Strategy Update

Vodafone Group Plc
30 May 2006



30 May 2006

                          Strategy Update from Vodafone

Vodafone today sets out five key strategic objectives, which have been developed
in the context of the changing landscape in the mobile industry and which draw
on the Group's strengths. Notable changes in the environment include customers
increasingly seeking products and services which meet their total communications
needs, a greater desire for simplicity and value, the emergence of new
technologies, intensifying price competition and regulatory pressure. The
objectives also reflect the differing growth rates that Vodafone is experiencing
in different regions of the world. The five strategic objectives are:

  * Reduce costs and stimulate revenues in Europe

  * Deliver strong growth in emerging markets

  * Innovate and deliver on customers' total communications needs

  * Actively manage the portfolio to maximise returns

  * Align capital structure and shareholder returns policy to strategy

To recognise the different areas of focus throughout the business, as previously
announced, Vodafone has organised its operations around three principal business
units:

  * Europe, headed by Bill Morrow , and including all of Vodafone's Western
    European controlled businesses

  * Eastern Europe, Middle East, Africa, Asia Pacific and affiliates ('EMAPA'),
    headed by Paul Donovan, containing all of Vodafone's other businesses,
    including its emerging market portfolio

  * New Businesses, headed by Thomas Geitner, with responsibility for the
    delivery of new communication services which address the converging areas of
    mobile, broadband and the internet.


Today Vodafone is outlining its approach to deliver on these five key strategic
objectives in a series of presentations.


                Cost reduction and revenue stimulation in Europe

The key areas of focus for the Europe region will be cost reduction and revenue
stimulation, reflecting a more mature mobile marketplace.

In driving cost reduction, Vodafone will build on its existing One Vodafone
programme, in addition to implementing further methods of reducing its costs
including outsourcing, advancing its shared services efforts and reducing
overheads. In line with this approach, Vodafone has taken the decision to
outsource its IT Application Development and Maintenance activities with likely
savings of approximately 25-30% within 3 to 5 years against current annual costs
of £560 million. Further initiatives include the centralisation of Network
Supply Chain Management activities, with expected savings of 8% within 2 years,
against a £3.3 billion annual external spend today. Also, Vodafone's regional
consolidation of its data centres is expected to provide savings of 25-30%
within 3-5 years, against a £320 million annual cost today.

Group overheads will also be reduced, resulting in operating expenditure savings
and an expected reduction of more than 400 positions in the corporate centre and
ensuring an appropriate balance between Group and local management of
activities.

Regarding revenue stimulation, Vodafone aims to drive additional usage of voice
and data services within its existing, sizable European base of customers. A
variety of services are currently being rolled out as part of this effort, with
high value customers being migrated from prepaid to contract plans, the
introduction of 'family plans' designed to stimulate greater usage, greater
promotion of its Vodafone Passport roaming plans and the introduction of tariffs
which encourage customers to utilise their mobile devices more extensively
within their home and/or office.


                   Deliver strong growth in emerging markets

Emerging markets are expected to generate an increasing proportion of Vodafone's
growth in the next few years. Mobile penetration remains low in many fast
growing emerging economies.

Vodafone has targeted significant growth in these markets and outperformance
against the original business cases for recent acquisitions. In its
restructuring announcement, Vodafone highlighted the benefits of establishing a
dedicated business unit focused on capturing growth in these markets. Vodafone
will today highlight the robust performance of its emerging market portfolio
with its continued strong growth profile.


       Innovate and deliver on our customers' total communications needs

In the context of changing customer requirements and the growing convergence of
mobile, broadband and the internet, Vodafone's third strategy objective will be
to innovate and deliver on customers' total communications needs. A third
business unit, 'New Businesses' has been established to lead this effort.

Vodafone's New Businesses unit will focus initially on three streams of
activity, which together will be known as 'Mobile Plus' and will allow Vodafone
to target new sources of revenue. The first stream is focused on extending
Vodafone's service offerings in the home and at the office to meet customers'
growing voice and broadband data service needs, including the provision of DSL.
Vodafone Germany has today announced that it will launch bundled homezone
products with DSL access provided by Arcor, in the third quarter of the current
financial year. The second stream is focused on the integration of the mobile,
PC and the internet at the application level, offering seamless interoperability
of services. The third area of focus seeks to introduce advertising based
services and business models that customers will view as the most appealing and
acceptable.

Vodafone believes that its mobile centric approach in satisfying customers'
total communications needs will deliver competitive advantage in the marketplace
as it focuses on customers' two basic preferences - for mobility and
personalisation. Vodafone has already launched initial offerings in this area
including Vodafone Zuhause in Germany and Vodafone Casa in Italy, which feature
attractive homezone calling and data services. Further services will be
introduced over time. Vodafone Mobile Plus offerings will benefit from the
upgrade of Vodafone's 3G networks to HSDPA, which features greater capacity and
higher data rates, the availability of complementary new broadband technologies
including DSL and the opportunities for service creation based on IP technology.


            Actively manage Vodafone's portfolio to maximise returns

Vodafone will seek to optimise its portfolio of assets, either disposing of
assets where it believes it cannot earn a superior return or investing in
businesses where it believes it can create substantial additional value for
shareholders.

Vodafone envisages a lower level of merger and acquisition activity in the
future. Where value adding opportunities arise to acquire mobile assets, strict
criteria will be applied. Firstly, targeted businesses should consolidate
Vodafone's presence in a local or regional market. Second, a clear path to
control will need to be identified.

In addition, any acquisition must deliver an Investment Rate of Return exceeding
the local, risk adjusted, cost of capital by at least 200 basis points and the
return on invested capital should exceed the local, risk adjusted, cost of
capital within 3 to 5 years.


       Align capital structure and shareholder returns policy to strategy

Some of Vodafone's businesses have entered a more mature phase, while several
others are still exhibiting high growth. The Group will focus its operational
execution based on the different profiles of its businesses. Consequently,
financial policies have been set to reflect the balance of mature and growth
businesses within the Group.

As a result, Vodafone today announced an increased, 60% dividend payout of
adjusted earnings per share for FY05/06. Vodafone will continue to target a 60%
payout in the future, with increases in dividends linked to the increase in its
underlying earnings per share.

Vodafone has also announced that it is targeting a low Single A credit rating as
it aligns its capital structure to its evolved strategy. The result is that
Vodafone is announcing a further one time, £3 billion return to shareholders,
which will be combined with the existing £6 billion return announced as a result
of the sale of its Japanese business. This combined £9 billion will be returned
to shareholders via a B Share scheme and associated share consolidation in
August 2006. As a result of this one time return and the new target credit
rating, Vodafone has no current plans for further share purchases or other
one-off returns to shareholders.


                                Financial impact

As a result of focusing on its five key strategic objectives, Vodafone
anticipates the financial impact will be as follows:

  * In the Europe Region, Vodafone is targeting modest revenue growth over
    the medium term. As a result of its cost reduction initiatives, Vodafone is
    targeting flat operating expenditures in FY07/08 versus FY05/06. The net
    effect of this is that EBITDA margins are expected to decline slightly.
    However, with a capital expenditure-to-sales ratio of 10% in FY07/08,
    Vodafone continues to expect the Europe Region to generate considerable
    amounts of operating free cash flow.

  * In the EMAPA region, Vodafone expects to see continued strong top line
    growth for several years with EBITDA margins being broadly stable as
    increased investments in customer growth are largely offset by scale
    efficiencies. The capital expenditure to sales ratio is expected to
    initially remain above 10%, although it is expected to trend towards 10% in
    the medium to long term.

  * In the New Businesses area, Vodafone anticipates that its Mobile Plus
    strategy will account for approximately 10% of Group revenues in three to
    four years. Given an 'infrastructure-light' approach, Vodafone expects
    modest levels of investment over the medium term.

Vodafone is now targeting outperformance on its original One Vodafone plans:

  * Vodafone will continue through FY07/08 to measure the revenue performance
    of its key European operations by reference to targeting 1% revenue market
    share outperformance compared to principal competitors.

  * With regards to costs, Vodafone previously committed to the combined capex
    and opex expenses being at around FY03/04 levels in FY07/08 for the 16 One
    Vodafone operations. Vodafone has decided to split out the capex and opex
    target into two separate parts for the Europe Region. The Europe Region
    accounts for over 85% of the remaining One Vodafone cost base and is
    therefore a logical evolution of its previous target.

  * The updated targets for the European Region are, therefore, to hold FY07/
    08 opex flat against the FY05/06 results and, therefore, avoid a further
    £150-200million of future increases. Additionally, Vodafone will continue to
    target a 10% capex-to-sales efficiency, the result of which is that Vodafone
    expects to reduce FY07/08 capex by between £400-£500 million when compared
    to the current year.


Commenting on today's announcement, Arun Sarin said:

'Vodafone has a strong market position, outperforming its principal competitors.
However we have been reviewing our strategy, given our continuing desire to meet
our customers' changing requirements. I am encouraged by the opportunity to
broaden our range of services for our customers and our more focused efforts to
drive cost reduction and revenue stimulation in Europe, while we capitalise on
growth opportunities in our emerging market businesses. I believe we are well
positioned to continue our success in a changing environment.'

                                     - ends-


For further information:

Vodafone Group

Investor Relations                                     Media Relations
Tel: [phone]                               Tel: [phone]


High resolution photographs are available to the media free of charge at
www.newscast.co.uk.

Video interviews with Arun Sarin, Chief Executive and Andy Halford, Chief
Financial Officer are available from midday on www.vodafone.com and
www.cantos.com. 



                      This information is provided by RNS
            The company news service from the London Stock Exchange