VODAFONE GROUP PLC (VOD) Q3 2021 Earnings Call Transcript

Image source: The Motley Fool.

VODAFONE GROUP PLC (VOD)
Q3 2021 Earnings Call
Feb 3, 2021, 5:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Nick Read -- Chief Executive Officer

Good morning, everyone and welcome to our Q3 Trading Update. I'm joined by Margherita. Good morning, Margherita.

Margherita Della Valle -- Chief Financial Officer

Hello.

Nick Read -- Chief Executive Officer

And we have an opportunity just to go through the results and Q&A with you. We attached a short presentation on our IR website. We're not going to go through page by page on that, but what I thought I'd do is just give you a sort of one minute summary of the key messages. So first, and most importantly, we are back to growth. That growth was an improvement in our underlying performance and also a lot of a drag from roaming. We also had a very good performance in Germany, our largest market. It's really [0:08:11] pleased with the consistent level of commercial performance. We saw a mobile European contract churn year-to-date down 1.1 percentage point, so continuing trend in terms of customer loyalty and better economic model for us as a business.

And secondly, we also saw good NGN fixed broadband customer net adds 330,000 for the quarter, that takes us to over 1 million year-to-date. So really good additional momentum on fixed side. In Germany, we added almost a 100,000 cable net adds over the quarter. And importantly, 40% of our cable additions are choosing the 1 gigabit plan, which is key for our differentiation as a business. In Italy, we've seen some recent improvements in the pricing landscape at the lower end as of the start of January, so, not in the quarter itself. And importantly, we're starting the migration process of our new MVNO contracts onto our network, which will be a positive for next fiscal year.

In the UK, we continue to maintain good commercial momentum, and as you saw we put through in December our new pricing of CPI plus 3.9% for new customers. In Spain, as service revenues continue to stabilize further, so quarter-over-quarter improvement and we managed a price increase in the month of November in what was a highly promotional and intensive quarter and I think we landed that very well. In Vodacom, good strong performance continues in South Africa and importantly in the international markets. The zero rating of peer-to-peer has now ended in the month of January for all of our markets. So we are now charging again for M-Pesa. And Vodafone Business which is about a third of our business really good growing share strong demand for our products and high usage given the pandemic. So we've really seen a tailwind for our business for us.

Good overall performance therefore underscores our confidence in our full year outlook and we reiterated our guidance of over EUR5 billion of free cash flow. Importantly, we continue to make progress on our strategic initiatives. We were able to commercialize the joint venture with Telefonica in the UK on towers and therefore allowing us to move our 50% underneath Vantage Towers which is firmly on track for early this year IPO.

So on that, let me hand over to you all to ask questions Margherita and myself.

Questions and Answers:

Operator

Thank you very much, Nick. Our first question comes from Maurice Patrick from Barclays. Maurice, you are now live. Please go ahead.

Maurice Patrick -- Barclays -- Analyst

Yeah. Good morning guys. Thanks for hosting the call today. A question may be on the trajectory of service revenues, if that's OK. You saw an improvement this quarter as you called out much of that seems to be the lower roaming drag as it's traditionally a lower quarter I guess this quarter. So I guess the question is, I not expect you to give guidance for the quarters ahead on service revenue, maybe if you could give us a hand with some of the puts and takes for the fourth quarter or maybe for next year? I mean, I'm sure you will talk about the continuing revenue drag in the fourth quarter, but given you are growing by 1.8% now ex-pats. And as we see a gradual recovery in the hopes of that you will see accelerating growth into next year. So maybe thoughts on that would be helpful. Thank you.

Nick Read -- Chief Executive Officer

Maybe, Margherita?

Margherita Della Valle -- Chief Financial Officer

Sure. Hello, Maurice. Yes, we are very pleased to be into growth -- back into growth and I would say firmly back into growth. We have good momentum. Nick mentioned the fact that our growth rate excluding roaming drags is now 1.8% for the Group. Worth noting that we are also back to growth in Europe excluding roaming. I think you were right on quarters, I prefer to avoid giving specific guidance, as you know 0.1 is less than EUR10 million for the Group, so we would avoid that. But we are definitely looking into next year as a year of acceleration for this growth.

And I would call out two reasons for that. The first one is the strong demand for our services that Nick mentioned. Vodafone Business is today back into growth including the drag on travel, it's growing 1% and if you exclude the drag from roaming, it's growing more than 3%. We see the strong demand across the whole spectrum of segments in business. I would say from the public sector, all the way to SMEs and it's particularly strong around fixed connectivity and digital products. We really believe that in fixed, we are seeing a growing market in which we are also specifically growing share and maybe to give you more information on that we have as you know, an Investor Day dedicated to Business coming up because it's a third of our revenue, it's an important point.

So number one is demand, and number two is, also commercial momentum. We have had lockdowns in Europe again in Q3, but as you have seen from the results, we have maintained good commercial momentum, particularly in Germany as Nick mentioned, almost 100,000 connections in cable, but also similar volumes in mobile. So good performance maintained despite the lockdown. On the back of this, we are really looking forward to come into Q1, where we will see the underlying performance emerge as the growth rate for the Group, and our focus, as I said, will be on seeing this accelerating over time.

Maurice Patrick -- Barclays -- Analyst

Great. Thanks so much.

Nick Read -- Chief Executive Officer

I think I would just maybe one build on Margherita's point. I mean a lot of momentum as you can see from her summary. I'd also say just the pricing climate, you're basically seeing customers showing a deeper appreciation for quality networks, you're also seeing I believe government's regulators starting to understand the need for investment into high quality networks and therefore the industry needs to earn a return. And I think there is a little bit more latitude to discuss pricing in this environment.

And therefore, as I said with UK has got the new formula, which seems to be a cost by most of the players in the industry, you've got Germany now just putting through under the draft rules and a simpler way of doing price increasing, you've got our sales in South Africa [Phonetic] increased prices over the quarter in Spain, and you will see in the low end in Italy. So I just -- I think it's a climate -- when people start to appreciate the quality of networks and that gives a little bit more I wouldn't say it strong pricing power, but it just gives a little bit more latitude to do targeted more for more pricing.

Maurice Patrick -- Barclays -- Analyst

Great. Thank you very much.

Operator

Thank you, Maurice. Our next question comes from Sam McHugh from Exane. Sam, you are live. Please go ahead.

Sam McHugh -- Exane -- Analyst

Yeah. Thanks, guys. A quick question on B2B actually and apologies if it [Indecipherable] some of your Investor Day. I guess was one of the good parts this quarter and you flagged out on fixed B2B growing around 5%. So I guess the implication is mobile still falling 1% or 2%. So I wonder if you could give us some color on that mobile decline, is that just roaming, I'm just try to understand if the core B2B mobile business has stabilized in terms of pricing and subscribers. And then do you think your B2B business can outgrow the consumer business in the medium term?

Margherita Della Valle -- Chief Financial Officer

Sam, you are absolutely right. The drag on mobile revenues in business is coming from roaming. Excluding roaming, we are also seeing an accelerating momentum there and I think this is quite important, we are seeing an accelerating momentum, particularly in our main markets of UK and Germany. When I was saying there is strong demand there is also strong demand for some of our mobile products, see as for example IoT, which is within mobile. We have had -- I think the highest quarter of IoT connection in Q3 since at least for four years, so a record quarter.

And when we also talk about public sector demand, we see an increased demand for mobile connectivity coming from these areas. So I definitely would say that mobile as well is on the up and the only reason why it's negative is roaming. Again next year, as we lap into Q1, we will see the roaming drag fall away, and then at some point in the future, which I think is yet to be determined the roaming may also become a tailwind which will be particularly important in business.

Nick Read -- Chief Executive Officer

Yeah. Again, just one quick build, I do think that a lot of incumbents are associated with the lack of SME. Whereas we're seeing as more of our from modern set of products and services, and so now the whole SME and public sector to Margherita's point are waking up to the fact they look -- they were caught out by the pandemic and they need to digitize. And I think that they are turning to us, because I think they see us as a modern solution set, which I think pays [Indecipherable].

Sam McHugh -- Exane -- Analyst

Fantastic. Look forward to hearing more about it.

Margherita Della Valle -- Chief Financial Officer

Thank you, Sam.

Operator

Thank you, Sam. Our next question comes from Georgios at Citigroup. Georgios, you are now live. Please go ahead.

Georgios Ierodiaconou -- Citigroup -- Analyst

Good morning and thank you for taking my question. I just wanted to ask a follow-up on the pricing of comments we had earlier. And obviously, price increases landed very well in the UK because everyone followed. In Spain, it looks like there is a small increase in churn, don't know it's directly linked started leading to that or maybe other market dynamics. But will it be possible to give us an idea of how you are thinking about different markets over the next year? And the comment you made about Germany, whether it's something that could be implemented shortly, or whether it takes a couple of years for the implementation? Thank you.

Nick Read -- Chief Executive Officer

Georgios, what I would say is pricing is very specific to each individual market and each individual -- where the price table is today, what the competitive intensity and objectives of different players are. So what I'd say specifically about Spain is it wasn't really the price increase that was the key driver. It was more the fact that the market got more aggressive. I think Orange wanted to reassert itself in the marketplace and made a stronger promotional play and some repositioning. You had a number of other low end brands reposition as well with Virgin coming into the market.

So I would say, it's more to do with everyone repositioning around us. And then ultimately, we repositioned to those new prices in early December. So we saw December and January, we went net positive again. So, all I'm saying is, we set the Spanish business up to be able to compete if people lower price, at the same time, where there is opportunity to do more for more, which we did, if others do them, we will take that on board as well. So I consider us a very rational player.

I think Italy, I'd call out is a market that wasn't able to do any pricing actions and normally we do, do pricing actions. I think next year the climate could be a bit different. I think all players need to improve performance and returns. I'd say the German market has been pretty benign for a while now. So I'm not saying, but you should expect headline pricing action. But I think what you'll see is more for more hence wherever possible and might be more base actions.

Georgios Ierodiaconou -- Citigroup -- Analyst

Thank you.

Operator

Thank you very much, Georgios. Our next question comes from Carl Murdock-Smith from Berenberg. Carl, your line is now open. Please go ahead.

Carl Murdock-Smith -- Berenberg -- Analyst

Good morning and thanks for the question. I just wanted to ask about the acquisition of the Kabel Deutschland minorities. In what ways will this help to simplify and improve the efficiency of your German operations? And also kind of why now -- why the decision to do -- to acquire the minorities now, it's accretive and credit rating neutral. What stops you from achieving that previously? Thanks.

Nick Read -- Chief Executive Officer

What I would say, it's not really an operational impact per se. It was a lot more to do with the fact that was financially attractive, essentially as you say it was both adjusted EPS and free cash flow per share accretive immediately and it was neutral to our credit rating. I think importantly and to your point of timing. Look, these disputes in Germany can run decades as you saw with management. So at some point, you don't want the distraction. And at some point, you want to try and eliminate any possible downside scenario, which they stayed at an attractive price.

Margherita Della Valle -- Chief Financial Officer

Maybe just to add that in terms of being able to find an agreement at an attractive price, we just said that -- received a favorable ruling from the Munich Court which may have supported our case.

Nick Read -- Chief Executive Officer

Yeah. Perfect.

Carl Murdock-Smith -- Berenberg -- Analyst

That's great. Thanks very much.

Operator

Thank you very much, Carl. Now, the next question is coming from Robert Grindle, please bear with me.

Nick Read -- Chief Executive Officer

Really, Robert gets specialized treatment.

Operator

Robert, your line is now open, please go ahead.

Robert Grindle -- Deutsche Bank -- Analyst

Yeah. Thanks very much. Good to see you both. You have decided to split your technology division on the [Indecipherable] into networks unit. And I think it's digital and IT arm. Please could you share some of your thinking behind this move. Is it about sort of costs and efficiency? Are you thinking more along the lines of your network co and service co separately. And if that's the case, does that apply to fixed as well as mobile? Thank you.

Nick Read -- Chief Executive Officer

Yeah, Rob. I'm really pleased you asked the question, because actually these are significant changes we're doing on the operating model of the business. I wouldn't describe than the way you did. So, maybe if I could have a go and describe it slightly differently. So what we're doing is, we are driving greater standardization across network and IT and digital. So today, we are organized with CTOs in each of the markets and then we have group functions. What we are doing is vertically integrating those functions, network and IT digital for the whole European Group, so they act as one organization driving a standardized roadmap.

I believe, what this has delivered for us is, it leverages actual Group scale, it drives greater efficiency because standardization drives efficiency. And the third is, it improves speed to market of the products and solutions we're bringing to market. So there are four components. First is, it's a new Group product development process. So imagine, we will have one Group roadmap for products. So let me pick an example, consumer IoT, you will seeing us develop one platform for the Group and one set of products that they can get launched across the footprint. So that's where the speed to market comes from.

The second thing is, we are focusing on platforms and we are going to place platforms as centers of excellence. So you might have consumer IoT as one center of excellence, that coordinates in a distributed model across our European footprint. The third is, we're going to insource IT development engineering capability versus what has been historically outsourced. We already have a significant insourced activity, but we're really going to scale that to develop our own IP going forward to make our differentiation stronger.

And then finally, we're going to use those standardized platforms and integrated European organization from a technology perspective to make it easier for third-party strategic partners, the Microsoft's, the Amazon's etc., to connect with our platform and go across our footprint seamlessly and at speed. So an example would be AWS and Edge Computing as an example or Accenture in the security product. So this is really turbocharging Vodafone to deliver on our bigger vision of a next-generation telco from more of a classic telco historically.

Of course, in the process of doing all of that, there are significant synergies. It will help support the $1 billion opex target. The three-year target we've talked about before, but also it provides us resources to invest in growth going forward and maintaining that balance. So I think it's a really big move for us.

Margherita Della Valle -- Chief Financial Officer

Yes. Sorry to add something, but I have been very passionate on all these as Nick notes. I think it's a great move in terms of return on capital because our investments will go further, we will get more growth for our investment by wherever possible, invest once and deploy many times. I think it's a natural evolution versus where we were. But it's a great step to maximize the potential of the Group.

Robert Grindle -- Deutsche Bank -- Analyst

Thanks.

Operator

Thank you very much, Robert. Our next question comes from Adam Fox-Rumley from HSBC. Adam, your line is now open. Please go ahead.

Adam Fox-Rumley -- HSBC -- Analyst

Thanks very much. I actually wanted to ask about the cost implications of your new greenhouse gas emission reduction targets please. Because while 2040 is a long way off. I think your Scope 3 target is very ambitious, especially [Indecipherable]. So I wondered if you could comment on what extra costs involved in the medium term to get that going or does the timeframe mean that you can just wrap it into your existing operating plans. Thanks very much.

Nick Read -- Chief Executive Officer

Hi, Adam. Can I just say, I firmly believe and our ExCo believes that it's more a question of we can't afford the cost of not taking action more than obsessing about the cost of action. If you think about the future, the next 10 years, 20 years, you think about carbon tax, you think about regulation, you think about government multinational corporate bids and how you qualify. We think in action would be very, very expensive. Our energy bill -- and Margarita correct me if I'm wrong is something like EUR0.7 billion.

Margherita Della Valle -- Chief Financial Officer

Yeah.

Nick Read -- Chief Executive Officer

So we are concerned that would only escalate at a rapid rate with carbon taxes versus other things. So we think that is responsible from a society perspective, but also very rational from a business perspective as well, which is why we feel this is a win for all stakeholders.

Margherita Della Valle -- Chief Financial Officer

Maybe worth adding that we are starting to win some business on the back of our environmental objectives. We have recently done a deal, probably I cannot specify which one, but you can start to see that our environmental credentials become a critical factor in winning business in Vodafone Business and Italy and Germany networks are already 100% renewable. The rest of Europe will be there by July, and this I think is an important step for our most conscious customers.

Adam Fox-Rumley -- HSBC -- Analyst

That's a really interesting answer. Thank you.

Operator

Thank you very much, Adam. Our next question comes from James Ratzer from New Street. James, your line is now open. Please go ahead.

James Ratzer -- New Street -- Analyst

Good morning, Nick. Good morning, Margherita. Thanks very much. Kind of you have great set of results and encouraging commentary about returning to growth. So with that in mind, just love to hear an update on your thoughts about potential cash return to shareholders. I think in the past you've talked about considering incremental returns when you got down to 2.5 times net debt to EBITDA. I mean, is that still your thinking at this stage or are you willing to show more flexibility around that especially with the upcoming Vantage Towers IPO? And if I could ask a very quick extra one you flag in Italy the postpay and VG MVNO. Could you quantify what the revenue run rate of those will be when they're fully integrated onto your Italian business? Thank you.

Nick Read -- Chief Executive Officer

I will leave both for you, Margherita.

Margherita Della Valle -- Chief Financial Officer

Thank you, Nick. On returns to shareholders, as you know, James, we have three capital allocation priorities. First is invest in our critical network infrastructure. The second is deleveraging. To your point, we have a clear intention to move toward the lower end of our 3 times to 2.5 times net debt to EBITDA range. And the third is to provide attractive return to shareholders.

On leverage, we are really focused now on moving down. So that's the priority we are thinking about and you should think about for the coming months. I think the two key levers there for us will be the return to growth. We have talked about revenues today, but we clearly see ourselves after the COVID pause to be back into EBITDA growth next year, and this will be a key driver for deleveraging and then also the IPO of Vantage.

And then probably, as you may remember, we have our mandatory convertible bonds approaching maturity first tranche in March, so we like to deal with that. So I think nothing surprising I would say compared to what we have always said, we would do focus on deleveraging.

On your second point on the MVNO deals in Italy, two deals, but two very different deals. VG in Italy is very small. Ethnic MVNO, while Poste is the second largest in the market if you take out Iliad are the first fewer MVNO. So very different level of materiality. We have started the migrations now. And of course, I cannot disclose precise number because these are private contracts, but in terms of phasing, I think you should expect Poste to reach run rate around the half year and sort of grow between now and then.

Nick Read -- Chief Executive Officer

James, and just one build on the dividend. I really feel that lowering our leverage to the lower end of the range will remove the discount. I feel we're getting on the dividend we already do pay given the dividend yield and the share price where it is. So I think it's an important consideration on the share price itself.

James Ratzer -- New Street -- Analyst

Okay. Thank you.

Operator

Thank you, James. Our next question comes from Jakob Bluestone from Credit Suisse. Jakob, you are online. Please go ahead. Jakob, we cannot hear you, if you can unmute yourself please.

Nick Read -- Chief Executive Officer

Jacob, you went...

Operator

There we go. We can hear you now. Thank you. Please go ahead.

Jakob Bluestone -- Credit Suisse -- Analyst

Great. Thank you. I had a question on your thoughts post the acquisition of DOCSIS by AMT. Could you maybe share a little bit what you think it means first of all for the [Indecipherable] towers market, but also, what is your current thinking longer-term about the impact from Drillisch given there clearly is more support coming from more independent tower companies, how do you think that will impact your retail business more long term in Germany as that becomes more of a reality. Thank you.

Nick Read -- Chief Executive Officer

Yeah. Look it was an interesting transaction and it did make me reflect. I think first of all, I feel two years ago, we made the right decision to stand up our towers as a separate business with a dedicated focus because we took the view that consolidation will play out in the European market that this would be an important asset in a sort of digital world going forward or digital society.

So number one, I'm very pleased that we did the action when we did, because now we're very much in a position to shape the market with Vantage Towers. I think it's well equipped to do that. Secondly the multiple, it was an attractive multiple wins. So a nice reference to have out there. And I think third for me is just -- it really highlighted just what an opportunity the German market is and I think Vantage Towers is very much positioned to do well in the German market.

So from my standpoint, these are all positives. I don't think it overly changed the competitive landscape. It was always going to stay these players where there already. I think us was having a dedicated team, dedicated focus, having the high quality assets and the ability and balance sheet to grow both organically and inorganically, I think, was really important to position at this moment in time.

So look, they will examine German opportunities, one and one will be one of those opportunities that they will actively review and participate in as you would expect, I think from a one-on-one perspective. Look, the good news out of the Telecom Draft Telecom Law was that there was still no mandatory obligation on national roaming, it's still to be commercially negotiated and of course, we are actively participating in that. So they have to decide to stand up the network and the cost associated with standing up that network. Clearly, their focus is going to be in the modern [Phonetic] areas. And I only have a certain amount of spectrum, so spectrum will not be the same. And so therefore the network quality will not be the same.

So I see them as participating in an area of the market, where that all second brands and other value brands today. And of course, we will have to adjust our strategy to compete on different value segments with our position, but I still think strategically you stand back on our own position and we have a truly unique differentiated gigabit network now covering 22 million homes already with DOCSIS 3.1 rolled out with high quality mobile network and you see the momentum in our most recent quarterly results.

Jakob Bluestone -- Credit Suisse -- Analyst

Thank you.

Operator

Thank you very much, Jakob. Our next question comes from Akhil Dattani at JPMorgan. Akhil, your line is open. Please go ahead.

Nick Read -- Chief Executive Officer

Great.

Akhil Dattani -- JPMorgan -- Analyst

Hi. Good morning. Just a quick question on the topic of in-market consolidation, please. And I guess, as I'm sure you've seen there's a lot of speculation on Spain, at the moment and the prospect of potential deals there. I'm sure there are limits in terms of what you can say, but I guess some high-level comments in regards to your thoughts around the organic versus inorganic options in the market. And the only specific question around is just to understand if you ever were to consider a deal, is consolidation a mandatory requirement for any transaction or would you consider other options, which could lead to deconsolidation like Inseego.

And then just to kind of follow-up question, which is a bit broader when we think about regulation, Nick, you already talked about regulatory issues in Europe. And to what extent does the UK consolidation decision from the European Parliament matter? How significant is that when we think about the prospects of board [Phonetic] consolidation in Europe?

Nick Read -- Chief Executive Officer

Okay. Akhil, I got the multi-level question. Look I'd say with Spain, I'm not going to get drawn into what has been long-running speculation. And I think you see from our results as Spanish business maintained its momentum. I think the repositioning, we did really did strengthen us both commercially, but also from a cost base perspective to allow us to compete at all the tiers. Now clearly, we have been still working on how can we improve returns further and you've got digitization, you've got network sharing those benefits still to come within our numbers within the Spanish business. I think if -- so I'm pleased with our organic execution.

Of course, we will always examine opportunities to enhance and strengthen our business. We've laid out three core principles for all of our assets. The first principle was, do we have local scale and then do we in addition leverage, does our asset leverage a regional scale. Spain, we are now number two on retail in the Spanish market. We have scale in Spain and it leverages a lot of the European regional scale. Going back to the question around our new operating model, very much driven benefits for the Spain.

I'd say secondly, I'll be sitting with a credible and actionable plan to get return on capital above market WACC. You've seen the progress we've made, we think there is additional benefits still to come. And I'd say the third is then are with the best custodians of the asset or can someone else drive more value? And of course, we've always said, we will look pragmatically at the situation -- of any situation in any market to ensure that we're doing the right things for our shareholders. So look, I don't eliminate anything, we evaluate, we consider as to what's the best for our shareholders. But importantly, understand the intrinsic value of the business in Spain and the value that's brought through the synergies that we have as part of the overall Group.

I'd say, then, secondly, just so that your point about the UK and regulation, actually this week alone, so Monday I spent an hour and half with Director-General [Indecipherable] the policy setting of EC. And yesterday, I was with GSMA and another eight CEOs through Europe talking to Commissioner Breton about importantly two things, one is, yeah, how do we improve returns in the telecom sector to encourage more private investments to match the public investments. So what are the things that would unleash investment? One of which was consolidation, at the Europe level, at the in-market level and at the infrastructure level. So discussing the importance and differences with those three as one of the aspects.

I'd say the second thing, we were talking about was just by the way that is one of several things that we feel are needed to be done. And the other important topic is where are the areas that the AEC should be investing with the member states. The EUR750 billion recovery funds and the 20% go into digital, of which I talked about the [Indecipherable] there is before things like rural coverage, open ran, things like digitization of SMEs and public sector. So we've been clear about the different areas.

I think I think we're making really good progress on the allocation of funds from the recovery to the right target areas. I think the commission is really trying to understand how these components like consolidation, collaboration more cooperation among the industry could be a better model to ultimately encourage more private investment. And so I would say some early days, so I think that's more important than per se the UK decision. I don't see the UK, it was incrementally positive, but it's more of this conversation that we're having is more shaping if you allow us to do the following things, this is what it's going to mean in terms of investment coming into the sector.

Akhil Dattani -- JPMorgan -- Analyst

That's super interesting. Thanks.

Operator

Thank you very much, Akhil. Our next question comes from John Karidis. John Karidis is from Numis. Please go ahead.

John Karidis -- Numis -- Analyst

Thank you. Good morning to you. If I may, I wanted to ask a question about unlimited tariffs simply because in the States, every quarter, Verizon and AT&T highlight the various net present value benefits were getting more of their our customers onto unlimited tariffs. So, I've got two parts to it. One, am I after some numbers, and two am I after some words. On the numbers, and I'm trying to understand in your top four markets, probably not Italy but the other three and what proportion of your contract customers are on unlimited now? And then secondly, what I'm trying to figure out is, if whether the intensity of competition for customers on unlimited tariffs varies meaningfully versus the intensity of competition for customers on meter tariffs? And I appreciate that's not the case in Spain, but could it be the case in other markets.

Nick Read -- Chief Executive Officer

Margherita, would you like to?

Margherita Della Valle -- Chief Financial Officer

I would go, yes. I'll start from the numbers, John. You asked what proportion of our customers are on unlimited. The overall number is around 10 million now and it's growing fast. In terms of offer slightly different positions across our main markets, unlimited is not a feature of the German market as you probably are already aware of. Across the other markets, about the third of the eligible base of postpaid contract has now taken up unlimited and these were from Spain, which is at the highest level of penetration of around 70% and then slightly lower in Italy and the UK.

However, I would say, Italy also growing very strongly. And for us in Italy, it's a great more for more initiatives that customers pick up and move on to. So good progression in terms of number quarter-after-quarter, and also in terms of ARPU, we have not put it on the slide in this quarter because we wanted a short presentation, but as you know, we do get ARPU uplifts whenever we move customers to unlimited.

From a competition perspective, I would say, the key feature of unlimited probably is customers want it. It's a very simple proposition for customers also in terms of interactions with us. You don't have deal problems. You don't have all the sort of questions that you can have with other offers. So it's a great simplification, which drives good net promoter score. And then we focus our activity more for a more in an unlimited environment, which is to move customers across tiers.

And from the lower end of 2 megabit per second to the upper end of unlimited. Overall, we really see this as the key driver of our acceleration in performance. We were talking at the beginning of the call about the fact that our underlying performance has kept accelerating throughout the year and in mobile unlimited has been a great driver for that.

John Karidis -- Numis -- Analyst

Thank you. Sorry.

Nick Read -- Chief Executive Officer

I would also -- just one last build, which is I think unlimited opens up a bit of a gateway. We talk about that we won a multi-product relationship with our customers, and therefore, to have an anchor of unlimited is helpful for then building other products and services on top of that, so in an ARPU accretive way to Margherita's point. So it's quickly -- it's just we would like to go as quickly as possible depending on market conditions but Margherita is correctly said, this -- we're driving ARPU accretive way and then having the speed tiers allowing us to then take the customer on a journey of ARPU accretion over the years to come as well as we roll out 5G etc.

John Karidis -- Numis -- Analyst

Thank you, both.

Operator

Thank you very much, John. Our final question comes from Andrew Lee at Goldman Sachs. Andrew, please go ahead.

Andrew Lee -- Goldman Sachs -- Analyst

Great. Good morning, everyone. I had a question, digital share's [Phonetic] showed strong commerciality in the quarter. So just wanted to ask about the efficiency improvements on those sales and specifically the digital sales as a proportion of the total. I think it's 26% in the quarter, is that is high as you would have hoped given lockdowns and how is the underlying trend going here. Is it better underlying than you would have expected the same, worse, any comments you can give on that would be really helpful. As a thought, just any comments to a similar question on churn and how you're seeing that go? Thank you.

Nick Read -- Chief Executive Officer

Margherita?

Margherita Della Valle -- Chief Financial Officer

Sure. Andrew, we do many underlying, I was trying to think how do we do the underlying on the digital share. I think it's quite difficult to split the impacts in a very analytical way, but we are pleased with the progression as you said 26%. I think the most notable results are in the UK, where it's now almost 40%. And with the iPhone 12 launch where we have been very successful in the UK recently, we have seen 55% of those sales happening online, which is an absolute record.

Clearly, to your point, part of this is driven by the lockdown, but if you look at the UK performance, we have sold 33% more iPhone 12s this year than when the latest iPhone launched a year ago despite the lockdown. And therefore, it's not just gain of share online, but it's also gain of absolutes. We see this as continuing, we mentioned that when COVID started, we immediately shutdown with all the markets to ensure that we have plans in place, to make sure that the benefits of COVID and the changes of customers' behavior would become locked in our own plans and this is what we are progressing toward at the moment.

Clearly, with benefits in terms of efficiency, I talked about the fact that we were seeing the opportunity now to see commissions in our P&L to stabilize and then start decreasing over time and this is a key element in driving this.

Andrew Lee -- Goldman Sachs -- Analyst

Are you surprised -- hasn't -- yeah, we've seen in retail across fundamental shift in how consumers go and buy their products elsewhere in other sectors, these price hasn't shifted more in telco?

Nick Read -- Chief Executive Officer

Well, I mean, I would say on -- retail has not been as aggressively impacted the second time through. And I would say that people still need to interact with retail for different activities. I think what -- if you look at what we're trying to do. We're trying to drive a standardized My Vodafone app, so capturing all of the important customer journeys from the service experience perspective. If we can capture everything you need and you can execute it through the app, that is great.

We also want to have Click and Collect into retail. So we are funding, so UK as an example, 230 stores are available and open for Click and Collect. And I think you're going to see us play more into that strategy moving forward more Click and Collect, more express, smaller formats with very specific purposes. So we talked about -- oh, I want to say 18 months, 12 months ago about reformatting our retail state and making it complementary toward digital first execution, so rather than saying we're retail first, and we've got digital.

We're saying no, no, we're digital first in all of that channels. And then retail complements the execution and you are seeing us pivot toward that in our current execution. So whether others are doing it, I can't comment, but that's definitely what we will be doing.

Margherita Della Valle -- Chief Financial Officer

Andrew, you also asked about churn, and which was just conscious, we didn't give you an answer of that. You have seen the numbers, any particular angle there?

Andrew Lee -- Goldman Sachs -- Analyst

It's just a similar question, would you expect to that come down more or are you happy with the underlying trends? I realize, I'm being greedy with the second -- a follow-up question there, so yeah.

Margherita Della Valle -- Chief Financial Officer

Yeah. No. Just to say, very happy with the trends. You may remember that when we gave our guidance in May for this year, we said we are not betting on structural reduction on volumes or churn because of COVID. And I think in reality, we have seen that this has not really happened in most markets. So the fact that we continue to see structural churn reduction 1% down year-on-year, year-to-date is positive.

And then when you look at it by driver, you can really see why it's structural, because unlimited have lower churn, convergence products have lower churn, Vodafone Business, we were talking about the recovery mobile, one of the drivers there is also lower churn. And it is supported by a leading NPS, which has been again the highest in business for a long time. So I think we will see this trend continuing as well into next year.

Operator

Thank you, Andrew. At this point, I would like to hand over to Nick for any closing remarks.

Nick Read -- Chief Executive Officer

Look, just wanted to say thank you very much for taking the time to join us. I'm glad to see so many of you are fit and strong and look -- returning to growth is a good positive for us. And now our focus as a management team is accelerating from this point onwards. We talked to many other reasons why we believe that will happen and the actions we're taking and we look forward to updating you on our full year results in May. Take care and stay safe.

Margherita Della Valle -- Chief Financial Officer

Bye.

Duration: 48 minutes

Call participants:

Nick Read -- Chief Executive Officer

Margherita Della Valle -- Chief Financial Officer

Maurice Patrick -- Barclays -- Analyst

Sam McHugh -- Exane -- Analyst

Georgios Ierodiaconou -- Citigroup -- Analyst

Carl Murdock-Smith -- Berenberg -- Analyst

Robert Grindle -- Deutsche Bank -- Analyst

Adam Fox-Rumley -- HSBC -- Analyst

James Ratzer -- New Street -- Analyst

Jakob Bluestone -- Credit Suisse -- Analyst

Akhil Dattani -- JPMorgan -- Analyst

John Karidis -- Numis -- Analyst

Andrew Lee -- Goldman Sachs -- Analyst

More VOD analysis

All earnings call transcripts