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Vodafone spend dents outlook

Tuesday, May 20, 2014 - 02:19

May 20 - Britain's Vodafone says next year's earnings will be hit by urgent investment in its network as it reports a 6.6 billion-pound dent to its 2014 results. David Pollard looks at the struggles it's having in Europe's tough market.

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We're text mad - but we're making fewer voice calls than before. The reason: we've been trying to save money through recession. That and price cuts imposed by regulators and tougher competition across Europe is hitting Vodafone badly. As for the company itself: it's planning a 19 billion pound splurge on its network over the next two years. Part of a strategy of betting on ultrafast 4G - and 'quad' or bundled packages of mobile, fixed-line, internet and TV. Mike Ingram of BGC. (SOUNDBITE) (English): MIKE INGRAM, MARKET STRATEGIST, BGC, SAYING: ''Moving towards triple and quad play, you know, infrastructure is absolutely essential for Vodafone to get, if you like, a new lease of life. We've clearly seen also AT&T make a major move in that direction. Vodafone did pay top dollar for Kabel Deutschland, getting into a bidding war as I recall with Liberty Global, and they need to make this sort of acquisition work if it's to remain as an independent company going forward.'' Vodafone has already reported record falls in underlying revenue over the last year and half. Now it's announcing a 6.6 billion pound writedown in its latest numbers. After the news, shares were down over four per cent. Also weighing on sentiment: news of AT&T's plans to buy DirecTV - putting it out of the frame as a bidder for Vodafone for now. Though with its 130 billion dollar disposal of its Verizon unit completed in February, it could still be attractive to someone. Brenda Kelly of IG. (SOUNDBITE) (English): BRENDA KELLY, CHIEF MARKET STRATEGIST, IG, SAYING: ''We could see it as a takeover target later on down the line, but right now there don't seem to be any real targetting companies that might actually hoover it up. So for the time being we are going to have to judge Vodafone on its own merits. And, of course, it is in quite a competitive space over in Europe, and it has had the effect of the recession in terms of the pull-back in phone calls being made. But I do feel the capital expenditure will set them up to really kind of make some radical changes and to compete quite well.'' Overall, the 2014 figures are in line with forecasts. And whilst Europe is tough, Vodafone says its emerging markets business is strong. In the words of one analyst, 2015 will be an ''interesting year'' for the world's No. 2 mobile operator.

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Vodafone spend dents outlook

Tuesday, May 20, 2014 - 02:19