Tuesday, September 03 16:00:27
Vodafone's plan to boost investment in broadband and superfast mobile networks after its $130 billion deal with Verizon could force its European competitors to increase their own spending and even prompt further deal-making.
Under its "Project Spring", Vodafone plans to raise its capital expenditures by 6 billion pounds ($9 billion) over three financial years to improve network quality for customers in Europe and emerging markets such as India and South Africa.
Strong growth in data consumption by smartphones, tablets and other devices means network quality is becoming more important in the fight to win and keep customers.
With that in mind, Vodafone decided to plough some of the proceeds from the sale of its 45 percent in Verizon Wireless into infrastructure. But the bulk of the windfall - $84 billion - will be handed to shareholders with the rest to pay down debt.
The move is also a sign that Chief Executive Vittorio Colao is betting the sector will benefit from softer regulation from the European Commission after it spent years forcing down roaming and other types of mobile call fees.
"With the advent of 4G mobile, there is a window for number one or two players in each market to spring ahead and put more space between us and smaller players," he said.
"The operators with bigger shoulders will follow us, while the smaller ones, or the ones who are more financially constrained, may not be able to."
The pressure from a stronger Vodafone is likely to be toughest for Telefonica in Spain, Germany, and Britain and Telecom Italia in Italy. Both groups have high levels of debt that they have been trying to pay down.
Germany, in particular, is likely to be a battlefield. Vodafone and Deutsche Telekom each have about 34 percent of mobile service revenue, and fourth-placed Telefonica has agreed to buy third-placed KPN. (Reuters)