Vodafone boosts 'Project Spring' network upgrade spending to £7B

Vodafone said it will increase its planned investments under its "Project Spring"  network upgrade to £7 billion ($11.13 billion), up from £6 billion, over the next two years to strengthen networks and services in major markets and accelerate its strategy of focusing on data, enterprises and emerging markets.

Project Spring, which was first unveiled after Vodafone announced the sale of its 45 per cent stake in Verizon Wireless for $130 billion, aims to reverse declining revenues in Europe amid what CEO Vittorio Colao described as "very tough" trading conditions. Reuters noted that this will bring total investments in the next two years to £19 billion.

Vodafone has just unveiled its results for its second quarter and first half of the current financial year, reporting a 15.5 per cent second-quarter revenue decline in South Europe as well as a 4.9 per cent drop in North and Central Europe. In contrast, revenue was up 5.7 per cent in its emerging markets such as India and South Africa. Total group revenue fell by 4.9 per cent in the second quarter, which was worse than expected.

"Our Project Spring organic investment programme--now increased to £7 billion--will accelerate further our plans to establish stronger network and service differentiation for our customers," Colao said in a statement on the results for the second quarter and first half of the year.

The company plans to invest around £3 billion in its mobile and fixed networks in Europe with a focus on improving 3G coverage and accelerating LTE network rollouts using a Single RAN approach and complemented by small cells and Wi-Fi.

A further £1 billion will be invested in the operator's unified communications strategy to increase its xDSL and fibre footprint. The company is implementing various strategies to expand its access to fixed networks including acquisitions, such as the purchase of Kabel Deutschland in Germany.

"We expect that during the next three to five years, Europe will definitely improve," Colao told Reuters. "Therefore, we prefer to have a stronger, more performing and more differentiated operation by then so that we can come out at a higher speed than everybody else."

Analysts broadly welcomed the news that investment is to be increased under Project Spring, but warned that this would place rivals under even greater pressure.

"The clear, underlying message is that most companies in Europe are going to have to step up their capex in order to accelerate convergence to set off the challenges coming from Vodafone," Carlos Winzer, senior vice president of corporate finance at Moody's, told Bloomberg.

Colao did not comment on the ongoing rumours that AT&T is interested in buying the UK-based operator.

For more:
- see this Vodafone release
- see this Reuters article
- see this Bloomberg article

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