Managing Organisation Effectiveness within Vodafone Europe The Organisation

Managing Organisation Effectiveness within Vodafone Europe The ‘Organisation Efficiency Review’ CRF Presentation 2 March 2011 C 3 – Company Confidential

Overview 1. Vodafone Context - The origins of the ‘Organisation Effectiveness Review’ (OER) 2. The ‘OER’ structure (I) Review against the Vodafone Organisation Design principles (II) Management efficiency KPI’s (III) General ‘Organisation efficiency’ KPI’s (IV) The Opco ‘Organisation health template’ 3. So how does the overall process work ? 4. Benefits so far 5. Key learnings 2 C 3 – Company Confidential December 2009

Vodafone in context… § Established in 1985, now Global leader in mobile telecommunications - c. £ 45 bn annual service revenue - c. 35% operating profit - c. 90, 000 global workforce § Global footprint split into 2 Regions: § Emerging Markets Region: India, South Africa, Egypt, Australia, NZ § Europe Region: Still represents c. 75% of global revenue/assets § The VF Europe Region comprises 14 Operating Companies in national markets across Central and Western Europe. § The ‘big four’: UK, Germany, Italy, Spain (SR £ 5 -7 bn) § W Europe Medium: Portugal, Ireland, NL, Greece (SR c. £ 1 bn) § E Europe Medium: Turkey (£ 3 bn) Czech, Hungary, Rumania (£ 600 m-1 bn) § Small: Malta, Albania ( £ 300 m) 3 C 3 – Company Confidential December 2009

The origins of the ‘Organisation Efficiency Review’ § Europe now a very mature market still in recession - Mobile telco market reduced by c. 10% over past 3 years - Vodafone Service Revenue reduced in line, leading to a strong focus on Operating Expenditure to sustain profitability § Employment cost typically represents c. 40% of overall OPEX - Initially headcount/FTE’s became the classic target, but unsophisticated and unfair, given our varying opco sourcing models § Led to the creation of the OER process, the aim of which was to; (i) Evaluate all Europe opcos against a common suite of organisation efficiency/effectiveness indicators (ii) Establish relative internal best practice and give it visibility (iii) Create organisation efficiency targets/actions bespoke to each opco to drive year on year operational efficiency improvement 4 C 3 – Company Confidential December 2009

Organisation Effectiveness Review (OER) structure (I) Organisation design review - Review Opco structure against the ’mature market OD principles’ (II) Review of management organisation efficiency - Opco Management Spans and Layers - Management Ratios (III) Review of General organisation efficiency/effectiveness KPI’s - OPEX as % Service Revenue - Total Employment Costs as % OPEX - Total Employment Costs as % Service Revenue - Distribution of Employment Costs across the organisation - Opco Sourcing model: In house versus outsourcing …. . Narrowed down from a list of thousands ! (IV) Completion of the overall Opco ‘Organisation health’ template NB: Employment Costs = Payroll, Contractors and Outsourced people costs 5 C 3 – Company Confidential December 2009

(I) The Organisation Design Review 6 C 3 – Company Confidential December 2009

2007 “Mature Market” Organisation Design Principles Commercial • Consumer and Enterprise Business Units will have full P&L accountability and report directly to the CEO • Customer Operations should be a shared service function residing outside of CBU and EBU • Online and all directly owned resources should report direct to the CEO • Terminals should have dotted line into CBU with a solid line to Group Terminals and provide services across both CBU/ EBU • Brand lead should either sit as direct report to CEO or CBU Technology • Hub CTO has a dotted line into CEO with a solid line into the Group CTO, Spoke CTO has a dotted line into CEO with a solid line into Hub CTO Support Functions • Corporate Affairs and Legal and Regulatory should be stand alone functions reporting to the CEO • A combined Strategy, Wholesale and Business Improvement Function should exist as a single unit reporting to the CEO • Where the CEO has a large span of control, the Strategy, Wholesale and BI function could be combined as a single unit with Legal, Regulatory and FRS • The HR function should hold responsibility for Internal Communications, Health Safety & Wellbeing, and Property • Finance should have dotted line responsibility for Internal Audit and SCM with a solid line to Group SCM/Audit General • For every group programme, there must be an identifiable single contact within the Local Market organisation reporting directly into a Local Market SLT member e. g. CVM, 7 C 3 – Company Confidential December 2009

2007 ‘Mature Market’ Management Team OD principles Europe CEO CTO (Hub/Spoke CEO Customer Operations CBU EBU • P+L for Cons • P+L for Ent • Customer business • Cons product roadmap • Go to marketing • Cons sales channels (retail etc. ) • Brand Customer Experience business • Ent product roadmap • Go to marketing • Ent sales channels Operations • Customer Value Management Strategy and Wholesale HRD CTO • Strategy • Wholesale/ • HR • Internal • Network • IS MVNO • Business Improvement Comms • Property • HS&W CFO Legal and Regulatory • Decision • Commercial • External Support • Finance Operations Law • Regulatory • FRS Comms • CSR • Internal Audit • SCM • VIS • Terminals Solid line reporting into Group 8 C 3 – Company Confidential Corporate Affairs December 2009 Online • Online • VIS if not CBU

(II) The Management Organisation Review - Local Market Management Spans and Layers - Management Ratios 9 C 3 – Company Confidential December 2009

Vodafone Management Spans and layers policy guidelines Generic principles Governance/Support Functions Commercial and Customer Operations Technology Target = 6 Target = 8 Target = 10 Management Spans Min = 4 Max = 8 Min = 6 Max =10 Min = 8 Max 15 (Average span of control) No “one on one” or “two on one” reporting Management Layers 6 layers 7 layers 6 layers (A-F Band roles as %of total roles. 5 -7% target) c. 30% c. 7% c. 5% Single Contributors No A-D single contributors, E Band by exception (maximum no. inc. CEO) Banding Ratios 10 C 3 – Company Confidential December 2009

Management ‘Layers’ by function: Europe large markets Opco A Opco B Opco C Opco D Layers: Observations • Technology: Opco’s A and B have 7 layers, against 6 in Opco’s D and C. Main driver for a 7 th layer is the number of FTEs in the area. • Consumer: Opco’s A, B, C have reduced one layer. 7 th layer in Opco D associated to the high number of own shops. • Business: Opco D the only country with 7 layers, plan in place to adhere layers to the target, upon full integration of a recent acquisition. • Customer Operations: plans to reduce 7 th layer in Opco D (Enterprise Customer Services) by June 2011. • Support: in general, Support Functions have 5 layers. Finance Planning and Control generates a 6 th layer in Finance. 7 th layer in Opco B located in HR, under the Training Unit. 11 C 3 – Company Confidential December 2009

Management ‘spans’ by function: Europe large markets Opco A Opco B Opco C Opco D Spans: Observations • Average Manager Span within lean organisation guidelines for all large local markets • All improved average manager spans since OER Nov 09 with the exception of Opco C with a slight decrease • Remarkable improvement in Opco D previously under guidelines in several areas • Outstanding improvement in Opco A having reduced significantly the population of managers in bands F and G in Technology, Consumer and Customer Operations. 12 C 3 – Company Confidential December 2009

Management ratios as % workforce: all Europe markets …target range 5 -6% but sourcing model impacts Opco A Opco B Opco C Opco D Opco E Opco F Opco G Opco H Opco I Opco J Opco K Opco L Large Markets • Highest percentage of A-F population in Opco C with 10, 9%, lowest in Opco D with 4. 6% • E band: highest number in Opco B with 141, lowest in Opco D with 76 • F Band: highest number in Opco A with 489, lowest in Opco D with 307 Medium Markets • Highest percentage of A-F population in Opco F with 10, 0%, lowest in Opco J with 4, 5% • E band: highest number in Opco L with 44, lowest in Opco F with 25 • F Band: highest number in Opco G with 179, lowest in Opco K with 58 13 Notes: • Includes verticals C 3 – Company Confidential December 2009 Opco M Opco N

Management ratios: all Europe markets shown another way… Opco A Opco B Opco C Opco D Opco E Opco F Opco G Opco H Opco I Opco J Opco K Opco L Opco M Opco N F Opco A 14 Notes: • Includes verticals Opco B Opco C Opco D Opco E Opco F C 3 – Company Confidential Opco I Opco J Opco K December 2009 Opco L Opco M Opco N

(III) General ‘Organisation efficiency’ KPI’s - OPEX as % Service Revenue - Employment Costs as % OPEX - Employment Costs as % service Revenue - Distribution of Employment Costs - Opco Sourcing model 15 C 3 – Company Confidential December 2009

Opex as % of Service Revenue Op Ex % of Service Revenue 40. 0% 36. 5% 32. 8% 31. 2% 30. 0% 27. 9% 26. 2%25. 5% 22. 3% 20. 0% 30. 5% 29. 6% 20. 1% 25. 1% 24. 8% 24. 1% 22. 9% 20. 1%20. 6% 20. 5%20. 2% 20. 8% 29. 2%28. 8% 26. 2% 23. 3% 24. 3% 21. 2% 18. 9%19. 6% 10. 0% N co Op M co Op L co Op K Op co J Op co I co Op H co Op G co Op F co Op E co Op co D Op co C Op B co Op Op co A 0. 0% 5+7 FY 11 Actual FY 10 • Large markets: all keep a stable ratio around 20%. • Medium markets: in the case of Opco’s E, J and K, percentage around 30% due to a significant decrease in Service Revenues. Opco I is in expansion phase with high expenditures in network and commercial. Opco G best performer, has been able to adequate cost structure while improve revenues significantly. 16 C 3 – Company Confidential December 2009

Employment Costs as % of OPEX Employment Costs % of Op Ex 60. 0% 54. 8% 52. 5% 50. 0% 42. 1%42. 0% 40. 6% 40. 0% 33. 4% 30. 7% 30. 0% 49. 2% 47. 5% 47. 2% 43. 9% 43. 7% 41. 3% 38. 9% 39. 5% 45. 0%44. 5% 42. 2% 41. 1% 40. 8% 39. 4% 35. 4% 33. 6% 29. 3% 27. 8% 19. 1% 18. 9% 20. 0% 10. 0% N co Op M co Op L co Op K co Op J co Op I co Op H co Op G co Op F co Op E co Op co D Op co C Op B co Op Op co A 0. 0% 5+7 FY 11 Actual FY 10 Overall Europe average of EC as % OPEX 45% driven by predominantly by Opco A ratio • Large markets: High correlation with EC as % SR • Medium markets: Opco’s E and I low. Opco’s G, H, J and K over 40%, the first two decreasing and the last two increasing against YE 09/10 C 3 – Company Confidential 17 December 2009

Employment Cost as % of Service Revenue by Opco Employment Costs % of Service Revenue 14. 0% 12. 9% 12. 0% 11. 7% 11. 0% 10. 8% 10. 2%10. 4% 10. 0% 9. 4% 11. 2% 11. 7% 11. 0% 9. 2% 9. 4% 9. 1% 8. 5% 8. 6% 8. 3% 8. 2% 12. 4% 9. 9% 9. 6% 10. 2% 8. 8% 8. 3% 7. 8% 8. 0% 6. 0% 4. 6% 4. 0% N co Op M co Op L co Op K co Op J co Op I co Op H co Op G co Op F co Op E co Op co D Op co C Op B co Op Op co - A 2. 0% 5+7 FY 11 Actual FY 10 Employments Costs as % of Service Revenue 9. 2% • Large markets: Scale typically helps. Opco D and Opco A highest reduction against YE 09 -10 (0, 8% and 0, 7% respectively) • Medium markets: Opco G best performing with 0, 9% reduction. Opco’s J, K, and N worst performing. Deterioration in Opco’s J, C 3 – Company Confidential E, L, and K. 18 December 2009

EC as a % SR excluding Sales and Distribution Costs Employment Costs % of Service Revenue (Excluding Sales & Distribution) 12. 0% 10. 8% 10. 5% 10. 0% 8. 5% 8. 9% 8. 0% 8. 8% 7. 9% 7. 4% 7. 6% 6. 5% 6. 7% 7. 2% 7. 0% 7. 3% 9. 8% 9. 4% 8. 7% 9. 8% 9. 7% 9. 2% 8. 4% 7. 8% 5. 9% 6. 0% 6. 4% 6. 0% 5. 2% 3. 9% 4. 0% 3. 5% N co Op M Op co L co Op K co Op J co Op I co Op H co Op G co Op F co Op E co Op co D Op co C Op B co Op Op co - A 2. 0% Employee cost (excl S&D) % Service Revenue 5+7 FY 11 Employee cost (excl S&D) % Service Revenue Actual FY 10 • Large markets: overall relative performance similar but Opco A and Opco D close the gap with Opco B and Opco C significantly • Medium markets: Opco’s J and K closer to other medium Opco’s. Opco H increases gap with the other medium. 19 C 3 – Company Confidential December 2009

Distribution of Employment Costs Commercial Employment Costs % of Total Employment Costs Technology Employment Costs % Total Employment Costs 80. 0% 69. 9% 70. 0% 62. 7% 59. 8% 59. 5% 55. 0% 50. 0% 45. 0% 40. 0% 67. 9% 66. 8% 57. 7% 56. 7% 60. 0% 56. 9% 52. 1% 51. 7% 59. 9% 56. 5% 53. 8% 52. 9% 49. 7% 49. 6% 50. 0% 61. 5% 60. 5% 59. 8% 37. 1% 34. 4% 45. 3% 43. 2% 41. 9% 40. 6% 43. 1% 40. 7% 40. 0% 47. 5% 47. 0% 33. 3% 32. 9% 30. 0% 20. 0% 35. 0% 32. 3% 31. 7% 27. 6% 27. 4% 30. 0% 27. 2% 26. 9% 26. 7% 24. 6% 25. 0% 21. 7% 21. 2% 20. 0% 15. 0% 33. 0% 31. 9% 29. 1% 28. 1% 26. 1% 24. 8% 28. 8% 26. 1% 5+7 FY 11 Actual FY 10 Support Function Employment Costs % of Total Employment Costs Overall Europe balance driving future targets… 30. 0% 26. 8% 25. 0% 24. 3% 23. 7% 22. 8% 20. 6% 20. 0% 17. 6% 17. 2% 16. 7% 16. 3% 9. 0% 9. 8% 9. 5% 13. 6% 12. 7% 11. 4% • Technology – 28. 8% 17. 0% 16. 6% • Support Functions – 11. 3%. . 14. 9% 14. 4% 15. 0% 12. 6% 12. 5% 11. 6% 12. 1% 11. 9% • Large markets: 9. 3% 7. 5% - Opco’s C, D better overall profiles than Opco’s A, B 4. 6% 5. 0% • Commercial – 59. 9% • Medium markets: co N Op M Op co co L Op K Op co co J Op co I Op co H Op G Op co co F Op co E Op D Op co co C Op B co Op Op co A 0. 0% - Technology costs in Opco’s I and K % high - Support function costs Opco’s I, E and K high. 5+7 FY 11 Actual FY 10 20 C 3 – Company Confidential December 2009 Op co N co M Op Op Op co L co K J co Op I Op co H co G Op F co Op Op co E co D Op Op co C B Op co Op Op co N co M Op Op co L co K Op Op co J I Op co Op Op co H co G F co Op Op co E co D Op Op co C B Op co A 0. 0% co A 10. 0% 5. 0% 0. 0% 10. 0% 30. 1% 28. 9% 25. 7% 24. 8%

Distribution of Employment costs shown another way… Local Employment Costs Distribution 5+7 FY 11 (£m) Opco O - 11 72 Opco P Opco I Opco Q 154 44 50 23 Opco K 19 43 2 4 Opco R Opco H 0 7 13 Opco E 5 2 17 Opco N Opco S 3 163 2 Opco T 16 63 128 Opco M * 0 2 1 2 0 16 13 - 10 38 5 26 47 25 53 489 Egypt 41 Opco F 4 15 44 Opco A 2 15 28 Opco J - 13 23 4 10 277 77 17 56 1 11 26 16 3 13 Opco B 377 Opco G 82 36 16 3 Opco L 36 16 7 2 287 Opco D 58 88 25% 50% Commercial 21 60 99 278 Opco C 0% 174 2 Technology 75% Support Functions Share Based Payments C 3 – Company Confidential December 2009 20 13 39 11 100%

Opco Sourcing models Insourcing / Outsourcing 100. 0% 90. 0% 4. 1% 8. 4% 12. 8% 8. 4% 0. 3% 15. 4% 8. 0% 3. 5% 26. 7% 29. 1% 80. 0% 12. 2% 15. 1% 35. 0% 43. 4% 70. 0% 60. 0% 50. 0% 40. 0% 95. 9% 87. 2% 87. 8% 84. 9% 91. 6% 84. 6% 92. 0% 96. 5% 73. 3% 70. 9% 30. 0% 99. 7% 91. 6% 65. 0% 56. 6% 20. 0% 5+7 FY 11 Insourced 5+7 FY 11 Outsourced Overall 22. 3% of Vodafone Europe Employment Costs are outsourced • Large markets: strong correlation between extent of outsourcing and overall EC performance • Medium markets: large variation in sourcing models driven by maturity of outsourcing options. 22 C 3 – Company Confidential December 2009 N co Op M co Op L co Op K co Op J co Op I co Op H co Op G co Op F co Op E co Op co D Op co C Op B co Op Op co 0. 0% A 10. 0%

(IV) The Local Market ‘Health assessment’ template C 3 – Company Confidential

Example: Local Market “Health Assessment” template: Opco A 11/12 Budget Considerations Strengths • Organisation Model broadly aligned to the ‘mature market OD principles’ • On track to deliver 10/11 Employment cost reduction target • On track to deliver FTE reduction target • Field Maintenance outsourcing completed • Continue traction on EC savings to achieve another reduction of c. ? m by YE 11/12 • Explore and define actions to target the internal FTE number to ? by YE 11/12 • 100 civil servants transferred out of the company • Forced/managed attrition programme on track • Fixed Line integration brought significant management cost savings: • Management A-F is now 5. 3% of population • Reduction of 110 band A-F since last OER exercise • Good progress on spans and layers Weaknesses • Still the highest Employment Costs as % Service Revenue of the large markets at 11. 0%, although 0, 7% reduction 5+7 vs YE 10 • Employment costs as % Opex increased in 2. 7% 5+7 vs YE 10 • Distribution of Employment Cost lowest Commercial focus and highest Technology focus of the big four • Still further FTE efficiency opportunities • EC and FTE’s in Finance and HR still high • Technology still looks heavy • Customer Operations costs still high. 100% outbound and 75% inbound calls outsourced, but still 3, 650 internal FTE’s 24 C 3 – Company Confidential December 2009

3. So how does the overall process work ? C 3 – Company Confidential

Organisation Effectiveness Review: the overall process OCTOBER - DECEMBER JANUARY- MARCH PHASE 1 PHASE 2 PHASE 3 “Data collection and analysis” “Data review and action planning” “Baking targets into budgets and People Plans” OPCO ‘OER’ TEMPLATES COMPLETED OPCO OER’S (x 14) “DB” ANNUAL BUDGET CREATION Europe CEO / HRD with Opco CEO / HRD Ø OD alignment Ø Review KPI’s Ø Agree action planning REGIONAL CONSOLIDATION OF OPCO OER DATA Ø KPI analysis with Europe wide results transparency 26 Ø “Initial” EC targets inserted in Opco pre- budget guidance Ø Opco DB submissions (including EC and FTE targets) reviewed and approved GROUP CEO OER OPCO ANNUAL PEOPLE PLANNING Group CEO / HRD With Europe CEO/ HRD Ø Visibility of Opco actions Ø Regional / global actions Ø Establish “Initial” DB employment cost targets C 3 – Company Confidential Ø OER actions baked into overall Opco “People Plans” within the “Organisation and Change touch point” December 2009

4. OER outcomes to date… C 3 – Company Confidential

Qualitative benefits so far… • Drives alignment to the Vodafone OD Principles • Eliminating organisational complexity • Clearer line of sight between Vodafone Group organisation and the Operating Companies • Provides internal reference point for OE benchmarking and OD practice sharing which is enabling efficiency improvement. • Enables intelligent OE target setting rather than ‘FTE focused’ targets • Provides a platform for HR to drive the OD and organisational efficiency agenda. • Positive effect on line management mindset on organisational efficiency 28 C 3 – Company Confidential December 2009

Quantitative benefits so far… Employment costs and FTEs • Annual employment costs reduced by c. £ 275 m over 2 years • Employment Costs as a % of Service Revenue improved from 10. 1% to 9. 2% • FTE’s reduced by 12% Management efficiency gains • Management to workforce ratio improved by 1. 5% to 6. 2% • Layers: 5/6 layers now the norm from CEO to frontline staff • Spans: Almost complete compliance against our span guidelines • Single contributors: All A-E Band single contributors eliminated 29 C 3 – Company Confidential December 2009

5. Key learnings… C 3 – Company Confidential

Key learnings… • Gaining Group CEO advocacy really helped ! • Opco Comparability drives tool ‘usefulness’ • Results transparency drives best practice…avoiding judgements a key enabler • Tool development • Fewer more impactful measures • Inclusive approach to tool development • Institutionalise the process • Must be linked to business outcomes and consequences • HR capability key and develops with experience/depth of knowledge . . . as does that of the line managers and their HR input/support expectations ! • The process provokes questions and inevitably further OD interventions e. g. Outsourcing review, Support Functions structure review, COP’s role expansion ? 31 C 3 – Company Confidential December 2009

Questions/discussion… C 3 – Company Confidential