IFRS 15 was adopted on 1 April 2018 for our statutory reporting, without restating prior year figures. As a result, the discussion of our operating results is primarily on an IAS 18 basis for all periods presented.

Highlights

  • Group revenue of €11.0 billion, down by €0.8 billion due to the adoption of IFRS15, the sale of Qatar and FX headwinds
  • Q3 organic service revenue growth (excluding UK handset financing, IAS 18 basis) of 0.1%** (Q2: 0.5%**); on an IFRS15 basis, growth was 0.4%* (Q2: 0.3%*)
  • Similar performance to Q2 in Europe, with service revenues -1.1%**, reflecting improving customer and financial trends in Italy, robust retail growth in Germany, reduced churn in Spain and a consistent performance in the UK
  • Rest of World grew 4.9%* (Q2: 7.7%*), as a decline in South Africa was offset by good growth in other markets
  • Robust commercial momentum across the Group: mobile contract churn reduced by 2.0 percentage points year-on-year; 747,000 mobile contract and 341,000 broadband net additions, converged base up by 190,000 in Q3
  • Intention to extend our existing UK network sharing agreement with Telefonica O2 to include 5G services
  • Guidance reiterated: underlying organic adjusted EBITDA growth of c.3%; free cash flow (pre-spectrum) c.€5.4 billion
 

Quarter ended 31 December

 

Growth
  2018 IFRS 15
€m
2017 IAS 181
 €m
Reported
%
Organic**
%
Group revenue 10,996    11,797 (6.8)  
Europe 8,145 8,631 (5.6)
 
Rest of the World2 2,547 2,864 (11.1)  
Alternative performance measures3
  2018 IAS 18 €m 2017 IAS 18 €m IAS 18 Reported Growth % IAS 18 Organic** Growth %
Group service revenue 9,787    10,189 (3.9) 0.1
Europe 7,496 7,649 (2.0) (1.1)
Rest of the World2 2,170 2,338 (7.2) 4.9

Nick Read, Group Chief Executive, commented:

“We have executed at pace this quarter and have improved the consistency of our commercial performance. Lower mobile contract churn across our markets and improved customer trends in Italy and Spain are encouraging, however these have not yet translated into our financial results, with a similar revenue trend in Europe to Q2. We enjoyed good growth across our emerging markets with the exception of South Africa, which was impacted by our pricing transformation initiatives and a challenging macroeconomic environment. Overall, this performance underpins our confidence in our full year guidance.

We are moving to implement a radically simpler operating model and to accelerate our digital transformation, as demonstrated by the organisational changes we have announced in Spain and the UK. We are also assessing opportunities across our markets to improve asset utilisation through partnering. This week we announced the intention to extend our existing network sharing agreement with Telefonica O2 in the UK to include 5G services. This will enable us to deploy 5G services to more customers over a wider geographic area, and to do so at a lower cost. After these arrangements have been finalised, we also intend to explore opportunities to monetise our UK tower assets”.

 

For further information:

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Notes:

* All amounts in this document marked with an “*” represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and movements in foreign exchange rates. Organic growth is an alternative performance measure. See “Alternative performance measures” on page 9 for further details and reconciliations to the respective closest equivalent GAAP measure.

** Organic growth excluding the impact of UK handset financing and settlements (see page 12 for further details).

1.   Following the adoption of IFRS 15 “Revenue from Contracts with Customers” on 1 April 2018, the Group’s statutory results for the quarter ended 31 December 2018 are on an IFRS 15 basis, whereas the statutory results for the quarter ended 31 December ended 2017 are on an IAS 18 basis as previously reported. The operating review discussion is primarily performed on an IAS 18 basis. 2018 information and percentage movements on an IAS 18 basis are alternative performance measures. See “Alternative performance measures” on page 9 for more information and reconciliations to the closest respective equivalent GAAP measure and “Definitions of terms” on page 14 for further details.

2.   The Group revised its reporting segments on 1 October 2018 to reflect changes to its organisational structure. The Rest of the World region (previously Africa, Middle East and Asia Pacific) comprises the Vodacom, Turkey and Other Markets operating segments. Current period results are reported under this new organisational structure and comparative periods have been restated accordingly.

3.   Alternative performance measures are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Alternative performance measures” on page 9 for more information and reconciliations to the closest equivalent GAAP measure.