Vodafone adds £1bn to plans for future investment

VODAFONE has topped up its investment plans by another £1bn as it reaps the benefit from one of the biggest corporate deals in history.

The mobile phone giant previously pledged to spend £6bn under Project Spring, with initiatives including the roll-out of its 4G network to ensure 90 per cent coverage in its five main European markets by 2017.

But with the £84bn sale of its share of Verizon Wireless under its belt, the company yesterday announced investment will reach £7bn by March 2016, as it looks to build a stronger network for customers.

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Shareholders have already been told that the company will return £54bn to them as a result of the Verizon deal in the United States.

The investment update came as the company highlighted the impact of difficult trading conditions in Europe, with its service revenues down by 4.9 per cent on an underlying basis in the six months to September 30.

It has been squeezed by increasing price competition in its major European markets of Germany, the Netherlands and the UK, where service revenues decreased by 4.4 per cent.

Adjusted operating profits for the group were 8.3 per cent lower at £5.7bn but Vodafone said it remained on track to meet its full-year forecasts.

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Chief executive Vittorio Colao described trading conditions in Europe as “very tough” but said he was encouraged by signs of economic recovery and potential regulatory support for greater industry investment and consolidation.

“We expect that during the next three to five years, Europe will definitely improve,” Mr Colao added. “Therefore, we prefer to have a stronger, more performing and more differentiated operation by then so that we can come out at a higher speed than everybody else.”

Shares were more than 1 per cent higher following the results.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “The immediate picture is cloudy, but Vodafone remains a longer term play.”

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He noted that the company was positioning itself for the eventual European economic recovery – through the recent purchase of Kabel Deutschland – and continues to benefit from increasing penetration and data usage within emerging markets.

And Vodafone’s increased investment in network and infrastructure spend should reap longer term rewards whilst also stepping up the pressure on rivals, he added.