach to FY22 year-end
ESG reporting and assurance.
Key focus for the next year
The key areas of focus for the next year:
–
Deep dives into Inclusion for All and Digital Society purpose pillars;
–
Review of Vodafone’s approach to human rights, including associated
governance and reporting;
–
Further understanding of operationalisation of ESG approach across
the business, with a focus on Vodacom; and
–
Continuing to review progress of ESG strategy, including performance
against external targets and ESG indices and rankings.
Mapping of ESG topics
When establishing the ESG Committee and setting its remit, we
completed a mapping of all key ESG topics for Vodafone, to ensure
clarity on the role of the ESG Committee alongside the Board and
other relevant Committees. This is presented below, alongside further
details of each ESG topic.
42
43
43
66
56
5535
Key
Audit and Risk Committee ESG Committee
Nominations and
Governance Committee
Full Board
A
N
E
B
68
56
49
53
4436
5447
55
47
39
52
Governance (continued)
E
E
E
A E
B
AB
B E
A E
E
B
A B
A
A
N
B
B EA
41
Strategic report Other information
Governance
Financials91
Vodafone Group Plc
Annual Report 2022
Letter from the Remuneration
Committee Chairman
On behalf of the Board, I present our 2022
Directors’ Remuneration Report.
This report includes both our Policy Report (as approved by shareholders
at the 2020 AGM), and our 2022 Annual Report on Remuneration, which
sets out how our policy was implemented during the year under review,
and how it will be applied for the year ahead.
Activities during the year
During the last year, we have demonstrated consistent and sustainable
growth and have continued to deliver against our purpose and strategy,
keeping society connected during recent volatile and critical times.
As we start to move forward after the COVID-19 pandemic, we will
continue to support our people and in my role as Workforce Engagement
Lead I have heard how our response to the pandemic provided support
and clarity to our colleagues during this period. Our actions ensured that
no employees were furloughed whilst we also continued to run global
all-employee pay programmes, including the delivery of performance
related pay across our business. We also enhanced our working from
home capabilities and given we are able to meet and collaborate in
person again, we are moving to a flexible hybrid working policy which
blends the best of both home and office working.
Looking specifically at executive remuneration, in implementing the
current policy during the year the Committee has continued to consider
the experience of wider stakeholders when determining matters including
executive salaries, incentive outcomes, and package structures, with all
such decisions aligned with our shareholder approved Remuneration
Policy and the Committee’s principles. These principles aim to ensure
our
{
pay arrangements drive the delivery of our strategy, are aligned with performance, encourage shareholder alignment, and support our Fair Pay
principles – further details can be found online using the link at the top of
this page.
Alignment with our strategic framework
Ensuring our Remuneration Policy supports and drives our wider business
strategy remains a core focus of the Committee. Our vision is to become
a
{
new generation connectivity and digital services provider for Europe and
Africa, which will enable an inclusive and sustainable digital society. We
are focused on growing our converged connectivity markets in Europe
and mobile data and payments in Africa, reflecting our three core
customer segments of Europe Consumer, Africa Consumer, and
Vodafone
{
Business.To enable us to meet this objective, our strategic priorities are to
become
{
a simplified and efficient operator, to maintain our leading gigabit
{
networks, and to shape the digital society through our role in
influencing policy and regulation. These priorities require us to deliver
sustainable growth, leverage our scale to deliver efficiencies and value
creation, and to continue to optimise our portfolio.
The importance of our strategic framework is reflected in the inclusion
of
{
the free cash flow measure in both our short-term and long-term incentive plans, with cash generation remaining a key driver of value
creation in our business. Service revenue and adjusted EBIT also continue
to be important financial measures in our short-term incentive plan, both
for measuring the impact of our strategic growth initiatives and in helping
us deliver long-term value to our shareholders.
Our growth plan is built around deepening the trusted relationships with
consumers and business customers and the importance of customer
relationships is reflected in the inclusion of
{
a
{
customer appreciation
metric in our short-term incentive.
Engagement during the year
It is the Committee’s strong belief that through constructive engagement
the
{
relationship between the Committee and shareholders is mutually beneficial. Our 2020 Policy Report was approved by over 96% of
shareholders,
reflecting the importance and effectiveness of two-way
dialogue during such consultations.
The Committee remains satisfied that the current policy is operating
effectively. Our Remuneration Policy will next be reviewed ahead of
its
{
submission for shareholder approval at the 2023 AGM following the
{
conclusion of its full three-year term. Shareholder consultation will form an important part of the Committee’s review over the course of
the
{
next year.In terms of engaging the employee voice, as Workforce Engagement
Lead
{
I attended meetings with both our European and South African forums, with feedback and comments from the meetings subsequently
reported back directly to the Board. The key topics raised by employee
representatives this year focused on our Future Ready ways of working,
our response to COVID-19 and the progress on our Fair Pay agenda.
I
{
would like to thank the representatives from both forums for inviting
me
{
and for contributing to the discussions.When looking at the feedback from these forums and our other
channels
{
of engagement it is evident that our colleagues value the
open
{
and regular updates the business has given throughout the year,
and the Board will ensure these continue in the year ahead.
Read more about our stakeholder engagement activities
on
b
pages 14 to 15 of this Annual ReportArrangements for 2023
Base salary and pension arrangements
The base salaries for both Executive Directors have been frozen since their
respective appointments in 2018.
As set out in last year’s Directors’ Remuneration Report, the Committee
agreed during the 2021 review that salary increases for both individuals
were warranted – however, given the context of COVID-19 and wider
budgetary restraint shown at leadership level it was decided that both
salaries would remain unchanged and that the position would be
reviewed again in 2022.
Following this year’s review the Committee concluded that
{
in light of their experience it
{
was appropriate to increase the salaries of both Executive
Directors.
{
The{
Committee discussed the matter in detail and, despite the
rationale for more significant adjustments, agreed that for 2022 the most
appropriate decision was for the increases to be aligned with the wider UK
workforce budget. The salaries for both Executive Directors will therefore
be increased by 3% effective from 1 July 2022.
The Committee is conscious of the importance of our executive
remuneration arrangements remaining fair and competitive and will
re-visit this topic again as part of the next review in 2023 to determine
if
{
any further adjustments are required. Pension arrangements for both Executive Directors will continue to
remain aligned with the wider UK workforce at 10% of base salary.
Remuneration Committee
Scan or click to watch the Senior Independent Director
and Chair of the Remuneration Committee explain her
role:
investors.vodafone.com/videos
Strategic report Financials Other information
92
Vodafone Group Plc
Annual Report 2022
Governance
Annual bonus (‘GSTIP’)
At the January 2022 meeting, the Committee agreed that the performance
conditions and their respective weightings for 2023 should remain
unchanged from 2022.
The measures under the annual bonus of service revenue, adjusted free
cash flow, adjusted EBIT, and customer appreciation KPIs will continue to
be equally weighted at 25% for the 2023 plan.
Global long-term incentive (‘GLTI’)
The GLTI structure will also remain unchanged for 2023, in line with our
agreed normal policy. The measures under the long-term incentive will
continue to be weighted at 60% adjusted free cash flow, 30% relative
TSR
{
and 10% ESG. Read more
on pages 110 and 111
Performance outcomes during 2022
GSTIP performance (1 April 2021 – 31 March 2022)
Annual bonus performance during the year was measured against
both
{
financial and strategic measures. The four measures were equally weighted at 25% each, with financial metrics constituting service revenue,
adjusted EBIT and adjusted free cash flow whilst the strategic measure
was linked to customer appreciation KPIs. These KPIs covered metrics
including churn, revenue market share, and net promoter score.
Performance under both the financial performance measures and the
customer appreciation KPIs metrics was above the midpoint of the target
range. The combined performance resulted in an overall bonus payout
of
{
69.2% of maximum. Further details on performance can be found on pages 100 and 101.
GLTI performance (1 April 2019 – 31 March 2022)
The 2020 GLTI award (granted June 2019) was subject to adjusted
free
{
cash flow (2/3 of total award) and relative TSR (1/3 of total award) performance. Both performance conditions were measured over the
three-year period ending 31 March 2022.
Final FCF performance finished below the mid-point of the range resulting
in 29.2% of the FCF element vesting. TSR performance was above the
median of the peer group resulting in vesting just above threshold
under
{
this element. This resulted in an overall vesting percentage of 26.1% of
{
maximum. Further details of this vesting calculation can be found on pages 101 and 102.
Consideration of discretion
The Committee reviewed the appropriateness of the outcomes of
both
{
the annual bonus and long-term incentive plan in light of both
the
{
relevant performance targets and the wider financial and business performance across the respective measurement periods. Outcomes
were reviewed against the wider employee experience during the
periods
{
under review with the Committee noting that global employee pay reviews, including the delivery of performance-related pay, had been
undertaken throughout the COVID-19 pandemic and was also scheduled
for later in 2022. It was agreed that the outcomes were appropriate and
that no adjustments were required.
Looking forward
Over the course of the next 12 months the Committee will be reviewing
the current Remuneration Policy ahead of its submission for approval at
the 2023 AGM in line with regulatory requirements and I look forward to
engaging with you, our shareholders, ahead of this date. As per previous
reviews, the Committee will ensure sufficient time is allocated for
consultation prior to the policy being finalised for approval.
The rest of this report sets out both our Policy Report, as approved at the
2020 AGM, and our Annual Report on Remuneration which sets out the
decisions and outcomes summarised in this letter in further detail.
Valerie Gooding
Chairman of the Remuneration Committee
17 May 2022
Remuneration at a glance
Component 2022 (year ending 31 March 2022) 2023 (year ending 31 March 2023)
Fixed pay
Base salary Effective 1 July 2021:
Chief Executive: £1,050,000 (no increase).
Chief Financial Officer: £700,000 (no increase).
Effective 1 July 2022:
Chief Executive: £1,081,500 (3.0% increase)
Chief Financial Officer: £721,000 (3.0% increase)
Benefits
Travel related benefits and private medical cover. Travel related benefits and private medical cover.
Pension
Pension contribution of 10% of salary for all
Executive
{
Directors.Pension contribution of 10% of salary for all
Executive
{
Directors.Annual bonus
GSTIP Opportunity (% of salary):
Target: 100%/Maximum: 200%
Measures:
Service revenue (25%), adjusted EBIT (25%), adjusted FCF
(25%), and customer appreciation KPIs (25%).
Opportunity (% of salary):
Target: 100%/Maximum: 200%
Measures:
Service revenue (25%), adjusted EBIT (25%), adjusted FCF
(25%), and customer appreciation KPIs (25%).
Long-term incentive
GLTI Opportunity (% of salary – maximum):
Chief Executive: 500%/Other Executive Directors: 450%
Measures:
Adjusted free cash flow (60%) , relative TSR (30%),
and ESG (10%).
Performance/holding periods:
Three-year performance + two-year holding period.
Opportunity (% of salary – maximum):
Chief Executive: 500%/Other Executive Directors: 450%
Measures:
Adjusted free cash flow (60%) , relative TSR (30%),
and ESG (10%).
Performance/holding periods:
Three-year performance + two-year holding period.
Remuneration Committee (continued)
Strategic report Other information
Governance
Financials93
Vodafone Group Plc
Annual Report 2022
Remuneration Policy
Remuneration Policy – notes to reader
No changes have been made to our policy since its approval at the 2020 Annual General Meeting which was held on 28 July 2020. O
ur approved
Policy
{
Report is available on our website at vodafone.com, and has been reproduced below in the shaded boxes exactly as it was set out
in the 2020
{
Annual Report. As such, some of the policy wording is now out of date; this includes references to the 2020 Annual General Meet
ing and page
{
number references. Remuneration Policy
In this forward-looking section we describe our Remuneration Policy for the Board. This includes our considerations when determining policy,
a
{
description of the elements of the reward package, including an indication of the potential future value of this package for ea
ch of the
Executive
{
Directors, and the policy applied to the Chairman and Non-Executive Directors.We will be seeking shareholder approval for our Remuneration Policy at the 2020 AGM and we intend to implement it at that point. A summary
and
{
explanation of the proposed changes to the current Remuneration Policy is provided on page 100. Subject to approval, we will review our policy each year to ensure that it continues to support our company strategy and if it is necessary to make a change to our policy within the next three years,
we
{
will seek shareholder approval.Considerations when determining our Remuneration Policy
Our remuneration principles which are outlined on page 97 guide the Remuneration Committee when making decisions on our policy and its
implementation. A critical consideration for the Remuneration Committee when determining our Remuneration Policy is to ensure that it supports
our
{
company purpose, strategy, and business objectives.A variety of stakeholder views are taken into account when determining executive pay, including those of our shareholders, colleagues, and external
bodies. Further details on how we engage with, and consider the views of, each of these stakeholders are set out on page 115.
In advance of submitting our policy for shareholder approval we ran a thorough consultation exercise with our major shareholders. We invited our
{
top 20 shareholders and a number of key governance stakeholders to comment on remuneration at Vodafone and to provide feedback on
{
the proposed
changes to the current policy which was approved at the 2017 AGM. A number of meetings between shareholders and the Remuneration Committee
Chairman took place during this consultation period. Further details of this consultation are provided on pages 97 and
{
98 whilst a summary of the proposed changes to our current policy, which are incorporated in this revised Remuneration Policy report, is
{
provided on page 100.
Listening to and consulting with our employees is very important and the Committee is supportive of the growing focus on engaging the employee
voice, which has accompanied recent changes to the UK Corporate Governance Code. Our engagement with colleagues can take different forms in
different markets but includes a variety of channels and approaches including our annual people survey which attracts very high
{
levels of participation and engagement, regular business leader Q&A sessions, and a number of internal digital communication platforms.
Our Senior Independent Director also undertakes an annual attendance at our European employee forum, and a similar body in South Africa, with
{
any questions or concerns raised by the employee representatives fed back directly to the Board for consideration and discussion.
We do not formally consult directly with employees on the executive Remuneration Policy nor is any fixed remuneration comparison measurement
used. However, when determining the policy for Executive Directors, the Remuneration Committee is briefed on pay and employment conditions of
employees in Vodafone Group as a whole, with particular reference to the market in which the executive is based. Further information on our approach
to remuneration for other employees is given on page 105.
Performance measures and targets
Our Company strategy and business objectives are the primary consideration when we are selecting performance measures for our incentive plans.
The targets within our incentive plans that are related to internal financial measures (such as revenue, profit and cash flow) are typically determined
based on our budgets. Targets for strategic and external measures (such as customer appreciation KPIs, ESG measures, and total shareholder
return
{
(‘TSR’)) are set based on company objectives and in light of the competitive marketplace. The threshold and maximum levels of{
performance
are set to reflect minimum acceptable levels at threshold and very stretching levels at maximum.
As in previous Remuneration Reports we will disclose the details of our performance targets for our short and long-term incentive plans. However, our
annual bonus targets are commercially sensitive and therefore we will only disclose our targets in the Remuneration Report following the completion
of the financial year. We will normally disclose the targets for each long-term award in the Remuneration Report for the financial year preceding
the
{
start of the performance period – where this is not possible, such targets will be disclosed at the time of grant and published in the next Remuneration Report.
At the end of each performance period we review performance against the targets, using judgement to account for items such as (but not limited
to)
{
mergers, acquisitions, disposals, foreign exchange rate movements, changes in accounting treatment, material one-off tax settlements etc. The
{
application of judgement is important to ensure that the final assessments of performance are fair and appropriate.
Strategic report Financials Other information
94
Vodafone Group Plc
Annual Report 2022
Governance
Remuneration Policy (continued)
Malus and clawback
In addition, the Remuneration Committee reviews the incentive plan results before any payments are made to executives or any shares vest and has
full discretion to adjust the final payment or vesting downwards if they believe circumstances warrant it. In particular, the Committee has the discretion
to use either malus or clawback as it sees appropriate. In the case of malus, the award may lapse wholly or in part, may vest to a lesser extent than it
would otherwise have vested or vesting may be delayed.
In the case of clawback, the Committee may recover bonus amounts that have been paid up to three years after the relevant payment date, or
{
recover share awards that have vested up to five years after the relevant grant date. The key trigger events for the use of the clawback arrangements include
material misstatement of performance, material miscalculation of performance condition outcomes, gross misconduct, and
{
reputational damage. Subject to approval of this Remuneration Policy, these arrangements will be applicable to all bonus amounts paid, or share awards granted, following
the 2020 AGM. The current clawback arrangements, which are set out in the Remuneration Policy approved by shareholders at the 2017 AGM, have
been applicable to all bonus amounts paid, or share awards granted, since the 2017 AGM.
The Remuneration Policy table
The table below summarises the main components of the reward package for Executive Directors.
Fixed pay:
Base salary
Purpose and link
to
{
strategyTo attract and retain the best talent
Operation Salaries are usually reviewed annually and fixed for 12
{
months commencing 1 July. Decision is influenced by:
–
level of skill, experience and scope of responsibilities of
{
individual; –
business performance, scarcity of talent, economic climate and market conditions;
–
increases elsewhere within the Group; and
–
external comparator groups (which are used for reference purposes only) made up of companies of
{
similar size and
{
complexity to Vodafone.Opportunity Average salary increases for existing Executive Committee members (including Executive Directors) will not normally
exceed average increases for employees in other appropriate parts of the Group. Increases above this level may be made
in
{
specific situations. These situations could{
include (but are not limited to) internal promotions, changes to role, material
changes to the business and exceptional company performance.
Performance metrics None.
Fixed pay:
Pension
Purpose and link
to
{
strategyTo remain competitive within the marketplace
Operation
–
Executive Directors may choose to participate in the defined contribution pension scheme or to receive a cash allowance
in
{
lieu of pension.Opportunity
–
The pension contribution or cash payment is equal to the maximum employer contribution available to our UK
employees under our Defined Contribution scheme (currently 10% of annual gross salary).
Performance metrics None.
Fixed pay:
Benefits
Purpose and link
to strategy
To aid retention and remain competitive within the marketplace
Operation
–
Travel related benefits. This may include (but is not limited to) company car or cash allowance, fuel and access to a driver
where appropriate.
–
Private medical, death and disability insurance and annual health checks.
–
In the event that we ask an individual to relocate we would offer them support in line with Vodafone’s relocation or
international assignment policies. This may cover (but is not limited to) relocation, cost of living allowance, housing,
home
{
leave, education support, tax equalisation and advice. –
Legal fees if appropriate.
–
Other benefits are also offered in line with the benefits offered to other employees, for example, our all-employee share
plan, mobile phone discounts, maternity/paternity benefits, sick leave, paid holiday, etc.
Opportunity
–
Benefits will be provided in line with appropriate levels indicated by local market practice in the country of employment.
–
We expect to maintain benefits at the current level but the value of benefit may fluctuate depending on, amongst other
things, personal situation, insurance premiums and other external factors.
Performance metrics None.
Strategic report Other information
Governance
Financials95
Vodafone Group Plc
Annual Report 2022
Annual bonus –
Global Short-Term Incentive Plan (‘GSTIP’)
Purpose and link
to strategy
To drive behaviour and communicate the key priorities for the year.
To motivate employees and incentivise delivery of performance over the one year operating cycle.
The financial metrics drive our growth strategies whilst also focusing on improving operating efficiencies.
The
{
strategic measures aim to ensure a great customer experience remains at the heart of what we do. Operation
–
Bonus levels and the appropriateness of measures and weightings are reviewed annually to ensure they continue to
support our strategy.
–
Performance over the financial year is measured against stretching financial and non-financial performance targets set
at
{
the start of the financial year. –
The annual bonus is usually paid in cash in June each year for performance over the previous year. A mandatory deferral
of 25% of post-tax bonus earned into shares for two years will normally apply except where an executive has met or
exceeded their share ownership requirement.
Opportunity
–
Bonuses can range from 0–200% of base salary, with 100% paid
{
for on-target performance. Maximum is only paid out for exceptional performance.
Performance metrics
–
Performance over each financial year is measured against stretching targets set at the beginning of the year.
–
The performance measures normally comprise a mix of financial and strategic measures. Financial measures may
include (but are not limited to) profit, revenue and cash flow with a weighting of no less than 50%. Strategic measures
may include (but are not limited to) customer appreciation KPIs such as churn, revenue market share, and NPS.
Long-term incentive –
Global Long-Term Incentive Plan (‘GLTI’)
Purpose and link
to strategy
To motivate and incentivise delivery of
{
sustained performance over the long term.To support and encourage greater shareholder alignment through a high level of
{
personal share
{
ownership.
The use of free cash flow as the principal performance measure ensures we apply prudent cash management
and rigorous capital discipline to our investment decisions.
The use of TSR along with a performance period of not less than three years means that we are focused on
{
the long-term interests of our shareholders.
Operation
–
Award levels and the framework for determining vesting are reviewed annually.
–
Long-term incentive awards consist of shares subject to performance conditions which are granted each year.
–
Awards will normally vest not less than three years after the respective award grant date based on Group performance
against the performance metrics set out below. In exceptional circumstances, such as but not limited to where a delay to
the grant date is required, the Committee may set a vesting period of less than three years, although awards will continue
to be subject to a performance period of at least three years.
–
All post-tax shares are subject to a mandatory two year holding from the date of vest prior to release.
–
Dividend equivalents are paid in cash after the vesting date.
Opportunity
–
Maximum long-term incentive face value at award of 500% of base salary for the Chief Executive and 450% for other
Executive Directors.
–
Threshold long-term incentive face value at award is 20% of maximum opportunity. Minimum vesting is 0% of maximum
opportunity. Awards vest on a straight-line basis between threshold and maximum.
–
The Committee has the discretion to reduce long-term incentive grant levels for Directors who have neither met their
shareholding guideline nor increased their shareholding by 100% of salary during the year.
–
The awards that vest accrue cash dividend equivalents over the three year vesting period.
–
Awards vest to the extent performance conditions are satisfied.
Performance metrics
–
Performance is measured against stretching targets set at the time of grant.
–
Vesting is determined based on the following measures: adjusted free cash flow as our operational performance
measure, relative TSR against a peer group of companies as our external performance measure, ESG as a measure of our
external impact and commitment to our purpose.
–
Weightings will be determined each year and will normally constitute 60% on adjusted free cash flow, 30% on relative
total shareholder return, and 10% on ESG. The Committee will determine the actual weighting of an award prior to grant,
taking into account all relevant information.
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96
Vodafone Group Plc
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Governance
Remuneration Policy (continued)
Notes to the Remuneration Policy table
Existing arrangements
We will honour existing awards, incentives, benefits and contractual arrangements made to individuals prior to their promotion to the Board and/
or
{
prior to the approval and implementation of this policy. For the avoidance of doubt this includes payments in respect of any award granted under any previous Remuneration Policy. This will last until the existing incentives vest (or lapse) or the benefits or contractual arrangements no longer apply.
Long-term incentive (‘GLTI’)
When referring to our long-term incentive awards we use the financial year end in which the award was made. For example, the “2020 award”
was
{
made in the financial year ending 31 March 2020. The awards are usually made in the first half of the financial year.The extent to which awards vest depends on three performance conditions:
–
underlying operational performance as measured by adjusted free cash flow;
–
relative Total Shareholder Return (‘TSR’) against a peer group median; and
–
performance against our Environmental, Social, and Governance (‘ESG’) targets.
Adjusted free cash flow
The free cash flow performance is based on the cumulative adjusted free cash flow figure over the performance period. The detailed targets and
the
{
definition of{
adjusted free cash flow are determined each year as appropriate. The target adjusted free cash flow level is set by reference t
o
our
{
long-range plan and market expectations. We consider the targets to be critical to the Company’s long-term success and its ability to maximise shareholder value, and to be in line with the strategic goals of the Company. The Remuneration Committee sets these targets to be sufficiently
demanding with significant stretch where only outstanding performance will be rewarded with a maximum payout.
The cumulative adjusted free cash flow vesting levels as a percentage of the award subject to this performance element are shown in the table below
(with linear interpolation between points):
Performance
Vesting percentage
(% of FCF element)
Below threshold 0%
Threshold 20%
Maximum 100%
TSR outperformance of a peer group median
We have a limited number of appropriate peers and this makes the measurement of a relative ranking system volatile. As such, the outperformance of
the median of a peer group is felt to be the most appropriate TSR measure. The peer group for the performance condition
{
is reviewed each year and amended as appropriate.
The TSR vesting levels as a percentage of the award subject to this performance element are shown in the table below (with linear interpolation
between points):
Vesting percentage
(% of TSR element)
Below median 0%
Median 20%
Percentage outperformance of the peer group median equivalent to 80th percentile 100%
In order to determine the percentages for the equivalent outperformance levels above median, the Remuneration Committee seeks independent
external advice.
ESG performance
Our ESG targets will be set on an annual basis (as per the approach for our other performance measures), and will be aligned to our externally
communicated ambitions in this area. Where performance is below the agreed ambition, the Committee will use its discretion to assess vesting
based
{
on performance against the stated ambition and any other relevant information.
Remuneration policy for other employees
While our remuneration policy follows the same fundamental principles across the Group, packages offered to employees reflect differences in
market
{
practice in the different countries, role and seniority.For example, the remuneration package elements for our Executive Committee are essentially the same as for the Executive Directors with
some
{
minor differences, for example smaller levels of share awards and local variances where appropriate. The remuneration for the next level of
{
management, our senior leadership team, again follows the same principles with local and individual performance aspects in the
annual bonus targets and performance share awards. They also receive lower levels of share awards which are partly delivered in conditional share awards without
performance conditions.
Strategic report Other information
Governance
Financials97
Vodafone Group Plc
Annual Report 2022
Estimates of total future potential remuneration from 2021 pay packages
The tables below provide estimates of the potential future remuneration for each of the Executive Directors based on the remuneration opportunity
to
{
be granted in the 2021 financial year. Potential outcomes based on different performance scenarios are provided for each Executive Director.The assumptions underlying each scenario are described below
1
.
Fixed Consists of base salary, benefits and pension.
Base salary is at 1 July 2020.
Benefits are valued using the figures in the total remuneration for the 2020 financial year table on page 109 (of the 2020 report).
Pensions are valued by applying cash allowance rate of 10% of base salary at 1 July 2020.
Base
(£’000)
Benefits
(£’000)
Pension
(£’000)
Total fixed
(£’000)
Chief Executive 1,050 42 105 1,197
Chief Financial Officer 700 22 70 792
Mid-point Based on what a Director would receive if performance was in line with plan.
The opportunity for the annual bonus (‘GSTIP’) is 100% of base salary under this scenario.
The opportunity for the long-term incentive (‘GLTI’) reflects assumed achievement mid-way between threshold and
maximum
{
performance.Maximum The maximum award opportunity for the GSTIP is 200% of base salary.
The maximum GLTI opportunity reflects full vesting based on the maximum award levels set out in this Remuneration Policy
(i.e. 500% of base salary for the Chief Executive and 450% of base salary for the Chief Financial Officer).
All scenarios Long-term incentives consist of share awards only which are measured at face value i.e. no assumption for cash dividend
equivalents
{
payable.22%22%
14%14%
11%11%
£11,172£11,172
70%70%
£8,547£8,547
£5,397£5,397
58%58%
£1,197£1,197
61%61%
Mid-point Maximum Maximum
(assuming 50%
share price growth)
Fixed
Salary, Bene
Ż
ts, and PensionAnnual Bonus Long-Term Incentive
19%19%25%25%
20%20%
Nick Read
Chief Executive £’000
23%23% 15%15% 12%12%
£6,917£6,917
68%68%
£5,342£5,342
59%59%
£3,382£3,382
56%56%
£792£792
Mid-point Maximum Maximum
(assuming 50%
share price growth)
Fixed
Salary, Bene
Ż
ts, and PensionAnnual Bonus Long-Term Incentive
20%20%
26%26%
21%21%
Margherita Della Valle
Chief Financial Of £’000
Ż
cerNote:
1. In line with UK reporting requirements, the fourth bar in each chart reflects the same assumptions as per the Maximum scenario but with an assumed share price increase of 50% (which
{
subsequently increases the hypothetical value of the long-term incentive under this scenario by the same percentage).
Recruitment remuneration
Our approach to recruitment remuneration is to pay no more than is necessary and appropriate to attract the right talent to the role.
The Remuneration Policy table (pages 103 and 104) sets out the various components which would be considered for inclusion in th
e remuneration
package for the appointment of an Executive Director. Any new Director’s remuneration package would include the same elements, and be subject to
the same constraints, as those of the existing Directors performing similar roles. This means a potential maximum bonus opportunity of 200% of base
salary and long-term incentive maximum face value of opportunity at award of 500% of base salary.
When considering the remuneration arrangements of individuals recruited from external roles to the Board, we will take into account the remuneration
package of that individual in their prior role. We only provide additional compensation to individuals for awards foregone. If necessary we will seek to
replicate, as far as practicable, the level and timing of such remuneration, taking into account also any remaining performance requirements applying
to it. This will be achieved by granting awards of cash or shares that vest over a timeframe similar to those forfeited and if appropriate based on
performance conditions. A commensurate reduction in quantum will be applied where it is determined that the new awards are either not subject
to
{
performance conditions or subject to performance conditions that are not as stretching as those of the awards forfeited.
Service contracts of Executive Directors
Executive Directors contracts have rolling terms and are terminable on no more than 12
{
months’ notice.The key elements of the service contract for executives relate to remuneration, payments on loss of office (see below), and restrictions during active
employment (and for 12 months thereafter). These restrictions include non-competition, non-solicitation of customers and employees etc.
Strategic report Financials Other information
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Vodafone Group Plc
Annual Report 2022
Governance
Treatment of corporate events
All of the Company’s share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and become
exercisable on a change of control to the extent that any performance condition has been satisfied and pro-rated to reflect the acceleration of vesting,
unless the Committee determines otherwise.
In the event of a demerger, distribution (other than an ordinary dividend) or other transaction which would affect the current or future value of any
award, the Committee may allow awards to vest on the same basis as for a change of control described above. Alternatively, an adjustment may be
made to the number of shares if considered appropriate.
Payments for departing Executive Directors
In the table below we summarise the key elements of our policy on payment for loss of office. We will of course, always comply both with the relevant
plan rules and local employment legislation.
Provision Policy
Notice period and
compensation for
loss
{
of{
office in
service
{
contracts –
12 months’ notice from the Company to the Executive Director.
–
Up to 12 months’ base salary (in line with the notice period). Notice period payments will either be made as normal
(if
{
the{
executive continues to work during the notice period or is on gardening leave) or they will be made as monthly
payments in lieu of notice (subject to mitigation if alternative employment is obtained).
Treatment of annual
bonus (‘GSTIP’) on
termination under
plan
{
rules –
The annual bonus will be pro-rated for the period of service during the financial year and will reflect the extent to which
Company performance has been achieved.
–
The Remuneration Committee has discretion to reduce the entitlement to an annual bonus to reflect the individual’s
performance and the circumstances of the termination.
Treatment of unvested
long-term incentive
awards (‘GLTI’)
on
{
termination under
{
plan{
rules
–
An Executive Director’s award will vest in accordance with the terms of the plan and satisfaction of performance
conditions measured at the normal completion of the performance period, with the award pro-rated for the proportion
of
{
the vesting period that had elapsed at the date of cessation of employment. –
The Remuneration Committee has discretion to vary the level of vesting as deemed appropriate, and in particular to
determine that awards should not vest for reasons which may include, at their absolute discretion, departure in case
of
{
poor performance, departure without the agreement of the Board, or detrimental competitive activity.Pension and benefits
–
Generally pension and benefit provisions will continue to apply until the termination date.
–
Where appropriate other benefits may be receivable, such as (but not limited to) payments in lieu of accrued holiday
and
{
legal fees or tax advice costs in relation to the termination. –
Benefits of relative small value may continue after termination where appropriate, such as (but not limited to) mobile
phone provision.
In exceptional circumstances, an arrangement may be established specifically to facilitate the exit of a particular individual albeit that any such
arrangement would be made within the context of minimising the cost to the Group. We will only take such a course of action in exceptional
circumstances and where it is considered to be in the best interests of shareholders.
Chairman and Non-Executive Directors’ remuneration
Our policy is for the Chairman to review the remuneration of Non-Executive Directors annually following consultation with the Remuneration
Committee Chairman. Fees for the Chairman are set by the Remuneration Committee.
Element Policy
Fees
–
We aim to pay competitively for the role including consideration of the time commitment required. We benchmark the fees against
an appropriate external comparator group. We pay a fee to our Chairman which includes fees for chairmanship of any
{
committees. We pay a fee to each of our other Non-Executive Directors and they receive an additional fee if they chair a committee and/or
hold
{
the position of Senior Independent Director. Non-executive fee levels are set within the maximum level as approved by shareholders as part of our Articles of Association. We review the structure of fees from time to time and may, as appropriate, make
changes to the manner in which total fees are structured, including but not limited to any additional chair or membership fees.
Allowances
–
Under a legacy arrangement, an allowance is payable each time certain non-Europe-based Non-Executive Directors are required
to
{
travel to attend Board and committee meetings to reflect the additional time commitment involved. Incentives
–
Non-Executive Directors do not participate in any incentive plans.
Benefits
–
Non-Executive Directors do not participate in any benefit plans. The Company does not provide any contribution to their
pension
{
arrangements. The Chairman is entitled to the use of a car and a driver whenever and wherever he is providing
his
{
services{
to or representing the
{
Company. We have been advised that for Non-Executive Directors, certain travel and accommodation expenses in
{
relation to attending Board meetings should be treated as a taxable benefit therefore we also
cover
{
the tax liability for these expenses.Non-Executive Director letters of appointment
Non-Executive Directors are engaged on letters of appointment that set out their duties and responsibilities. The
{
appointment of Non-Executive
Directors may be terminated without compensation. Non-Executive Directors are generally not expected to
{
serve for a period exceeding nine years. For further information refer to the Nominations and Governance Committee section of the Annual Report.
Remuneration Policy (continued)
Strategic report Other information
Governance
Financials99
Vodafone Group Plc
Annual Report 2022
Remuneration Committee
In this section we give details of the composition of the Remuneration Committee and activities undertaken during the 2022 financial year.
The
{
Committee’s function is to exercise independent judgement and consists only of the following independent Non-Executive Directors:Chairman:
Valerie Gooding
Committee members:
Michel Demaré and Dame Clara Furse
The Committee regularly consults with Nick Read, the Chief Executive, and Leanne Wood, the Chief Human Resources Officer, on various matters relating
to the appropriateness of awards for Executive Directors and senior executives, though they are not present when their own compensation is discussed.
In
{
addition, James Ludlow, the Group Reward and Policy Director, provides a perspective on information provided to the Committee, and requests information and analysis from external advisers as required. Rosemary Martin, the Group General Counsel and Company Secretary, advises the
{
Committee on corporate governance guidelines and is Secretary to the Committee.
External advisers
The Remuneration Committee seeks and considers advice from independent remuneration advisers where appropriate. The appointed advisers, WTW,
were selected following a thorough process led by the Chairman of the Remuneration Committee at the time and were appointed by the Committee
in
{
2007. The Chairman of the Remuneration Committee has direct access to the advisers as and when required, and the Committee dete
rmines the protocols by which the advisers interact with management in support of the Committee. The advice and recommendations of the external advisers
are
{
used as a guide, but do not serve as a substitute for thorough consideration of the issues by each Committee member. Advisers attend Committee meetings occasionally, as and when required by the Committee.
WTW is a member of the Remuneration Consultants’ Group and, as such, voluntarily operates under the Remuneration Consultants’ Group Code of
Conduct in relation to executive remuneration consulting in the UK. This is based upon principles of transparency, integrity, objectivity, competence, due
care and confidentiality by executive remuneration consultants. WTW has confirmed that it adheres to that Code of Conduct throughout the year for all
remuneration services provided to Vodafone and therefore the Committee is satisfied that it is independent and objective. The Remuneration Consultants’
Group Code of Conduct is available at remunerationconsultantsgroup.com.
Adviser Appointed by Services provided to the Committee
Fees for services provided
to
{
the Committee £’000
1
Other services provided to the Company
WTW Remuneration
Committee
in 2007
Advice on market practice; governance;
provision of
{
market data on executive reward; reward
{
consultancy; and performance analysis.
£195 Reward and benefits consultancy;
provision of benchmark data; outsourced
pension administration; and insurance
consultancy services.
Note:
1. Fees are determined on a time spent basis.
2020 Annual General Meeting – Remuneration Policy voting results
At the 2020 Annual General Meeting there was a binding vote on our Remuneration Policy. Details of the voting outcomes are prov
ided in the table
{
below.Votes for % Votes against % Total votes Withheld
Remuneration Policy 17,195,227,349 96.41 639,935,461 3.59 17,835,162,810 185,334,870
2021 Annual General Meeting – Remuneration Report voting results
At the 2021 Annual General Meeting there was an advisory vote on our Remuneration Report. Details of the voting outcomes are provided in the
table
{
below.Votes for % Votes against % Total votes Withheld
Remuneration Report 16,729,088,541 97.65 402,218,134 2.35 17,131,306,675 25,262,861
Meetings
The Remuneration Committee had five formal meetings during the year. In addition, informal conference calls can also take place. Meeting attendance
can be found on page 68. The principal agenda items at the formal meetings were as follows:
Meeting Agenda items
May 2021
–
2021 annual bonus achievement and 2022 targets/ranges
–
2019 long-term incentive award vesting and 2022 targets/ranges
–
External market update
–
2021 Directors’ Remuneration Report
July 2021
–
2021 AGM update
–Share plan update
November 2021
–
External market update
–Share plan update
January 2022
–
2023 short-term incentive structure
–
Share plan update
–
External market update
–
Gender Pay Gap reporting
March 2022
–
Risk assessment of incentive plans
–
Remuneration arrangements across Vodafone
–
Committee’s terms of reference
–
Chairman and Non-Executive Director fee levels
–
2023 reward packages for the Executive Committee
–
2022 Directors’ Remuneration Report
Annual Report on Remuneration
Strategic report Financials Other information
100
Vodafone Group Plc
Annual Report 2022
Governance
Annual Report on Remuneration (continued)
2022 remuneration
In this section we summarise the pay packages awarded to our Executive Directors for performance in the 2022 financial year versus 2021. Specifically we
have provided a table that shows all remuneration that was earned by each individual during the year and computed a single total remuneration figure for
the year. The value of the annual bonus (‘GSTIP’) reflects what was earned in respect of the year but will be paid out in cash in the following year. Similarly
the value of the long-term incentive (‘GLTI’) reflects the share awards which will vest in June 2022 as a result of the performance through the three-year
period ended at the completion of our financial year on 31 March 2022.
Consideration of the use of discretion
The Remuneration Committee reviews all incentive awards prior to payment and uses judgement to ensure that the final assessments of performance are
fair and appropriate. If circumstances warrant it, the Committee may adjust the final payment or vesting.
The Committee reviewed incentive outcomes at the May 2022 meeting and considered the appropriateness of outcomes in light of wider financial and
business performance across the relevant measurement periods for both the short-term and long-term incentive plans. Outcomes were reviewed against
the wider employee experience during the periods under review with the Committee noting that global employee pay reviews, including the delivery of
performance-related pay, had been undertaken throughout the COVID-19 pandemic and was also scheduled for later in 2022. As such it was agreed that
the outcomes were appropriate and that no adjustments were required to either the short-term or long-term incentive outcomes this year.
2022 annual bonus (‘GSTIP’) payout (audited)
In the table below we disclose our achievement against each of the performance measures and targets in our annual bonus (‘GSTIP
’) and the resulting
total annual bonus payout level for the year ended 31 March 2022 of 69.2% of maximum. This is applied to the maximum bonus level of 200% of base
salary for each executive. Commentary on our performance against each measure is provided on the next page.
Performance measure
Payout at
maximum
performance
(% of salary)
Actual payout
(% of salary)
Actual payout
(% of overall
bonus
maximum)
Threshold
performance
level
€bn
Target
performance
level
€bn
Maximum
performance
level
€bn
Actual
performance
level
1
€bn
Service revenue 50.0% 35.5% 17.8% 35.5 36.6 37.7 37.1
Adjusted EBIT 50.0% 34.9% 17.4% 4.3 5.1 5.8 5.4
Adjusted free cash flow 50.0% 39.9% 20.0% 4.0 4.5 5.0 4.8
Customer appreciation KPIs 50.0% 28.0% 14.0% See overleaf for further details
Total annual bonus payout level 200.0% 138.3% 69.2%
Note:
These figures are adjusted for the impact of M&A, foreign exchange movements and any changes in accounting treatment.
Total remuneration for the 2022 financial year (audited)
Nick Read Margherita Della Valle
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Salary/fees 1,050 1,050 700 700
Taxable benefits
1
42 32 22 21
Annual bonus: GSTIP (see below for further detail) 1,452 1,301 968 867
Total long-term incentive: 1,521 1,062 926 646
GLTI awards
2,3
1,285 888 782 540
GLTI dividends
4
236 174 144 106
Pension/cash in lieu of pension 105 105 70 70
Other
5
11 ––
Total 4,171 3,551 2,686 2,304
Total Fixed Remuneration 1,198 1,188 792 791
Total Variable Remuneration 2,973 2,363 1,894 1,513
Notes:
1. Taxable benefits include amounts in respect of: – Private healthcare (2022: Nick Read £2,189, Margherita Della Valle £2,153; 2021: Nick Read £2,683, Margherita Della Valle £2,153);
– Cash car allowance £19,200 p.a.; and
– Travel (2022: Nick Read £20,626, Margherita Della Valle £1,141; 2021: Nick Read £10,114, Margherita Della Valle £nil).
2. The share price used for the 2021 value, as set out in note 3 below, is lower than the award grant price. As such, no amount of the value shown in the 2021 column is attributable to share price
appreciation during the performance or vesting periods. The grant price of the award which vests on 26 June 2022 was 124.24 pence whilst the value in the 2022 column is calculated using the
average closing share price over the last quarter of the 2022 financial year of 126.61 pence. Therefore the values attributable to share price appreciation in respect of the 2020 GLTI vest for Nick Read
and Margherita Della Valle are £24k and £15k respectively.
3. The value shown in the 2021 column is the award which vested on 26 June 2021 in respect of Nick Read and Margherita Della Valle, and is valued using the execution share price on 26 June 2021
of
{
120.98 pence. The value shown in the 2022 column is the award which vests on 26 June 2022 and is valued using an average closing share price over the last quarter of the 2022 financial year of 126.61 pence.
4. Nick Read and Margherita Della Valle receive a cash award equivalent in value to the dividends that would have been paid during the vesting period on any shares that vest. The dividend value shown
in 2022 relates to awards vesting on 26 June 2022.
5. Reflects the value of the SAYE benefit which is calculated as £375 x 12 months x 20% to reflect the discount applied based on savings made during the year.
Strategic report Other information
Governance
Financials101
Vodafone Group Plc
Annual Report 2022
Financial metrics
As set out in the table above, service revenue, free cash flow and EBIT finished above the midpoints of the respective target r
anges reflecting strong
performance in markets such as South Africa, Egypt, Turkey and Portugal.
Customer appreciation KPIs
An assessment of performance under the customer appreciation KPIs measure was conducted on a market by market basis. Each market was assessed
against a number of different metrics which included:
–
Churn – defined as total gross customer disconnections in the period divided by the average total customers in the period.
–
Revenue market share – based on our total service revenue and that of our competitors in the markets we operate in.
–
Net Promoter Score (‘NPS’) for both Consumer and Vodafone Business – defined as the extent to which our customers would recommend us.
All measures utilise data from our local markets which is collected and validated for quality and consistency by independent third-party agencies where
possible. Further details on our performance against each key metric is set out below.
Despite a backdrop of regulatory changes and intense competition, the business recorded good overall churn results with a year-on-year reduction in
mobile churn reflecting strong performance in Turkey, Italy, and the UK, despite less favourable performance in Germany and Spain. Aggressive market
conditions saw more pressure on our fixed churn results, particularly in Spain and Italy, albeit with overall results remaining relatively stable and a number
of markets, including Germany and the UK delivering positive performance.
Revenue market share improved in our four largest European markets with the gap to the local leader also reducing in these markets, with the exception
of Germany where our overall position remained broadly unchanged. Elsewhere our market position remained broadly stable with a number of markets
including South Africa gaining market share and/or reducing the gap to the leader.
Consumer NPS performance during the year saw us holding market leader or co-leader positions in several markets. Particularly strong performance was
recorded in Italy as well as Portugal and Ireland with generally good performance recorded elsewhere including in the UK and Turkey which retained their
second place position. Overall consumer NPS performance was offset by slightly weaker performance in Germany and Spain.
Business NPS performance remained strong during the year and we continue to hold market leader or co-leader positions in the majority of our markets
including the UK, Italy, Spain and South Africa. In the UK we regained co-leadership position, having lost the position last year due to competitive
conditions. In Germany and Turkey, we retained second place and continue to reduce the gap to our competitors.
It is within this context that overall performance against our customer appreciation KPIs metrics during the year was judged to be above the midpoint
of
{
the target range. The aggregated performance for the Group is calculated on a revenue-weighted average to give an overall achievement. The overall Group achievement for the year was 56.1% which reflects good consistent performance across a number of our largest markets including in particular the
UK, Italy, and South Africa.
Overall outcome
2022 annual bonus (‘GSTIP’) amounts
Base salary
£’000
Maximum bonus
% of base salary
2022 payout
% of maximum
Actual payment
£’000
Nick Read 1,050 200% 69.2% 1,452
Margherita Della Valle 700 200% 69.2% 968
Long-term incentive (‘GLTI’) award vesting in June 2022 (audited)
Vesting outcome
The 2020 long-term incentive (‘GLTI’) awards which were made to executives in June 2019 will vest at 26.1% of maximum in June
{
2022. The performance conditions for the three-year period ending in the 2022 financial year are as follows:
Adjusted FCF performance – 2/3 of total award (€bn) TSR outperformance – 1/3 of total award TSR peer group
Below threshold <15.85 Below threshold Below median BT Group Orange
Threshold 15.85 Threshold Median Deutsche Telekom Royal KPN
Maximum 19.55 Maximum 8.50% p.a. Liberty Global Telecom Italia
MTN Telefónica
Strategic report Financials Other information
102
Vodafone Group Plc
Annual Report 2022
Governance
Annual Report on Remuneration (continued)
100
94
103
96
104
85
75
87
97
83
99
104
98
121
98
99
125
107
04/19 09/2103/2109/2003/2009/19 03/22
Vodafone Group Median of peer group Outperformance of
median 8.5% p.a.
70
80
90
100
110
120
130
140
2020 GLTI award: TSR performance
Growth in the value of a hypothetical US$100 holding
over the performance period, six month averaging
2020 GLTI share awards subject to performance conditions vesting in June 2022
Maximum
number
of shares
Adjusted free cash
flow performance
payout
% of maximum
Relative TSR
performance payout
% of maximum
Weighted
performance payout
% of maximum
Number of
shares vesting
Value of
shares vesting
(’000)
Nick Read 3,887,636 29.2% 20.0% 26.1% 1,014,672 £1,285
Margherita Della Valle 2,366,387 29.2% 20.0% 26.1% 617,627 £782
Specified procedures are performed by our internal audit team over the adjusted free cash flow to assist with the Committee’s assessment of performance.
The performance assessment in respect of the TSR measure is undertaken by WTW. Details of how the plan works can be found in th
e
{
Remuneration
Policy.
Long-term incentive (‘GLTI’) awarded during the year (audited)
The independent performance conditions for the 2022 long-term incentive awards made in August 2021, and subject to a three-year performance
period
{
ending 31 March 2024, are adjusted free cash flow (60% of total award), relative TSR (30% of total award) and ESG (10% of total
award) performance as follows:
Adjusted FCF performance
(60% of total award)
Adjusted FCF performance
(€bn)
Vesting percentage
(% of FCF element)
Below threshold <15.0 0%
Threshold 15.0 20%
Maximum 17.0 100%
TSR performance
(30% of total award) TSR outperformance
Vesting percentage
(% of TSR element)
Below threshold Below median 0%
Threshold Median 20%
Maximum 8.50% p.a. 100%
TSR peer group
BT Group Deutsche Telekom Liberty Global MTN
Orange Royal KPN Telecom Italia Telefónica
Telefónica Deutschland
The adjusted free cash flow for the three-year period ended on
31
{
March{
2022 was €16.8 billion and equates to vesting under
the
{
FCF{
element of 29.2% of maximum.
The chart to the right shows that our TSR performance over
the
{
three-year period ended on 31 March 2022 was above the median
{
of{
our comparator group and equates to vesting under
the
{
TSR{
element of 20%
{
of maximum.When the weighting of each condition is applied to the respective
performance outcomes, this results in a calculated payout of 26.1%
of
{
overall maximum.The vesting impact of this outcome when applied to the number
of
{
shares{
granted is set out in the table below.
Strategic report Other information
Governance
Financials103
Vodafone Group Plc
Annual Report 2022
Purpose pillar ESG metric for 2022 GLTI Overall ambition Baseline position for 2022 GLTI Ambition for 2022 GLTI (10% of total award
Planet Greenhouse gas reduction 50% reduction from FY17
baseline by 2025
37% reduction from FY17
baseline at 31 March 2021
60% reduction from FY17
baseline by 31 March 2024
Inclusion for All Women in management 40% representation of
women in management
by
{
203032% representation of
women in management
at
{
31 March 202135% representation of
women in management
by
{
31 March 2024Digital Society /
Inclusion for All
M-Pesa connections Connect >50m people
and
{
their families to mobile
{
money by 202548.3m connections
at 31 March 2021
68.2m connections
by 31 March 2024
The table below sets out the conditional awards of shares made to the Executive Directors in August 2021.
2022 GLTI performance share awards made in August 2021
1
Maximum
vesting level
(number of shares)
Maximum
vesting level
(face value
2
)
Proportion of
maximum award vesting at
minimum performance
Performance
period end
Nick Read 4,494,863 £5,250,000 1/5th 31 Mar 2024
Margherita Della Valle 2,696,917 £3,149,999 1/5th 31 Mar 2024
Notes:
1. GLTI awards were granted as conditional share awards over shares with a value equal to the percentages of salary referred to on page 92. Dividend equivalents on the shares that vest are paid in cash after
the vesting date.
2. Face value calculated based on the closing share price on 2 August 2021 (day immediately preceding the date of grant) of 116
.8 pence.
Outstanding awards
The structure for awards made in November 2020 (vesting August 2023) and August 2021 (vesting August 2024) is set out on the pr
evious page.
Further
{
details on the structure of these awards, and relevant targets, can be found in the Annual Report on Remuneration of the releva
nt year.All-employee share plans
During the year the Executive Directors were eligible to participate in the Vodafone Group Sharesave Plan which is open to all UK employees.
The Vodafone Sharesave Plan is an HM Revenue & Customs (‘HMRC’) approved scheme open to all staff permanently employed by a Vodafone company
in the UK as of the eligibility date. Options under the plan are granted at up to a 20% discount to market value. Executive Directors’ participation is included
in the option table on page 105.
Pensions (audited)
During the 2022 financial year Nick Read received a cash allowance of 10% of base salary. Margherita Della Valle accrued benefits under the defined
contribution pension plan of £3,999.96, with the remainder of her 10% of base salary pension benefit for the year delivered as a cash allowance.
Nick Read is a deferred member of the Vodafone Group Pension Scheme which closed to future accrual in 2010 before he was an Executive Director.
Margherita Della Valle has not participated in a Vodafone sponsored defined benefit scheme during her employment.
The Executive Directors are provided benefits in the event of death in service. In the event of ill health, an entitlement to b
enefit of 2/3 of base salary,
up
{
to{
a maximum benefit determined by the insurer, may be provided up until State Pension Age. In respect of the Executive Committee members,
the
{
Group has made aggregate contributions of £143,175 (2021: £194,955) into defined contribution pension schemes.Alignment to shareholder interests (audited)
Current levels of ownership by the Executive Directors, and the date by which the goal should be or should have been achieved, are shown below.
Based on a share price of 126.61 pence, Nick Read is currently above, and Margherita Della Valle currently below, the respectiv
e shareholding
requirement. As shown in the charts below, both Executive Directors increased their shareholding levels during the year. Margherita Della Valle
joined
{
the{
Board on 27 July 2018 and is expected to achieve her goal following the aforementioned vest of the 2020 GLTI.
At 31 March 2022
Requirement
as a % of salary
Current %
of salary held
% of requirement
achieved
Number of
shares owned
Value of
shareholding
Date for requirement
to be achieved
Nick Read 500% 555% 111% 4,604,134 £5.8m July 2023
Margherita Della Valle 400% 328% 82% 1,814,284 £2.3m July 2023
4.6m4.6m
4.4m4.4m
500%500%
555%555%
545%545%
444%
444%
666%
666%
4%
increase
31/03
2022
31/03
2021
Goal Actual
31/03
2022
Illustrative
20% SP
increase
Illustrative
20% SP
decrease
Actual
31/03
2021
Goal Deadline:
July 2023
Nick Read
Actual holding
(number of shares)
Holding scenario
(% of salary)
22%
increase
Margherita Della Valle
Actual holding
(number of shares)
Goal Deadline:
July 2023
Holding scenario
(% of salary)
31/03
2022
31/03
2021
Goal Actual
31/03
2022
Illustrative
20% SP
increase
Illustrative
20% SP
decrease
Actual
31/03
2021
1.8m
1.5m
400%
328%
275%
262%
262%
394%
394%
Strategic report Financials Other information
104
Vodafone Group Plc
Annual Report 2022
Governance
Annual Report on Remuneration (continued)
The shareholding requirements include a post employment condition whereby the Executive Directors will need to continue to hold shares equivalent to
the value of their requirement at the date of departure (or actual holding on departure if the requirement has not been reached during employment) for
a
{
further two years post employment. The Committee has a number of processes in place to ensure this condition is met, including executives agreeing
to
{
these terms prior to receiving an award, executives holding the majority of their shares (and at least up to the value of their
requirement) in{
a Company
accessible account, and the Committee having the ability to lapse any unvested GLTI awards if the condition is not met.
Collectively the Executive Committee including the Executive Directors
{
owned 27,921,648 Vodafone shares at 31 March 2022, with a value of over £35.3
{
million. None of the Executive Committee members’ shareholdings amounts to more than 1% of the issued shares in that class of share, excluding treasury shares.
Directors’ interests in the shares of the Company (audited)
A summary of interests in shares and scheme interests of the Directors who served during the year is given below. More details of the outstanding shares
subject to award and options are set out in the table below and on page 105.
Share options
At 31 March 2022
Total number
of interests in shares
(at maximum)
1
Unvested with
performance conditions
(at target)
Unvested with
performance conditions
(at maximum)
SAYE
(unvested without
performance conditions)
Executive Directors
Nick Read 17,203,287 6,773,988 12,585,861 13,292
Margherita Della Valle 9,399,605 4,077,914 7,585,321 –
Total 26,602,892 10,851,902 20,171,182 13,292
Note:
1. This includes both owned shares and the maximum number of unvested share awards.
The total number of interests in shares includes interests of connected persons, unvested share awards and share options.
At 31 March 2022 Total number of interests in shares
Non-Executive Directors
Sanjiv Ahuja (position at retirement) 14,000 (ADRs)
1
Sir Crispin Davis 34,500
Michel Demaré 100,000
Dame Clara Furse 150,000
Valerie Gooding 28,970
Renee James (position at retirement) 27,272
Deborah Kerr (appointed 1 March 2022) 12,000 (ADRs)
1
Maria Amparo Moraleda Martinez 30,000
David Nish 107,018
Olaf Swantee (position at retirement) 220,000
Jean-François van Boxmeer 323,380
Note:
1. One ADR is equivalent to 10 ordinary shares.
At 17 May 2022, and during the period from 1 April 2022 to 17 May 2022, no Director had any interest in the shares of any subsidiary company. Other
than those individuals included in the tables above who were Board members at 31 March 2022, members of the Group’s Executive C
ommittee at
31
{
March 2022 had an aggregate beneficial interest in 21,503,230 ordinary shares of the Company. At 17 May 2022, the Directors had an aggregate beneficial interest in 7,312,286 ordinary shares of the Company and the Executive Committee members had an aggregate beneficial interest in
21,503,230 ordinary shares of the Company. None of the Directors or the Executive Committee members had an individual beneficial interest
amounting
{
to greater than 1% of the Company’s ordinary shares.Performance share awards
The maximum number of shares subject to outstanding awards that have been granted to Directors under the long-term incentive (‘GLTI’) plan are
currently as follows:
GLTI performance share awards
2020 award
Awarded: June 2019
Performance period ending: March 2022
Vesting date: June 2022
Share price at grant: 124.2 pence
2021 award
Awarded: November 2020
Performance period ending: March 2023
Vesting date: August 2023
Share price at grant: 124.9 pence
2022 award
Awarded: August 2021
Performance period ending: March 2024
Vesting date: August 2024
Share price at grant: 116.8 pence
Nick Read 3,887,636 4,203,362 4,494,863
Margherita Della Valle 2,366,387 2,522,017 2,696,917
Details of the performance conditions for the awards can be found on pages 101 to 103 or in the Remuneration Report from the relevant year.
Strategic report Other information
Governance
Financials105
Vodafone Group Plc
Annual Report 2022
Share options
The following information summarises the Executive Directors’ options under the HMRC approved Vodafone Group 2008 Sharesave Plan (‘SAYE’).
No
{
other Directors have options under any schemes and, other than under the SAYE, no options have been granted since 2007. Options under the SAYE
{
were granted at a discount of 20% to the market value of the shares at the time of the grant. No other options may be granted at a discount.Grant date
At
1 April 2021
or date of
appointment
Options
granted
during the
2022 financial
year
Options
exercised
during the
2022 financial
year
Options
lapsed
during the
2022 financial
year
Options
held at
31 March 2022
Option
price
Date from
which
exercisable Expiry date
Market
price on
exercise
Gain on
exercise
Number
of shares
Number
of shares
Number
of shares
Number
of shares
Number
of shares Pence
1
Pence
Nick Read
SAYE 2 Mar 17 4,854 – – – 4,854 154.51 1 Apr 22 1 Oct 22 – –
SAYE 14 Jul 17 8,438 – – – 8,438 177.75 1 – –
Sep 22 1
Mar 23Total 13,292 – – – 13,292 – –
Note:
1. The closing trade share price on 31 March 2022 was 124.84 pence. The highest trade share price during the year was 142.42 pence and the lowest price was 106.94 pence.
At 17 May 2022 there had been no change to the Directors’ interests in share options from 31 March 2022. Other than the individual included
in
{
the{
table
{
above, at 17 May 2022 members of the Group’s Executive Committee held options for 25,241 ordinary shares at prices ranging from102.6
{
pence to{
111.7 pence per ordinary share, with a weighted average exercise price of 107.0 pence per ordinary share exercisable at dates
ranging
{
from 1{
September 2022 to 1 September 2023.
Margherita Della Valle, Hannes Ametsreiter, Aldo Bisio, Colman Deegan, Ahmed Essam, Alexandre Froment-Curtil, Shameel Joosub, V
inod Kumar,
Rosemary Martin, Serpil Timuray, and Johan Wibergh held no options at 17 May 2022.
Loss of office payments (audited)
Other than amounts already disclosed in prior year reports, no loss of office payments were made during the year.
Payments to past Directors (audited)
During the 2022 financial year Lord MacLaurin received benefit payments in respect of security costs as per his contractual arrangements. These costs
exceeded our de minimis threshold of £5,000 p.a. and, including the tax paid, were £23,679 (2021: £23,513).
Fees retained for external non-executive directorships
Executive Directors may hold positions in other companies as non-executive directors and retain the fees.
During the year ended 31 March 2022, Nick Read served as a non-executive director on the board of Booking Holdings Inc. where h
e retained fees
of
{
US$462,571 (2021: US$277,389). Margherita Della Valle served as a non-executive director on the board of Reckitt Benckiser Grou
p plc where she retained fees of £115,563 (2021: £112,000).
2022 remuneration for the Chairman and Non-Executive Directors (audited)
Salary/fees Benefits
1
Total
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Chairman
Jean-François van Boxmeer 650 297 18 – 668 297
Senior Independent Director
Valerie Gooding 165 165 9 – 174 165
Non-Executive Directors
Sir Crispin Davis 115 115 9 1 124 116
Michel Demaré 115 115 1 – 116 115
Dame Clara Furse 115 115 3 – 118 115
Deborah Kerr (appointed 1 March 2022) 10 – 1 – 11 –
Maria Amparo Moraleda Martinez 137 115 1 – 138 115
David Nish 140 140 10 1 150 141
Former Non-Executive Directors
Sanjiv Ahuja (stepped down 27 July 2021) 38 115 – 1 38 116
Renee James (stepped down 27 July 2021) 38 115 3 – 41 115
Olaf Swantee (stepped down 25 September 2021) 21 – – – 21 –
Total 1,544 1,292 55 3 1,599 1,295
Note:
1. We have been advised that for Non-Executive Directors, certain travel and accommodation expenses in relation to attending Board meetings should be treated as a taxable benefit. The table above includes
these travel expenses and the corresponding tax contribution.
Strategic report Financials Other information
106
Vodafone Group Plc
Annual Report 2022
Governance
Annual Report on Remuneration (continued)
Pay in the wider context
Fair pay at Vodafone
As part of its review of executive remuneration arrangements, the Committee takes account of the pay policies in place across the wider business. This
includes considering the structure of remuneration offerings at each level of the business to ensure there is a strong rationale for how packages evolve
across the different levels of the organisation.
During the year the Committee reviewed the remuneration structure across the business, which included how our arrangements aligned with our strategy,
supported our purpose, and celebrated the Spirit of Vodafone. The update also set out the results of the latest annual fair pay review, including where
the
{
key focus areas were and what actions had been agreed locally to implement any required adjustments. In addition to being a cor
e principle of the Committee, there
{
is a clear culture in our business of ensuring we offer competitive and fair pay to all employees. Our approach across our business is guided by the six principles set out below. Our commitment to these principles is reflected in how the UK based Living Wage Foundation has certified us
as
{
an Accredited Living Wage employer.1. Market competitive
The pay of our people is reflective of their skills, role and function and the external market.
We annually review the pay of each employee and actively manage any who fall below the market competitive range.
2. Free from discrimination
Our pay should not be affected by gender, age, disability, gender identity and expression, sexual orientation, race, ethnicity, cultural heritage or belief.
We annually compare the average position of our men and women against their market benchmark, grade and function to identify and understand any
differences, and take action if necessary.
3. Ensure a good standard of living
We work with the independent organisation, the Fair Wage Network, to assess how our pay compares to the ‘living wage’ in each o
f our markets because
we are committed to providing a good standard of living for our people and their families.
4. Share in our successes
All our people should have the opportunity to share in our success by being eligible to receive some form of performance related pay, e.g. a bonus, shares
or sales incentive.
5. Provide benefits for all
Our global standard is to offer all our people life insurance, parental leave and access to either Company or state provided healthcare and pension
{
provision.
6. Open and transparent
We ensure that our people understand their pay. We do this through a series of user-friendly guides, webpages and an annual reward statement,
which
{
help explain our people’s pay and outline the value of their core reward package. In addition, they also receive monthly or weekly payslips and a payment schedule.
Click to read more about Fair Pay at Vodafone:
vodafone.com/fair-pay
Stakeholder engagement
The Committee considers all stakeholder groups when setting executive pay including:
Colleagues
The Committee is fully briefed on pay arrangements across the business to ensure any decisions on executive pay are made within our wider business
context and take into account wider employee pay conditions. We engage with our employees through a variety of means including employee forums,
interactive webinars (including with our executives), global Spirit Beat surveys and digital platforms – all of which give our people the chance to voice their
opinion on any area of interest – including all-employee and executive pay.
Shareholders
The Committee values the active participation of our shareholders during our consultations and fully considers all feedback as part of the review process.
Government
The Committee actively engages with external professional bodies and government departments when they issue consultations on proposed changes to
legislation or reporting guidelines.
Wider society
The Committee is fully aware that society remains concerned about the risk of excessive executive pay practices in the wider market. The Committee
believes that transparent reporting and active engagement in explaining both the operation of, and rationale for, executive pay decisions is key for
businesses to retain trust in this area.
Strategic report Other information
Governance
Financials107
Vodafone Group Plc
Annual Report 2022
UK Gender Pay Gap reporting
Each year we publish our UK Gender Pay Gap in line with the statutory UK methodology. The nature of the statutory calculation means the gap will
fluctuate year on year, influenced by changes in our business structure, Company performance and the percentage of men and women at all levels and
positions. The existence of a UK gender pay gap in our business is primarily a consequence of more men than women holding senior or specialist, and
therefore higher-paid, roles.
With our commitment to embed an inclusive culture, we continue our work to reduce the gap and have made good progress since the publication of
the
{
first report in 2017. Our global programmes aim to support women across different roles, areas, and geographies of our business
and will, over time, reduce our specific UK Gender Pay Gap which this year was calculated as 9.6% – a decrease from our 2020 figure of 12.0%.
We have made significant progress over the last five years with the 2022 Bloomberg Gender-Equality Index recognising Vodafone a
s one of the top
companies globally in leading the way towards more equal, inclusive workplaces. We are proud of the progress we are making but recognise there is
more
{
to be done.Click to learn more about our initiatives, case studies, and key statistics on our dedicated UK Gender Pay Gap webpage at
vodafone.com/uk-gender-pay-gap
Relative spend on pay
The chart below shows both the dividends distributed in the year and the total cost of remuneration in the Group.
5,1575,157
5,3345,334
2,4122,412
2,4832,483
Distributed by way
of dividends
Overall expenditure on
remuneration for all employees
2021
2022
20212022
€m
Read more details on dividends and expenditure on remuneration for all employees,
on pages 160 and 194 respectively
CEO pay ratio
The following table sets out our CEO pay ratio figures:
Year CEO single figure Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2022 £4,171k Option B 113:1 73:1 48:1
2021 £3,551k Option B 106:1 87:1 42:1
2020 £3,529k Option B 113.1 69.1 45.1
2019
1
£4,359k Option B 154:1 107:1 56:1
Note:
1. The CEO single figure used in the calculation of the 2019 ratios reflects a blended figure for Vittorio Colao and Nick Read, recognising the change in incumbency for the role during this year.
The pay ratio figures in the above table are calculated using the following total pay and benefits information:
Year Supporting information 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2022 Salary £31.7k £47.1k £71.5k
Total pay and benefits £36.9k £57.5k £87.2k
2021 Salary £30.0k £37.1k £71.2k
Total pay and benefits £33.5k £41.0k £85.3k
2020 Salary £28.0k £42.8k £65.0k
Total pay and benefits £31.3k £51.1k £78.6k
2019 Salary £23.1k £36.4k £65.0k
Total pay and benefits £28.3k £40.8k £78.2k
The calculation methodology used reflects Option B as defined under the relevant regulations. In line with the relevant regulations this utilises the most
recently collected and disclosed data analysed within our Gender Pay Gap report, with employees at the three quartiles identified from this analysis and
their respective single figure values calculated.
To ensure this data accurately reflects individuals at such quartiles, the single figure values for individuals immediately above and below the identified
employee at each quartile within the Gender Pay Gap analysis were also reviewed.
In recent years our ratios have remained relatively consistent, reflecting how the single figures for both the Chief Executive and employees at the quartile
positions have remained stable when viewed over the period set out in the table above. In general we expect the ratios to be primarily driven by the
valuation of the long-term incentive that is included in the Chief Executive’s single figure for the year.
Strategic report Financials Other information
108
Vodafone Group Plc
Annual Report 2022
Governance
Annual Report on Remuneration (continued)
Change in remuneration for Directors and all employees
In line with regulatory requirements, the table below calculates the percentage change in Directors’ remuneration (salary, taxable benefits and annual
bonus payment) compared to the average remuneration for other Vodafone Group employees who are measured on comparable business objectives
and
{
who have been employed in the UK since 2020 (2020 to 2021) and 2021 (2021 to 2022) (per capita). Vodafone has employees based a
ll around the
{
world and some of these individuals work in countries with very high inflation; therefore Vodafone’s UK-based Group employees i
s deemed the most appropriate employee group for this comparison.
Percentage change from 2021 to 2022 Percentage change from 2020 to 2021
Base Salary Taxable benefits Annual bonus Base Salary Taxable benefits Annual bonus
Executive Directors
Nick Read 0.0% 31.3% 11.6% 0.0% -23.8% 19.4%
Margherita Della Valle 0.0% 4.8% 11.6% 0.0% -4.5% 19.3%
Non-Executive Directors
Jean-François van Boxmeer 118.9% – – – – –
Valerie Gooding 0.0% – – 0.0% -100.0% –
Sir Crispin Davis 0.0% 800.0% – 0.0% -95.7% –
Michel Demaré 0.0% – – 0.0% -100.0% –
Dame Clara Furse 0.0% – – 0.0% -100.0% –
Deborah Kerr (appointed 1 March 2022) – – – – – –
Maria Amparo Moraleda Martinez 19.10% – – 0% -100.0% –
David Nish 0.0% 900.0% – 0.00% -96.8% –
Former Non-Executive Directors
Sanjiv Ahuja (stepped down 27 July 2021) -67.0% -100.0% – 0.0% -66.7% –
Renee James (stepped down 3 November 2020) -67.0% – – -13.5% -100.0% –
Olaf Swantee (stepped down 25 September 2021) – – – – – –
Other Vodafone Group employees employed in the UK 2.5% 0.3% 80.0% 3.8% 0.2% 30.2%
The significant year-on-year increase in fees paid to Jean-François van Boxmeer reflects how the individual was appointed on 28 July 2020 and therefore
the 2021 fees figure used for the purpose of this calculation does not reflect a full year value. The percentage increase does not reflect an actual increase
in the fee payable to the Chairman which has remained unchanged since April 2018. Read more on pages 105 and 112.
Similarly, whilst some of the percentages within the ‘Taxable benefits’ column look significant, these actually reflect relatively small increases in value when
viewed on an absolute basis. The percentages also reflect how certain travel and accommodation expenses in relation to attending Board meetings were
lower than normal in 2021 due to the impact of COVID-19 on the ability to attend meetings in-person. Where an individual had no taxable benefit values
in
{
2021 it has not been possible to calculate a percentage for the table above. Further details on the actual values can be found
on page 105.
Strategic report Other information
Governance
Financials109
Vodafone Group Plc
Annual Report 2022
Assessing pay and performance
In the table below we summarise the Chief Executive’s single figure remuneration over the past 10 years, as well as how our variable pay plans have
paid
{
out in relation to the maximum opportunity. This can be compared with the historic TSR performance over the same period. The ch
art below shows
{
the performance of the Company relative to the STOXX Europe 600 Index over a 10-year period. The STOXX Europe 600 Index was sel
ected as
{
this{
is a
{
broad-based index that includes many of our closest competitors. It should be noted that the TSR element of the 2020 GLTI is based on the
{
TSR{
performance shown in the chart on page 102 and not this chart.
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
10-year historical TSR performance
Growth in the value of a hypothetical
€100
{
holding over 10 years 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Financial year remuneration
for Chief Executive
Single figure of total remuneration £’000 11,099 8,014 2,810 5,224 6,332 7,389
2,740
1
/1619
2
3,529 3,551 4,171
Annual bonus
(actual award versus max opportunity) 33% 44% 56% 58% 47% 64% 44% 52% 62% 69%
Long-term incentive
(vesting versus max opportunity) 57% 37% 0% 23% 44% 67% 40% 50% 22% 26%
Notes:
1. Reflects the single figure in respect of Vittorio Colao for the period to 30 September 2018.
2. Reflects the single figure in respect of Nick Read for the period from 1 October 2018.
90
110
130
150
170
190
210
230
250
Vodafone Group
STOXX Europe
600 index
160
220
240
100
116
141
169
163
113
137
168
147
150
145
114
95
123
124
172
173
183
0
10
20
30
40
50
60
70
80
90
100
LTI
average 37%
Annual Bonus
average 53%
Strategic report Financials Other information
110
Vodafone Group Plc
Annual Report 2022
Governance
Annual Report on Remuneration (continued)
2023 remuneration
Details of how the Remuneration Policy will be implemented for the 2023 financial year are set out below.
Prior to reviewing executive remuneration arrangements the Committee was fully briefed on remuneration arrangements elsewhere in the business.
This
{
included a detailed discussion on the structure of remuneration offerings at each level of the business, how pay at these levels is determined, and
{
the{
findings of the latest annual Fair Pay review. The Committee also considered the external context and decisions made in relation to our wider
employee population.
The cumulative effect of these discussions was that the Committee was able to make decisions in respect of executive remuneration within the context
of
{
the wider employee pay landscape within the business.21
2023 Base salaries
Neither the Chief Executive nor the Chief Financial Officer has received a salary increase since their appointment to their current roles in 2018. During the
March 2021 review, and as set out in the 2021 Directors’ Remuneration Report, the Committee agreed that increases for the Executive Directors were
warranted, but determined to keep both salaries unchanged given the context of COVID-19 and the budgetary restraint being shown for the wider
leadership team at the time. The Committee agreed it would review this position again in 2022.
As part of this year’s review, conducted in March 2022, the Committee reviewed executive remuneration arrangements against the following
comparator
{
groups:1.
A EuroTop peer group constituting the top 25-75 European companies (excluding financial services companies) and a few other select companies
relevant to the telco sector; and
2.
The FTSE 30 (excluding financial services companies).
Following the 2022 review the Committee concluded that in light of their experience it was appropriate to increase the salaries of both Executive Directors.
It was further agreed that despite the rationale for more significant adjustments, it was appropriate for the increases to be aligned with the wider UK workforce
budget. The salaries for both Executive Directors will therefore be increased by 3% effective from 1 July 2022 to the following levels:
–
Chief Executive: Nick Read £1,081,500; and
–
Chief Financial Officer: Margherita Della Valle £721,000.
Pension
Pension arrangements for both the Chief Executive and the Chief Financial Officer will remain unchanged at 10% of salary, in line with the maximum
employer contribution level for the wider UK population.
2023 Annual Bonus (
ȁ
GSTIP’)Following its annual review of the GSTIP structure, the Committee agreed that the performance measures and associated weightings for the 2023 plan
should remain unchanged from 2022 as follows:
–
Service revenue (25%);
–
Adjusted EBIT (25%);
–
Adjusted free cash flow (25%); and
–
Customer appreciation KPIs (25%). This includes an assessment of churn, revenue market share and Net Promoter Score
1
(‘NPS’).
Note:
1. The assessment of NPS utilises data collected in our local markets which is validated for quality and consistency by independent third party agencies.
Due to the potential impact on our commercial interests, annual bonus targets are considered commercially sensitive and therefore will be disclosed
in
{
the 2023 Remuneration Report following the completion of the financial year.Long-term incentive (
ȁ
GLTI’) awards for 2023Awards for 2023 will be made in line with the arrangements described in our policy on pages 95 and 96. Vesting of the 2023 award will be subject
to
{
adjusted free cash flow (60% of total award), relative TSR (30% of total award), and ESG (10% of total award) performance. Perf
ormance will be measured over the three financial years ending 31 March 2025, and any net vested shares will be subject to an additional two-year holding period
(i.e.
{
the{
‘3+2’ model). It is anticipated that the final awards will be reviewed by the Committee at the July 2022 meeting and, subject to the Committee’s
approval, will be granted shortly afterwards.
Further details of the 2023 award targets are provided are on the following page.
Strategic report Other information
Governance
Financials111
Vodafone Group Plc
Annual Report 2022
Adjusted free cash flow (60% of total award)
Reflecting internal timings on budget finalisation and the grant date, the Committee intends to approve the target range for the three year adjusted
free
{
cash flow target at its July 2022 meeting. Details of the final range will be disclosed in the relevant market announcement at
the time of grant and published in the 2023 Directors’ Remuneration Report.
Relative TSR (30% of total award)
Following the annual review of the performance measures which included a review of analysis provided by the Committee’s external advisers,
the
{
Committee determined that the TSR outperformance range for the 2023 award should be set at 8.50% p.a. at maximum.
The Committee further determined that the TSR peer group should remain unchanged for the 2023 award. Further details are set out in the tables
{
below.Relative TSR (30% of total award) TSR outperformance Vesting (% of relative TSR element)
Below threshold Below median 0.0%
Threshold Median 20.0%
Maximum 8.50% p.a. 100.0%
TSR peer group
BT Group Deutsche Telekom Liberty Global MTN Orange
Royal KPN Telecom Italia Telefónica Telefónica Deutschland
Linear interpolation (i.e. straight-line vesting) occurs for performance between threshold and maximum.
ESG (10% of total award)
The table below sets out how performance under the ESG measure for the 2023 award will be assessed against three quantitative a
mbitions:
Purpose pillar Metric for 2023 GLTI Overall ambition Baseline position for 2023 GLTI Ambition for 2023 GLTI (10% of total award)
Planet Net zero Net zero under Scope 1 & 2
by
{
20301
46% reduction in Scope 1 & 2
emissions versus a FY20 baseline
at 31 March 2022
80% reduction in Scope 1 & 2
emissions versus a FY20 baseline
by 31 March 2025
Inclusion for All Female representation
in
{
management40% representation of women
in
{
management by 203032% representation of women in
management at 31 March 2022
35% representation of women in
management by 31 March 2025
Digital Society /
Inclusion for All
Financial inclusion
customers
>75m financial inclusion
customers by 2026
54.5m financial inclusion
customers at 31 March 2022
70.0m financial inclusion
customers by 31 March 2025
Note:
1. This carbon reduction ambition has been approved by the Science Based Targets initiative.
Each ambition for the 2023 award has been set by considering both our externally communicated targets and our internal progress as at 31 March 2022.
At the end of the performance period the Committee will assess achievement across the three metrics against the stated ambitions and determine vesting
under this element. Full disclosure of the rationale for the final vesting decision will be provided in the relevant Directors’ Remuneration Report.
Strategic report Financials Other information
112
Vodafone Group Plc
Annual Report 2022
Governance
2023 remuneration for the Chairman and Non-Executive Directors
During the year, and following its establishment via Board approval in May 2021, it was agreed that the Chair of the newly formed ESG Committee would
receive an additional fee in line with those payable for other Committee Chairmanships.
Fees for our Chairman and Non-Executive Directors have been benchmarked against the FTSE 30 (excluding financial services companies). Following
{
this year’s review it was agreed that no changes will be made to the current fee levels, which are set out in the table below.
Position/role
Fee payable
£’000
Chairman
1
650
Non-Executive Director 115
Additional combined fee for Senior Independent Director and Chairman of the Remuneration Committee 50
Additional fee for Chairmanship of Audit and Risk Committee 25
Additional fee for Chairmanship of ESG Committee 25
Note:
1. The Chairman’s fee also includes the fee for the Chairmanship of the Nominations and Governance Committee.
Further remuneration information
Dilution
All awards are made under plans that incorporate dilution limits as set out in the guidelines for share incentive schemes published by the
Investment
{
Association. The current estimated dilution from subsisting executive awards is approximately 2.7% of the Company’s share capital at 31
{
March 2022 (2.6% at 31 March 2021), whilst from all-employee share awards it is approximately 0.3%{
(0.3%
{
at 31 March 2021). This gives a total dilution of 3.0% (2.9%
{
at 31 March 2021).Service contracts
The terms and conditions of appointment of our Directors are available for inspection at the Company’s registered office during normal business hours
and
{
at the Annual General Meeting (for 15 minutes prior to the meeting and during the meeting). The Executive Directors have notice
periods in their service contracts of 12 months. The Non-Executive Directors’ letters of appointment do not contain provision for notice periods or for compensation if
their appointments are terminated.
This report on remuneration has been approved by the Board of Directors and signed on its behalf by:
Valerie Gooding
Chairman of the Remuneration Committee
17 May 2022
Valerie Gooding
Annual Report on Remuneration (continued)
Strategic report Other information
Governance
Financials113
Vodafone Group Plc
Annual Report 2022
Our US listing requirements
As Vodafone’s American depositary shares are listed on NASDAQ Stock Market LLC (‘NASDAQ’), we are required to disclose a summary of any material
differences between the corporate governance practices we follow and those of US companies listed on NASDAQ. Vodafone’s corporate governance
practices are primarily based on UK requirements but substantially conform to those required of US companies listed on NASDAQ.
The material differences are set out in the following table:
Board member independence
Different tests of independence for Board members are applied under the 2018 UK Corporate
Governance Code (the ‘Code’) and the NASDAQ listing rules. The Board is not required to take
into
{
consideration NASDAQ’s detailed definitions of independence as set out in the NASDAQ listing rules. The Board has carried out an assessment based on the independence requirements of the
Code and has determined that, in its judgement, each of Vodafone’s Non-Executive Directors is
independent within the meaning of those requirements.
Committees
The NASDAQ listing rules require US companies to have a nominations committee, an audit
committee and a compensation committee, each composed entirely of independent directors, with
the nominations committee and the audit committee each required to have a written charter which
addresses the committee’s purpose and responsibilities, and the compensation committee having
sole authority and adequate funding to engage compensation consultants, independent legal
counsel and other compensation advisers.
–
Our Nominations and Governance Committee is chaired by the Chairman of the Board and its
other members are independent Non-Executive Directors.
–
Our Remuneration Committee is composed entirely of independent Non-Executive Directors.
–
Our Audit and Risk Committee is composed entirely of Non-Executive Directors, each
of
{
whom{
(i)
{
the Board has determined to be independent based on the independence requirements of the Code and (ii) meets the independence requirements of the Securities
Exchange Act of 1934.
–
We have terms of reference for our Nominations and Governance Committee, Audit and Risk
Committee and Remuneration Committee, each of which comply with the requirements of the
Code and are available for inspection on our website at vodafone.com/governance
–
These terms of reference are generally responsive to the relevant NASDAQ listing rules, but may
not address all aspects of these rules.
Code of Ethics and Code of Conduct
Under the NASDAQ listing rules, US companies must adopt a Code of Conduct applicable to all
directors, officers and employees that complies with the definition of a ‘Code of Ethics’ set out in
section 406 of the Sarbanes-Oxley Act.
–
We have adopted a Code of Ethics that complies with section 406 of the Sarbanes-Oxley Act
which is applicable only to the senior financial and principal executive officers.
Click to read our Code of Ethics
vodafone.com/governance
–
We have also adopted a separate Code of Conduct which applies to all employees.
Quorum
The quorum required for shareholder meetings, in accordance with our Articles of Association, is
two shareholders, regardless of the level of their aggregate share ownership, while US companies
listed on NASDAQ are required by the NASDAQ listing rules to have a minimum quorum of 33.33%
of the shareholders of ordinary shares for shareholder meetings.
Related party transactions
In lieu of obtaining an independent review of related party transactions for conflicts of interests
in
{
accordance with the NASDAQ listing rules, we seek shareholder approval for related party transactions that (i) meet certain financial thresholds or (ii) have unusual features in accordance
with the Listing Rules issued by the Financial Conduct Authority (FCA) in the UK (the ‘Listing Rules’),
the Companies Act 2006 and our Articles of Association.
Further, we use the definition of a transaction with a related party as set out in the Listing Rules,
which differs in certain respects from the definition of related party transaction in the NASDAQ
listing rules.
Shareholder approval
When determining whether shareholder approval is required for a proposed transaction, we comply
with both the NASDAQ listing rules and the Listing Rules. Under the NASDAQ listing rules, whether
shareholder approval is required for a transaction depends on, among other things, the percentage
of shares to be issued or sold in connection with the transaction. Under the Listing Rules, whether
shareholder approval is required for a transaction depends on, among other things, whether the
size of a transaction exceeds a certain percentage of the size of the listed company undertaking
the
{
transaction.Strategic report Financials Other information
114
Vodafone Group Plc
Annual Report 2022
Governance
The Directors of the Company present their report
together with the
b
audited consolidated financial statements for the year ended 31
b
Marchb
2022.
This report has been prepared in accordance with requirements outlined
within The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 and forms part of the management report
as required under Disclosure Guidance and Transparency Rule (‘DTR’) 4.
Certain information that fulfils the requirements of the Directors’ report
can be found elsewhere in this document and is referred to below. This
information is incorporated into this Directors’ report by reference.
Vodafone Group plc is incorporated and domiciled in England and
Wales
{
(registration number 1833679). The registered address of the
Company is Vodafone House, The Connection, Newbury, Berkshire,
RG14
{
2FN, England. Responsibility statement
As required under the DTRs, a statement made by the Board regarding
the preparation of the financial statements is set out on pages 117-118
which also provides details regarding the disclosure of information to the
Company’s auditor and management’s report on internal control over
financial information.
Going concern
The going concern statement required by the Listing Rules and
the
{
UK{
Corporate Governance Code (the ‘Code’) is set out in the
“Directors’ statement of responsibility” on page 118.
System of risk management and internal control
The Board is responsible for maintaining a risk management and internal
control system and for managing principal risks faced by the Group. Such
a system is designed to manage rather than eliminate business risks and
can only provide reasonable and not absolute assurance against material
mistreatment or loss. This is described in more detail in the Audit and Risk
Committee Report on pages 83-88.
The Board has implemented in full the FRC ‘Guidance on Risk
Management, Internal Control and related Financial and Business
Reporting’ for the year and to the date of this Annual Report. The
resulting
{
procedures, which are subject to regular monitoring and review, provide an ongoing process for identifying, evaluating and managing the
Company’s principal risks (which can be found on pages 59-65).
Corporate Governance Statement
The Corporate Governance Statement setting out how the Company
complies with the Code is set out on page 71. This includes a description of
the main features of our internal control and risk management arrangements
in
{
relation to the financial reporting process. The inf
ormation required by
DTR 7.2.6R can be found in the “Shareholder information” section on
pages 234-239. A description of the composition and operation of the
Board and its Committees including the
{
Board Diversity Policy is set out on page 75, pages 80-90 and page
{
99. The Code can be viewed in{
full
at
{
frc.org.uk.Strategic Report
The Strategic Report is set out on pages 1-67 and is incorporated into this
Directors’ report by reference.
Directors and their interests
The Directors of the Company who served during the financial year
ended
{
31 March 2022 and up to the date of signing the financial statements are as follows: Jean-François van Boxmeer, Nick Read,
Margherita Della Valle, Sir
{
Crispin Davis, Michel Demaré, Dame Clara Furse,
Valerie Gooding, Deborah Kerr (appointed 1 March 2022), Maria Amparo
Moraleda Martinez and David Nish. Sanjiv Ahuja and Renee James
stepped down on 27 July 2021, and Olaf Swantee stepped down
on
{
25{
September 2021. A summary of the rules related to
{
the appointment
{
and replacement of Directors and Directors’ powers can
be
{
found on page 236. Details of Directors’ interests in the Company’s ordinary shares, options held over ordinary shares, interests in share
options and long-term incentive plans are set out on pages 93-112.
Directors’ conflicts of interest
Established within the Company is a procedure for managing and
monitoring conflicts of interest for Directors. Details of this procedure
are
{
set out on page 81.Directors’ indemnities
In accordance with our Articles of Association and to the extent permitted
by law, Directors are granted an indemnity from the Company in respect
of liability incurred as a result of their office. In addition, we maintained
a
{
Directors’ and officers’ liability insurance policy throughout the year.
Neither our indemnity nor the insurance provides cover in the event
that
{
a Director is proven to have acted dishonestly or fraudulently.Disclosures required under Listing Rule 9.8.4
The information on the amount of interest capitalised and the treatment
of tax relief can be found in notes 5 and 6 to the consolidated financial
statements respectively. The remaining disclosures required by Listing
Rule 9.8.4 are not applicable to Vodafone.
Capital structure and rights attaching to shares
Ordinary shares of Vodafone Group Plc are traded on the London
Stock
{
Exchange and in the form of American Depositary Shares (‘ADS’) on
{
NASDAQ. ADSs, each representing 10 ordinary shares, are traded on NASDAQ
under
{
the symbol ‘VOD’. The ADSs are evidenced by American Depositary
{
Receipts (‘ADR’) issued by{
J.P. Morgan, as depositary, under a
deposit agreement, dated 15
{
February 2022 between the Company, the
depositary and the holders
{
from time to time of ADRs issued thereunder.ADS holders are not shareholders in the Company but may instruct
J.P.
{
Morgan on the exercise of voting rights relative to the number of
{
ordinary shares represented by their ADSs. See “Articles of Association
{
and applicable English law” and “Rights attaching to
{
the{
Company’s shares – Voting rights” on page 236.
Directors’ report
Strategic report Other information
Governance
Financials115
Vodafone Group Plc
Annual Report 2022
All information relating to the Company’s capital structure, rights
attaching to shares, dividends, the policy to repurchase the Company’s
own shares, details of Company share repurchases and details of other
shareholder information is contained on pages 32-33 and pages 234-239.
Change of control
Details of change of control provisions in the Company’s revolving credit
facilities are set out in note 22 “Capital and financial risk management”.
Information on agreements between the Company and its Directors
providing for compensation for loss of office of employment (including
details of change of control provisions in share schemes) is set out on
pages 97-98. Subject to that, there are no agreements between the
Company and its employees providing for compensation for loss of
office
{
or employment that occurs because of a takeover bid.Dividends
Full details of the Company’s dividend policy and proposed final dividend
payment for the year ended 31 March 2022 are set out on page 33 and
note 9 to the consolidated financial statements.
Sustainability
Information about the Company’s approach to sustainability risks and
opportunities is set out on pages 34-57. Details of our greenhouse gas
emissions are also included on these pages.
Political donations
No political donations or contributions to political parties under
the
{
Companies Act 2006 have been made during the financial year. The
{
Group policy is that no political donations be made or political expenditure incurred.
Financial risk management objectives and policies
Disclosures relating to financial risk management objectives and
policies,
{
including our policy for hedging are set out in note 22 to the
consolidated financial statements and disclosures relating to exposure
to
{
credit risk, liquidity risk and market risk are outlined in note
{
22.
Important events since the end of the financial year
There were no important events affecting the Company which have
occurred since the end of the financial year.
Future developments within the Group
The Strategic Report contains details of likely future developments within
the Group.
Group policy compliance
Each Group policy is owned by a member of the Executive Committee so
that there is clear accountability and authority for ensuring the associated
business risk is adequately managed. Regional Chief Executives and the
Senior Leadership Team member responsible for each Group function
have primary accountability for ensuring compliance with all Group
policies by all our markets and entities.
Our Group compliance team and policy champions support the policy
owners and local markets in implementing policies and monitoring
compliance. All of the key Group policies have been consolidated into
the
{
Vodafone Code of Conduct which applies to all employees and those
{
who work for or on behalf of Vodafone. It sets out the standards of
{
behaviour expected in relation to areas such as insider dealing, bribery
{
and raising concerns through the whistle blowing process (known
{
internally as ‘Speak Up’). Read more
on page 47
Branches
The Group, through various subsidiaries, has branches in a number of
different jurisdictions in which the business operates. Further details are
included in note 31.
Employee disclosures
Vodafone is an inclusive employer and diversity is important to us.
We
{
give{
full and fair consideration to applications for employment by
disabled
{
persons and the continued employment of anyone incurring a
{
disability while employed by us. Training, career development and
promotion opportunities are equally applied for all our employees,
regardless of disability. Our disclosures relating to the employment of
women in senior management roles, diversity, employee engagement
and policies are set out on page 14, pages 39 and 40, page 78 and
page
{
81.By order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
17 May 2022
Strategic report Governance
Financials
Other information116
Vodafone Group Plc
Annual Report 2022
117
Directors’ statement of responsibility
119
Independent auditor’s report to the members of Vodafone Group Plc
129
Consolidated financial statements
129
Consolidated income statement
129
Consolidated statement of comprehensive income
130
Consolidated statement of financial position
131
Consolidated statement of changes in equity
132
Consolidated statement of cash flows
133
Notes to the consolidated financial statements
133
1.
Basis of preparation
Income statement
139
2.
Revenue disaggregation and segmental analysis
145
3.
Operating profit
146
4.
Impairment losses
153
5.
Investment income and financing costs
154
6.
Taxation
159
7.
Discontinued operations and assets held for sale
160
8.
Earnings per share
160
9.
Equity dividends
Financial position
161
10.
Intangible assets
163
11.
Property, plant and equipment
165
12.
Investments in associates and joint arrangements
171
13.
Other investments
172
14.
Trade and other receivables
173
15.
Trade and other payables
174
16.
Provisions
175
17.
Called up share capital
Cash flows
176
18.
Reconciliation of net cash flow from operating activities
176
19.
Cash and cash equivalents
177
20.
Leases
180
21.
Borrowings
182
22.
Capital and financial risk management
Employee remuneration
191
23.
Directors’ and key management compensation
192
24.
Employees
193
25.
Post employment benefits
197
26.
Share-based payments
Additional disclosures
199
27.
Acquisitions and disposals
200
28.
Commitments
200
29.
Contingent liabilities and legal proceedings
204
30.
Related party transactions
205
31.
Related undertakings
214
32.
Subsidiaries exempt from audit
215 Company financial statements of
Vodafone Group Plc
215
Company statement of financial position of Vodafone Group Plc
216
Company statement of changes in equity of Vodafone Group Plc
217 Notes to the Company financial statements
217
1.
Basis of preparation
219
2.
Fixed assets
220
3.
Debtors
220
4.
Other investments
220
5.
Creditors
221
6.
Called up share capital
221
7.
Share-based payments
221
8.
Reserves
222
9.
Equity dividends
222
10.
Contingent liabilities and legal proceedings
222
11.
Other matters
223 Non-GAAP measures (unaudited information)
233 Additional information (unaudited information)
Reporting on our financial performance
Index
Strategic report Governance
Financials
Other information117
Vodafone Group Plc
Annual Report 2022
Directors’ statement of responsibility
The Directors are responsible for preparing the
financial
b
statements in accordance with applicable law
b
and regulations and keeping proper accounting records. Detailed below are statements made by
the
b
Directors inb
relation to their responsibilities,
disclosure of
b
information to the Company’s auditor,
going concern
b
and management’s report on internal
b
controlb
over financial reporting.
Financial statements and accounting records
Company law of England and Wales requires the Directors to prepare
financial statements for each financial year which give a true and fair
view
{
of the state of affairs of the Company and of the Group at the end of
{
the financial year and of the profit or loss of the Group for that period. In
{
preparing those financial statements the Directors are required to: –
select suitable accounting policies and apply them consistently;
–
make judgements and estimates that are reasonable and prudent;
–
present information, including accounting policies, in a
manner
{
that{
provides relevant, reliable, comparable and
understandable information;
–
state whether the consolidated financial statements have been
prepared in accordance with UK-adopted International Accounting
Standards (‘IAS’), with International Financial Reporting Standards
(‘IFRS’) as issued by the International Accounting Standards Board
(‘IASB’) and with the requirements of the UK Companies Act 2006
(the
{
‘Act’); state for the Company’s financial statements whether applicable UK
{
accounting standards have been followed; and –
prepare the financial statements on a going concern basis unless it
is
{
inappropriate to presume that the Company and the Group will continue in business.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position
{
of the Company and of the Group and enable them to ensure
{
that the financial statements are prepared in accordance with
{
UK-adopted IAS, with IFRS as issued by the IASB and with the requirements of the Act. They are also responsible for the system
of
{
internal control, for safeguarding the assets{
of the Company and the
Group and for taking reasonable steps for the prevention and detection
of
{
fraud and other irregularities.The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ responsibility statement
Each of the Directors, whose names and functions are listed on pages 73
and 74, confirms that, to the best of his or her knowledge:
–
the consolidated financial statements, prepared in accordance
with
{
UK-adopted IAS, with IFRS as issued by the IASB and with the requirements of the Act, give a true and fair view of the assets, liabilities,
financial position and profit of the
{
Group; –
the parent company financial statements, prepared in accordance with
United Kingdom generally accepted accounting practice, give a true
and fair view of the assets, liabilities, financial position and profit of the
Company; and
–
the Strategic Report includes a fair review of the development and
performance of the business and the position of the Group, together
with a description and robust assessment of the principal risks and
uncertainties that it faces.
The Directors are also responsible under section 172 of the Companies
Act 2006 to promote the success of the Company for the benefit of
its
{
members as a whole and in doing so have regard for the needs of wider society and stakeholders, including customers, consistent with
the
{
Group’s core and sustainable business objectives.Having taken advice from the Audit and Risk Committee, the Board
considers the Annual Report, taken as a whole, is fair, balanced and
understandable and that it provides the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
Neither the Company nor the Directors accepts any liability to any person
in relation to the Annual Report except to the extent that such liability
could arise under English law. Accordingly, any liability to a person
who
{
has demonstrated reliance on any untrue or misleading statement or
{
omission shall be determined in accordance with section 90A and
schedule 10A of the Financial Services and Markets Act 2000.
Disclosure of information to the auditors
Having made the requisite enquiries, so far as the Directors are aware,
there is no relevant audit information (as defined by section 418(3) of
the
{
Companies Act 2006) of which the Company’s auditor is unaware and the Directors have taken all the steps they ought to have taken to make
themselves aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
Strategic report Governance
Financials
Other information118
Vodafone Group Plc
Annual Report 2022
Going concern
The Group’s business activities, performance, position, principal risks and
uncertainties and the Directors’ assessment of its long-term viability are
set out on page 65.
In addition, the funding position of the Group is included in ‘Borrowings’
and
{
’Capital and financial risk management’ in notes 21 and 22, respectively,
to the consolidated financial statements. Notes 21 and 22
{
include disclosure in relation to the Group’s objectives, policies and processes
for
{
managing as well as details regarding its capital, its financial risk management objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity risk. As
{
noted on page 184, the Group has access to substantial cash and financing facilities.
The Group also believes it adequately manages or mitigates its solvency
and liquidity risks through two primary processes, described below.
Business planning process and performance management
The Group’s forecasting and planning cycle consists of three in-year
forecasts, a budget and a long-range plan. These generate income
statement, cash flow and net debt projections for assessment by
Group
{
management and the Board. Each forecast is compared with prior
{
forecasts and actual results to identify variances and understand the
{
drivers of the changes and their future impact so management can take action where appropriate. Additional analysis is undertaken to review
and sense check the key assumptions underpinning the forecasts.
Cash flow and liquidity reviews
The business planning process provides outputs for detailed cash
flow
{
and liquidity reviews, to ensure that the Group maintains adequate
liquidity throughout the forecast periods. The prime output is a liquidity
forecast which is prepared and updated at least on a monthly basis which
highlights the extent of the Group’s liquidity based on controlled cash
flows and the headroom under the Group’s undrawn revolving credit
facility. The key inputs into this forecast are:
–
Free cash flow forecasts with information taken from the business
planning process;
–
Bond and other debt maturities; and
–
Expectations for shareholder returns, spectrum auctions and
M&A
{
activity.The liquidity forecast is reviewed by the Group Chief Financial Officer
and
{
included in each of her reports to the Board. In addition, the Group
continues to manage its foreign exchange and interest rate risks within
the framework of policies and guidelines authorised and reviewed by
the
{
Board, with oversight provided by the Treasury Risk Committee. The Group’s financial performance was resilient during the COVID-19
pandemic and the residual impact has been considered as part of the
business planning process and reflected in the Group’s cash flow
forecasts. The Directors have also considered sensitivities in respect
of
{
potential downside scenarios in concluding that the Group is able to
{
continue in operation for the period to 30 June 2023 from the date of
{
approving the consolidated financial statements. Those sensitivities include the non-refinancing of debt maturities in the assessment period.
A
{
reverse stress test was also reviewed to understand how severe
conditions would have to be to breach liquidity including the required
reduction in Adjusted EBITDAaL. In addition to the liquidity forecasts,
downside scenarios and reverse stress test that are prepared, the
Director’s considered the availability of the
{
Group’s €7.6{
billion
undrawn
{
revolving credit facilities as at 31{
March
{
2022. In reaching their conclusion on the going concern assessment,
the
{
Directors{
also considered the findings of the work performed
to
{
support{
the statement on the long-term viability of the Group.
As
{
noted{
on page
{
65, this included key changes to relevant principal risks
{
in{
light of
{
global economic and political uncertainty, sensitivity analysis,
{
scenario assessments, and combinations of these, over the viability assessment period.
Conclusion
Based on the review, the Directors have a reasonable expectation that
the
{
Company and the Group have adequate resources to continue in
{
operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
Controls over financial reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Group.
The Group’s internal control over financial reporting includes policies
and
{
procedures that: –
Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect transactions and dispositions of assets;
–
Are designed to provide reasonable assurance that transactions
are
{
recorded as necessary to permit the preparation of financial statements in accordance with UK-adopted IAS, with IFRS as issued
by
{
the IASB and with the requirements of the Act and that receipts and expenditures are being made only in accordance with authorisation of
management and
{
the Directors of the Company; and –
Provide reasonable assurance regarding prevention or timely detection
of unauthorised acquisition, use or disposition of the Group’s assets
that could have a material effect on the financial statements.
Any internal control framework, no matter how well designed, has
inherent limitations including the possibility of human error and the
circumvention or overriding of the controls and procedures, and may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or because the
degree of compliance with the policies or procedures may deteriorate.
By order of the Board
Rosemary Martin
Group General Counsel and Company Secretary
17 May 2022
Directors’ statement of responsibility (continued)
Strategic report Governance
Financials
Other information119
Vodafone Group Plc
Annual Report 2022
Opinion
In our opinion:
–
Vodafone Group Plc’s consolidated financial statements and Company
financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at
31
{
March 2022 and of the Group’s profit for the year then ended; –
the consolidated financial statements have been properly prepared
in
{
accordance with UK adopted international accounting standards and
{
International Financial Reporting Standards (IFRS) as issued by the
{
International Accounting Standards Board (IASB); –
the Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice; and
–
the financial statements have been prepared in accordance with
the
{
requirements of the Companies Act 2006.We have audited the financial statements of Vodafone Group Plc
(the
{
“Parent company”) and its subsidiaries (the “Group”) for the year ended
{
31 March 2022 which comprise:Group Parent company
Consolidated statement
of
{
financial position as at 31
{
March{
2022
Company statement of financial
position as at 31 March 2022
Consolidated income statement
for the year then ended
Company statement of changes
in
{
equity for the year then endedConsolidated statement of
comprehensive income for
the
{
year then endedRelated notes 1 to 11 to the
financial statements including
a
{
summary of significant
accounting policies
Consolidated statement of
changes in equity for the year
then
{
endedConsolidated statement of cash
flows for the year then ended
Related notes 1 to 32 to the
financial statements, including
a
{
summary of significant
accounting policies
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and UK
adopted international accounting standards and International Financial
Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). The financial reporting framework that has
been
{
applied in the preparation of the Parent company financial statements is applicable law and United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework” (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards
on
{
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the ‘Auditor’s responsibilities for the
audit of the financial statements’ section of our report. We believe that
{
the audit evidence we have obtained is sufficient and appropriate to
{
provide a basis for our opinion.
Independence
We are independent of the Group and Parent in accordance with
the
{
ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to
{
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were
not
{
provided to the Group or the Parent company and we remain independent of the Group and the Parent company in conducting
the
{
audit.Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors’
assessment of the Group and Parent company’s ability to continue
to
{
adopt the going concern basis of accounting included: –
confirming our understanding of the directors’ going concern
assessment process, including the controls over the review and
approval of the budget and long-range plan;
–
assessing the appropriateness of the duration of the going concern
assessment period to 30 June 2023 and considering the existence of
any significant events or conditions beyond this period based on our
procedures on the Group’s long-range plan and knowledge arising
from other areas of the audit;
–
verifying inputs against board-approved forecasts and debt facility
terms and reconciling the opening liquidity position to the prior year
end and half year interim going concern assessments;
–
reviewing borrowing facilities to confirm both their availability to the
Group and the forecast debt repayments through the going concern
assessment period and to validate that there is no financial covenant
in
{
relation to any of loan arrangements; –
evaluating management’s historical forecasting accuracy and the
consistency of the going concern assessment with information
obtained from other areas of the audit, such as our audit procedures
on
{
the long-range plans, which underpin management’s goodwill impairment assessments;
–
testing the assessment, including forecast liquidity, for clerical accuracy;
–
assessing whether assumptions made were reasonable and appropriately
severe, in light of the Group’s relevant principal risks and uncertainties
and our own independent assessment of those risks;
–
evaluating the amount and timing of identified mitigating actions available
to respond to a severe downside scenario, and whether those actions
are feasible and within the Group’s control;
–
considering the appropriateness of management’s ‘reverse stress test’
downside scenario, to understand how severe conditions would have
to be to breach liquidity and whether the reduction in EBITDAaL required
has no more than a remote possibility of occurring;
–
performing independent sensitivity analysis on management’s
assumptions including applying incremental adverse cashflow
sensitivities. These sensitivities included the impact of certain severe
but plausible scenarios, evaluated as part of management’s work on
the Group’s long term viability including the war in Ukraine, materialising
within the going concern assessment period; and
–
assessing the appropriateness of the going concern disclosure on
page
{
118. Independent auditor’s report to the members of Vodafone Group Plc
Strategic report Governance
Financials
Other information120
Vodafone Group Plc
Annual Report 2022
Our key observations
–
The directors’ assessment forecasts that the Group will maintain
sufficient liquidity throughout the going concern assessment period.
This included the scenario of non-refinancing of debt maturities in the
assessment period and also the availability of the Group’s €7.6 billion
revolving credit facilities, undrawn as at 31 March 2022. Furthermore,
management’s reverse stress test to model the extent of the EBITDAaL
reduction compared to forecasts required to breach liquidity during the
going concern assessment period is considered to have only a remote
possibility of occurring.
–
The controllable mitigating actions available to management to
increase liquidity over the going concern assessment period were
not
{
modelled by management, nor the audit team, due to the level of
{
headroom in both the directors’ assessment forecasts and the audit
{
team’s additional downside sensitivities.Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or
{
collectively, may cast significant doubt on the Group and Parent company’s ability to continue as a going concern for a period from
when
{
the financial statements are authorised for issue to 30 June 2023.In relation to the Group and Parent company’s reporting on how they have
applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect
to
{
going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s ability to continue as
a
{
going concern.
Overview of our audit approach
Audit scope
–
We performed an audit of the complete
financial
{
information of 9 components, full audit
{
procedures on specific balances for 4
{
components, specified audit procedures on
specific balances for a further 6 components
and other procedures on the remaining
292
{
components. –
The components where we performed
full
{
audit{
procedures accounted for 75% of
Adjusted EBITDAaL and where we performed
full or specified procedures in respect of
revenue accounted for 78% of Revenue.
Key audit matters
–
Revenue recognition
–
Carrying value of cash generating units,
including goodwill
–
Recognition and recoverability of deferred
tax
{
assets on tax losses – LuxembourgMateriality
–
Overall Group materiality of €290m (FY21:
€280m) has been calculated based on Adjusted
EBITDAaL as defined in the ‘Our application of
materiality’ section of this report. This materiality
represents approximately 2% of the Group’s
Adjusted EBITDAaL as reported in Note 2 in
the
{
Consolidated financial statements.An overview of the scope of the Company
and
{
Group{
audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our
allocation of performance materiality determine our audit scope for
each
{
component within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into
account size, risk profile, the organisation of the Group and effectiveness
of group-wide controls, changes in the business environment and other
factors such as recent internal audit results when assessing the level of
work to be performed at each component.
In assessing the risk of material misstatement to the consolidated financial
statements, and to ensure we had adequate quantitative coverage of
significant accounts in the consolidated financial statements, of the
311
{
reporting components of the Group, we selected 19 components covering entities within Germany, South Africa, Italy, United Kingdom,
Spain, Turkey, Czech Republic, Hungary, Egypt, Luxembourg and
corporate entities, which represent the principal business units within
the
{
Group.Of the 19 components selected, we performed an audit of the complete
financial information of 9 components (“full scope components”) which
were selected based on their size or risk characteristics.
For 4 components (“specific scope components”), we performed full
audit
{
procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant
accounts in the consolidated financial statements either because of
the
{
size of these accounts or their risk profile. For the remaining 6 components (“specified procedures components”), we performed
certain
{
audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant
accounts in the financial statements, either because of the size of these
accounts or their risk profile. Depending on the component or type of
procedures, these procedures were undertaken by the primary audit
team
or separate component audit team under the primary audit team’s direction.
The audit scope of these components may not
have included t
esting of all
significant accounts of the component, but will have contributed to the
coverage of significant accounts tested for the Group.
For the 302 components where we did not perform full audit procedures,
together these represent 25% of the Group’s Adjusted EBITDAaL, and
none are individually greater than 5% of the Group’s Adjusted EBITDAaL.
For the remaining 292 components which are not full scope, specific
scope or specified procedures scope, we performed other procedures,
including analytical review at both the Group and individual component
levels and the use of customised data analytics tools over the purchase
to
{
pay process, fixed assets to profile trends and identify items for further investigation, inquiry of management, testing entity level controls, testing
group-wide controls and testing of journals across the Group, including
these remaining components, in order to respond to any potential risks
of
{
material misstatement to the consolidated financial statements.Independent auditor’s report to the members of Vodafone Group Plc (continued)
Strategic report Governance
Financials
Other information121
Vodafone Group Plc
Annual Report 2022
Changes from the prior year
The approach to audit scoping is similar to the prior year audit, with the
rotation of a number of markets, designated as specified procedures
scope for selected significant accounts, to extend the Group audit
procedures beyond the Group’s main markets and to introduce a level
of
{
unpredictability through rotational testing. This approach resulted in: –
a specified procedure scope being assigned to components in
Czech
{
Republic and Hungary which were not subject to direct audit
{
procedures in the prior year; and –
Greece, Romania, Vantage Towers Germany and Vantage Towers Spain
being reassessed as other procedures components in the current year.
Involvement with component audit teams
In establishing our overall approach to the Group audit, we determined
the type of work that needed to be undertaken at each of the components
by us, as the primary audit team, or by component auditors from other EY
global network firms operating under our instruction. Of the 9 full scope
components, audit procedures were performed on 2 of these directly
by
{
the primary audit team with the remaining 7 being performed by
component audit teams. For the 4 specific scope components, the
procedures were performed directly by the primary audit team. For
the
{
6
{
specified procedures scope components, work was performed
directly by the primary audit team for 2 of these, with the remaining
4
{
being performed by component audit teams. Where the work was
performed by
{
component auditors, we determined the appropriate level
of involvement to enable us to determine that sufficient audit evidence
had
{
been obtained as a basis for our opinion on the consolidated financial statements as a whole.
Vodafone has centralised processes and controls over certain areas
within
{
its Vodafone Intelligent Solutions (“VOIS”) finance shared service centre locations. The primary audit team performs direct oversight, review,
and coordination of the EY audit teams at VOIS locations, whose work
includes centralised testing for certain controls and accounts, including
specified procedures on revenue, leases, cash and centralised purchase
to
{
pay processes.The table below illustrates the coverage obtained from the work performed by our audit teams.
2022 2021
Reporting components Number
% of Group
Adjusted EBITDAaL* % of Group Revenue Note Number
% of Group
Adjusted EBITDA* % of Group Revenue
Full scope 9 75% 71%
1, 2, 5
9 76% 71%
Specific scope 4 0% 0%
3
Specified procedures 6 0% 7%
2, 4, 5
12 0% 8%
Full and specified procedures coverage 19 75% 78% 21 76% 79%
Remaining components 292 25% 22%
6, 7, 8
343 24% 21%
Total reporting components 311 100% 100% 364 100% 100%
Notes:
1. 2 of the 9 full scope components relate to the Company and another corporate entity whose activities include consolidation adjustments, which are audited by the primary audit team. Procedures on
3 of the other full scope locations are undertaken by component audit teams based in Germany and the remaining 4 full scope components are Italy, South Africa, Spain, and the UK.
2. The Group audit risks in relation to revenue recognition were subject to audit procedures at each of the full and specified procedures scope locations with significant revenue streams (being 7 full scope
components and 3 specified procedures components).
3. The primary audit team performed full audit procedures on specific accounts in respect of 4 finance and corporate entities across a range of significant accounts. The audit procedures did not include
testing of all significant accounts of the components but will have contributed to the coverage of significant accounts selected for testing by the primary audit team.
4. For the Turkey, Czech Republic and Hungary components, specified procedures were defined by the Group team in respect of Revenue, Cost of sales, Operating expenses, Intangible assets, Property,
Plant
{
and Equipment, Trade receivables, Trade and other payables and Cash. For the Egypt component, specified procedures were performed in respect of certain Intangible Assets and Cash. The primary audit team also performed specified procedures over a further 2 entities across a range of significant accounts. The audit procedures did not include testing of all significant accounts of the components
but
{
will have contributed to the coverage of significant accounts selected for testing by the primary audit team.5. The Group audit risks in relation to ‘Carrying value of cash generating units, including goodwill’ and ‘Recognition and recoverability of deferred tax assets on tax losses – Luxembourg’ were subject to
audit
{
procedures by the primary audit team on the entire balance, with support from component audit teams on certain procedures.6. The contribution of specified procedures components to Group Adjusted EBITDAaL is included within ‘remaining components’ as audit procedures were performed on certain, but not all, significant
accounts of the specified procedures components contributing to Group Adjusted EBITDAaL.
7. Included within the 311 reporting components are the Group’s joint venture investments in Vodafone Ziggo and INWIT, and Safaricom, an associate, which were subject to review procedures.
8. Changes in the number of remaining components compared to prior year reflect decreases in the number of entities within the Group’s consolidation system.
* Adjusted EBITDAaL as defined in ‘Our application of materiality’ section of this report. Adjusted EBITDAaL was referred to as Adjusted EBITDA in prior years. The metrics have the same definition.
Impact of the COVID-19 pandemic – direction, supervision
and
{
review of component audit teamsDue to the ongoing travel restrictions imposed by the COVID-19
pandemic, physical site visits were only possible to certain locations
during the FY22 audit; for other locations these were performed virtually.
Physical site visits were undertaken by the Senior Statutory Auditor and/
or primary audit team members to component audit teams in Germany,
Spain, Italy, UK, Czech Republic, Hungary and Egypt. These visits involved
discussing the audit approach with the component team and any issues
arising from their work, meeting with local management, attending key
meetings and reviewing relevant audit working papers on risk areas.
Virtual site visits were undertaken by the primary audit team to the
component audit teams in South Africa and Turkey. These followed the
same format as the physical site visits but used our global audit software,
screen sharing or the provision of copies of work papers direct to the
primary audit team, to enable the Senior Statutory Auditor, and other
members of the primary audit team, to complete reviews of key
component audit team working papers, particularly focussing on the
Group’s risk areas. For all full scope and specified procedures overseas
components, during the year we conducted meetings using video
conferencing to discuss the audit approach and execution with the
component audit teams and to discuss audit issues arising from their
work. The Senior Statutory Auditor, or other members of the primary
audit
{
team, attended key meetings with local management via video conference, to discuss the component’s business performance and
matters relating to the local finance organisation including the internal
financial control environment.
The primary audit team interacted regularly with the local EY full scope
and specified procedures component teams where appropriate during
various stages of the audit, reviewed relevant working papers and were
responsible for the scope and direction of the audit process. We maintained
continuous and open dialogue with the component audit teams
in addition
to holding formal meetings to ensure that we were fully aware of their
progress and the results of their procedures. Close meetings for full, specific,
and specified procedures components (excluding those performed by the
primary audit team) were held via video conference in April 2022 and were
attended by the Senior Statutory Auditor and/or other members of the
primary audit team. This, together with the additional procedures performed at
Group level, gave us appropriate evidence for our opinion on the consolidated
financial statements.
Strategic report Governance
Financials
Other information122
Vodafone Group Plc
Annual Report 2022
Climate change
There has been increasing interest from stakeholders as to how
climate
{
change will impact Vodafone Group Plc. The Group has determined that the most significant future impacts from climate change
on its operations will be from its Planet activities and commitments set
out on pages 41 to
{
44 and the material climate-related physical and transitional risks explained on pages 66 to 67 in the required Task Force
for Climate related
{
Financial Disclosures, both of which form part of the “Other information”, rather than the audited financial statements. Our
procedures on these disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial statements or
our knowledge obtained in the course of the audit or otherwise appear
to
{
be materially misstated. As explained in Note 1 Basis of Preparation to the consolidated financial
statements, environmental, regulatory and other factors responsive to
climate change risks are still developing, and are outside of the Group’s
control, and consequently financial statements cannot capture all
possible future outcomes as these are not yet known. The degree of
certainty of these changes may also mean that they cannot be taken into
account when determining asset and liability valuations and the timing
of
{
future cash flows under the requirements of UK-adopted International Accounting Standards and International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
The
{
significant accounting estimates and judgements assessed by management to be potentially impacted by climate risks have been
described in Note 1 and with further disclosure in respect of the impact
on the Group’s long-range plans and deferred tax asset recognition
provided in Note 4 and Note 6 respectively.
Our audit effort in considering climate change was focused on ensuring
that the effects of material climate risks disclosed on page 67 have been
appropriately reflected in asset values and associated disclosures where
values are determined through modelling future cash flows, being ‘Goodwill’,
‘Other intangible assets’ and ‘Deferred tax assets’, and in the timing and
nature of liabilities recognised, being ‘Asset Retirement Obligations’. The
findings from our procedures supported our evaluation of the adequacy
of climate change considerations in the Directors’ assessment of going
concern and viability and associated disclosures.
Independent auditor’s report to the members of Vodafone Group Plc (continued)
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context
of
{
our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Strategic report Governance
Financials
Other information123
Vodafone Group Plc
Annual Report 2022
Risk
Revenue recognition
As more fully described in Note 2, Note 14 and Note 15 to the consolidated financial statements, the Group reported revenue of €45,580 million
(FY21:
{
€43,809 million), contract assets of €3,551 million (FY21: €3,566 million) and contract liabilities of €2,521 million (FY21: €2,490million) for the year ended and as at 31 March 2022. Management records revenue according to the principles of IFRS 15, Revenue from Contracts w
ith Customers,
including following the 5-step model therein. Under IFRS 15, management must determine if there are separate performance obligations for the
services and goods it provides to customers and assign values thereto, based on the selling prices of goods or services in separate transactions
under
{
similar conditions to similar customers (the “stand-alone selling price”).Auditing the revenue recorded by the Group is complex due to the multiple IT systems and tools utilised in the initiation, processing and recording
of
{
transactions, which includes a high volume of individually low monetary value transactions. Furthermore, judgement and the invo
lvement of IT professionals was required to determine the audit approach to test and evaluate the relevant data that was captured and aggregated, and to assess the
sufficiency of the audit evidence obtained. In addition, determining the stand-alone selling price and therefore the allocation of revenue to the different
performance obligations, which impacts timing of the related revenue recognition, is complex and judgemental, particularly on new product offerings
and non-standard enterprise contracts.
We have also identified a risk of management override through inappropriate manual topside revenue journal entries, given revenue is a key
performance indicator, both in external communication and for management incentives.
Our response to the risk
We performed full or specified audit procedures over this risk area in 7 full scope and 3 specified procedure components with significant revenue
streams, which covered 78% of the Group’s revenue.
Our audit procedures at full scope component locations included, among others, obtaining an understanding of, evaluating the design and testing the
operating effectiveness of controls over the Group’s revenue recognition process, which includes management’s review of contracts, their identification
of performance obligations, the estimation of the relative standalone selling price for each performance obligation, and the determination of the timing
of revenue recorded. With the support of our IT professionals, we also evaluated the design and tested the operating effectiven
ess of controls over
the
{
appropriate flow of transactional data through the IT systems and tools and the reconciliation of the transactional data to the accounting records. For specified procedures components, we obtained an understanding of the design of controls over the revenue recognition process.
We evaluated management’s accounting policies and the methodology used by management to determine the standalone selling price, where
relevant to the requirements of IFRS 15.
For significant revenue streams, our audit procedures included the following, on a sample basis:
–
We obtained a list of new propositions/tariff plans introduced during the period and tested the completeness of the listing. We
evaluated
management’s assessment of the accounting treatment for new propositions/tariff plans for compliance with IFRS 15.
–
For each significant revenue IT system, we obtained the billing data to general ledger reconciliation which included the relevant adjustments to
deferred and accrued revenue balances. We reperformed these end-to-end reconciliations, including assessing the accuracy of the data inputs
to
{
underlying source documentation including contractual agreements where applicable. In addition, we tested the mathematical accu
racy and
{
completeness of the reconciliations and any material reconciling items including significant revenue postings outside of the billing systems. –
We recalculated the revenue recognised to evaluate whether the processing of the revenue recognition by the Group’s IT systems was
materially
{
correct. –
We corroborated the standalone selling price allocated to individual elements of bundled contracts, including to observable market pricing
where
{
available. –
We used data analytic tools to identify revenue related manual journals posted to the general ledger and traced these back to s
ource systems.
This
{
included analytical procedures to consider the completeness of journal postings. We obtained and evaluated underlying source documentation to test the completeness and accuracy of the postings, including those journals we considered unusual in nature.
We also assessed the adequacy of the Group’s disclosures in respect to the accounting policies on revenue recognition.
Key observations communicated to the Audit and Risk Committee
Based on the procedures performed, including those in respect of manual adjustments to revenue, we did not identify any evidence of material
misstatement in the revenue recognised in the year nor in amounts capitalised or deferred as at 31 March 2022.
Strategic report Governance
Financials
Other information124
Vodafone Group Plc
Annual Report 2022
Risk
Carrying value of cash generating units, including goodwill
As more fully described in Note 4 to the consolidated financial statements, in accordance with IAS 36 Impairment of Assets, the Group calculates the
value in use (“VIU”) for cash generating units (“CGUs”) to determine whether an adjustment to the carrying value of the CGU, and therefore, goodwill, is
required. As of 31 March 2022, the Group has recorded €31,884 million of goodwill, primarily in respect of Germany, Italy and Vantage Towers Germany.
The Group’s assessment of the VIU of its CGUs involves estimation about the future performance of the local market businesses. In particular,
the
{
determination of the VIUs was sensitive to the significant assumptions of projected adjusted EBITDAaL growth, long-term growth
rates, and discount
{
rates. Auditing the Group’s annual impairment test was complex and involved significant auditor judgement, given the estimation uncertainty related to the
significant assumptions described above used in the VIU models and the sensitivity of certain VIU models to fluctuations in those assumptions, including
where those CGUs had historical impairments, market specific events or other factors which resulted in low headroom.
Our response to the risk
The recoverability of the Group’s goodwill balances was subject to full scope audit procedures performed by the primary audit team with support from
relevant component audit teams on certain procedures.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Group’s goodwill impairment review
process, including management’s controls over the significant assumptions described above.
To test the determination of the VIU of the Group’s goodwill, we performed audit procedures that included, among others, evaluating the
appropriateness of the determination of the CGUs identified and testing the allocation of assets and liabilities to the carrying value of each CGU.
For the annual impairment assessment as at 31 March 2022, we also tested, with the help of a valuation specialist, the methodology applied in the
VIU
{
models, as compared to the requirements of IAS 36, including the mathematical accuracy of management’s model. We performed procedures to
{
test and assess the significant assumptions used in the VIU models, including:
–
evaluating projected adjusted EBITDAaL growth, for example by comparing underlying assumptions to external data, such as economic and industry
forecasts for the relevant markets and for consistency with evidence obtained from other areas of our audit;
–
comparing long-term growth rates and discount rates to EY independently determined acceptable ranges;
–
performing sensitivity analyses on the above described assumptions in the VIU models to evaluate the parameters that, should they arise, would
cause an impairment of the CGU or indicate additional disclosures were appropriate; and
–
in considering the existence of contrary evidence, for management’s assessment of implied recoverable value we compared CGU EBITDAaL
multiples to market listed peers and considered independent analyst valuations for individual CGUs where available.
For each CGU, we compared the cash flow projections used in the VIU models to the information approved by the Group’s Board of Directors and
evaluated
{
the historical accuracy of management’s business plans, which underpin the VIU models by comparing prior year forecasts to actual results
in
{
the
{
current period. We involved a valuation specialist in our team to assist us with certain of these audit activities.
We also assessed the adequacy of the related disclosures provided in Note 4 of the consolidated financial statements, in particular the sensitivity disclosures
in relation to reasonably possible changes in assumptions that could result in impairment.
Key observations communicated to the Audit and Risk Committee
We agree with management’s conclusion that the carrying value of the Group’s CGUs are supportable as at 31 March 2022 and that no impairment
charge is required to be recognised in the year.
We agree with management that additional sensitivity disclosures are required in Note 4 of the consolidated financial statements on the basis that a
reasonably possible change in certain key assumptions could lead to a different conclusion in respect of the recoverability of carrying value of certain
cash generating units.
Independent auditor’s report to the members of Vodafone Group Plc (continued)
Strategic report Governance
Financials
Other information125
Vodafone Group Plc
Annual Report 2022
Risk
Recognition and recoverability of deferred tax assets on tax losses – Luxembourg
As more fully described in Note 6 to the consolidated financial statements, the Group recognises deferred tax assets in accordance with IAS 12
Income
{
Taxes, based on their estimated recoverability and whether management judges that it is probable that there will be sufficient and suitable taxable profits in the relevant legal entity or tax group against which to utilise the assets in the future.
A deferred tax asset in Luxembourg of €16,298 million (FY21: €17,394 million) has been recognised in respect of losses, as management concluded it
is
{
probable that the Luxembourg entities will continue to generate taxable profits in the future against which they can utilise these assets. Management estimates that the losses will be utilised over a period of 45-48 years.
The Luxembourg companies’ income is derived from the Group’s internal financing, procurement and roaming activities. The forecast future finance
income can vary based on forecast interest rates and intercompany debt levels which in turn impacts the timeframe over which the deferred tax asset
is
{
forecast to be recovered. Furthermore, Luxembourg owns direct and indirect interests in the Group’s operating activities. The value of these investments is primarily based on the
Group’s value in use calculations. Changes in the value for the purposes of local Luxembourg statutory financial statements can result in impairment
reversals or change which are taxable / tax deductible under local law. In the current year, there has been a reversal of a historical impairment, which
has resulted in the utilisation of brought forward tax losses, thereby reducing the carrying value of the deferred tax asset recognised and a reduced
timeframe over which the deferred tax asset, recognised at 31 March 2022, is forecast to be recovered.
Auditing the Group’s recognition and recoverability of deferred tax assets in Luxembourg is significant to the audit because it involves material amounts,
and the judgements and estimates in relation to future taxable profits and the period of time over which it is expected to utilise these assets, results in
increased estimation uncertainty.
Our response to the risk
Audit procedures on the recognition and recoverability of deferred tax assets on tax losses in Luxembourg were performed by the primary audit team
and its tax professionals with support from Luxembourg tax and transfer pricing specialists on certain procedures.
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls around the recognition of
deferred tax assets in Luxembourg, including the calculation of the gross amount of deferred tax assets recorded, the preparation of the prospective
financial information used to determine the Luxembourg entities’ future taxable income, and management’s identification and use of available
commercial strategies.
To test the realisability of the deferred tax assets in Luxembourg, with the support of tax professionals and tax specialists, our audit procedures included,
among others;
–
assessing the existence of available losses, including the impact of current year taxable profits resulting from roaming, procurement and finance
income and the reversal of previously recognised impairments within the local statutory financial statements;
–
evaluating management’s position on the recoverability of the losses with respect to local tax law and tax planning strategies adopted;
–
testing the calculation of the reversal of previous impairments, by agreeing the value in use calculations to our audit work performed on
‘Carrying
{
value of cash generating units, including goodwill’, assessing the Luxembourg ownership structure;
–
testing the reasonableness of the forecasted procurement and roaming taxable profits utilised in management’s realisability assessment,
by
{
comparing to historical actual profits and with evidence obtained from other areas of our audit; –
evaluating the forecast finance income by, on a sample basis, recalculating income with reference to underlying agreements, comparing future
interest rates utilised in the forecasts to relevant external benchmarks and the assumed reductions in intergroup debt for consistency with our
understanding of relevant guidance in respect of transfer pricing of financial transactions;
–
assessing whether contrary evidence exists that is not consistent with either management’s stated intention that the financing structures will remain
in place or that it is probable that future taxable profits will exist; and
–
reviewing the adequacy of the disclosures in respect of the recognition of the deferred tax asset, which explain the evidence supporting the recognition,
judgements in respect of the utilisation profile including longer term uncertainties and the key drivers of changes in the carrying value of the asset
and the utilisation period.
Key observations communicated to the Audit and Risk Committee
We agree with the recognition of the deferred tax assets, and consequently the long recoverability period, on the basis of forecast profits which are
considered probable given management’s intention to retain current activities in Luxembourg over the long term and the track record of historical
profitability in these operations.
The reduction in the period of utilisation is consistent with the utilisation of losses during the period, the reversal of historic impairments in the local
statutory financial statements and forecast taxable profits in Luxembourg.
Strategic report Governance
Financials
Other information126
Vodafone Group Plc
Annual Report 2022
Our application of materiality
We apply the concept of materiality in planning and performing the audit,
in evaluating the effect of identified misstatements on the audit and in
forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in
the
{
aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a
basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be €290 million (2021:
€280
{
million), which is approximately 2% (2021: 2%) of Adjusted EBITDAaL.
We believe that Adjusted EBITDAaL provides us with the most relevant
performance measure on which to determine materiality, given
the
{
prominence of this metric throughout the Annual Report and consolidated financial statements, investor presentations, profit
metrics
{
focussed on by analysts and its alignment to the management remuneration metric of adjusted EBIT. In the prior year, the materiality
basis included the add back of restructuring costs. These have not
been
{
added back in current year. There is no significant change in the
{
materiality level resulting from this change.We determined materiality for the Company to be €467 million (2021:
€445 million), which is 1% (2021: 1%) of the Company’s equity. However,
since the Company was a full scope component, for accounts that were
relevant for the Group financial statements, a performance materiality of
€42 million was applied.
During the course of our audit, we reassessed initial materiality with
the
{
only change in the final materiality from our original assessment at planning being to reflect the actual reported performance during the year.
Performance materiality
The application of materiality at the individual account or balance level. It
is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment of the
Group’s overall control environment, our judgement was that performance
materiality was 75% (2021: 50%) of our planning materiality, namely
€218m (2021: €140m). We have set performance materiality at this
higher percentage due to:
–
Our view of the effectiveness of the control environment to prevent or
detect and correct errors and the low number of control deficiencies in
the prior year audit;
–
The resilience and pace of recovery of the business through the
COVID-19 pandemic; and
–
The reduced level and scale of M&A transactions during FY22
relative
{
to previous years.Audit work at component locations for the purpose of obtaining audit
coverage over significant financial statement accounts is undertaken
based
{
on a percentage of total performance materiality. The performance
materiality set for each component is based on the relative scale and
risk
{
of the component to the Group as a whole and our assessment of the risk
{
of misstatement at that component. In the current year, the range of performance materiality allocated to components was €42m to €218m
(2021: €28m to €140m).
Reporting threshold
An amount below which identified misstatements are considered as being
clearly trivial.
We agreed with the Audit and Risk Committee that we would report to
them all uncorrected audit differences in excess of €15m (2021: €14m),
which is set at 5% of planning materiality, as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the Annual
Report set out on pages 1 to 115, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other
information contained within the Annual Report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility
{
is to read the other information and, in doing so, consider
{
whether the other information is materially inconsistent with
the
{
financial statements or our knowledge obtained in the course of the
{
audit or otherwise appears to be materially misstated. If we identify
such
{
material inconsistencies or apparent material misstatements, we
{
are{
required to determine whether there is a material misstatement
in
{
the{
financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of the
other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
–
the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is
{
consistent with the financial statements; and –
the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report
by
{
exceptionIn the light of the knowledge and understanding of the Group and the
Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or
the
{
directors’ report.We have nothing to report in respect of the following matters in
relation
{
to which the Companies Act 2006 requires us to report to
you
{
if,{
in our opinion:
–
adequate accounting records have not been kept by the Company, or
returns adequate for our audit have not been received from branches
not visited by us; or
–
the Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
–
certain disclosures of directors’ remuneration specified by law are not
made; or
–
we have not received all the information and explanations we require
for our audit.
Independent auditor’s report to the members of Vodafone Group Plc (continued)
Strategic report Governance
Financials
Other information127
Vodafone Group Plc
Annual Report 2022
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation
to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group and Company’s compliance
with the provisions of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our
knowledge obtained during the audit:
–
Directors’ statement with regards to the appropriateness of adopting
the going concern basis of accounting and any material uncertainties
identified set out on page 118;
–
Directors’ explanation as to its assessment of the company’s prospects,
the period this assessment covers and why the period is appropriate
set out on page 65;
–
Director’s statement on whether it has a reasonable expectation that
the Group will be able to continue in operation and meets its liabilities
set out on page 118;
–
Directors’ statement on fair, balanced and understandable set out on
page 117;
–
Board’s confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on page 117;
–
The section of the annual report that describes the review of effectiveness
of risk management and internal control systems set out on pages
86-87 and 114; and;
–
The section describing the work of the Audit and Risk Committee set
out on pages 83-88
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out
on pages 117-118, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for
{
assessing the Group and Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations,
or
{
have no realistic alternative but to do so.Auditor’s responsibilities for the audit of the
financial
{
statements Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs
{
(UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
{
individually or
{
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable
of
{
detecting irregularities, including fraudIrregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not
detecting a material misstatement due to fraud is higher than the risk
of
{
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or
{
through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of
fraud rests with both those charged with governance of the Company
and
{
management. –
We obtained an understanding of the legal and regulatory
frameworks
{
that are applicable to the Group and determined that the
{
most significant are those that relate to the reporting framework (IFRS, FRS 101, the UK Companies Act 2006 and UK Corporate
Governance Code), the relevant tax compliance regulations in the
jurisdictions in which the Group operates and the EU General Data
Protection Regulation (GDPR).
–
We understood how the Group is complying with those frameworks
by
{
making enquiries of management, internal audit, those responsible for legal and compliance procedures and the company secretary.
We
{
corroborated our enquiries through our review of board minutes and papers provided to the Audit and Risk Committee, correspondence
received from regulatory bodies and attendance at all meetings of the
Audit and Risk Committee, as well as consideration of the results of our
audit procedures across the Group.
–
We assessed the susceptibility of the Group’s financial statements
to
{
material misstatement, including how fraud might occur by meeting
{
with management from various parts of the business including
{
management and finance teams of the local markets designated as full, specific and specified procedures scope locations,
Head Office, the Audit and Risk Committee, the internal audit function,
the Group legal function and individuals in the fraud and compliance
department to understand where it considered there was susceptibility
to fraud; and assessing whistleblowing incidences for those with a potential
financial reporting impact. We also considered performance targets and
their propensity to influence on efforts made by management to ma
nage
earnings or influence the perceptions of analysts. We considered the
programmes and controls that the Group has established to address
risks identified, or that otherwise prevent, deter and detect fraud, and
how senior management monitors those programmes and controls.
Strategic report Governance
Financials
Other information128
Vodafone Group Plc
Annual Report 2022
–
Based on this understanding we designed our audit procedures to
identify non-compliance with such laws and regulations, including
where necessary using our forensic specialists. Our procedures
involved enquiries of management at Head Office, the Audit and
Risk
{
Committee, the internal audit function, the Group legal function, the corporate security team, individuals in the fraud and compliance
department (including those responsible for fraud investigation
and
{
whistleblowing); journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual
transactions, based on our understanding of the business; and
challenging the assumptions and judgements made by management
in respect of significant one-off transactions in the financial year and
significant accounting estimates as referred to in the key audit matters
section above. At a component level, our full and specified procedure
scope component audit teams’ procedures included enquiries of
component management; journal entry testing; and focussed testing,
including in respect of the key audit matter of revenue recognition. We
also leveraged our data analytics capabilities in performing work on the
purchase to pay process and property, plant and equipment balances
and leases, to assist in identifying higher risk transactions and balances,
respectively, for testing.
–
If significant instances of non-compliance with laws and regulations
were identified, these were communicated to the relevant local EY
teams who performed sufficient and appropriate audit procedures,
supplemented by audit procedures performed at the Group level,
to
{
conclude that there was no material impact on the consolidated financial statements.
–
Where the risk was considered to be higher, including areas impacting
Group key performance indicators or management remuneration,
we
{
performed audit procedures to address each identified fraud risk
or
{
other risk of material misstatement. These procedures included those on revenue recognition referred to in the key audit matter
section above and testing manual journals and were designed to
provide reasonable assurance that the financial statements were
free
{
from material fraud or error.A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Other matters we are required to address
–
Following the recommendation from the Audit and Risk Committee,
we were appointed by the Company on 23 July 2019 to audit
the
{
financial statements for the year ending 31 March 2020 and subsequent financial periods.
The period of total uninterrupted engagement including previous
renewals and reappointments is three years, covering the years ending
31 March 2020 to 31 March 2022.
–
The audit opinion is consistent with the additional report to the
Audit
{
and Risk Committee.Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law,
we
{
do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work,
for
{
this report, or for the opinions we have formed. Alison Duncan (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
17 May 2022
Independent auditor’s report to the members of Vodafone Group Plc (continued)
Consolidated income statement
for the years ended 31 March
2022
2021 2020
Note
€m
€m €m
Revenue
2
Cost of sales
(30,574 )
(30,086 )
(30,682 )
Gross profit
Selling and distribution expenses
(3,358 )
(3,522 )
(3,814 )
Administrative expenses
(5,713 )
(5,350 )
(5,810 )
Net credit losses
on financial assets
22
(561 ) (664 ) (660 )
Share of results of equity ac
counted associates and joint ventures
12
(2,505 )
Impairment loss
4
(1,685 )
Other income
3
Operating profit
3
Non-operating expense
(3 )
Investment income
5
Financing costs
5
(1,964 )
(1,027 )
(3,549 )
Profit before taxation 3,954 4,400 795
Income tax expense
6
(1,330 )
(3,864 )
(1,250 )
Profit/(loss) for
the financial year 2,624 536
(455 )
Attributable to:
– Owners of the parent 2,088 112
(920 )
– Non-controlling interests 536 424 465
Profit/(loss) for
the financial year 2,624 536
(455 )
Earnings/(loss) per share
From continuing operations
– Basic
8
(3.13 )c
– Diluted
8
(3.13 )c
Total Group
– Basic
8
(3.13 )c
– Diluted
8
(3.13 )c
Consolidated statement of comprehensive income
for the years ended 31 March
2022
2021 2020
Note
€m
€m €m
Profit/(loss) for
the financial year
(455 )
Other comprehensive income/(expense):
Items that may be reclassified to t
he income statement in subsequent years:
Foreign exchange translation
differences, net of tax
(25 ) 133
(982 )
Foreign exchange translation differenc
es transferred to the income statement
(17 ) (36 )
Other, net of tax
1
(3,743 ) 3,066
Total items that may be reclassified to the income statement in subsequent
years
(3,627 )
Items that will not be reclassified to th
e income statement in
subsequent years:
Net actuarial gains/(losses
) on defined benefit p
ension schemes, net of tax
25
(555 )
Total items that will not be reclassified to the income statement in
subsequent years
(555 )
Other comprehensive
income/(expense)
(4,182 )
Total comprehensive
income/(expense) fo
r the financial year
(3,646 )
Attributable to:
– Owners of the parent 4,402 1,696
(4,069 )
– Non-controlling interests 562 423 423
(3,646 )
Note:
1 Principally includes the impact of the Group’s cash flow hedges deferred to other comprehensive income during the year.
Further details on items in the consolidated
statement of comprehensive income can be
found in the consol
idated statement of ch
anges in equity on page 131.
Strategic report Governance
Financials
Other information129
Vodafone Group Plc
Annual Report 2022
Consolidated statement of
financial position
at 31 March
31 March 2022
31 March 2021
Note
€m
€m
Non-current assets
Goodwill
10
Other intangible assets
10
Property, plant and equipment
11
Investments in associates and joint ventures
12
Other investments
13
Deferred tax assets
6
Post employment benefits
25
Trade and other receivables
14
Current assets
Inventory 836 676
Taxation recoverable 296 434
Trade and other receivables
14
Other investments
13
Cash and cash equivalents
19
Assets held for sale
7
Total assets 153,953 155,063
Equity
Called up share capital
17
Additional paid-in capital 149,018 150,812
Treasury shares
(7,278 ) (6,172 )
Accumulated losses
(122,118 ) (121,587 )
Accumulated other comprehensive income 30,268 27,954
Total attributable to owners of the parent 54,687 55,804
Non-controlling interests 2,290 2,012
Total equity 56,977 57,816
Non-current liabilities
Borrowings
21
Deferred tax liabilities
6
Post employment benefits
25
Provisions
16
Trade and other payables
15
Current liabilities
Borrowings
21
Financial liabilities und
er put option arrangements
22
Taxation liabilities 864 769
Provisions
16
Trade and other payables
15
Total equity and liabilities 153,953 155,063
The consolidated financial statements on pages 129 to 214 were approved by the Board of Directors and authorised for issue on 17 May 2022
andweresignedonitsbehalfby:
Nick Read Margherita Della Valle
Chief Executive Chief Financial Officer
M
Strategic report Governance
Financials
Other information130
Vodafone Group Plc
Annual Report 2022
Consolidated statement of changes in equity
for the years ended 31 March
capital
1
capital
2
shares losses reserve
3
reserve surplus
4
Other
5
to owners interests equity
1 April 2019 4,796 152,503 29,284
(7,875 )
(116,986 )
(1,205 ) 1,227 213 61,957 1,231 63,188
Issue or reissue of shares 1 1 73 – – – – 7 – 7
(68 )
Share-based payments – 125 – – – – – – 125 11 136
Transactions with NCI in
subsidiaries
(58 )
(58 )
(102 )
(160 )
Dividends – – – – – – –
(2,317 )
(2,317 )
(348 )
(2,665 )
Comprehensive
(expense)/income
(920 )
(976 )
(Loss)/profit – – –
(920 ) – – – – (920 ) 465 (455 )
OCI - before tax – – – – 640 – 3,771 3,460 3,414
(951 )
(46 )
OCI - taxes – – – – 19 –
(114 )
(705 )
(800 )
(4 )
(804 )
Transfer to the income
statement
(44 )
(44 ) 8
(36 )
31 March 2020 4,797 152,629 28,308 1,227 3,279 61,410 1,215 62,625
(7,802 )
(120,349 )
(679 )
Issue or reissue of shares
6
(1,943 )
(87 )
Share-based payments – 126 – – – – – – 126 10 136
Transactions with NCI in
subsidiaries
7
Dividends – – – – – – –
(2,412 )
(2,412 )
(384 )
(2,796 )
Comprehensive
income/(expense)
(555 )
(3,743 )
(4,069 )
(3,646 )
Profit – – – 112 – – – – 112 424 536
OCI - before tax – – – – 124 –
(686 )
(4,630 )
(5,192 ) –
(5,192 )
OCI - taxes – – – – 6 131 – 887 1,024 3 1,027
Transfer to the income
statement
(13 )
(13 )
(4 )
(17 )
Purchase of treasury
shares
8
(403 )
(403 ) –
(403 )
31 March 2021 4,797 150,812 28,425 1,227 55,804 2,012 57,816
(6,172 )
(121,587 )
(1,234 )
(464 )
Issue or reissue of shares
6
(1,902 )
(98 )
Share-based payments – 108 – – – – – – 108 11 119
Transactions with NCI in
subsidiaries
7
(38 )
(38 )
Dividends – – – – – – –
(2,483 )
(2,483 )
(532 )
(3,015 )
Comprehensive
income/(expense)
(32 ) 483 –
Profit – – – 2,088 – – – – 2,088 536 2,624
OCI - before tax – – – – 627 – 2,368 2,944 26 2,970
(51 )
OCI - taxes – – – – – – –
(144 )
(505 )
(649 )
(649 )
Transfer to the income
statement
Purchase of treasury
shares
8
(3,106 )
(3,106 )
(3,106 )
31 March 2022 4,797 149,018 28,393 1,227 1,399 54,687 2,290 56,977
(7,278 )
(122,118 )
(751 )
Notes:
1 See note 17 ‘Called up share capital’.
2 Includes share premium, capital reserve, capital redemption rese
rve, merger reserve and share-
based payment reserve. The merg
er reserve was derive
d from acqu
isitions made
prior to 31 March
2004 and subsequently allocated to additiona
l paid-in capital on adoption of IFRS.
3 The currency reserve is used to record cumulative translation
differences on the assets and liabilities of foreign operations
. The cumulative translation differences are recycled to the income
statement on disposal of the foreign operation.
4 The revaluation surplus derives
from acqu
isitions of subsidiaries made
before the Group’s adoption of IFRS 3 (Revised) on 1 A
pril 2010 and comprises the amounts arising from recognising the
Group’s pre-existing equity interest in the acquired subsidiary at fair value.
5 Principally includes the impact of the Group’s cash flow hedges
with €3,704 million net gain
deferred to other comprehensive
income during the year (2021: €5,892 million net loss; 2020: €4,113
million net gain) and €1,422 million net gain (2021: €1,226 million net loss; 2020: €408 million net gain) recycled to the inco
me statement. These hedges primarily relate to foreign exchange
exposure on fixed borrowings, with any
foreign exchange on nominal balances directly impacting income statement in each period but interest cash flows unwinding to t
he income statement
over the life of the hedges (up to 2059). See note 22 ‘Capital and financial risk management’ for further details.
6 Movements include the re-issue of 1,427 million shares
(€1,944 million) in March 2021 to satisfy the first tranche and
the re-issue of 1,519 million shares (€1,903 million) in March 2022
to satisfy the second tranche of the Mandatory Convertible Bond issued in March 2019.
7 Principally relates to the IPO of Vantage Towers A.G.
See note 27 ‘Acquisitions and disposals’ for details.
8 Represents the irrevocable and non-discretionary share buyback
programmes announced on 19 March 2021, 19 May 2021, 23 July 20
21, 17 November 2021 and 9 March 2022.
Strategic report Governance
Financials
Other information131
Vodafone Group Plc
Annual Report 2022
Consolidated statement of cash flows
for the years ended 31 March
2022
2021 2020
Note
€m
€m €m
Inflow from operating activities
18
Cash flows from investing activities
Purchase of interests in subsidi
aries, net of cash acquired
27
(136 )
(10,295 )
Purchase of interests in as
sociates and joint ventures
12
(445 )
(13 )
(1,424 )
Purchase of intangible assets
(3,262 ) (3,227 ) (2,423 )
Purchase of property
, plant and equipment
(5,798 ) (5,413 ) (5,182 )
Purchase of investments
(2,009 ) (3,726 ) (1,832 )
Disposal of interests in subsidia
ries, net of cash disposed
27
Disposal of interests in as
sociates and joint ventures
Disposal of property, plant a
nd equipment and intangible assets
Disposal of investments
Dividends received from associates and joint ventures
Interest received
Outflow from investing activities
(6,868 ) (9,262 )
(8,088 )
Cash flows from fi
nancing activities
Proceeds from issue of long-term borrowings
Repayment of borrowings
(8,248 )
(12,237 ) (16,028 )
Net movement in short-term borrowings
(2,791 ) 2,488
Net movement in derivatives
(293 ) 279 98
Interest paid
1
(1,804 ) (2,152 ) (2,284 )
Payments for settlement
of written put options
2
(1,482 ) –
Purchase of treasury shares
(2,087 )
(62 )
(821 )
Issue of ordinary share capital
and reissue of treasury shares
17
Equity dividends paid
9
(2,474 ) (2,427 ) (2,296 )
Dividends paid to non-controlling shareholders in subsidiaries
(539 ) (391 ) (348 )
Other transactions with non-contr
olling shareholders in subsidiaries
27
(160 )
Other movements with associates and joint ventures
Outflow from financing activities
(9,706 )
(15,196 )
(9,352 )
Net cash inflow/(outflow) 1,507
(7,243 )
(61 )
Cash and cash equivalents at beginning of the financial year
19
Exchange gain/(loss)
on cash and cash equivalents 74
(255 )
(256 )
Cash and cash equi
valents at end of the financial year
19
Notes:
1
Amount for 2022 includes €58 million (2021: €9 million inflow; 2020: €273 million outflow) of cash inflow on derivative financi
al instruments for the share buyback related to maturing tranches of
mandatory convertible bonds.
2
Amount for 2021 reflects the settlement of a tender offer made
to other shareholders of Kabel Deutschland Holding A.G.
Strategic report Governance
Financials
Other information132
Vodafone Group Plc
Annual Report 2022
1. Basis of preparation
This section describes the critical accounting judgemen
ts and estimates that management has identified as
having a potentially material impact on the Grou
p’s consolidated financial statements and sets out our
significant accounting policies that relate to the financial statements as a whole. Where an accounting
policy is generally applicable to a specific note to the financial statements, the policy is described within
that note. We have also detailed below the new accounting pronouncements that we will adopt in future
years and our current view of the impact they will have on our financial reporting.
The consolidated financial statements are prepared in accordance
with UK-adopted International Accounting Standards (‘IAS’), wi
th
International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’) and wit
h the requirements
of the Companies Act 2006 (the ‘Act’). The consolidated financial
statements are prepared on a
going concern basis (see page 11
8).
the
Company is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England.
IFRS requires the Directors to adopt accounting policies that are the most appropriate to the
Group’s circumstances. These have been applied
consistently to all the years presented, unless otherwise stated. In determining and applying accounting policies, Directors an
d management
are required to make judgements and estimates in respect of it
ems where the choice of specific
policy, accounting judgement, es
timate or
assumption to be followed could materially affect the Group’s reported financial position, results or cash flows and disclosure
of contingent
assets or liabilities during the reporting period; it may later
be determined that a different choice may have been more approp
riate.
The Group’s critical accounting judgements and key sources of estimation uncertainty are detailed below. Actual outcomes could
differ from
those estimates. The estimates and underlying assumptions are revi
ewed on an ongoing basis. Revisions to accounting estimates a
re
recognised in the period in which the estimate is revised if the revision affects only that period; they are recognised in the
period of the revision
and future periods if the revision affects both current and future periods.
Management regularly reviews, and revises as necessary, the accounting judgements that significantly impact the amounts recogni
sed in the
financial statements and the estimates that are considered to
be ‘critical estimates’ due to their potential to give rise
to material adjustments in
the Group’s financial statements in the year to 31 March 2023. As
at 31 March 2022 , management has identified critical judgemen
ts in respect
of revenue recognition, lease accounting, valuing assets and liabilities acquired in business combinations, the accounting for
tax disputes in
India, the classification of joint arrangements, whether to recogn
ise provisions or to disclose contingent liabilities and the
impacts of climate
change. In addition, management has identified critical accounting estimates in relation to the recovery of deferred tax assets
, post employment
benefits and impairment reviews; estimates ha
ve also been identified that are not considered to be critical in respect of the a
llocation of
revenue to goods and services, the useful economic lives of finite lived intangibles and property, plant and equipment.
The majority of the Group’s provisions are either long-term in na
ture (such as asset retirement obligations) or relate to short
er-term liabilities
(such as those relating to restructuring and property) where there is not considered to be a significant risk of material adjus
tment in the next
financial year. Critical judgements exercised in respect of tax
disputes in India, include the cases relating to our acquisitio
n of Hutchison Essar
Limited (Vodafone India).
These critical accounting judgements, estima
tes and related disclosures have been disc
ussed with the Group’s Audit and Risk Com
mittee.
Critical accounting judgements and key sources of estimation uncertainty
Revenue recognition
Revenue recognition under IFRS 15 necessitates the collation and
processing of very large amounts of data and the use of manage
ment
judgements and estimates to produce financial information. The most
significant accounting judgements and source of estimation
uncertainty
are disclosed below.
Gross versus net presentation
If the Group has control of goods or services when they are de
livered to a customer, then the Group is the principal in the sal
e to the customer;
otherwise the Group is acting as an agent. Whether the Group is
considered to be the principal or an agent in the transaction d
epends on
analysis by management of both the legal form and substance of
the agreement between the Group
and its business partners; such
judgements impact the amount of reported re
venue and operating expenses (see note 2 ‘R
evenue disaggregation and segmental analy
sis’) but
do not impact reported assets, liabilities or cash flows. Scenar
ios requiring judgement to determine whether the Group is a pri
ncipal or an agent
include, for example, those where the Group
delivers third-party branded software or services (such as premium music, TV content or cloud-
based services) to customers and good or services deli
vered to customers in partne
rship with a third-party.
Notes to the consolidated financial statements
Strategic report Governance
Financials
Other information133
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
1. Basis of preparation (continued)
Allocation of revenue to goods and services provided to customers
Revenue is recognised when goods and servic
es are delivered to customers (see note
2 ‘Revenue disaggregation and segmental anal
ysis’). Goods
and services may be delivered to a customer at different times un
der the same contract, hence it is necessary to allocate the a
mount payable by
the customer between goods and se
rvices on a ‘relative standalone selling price
basis’; this requires the identification of per
formance obligations
(‘obligations’) and the determina
tion of standalone selling prices for the identif
ied obligations. The d
etermination of obligat
ions is, for the primary
goods and services sold by the Group, not considered to be a critical accounting judgement; the Group’s policy on identifying o
bligations is
disclosed in note 2 ‘Revenue disaggregation and segmental analys
is’. The determination of stan
dalone selling prices for identified obligations is
discussed below.
It is necessary to estimate the standalone pr
ice when the Group does not sell equivalent goods or services in similar circumsta
nces on a standalone
basis. When estimating the standalone pric
e the Group maximises the use of external in
puts; methods for esti
mating standalone p
rices include
determining the standalone price of si
milar goods and services
sold by the Group, observing the standalone prices for similar goods and services
when sold by third parties or using a cost-plus reasonable margin
approach (which is sometimes the case for devices and other e
quipment). Where
it is not possible to reliably estimate standalone prices due to a lack of observable standalone sales or highly variable prici
ng, which is sometimes the
case for services, the standalone price of an
obligation may be determined as the tran
saction price less the standalone prices
of other obligations in
the contract. The standa
lone price determined for obligati
ons materially impacts the allocatio
n of revenue between obligations
and impacts the
timing of revenue when obligations are provided to customers at different times – for example, the allocation of revenue betwee
n devices, which are
usually delivered up-front, and services wh
ich are typically delivered over the contract period. However, there is not consider
ed to be a significant
risk of material adjustment to the carrying value of contract-rela
ted assets or liabilities in
the 12 months after the balance
sheet date if these estimates were revised.
Lease accounting
Lease accounting under IFRS 16 is complex and necessitates the collation and processing of very large amounts of data and the i
ncreased use
of
management judgements and estimates to pr
oduce financial information. The most significant accounting judgements are disclosed
below.
Lease identification
Whether the arrangement is considered a lease or a service contract depends on the analysis by management of both the legal for
m and substance
of the arrangement betw
een the Group and the counter-party
to determine if control of an iden
tified asset has
been passed betwe
en the parties; if
not, the arrangement is a service arrangem
ent. Control exists if the Group obtains
substantially all of the economic benefit fr
om the use of the asset,
and has the ability to direct its use, for a period of time. An identified asset exists where an
agreement explicitly or implic
itly identifies an asset or a
physically distinct portion of an asset which the
lessor has no substantiv
e right to substitute.
The scenarios requiring th
e greatest judgement include those where the arrang
ement is for the use of fibre or other fixed telec
ommunication lines.
Generally, where the Group has exclusive us
e of a physical line it is determined that
the Group can also direct the use of the
line and therefore leases
will be recognised. Where the Group provides access to fibre or other
fixed telecommunication lines to another operator on a wholesale basis the
arrangement will generally be identified as a lease, whereas when
the Group provides fixed line se
rvices to an end-user, genera
lly control over such
lines is not passed to the end-user and a lease is not identified.
The impact of determining whether an agreement is a lease or a
service depends on whether the
Group is a potential lessee or le
ssor in the
arrangement and, where the Group is a lessor,
whether the arrangement is classified as
an operating or finance lease. The impac
ts for each scenario
are described below where
the Group is potentially:
-
A lessee. The judgement impacts the nature and timing of both cost
s and reported assets and liabil
ities. A lease results in an
asset and a liability
being reported and depreciation
and interest being recognised; the
interest charge will decrease over the life of the lease. A
service contract
results in operating expenses being recognised evenly over the life of the contract and no assets or liabilities being recorded
(other than trade
payables, prepayments and accruals).
-
An operating lessor. The judgement impacts the nature of income recognised. An operating lease
results in lease income being recognised whilst
a service contract results in service revenue. Both
are recognised evenly over the life of the contract.
-
A finance lessor. The judgement impacts the
nature and timing of both income and repo
rted assets. A finance lease results in th
e lease income
being recognised at commencement of the lease and an asset (the net investment in the lease) being recorded.
Lease term
Where leases include additional optional pe
riods after an initial lease term, signific
ant judgement is required in determining
whether these optional
periods should be included when determini
ng the lease term. The impact of this judg
ement is significantly
greater where the Gro
up is a lessee. As a
lessee, optional periods are included in
the lease term if the Group is
reasonably certain it will exercise an extension option
or will not exercise a
termination option; this depends on an analysis by management of all relevant facts and circumstances including the leased asse
t’s nature and
purpose, the economic and practical potential for replacing the asset and any plans that the Group has in place for the future
use of the asset. Where
a leased asset is highly customised
(either when initially provided or
as a result of leasehold improvements) or it is impractical or uneconomic to
replace then the Group is more li
kely to judge that lease extension options are
reasonably certain to be exercised. The value o
f the right-of-use asset
and lease liability will be greater when extension options are included in the lease term. The normal approach adopted for leas
e term by asset class
is described below.
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Vodafone Group Plc
Annual Report 2022
The lease terms can vary significantly by type and use of asset and geography. In addition, the exact lease term is subject to
the non-cancellable
period and rights and options in each contract. Generally, leas
e terms are judged to be the longer of the minimum lease term an
d:
-
Between 5 and 10 years for land and buildings (excluding retail),
with terms at the top end of th
is range if the lease relates
to assets that are
considered to be difficult to exit sooner for economic, practical or reputational reasons;
-
To the next contractual lease break
date for retail premises
(excluding breaks within the next 12 months);
-
Where leases are used to provide internal
connectivity the lease term for the connect
ivity is aligned to the lease term or usef
ul economic life of
the assets connected;
-
The customer service agreement length for leases of local loop co
nnections or other assets required to provide fixed line servi
ces to individual
customers; and
-
Where there are contractual agreements to provide services usin
g leased assets, the lease term
for these assets is generally se
t in accordance
with the above principles or for the lease term required to provide
the services for the agreed
service period, if longer.
In most instances the Group has options to
renew or extend leases for additional pe
riods after the end of the lease term which
are assessed using
the criteria above.
Lease terms are reassessed if a significant event or change in circumstances occurs relating to the leased assets that is withi
n the control of the
Group; such changes usually relate to comme
rcial agreements entered into by the Group,
or business decisions made by the Group.
Where such
changes change the Group’s assessment of whether it is reasonably ce
rtain to exercise options to
extend, or not terminate lease
s, then the lease
term is reassessed and the lease liability is remeasured, whic
h in most cases will increa
se the lease liability.
Taxation
The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the
Group’s total tax
charge involves estimation and judgement in
respect of certain matters, being principally:
Recognition of deferred tax assets
Significant items on which the Group has exercised accounting estimation and judgement include the recognition of deferred tax
assets in
respect of losses in Luxembourg, Germany, Italy and Spain
as well as capital allowances in the United Kingdom. The recognition of deferred tax
assets, particularly in respect of tax losses, is based upon whet
her management judge that it is probable that there will be su
fficient and suitable
taxable profits in the relevant legal entity or tax group agains
t which to utilise the assets in the future. The Group assesses
the availability of
future taxable profits using the same undiscounted five year forec
asts for the Group’s operations as are used in the Group’s va
lue in use
calculations (see note 4 ‘Impairment losses’). In the case of Lu
xembourg, this includes forecasts of future income from the Gro
up’s internal
financing, centralised procurement and roaming activities.
Where tax losses are forecast to be recovered beyond the five year period, the availability of taxable profits is assessed usin
g the cash flows and
long-term growth rates used for the value in use calculations.
The estimated cash flows inherent in these forecasts include the unsystematic risks of operating in the telecommunications busi
ness including
the potential impacts of changes in the market structure, trends
in customer pricing, the costs associated with the acquisition
and retention of
customers, future technological evolutions and potential regulatory changes,
such as our ability to acquire and/or renew spectrum licences.
Changes in the estimates which underpin the
Group’s forecasts could have an impact on
the amount of future taxable profits and
could have a
significant impact on the period over which the deferred tax asset would be recovered.
The Group only considers substantively enacted tax laws when a
ssessing the amount and availability of tax losses to offset agai
nst the future
taxable profits. See note 6 ‘Taxation’ to the consolidated financial statements.
See additional commentary relating to
climate change on page 158.
Uncertain tax positions
The tax impact of a transaction or item can be uncertain until
a conclusion is reached with the relevant tax authority or throu
gh a legal process.
The Group uses in-house tax experts when assessing uncertain tax
positions and seeks the advice of external professional adviso
rs where
appropriate. The most significant judgement in this area relate
s to the Group’s tax disputes in India, including the cases rela
ting to the Group’s
acquisition of Hutchison Essar Limited (Vodafone India). Further de
tails of the tax disputes in India are included in note 29 ‘
Contingent liabilities
and legal proceedings’ to the consolidated financial statements.
Business combinations and
goodwill
When the Group completes a business combination, the fair values
of the identifiable assets and
liabilities acquired, including
intangible assets, are
recognised. The determination of the fair va
lues of acquired assets and liabilities is
based, to a considerable extent, on mana
gement’s judgement. If
the purchase consideration
exceeds the fair value of the net a
ssets acquired then the incrementa
l amount paid is recognised as
goodwill. If the
purchase price consideration is lower than the fair value of the
assets acquired then the differe
nce is recorded as a gain in t
he income statement.
Allocation of the purchase price between finite lived assets (discussed below) and indefinite lived assets such as goodwill aff
ects the subsequent
results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible assets, including goo
dwill, are not amortised.
See note 27 ‘Acquisitions and disposals’ to the cons
olidated financial statemen
ts for further details.
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Financials
Other information135
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
1. Basis of preparation (continued)
Joint arrangements
The Group participates in a number of joint a
rrangements where control of
the arrangement is shared wi
th one or more other part
ies. Judgement is
required to classify joint arrangements in
a separate legal entity as either a join
t operation or as a joint venture, which dep
ends on management’s
assessment of the legal form and substance of the arrangement taking into account relevant facts and circumstances such as whet
her the owners
have rights to substa
ntially all the economic
outputs and, in substance, s
ettle the liabilities of the entity.
The classification can have a material impact on the consolidated financial statements. The Group’s share of assets, liabilitie
s, revenue, expenses and
cash flows of joint operations are included in the consolidated fi
nancial statements on a line-by-line basis, whereas the Group
’s investment and
share of results of joint ventures are shown within single line
items in the consolidated statem
ent of financial position and c
onsolidated income
statement respectively. See note 12 ‘Investments in associates
and joint arrangements’ to the consolidated financial statements
.
Finite lived intangible assets
Other intangible assets include amounts sp
ent by the Group acquiring licences and sp
ectrum, customer bases and the costs of pur
chasing and
developing computer softwa
re.
Where intangible assets are acquired throug
h business combinations and no active market
for the assets exists, the fair value o
f these assets is
determined by discounting estimated future net cash flows generated
by the asset. Estimates relating to the future cash flows a
nd discount rates
used may have a material effect on the repor
ted amounts of finite lived intangible assets.
Estimation of useful life
The useful life over which in
tangible assets are amortised depe
nds on management’s estimate of th
e period over which economic b
enefit will be
derived from the asset. Useful lives are peri
odically reviewed to
ensure that they remain approp
riate. Management’s estimates of useful life have a
material impact on the amount of amortisati
on recorded in the year, but there is not considered to be a significant risk of mat
erial adjustment to the
carrying values of intangible ass
ets in the year to 31 March 2023 if these estima
tes were revised. The
basis for determining th
e useful life for the
most significant categories of intang
ible assets are discussed below.
Customer bases
The estimated useful life principally reflects management’s view of the average economic life of the customer base and is asses
sed by reference to
customer churn rates. An
increase in churn rates may lead to a reduction in the estimated useful life and an increase in the amortisation charge.
Capitalised software
For computer software, the estima
ted useful life is based on management’s view, considering historical experience with similar
products as well as
anticipation of future events which may impact their life such as changes in technology. The useful life will not exceed the du
ration of a licence.
Property, plant and equipment
Property, plant and equipment represents 26.
5% of the Group’s total assets (2021: 26.6
%). Estimates and assumptions made may ha
ve a material
impact on their carrying value and related depreciation charge. See note 11 ‘Property, plant and equipment’ to the consolidated
financial
statements for f
urther details.
Estimation of useful life
The depreciation charge for an asset is de
rived using estimates of its expected useful
life and expected residual value, which are reviewed annually.
Management’s estimates of useful life have
a material impact on the amount of deprecia
tion recorded in the year, but there is n
ot considered to be
a significant risk of material adjustment to
the carrying values of proper
ty, plant and equipm
ent in the year to 31 March 2023
if these estimates were
revised.
Management
determines the useful lives and re
sidual values for assets when they are acquired,
based on experience wi
th similar assets and
taking
into account other relevant
factors such as any expec
ted changes in technology.
See additional commentary relating
to climate change, below.
Post employment benefits
Management uses estimates when
determining the Group’s liabilities and expenses
arising for defined benefit pension schemes. Ma
nagement is
required to estimate the future rates of in
flation, salary increases, discount rates and longevity of members, each of which ma
y have a material
impact on the defined benefit obligations that are recorded. Further details, including a sensitivity analysis, are included in
note 25 ‘Post employment
benefits’ to the consolida
ted financial statements.
Contingent liabilities
The Group exercises judgement to determine
whether to recognise provisio
ns and the exposure
s to contingent liabilities related
to pending
litigations or other outstanding claims subj
ect to negotiated settlement, mediation, ar
bitration or government regulation, as w
ell as other contingent
liabilities (see note 29 ‘Contingent liabilities and legal proc
eedings’ to the consolidated fina
ncial statements). Judgement is
necessary to assess the
likelihood that a pending claim will succeed, or a liability will arise.
Impairment reviews
IFRS requires management to perform im
pairment tests annually for indefinite
lived assets, for finite lived assets and for equity accounted
investments, if events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Strategic report Governance
Financials
Other information136
Vodafone Group Plc
Annual Report 2022
A lack of observable market data on fair values for equivalent assets means that the Group’s valuation approach for impairment
testing focuses
primarily on value in use. For a number of reasons, transaction va
lues agreed as part of any business acquisition or disposal m
ay be higher than
the assessed value in use. Where the Group has interests in list
ed entities, market data, such as share price, is used to asses
s the fair value of
those interests.
For operations that are classified as held for sale, management is required to determine whether the carrying value of the disc
ontinued
operation can be supported by the fair value less costs to sell.
Where not observable in a quoted market, management has determ
ined fair
value less costs to sell by reference to the outcomes from the application of a number of potential valuation techniques, deter
mined from
inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Impairment testing requires management to judge whether the ca
rrying value of assets can be supported by the net present value
of future
cash flows that they generate. Calculating the net present value of the future cash flows requires
estimates to be made in respect of highly
uncertain matters including management’s expectations of:
Growth in adjusted EBITDAaL, calculated as adjusted operating profit before depreciation and amortisation;
Timing and amount of future capital expenditure, licence and spectrum payments;
Long-term growth rates; and
Appropriate discount rates to reflect the risks involved.
A long-term growth rate into perpetuity has been determined as the lower of:
The nominal GDP growth rates for
the country of operation; and
The long-term compound annual growth rate in adjusted EBIT
DAaL in years six to ten, as estimated by management.
Changing the assumptions selected by management, in particular th
e adjusted EBITDAaL and growth rate assumptions used in the ca
sh flow
projections, could significantly affect the Group’s impairment evaluation and hence reported assets and profits or losses. Furt
her details,
including a sensitivity analysis, are included in note 4 ‘I
mpairment losses’ to the consol
idated financial statements.
See additional commentary relating to climate change, below.
Climate change
The potential climate change-related risks and opportunities to wh
ich the Group is exposed, as identified by management, are di
sclosed in the
Group’s TCFD disclosures on pages 66 and 67.
Management has assessed the potential financial impacts relating to the identified risks, primarily
considering the useful lives of, and retirement obligations for,
property, plant and equipment,
the possibility of impairment o
f goodwill and other
long-lived assets and the recoverability of the Group’s deferred tax assets. Management has exercised judgement in concluding t
hat there are
no further material financial impacts of the Group’s climate-related risks and opportunities on the consolidated financial stat
ements. These
judgements will be kept under review by management as the future
impacts of climate change depend
on environmental, regulatory
and other
factors outside of the Group’s control which are not all currently known.
Significant accounting policies applied in the current reporting period that relate to the financial
statements as a whole
Accounting convention
The consolidated financial statements are prepared on a historical cost basis except for certain financial and equity instrumen
ts that have been
measured at fair value.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company, subsidiaries controlled by the Compa
ny (see note
31 ‘Related undertakings’ to the consolidated financial statements
), joint operations that are su
bject to joint control and the
results of joint
ventures and associates (see
note 12 ‘Investments in associates and joint arrang
ements’ to the consolidated financial statements).
Foreign currencies
The consolidated financial statements are presented in euro, whic
h is also the Company’s functional currency. Each entity in th
e Group
determines its own functional currency and items included in the
financial statements of each entity are measured using that fu
nctional
currency.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transac
tion. Monetary assets
and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the
rates prevailing on
the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated
at the rates
prevailing on the initial transaction dates. Non-monetary items me
asured in terms of historical
cost in a foreign currency are
not retranslated.
Changes in the fair value of monetary securities denominated in
foreign currency are analysed between translation differences a
nd other
changes in the carrying amount of the security. Translation differences are recognised in the consolidated income statement and
other
changes in carrying amount are recognised in the consolidated statement of comprehensive income.
Translation differences on non-monetary
financial assets, such as investments in equity securities classified at fair value through other
comprehensive income, are reported as part of the fair value gain
or loss and are included in the consolidated statement of com
prehensive
income.
Share capital, share premium and other capital reserves are initially recorded at the functional currency rate prevailing at th
e date of the
transaction and are not retranslated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of entities with a functional curre
ncy other than euro
are expressed in euro using exchange rates
prevailing at the reporting period date.
Strategic report Governance
Financials
Other information137
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
1. Basis of preparation (continued)
Income and expense items and cash flows are translated at the average exchange rates for each month and exchange differences ar
ising are
recognised directly in other comprehensive income. On disposal of a foreign entity, the cumulative amount previously recognised
in the
consolidated statement of comprehensive income relating to that particular foreign operation is recognised in profit or loss in
the consolidated
income statement.
Goodwill and fair value adjustments arising on the acquisition of
a foreign operation are treated as assets and liabilities of
the foreign operation
and translated accordingly.
The net foreign exchange loss recognised in
the consolidated income statement for the ye
ar ended 31 March 2022 is €309 million
(31 March
2021: €13 million loss; 2020: €146 million loss). The net gains and net losses are recorded within operating profit (2022: €24
million charge;
2021: €3 million credit; 2020: €61 million credit), financing costs (2022: €284 million charge; 2021: €23 million charge; 2020:
€205 million
charge) and income tax expense (2022: €1 million charge; 2021: €7 million credit; 2020: €2 million charge). The foreign exchang
e gains and
losses included within other income
and non-operating expense arise on th
e disposal of subsidiaries, interests
in joint ventures, associates and
investments from the recycling of foreign exchange gains and losses previously recognised in the consolidated statement of comp
rehensive
income.
Current or non-current classification
Assets are classified as current in the consolidated statement of financial position where recovery is expected within 12 month
s of the reporting
date. All assets where recovery is expected more than 12 months from the reporting date and all deferred tax assets, goodwill a
nd intangible
assets, property, plant and equipment and investments in associates and joint ventures are reported as non-current.
Liabilities are classified as current unless the Group has an unconditional right to defer settlement of the liability for at l
east 12 months after the
reporting date. For provisions, where the timing of settlement is
uncertain, amounts are classified as non-current where settle
ment is expected
more than 12 months from the reporting date. In addition, defe
rred tax liabilities and post-employment benefits are reported as
non-current.
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost is determined on the basis of weighted average costs an
d comprises direct
materials and, where applicable, direct labour costs and those overheads that have been
incurred in bringing the in
ventories to their present
location and condition.
New accounting pronouncements adopted on 1 April 2021
The Group adopted the following new accounting policies on 1 April 2021 to comply with amendments to IFRS. The accounting
pronouncements, none of which had a material impact on the Group’s financial reporting on adoption, are:
Amendments to IFRS 16 ‘Covid-19-Related Rent Concessions’ and ‘Covid-19-Related Rent Concessions beyond 30 June 2021’; and
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 ‘Interest Rate Benchmark Reform - Phase 2’.
New accounting pronouncements and basis of preparation changes to be adopted on or after 1 April
2022
The IASB has issued the following pronouncements for annual periods beginning on or after 1 January 2022:
Annual Improvements to IFRS Standards 2018-2020;
Amendments to IAS 16 ‘Property, Plant and Equipment: Proceeds before Intended Use’;
Amendments to IAS 37 ‘Onerous Contracts - Cost of Fulfilling a Contract’; and
Amendments to IFRS 3 ‘Reference to the Conceptual Framework’.
These amendments have been endors
ed by the UK Endorsement Board.
The Group’s financial reporting will be presented in accordance with
the above new standards from 1 April 2022. The changes are not expected to have a material impact on the consolidated income st
atement,
consolidated statement of financial position or consolidated statement of cash flows.
In addition, it is expected that Turkey will meet the requirements to be designated as a hyper-inflationary economy under IAS 2
9 ‘Financial
Reporting in Hyper-Inflationary Economies’ in the quarter to 30 June 2022 and that the Group’s financial reporting relating to
Turkey during the
year ending 31 March 2023 will be in accordance with IAS 29. Under IAS 29, Turkish Lira results and non-monetary asset and lia
bility balances
are revalued to present value equivalent local currency amounts (a
djusted based on an inflation index) before translation to eu
ros at
reporting-date exchange rates.
New accounting pronouncements to be adopted on or after 1 April 2023
The following new standards and narrow-scope amendments have been issued by the IASB and are effective for annual periods begin
ning on or
after 1 January 2023; they were not endorsed by the EU at 31 December 2020 and have not yet
been endorsed by the UK Endorsement Board.
IFRS 17 ‘Insurance Contracts’ and Amendments to IFRS 17 ‘Insurance Contracts’;
Amendments to IAS 1 ‘Classification of Liabilities as Current or Non-Current’;
Amendments to IAS 1 ‘Disclosure of Accounting Policies’;
Amendment to IAS 8 ‘Definition of Accounting Estimates’; and
Amendment to IAS 12 ‘Deferred Tax related to Assets and Liabilities arising from a Single Transaction’.
The Group is assessing the impact of these new standards and the Group’s financial reporting will be presented in accordance wi
th these
standards from 1 April 2023 as applicable.
Strategic report Governance
Financials
Other information138
Vodafone Group Plc
Annual Report 2022
2. Revenue disaggregation and segmental analysis
The Group’s businesses are managed on a geographical basis. Selected financial data is presented on this
basis below.
Accounting policies
Revenue
When the Group enters into an agreement wi
th a customer, goods and services deliverable under the contract are identified as se
parate
performance obligations (‘obligations’) to the extent that the cu
stomer can benefit from the goods or services on their own and
that the
separate goods and services are considered distinct from other
goods and services in the agreem
ent. Where individual goods and
services do
not meet the criteria to be identified as separate obligations
they are aggregated with other goods and/or services in the agre
ement until a
separate obligation is identified. The obligations identified will depend on the nature of individual customer contracts, but m
ight typically be
separately identified for mobile handsets, other equipment such as set-top boxes and routers provided to customers and services
provided to
customers such as mobile and fixed line communication services.
Where goods and services have a functional dependency (for exam
ple, a fixed
line router can only be used with the Group’s services) this does not, in isolation, prevent those goods or services from being
assessed as
separate obligations. Activities
relating to connecting customers to the Group’s network
for the future provision of se
rvices are not considered
to meet the criteria to be recognised as obligations except to
the extent that the control of re
lated equipment passes to custo
mers.
The Group determines the transaction price to which it expects to be entitled in return for providing the promised obligations
to the customer
based on the committed contractual amounts, net of sales taxes and
discounts. Where indirect channel dealers, such as retailers
, acquire
customer contracts on behalf of the Group and receive commission, any commissions that the dealer is compelled to use to fund d
iscounts or
other incentives to the customer are treated as payments to the customer when determining the transaction price and consequentl
y are not
included in contract acquisition costs.
The transaction price is allocated between the identified obligations according to the relative standalone selling prices of th
e obligations. The
standalone selling price of each obligation deliverable in the contract is determined according to the prices that the Group wo
uld achieve by
selling the same goods and/or services included in the obligation to a similar customer on a standalone basis; where standalone
selling prices
are not directly
observable, estimation techniques are used maximising the use
of external inputs. See ‘Critical
accounting judgements and key
sources of estimation uncertainty’ in note
1 for details. Revenue is recognised when the respective obligations in the contract
are delivered to
the customer and cash collection is considered probable. Revenue for the provision of services, such as mobile airtime and fixe
d line broadband,
is recognised when the Group provides the related service during the agreed service period.
Revenue for device sales to end customers is generally recognise
d when the device is delivered to the end customer. For device
sales made to
intermediaries such as indirect channel dealers, revenue is recognised if control of the device has transferred to the intermed
iary and the
intermediary has no right to return the device to receive a refu
nd; otherwise revenue recognition is deferred until sale of the
device to an end
customer by the intermediary or the expiry of any right of return.
Where refunds are issued to customer
s they are deducted from revenue in the relevant service period.
When the Group has control of goods or services prior to delive
ry to a customer, then the Group is the principal in the sale to
the
customer. As a
principal, receipts from, and payments to, suppliers are reported on a gross basis in revenue and operating costs. If another p
arty has control of
goods or services prior to transfer to a customer, then the Gr
oup is acting as an agent for the other party and revenue in resp
ect of the relevant
obligations is recognised net of any related payments to the supplier and recognised revenue represents the margin earned by the Group. See
‘Critical accounting judgements and key sources of estimation uncertainty’ in note 1 for details.
Customers typically pay in advance for prepay mobile services
and monthly for other communication services. Customers typically
pay for
handsets and other equipment either up-front at the time of
sale or over the term of the related service agreement.
When revenue recognised in respect of a customer contract exceeds
amounts received or receivable from a customer at that time a
contract
asset is recognised; contract assets will typically be recognised for handsets or other equipment provided to customers where p
ayment is
recovered by the Group via future service fee
s. If amounts received or receivable from
a customer exceed revenue recognised for
a contract, for
example if
the Group receives an advance payment from a customer, a contract liability is recognised.
When contract assets or liabilities are recognised, a financing
component may exist in the contract; this is typically the case
when a handset or
other equipment is provided to a customer up
-front but payment is received over the te
rm of the related service agreement, in w
hich case the
customer is deemed to have received financing. If a signific
ant financing component is provided
to the customer, the transactio
n price is
reduced and interest revenue is recognised over the customer’s payment period using an interest rate reflecting the relevant ce
ntral bank rates
and customer credit risk.
Contract-related costs
When costs directly relating to a specific contract are incurred prior to recognising revenue for a related obligation, and tho
se costs enhance the
ability of the Group to deliver an obligation and are expected to be recovered, then those costs are recognised on the statemen
t of financial
position as fulfilment costs and are recognised as expenses in line with the recognition of revenue when the related obligation
is delivered.
The direct and incremental costs of acquiring a contract including, for example, certain commissions payable to staff or
agents for acquiring
customers on behalf of the Group, are recognised as contract acqu
isition cost assets in the statement of financial position whe
n the related
payment obligation is recorded. Costs are recognised as an expense in line with the recognition of the related revenue that is
expected to be
earned by the Group; typically this is over the customer contract period as new commissions are payable on contract renewal. Ce
rtain amounts
payable to agents are deducted fr
om revenue recognised (see above).
Strategic report Governance
Financials
Other information139
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
2. Revenue disaggregation and segmental analysis (continued)
Revenue disaggregation and segmental income statement analysis
Revenue reported for the year includes revenue from contracts with customers, comprising service and equipment revenue, as well
as other
revenue items including revenue from leases and interest revenue arising from transactions with a significant financing compone
nt.
The table below presents Revenue and Adjust
ed EBITDAaL for the year ended 31 March 2022 under the updated segmental reporting
structure.
Service Equipment contracts with Other Interest segment Adjusted
31 March 2022
revenue revenue customers revenue
1
revenue revenue EBITDAaL
€m €m €m €m €m €m €m
Germany
11,616
1,126
12,742365 21
13,1285,669
Italy
4,379
525
4,904
108
10
5,022
1,699
UK
5,154 1,333 6,487 1,395
69 33
6,589Spain
3,714
369
4,083
73
24
4,180
957
Other Europe
5,001 1,606
528
5,529105 19
5,653Vodacom
4,635
950
5,585
384
24
5,993
2,125
Other Markets
3,420
404
3,824
6
–
3,830
1,335
Vantage Towers
–
–
–
1,252
–
1,252
619
Common Functions
2
522
53
575
838
1
1,414
(197)
Eliminations
(238)
(1)
(239)(1,242) (1,481)
–
–
Group
38,203 15,208
5,287
43,4901,958
45,580132
The table below presents Revenue and Adjusted
EBITDAaL for the year ended 31 March 20
22 under the previous segmental reporting
structure.
Revenue from Total
Service Equipment contracts with Other Interest segment Adjusted
31 March 2022
revenue revenue customers revenue
1
revenue revenue EBITDAaL
€m €m €m €m €m €m €m
Germany
11,616
1,126
12,742424 21
13,1875,978
Italy
4,379 1,699
525
4,904108 10
5,022UK
5,154 1,333 6,487 1,457
69 33
6,589Spain
3,714 1,041
369
4,08392 24
4,199Other Europe
5,001 1,770
528
5,529189 19
5,737Vodacom
4,635 2,125
950
5,585384 24
5,993Other Markets
3,420
404
3,824
6
–
3,830
1,335
Common Functions
2
522
53
575
838
1
1,414
(197)
Eliminations
(238) (152) (391)
(1)
(239)–
–
Group
38,203 15,208
5,287
43,4901,958
45,580132
Notes:
1
Other revenue includes leas
e revenue recognised under IFRS 16 ‘L
eases’ (see note 20 ‘Leases’).
2
Comprises central teams and business functions.
Strategic report Governance
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Other information140
Vodafone Group Plc
Annual Report 2022
The tables below present Revenue and Adjusted
EBITDAaL comparative information for the years ended 31 March 2021 and 31 March 2
020
under the previous segmental reporting structure.
Revenue from Total
Service Equipment contracts with Other Interest segment Adjusted
31 March 2021
revenue revenue customers revenue
1
revenue revenue EBITDAaL
€m €m €m €m €m €m €m
Germany
11,520
1,055
12,575380 29
12,9845,634
Italy
4,458 1,597
446
4,90497 13
5,014UK
4,848 1,206 6,054 1,367
44 53
6,151Spain
3,788 1,044
292
4,08064 22
4,166Other Europe
4,859 1,760
549
5,408124 17
5,549Vodacom
4,083 1,873
800
4,883282 16
5,181Other Markets
3,312
441
3,753
12
–
3,765
1,228
Common Functions
2
470
36
506
862
–
1,368
(117)
Eliminations
(197) (171) (369)
(1)
(198)–
–
Group
37,141 14,386
4,824
41,9651,694
43,809150
Revenue from Total
Service Equipment contracts with Other Interest segment Adjusted
31 March 2020
revenue revenue customers revenue
1
revenue revenue EBITDAaL
€m €m €m €m €m €m €m
Germany
10,696
1,055
11,751300 25
12,0765,077
Italy
4,833 2,068
583
5,416101 12
5,529UK
5,020 1,333 6,353 1,500
63 68
6,484Spain
3,904 1,009
318
4,22251 23
4,296Other Europe
4,890 1,738
539
5,42994 18
5,541Vodacom
4,470 2,088
864
5,334190
5,5317
Other Markets
3,796
552
4,348
36
2
4,386
1,400
Common Functions
2
494
53
547
1,020
–
1,567
1
Eliminations
(232) (202) (436)
(2)
(234)–
–
Group
37,871 14,881
5,295
43,1661,653
44,974155
Notes:
1
Other revenue includes leas
e revenue recognised under IFRS 16 ‘L
eases’ (see note 20 ‘Leases’).
2
Comprises central teams and business functions.
The total future revenue from the remaining term of Group’s contracts with customers for performance obligations not yet delive
red to those
customers at 31 March 2022 is €20,013 million (2021: €21,038 million; 2020: €20,336 million); of which €12,913 million (2021: €
14,110 million;
2020: €13,456 million) is expected to be recognised within the next year and the majority of the remaining amount in the follow
ing 12 months.
Strategic report Governance
Financials
Other information141
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
2. Revenue disaggregation and segmental analysis (continued)
Segmental analysis
The Group’s operating segments are established
on the basis of those components of the Group that are evaluated regularly by th
e chief
operating decision maker in deciding how to allocate resources and in assessing performance. The Group has determined the chief
operating
decision maker to be its Chief Executive. The Group has a single
group of similar services and pr
oducts, being the supply of co
mmunications
services and related products.
Following the IPO of Vantage Towers A.G. (‘Vantage Towers’) in March 2021, the Group has updated its segmental reporting struct
ure to reflect
the way in which the Group now manages its operations with Vantage Towers now reported as a new segment within the Vodafone Gro
up’s
financial results. This change in reporting structure has taken effect for the year ended 31 March 2022 onwards. Total revenue
is unaffected as
charges from Vantage Towers to operating companies are eliminated
on consolidation. There has been
no change to the segmental
presentation of amounts derived from the income statement for comparative periods, which remain as previously disclosed. Segmen
tal
information for the years ended 31 March 2021 and 31 March 2020
is presented on the previous ba
sis of segmental reporting.
Revenue is
attributed to a country based on the loc
ation of the Group company reporting the
revenue. Transactions between operating
segments are charged at arm’s-length prices.
With the exception of Vodacom, which is a legal entity encompassing South Africa and certain other smaller African markets, and
Vantage
Towers, which comprises companies providing mobile tower infrastruc
ture in a number of European markets, segment information is
primarily
provided on the basis of geographic areas, being the basis on which the Group manages its worldwide interests.
The operating segments for Germany, Italy, UK, Spain, Vodacom and Vantage Towers are individually material for the Group and ar
e each
reporting segments for which certain financial information is pr
ovided. The aggregation of smaller operating segments into the
Other Europe
and Other Markets reporting segments reflects, in the opinion of
management, the similar local market economic characteristics
and regulatory
environments for each of those operating segments as well as the
similar products and services sold and comparable classes of c
ustomers. In
the case of the Other Europe region (comprising Albania, Czech Republic, Greece, Hungary, Ireland, Portugal and Romania), this
largely reflects
membership or a close association with the European Union, while the Other Markets segment
(comprising Egypt, Ghana and Turkey) largely
includes developing economies with less stable economic or regulatory environments. Common Functions is a separate reporting se
gment and
comprises activities which are undertaken primarily in central Group entities that do not meet the criteria for aggregation wit
h other reporting
segments.
A reconciliation of adjusted EBITDAaL, the Group’s measure of segment profit, to the Group’s profit or loss before taxation for
the financial year is
shown below.
2022
2021 2020
€m
€m €m
Adjusted EBITDAaL
15,208
14,386
14,881
Restructuring costs
(346)
(356)
(695)
Interest on lease liabilities
398
374
330
Loss on disposal of owned assets
(28)
(30)
(54)
Depreciation and amortis
ation on owned assets
(9,858)
(10,187)
(10,454)
Share of results of equity ac
counted associates and joint ventures
211
342
(2,505)
Impairment losses
–
–
(1,685)
Other income
79
568
4,281
Operating profit
5,664
5,097
4,099
Non-operating expense
–
–
(3)
Investment income
254
330
248
Finance costs
(1,964)
(1,027)
(3,549)
Profit before taxation
3,954
4,400
795
Strategic report Governance
Financials
Other information142
Vodafone Group Plc
Annual Report 2022
Segmental assets
The tables below present the segmental assets
for the year ended 31 March 2022 in line with our updated segmental reporting str
ucture and
under the previous basis of segmental reporting.
Non-current Capital Right-of-use
Other additions to
Depreciation
and
31 March 2022
assets
1
additions
2
3
amortisation Impairment loss
€m €m €m €m €m €m
Germany
43,190
2,670
795
3,981–
–
Italy
10,519
840 670 255
1,929
–
UK
6,226
832 580 229
1,905–
Spain
6,433
676 422 291
1,499–
Other Europe
8,548
1,009
502
126
1,511
–
Vodacom
6,383
853 187 920
–
–
Other Markets
2,467
530
229
–
598
–
Vantage Towers
8,179
366
320
–
523
–
Common Functions
2,103
844
123
–
979
–
Group
94,048
8,620 3,828
13,845901
–
Non-current Capital Right-of-use
Other additions to
intangible assets
3
Depreciation
and
31 March 2022
assets
1
additions
2
€m €m €m €m €m €m
Germany
47,310
2,885
909
4,112–
–
Italy
10,519
840 670 255
1,929
–
UK
7,612
888 639 229
2,073–
Spain
7,066
704 478 291
1,567–
Other Europe
10,588
1,076
593
126
1,667
–
Vodacom
6,383
853 187 920
–
–
Other Markets
2,467
530
229
–
598
–
Common Functions
2,103
844
123
–
979
–
Group
94,048
8,620 3,828
13,845901
–
Notes:
1 Comprises goodwill, other intangible assets and property, plant and equipment.
2 Includes additions to property, plant and equipment (excluding right-of-use assets,), computer software and development costs
, reported within Intangible assets.
3 Includes additions to licences and sp
ectrum and customer
base acqui
sitions.
Strategic report Governance
Financials
Other information143
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
2. Revenue disaggregation and segmental analysis (continued)
Segmental assets
The tables below present the comp
arative segmental assets for the years ended 31
March 2021 and 31 March 2020 under the previou
s
segmental reporting structure.
Non-current Capital Right-of-use
Other additions to
Depreciation
and
31 March 2021
assets
1
additions
2
3
amortisation Impairment loss
€m €m €m €m €m €m
Germany
47,563
2,772 1,133 4,836
1
–
Italy
10,707
805 758 17
2,025
–
UK
7,968 2,202
822
1,138–
–
Spain
7,213
772 700
1,5799
–
Other Europe
10,369
968
1,016
431
1,727
–
Vodacom
5,839
703 174 872
–
–
Other Markets
2,988
512
247
439
666
–
Common Functions
2,145
829
140
–
194
–
Group
94,792
8,183 5,306
14,101897
–
Non-current Capital Right-of-use
Other additions to
Depreciation
and
31 March 2020
assets
1
additions
2
3
amortisation Impairment loss
€m €m €m €m €m €m
Germany
48,266
2,278 4,805
912
1,613–
Italy
11,119
697
1,645
24
1,958
–
UK
7,790
753 733
2,160–
–
Spain
7,229
761 386
1,763–
(840)
Other Europe
9,138
823
298
29
1,706
(740)
Vodacom
5,400
802 174 55 939
–
Other Markets
2,963
587
290
55
672
–
Common Functions
2,217
821
155
–
171
(105)
Group
94,122
7,522 4,593 1,776
14,174(1,685)
Notes:
1 Comprises goodwill, other intangible assets and property, plant and equipment.
2 Includes additions to property, plant and equipment (excluding right-of-use assets,), computer software and development costs
, reported within Intangible assets.
3 Includes additions to licences and sp
ectrum and customer
base acqui
sitions.
Strategic report Governance
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Vodafone Group Plc
Annual Report 2022
3. Operating profit
Detailed below are the key amounts recognised in arriving at our operating profit
2022
2021 2020
€m
€m €m
Amortisation of intang
ible assets (note 10)
4,044
4,421
4,459
Depreciation of property,
plant and equipment (note 11):
Owned assets
5,857
5,766
5,995
Leased assets
3,944
3,914
3,720
Impairment losses (note 4)
–
–
1,685
Staff costs (note 24)
5,334
5,157
5,462
Amounts related to inventory included in cost of sales
5,671
5,160
5,699
Own costs capitalised attributabl
e to the construction or acquis
ition of property, plant and
equipment
(1,092)
(995)
(902)
Gain on disposal of Indus Towers Limited
1
110
–
–
Pledge arrangements in respect of Indus Towers Limited
1
(note 29)
(15)
(429)
–
Net gain on formation of TPG Telecom
1
(note 12)
–
1,043
–
Net gain on formation of Indus Towers Limited
1
(note 12)
–
292
–
Settlement of tender offer to KDG shareholders
1
–
(204)
–
Net gain on disposal of Vodafone New Zealand
1
(1,078)
Net gain on disposal of tower infrastructure in Italy
1
(3,356)
Net gain on disposal of Vodafone Malta
1
(170)
Note:
1
Included in Other income and expense in the Consolidated income statement.
The total remuneration of the Group’s auditor, Ernst & Young LLP and other member firms of Ernst & Young Global Limited, for se
rvices
provided to the Group during the year ended 31 March 2022 is analysed below.
2022
2021
2020
Re-presented
1
€m
€m €m
Parent company
4
3
4
Subsidiaries
2
19
18
17
Subsidiaries - new accounting standards
3
–
–
1
Audit fees
4
23
21
22
Vantage Towers IPO
5
–
11
5
Audit-related
6
2
–
1
Corporate finance
7
–
–
1
Non-audit fees
2
11
7
Total fees
25
32
29
Notes:
1 Audit fees of subsidiaries for the year ended 31 March 2021 have
increased by €1 million compared to the amount previously re
ported. Similarly, Vantage Towers IPO non-audit fees have
increased by €3 million. This is to include fees agreed during the year ended 31 March 2022 but which related to the year ended
31 March 2021.
2 During the year ended 31 March 2021, audit fees of €1 millio
n were incurred for incremental financial statement audit service
s during the IPO of Vantage Towers A.G.
3 Fees for the implementation of new accounting standards, notably IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 16
‘Leases’.
4 Includes fees in connection with the interim review, preliminary announcement and controls audit required under Section 404 o
f the Sarbanes Oxley Act. In total this amounted to €1 million in
each of the years presented.
5 Fees incurred for IPO services relating
to the IPO of Vantage Towers A.G. on 18 March 2021.
6 Fees for statutory and regulatory filings during the year.
7 At the time of the Board decision to recommend Ernst & Young LLP as the statutory auditor for the
year ended 31 March 2020 in February 2019, Ernst & Young LLP were providing a range of
services to the Group. All services that were prohibited by the Fi
nancial Reporting Council (‘FRC’) or Securities and Exchange
Commission (‘SEC’) for a statutory auditor to provide ceased by 31
March 2019. All engagements that were not prohibited by the FRC or
SEC but were not in accordance with the Group’s own internal
approval policy for non-audit services, ceased early in the
financial year ended 31 March 2020 to enable a smooth transition to alternative suppliers, where required.
Strategic report Governance
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Other information145
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
4. Impairment losses
Impairment occurs when the carrying value of assets is greater than the present value of the net cash flows
they are expected to generate. We review the carrying value of assets for each country in which we operate
at least annually. For further details of our impairment review process see ‘Critical accounting judgements
and key sources of estimation uncertainty’ in note 1 ‘Basis of preparation’ to the consolidated financial
statements.
Accounting policies
Goodwill
Goodwill is not subject to amortisation but is tested for impair
ment annually or whenever there is an indication that the asset
may be impaired.
For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash
flows, known as
cash-generating units. The determination of
the Group’s cash-generating units is primar
ily based on the geographic area where t
he Group
supplies communications services and products. If cash flows from assets within one jurisdiction are largely independent of the
cash flows from
other assets in that same jurisdiction and management monitors
performance separately, multiple cash-generating units are ident
ified within
that geographic area.
If the recoverable amount of the cash-generating unit is less than the carrying amount
of the unit, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis
of the carrying
amount of each asset in the unit. Impairment losses recognise
d for goodwill are not reversible in subsequent periods.
The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the esti
mated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Management prepares formal five year plans for the Group’s cash-generating units, which are the basis for the value in use calc
ulations.
Property, plant and equipment, fi
nite lived intangible assets an
d equity accounted investments
At each reporting period date, the Group reviews the carrying amounts of its property, plant and equipment, finite lived intang
ible assets and
equity-accounted investments
to determine whether there is any indication that those assets have suffered an impairment loss.
If any such
indication exists, the recoverable amount of the asset is estima
ted in order to determine the ex
tent, if any, of the impairment
loss. Where it is not
possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-gene
rating unit to
which the asset belongs.
If the recoverable amount of an asset or cash-generating unit
is estimated to be less than its carrying amount, the carrying am
ount of the asset
or cash-generating unit is reduced to its recoverable amount an
d an impairment loss is recognised
immediately in the income sta
tement.
Where there has been a change in the estima
tes used to determine recoverable amount and an impairment loss subsequently reverse
s, the
carrying amount of the asset or cash-generat
ing unit is increased to the revised estimate of its recoverable amount, not to exc
eed the carrying
amount that would have been determined had no impairment loss b
een recognised for the asset or
cash-generating unit in prior ye
ars and an
impairment loss reversal is recognised immediately in the income statement.
Impairment losses
Following our annual impairment review, the impairment charges recognised in the consolidated income statement within operating
profit are
stated below. Further detail on the events and circumstances that led to the recognition of the impairment charges is included
below.
2022
2021 2020
Cash-generating unit Reportable segment
€m
€m €m
Spain Spain
–
–
840
Ireland
Other Europe
–
–
630
Romania
Other Europe
–
–
110
Vodafone Automotive
Common Functions
–
–
105
– –
1,685
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Vodafone Group Plc
Annual Report 2022
Goodwill
The remaining carrying value of goodwill at 31 March was as follows:
2022
2021
€m
€m
Germany
20,335 20,335
Vantage Towers Germany
2,565
2,565
Italy
2,481 2,481
Other
6,503 6,350
31,884 31,731
Key assumptions used in the value in use calculations
The key assumptions used in determining the value in use are:
Assumption How determined
Projected adjusted
EBITDAaL
Projected adjusted EBITDAaL has b
een based on past experience
adjusted for the following:
-
In Europe, mobile revenue is expe
cted to benefit from increased usage as
customers transition
to higher data
bundles, and new products and serv
ices are introduced. Fixed revenue is
expected to continue to grow as
penetration is increased
and more products and services are sold to customers;
-
Outside of Europe, revenue is
expected to continue to grow as the penetra
tion of faster data
-enabled devices
rises along with higher da
ta bundle attachment rates
, and new products and services are introduced. The
Other Markets segment is also expe
cted to benefit from increased usage
and penetration of M-Pesa in Africa;
and
-
Margins are expected to be impac
ted by negative factors such as
the cost of acquiring
and retaining
customers in increasingly comp
etitive markets and by positive factors
such as the efficiencies expected from
the implementation of
Group initiatives.
Projected capital
expenditure
The cash flow forecasts for capital
expenditure are based on
past experience and include
the ongoing capital
expenditure required to maintain our
networks, provide products a
nd services in line with customer
expectations, including of higher
data volumes and speeds,
and to meet the popula
tion coverage requirements
of certain of the Group’s licences. In
Europe, capital expenditure is required
to roll out capacity-building next
generation 5G and gigabit networks. Outside of Europ
e, capital expenditure will
be required for the continued
rollout of current and next generation mobile networks in
emerging markets. Capital expenditure includes cash
outflows for the purchase of property
, plant and equipment
and computer software.
Projected licence and
spectrum payments
To enable the continued provision of pr
oducts and services, the cash flow
forecasts for licence and spectrum
payments for each relevant cash-genera
ting unit include amounts for expe
cted renewals and
newly available
spectrum. Beyond the five year forecast period,
a long-run cost of
spectrum is assumed.
Long-term growth rate
For the purposes of the Group
’s value in use calculations, a long
Ǧ
term growth rate into perpetuity is applied
immediately at the end of the five year fore
cast period and is base
d on the lower of:
-
the nominal GDP growth ra
te forecasts for the country of operation; and
-
the long-term compound annual growth rate in adjus
ted EBITDAaL as estimated by management.
Long-term compound annual growth rates
determined by manageme
nt may be lower tha
n forecast nominal
GDP growth rates due to the following
market-specific factors: competitive
intensity levels, maturity of business,
regulatory environment or sector-
specific inflation expectations.
Pre-tax risk adjusted
discount rate
The discount rate applied to the cash
flows of each of the Group’s cash-genera
ting units is generally based on
the risk free rate for ten year bonds issued by
the government in the respecti
ve market. Where government
bond rates contain a material component of
credit risk, high-quality local corporate bond rates may be used.
These rates are adjusted for a ri
sk premium to reflect both the increased
risk of investing
in equities and the
systematic risk of the specific ca
sh-generating unit. In making th
is adjustment, inputs
required are the equity
market risk premium (that is the required r
eturn over and above a risk free rate by
an investor who is investing in
the market as a whole) and the risk adjustment, beta, applied to
reflect the risk of the
specific cash-generating
unit relative to the market as a whole.
In determining the risk ad
justed discount rate, manag
ement has applied an adjustment fo
r the systematic risk to
each of the Group’s cash-generating
companies determined using an
average of the betas
of comparable listed
telecommunications companies and, wh
ere available and appropriate, across
a specific territory. Management
has used a forward-looking equity market risk premium that takes into consid
eration both studies by
independent economists
, the long-term average equity market
risk premium and the market risk premiums
typically used by va
luations practitioners.
The risk adjusted discount ra
te is also based on typical leverage rati
os of telecommunications companies in
each cash-generating units'
respective market or region.
Strategic report Governance
Financials
Other information147
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
4. Impairment losses (continued)
Year ended 31 March 2022
The Group performs its annual impairment test for goodwill and in
definite lived intangible assets at 31 March and when there is
an indicator of
impairment of an asset. At each reporting period date judgement
is exercised by management in determining whether any internal
or external
sources of information observed are indicative that the carrying amount of any of the Group’s cash generating units is not reco
verable.
As a large owner of infrastructure and consumer of energy, the Group has exposure to climate change related risks such as energ
y cost
increases, asset damage and service disruption. The long range pl
ans used in the Group’s impairment testing include forecast en
ergy costs and
other costs that are embedded in the planning process to deliver the Group’s zero carbon targets. The long range plans also inc
lude capital
expenditure in relation to the Group’s use of durable and ener
gy efficient infrastructure and
the costs of the Group’s extensiv
e and ongoing
network maintenance programme. Furthermore, the Group will contin
ue to develop strong reactive initiatives to manage the unpred
ictable
impacts of future climate-related risks. Climate change, therefore, has not had a material impact on the outcome of the Group’s
impairment
testing and the Group will continue to refine its approach to
modelling climate-related risks and opportunities in the value in
use calculations.
As the war in Ukraine continues, it is challenging to predict the full extent and duration of its impact on the economy and the
Group’s
businesses. However, to assess a potential impact of this on the Group’s impairment testing, management prepared scenario analy
sis based on
adjustments to the long range plans for high level estimates of
market risks impacted by the war. This analysis did not indicat
e a risk of
impairment at 31 March 2022. Management will update the cash flows
and assumptions used in the Gr
oup’s impairment testing at fu
ture
reporting dates with latest best estimates.
No impairments were recognised for the Group’s cash generating units during the year to 31 March 2022.
Value in use assumptions
The table below shows key assumptions used in the value in use calculations, and separately presented cash generating units for
which the
carrying amount of goodwill is significant in comparison with the Group’s total carrying amount of goodwill:
Germany Italy
Vantage Towers
Germany Other
Pre-tax risk adjus
ted discount rate
7.4 9.3 6.1
6.2-22.5
Long-term growth rate
0.5 1.5 1.5
1.0-8.9
Projected adjusted EBITDAaL
1
(0.1) (0.2)
11.0
(5.4)-13.0
Projected capital expenditure
2
19.6-21.8 15.0-16.3 32.0-62.1 10.0-51.4
Sensitivity analysis
The estimated recoverable amounts of the Group’s operations in Ge
rmany, Italy, the UK and Spain exceed their carrying values by
€7.3 billion,
€0.4 billion, €1.3 billion and €0.1 billion respectively. However,
if the assumptions used in the impairment review were change
d to a greater
extent than as presented in the following table, the changes would, in isolation, lead to an impairment loss being recognised f
or the year ended
31 March 2022.
Germany Italy UK Spain
Pre-tax risk adjus
ted discount rate
1.4 0.3 1.3 0.1
Long-term growth rate
(1.4) (0.3) (1.5) (0.1)
Projected adjusted EBITDAaL
1
(4.1) (0.9) (3.1) (0.4)
Projected capital expenditure
2
12.6
1.8 4.3 0.5
Notes:
1 Projected Adjusted EBITDAaL is expressed as the compound an
nual growth rates in the initial five years for all cash-generatin
g units of the plans used for impairment testing. For the purposes of
this disclosure Italy’s FY22 EBITDAaL excludes the TIM settlement.
2 Projected capital expenditure, which excludes licences and spectrum, is expressed as capital expenditure as a percentage of r
evenue in the initial five years for all cash-generating units of the plans
used for impairment testing.
For the Group’s operations in Germany, Italy, the UK and Spai
n management has considered the following reasonably possible chan
ges in pre-
tax adjusted discount rate, adjusted EBITDAaL
1
and long-term growth rate assumptions, leaving all other assumptions unchanged. The
sensitivity analysis presented is prepared on the basis that the reasonably possible change in each key assumption would not ha
ve a
consequential impact on other assumptions used in the impairment
review. The associated impact on the impairment assessment is
presented
in the table overleaf.
Management has concluded that no reasonably possible or foreseeable change in projected capital expenditure
2
would cause the difference
between the carrying value and recoverable amount for any cash-generating unit to be materially
different to the base case disclosed overleaf.
Strategic report Governance
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Annual Report 2022
Germany Italy UK Spain
€
bn
€bn
€bn
€bn
Base case as at 31 March 2022
7.3 0.4 1.3 0.1
Change in pre-tax risk
adjusted discount rate
Decrease by 1pps
14.9
1.7 2.8 1.0
Increase by 1pps
1.7
(0.7)
0.3(0.6)
Change in long-term growth rate
Decrease by 1pps
1.6
(0.6)
0.4(0.5)
Increase by 1pps
15.6
1.7 2.8 0.9
Change in projected
adjusted EBITDAaL
1
Decrease by 5pps
(1.4) (1.6) (0.7) (1.1)
Increase by 5pps
17.9
2.8 3.8 1.5
Note:
1 Projected Adjusted EBITDAaL is expressed as the compound an
nual growth rates in the initial five years for all cash-generatin
g units of the plans used for impairment testing. For the purposes of
this disclosure, EBITDAaL for Italy in the year ended 31 March 2022 excludes the TIM settlement.
Year ended 31 March 2021
The disclosures below for the year ended 31 March 2021 are as previously disclosed in the 31 March 2021 Annual Report.
Following the carve-out of Vodafone’s tower infrastructure to Vantage Towers A.G. (‘Vantage Towers’) during the year in Germany
, Spain,
Portugal, Ireland, Greece, Romania, Czech Republic and Hungary an
d the acquisitions by Vantage Towers of Vodafone UK’s 50% shar
eholding in
Cornerstone Telecommunications Infrastructure Limited (‘CTIL’) an
d the remaining shareholding in the Vantage Towers Greece, man
agement
considers Vodafone’s operating companies and Vantage Tower’s operating companies in the affected geographical areas to represen
t two
cash-generating units for the purpose of impairment testing as at 31 March 2021. Vodafone’s investment in Infrastrutture Wirele
ss Italiane S.p.A.
(‘INWIT’) was also transferred to Vantage Towers during the year.
Goodwill has been allocated on a relative values basis to the Vantage Towers cash-generating units,
where applicable, as part of the tower
business carve out from Vodafone’s operations. The cash-generating units described below relate to Vodafone’s mobile and fixed
line trading
businesses, unless otherwise indicated as being part of Vantage Towers.
Value in use assumptions
The table below shows key assumptions us
ed in the value in use calculations.
Assumptions used in value in use calculation
Germany Italy Spain Ireland Romania
Vantage Towers
Germany
% % % % % %
Pre-tax risk adjus
ted discount rate
7.4
10.5
9.2
7.7
9.9
6.0
Long-term growth rate
0.5
0.5
0.5
0.5
1.0
1.5
Projected adjusted EBITDAaL
1
1.2
2.1
4.9
0.5
0.9
8.4
Projected capital expenditure
2
19.7-21.5
14.4-15.9
15.7-17.6
12.6-15.1
12.3-15.2
39.1-56.2
Notes:
1 Projected Adjusted EBITDAaL is expressed as the compound an
nual growth rates in the initial five years for all cash-generatin
g units of the plans used for impairment testing. A pro-rata adjustment
has been made to true-up 31 March 2021 Adjusted EBITDAaL to a full year where the towers business carve-out occurred during the
year.
2 Projected capital expenditure, which excludes licences and spectrum, is expressed as capital expenditure as a percentage of r
evenue in the initial five years for all cash-generating units of the plans
used for impairment testing.
Strategic report Governance
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Other information149
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
4. Impairment losses (continued)
Sensitivity analysis
The estimated recoverable amounts of the Group’s operations in Germ
any, Italy, Spain, Ireland, Romania and Vantage Towers Germa
ny exceed
their carrying values by €7.4 billion, €0.6 billion, €0.3 billion, €0.1 billion, €0.1 billion and €3.5 billion, respectively. I
f the assumptions used in the
impairment review were changed to a greater extent than as presented in the following table, the changes would, in isolation, l
ead to an
impairment loss being recognised for the year ended 31 March 2021.
Germany Italy Spain Ireland Romania
Vantage Towers
Germany
pps pps pps pps pps pps
Pre-tax risk adjus
ted discount rate
1.3
0.7
0.4
0.7
0.7
5.2
Long-term growth rate
(1.3)
(0.8)
(0.5)
(0.7)
(0.9)
(4.9)
Projected adjusted EBITDAaL
1
(4.0)
(1.5)
(1.5)
(1.6)
(1.9)
(19.3)
Projected capital expenditure
2
12.7
3.0
1.6
2.8
1.9
162.6
Management considered the following reasonably possible changes in key assumptions for projected adjusted EBITDAaL
1
and long-term
growth rate, leaving all other assumptions unchanged. Consistent
with the prior year, and due to the uncertainty of future COVI
D-19 impacts,
management’s range of reasonably possible changes in projected ad
justed EBITDAaL is plus or minus 5 percentage points (2020: +/
- 5
percentage points). The sensitivity analysis presented is prepared on the basis that the reasonably possible change in each key
assumption
would not have a consequential impact on other assumptions used
in the impairment review. The associated impact on the impairme
nt
assessment is presented in the table below.
Management believes that no reasonably possible or foreseeable
change in the pre-tax adjusted di
scount rate or projected capita
l expenditure
2
would cause the difference between the carrying value and recoverable amount for any cash-generating unit to be materially diff
erent from the
base case disclosed below.
Recoverable amount less carrying value
Germany Italy Spain Ireland Romania
Vantage Towers
Germany
€
bn
€bn
€bn
€bn
€bn
€bn
Base case as at 31 March 2021
7.4
0.6
0.3
0.1
0.1
3.5
Change in projected
adjusted EBITDAaL
1
Decrease by 5pps
(1.6)
(1.3)
(0.6)
(0.2)
(0.1)
2.4
Increase by 5pps
18.2
2.9
1.4
0.5
0.3
5.0
Change in long-term growth rate
Decrease by 1pps
1.5
(0.1)
(0.3)
–
–
2.2
Increase by 1pps
16.0
1.6
1.0
0.3
0.2
6.1
The carrying values for Vodafone UK, Portugal, Czech Republic, and
Hungary include goodwill arising from acquisitions and/or th
e purchase of
operating licences or spectrum rights. The recoverable amounts for these operating companies are also not materially greater th
an their
carrying values and accordingly are disclosed below.
If the assumptions used in the impairment review were changed to a greater extent than as presented in the following table, the
changes would,
in isolation, lead to an impairment loss being recognised in the year ended 31 March 2021.
UK Portugal Czech Republic Hungary
pps pps pps pps
Pre-tax risk adjus
ted discount rate
0.8 0.9 1.2 0.3
Long-term growth rate
(0.8) (1.0) (1.3) (0.4)
Projected adjusted EBITDAaL
1
(1.7) (2.2) (3.0) (0.7)
Projected capital expenditure
2
2.5 3.7 7.5 1.5
Notes:
1 Projected adjusted EBITDAaL is expressed as the compound annu
al growth rates in the initial five years for all cash-generatin
g units of the plans used for impairment testing. A pro-rata adjustment
has been made to true up 31 March 2021 adjusted EBITDAaL to a fu
ll year where the towers business carve-out occurred during the
year.
2 Projected capital expenditure, which excludes licences and spectrum, is expressed as capital expenditure as a percentage of r
evenue in the initial five years for all cash-generating units of the plans
used for impairment testing.
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Vodafone Group Plc
Annual Report 2022
Year ended 31 March 2020
The disclosures below for the year ended 31 March 2020 are as previously disclosed in the 31 March 2020 Annual Report.
For the year ended 31 March 2020, the Group recorded impairment
charges of €0.8 billion, €0.6 billion, €0.1 billion and €0.1 bi
llion with respect
to the Group’s investments in Spain, Ireland, Romania and Vodafone Automotive respectively. The impairment charges relate solel
y to goodwill
and are recognised in the consolidated income statement within operating profit/(loss). The recoverable amounts for Spain, Irel
and, Romania
and Vodafone Automotive are €5.6 billion, €1.2 billion, €0.9 billion and €0.0 billion respectively, and based on value in use c
alculations.
The COVID-19 outbreak developed rapidly in early 2020. Many countr
ies have required businesses to limit or suspend operations a
nd
implemented travel restrictions and quarantine measures. The measures taken to contain the virus have adversely affected econom
ic activity
and disrupted many businesses. As the outbreak continues to progress and evolve, it is extremely challenging to predict the ful
l extent and
duration of its impact on Vodafone’s businesses and the countrie
s where Vodafone operates. Based on information available as at
31 March
2020, management made additional adjustments to the five
year business plans used in the Group’s im
pairment testing in order to reflect the
estimated impact. The impairment charges recognised and discussed immediately below, were based on expected cash flows after ap
plying
these adjustments.
Challenging trading and economic conditions in Spain materialise
d in the prior financial year and management recognised an impa
irment
charge following a reduction in projected cash flows. During the year ended 31 March 2020 there was an observable repositioning
towards low-
cost brands and competitive intensity within
the multi-branded market was expected to re
main elevated in the medium term. These
factors led
to management projecting lower cash flows and recognising an impa
irment charge with respect to the Group’s investment in Spain.
The impairment charge recognised with respect to Ireland was attributable to increased competition and the aforementioned incre
ased
economic uncertainty. As a consequence, growth and ARPUs were expected to be lower. Management reflected these assumptions in
expected cash flows.
The impairment charges recognised with respect to Romania and Vodafone Automotive reflect management’s latest assessment of lik
ely
trading and economic conditions in the five year business plan.
Management’s view of the long-term potential in these markets r
emains
unchanged.
The European
Liberty Global assets acquired in July 2019 were subsumed wi
thin existing cash-generating un
its in Germany, Czech Republic,
Hungary and Romania. The primary reason for acquiring the businesses was to create a converged national provider of digital inf
rastructure in
Germany, together with creating converged communications operators in the Czech Republic, Hungary and Romania. Following the in
tegration
of the acquired businesses, management considered the cash flows within these cash-generating units to be largely interdependen
t and
monitors performance on a country-level basis.
On 31 March 2020, the Group merged its passive tower infrastructu
re in Italy with INWIT. On the date of the merger, management
monitored
performance of its operations in Italy on a country-wide basis
and considered Vodafone Italy, including its passive tower infra
structure, to be one
cash-generating unit for the purpose of impairment testing as at
31 March 2020. No impairment in relation to Vodafone Italy wou
ld be
necessary if impairment testing was performed on a post-merger basis at 31 March 2020.
Value in use assumptions
The table below shows key assumptions us
ed in the value in use calculations.
Assumptions used in value in use calculation
Germany Italy Spain Ireland Romania
Vodafone
Automotive
% % % % % %
Pre-tax risk adjus
ted discount rate
7.5
10.3
9.2
7.6
10.2
9.1
Long-term growth rate
0.5
0.5
0.5
0.5
1.0
1.9
Projected adjusted EBITDAaL
1
3.8
0.2
8.2
3.0
8.0
31.3
Projected capital expenditure
2
20.1-20.7
12.5-13.4
16.2-18.1
10.7-15.2
13.7-18.5
14.1-23.4
Notes:
1 Projected Adjusted EBITDAaL is expressed as the compound an
nual growth rates in the initial five years for all cash-generatin
g units of the plans used for impairment testing.
2 Projected capital expenditure, which excludes licences and spectrum, is expressed as capital expenditure as a percentage of r
evenue in the initial five years for all cash-generating units of the plans
used for impairment testing.
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Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
4. Impairment losses (continued)
Sensitivity analysis
The estimated recoverable amount of the Group’s operations in Ge
rmany and Italy exceed their carrying values by €6.6 billion an
d €1.8 billion
respectively. If the assumptions used in the impairment review were changed to a greater extent than as presented in the follow
ing table, the
changes would, in isolation, lead to an impairment los
s being recognised for the year ended 31 March 2020.
Change required for carrying value to
equal recoverable amount
Germany Italy
pps pps
Pre-tax risk adjus
ted discount rate
1.1
1.7
Long-term growth rate
(1.0)
(2.0)
Projected adjusted EBITDAaL
1
(3.2)
(3.1)
Projected capital expenditure
2
11.4
7.9
Management considered the following reasonably possible changes in the key adjusted EBITDAaL
1
and long-term growth rate assumptions,
leaving all other assumptions unchanged. Due to increased uncertainty following the COVID-19 outbreak, management has widened t
he range
of reasonably possible changes in the key adjusted EBITDAaL growth
rate assumption to plus or minus 5 percentage points (2019:
2 percentage
points). The sensitivity analysis presente
d is prepared on the basis that the reason
ably possible change in each key assumption
would not have
a consequential impact on other assumptions used in the impairme
nt review. The associated impact on the impairment assessment i
s
presented in the table below, with the exception of Vodafone Automotive, where no reasonably possible change in the key assumpt
ions would
materially change the impairment charge recognised.
Management believes that no reasonably possible or foreseeable change in the pre-tax adjusted discount rate or projected capita
l expenditure
2
would cause the difference between the carrying value and recoverable amount for any cash-generating unit to be materially diff
erent to the
base case disclosed below.
Recoverable amount less carrying value (prior
to recognition of impairment charges)
Germany Italy Spain Ireland Romania
€
bn
€bn
€bn
€bn
€bn
Base case as at 31 March 2020
6.6
1.8
(0.8)
(0.6)
(0.1)
Change in projected
adjusted EBITDAaL
1
Decrease by 5pps
(3.3)
(1.0)
(2.3)
(1.1)
(0.3)
Increase by 5pps
18.4
5.1
0.9
–
0.1
Change in long-
term growth rate
Decrease by 1pps
0.2
0.8
(1.5)
(0.8)
(0.2)
Increase by 1pps
15.8
3.0
–
(0.4)
–
The carrying values for Vodafone UK, Portugal, Czech Republic and
Hungary include goodwill arising
from acquisitions and/or the
purchase of
operating licences or spectrum rights. While the recoverable amounts for these operating companies are not materially greater t
han their
carrying value, each has a lower risk of giving rise to an impairment that would be material to the Group given their relative
size or the
composition of their carrying value.
If the assumptions used in the impairment review were changed to a greater extent than as presented in the following table, the
changes would,
in isolation, lead to an impairment loss being recognised in the year ended 31 March 2020.
UK Portugal Czech Republic Hungary
pps pps pps pps
Pre-tax risk adjus
ted discount rate
1.1 1.5 1.7 1.9
Long-term growth rate
(1.3) (1.6) (1.8) (2.2)
Projected adjusted EBITDAaL
1
(2.3) (3.4) (4.0) (3.9)
Projected capital expenditure
2
4.5 7.1
12.5
9.1Notes:
1 Projected adjusted EBITDAaL is expressed as the compound annu
al growth rates in the initial five years for all cash-generatin
g units of the plans used for impairment testing.
2 Projected capital expenditure, which excludes licences and spectrum, is expressed as capital expenditure as a percentage of r
evenue in the initial five years for all cash-generating units of the plans
used for impairment testing.
VodafoneZiggo
The recoverable amount for VodafoneZiggo is not materially greater than its carrying value. If adverse impacts of economic, com
petitive,
regulatory or other factors were to cause significant deterioration in the operations of VodafoneZiggo and the entity’s expecte
d future cash
flows, this may lead to an impairment loss being recognised.
Strategic report Governance
Financials
Other information152
Vodafone Group Plc
Annual Report 2022
5. Investment income and financing costs
Investment income comprises interest received from short-term investments and other receivables.
Financing costs mainly arise from interest due on bonds and commercial paper issued, bank loans and the
results of hedging transactions used to manage foreign exchange and interest rate movements.
2022
2021 2020
€m
€m €m
Investment income
Financial assets measured at amortised cost
249
306
157
Financial assets mea
sured at fair value thro
ugh profit and loss
5
24
91
254 330 248
Financing costs
Financial liabilities
measured at amortised cost
Bonds
1,546
1,722
1,580
Lease liabilities
398
374
330
Bank loa
ns and other liabilities
1
469
463
626
Interest on derivatives
(428)
(485)
(354)
Mark-to-market on derivatives
(341)
(1,070)
1,162
Financial assets mea
sured at fair value thro
ugh profit and loss
36
–
–
Foreign exchange
284
23
205
1,964 1,027 3,549
Net financing costs
1,710
697
3,301
Note:
1 Interest capitalised for the year ended 31 March 2022 was €17 million (2021: €17 million, 2020: €25 million)
Strategic report Governance
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Other information153
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
6. Taxation
This note explains how our Group tax charge arises. The deferred tax section of the note also provides
information on our expected future tax charges and se
ts out the tax assets held across the Group together
with our view on whether or not we expect to be able to make use of these in the future.
Accounting policies
Income tax expense represents the sum of the current and deferred taxes.
Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in t
he income statement
because some items of income or expense are taxable or deductible
in different years or may never be taxable or deductible. The
Group’s
liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the reporti
ng period date.
The Group recognises provisions for uncertain tax positions when the Group has a present obligation as a result of a past event
and
management judge that it is probable that there will be a futur
e outflow of economic benefits from the Group to settle the obli
gation. Uncertain
tax positions are assessed and measured on an issue by issue basis
within the jurisdictions that we operat
e either using management’s estimate
of the most likely outcome where the issues are binary, or the ex
pected value approach where the issues have a range of possibl
e outcomes.
The Group recognises interest on late paid taxes as part of financing costs, and any penalties, if applicable, as part of the i
ncome tax expense.
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carr
ying amounts of
assets and liabilities in the financial statements and the corresp
onding tax bases used in the computation of taxable profit. I
t is accounted for
using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable t
emporary differences
and deferred tax assets are recognised to the extent that it is
probable that temporary differences or taxable profits will be
available against
which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary di
fference arises from the initial recognition (other than in a
business
combination) of assets and liabilities in a transaction that a
ffects neither the taxable profit nor the accounting profit. Defe
rred tax liabilities are
not
recognised to the extent they arise from the initial recognition of non-tax deductible goodwill.
Deferred tax liabilities are recognised for taxable temporary diffe
rences arising on investments in subsidiaries and associates
, and interests in
joint arrangements, except where the Group is able to control the reversal of the temporary difference and it is probable that
the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting period date and adjusted to reflect changes in the Gro
up’s assessment
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised, based on tax
rates that have been enacted or substantively enacted by the reporting period date.
Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current t
ax liabilities and when
they either relate to income taxes levied by the same taxation
authority on either the same taxable entity or on different taxa
ble entities which
intend to settle
the current tax assets and liabilities on a net basis.
Tax is charged or credited to the income statement, except when it relates to items charged or credited to other comprehensive
income or
directly to equity, in which case the tax is recognised in other comprehensive income or in equity.
Income tax expense
2022
2021 2020
€m
€m €m
United Kingdom corporatio
n tax expense/(credit):
Current year
22
24
42
Adjustments in respect of prior years
17
3
(6)
39 27 36
Overseas current tax expense/(credit):
Current year
993
872
900
Adjustments in respect of prior years
81
(30)
80
1,074
842 980
Total current tax expense
1,113
869
1,016Deferred tax on origination and re
versal of temporary differences:
United Kingdom deferred tax
(791)
(94)
(318)
Overseas deferred tax
1,008
3,089
552
Total deferred tax expense
217
2,995
234
Total income tax expense
1,330
3,864
1,250
UK operating profits are more than offset by statutory allowances for capital investment in the UK network and systems plus ong
oing interest
costs including those arising from the €10.7 billion of spectr
um payments to the UK government in 2000, 2013 and 2018.
Strategic report Governance
Financials
Other information154
Vodafone Group Plc
Annual Report 2022
Tax charged/(credited) directly to other comprehensive income
2022
2021 2020
€m
€m €m
Current tax
–
(17)
(26)
Deferred tax
648
(1,009)
830
Total tax charged/(credited) dire
ctly to other comprehensive income
648
(1,026)
804
Tax credited directly to equity
2022
2021 2020
€m
€m €m
Deferred tax – –
(2)
Total tax credited directly to equity
–
(2)
–
Factors affecting the tax expense for the year
The table below explains the differences
between the expected tax expense,
e Group’s geographical splibeing the aggregate of th
t of
profits multiplied by the relevant local tax rates
and the Group’s total tax
expense for each year.
2022
2021 2020
€m
€m €m
(restated)*
Continuing profit before tax as shown in
the consolidated income statement
3,954
4,400
795
Aggregated expected
income tax expense
1,191
1,124
226
Impairment losses
with no tax effect
–
–
332
Disposal of Group investments
(1)
(8)
(332)
(1,113)
Effect of taxation of associates and
joint ventures, reported within profit before tax
(66)
56
728
Deferred tax charge/(cred
it) following revaluation
of investments in Luxembourg
1,455
2,120*
(348)
Previously unrecognised temporary
differences we expect to use in the future, including in
Luxembourg
(708)
(45) (14)
Previously recognised temporary d
ifferences and losses we no longer expect to use in the
future
74 699*
–
Current year temporary differences (including lo
sses) that we currently do not expect to use
116
170
352
Adjustments in respect of p
rior year tax liabilities
13
(10)
(86)
Impact of tax credits
and irrecoverable taxes
74
90
52
Deferred tax on
overseas earnings
2
–
3
Effect of current year changes in statuto
ry tax rates on defe
rred tax balances
(2)
(667)
(45)
757
Financing costs not deductible/
(taxable) for tax purposes
46
(62)
174
Revaluation of asse
ts for tax purposes
in Italy and Turkey
(357)
–
–
Expenses not deductibl
e for tax purposes
165
99
187
Income tax expense
1,330
3,864
1,250
Notes:
* During the year ended 31 March 2022, we revised the calculation
of certain impairment reversals recognised by our Luxembourg holding companies for the year ended 31 March 2021; this had
no impact on the amount of deferred tax assets recognised at that date but has changed the amount of our unrecognised deferred
tax assets by €0.7 billion (unrecognised losses of €2.8 billion)..
Further details can be found on page 158. We have adju
sted certain 31 March 2021 disclosures as denoted by an *.
1 2021 includes the tax exempt gains relating to the TPG Telecom Limited merger in Australia and Indus Towers Limited in India.
2020 relates to tax exempt disposal gains on Vodafone New
Zealand, Vodafone Malta and the merger of the Italian towers with INWIT.
2 2022 includes the increase in future UK tax rate to 25%. 2020 includes the impact of a lower corporate tax rate in Luxembourg
and the retention of the 19% corporate tax rate in the UK.
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Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
6. Taxation (continued)
Deferred tax
Analysis of movements in the net deferred
tax asset balance
during the year:
€m
1 April 2021
19,474
Foreign exchange movements
(29)
Charged to the income statement
(217)
Charged directly to OCI
(648)
Charged direc
tly to equity
–
Arising on acquisitions and disposals
(11)
31 March 2022
1
18,569
Deferred tax assets and liabilities, before offset
of balances within
countries, are as follows:
Amount Net
credited/ recognised
(expensed) Gross Gross Less deferred tax
in income deferred deferred tax amounts (liability)/
statement tax asset liability unrecognised asset
€m €m €m €m €m
Accelerated tax depreciation
672
2,589
(1,361)
(58)
1,170
Intangible assets
643
666
(1,801)
11
(1,124)
Tax losses
(1,450)
28,977
–
(10,341)
18,636
Treasury related items
(90)
616
(372)
(562)
(318)
Temporary differences rela
ting to rev
enue recognition
(9)
3
(666)
–
(663)
Temporary differences relating to leases
(3)
1,754
(1,577)
–
177
Other temporary differences
20
1,148
(379)
(78)
691
31 March 2022
1
(217)
35,753 18,569
(6,156)
(11,028)Analysed in the balance sheet, after offs
et of balances within countries, as:
€m
Deferred tax asset
19,089
Deferred tax liability
(520)
31 March 2022
1
18,569
At 31 March 2021, deferred tax assets
and liabilities, before offset of
balances within countries
, were as follows:
credited/ recognised
(expensed) Gross Gross Less deferred tax
in income deferred deferred tax amounts (liability)/
statement tax asset* liability* unrecognised* asset
€m €m €m €m €m
Accelerated tax depreciation
716
2,331
(2,034)
(9)
288
Intangible assets
336
434
(1,938)
13
(1,491)
Tax losses
(3,292)
30,490
–
(10,400)
20,090
Treasury related items
(9)
761
(37)
(392)
332
Temporary differences rela
ting to rev
enue recognition
(84)
3
(651)
–
(648)
Temporary differences relating to leases
(34)
1,758
(1,568)
–
190
Other temporary differences
(627)
1,095
(335)
(47)
713
31 March 2021
1
(2,994)
36,872
(6,563)
(10,835)
19,474
At 31 March 2021, analysed in
the balance sheet, after offset of
balances within countries, as:
Deferred tax asset
21,569
Deferred tax liability
(2,095)
31 March 2021
1
19,474
Note:
1 The Group does not discount deferred tax assets. This is in accordance with IAS 12.
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Vodafone Group Plc
Annual Report 2022
Factors affecting the tax charge in future years
The Group’s future tax charge, and effective tax rate, could be affected by several factors including; tax reform in countries
around the world,
including any arising from the OECD’s or European Commission’s wo
rk on the taxation of the digital economy and European Commiss
ion
initiatives such as the proposed tax and financial reporting di
rective or as a consequence of
state aid investigations, future
corporate acquisitions
and disposals, any restructuring of our businesses and the resolution of open tax issues (see below).
On 25 April 2019, the European Commission published its full decisi
on in relation to its investigation into the ‘group financin
g exemption’ (GFE)
in the UK’s controlled foreign company rules and whether the GFE constituted unlawful State Aid. It concluded the GFE does not
constitute
unlawful state aid when the managing of the financing activities
is outside the UK. We consider that the Group’s Luxembourg fin
ancing activities
are properly established and operate in accordance with EU and local law as well as the OECD’s transfer pricing guidelines and
on 27 May 2021
the UK tax authorities confirmed it reached the view
Vodafone was not in receipt of any state aid relating
to the GFE. The European Commission
has indicated it agrees with this conclusion
The Group is routinely subject to audit by
tax authorities in the territories in whic
h it operates. The Group considers each is
sue on its merits and,
where appropriate, holds provisions in respect of the potential ta
x liability that may arise. As at 31 March 2022, the Group h
olds provisions for
such potential liabilities of €463 million (2021: €606 million).
These provisions relate to multiple issues, across the jurisdi
ctions in which the
Group operates. The reduction during the
year is primarily a result of the closure of state tax audits in the US.
As the tax impact of a transaction can be uncertain until a conc
lusion is reached with the relevant tax authority or through a
legal process, the
amount ultimately paid may differ materially from the amount
accrued and could therefore affect the Group's overall profitabili
ty and cash
flows in future periods. See Note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated financial statements.
At 31 March 2022, the gross amount and expiry dates of losses available for carry forward are as follows:
Expiring Expiring
within beyond
5 years 6 years Unlimited Total
€m €m €m €m
Losses for which a deferred
tax asset is recognised
19
259
79,848
80,126
Losses for which no
deferred tax is recognised
334
13,162
23,928
37,424
353
13,421
103,776 117,550
At 31 March 2021, the gross
amount and expiry dates
of losses available for ca
rry forward w
ere as follows:
Losses for which a deferred
tax asset is recognised
63
222
86,623
86,908
Losses for which no
deferred tax is recognised
245
13,217
26,290
39,752
308
13,439
112,913 126,660
Deferred tax assets on losses in Luxembourg
Included in the table above are losses of €65,348 million (2021:
€72,552 million*) that have arisen in Luxembourg companies. A
deferred tax
asset of €16,298 million (2021: €17,394 million) has been recognised in respect of these losses, as we conclude it is probable
that the
Luxembourg entities will continue to generate taxable profits in the future against which we can utilise these losses. These ta
x losses principally
arose from historical impairments, primarily following the acquisition of the Mannesmann Group in 2000. These losses arose prio
r to the 2017
tax reform in Luxembourg and are available to carry forward indefinitely.
The Luxembourg companies hold investments in
the Group’s operating companies which are assessed for impairment for local GAAP f
inancial
statements using the Group’s recoverable value calculations (see Note 4 ‘Impairment losses’). The recognition or reversal of im
pairments is
recorded in the local GAAP financial statements and therefore the carrying values and valuation methodology differs from the go
odwill
assessment for the Group’s consolidated financial statements. This
assessment can give rise to tax deductible impairments or ta
xable reversals
of previous impairments.
Following the 2017 tax reform in Luxembourg,
tax losses expire after 17 years and are only used
after any pre-existing losses. In the year ended
31 March 2020 the Luxembourg companies had tax deductible impair
ments resulting in additional tax losses. No deferred tax asset
is
recognised for these losses on the basis that
they are not forecast to be used prior to
the expiry of their 17 year life. In a
period where pre-
existing tax losses are not utilised due to impairments arisin
g the forecast utilisation timeframe extends by one year.
The reversal of impairments can result in
a significant reduction to our deferred tax assets and the period over which these as
sets can be
utilised. In the year ended 31 March 2022 a reversal of previous impairments of €6 billion (2021: €9 billion* - previously €12
billion) has arisen in
Luxembourg. This represents taxable income against which the
brought forward losses can be used. This is the main driver of t
he reduction in
the losses, and the associated deferred tax asset, compared to the prior period.
The Luxembourg companies’ recurring profits are derived from the Group’s internal financing, centralised procurement, and inter
national
roaming activities. These activities have consistently generated taxable
profits of over €1bn per annum throughout their existence. The Group
has reviewed the latest 5 year forecasts for the Luxembourg compan
ies, including their ability to continue to generate income b
eyond this
period. The forecasts consider the impact of the current market conditions on the existing financing activities, including the
current view of
interest rates, levels of intragroup financing, as well as the future profits generated from the procurement and roaming activi
ties. The valuations
take into account all information at the balance sheet date and the Group does not forecast potential future impairments or rev
ersals of
impairments.
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Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
6. Taxation (continued)
This assessment also included a review of the commercial struc
tures supporting the profits generated from these activities and
considered the
factors, under the Group’s control, which could impact the ability of these activities to generate taxable profits. We have ass
essed that the
current structure continues to be sustainable under the tax laws
substantively enacted at the balance sheet date and the Group’
s intentions to
keep these activities in Luxembourg remains unchanged.
Based on the current forecasts, €3,546 million (2021: €2,881 milli
on) of the deferred tax asset is forecast to be used within t
he next 10 years,
and €6,953 million (2021: €4,891 million) used within 20 years. The losses are projected to be fully utilised over the next 45
to 48 years. The
decrease in the recovery period over the prior year is principally
a result of higher interest rates, driving margins up on exi
sting financing
activities combined with the reversal of pr
eviously tax deductible impairments. These same factors also meant the Group recogni
sed €699m of
previously unrecognised deferred tax asset as the latest forecas
t show these losses will be used within 60 years. The Group pre
viously did not
recognise the asset as the losses were forecast to
be used beyond 60 years.
An increase or decrease in the forecast income in Luxembourg in each year of 5%-10% would change the period over which the loss
es will be
fully utilised by 2 to 5 years. The Group uses a change in forecas
t income to understand the impact that a change in interest r
ates or level of
debt advanced by the Luxembourg companies could have on the recovery period of the losses.
Any future changes in tax law, including thos
e driven by OECD, EU or domestic tax reforms or the structure of the Group could h
ave a significant
effect on the use of the Luxembourg losses, including the period
over which these losses can be utilised. The Group has reviewe
d the OECD
model rules and supporting commentary and does not anticipate a si
gnificant impact on its ability to continue to use our losses in Luxembourg.
On the basis that future changes in tax laws are unknown, th
e profit forecasts assume that existing tax laws continue.
Based on the above factors the Group concludes that it is probab
le that the Luxembourg companies will continue to generate taxa
ble profits in
the future against which it will
use these losses. In addition to the above, €13,298 million (2021; €12,975 million) of the Group’s Luxembourg
losses expire after 12-17 years and no deferred tax asset is recognised as they will expire before we can use these losses. Th
e remaining losses
do not expire. We also have €9,136 million (2021: €9,136 million) of Luxembourg losses in a former Cable & Wireless Worldwide G
roup
company, for which no deferred tax asset has been recognised as it is uncertain whether these losses will be utilised.
Deferred tax assets on losses in Germany
The Group has tax losses of €13,955 million (2021: €16,296 million
) in Germany arising on the write down of investments in Germ
any in 2000.
The losses are available to use against both German federal and trade tax liabilities and they do not expire. A deferred tax as
set of €2,170 million
(2021: €2,529 million) has been recognised in respect of these losses as we conclude it is probable that the German business wi
ll continue to
generate taxable profits in the future against which we can util
ise these losses. The Group has reviewed the latest forecasts
for the German
business which incorporate the unsystematic risks of
operating in the telecommunications business (see page 146). In the period beyond the 5
year forecast we have reviewed the profits inherent in the terminal period and based on these and our expectations for the Germ
an business we
believe it is probable the German losses will be fully utilised.
Based on the current forecasts the losses will be fully utilis
ed over the next 4 to 8
years. This period has decreased compared to the prior year as a result of restructuring the German businesses. A 5%-10% chang
e in the
forecast profits of the German business would alter the utilisation period by 1 year.
Deferred tax assets on losses in Spain
The Group has tax losses of €4,627 million (2021: €4,334 million) which are available to offset against the future profits of t
he Grupo Corporativo
ONO business. The losses do not expire, and no deferred tax asset is recognised for these losses due to the trading environmen
t in Spain.
Deferred tax assets in Italy
The Group has a recognised deferred tax asset of €411 million (2021: €162 million), including €71 million (2021: €27 million) r
elating to tax
losses in Italy. The deferred tax asset increased in the year
following a revaluation of the Italian business’s assets for tax
purposes. The Italian
business has historically been profitable and is forecasted to return to profitability, absent the impacts from the revaluation
of assets, in the short
term.
Other tax losses
The Group has losses amounting to €8,444 million (2021: €8,285 million) in respect of UK subsidiaries which are only available
for offset against
future capital gains and since it is uncertain whether these losses will be utilised, no deferred tax asset has been recognised
, as in the prior year.
The remaining losses relate to a number of other jurisdictions
across the Group. There are also €2,365 million (2021: €2,092 million) of
unrecognised temporary differences relating to treasury items and other items.
Impact of climate risks
The recovery of the Group’s deferred tax assets is dependent on its forecasts of future profitability and the climate related r
isks identified on
page 148 have been considered in the Group’s assessment of the recovery of those assets. The Group does not expect the climate
related risks
to have an impact on the ability of Luxembourg to continue to provide the internal financing, procurement, and roaming activiti
es to other
members of the Group.
Unremitted earnings
No deferred tax liability has been recognised in respect of a fu
rther €8,599 million (2021: €7,522 million) of unremitted earni
ngs of subsidiaries
because the Group is in a position to control the timing of the
reversal of the temporary difference, and it is probable that s
uch differences will
not reverse in the foreseeable future. It is not practicable to estimate the amount of unrecognised deferred tax liabilities i
n respect of these
unremitted earnings.
Strategic report Governance
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Other information158
Vodafone Group Plc
Annual Report 2022
7. Discontinued operations and assets held for sale
The Group classifies certain of its assets that it expects to dispose as either discontinued operations or as
held for sale.
The Group classifies non-current assets and assets and liabilities within disposal groups (‘assets’) as held for sale if the as
sets are available
immediately for sale in their present condition, management is comm
itted to a plan to sell the assets under usual terms, it is
highly probable
that their carrying amounts will be recovered principally through a sale transaction rather than through continuing use and the
sale is expected
to be completed within one year from the date of the initial classification.
Assets and liabilities classified as held for sale are presented separately as current items in the consolidated statement of f
inancial position and
are measured at the lower of their carrying amount and fair value less costs to sell. Property, plant and equipment and intangi
ble assets are not
depreciated or amortised once classified as held for sale; this also applies in respect of assets held by equity accounted asso
ciates and joint
ventures.
Where operations constitute a separately reportable segment (see
note 2 ‘Revenue disaggregation and segmental analysis’) and ha
ve been
disposed of, or are
classified as held for sale, the Group classifies such operations as discontinued.
Discontinued operations are excluded from
the results of continuing operations and are presented as a single amount as profit o
r loss after tax
from discontinued operations in the Group consolidated income statement. Discontinued operations are also excluded from segment
reporting.
All other notes to the financial statements include amounts
for continuing operations, unless indicated otherwise.
Discontinued operations
The Group did not have any discontinued operations in the year
ended 31 March 2022 or the comparative years ended 31 March 2021
and 31
March 2020.
Assets held for sale
Assets held for sale at 31 March 2022 comprise the Group’s 21.0%
interest in Indus Towers (2021: 28.1%). The Group’s interest i
n Indus Towers
has been provided as security against both certain bank borrowing
s (see note 21 ‘Borrowings’) and partly to the pledges provide
d to the new
Indus Towers entity under the terms of the
merger between erstwhile Indus Towers and Bharti Infratel (see note 29 ‘Contingent l
iabilities and
legal proceedings’).
The relevant assets are detailed in the table below.
2022
2021
€m
€m
Non-current assets
Investments in associates and joint ventures
959
1,257
Assets held for sale
959
1,257
Strategic report Governance
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Other information159
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
8. Earnings per share
Basic earnings per share is the amount of profit generated for the financial year attributable to equity
shareholders divided by the weighted average number of shares in issue during the year.
2022
2021 2020
Millions
Millions Millions
Weighted average number of share
s for basic earnings per share
29,012
29,592
29,422
Effect of dilutive potential shares:
restricted shares and share options
97
91
–
Weighted average number of shares
for diluted earnin
gs per share
29,109
29,683
29,422
2022
2021
2020
€m
€m
€m
Profit/(loss) for earnings per sha
re from continuing operations
2,088
112
(920)
Profit/(loss) for basic and
diluted earnings per share
2,088
112
(920)
eurocents
eurocents eurocents
Basic earnings/(loss) per sha
re from continuing operations
7.20c 0.38c
(3.13)c
Basic earnings/(loss) per share
7.20c
0.38c
(3.13)c
eurocents
eurocents eurocents
Diluted earnings/(loss) per share from continuing operations
7.17c
0.38c
(3.13)c
Diluted earnings/(loss) per share
7.17c
0.38c
(3.13)c
9. Equity dividends
Dividends are one type of shareholder return, historically paid to our shareholders in February and August.
2022
2021 2020
€m
€m €m
Declared during the financial year
Final dividend for the year ended 31
March 2021: 4.50
eurocents per share
1,254 1,205 1,112
(2020: 4.50 eurocents per share, 2019: 4.16 eurocents per share)
Interim dividend for the year ended 31
March 2022: 4.50 eurocents per share
1,229 1,207 1,205
(2021: 4.50 eurocents per share,
2020: 4.50 eurocents per share)
2,483 2,412 2,317
Proposed after the end of the year
and not recognised as a liability
Final dividend for the year ended 31
March 2022: 4.50 eurocents per share
1,265 1,260 1,205
(2021: 4.50 eurocents per share,
2020: 4.50 eurocents per share)
Strategic report Governance
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Other information160
Vodafone Group Plc
Annual Report 2022
10. Intangible assets
The statement of financial position contains significant intangible assets, mainly in relation to goodwill and
licences and spectrum. Goodwill, which arises when we acquire a business and pay a higher amount than
the fair value of its net assets primarily due to the synergies we expect to create, is not amortised but is
subject to annual impairment reviews. Licences and sp
ectrum are amortised over the life of the licence. For
further details see ‘Critical accounting judgements and key sources of estimation uncertainty’ in note 1
‘Basis of preparation ‘ to the consolidated financial statements.
Accounting policies
Identifiable intangible assets are recognised
when the Group controls the asset, it is probable that future economic benefits a
ttributed to the
asset will flow to the Group and the cost of the asset can be reliably measured. Identifiable intangible assets are recognised at fair value when
the Group completes a business combination. The determination of
the fair values of the separately identified intangibles, is b
ased, to a
considerable extent, on management’s judgement.
Goodwill
Goodwill arising on the acquisition of an entity represents the
excess of the cost of acquisition over the Group’s interest in
the net fair value of
the identifiable assets, liabilities and
contingent liabilities of the entity recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is su
bsequently measured at cost le
ss any accumulated impairment losse
s. Goodwill is
not subject to amortisation but is tested for impairment annua
lly or whenever there is evidence that it may be impaired. Goodwi
ll is
denominated in the currency of the acquired
entity and revalued to the closing exchange rate at each reporting period date.
Negative goodwill arising on an acquisition is
recognised directly in the income statement.
On disposal of a subsidiary or a joint arrangement, the attributable amount of goodwill is included in the determination of the
profit or loss
recognised in the income statement on disposal.
Finite lived intangible assets
Intangible assets with finite lives are stated at acquisition or development cost, less accumulated amortisation. The amortisat
ion period and
method is reviewed at least annually. Changes in the expected us
eful life or the expected pattern of consumption of future econ
omic benefits
embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as chang
es in
accounting estimates.
Licence and spectrum fees
Amortisation periods for licence and spectrum fees
are determined primarily by reference to the unexpired licence period, the conditions for
licence renewal and whether licences are dependent on specific technologies. Amortisation is charged to the income statement on
a straight-
line basis over the estimated useful lives from the commencement of related network services.
Computer software
Computer software comprises software purchased from third parties
as well as the cost of internally developed software. Compute
r software
licences are capitalised on the basis of the costs incurred to
acquire and bring into use the sp
ecific software. Costs that are directly associated
with the production of identifiable and unique software products
controlled by the Group, and are probable of producing future
economic
benefits, are recognised as intangible assets. Direct costs of software development include employee costs and directly attribu
table overheads.
Software integral to an item of hardware equipment is classified as property, plant and equipment.
Costs associated with maintaining soft
ware programs are recognised as an expense when they are incurred.
Amortisation is charged to the income statement on a straight-l
ine basis over the estimated useful life from the date the softw
are is available for
use.
Other intangible assets
Other intangible assets, including
brands and customer bases, are
recorded at fair value at the date of acquisition. Amortisation is charged to the
income statement, over the estimated useful lives of intangible assets from the date they are available for use, on a straight-
line basis. The
amortisation basis adopted for each class of intangible asset reflects the Group’s consumption of the economic benefit from tha
t asset.
Estimated useful lives
The estimated useful lives of finite lived intangible assets are as follows:
– Licence and spectrum fees
3 - 40 years
– Computer software
3 - 5 years
– Brands
1 - 10 years
– Customer bases
2 - 32 years
Strategic report Governance
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Other information161
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
10. Intangible assets (continued)
1
software bases Other Total
Cost
1 April 2020
99,170
32,691
16,768
11,964
453
161,046
Exchange movements
107
234
43
144
11
539
Arising on acquisition
87
–
–
200
–
287
Additions
–
896
2,462 3,367
1
8
Disposals
–
(293)
(1,651) (1) (2) (1,947)
Other
–
–
211
–
(4)
20731 March 2021
99,364
33,528
17,833
12,308
466
163,499
Exchange movements
(21)
(148)
(60)
80
1
(148)
Arising on acquisition
(10)
–
–
54
–
44
Additions
–
901
2,727 3,635
–
7
Disposals
–
(356)
(2,823) (1) (3,180)
–
Other
–
1
36
–
(10)
2731 March 2022
99,333
33,926
17,713
12,442
463
163,877
Accumulated impairment losses and
amortisation
1 April 2020
67,792
20,360
11,737
6,705
443
107,037
Exchange movements
(159)
255
3
131
11
241
Amortisation charge for the year
–
1,721
2,210
488
2
4,421
Disposals
–
(293)
(1,643) (1) (1,937)
–
Other
–
–
189
–
(1)
18831 March 2021
67,633
22,043
12,496
7,324
454
109,950
Exchange movements
(184)
(35)
(72)
70
1
(220)
Amortisation charge for the year
–
1,306
2,225
509
4
4,044
Disposals
–
(351)
(2,821) (1) (3,173)
–
Other
–
–
39
–
(7)
3231 March 2022
67,449
22,963
11,867
7,903
451
110,633
Net book value
31 March 2021
31,731
11,485
5,337
4,984
12
53,549
31 March 2022
31,884
10,963
5,846
4,539
12
53,244
Note:
1 Includes €229 million in relation to licences and spectrum issued in the UK, which was settled from a deposit made in the y
ear ended 31 March 2021 as part of the auction process. The
consolidated statement of cash flows for the year ended 31 March 2022 includes a return of €167 million in relation to the port
ion of the deposit refunded.
For licences and spectrum fees and other intangible assets, amortisation is included within the cost of sales line within the c
onsolidated income
statement. Included in the net book value of computer software are assets in the course of construction, which are not deprecia
ted, with a cost
of €1,955m (2021: €1,541m).
The net book value and expiry dates of the most significant licences are as follows:
2022
2021
€m
€m
Germany
2025/2033/2040
3,270 3,564
Italy
2029/2037
3,415
3,429
UK
2023/2033/2038/2041
1,209 1,383
Spain
2028/2030/2031/2038/2041
809 567
The remaining amortisation period for each of the licences in
the table above corresponds to the expiry date of the respective
licence. A
summary of the Group’s most significant spectrum licences can be found on page 247.
Strategic report Governance
Financials
Other information162
Vodafone Group Plc
Annual Report 2022
11. Property, plant and equipment
The Group makes significant investments in network equipment and infrastructure – the base stations and
technology required to operate our networks – that form the majority of our tangible assets. All assets are
depreciated over their useful economic lives. For furthe
r details on the estimation of useful economic lives,
see ‘Critical accounting judgements and key sources of estimation uncertainty’ in note 1 ‘Basis of
preparation ‘to the consolidated financial statements.
Accounting policies
Land and buildings held for use are stated in the statement of financial position at their cost, less any accumulated depreciat
ion and any
accumulated impairment losses.
Amounts for equipment, fixtures and fittings, which includes network infrastructure assets are stated at cost less accumulated
depreciation and
any accumulated impairment losses.
Assets in the course of construction are carried at cost, less
any recognised impairment losses. Depreciation of these assets c
ommences when
the assets are ready for their intended use.
The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and in
stallation.
Depreciation is charged so as to write off the cost of assets,
other than land, using the straight-line method, over their esti
mated useful lives, as
follows:
Land and buildings
– Freehold buildings
25 - 50 years
– Leasehold premises
the term of the lease
Equipment, fixtures and fittings
– Network infrastructure and other
1 - 35 years
Depreciation is not provided on freehold land.
Right-of-use assets arising from the Group’s lease arrangements
are depreciated over their reasonably certain lease term, as de
termined under
the Group’s leases policy (see note 20 ‘Leases’ and ‘Critical accounting judgements and key sources of estimation uncertainty’
in note 1 for
details).
The gain or loss arising on the disposal, retirement or granting of a finance lease on an item of property, plant and equipment
is determined as
the difference between any proceeds from sale or receivables arising on a lease and the carrying amount of the asset and is rec
ognised in the
income statement.
Strategic report Governance
Financials
Other information163
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
11. Property, plant and equipment (continued)
Cost
1 April 2020
2,261
72,305
74,566
Exchan
g
e movements
25
188
213
Arisin
g
on ac
q
uisition
74 19 93
Additions
47
5,666
5,713
Dis
p
osals
(100)
(2,512) (2,612)
Other
8
308 316
31 March 2021
2,315
75,974
78,289
Exchan
g
e movements
1
(265)
(264)
Arisin
g
on ac
q
uisition
(74)
44
(30)Additions
41
5,845
5,886
Dis
p
osals
(200)
(2,280) (2,480)
Other
263 265
2
31 March 2022
2,346
79,320
81,666
Accumulated depreciation and impairment
1 April 2020
1,269
44,933
46,202
Exchan
g
e movements
8
114
122
Char
g
e for the
y
ear
39
5,727
5,766
Dis
p
osals
(97)
(2,448) (2,545)
Other
(3)
77 74
31 March 2021
1,216
48,403
49,619
Exchan
g
e movements
3
(171)
(168)
Char
g
e for the
y
ear
117
5,740 5,857
Dis
p
osals
(191)
(2,240) (2,431)
Other
224
(223)
1
31 March 2022
1,369
51,509
52,878
Net book value
31 March 2021
1,099
27,571
28,670
31 March 2022
977
27,811
28,788
Included in the net book value of land and buildings and equipment, fixtures and fittings are assets in the course of construct
ion, which are not
depreciated, with a cost of €12 million (2021: €15 million) and €2,353 million (2021: €2,243 million) respectively. Also includ
ed in the book
value of equipment, fixtures and fittings are assets leased out
by the Group under operating leases, with a cost of €2,998 mill
ion (2021: €2,930
million), accumulated depreciation of €2,050 million (2021: €1,828 million) and net book value of €948 million (2021: €1,102 mi
llion).
Right-of-use assets arising from the Group’s lease arrangements are recorded within property, plant and equipment:
2022
2021
€m
€m
Pro
p
ert
y
,
p
lant and e
q
ui
p
ment (owned assets)
28,788 28,670
Ri
g
ht-of-use assets
1
12,016
12,573
31 March
40,804 41,243
Note:
1 Additions of €3,828 million (2021: €5,306 million) and a depr
eciation charge of €3,944 million (2021: €3,914 million) were
recorded in respect of right-of-use assets during the year to 31 March
2022.
Strategic report Governance
Financials
Other information164
Vodafone Group Plc
Annual Report 2022
12. Investments in associates and joint arrangements
The Group holds interests in associates in Kenya and in In
dia, where we have significant influence, as well as
in a number of joint arrangements in the UK, Italy,
the Netherlands, India and Australia, where we share
control with one or more third parties. For further details see ‘Critical accounting judgements and key
sources of estimation uncertainty’ in note 1 ‘Basis of preparation ‘to the consolidated financial statements.
Accounting policies
Interests in joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is sub
ject to joint
control; that is, when the relevant activities that significan
tly affect the investee’s returns require the unanimous consent o
f the parties sharing
control. Joint arrangements are either
joint operations or joint ventures.
Gains or losses resulting from the contribution or sale of a subs
idiary as part of the formation of a joint arrangement are rec
ognised in respect of
the Group’s entire equity holding in the subsidiary.
Joint operations
A joint operation is a joint arrangement wher
eby the parties that have joint control have the rights to the assets, and obligat
ions for the liabilities,
relating to the arrangement or that other facts and circumstances indicate
that this is the case. The Group’s share of assets, liabilities, revenue,
expenses and cash flows are combined with the equivalent items in the financial statements on a line-by-line basis.
Any goodwill arising on the acquisition of the Group’s interest
in a joint operation is accounted for in accordance with the Gr
oup’s accounting
policy for goodwill arising on the acquisition of a subsidiary.
Joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control have the rights to the net assets of the arr
angement.
At the date of acquisition, any excess of the cost of acquisit
ion over the Group’s share of the net fair value of the identifia
ble assets, liabilities and
contingent liabilities of the joint venture is recognised as good
will. The goodwill is included within the carrying amount of t
he investment.
The results and assets and liabilities of joint ventures, other th
an those joint ventures or part thereof that are held for sale (see note 7
‘Discontinued operations and assets and liabilities held for sale’), are incorporated in the consolidated financial statements
using the equity
method of accounting. Under the equity method, in
vestments in joint ventures are carried in the
consolidated statement of financial position at
cost adjusted for post-acquisition changes in
the Group’s share of the net assets of
the joint venture, less any impairment in
the value of the
investment. The Group’s share of post-tax profits or losses are re
cognised in the consolidated income statement. Losses of a jo
int venture in
excess of the Group’s interest in that joint venture are recognise
d only to the extent that the Group has incurred legal or con
structive obligations
or made payments on behalf of the joint venture.
Associates
An associate is an entity over which the Group has significant in
fluence and that is neither a subsidiary nor an interest in a
joint arrangement.
Significant influence is the power to participate in the financia
l and operating policy decisions of the investee but where the
Group does not
have control or joint control over those policies.
At the date of acquisition, any excess of the cost of acquisit
ion over the Group’s share of the
net fair value of the identifia
ble assets, liabilities
and contingent liabilities of the associate is recognised as goodwill. The goodwill is included within the carrying amount of t
he investment.
The results and assets
and liabilities of associates are incorporated in the consoli
dated financial statements using the same equity method of
accounting used for joint ventures, described above.
Joint operations
The Company’s principal joint operation has share capital consisti
ng solely of ordinary shares and is indirectly held, and prin
cipally operates in
the UK. The financial and operating activities of the operation are jointly controlled by the participating shareholders and ar
e primarily designed
for all but an insignificant amount of the o
utput to be consumed by the shareholders.
Country of
incorporation or
registration
Percentage
shareholding
1
Percentage
shareholding
1
Name of joint operation
Principal activity 2022 2021
Cornerstone Telecommunications Infrastructure Limited
Network infrastructure
UK
50.0
50.0
Note:
1 Effective ownership percentages of Vodafone Group
Plc rounded to the nearest tenth of one percent.
Strategic report Governance
Financials
Other information165
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
12. Investments in associates and joint arrangements (continued)
Joint ventures and associates
2022
2021
€m
€m
Investments in
j
oint ventures
3,781 4,249
Investments in associates
487 421
31 March
4,268 4,670
Joint ventures
The financial and operating activities of the Group’s joint ventures are jointly controlled by the participating shareholders.
The participating
shareholders have rights to the net assets of the joint ventur
es through their equity shareholdings. Unless otherwise stated, t
he Company’s
principal joint ventures all have share capital consisting solely of ordinary shares and are all indirectly held. The country o
f incorporation or
registration of all joint ventures is also their principal place of operation.
Country of
incorporation or
registration
Percentage
shareholdings
1
Percentage
shareholdings
1
Name of joint venture
Principal activity 2022 2021
Infrastructture Wireless Italiane (INWIT) S.
p
.A.
2
Network infrastructure
Ital
y
33.2
33.2
VodafoneZi
gg
o Grou
p
Holdin
g
B.V.
Network o
p
erator
Netherlands
50.0 50.0
TPG Telecom Limited
3
Network o
p
erator
Australia
25.1 25.1
Vodafone Idea Limited
4
Network o
p
erator
India
47.6 44.4
Notes:
1 Effective ownership percentages of Vodafone Group
Plc rounded to the nearest tenth of one percent.
2 At 31 March 2022 the fair value of the Group’s interest in
INWIT S.p.A. was €3,238 million (2021: €3
,026 million) based on the quoted share price on the Milan Stock Exchange.
3 At 31 March 2022 the fair value of the Group’s interest in TP
G Telecom Limited was AUD 2,818 million (€1,902 million) (2021:
AUD 2,948 million (€1,911 million)) based on the quoted share price
on ASX.
4 At 31 March 2022 the fair value of the Group’s interest in Vodafone Idea Limited was INR 148 billion (€1,750 million) (2021:
INR 118 billion (€1,373 million)) based on the quoted share price on
the National Stock Exchange of India.
Vodafone Idea Limited
The Group’s carrying value in Vodafone Idea Limited (‘VIL’) reduce
d to €nil at 30 September 2019. The Group’s share of VIL’s lo
sses not
recognised at 31 March 2022 is €5,120 million (31 March 2021: €3,562 million). Significant uncertainties exist in relation to V
IL’s ability to
generate the cash flow it requires to settle or its ability to refinance its liabilities and guarantees as
they fall due (see note 29 ‘Contingent
liabilities and legal proceedings’).
The value of the Group’s 21.0% shareholding in Indus Towers Limite
d is, in part, dependent on the income generated by Indus Tow
ers Limited
from tower rentals to major customers, including VIL. Any inability of these major customers to pay such amounts in the future
may result in an
impairment in the carrying value (31 March 2022: €1.0 billion) of the Group’s investment in Indus Towers Limited.
TPG Telecom Limited
TPG Telecom Limited is listed on the Australian Securities Exchange (‘ASX’). Vodafone and Hutchison Telecommunications (Austral
ia) Limited
each own an economic interest of 25.05%, with the remaining 49.9% listed as free float on the ASX. The financial information pr
esented in the
tables below includes debt held within the stru
cture that holds the Group’s interest in TPG.
The following table provides aggregated financial information for the Group’s joint ventures as it relates to the amounts recog
nised in the
income statement, statement of comprehensive
income and statement of financial position.
INWIT S.p.A.
Financial information presented for INWIT S.p.A. for the years to 31 March 2022 and 31 March 2021 is based on INWIT S.p.A’s fin
ancial
results
and financial position as at 31 December 2021 and 31 December 2020, respectively, being the latest financial information availa
ble to the
Group on completing the financial statements for each year.
Investment in joint ventures
Profit/(loss) from
continuing operations
2
2022
2021
2022 2021 2020
€m
€m
€m €m €m
INWIT S.p.A.
2,851
2,920
27
3
–
VodafoneZiggo Group
Holding B.V.
822
1,190
(19)
(232)
(64)
TPG Telecom Limited
1
84
104
(5)
98
(35)
Indus Towers Limited
–
–
–
–
19
Vodafone Idea Limited
–
–
–
–
(2,546)
Other
24 35
(14) (15)
(125)
Total
3,781
4,249
(11)
(146)
(2,751)
Notes:
1 Amounts presented reflect Vodafone Hutchiso
n Australia Pty Limited results only until
the date of the merger with TPG Telecom
Limited on 26 June 2020, subsequent of which the combined
results are presented.
2 Total Other comprehensive (expense)/inco
me is not materially different to profit/(loss) from continuing operations.
Strategic report Governance
Financials
Other information166
Vodafone Group Plc
Annual Report 2022
Summarised financial information
Summarised financial information for each of the Group’s material
joint ventures on a 100% ownership basis is set out below.
Financial information presented for the year to, and as at 31 Marc
h 2021, has been updated to reflect the release of full year
financial
information by VIL. As disclosed above, the Group’s investment in
VIL was reduced to €nil in the year ended 31 March 2020 and t
he Group has
not recorded any profit or loss in respect of its share of VIL’s results since that date.
INWIT S.p.A.
VodafoneZiggo Group Holding B.V.
2022
2021 2020
2022
2021 2020
€m
€m €m
€m €m €m
Income statement
Revenue
785 562
–
4,056 4,010 3,948
Operating expenses
(70)
(46)
–
(2,104) (2,058) (2,163)
Depreciation and amortisation
(513)
(398)
–
(1,592) (1,658) (1,528)
Other income
–
–
–
– –
25
Operating profit
202
118
–
360 319 257
Interest income
–
–
–
– – –
Interest expense
(90)
(101)
–
(276) (658) (343)
Profit/(loss) before tax
112
17
–
84
(339)
(86)
Income tax expense
(30)
(7)
–
(121) (125)
(42)
Profit/(loss) from cont
inuing operations
1
82 10
–
(37)
(464) (128)
TPG Telecom Limited
Vodafone Idea Limited
2022
2021 2020
2022
2021 2020
€m
€m €m
€m €m €m
Income statement
Revenue
3,375 3,010 2,108
4,450 4,847 5,704
Operating expenses
(2,292)
(2,096)
(1,489)
(2,802) (3,133) (4,938)
Depreciation and amortisation
(914)
(769)
(508)
(2,390) (2,442) (2,426)
Other income
–
–
–
(34)
(2,135) (6,627)
Operating profit/(loss)
169
145
111
(776)
(2,863) (8,287)
Interest income
–
1
4
14 32 147
Interest expense
(122)
(201)
(256)
(2,297) (2,035) (1,740)
Profit/(loss) before tax
47
(55)
(141)
(3,059) (4,866)
(9,880)
Income tax (expense)/credit –
(27)
495
2 – –
Profit/(loss) from cont
inuing operations
1
20 440
(141)
(3,057) (4,866)
(9,880)
Note:
1 Total Other comprehensive income/(expense) is not materially
different to profit/(loss) from continuing operations.
Strategic report Governance
Financials
Other information167
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
12. Investments in associates and joint arrangements (continued)
INWIT S.p.A. VodafoneZiggo Group Holding B.V.
2022
2021
2022 2021
€m
€m
€m €m
Statement of financial position
Non-current assets
14,532
14,422
16,521 16,978
Current assets
270
256
739 911
Total assets
14,802
14,678
17,260 17,889
Equity shareholders’ funds
8,595
8,801
1,643 2,380
Non-current liabilities
5,672
5,536
13,187 13,025
Current liabilities
535
341
2,430 2,484
Cash and cash equivalents within current assets
96
120
190 330
Non-current liabilities excluding trad
e and other payabl
es and provisions
5,420
5,314
13,007 12,466
Current liabilities excluding trade and
other payables
and provisions
319
185
1,282 1,154
TPG Telecom Limited Vodafone Idea Limited
1
2022
2021
2022 2021
€m
€m
€m €m
Statement of financial position
Non-current assets
10,638
10,272
17,267 17,975
Current assets
898
679
2,693 2,648
Total assets
11,536
10,951
19,960 20,623
Equity shareholders’ funds
3,129
3,121
(10,214)
(7,457)
Non-current liabilities
7,227
6,884
23,266 20,769
Current liabilities
1,180
946
6,908 7,315
Cash and cash equivalents within current assets
435
268
365 260
Non-current liabilities excluding trad
e and other payabl
es and provisions
7,173
6,825
23,241 14,187
Current liabilities excluding trade and
other payables
and provisions
121
83
3,334 3,914
Note:
1
Includes certain amounts subject to an adjustment mechanism agreed as part of the formation of Vodafone Idea Limited. See note
29 ‘Contingent liabilities and legal proceedings’ for more detail.
The Group received dividends in the year ended 31 March 2022 from VodafoneZiggo Group Holding B.V. of €350 million (2021: €209
million,
2020: €148 million) , from INWIT S.p.A of €96 million (2021: €42 million, 2020: €nil) and from TPG Telecom Ltd of €22 million (
2021: €nil, 2020:
nil).
Strategic report Governance
Financials
Other information168
Vodafone Group Plc
Annual Report 2022
Reconciliation of summarised financial information
The reconciliation of summarised financial information presented
to the carrying amount of our interest in joint ventures is se
t out below:
INWIT S.p.A.
VodafoneZiggo Group Holding B.V.
2022
2021
2022 2020
2021 2020
€m
€m
€m €m
€m €m
Equity shareholders’ funds
8,595
8,801
1,643 2,380
Interest in joint ventures
1
2,851
2,920
822
1,190
Carrying value
2,851
2,920
822
1,190
Profit/(loss) from continuing operations
82
10
–
(37)
(464) (128)
Share of profit/(loss)
1
27
3
–
(19)
(232)
(64)Share of profit/(loss)
27
3
–
(19)
(232)
(64)TPG Telecom Limited
Vodafone Idea Limited
2022
2021
2022 2020
2021 2020
€m
€m
€m €m
€m €m
Equity shareholders’ funds/(deficit)
3,129
3,121
(10,214)
(7,457)
Interest in joint ventures
1
27
50
(4,863) (3,310)
Impairment
–
–
(257) (252)
Goodwill
57 54
– –
Investment proportion not recognised
–
–
5,120 3,562
Carrying value
84
104
– –
Profit/(loss) from continuing operations
20
440
(141)
(3,057) (4,866) (9,880)
Share of (loss)/profit
1
(5)
98
(70)
(1,357) (2,160) (4,386)
Share of loss not recognised
–
–
35
1,357 2,160 1,840
Share of (loss)/profit
1
(5)
98
(35)
– –
(2,546)
Note:
1 The Group’s effective ownership percentages of Vodafone Idea Li
mited, VodafoneZiggo Group Holding B.V., Inwit S.p.A. and TPG
Telecom Limited are 47.6%, 50.0%,
33.2% and 25.1% respectively,
rounded to the nearest tenth of one percent.
Associates
Unless otherwise stated, the Company’s principal associates all have share capital consisting solely of ordinary shares and are
all indirectly held.
The country of incorporation or registration of all associates is also their principal place of operation.
Country of Percentage Percentage
incorporation or shareholding
1
shareholding
1
Name of associate
Principal activity registration 2022 2021
Indus Towers Limited
2
Network infrastructure India 21.0 28.1
Safaricom PLC
3
Network o
p
erator Ken
y
a 40.0 40.0
Notes:
1 Effective ownership percentages of Vodafone Group
Plc rounded to the nearest tenth of one percent.
2 At 31 March 2022, the fair value of the Group’s interest in Indus Towers Limited was INR 126 billion (€1,494 million) (2021:
INR 186 billion (€2,161 million)) based on the closing quoted share price
on the National Stock Exchange of India.
3 At 31 March 2022, the fair value of the Group’s interest in Safaricom PLC was KES 546 billion (€4,270 million) (2021: KES 580
billion (€4,513 million)) based on the closing quoted share price on
the Nairobi Stock Exchange. The Group also holds two non-voting shares.
The tables below and overleaf provide aggregated financial informa
tion for the Group’s associates as it relates to the amounts
recognised in the
income statement, statement of comprehensive income
and consolidated statement of financial position.
Investment in associates Profit from continuing operations
1
2022
2021
2022
2021 2020
€m
€m
€m €m €m
Safaricom PLC
428
421
217 217 247
Indus Towers Limited
1
274
Other
59
–
5
(3) (1)
Total
487 421
222 488 246
Note:
1. Indus Towers Limited was classified as held for sale at
31 March 2022 and 31 March 2021. See note 7 'Discontinued operatio
ns and assets held for sale'.
Strategic report Governance
Financials
Other information169
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
12. Investments in associates and joint arrangements (continued)
Safaricom PLC Indus Towers Limited
2022
2021 2020
2022
2021 2020
€m
€m €m
€m
€m €m
Income statement
Revenue
2,318 2,083 2,310 3,122 2,421 2,365
Operating expenses
(1,164)
(1,030)
(1,122)
(1,480)
(1,247)
(1,336)
Depreciation and amortisation
(309)
(299)
(295)
(598)
(477)
(268)
Other income/(expense)
–
–
–
–
412
(592)
Operating profit
845
754
893
1,044
1,109
169
Interest income
9
12
26
–
61
32
Interest expense
(59)
(27)
(18)
(140)
(194)
(196)
Profit before tax
795
739
901
904
976
5
Income tax (expense)/credit
(270)
(197)
(282)
(272)
(168)
39
Profit from continuing operations and total
comprehensive income
525
542
619
632
808
44
Attributable to:
- Owners of the parent
542
542
619
632
808
44
- Non-controlling interests
(17)
–
–
–
–
–
Statement of financial position
Non-current assets
2,173
1,333
5,359 5,271
Current assets
510
438
1,685 1,198
Total assets
2,683
1,771
7,044 6,469
Equity shareholders' funds
1,066
1,045
3,774 3,083
Non-controlling interests
312
–
– –
Non-current liabilities
558
131
2,101 1,936
Current liabilities
747
595
1,169 1,450
Cash and cash equivalents within current assets
241
208
278 230
Non-current liabilities excluding trade and other
payables and provisions
465
93
1,795 1,656
Current liabilities excluding trade and other
payables and provisions
241
149
638 906
The reconciliation of summarised
financial information presented to the carrying
amount of our interest in the associate is set
out
below.
Equity shareholders' funds
1,066
1,045
3,774 3,083
Interest in associates
425
418
794 867
Goodwill
3
3
261 342
Transferred to assets held for sale
–
–
(959)
(1,257)
Investment proportion not recognised
–
–
(96)
48
Carrying value
428
421
– –
Profit from continuing operations
542
542
619
632
808
44
Share of profit
217
217
247
178
306
19
Share of profit not recognised
–
–
–
(178)
(32)
–
Share of profit
217
217 247
–
274 19
During the year ended 31 March 2022, the Group received a dividend from Indus Towers Limited of €nil (2021: €201 million, 2020:
€nil) and a
dividend from Safaricom PLC of €170 million (2021: €171 million, 2020: €261 million).
Strategic report Governance
Financials
Other information170
Vodafone Group Plc
Annual Report 2022
13. Other investments
The Group holds a number of other listed and unlisted investments, mainly comprising managed funds,
deposits and government bonds.
Accounting policies
Other investments comprising debt and equity instruments are recognised and derecognised on a trade date where a purchase or sa
le of an
investment is under a contract whose terms require delivery of
the investment within the timeframe established by the market co
ncerned, and
are initially measured at fair value, including transaction costs.
Debt securities that are held for collection of contractual cash flows where those cash flows represent solely payments of prin
cipal and interest
are measured at amortised cost using the effective interest method
, less any impairment. Debt securities that do not meet the c
riteria for
amortised cost are measured at fair value through profit and loss.
Equity securities are classified and measured at fair value through other comprehensive income, there is no subsequent reclassi
fication of fair
value gains and losses to profit or loss following derecognition of the investment.
2022
2021
€m
€m
Included within non-current assets
Equity securities
1
143 128
Debt securities
2
930 797
1,073
925
Included within current assets
Short-term investments:
Bonds and debt securities
3
1,446 1,053
Managed investment funds
1
3,349 2,954
4,795 4,007
Collateral assets
4
698
3,107
Other investments
5
2,438 2,045
7,931 9,159
Notes:
1 Items measured at a fair value, €91 million (2021: €nil) of equity securities have a valuation basis of level 1 classificatio
n, which comprises financial instruments where fair value is determined by
unadjusted quoted prices in active markets for identical assets an
d liabilities. The remaining items are measured at fair value
and the basis is level 2 classificatio
n, which comprises items where fair
value is determined from inputs other than quoted prices that ar
e observable for the asset or liability, either directly or ind
irectly.
2 Items are measured at amortised cost and have a fair value of €830 million (2021: €788 million) with a valuation basis of lev
el 1 classification.
3 Items are measured at fair value and the valuation basis is level 1 classification.
4 Items are measured at amortised cost and the carrying amount approximates fair value.
5 Includes investments measured at a fair value of €1,460 millio
n (2021: €1,057 million). The valuation basis is level 1. The r
emaining items are measured at amortised cost and the carrying amount
approximates fair value.
Non-current debt securities within non-current assets include €885 million (2021: €764 million) of loan notes issued by Vodafon
eZiggo Holding
B.V.
The Group invests surplus cash positions across a portfolio of shor
t-term investments to manage liquidity and credit risk whils
t achieving
suitable returns. Collateral arrangements on derivative financial instruments result in cash being paid/(held), repayable when
the derivatives are
settled. These assets do not meet the defini
tion of cash and cash equivalents but are
included in the Group’s net debt based on
their liquidity.
Bonds and debt securities includes €681 million (2021: €nil) of highly liquid Japanese; €nil (2021: €499 million) German; €501
million (2021:
€nil) Belgian; €200 million (2021: €554 million) French government securities and €64 million (2021: €nil) of UK government bon
ds.
Managed investment funds of €3,349 million (2021: €2,954 million) are in funds with liquidity of up to 90 days.
Collateral assets of €698 million (2021: €3,107 million) represents collateral paid on derivative financial instruments.
Other investments are excluded from net debt based on their liqu
idity and primarily consist of restricted debt securities inclu
ding amounts held
in qualifying assets by Group insurance co
mpanies to meet regulatory requirements.
Strategic report Governance
Financials
Other information171
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
14. Trade and other receivables
Trade and other receivables mainly consist of amounts owed to us by customers and amounts that we pay
to our suppliers in advance. Derivative financial instruments with a positive market value are reported within
this note as are contract assets, which represent an asset for accrued revenue in respect of goods or
services delivered to customers for which a trade receivable does not yet exist, and finance lease
receivables recognised where the Group acts as a less
or. See note 20 ‘Leases’ for more information on the
Group’s leasing activities.
Accounting policies
Trade receivables represent amounts owed by customers where the
right to receive payment is conditional only on the passage of
time. Trade receivables that are recovered in instalments from customers over
an extended period are discounted at market rates and interes
t revenue is
accreted over the expected repayment period. Other trade receivab
les do not carry any interest and are stated at their nominal
value. When the
Group establishes a practice of selling portfolios of receivables from time to time these portfolios are recorded at fair value
through other
comprehensive income; all other trade receivables are recorded at amortised cost.
The carrying value of all trade receivables, contract
assets and finance lease receivables recorded at amortised cost is reduced by allowances
for lifetime estimated credit losses. Estimated future credit los
ses are first recorded on the initial recognition of a receiva
ble and are based on
the ageing of the receivable balances, historical experience and forward looking considerations. Individual balances are writte
n off when
management deems them not to be collectible.
2022
2021
€m
€m
Included within non-current assets
Trade receivables
34 52
Trade receivables held
at fair value through
other comprehensive income
606
278
Net investment in leases
134 104
Contract assets
495 528
Contract-related costs
630 580
Other receivables
37 76
Prepayments
231 247
Derivative financial instruments
1
4,216 2,912
6,383 4,777
Included within current assets
Trade receivables
3,300 3,625
Trade receivables held
at fair value through
other comprehensive income
802
466
Net investment in leases
66 36
Contract assets
3,056 3,038
Contract-related costs
1,403 1,364
Amounts owed by assoc
iates and joint ventures
241 184
Other receivables
869 889
Prepayments
872
1,082
Derivative financial instruments
1
410 239
11,019 10,923
Note:
1 Items are measured at fair value and the valuation basis is level 2 classification, which comprises items where fair value is
determined from inputs other than quoted prices that are observable for
the asset or liability, either
directly or indirectly.
The Group’s trade receivables and contract assets are classified at amortised cost unless stated otherwise and are measured aft
er allowances
for future expected credit losses, see note
22 ‘Capital and financial risk management’ for more information on credit risk.
The carrying amounts of trade and other receivables, which are measured at amortised cost, approximate their fair value and are
predominantly
non-interest bearing.
The Group’s contract-related costs comprise €1,967 million (2021:
€1,883 million) relating to costs incurred to obtain customer
contracts and
€66 million (2021: €61 million) relating to costs incurred to fulfil customer contracts; an amortisation and impairment expense
of €1,517 million
(2021: €1,497 million) was recognised in operating profit during the year.
The fair values of the derivative financial instruments are calculated by discounting the future cash flows to net present valu
es using appropriate
market interest rates and foreign currency rates prevailing at 31 March.
Strategic report Governance
Financials
Other information172
Vodafone Group Plc
Annual Report 2022
15. Trade and other payables
Trade and other payables mainly consist of amounts ow
ed to suppliers that have been invoiced or are
accrued and contract liabilities relating to consideration received from customers in advance. They also
include taxes and social security amounts due in relati
on to the Group’s role as an employer. Derivative
financial instruments with a negative market value are reported within this note.
Accounting policies
Trade payables are not interest-bearing and are stated at their nominal value.
2022
2021
€m
€m
Included within non-
current l
iabilities
Other payables
452
424
Accruals
28
47
Contract liabilities
530
519
Derivative financial instruments
1
1,506
3,919
2,516 4,909
Included within cu
rrent liabilities
Trade payables
7,327
6,739
Amounts owed to associates and joint ventures
40
36
Other taxes and soci
al security payable
1,114
1,196
Other payables
2,032
2,349
Accruals
2
6,991
5,688
Contract liabilities
1,991
1,971
Derivative financial instruments
1
166
91
19,661 18,070
Notes:
1 Items are measured at fair value and the valuation basis is level 2 classification, which comprises items where fair value is
determined from inputs other than quoted prices that are observable for
the asset or liability, either
directly or indirectly.
2 Includes €1,434 million (2021: €339 million) payable in relation to the irrevocable and non-discretionary share buyback progr
ammes.
The carrying amounts of trade and other payables approximate their fair value.
Materially all of the €1,971 million recorded as current contract
liabilities at 1 April 2021 was recognised as revenue during
the year.
Other payables included within non-current liabilities include €3
51 million (2021: €383 million) in respect of the re-insurance
of a third party
annuity policy related to the Vodafone and CWW Sections of the Vodafone UK Group Pension Scheme.
The fair values of the derivative financial instruments are calculated by discounting the future cash flows to net present valu
es using appropriate
market interest rates and foreign currency rates prevailing at 31 March.
Strategic report Governance
Financials
Other information173
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
16. Provisions
A provision is a liability recorded in the statement of financial position, where there is uncertainty over the
timing or amount that will be paid, and is therefore often estimated. The main provisions we hold are in
relation to asset retirement obligations, which include th
e cost of returning network infrastructure sites to
their original condition at the end of the lease
and claims for legal and regulatory matters.
Accounting policies
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is pr
obable that the Group will be required
to settle that obligation and a reliable estimate can be made
of the amount of the obligation. Pr
ovisions are measured at the D
irectors’ best estimate of the
expenditure required to settle the obligation at the reporting
date and are discounted to present value where the effect is material. Where the timing of
settlement is uncertain amounts are classifie
d as non-current where settlement is expected
more than 12 months from the reporti
ng date.
Asset retirement obligations
In the course of the Group’s activities, a number of sites and ot
her assets are utilised which are expected to have costs assoc
iated
with decommissioning. The
associated cash outflows are substantially expected to occur at
the dates of decommissioning of the assets to which they relate
, and are long term in nature.
Legal and regulatory
The Group is involved in a number of legal and other disputes, including where the Group has received notifications of possible
claims. The
Directors of the Company, after taking legal advice, have established provisions considering the facts of each case. For a disc
ussion of certain
legal issues potentially affecting the Group see note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated fin
ancial statements.
Restructuring
The Group undertakes periodic reviews of
its operations and recognises
provisions as required based
on the outcomes of these re
views.
The associated cash outflows for restructuring
costs are primarily less than one year.
Other
Other comprise various items that do not fall within the Group’s other categories of provisions.
retirement Legal and
obligations regulatory Restructuring Other Total
€m €m €m €m €m
1 April 2020
955
502
545
530
2,532
Exchange movements
6
(11)
4
7
6
Acquisition of subsidiaries
6
–
–
–
6
Amounts capitalised in the year
294
–
–
–
294
Amounts charged to the income statement
–
138
153
167
458
Utilised in the year - payments
(32)
(54)
(243)
(175)
(504)
Amounts released to the income statement
(7)
(47)
(33)
(66)
(153)
31 March 2021
1,222
528
426
463
2,639
Exchange movements
3
(25)
(4)
5
(21)
Amounts capitalised in the year
297
–
–
–
297
Amounts charged to the income statement
–
216
216
139
571
Utilised in the year - payments
(51)
(128)
(295)
(197)
(671)
Amounts released to the income statement
(1)
(142)
(41)
(83)
(267)
31 March 2022
1,470
449
302
327
2,548
Strategic report Governance
Financials
Other information174
Vodafone Group Plc
Annual Report 2022
Provisions have been analysed between current and non-current as follows:
31 March 2022
Asset
retirement Legal and
obligations regulatory Restructuring Other Total
€m €m €m €m €m
Current liabilities
43
235
241
148
667
Non-current liabilities
1,427
214
61
179
1,881
1,470
449 302 327
2,54831 March 2021
retirement Legal and
obligations regulatory Restructuring Other Total
€m €m €m €m €m
Current liabilities
43
273
353
223
892
Non-current liabilities
1,179
255
73
240
1,747
1,222
528 426 463
2,63917. Called up share capital
Called up share capital is the number of shares in issue at their par value. A number of shares were allotted
during the year in relation to employee share schemes.
Accounting policies
Equity instruments issued by the Group are recorded at the amou
nt of the proceeds received, net of direct issuance costs.
2022
2021
Number €m
Number €m
Ordinary shares of 20
20
Ū
21
US cents each allotted,
issued and fully paid:
1, 2, 3
1 April
28,816,835,778
4,797
28,815,914,9784,797
Allotted during the year
792,090
–
920,800
–
31 March
28,817,627,868
4,797
28,816,835,7784,797
Notes:
1 At 31 March 2022 there were 50,000 (2021: 50,000) 7% cumulative fixed rate shares of £1 each in issue.
2 At 31 March 2022 the Group held 447,576,522
(2021: 592,642,309) treasury shares with a
nominal value of €75 million (2021: €9
9 million). The market value of shares held was €661 million
(2021: €918 million). During the year, 68,306,442 (2021: 63,830,400) tr
easury shares were reissued under Group share schemes.
3 On 5 March 2019 the Group announced the placing of subordinated mandatory convertible bonds totalling £1.72 billion with a 2
year maturity date in 2021 and £1.72 billion with a 3 year
maturity date in 2022. During the year, 1,518,629,693 treasury shares were issued in settlement of tranche 2 of the maturing su
bordinated mandatory convertible bond, whilst in the year ended
31 March 2021, 1,426,793,872 ordinary shares were
issued in settlement of tranche 1. For further details see note 21 ‘Borrowing
s’.
Strategic report Governance
Financials
Other information175
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
18. Reconciliation of net cash flow from operating activities
The table below shows how our profit/(loss) for the year from continuing operations translates into cash
flows generated from our operating activities.
2022
2021 2020
Notes
€m
€m €m
Profit/(loss) for
the financial year
2,624
536
(455)
Non-operating expense
– – 3
Investment income
5
(254) (330) (248)
Financing costs
5
1,964 1,027 3,549
Income tax expense
6
1,330 3,864 1,250
Operating profit
5,664 5,097 4,099
Adjustments for:
Share-based payments
and other non-cash charges
173 146 146
Depreciation
and amortisation
10, 11
13,845 14,101 14,174
Loss on disposal of property,
plant and equipment a
nd intangible assets
30 17 51
Share of result of equity
accounted associates and joint ventures
12
(211) (342)
2,505
Impairment losses
4
– –
1,685
Other income
3
(79)
(568)
(4,281)
(Increase)/de
crease in inventory
(162)
(68)
68
(Increase)/de
crease in trade and other receivables
14
(638)
582
(38)
Increase/(decrease) in
trade and other payables
15
384
(730) (100)
Cash generated by operations
19,006 18,235 18,309
Net tax paid
(925)
(1,020)
(930)Net cash flow from
operating activities
18,081 17,215 17,379
19. Cash and cash equivalents
The majority of the Group’s cash is held in bank deposits or money market funds which have a maturity of
three months or less from acquisition to enable us to meet our short-term liquidity requirements.
Accounting policies
Cash and cash equivalents comprise cash in hand and call depo
sits, and other short-term highly liquid investments that are read
ily convertible
to a known amount of cash and are subject to an insignificant risk of changes in value. Assets in money market funds, whose con
tractual cash
flows do not represent solely payments of interest and principal, are measured at fair value with gains and losses arising from
changes in fair
value included in net profit or loss for the period. All other cash and cash equivalents are measured at amortised cost.
2022
2021
€m
€m
Cash at bank and in hand
2,220
2,705
Money market funds
1
5,276
3,116
Cash and cash equivalents as presented
in the statement of financial position
7,496
5,821
Bank overdrafts
(125)
(31)
Cash and cash equivalents as presented in the statement of cash flows
7,371
5,790
Note:
1 Items are measured at fair value and the valuation basis is level 1 classification, which comprises financial instruments whe
re fair value is determined by unadjusted quoted prices in active markets.
The carrying amount of balances at amortised cost approximates their fair value.
Cash and cash equivalents of €1,554 million (2021: €1,741 million
) are held in countries with restrictions on remittances but w
here the balances
could be used to repay subsidiaries’ third party liabilities. In addition, those balances could also be used to repay €932 mill
ion (2021: €879
million) of intercompany liabilities as at 31 March 2022.
Strategic report Governance
Financials
Other information176
Vodafone Group Plc
Annual Report 2022
20. Leases
The Group leases assets from other parties (the Group is a lessee) and also leases assets to other parties (the
Group is a lessor). This note describes how the Group accounts for leases and provides details about its lease
arrangements.
Accounting policies
As a lessee
When the Group leases an asset, a ‘right-of-use asset’ is recognised for the leased item and a lease liability is recognised fo
r any lease payments
to be paid over the lease term at the lease commencement date. The right-of-use asset is initially measured at cost, being the
present value of
the lease payments paid or payable, plus any initial direct costs incurred in entering the lease and less any lease incentives
received.
Right-of-use assets are depreciated on a straight-line basis from
the commencement date to the earlier of the end of the asset’
s useful life or
the end of the lease term. The lease term is the non-cancellable period of the lease plus any periods for which the Group is ‘reasonably certain’
to exercise any extension options (see belo
w). The useful life of the asset is determined in a manner consistent to that for ow
ned
property, plant
and equipment (as described in note 11 ‘Property, plant and equipment’). If right-of-use assets are considered to be impaired,
the carrying value
is reduced accordingly.
Lease liabilities are initially measured at the value of the lease
payments over the lease term that are not paid at the commen
cement date and
are usually discounted using the incremental borrowing rates of th
e applicable Group entity (the rate implicit in the lease is
used if it is readily
determinable). Lease payments included in
the lease liability include both fixed paymen
ts and in-substance fixed payments durin
g the term of
the lease.
After initial recognition, the lease liability is recorded at amor
tised cost using the effective interest method. It is remeasu
red when there is a
change in future lease payments arising from
a change in an index or rate (e.g. an inflation related increase) or if the Group’
s assessment of the
lease term changes; any changes in the lease liability as a result of these changes also results in a corresponding change in t
he recorded right-
of-use asset.
As a lessor
Where the Group is a lessor, it deter
mines at inception whether the lease
is a finance or an operating lease. When a lease transfers substantially
all the risks and rewards of ownership of the underlying asset then the lease is a finance lease; otherwise the lease is an ope
rating lease.
Where the Group is an intermediate lessor,
the interests in the head lease and the sub-lease are accounted for separately and t
he lease
classification of a sub-lease is determined by reference to
the right-of-use asset arising from the head lease.
Income from operating leases is recognised on a straight-line basis over the lease term. Income from finance leases is recognis
ed at lease
commencement with interest income recognised over the lease term.
Lease income is recognised as revenue for transactions that are part of the Group’s ordinary activities (primarily leases of ha
ndsets or other
equipment to customers, leases of wholesale access to the Group’s fibre and cable networks and leases of tower infrastructure a
ssets). The
Group uses IFRS 15 principles to allocate the consideration in contracts between any lease and non-lease components.
The Group’s leasing activities as a lessee
The Group leases buildings for its retail stores, offices and data centres, land on which
to construct mobile base stations, space on mobile base
stations to place active RAN equipment and network space (primarily rack space or duct space). In addition, the Group leases fi
bre and other
fixed connectivity to provide internal connectivity for the Group’s operations and on a wholesale basis from other operators to
provide fixed
connectivity services to the Group’s customers.
The Group’s general approach to determining lease term by class of
asset is described in note 1 under critical accounting judge
ments and key
sources of estimation uncertainty.
Most of the Group’s leases include future pr
ice increases through fixed percentage increases, indexation to inflation measures
on a periodic
basis or rent review clauses. Other than fixed percentage increases the lease liability does not reflect the impact of these fu
ture increases unless
the measurement date has passed. The Group’s leases contain no material variable payments clauses other than those related to t
he number of
operators sharing space on third party mobile base stations.
The Group sub-leases excess retail and office properties under bo
th operating and finance leases; see disclosure on the Group’s
leasing activities
as a lessor below on page 179.
Strategic report Governance
Financials
Other information177
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
20. Leases (continued)
Optional lease periods
Where practicable the Group seeks
to include extension or break options in leases to provide operational flexibility, therefore
many of the
Group’s lease contracts contain optional periods. The Group’s policy on assessing and reassessing whether it is reasonably cert
ain that the
optional period will be included in the lease term is described in note 1 ‘Basis of preparation’ under ‘critical accounting jud
gements and key
sources of estimation uncertainty’.
After initial recognition of a lease, the Group only reassesses the lease term when there is a significant event or a significa
nt change in
circumstances, which was not anticipated at the time of the previous assessment. Significant events or significant changes in c
ircumstances
could include merger and acquisition or similar activity, significant expenditure on the leased asset not anticipated in the pr
evious assessment,
or detailed management plans indicating a different conclusion on
optional periods to the previous assessment. Where a signific
ant event or
significant change in circumstances does not occur, the lease term and therefore lease liability and right-of-use asset value,
will decline over
time.
The Group’s cash outflow for leases in the year ended 31 March 2022 was €4,338 million (2021: €4,234 million) and,
absent significant future
changes in the volume of the Group’s activities or strategic changes to use more or fewer owned assets this level of cash outfl
ow from leases
would be expected to continue for future periods, subject to co
ntractual price increases. The future cash outflows included wit
hin lease liabilities
are shown in the maturity analysis below. The maturity analysis only includes the reasonably certain payments to be made; cash
outflows in
these future periods will likely exceed these amounts as payments will be made on optional periods not considered reasonably ce
rtain at
present and on new leases entered into in future periods.
The Group’s leases for customer connectivity are normally either
under regulated access or network sharing or similar preferent
ial access
arrangements and as a result the Group normally has significant flexibility over the term it can lease such connections for; ge
nerally the notice
period required to cancel the lease is less than the notice period included in the service contract with the end customer. As
a result, the Group
does not have any significant cash exposure to optional periods on customer connectivity as the Group can cancel the lease when
the service
agreement ends. In some circumstances
the Group is committed to minimum spend amounts fo
r connectivity leases, which are included within
reported lease liabilities.
Sale and leaseback
Sale and leaseback transactions entered into by the Group were not material, individually or in aggregate.
Amounts recognised in the primary financial statements in relation to lessee transactions
Right-of-use assets
The carrying value of the Group’s right-of-use assets, depreciation charge for the year and additions during the year are discl
osed in note 11
‘Property, plant and equipment’.
Lease liabilities
The Group’s lease liabilities are disclosed in note 21 ‘Borrowi
ngs’. The maturity profile of the Group’s lease liabilities is a
s follows:
2022 2021
€m €m
Within one year
3,130
3,419
In more than one year but less than two years
2,189
2,142
In more than two years but less than three years
1,759
1,661
In more than three years but less than four years
1,579
1,457
In more than four years but less than five years
1,387
1,316
In more than five years
4,242
4,696
14,286 14,691
Effect of discounting
(1,747)
(1,659)
Lease liability - as disclose
d in note 21 ‘Borrowings’
12,539
13,032
At 31 March 2022 the Group has entered into lease contracts with
payment obligations with an undiscounted value of €51 million
(2021: €82
million) that had not commenced at 31 March 2022.
Interest expense on lease liabilities for the year is disclos
ed in note 5 ‘Investment income and financing costs’.
The Group has no material liabilities under residual value guarantees and makes no material variable payments not included in t
he lease liability.
The Group does not apply either the short term or
low value expedient options in IFRS 16.
Strategic report Governance
Financials
Other information178
Vodafone Group Plc
Annual Report 2022
The Group’s leasing activities as a lessor
The Group has a wide range of lessor activities with consumer an
d enterprise customers, other telecommunication companies and o
ther
companies. With consumer and enterprise cu
stomers, the Group generates lease income
from the provision of handsets, routers and
other
communications equipment. The Group provides wholesale access to the Group’s fibre and cable networks and leases out space on t
he Group’s
owned mobile base stations to other telecommunication companies.
In addition, the Group sub-leases retail stores to franchise p
artners in
certain markets and leases out surplus assets (e.g. vacant offices and retail stores) to other companies.
Lessor transactions are classified as operating or finance leas
es based on whether the lease transfers substantially all of the
risks and rewards
incidental to ownership of the asset. Leases are individually assessed, but generally, the Group’s lessor transactions are clas
sified as:
-
Operating leases where the Group is lessor of space on owned mobile base stations, provides wholesale access to its fibre and c
able
networks or provides routers or similar equipment to fixed customers; and
-
Finance leases where the Group is sub-lessor of handsets
or similar items in back-to-
back arrangements or where
surplus assets are sublet
out for all or substantially all of the remaining head lease term.
The Group’s income as a lessor in the year is as follows:
2022 2021
€m €m
Operatin
g
leases
Lease revenue (note 2 ‘Revenue disa
gg
re
g
ation and se
g
mental anal
y
sis’)
758 559
Income from leases not reco
g
nised as revenue
45
180
The Group’s net investments in leases are disclosed in note 14
‘Trade and other receivables’. The committed amounts to be recei
ved from the
Group’s operating leases are as follows:
Maturity
Within one
year
In one to two
years
In two to
three years
In three to four
years
In four to five
years
In more than
five years
Total
€m €m €m €m €m €m
€m
31 March 2022
Committed operating lease
payments due to the Group
as a lessor
513
250
161
128
114
343
1,509
31 March 2021
Committed operating lease
payments due to the Group
as a lessor
510
261
175
134
115
395
1,590
The Group has no material lease income arising from variable lease payments.
Strategic report Governance
Financials
Other information179
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
21. Borrowings
The Group’s sources of borrowing for funding and liquidity purposes come from a range of committed bank
facilities and through short-term and long-term issuances in the capital markets including bond and
commercial paper issues and bank loans. Liabilities arising from the Group’s lease arrangements are also
reported in borrowings; see note 20 ‘Leases’. We manage the basis on which we incur interest on debt
between fixed interest rates and floating interest rates
depending on market conditions using interest rate
derivatives. The Group enters into foreign exchange contracts to mitigate the impact of exchange rate
movements on certain monetary items.
Accounting policies
Interest-bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception), and are subse
quently measured at
amortised cost, using the effective interest rate method. Where they are identified as a hedged item in a designated fair value
hedge
relationship, fair value adjustments are recognised in accordance with our policy (see note 22 ‘Capital and financial risk mana
gement’). Any
difference between the proceeds net of transaction costs and the amount due on settlement or redemption of borrowings is recogn
ised over
the term of the borrowing. Where bonds issued
with certain conversion rights are identified as compound instruments they are initially
measured at fair value with th
e nominal amounts recognised as a component in equity and the fair
value of future coupons includ
ed in
borrowings. These are subsequently measured at amort
ised cost using the effective interest rate method.
Borrowings
2022
2021
€m
€m
Non-current borrowings
Bonds
46,156 44,634
Bank loans
629
761
Lease liabilities (note 20)
9,810
9,909
Bank borrowings secured ag
ainst Indian assets
–
385
Other borrowings
1
1,536
3,583
58,131 59,272
Current borrowings
Bonds
1,875 2,251
Bank loans
688
658
Lease liabilities (note 20)
2,729
3,123
Collateral liabilities
2,914
962
Bank borrowings secured ag
ainst Indian assets
1,382
862
Other borrowings
1
2,373
632
11,961
8,488
Borrowings
70,092 67,760
Note:
1 Includes €1,273 million (2021: €3,312 million) and €2,165 millio
n (2021: €381 million) of licence and spectrum fees payable i
n non-current and current borrowings respectively.
The fair value of the Group’s financial liabilities held at amorti
sed cost approximate to fair value with the exception of long
-term bonds with a
carrying value of €46,156 million (2021: €44,634 million) which have a fair value of €46,348 million (2021: €48,630 million). F
air value is based
on level 1 of the fair value hierarchy using quoted market prices.
The Group’s borrowings also include €1,382 million (2021: €1,247
million) of bank borrowings that are secured against the Group
’s
shareholdings in Indus Towers and Vodafone Idea (see note 12 ‘In
vestments in Associates and Joint Ventures’ for further details
of these assets)
and will be repaid through the realisation of proceeds from th
ose assets. In accordance with the terms of the loan arrangement,
the Group
intends to dispose of its shareholding in In
dus Towers in order to repay the borrowing.
The Group’s borrowings include certain bonds which have been designated in hedge relationships, which are carried at €1,316 mil
lion higher
(2021: €1,390 million) than their euro equivalent redemption
value. In addition, where bonds are issued in currencies other than euros, the
Group has entered into foreign currency swaps to fix the euro cash outflows on redemption. The impact of these swaps is not ref
lected in
borrowings and would decrease the euro equivalent redemption value of the bonds by €1,456 million (2021: €127 million).
Commercial paper programmes
We currently have US and euro commercial paper programmes of US$15 billion (€13.5 billion) and €10 billion respectively which a
re available
to be used to meet short-term liquidity requirements
. At 31 March 2022 both programmes remained undrawn.
The commercial paper facilities were supported by US$4.0 billion (€3.6 billion) and €4.0 billion of syndicated committed bank f
acilities. No
amounts had been drawn under these facilities.
Strategic report Governance
Financials
Other information180
Vodafone Group Plc
Annual Report 2022
Bonds
We have a €30 billion euro medium-term note programme and a US shelf programme which are used to meet medium to long-term fundi
ng
requirements. At 31 March 2022 the total amounts in issue under these programmes split by currency were US$25.3 billion, €16.2
billion, £3
billion, AUD$1.2 billion, HKD$2.1 billion, NOK2.2 billion, CHF0.7 billion and JPY10 billion.
Vantage Towers A.G. has a €5 billion debt issuance programme to
meet its medium to long-term funding requirements. As at 31 Mar
ch 2022,
Vantage Towers A.G. had bonds outstanding with a nominal value of €2.2 billion.
At 31 March 2022 the Group had bonds outstanding with a nominal value equivalent to €46.7 billion. During the year ended 31 Mar
ch 2022,
bonds with a nominal value of US$2.5 billion were issued utilisin
g the US Shelf programme and bonds with a nominal value of €2.
1 billion
matured.
Bonds mature between 2022 and 2059 (2021: 2021 and 2059) and have interest rates between 0% and 7.875% (2021: 0% and 7.875%).
Mandatory convertible bonds
On 12 March 2019 the Group issued £3.4 billion of subordinated mandatory convertible
bonds (‘MCBs’) split into two equal tranches of £1.7
billion with coupons of 1.2% and 1.5% respectively. The first tranche matured on 12 March 2021 at a conversion price of £1.2055
per share and
the second tranche matured on 12 March 2022 at a conversion price of £1.1326 per share. These were recognised as compound instr
uments
with nominal values of £3.4 billion (€3.8 billion) recognised as a component of shareholders’ funds in equity and the fair valu
e of future coupons
£0.1 billion (€0.1 billion) recognised as a financial liability in
borrowings. The Group’s strategy
was to hedge the equity ris
k associated with the
MCB issuance to any future movement in its share price by an opti
on strategy designed to hedge the economic impact of share pri
ce
movements. In instances where the Group decides to buy back ordina
ry shares to mitigate dilution resulting from the conversion,
the hedging
strategy provides a hedge for the repurchase price.
Treasury shares
The Group held a maximum of 1,911,661,729 (2021: 2,043,732,147) of its own shares during the year which represented 6.6% (2021:
7.1%) of
issued share capital at that time.
Strategic report Governance
Financials
Other information181
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
22. Capital and financial risk management
This note details the treasury management and financial risk management objectives and policies, as well
as the exposure and sensitivity of the Group to credit, liquidity, interest and foreign exchange risk, and the
policies in place to monitor and manage these risks.
Accounting policies
Financial instruments
Financial assets and financial liabilities, in respect of financ
ial instruments, are recognised on the Group’s consolidated sta
tement of financial
position when the Group becomes a party to th
e contractual provisions of the instrument.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Group
are classified according to the substance of the contractual a
rrangements
entered into and the definitions of a financ
ial liability and an equity instrument. An equity instrument is any contract that p
rovides a residual
interest in the assets of the Group after deducting all of its
liabilities and includes no obligation to deliver cash or other
financial assets. The
accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Financial liabilities under put option arrangements
The Group has an obligation to pay a fixed rate of return to minority equity shareholders in the Group’s subsidiary Kabel Deuts
chland AG, under
the terms of
a court-imposed domination and profit and loss transfer agreement.
This agreement also provides the minority shareholders the
option to put their shareholding to Vodafone at a fixed price per
share. The obligation to purcha
se the shares has been recogni
sed as a financial
liability and no non-controlling interests are recognised in re
spect of minority shareholders. Interest costs are accrued at th
e agreed rate of
return and recognised in financing costs.
Derivative financial instrum
ents and hedge accounting
The Group’s activities expose it to the financial risks of change
s in foreign exchange rates and interest rates which it manage
s using derivative
financial instruments. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors,
which provide
written principles on the use of financial derivatives consistent
with the Group’s risk management strategy. The Group does not
use derivative
financial instruments for speculative purposes.
The Group designates certain derivatives as:
hedges of the change in fair value of recognised assets and liabilities (‘fair value hedges’);
hedges of highly probable forecast transactions or hedges of fo
reign currency or interest rate risks of firm commitments (‘cash
flow hedges’); or
hedges of net investments in foreign operations.
Derivative financial instruments are initially measured at fair value on the contract date and are subsequently re-measured to
fair value at each
reporting date. Changes in values of all derivatives of a financ
ing nature are included within investment income and financing
costs in the
income statement unless designated in an e
ffective cash flow hedge relationship or a hedge of a net investment in foreign opera
tions when the
effective portion of changes in value are deferred to other comprehensive income. Hedge effectiveness is determined at the inception of the
hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists b
etween the
hedged item and hedging instrument. For fair value hedges, the carrying value of the hedged item is also adjusted for changes i
n fair value for
the hedged risk, with gains and losses recogn
ised in the income statement for the period.
Hedge accounting is discontinued when the hedging instrument expi
res or is sold, terminated, exercised or no longer qualifies f
or hedge
accounting. When hedge accounting is discontinued, any gain or loss recognised in other comprehensive income at that time remai
ns in equity
and is recognised in the income statement when the hedged transaction is
ultimately recognised in the income statement.
For cash flow hedges, when the hedged item
is recognised in the income statement, amounts previously recognised in other compre
hensive
income and accumulated in equity for the hedging instrument are reclassified to the income statement. However, when the hedged
transaction
results in the recognition of a non-financial asset or a non-fin
ancial liability, the gains and losses previously recognised in
other comprehensive
income and accumulated in equity are transferred from equity and
included in the initial measurement of the cost of the non-fin
ancial asset or
non
Ǧ
financial liability. If a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recogn
ised immediately
in the income statement.
For net investment hedges, gains and losses accumulated in other
comprehensive income are included in the income statement when
the
foreign operation is disposed of.
Strategic report Governance
Financials
Other information182
Vodafone Group Plc
Annual Report 2022
Capital management
The following table summarises the capital of the Group at 31 March:
2022
2021
€m
€m
Borrowings (note 21)
70,092
67,760
Cash and cash equivalents (note 19)
(7,496)
(5,821)
Derivative financial instruments included in tr
ade and other receivables (note 14)
(4,626)
(3,151)
Derivative financial instruments included in tr
ade and other payables (note 15)
1,672
4,010
Short-term investments (note 13)
(4,795)
(4,007)
Collateral assets (note 13)
(698)
(3,107)
Financial liabilities und
er put option arrangements
494
492
Equity
56,977 57,816
Capital
111,620 113,992
The Group’s policy is to borrow centrally using a mixture of long-term and short-term capital market issues and borrowing facil
ities to meet
anticipated funding requirements. These borrowings, together with
cash generated from operations, are loaned internally or cont
ributed as
equity to certain subsidiaries.
Dividends from associates and to non-controlling shareholders
Dividends from our associates are generally paid at the discretion of the Board of Directors or shareholders of the individual
operating and
holding companies, and we have no rights to receive dividends
except where specified within ce
rtain of the Group’s shareholders
’ agreements.
Similarly, other than ongoing dividend obligations to the Kabel
Deutschland A.G. minority shareholders, should they continue to
hold their
minority stake, we do not have existing obligations under shareholders’ agreements to pay dividends to non-controlling interest
partners of our
subsidiaries or joint ventures. The amount of dividends received
and paid in the year are disclosed in the consolidated stateme
nt of cash flows.
Potential cash outflows from option agreements and similar arrangements
Put options issued as part of the hedging strategy for the MCBs
permit the holders to exercise against the Group at maturity of
the option if
there is a decrease in our
share price. Under the terms of the options, settlement must
be made in cash which will equate to the reduced value
of shares from the initial conversion price, adjusted for dividends declared, on 1,452 million (2021: 2,494 million) shares as
at 31 March 2022.
Sale of trade receivables
During the year, the Group sold certain trade receivables to a nu
mber of financial institutions. Whilst there are no repurchase
obligations in
respect of these receivables, the Group provided credit guarante
es which would only become payable if default rates were signif
icantly higher
than historical rates. The credit guarantee is not considered
substantive and substantially all risks and rewards associated wi
th the receivables
passed to the purchaser at the date of sale, therefore the rece
ivables were derecognised. The ma
ximum payable under the guarant
ees at 31
March 2022 was €1,341 million (2021: €1,503 million). No provision has been made in respect of these guarantees as the likeliho
od of a cash
outflow has been assessed as remote.
Supplier financing arrangements
The Group offers suppliers the opportunity to use supply chain financing (‘SCF’). SCF allows suppliers that decide to use it to
receive funding
earlier than the invoice due date. At 31 March
2022, the financial institutions that run the SCF programmes had purchased €2.4 billion (2021:
€2.3 billion) of outstanding supplier invoices, principally from larger suppliers. The Group does not provide any financial gua
rantees to the
financial institutions under this programme and continues to cash
settle supplier payables in accordance with their contractual
terms. As such,
the programme does not change the Group’s net debt, trade payable balances or cash flows.
The Group evaluates supplier arrangements against a number of indicators to assess if the payable continues to hold the characteristics of a
trade payable or should be classified as borrowings; these indi
cators include whether the payment
terms exceed the shorter of c
ustomary
payment terms in the industry or 180 days. At 31 March 2022, none of the payables subject to supplier financing arrangements me
t the criteria
to be reclassified as borrowings.
Financial risk management
The Group’s treasury function centrally manages the Group’s fundin
g requirement, net foreign exchange exposure, interest rate m
anagement
exposures and counterparty risk arising from investments and deri
vatives. Treasury operations are conducted within a framework
of policies and
guidelines authorised and reviewed by the Board, most recently in May 2021. A treasury risk committee comprising
of the Group’s Chief
Financial Officer, Group General Counsel and Company Secretary, Group Financial Controller, Group Corporate Finance Director, G
roup Treasury
Director and Group Director of Financial Controlling and Operations meets three times a year to review treasury activities and
its members
receive management information relating to treasury activities on a quarterly basis. The Group’s accounting function, which doe
s not report to
the Group Treasury Director, provides regular update reports of treasury activity to the Board. The Group’s Internal Auditor re
views the internal
control environment regularly.
No bonds issued by the Group or the Revolving Credit Facilities are subject to financial covenant ratios. Approximately €38 bil
lion (2021: €37
billion) of issued bonds have a change of control clause. The Grou
p uses a number of derivative instruments for currency and in
terest rate risk
management purposes only that are transacted by specialist trea
sury personnel. The Group mitigates banking sector credit risk b
y the use of
collateral support agreements.
Strategic report Governance
Financials
Other information183
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
22. Capital and financial risk management (continued)
The Group’s financial risk management polici
es seek to reduce the Group’s exposure to
any future disruption to financial market
s, including any
future impacts from COVID or
other macro economic events.
The Group has combined cash and cash equivalent and short-term
investments of €12.3 billion, providing significant headroom ove
r short-term
liquidity requirements. Additionally the Group maintains undrawn revolving credit facilities of €7.6 billion euro equivalent. A
s at 31 March 2022
and after hedging, substantially all the Group’s borrowings are he
ld on a fixed interest basis, mitigating exposure to interest
rate risk. The Group
has no significant currency exposures other than positions in economic hedging relationships. The Group’s credit risk under fin
ancing activities is
spread across a portfolio of highly rated institutions to reduce counterparty exposures and derivative balances are substantial
ly all collateralised.
The Group’s operating activities result in customer credit risk
, for which provisions for expected credit losses are recognised
.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial asset leading to a financial loss f
or the Group. The Group is
exposed to credit risk from its operating activities and from its financing activities, the
Group considers its maximum exposure to credit risk at 31
March to be:
2022
2021
€m
€m
Cash at bank and in hand (note 19)
2,220
2,705
Money market funds (note 19)
5,276
3,116
Managed investment funds (note 13)
3,349
2,954
Current bonds and debt se
curities (note 13)
1,446
1,053
Non-current debt securities (note 13)
930
797
Collateral assets (note 13)
698
3,107
Other investments (note 13)
2,438
2,045
Derivative financial instruments (note 14)
4,626
3,151
Trade receivables (note 14)
1
6,083
5,924
Contract assets and other
receivables (note 14)
4,457 4,531
Performance bonds and other guarantees (note 29)
2,866
2,728
34,389 32,111
Note:
1 Includes amounts guaranteed under sales of trade receivables €1,341 million (2021: €1,503 million)
Expected credit loss
The Group has financial assets classified and measured at amortised cost and fair value through other comprehensive income that
are subject
to the expected credit loss model requirements of IFRS 9. Cash
at bank and in hand and certain other investments are both class
ified and
measured at amortised cost and subject to
impairment requirements. However, the identi
fied expected credit loss is considered t
o be
immaterial.
Information about expected credit losses for trade receivables and contract assets can be found under ‘operating activities’ on
page 185.
Financing activities
The Group invests in government securities on the basis they generate a fixed rate of return and are amongst the most creditwor
thy of
investments available.
Investments are made in accordance with established internal trea
sury policies which dictate the scaled maximum exposure permis
sible in
relation to an investment’s long-term credit rating. The Group invests in AAA unsecured money market mutual funds, where the in
vestment is
limited to 10% of each fund; A to
AAA government securities, both directly and
through money market mutual funds; and has two m
anaged
investment funds that hold securities
with an average credit quality of AA.
In respect of financial instruments used by the Group’s treasury function, the aggregate credit risk the Group may have with on
e counterparty is
limited by reference to the long-term credit ratings assigned fo
r that counterparty by Moody’s, Fitch Ratings and Standard & Po
or’s.
Furthermore, collateral support agreements reduce the Group’s exposure to counterparties who must post cash collateral when the
re is value
due to the Group under outstanding derivati
ve contracts that exceeds a contractually agreed threshold amount. When value is due
to the
counterparty the Group is required to post collateral on identical terms. Such cash collateral is adjusted daily as necessary.
Strategic report Governance
Financials
Other information184
Vodafone Group Plc
Annual Report 2022
In the event of any default, ownership of the cash collateral would revert to the respective holder at that point. Detailed bel
ow is the value of the
cash collateral, which is reported within curre
nt borrowings, held by the Group at 31 March:
2022
2021
€m
€m
Collateral liabilities
2,914
962
In addition, as discussed in note 29 ‘Contingent liabilities and legal proceedings’, the Group has covenanted to provide securi
ty in favour of the
trustee of the Vodafone Group UK Pension Scheme in respect of th
e funding deficit in the scheme and pledged security in relatio
n to the Indus
Towers merger. The Group has also pledged cash as collateral against derivative financial instruments as disclosed in note 13 ‘
Other
investments’.
Operating activities
Customer credit risk is managed by the Group’s business units which each have policies, procedures and controls relating to cus
tomer credit
risk management. Outstanding trade receivables and contract assets are regularly reviewed to monitor any changes in credit risk
with
concentrations of credit risk considered to be limited given that the Group’s customer base is large and unrelated. The Group a
pplies the
simplified approach and records lifetime expected credit losses
for trade receivables and contract assets. Expected credit loss
es are measured
using historical cash collection data for periods of at least 24 months wherever possible and grouped into various customer seg
ments based on
product or customer type. The historical loss rates are adjusted
where macroeconomic factors, for example changes in interest r
ates or
unemployment
rates, or other commercial factors are expected to have a significant impact when determining future expected credit loss rates
.
For trade receivables the expected credit loss provision is calculated using a provision matrix, in which the provision increas
es as balances age,
and for receivables paid in instalments and contract assets a weighted loss rate is calculated to reflect the period over which
the amounts
become due for payment by the customer. Trade receivables and contract assets are written off when each business unit determine
s there to
be no reasonable expectation of recovery and enforcement activity has ceased.
Movements in the allowance for expected credit losses during the year were as follows:
Contract assets at amortised co
st other comprehensive income
2022
2021
2022
2021 2022
2021 €m
€m
€m
€m €m
€m 1 April
101
137
1,480
1,431
57
51
Exchange movements
1
2
(70)
(47)
–
–
Amounts charged to credit loss
es on financial assets
114
63
394
592
53
9
Other
1
(133)
(101)
(462)
(496)
(2)
(3)
31 March
83
101
1,342
1,480
108
57
Note:
1 Primarily utilisation of the provision.
Expected credit losses are presented as net impairment losses wi
thin operating profit and subsequent recoveries of amounts prev
iously written
off are credited against the same line item.
Strategic report Governance
Financials
Other information185
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
22. Capital and financial risk management (continued)
The majority of the Group’s trade receivables are due for maturity
within 90 days and largely comprise amounts receivable from
consumers and business
customers.
The following table presents information on trade receivables past due¹ and their associated expected credit losses:
31 March 2022
30 days 31–60 61–180 180
Total
Due or less days days days+
Gross carrying amount
2,411
650
182
390
1,043
4,676
Expected credit loss allowance
(123)
(83)
(53)
(190)
(893)
(1,342)
Net carrying amount
2,288
567
129
200
150
3,334
31 March 2021
30 days 31–60 61–180 180
Total
Due or less days days days+
Gross carrying amount
2,568
717
177
405
1,290
5,157
Expected credit loss allowance
(30)
(72)
(62)
(211)
(1,105)
(1,480)
Net carrying amount
2,538
645
115
194
185
3,677
Note:
1 Contract assets relate to amounts not yet due from customers. These amounts will be reclassified as trade receivables before they become due. Trade receivables at fair value through other
comprehensive income are not materially past due.
Liquidity risk
Liquidity is reviewed daily on at least a 12 month rolling basis and stress tested on the assumption that any commercial paper
outstanding
matures and is not reissued. The Group maintains substantial cash an
d cash equivalents which at 31 March 2022 amounted to cash
€7.5
billion
(2021: €5.8 billion) and undrawn committed facilities of €8.2 bi
llion (2021: €8.0 billion), principally euro and US dollar revo
lving credit facilities of
€4.0 billion and US$4.0 billion (€3.6 billion) which mature in 2025 and 2027 respectively. The Group manages liquidity risk on
non-current
borrowings by maintaining a varied maturity profile with a cap on the level of debt maturity in any one calendar year, therefor
e minimising
refinancing risk. Non-current borrowings mature between 1 and 37 years.
The maturity profile
of the anticipated future cash flows including interest in relation to the Group’s non-derivative financial liabilities on an
undiscounted basis which, therefore, differs from both the carrying value and fair value, is as follows:
Maturity profile
1
other financial
Bank loans Bonds Lease liabilities Other
2
Total borrowings liabilities
3
Total
€m €m €m €m €m €m €m
Within one year
700
3,569
3,130
6,823
14,222
16,884
31,106
In one to two years
33
6,190
2,189
417
8,829
29
8,858
In two to three years
411
3,786
1,759
207
6,163
–
6,163
In three to four years
2
5,746
1,579
199
7,526
–
7,526
In four to five years
205
6,253
1,387
678
8,523
–
8,523
In more than five years
21
43,514
4,242
136
47,913
–
47,913
1,372
69,058 14,286
8,46093,176 16,913
110,089
Effect of discount/financing rates
(55)
(21,027)
(1,747)
(255)
(23,084)
(1)
(23,085)
31 March 2022
1,317
48,031
12,539
8,205
70,092
16,912
87,004
Within one year
674
3,774
3,419
2,516
10,383
15,304
25,687
In one to two years
174
3,329
2,142
2,575
8,220
49
8,269
In two to three years
440
5,964
1,661
399
8,464
–
8,464
In three to four years
173
2,784
1,457
166
4,580
–
4,580
In four to five years
2
5,506
1,316
199
7,023
–
7,023
In more than five years
23
45,538
4,696
986
51,243
–
51,243
1,486
66,895 14,691
6,84189,913 15,353
105,266
Effect of discount/financing rates
(67)
(20,010)
(1,659)
(417)
(22,153)
(2)
(22,155)
31 March 2021
1,419
46,885
13,032
6,424
67,760
15,351
83,111
Notes:
1 Maturities reflect contractual cash flows applicable except in the event of a change of control or event of default, upon whi
ch lenders have the right, but not the obligation, to request payment
within 30 days. This also applies to undrawn committed facilities. There is no debt that is subject to a material advers
e change clause (2021: €30 million of debt in relation to the mandatorily
convertible bond that matured on 12 March 2022 was subject to a material adverse change clause which would have accelerated con
version of the £1.7 billion principal recognised in equity –
see note 21 ‘Borrowings’).
2 Includes spectrum licence payables with maturity profile €2,319 million (2021: €381 million) within one year, €165 million
(2021: €2,171 million) in one to two years, €199 million (2021: €165
million) in two to three years, €199 million (2021: €165 million) in three to four years, €662 million (2021: €199 million) in
four to five years and €136 million (2021: €986 million) in more than five
years. Also includes €2,914 million (2021: €962 millio
n) in relation to cash received under collateral support
agreements shown within 1 year.
3 Includes financial liabilities under put option arrangements
and non-derivative financial liabilities presented within trade
and other payables.
Strategic report Governance
Financials
Other information186
Vodafone Group Plc
Annual Report 2022
The maturity profile of the Group’s financial derivatives (which in
clude interest rate swaps, cross-currency interest rate swap
s and foreign
exchange swaps) using undiscounted cash flows, is as follows:
2022
2021
Payable Receivable Total Payable Receivable Total
€m €m €m €m €m €m
Within one year
(12,671)
13,470
799
(16,218)
16,864
646
In one to two years
(5,897)
6,399
502
(3,121)
3,723
602
In two to three years
(2,584)
3,158
574
(5,623)
5,978
355
In three to four years
(3,373)
3,864
491
(2,518)
2,903
385
In four to five years
(1,699)
2,139
440
(3,305)
3,620
315
In more than five years
(34,097)
40,129
6,032
(33,777)
37,399
3,622
(60,321) 69,159 70,487
8,838
(64,562)5,925
Effect of discount/financing rates
(5,884)
(6,784)
Financial derivative n
et receivable/(payable)
2,954
(859)
Payables and receivables are stated separately in the
table above as cash settlement is on a gross basis.
Market risk
Interest rate management
Under the Group’s interest rate management
policy, interest rates on long-term monetary assets and liabilities are principally
maintained on a
fixed rate basis.
At 31 March 2022 and after hedging, substantially all of our outs
tanding liabilities are held on a fixed interest rate basis in
accordance with
treasury policy.
For each one hundred basis point rise in market interest rates for
all currencies in which the Group had borrowings at 31 March
2022 there
would be an increase in profit before tax by €420 million (2021:
€782 million) including mark to market revaluations of interes
t rate and other
derivatives and the potential interest on cash and short-term
investments. There would be no material impact on equity.
At 31 March 2022, the Group had limited exposure through interest
rate derivatives and floating rate bonds referencing LIBOR an
d other
interbank offered rates (IBORs).
Foreign exchange management
As Vodafone’s primary listing is on the London Stock Exchange it
s share price is quoted in sterling. Since the sterling share p
rice represents the
value of its future multi-currency cash flows, principally in euro, South African rand and sterling, the Group maintains the cu
rrency of debt and
interest charges in proportion to its expected future principa
l cash flows and has a policy to hedge external foreign exchange
risks on
transactions denominated in other currencies above a certain de minimis level.
At 31 March 2022 11% of net debt was denominated in currencies other than euro (6% sterling, 4% South African rand and 1% other
). This
allows sterling, South African rand and other debt to be serviced
in proportion to expected future cash flows and therefore pro
vides a partial
economic hedge against income statement tr
anslation exposure, as interest costs will
be denominated in foreign currencies.
Under the Group’s foreign exchange management policy, foreign ex
change transaction exposure in
Group companies is generally mai
ntained at
the lower of €5 million per currency per month or €15 million per currency over a six month period.
The Group recognises foreign exchange movements in equity for th
e translation of net investment hedging instruments and balance
s treated
as investments in foreign operations. However, ther
e is no net impact on equity for exchange rate
movements on net investment hedging
instruments as there would be an offset in the currency translation of the foreign operation. At 31 March 2022 the Group held f
inancial liabilities
in a net investment hedge against the Group’s South African rand
operations. Sensitivity to foreign
exchange movements on the h
edging
liabilities, analysed against a strengthenin
g of the South African rand by 13% (2021: 15
%) would result in a decrease in equity
of €221 million
(2021: €285 million) which would be fully offset by foreign exchange movements on the hedged net assets. In addition, cash flow
hedges of
principally US dollar borrowings would result in an increase in equity of €371 million (2021: €469 million) against a strengthe
ning of US dollar
by 5% (2021: 6%).
The Group profit and loss account is exposed to foreign exchange risk within both operating profit and financing income and exp
ense. The
principal reporting segment not generating income in euro is
Vodacom, whose functional currency is predominantly South African
rand.
Financing income and expense includes foreign currency gains/losses incurred on the translation of balance sheet items not held
in functional
currency. These are principally on certain borrowings,
derivatives, and other investments denominated in sterling and Turkish lira.
Strategic report Governance
Financials
Other information187
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
22. Capital and financial risk management (continued)
The following table details the Group’s sensitivity to foreign exch
ange risk. The percentage movement applied to the currency i
s based on the
average movements in the previous three annual reporting periods.
2022
2021
€m
€m
Increase/ (decrease) in Profit before taxation
ZAR 13% change (2021: 15%)
134
152
TRY 39% change (2021: 26%)
83
87
GBP 2% change (2021: 3%)
(67)
(23)
Equity risk
There is no material equity risk relating to the Group’s equity
investments which are detailed in note 13 ‘Other investments’.
The Group has hedged its exposure under the subordinated mandat
ory convertible bonds to any futur
e movements in its share price
by an
option strategy designed to hedge the economic impact of share
price movements. As at 31 March 2022 the Group’s sensitivity to
a movement
of 7% (2021: 7%) in its share price would re
sult in an increase or decrease in pr
ofit before tax of €36 million (2021: €283 mil
lion).
Risk management strategy of hedge relationships
The risk strategies of the designated cash flow, fair value, and net investment hedges reflect the above market risk strategies
.
The objective of the cash flow hedges is principally to convert foreign currency denominated fixed rate borrowings in US dollar
, pound sterling,
Australian dollar, Swiss franc, Hong Kong dollar, Japanese yen,
Norwegian krona and euro and US dollar floating rate borrowings
into euro fixed
rate borrowings and hedge the foreign exchange spot rate and interest rate risk. There are also cash flow hedges of certain sub
sidiary
expenditure not denominated in functional currency of
the entity, to hedge foreign exchange spot
risk. Derivative financial instruments
designated in cash flow hedges are cross-currency interest rate swaps and foreign exchange swaps and forwards. The swap maturit
y dates and
liquidity profiles of the nominal cash flows match those of the underlying borrowings and exposures.
The objective of the net investment hedges is to hedge foreign
exchange risk in foreign operations. Derivative financial instru
ments designated
in net investment hedges are cross-currency interest rate swaps and foreign exchange swaps. The hedging instruments are rolled
on an
ongoing basis as determined by the nature of the business.
The objective of the fair value hedges is to hedge a proportion of the Group’s fixed rate euro denominated borrowing to a euro
floating rate
borrowing. The swap maturity dates match those of the underlying
borrowing and the nominal cash flows are converted to quarterl
y payments.
Hedge effectiveness is determined at the inception of the hedge
relationship and through periodic prospective effectiveness ass
essments to
ensure that an economic relationship exists be
tween the hedged item and hedging instrument.
For hedges of foreign currency denominated borrowings and investments, the Group uses a combination of cross-currency and forei
gn
exchange swaps to
hedge its exposure to foreign exchange risk and interest rate risk and enters into hedge relationships where the critical term
s
of the hedging instrument match with the terms of the hedged item. Therefore the Group expects a highly effective hedging relat
ionship with
the swap contracts and the value of the corresponding hedged items to change systematically in the opposite direction in respon
se to
movements in the underlying exchange rates and interest rates.
The Group therefore performs a qualitative assessment of effecti
veness. If
changes in circumstances affect the terms of the hedged item such that the critical terms no longer match with the critical ter
ms of the hedging
instrument, the Group uses the hypothetical de
rivative method to assess effectiveness.
Hedge ineffectiveness may occur due to:
a) The fair value of the hedging instrument on the hedge relationship designation date if the fair value is not nil;
b) Changes in the contractual terms or timing of the payments on the hedged item; and
c) A change in the credit risk of the Group or
the counterparty with
the hedging instrument.
The hedge ratio for each designation will be
established by comparing the quantity of
the hedging instrument and the quantity
of the hedged
item to determine their relative weighting; for all of the Grou
p’s existing hedge relationships the hedge ratio has been determ
ined as 1:1.
The fair values of the derivative financial instruments are calculated by discounting the future cash flows to net present valu
es using appropriate
market rates and foreign currency rates prevailing at 31 March. Th
e valuation basis is level 2 of the fair value hierarchy. Thi
s classification
comprises items where fair value is determined from inputs other
than quoted prices that are observable for the asset and liabi
lity, either
directly or indirectly. Derivative financial assets and liabilities are included within trade and other receivables and trade a
nd other payables in the
statement of financial position.
Strategic report Governance
Financials
Other information188
Vodafone Group Plc
Annual Report 2022
The following table represents the carrying values and nominal amounts of derivatives in a continued hedge relationship as at 3
1 March.
At 31 March 2022
Other com
p
rehensive income
Wei
g
hted avera
g
e
Opening (Gain)/ Gain/(Loss) Closing
Carrying Carrying balance Loss recycled to balance Euro
Nominal value value 1 April deferred to financing 31 March Maturity interest
amounts Assets Liabilities 2021 OCI costs 2022
1
year FX rate rate
€m €m €m €m €m €m €m %
Cash flow hedges
- foreign currency
risk
3
Cross-currency and foreign exchange
swaps
US dollar bonds
20,995
2,745
10
501
(3,257)
1,272
(1,484)
2036
1.18
2.76
Australian dollar bonds
736
50
–
(24)
(12)
31
(5)
2024
1.56
0.92
Swiss franc bonds
624
16
1
30
(59)
49
20
2026
1.08
1.26
Pound sterling bonds
3,498
61
145
323
(239)
25
109
2043
0.86
2.97
Hong Kong dollar bonds
233
8
3
13
(18)
12
7
2028
9.08
1.48
Japanese yen bonds
78
–
6
11
(7)
(2)
2
2037
128.53
2.47
Norwegian krona bonds
241
–
16
3
(7)
7
3
2026
9.15
1.12
Foreign exchange forwards
2
244
–
69
–
(72)
3
(69)
2022
12.34
–
Cash flow hedges
- foreign currency
and interest rate risk
3
Cross currency swaps - US dollar bonds
417 24
–
8
(33)
24(1)
20231.17 1.07
Cash flow hedges - interest rate risk
3
Interest rate swaps
- Euro loans
–
–
–
(1)
–
1
–
–
–
–
Net investment hedge - foreign
exchange risk
5
Cross-currency and foreign exchange
swaps - South African rand investment
1,555
–
113
959
174
–
1,133
2022
17.29
0.31
28,621
2,904
363
1,823(3,530)
1,422
(285)
At 31 March 2021
Other com
p
rehensive income
Wei
g
hted avera
g
e
Opening (Gain)/ Gain/(Loss) Closing
Carrying Carrying balance Loss recycled to balance Euro
Nominal value value 1 April deferred to financing 31 March Maturity interest
amounts Assets Liabilities 2020 OCI costs 2021
1
year FX rate rate
€m €m €m €m €m €m €m %
Cash flow hedges
- foreign currency
risk
3
Cross-currency and foreign exchange
swaps
US dollar bonds
18,995
621
1,070
(3,922)
5,900
(1,477)
501
2036
1.18
2.82
Australian dollar bonds
736
38
–
(26)
(102)
104
(24)
2024
1.56
0.92
Swiss franc bonds
624
–
45
28
28
(26)
30
2026
1.08
1.26
Pound sterling bonds
2,585
40
199
94
1
228
323
2047
0.89
2.59
Hong Kong dollar bonds
233
–
13
(4)
34
(17)
13
2028
9.08
1.48
Japanese yen bonds
78
–
12
6
13
(8)
11
2037
128.53
2.47
Norwegian krona bonds
241
–
22
(3)
(23)
29
3
2026
9.15
1.12
Cash flow hedges
- foreign currency
and interest rate risk
3
Cross currency swaps - US dollar bonds
417 18 52
–
8
(62)
20238
1.17 1.07
Cash flow hedges - interest rate risk
3
Interest rate swaps
- Euro loans
568
–
–
7
(11)
3
(1)
2021
–
1.21
Fair value hedges -
interest rate risk
4
Interest rate swap
s - Eurobonds
186
131
–
–
–
–
–
2028
–
–
Net investment hedge - foreign
exchange risk
5
Cross-currency and foreign exchange
swaps - South African rand investment
1,785
–
23
631
328
–
959
2021
17.30
0.31
26,448
830
1,392
(3,171)
6,220
(1,226)
1,823
Notes:
1 Fair value movement deferred into other comprehensive in
come includes €1,318 million loss (2021: €1,164 million loss) and
€1 million gain (2021: €2 million gain) of foreign currency basis outside the cash flow
and net investment hedge relationships respectively.
2 Includes euro and US dollar forward contracts against Turkish lira to hedge foreign currency forecast expenditures in loc
al markets. Notional amounts of €146 million and $109 million (€98 million) with weighted
average exchange rates of 12.45 and 10.95 respectively to Turkish lira.
3 For cashflow hedges, the movement in the hypothetical derivative (hedged item) mirrors that of the hedging instrument. Hedge
ineffectiveness of the swaps designated in a cash flow hedge during the period
was €nil (2021: €nil).
4 The fair value hedge was de-designated during the financial year. The carrying value of the bond de-designated during the fin
ancial year includes €66 million loss (2021: €76 million loss) of cumulative fair value
adjustment for the hedged interest risk. Hedge ineffectiveness is €nil (2021: €8 million gain). The carrying value of bonds inc
ludes an additional €760 million loss (2021: €774
million
loss) in relation to fair value of
other bonds previously designated
in fair value hedge relationships.
5 Hedge ineffectiveness of swaps designated in a net in
vestment hedge during the period was €nil (2021: €nil).
Strategic report Governance
Financials
Other information189
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
22. Capital and financial risk management (continued)
Changes in assets and liabilities
arising from financing activities
Borrowings
Derivative assets and
liabilities
Financial liabilities
under put options Other liabilities
Assets and liabilities
arising from financing
activities
€m
€m €m €m €m
1 April 2021
6
6
7,760
8
8
59
4
4
92
4
4
91
6
6
9,602
Cash movements
Proceeds from issuance of long-term borrowings
2,548
–
–
–
2,548
Repayment of borrowings
(8,248)
–
–
–
(8,248)
Net movement in short-term borrowings
3,002
–
–
–
3,002
Net movement in derivatives
–
(293)
–
–
(293)
Interest paid
(2,246)
469
(17)
(10)
(1,804)
Purchase of treasury shares
–
–
–
(2,087)
(2,087)
Non-cash movements
Fair value movements
–
(2,631)
–
–
(2,631)
Foreign exchange
1,386
(930)
–
(15)
441
Interest costs
2,356
(428)
19
13
1,960
Lease additions
3,410
–
–
–
3,410
Other
1
124
–
–
3,106
3,230
31 March 2022
70,092
(2,954)
494
1,498
69,130
Borrowings
Derivative assets and
liabilities
Financial liabilities
under put options Other liabilities
Assets and liabilities
arising from financing
activities
€m €m €m €m €m
1 April 2020
7
7
4,925
(
(
4,409)
1
1
,850
1
1
70
7
7
2,536
Cash movements
Proceeds from issuance of long-term borrowings
4,359
–
–
–
4,359
Repayment of borrowings
(12,237) (12,237)
–
–
–
Net movement in short-term borrowings
(2,791)
–
–
–
(2,791)
Net movement in derivatives
–
279
–
–
279
Interest paid
(2,421)
452
(141)
(42)
(2,152)
Purchase of treasury shares
–
–
–
(62)
(62)
Payments for settlement
of written put options
–
–
(1,482)
–
(1,482)
Non-cash movements
Fair value movements
(9)
3,594
–
–
3,585
Foreign exchange
(1,480)
1,428
–
(2)
(54)
Interest costs
2,459
(485)
62
11
2,047
Lease additions
4,578
–
–
–
4,578
Acquisitions of subsidiaries
234
–
–
–
234
Other
1
143
–
203
416
762
31 March 2021
67,760
859
492
491
69,602
Note:
1 Movement in Other liabilities primaril
y relate to share buyback programmes.
Strategic report Governance
Financials
Other information190
Vodafone Group Plc
Annual Report 2022
Fair value and carrying value information
The carrying value and valuation basis of the Group’s financial asse
ts are set out in notes 13 ‘Other investments’, 14 ‘Trade a
nd other
receivables’ and 19 ‘Cash and cash equivalents’. For all financial assets held at amortised cost the carrying values approximat
e fair value except
as disclosed in note 13 ‘Other investments’.
The carrying value and valuation basis of the Group’s financial li
abilities are set out in notes 15 ‘Trade and other payables’
and 21 ‘Borrowings’.
The carrying values approximate fair value for the Group’s trade payables and other payables categories. For other financial li
abilities a
comparison of fair value and carrying value is disclosed in note 21 ‘Borrowings’.
Net financial instruments
The table below shows the Group’s financial assets and liabilities that are subject to offset in the balance sheet and the impa
ct of enforceable
master netting or similar agreements.
At 31 March 2022
Gross amount Amount set off
Amounts
presented in
balance sheet
Right of set off
with derivative
counterparties
Collateral
(liabilities)/assets
1
Net amount
€m €m €m €m €m €m
Derivative financial assets
4,626 4,626
–
(1,365) (2,914)
347
Derivative financial liabilities
(1,672)
–
(1,672)
1,365
368
61
Total
2,954 2,954
–
–
(2,546)
408
At 31 March 2021
Gross amount Amount set off
Amounts
presented in
balance sheet
Right of set off
with derivative
counterparties
Collateral
(liabilities)/assets
1
Net amount
€m €m €m €m €m €m
Derivative financial assets
3,151 3,151
–
(1,989)
(962)
200
Derivative financial liabilities
(4,010)
–
(4,010)
1,989
2,194
173
Total
(859) (859)
–
–
1,232
373
Note:
1
Excludes collateral of €330 million (2021: €913 million) pledged as initial margin that does not offset against existing mark t
o market balances as at 31 March.
Financial assets and liabilities are offset and the net amount
reported in the consolidated balance sheet when there is a legal
ly enforceable right
to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liabili
ty simultaneously.
Derivative financial instruments that do not meet the criteria for offset could be settled net in certain circumstances under I
SDA (‘International
Swaps and Derivatives Association’) agreements where each party
has the option to settle amounts on a net basis in the event of
default from
the other. Collateral may be offset and net settled against derivative financial instruments in the event of default by either
party. The
aforementioned collateral balances are recorded in ‘other investments’ or ‘current borrowings’ respectively.
23. Directors and key management compensation
This note details the total amounts earned by the Company’s Directors and members of the Executive
Committee.
Directors
Aggregate emoluments of the Directors of the Company were as follows:
2022
2021 2020
€m
€m €m
Salaries and fees
4
4
4
Incentive schemes
1
3
3
2
Other benefits
2
–
–
1
7 7 7
Notes:
1 Excludes gains from long-term incentive plans.
2 Includes the value of the cash allowance taken by some individuals in lieu of pension contributions.
No Directors serving during the year exercised share options
in the year ended 31 March 2022 (2021: None; 2020: None).
Strategic report Governance
Financials
Other information191
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
23. Directors and key management compensation (continued)
Key management compensation
Aggregate compensation for key management, being the Directors and members of the Executive Committee, was as follows:
2022
2021 2020
Re-presented
1
Re-presented
1
€m
€m €m
Short-term employee benefits
28
28
27
Share-based payments
8
11
7
36 39 34
Note:
1 The prior year comparatives for share-based payments have been
re-presented to reflect the market value of the vested shares
provided to key management personnel in the reported period.
The previous presentation was based on the value of share awards
granted and recognised over the vesting period, however the gr
ants were subject to various vesting conditions. The revised
measurement basis is considered to provide a more appropriate measure of actual compensation received by key management personn
el in the period. The re-presentation decreases the
previously disclosed amounts by €12 million and €23 million for the years ended 31 March 2021 and 31 March 2020, respectively.
24. Employees
This note shows the average number of people employed by the Group during the year, in which areas of
our business our employees work and where they
are based. It also shows total employment costs.
2022
2021 2020
Employees
Employees Employees
By activity
Operations
15,404 14,893 14,616
Selling and distribution
25,499
26,874
28,133
Customer care and
administration
56,038 54,739 52,470
96,941 96,506 95,219
By segment
Germany
15,256 15,798 15,199
Italy
5,765 5,818 5,980
Spain
4,194 4,257 4,316
UK
9,198 9,584
10,295
Other Europe
15,106
15,460
14,646
Vodacom
7,973 7,810 7,773
Other Markets
9,336
9,498
10,515
Vantage Towers
1
502
–
–
Common Functions
29,611
28,281
26,495
Total
96,941 96,506 95,219
Note:
1
Vantage Towers is a new reporting segment for the year ended 31 March 2022. See Note 2 ‘Revenue disaggregation and segmental an
alysis’ for details.
The cost incurred in respect of these employees (including Directors) was:
2022
2021 2020
€m
€m €m
Wages and salaries
4,469
4,238
4,571
Social security costs
578
549
531
Other pension costs (note 25)
168
235
226
Share-based payments (note 26)
119
135
134
Total
5,334 5,157 5,462
Strategic report Governance
Financials
Other information192
Vodafone Group Plc
Annual Report 2022
25. Post employment benefits
The Group operates a number of Defined Benefit and Defined Contribution retirement plans for our
employees. The Group’s largest defined benefit plan is in the UK. For further details see ‘Critical accounting
judgements and key sources of estimation uncertainty’ in note 1 ‘Basis of preparation’.
Accounting policies
For defined benefit retirement plans, the difference between the fa
ir value of the plan assets an
d the present value of the pla
n liabilities is
recognised as an asset or a liability on the consolidated statement of financial position. Defined benefit plan liabilities are
assessed using the
projected unit funding method and applying the principal actuarial assumptions at the reporting period date. Assets are valued
at market value.
Actuarial gains and losses are taken to the consolidated statement of comprehensive income for defined benefit plans or consoli
dated income
statement for cash leaver plans as incurred. For this purpose,
actuarial gains and losses comprise both the effects of changes
in actuarial
assumptions and experience adjustments arising from differences between the previous actuarial assumptions and what has actuall
y occurred.
The return on plan assets, in excess of interest income, and cost
s incurred for the management of plan assets are also taken to
other
comprehensive income.
Other movements in the net surplus or deficit are recognised in the consolidated income statement, including the current servic
e cost, any past
service cost and the effect of any settlements. The interest cost
less the expected interest income on assets is also charged t
o the consolidated
income statement. The amount charged to the consolidated income statement in respect of these plans is included within operatin
g costs or in
the Group’s share of the results of equity accounted operations, as appropriate.
The Group’s contributions to defined contribution pension plans are charged to the consolidated income statement as they fall d
ue.
Background
At 31 March 2022 the Group operated a number of retirement plan
s for the benefit of its employee
s throughout the world, with va
rying rights
and obligations depending on the conditions and practices in th
e countries concerned. The Group’s philosophy is to provide acce
ss to defined
contribution retirement plans where feasible and to manage lega
cy defined benefit retirement arrangements. Defined benefit plan
s provide
benefits based on the employees’ length of pensionable service
and their final pensionable salary or other criteria. Defined co
ntribution plans
offer employees individual funds that are converted into benefits at the
time of retirement.
The Group operates defined benefit plans in Germany, India, Ireland, Italy, the UK, the United States; defined benefit indemnit
y plans in Greece
and Turkey; and a cash leaver plan in India. Defined contribution plans are currently provided in Egypt, Germany, Greece, Hunga
ry, India,
Ireland, Italy, Portugal, South Africa, Spain and the UK.
Income statement expense
2022
2021 2020
€m
€m €m
Defined contribution plans
197
204
180
Defined benefit plans
(29)
31
46
Total amount charged to in
come statement (note 24)
168
235
226
Defined benefit plans
The Group’s retirement policy is to provide competitive pension pr
ovision, in each operating country, in line with the market m
edian for that
location. The Group’s preferred retirement provision is focused on
Defined Contribution arrangements and/or State provision for
future service.
The Group’s main defined benefit funding liability is the Vodafon
e UK Group Pension Scheme (‘Vodafone UK plan’). Since June 201
4 the
Vodafone UK plan has consisted of two segregated sections: the Vodafone Section and the Cable & Wireless Section (‘CWW Section’
). Both
sections are closed to new entrants and to future accrual. The Group also operates smaller funded and unfunded plans in the UK,
funded and
unfunded plans in Germany and a funded plan in Ireland. Define
d benefit pension provision exposes the Group to actuarial risks
such as longer
than expected longevity of participants, lower than expected re
turn on investments and higher th
an expected inflation, which ma
y increase the
liabilities or reduce the value of assets of the plans.
During 2022 the Group consolidated its defined benefit plans with
the mergers of a small plan in
the UK, The J O Grant & Taylor
(London) Ltd
Staff Pension Scheme, into the Vodafone Section of the
Vodafone UK plan and of the Cable and Wireless Employee Benefits Scheme in Ireland
into the Vodafone Ireland Pension Plan.
The main defined benefit plans are administered by trustee boards which are legally separate from the Group and consist of repr
esentatives
who are employees, former employees or are independent from the Group. The trustee boards of the pension plans are required by
legislation
to act in the best interest of the participants, set the invest
ment strategy and contribution rates and are subject to statutor
y funding regimes.
The Vodafone UK plan is registered as an occupational pension plan
with HM Revenue and Customs (‘HMRC’) and is subject to UK le
gislation
and operates within the framework outlined
by the Pensions Regulator. UK legislation requires that pension plans are funded pru
dently and that
valuations are undertaken at least every three years. Separate valuations are required for the Vodafone Section and CWW Section
.
Strategic report Governance
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Other information193
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
25. Post employment benefits (continued)
The trustees obtain regular actuarial valuations to check whethe
r the statutory funding objective is met and whether a recovery
plan is required
to restore funding to the level of the agreed technical provisio
ns. The 31 March 2019 triennial actuarial valuation for the Vod
afone Section and
CWW Section of the Vodafone UK plan showed a net deficit of £78 million (€90 million) on the funding basis, comprising of a £17
3 million (€200
million) deficit for the Vodafone Section and a £95 million (€110 million) surplus for the CWW Section. The next triennial actu
arial valuation of
the Vodafone UK plan has an effective date of 31 March 2022.
These plan-specific actuarial valuations will differ to the IAS 19 accounting basis, which is used to measure pension assets an
d liabilities
presented in the Group’s consolidated statement of financial position.
Following the 2019 triennial valuation, the Group and trustees of the Vodafone UK plan agreed a funding plan to address the val
uation deficit in
the Vodafone Section over the period to 31 March 2025 and made a cash contribution on 4 September 2020 of £80 million (€90 mill
ion) into
the Vodafone Section. This cash payment
was invested into an annuity policy
issued by a third party insuranc
e company which in turn entered
into a reinsurance policy covering these risks with the Group’s captive insurance company, see note 15 ‘Trade and other payable
s’. No further
contributions are due in respect of the deficit revealed at the 2019 valuation.
Funding plans are individually agreed for each of the Group’s ot
her defined benefit plans with the respective trustees or gover
ning board, taking
into account local regulatory requ
irements. It is expected that ordinary contributi
ons of €49 million will be paid into the Gro
up’s defined benefit
plans during the year ending 31 March 2023. The Group has also provided certain guarantees in respect of the Vodafone UK plan;
further details
are provided in note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated financial statements.
The investment strategy for the UK plans is controlled by the trus
tees in consultation with the Group and the plans have no dir
ect investments
in the Group’s equity securities or in property or other assets currently used by the Group. The allocation of assets between d
ifferent classes of
investment is reviewed regularly and is a key factor in the trus
tee investment policy. The trust
ees aim to achieve the plan’s i
nvestment
objectives through investing partly in a diversified mix of growth assets which, over the long term, are expected to grow in va
lue by more than
the low risk assets. The low risk assets include cash and gilts,
inflation and interest rate hedging and in substance insured p
ensioner annuity
policies in both the Vodafone Section and CWW Sections of the Vodafone UK plan and an insured pensioner annuity policy in the V
odafone
Ireland Pension Plan. A number of investment managers are appoin
ted to promote diversification by assets, organisation and inve
stment style
and current market conditions and trends are regularly assesse
d, which may lead to adjustments in the asset allocation.
Actuarial assumptions
The Group’s plan liabilities are measured
using the projected unit credit method u
sing the principal actuarial assumptions set
out below:
2022
2021 2020
%
% %
Weighted average actuarial assumptions used at 31 March
1
:
Rate of inflation
2
3.3
2.9
2.2
Rate of increase in salaries
3
3.1
2.7
2.5
Discount rate
2.5
1.8
2.0
Notes:
1 Figures shown represent a weighted average assumption of the individual plans.
2 The rate of increase in pensions in payment and deferr
ed revaluation are dependent on the rate of inflation.
3 Relates only to schemes open to future accrual primarily in Germany, Ireland and India.
Mortality assumptions used are based on recommendations from the individual local actuaries which include adjustments for the e
xperience of
the Group where appropriate. The Group’s larg
est plan is the Vodafone UK plan. Further life expectancies assumed for the UK pla
ns are
23.4/25.4 years (2021: 23.4/25.4 years) for a male/female pensioner currently aged 65 years and 25.4/27.5 years (2021: 25.4/27.
4 years)
from age 65 for a male/female non-pensioner member currently aged 40.
Charges made to the consolidated income statement and consolidated statement of comprehensive income (‘SOCI’) on the basis of t
he
assumptions stated above are:
2022
2021 2020
€m
€m €m
Current service cost
38
37
37
Net
p
ast service (credit)/costs
1
(71)
2
–
Net interest char
g
e/(income)
4
(8)
9
Total net (credit)/cost included within staff costs
(29)
31
46
Actuarial
g
ains/(losses) reco
g
nised in the SOCI
627
(686)
640
Note:
1 A change in Germany relating to the provision of death and disability benefits effective from 1 April 2021 resulted in a past
service credit of €49 million; further net past service credits were
recognised in the year ended 31 March 2022 for the Vodafone UK plan relating to the offer of a pension increase exchange to all
members at retirement and benefit clarifications.
Duration of the benefit obligations
The weighted average duration of the defined benefit obligation at 31 March 2022 is 21 years (2021: 21 years).
Strategic report Governance
Financials
Other information194
Vodafone Group Plc
Annual Report 2022
Fair value of the assets and present value of the liabilities of the plans
The amount included in the consolidated statement of financial position arising from the Group’s obligations in respect of its
defined benefit
plans is as follows:
Assets Liabilities
Net surplus/
(deficit)
€m €m €m
1 April 2020
6,906
(6,754)
152
Service cost
–
(39)
(39)
Interest income/(cost) 8
137
(129)
Return on plan assets excluding interest income
466
–
466
Actuarial losses arisi
ng from changes in financial assumptions
–
(1,118)
(1,118)
Actuarial losses
arising from experience adjustments
–
(34)
(34)
Employer cash contributions –
125
125
Member cash contributions
10
(10)
–
Benefits paid
(243)
243
–
Exchange rate movements
244
(249)
(5)
Other movements
(13)
5
(8)
31 March 2021
7,632
(8,085)
(453)
Service cost
–
(38)
(38)
Past service credit
–
71
71
Interest income/(cost)
140
(144)
(4)
Return on plan assets excluding interest income
58
–
58
Actuarial gains arising from ch
anges in demographic assumptions
–
7
7
Actuarial gains arising from ch
anges in financial assumptions
–
483
483
Actuarial gains arising
from experience adjustments –
79
79
Employer cash contributions –
60
60
Member cash contributions
17
(17)
–
Benefits paid
(241)
241
–
Exchange rate movements
52
(45)
7
Other movements
(3)
7
4
31 March 2022
7,715
(7,441)
274
An analysis of the net surplus/(deficit) is provided below for the Group as a whole.
2022
2021
€m
€m
Analysis of net
surplus/(deficit):
Total fair value of plan assets
7,715
7,632
Present value of funded plan liabilities
(7,337)
(7,968)
Net surplus/(deficit) for funded plans
378
(336)
Present value of unfunded plan liabilities
(104)
(117)
Net surplus/(deficit)
274
(453)
Net surplus/(deficit) is analysed as:
Assets
1
555
60
Liabilities
(281) (513)
Note:
1 Pension assets are deemed to be recoverable and there are
no adjustments in respect of minimum funding requirements as eco
nomic benefits are available to
the Group either in the form of
future refunds or, for plans still open to benefit accrual, in the form of possible reductions in future contributions.
An analysis of net surplus/(deficit) is provided below for the Vodafone UK plan, which is a funded plan. As part of the merger
of the Vodafone UK
plan and the Cable and Wireless Worldwide Retirement Plan (‘CWWRP’) plan on 6 June 2014 the assets and liabilities of the CWW S
ection are
segregated from the Vodafone Section an
d hence are reported separately below.
CWW Section Vodafone Section
2022
2021
2022
2021 €m
€m
€m
€m Analysis of net
surplus/(deficit):
Total fair value of plan assets
2,850
2,912
3,399
3,298
Present value of plan liabilities
(2,565)
(2,852)
(3,166)
(3,457)
Net surplus/(deficit)
285
60
233
(159)
Net surplus/(deficit) are analysed as:
Assets
285 60 233
–
Liabilities
–
–
–
(159)
Strategic report Governance
Financials
Other information195
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
25. Post employment benefits (continued)
Fair value of plan assets
2022
2021
€m
€m
Cash and cash equivalents
55
247
Equity investments:
With quoted prices in an active market
849
1,376
Without quoted prices in an active market
359
294
Debt instruments:
With quoted prices in an active market
1,334
4,589
Without quoted prices in an active market
317
559
Property:
With quoted prices in an active market
29
26
Without quoted prices in an active market
460
494
Derivatives:
1
Without quoted prices in an active market
2,195
(1,557)
Investment fund
1,161
604
Annuity policies
With quoted prices in an active market
34
4
Without quoted prices
922
996
Total
7,715
7,632
Note:
1 Derivatives include collateral held in the
form of cash. Assets are valued using ‘level 2’ inputs under IFRS 13 ‘Fair Value M
easurement’ principles and classified as unquoted accordingly.
The fair value of plan assets, which have been measured in accordance with IFRS 13 ‘Fair Value Measurement’, are analysed by as
set category
above and are subdivided by assets that have a quoted market price
in an active market and those that do not, such as investmen
t funds. Where
available, the fair values are quoted prices (e.g. listed equi
ty, sovereign debt and corporate bonds). Unlisted investments wit
hout quoted prices in
an active market (e.g. private equity) are included at values provided by the fund manager in accordance with relevant guidance
. Other
significant assets are valued based on observable inputs such as yield curves. The Vodafone UK plan annuity policies fully matc
h the pension
obligations of those pensioners insured and therefore are set equal to the present value of the related obligations. Investment
funds of €1,161
million at 31 March 2022 include investments in diversified alternative beta funds held in the Vodafone Section of the Vodafone
UK plan.
The actual return on plan assets over the year to 31
March 2022 was a gain of €198 million (2021: €603 million gain).
Sensitivity analysis
Measurement of the Group’s defined benefit retirement obligation is sensitive to changes in certain key assumptions. The sensit
ivity analysis
below shows how a reasonably possible increase or decrease in a
particular assumption would, in isolation, result in an increas
e or decrease in
the present value of the defined benefit obligation as at 31 March 2022.
salaries Discount rate Life expectancy
Decrease by 0.5% Increase by 0.5% Decrease by 0.5% Increase by 0.5% Decrease by 0.5% Increase by 0.5% Decrease by 1 year Increa
se by 1 year
€m €m €m €m €m €m €m €m
(Decrease)/increa
se in present
(547) (248)
552
(668)(1)
7701
248
value of defined benefit obligation
1
Note:
1 The sensitivity analysis may not be representative of an actual change in the defined benefit obligation as it is unlikely th
at changes in assumptions would occur in isolation of one another. In
presenting this sensitivity analysis, the
change in the present value of the defined benefit obligation has been calculated on
the same basis as prior years using the projected unit credit method at
the end of the year, which is the same as that applied in calcu
lating the defined benefit obliga
tion liability recognised in th
e statement of financial position. The rate of inflation assumption
sensitivity factors in the impact of changes to all assumptions re
lating to inflation including the rate of increase in salarie
s, pension increases and deferred revaluations.
Strategic report Governance
Financials
Other information196
Vodafone Group Plc
Annual Report 2022
26. Share-based payments
The Group has a number of share plans used to award shares to Executive Directors and employees as part
of their remuneration package. A charge is recognised over the vesting period in the consolidated income
statement to record the cost of these, based on the fair value of the award on the grant date.
Accounting policies
The Group issues equity-settled share-based awards to certain
employees. Equity-settled share-based awards are measured at fair
value
(excluding the effect of non-market-based vesting conditions) at
the date of grant. The fair val
ue determined at the grant date
of the equity-
settled share-based award is expensed on a straight-line basis ov
er the vesting period, based on the Group’s estimate of the sh
ares that will
eventually vest and adjusted for the effect of non-market-based
vesting conditions. A corresponding increase in additional paid
-in capital is also
recognised.
Some share awards have an attached market condition, based on total shareholder return (‘TSR’), which is taken into account whe
n calculating
the fair value of the share awards. The valuation for the TSR is based on Vodafone’s ranking within the same group of companies
, where
possible, over the
past five years.
The fair value of awards of non-vested shares is a calculation of
the closing price of the Compan
y’s shares on the day prior to
the grant date,
adjusted for the present value of the delay in receiving dividends where appropriate.
The maximum aggregate number of ordinary shares which may be is
sued in respect of share options or share plans will not (withou
t
shareholder approval) exceed:
10% of the ordinary share capital of the Company in issue immediate
ly prior to the date of grant, when aggregated with the tota
l number of
ordinary shares which have been allocated in the preceding ten year period under all plans; and
5% of the ordinary share capital of the Company in issue immediatel
y prior to the date of grant,
when aggregated with the total
number of
ordinary shares which have been allocated in
the preceding ten year period under all
plans, other than any plans which are oper
ated
on an all-employee basis.
Share options
Vodafone Sharesave Plan
Under the Vodafone Sharesave Plan UK staff may acquire shares in
the Company through monthly savings of up to £375 over a three
and/or
five year period. The savings may
then be used to purchase shares at the option price, which is set at the beginning of the invitation period and
usually at a discount of 20% to the then prevailing market price of the Company’s shares.
Share plans
Vodafone Group executive plans
Under the Vodafone Global Incentive Plan awards of shares are granted to Directors and certain employees. The release of these
shares is
conditional upon continued employment and for some awards achie
vement of certain performance targets measured over a three year
period.
Vodafone Share Incentive Plan
Following a review of the UK all-employee plans it was decided that with effect from 1 April 2017 employees would no longer be
able to
contribute to the Share Incentive Plan and would therefore no longer receive matching shares. Individuals who hold shares in th
e plan will
continue to receive dividend shares.
Strategic report Governance
Financials
Other information197
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
26. Share-based payments (continued)
Movements in outstanding ordinary share options
Ordinary share options
2022
2021 2020
Millions
Millions Millions
1 April
62
53
46
Granted during the year
20
35
39
Forfeited during the year
(2)
(1)
(1)
Exercised during the year
(1)
–
–
Expired during the year
(18)
(25)
(31)
31 March
61
62
53
Weighted average exercise price:
1 April
£1.07 £1.19 £1.40
Granted during the year
£0.95
£1.03
£1.06
Forfeited during the year
£1.06
£1.16
£1.36
Exercised during the year
£1.17
£1.23
£1.50
Expired during the year
£1.10
£1.27
£1.34
31 March
£1.02
£1.07
£1.19
Summary of options outstanding
31 March 2022
31 March 2021
Outstanding
shares
Weighted
average
exercise
Weighted
remaining
average
contractual
life
Outstanding
shares
Weighted
average
exercise
Weighted
remaining
average
contractual
life
Millions price Months
Millions price Months
Vodafone Group Sharesave Plan:
£0.91 – £1.89
61
£1.02
24
62
£1.07
30
Share awards
Movements in non-vested shares are as follows:
2022
2021 2020
Millions grant date
Millions grant date Millions grant date
1 April
267
£1.20
245
£1.41
200
£1.92
Granted
113
£1.17
108£0.99
135£1.00
Vested
(68)
£1.44
(56)
£1.56
(44)
£2.10
Forfeited
(42)
£1.52
(30)
£1.10
(46)
£1.76
31 March
270
£1.07
267
£1.20
245
£1.41
Other information
The total fair value of shares vested during the year ended 31 March 2022 was £98 million (2021: £108 million; 2020: £92 millio
n).
The compensation cost included in the consolidated income stat
ement in respect of share options and share plans was €119 millio
n (2021:
€135 million; 2020: €134 million) which is comprised principally of equity-settled transactions.
The average share price for the year ended 31 March 2022 was 122.1 pence (2021: 120.8 pence; 2020: 135.9 pence).
Strategic report Governance
Financials
Other information198
Vodafone Group Plc
Annual Report 2022
27. Acquisitions and disposals
The note below provides details of acquisition and disposal transactions for the current year as well as those
completed in the prior year. For further details see ‘Critical accounting judgements and key sources of estimation
uncertainty’ in note 1 ‘Basis of preparation’ to the consolidated financial statements.
Accounting policies
Business combinations
Acquisitions of subsidiaries are accounted
for using the acquisition method. The cost
of the acquisition is measured at the agg
regate of the fair
values at the date of exchange of assets given, liabilities inc
urred or assumed and equity instruments issued by the Group. Acq
uisition-related costs
are recognised in the consolidated income statement as incurred.
The acquiree’s identifiable assets and liabilities are recogni
sed at their fair values at
the acquisition date, which is the date on which control is transferred to the Group. Goodwill is measured as the excess of the
sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the Group’s previo
usly held equity
interest in the acquiree, if any, over the net amounts of identifiable assets acquired and liabilities assumed at the acquisiti
on date. The interest of the
non-controlling shareholders in the
acquiree may initially be measured either at fair value or at the non-controlling shareholders’ proportion of the
net fair value of the identifiable assets acquired, liabilities and contingent liabilities assumed. The choice of measurement basis is made on an
acquisition-by-acquisition basis.
Acquisition of interests from non-controlling shareholders
In transactions with non-controlling parties that do not result in a change in control, the difference between the fair value o
f the consideration paid
or received and the amount by which the non-contro
lling interest is adjusted is
recognised in equity.
Acquisitions
The aggregate cash consideration in respect of purchases of subsidiaries, net of cash acquired, is as follows:
2022
2021
€m
€m
Cash consideration paid
Acquisitions during the year
–
138
Net cash acquired
–
(2)
–
136
During the prior year ended 31 March 2021, the Group completed ac
quisitions for an aggregate consideration of €178 million, sat
isfied by the
transfer of equity interests in certain of
the Group’s subsidiaries. The aggregate fair values of goodwill, identifiable assets
, liabilities and non-
controlling interests recognised on acquisition were €82 million, €468 million, €312 million and €60 million, respectively. In
addition, the Group paid
€138 million in respect of acquisitions
completed in prior periods.
Disposals
The difference between the
carrying value of the net assets dis
posed of and the fair value of consideration received is recorde
d as a gain or loss on
disposal. Foreign exchange translation gains or losses relating to
subsidiaries, joint arrangements
and associates that the Gro
up has disposed of, and
that have previously recorded in other comprehensive income or expense, are also recognised as part of the gain or loss on disp
osal.
The aggregate cash consideration in respect of the disposal of subsidiaries, net of cash disposed, is as follows:
2022
2021
€m
€m
Cash consider
ation received
Vodafone New Zealand
–
(37)
Tower infrastructure in Italy
–
192
Other disposals during the period
–
3
Net cash disposed
–
(1)
–
157
Other transactions with non-controlling shareholders in subsidiaries
2022
2021
€m
€m
Cash consideration received/(paid)
Vantage Towers IPO
217
2,000
Vantage Towers Greece
–
(288)
Other
(28) (49)
189
1,663
Strategic report Governance
Financials
Other information199
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
27. Acquisitions and disposals (continued)
Vantage Towers IPO
In the comparative period, the Group completed an initial public
offering of Vantage Towers AG, with the first day of trading o
n the
Regulated Market of the Frankfurt Stock Exchange being 18 March 2021. The offer consisted solely of a secondary sell-down of ex
isting
shares held by Vodafone GmbH. Cash consideration of €2,000 million was received in the comparative period. A further €217 mill
ion was
received in April 2021, following completion of the market st
abilisation period described in the Vantage Towers prospectus.
Vantage Towers Greece
In the comparative period on 25 March 2021, the Group exercised its option to purchase the remaining 38% of Vantage Towers Gree
ce for
cash consideration of
€288 million
, taking its shar
eholding to 100%.
Other matters
Vodafone Egypt
On 10 November 2021, the Group announced that it had agreed to transfer its 55% shareholding in Vodafone Egypt to its subsidiar
y,
Vodacom Group Limited (‘Vodacom’).
The total consideration is €2,365 million of which approximatel
y €1,892 million will be settled by the issue of 242 million new
ordinary
Vodacom shares to Vodafone at an issue pr
ice of ZAR 135.75 per
share; the remaining
€473 million
will be settled in cash. As a
result,
Vodafone’s ownership in Vodacom will increase from 60.5% to 65.1%.
Under the terms of the sale and purchase
agreement, the cash element of the purchase co
nsideration will be adjusted for any mov
ement in
the net debt and agreed working capital of Vodafone Egypt between
signing and closing. Completion of the transaction is subject
to a
number of regulatory approvals, which are expected in the near term.
28. Commitments
A commitment is a contractual obligation to make a payment in the future, mainly in relation to agreements to
buy assets such as mobile devices,
network infrastructure and IT systems and leases that have not commenced.
These amounts are not recorded in the consolidated statement of financial position since we have not yet
received the goods or services from the supplier. The amounts below are the minimum amounts that we are
committed to pay.
Capital commitments
p
an
y
and subsidiaries Share of
j
oint o
p
erations Grou
p
2022
2021
2022
2021 2022
2021
€m
€m
€m
€m €m
€m Contracts placed for future capital
expenditure not provid
ed in the financial
statements
1
4,388 3,993 4,126
140 133
4,527Note:
1 Commitment includes contracts placed for proper
ty, plant and equipment and intangible assets.
Leases entered into by the Grou
p but not commenced at 31 March 2022 are disclos
ed in note 20 ‘Leases’. Included in capital comm
itments is an
amount of €331 million relating to spectrum acquisition commitments in Vodacom. €197 million of this spectrum acquisition commi
tment was
settled subsequent to year-end.
29. Contingent liabilities and legal proceedings
Contingent liabilities are potential future cash outflows
, where the likelihood of payment is considered more than
remote, but is not considered probable or cannot be measured reliably.
2022
2021
€m
€m
Performance bonds
1
430
381
Other guarantees
2
2,436
2,347
Notes:
1 Performance bonds require the Group to ma
ke payments to third parties in the even
t that the Group does not perform what is
expected of it under the terms of any related contracts or commercial
arrangements.
2 Other guarantees principally comprise Vodafone Group Plc’s guarantee of the Group’s 50% share of a US$3.5 billion loan fac
ility (2021: US$3.5 billion loan facility),
which forms part of the Group’s overall
joint venture investment in TPG Telecom Ltd. The Group’s share of
these loan balances is included
in the net investment in join
t venture (see note 12 ‘Investments in
associates and joint arrangements’).
Other guarantees also include INR42.5 billion
(2021: INR42.5 billion) in relation to the
secondary pledge over shares owned by
Vodafone Group in Indus Towers. See page 201.
Strategic report Governance
Financials
Other information200
Vodafone Group Plc
Annual Report 2022
29. Contingent liabilities and legal proceedings (continued)
UK pension schemes
The Group’s main defined benefit plan is the Vodafone UK Group Pe
nsion Scheme (‘Vodafone UK Plan’) which has two segregated sec
tions, the
Vodafone Section and the CWW Section, as detail
ed in note 25 ‘Post em
ployment benefits’.
The Group has covenanted to provide security
in favour of both the Vodafone Section and CWW Section when they are in a deficit
position. The
deficit is measured on a prescribed basis agreed between the Group and trustee, which differs from the accounting basis reporte
d in note 25 ‘Post
employment benefits’. The Group prov
ides surety bonds as the security.
The level of the security has vari
ed since inception in line with
the movement in the Vodafone UK
Plan deficit. Due to the impr
oved funding position
of the Plan the level of security has redu
ced significantly over the year. As at 31 March 2022 the Vodafone UK Plan retains sec
urity over €237
million (notional value) for the Vodafone Section and no security
is currently required for the CWW Section. The security may b
e substituted either
on a voluntary or mandatory basis. The Company has also provided two guarantees to the Vodafone Section of
the Vodafone UK Plan for a
combined value up to €1.48 billion to prov
ide security over the deficit under certai
n defined circumstance
s, including insolven
cy of the employers.
The Company has also ag
reed a similar guarantee of up to €1.48 billion for the CWW Section.
An additional smaller UK defined benefit plan, the THUS Plc Group Scheme, has a guarantee from the Company for up to €118 milli
on.
Vodafone Idea
As part of the agreement to merge Vodafone
India and Idea Cellular in 2017, the parties agreed a mechanism for payments between
the Group and
Vodafone Idea Limited (‘VIL’) pursuant to the difference between
the crystallisation of certain
identified contingent liabiliti
es in relation to legal,
regulatory, tax and other matters, and refun
ds relating to Vodafon
e India and Idea Cellular. Cash
payments or cash receipts relating to these matters
must have been made or received by VIL before any amount become
s due from or owed to the Group. Any future payments by the Grou
p to VIL as
a result of this agreement would only be made after satisfaction of this and other contractual conditions.
The Group’s potential exposure under this mechanism is capped at INR 64 billion (€743
million) following payments made under this mechanism
from Vodafone to VIL, in the year ended 31 March 2021, totalling INR 19 billion (€235 million). On 15 September 2021, the Gover
nment of India
announced a relief package and a series of reforms designed to
improve the liquidity and financ
ial health of the telecom sector. The reforms include
a four-year moratorium on spectrum and AGR payments and the opti
on to convert payments due on spectrum and AGR payments to equi
ty at the
end of the moratorium period, with interest on due amounts being convertible during the moratorium period; VIL elected to accep
t the options in
October and November 2021, respectively.
VIL raised INR 45 billion (€524 million) via the issue of new equi
ty in March 2022, most of which was used to settle amounts du
e to Indus. VIL
remains in need of additional liquidity support from its lender
s and intends to raise additional
equity capital. There are sign
ificant uncertainties in
relation to VIL’s ability
to make payments in relation to any remaining liabilities covered by the mechanism and no further cas
h payments are
considered probable from the Group as at 31 March 2022. The carrying value of the Group’s
investment in VIL is €nil
and the Group is recording no
further share of losses in respect of VIL. The Group’s potential exposure to liabilities within VIL is capped by the mechanism
described above;
consequently, contingent liabilities arising
from litigation in India concerning oper
ations of Vodafone India are not reported.
Indus Towers
VIL’s ability to satisfy certain payment ob
ligations under its Master Services Agreem
ents with Indus Towe
rs (the ‘MSAs’) is unc
ertain and depends on
a number of factors including its ability to raise additional fun
ding. Under the terms of the Indus and Bharti Infratel merger
in November 2020, a
security package was agreed for the benefi
t of the newly created merged
entity, Indus Towers, which co
uld be invoked in the eve
nt that VIL was
unable to make MSA payments. The security package included the following elements:
-
A prepayment in cash of INR 24 billion (€279 million) by VIL to Indus Towers in respect of its payment obligations that are und
isputed, due and
payable under the MSAs after
the merger closing. The prepayment was fully utilised during the year to 31 March 2022;
-
A primary pledge over 190.7 million shares owned by Vodafone Group in Indus Towers
having a value of INR 47 billion (€544 million) as at 31
March 2021; and
-
A secondary pledge over shares owned by Vodafone Group in Indus Towers (ranking behind Vodafone’
s existing lenders for the outs
tanding
bank borrowings of €1.4 billion as at 31 March 2022 secured against Indian assets utilised to fund Vodafone’s contribution to t
he VIL rights issue
in 2019) (‘the Bank Borrowings’) with a maximum liability cap of INR 42.5 billion (€504 million).
In the event of non-payment of relevant MSA obligations by VIL, Ind
us Towers would have recourse to the primary pledge shares a
nd, after
repayment of the Bank Borrowings in full, any secondary pledged shares, up to the value of the liability cap.
During February and March 2022, the Group announced the disposal of
the 190.7 million shares that we
re subject to the primary p
ledge in two
transactions for a combined INR 38.1 billion (€445 million). The Group invested INR 33.7 billion (€393 million) of the proceeds
by subscribing to
newly issued VIL equity,
which VIL immediately used to partia
lly settle outstanding MS
A obligations to Indus
Towers. This tran
saction resulted in an
equivalent partial release
of the primary pledge, with
the remaining INR 4.4 billion (€52 million) proceeds of the share disposal remaining secured for
further utilisation by Indus Towers.
Indus Towers has recourse against the second
ary pledge to the maximum liability cap,
from any proceeds remaining after the sett
lement of the
Bank Borrowings.
Strategic report Governance
Financials
Other information201
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
29. Contingent liabilities and legal proceedings (continued)
Legal Proceedings
The Group is currently involved in a number of legal proceedings,
including inquiries from, or discussions with, government aut
horities that are
incidental to its operations.
Legal proceedings where the Group considers that the likelihood of material future outflows of cash or other resources is more
than remote are
disclosed below. Where the Group assesses that it is probable that the outcome of legal proceedings will result in a financial
outflow, and a
reliable estimate can be made of the amount of that obligation, a provision is recognised for these amounts.
In all cases, determining the probability of successfully defending a claim against the Group involves the application of judge
ment as the
outcome is inherently uncertain. The determination of the value
of any future outflows of cash or other resources, and the timi
ng of such
outflows, involves the use of estimates. The costs incurred in complex legal proceedings, regardless of outcome, can be signifi
cant.
The Group is not involved in any material proceedings in which an
y of the Group’s Directors, members of senior management or af
filiates are
either a party adverse to the Group or have a material interest adverse to the Group.
Indian tax cases
In
January 2012, the Supreme Court of India found against the India
n tax authority and in favour of Vodafone International Holdin
gs BV (‘VIHBV’)
in proceedings brought after the Indian ta
x authority alleged potential liability unde
r the Income Tax Act 1961 for the failure
by VIHBV to deduct
withholding tax from consideration paid to the Hutchison Telecommunications International Limited group (‘HTIL’) in connection
with its 2007
disposal to VIHBV of its interests in a wholly-owned Cayman Island incorporated subsidiary that indirectly held interests in Vo
dafone India
Limited (‘Vodafone India’).
The Finance Act 2012 of India, which amended various provisions of the Income Tax Act 1961 with retrospective effect, contained
provisions
intended to tax any gain on transfer of shares in a non-Indian company, which derives substantial value from underlying Indian
assets, such as
VIHBV’s transaction with HTIL in 2007. Further, it sought to subject a purchaser, such as VIHBV, to a retrospective obligation
to withhold tax. On 3
January 2013, VIHBV received a letter from the Indian tax author
ity reminding it of the tax demand raised prior to the Supreme
Court of India’s
judgement and updating the interest element of
that demand to a total amount of INR142
billion, which included principal and interest as
calculated by the Indian tax authority but did not include penalties. On 12 February 2016, VIHBV received a notice dated 4 Febr
uary 2016 of an
outstanding tax demand of INR221 billion (plus interest). On 29 September 2017, VIHBV received an electronically generated dema
nd in
respect of alleged principal, interest and pe
nalties in the amount of INR190.7 billion.
VIHBV initiated arbitration proceedings under the Netherlands-India
Bilateral Investment Treaty (‘Dutch BIT’) on 17 April 2014.
In September
2020, the arbitration tribunal issued its award unanimously rulin
g in Vodafone’s favour. The Indian Government applied to set a
side the award
primarily on jurisdictional grounds. The proceedings have been
transferred to the Singapore In
ternational Commercial Court (‘SI
CC’).
Separately, on 24 January 2017, Vodafone Group Plc and Vodafone Consolidated Holdings Limited formally commenced arbitration wi
th the
Indian Government under the United Kingdom-India Bilateral Investme
nt Treaty (‘UK BIT’). Although relating to the same underlyi
ng facts as the
claim under the Dutch BIT, the UK BIT claim is a separate and distinct claim under a different treaty and includes independent
claims relating to
disputes between the Indian tax authority and Vo
dafone India Services Private Limited (‘VISPL’)
(see below). In 2020, following attempts by the
Indian Government to obtain a court injunction preventing Vodafone from progressing the UK BIT arbitration, the Delhi High Cour
t ordered that
Vodafone shall proceed with the UK BIT arbitration only if the award already published under the Dutch BIT is set aside.
In August 2021 the Indian Parliament passed new legislation which affects the retrospective effect of the Finance Act 2012. The
impact of this
legislation on the Dutch and UK BIT proceedings, in particular
whether the Indian Government will withdraw its challenge to the
arbitration
award in the Dutch BIT, is unknown as of the date of this report
. The SICC granted a stay in th
e Dutch BIT proceedings to 15 Ju
ne 2022.
VIHBV and Vodafone Group Plc will continue to defend vigorously
any allegation that VIHBV or Vodafone India is liable to pay ta
x in connection
with the transaction with HTIL. Based on the facts and circumstances of this matter, including the outcome of legal proceedings
to date, the
Group considers that it is more likely than not that no present obligation exists at 31 March 2022.
VISPL tax claims
VISPL is involved in a
number of tax cases. The total value of the claims is approximately €500 million plus interest, and penalties of up to 300%
of the principal.
Of the individual tax claims, the most sign
ificant is in the amount of approximately €254 million (plus interest of €614 millio
n), which VISPL has
been assessed as owing in respect of (i) a transfer pricing marg
in charged for the international call centre of HTIL prior to t
he 2007 transaction
with Vodafone for HTIL assets in India; (ii) the sale of the international call centre by VISPL to HTIL; and (iii) the acquisit
ion of and/or the alleged
transfer of options held by VISPL in Vodafone India. A stay of the tax demand on a deposit of £20 million and a corporate guara
ntee by VIHBV
for the balance of tax assessed are in place. On 8 October 2015, the Bombay High Court ruled in favour of Vodafone in relation
to the options
and the call centre sale. The Indian Tax Authority has appealed
to the Supreme Court of India.
The appeal hearing has been adjo
urned
indefinitely.
While there is some uncertainty as to the outcome of
the tax cases involving VISPL, the Group believes it
has valid defences and does not
consider it probable that a financial outflow will be required to settle these cases.
Strategic report Governance
Financials
Other information202
Vodafone Group Plc
Annual Report 2022
Other cases in the Group
Spain and UK: TOT v Vodafone Group Plc, VGSL, and Vodafone UK
The Group has been defending cases brought against it in Spain and the UK by TOT Power Control and Top Optimized Technologies (
jointly
‘TOT’) alleging breach of confidentiality and patent infringement. In November 2021 TOT withdrew all of its claims against the
Group in Spain
and the UK as part of an agreed settlement.
Further background relating to these claims is provided in the Group’s Annual Report for the financial year ended 31 March 2021
.
Germany: Kabel Deutschland takeover - class actions
The German courts have been determining the adequacy of the ma
ndatory cash offer made to minority shareholders in Vodafone’s ta
keover of
Kabel Deutschland. Hearings took place in May 2019 and a decision was delivered in November 2019 in Vodafone’s favour, rejectin
g all claims
by minority shareholders. A number of shareholders appealed which was rejected by the court in December 2021. Several minority
shareholders have filed a further appeal before the Federal Court of Justice. The appeal process is ongoing. While the outcome
is uncertain, the
Group believes it has valid defences and that the outcome of the appeal will
be favourable to Vodafone.
Italy: Iliad v Vodafone Italy
In July 2019, Iliad filed a claim for €500 million against Vodafone Italy in the Civil Court of Milan. The claim alleges anti-c
ompetitive behaviour in
relation to portability and certain advertising campaigns by Voda
fone Italy. Preliminary hearings have taken place, including o
ne at which the
Court rejected Iliad’s application for a cease and desist order against alleged misleading advertising by Vodafone. The main he
aring on the
merits of the claim took place on 8 June 2021 and we are waiting to receive the judgement.
The Group is currently unable to estimate any possible loss in
this claim in the event of an adverse judgement but while the ou
tcome is
uncertain, the Group believes it has valid defences and that it is probable that no present obligation exists.
Greece: Papistas Holdings SA, Mobile Trade Stores (formerly Papistas SA) and Athanasios and Loukia Papistas v Vodafone Greece
In October 2019, Mr. and Mrs. Papistas, and companies owned or controlled by them, filed several new claims against Vodafone Gr
eece with a
total value of approximately €330 million for purported damage caused by the alleged abuse of dominance and wrongful terminatio
n
of a
franchise arrangement with a Papistas company. Lawsuits which the Papistas claimants had previously brought against Vodafone Gr
oup Plc and
certain Directors and officers of Vodafone were withdrawn. Vodafone Greece filed a counter claim and all claims were heard in F
ebruary 2020.
All of the Papistas claims were rejected by the Greek Court becaus
e the stamp duty payments requir
ed to have the merits of the
case
considered had not been made. Vodafone Greece’s counter claim was also rejected. The Papistas claimants and Vodafone Greece ha
ve each
filed appeals and, subject to the Papistas claimants paying the
requisite stamp duty, the hearing on the merits of these appeal
s will take place in
early 2023.
The amount claimed in these lawsuits is substantial and, if th
e claimants are successful, the to
tal potential liability could b
e material. However,
we are continuing vigorously to defend the claims and based on the progress of the litigation so far the Group believes that it
is highly unlikely
that there will be an adverse ruling for the Group. On this ba
sis, the Group does not expect the outcome of these claims to hav
e a material
financial impact.
UK: Phones 4U in Administration v
Vodafone Limited and Vodafone Group Plc and Others
In December 2018, the administrators of former UK indirect seller,
Phones 4U, sued the three main UK mobile network operators (
‘MNOs’),
including Vodafone, and their parent companies. The administrators allege collusion between the MNOs to pull their business fro
m Phones 4U
thereby causing its collapse. Vodafone and the other defendants
filed their defences in April 2019 and the Administrators filed
their replies in
October 2019. Disclosure has taken place and witness statements
were filed in December 2021. The judge has also ordered that t
here should
be a split trial between liability and damage
s. The first trial started in May 2022.
Taking into account all available evidence, the Group assesses it to
be more likely than not that a present obligation does not
exist and that the
allegations of collusion are completely without merit; the Group is vigorously defending the claim. The value of the claim is n
ot pleaded but we
understand it to be the total value of the business, allegedly equivalent to approximately £1 billion with the addition of alle
ged exemplary
damages. Vodafone’s alleged share of the liability is also not pleaded. The Group is not able to
estimate any possible loss in the event of an
adverse judgment.
Strategic report Governance
Financials
Other information203
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
30. Related party transactions
The Group has a number of related parties including jo
int arrangements and associ
ates, pension schemes and
Directors and Executive Committee members (see note 12 ‘Investments in associates and joint arrangements’,
note 25 ‘Post employment benefits’ and note 23 ‘Directors and key management compensation’).
Transactions with joint arrangements and associates
Related party transactions with the Group’s
joint arrangements and associates primaril
y comprise fees for the use of products a
nd services including
network airtime and access charges, fees for the provision of network infrastructure and cash pooling arrangements. No related
party transactions
have been entered into d
uring the year which might reasonably affect any decisions made by the users of these consolidated fina
ncial statements
except as disclosed below.
2022
2021 2020
€m
€m €m
Sales of goods and
services to associates
20
14
32
Purchase of goods and services from associates
10
5
4
Sales of goods and servic
es to joint arrangements
221
203
305
Purchase of goods and serv
ices from joint arrangements
298
109
97
Interest income receivable
from joint arrangements
1
48
65
71
Interest expense payable to joint arrangements
1
52
56
–
Trade balances owed:
by associates
8
3
4
to associates
6
5
4
by joint arrangements
139
88
157
to joint arrangements
34
31
37
Other balances owed
by associates
80
56
–
Other balances owed
by joint arrangements
1
1,080
955
1,083
Other balances owed
to joint arrangements
2
1,561
1,575
2,017
Notes:
1
Amounts arise primarily through VodafoneZiggo, TPG Telecom Limited
and INWIT S.p.A.. Interest is paid in line with market rates
.
2
Amounts are primarily in relation to le
ases of tower space from INWIT S.p.A.
Dividends received from associates and joint ventures are disclosed in the consolidated statement of cash flows.
Transactions with Directors other than compensation
During the three years ended 31 March 2022 and as of 17 May 2022, no Director nor any other executive officer, nor any associat
e of any Director
or any other executive officer, was indebted to the Group. During the three years ended 31 March 2022 and as of 17 May 2022, th
e Group has not
been a party to any other material transaction, or proposed transactions, in which any member of the key management personnel (
including
Directors, any other executive officer, senior manager, any spouse or relative of any of the foregoing or any relative of such
spouse) had or was to
have a direct or indirect material interest.
Strategic report Governance
Financials
Other information204
Vodafone Group Plc
Annual Report 2022
31. Related undertakings
A full list of all of our subsidiaries, joint arrangements and associated undertakings is detailed below.
A full list of subsidiaries, joint arrangements and associated
undertakings (as defined in the Large and Medium-sized Companies
and Groups
(Accounts and Reports) Regulations 2008) as at 31 March 2022 is detailed below. No subsidiaries are excluded from the Group con
solidation.
Unless otherwise stated the Company’s subsidiaries all have shar
e capital consisting solely of ordinary shares and are indirect
ly held. The
percentage held by Group companies reflect both the proportion of nominal capital and voting rights unless otherwise stated. Su
mmarised
financial information is provided in respect of the Group’s most
significant joint arrangements and associates in note 12 ‘Inve
stments in
associates and joint arrangements’.
Subsidiaries
Accounting policies
A subsidiary is an entity directly or indirectly controlled by the Company. Control is achieved where the Company has existing
rights that give it
the current ability to direct the activities that affect the Company’s returns and exposure or rights to variable returns from
the entity. The results
of subsidiaries acquired or disposed of during the year are in
cluded in the consolidated income statement from the effective da
te of acquisition
or up to the
effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries t
o
bring their accounting policies into line with those used by
the Group. All intra-group transa
ctions, balances, income and expe
nses are
eliminated on consolidation. Non-controlling interests in the net
assets of consolidated subsidiaries are identified separately
from the Group’s
equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combina
tion and the non-
controlling shareholder’s share of changes in equity since the date of the combination. Total comprehensive income is attribute
d to non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
Company name
% of shar
e
class held b
y
Group
Companie
s
Share clas
s
A
lbania
Autostrada Tirane-Durres, Rruga: “Pavaresia”, Nr 61, Kashar,
Tirana, Albania
Vodafone Albania Sh.A 99.94 Ordinary shares
Lagjia Kongresi Përmetit, Bulevardi
"Jakov Xoxa", pallati nr. 5,
kati nr. 1, Fier, Albania
ApNet SHPK
99.94
Ordinary shares
Rruga "Ibrahim Rugova", Sky Tower, Kati i 5, Hyrja 2, Tiranë,
1000, Albania
_
VOIS Albania ShpK. 100.0
0
Ordinary shares
A
rgentina
Cerrito 348, 5 to B, C1010AAH, Buenos Aires, Argentina
CWGNL S.A. (in process of dissolution) 100.0
0
Ordinary share
s
A
ustralia
Mills Oakley, Level 7, 151 Clarence Street, Sydney NSW 2000,
Australia
Vodafone Enterprise Australia Pty
Limited
100.0
0
Ordinary shares
A
ustria
c/o Stolitzka & Partner Rechtsanwälte OG,
Kärntner Ring 12, 3. Stock, 1010, Wien, Austria
Vodafone Enterprise Austria GmbH 100.0
0
Ordinary shares
Bahrain
RSM Bahrain, 3rd Floor Falcon Tower, Diplomatic Area,
Manama, PO BOX 11816, Bahrain
Vodafone Enterprise Bahrain W.L.L. 100.0
0
Ordinary shares
Belgium
Company name
% of shar
e
class held b
y
Group
Companie
s
Share class
Malta House, rue Archimède 25, 1000 Bruxelles, Belgium
Vodafone Belgium SA/NV 100.0
0
Ordinary shares
Brazil
Avenida Cidade Jardim, 400, 7th and 20th Floors,
Jardim Paulistano, São Paulo, Brazil, 01454-000
Vodafone Serviços Empresariais Brasil
Ltda.
100.0
0
Ordinary shares
Av José Rocha Bonfim, 214, Cond Praça Capital – Edifício
Toronto, sls 228/229 13080-900 Jardim Santa Genebra –
Campinas, São Paulo, Brazil
Cobra do Brasil Serviços de
Telemàtica ltda. (in process
of dissolution)
70.0
0
Ordinary shares
Av Paulista 37 – 4º andar, Sala 427, Bela Vista, CEP, 01311 –
902, São Paulo, Brazil
Vodafone Empresa Brasil
Telecomunicações Ltda
100.0
0
Ordinary shares
Bulgaria
10 Tsar Osvoboditel Blvd., 3rd
Floor, Spredets Region, Sofia,
1000, Bulgaria
Vodafone Enterprise Bulgaria EOOD 100.0
0
Ordinary shares
Canada
c/o ARC Information Services Inc., 3-84 Castlebury Crescent,
Toronto ON M2H 1W8, Canada
Vodafone Canada Inc. 100.0
0
Common shares
Cayman Islands
One Nexus Way, Camana Bay, Grand Cayman, KY1-9005,
Cayman Islands
CGP Investments (Holdings) Limited 100.0
0
Ordinary shares
Company name
% of shar
e
class held b
y
Group
Companie
s
Share class
Chile
222 Miraflores, P.28, Santiago, Metrop, 97-763, Chile
Vodafone Enterprise Chile S.A. 100.0
0
Ordinary shares
China
Building 21, 11, Kangding St., BDA, Beijing, 100176 – China
Vodafone Automotive Technologies
(Beijing) Co, Ltd
100.0
0
Ordinary shares
Level 9, Tower 2, China Central Place, Room 941, No.79 Jianguo
Road, Chaoyang District, Beijing, 100025, China
Vodafone Enterprise
Communications Technical Service
(Shanghai) Co., Ltd. Beijing Branch
2
100.0
0
Branch
Room 1603, 16
th
Floor, 1200 Pudong Avenue, Free Trade Zone,
Shanghai, China
Vodafone Enterprise
Communications Technical Service
(Shanghai) Co., Ltd.
100.0
0
Ordinary shares
Congo, The Democratic Republic of the
292 Avenue de La Justice, Commune de la Gombe, Kinshasa, Th
e
Democratic Republic of the Congo
Vodacom Congo (RDC) SA
5
30.85 Ordinary shares
Building Comimmo II Ground Floor Right, 3157 Boulevard du 30
Juin, Commune de la Gombe, Kinshasa, DRC Congo, The
Democratic Republic of the
Vodacash S.A.
5
30.85 Ordinary shares
Cyprus
Ali R
Ŧ
za Efendi Caddesi No:33/A Ortaköy, Lefko
Ɣ
a, Cyprus
Vodafone Evde Operations Ltd 100.0
0
Ordinary shares
Vodafone Mobile Operations Limited 100.0
0
Ordinary shares
Strategic report Governance
Financials
Other information205
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
31. Related undertakings (continued)
Czech Republic
n
Ą
m
Ģ
stí Junkových 2, Prague 5, Czech Republic, 155 00, Czech
Republic
Nadace Vodafone
ç
esk
¼ Republika 100.00 Truste
e
Oskar Mobil S.R.O. 100.00 Ordinary shares
Vodafone Czech Republic A.S. 100.00 Ordinary shares
Vodafone Enterprise Europe (UK)
Limited - Czech Branch
2
100.00 Branc
h
Praha 4, Nusle, Závišova 502/5, 14000, Czech Republic
Vantage Towers 2 s.r.o. 100.00 Ordinary share
s
Vantage Towers s.r.o.
4
81.74 Ordinary share
s
Z
¼
vi
w
ova Real Estate, s.r.o. 100.00 Ordinary share
s
Denmark
Tuborg Boulevard 12, 2900, Hellerup, Denmark
Vodafone Enterprise Denmark A/S 100.0
0
Ordinary (DKK
)
shares
Egypt
37 Kaser El Nil St, 4th. Floor, Cairo, Egypt
Starnet 55.0
0
Ordinary shares
54 El Batal Ahmed Abed El
Aziz, Mohandseen, Giza, Egypt
Sarmady Communications 55.0
0
Ordinary shares
Building no. 2109 “VHUB1”, Smart Village, Cairo Alexandria,
Egypt
Vodafone International Services LLC 100.0
0
Ordinary shares
Site No 15/3C, Central Axis, 6th October City, Egypt
Vodafone Egypt
Telecommunications S.A.E.
55.0
0
Ordinary shares
Smart Village C3 Vodafone Building, Egypt
Vodafone Data 55.0
0
Ordinary shares
V
odafone Building Zahraa EL Maadi, Building A, Service Area D,
Maadi, Cairo, Egypt
Vodafone For Trading 54.95 Ordinary shares
Finland
c/o Eversheds Asianajotoimisto Oy, Fabianinkatu 29 B, Helsinki,
00100, Finland
Vodafone Enterprise Finland OY 100.0
0
Ordinary share
s
France
1300 route de Cretes, Le WTC, Bat I1, 06560, Valbonne Soph,
France
Vodafone Automotive Telematics
Development S.A.S
100.0
0
Ordinary shares
EuroPlaza Tour, 20 Avenue Andr
e Prothin, La Défense Cedex-
France (149153), 92400, Courbevoie, France
Vodafone Automotive France S.A.S 100.0
0
Ordinary shares
Vodafone Enterprise France SAS 100.0
0
New eur
o
shares
Rue Champollion, 22300, Lannion, France
Apollo Submarine Cable System Ltd
–
French Branch
2
100.0
0
Branc
h
Germany
Aachener Str. 746-750, 50933, Köln, Germany
Arena Sport Rechte Marketing GmbH
i.L (in liquidation)
100.0
0
Ordinary share
s
Altes Forsthaus 2, 67661, Kaiserslautern, Germany
TKS Telepost Kabel-Service
Kaiserslautern GmbH
3
93.8
4
Ordinary shares
Betastraße 6-8, 85774 Unterföhring, Germany
Kabel Deutschland Holding AG 93.8
4
Ordinary shares
Vodafone Customer Care GmbH
3
93.8
4
Ordinary shares
Vodafone Deutschland GmbH 93.8
4
Ordinary shares
Buschurweg 4, 76870, Kandel, Germany
Vodafone Automotive Deutschland
GmbH
100.0
0
Ordinary shares
Ferdinand-Braun-Platz 1, 40549, Duesseldorf, Germany
Vodafone Enterprise Germany GmbH 100.0
0
Ordinary share
s
Vodafone GmbH 100.0
0
Ordinary
A
shares, Ordinar
y
B share
s
Vodafone Group Services GmbH 100.0
0
Ordinary shares
Vodafone Institut für Gesellschaft und
Kommunikation GmbH
100.0
0
Ordinary shares
Vodafone Stiftung Deutschland
Gemeinnutzige GmbH
100.0
0
Ordinary shares
Vodafone Vierte Verwaltungs AG 100.0
0
Ordinary shares
Vodafone West GmbH 100.0
0
Ordinary share
s
Friedrich-Wilhelm-Strasse 2, 38100, Braunschweig, Germany
KABELCOM Braunschweig
Gesellschaft Fur Breitbandkabel-
Kommunikation Mit Beschrankter
Haftung
3
93.8
4
Ordinary shares
Helmholtzstaße. 2-9, Gerbäude 10587, Berlin, Germany
Vodafone Service GmbH 100.0
0
Ordinary share
s
Holzmarkt 1, 50676, Köln, North Rhine-Westphalia, Germany
Grandcentrix GmbH 100.0
0
Ordinary share
s
Nobelstrasse 55, 18059, Rostock, Germany
p
Urbana Teleunion
q
Rostock GmbH &
Co.KG
3
65.6
9
Ordinary shares
Prinzenallee 11-13, 40549, Düsseldorf, Germany
Vantage Towers AG 81.74 Ordinary share
s
Vantage Towers Erste Verwaltungsgesellschaft
mbH
4
81.74 Ordinary share
s
Vantage Towers Zweite
Verwaltungsgesellschaft mbH
4
81.74 Ordinary share
s
Seilerstrasse 18, 38440, Wolfsburg, Germany
KABELCOM Wolfsburg Gesellschaft
Fur Breitbandkabel-Kommunikation
Mit Beschrankter Haftung
3
93.8
4
Ordinary shares
Ghana
Manet Tower A, South Liberation
Link, Airport City, Accra,
Ghana
Ghana Telecommunications
Company Limited
70.0
0
Ordinary shares,
Preferenc
e
share
s
Vodacom Business (Ghana) Limited 70.0
0
Ordinary shares,
Preferenc
e
share
s
Vodafone Ghana Mobile Financial
Services Limited
70.0
0
Ordinary share
s
Telecom House, Nsawam Road, Accra-North,
Greater Accra Region, PMB 221, Ghana
National Communications Backbone
Company Limited
70.0
0
Ordinary shares
Greece
1-3 Tzavella str, 152 31 Halandri, Athens, Greece
Vodafone-Panafon Hellenic
Telecommunications Company S.A.
99.87 Ordinary shares
12,5 km National Road Athens – Lamia,
Metamorfosi / Athens, 14452, Greece
Vodafone Innovus S.A. 99.87 Ordinary shares
2 Adrianeiou str, Athens, 11525, Greece
Vantage Towers Single Member
Societe Anonyme
4
81.74 Ordinary shares
Pireos 163 & Ehelidon, Athens, 11854, Greece
360 Connect S.A. 99.87 Ordinary shares
Guernsey
Martello Court, Admiral Park, St. Peter Port, GY1 3HB,
Guernsey
FB Holdings Limited 100.0
0
Ordinary shares
Le Bunt Holdings Limited 100.0
0
Ordinary shares
Silver Stream Investments Limited 100.0
0
Ordinary shares
Roseneath, The Grange, St Peter Port, GY1 2QJ, Guernsey
VBA Holdings Limited
5
60.5
0
Ordinary share
s
and non-voting,
irredeemable,
non-cumulativ
e
preferenc
e
share
s
VBA International Limited
5
60.5
0
Ordinary shares,
and non-voting,
irredeemable,
non-convertible,
non-cumulativ
e
preferenc
e
share
s
Hong Kong
Level 24, Dorset House, Taikoo Place, 979 King
͛
s Road, Quarry
Bay, Hong Kong
Vodafone Enterprise Hong Kong Ltd 100.0
0
Ordinary shares
Hungary
40-44 Hungaria Krt., Budapest, H-1087, Hungary
VSSB Vodafone Szolgáltató Központ
Budapest Zártkör
ň
en M
ň
köd
ĬRészvénytársaság
100.0
0
Registered
ordinary shares
6 Lechner Ödön fasor, Budapest, 1096, Hungary
Vantage Towers Zártkör
ň
en M
ň
köd
ĬRészvénytársaság
4
81.74 Ordinary share
s
Vodafone Magyarország Távközlési
Zártkör
ň
en M
ň
köd
ĬRészvénytársaság
100.0
0
Series
A
Registered
common shares
Strategic report Governance
Financials
Other information206
Vodafone Group Plc
Annual Report 2022
India
10th Floor, Tower A&B, Global Technology Park, (Maple Tree
Building), Marathahalli Outer Ring Road, Devarabeesanahalli
Village, Varthur Hobli, Bengaluru, Karnataka, 560103, India
Cable & Wireless Networks India
Private Limited
100.0
0
Equity shares
Cable and Wireless (India) Limited –
Branch
2
100.0
0
Branch
Cable and Wireless Global (India)
Private Limited
100.0
0
Equity share
s
201 - 206, Shiv Smriti Chambers, 49/A, Dr. Annie Besant Road,
Worli, Mumbai, Maharashtra, 400018, India
Omega Telecom Holdings Private
Limited
100.0
0
Equity shares
Vodafone India Services Private Ltd 100.0
0
Equity share
s
Business@Mantri, Tower B, Wing no – B1 & B2, 3rd Floor, S.
No. – 197, Near Hotel Four Points, Lohegaon, Pune,
Maharashtra, 411014, India
Vodafone Global Services Private Ltd 100.0
0
Equity share
s
E-47, Bankra Super Market, Bankra, Howrah, West Bengal,
711403, India
Usha Martin Telematics Limited 100.0
0
Equity share
s
Ireland
2nd Floor, Palmerston House, Feni
an Street, Dublin 2, Ireland
Vodafone International Financing
Designated Activity Company
100.00 Ordinary shares
38/39 Fitzwilliam Square West, Dublin 2, D02 NX53, Ireland
Vodafone Enterprise Global Limited
100.00
Ordinary shares
Vodafone Global Network Limited 100.00 Ordinary shares
Mountainview, Leopardstown, Dublin 18, Ireland
Vantage Towers Limited
4
81.74 Ordinary share
s
VF Ireland Property Holdings Limited 100.0
0
Ordinary euro
shares
Vodafone Group Services Ireland
Limited
100.0
0
Ordinary shares
Vodafone Ireland Limited 100.0
0
Ordinary shares
Vodafone Ireland Marketing Limited 100.0
0
Ordinary shares
Vodafone Ireland Retail Limited 100.0
0
Ordinary share
s
Italy
Piazzale Luigi Cadorna, 4, 20123, Milano, Italy
Vodafone Global Enterprise (Italy)
S.R.L.
100.0
0
Ordinary shares
SS 33 del Sempione KM 35, 212, 21052 Busto Arsizio (VA), Italy
Vodafone Automotive Italia S.p.A 100.0
0
Ordinary shares
Via Astico 41, 21100 Varese, Italy
Vodafone Automotive Electronic
Systems S.r.L
100.0
0
Ordinary shares
Vodafone Automotive SpA 100.0
0
Ordinary shares
Vodafone Automotive Telematics Srl 100.0
0
Ordinary share
s
Via Jervis 13, 10015, Ivrea, Tourin, Italy
VEI S.r.l. 100.0
0
Partnership interes
t
shares
Vodafone Italia S.p.A. 100.0
0
Ordinary shares
Via Lorenteggio 240, 20147, Milan, Italy
Vodafone Enterprise Italy S.r.L 100.0
0
Euro shares
Vodafone Gestioni S.p.A. 100.0
0
Ordinary shares
Vodafone Servizi E Tecnologie S.R.L. 100.0
0
Equity shares
Via per Carpi 26/B, 42015, Correggio (RE), Italy
VND S.p.A 100.0
0
Ordinary shares
Japan
KAKiYa building, 9F, 2-7-17 Shin-Yokohama, Kohoku-ku,
Yokoha- City, Kanagawa, 222-0033, Japan
Vodafone Automotive Japan KK 100.0
0
Ordinary shares
Marunouchi Trust Tower North 15F, 8-1, Marunouchi 1-chome,
Level 15, Chiyoda-ku, Tokyo, Japan
Vodafone Enterprise U.K. –
Japanese Branch
2
100.0
0
Branch
Vodafone Global Enterprise (Japan)
K.K.
100.0
0
Ordinary shares
Jersey
44 Esplanade, St Helier, JE4 9WG, Jersey
Aztec Limited 100.0
0
Ordinary shares
Globe Limited 100.0
0
Ordinary shares
Plex Limited 100.0
0
Ordinary shares
Vizzavi Finance Limited 99.9
9
Ordinary shares
Vodafone International 2 Limited 100.0
0
Ordinary shares
Vodafone Jersey Dollar Holdings
Limited
100.0
0
Limited liabilit
y
shares
Vodafone Jersey Finance 100.0
0
Ordinary shares
Vodafone Jersey Yen Holdings
Unlimited
100.0
0
Limited liabilit
y
shares
Kenya
6th Floor, ABC Towers, ABC Place, Waiyaki Way, Nairobi,
00100, Kenya
M-PESA Holding Co. Limited 100.0
0
Equity shares
Vodafone Kenya Limited
5
65.43 Ordinary voting
shares
The Riverfront, 4th floor, Prof. David Wasawo Drive, Off Riverside
Drive, Nairobi, Kenya
Vodacom Business (Kenya) Limited
5
48.4
0
Ordinary shares,
Ordinary B shares
Korea, Republic of
ASEM Tower Level 37, 517 Yeongdong-daero, Gangnam-gu,
Seoul, 135-798, Korea, Republic of
Vodafone Enterprise Korea Limited 100.0
0
Ordinary shares
Lesotho
585 Mabile Road, Vodacom Park, Maseru, Lesotho
Vodacom Lesotho (Pty) Limited
5
48.40
Ordinary shares
Luxembourg
15 rue Edward Steichen, Luxembourg, 2540, Luxembourg
Tomorrow Street GP S.à r.l. 100.0
0
Ordinary shares
Vodafone Asset Management
Services S.à r.l.
100.0
0
Ordinary shares
Vodafone Enterprise Global
Businesses S.à r.l.
100.0
0
Ordinary shares
Vodafone Enterprise Luxembourg S.A. 100.0
0
Ordinary euro
share
s
Vodafone International 1 S.à r.l. 100.0
0
Ordinary shares
Vodafone International M S.à r.l. 100.0
0
Ordinary shares
Vodafone Investments Luxembourg
S.à r.l.
100.0
0
Ordinary shares
Vodafone Luxembourg 5 S.à r.l. 100.0
0
Ordinary shares
Vodafone Luxembourg S.à r.l. 100.0
0
Ordinary shares
Vodafone Procurement Company S.à
r.l.
100.0
0
Ordinary shares
Vodafone Roaming Services S.à r.l. 100.0
0
Ordinary shares
Vodafone Services Company S.à r.l. 100.0
0
Ordinary shares
Malaysia
Suite 13.03, 13th Floor, Menara Tan & Tan,
207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia
Vodafone Global Enterprise (Malaysia)
Sdn Bhd
100.0
0
Ordinary shares
Malta
Portomaso Business Tower, Level 15B, St Julians, STJ 4011,
Malta
Vodafone Holdings Limited 100.0
0
‘A’ Ordinary shares,
‘B’ Ordinary share
s
Vodafone Insurance Limited 100.0
0
‘A’ Ordinary shares,
‘B’ Ordinary shares
Mauritius
10th Floor, Standard Chartered Towers, 19 Cybercity, Ebene,
Mauritius
Mobile Wallet VM1
5
60.5
0
Ordinary shares
Mobile Wallet VM2
5
60.5
0
Ordinary shares
VBA (Mauritius) Limited
5
60.5
0
Ordinary shares,
Redeemable
preference shares
Vodacom International Limited
5
60.5
0
Ordinary shares,
Non-cumulative
preference shares
Fifth Floor, Ebene Esplanade, 24 Bank Street, Cybercity, Ebene,
Mauritius
Al-Amin Investments Limited 100.0
0
Ordinary shares
Array Holdings Limited 100.0
0
Ordinary shares
Asian Telecommunication
Investments (Mauritius) Limited
100.0
0
Ordinary shares
CCII (Mauritius), Inc. 100.0
0
Ordinary shares
CGP India Investments Ltd. 100.0
0
Ordinary shares
Euro Pacific Securities Ltd. 100.0
0
Ordinary shares
Mobilvest 100.0
0
Ordinary shares
Prime Metals Ltd. 100.0
0
Ordinary shares
Trans Crystal Ltd. 100.0
0
Ordinary shares
Vodafone Mauritius Ltd. 100.0
0
Ordinary shares
Vodafone Tele-Services (India)
Holdings Limited
100.0
0
Ordinary shares
Vodafone Telecommunications
(India) Limited
100.0
0
Ordinary shares
Strategic report Governance
Financials
Other information207
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
31. Related undertakings (continued)
Mexico
Avenida Insurgentes Sur No. 1647, Piso 12, despacho 1202,
Colonia San José Insurgentes, Alcaldía Benito Juárez, C.P.
03900, Ciudad de México, Mexico
Vodafone Empresa México S.de R.L.
de C.V.
100.0
0
Corporate certificat
e
series A shares
,
Corporate certificat
e
series B shares
Mozambique
Rua dos Desportistas, Numero 649, Cidade de Maputo,
Mozambique
Vodacom Moçambique, SA
5
51.42 Ordinary share
s
Vodafone M-Pesa, S.A
5
51.42 Ordinary share
s
Netherlands
Rivium Quadrant 173, 15th Floor, 2909 LC, Capelle aan den
IJssel, Netherlands
Vodafone Enterprise Netherlands B.V. 100.0
0
Ordinary shares
Vodafone Europe B.V. 100.0
0
Ordinary shares
Vodafone International Holdings B.V. 100.0
0
Ordinary shares
Vodafone Panafon International
Holdings B.V.
99.87 Ordinary shares
Rivium Quadrant 175, 2909 LC, Capelle aan den IJssel,
Netherlands
Central Tower Holding Company B.V.
4
81.74 Ordinary share
s
and specia
l
share
s
Zuid-hollanden 7, Rode Olifant, Spaces, 2596AL, den
Haag,
Netherlands
IoT.nxt USA BV
5
30.87 Ordinary shares
IOT.NXT B.V.
5
30.87 Ordinary shares
IoT.nxt Europe BV
5
30.87 Ordinary shares
New Zealand
74 Taharoto Road, Takapuna,
Auckland, 0622, New Zealand
Vodafone Enterprise Hong Kong
Limited - New Zealand Branch
2
100.0
0
Branch
Norway
c/o EconPartner AS, Dronning Mauds gate 15, Oslo, 0250,
Norway
Vodafone Enterprise Norway AS 100.0
0
Ordinary share
s
Vodafone House, The Connection, Newbury, Berkshire, RG14
2FN, United Kingdom
Vodafone Limited – Norway Branch
2
100.0
0
Branc
h
Oman
Knowledge Oasis Muscat, Al-seeb, Muscat, Governorate P.O Box
104 135, Oman
Vodafone Services LLC 100.0
0
Share
s
Poland
ul. Towarowa 28, 00-839, Warsaw, Poland
Vodafone Business Poland sp. z o.o. 100.0
0
Ordinary shares
Portugal
Av. D. João II, nº 36 – 8º Piso, 1998 – 017, Parque das Nações,
Lisboa, Portugal
Oni Way - Infocomunicacoes, S.A 100.0
0
Ordinary shares
Vantage Towers, S.A.
4
81.7
4
Ordinary share
s
Vodafone Enterprise Spain, S.L.U. -
Portugal Branch
2
100.0
0
Branch
Vodafone Portugal - Comunicacoes
Pessoais, S.A.
100.0
0
Ordinary shares
Romania
1 A Constantin Ghercu Street, 10th Floor, 6
th
District, Bucharest,
Romania
UPC Services S.R.L. (in liquidation) 100.0
0
Ordinary share
s
201 Barbu Vacarescu, 4th Floor, 2nd District,
Bucharest, Romania
Vodafone Romania S.A 100.00 Ordinary shares
201 Barbu Vacarescu, 5th Floor, 2nd District,
Bucharest, Romania
Vodafone External Services S.R.L. 100.0
0
Ordinary share
s
201 Barbu Vacarescu Street, Mezzanine, District 2, Bucharest,
Romania
Vodafone Foundation 100.00 Sole member
201 Barbu Vacarescu Street, Mezzanine, Room 1, District 2,
Bucharest, Romania
Vantage Towers S.R.L.
4
62D Nordului Street, District 1, Bucharest, Romania
UPC Foundation 100.00 Sole member
Oltenitei Street no. 2, City Offices Building, 3rd Floor, Bucharest,
4th District, Romania
Vodafone România Technologies SRL 100.0
0
Ordinary shares
Sectorul 2, Strada Barbu V
ĉ
c
ĉ
rescu, Nr. 201, Etaj 1, Bucharest,
Romania
Vodafone România M - Payments
SRL 100.00 Ordinary shares
c
oseaua Vestului no. 1A, West Mall Ploie
ƕti, First Floor, Ploie
ƕti,
Romania
Evotracking SRL 100.0
0
Ordinary shares
Russian Federation
Build. 2, 14/10, Chayanova str., 125047, Moscow, Russian
Federation
Cable & Wireless CIS Svyaz LLC 100.0
0
Charter capita
l
shares
Serbia
Vladimira Popovi
đ
a 38-40, New Belgrade, 11070, Serbia
Vodafone Enterprise Equipment
Limited Ogranak u Beogradu - Serbia
Branch
2
100.0
0
Branch
Singapore
Asia Square Tower 2, 12 Marina View, #17-01, 018961,
Singapore
Vodafone Enterprise Singapore
Pte.Ltd
100.0
0
Ordinary shares
Slovakia
Prievozská 6, Bratislava, 821 09, Slovakia
Vodafone Czech Republic A.S. –
Slovakia Branch
2
100.0
0
Branch
Suché mýto 1, Bratislava, 811 03, Slovakia
Vodafone Global Network Limited –
Slovakia Branch
2
100.0
0
Branch
South Africa
319 Frere Road, Glenwood, 4001, South Africa
Cable and Wireless Worldwide South
Africa (Pty) Ltd
100.0
0
Ordinary shares
9 Kinross Street, Germiston South, 1401, South Africa
Vodafone Holdings (SA) Proprietary
Limited
100.0
0
Ordinary shares
Vodafone Investments (SA)
Proprietary Limited
100.0
0
Ordinary A shares,
“B” Ordinary no par
value shares
Bylsbridge Office Park, Building 14m Block C, 1st Floor,
Alexandra Road, Centurion, Highve
ld Ext 73, 0046, South Africa
10T Holdings (Proprietary) Limited
5
30.8
6
Ordinary share
s
IoT.nxt (Pty) Limited
5
30.8
6
Ordinary share
s
IOT.nxt Development (Pty) Limited
5
30.8
6
Ordinary share
s
Vodacom Corporate Park, 082 Vodacom Boulevard, Midrand,
1685, South Africa
GS Telecom (Pty) Limited
5
60.5
0
Ordinary shares
Infinity Services Partner Company
5
60.5
0
Ordinary share
s
Jupicol (Proprietary) Limited
5
42.35 Ordinary share
s
Mezzanine Ware (RF) Proprietary
Limited
5
54.45 Ordinary shares
Motifprops 1 (Proprietary) Limited
5
60.5
0
Ordinary shares
Scarlet Ibis Investments 23 (Pty)
Limited
5
60.5
0
Ordinary shares
Storage Technology Services (Pty)
Limited
5
30.85 Ordinary share
s
Vodacom (Pty) Limited
5
60.5
0
Ordinary shares,
Ordinary A shares
Vodacom Business Africa Group (Pty)
Limited
5
60.5
0
Ordinary shares
Vodacom Financial Services
(Proprietary) Limited
5
60.5
0
Ordinary shares
Vodacom Group Limited 60.5
0
Ordinary shares
Vodacom Insurance Administration
Company (Proprietary) Limited
5
60.5
0
Ordinary shares
Vodacom Insurance Company (RF)
Limited
5
60.5
0
Ordinary shares
Vodacom International Holdings (Pty)
Limited
5
60.5
0
Ordinary shares
Vodacom Life Assurance Company
(RF) Limited
5
60.5
0
Ordinary shares
Vodacom Payment Services
(Proprietary) Limited
5
60.5
0
Ordinary shares
Vodacom Properties No 1
(Proprietary) Limited
5
60.5
0
Ordinary shares
Vodacom Properties No.2 (Pty)
Limited
5
60.5
0
Ordinary shares
Wheatfields Investments 276
(Proprietary) Limited
5
60.5
0
Ordinary shares
XLink Communications (Proprietary)
Limited
5
60.5
0
Ordinary A Share
s
Strategic report Governance
Financials
Other information208
Vodafone Group Plc
Annual Report 2022
Spain
Antracita, 7 – 28045, Madrid, Spain
Vodafone Automotive Iberia S.L. 100.00 Ordinary shares
Avenida de América 115, 28042, Madrid, Spain
Vodafone Enabler España, S.L. 100.00 Ordinary shares
Vodafone Energía, S.L. 100.00 Ordinary share
s
Vodafone Enterprise Spain SLU 100.00 Ordinary shares,
Ordinary euro
shares
Vodafone España S.A.U. 100.00 Ordinary shares
Vodafone Holdings Europe S.L.U. 100.00 Ordinary shares
Vodafone ONO, S.A.U. 100.00 Ordinary shares
Vodafone Servicios S.L.U. 100.00 Ordinary share
s
Calle San Severo 22, 28042, Madrid, Spain
Vantage Towers, S.L.U.
4
81.74 Ordinary share
s
Torre Norte Adif, Explanada de la Estación no 7, 29002, Málaga,
Spain
V
odafone Intelligent Solutions España,
S.L.U.
100.00
Ordinary shares
Sweden
c/o Hellström advokatbyrå, Box 7305, 103 90, Stockholm,
Sweden
Vodafone Enterprise Sweden AB 100.00 Ordinary shares,
Shareholder’
s
contribution share
s
Switzerland
Schiffbaustrasse 2, 8005, Zurich, Switzerland
Vodafone Enterprise Switzerland AG 100.00 Ordinary shares
Taiwan
22F., No.100, Songren Road., Xinyi District, Taipei City, 11070,
Taiwan
Vodafone Global Enterprise Taiwan
Limited
100.00 Ordinary share
s
Tanzania, United Republic of
15 Floor, Vodacom Tower, Ursino Estate, Plot No. 23,
Bagamoyo Road, Dar es Salaam, Tanzania, United Republic of
M-Pesa Limited
5
45.37
Ordinary A shares,
Ordinary B shares
Shared Networks Tanzania Limited
5
45.37
Ordinary shares
Vodacom Tanzania Public Limited
Company
5
45.37
Ordinary shares
3rd Floor, Maktaba (Library), ComplexBibi, Titi Mohaned Road,
Dar es Salaam, Tanzania, United Republic of
Gateway Communications Tanzania
Limited (in liquidation)
5
59.89 Ordinary shares
Turkey
Büyükdere Caddesi, No: 251, Maslak,
b
i
Ɣ
li /
7stanbul, 34398,
Turkey
Vodafone Bilgi Ve Il
etisim Hizmetleri
AS
100.00 Registered shares
Vodafone Dagitim, Servis ve Icerik
Hizmetleri A.S.
100.00 Ordinary shares
Vodafone Dijital Yayincilik Hizmetleri
A.S.
100.00 Ordinary share
s
Vodafone Holding A.S. 100.00 Registered shares
Vodafone Kule ve Altyapi Hizmetleri
A.S.
100.00 Ordinary share
s
Vodafone Mall Ve Electronik 100.00 Ordinary share
s
Hizmetler Ticaret AS
Vodafone Medya Icerik Hizmetleri A.S. 100.0
0
Ordinary shares
Vodafone Net
ċ
leti
ĸim Hizmetleri A.S. 100.0
0
Ordinary shares
Vodafone Telekomunikasyon A.S. 100.0
0
Registered shares
7
T
m
Ayaza
Œ
a Kampüsü, Koru Yolu, Ar
Ŧ
Teknokent Ar
Ŧ
3 Binas
Ŧ
,
Maslak,
7
stanbul, 586553, Turkey
Vodafone Teknoloji Hizmetleri A.S. 100.0
0
Registered shares
Maslak Mah. AOS 55 Sk. 42 Maslak Sit. B Blok Apt. No: 4/663,
Sar
Č
yer Istanbul, Turkey
Vodafone Sigorta Aracilik Hismetleri A.S.
100.00
Ordinary shares
Maslak Mah. AOS 55. Sok. 42 Maslak B BLOK Sit. No: 4 / 665,
Sar
Č
yer / Istanbul, Turkey
Vodafone Elektronik Para Ve Ödeme
Hizmetleri A.S.
100.00 Registered shares
Maslak Mah. AOS 55.Sokak 42 Maslak Sitesi No:4 Kat 18, Ic Kapi:
664 Sar
Č
yer Istanbul, Turkey
Vodafone Finansman A.S. 100.00 Ordinary shares
Ukraine
Bohdana Khmelnytskogo Str. 19-21, Kyiv, Ukraine
LLC Vodafone Enterprise Ukraine 100.0
0
Ordinary shares
United Arab Emirates
16-SD 129, Ground Floor, Building 16-Co Work, Dubai Internet
City, United Arab Emirates
Vodacom Fintech Services FZ-LLC
5
60.5
0
Ordinary shares
Office 101, 1st Floor, DIC Building 1, Dubai Internet City, Dubai,
United Arab Emirates
Vodafone Enterprise Europe (UK) Limited
– Dubai Branch
2
100.0
0
Branch
United Kingdom
1-2 Berkeley Square, 99 Berkeley Street, Glasgow, G3 7HR,
Scotland
Thus Group Holdings Limited 100.0
0
Ordinary shares
Thus Group Limited 100.0
0
Ordinary shares
Thus Profit Sharing Trustees Limited 100.0
0
Ordinary shares
11 Staple Inn, London, WC1V 7QH, United Kingdom
Vodacom Business Africa Group Services
Limited
5
60.50
Ordinary shares,
Preference
shares
Vodacom Investments Company
Proprietary Limited
5
60.50
Ordinary shares
Vodacom UK Limited
5
60.50
Ordinary shares,
Non-redeemable
ordinary A
shares, Ordinary
B shares, Non-
redeemable
preference
shares
784 Upper Newtownards Road, Belfast, BT16 1UD, United
Kingdom
Vodafone (NI) Limited
100.00
Ordinary shares
Edinburgh House, 4 North St.
Andrew Street, Edinburgh, EH2
1HJ, United Kingdom
Pinnacle Cellular Group Limited 100.0
0
Ordinary shares
Pinnacle Cellular Limited 100.0
0
Ordinary shares
Vodafone (Scotland) Limited 100.0
0
Ordinary shares
Quarry Corner, Dundonald, Belfast, BT16 1UD,
Northern Ireland
Energis (Ireland) Limited 100.0
0
A Ordinary shares, B
Ordinary shares, C
Ordinary shares, D
Ordinary
Vodafone House, The Connection, Newbury, Berkshire, RG14
2FN, United Kingdom
Apollo Submarine Cable System
Limited
100.0
0
Ordinary shares
Bluefish Communications Limited 100.0
0
Ordinary A shares,
Ordinary B shares,
Ordinary C shares,
Ordinary D shares
Cable & Wireless Aspac Holdings
Limited
100.0
0
Ordinary shares
Cable & Wireless CIS
Services Limited 100.0
0
Ordinary shares
Cable & Wireless Communications
Data Network Services Limited
100.0
0
‘A’ Ordinary shares,
‘B’ Ordinary shares
Cable & Wireless Europe Holdings
Limited
100.0
0
Ordinary shares
Cable & Wireless Global Business
Services Limited
100.0
0
Ordinary shares
Cable & Wireless Global Holding
Limited
100.0
0
Ordinary shares
Cable & Wireless Global
Telecommunication Services Limited
100.0
0
Ordinary shares
Cable & Wireless UK Holdings Limited 100.0
0
Ordinary shares
Cable & Wireless Worldwide Limited 100.0
0
Ordinary shares,
Redeemable
preference shares
Cable & Wireless Worldwide Voice
Messaging Limited
100.0
0
Ordinary shares
Cable and Wireless (India) Limited 100.0
0
Ordinary shares
Cable and Wireless Nominee Limited 100.0
0
Ordinary shares
Central Communications Group
Limited
100.0
0
Ordinary shares,
Ordinary A shares
Energis Communications Limited 100.0
0
Ordinary shares
Energis Squared Limited 100.0
0
Ordinary shares
General Mobile Corporation Limited
(in process of dissolution)
100.0
0
Ordinary shares
London Hydraulic Power Company
(The)
100.0
0
Ordinary shares, 5%
Non-Cumulative
preference shares
MetroHoldings Limited 100.0
0
Ordinary shares
ML Integration Group Limited 100.0
0
Ordinary shares
Navtrak Limited 100.0
0
Ordinary shares
Project Telecom Holdings Limited
1
100.0
0
Ordinary shares
Rian Mobile Limited 100.0
0
Ordinary shares
Talkland International Limited (in
process of dissolution)
100.0
0
Ordinary shares
Talkmobile Limited 100.0
0
Ordinary shares
The Eastern Leasing Company
Limited
100.0
0
Ordinary shares
Thus Limited 100.0
0
Ordinary shares
Vizzavi Limited 100.0
0
Ordinary shares
Voda Limited 100.0
0
Ordinary shares
Vodafone (New Zealand) Hedging
Limited
100.0
0
Ordinary shares
Vodafone 2. 100.0
0
Ordinary shares
Vodafone 4 UK 100.0
0
Ordinary shares
Vodafone 5 Limited 100.0
0
Ordinary shares
Vodafone 5 UK 100.0
0
Ordinary shares
Vodafone 6 UK 100.0
0
Ordinary shares
Vodafone Americas 4 100.0
0
Ordinary shares
Strategic report Governance
Financials
Other information209
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
31. Related undertakings (continued)
Vodafone Automotive UK Limited 100.0
0
Ordinary share
s
Vodafone Benelux Limited 100.0
0
Ordinary shares,
Preference share
s
Vodafone Cellular Limited
1
100.0
0
Ordinary shares
Vodafone Consolidated Holdings
Limited
100.0
0
Ordinary shares
Vodafone Corporate Limited 100.0
0
Ordinary shares
Vodafone Corporate Secretaries
Limited
1
100.0
0
Ordinary shares
Vodafone DC Pension Trustee
Company Limited
1
100.0
0
Ordinary shares
Vodafone Distribution Holdings
Limited
100.0
0
Ordinary shares
Vodafone Enterprise Corporate
Secretaries Limited
100.0
0
Ordinary shares
Vodafone Enterprise Equipment
Limited
100.0
0
Ordinary shares
Vodafone Enterprise Europe (UK)
Limited
100.0
0
Ordinary shares
Vodafone Enterprise U.K. 100.0
0
Ordinary share
s
Vodafone Euro Hedging Limited 100.0
0
Ordinary shares
Vodafone Euro Hedging Two 100.0
0
Ordinary shares
Vodafone Europe UK 100.0
0
Ordinary shares
Vodafone European Investments
1
100.0
0
Ordinary shares
Vodafone European Portal Limited
1
100.0
0
Ordinary shares
Vodafone Finance Limited
1
100.0
0
Ordinary shares
Vodafone Finance Luxembourg
Limited
100.0
0
Ordinary shares
Vodafone Finance Sweden 100.0
0
Ordinary shares,
Ordinary deferred
Vodafone Finance UK Limited 100.0
0
Ordinary shares
Vodafone Financial Operations 100.0
0
Ordinary shares
Vodafone Global Content Services
Limited
100.0
0
Ordinary shares, 5
%
fixed rate non-voting
preference share
s
Vodafone Global Enterprise Limited 100.0
0
Ordinary shares,
Deferred shares,
B
deferred shares
Vodafone Group (Directors) Trustee
Limited
1
100.0
0
Ordinary shares
Vodafone Group Pension Trustee
Limited
1
100.0
0
Ordinary shares
Vodafone Group Services Limited 100.0
0
Ordinary shares,
Deferred shares
Vodafone Group Services No.2
Limited
1
100.0
0
Ordinary shares
Vodafone Group Share Trustee
Limited
1
100.0
0
Ordinary shares
Vodafone Holdings Luxembourg
Limited
100.0
0
Ordinary shares
Vodafone Intermediate Enterprises
Limited
100.0
0
Ordinary shares
Vodafone International 2 Limited –
UK Branch
2
100.0
0
Branch
Vodafone International Holdings
Limited
100.0
0
Ordinary shares
Vodafone International Operations
Limited
100.0
0
Ordinary shares
Vodafone Investment UK 100.0
0
Ordinary shares
Vodafone Investments Australia
Limited
100.0
0
Ordinary shares
Vodafone Investments Limited
1
100.0
0
Ordinary shares,
Zero coupon
redeemabl
e
preference share
s
Vodafone IP Licensing Limited
1
100.0
0
Ordinary shares
Vodafone Limited 100.0
0
Ordinary shares
Vodafone Marketing UK 100.0
0
Ordinary shares
Vodafone Mobile Communications
Limited
100.0
0
Ordinary shares
Vodafone Mobile Enterprises Limited 100.0
0
A-ordinary shares,
Ordinary one pound
shares
Vodafone Mobile Network Limited 100.0
0
A-ordinary shares,
Ordinary one pound
shares
Vodafone Nominees Limited
1
100.0
0
Ordinary shares
Vodafone Oceania Limited 100.0
0
Ordinary shares
Vodafone Old Show Ground Site
Management Limited
100.0
0
Ordinary shares
Vodafone Overseas Finance Limited 100.0
0
Ordinary shares
Vodafone Overseas Holdings Limited 100.0
0
Ordinary shares
Vodafone Panafon UK 99.87 Ordinary shares
Vodafone Partner Services Limited 100.0
0
Ordinary shares,
Redeemabl
e
preference shares
Vodafone Property Investments
Limited
100.0
0
Ordinary shares
Vodafone Retail (Holdings) Limited 100.0
0
Ordinary shares
Vodafone Sales & Services Limited 100.0
0
Ordinary shares
Vodafone UK Foundation 100.0
0
Sole membe
r
Vodafone UK Limited
1
100.0
0
Ordinary shares
Vodafone Ventures Limited
1
100.0
0
Ordinary shares
Vodafone Worldwide Holdings
Limited
100.0
0
Ordinary shares
;
Cumulativ
e
preferenc
e
Vodafone Yen Finance Limited 100.0
0
Ordinary shares
Vodafone-Central Limited 100.0
0
Ordinary shares
Vodaphone Limited 100.0
0
Ordinary shares
Vodata Limited 100.0
0
Ordinary shares
Your Communications Group Limited 100.0
0
Redeemabl
e
preference share
s
United States
1209 Orange, Orange Street, Wilmington, New Castle DE
19801, United States
IoT nxt USA Inc
5
30.87
Common stock
145 West 45th St., 8th Floor, New York NY 10036, United States
Cable & Wireless Americas Systems,
Inc.
100.0
0
Common stoc
k
shares
Vodafone Americas Virginia Inc. 100.0
0
Common stoc
k
shares
Vodafone US Inc. 100.0
0
Common stoc
k
share
s
1615 Platte Street, Suite 02-115, Denver CO 80202, United States
Vodafone Americas Foundation 100.0
0
Truste
e
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808,
United States
Unitymedia Finance LLC
100.00
Sole member
Strategic report Governance
Financials
Other information210
Vodafone Group Plc
Annual Report 2022
Associated undertakings and
joint arrangements
A
ustralia
Ground Floor, 55 Clarence Street, Sydney NSW 2000, Australia
FTTB Wholesale Pty Ltd
25.05
Ordinary shares
Level 1, 177 Pacific Highway, North Sydney NSW 2060,
Australia
3.6 GHz Spectrum Pty Ltd 25.05 Ordinary share
s
AAPT Limited 25.05 Ordinary share
s
ACN 088 889 230 Pty Ltd 25.05 Ordinary share
s
ACN 139 798 404 Pty Ltd 25.05 Ordinary share
s
Adam Internet Holdings Pty Ltd 25.05 Ordinary share
s
Adam Internet Pty Ltd 25.05 A shares, B shares,
Ordinary share
s
Agile Pty Ltd 25.05 Ordinary share
s
AlchemyIT Pty Ltd 25.05 Ordinary share
s
Blue Call Pty Ltd 25.05 Ordinary share
s
Cable Licence Holdings Pty Ltd 25.05 A shares, B share
s
Chariot Pty Ltd 25.05 Ordinary share
s
Chime Communications Pty Ltd 25.05 Ordinary share
s
Connect Internet Solutions Pty
Limited
25.05 Ordinary share
s
Connect West Pty Ltd 25.05 No 1 Ordinar
y
share
s
Destra Communications Pty Ltd 25.05 Ordinary share
s
Digiplus Contracts Pty Ltd 25.05 Ordinary share
s
Digiplus Holdings Pty Ltd 25.05 Ordinary share
s
Digiplus Investments Pty Ltd 25.05 Ordinary share
s
Digiplus Pty Ltd 25.05 Ordinary share
s
H3GA Properties (No.3) Pty Limited 25.05 Ordinary shares
Hosteddesktop.com Pty Ltd 25.05 Ordinary shares
iHug Pty Ltd 25.05 No 1 Ordinar
y
share
s
iiNet (Ozemail) Pty Ltd 25.05 Ordinary shares
iiNet Labs Pty Ltd 25.05 Ordinary shares
iiNet Limited 25.05 Ordinary shares
Internode Pty Ltd 25.05 B shares, Ordinar
y
share
s
IntraPower Pty Limited 25.05 Ordinary shares
Intrapower Terrestrial Pty Ltd 25.05 Ordinary shares
IP Group Pty Ltd 25.05 Ordinary shares
IP Services Xchange Pty Ltd 25.05 A shares, B share
s
Jiva Pty Ltd 25.05 Ordinary shares
Kooee Communications Pty Ltd 25.05 Ordinary shares
Kooee Mobile Pty Ltd 25.05 Ordinary shares
Kooee Pty Ltd 25.05 A shares, B share
s
Mercury Connect Pty Ltd 25.05 E shares, Ordinar
y
share
s
Mobile JV Pty Limited 25.05 Ordinary share
s
Mobileworld Communications Pty
Limited
25.05 Ordinary shares
Mobileworld Operating Pty Ltd 25.05 Ordinary shares
Netspace Online Systems Pty Ltd 25.05 Ordinary shares
Numillar IPS Pty Ltd 25.05 Ordinary shares
Orchid Human Resources Pty Ltd 25.05 Ordinary shares
PIPE International (Australia) Pty Ltd 25.05 Ordinary shares
PIPE Networks Pty Limited 25.05 Ordinary shares
PIPE Transmission Pty Limited 25.05 Ordinary shares
PowerTel Limited 25.05 Ordinary shares
Request Broadband Pty Ltd 25.05 Ordinary shares
Soul Communications Pty Ltd 25.05 Ordinary shares
Soul Contracts Pty Ltd 25.05 Ordinary shares
Soul Pattinson Telecommunications
Pty Ltd
25.05 Ordinary shares
SPT Telecommunications Pty Ltd 25.05 Ordinary shares
SPTCom Pty Ltd 25.05 Ordinary shares
Telecom Enterprises Australia Pty
Limited
25.05 Ordinary shares
Telecom New Zealand Australia Pty
Ltd
25.05 Ordinary shares,
Redeemable
preference shares
TPG Corporation Limited 25.05 Ordinary shares
TPG Energy Pty Ltd 25.05 Ordinary shares
TPG Finance Pty Limited 25.05 Ordinary shares
TPG Holdings Pty Ltd 25.05 Ordinary shares
TPG Internet Pty Ltd 25.05 Ordinary shares
TPG JV Company Pty Ltd 25.05 Ordinary shares
TPG Network Pty Ltd 25.05 Ordinary shares
TPG Telecom Limited 25.05 Ordinary shares
TransACT Broadcasting Pty Ltd 25.05 Ordinary shares
TransACT Capital Communications
Pty Ltd
25.05 Ordinary shares
TransACT Communications Pty Ltd 25.05 Ordinary shares
TransACT Victoria Communications
Pty Ltd
25.05 Ordinary shares
TransACT Victoria Holdings Pty Ltd 25.05 Ordinary shares
Transflicks Pty Ltd 25.05 Ordinary shares
Trusted Cloud Pty Ltd 25.05 Ordinary shares
Trusted Cloud Solutions Pty Ltd 25.05 Ordinary shares
Value Added Network Pty Ltd 25.05 Ordinary shares
Virtual Desktop Pty Ltd 25.05 Ordinary shares
Vodafone Australia Pty Limited 25.05 Ordinary shares,
Class B shares,
Redeemable
preference shares
Vodafone Foundation Australia Pty
Limited
25.05 Ordinary shares
Vodafone Hutchison Receivables Pty
Limited
25.05 Ordinary shares
Vodafone Hutchison Spectrum Pty
Limited
25.05 Ordinary shares
Vodafone Network Pty Limited 25.05 Ordinary shares
Vodafone Pty Limited 25.05 Ordinary shares
VtalkVoip Pty Ltd 25.05 Ordinary shares
Westnet Pty Ltd 25.05 Ordinary shares
Bermuda
Clarendon House, 2 Church St, Hamilton, HM11, Bermuda
PPC 1 Limited 25.05 Ordinary shares
Czech Republic
U Rajské zahrady 1912/3, Praha 3, 130 00, Czech Republic
COOP Mobil s.r.o. 33.33 Ordinary shares
Egypt
23 Kasr El Nil St, Cairo, 11211, Egypt
Wataneya Telecommunications S.A.E 50.0
0
Ordinary shares
Ethiopia
Kirkos Sub-City, Woreda 01, House No. New, (Safaricom HQ),
Addis Ababa, Ethiopia
Safaricom Telecommunications
Ethiopia Private Limited Company
5
18.3
0
Ordinary shares
Germany
38 Berliner Allee, 40212, Düsseldorf, Germany
MNP Deutschland Gesellschaft
bürgerlichen Rechts
33.33 Partnership
share
Nobelstrasse 55, 18059, Rostock, Germany
Verwaltung “Urbana Teleunion”
Rostock GmbH
3
46.92 Ordinary shares
Greece
43-45 Valtetsiou Str., Athens, Greece
Safenet N.P,A. 24.97 Ordinary shares
56 Kifisias Avenue & Delfwn, Marousi, 151 25, Greece
Tilegnous IKE 33.29 Ordinary shares
Marathonos Ave 18 km & Pylou, Pallini, Attica, 15351, Greece
Victus Networks S.A. 49.94 Ordinary shares
India
10th Floor, Birla Centurion, Century Mills Compound,
Pandurang Budhkar Marg, Worli, Mumbai, Maharashtra,
400030, India
Vodafone Foundation
7
46.9
0
Equity shares
Vodafone Idea Shared Services
Limited
7
47.61 Equity shares
Vodafone Idea Technology Solutions
Limited
7
47.61 Equity shares
Vodafone m-pesa Limited
7
47.61 Equity shares
You Broadband India Limited
7
47.61 Equity shares
A-19, Mohan Co-operative Industrial Estate, Mathura Road,
New Delhi, Delhi, 110044, India
FireFly Networks Limited
7
A4, Aditya Birla Centre, S.K. Ahire Marg, Worli, Mumbai,
Maharashtra, 400030, India
Aditya Birla Idea Payments Bank
Limited (in liquidation)
7
23.33 Equity shares
Building No.10, Tower-A, 4th Floor, DLF Cyber City, Gurugram,
Haryana, 122002, India
Indus Towers Limited 21.05 Ordinary shares
Strategic report Governance
Financials
Other information211
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
31. Related undertakings (continued)
Netherlands
Suman Tower Plot No. 18, Sect
or No. 11, Gandhinagar, 382011,
Gujarat, India
Vodafone Idea Limited 47.61 Equity shares
Vodafone Idea Manpower Services
Limited
7
47.0
4
Equity share
s
Vodafone House, Corporate Road, Prahladnagar, Off S. G.
Highway, Ahmedabad, Gujarat, 380051, India
Connect (India) Mobile Technologies
Private Limited
7
47.61 Equity share
s
Vodafone Idea Business Services
Limited
7
47.61 Equity share
s
Vodafone Idea Communication
Systems Limited
7
47.61 Equity share
s
Vodafone Idea Telecom Infrastructure
Limited
7
47.61 Equity share
s
Ireland
The Herbert Building, The Park, Carrickmines, Dublin, Ireland
Siro DAC
50.00
Ordinary shares
Siro JV Holdco Limited 50.0
0
Ordinary B share
s
Italy
Via Gaetana Negri 1, 20123, Milano, Italy
Infrastrutture Wireless Italiane S.p.A
4
27.12 Ordinary share
s
Kenya
LR No. 13263, Safaricom House, Waiyaki Way, PO Box 66827-
00800, Nairobi, Kenya
Safaricom PLC
6
26.13 Ordinary shares
Safaricom House, Waiyaki Way Westlands, Nairobi, Kenya
M-PESA Africa Limited
5
43.31 Ordinary shares
Luxembourg
15 rue Edward Steichen, Luxembourg, 2540, Luxembourg
Tomorrow Street SCA 50.0
0
Ordinary A shares
,
Ordinary B shares
,
Ordinary C shares
3 More London Riverside, London, SE1 2AQ, United Kingdom
Global Partnership for Ethiopia B.V.
5
18.30
Ordinary shares
Avenue Ceramique 300, 6221 Kx, Maastricht, Netherlands
Vodafone Libertel B.V. 50.0
0
Ordinary share
s
Boven Vredenburgpassage 128, 3511 WR, Utrecht,
Netherlands
Amsterdamse Beheer- en
Consultingmaatschappij B.V.
50.0
0
Ordinary share
s
Esprit Telecom B.V. 50.0
0
Ordinary share
s
FinCo Partner 1 B.V. 50.0
0
Ordinary share
s
LGE HoldCo V B.V. 50.0
0
Ordinary share
s
LGE HoldCo VI B.V. 50.0
0
Ordinary share
s
LGE Holdco VII B.V. 50.0
0
Ordinary share
s
LGE HoldCo VIII B.V. 50.0
0
Ordinary share
s
Vodafone Financial Services B.V. 50.0
0
Ordinary share
s
Vodafone Nederland Holding I B.V. 50.0
0
Ordinary share
s
Vodafone Nederland Holding II B.V. 50.00 Ordinary share
s
VodafoneZiggo Employment B.V. 50.00 Ordinary share
s
VodafoneZiggo Group B.V. 50.00 Ordinary share
s
VodafoneZiggo Group Holding B.V. 50.00 Ordinary share
s
VZ Financing I B.V. 50.00 Ordinary share
s
VZ Financing II B.V. 50.00 Ordinary share
s
VZ FinCo B.V. 50.00 Ordinary share
s
VZ PropCo B.V. 50.00 Ordinary share
s
VZ Secured Financing B.V. 50.00 Ordinary share
s
XB Facilities B.V. 50.00 Ordinary share
s
Ziggo B.V. 50.00 Ordinary share
s
Ziggo Deelnemingen B.V. 50.00 Ordinary share
s
Ziggo Finance 2 B.V. 50.00 Ordinary share
s
Ziggo Netwerk II B.V. 50.00 Ordinary share
s
Ziggo Real Estate B.V. 50.00 Ordinary share
s
Ziggo Services B.V. 50.00 Ordinary share
s
Ziggo Services Employment B.V. 50.00 Ordinary share
s
Ziggo Services Netwerk 2 B.V. 50.00 Ordinary share
s
Ziggo Zakelijk Services B.V. 50.00 Ordinary share
s
Zoranet Connectivity Services B.V. 50.00 Ordinary share
s
ZUM B.V. 50.00 Ordinary share
s
Media Parkboulevard 2, 1217 WE Hilversum, Netherlands
Liberty Global Content Netherlands
B.V.
50.00 Ordinary share
s
Winschoterdiep 60, 9723 AB Groningen, Netherlands
Zesko B.V. 50.00 Ordinary share
s
Ziggo Bond Company B.V. 50.00 Ordinary share
s
Ziggo Netwerk B.V. 50.00 Ordinary share
s
New Zealand
Tompkins Wake, Level 11, 41 Shortland Street, Auckland 1010,
New Zealand
iiNet (New Zealand) AKL Limited 25.05 Ordinary shares
Unit 17, 24 Allright Place, Mt Wellington, Auckland, New
Zealand
TPG (NZ) Pty Ltd
25.05
Ordinary shares
Philippines
22F Robinson Equitable Tower, ADB Ave, Corner Povega St,
Ortigas Center, Pasig City, Philippines
Orchid Cybertech Services Inc
25.05
Ordinary shares
Portugal
Espaço Sete Rios, LEAP Rua de Campolide, 351, 0.05 , 1070-034,
Lisboa, Portugal
Dualgrid – Gestão de Redes
Partilhadas, S.A.
50.00 Ordinary shares
Rua Pedro e Inês, Lote 2.08.01, 1990-075,
Parque das Nações, Lisboa, Portugal
Sport TV Portugal, S.A. 25.00 Nominative share
s
Romania
Floor 3, Module 2, Connected Buildings III, Nr. 10A,
Dimitrie Pompei Boulevard, Bucharest, Sector 2, Romania
Netgrid Telecom SRL 50.0
0
Ordinary shares
Russian Federation
Building 3, 11, Promyshlennaya Street, Moscow 115 516
Autoconnex Limited 35.0
0
Ordinary shares
South Africa
76 Maude Street, Sandton, Johannesberg, 2196, South Africa
Waterberg Lodge (Proprietary)
Limited
5
30.25 Ordinary shares
Building 13, Ground Floor, East Thornhill Office Park, 94 Bekker
Road, Vorna Valley, X67 1685, South Africa
Number Portability Company (Pty)
Ltd
5
12.1
0
Ordinary shares
Rigel Park, Block A, 446 Rigel Avenue, Erasmusrand, Pretoria,
0181, South Africa
Canard Spatial Technologies (Pty) Ltd
5
19.66
Ordinary shares
AfriGis (Pty) Ltd
5
16.13
Ordinary shares
Vodacom Corporate Park, 082 Vodacom Boulevard, Midrand,
1685, South Africa
M-Pesa S.A (Proprietary) Limited
5
43.31 Ordinary shares
Tanzania, United Republic of
Plot No. 23, Ursino Estate, Bagamoyo Road, Dar es Salaam,
Tanzania, United Republic of
Vodacom Trust Limited (in
liquidation)
5
45.37 Ordinary A shares,
Ordinary B shares
Turkey
Çifte Havuzlar Mah Eski Londra Asfalt
Č
Cad No: 151/1E/301,
Esenler, Istanbul, Turkey
FGS Bilgi Islem Urunler Sanayi ve
Ticaret AS
50.00 Ordinary shares
United Kingdom
24/25 The Shard, 32 London Bridge Street, London, SE1 9SG,
United Kingdom
Digital Mobile Spectrum Limited 25.0
0
Ordinary shares
3 More London Riverside, London, SE1 2AQ, United Kingdom
VodaFamily Ethiopia Holding
Company Limited
5
29.57 Ordinary shares
Griffin House, 161 Hammersmith Road, London, W6 8BS,
United Kingdom
Cable & Wireless Trade Mark
Management Limited
50.0
0
Ordinary A shares,
Ordinary B shares
Hive 2, 1530 Arlington Business Park, Theale, Reading,
Berkshire, RG7 4SA, United Kingdom
Cornerstone Telecommunications
Infrastructure Limited
4
40.87 Ordinary shares
Vodafone House, The Connection, Newbury, Berkshire, RG14
2FN, United Kingdom
Vodafone Hutchison (Australia) Holdings
Limited
50.00
Ordinary shares
Strategic report Governance
Financials
Other information212
Vodafone Group Plc
Annual Report 2022
United States
251 Little Falls Drive, Wilmington DE 19808, United States
LG Financing Partnership 50.0
0
Partnership interes
t
PPC 1 (US) Inc. 25.05 Ordinary share
s
Ziggo Financing Partnership 50.0
0
Partnership interes
t
Notes:
1 Directly held by Vodafone Group Plc.
2 Branches.
3 Shareholding is indirect through Vodafone Deutschland GmbH.
4 Shareholding is indirect through Vantage Towers A.G.
5 Shareholding is indirect through Vodacom Group Limited. The
indirect shareholding is calculated using the 60.50% ownership
interest in Vodacom Group Limited.
6 At 31 March 2022 the fair value of Safaricom Plc was KES 1,370
billion (€10,693 million) based on the closing quoted share price
on the Nairobi Stock Exchange.
7 Includes the indirect interest held through Vodafone Idea
Limited.
Selected financial information
The table below shows selected financial information in respect of subsidiaries that have non-controlling interests that are ma
terial to the Group
1
.
Vodacom Group Limited
Vodafone Egypt
Telecommunications S.A.E
Vantage Towers
A.G.
2022
2021
2022
2021 2022
€m
€m
€m
€m €m
Summary comprehensiv
e income information
Revenue
5,993 5,181 1,814 1,537 1,252
Profit for the financial year
1,002
891
314
271
345
Other comprehensive expense
(2)
(17)
–
–
–
Total comprehensive income
1,000
874
314
271
345
Other financial information
Profit for the financial year al
located to non-controlling interests
353
310
141
122
66
Dividends paid to non-controlling interests
294
307
194
84
52
Summary financial po
sition information
Non-current assets
7,253
6,592
1,630
1,765
11,137
Current assets
3,123
2,671
440
640
704
Total assets
10,376
9,263
2,070
2,405
11,841
Non-current liabilities
(2,191)
(2,617)
(83)
(198)
(5,251)
Current liabilities
(3,539)
(2,406)
(1,197)
(1,217)
(1,055)
Total assets less total liabilities
4,646
4,240
790
990
5,535
Equity shareholders’ funds
3,624
3,332
474
587
4,522
Non-controlling interests
1,022
908 316 403
1,013Total equity
4,646
4,240
790
990
5,535
Statement of cash flows
Net cash inflow from operating activities
1,946
1,711
755
523
1,110
Net cash outflow from investing activities
(666)
(424)
(284)
(418)
(232)
Net cash outflow from financing activities
(1,177)
(1,251)
(749)
(7)
(861)
Net cash inflow/(outflow)
103
36
(278)
98
17
Cash and cash equival
ents brought forward
876
826
348
273
48
Exchange gain/(loss)
on cash and cash equivalents
46
14
2
(23)
–
Cash and cash
equivalents
1,025
876
72
348
65
Note:
1
Vantage Towers A.G. was listed on the Frankfurt Stock exchange
on 18 March 2021, resulting in the recognition of non-controllin
g interests of €1,019 milli
on in year ending 31 March 2021 in the Group’s
consolidated Statement of financial position. Non-current asse
ts, current assets, non-current
liabilities and current liabiliti
es for Vantage Towers A.G. were €10,899 million, €490 million, €4,976 million and
€958 million respectively, in the year endi
ng 31 March 2021 in the Group’s consolid
ated Statement of financial position.
Strategic report Governance
Financials
Other information213
Vodafone Group Plc
Annual Report 2022
Notes to the consolidated financial statements (continued)
32. Subsidiaries exempt from audit
The following UK subsidiaries will take advantage of
the audit exemption set o
ut within section 479A of the
Companies Act 2006 for the year ended 31 March 2022.
Name Registration number
Name Registration number
Bluefish Communications Limited
5142610
Vodafone Enterprise Europe (UK) Limited
3137479
Cable & Wireless Aspac Holdings Limited
4705342
Vodafone Euro Hedging Limited
3954207
Cable & Wireless CIS Services Limited
2964774
Vodafone Euro Hedging Two
4055111
Cable & Wireless Europe Holdings Limited
4659719
Vodafone Europe UK
5798451
Cable & Wireless Global
Business Services Limited
3537591
Vodafone European Investments
3961908
Cable & Wireless Global Holding Limited
3740694
Vodafone European Portal Limited
3973442
Cable & Wireless UK Holdings Limited
3840888
Vodafone Finance Lu
xembourg Limited
5754479
Cable & Wireless Worldwide Limited
7029206
Vodafone Finance Sweden
2139168
Cable & Wireless Worldwide Voice Messaging
1981417
Vodafone Finance UK Limited
3922620
Limited
Vodafone Financ
ial Operations
4016558
Cable & Wireless Nominee Limited
3249884
Vodafone Global Co
ntent Services Limited
4064873
Energis (Ireland) Limited
NI035793
Vodafone Holdings Luxembourg Limited
4200970
Energis Communications Limited
2630471
Vodafone Intermediate Enterprises Limited
3869137
Energis Squared Limited
3037442
Vodafone International Holdings Limited
2797426
General Mobile Corporation Limited
2585763
Vodafone International Operations Limited
2797438
London Hydraulic Power Company (The)
ZC000055
Vodafone Investment UK
5798385
MetroHoldings Limited
3511122
Vodafone Investments Limited
1530514
ML Integration Group Limited
3252903
Vodafone IP Licensing Limited
6846238
Talkland International Limited
2354106
Vodafone Marketing UK
6858585
The Eastern Leasing Company Limited
1672832
Vodafone Mobile Communications Limited
3942221
Thus Group Holdings Limited
SC192666
Vodafone Mobile Enterprises Limited
3961390
Thus Group Limited
SC226738
Vodafone Mobile Network Limited
3961482
Voda Limited
1847509
Vodafone Nominees Limited
1172051
Vodafone 2.
4083193
Vodafone Oceania Limited
3973427
Vodafone 4 UK
6357658
Vodafone Overseas Finance Limited
4171115
Vodafone 5 Limited
6688527
Vodafone Overseas Holdings Limited
2809758
Vodafone 5 UK
2960479
Vodafone Panafon UK
6326918
Vodafone 6 UK
8809444
Vodafone Property
Investments Limited
3903420
Vodafone Americas 4
6389457
Vodafone UK Limited
2227940
Vodafone Benelux Limited
4200960
Vodafone Worldwide Holdings Limited
3294074
Vodafone Cellular Limited
896318
Vodafone Yen Finance Limited
4373166
Vodafone Consolidated Holdings Limited
5754561
Vodaphone Limited
2373469
Vodafone Corporate Secretaries Limited
2357692
Vodata Limited
2502373
Vodafone Enterprise
Corporate Secretaries Limited
2303594
Your Communications Group Limited
4171876
Vodafone Enter
p
rise E
q
ui
p
ment Limited
1648524
Strategic report Governance
Financials
Other information214
Vodafone Group Plc
Annual Report 2022
Company statement of financial position of Vodafone Group Plc
at 31 March
2022
2021
Note
€m
€m
Fixed assets
Shares in Group undertakings
2
83,406 83,385
Current assets
Debtors: amounts falling due
after more than one year
3
4,288 3,128
Debtors: amounts falling due within one year
3
172,684 164,149
Other investments
4
698 3,107
Cash at bank and in hand
362 586
178,032 170,970
Creditors: amounts falling due within one year
5
(168,913) (162,761)
Net current assets
9,119 8,209
Total assets less current liabilities 92,525 91,594
Creditors: amounts falling due
after more than one year
5
(45,818) (47,122)
46,707 44,472
Capital and reserves
Called up share capital
6
4,797 4,797
Share premium account
20,384 20,383
Capital redemption reserve
111 111
Other reserves
1,088 2,970
Own shares held
(7,413) (6,307)
Profit and loss account
1
27,740 22,518
Total equity shareholders’ funds 46,707 44,472
Note:
1 The profit for the financial year dealt with in the financial state
ments of the Company is €5,995 million (2021: €3,863 million).
The Company financial statements on pages 215 to 222 were approved by the Board of Directors and authorised for issue on 17 May 2022 and
were signed on its behalf by:
Nick Read Margherita Della Valle
Chief Executive Chief Financial Officer
The accompanying notes are an integral part of these financial statements.
Strategic report Governance
Financials
Other information215
Vodafone Group Plc
Annual Report 2022
Company statement of changes in
equity of Vodafone Group Plc
For the years ended 31 March
Called up share
capital
Share premium
account
1
Capital
redemption
reserve
1
Other reserves
1
Reserve for
own shares
2
Profit and loss
account
3
Total equity
shareholders’
funds
€m €m €m €m €m €m €m
1 April 2020
4,797
20,382
111
4,865
(7,937)
24,844
47,062
Issue or re-issue of shares
4
–
1
–
(1,944)
2,033
–
90
Profit for the financial year
–
–
–
–
–
3,863
3,863
Dividends – – – – –
(2,412)
(2,412)
Capital contribution given relatin
g to share-based payments
5
–
–
–
136
–
–
136
Contribution received relating
to share-based payments
–
–
–
(87)
–
–
(87)
Repurchase of treasury shares
6
–
–
–
–
(403)
–
(403)
Other movements
7
–
–
–
–
–
(3,777)
(3,777)
31 March 2021
4,797
20,383
111
2,970
(6,307)
22,518
44,472
Issue or re-issue of shares
4
–
1
–
(1,903)
2,000
–
98
Profit for the financial year
–
–
–
–
–
5,995
5,995
Dividends – – – – –
(2,483)
(2,483)
Capital contribution given relatin
g to share-based payments
5
–
–
–
119
–
–
119
Contribution received relating
to share-based payments
–
–
–
(98)
–
–
(98)
Repurchase of treasury shares
6
–
–
–
–
(3,106)
–
(3,106)
Other movements
7
–
–
–
–
–
1,710
1,710
31 March 2022
4,797
20,384
111
1,088
(7,413)
27,740
46,707
Notes:
1 These reserves are not distributable.
2 Own shares relate to treasury shares which are purchased
out of distributable profits and
therefore reduce reserves avail
able for distribution.
3 The Company has determined what amounts within this rese
rve are distributable and non-distributable in accordance with th
e guidance provided by ICAEW TECH 02/17BL and the requirements of UK
law. In accordance with UK Companies Act 2006 s831(2), a public
company may make a distribution o
nly if, after gi
ving effect to
such distribution, the amount of
its net assets is not less than the
aggregate of its’ called up share cap
ital and non-distributable reserves.
4 Movements include the re-issue of
1,427 million shares (€1,944 million) in March 2021 to satisfy the first tranche and in
cludes the re-issue of 1,519 million shar
es (€1,903 million) in March 2022 to satisfy
the second tranche of the Mandatory Convertible Bond issued in March 2019.
5 Includes €nil tax credit (2021: €1 million).
6 Represents the irrevocable and no
n-discretionary share buyback programmes announced on 19 May 2021, 23 July 2021, 17 Nove
mber 2021 and 9 March 2022 (2021: Announced
on 19 March 2021).
7 Includes the impact of the Compan
y’s cash flow hedges with €3,632 million ne
t gain deferred to othe
r comprehensive income
during the year (2021: €5,892 million net loss), €1,419 million net gain
(2021: €1,226 million net loss) recycled to
the income statement, and a tax charge of €501 million (2021: credit of €886 millio
n). These hedges primarily relate to foreign exchange exposure on fixed
borrowings, with any foreign exchange on nominal balances direct
ly impacting income statement in
each period but interest cash
flows unwinding to the income statement
over the life of the hedges (up
to 2059). See note 22 ‘Capital and financial risk management’ to
the consolidated financial statements for further details.
Strategic report Governance
Financials
Other information216
Vodafone Group Plc
Annual Report 2022
1. Basis of preparation
The separate financial statements of the Company are drawn up in accordance with the Companies Act 2006 and Financial Reporting
Standard 101 ‘Reduced disclosure framework’, (‘FRS 101’). The Com
pany will continue to prepare its financial statements in acco
rdance with
FRS 101 on an ongoing basis until such time as it notifies shareholders of any change to its chosen accounting framework.
The Company financial statements have been prepared using the historical cost convention, as modified by the revaluation of cer
tain financial assets
and financial liabilities and in accordance with the UK Companies Act 2006. The financial statements have been prepared on a go
ing concern basis.
The following exemptions available under FRS 101 have been applied:
Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Shared-based payment’ (details of the number and weighted-average exercise prices of
share
options, and how the fair value of goods or services received was determined);
IFRS 7 ‘Financial Instruments: Disclosures’;
Paragraph 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclos
ure of valuation techniques and inputs used for fair value meas
urement of
assets and liabilities);
Paragraph 38 of IAS 1 ‘Presentation of financial statements’
comparative information requirements in respect of paragraph 79(a)(iv) of IAS 1;
The following paragraphs of IAS 1 ‘Presentation of financial statements’:
10(d) (statement of cash flows);
16 (statement of compliance with all IFRS);
38A (requirement for minimum of two primary st
atements, including cash flow statements);
38B-D (additional comparative information);
40A-D (requirements for a third statement of financial position);
111 (cash flow statement information); and
134-136 (capital management disclosures).
IAS 7 ‘Statement of cash flows’;
Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure
of
information when an entity has not applied a new IFRS
that has been issued but is not yet effective);
The requirements in IAS 24 ‘Related party disclosures’ to disclose related party transactions entered into between two or more
members of a group;
The requirements in IAS 36 ‘Impairment of asset’ to disclose val
uation technique and assumptions used in determining recoverabl
e amount.
As permitted by section 408(3) of the Companies Act 2006, the in
come statement of the Company is not presented in this Annual R
eport.
These
separate financial statements are not intended to give a true and fair view of the profit or loss or cash flows of the Company
. The
Company has not published its individual cash flow statement as
its liquidity, solvency and financial adaptability are dependen
t on the Group
rather than its own cash flows.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of Company financial statements in conformity wi
th FRS 101 requires management to make estimates and assumption
s that
affect the reported amounts of assets and liabilities and disclosu
re of contingent assets and liabilities at the date of the Co
mpany financial
statements and the reported amounts of revenue and expenses duri
ng the reporting period. Actual results could differ from those
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in
which the estimate is revised if the revisio
n affects only that period or in the peri
od of the revision and future periods if t
he revision affects both
current and future periods. Management regularly reviews the acco
unting judgements that significantly impact the amounts recogn
ised in the
financial statements and the estimates that are considered to
be ‘critical estimates’ due to their potential to give rise to material adjustments in
the Company’s financial statements in the year ending 31 March 2022.
A source of estimation uncertainty for the Company relates to the review for impairment of investment carrying values and the e
stimates used
when determining the recoverable value of the investment. However,
there is not considered to be a significant risk of material
adjustment from
revisions to these assumptions within the next financial year (see note 2 ‘Fixed assets’).
Significant accounting policies applied in the current reporting period that relate to the financial statements as a whole
Foreign currencies
Transactions in foreign currencies are initially recorded at the functional rate of currency prevailing on the date of the tran
saction. Monetary
assets and liabilities denominated in foreign currencies are retr
anslated into the Company’s functional currency at the rates p
revailing on the
reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at
the rates
prevailing on the initial transaction dates. Non-monetary items measured in terms of historical
cost in a foreign currency are
not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in the income
statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are inc
luded in the
income statement for the period.
Borrowing costs
All borrowing costs are recognised in the income st
atement in the period in which they are incurred.
Notes to the Company financial statements
Strategic report Governance
Financials
Other information217
Vodafone Group Plc
Annual Report 2022
Notes to the Company financial statements (continued)
1. Basis of preparation (continued)
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws
that have been enacted or substantively enacted by the reporting period date.
Deferred tax is provided in full on temporar
y differences that exist at the reporting period date and that result in an obligat
ion to pay more tax, or
a right to pay less tax in the future. The deferred tax is measured
at the rate expected to apply in the periods in which the t
emporary differences
are expected to reverse, based on the tax rates and laws that are enacted or substantively enacted at the reporting period date
. Temporary
differences arise from the inclusion of items of income and expe
nditure in taxation computations in periods different from thos
e in which they
are included in the Company financial statements. Deferred tax assets
are recognised to the extent that it is regarded as more
likely than not
that they will be recovered. Deferred tax assets and liabilities are not discounted.
Financial instruments
Financial assets and financial liabilities, in respect of financ
ial instruments, are recognised on the Company statement of fin
ancial position when
the Company
becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Compan
y are classified according to the substance of the contractual
arrangements
entered into and the definitions of a financial liability and an eq
uity instrument. An equity instrument is any contract that e
vidences a residual
interest in the assets of the Company after deducting all of its
liabilities and includes no obligation to deliver cash or othe
r financial assets. The
accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Derivative financial instruments and hedge accounting
The Company’s activities expose it to the financial risks of ch
anges in foreign exchange rates
and interest rates which it mana
ges using derivative
financial instruments.
The use of derivative financial instruments is governed by the Group’s policies approved by the Board of Directors, which provi
de written
principles on the use of derivative financial instruments consistent with the Group’s risk management strategy. Changes in valu
es of all
derivative financial instruments are included within the income st
atement unless designated in an effective cash flow hedge rel
ationship when
changes in value are deferred to other comprehensive income or equity respectively.
The Company does not use derivative financial
instruments for speculative purposes.
Derivative financial instruments are initially measured at fair value on the contract date and are subsequently remeasured to f
air value at each
reporting date. The Company designates certain derivatives as hedg
es of the change of fair value of recognised assets and liabi
lities (‘fair value
hedges’) or hedges of highly probable forecast transactions or
hedges of foreign currency or interest rate risks of firm commit
ments (‘cash flow
hedges’). Hedge accounting is discontinued when the hedging inst
rument expires or is sold, terminated, exercised or no longer q
ualifies for
hedge accounting.
Fair value hedges
The Company’s policy is to use derivative financial instruments (primarily interest rate swaps) to convert a proportion of its
fixed rate debt to
floating rates in order to hedge the interest rate risk arising, principally, from capital market borrowings. The Company desig
nates these as fair
value hedges of interest rate risk with changes in fair value
of the hedging instrument recognised in the income statement for
the period
together with the changes in the fair value of the hedged item
due to the hedged risk, to the extent the hedge is effective. Ga
ins and losses
relating to
any ineffective portion are recognised
immediately in the income statement.
Cash flow hedges
Cash flow hedging is used by the Company to hedge certain exposures to variability in future cash flows. The portion of gains o
r losses relating
to changes in the fair value of derivatives that are designated and qualify as effective cash flow hedges is recognised in othe
r comprehensive
income; gains or losses relating to any ineffective portion are re
cognised immediately in the income
statement. However, when t
he hedged
transaction results in the recognition of a non-financial asset
or a non-financial liability, the gains and losses previously r
ecognised in other
comprehensive income and accumulated in equity are transferred fr
om equity and included in the initial measurement of the cost
of the non-
financial asset or non-financial liability. When the hedged item is recognised in the income statement, amounts previously reco
gnised in other
comprehensive income and accumulated in equity for the hedging in
strument are reclassified to the income statement. When hedge
accounting is discontinued, any gain or loss recognised in other co
mprehensive income at that time remains in equity and is rec
ognised in the
income statement when the hedged transaction is ultimately recognised in
the income statement. If a forecast transaction is no longer
expected to occur, the gain or loss accumulated in equi
ty is recognised immediately in the income statement.
New accounting pronouncements
To the extent applicable the Comp
any will adopt new accounting policies as set out in note 1 ‘Basis of preparation’ in the cons
olidated financial statements.
Strategic report Governance
Financials
Other information218
Vodafone Group Plc
Annual Report 2022
2. Fixed assets
Accounting policies
Shares in Group undertakings are stated at cost less any provision for impairment and capital related to share-based payments.
Contributions in
respect of share-based payments are recognised in line wi
th the policy set out in note 7 ‘Share-based payments’.
The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of
an
investment may not be recoverable. If any such indication of
impairment exists, the Company makes an estimate of the recoverabl
e amount. If
the recoverable amount of the cash-generating unit is less than th
e value of the investment, the investment is considered to be
impaired and is
written down to its recoverable amount. An impairment lo
ss is recognised immediately in the income statement.
Where there has been a change in the estima
tes used to determine recoverable amount and an impairment loss subsequently reverse
s, the
carrying amount of the cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the c
arrying amount
that would have been determined had no impairment loss been reco
gnised for the cash-generating unit
in prior years and an impai
rment loss
reversal is recognised immediately in the
income statement.
The Company applies the same methodology and assumptions used by
the Group for goodwill impairment testing purposes, as set out
in note
4 ‘Impairment losses’ to the consolidated financial statements. For the purposes of the Company’s own impairment assessment, th
e Group’s
operations are considered to be a single cash generating unit
(‘CGU’) held within the Company’s principal subsidiary, Vodafone
European
Investments. The pooling of the Company’s interests within a single CGU significantly reduces the risk that movements in indivi
dual
assumptions used during the goodwill impairment testing will impa
ct the result of the investment impairment assessment. Whilst
the
underlying assumptions used are a source of estimation uncertainty,
they do not give rise to a significant risk of adjustment w
ithin the next
financial year.
Shares in Group undertakings
2022
2021
€m
€m
Cost
1 April
84,313
84,264
Capital contributions arising from
share-based payments
119
136
Contributions received in relation
to share-based payments
(98)
(87)
31 March
84,334 84,313
Amounts provided for
1 April
928
798
Impairment losses
–
130
31 March
928
928
Net book value
31 March
83,406 83,385
At 31 March 2022 the Company had the following principal subsidiary:
Name
Principal activity Country of incorporation Percentage shareholding
Vodafone Euro
p
ean Investments
Holdin
g
Com
p
an
y
En
g
land
100
Details of direct and indirect related undertakings are set ou
t in note 31 ‘Related undertakings’ to the consolidated financial
statements.
Strategic report Governance
Financials
Other information219
Vodafone Group Plc
Annual Report 2022
3. Debtors
Accounting policies
Amounts owed by subsidiaries are classified and recorded at amortised cost and reduced by allowances for expected credit losses
. Estimated
future credit losses are first recorded on initial recognition of
a receivable and are based on estimated probability of defaul
t. Individual balances
are written off when management deems them not to be collectible. Derivative financial instruments are measured at fair value t
hrough profit
and loss.
2022
2021
€m
€m
Amounts falling due
within one year
Amounts owed by subsidiaries
1
172,039 163,667
Taxation recoverable
219
194
Other debtors
10
14
Derivative financial instruments
416
274
172,684 164,149
Amounts falling
due after more than one year
Deferred tax
–
164
Derivative financial instruments
4,288
2,964
4,288 3,128
Notes:
1 Amounts owned by subsidiaries are unse
cured, have no fixed date of repayment an
d are repayable on demand with sufficient l
iquidity in the group to flow funds if required. Therefore expected credit
losses are considered to be immaterial.
2 Primarily relates to amounts owed
by group companies due to group relief.
4. Other Investments
Accounting policies
Investments are classified and measured at amortised cost us
ing the effective interest rate method, less any impairment.
2022
2021
€m
€m
Collateral
698
3,107
5. Creditors
Accounting policies
Capital market and bank borrowings
Interest-bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception) and are subseq
uently measured at
amortised cost using the effective interest
rate method, except where they are identifi
ed as a hedged item in a designated fair
value hedge
relationship. Any difference between the proceeds net of transaction costs and the amount due on settlement or redemption of bo
rrowings is
recognised over the term of the borrowing.
2022
2021
€m
€m
Amounts falling
due within one year
Bonds
1,875 2,251
Bank loans
3
–
Collateral liabilities
2,914
962
Other borrowings
6
36
Bank borrowings secured ag
ainst Indian assets
1,382
862
Amounts owed to subsidiaries
1
161,114
158,017
Derivative financial instruments
141
109
Other creditors
20
92
Accruals and deferred income
2
1,458
432
168,913 162,761
Amounts falling
due after more than one year
Deferred tax –
338
Bonds
43,967 42,447
Bank loans
2
350
Bank borrowings secured against Indian assets
–
385
Derivative financial instruments
1,511 3,940
45,818 47,122
Notes:
1 Amounts owed to subsidiaries are unsecured, have
no fixed date of repayment and are repayable on demand.
2 Includes €1,434 million (2021: €339 million) payable in
relation to the irrevocable and non-discretionary share buyback programme announced in March 2022 (2021: announced March 2021).
Notes to the Company financial statements (continued)
Strategic report Governance
Financials
Other information220
Vodafone Group Plc
Annual Report 2022
Included in amounts falling due after more than one year are bonds of €29,206 million (2021: €30,337) which are due in more tha
n five years
from 1 April 2022 and are payable otherwise than by instalments. Interest payable on these bonds ranges from 0.5% to 7.875% (20
21: 0.0% to
7.875%).
6. Called up share capital
Accounting policies
Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of direct issuance costs.
2022
2021
Number €m
Numbe
r
€m
Ordinary shares of 20
20
Ū
21
US cents each allotted,
issued and fully paid:
1,2,3
1 April
28,816,835,778
4,797
28,815,914,978
4,797
Allotted during the year –
792,090
920,800
–
31 March
28,817,627,868
4,797
28,816,835,778
4,797
Notes:
1 At 31 March 2022 there were 50,000 (2021: 50,000) 7% cumulative fixed rate shares of £1 each in issue.
2 At 31 March 2022 the Group held 447,576,522 (2021: 592,642,309) treasury shares with a nominal value of €75 million (2021: €9
9 million). The market value of shares held was €661 million
(2021: €918 million). During the year, 68,306,442 (2021: 63,830,400) tr
easury shares were reissued under Group share schemes.
3 On 5 March 2019 the Group announced the placing of subordinated mandatory convertible bonds totalling £1.72 billion with a 2
year maturity date in 2021 and £1.72 billion with a 3 year
maturity date in 2022. During the year, 1,518,629,693 treasury shares were issued in settlement of tranche 2 of the maturing su
bordinated mandatory convertible bond, whilst in the year ended
31 March 2021, 1,426,793,872 ordinary shares were
issued in settlement of tranche 1. For further details see note 21 ‘Borrowing
s’ in the consolidated financial statements.
7. Share-based payments
Accounting policies
The Group operates a number of equity-se
ttled share-based payment plans for the emp
loyees of subsidiaries using the Company’s e
quity
instruments. The fair value of the compensation given in resp
ect of these share-based payment plans is recognised as a capital
contribution to
the Company’s subsidiaries over the vesting period. The capital co
ntribution is reduced by any payments received from subsidiar
ies in respect of
these share-based payments.
The Company currently uses a number of equity-settled share plans to grant options and shares to the Directors and employees of
its
subsidiaries.
At 31 March 2022, the Company had 61 million ordinary share options outstanding (2021: 62 million).
The Company has made capital contributions to its subsidiaries in
relation to share-based payments. At 31 March 2022, the cumul
ative capital
contribution net of payments received from subsidiaries was €239 million (2021: €218 million). During the year ended 31 March 2
022, the total
capital contribution arising from share-based payments was €119 million (2021: €136 million), with payments of €98 million (202
1: €87 million)
received from subsidiaries.
Full details of share-based payments, share option scheme
s and share plans are disclosed in note 26 ‘Share-based
payments’ to the
consolidated financial statements.
8. Reserves
The Board is responsible for the Group’s capi
tal management including the approval of
dividends. This includes an assessment of
both the level
of reserves legally available for distribution and consideration as to whether the Company would be solvent and retain sufficie
nt liquidity
following any proposed distribution.
As Vodafone Group Plc is a Group holding company with no direct
operations, its ability to make shareholder distributions is de
pendent on its
ability to receive funds for such purposes from its subsidiaries
in a manner which creates profits available for distribution f
or the Company. The
major factors that impact the ability of the Company to access profits held in subsidiary companies at an appropriate level to
fulfil its needs for
distributable reserves on an ongoing basis include:
the absolute size of the profit pools either currently available for distribution or capable of realisation into distributable
reserves in the
relevant entities;
the location of these entities in
the Group’s corporate structure;
profit and cash flow generation in those entities; and
the risk of adverse changes in business valuations giving rise to investment impairment charges, reducing profits available for
distribution.
The Group’s consolidated reserves set out on page 131 do not
reflect the profits available for distribution in the Group.
Strategic report Governance
Financials
Other information221
Vodafone Group Plc
Annual Report 2022
9. Equity dividends
Accounting policies
Dividends paid and received are included in the Company financia
l statements in the period in
which the related dividends are a
ctually paid or
received or, in respect of the Company’s final dividend for the year, approved by shareholders.
2022
2021
€m
€m Declared during the financial year
Final dividend for the year ended 31
March 2021: 4.50 eurocents per share
(2020: 4.50 eurocents per share)
1,254 1,205
Interim dividend for the year ended 31
March 2022: 4.50 eurocents per share
(2021: 4.50 eurocents per share)
1,229 1,207
2,483 2,412
Proposed after the balance sheet date
and not recognised
as a liability
Final dividend for the year ended 31
March 2022: 4.50 eurocents per share
(2021: 4.50 eurocents per share)
1,265 1,260
10. Contingent liabilities and legal proceedings
2022
2021
€m
€m
Other guarantees
3,427
3,340
Other guarantees and contingent liabilities
Other guarantees principally comprise the Company’s guarantee of the Group’s 50% share of a US$3.5 billion loan facility (2021:
US$3.5 billion
loan facility), which forms part of the Group’s overall joint venture investment in TPG Telecom Limited and the guarantee of €1
.8 billion (2021:
€1.8 billion) of subsidiary spectrum payments.
The Company will guarantee the debts and liabilities of certain of
its UK subsidiaries at the balance sheet date in accordance
with section 479C
of the Companies Act 2006. The Company has assessed the
probability of loss under these guarantees as remote.
As detailed in note 25 ‘Post employment benefits’ to the cons
olidated financial statements, the Company is the sponsor of the G
roup’s main
defined benefit scheme in the UK, being th
e Vodafone Group UK Pension Scheme (‘Vodafone UK plan’). The results, assets and liab
ilities
associated with the Vodafone UK plan are recognised in the financial statements of Vodafone Limited and Vodafone Group Services
Limited.
As detailed in note 29 ‘Contingent liabilities and legal procee
dings’ to the consolidated financial statements, the Company has
covenanted to
provide security on the Group’s performance bond
s and also in favour
of the trustee of the
Vodafone Group UK Pension Scheme and the
Trustees of THUS Plc Group Scheme.
Legal proceedings
Details regarding certain legal actions which involve the Company
are set out in note 29 ‘Contingent liabilities and legal proc
eedings’ to the
consolidated financial statements.
11. Other matters
The auditor’s remuneration for the current year in respect of
audit and audit-related services was €4 million (2021: €3 million
) and for non-audit
services was €nil (2021: €nil).
The Company had two (2021: two) employees throughout the year, be
ing the executive directors. They are remunerated by the Compa
ny for
their services to the Group as a whole. No remuneration was paid to them specifically in respect of their services to Vodafone
Group Plc for
either year. Full details of the Directors’ remuneration are di
sclosed in the ‘Annual Report on Remuneration’ on pages 99 to 11
2 and Note 23
‘Directors and key management compensation’ on page 191 of the consolidated financial statements.
Vodafone Group Plc is incorporated and domiciled in England and
Wales (registration number 1833679). The registered address of
the
Company is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England.
Notes to the Company financial statements (continued)
Strategic report Governance
Financials
Other information222
Vodafone Group Plc
Annual Report 2022
In the discussion of the Group’s reported operating results, non-GAAP measures are presented to provide readers with additional
financial
information that is regularly reviewed by management. This additional information presented is not uniformly defined by all com
panies
including those in the Group’s industry. Accordingly, it may not
be comparable with similarly titled measures and disclosures b
y other
companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not it
self a measure
defined under GAAP. Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
The non-GAAP measures discussed in this document are listed below.
Non-GAAP measure
Defined on page
Closest equivalent GAAP measure
Reconciled on page
Performance metrics
Adjusted EBITDAaL
Previously referred to as Adjusted EBITDA in prior years. The metrics
have the same definition.
Page 224
Operating profit
Page 227Organic Adjusted EBITDAaL growth
Page 224
Not applicable
Not applicable
Organic percentage point change in
Adjusted EBITDAaL margin
Page 224
Not applicable Not applicable
Organic revenue growth
Page 224
Revenue
Pages 225 and 226
Organic service revenue growth
Page 224
Service revenue
Pages 225 and 226
Organic mobile service revenue growth
Page 224
Service revenue
Pages 225 and 226
Organic fixed service revenue growth
Page 224
Service revenue
Pages 225 and 226
Organic Vodafone
Business service revenue
growth
Page 224
Service revenue
Pages 225 and 226
Organic financial serv
ices revenue growth in
South Africa
Page 224
Service revenue
Pages 225 and 226
Organic retail service revenue growth in
Germany
Page 224
Service revenue
Pages 225 and 226
Other metrics
Adjusted profit attributable to owners of the
parent
Page 227
Profit attributable to owners of the parent
Page 227Adjusted basic earnings per share
Page 227
Basic earnings per share
Page 228Cash flow, funding and capital
allocation metrics
Free cash flow
Page 228
Inflow from operating activities
Page 229Adjusted free cash flow
Previously referred to as Free cash flow (pre spectrum, restructuring
and integration costs) but now excludes Vantage Towers growth
capital expenditure.
Page 228
Inflow from operating activities
Pages 31 and 229
Gross debt Page 228 Page 229
Borrowings
Net debt
Page 228
Borrowings less cash and cash equivalents
Page 229Pre-tax ROCE (controlled)
Page 230
ROCE calculated using GAAP measures
Pages 230 and 231
Post-tax ROCE (controlled and
associates/joint ventures)
Page 230
ROCE calculated using GAAP measures
Pages 230 and 231
Financing and Taxation metrics
Adjusted net financing costs
Page 232
Net financing costs
Page 30Adjusted profit before taxation
Page 232
Profit before taxation
Page 232Adjusted income tax expense
Page 232 Page 232
Income tax expense
Adjusted effective tax rate
Page 232 Page 232
Income tax expense
Adjusted share of results of equity
accounted associates and joint ventures
Page 232
Share of results of equity accounted
associates and joint ventures
Page 233
Adjusted share of results of equity
accounted associates and joint ventures
used in post-tax ROCE
Page 232
Share of results of equity accounted
associates and joint ventures
Page 233
Non-GAAP measures
Unaudited information
Strategic report Governance Financials
Other information
223
Vodafone Group Plc
Annual Report 2022
Performance metrics
Non-GAAP measure
Purpose
Definition
Adjusted EBITDAaL
Adjusted EBITDAaL is used in conjunction with
financial measures suc
h as operating pr
ofit to assess
our operating perfo
rmance and profitability.
Adjusted EBITDAaL is operating profit after
depreciation on lease-rela
ted right of use assets and
interest on leases but excluding depreciation,
amortisation and gains/losse
s on disposal of owned
assets and excluding share of results of equity
accounted associates an
d joint ventures, impairment
losses, restructuring costs
arising from discrete
restructuring plans, other income and expense and
significant items that
are not considered by
management to be reflect
ive of the underlying
performance of the Group.
It is a key external metric
used by the investor
community to assess perfo
rmance of our operations.
It is our segment p
erformance measure in
accordance with IFRS 8 (O
perating Segments).
Adjusted EBITDAaL margin is Adjusted EBITDAaL divided by Revenue.
Organic growth
All amounts marked with an ‘*’ in this document represent organic growth which presents performance on a comparable basis, excl
uding the
impact of foreign exchange rates, mergers and acquisitions and other adjustments to improve the comparability of results betwee
n periods.
When calculating organic growth, the FY21 results for Vantage Towe
rs and relevant operating entities have been adjusted to refl
ect a full year of
operation on a pro forma basis in order to be comparable to FY22.
Organic growth is calculated for revenue and profitability metrics, as follows:
Adjusted EBITDAaL;
Percentage point change in Adjusted EBITDAaL margin;
Revenue;
Service revenue;
Mobile service revenue;
Fixed service revenue;
Vodafone Business service revenue;
Financial services revenue in South Africa; and
Retail service revenue in Germany.
Whilst organic growth is not intended to be a substitute for report
ed growth, nor is it superior
to reported growth, we believe
that the measure
provides useful and necessary information to investors and other interested parties for the following reasons:
It provides additional information on underlying growth of the business without the effect of
certain factors unrelated to its operating
performance;
It is used for internal performance analysis; and
It facilitates comparability of underlying growth with other co
mpanies (although the term ‘organic’ is not a defined term under
GAAP and may
not, therefore, be comparable with similarly
titled measures reported by other companies).
We have not provided a comparative in respect of organic growth rates as the current rates describe the change between the begi
nning and
end of the current period, with such changes being explained by the commentary in this document. If comparatives were provided,
significant
sections of the commentary for prior periods would also need to be included, reducing the usefulness and transparency of this d
ocument.
Non-GAAP measures (continued)
Unaudited information
Strategic report Governance Financials
Other information
224
Vodafone Group Plc
Annual Report 2022
Reported M&A and Foreign Organic
FY22 FY21
growth Other exchange growth*
€m €m
% pps pps %
Year ended 31 March 2022
Service revenue
Germany
11,616
11,520
0.8 0.3 1.1
–
Mobile service revenue
5,124
5,056
1.3 0.5
–
1.8
Fixed service revenue
6,492
6,464
0.4 0.1
–
0.5
Italy
4,379 4,458
(1.8)
0.0
(1.8)–
Mobile service revenue
3,141
3,244
(3.2)
–
–
(3.2)
Fixed service revenue
1,238
1,214
2.0
–
–
2.0
UK
5,154 4,848
6.3
–
1.3(5.0)
Mobile service revenue
3,697
3,428
7.8
–
(5.0)
2.8
Fixed service revenue
1,457
1,420
2.6
–
(4.9)
(2.3)
Spain
3,714 3,788
(2.0)
– –
(2.0)Other Europe
5,001
4,859
2.9 0.7
(0.6)
3.0
Vodacom
4,635 4,083
(8.9)13.5
–
4.6
Other Markets
3,420
3,312
3.3
–
16.1
19.4
Vantage Towers
–
–
–
–
–
–
Common Functions
522
470
Eliminations
(238) (197)
Total service revenue
38,203
37,141
2.9 0.2
(0.5)
2.6
Other revenue
7,377 6,668
Revenue
45,580
43,809
4.0 0.0
(0.5)
3.5
Other growth metrics
Vodafone Business
- Service revenue
10,316
10,076
2.4
(0.4)
(1.2)
0.8
South Africa - Financial services revenue
155
125
24.0
-
(11.6)
12.4
Germany - Retail service revenue
11,348
11,201
1.3
0.3
-
1.6
Adjusted EBITDAaL
Germany
5,669 5,634
0.6 5.9 6.5
–
Italy
1,699 1,597
6.4
– –
6.4UK
1,395 1,367
2.0 6.0
(4.7)
3.3Spain
957
1,044
(8.3)
7.2
(1.1)–
Other Europe
1,606
1,760
(8.8)
10.8
(0.6)
1.4
Vodacom
2,125 1,873
13.5
–
(10.1)
3.4
Other Markets
1,335
1,228
8.7
–
14.3
23.0
Vantage Towers
619
–
–
–
–
–
Common Functions
1
(197)
(117)
Group
15,208
14,386
5.7 0.1
(0.8)
5.0
Percentage point change in
Adjusted EBITDAaL margin
Germany
43.2% 43.4%
(0.2)
2.3 2.1
–
Italy
33.8% 31.9%
1.9
– –
1.9UK
21.2%
22.2%
(1.0)
1.3
–
0.3
Spain
22.9% 25.1%
(2.2)
1.9
(0.3)–
Other Europe
28.4%
31.7%
(3.3)
3.2
(0.1)
(0.2)
Vodacom (1.0)
35.5% 36.2%
(0.7)–
(0.3)Other Markets
34.9%
32.6%
2.3
–
(1.2)
1.1
Vantage Towers
49.4%
–
–
–
–
–
Group
33.4% 32.8
%
0.6
–
(0.1)
0.5
Note:
1
Common Functions Adjusted EBITDAaL includes a non-recurring char
ge in relation to the impairment of prior year receivables.
Strategic report Governance Financials
Other information
225
Vodafone Group Plc
Annual Report 2022
Reported M&A and Foreign Organic
Q4 FY22 Q4 FY21
growth Other exchange growth*
€m €m
% pps pps %
Quarter ended 31 March 2022
Service revenue
Germany
2,903 2,885
0.6 0.2 0.8
–
Mobile service revenue
1,282
1,274
0.6
1.8
–
2.4
Fixed service revenue
1,621
1,611
0.6
(1.0)
–
(0.4)
Italy
1,085
1,084
0.1
(0.9)
–
(0.8)
Mobile service revenue
758
788
(3.8)
0.7
–
(3.1)
Fixed service revenue
327
296
10.5
(5.2)
–
5.3
UK
1,341 1,231
8.9
(2.3) (4.6)
2.0 Mobile service revenue
972
880
10.5
–
(4.6)
5.9
Fixed service revenue
369
351
5.1
(7.3)
(4.8)
(7.0)
Spain
908 951
(4.5) (0.6) (5.1)
-
Other Europe
1,242
1,233
0.7
2.6
(0.6)
2.7
Vodacom (7.4)
1,192 1,078
(0.1)10.6
3.1
Other Markets
801
827
(3.1)
(0.1)
23.0
19.8
Vantage Towers
–
–
–
–
–
–
Common Functions
134
136
Eliminations
(60) (59)
Total service revenue
9,546
9,366
1.9
(0.1)
0.2
2.0
Other revenue
1,861
1,815
Revenue
11,407 11,181
2.0 2.1
(0.1)
0.2Other growth metrics
Germany - Retail service revenue
2,841 2,812
1.0 0.2 1.2
-
Reported M&A and Foreign Organic
Q3 FY22 Q3 FY21
growth Other exchange growth*
€m €m
% pps pps %
Quarter ended 31
December 2021
Service revenue
Germany
2,936 2,912
0.8 0.3 1.1
–
Mobile service revenue
1,301
1,279
1.7
–
–
1.7
Fixed service revenue
1,635
1,633
0.1
0.6
–
0.7
Italy
1,107 1,125
(1.6)
0.3
(1.3)–
Mobile service revenue
794
818
(2.9)
–
–
(2.9)
Fixed service revenue
313
307
2.0
1.1
–
3.1
UK
1,292 1,216
6.3 1.1
(6.5)
0.9 Mobile service revenue
928
848
9.4
–
(6.8)
2.6
Fixed service revenue
364
368
(1.1)
3.5
(5.7)
(3.3)
Spain
940 957
(1.8)
0.2
(1.6)–
Other Europe
1,257
1,215
3.5
0.2
(0.8)
2.9
Vodacom
1,172 1,056
(6.6)11.0
–
4.4
Other Markets
867
806
7.6
–
12.2
19.8
Vantage Towers
–
–
–
–
–
–
Common Functions
136
115
Eliminations
(60) (45)
Total service revenue
9,647
9,357
3.1
0.4
(0.8)
2.7
Other revenue
2,037 1,844
Revenue
11,684 11,201
4.3 0.2
(0.8)
3.7Other growth metrics
South Africa - Financ
ial services revenue
39
33
18.2
–
(6.5)
11.7
Germany - Retail service revenue
2,871
2,832
1.4
0.3
–
1.7
Non-GAAP measures (continued)
Unaudited information
Strategic report Governance Financials
Other information
226
Vodafone Group Plc
Annual Report 2022
Other metrics
Non-GAAP measure
Purpose
Definition
Adjusted profit attributable
to owners of the parent
This metric is used in the calcula
tion of ad
justed basic
earnings per share.
Adjusted profit attributable
to owners of the parent
excludes restructuring costs
arising from discrete
restructuring plans, amortisat
ion of customer bases
and brand intangible assets, impairment losses, other
income and expense and mark-to-market and foreign
exchange movements, together with related tax
effects.
Adjusted basic earnings per
share
This performance measure is
used in discussions with
the investor community.
Adjusted basic earnings p
er share is Adjusted profit
attributable to owners of t
he parent divided by the
weighted average number of shares outstanding. This
is the same denomi
nator used when calculating basic
earnings / (loss) per share.
Adjusted EBITDAaL and Adjusted profit attributable to owners of the parent
The table below reconciles Adjusted EBITDAaL and Adjusted profit
attributable to owners of the pa
rent to their closest equivale
nt GAAP
measures, being Operating profit and Profit attributable to owners of the parent, respectively.
FY22 FY21
Reported Adjustments Adjusted Reported Adjustments Adjusted
€m €m €m €m €m €m
Adjusted EBITDAaL
15,208
–
15,208
14,386
–
14,386
Restructuring costs
(346)
346
–
(356)
356
–
Interest on lease liabilities
398
–
398
374
–
374
Loss on disposal of pr
operty, plant & equipment
and intangible assets
(28)
–
(28)
(30)
–
(30)
Depreciation and amortisation on owned assets
1
(9,858)
509
(9,349)
(10,187)
488
(9,699)
Share of results of equity
accounted associates
and joint ventures
2
211
250
461
342
90
432
Other income
79
(79)
–
568
(568)
–
Operating profit
5,664
1,026
6,690
5,097
366
5,463
Investment income
254
–
254
330
–
330
Financing costs
(1,964)
28
(1,936)
(1,027)
(1,068)
(2,095)
Profit before taxation
3,954
1,054
5,008
4,400
(702)
3,698
Income tax expense
(1,330) (3,864)
61
(1,269)2,985
(879)
Profit for the fi
nancial year
2,624
1,115
3,739
536
2,283
2,819
Profit attributable to:
- Owners of the parent
2,088
1,111
3,199
112
2,278
2,390
- Non-controlled interests
536
4
540
424
5
429
Profit for the fi
nancial year
2,624
1,115
3,739
536
2,283
2,819
Notes:
1
Reported depreciation and amortisation excludes depreciation on le
ased assets and loss on disposal of leased assets included wi
thin Adjusted EBITDAaL. Refer to Additional Information on page
233 for an analysis of depreciation and amortisation. The adjustments of €509 million (FY21: €488 million) relate to amortisati
on of customer bases and brand intangible assets.
2
Refer to page 233 for a breakdown of the adjustments to Share of results of equity accounted associates and joint ventures to d
erive Adjusted share of results of equity accounted associates and
joint ventures.
Strategic report Governance Financials
Other information
227
Vodafone Group Plc
Annual Report 2022
Adjusted basic earnings per share
The reconciliation of adjusted basic earnings per share to the c
losest equivalent GAAP measure, basic earnings per share, is pr
ovided below.
FY22 FY21
€m €m
Profit attributable to owners of the parent
2,088
112
Adjusted profit attributable
to owners of the parent
3,199 2,390
Million Million
Weighted average number of
shares outstanding - Basic
29,012 29,592
eurocents eurocents
Basic earnings per share
7.20c 0.38c
Adjusted basic earnings per share
11.03c
8.08c
Cash flow, funding and capital allocation metrics
Cash flow and funding
Non-GAAP measure
Purpose
Definition
Free cash flow
Internal performance reporting.
Free cash flow is Adjusted
EBITDAaL after cash flows
in relation to capital additions, working capital,
disposal of property, plant and equipment,
restructuring costs arising fr
om discrete restructuring
plans, integration capital
additions and working
capital related items, li
cences and spectrum, interest
received and paid, taxation, dividends received from
associates and investments,
dividends paid to non-
controlling shareholders in subsidiaries and
payments in respect of lease liabilities.
External metric used by investor community.
Assists comparability with other companies,
although our metric may not be directly
comparable to similar
ly titled measures used by
other companies.
Adjusted free cash flow
Internal performance reporting.
Adjusted free cash flow is Free cash flow before
licences and spectrum, re
structuring costs arising
from discrete restructuring pl
ans, integration capital
additions and working capita
l related items, M&A and
Vantage Towers growth
capital expenditure.
This non-GAAP measure has changed for the year
ended 31 March 2022 due to
the change in business
model explained in Note 2 'Revenue disaggregation
and segmental analysis'. Adjus
ted free cash flow now
excludes Vantage Towers
growth capital expenditure.
This change was made so the measure aligns to the
basis on which outl
ook guidance is pr
ovided and so is
a more useful metric for
the investor community.
Growth capital expenditure
is total capital
expenditure excluding maintenance-type
expenditure.
External metric used by investor community.
Setting director and ma
nagement remuneration.
Key external metric used to evaluate liquidity and
the cash generated by
our operations.
Gross debt
Prominent metric used by debt rating agencies and
the investor community.
Non-current borrowings a
nd current borrowings,
excluding lease liabilities
, collateral liabilities and
borrowings specifica
lly secured against
Indian assets.
Net debt
Prominent metric used by debt rating agencies and
the investor community.
Gross debt less cash and cash equivalents, short-term
investments, derivative financial instruments
excluding mark-to-market adjustments and net
collateral assets.
Non-GAAP measures (continued)
Unaudited information
Strategic report Governance Financials
Other information
228
Vodafone Group Plc
Annual Report 2022
Cash flow and funding (continued)
The tables below present: (i) the reconciliation between Inflow from operating activities and Free cash flow and (ii) the recon
ciliation between
Borrowings, Gross debt and Net debt.
FY22 FY21
€m €m
Inflow from operating activities
18,081
17,215
Net tax paid
925
1,020
Cash generated by operations
19,006
18,235
Capital additions
(8,306)
(7,854)
Working capital movement in
respect of capital additions
157
410
Disposal of property, plant a
nd equipment and intangible assets
27
42
Integration capital additions
(314)
(329)
Working capital movement in respect
of integration cap
ital additions
(34)
62
Licences and spectrum
(896)
(1,221)
Interest received and paid
(1,615)
(1,860)
Taxation
(925)
(1,020)
Dividends received from associates and joint ventures
638
628
Dividends paid to non-controlling shareholders in subsidiaries
(539)
(391)
Payments in respect of lease liabilities
(3,943)
(3,897)
Other
53 305
Free cash flow
3,309
3,110
FY22 FY21
€m €m
Borrowings
(70,092)
(67,760)
Lease liabilities
12,539
13,032
Bank borrowings secured ag
ainst Indian assets
1,382 1,247
Collateral liabilities
2,914
962
Gross debt
(53,257)
(52,519)
Collateral liabilities
(2,914)
(962)
Cash and cash equivalents
7,496
5,821
Short-term investments
4,795
4,007
Collateral assets
698
3,107
Derivative financial instruments
2,954
(859)
Less mark-to-market (gains
)/losses deferred in hedge reserves
(1,350)
862
Net debt
(41,578) (40,543)
Strategic report Governance Financials
Other information
229
Vodafone Group Plc
Annual Report 2022
Return on Capital Employed
Non-GAAP measure
Purpose
Definition
Return on Capital
Employed ('ROCE')
ROCE is a metric used by the investor community
and reflects how efficient
ly we are generating profit
with the capital
we deploy.
We calculate ROCE by divi
ding Operating profit by
the average of capital emp
loyed as reported in the
consolidated statement of f
inancial position. Capital
employed includes Borrowings, cash and cash
equivalents, derivative financial instruments included
in trade and other receivab
les/payables, short term
investments, collateral
assets, financial liabilities
under put option ar
rangements and equity.
Pre-tax ROCE (controlled)
Post-tax ROCE
(controlled and
associates/joint ventures)
As above.
We calculate pre-tax ROCE
(controlled operations)
by dividing Operating profit excluding interest on
lease liabilities, restructuring
costs arising from
discrete restructuring plans, impairment losses, other
income and expense and the
share of results of
equity accounted associates
and joint ventures. On a
post-tax basis, the mea
sure includes our adjusted
share of results from associates and joint ventures
and a notional tax charge.
Capital is equivalent to net
operating assets and
is calculated as
the average of
opening and closing
balances of: pr
operty, plant and
equipment (including Righ
t-of-Use assets and
liabilities), intangible asse
ts (including goodwill),
operating working ca
pital (including held for sale
assets and excluding derivative balances) and
provisions. Other assets
that do not directly
contribute to returns are excluded from this measure
and include other inves
tments, current and deferred
tax balances and post
employment benefits. On a
post-tax basis, ROCE
also includes our investments in
associates and joint ventures.
Return on Capital Employed (‘ROCE’) using GAAP measures
The table below presents the calculation of ROCE using GAAP measures as reported in the consolidated income statement and conso
lidated
statement of financial position.
FY22 FY21
€m €m
Operating profit
1
5,664
5,097
Borrowings
70,092 67,760
Cash and cash equivalents
(7,496)
(5,821)
Derivative financial instruments include
d in trade and other receivables
(4,626)
(3,151)
Derivative financial instruments include
d in trade and other payables
1,672
4,010
Short-term investments
(4,795)
(4,007)
Collateral assets
(698)
(3,107)
Financial liabilities und
er put option arrangements
494
492
Equity
56,977 57,816
Capital employed at end of the year
111,620
113,992
Average capital employed for the year
112,806
115,090
ROCE using GAAP measures
5.0%
4.4%
Note:
1
Operating profit includes Other income/(expense), which includes merger and acquisition activity that is non-recurring in natur
e.
Non-GAAP measures (continued)
Unaudited information
Strategic report Governance Financials
Other information
230
Vodafone Group Plc
Annual Report 2022
Return on Capital Employed (‘ROCE’): Non-GAAP basis
The table below presents the calculation of
ROCE using non-GAAP measures and reconciling to the closest equivalent GAAP measure
.
FY22 FY21
€m €m
Operating profit
5,664
5,097
Interest on lease liabilities
(398)
(374)
Restructuring costs
346
356
Other income
(79)
(568)
Share of results of equity ac
counted associates and joint ventures
(211)
(342)
Adjusted operating profit for calc
ulating pre-tax ROCE (controlled)
5,322
4,169
Adjusted share of results of equity accounted as
sociates and joint ventures used in post-tax ROCE
1
223
203
Notional tax at adjusted
effective tax rate
2
(1,547)
(1,176)
Adjusted operating profit for ca
lculating post-tax ROCE (con
trolled and associates/joint
ventures)
3,998
3,196
Capital employed for calcul
ating ROCE on a GAAP basis
111,620 113,992
Adjustments to exclude:
- Leases
(12,539)
(13,032)
- Deferred tax assets
(19,089)
(21,569)
- Deferred tax liabilities
520
2,095
- Taxation
recoverable
(296) (434)
- Taxation payable
864
769
- Other investments
(1,855)
(1,514)
- Associates, joint ventures and
assets held for sale
(5,227)
(5,927)
- Pension assets and liabilities
(274)
453
Adjusted capital employed for calculating pre-tax ROCE (controlled)
73,724
74,833
Associates, joint ventures and as
sets held for sale
5,227
5,927
Adjusted capital employed for calculating post-tax ROCE (controlled and associates/joint
ventures)
78,951 80,760
Average capital employed for calculating pre-tax ROCE (controlled)
74,279
75,470
Average capital employed for calculating post-tax ROCE (controlled and associates/joint
ventures)
79,856 81,143
Pre-tax ROCE (controlled)
7.2%
5.5%
Post-tax ROCE (controlled an
d associates/joint ventures)
5.0%
3.9%
Notes:
1
Adjusted share of results of equity accounted associates and joint ventures used in post-tax ROCE is a non-GAAP measure.
2
Includes tax at the Adjusted effective tax rate of 27.9%.
Strategic report Governance Financials
Other information
231
Vodafone Group Plc
Annual Report 2022
Financing and Taxation metrics
Non-GAAP measure
Purpose
Definition
Adjusted net financing
costs
This metric is used by
both management and the
investor community.
Adjusted net financing costs exclude mark-to-market
and foreign exchange gains/losses.
This metric is used in the cal
culation of adjusted
basic earnings per share.
Adjusted profit before
taxation
This metric is used in the calcu
lation of the adjusted
effective tax rate (see below).
Adjusted profit before taxation excludes the items
excluded from adjusted
basic earnings per share,
including: amortisation of
customer bases and brand
intangible assets, restruc
turing costs arising from
discrete restructuring plans, other income and
expense and mark-to-market and foreign exchange
movements.
Adjusted income tax
expense
This metric is used in the calcu
lation of the adjusted
effective tax rate (see below).
Adjusted income tax expense ex
cludes the tax effects
of items excluded from
adjusted basic earnings per
share, including: amorti
sation of customer bases and
brand intangible assets, restructuring costs arising
from discrete restructuring plans, other income and
expense and mark-to-market and foreign exchange
movements. It also excludes deferred tax movements
relating to tax losses in Lu
xembourg as well as other
significant one-off items.
Adjusted effective tax rate
This metric is used by
both management and the
investor community.
Adjusted income tax expense (see above) divided by
Adjusted profit before taxation (see above).
Adjusted share of results
of equity accounted
associates and joint
ventures
This metric is used in the cal
culation of adjusted
effective tax rate.
Share of results of equity
accounted associates and
j
oint ventures excluding restructuring costs,
amortisation of acquired
customer base and brand
intangible assets and
other income and expense.
Adjusted share of results
of equity accounted
associates and joint
ventures used in post-tax
ROCE
This metric is used in the calcu
lation of post-tax
ROCE (controlled and
associates/joint ventures).
Share of results of equity
accounted associates and
j
oint ventures excluding restructuring costs and other
income and expense.
Adjusted tax metrics
The table below reconciles profit before taxation and income tax
expense to adjusted profit before taxation, adjusted income ta
x expense and
adjusted effective tax rate.
FY22 FY21
€m €m
Profit before taxation
3,954
4,400
Adjustments to derive adjusted profit before tax
1,054
(702)
Adjusted profit before taxation
5,008
3,698
Adjusted share of results of equity
accounted associates and joint ventures
(461)
(432)
Adjusted profit before tax for calculating adjusted effective tax rate
4,547
3,266
Income tax expense
(1,330)
(3,864)
Tax on adjustments to derive
adjusted profit before tax
(169)
(162)
Adjustments:
- Deferred tax following revaluati
on of investments in Luxembourg
1,468 2,128
*
- Deferred tax on use of Luxembourg losses in the year
327
320
- Recognition of deferr
ed tax asset in Luxembourg
(699)
699
*
- Increase in deferred tax assets in
the UK as a result of a change
in the corporate tax rate
(593)
–
- Revaluation of assets for
tax purposes in Italy
(273)
–
Adjusted income tax expense for
calculating adjusted tax rate
(1,269)
(879)
Adjusted effective tax rate
27.9%
26.9%
Note:
During the year ended 31 March 2022, we revised the calculation of
certain impairment reversals re
cognised by our Luxembourg ho
lding companies for the year ended 31 March
2021; this had no impact on the amount of deferred tax assets re
cognised at that date but has changed the amount of our unrecog
nised deferred tax assets by €0.7 billion
(unrecognised losses of €2.8 billion).
Non-GAAP measures (continued)
Unaudited information
Strategic report Governance Financials
Other information
232
Vodafone Group Plc
Annual Report 2022
Adjusted share of results of equity accounted associates and joint ventures
The table below reconciles adjusted share of results of equity accounted associates and joint ventures to the closest GAAP equi
valent, share of
results of equity accounted associates and joint ventures.
FY22 FY21
€m €m
Share of results of equity acco
unted associates and joint ventures
211
342
Restructuring costs
12
3
Other income
–
(142)
Adjusted share of results of equity accounted
associates and joint vent
ures used in post-
tax ROCE
223
203
Amortisation of acquired customer
base and brand intangible assets
238
229
Adjusted share of results of equity
accounted associates
and joint ventures
461
432
Additional information
Analysis of depreciation and amortisation
The table below presents an analysis of the different components
of depreciation and amortisation discussed in the document, re
conciled to the
GAAP amounts in the consolidated income statement.
FY22 FY21
€m €m
Depreciation on leased as
sets - included in Adjusted EBITDAaL
3,908
3,914
Depreciation on leased as
sets - included in Restructuring costs
36
–
Depreciation on leased assets
3,944
3,914
Depreciation on owned assets
5,814
5,766
Amortisation of owned
intangible assets
4,044
4,421
Depreciation and amortisation on owned assets
9,858
10,187
Depreciation and amortis
ation on owned assets
included in Restructuring costs
43
–
–
Total depreciation and amortisation on owned assets
9,901
10,187
Total depreciation and amortisation on owned and leased assets
13,845
14,101
Loss on disposal of owned fixed assets
28
30
Loss on disposal of leased assets
2
(13)
Depreciation and amortisation - as recognised in the consolidated income statement
13,875 14,118
Analysis of tangible and intangible additions
The table below presents an analysis of the different components
of tangible and intangible additions discussed in the document
.
FY22 FY21
€m €m
Capital additions
8,306
7,854
Integration related
capital additions
314
329
Licence and spectrum additions
901
896
Additions to customer bases
–
1
Additions
9,521 9,080
Intangible assets additions
3,635
3,367
Property, plant and eq
uipment owned additions
5,886
5,713
Total additions
9,521
9,080
Strategic report Governance Financials
Other information
233
Vodafone Group Plc
Annual Report 2022
Strategic report Governance Financials
Other information
234
Vodafone Group Plc
Annual Report 2022
2021/22 Financial calendar key dates
Ex-dividend date for final dividend 1 June 2022
Record date for final dividend 6 June 2022
AGM 26 July 2022
Final dividend payment 5 August 2022
Useful contacts
The Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: +44 (0) 371 384 2532
See
help.shareview.co.uk
for more information about this service
ADS holders
EQ Shareowner Services
P.O. Box 64504
St. Paul, MN 55164-0504
United States of America
Telephone: +1 800 233 5601 (toll free) or, for calls outside the
United States: +1 651 453 2128
See
shareowneronline.com
for more information about this service
Shareholder information
Managing your shares via Shareview
Our share Registrar, Equiniti operates a portfolio service, Shareview, for
investors in ordinary shares. This provides our shareholders with online
access to information about their investments as well as a facility to help
manage their holdings online, such as being able to:
–
update your details online including your address and dividend
payment instructions;
–
buy and sell shares easily;
–
receive certain shareholder communications electronically;
–
send your general meeting voting instructions in advance of
shareholder meetings;
–
view information about and join the Vodafone Group plc Dividend
Reinvestment Plan (‘DRIP’); and
–
access your online statements.
Equiniti also offers an internet and telephone share dealing
service
{
to{
existing shareholders. The service can be obtained at
www.shareview.co.uk.
Shareholders with any queries regarding their holding should contact
Equiniti on the contact details above.
Shareholders may also find the investors section of our corporate website,
vodafone.com/investor, useful for general queries and information about
the Company.
AGM
Our thirty-eighth AGM will be held at The Pavilion, Vodafone House,
Newbury RG14 2FN on 26 July 2022 at 10.00 am.
Shareholder communications
We are taking significant steps to reduce our impact on our planet. The
use of electronic communications, rather than printed paper documents,
means information about the Company can be accessed through emails
or the Company’s website, thus reducing our impact on the environment.
A growing number of our shareholders have opted to receive
communications from us electronically. Shareholders who have done
so
{
will be sent an email alert containing a link to the relevant documents.We encourage all our shareholders to sign up for this service. You can
register for this service at www.shareview.co.uk or by contacting Equiniti
by the telephone number provided on the left of this page.
See
vodafone.com/investor
for further information about this service
Shareholder information
Strategic report Governance Financials
Other information
235
Vodafone Group Plc
Annual Report 2022
ShareGift
We support ShareGift, the charity share donation scheme (registered
charity number 1052686). Through ShareGift, shareholders who
have
{
only a very small number of shares, which might be considered uneconomic to sell, are able to donate them to charity. Donated shares
are aggregated and sold by ShareGift with the proceeds being passed
on
{
to a wide range of UK charities.See sharegift.org or call +44 (0)20 7930 3737 for further details.
Landmark Financial Asset Search
We participate in an online service which provides a search facility
for
{
solicitors and probate professionals to quickly and easily trace
UK
{
shareholdings relating to deceased estates.Visit www.landmarkfas.co.uk or call +44 (0)844 844 9967 for
further
{
information.Warning to shareholders (“boiler room” scams)
Over recent years we have become aware of investors who have received
unsolicited calls or correspondence, in some cases purporting to have
been issued by us, concerning investment matters. These callers typically
make claims of highly profitable investment opportunities which turn
out
{
to be worthless or simply do not exist. These approaches are usually made by unauthorised companies and individuals and are commonly
known as “boiler room” scams. Investors are advised to be wary of any
unsolicited advice or offers to buy shares. If it sounds too good to be true,
it often is.
See the FCA website at
fca.org.uk/scamsmart
for more
b
detailed information about this or similar activitiesDividends
Read more on the dividend amount per share on pages 33 and 222.
Euro dividends
Dividends are declared in euros and paid in euros and pounds sterling
according to where the shareholder is resident. Cash dividends to ADS
holders are paid by the ADS depositary bank in US dollars. This aligns
the
{
Group’s shareholder returns with the primary currency in which we generate free cash flow. The foreign exchange rates at which dividends
declared in euros are converted into pounds sterling and US dollars are
calculated based on the average exchange rate of the five business days
during the week prior to the payment of the dividend.
Payment of dividends by direct credit
We pay cash dividends directly to shareholders’ bank or building society
accounts. This ensures secure delivery and means dividend payments
are
{
credited to shareholders’ designated accounts on the same day as payment. A dividend confirmation covering both the interim and final
dividends paid during the financial year is sent to shareholders at the
time
{
of the interim dividend in February. ADS holders may choose to have
{
their cash dividends paid by cheque from our ADS depository bank,
{
J.P. Morgan.Dividend reinvestment plan
We offer a dividend reinvestment plan which allows holders of ordinary
shares who choose to participate to use their cash dividends to acquire
additional shares in the Company. These are purchased on their behalf by
the plan administrator, Equiniti, through a low-cost dealing arrangement.
For ADS holders, J.P. Morgan, through its transfer agent, EQ Shareowner
Services, maintains the Global Invest Direct Program which is a direct
purchase and sale plan for depositary receipts with a dividend reinvestment
facility. See vodafone.com/dividends for further information about
dividend payments or, alternatively, please contact our registrar,
Equiniti
{
or EQ Shareowner Services for ADS holders as applicable. Contact information for Equiniti and EQ Shareowner Services
can be found on page 234
Taxation of dividends
See page 238 for details on dividend taxation.
Shareholders as at 31 March 2022
Number of ordinary Number of accounts % of total of issued shares
1-1,000 289,430 0.03
1,001-5,000 37,014 0.11
5,001-50,000 10,485 0.27
50,001-100,000 470 0.09
100,001-500,000 603 0.46
More than 500,000 1,075 99.04
Major shareholders
As at 13 May 2022, J.P. Morgan, as custodian of our ADR programme,
held
{
approximately 14.5% of our ordinary shares of 20 20/21
US cents each
as nominee. At this date, the total number of ADRs outstanding
was
{
408,917,251. As at 16 May 2022, 1,445 holders of ordinary shares had registered
addresses in the United States and held a total of approximately 0.0107%
of the ordinary shares of the Company.
At 31 March 2022, the following percentage interests in the ordinary
share capital of the Company, disclosable under the Disclosure Guidance
and Transparency Rules, (‘DTR 5’), have been notified to the Directors.
Shareholder Shareholding
1
BlackRock, Inc.
2
6.90%
Norges Bank 3.0004%
Notes:
1. The percentage of voting rights detailed above was calculated at the time of the
relevant
{
disclosures made in accordance with Rule 5 of the Disclosure Guidance and Transparency Rules.
2. On 7 February 2022, BlackRock, Inc. disclosed by way of a Schedule 13G filed with
the
{
SEC,{
beneficial ownership of 2,125,091,980 ordinary shares of the Company as of
{
31{
December{
2021, representing 7.8% of that class of shares at that date. On 14 May 2022, the Company was informed by Emirates
Telecommunications Group Company (‘Etisalat’) that they have
become
{
Vodafone’s largest shareholder with a 9.8% stake.On 16 May 2022, the Company was informed by BlackRock, Inc
that
{
their{
shareholding had increased to 6.98%.
The Company is not aware of any other changes in the interests
disclosed
{
under DTR 5 between 31 March 2022 and 16 May 2022.As far as the Company is aware, between 1 April 2016 and 16 May 2022, no
shareholder, other than described above, held 3% or more of
{
the voting rights
attributable to the ordinary shares of the Company other
{
than (i)
{
J.P.
{
Morgan,
as custodian of our ADR programme, (ii)
{
Etisalat,
{
Blackrock, Inc and Norges Bank (as described above) and (iii)
{
Morgan{
Stanley, which
owned
{
3.6% of the Company’s ordinary shares{
at 13
{
February 2018.The rights attaching to the ordinary shares of the Company held by
these
{
shareholders are identical in all respects to the rights attaching to
all
{
the ordinary shares of the Company. As at 16 May 2022 the Directors are not
{
aware of any other interest of 3% or more in the ordinary share capital
{
of the Company. The Company is not directly or indirectly owned or controlled by any foreign government or any other legal entity. There are
no arrangements known to the Company that could result in a change of
control of the Company.
Other information
Articles of Association and applicable English law
The following description summarises certain provisions of the
Company’s
{
Articles of Association and applicable English law. This summary is qualified in its entirety by reference to the Companies Act
2006 and the Company’s Articles of Association. The Company is a public
limited company under the laws of England and Wales. The Company is
registered in England and Wales under the name Vodafone Group Public
Limited Company with the registration number 1833679.
Full details on where copies of the Articles of Association
can be obtained are detailed on page 237 under
“Documents on display”
Strategic report Governance Financials
Other information
236
Vodafone Group Plc
Annual Report 2022
All of the Company’s ordinary shares are fully paid. Accordingly, no further
contribution of capital may be required by the Company from the holders
of such shares.
English law specifies that any alteration to the Articles of Association
must
{
be approved by a special resolution of the Company’s shareholders.Articles of Association
The Company’s Articles of Association do not specifically restrict the
objects of the Company.
Directors
The Directors are empowered under the Articles of Association to exercise
all the powers of the Company subject to any restrictions in the Articles
of
{
Association, the Companies Act 2006 (as defined in the Articles of Association) and any special resolution.
Under the Company’s Articles of Association a Director cannot vote in
respect of any proposal in which the Director, or any person connected
with the Director, has a material interest other than by virtue of the
Director’s interest in the Company’s shares or other securities. However,
this restriction on voting does not apply in certain circumstances as set
out in the Articles of Association.
The Directors are empowered to exercise all the powers of the Company
to borrow money, subject to the limitation that the aggregate amount of
all liabilities and obligations of the Group outstanding at any time shall not
exceed an amount equal to 1.5 times the aggregate of the Group’s share
capital and reserves calculated in the manner prescribed in the Articles
of
{
Association unless sanctioned by an ordinary resolution of the Company’s shareholders.
The Company can make market purchases of its own shares or agree
to
{
do so in the future provided it is duly authorised by its members in a general meeting and subject to and in accordance with section 701 of
the
{
Companies Act 2006. Such authority was given at the 2021 AGM. On
{
9 March 2022, the Company announced the first tranche of the irrevocable and non-discretionary share buy-back programme as a result
of the maturing of the first tranche of the mandatory convertible bond
(‘MCB’), as announced on 19 March 2021, had concluded. Following the
maturing of the second tranche of the MCB, the Company announced
that a new irrevocable and non-discretionary share buy-back programme
would commence on 17 March 2022. In order to satisfy the conversion
of
{
the second tranche of the MCB, 1,518,629,693 shares were issued from
existing shares held in treasury. Under this programme the Company is
expected to purchase up to the number of ordinary shares of 20
20/21
US
cents each announced for the programme on 9 March 2022. The number
of shares expected to be purchased is below the number permitted to be
purchased by the Company pursuant to the authority granted by the
shareholders at the 2021 AGM.
Read more about the programme
on pages 31-32
At each AGM all Directors shall offer themselves for election or
re-election, as applicable, in accordance with the Company’s Articles
of
{
Association and in the interests of good corporate governance.Directors are not required under the Company’s Articles of Association
to
{
hold any shares of the Company as a qualification to act as a Director,
although the Executive Directors are required to under the Company’s
Remuneration Policy.
Read more on the Remuneration Policy
on pages 93-98
Rights attaching to the Company’s shares
At 31 March 2022, the issued share capital of the Company was
comprised of 50,000 7% cumulative fixed rate shares of £1.00 each and
28,370,051,346 ordinary shares (excluding treasury shares) of 20
20/21
US
cents each. As at 31 March 2022, 447,576,522 ordinary shares were held
in Treasury.
Dividend rights
Holders of 7% cumulative fixed rate shares are entitled to be paid
in
{
respect of each financial year, or other accounting period of the Company, a fixed cumulative preferential dividend of 7% p.a. on the
nominal value of the fixed rate shares. A fixed cumulative preferential
dividend may only be paid out of available distributable profits which
the
{
Directors have resolved should be distributed.The fixed rate shares do not have any other right to share in the
Company’s profits.
Holders of the Company’s ordinary shares may, by ordinary resolution,
declare dividends but may not declare dividends in excess of the amount
recommended by the Directors. The Board of Directors may also pay
interim dividends. No dividend may be paid other than out of profits
available for distribution.
Dividends on ordinary shares can be paid to shareholders in whatever
currency the Directors decide, using an appropriate exchange rate for
any
{
currency conversions which are required.If a dividend has not been claimed for one year after the date of the
resolution passed at a general meeting declaring that dividend or the
resolution of the Directors providing for payment of that dividend, the
Directors may invest the dividend or use it in some other way for the
benefit of the Company until the dividend is claimed. If the dividend
remains unclaimed for 12 years after the relevant resolution either
declaring that dividend or providing for payment of that dividend,
it
{
will{
be
{
forfeited and belong to the Company.Voting rights
At a general meeting of the Company, when voting on substantive
resolutions (i.e. any resolution which is not a procedural resolution) each
shareholder who is entitled to vote and is present in person or by proxy
has one vote for every share held (a poll vote). Procedural resolutions
(such as a resolution to adjourn a general meeting or a resolution on the
choice of Chairman of a general meeting) shall be decided on a show of
hands, where each shareholder who is present at the meeting has one
vote regardless of the number of shares held, unless a poll is demanded.
Shareholders entitled to vote at general meetings may appoint proxies
who are entitled to vote, attend and speak at general meetings. Two
shareholders present in person or by proxy constitute a quorum for
purposes of a general meeting of the Company.
Under English law, shareholders of a public company such as the
Company are not permitted to pass resolutions by written consent.
Record holders of the Company’s ADSs are entitled to attend, speak
and
{
vote on a poll or a show of hands at any general meeting of the Company’s shareholders by the depositary’s appointment of them
as
{
corporate representatives or proxies with respect to the underlying ordinary shares represented by their ADSs. Alternatively, holders of ADSs
are entitled to vote by supplying their voting instructions to the depositary
or its nominee who will vote the ordinary shares underlying their ADSs in
accordance with their instructions.
Holders of the Company’s ADSs are entitled to receive notices of
shareholders’ meetings under the terms of the deposit agreement
relating to the ADSs.
Employees who hold shares in a vested nominee share account are able
to vote through the respective plan’s trustees. Note there is now a vested
share account with Computershare (in respect of shares arising from a
SAYE exercise) and Equatex (MyShareBank).
Holders of the Company’s 7% cumulative fixed rate shares are only
entitled to vote on any resolution to vary or abrogate the rights attached
to the fixed rate shares. Holders have one vote for every fully paid 7%
cumulative fixed rate share.
Shareholder information (continued)
Strategic report Governance Financials
Other information
237
Vodafone Group Plc
Annual Report 2022
Liquidation rights
In the event of the liquidation of the Company, after payment of all
liabilities and deductions in accordance with English law, the holders of
the Company’s 7% cumulative fixed rate shares would be entitled to a
sum equal to the capital paid up on such shares, together with certain
dividend payments, in priority to holders of the Company’s ordinary
shares. The holders of the fixed rate shares do not have any other right
to
{
share in the Company’s surplus assets.Pre-emptive rights and new issues of shares
Under section 549 of the Companies Act 2006 Directors are, with certain
exceptions, unable to allot the Company’s ordinary shares or securities
convertible into the Company’s ordinary shares without the authority
of
{
the shareholders in a general meeting. In addition, section 561 of the
Companies Act 2006 imposes further restrictions on the issue of equity
securities (as defined in the Companies Act 2006 which include the
Company’s ordinary shares and securities convertible into ordinary
shares) which are, or are to be, paid up wholly in cash and not first
offered
{
to existing shareholders. The Company’s Articles of Association allow shareholders to authorise Directors for a period specified in the
relevant resolution to allot (i) relevant securities generally up to an
amount fixed by
{
the shareholders; and (ii) equity securities for cash other
{
than in connection with a pre-emptive offer up to an amount specified by
{
the shareholders and free of the pre-emption restriction in section 561. At the 2021 AGM the amount of relevant securities fixed by
shareholders under (i) above and the amount of equity securities specified
by shareholders under (ii) above were in line with the Pre-Emption Group’s
Statement of
{
Principles. Further details of such proposals are provided in the 2022 Notice of AGM.
Disclosure of interests in the Company’s shares
There are no provisions in the Articles of Association whereby persons
acquiring, holding or disposing of a certain percentage of the Company’s
shares are required to make disclosure of their ownership percentage
although such requirements exist under the Disclosure Guidance and
Transparency Rules.
General meetings and notices
Subject to the Articles of Association, AGMs are held at such times and
place as determined by the Directors of the Company. The Directors
may
{
also, when they think fit, convene other general meetings of the Company. General meetings may also be convened on requisition as
provided by the Companies Act 2006.
An AGM is required to be called on not less than 21 days’ notice in
writing.
{
Subject to obtaining shareholder approval on an annual basis, the
{
Company may call other general meetings on 14 days’ notice. The
{
Directors may determine that persons entitled to receive notices of
{
meetings are those persons entered on the register at the close of business on a day determined by the Directors but not later than 21 days
before the date the relevant notice is sent. The notice may also specify
the record date, the time of which shall be determined in accordance
with
{
the Articles of Association and the Companies Act 2006.Under section 336 of the Companies Act 2006 the AGM must be held
each calendar year and within six months of the Company’s year end.
Variation of rights
If at any time the Company’s share capital is divided into different classes
of shares, the rights attached to any class may be varied, subject to the
provisions of the Companies Act 2006, either with the consent in writing
of the holders of three quarters in nominal value of the shares of that
class
{
or at a separate meeting of the holders of the shares of that class.
At every such separate meeting all of the provisions of the Articles of
Association relating to proceedings at a general meeting apply, except
that (i) the quorum is to be the number of persons (which must be at least
two) who hold or represent by proxy not less than one third in nominal
value of the issued shares of the class or, if such quorum is not present
on
{
an adjourned meeting, one person who holds shares of the class regardless of the number of shares he holds; (ii) any person present in
person or by proxy may demand a poll; and (iii) each shareholder will have
one vote per share held in that particular class in the event a poll is taken.
Class rights are deemed not to have been varied by the creation or issue
of new shares ranking equally with or subsequent to that class of shares
in
{
sharing in profits or assets of the Company or by a redemption or repurchase of the shares by the Company.
Limitations on transfer, voting and shareholding
As far as the Company is aware there are no limitations imposed on the
transfer, holding or voting of the Company’s ordinary shares other than
those limitations that would generally apply to all of the shareholders,
those that apply by law (e.g. due to insider dealing rules) or those that
apply as a result of failure to comply with a notice under section 793
of
{
the Companies Act 2006.No shareholder has any securities carrying special rights with regard to
control of the Company. The Company is not aware of any agreements
between holders of securities that may result in restrictions on the
transfer of securities.
Documents on display
The Company is subject to the information requirements of the
Exchange
{
Act applicable to foreign private issuers. In accordance with these requirements the Company files its Annual Report on Form 20-F
and other related documents with the SEC. These documents may be
inspected at the SEC’s public reference rooms located at 100 F Street,
NE
{
Washington, DC 20549. Information on the operation of the public reference room can be obtained in the United States by calling the SEC
on +1-800-SEC-0330. In addition, some of the Company’s SEC filings,
including all those filed on or after 4 November 2002, are available on
the
{
SEC’s website at sec.gov. Click to download a copy of the Company’s Articles
of Association. Copies can also be obtained from the
Company’s registered of
ȣ
ceMaterial contracts
At the date of this Annual Report the Group is not party to any contracts
that are considered material to its results or operations except for:
–
its EUR 3,840,000,000 (as increased to EUR 3,990,000,000) and
USD
{
3,935,000,000 (as increased to USD 4,004,000,000) revolving credit facilities which are discussed in note 21 “Borrowings” to the
consolidated statements;
–
the Contribution and Transfer Agreement dated 31 December 2016,
as
{
amended, relating to the contribution and/or transfer of shares in Ziggo Group Holding B.V. and Vodafone Libertel B.V. to Lynx Global
Europe II B.V. and the formation of the Netherlands joint venture;
–
the Implementation Agreement dated 20 March 2017, as amended,
relating to the combination of the Indian mobile telecommunications
businesses of Vodafone Group and Idea Group as detailed in note 27
“Acquisitions and disposals” to the consolidated financial statements;
–
the Implementation Agreement dated 25 April 2018 relating to the
combination of the businesses of Indus Towers and Bharti Infratel;
–
the Sale and Purchase Agreement dated 9 May 2018 relating to the
purchase of Liberty Global plc’s businesses in Germany, Romania,
Hungary and the Czech Republic;
–
the Transitional Services Agreement dated 31 July 2019 relating
to
{
services and cooperation relating to the sale of Liberty Global plc’s businesses in Germany, Romania, Hungary and the Czech Republic; and
–
the Deed of Merger dated 31 March 2020 relating to the combination
of Vodafone Italy’s towers with INWIT’s passive network infrastructure.
Exchange controls
There are no UK Government laws, decrees or regulations that restrict or
affect the export or import of capital including, but not limited to, foreign
exchange controls on remittance of dividends on the ordinary shares or
on the conduct of the Group’s operations.
Strategic report Governance Financials
Other information
238
Vodafone Group Plc
Annual Report 2022
Taxation
As this is a complex area investors should consult their own tax
adviser
{
regarding the US federal, state and local, the UK and other tax consequences of owning and disposing of shares and ADSs in their
particular circumstances.
This section describes, primarily for a US holder (as defined below),
in
{
general terms, the principal US federal income tax and UK tax consequences of owning or disposing of shares or ADSs in the Company
held as capital assets (for US and UK tax purposes). This section does not,
however, cover the tax consequences for members of certain classes of
holders subject to special rules including, for example, US expatriates and
former long-term residents of the United States; officers and employees
of the Company; holders that, directly, indirectly or by attribution,
hold
{
5%{
or more of the Company’s stock (by vote or value); financial
institutions; insurance companies; individual retirement accounts
and
{
other tax-deferred accounts; tax-exempt organisations; dealers in securities or
{
currencies; investors that will hold shares or ADSs as part of straddles, hedging transactions or conversion transactions for US federal
income tax
{
purposes; investors holding shares or ADSs in connection with a trade or business conducted outside of the US; or US holders whose
functional currency is not the US dollar.
A US holder is a beneficial owner of shares or ADSs that is for US federal
income tax purposes:
–
an individual citizen or resident of the United States;
–
a US domestic corporation;
–
an estate, the income of which is subject to US federal income tax
regardless of its source; or
–
a trust, if a US court can exercise primary supervision over the trust’s
administration and one or more US persons are authorised to control
all substantial decisions of the trust, or the trust has validly elected to
be
{
treated as a domestic trust for US federal income tax purposes. If an entity or arrangement treated as a partnership for US federal
income
{
tax purposes holds the shares or ADSs, the US federal income tax
{
treatment of a partner in such partnership will generally depend on the status of the partner and the tax treatment of the partnership. Holders
that are entities
{
or arrangements treated as partnerships for US federal income tax
{
purposes should consult their tax advisers concerning the US
{
federal income tax consequences to them and their partners of the
{
ownership and disposition of shares or ADSs by the partnership.This section is based on the US Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed regulations
thereunder, published rulings and court decisions, and on the tax laws
of
{
the UK, the Double Taxation Convention between the United States and the UK (the ‘treaty’) and current HM Revenue and Customs (‘HMRC’)
published practice, all as of the date hereof. These laws and such practice
are subject to change, possibly on a retroactive basis.
This section is further based in part upon the representations of the
depositary and assumes that each obligation in the deposit agreement
and any related agreement will be performed in accordance with
its
{
terms.For the purposes of the treaty and the US-UK double taxation convention
relating to estate and gift taxes (the ‘Estate Tax Convention’), and for US
federal income tax and UK tax purposes, this section is based on the
assumption that a holder of ADRs evidencing ADSs will generally be
treated as the owner of the shares in the Company represented by
those
{
ADRs. Investors should note that a ruling by the first-tier tax tribunal
{
in the{
UK has cast doubt on this view, but HMRC have stated that
they will continue to apply their long-standing practice of regarding the
holder of
{
such ADRs as holding the beneficial interest in the underlying shares. Similarly, the US Treasury has expressed concern that US holders
of depositary receipts (such as holders of ADRs representing our ADSs)
may be claiming foreign tax credits in situations where an intermediary
in
{
the chain of ownership between such holders and the issuer of the security underlying the depositary receipts, or a party to whom depositary
receipts or deposited shares are delivered by the depositary prior to
the
{
receipt by{
the depositary of the corresponding securities, has taken
actions inconsistent with the ownership of the underlying security by
the
{
person claiming the credit, such as a disposition of such security. Such
{
actions may also be inconsistent with the claiming of the reduced
{
tax rates that may be applicable to certain dividends received by
{
certain non-corporate holders, as described below. Accordingly, (i) the creditability of any UK taxes and (ii) the availability of the reduced tax rates
for any dividends received by certain non-corporate US holders, each as
described below, could be affected by actions taken by such parties or
intermediaries. Generally exchanges of shares for ADRs and ADRs for
shares will not be subject to US federal income tax or to UK tax other
than
{
stamp duty or stamp duty reserve tax. Taxation of dividends
UK taxation
Under current UK law, there is no requirement to withhold tax from the
dividends that we pay. Shareholders who are within the charge to UK
corporation tax will be subject to corporation tax on the dividends we
pay
{
unless the dividends fall within an exempt class and certain other conditions are met. It is expected that the dividends we pay would
generally be exempt.
Individual shareholders in the Company who are resident in the UK will
be
{
subject to the income tax on the dividends we pay. Dividends will be
{
taxable in the UK at the dividend rates applicable where the income received is above the dividend allowance (currently £2,000 per tax year)
which is taxed at a nil rate. Dividend income is treated as the highest
part
{
of an individual shareholder’s income and the dividend allowance will
{
count towards the basic or higher rate limits (as applicable) which may
{
affect the rate of tax due on any dividend income in excess of the
{
allowance.US federal income taxation
Subject to the passive foreign investment company (‘PFIC’) rules
described below, a US holder is subject to US federal income taxation
on
{
the gross amount of any dividend we pay out of our current or accumulated earnings and profits (as determined for US federal
income
{
tax purposes). Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to
the
{
extent of the US holder’s basis in the shares or ADSs and thereafter as
{
capital{
gain.
However, the Company does not maintain calculations of its earnings
and
{
profits in accordance with US federal income tax accounting principles. US holders should therefore assume that any distribution by
the Company with respect to shares will be reported as ordinary dividend
income. Dividends paid to a non-corporate US holder will be taxable to
the holder at the reduced rate normally applicable to long-term capital
gains provided that certain requirements are met.
Dividends must be included in income when the US holder, in the case
of
{
shares, or the depositary, in the case of ADSs, actually or constructively
receives the dividend and will not be eligible for the dividends-received
deduction generally allowed to US corporations in respect of dividends
received from other US corporations.
Shareholder information (continued)
Strategic report Governance Financials
Other information
239
Vodafone Group Plc
Annual Report 2022
The amount of the dividend distribution to be included in income will
be
{
the US dollar value of the pound sterling or euro payments made determined at the spot pound sterling/US dollar rate or the spot euro/
US
{
dollar rate, as applicable, on the date the dividends are received by
{
the{
US
{
holder, in the case of shares, or the depositary, in the case of
ADSs, regardless of whether the payment is in fact converted into US
dollars at that time. If dividends received in pounds sterling or euros are
converted into US dollars on the day they are received, the US holder
generally will not be required to recognise any foreign currency gain or
loss in respect of the dividend income.
Where UK tax is payable on any dividends received, a US holder may be
entitled, subject to certain limitations, to a foreign tax credit in respect of
such taxes.
Taxation of capital gains
UK taxation
A US holder that is not resident in the UK will generally not be liable for
UK
{
tax in respect of any capital gain realised on a disposal of our shares or
{
ADSs.However, a US holder may be liable for both UK and US tax in respect of
a
{
gain on the disposal of our shares or ADSs if the US holder:
–
is a citizen of the United States and is resident in the UK;
–
is an individual who realises such a gain during a period of “temporary
non-residence” (broadly, where the individual becomes resident in the
UK, having ceased to be so resident for a period of five years or less,
and
{
was resident in the UK for at least four out of the seven tax years immediately preceding the year of departure from the UK);
–
is a US domestic corporation resident in the UK by reason of being
centrally managed and controlled in the UK; or
–
is a citizen or a resident of the United States, or a US domestic
corporation, that has used, held or acquired the shares or ADSs in
connection with a branch, agency or permanent establishment in the
UK through which it carries on a trade, profession or vocation in the UK.
In such circumstances, relief from double taxation may be available
under
{
the treaty. Holders who may fall within one of the above categories
should consult their professional advisers.
US federal income taxation
Subject to the PFIC rules described below, a US holder that sells or
otherwise disposes of our shares or ADSs generally will recognise a capital
gain or loss for US federal income tax purposes equal to the difference, if
any, between the US dollar value of the amount realised and the holder’s
adjusted tax basis, determined in US dollars, in the shares or ADSs. This
capital gain or loss will be a long-term capital gain or loss if the US holder’s
holding period in the shares or ADSs exceeds one year.
The gain or loss will generally be income or loss from sources within the
US for foreign tax credit limitation purposes. The deductibility of losses is
subject to limitations.
Additional tax considerations
UK inheritance tax
An individual who is domiciled in the United States (for the purposes of
the Estate Tax Convention) and is not a UK national will not be subject
to
{
UK inheritance tax in respect of our shares or ADSs on the individual’s death or on a transfer of the shares or ADSs during the individual’s lifetime,
provided that any applicable US federal gift or estate tax is paid, unless
the
{
shares or ADSs are part of the business property of a UK permanent establishment or pertain to a UK fixed base used for the performance
of
{
independent personal services. Where the shares or ADSs have been placed in trust by a settlor they may be subject to UK inheritance tax
unless, when the trust was created, the settlor was domiciled in the
United
{
States and was not a UK national. Where the shares or ADSs are
{
subject to both UK inheritance tax and to US federal gift or estate tax,
{
the estate tax convention generally provides a credit against US
{
federal tax liabilities for UK inheritance tax paid.UK stamp duty and stamp duty reserve tax
Stamp duty will, subject to certain exceptions, be payable on any
instrument transferring our shares to the custodian of the depositary at
the rate of 1.5% on the amount or value of the consideration if on sale or
on the value of such shares if not on sale. Stamp duty reserve tax (‘SDRT’),
at the rate of 1.5% of the amount or value of the consideration or the
value of the shares, could also be payable in these circumstances but
no
{
SDRT will be payable if stamp duty equal to such SDRT liability is paid.Following rulings of the European Court of Justice and the first-tier tax
tribunal in the UK, HMRC have confirmed that the 1.5% SDRT charge will
not be levied on an issue of shares to a depositary receipt system on the
basis that such a charge is contrary to EU law. The effect of this EU case
law will continue to be recognised and followed in the United Kingdom
pursuant to the provisions of the European Union (Withdrawal) Act 2018,
even though the United Kingdom is no longer part of the EU, and HMRC’s
published practice remains that the 1.5% charge will remain disapplied in
such cases.
No stamp duty should in practice be required to be paid on any transfer of
our ADSs provided that the ADSs and any separate instrument of transfer
are executed and retained at all times outside the UK.
A transfer of our shares in registered form will attract ad valorem stamp
duty generally at the rate of 0.5% of the purchase price of the shares.
There is no charge to ad valorem stamp duty on gifts.
SDRT is generally payable on an unconditional agreement to transfer
our
{
shares in registered form at 0.5% of the amount or value of the consideration for the transfer, but if, within six years of the date of the
agreement, an instrument transferring the shares is executed and
stamped, any SDRT which has been paid would be repayable or, if the
SDRT has not been paid, the liability to pay the tax (but not necessarily
interest and penalties) would be cancelled. However, an agreement to
transfer our ADSs will not give rise to SDRT.
PFIC rules
We do not believe that our shares or ADSs will be stock of a PFIC
for
{
US{
federal income tax purposes for our current taxable year or
the
{
foreseeable future. This conclusion is a factual determination
that
{
is{
made
{
annually and thus is subject to change. If we are a PFIC,
US
{
holders of shares would be required (i) to pay a special US addition
to
{
tax on certain distributions and (ii) any gain realised on the sale or
{
other{
disposition of the shares or ADSs would in general not
be
{
treated{
as
{
a
{
capital gain unless
{a US holder elects to be taxed
annually
{
on{
a
{
mark-to-market basis with respect to the shares or ADSs.
Otherwise a US holder would be treated as if he or she has realised such
gain and certain “excess distributions” rateably over the holding period
for
{
the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated. An interest charge in
respect of the tax attributable to each such preceding year beginning with
the first such year in which our shares or ADSs were treated as stock in a
PFIC would also apply. In addition, dividends received from us would not
be eligible for the reduced rate of tax described above under “Taxation of
dividends – US federal income taxation”.
Back-up withholding and information reporting
Payments of dividends and other proceeds to a US holder with respect
to
{
shares or ADSs, by a US paying agent or other US intermediary will be
{
reported to the Internal Revenue Service and to the US holder as may be required under applicable regulations. Back-up withholding may apply
to
{
these payments if the US holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to comply
with applicable certification requirements.
Certain US holders are not subject to back-up withholding. US holders
should consult their tax advisers about these rules and any other
reporting obligations that may apply to the ownership or disposition
of
{
shares or ADSs, including requirements related to the holding of certain
{
foreign financial assets.
Strategic report Governance Financials
Other information
240
Vodafone Group Plc
Annual Report 2022
The Company was incorporated under English law in 1984 as Racal
Strategic Radio Limited (registered number 1833679). After various
name
{
changes, 20% of Racal Telecom Plc share capital was offered to
{
the{
public in October 1988. The Company was fully demerged
from
{
Racal{
Electronics Plc and became an independent company
in
{
September 1991 at which time it changed its name to Vodafone Group
{
Plc. Since then we have entered into various transactions which impacted on the development of the Group. The most significant in the
year ended 31 March 2022 are summarised below.
–
On 24 February 2022, the Group sold 63.6 million shares in Indus
Towers Limited (‘Indus’) through an accelerated book build offering
which generated net proceeds of approximately INR 14.2 billion
(US$189 million). Following this transaction, the Group held
694.2
{
million shares in Indus, equivalent to a 25.8% shareholding. –
On the same date, Vodafone entered into an agreement with Bharti
Airtel Limited (one of the existing promoters of Indus, ‘Bharti’), to sell
a
{
further 127.1 million shares in Indus, equivalent to 4.7% of Indus’
outstanding share capital. The transaction was completed on
29
{
March{
2022, following which Vodafone held 567.2 million shares
in
{
Indus, equivalent to a 21.0% shareholding. –
On 3 March 2022, Vodafone Idea Limited (‘Vi’) announced an equity
raise of up to INR 45 billion (US$600 million) by way of a preferential
allotment (the ‘Vi Capital Raise’). The Vi Capital Raise was completed
on
{
31 March 2022, with the Group contributing INR 33.75 billion (US$445 million) using the net proceeds realised through the earlier
sale of Indus shares. Following the Vi Capital Raise, Vodafone’s holding
in Vi was equivalent to a 47.6% shareholding.
Read more in our
ȣ
nancial statements, note 12 ȁ
Investments
bin associate and joint arrangements’
Introduction
Our operating companies are generally subject to regulation
governing
{
their business activities. Such regulation typically takes
{
the{
form of industry-specific law and regulation covering
telecommunications services and general competition (antitrust)
law
{
applicable to all activities. The following section describes the regulatory frameworks and the key
{
regulatory developments at national
{
and regional level and in the{
European Union (‘EU’), in which
we
{
had significant interests during the year ended 31 March 2022. Many
{
of the regulatory developments reported in the following section involve ongoing proceedings or consideration of potential proceedings
that have not reached a conclusion. Accordingly, we are unable to attach
a specific level of financial risk to our performance from such matters.
European Union (‘EU’)
The European Electronic Communications Code (‘Code’) has updated
the
{
telecoms regulatory framework in Europe. The Code should have been transposed by Member States in Europe by December 2020.
However, as
{
of end of March 2022, only some of the EU governments within our
{
footprint have done that: Germany, Italy, Hungary, Greece, Czech Republic, Netherlands (and UK). In other markets – namely Spain,
Portugal, Romania and Ireland – the law is still in the review and/or
approval process. Given the delay, the European Commission (‘EC’)
has
{
started infringement procedures and warned the remaining Member
{
States that in case of further delays the breach will be referred
{
to{
the Court of Justice of the European Union (‘CJEU’).
In April 2021, the EC published its AI regulation (‘AI Act’) setting out a
number of prohibited AI use cases and new requirements for providers
of
{
high-risk AI. Negotiations on the AI Act are progressing slowly, with the
{
Council of the European Union (‘Council’) looking to conduct a first
{
reading on the file before the end of the French Presidency in June
{
2022, and the European Parliament aiming to adopt its position in
{
a
{
Plenary vote
{in
{
November{
2022, paving the way for trilogue talks
on
{
the{
file to
{
conclude in early/mid 2023.Negotiations on the Digital Services Act package (consisting of the
Digital
{
Services Act (‘DSA’) and the Digital Markets Act (‘DMA’)) continue. On 24
{
March 2022, political negotiators in the EU Institutions reached
agreement on the text of the DMA. This included a number of technical
amendments from the December 2021 text, and compromises relevant
to the financial thresholds for those platforms that fall within scope, the
exact nature of some of the specific obligations (e.g. interoperability) and
also fines (under the agreed text, gatekeepers can be sanctioned up to
10% of their annual worldwide turnover in the case of first infringements,
and up to 20% in the case of repeated infringements). The DMA is
expected to be formally adopted in 2022, and enter into force in
early
{
2023. Negotiations on the DSA are progressing and will likely be
{
concluded under the Czech Presidency in the second half of{
2022.
In February 2022, the EC published its proposal for a regulation laying
down harmonised rules on fair access to and fair use of data (the ‘Data
Act’). The Data Act will be a regulation that aims to facilitate the sharing
and reuse of non-personal data in the single market, removing current
obstacles and clarifying the rights of various parties involved in generating
and sharing data. The regulation applies to manufacturers of connected
devices, data holders, recipients, and providers of data processing services
(cloud service providers) who will be subject to new requirements to
support switching and interoperability, while maintaining a minimum
service functionality.
In February 2021, the EC proposed the prolongation of the Roaming
Regulation for 10 years in order to ensure the continuation of Roam-
Like-at-Home (‘RLAH’). The political agreement between the European
Parliament and the Council was reached in December 2021 and
the
{
new{
regulation shall enter into force on 1 July 2022. The new
regulation
{
reduces the wholesale caps for all services (data, voice and
{
SMS) and{
brings new measures on transparency (including on
the
{
use{
of
{
non-terrestrial networks), quality of service and access to emergency
{
communications.History and development Regulation
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Other information
241
Vodafone Group Plc
Annual Report 2022
In March 2021, the EC published a ‘Connectivity Toolbox’, which
is
{
a
{
joint
{deliverable of Member States and the EC containing best
practices
{
on network cost reduction, spectrum authorisation for 5G, the
{
environmental footprint and environmental impact assessment of networks as well as electronic magnetic fields (‘EMF’). Member States are
in the process of implementing the toolbox. The objective of this toolbox
is to reduce the cost of broadband deployment in Europe for network
operators while the EC is in the process of revising the Broadband Cost
Reduction Directive (‘BCRD’). The BCRD proposal is expected to be
published in September 2022.
In September 2021, the EC published a legislative proposal for a
Decision
{
of the European Parliament and of the Council establishing the
{
2030 Policy Programme ‘Path to the Digital Decade’. The proposal sets ambitious targets to be met by Member States by 2030 on the
following four key pillars: a digitally skilled population and highly skilled
digital professionals; secure and sustainable digital infrastructures (target
is to
{
have all European households connected to gigabit speeds and all
populated areas covered by 5G); digital transformation of businesses; and
digitisation of public services. The European Parliament and Council will
need to endorse the targets through the regular EU legislative procedure.
Furthermore, in February 2022 the EC proposed European digital rights
and principles, covering issues including inclusion, freedom of choice
online, online safety and security, and sustainable digitisation.
Addressing the challenges posed by the COVID-19 pandemic, the
Next
{
Generation EU package is the Union’s means to support the recovery processes in EU Member States. The bulk of the proposed
recovery measures are funded by a new temporary recovery instrument,
the EU Recovery and Resilience Facility (‘RRF’), worth nearly €750 billion,
which was adopted in December 2020. A significant amount is allocated
towards digital and green initiatives, with a minimum threshold of 20%
of
{
the RRF to be allocated to digital and 37% to green initiatives. As of 31
{
March 2022, the EC had approved the national plans under the RRF for
{
24{
EU Member States, of which Czech Republic, Germany, Greece,
Ireland, Italy, Portugal, Romania and Spain are within Vodafone’s footprint.
In March 2022, the European Body of Regulators (‘BEREC’) published a
draft update to the BEREC Guidelines on Net Neutrality, in response to
the
{
recent CJEU rulings on zero-rating practices. BEREC interprets the rulings to prohibit all price-differentiation practices that are not application
agnostic. This would include Vodafone Pass tariff, which is currently offered
in eight EU markets. Stakeholders had until 14 April 2022 to provide
feedback, and BEREC intends to publish the final Guidelines in
{
June 2022. Germany
In October 2021, the national regulatory authority (‘BNetzA’) published its
draft regulation regarding the wholesale access markets (so-called Market
3a). In the draft, BNetzA proposes no significant changes in relation to the
regulation of the copper network access but has suggested a light touch
regulation of fibre access (‘FTTH’).
For the first time in Germany, an access regime based on full equivalence
of input (‘EoI’) is intended to enforce the equal treatment of wholesale
demand and Deutsche Telekom’s (‘DT’) retail arm. In addition, BNetzA
proposes improved access to DT’s passive infrastructure (ducts, masts)
with significant market power (‘SMP’) obligations to open DT’s passive
network, including regulated prices for the first time. This would ensure
Vodafone Germany’s wholesale based very high-speed digital subscriber
line (‘VDSL’) business in the future, improve cost effective build out of
Vodafone Germany’s own networks using ducts, and eliminate the risk of
complete deregulation of DT’s fibre networks. The final regulation for the
wholesale access markets is expected by the end of the second quarter
of
{
2022.Licences for frequency allocations at 800MHz, parts of 1800MHz, and
2600MHz will expire at the end of 2025. Vodafone Germany currently
holds allocations at 800MHz and 2600MHz. BNetzA is therefore assessing
its options on how to proceed on the reallocation of this spectrum. It
may either re-auction the spectrum, or prolong the existing licences, or
a combination of these. BNetzA is currently consulting with stakeholders
on approach and is expected to make a final decision on next steps by
end of 2023 at the latest.
In response to a preliminary reference from the National Court in
Germany, on 2 September 2021, the CJEU issued three judgments
related to zero-rated commercial offers of Vodafone Germany and DT.
The judgements concluded that the specific zero-rated offers that were
the subject of the judgments, and which included an exclusion of roaming
or tethering, or a limitation on the bandwidth for certain categories of
application respectively, were not compliant with the Open Internet
Regulation (‘OIR’). On 27 April 2022, BNetzA consequently issued an
order, announcing that Vodafone Pass is not compliant with OIR, and that
Vodafone Germany must, firstly, stop marketing Pass from 1 July 2022
and must migrate existing Pass customers to alternative tariffs by
31
{
March 2023.The IT Security Draft Law (‘IT SiG 2.0’), which lays down rules for using
vendors of critical components in critical infrastructure, was adopted in
May 2021. IT SiG 2.0 envisages two pillars to ensure network security
based on, firstly, mandatory certification of critical components and,
secondly, establishing the trustworthiness of the vendors of such
critical
{
components following clearly defined criteria and processes. To
{
the extent these are not met, there will be the possibility of removing
components from untrustworthy vendors. Components are deemed
critical when they are used for ‘critical functions’, which are defined
by
{
BNetzA in agreement with the Federal Office for Information Security
{
(‘BSI’).Italy
In March 2017, the national regulatory authority (‘AGCOM’) imposed a
minimum billing period of one month for fixed and convergent offers,
effective by the end of June 2017. The operators appealed AGCOM’s
resolution before the Administrative Court and the appeal was rejected in
February 2018. Vodafone Italy filed an appeal before the Council of State
and after the public hearing held in July 2020, the Council of State issued
a Preliminary referral to the CJEU in order to assess if AGCOM has the
power to impose minimum and binding billing periods under EU
{
law. The
{
date for the first hearing has not yet been set.In January 2020, the national competition authority (‘AGCM’) ruled
that
{
Vodafone Italy, Telecom Italia (‘TIM’), Fastweb and WindTre had coordinated their commercial strategies relating to the transition from
four-week billing (28 days) to monthly billing, with the maintenance of
an
{
8.6% price increase, in violation of Art.101 of Treaty on the Functioning of the EU (‘TFEU’). In July 2021, the Administrative Tribunal published its
judgment annulling the AGCM’s decision and fine against Vodafone Italy
for lack of evidence, accepting all of Vodafone Italy’s defensive arguments.
According to the Tribunal, the alleged infringement was in fact the
outcome of the companies’ independent choices to comply with
legislation imposing an obligation to issue customer bills on a monthly
basis. Prior to the Tribunal decision, Vodafone Italy had agreed to pay the
€60 million fine in 15 monthly instalments of €4 million each. Following
the Tribunal decision, Vodafone Italy started the process to be reimbursed
for the two instalments, totalling €8 million, paid so far. The AGCM has
submitted an appeal against the Tribunal decision to the Council of State.
The process is ongoing.
The frequencies in the 2.1GHz band have been renewed until 2029.
Vodafone Italy paid €240 million in April 2021 for the renewal.
In April 2021, AGCOM started a public consultation on the co-investment
commitments presented by TIM in January 2021. On the basis of the
public consultation, AGCOM asked TIM to make some amendments to
the co-investment offer. TIM accepted the amendments and published a
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Other information
242
Vodafone Group Plc
Annual Report 2022
final version of the co-investment offer on their website in January 2022.
AGCOM is now considering the monitoring activity that will be implemented
on the co-investment offers, but this is still subject to
{
approval.In accordance with Article 76 of the Code, once a co-investment is
approved, then a national regulatory authority (‘NRA’) may deregulate any
new fibre network developed through the co-investment offer. Therefore,
upon receiving the final co-investment offer, in December 2021, AGCOM
commenced a consultation on its proposed deregulation of any network
rolled out on the basis of the co-investment offer. The consultation
process is ongoing, with a final decision expected by the middle of 2022.
United Kingdom
In March 2021, Vodafone Ltd acquired 40MHz of 3.6GHz spectrum
expiring in
{
2041 for £176 million. Within the negotiation stage of the auction, Vodafone Ltd and Telefónica agreed to trade spectrum, subject
to regulatory approval, so that Vodafone Ltd’s
{
holdings in the 3.4-3.6GHz
band will be sufficiently proximate to be efficiently used by network
equipment. Regulatory approval was granted in August 2021, and there
will now be a transition period until 2025 as the trade is implemented.
Vodafone Ltd’s total holdings in 3.4-3.6GHz are 90MHz, with fees payable
from 2038.
The 2100MHz band, originally awarded for 3G usage, became liable
to
{
£17 million per annum fees from January 2022, coinciding with depreciation of the fee paid at auction (the national regulatory authority
(‘Ofcom’) levies annual fees on spectrum after an initial 20-year term).
Ofcom is conducting a review of the UK mobile market, which
commenced in May 2021. It is the first review of its kind, seeking to
review
{
the overall market structure and the ability of the market to fulfil
{
the investment challenges that lie ahead. It runs alongside the government’s Wireless Infrastructure Strategy review, which is focused
on
{
future technologies and infrastructure evolution in the sector, with a
{
particular focus on outcomes in the second half of the decade. Both
projects are expected to conclude in the next 12 months.
Ofcom’s review of Net Neutrality rules is also underway. While the UK is
still committed to high-level open internet alignment under the terms of
the UK/EU trade deal, there is recognition that some reform is needed to
ensure the potential of applications, devices and future technology is not
constrained by the current rules. Ofcom has not published an indicative
timeline for the completion of its review.
In November 2021, the Telecommunications Security Act (‘TSA’) was
passed into legislation. This modified the Communications Act to allow
the Secretary of State to issue High Risk Vendor (‘HRV’) designations that
restrict the usage of named equipment suppliers. In February 2022, a draft
HRV designation relating to Huawei products, which Vodafone Ltd uses
in
{
its radio access network, was issued for consultation. Measures being consulted on restrict the use of Huawei in the UK’s telecoms networks,
including the removal of Huawei from 5G networks by the end of 2027.
The consultation closed in March 2022. The TSA also allows the Secretary
of State to issue security regulations requiring providers of electronic
communications networks and services to comply with a specified Code
of Practice. In March 2022, the Department for Digital, Culture, Media
and
{
Sport also launched a consultation on the contents of these security regulations and associated Code of Practice. Ofcom is similarly consulting
on the compliance regime associated with the Code of Practice.
Spain
In February 2020, Vodafone Spain requested that the national regulatory
authority (‘CNMC’) extend and modify the commitments in relation to
the
{
Movistar-DTS merger in 2015 (which were due to end in April 2020). The CNMC issued a Resolution in July 2020, extending most of the
initial
{
commitments for an additional period of three years, in particular ensuring access to Movistar Estrenos and Movistar Series channels.
The
{
Resolution also removed the commitment that limited the terms (exclusivity, validity period and period of exploitation) in which Telefónica
could acquire subscription video on demand content. Vodafone Spain has
appealed this removal.
In November 2021, the government initiated the parliamentary process
to approve the new Audiovisual Communication Bill Project. The most
relevant changes are: (i) amending RTVE Financing law, to eliminate the
requirement on MNOs to contribute 0.9% telco revenues to the public
corporation RTVE; and (ii) including over-the-top service providers in
the
{
requirement to provide 1.5% audiovisual revenue to RTVE. The text will now begin its parliamentary process, where a long-lasting debate is
expected due to political divergences. Final approval is expected in the
first half of 2022.
In October 2021, the CNMC has approved the regulation of the
wholesale
{
markets for broadband access (Market 3a and 3b). In particular, it expanded the geographic areas where CNMC requires Telefónica to
maintain access obligations for ducts and poles and copper local loop
unbundling. In addition, the CNMC brought forward the date by which
Telefónica must close its copper exchanges. This will lead to an expedited
obligation on Vodafone Spain to remove its collocated equipment from
these exchanges.
In April 2021, the government approved a Royal Decree-Law amending
the General Telecommunications Act. The amendments increase the
duration of spectrum band concessions to a minimum of 20 years and
allow for the possibility to extend this initial period, from a minimum of
five
{
and maximum of 20 years. The amendments also make it possible to extend existing concessions by 20 years, but only upon specific approval
by the Ministry.
In November 2021, the government initiated the parliamentary process
to approve the new Telecommunications Bill. The most relevant points
included in the draft Bill presented to the Congress by the government
are: (i) the possibility of renewal of spectrum licences for all bands that
are
{
already assigned, (ii) the possibility of extending contracts for the same duration as the initial period (up to 24 months) and (iii) no specific
obligations on OTTs to register as public electronic communications
service providers, in line with the Code. The text was submitted to
Congress to start its parliamentary process for final approval, expected
in
{
the second quarter of 2022.In February 2022, the Ministry for Economy and Enterprise
approved
{
a
{
Ministerial Decree that regulates the reassignment
of
{
the{
frequencies in
{
the existing 3.4-3.8GHz concessions. This reassignment
{
is a consequence of the granting of two new concessions in
{
2021. The Ministerial Decree foresees a six-month period in which
the
{
four operators holding concessions, Vodafone Spain included, must
{
carry out a coordinated migration of the frequencies according to
{
its{
new organisation.
In July 2021, the spectrum auction for the 700MHz band took place.
Vodafone Spain, Orange and Telefónica each won spectrum, with
2x10MHz each. Vodafone Spain paid €350 million. The concessions
were
{
formalised by the Ministry for Economy and Enterprise in December
{
2021, and the operators began the deployment of new 700MHz radio stations network in January 2022.
In November 2021, the government published the draft Bill regulating
customer service for consumers, which will introduce new requirements
around the provision of customer care and managing customer
complaints, and compensation. It is anticipated that the Bill will be
approved in the first quarter of 2023.
In November 2021, the government approved the modification of the
Consumer Law in order to incorporate the Directive (EU) 2019/2161
as
{
regards to better enforcement and modernisation of EU consumer protection rules. This new regulation will enter into force on 28 May 2022.
In December 2021, the National State Budget 2022 was approved. The
law sets a reduction of spectrum fees for a temporary period of two years,
which will result in €11.2 million savings for Vodafone Spain.
Regulation (continued)
Strategic report Governance Financials
Other information
243
Vodafone Group Plc
Annual Report 2022
In January 2022, the government launched a consultation for all
stakeholders regarding the upcoming auction on the 26GHz band
(24.25
{
– 27.50GHz), to assess demand and technical readiness. Vodafone
{
Spain responded to the consultation in January 2022. The auction is expected to take place during the fourth quarter of 2022.
In June 2021, the CNMC approved the merger between M
¼
sMóvil and Euskaltel on grounds that the transaction does not significantly alter the
competitive situation. The Ministerial Council and Spain’s financial markets
regulator (‘CNMV’) have now also approved the proposed takeover. A few
months later, in March 2022, Orange and the newly merged M
¼
sMóvil announced the start of negotiations to merge their operations in Spain.
The transaction is expected to be signed in the second quarter of 2022,
and should be completed by the second quarter of 2023, once the
appropriate approvals are obtained from the relevant administrative,
competition and regulatory authorities.
In March 2022, the government adopted a decision, which requires
the
{
Parliament to ratify the Royal Decree-Law on Cybersecurity (‘Cybersecurity Law’) by the end of April 2022. The Cybersecurity Law
introduces the concept of high-risk suppliers (‘HRS’) and creates a new
framework: (i) for identifying HRS; (ii) limiting the use of HRS in both the
Core and the Access networks, including the introduction of timeframes
for the removal of HRS from the core and parts of the access network;
and (ii)
{
for 5G operators to develop a risk assessment on their networks, and a
{
vendor diversification strategy.Ireland
In April 2019, the national regulatory authority (‘ComReg’) published its
final decision on Universal Service funding applications by Eircom Ltd
(‘eir’) for 2010 to 2015. ComReg found that the net cost of the Universal
Service Obligation (‘USO’) did not represent an unfair burden on eir.
Subsequently, eir has challenged this decision. The proceedings are
ongoing, and Vodafone Ireland is a notice party to these proceedings.
In May 2019, ComReg initiated a review of the regulated Weighted
Average Cost of Capital (‘WACC’). In its draft decision notified to the
EC
{
in{
June 2020, ComReg proposed the regulated fixed WACC should
fall
{
from 8.18% to 5.61%. It was subject to annual review in June{
2021
and
{
fell further to 5.56%. ComReg issued its final decision on the Access
Network Cost Model, incorporating the reduced WACC in December 2021
with prices effective from 1 March 2022. This decision has been challenged
by eir which also sought a stay on pricing changes pending appeal. This
was not granted, and undertakings have been provided to the court by
Vodafone Ireland and Sky.
In December 2020, ComReg published its decision to proceed with
the
{
Multi-Band Spectrum Auction. In late January 2021, Three Ireland (Hutchison) Ltd and Three Ireland Services (Hutchison) Ltd (collectively
‘Three’) lodged an
{
appeal to the decision. The proceedings commenced in June
{
2021 and remain ongoing. ComReg and the Irish government have continued to extend the Temporary Spectrum Measures on
700MHz and 2.1GHz spectrum. The measures are now expected
to
{
extend to 1 October 2022. Portugal
In October 2021, the main bidding stage of 5G auction ended with
Vodafone Portugal acquiring 2x10MHz of 700MHz and 90MHz of
3.6GHz.
{
Rights of Use were issued in November and December 2021. With respect to the auction conditions, Vodafone Portugal began a
legal
{
action against the national regulatory authority (‘ANACOM’) in November 2020, with respect to aspects of the auction conditions,
including discriminatory measures between new entrants and mobile
network operators (‘MNOs’). The Court rejected Vodafone Portugal’s
claims in November 2021, and the Rights of Use were issued. However,
since the conclusion of the auction, Vodafone Portugal has submitted a
court action against ANACOM in relation to the Rights of Use issued and
associated obligations. Legal proceedings are ongoing and there is no
expected date of conclusion.
In June 2019, Vodafone Portugal began a legal action against ANACOM
seeking the revocation of Dense Air’s spectrum licence under the ‘use it
or
{
lose it’ principle. The legal proceedings are ongoing, with Vodafone
Portugal’s latest proceeding, regarding the restrictive impact of Dense
Air’s spectrum on Portugal’s 5G auction, being rejected by the Court in
June 2021. In July 2021, Vodafone Portugal appealed the rejection to
the
{
Administrative Central Court, and the outcome is pending. In July 2020, the national competition authority (‘AdC’) sent Vodafone
Portugal and three other national operators a Statement of Objections (‘SO’)
alleging that operators formed a cartel to limit competition in telecoms
services advertising via the Google search engine. In October 2020,
Vodafone Portugal responded to the SO and proceedings are
ongoing.
{
Vodafone Portugal has also filed motions and appeals with different authorities regarding procedural irregularities and invalidity
of
{
evidence{
collected during the December 2018 raid at Vodafone
Portugal’s premises. In December 2020, a Court decision declared email
evidence collected at Vodafone Portugal’s premises to be inadmissible.
The decision was appealed by the AdC and the public prosecutor,
and
{
appeals are still pending.Vodafone Portugal continues to challenge payment notices totalling
€34.8 million issued by ANACOM regarding 2012-2014 extraordinary
compensation of Universal Service net costs.
In July 2021, the Portuguese government approved a Decree-Law that
establishes a social tariff for broadband internet access (‘IST’), which will
benefit consumers with low income or with special social needs. Although
the Code (which is meant to define the scope of the Universal Service
going forward) has not yet been transposed into national law, the IST
is
{
qualified by this Decree-Law as Universal Service and all operators are
{
required to provide it under the terms that were defined by the government in November 2021. Vodafone Portugal made the IST
offer
{
available on 4 March 2022. In December 2021, the AdC issued a SO against Vodafone Portugal
and
{
two other national operators (MEO and NOS) and Accenture with
{
respect to an alleged anti-competitive agreement in the pay TV
recordings advertising market and in the market for the provision of pay
TV services (due to the introduction of pre-roll advertisings on pay TV
set
{
top boxes’ recordings of the three operators). Vodafone Portugal submitted a written defence and evidence in support of its case in March
2022. Vodafone Portugal has also filed an appeal regarding procedural
irregularities and invalidity of evidence collected during the October 2021
dawn raid at Accenture’s premises. Procedures are ongoing.
In July 2021, ANACOM approved the renewal of Vodafone Portugal and
MEO’s rights of use for 900MHz (2x5MHz) and 1800MHz (2x6MHz) until
2033. Although no upfront payment was required, additional coverage
obligations were set. For Vodafone Portugal, 44 out of 100 parishes must
have 90% of coverage of the population with 100Mbps in one years’ time,
starting from when ANACOM approves split of parishes amongst MEO and
Vodafone Portugal. Operators must reach an agreement by June 2022.
Romania
The 5G Security Law was adopted in June 2021. The law gives operators
five years to remove high risk vendors from their networks, and
{
replace their equipment with that of authorised vendors for core network, and
seven years for radio access networks related to 5G. The authorisation of
a vendor is granted by the Supreme Council for National Defence where
there is no evidence of identified risks, threats and vulnerabilities to
national security and defence.
The 5G spectrum auction for 700MHz and 3.5GHz has been delayed
until
{
the adoption of the Code. Only short-term, available and existing
spectrum in 800MHz, 2600MHz FDD and TDD, and 3.5GHz frequency
bands have been auctioned in November 2021.
The enforcement of the Code is subject to the final decision of the
Constitutional Court, with a resolution expected in May 2022.
Strategic report Governance Financials
Other information
244
Vodafone Group Plc
Annual Report 2022
Greece
In September 2021, the Greek government announced the reform
of
{
the{
‘special mobile tax’, which was previously charged at between
12
{
and{
20% of the mobile tariff, (and VAT of 24% was applied on
top
{
of{
this).
{
Effective from January 2022, this ‘special mobile tax’ was abolished
{
for{
subscribers aged up to 29 years, and reduced to 10%
for
{
all{
other
{
subscribers.Following the publication of the 5G Auction Tender document,
a
{
petition
{
by Greek residents for its annulment, as well as for any future
{
administrative acts, was filed before the Council of the State on
{
the{
grounds it infringed environmental protection provisions. The
hearing
{
was held in January 2022 and the decision is still pending.The national regulatory authority’s (‘EETT’) decision in relation to Wind’s
complaint against Vodafone Greece and Cosmote alleging abuse of
dominance in relation to calls to mobile networks in Albania is pending.
Vodafone Greece appealed EETT’s decision on the mobile virtual network
operator (‘MVNO’) access dispute
{
resolution between Vodafone Greece and Nova (ex-Forthnet). Vodafone Greece withdrew from the application
of annulment, as Nova requested the termination of its MVNO contract
in
{
view of expected future synergies with Wind following the latter’s acquisition by Nova’s parent company, United Group.
The development of a margin squeeze test model based on non-
discrimination obligation for OTE’s retail plans is currently still pending.
Operators have provided their comments on the model, and these
have
{
been assessed by EETT. However, the delays in the approval of the new model enabled the incumbent to announce free of charge speed
upgrades which the NRA approved under the outdated existing model.
Vodafone Greece is challenging the incumbent’s new offers.
EETT published a decision on the USO net cost for the period 2012-2016
of total amount €36.8 million for all operators, with Vodafone Greece’s
share being about €7.75 million, payable in five annual instalments. In
December 2021, Vodafone Greece filed a petition for the annulment of
the NRA’s decision before the Administrative Court of
{
Appeal. The hearing is scheduled for June 2022.
Vodafone Greece continues its appeal against EETT decisions from
2018,
{
which declared that Vodafone Greece was obliged to pay a total
{
of{
€9 million to OTE, in consideration of the Universal Services it
provided
{
in Greece during the years 2010 and 2011. As part of its appeal, in December 2021 Vodafone Greece raised additional arguments with
the
{
Council of State against the EETT’s decisions on the Universal Service Net Cost for the years 2010-11. The hearings are scheduled for May 2022
(for costs for year 2010) and June 2022 (for costs for year 2011).
Czech Republic
In August 2019, the EC sent a statement of objections to O2 Czech
Republic, CETIN and T-Mobile Czech Republic with respect to the
competition concerns in relation to the parties’ network sharing
agreement. Following commitments offered by the parties in respect
of
{
the agreement, on 1 October 2021 the EC announced it was seeking stakeholder feedback on these commitments. A final decision on
commitments is expected during the second quarter of 2022.
Vodafone Czech Republic filed a complaint to the EC, regarding Czech
Republic’s 5G spectrum auction, arguing that the auction terms set by
the
{
Czech national regulatory authority (‘CTU’) infringed EU law. The EC dismissed the complaint, and the case is now closed.
The re-farming of 3.4-3.8GHz spectrum was completed in September 2021,
to provide contiguous spectrum to each spectrum holder in this band.
Vodafone Czech Republic has 60MHz.
In September 2021, CTU published a draft market analysis of the mobile
wholesale access market for comments. The CTU has proposed in its
consultation to impose regulation on the wholesale price for mobile
voice,
{
SMS, and data. The consultation period ended on 25 October 2021 and CTU notified the draft measure to the EC in November 2021. On
17
{
February 2022, the EC issued its decision requesting CTU to withdraw
its notified proposals. The EC stated in its decision that the three criteria
test was not met, and ex ante regulation based on the joint SMP finding
was unjustified.
In October 2021, CTU published a proposal to deregulate the wholesale
central access provided at a fixed location for mass-market products and
significantly reduce the scope of regulation on the market of wholesale
local access provided at a fixed location. CTU is expected to notify the
proposals to the EC during 2022.
Hungary
In January 2021, the national regulatory authority (‘NMHH’) published its
market analysis decision for wholesale voice call termination on individual
mobile networks. Later, in June 2021, NMHH published its decision to
maintain obligations regarding transparency, equal treatment, access
and
{
interconnection, while the accounting separation obligation was withdrawn. The mobile termination rate from 1 January 2022 was set
at
{
HUF 1.67 per minute. Magyar Telekom (‘Telekom’) requested a review
of both the market analysis and the obligations in court. In March 2022,
the court rejected Telekom’s application for SMP designation. Telekom
withdrew its application against the decision imposing the obligation.
The
{
case is now closed.In July 2021, NMHH launched a sectoral inquiry on SMS termination
service and retail bulk SMS service, based on a concern raised by the
Hungarian Competition Office (‘HCO’). HCO has indicated their view that
mobile service providers (including Vodafone Hungary) in Hungary may
have a uniform pricing practice for SMS termination and bulk SMS. The
sectoral inquiry does not have a statutory deadline, and the procedure
is
{
still ongoing, but it is expected to conclude during the second quarter of
{
2022.In September 2021, NMHH published an examination of the justification
for maintaining the national domestic directory inquiry service as a
Universal Service. The NMHH final decision is to maintain this as a
Universal Service, and Magyar Telekom was appointed as national
Universal Service operator. The NMHH however decided not to
maintain
{
the provision of a printed phone book as a Universal Service.The HCO’s investigation into the network and spectrum sharing and
possible collusion in the previous spectrum tender by Magyar Telekom
and Yettel (formerly Telenor) is ongoing.
In December 2021, HCO closed its sectoral inquiry in audio-visual
broadcasting and distribution markets.
Regulation (continued)
Strategic report Governance Financials
Other information
245
Vodafone Group Plc
Annual Report 2022
Albania
In December 2021, 4iG entered into a purchase agreement with
ALBtelecom to acquire 80.27% of its shares and the transaction was
approved by the Albanian Competition Authority (‘AK’), who concluded
their investigation with no findings at the end of January 2022, allowing
the transaction to go forward. Shortly after the ALBtelecom acquisition, in
January 2021, 4iG notified the AK of their transaction to acquire 100% of
ONE Telecommunications, the second largest mobile operator in Albania.
AK decided to open an in-depth investigation into potential creation of
horizontal/vertical concentration of the market. The investigation was
closed in March 2022, with the approval of the transaction but subject
to
{
a number of remedies. From July 2021, roaming surcharge rates have been removed in
the
{
‘West{
Balkan 6’ (‘WB6’) countries (Albania, Kosovo, Montenegro,
Macedonia, Serbia, Bosnia). From these dates, users can RLAH across the
WB6 markets. It is possible for operators to implement a Fair Usage Policy
for data consumption in order to protect the operator from abusive usage.
The national regulatory authority (‘AKEP’) is planning an auction for all
bands (3.5MHz, 26GHz, 700MHz). AKEP instructed a consultancy to
prepare a 5G Strategy document, to evaluate and recommend details
with respect to the auction process and outcomes, and on the freeing
up
{
of the 700MHz band. The public consultation on this document closed
{
in December 2021 and is in the process of being approved by
{
AKEP. It is expected that the 5G auction will take place in 2023.
The Ministry of Infrastructure and Energy (‘MIE’) has started the
process
{
for the transposition of the Code into Albanian legislation with the
{
support{
of an external consultant. The aim is to fully align Albanian
telecommunication legislation with the same standards and rules applied
in the EU as a requirement of Chapter 10 ‘Information society & Media’
of
{
the Integration package for the accession of Albania in the EU.
African, Middle East
Vodacom: South Africa
In March 2021, the national regulatory authority (‘ICASA’) published a
findings document on its market inquiry into mobile broadband services.
ICASA found insufficient competition and designated Vodacom South
Africa (‘Vodacom SA’) as having SMP in several relevant markets at
wholesale (site access, national roaming) and retail levels, proposing
remedies primarily at the wholesale level. ICASA published the Draft
Regulations for comment and held public hearings in August 2021.
On
{
31{
March 2022, ICASA published the final regulations and reasons
document, bringing this process to a conclusion.
On 8 March 2022, the spectrum auction commenced in South Africa,
which involved an opt-in round for qualifying (non-Tier 1 operators)
bidders. The main auction for all the applicants began on 10 March 2022
and concluded on 17 March 2022. Vodacom SA secured 110MHz of
spectrum comprising two blocks of 2x5MHz in the 700MHz spectrum
band, 80MHz in 2600MHz spectrum band, and 10MHz in 3500MHz
spectrum band.
On 8 September 2021, e.TV commenced a motion with respect to ICASA
and the Minister of Communications and Digital Technologies, with a view
to delaying the digital migration process. The motion was heard by the
High Court in March 2022, with Vodacom SA intervening to support
the
{
Minister and ICASA. The High Court dismissed e.TV’s application, but
{
also{
deferred the analogue switch off date from 30 March 2022
to
{
30{
June
{
2022. e.TV has indicated it will appeal against the judgment.
On 11 March 2022, the Minister of Communications and Digital
Technologies published proposed amendments to the Policy for
High
{
Demand Spectrum and Policy direction for comment, specifically on
{
the licensing of the Wholesale Open Access Network (‘WOAN’). Under
{
the proposals, the WOAN is removed as the means to achieve a number of policy objectives i.e. increased service based competition, and
empowerment and instead, the policy objectives will be realised using the
next generation Radio Frequency Spectrum policy which is currently
being drafted for consultation.
In May 2021, ICASA published a notice announcing the start of the Review
of the Pro-competitive Conditions imposed on relevant licensees in terms of
the Call Termination Regulations, to be completed by March 2022. ICASA
has now completed the review and published its findings document. This
will be followed by cost modelling, to be completed by August 2022, and
final regulations, to be published by September 2022.
Vodacom: Democratic Republic of the Congo
In August 2018, the Customs Authority issued a draft infringement report
assessing that there were unpaid duties for alleged smuggled devices
bought by Vodacom Democratic Republic of the Congo (‘Vodacom DRC’)
which amounted to US$44 million, to which Vodacom DRC objected. In
May 2019, Vodacom DRC filed an administrative appeal at the Council of
State, which is still pending.
In April 2020, a new Decree introduced a Central Equipment
Register
{
System (‘CEIR’) and handset certification fees (‘RAM tax’). In
{
November 2020, Vodacom DRC was fined US$2.5 million by way of
{
a
{
Ministerial Decree for
{alleged shortcomings in its cooperation and
implementation of charging mechanisms related to the CEIR system.
Vodacom DRC appealed this decision, and requested a suspension of the
Decree, but this remains pending. Subsequently, the Council of Ministers
repealed the Decree, effective 1 March 2022. Consequently, the national
regulatory authority (‘ARPTC’) directed all operators to remove systems
implemented for collecting the RAM tax.
In March 2022, ARPTC sent letters to Vodacom DRC and other mobile
network operators stating that in light of cancellation of the RAM tax,
ARPTC requests submission of Vodacom DRC’s know-your-customer
(‘KYC’) databases within 72 hours. It remains unclear as to how ARPTC’s
request is related to the RAM tax. The industry has requested a meeting
with ARPTC to discuss and clarify this request.
In January 2021, Vodacom DRC received notice by the Minister of
Communications, stating that a December 2020 investigation found
{
non-compliant SIM cards without providing further details. Vodacom DRC sent
a letter requesting further information on the details of the investigation.
While awaiting a response to its letter in February 2021, Vodacom DRC
was fined US$3.65 million by way of a Ministerial Decree for alleged
non-compliance. Vodacom DRC initiated legal action and appealed for
a
{
stay of the execution of the fine for the duration of the appeal, which
was granted. In December 2021, ARPTC eventually submitted a letter
identifying seven non-compliant SIMs as being the reason for the
fine.
{
Vodacom DRC will challenge the findings as part of the ongoing legal
{
action. On 12 October 2021, the new Communications Act was published (‘the
Act’), and is effective from that date, repealing the old Communications
Act of 2002. Vodacom DRC and all mobile network operators are
to
{
convert their licences to the new regime within 12 months of its publication, at no cost. The licence conversion process is subject to
further publication of applicable decrees and implementation measures
of the new Act, which is still pending.
Vodacom: Tanzania
In February 2020, the national regulatory authority (‘TCRA’) issued new
SIM Card Registration Regulations to formalise the ‘biometric only’ SIM
registration requirement and restrict ownership of the number of SIMs by
customers. Since April 2021, Vodacom Tanzania has barred 568,000 SIMs
of subscribers who have not completed biometric registration.
In December 2021, the TCRA issued its quarterly report on Quality
of
{
Service (‘QoS’), in which Vodacom Tanzania has{
been found
non-compliant with several targets under the QoS regulations. As a
consequence, Vodacom Tanzania is executing network improvement
plans. There is a risk of fines for non-compliance.
Strategic report Governance Financials
Other information
246
Vodafone Group Plc
Annual Report 2022
The Finance Act of 2021 was passed by Parliament effective 1 July 2021.
The Finance Act amendments introduced a ‘Mobile Money Levy’, which
is
{
a levy to be charged on mobile money transfer transactions, at a rate
ranging from TZS10 to 10,000. The levy charged on mobile money
transactions started in July 2021. In September 2021, the Regulator
issued amended
{
Regulations with immediate effect: (i) Reducing levy
charges by 30%, and (ii) Revising the definition of
{
’Transfer{
and
Withdrawal’, to include mobile banking services and exclude transfers
from a bank account to a mobile money account. The Finance Act also
introduces an ‘Airtime Levy’, which is a levy to be charged on airtime, at a
rate ranging from TZS5 to 223.
Vodacom: Mozambique
The Communications Regulator (‘INCM’) assigned Vodacom Mozambique
temporary spectrum (2x5MHz of 1800 band). This was assigned under
a
{
COVID-19 relief programme as a temporary licence. The INCM has
subsequently demanded return of the temporary spectrum. Vodacom
Mozambique has entered discussions with INCM to potentially acquire
this spectrum as a permanent licence.
Vodacom: Lesotho
In December 2019, the Lesotho Communications Authority (‘LCA’) issued
a notice of enforcement against Vodacom Lesotho based on its assertion
that the company’s statutory external auditors were not independent,
as
{
required by the Companies Act. In September 2020, the LCA issued a
{
penalty of M134 million against Vodacom Lesotho. Despite Vodacom
Lesotho reserving its rights for appeal within the statuary timeframe,
in
{
October 2020 the LCA issued a notice of revocation of the operating licence of Vodacom Lesotho for failure to pay a penalty of M134 million.
Thirty percent of this fine was determined by the LCA to be payable in
October 2020 and the balance was suspended for a period of five years,
on the condition that Vodacom Lesotho is not found guilty of breaching
any of its regulatory obligations in the future. Vodacom Lesotho
has
{
launched an application in the Lesotho High Court to have both determinations of the LCA imposing the fine and revoking its operating
licence, respectively, reviewed and set aside. The Lesotho High Court
has,
{
in the meantime, issued an order interdicting the LCA from, inter alia,
{
enforcing the payment of the said fine and revoking Vodacom Lesotho’s operating licence. The Lesotho High Court heard the matter
in
{
December{
2020, and Vodacom Lesotho is awaiting judgment.
In June 2021, the Minister of Communications issued new SIM and
Device
{
Registration Regulations without prior consultations. The Regulations included a requirement for biometric registration and
penalties for non-compliance. Subsequently, the Parliament directed
the
{
LCA to withdraw the Regulations to allow for a comprehensive public stakeholder consultation prior to promulgating regulations. The LCA
initiated the consultation process which closed on 30 September 2021.
Vodacom Lesotho made submissions through the consultation process.
On 24 December 2021, the Minister of Communications (‘MoC’) promulgated
a revised version of the Communications (SIM Registration) Regulations
of
{
2021. The new regulations come into effect as of 24 June 2022 and allow service providers 12 months to meet compliance in respect of
existing SIMs. The LCA and/or MoC have powers to extend the
compliance timelines.
In August 2021, Vodacom Lesotho received approval for the renewal of
its 3500MHz trial 5G spectrum (1x100MHz) for a further six-month period
expiring 31 March 2022. Vodacom Lesotho commenced its 5G trial in
November 2021 and is engaging the LCA to convert the trial licence to
a
{
permanent licence.
Turkey
Since October 2021, a margin squeeze test has been applicable on
reference offers. The national regulatory authority (‘ICTA’) is expected
to
{
review and approve T×
rk Telekom’s Reference Offer to establish fibre
access model and tariffs as well as to redefine wholesale SLAs. According
to ICTA’s 2022 Business Plan, the deadline for completing this review is
December 2022, although it is anticipated that this will occur sooner.
In September 2019, the Local Court annulled the administrative penalty
at the amount of TRL138 million imposed by the Ministry of Trade on
Vodafone Turkey, due to the statute of limitation of the investigation
period stated in law. Vodafone Turkey entered into a reconciliation
procedure with the Ministry of Trade, to reach an agreement to conclude
the judicial process, under which Vodafone Turkey has been granted a
remission of the TRL138 fine, and in turn Vodafone Turkey has released
the right of litigation.
Egypt
In September 2020, Vodafone Egypt submitted its proposal to acquire
40MHz in response to the national regulatory authority (‘NTRA’) issuance
of a bid for spectrum acquisition in the 2600MHz band. In December
2020, Vodafone Egypt’s technical and financial proposal was accepted,
and a new License Annex was signed between NTRA and Vodafone Egypt
after payment of US$270 million and the remaining 50% to be paid over
two
{
years in two equal instalments. Vodafone Egypt has now received the
{
full spectrum bandwidth of 40MHz in the 2600MHz band over two tranches (1st in November 2021 and 2nd in January 2022). The 40MHz
are now operational across the network and deployment is progressing.
Ghana
Vodafone Ghana is involved in an ongoing legal dispute over a
parcel
{
of{
land. The plaintiff contends that, due to irregularities in the
documentation, he is due US$16 million in compensation. Vodafone
Ghana continues to appeal the claim, which is now sitting with the
Supreme Court. The next hearing is due by the end of April 2022.
In January 2020, Vodafone Ghana successfully renewed its 900MHz
and
{
1800MHz licences for 10 years, until 2029, pending payment of
US$25
{
million. Vodafone Ghana entered negotiations with the Ministry of
{
Communications and Digitalisation (‘MoCD’) and Ministry of Finance to amend the terms of renewal in relation to increasing duration of licence,
payment terms, re-farming rights, and additional 800MHz spectrum,
which continue. The MoCD extended the payment deadline date to
31
{
December 2021.The NRA assigned 2x5MHz of 800MHz frequency band on a temporary
basis until June 2021 as part of COVID-19 measures. Use of the temporary
spectrum was further extended until 31 December 2021. Currently
Vodafone Ghana has successfully temporarily extended the use of the
spectrum with the support of the MoCD until discussions for 2G licence
renewal are concluded.
In October 2021, SIM card re-registration commenced for a period
of
{
three{
months. All SIM cards are expected to be registered with
the
{
Ghana Card (biometric national identification card) issued by the
National
{
Identification Authority (‘NIA’), the regulator for identification in
{
Ghana. Due to insufficient registrations, the MoCD extended the
deadline for registration from 31 March 2022 to 30 July 2022.
Regulation (continued)
Strategic report Governance Financials
Other information
247
Vodafone Group Plc
Annual Report 2022
Overview of spectrum licences at 31 March 2022
700MHz 800MHz 900MHz 1400/1500MHz 1800MHz 2.1GHz 2.6GHz 3.5GHz
Quantity
1
(Expiry Date) Quantity
1
(Expiry Date) Quantity
1
(Expiry Date) Quantity
1
(Expiry Date) Quantity
1
(Expiry Date) Quantity
1
(Expiry Date) Quantity
1
(Expiry Date) Quantity
1
(Expiry Date)
Germany
2x10 (2033) 2x10 (2025) 2x10 (2033) 20 (2033) 2x25 (2033) 2x15
2
(2040) 2x20+25 (2025) 90 (2040)
2x5
2
(2025)
Italy
2x10 (2037) 2x10 (2029) 2x10 (2029) 20 (2029) 2x15 (2029) 2x15 (2029) 2x15 (2029) 80 (2037)
2x5
3
(2029)
UK
4
n/a 2x10 (2033) 2x17.4 20 (2023) 2x5.8 2x14.8 2x20+25 (2033) 50 (2038)
40 (2041)
5
Spain
2X10 (2041)
6
2x10 (2031) 2x10 (2028) n/a 2x20 (2030) 2x15+5 (2030) 2x20+20 (2030) 90 (2038)
Ireland
n/a
7
2x10 (2030) 2x10 (2030) n/a 2x25 (2030) 2x15 (2022) n/a 105
8
(2032)
Portugal
2X10 (2041) 2x10 (2027) 2x5 (2033) n/a 2x6 (2033) 2x20 (2033) 2x20+25 (2027) 90 MHz (2041)
2x5
3
(2027) 2x14
3
(2027)
Romania
n/a 2x10 (2029) 2x10 (2029) n/a 2x30 (2029) 2x15 (2031) n/a
9
40 (2025)
Greece
2x10(2036) 2x10 (2030) 2x15 (2027) n/a 2x10 (2027) 2x20 (2036) 2x20+20 (2030) 140 (2035)
2x15
3
(2035)
Czechia
2x10 (2036) 2x10 (2029) 2x10 (2029) n/a 2x27 (2029) 2x20 (2025) 2x20 (2029) 60 (2032)
Hungary
2x10 (2035)
10
2x10 (2029) 2x10 (2022) n/a 2x15 (2022) 2x15 (2027) 2x20+25 (2029) 60 (2034)
2x1
3
(2029) 2x20(2037)
10
2x5
3
(2035)
10
50
3
(2035)
10
2x9 (2037)
10
Albania
n/a 2x10 (2034) 2x8 (2031) n/a 2x9 (2031) 2x15+5 (2025) 2x20+20 (2030) n/a
2x2
3
(2030) 2x14
3
(2030) 2x5
3
(2029)
2x4
3
(2024)
11
2x5
3
(2024)
11
2x5
3
(2031)
11
Vodacom
South Africa
12
2x10 n/a 2x11
13
n/a 2x12 2x15
13
80 10
Vodacom:
Democratic
Republic of
the Congo
n/a 2x10 (2038) 2x6 (2038) n/a 2x18 (2038) 2x10+15
(2032)
n/a 2x15 (2026)
Lesotho
n/a 2x20
14
2x22
14
n/a 2x30
14
2x20
14
n/a 2x21
14
(2036)
79 (Trial)
Mozambique
n/a 2x10 (2039) 2x8 (2039) n/a 2x20(2039) 2x15+5 (2039) n/a 100
15
(2024)
2x5
3
(2022)
Tanzania
2x10 (2033) n/a 2x12.5 (2031) n/a 2x10 (2031) 2x15 (2031) n/a 2x7+2x14 (2031)
Turkey
n/a 2x10 (2029) 2x11 (2023) n/a 2x10 (2029) 2x15+5 (2029) 2x15+10 (2029) n/a
2x1.4
3
(2029)
Egypt
n/a n/a 2x12.5 (2031) n/a 2x10 (2031) 2x20 (2031) 40 (2031)
16
n/a
Ghana
n/a 2x15
17
(2034) 2x8
18
(2034) n/a 2x10
18
(2034) 2x15
17
(2023) n/a n/a
Notes:
1. ALL – Single (or unpaired) blocks of spectrum are used for asymmetric data (non-voice) use; block quantity has been rounded to the nearest whole number.
2. GERMANY – The allocation of 2.1GHz will change to the following: in January 2021 will have 2x15MHz (2040) and 2x5 (2025); in January 2026 will have 2x20MHz (2040).
3. MULTIPLE – Blocks within the same spectrum band but with different licence expiry dates are separately identified.
4. UK – all UK spectrum licences are perpetual so any dates given are the ones from which licence fees become payable, and where no date is given this means that licence fees already apply.
5. UK – Currently in the transition period of the 3.4-3.8GHz defragmentation deal with VMO2. Once the transition is completed i
n 2025, Vodafone will have 90 MHz with an expiry date of 2038.
6. SPAIN – The initial term of the licence is 20 years, with the option to renew the licence for an additional 20 years as long as the licence conditions have been met.
7. IRELAND – In Ireland a temporary licensing framework for spectrum rights of use on the 700MHz band has been established allowing the use 2X10 MHz. The licence is granted for a 3-month block commencing
1
{
April
{
2022 and a further application is then required for an extension from 1 July 2022. The licence granted under regulations shall
expire no later than 1 October 2022.
8. IRELAND – 105MHz in cities, 85MHz in regions.
9. ROMANIA – 2.6GHz TDD spectrum was returned to the regulator, effective July 2021.
10. HUNGARY – In Hungary 700MHz, 2.1GHz and 3.5GHz – conditional options of a further five-year extension to 2040; 900MHz, 1.8G
Hz – the 15-year right of use began April 8th 2022 when original licences expired;
conditional options of a further five-year extension to 2042.
11. ALBANIA – spectrum acquired from PLUS’ exit from market.
12. SOUTH AFRICA – Vodacom’s South African spectrum licences are renewed annually. As part of the migration to a new licensing regime the national regulator has issued Vodacom a service licence and a
{
network licence which will permit Vodacom to offer mobile and fixed services. The service and network licences have a 20-year duration and will expire in 2029. Vodacom South Africa was assigned Provisional spectrum in November
2021 when the Temporary Spectrum regime came to an end. The provisional spectrum assignments expire on 30 June 2022, after which the new permanent post-auction assignments will become effective (values in
table correspond to permanent assignments as per the outcome of the 2022 auction).
13. SOUTH AFRICA – South African Regulator has indicated that it has approved Vodacom’s 2100MHz licence amendment which effectively returns the 2100TDD spectrum. Surrender of 2X1MHz in 900MHz due to band
harmonisation imminent.
14. LESOTHO – Vodacom’s Lesotho spectrum licences are attached to a unified services licence and renewed annually. 1x79MHz of 3.5GHz has been licenced on a temporary basis and is pending renewal.
15. MOZAMBIQUE – Mozambique 3.5GHz spectrum for 5G trial which was extended to 2024. 2x5 of 2.1GHz has been acquired on a 3-yea
r lease which has expired in November 2021 and is pending renewal.
16. EGYPT – The first tranche of 20MHz of 2.6GHz was made available In November 2021 and the second tranche of 20MHz was receiv
ed in January 2022.
17. GHANA – NCA submitted a provisional licence for comments, to which Vodafone Ghana submitted feedback and final licence beyo
nd 2023 is pending.
18. GHANA – Vodafone Ghana has established an agreement with the MoF to renew its license for 15 years along with the permanent
assignment of an additional 2x5 800MHz. The agreement is pending written finalisation.
Strategic report Governance Financials
Other information
248
Vodafone Group Plc
Annual Report 2022
MTR Rates
Country by region 2019
1
2020
1
2021
1
2022
1
Europe
Germany (€ cents) 0.95 0.90 0.78 0.55
Italy (€ cents) 0.90 0.76 0.67 0.55
UK (GB£ pence) 0.489 0.479 0.468 0.391
Spain (€ cents) 0.67 0.64 0.64 0.55
Ireland (€ cents) 0.79 0.55 0.43 0.43
Portugal (€ cents) 0.39 0.39 0.36 0.36
Romania (€ cents) 0.96 0.76 0.76 0.55
Greece (€ cents) 0.946 0.622 0.622 0.55
Czech Republic (CZK) 0.248 0.248 0.248 0.141
Hungary (HUF) 1.71 1.71 1.71 1.675
Albania (ALL)
2
1.22 1.11 1.11 1.11
Africa, Middle East and Asia Pacific
Vodacom: South Africa (ZAR) 0.12 0.10 0.09 0.09
Vodacom: Democratic Republic of the Congo (USD) 2.00 2.00 2.00 2.00
Lesotho (LSL/ZAR) 0.15 0.12 0.09 0.09
Mozambique (meticash) (Dollar cents)
3
0.39 0.37 0.31 0.25
Tanzania (Tanzanian shillings) 10.40 5.20 2.60 2.00
Turkey (lira) 0.03 0.03 0.03 0.03
Egypt (PTS/Piastres) 11.00 11.00 11.00 11.00
Ghana (peswas)
4
4.00 2.80 2.80 2.45
Notes:
1. All MTRs are based on end of financial year values.
2. ALBANIA – There is no official decision so far regarding the reduction of the national MTRs below 1.11 ALL/min. In May 2021 the NRA approved the draft “Results of the cost model of wholesale
mobile
{
network services” based on a study by an external consultant. A glidepath was proposed aiming at a maximum MTR of 1.02 ALL/min in 2022 but the NRA never issued a decision imposing the
{
mentioned reduction.3. MOZAMBIQUE – New cost model completed and glidepath introduced from January 2021.
4. GHANA – The Ghanian Regulator has, since the declaration of MTN as Significant Market Power (‘SMP’), introduced asymmetrical MTRs. Vodafone Ghana pays 2.8 GHp (70% of 4 GHp) and receives 4 GHp
from MTN. This 30% discount to operators not declared as having SMP may change subject to a period of 2 years when a new Market Review is to be conducted.
Regulation (continued)
Strategic report Governance Financials
Other information
249
Vodafone Group Plc
Annual Report 2022
Form 20-F cross reference guide
The information in this document that is referenced in the following table will be included in our Annual Report on Form 20-F f
or 2022 filed with
the
{
SEC{
(the ‘2022 Form 20-F’). The information in this document will be updated and supplemented at the time of filing with the SEC or later
amended
{
if{
necessary. No other information in this document is included in the 2022 Form 20-F or incorporated by reference into any filing
s by us under
the Securities Act. Please see ‘Documents on display’ on page 237 for information on how to access the 2022 Form 20-F as filed with the SEC. The 2022
Form 20-F has not been approved or disapproved by the SEC nor has the SEC passed judgement upon the adequacy or accuracy of the 2022 Form 20-F.
Item Form 20-F caption Location in this document Page
1 Identity of Directors, senior management
and
{
advisersNot applicable –
2 Offer statistics and expected timetable
Not applicable –
3 Key information
3B Capitalisation and indebtedness Not applicable –
3C Reasons for the offer and use of proceeds Not applicable –
3D Risk factors Principal risk factors and uncertainties 59 to 64
4 Information on the Company
4A History and development of the Company
History and development 240
Contact details Back cover
Shareholder information: Contact details for Equiniti and EQ Shareholder Services 234
Shareholder information: Articles of Association and applicable English law 235 to 236
Strategic review 16 to 20
Note 1 ‘Basis of preparation’ 133 to 138
Note 2 ‘Revenue disaggregation and segmental analysis’ 139 to 144
Note 7 ‘Discontinued operations and assets held for sale’ 159
Note 11 ‘Property, plant and equipment’ 163 to 164
Note 27 ‘Acquisitions and disposals’ 199 to 200
Note 28 ‘Commitments’ 200
Documents on display 237
4B Business overview
Our strategic framework 1
About Vodafone 2 to 3
Financial and non-financial performance 4 to 5
Chairman’s message 6
Chief Executive’s statement 7
Market and strategy 8 to 9
Mega trends 12 to 13
Strategic review 16 to 20
Our financial performance 24 to 33
Purpose, sustainability and responsible business 34 to 58
Note 2 ‘Revenue disaggregation and segmental analysis’ 139 to 144
Regulation 240 to 248
4C Organisation structure
Note 31 ‘Related undertakings’ 205 to 213
Note 12 ‘Investments in associates and joint arrangements’ 165 to 170
Note 13 ‘Other investments’ 171
4D Property, plant and equipment
Strategic review 16 to 20
Note 11 ‘Property, plant and equipment’ 163 to 164
4A Unresolved staff comments
None –
5 Operating and financial review and prospects
5A Operating results
Our financial performance 24 to 33
Cyber security 49 to 51
Note 21 ‘Borrowings’ 180 to 181
Regulation 240 to 248
5B Liquidity and capital resources
Our financial performance: Cash flow, capital allocation and funding 31 to 33
Long-term viability statement 65
Directors’ statement of responsibility: Going concern 118
Note 19 ‘Cash and cash equivalents’ 176
Note 21 ‘Borrowings’ 180 to 181
Note 22 ‘Capital and financial risk management’ 182 to 191
Note 28 ‘Commitments’ 200
5C Research and development,
patents and licences etc.
Strategic review 16 to 20
Note 10 ‘Intangible assets’ 161 to 162
Regulation: Overview of spectrum licences 247
5D Trend information
Financial and non-financial performance 4 to 5
Mega trends 12 to 13
Long-term viability statement 65
5E Critical accounting estimates
Note 1 ‘Basis of preparation’ 133 to 138
Strategic report Governance Financials
Other information
250
Vodafone Group Plc
Annual Report 2022
Item Form 20-F caption Location in this document Page
6 Directors, senior management and employees
6A Directors and senior management
Our Board 73 to 74
Our governance structure 75
Division of responsibilities 76
6B Compensation
Annual Report on Remuneration: 2022 Remuneration 99 to 109
Remuneration Policy 93 to 98
Note 23 ‘Directors and key management compensation’ 191 to 192
6C Board practices
Shareholder information: Articles of Association and applicable English law 235 to 236
Remuneration Policy 93 to 98
Our Board 73 to 74
Nominations and Governance Committee 80 to 82
Audit and Risk Committee 83 to 88
ESG Committee 89 to 90
Remuneration Committee 91 to 92
Our governance structure 75
Division of responsibilities 76
6D Employees
Our people strategy 21 to 23
Note 24 ‘Employees’ 192
6E Share ownership
Annual Report on Remuneration: 2022 Remuneration 99 to 109
Remuneration Policy 93 to 98
All-employee share plans 103
Note 26 ‘Share-based payments’ 197 to 198
7 Major shareholders and related party transactions
7A Major shareholders
Shareholder information: Major shareholders 235
7B Related party transactions
Annual Report on Remuneration: 2022 Remuneration 99 to 109
Note 13 ‘Other investments’ 171
Note 23 ‘Directors and key management compensation’ 191 to 192
Note 29 ‘Contingent liabilities and legal proceedings’ 200 to 203
Note 30 ‘Related party transactions’ 204
7C Interests of experts and counsel
Not applicable –
8 Financial information
8A Consolidated statements and other
financial information
Consolidated financial statements 129 to 214
Report of independent registered public accounting firm –
Note 29 ‘Contingent liabilities and legal proceedings’ 200 to 203
Dividend rights 236
8B Significant changes
Not applicable –
9 The offer and listing
9A Offer and listing details
Shareholder information 234 to 239
9B Plan of distribution
Not applicable –
9C Markets
Shareholder information: Rights attaching to the Company’s shares 236
9D Selling shareholders
Not applicable –
9E Dilution
Not applicable –
9F Expenses of the issue
Not applicable –
10 Additional information
10A Share capital
Note 17 ‘Called up share capital’ 175
10B Memorandum and Articles of Association
Shareholder information 234 to 239
Description of securities registered –
10C Material contracts
Shareholder information: Material contracts 237
10D Exchange controls
Shareholder information: Exchange controls 237
10E Taxation
Shareholder information: Taxation 238 to 239
10F Dividends and paying agents
Note 9 ‘Equity dividends’ 160
Shareholder information 234 to 239
10G Statements by experts
Not applicable –
10H Documents on display
Shareholder information: Documents on display 237
10I Subsidiary information
Note 31 ’Related undertakings’ 205 to 213
Form 20-F cross reference guide (continued)
Strategic report Governance Financials
Other information
251
Vodafone Group Plc
Annual Report 2022
Item Form 20-F caption Location in this document Page
11 Quantitative and qualitative disclosures about
market risk
Note 22 ‘Capital and financial risk management’ 182 to 191
12 Description of securities other than equity securities
12A Debt securities
Not applicable –
12B Warrants and rights
Not applicable –
12C Other securities
Not applicable –
12D American depositary shares
Fees payable by ADR holders –
13 Defaults, dividend arrearages and delinquencies
Not applicable –
14 Material modifications to the rights of security holders
and use of proceeds
Not applicable –
15 Controls and procedures
Governance 68 to 115
Directors’ statement of responsibility: Management’s report on internal control
over financial reporting
118
Report of independent registered public accounting firm –
16 Reserved
16A Audit Committee financial expert
Board Committees 80 to 92
16B Code of ethics
Our US listing requirements 113
16C Principal accountant fees and services
Note 3 ‘Operating profit’ 145
Board Committees: Audit and Risk Committee – External audit 87
16D Exemptions from the listing standards
for audit committees
Not applicable –
16E Purchase of equity securities by the issuer
and affiliated purchasers
Share buybacks 33
16F Change in registrant’s certifying accountant
Not applicable –
16G Corporate governance
Our US listing requirements 113
16H Mine safety disclosure
Not applicable –
17 Financial statements
Consolidated financial statements 129 to 214
18 Financial statements
Consolidated financial statements 129 to 214
Report of independent registered public accounting firm –
19 Exhibits
Index to Exhibits –
Strategic report Governance Financials
Other information
252
Vodafone Group Plc
Annual Report 2022
This document contains ‘forward-looking statements’ within the meaning
of the US Private Securities Litigation Reform Act of 1995 with
{
respect to the Group’s financial condition, results of operations and
{
businesses, and certain of the Group’s plans and objectives. In particular, such forward-
looking statements include statements with
{
respect to: –
the Group’s expectations and guidance regarding its financial and
operating performance, the performance of associates and joint
ventures, other investments and newly acquired businesses,
preparation for 5G and expectations regarding customers;
–
intentions and expectations regarding the development of products,
services and initiatives introduced by, or together with, Vodafone or by
third parties;
–
expectations regarding the global economy and the Group’s operating
environment and market position, including future market
{
conditions, growth in the number of worldwide mobile phone
{
users and other
{
trends; –
revenue and growth expected from Vodafone Business’ and total
communications strategy;
–
mobile penetration and coverage rates, MTR cuts, the Group’s ability to
acquire spectrum and licences, including 5G licences, expected growth
prospects in the Europe and Rest of the World regions and growth in
customers and usage generally;
–
anticipated benefits to the Group from cost-efficiency programmes,
including their impact on the absolute indirect cost base;
–
possible future acquisitions, including increases in ownership in existing
investments, the timely completion of pending acquisition transactions
and pending offers for investments;
–
expectations and assumptions regarding the Group’s future revenue,
operating profit, Adjusted EBITDAaL, Adjusted EBITDAaL margin, free
cash flow, depreciation and amortisation charges, foreign exchange
rates, tax
{
rates and capital expenditure; –
expectations regarding the Group’s access to adequate funding for its
working capital requirements and share buyback programmes, and
the
{
Group’s future dividends or its existing investments; and –
the impact of regulatory and legal proceedings involving the Group
and
{
of scheduled or potential regulatory changes.Forward-looking statements are sometimes, but not always, identified
by
{
their use of a date in the future or such words as ‘will’, ‘anticipates’, ‘aims’, ‘could’, ‘may’, ‘should’, ‘expects’, ‘believes’, ‘intends’, ‘plans’
or
{
’targets’. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the
future. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by
these forward-looking statements. These factors include, but are not
limited to, the following:
–
general economic and political conditions in the jurisdictions in which
the Group operates and changes to the associated legal, regulatory
and tax environments;
–
increased competition;
–
levels of investment in network capacity and the Group’s ability to
deploy new technologies, products and services;
–
evolving cyber threats to the Group’s services and confidential data;
–
the Group’s ability to embed responses to climate-related risks into
business strategy and operations.
–
rapid changes to existing products and services and the inability of
new
{
products and services to perform in accordance with expectations; –
the ability of the Group to integrate new technologies, products and
services with existing networks, technologies, products and services;
–
the Group’s ability to generate and grow revenue;
–
a lower than expected impact of new or existing products, services
or
{
technologies on the Group’s future revenue, cost structure and capital expenditure outlays;
–
slower than expected customer growth, reduced customer
retention,
{
reductions or changes in customer spending and increased
{
pricing pressure; –
the Group’s ability to extend and expand its spectrum resources, to
support ongoing growth in customer demand for mobile data services;
–
the Group’s ability to secure the timely delivery of high-quality
products from
{
suppliers; –
loss of suppliers, disruption of supply chains and greater than
anticipated prices of new mobile handsets;
–
changes in the costs to the Group of, or the rates the Group may
charge for, terminations and roaming minutes;
–
the impact of a failure or significant interruption to the Group’s
telecommunications, networks, IT systems or data protection systems;
–
the Group’s ability to realise expected benefits from acquisitions,
partnerships, joint ventures, franchises, brand licences, platform sharing
or other arrangements with third parties;
–
acquisitions and divestments of Group businesses and assets and
the
{
pursuit of new, unexpected strategic opportunities; –
the Group’s ability to integrate acquired business or assets;
–
the extent of any future write-downs or impairment charges on the
Group’s assets, or restructuring charges incurred as a result of an
acquisition or disposition;
–
developments in the Group’s financial condition, earnings and
distributable funds and other factors that the Board takes into
account
{
in determining the level of dividends; –
the Group’s ability to satisfy working capital requirements;
–
changes in foreign exchange rates;
–
changes in the regulatory framework in which the Group operates;
–
the impact of legal or other proceedings against the Group or other
companies in the communications industry; and
–
changes in statutory tax rates and profit mix.
A review of the reasons why actual results and developments may
differ
{
materially from the expectations disclosed or{
implied within
forward-looking statements can be found under ‘Risk management’
on
{
pages{
59 to 65 of this document. All subsequent written or oral
forward-looking statements attributable to the Company or any member
of the Group or any persons acting on their behalf are expressly qualified
in their entirety by
{
the factors referred to above. No assurances can be
{
given that the forward-looking statements in this document will be
{
realised. Subject to{
compliance with applicable law and regulations,
Vodafone does not
{
intend to update these forward-looking statements and does not undertake any obligation to do so.
References in this document to information on websites, including
other
{
supporting disclosures located thereon such as videos, our ESG Addendum and our TCFD report, and/or social media sites are included
as
{
an aid to their location and such information is not incorporated in, and
{
does not form part of, the 2022 Annual Report on Form 20-F.Forward-looking statements
unaudited information
Strategic report Governance Financials
Other information
253
Vodafone Group Plc
Annual Report 2022
The definitions of non-GAAP measures are included in the ‘Non-GAAP measures’ section on pages 223 to 233.
3G
A cellular technology based on wide band code division multiple access delivering voice and faster data services.
4G
4G or long-term evolution (‘LTE’) technology offers even faster data transfer speeds than 3G/HSPA.
5G
5G is the fifth-generation wireless broadband technology which provides better speeds and coverage than the current 4G.
ADR
American depositary receipts is a mechanism designed to facilitate trading in shares of non-US companies in
{
the US stock markets. The main purpose is to create an instrument which can easily be settled through US
{
stock market clearing systems.
ADS
American depositary shares are shares evidenced by American depositary receipts. ADSs are issued by a depositary bank and
represent one or more shares of a non-US issuer held by the depositary bank. The main purpose of ADSs is to facilitate trading
in shares of non-US companies in the US markets and, accordingly, ADRs which evidence ADSs are in a form suitable for
holding in US clearing systems.
Africa
Comprises the Vodacom Group and businesses in Egypt and Ghana.
AGM
Annual General Meeting.
Applications (‘apps’)
Apps are software applications usually designed to run on a smartphone or tablet device and provide a convenient
means
{
for{
the user to perform certain tasks. They cover a wide range of activities including banking, ticket purchasing, travel
arrangements, social networking and games. For example, the MyVodafone
{
app lets customers check their bill totals on their smartphone and see the minutes, texts and data allowance remaining.
ARPU
Average revenue per user, defined as customer revenue and incoming revenue divided by average customers.
B2C
Business-to-Consumer refers to the process of selling products and services directly between a business and consumers who
are the end-users.
Capital additions
Comprises the purchase of property, plant and equipment and intangible assets, other than licence and spectrum payments
and integration capital expenditure.
Churn
Total gross customer disconnections in the period divided by the average total customers in the period.
Cloud services
This means the customer has little or no equipment, data and software at their premises. The capability associated with the
service is run from the Vodafone network and data centres instead. This removes the need for customers to make capital
investments and instead they have an operating cost model with a recurring monthly fee.
Common Functions
Comprises central teams and business functions.
Converged customer
A customer who receives fixed and mobile services (also known as unified communications) on a single bill or who receives a
discount across both bills.
Depreciation and amortisation
The accounting charge that allocates the cost of tangible or intangible assets, whether owned or leased, to the income
statement over its useful life. The measure includes the profit or loss on disposal of property, plant and equipment, software
and right-of-use assets.
Eliminations
Refers to the removal of intercompany transactions to derive the consolidated financial statements.
Europe
Comprises the Group’s European businesses and the UK.
FCA
Financial Conduct Authority.
Financial services revenue
Financial services revenue includes fees generated from the provision of advanced airtime, overdraft, financing and
lending
{
facilities, as well as merchant payments and the sale of insurance products (e.g. device insurance, life insurance and
{
funeral cover).Fixed service revenue
Service revenue relating to the provision of fixed line and carrier services.
Fibre to the cabinet (‘FTTC’)
Involves running fibre optic cables from the telephone exchange or distribution point to the street cabinets which then
connect to a standard phone line to provide broadband.
Fibre to the home (‘FTTH’)
Provides an end-to-end fibre optic connection the full distance from the exchange to the customer’s premises.
GAAP
Generally Accepted Accounting Principles.
GSMA
Global System for Mobile Communications Association
IAS 17
International Accounting Standard 17 ‘Leases’. The previous lease accounting standard that applied to the Group’s statutory
results for all reporting periods up to and including the quarter ended 31 March 2019.
ICT
Information and communications technology.
IFRS
International Financial Reporting Standards.
IFRS 15
International Financial Reporting Standard 15 ‘Revenue from Contracts with Customers’. The accounting policy adopted by
the Group on 1 April 2018.
IFRS 16
International Financial Reporting Standard 16 ‘Leases’. The accounting policy adopted by the Group on 1 April 2019.
Incoming revenue
Comprises revenue from termination rates for voice and messaging to Vodafone customers.
Integration capital expenditure
Capital expenditure incurred in relation to significant changes in the operating model, such as the integration of recently
acquired
{
subsidiaries. Internet of Things (‘IoT’)
The network of physical objects embedded with electronics, software, sensors, and network connectivity, including built-in
mobile SIM cards, that enables these objects to collect data and exchange communications with one another or a database.
LTM
Last twelve months
Definition of terms
unaudited information
Strategic report Governance Financials
Other information
254
Vodafone Group Plc
Annual Report 2022
Mark-to-market
Mark-to-market or fair value accounting refers to accounting for the value of an asset or liability based on the current market
price of the asset or liability.
Mbps
Megabits (millions) of bits per second.
Mobile broadband
Mobile broadband allows internet access through a browser or a native application using any portable or mobile device such
as smartphone, tablet or laptop connected to a cellular network.
Mobile service revenue
Service revenue relating to the provision of mobile services.
Mobile termination rate (‘MTR’)
A per minute charge paid by a telecommunications network operator when a customer makes a call to another mobile or
fixed network operator.
Mobile virtual network operator
(‘MVNO’)
Companies that provide mobile phone services under wholesale contracts with a mobile network operator, but do not have
their own licence or spectrum or the infrastructure required to operate a network.
Next-generation networks (‘NGN’)
Fibre or cable networks typically providing high-speed broadband over 30Mbps.
Net Promoter Score (‘NPS’)
Net Promoter Score is a customer loyalty metric used to monitor customer satisfaction.
Operating expenses (‘Opex’)
Comprise primarily sales and distribution costs, network and IT related expenditure and business support costs.
Other Europe
Other Europe markets include Portugal, Ireland, Greece, Romania, Czech Republic, Hungary and Albania.
Other Markets
Other Markets comprise Turkey, Egypt and Ghana.
Other revenue
Other revenue principally includes equipment revenue, interest income, income from partner market arrangements and lease
revenue, including in respect of the lease out of passive tower infrastructure.
Partner markets
Markets in which the Group has entered into a partner agreement with a local mobile operator enabling a range of Vodafone’s
global products and services to be marketed in that operator’s territory and extending Vodafone’s reach into such markets.
Penetration
Number of SIMs in a country as a percentage of the country’s population. Penetration can be in excess of 100% due to
customers owning more than one SIM.
Petabyte
A petabyte is a measure of data usage. One petabyte is a million gigabytes.
Pps
Percentage points.
RAN
Radio access network is the part of a mobile telecommunications system which provides cellular coverage to mobile
phones
{
via a{
radio interface, managed by thousands of base stations installed on towers and rooftops across the coverage
area, and linked to the core nodes through a backhaul infrastructure which can be owned, leased or a mix of both.
Reported growth
Reported growth is based on amounts reported in euros and determined under IFRS.
Restructuring costs
Costs incurred by the Group following the implementation of discrete restructuring plans to improve overall
{
efficiency.Retail service revenue
Retail service revenue comprises Service revenue excluding Mobile Virtual Network Operator (‘MVNO’) and Fixed Virtual
Network Operator (‘FVNO’) wholesale revenue.
Return on capital employed
(‘ROCE’)
Return on capital employed reflects how efficiently we are generating profit with the capital we deploy.
Revenue
The total of Service revenue (defined below) and Other revenue (defined above).
Roaming and Visitor
Roaming: allows customers to make calls, send and receive texts and data on other operators’ mobile networks, usually
while
{
travelling abroad. Visitor: revenue received from other operators or markets when their customers roam on one of our
{
markets’ networks. Smartphone penetration
The number of smartphone devices divided by the number of registered SIMs (excluding data only SIMs) and
telemetric
{
applications.Service revenue
Service revenue is all revenue related to the provision of ongoing services to the Group’s consumer and enterprise customers,
together with roaming revenue, revenue from incoming and outgoing network usage by non-Vodafone customers and
interconnect charges for incoming calls.
SME
Small and medium-sized enterprises.
SOHO
Small-Office-Home-Office customers.
Spectrum
The radio frequency bands and channels assigned for telecommunication services.
Task Force on Climate-related
Financial Disclosures (‘TCFD’)
The TCFD has released recommendations which provide a global framework for companies and other organisations
to
{
develop more effective climate-related financial disclosures through their existing reporting processes.Vodafone Business
Vodafone Business is part of the Group and partners with businesses of every size to provide a range of business-
related
{
services. Vodafone Procurement Company
(‘VPC’)
VPC is Vodafone’s procurement company, leading purchasing and supplier management for Vodafone as a whole. Based in
Luxembourg, VPC was founded in 2008 and manages most of Vodafone’s spending with suppliers worldwide. VPC supports
the needs of Vodafone’s operating companies and group functions, and sells procurement services to third parties.
_VOIS
Established in 2006, _VOIS (Vodafone Intelligent Solutions) has grown from a single entity service provider to a global
purpose-driven company that provides a comprehensive portfolio of services to Vodafone and other telecommunications
operators throughout the world.
Definition of terms (continued)
unaudited information
Strategic report Governance Financials
Other information
255
Vodafone Group Plc
Annual Report 2022
Notes
Strategic report Governance Financials
Other information
256
Vodafone Group Plc
Annual Report 2022
Notes (continued)
References to Vodafone are to Vodafone Group Plc and references to Vodafone Group are to Vodafone Group Plc and its subsidiaries unless
otherwise stated. Vodafone, the Vodafone Speech Mark Devices, Vodacom and The future is exciting. Ready? are trade marks owned by
Vodafone. Other product and company names
{
mentioned herein may be the trade marks of their respective owners.
The content of our website (vodafone.com) should not be considered to form part of this Annual Report or our Annual Report on Form 20-F.
© Vodafone Group 2022
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Telephone
+44 (0)1635 33251
vodafone.com
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Telephone
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