Thursday 19 October 2017

Vodafone to invest £7bn as trading slumps

Vodafone
Vodafone

Britain's Vodafone plans to spend £7bn on its networks following the sale of its US business, ramping up investment after it posted a record fall in quarterly organic service revenue.

The world's second-largest mobile operator, which agreed a deal in September to sell its U.S arm to Verizon Communications for $130bn, said it would spend £7bn by March 2016 to improve its networks in a bid to set it apart from rivals.

The group announced the details of its "Project Spring" spending programme as it reported first-half results showing the pressures across the group.

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Organic service revenue - its key ongoing revenue measurement which strips out the impact of one-off costs such as handset sales - was down 4.9pc in the second quarter due to very weak trading in Europe.

That was worse than the 3.5pc fall recorded in the first quarter and well below the last record fall of 4.2pc in the fourth quarter.

"Whilst trading conditions in Europe remain very tough at present, we are encouraged by the forecast return to economic growth over the next two years," Chief Executive Vittorio Colao said, in reference to general market indicators.

The investment, which is likely to prompt rivals to respond, is designed to improve network quality across Vodafone's footprint, to meet the demand of consumers who want to access the internet on the go via smartphones and tablets.

It plans to invest around £3bn in Europe, to improve the speed of its mobile networks. Some £1.5bn pounds will be used to extend coverage across major cities in its emerging markets. It will also spend on fixed networks and its corporate division.

Overall, first-half core earnings were down 4.1pc to £6.6bn, compared with a company-compiled estimate of 6.4 billion pounds. That was off revenues of £22bn pounds, down 3.2pc on an organic basis.

"The overall performance of the Group in the first half of the current financial year has been in line with our expectations," the company said on Tuesday.

"We are therefore on target to deliver adjusted operating profit of around £5bn and free cash flow in the £4.5bn- £5bn pounds range."

 

Reuters

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