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Vodafone Ups 'Project Spring' Capex to $11B+

Ray Le Maistre
11/12/2013
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Vodafone has reaffirmed its commitment to strategic network investments by increasing the pot of money set aside for its "Project Spring" capital expenditure plan by £1 billion (US$1.59 billion).

When Vodafone Group plc announced it was selling its stake in Verizon Wireless for $130 billion, the mobile giant said it would invest £6 billion ($9.53 billion) of the proceeds in a three-year investment plan it called Project Spring. (See Vodafone Agrees to $130B Verizon Stake Sale.)

Now it has decided to invest even more in its network and supporting systems in an effort to capitalize on the fixed and mobile broadband services boom and has provide guidance on where it will spend the money and on what. News of the increased investment plan comes only a day after Deutsche Telekom AG announced plans to boost its European network infrastructure portfolio with the €546 million (US$731 million) acquisition of GTS Central Europe . (See DT Boosts Datacenter, SDN Strategy With Acquisition.)

Vodafone announced the details as part of its fiscal half-year financial update, which revealed ongoing tough conditions in Europe. The mobile operator's group services revenues, generated by more than 411 million mobile services customers worldwide, were down by 4.2 percent to £20 billion ($31.76 billion) for the six months to September 30, with a 14.9 percent year-on-year revenues decline in Southern Europe, to £4.49 billion ($7.13 billion), dragging the numbers down.

But with the macro-economic situation in Europe set to improve, the operator is determined to invest for the future and believes that its Project Spring investment program will give it "a unique opportunity to strengthen further our network and service differentiation." The "transition to 4G and unified communications, coupled with the economic outlook for Europe, makes this the right time for Vodafone to pursue further development and differentiation," the operator noted.

So how will Vodafone, currently the subject of M&A speculation, spend its cash? (See Euronews: Vodafone Shares up on AT&T Takeover Rumor.)

The Project Spring investment plan
The operator intends to spend £7 billion ($11.11 billion) during the next two financial years, a move it believes will "improve competitive performance and deliver attractive returns."

In Europe, Vodafone will invest about £3 billion ($4.76 billion) in expanding and strengthening its 3G coverage and rolling out 4G, "supported by single RAN and high capacity backhaul." It intends to deliver "the best voice and video experience, using small cells and Wi-Fi to differentiate our network performance."

In AMAP (Africa, Middle East and Asia/Pacific), around £1.5 billion ($2.38 billion) will be pumped into the extension of 3G coverage in major cities and "key regions to provide wider voice coverage and the best data experience."

The operator, which recently completed the acquisition of German cable operator Kabel Deutschland Holding AG, is also investing in its fixed access networks in these regions. About £1 billion will be spent on DSL and fiber access networks in Europe, while a "fiber footprint" will be established in "key business areas" across AMAP to support provide fixed-plus-mobile packages. (See Euronews: Vodafone Strikes €7.7B Kabel Deal.)

Vodafone has also set aside £500 million ($794 million) to invest in various systems and assets to support its Enterprise services business, including machine-to-machine (M2M) capabilities, IP VPN coverage, datacenter hosting, and "traffic routing systems to build our carrier services business."

And last but certainly not least, the operator is pumping £1 billion into its customer experience management (CEM) capabilities. In addition to improving its online and mCare mobile app systems, Vodafone will accelerate its deployment of mobile payment systems in AMAP and some European markets and introduce "new and standardised systems will simplify Vodafone's operations and improve the experience for our customers."

Time to invest?
Vodafone may be setting a trend by increasing its network and Service Provider Information Technology (SPIT) investments. According to a new report on the European telecom sector from ratings agency Moody's Investors Service , the region's operators are expected to invest more in 2014 on their mobile and fixed broadband network upgrades, with some forced to react to their larger rival. "Vodafone's investment plans may force other European operators to follow suit and increase network spending," notes Moody's, though few will have access to Vodafone's resources.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
11/13/2013 | 10:35:19 AM
Re: What would Vodafone have done without VZON proceeds?
One of the lessons from AT&T and Verizon is that you need to invest consistently in the network. Flattish is good, as long as its enough.
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
11/13/2013 | 10:33:31 AM
Re: What would Vodafone have done without VZON proceeds?
Writing as a Vodafone UK customer, it's about time!

Service has been average-to-poor for the past year or two in London. The company has been riding on its brand value for years. It's approach to network investment seems to have been "do just enough". Thankfully it has now realised the London network (largest city in Europe) is not up to scratch and has allocated additional investment to fix it.

Writing as someone who has at least some pension invested in Vodafone (like nearly all Brits) they've done a good job with the dividend payments and the VZW sale. This big new investment over the next two years will take a while to turn into revenue. Let's hope they get it right.
Ray@LR
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[email protected],
User Rank: Blogger
11/13/2013 | 5:35:33 AM
Re: What would Vodafone have done without VZON proceeds?
If only more operators had access to the same level of funds.... I'm not sure we will ever so prolonged bom times again in telco infrastructure spending, just blips on an otherwise flattish line.
DOShea
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DOShea,
User Rank: Blogger
11/12/2013 | 9:01:56 AM
Re: What would Vodafone have done without VZON proceeds?
If more operators follow suit, it will give the vendor community much more hope for next year than many vendors currently have for the current quarter.
Ray@LR
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[email protected],
User Rank: Blogger
11/12/2013 | 7:28:20 AM
What would Vodafone have done without VZON proceeds?
I wonder what Vodafone would be doing if it didn't have the massive windfall fro teh sale of its VZON Wireless stake?

But that's neither here nor there. It does and it's trying to gain a competitive advantage through investment. 

That's got to be good news for the vendor community - I'm sure Huawei is pretty pleased at the prospects...
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