Vodafone increases network investments to give its European fortunes a boost

Vodafone's service revenue in Europe is dropping, but the company expects a return to economic growth there

Vodafone now plans to invest £7 billion (US$11.1 billion) in network and service improvements to turn around its sagging service revenue in Europe, the mobile operator said as it announced its results for six months to Sept. 30.

Vodafone's group revenue for the six months to Sept. 30 was £22 billion, down 3.2 percent year on year excluding the effects of acquisitions, discontinued operations and exchange rate fluctuations. Net income was £18 billion, thanks in large part to a £14.2 billion income tax credit. For the corresponding period a year earlier, Vodafone reported a £2 billion net loss.

In general, Vodafone performed well in emerging countries, driven a higher smartphone penetration and data usage, but the situation in Europe remained very tough, it said in a statement. For example, Vodafone's service revenue in Italy dropped by 16.7 percent excluding acquisitions, discontinued operations and exchange rate fluctuations, and in Spain it dropped by 13.4 percent on the same basis, while the service revenue in India grew by 13.5 percent.

However, Vodafone was encouraged by an expected return to economic growth in Europe over the next two years. The economic outlook for Europe, coupled with the transition to 4G, makes this the right time for Vodafone to pursue further development and differentiation, it said.

Vodafone's plan is to invest £7 billion in mobile and fixed networks over the next two financial years. The operator will use the funds to accelerate its roll out of LTE. Small cells and Wi-Fi will also be used to improve network performance, Vodafone said. The operator will increase its DSL and fiber footprint in Europe, and in the enterprise sector it will invest in a build-out of its hosting capabilities. Just like many other operators it is investing in machine-to-machine services, as well.

The last six months have been a very busy time for Vodafone, which closed the acquisition of Kabel Deutschland and announced it was selling its share in Verizon Wireless for US$130 billion.

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Mikael Ricknäs

IDG News Service
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