Vodafone 2015 Annual Report Download - page 5

The Board continues to consider the ordinary
dividend to be the core element of shareholder
returns, and believes in a consistent dividend
policy. This year we raised the dividend
per share by 2.0%, and we intend to raise
it annually hereafter.
A major economic
contributor
We have always invested at a high level
to ensure we are a leader in the quality
of service we deliver to customers.
With Project Spring we are reinforcing that
position, not only in Europe but across many
emerging markets too.
However, macroeconomic decline in Europe,
combined with the consequences of past
regulatory policies, has brought about a sharp
reduction in return on capital over recent
years. This has been exacerbated by market
structures which remain fragmented both
between and within member states.
This year, we published a report highlighting
our overall economic impact across the
12EU countries in which we operate.
In 2013/14 Vodafone contributed €23.7 billion
to the EU economy (measured in GVA or Gross
Value Added). In addition, Vodafone:
a provided employment for 170,000 people
across its direct workforce and European
supplier base, as of 31 March 2014;
a paid €2.4 billion to EU governments in direct
taxation, spectrum costs and other fees,
and an additional €4.4 billion in indirect tax
payments in 2013/14; and
a since 2000, has paid EU governments a total
of €20.8 billion for access to spectrum to roll
out 3G and 4G networks across Europe.
The new European Commission has identied
as a priority the need to reboot Europe’s digital
strategy. We encourage the Commission
to prioritise measures intended to ensure fair
and sustainable competition based on a level
playing eld for all companies.
It will also be important for the Commission
to pursue harmonisation of rules on spectrum,
data protection, copyright and other areas,
as well as to adopt a principles-based approach
to the open internet to support future
innovation and investment.
Our economic impact in emerging markets
is no less strongly felt, yet there too we face
continued pressures from regulatory and
scal intervention. In South Africa, for example,
the signicant mobile termination rate (‘MTR’)
cuts of the last year had a material nancial
impact on our business.
While India represents an excellent long
term investment opportunity, the present
regulatory challenges are hampering
economic development. Spectrum auction
structures combined with the piecemeal
release of new spectrum, leaves less capital
available for investment in bringing high
quality services to more of the country,
and this is exacerbated by other ongoing
regulatory challenges.
Changes to the Board
In January, Stephen Pusey informed
the Board of his intention to step down
as Group CTO. His many achievements
over eight years include the international
expansion of Vodafone’s 3G services,
the launch of 4G in 18 countries and the
development of global IT, procurement and
cyber security functions. More recently,
he has led the Project Spring investment
programme, and has also played a leading
role in developing the Group’s convergence
strategy. Stephen’s successor, Johan Wibergh,
was previously Executive Vice President and
Head of the Networks segment at Ericsson.
During the year there were a number
of changes to the non-executive team and
these are set out in my Governance statement
on page 50.
Gerard Kleisterlee
Chairman
Over the last two years, our move into unied
communications has taken signicant
steps forward, both through acquisition and
organic investment. 25% of European service
revenue now comes from xed line services,
and we have 12 million xed broadband
customers across the Group.
On 4G we have more than doubled our
footprint in Europe in the last 18 months,
to 72% population coverage. In India, we now
provide 3G services in over 90% of our target
urban areas. Data trafc across the Group grew
80% during the year.
These investments benet businesses
as much as consumers. Building on the Cable
& Wireless Worldwide acquisition, which
brought us global bre infrastructure and
points of presence in 62 countries, we are
taking new services into new geographical
areas to deepen customer relationships and
grow revenue.
Aligning management
pay to value creation and
customer perception
Our remuneration policies continue to focus
on rewarding long term value creation.
The annual bonus this year was slightly
higher than last year, reecting improved
performance against targets; but the failure
to meet the three year threshold on free cash
ow resulted in a zero pay-out on the long-
term incentive plan.
We have also made a number of changes
to management incentives in recent years
to limit total pay, such as the reduction of the
maximum achievable pay-out on the long-
term scheme and the payments made in lieu
of pension contributions.
This year we have made a signicant
change to the criteria for the annual bonus
(‘GSTIP’)scheme.
The substantial investments in networks
need to be supported by a clear step up in the
customer experience and satisfaction, and the
Board wants this to be reected in short
term incentives. 40% of the total GSTIP
assessment will now be based on Customer
Appreciation measures.
Overview Strategy review Performance Governance Financials Additional information Vodafone Group Plc
Annual Report 2015
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