Vodafone to Boost Capex 58 Percent, Fast, to Reverse Revenue Trend

By Gary Kim November 12, 2013

It might be one thing for a service provider executive to indicate confidence about reversing a major revenue decline. It is another thing when such an executive boosts capital investment broadly, across mobile and fixed networks, to underpin a return to revenue growth.

And that is precisely what Vodafone now will do. By making those investments, Vodafone also is making a choice about where revenue growth prospects are highest.

It is worth noting that Vodafone recently "voted" to exit the U.S. market.

U.S. mobile service providers have opposing views on prospects in the U.S. market compared to others in Europe. Verizon Wireless is betting almost entirely on U.S. growth, and Sprint and T-Mobile US have made major investments in the U.S. market as well.

AT&T, meanwhile, is talking up prospects for a major investment in Europe. Vodafone, which sold its minority stake in Verizon Wireless to Verizon Communications, seems to be betting on brighter prospects for Europe than in the United States.

And make no mistake, Vodafone appears to believe not only that it can reverse the recent years slide in mobile revenue, but also can makes gains in fixed network services in its European markets as well.

A sign of that confidence is the new commitment of £7 billion in capital investment over a two year period, substantially to boost capabilities of its European mobile and fixed network operations.

To put that into context, Vodafone originally had planned to spend about £12 billion in capital investment over a three year period starting in 2014. So Vodafone is boosting near term capital investment some 58 percent over two years.

As you would guess, a substantial portion of the £12 billion program will increase fourth generation Long Term Evolution sites from 12,000 in 2013 to 89,000 by the end of 2015.

The new “Project Spring:” spending will include £3 billion for Vodafone’s European markets, where the investments will be used to add new 2G, 3G, small cell and Wi-Fi sites.

Markets in Africa, Middle East and Asia Pacific will get investment of £1.5 billion, including £1 billion for fixed networks in Europe (Italy, Portugal) and India.

Investment in machine-to-machine services will be extended to 75 markets, while the Vodafone IP-VPN expands to 11 new markets (£500 million worth of investment).

Also, £1 billion is set aside for redesigning 6,500 retail outlets.

All of those investments are based on a belief that Vodafone can generate new revenue from existing and new services.

The point is that Vodafone has concluded it can reverse a several-year revenue slide if it invests in its current and next generation networks. It would be hugely significant if Vodafone can, in fact, reverse its revenue trend.

Edited by Ryan Sartor

Contributing Editor

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