Vodafone Group Plc (VOD)’s sale of its Verizon Wireless stake will usher in what Chief Executive Officer Vittorio Colao called a new chapter focused on expanding services and strengthening the company’s presence where it already exists.
Vodafone, the world’s second-biggest mobile-phone carrier, dubbed it Project Spring, and said it’ll use about $10 billion from the sale for upgrades, giving it faster, fourth-generation wireless coverage across 90 percent of its five biggest markets in Europe by 2017, Colao said in a conference call today.
“Now is the time for Vodafone to step up its investment and move ahead of the pack,” Colao said. “We expect the number of people using video on their smartphones to double over the next three years. We see average data consumption on 4G, where we have 4G working, running at twice the level of 3G.”
Vodafone’s $130 billion sale of its 45 percent stake in Verizon Wireless to partner Verizon Communications Inc. (VZ) will leave it with about $30 billion in cash. The deal caps Colao’s efforts to streamline the Newbury, England-based company, getting it out of partnerships where it doesn’t have a controlling interest to focus on growth in emerging markets and boosting data and unified services -- which he called chapters one and two of Vodafone’s evolution in a call yesterday.
Project Spring’s goal is to add fiber-optic cables, 3G and 4G infrastructure in Europe and select, high-density markets in places like India and Africa over three years. About half of the investment will go to speed up 4G deployment, add backhaul to boost wireless network capacity, and increase the capacity of 3G coverage, Vodafone said today.
“This is definitely a positive development for Vodacom and will further enhance our competitive positioning,” Vodacom Group Ltd. (VOD) CEO Shameel Joosub said in an e-mail. Vodafone owns 65 percent of the Johannesburg-based wireless company.
Revenue from Vodafone’s service plans has declined for the past four quarters as customers in strained European economies cut spending and high penetration rates in countries where mobile devices outnumber people make new sales difficult.
Vodafone has cut jobs and expenses on the continent to support profit and wrote down 7.7 billion pounds ($12 billion) on operations in Spain and Italy last fiscal year as southern Europe’s outlook worsened and competition rose.
In yesterday’s statement on the deal, Vodafone restated its adjusted operating profit forecast for 2014 to 5 billion pounds and said it sees free cash flow of 4.5 billion pounds to 5 billion pounds after the transaction.
Colao has been adding Internet and television services to his mobile packages to add customers and increase bills. He bought Kabel Deutschland Holding AG (KD8), Germany’s biggest cable television provider, in June.
Vodafone fell 7.6 pence, or 3.5 percent, to 205.7 pence in London trading. The shares have gained 33 percent this year.
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