Vodafone will boost investment in broadband and superfast mobile networks after its $130bn megadeal with Verizon.
Verizon Communications yesterday agreed to pay $58.9bn in cash, $60.2bn in Verizon stock, and an additional $11bn from smaller transactions, to buy Vodafone out of its US wireless business, signing history's third largest corporate deal and bringing an end to a 14-year partnership.
Thanks to the windfall Vodafone, under its 'Project Spring', plans to raise its capital expenditures by £6bn over three financial years to improve its networks across Europe and in emerging markets including India, South Africa and Turkey.
Booming growth in data consumption by mobile devices means network quality is becoming more and more important in the fight to win and retain customers. Chief executive Vittorio Colao said the mobile operator's large competitors would likely follow its example in increasing spending on their networks.
"With the advent of 4G, 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 told analysts today. "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, as both groups have high debt levels that they have been trying to pay down.
Vodafone said roughly half the money from Project Spring would go to mobile networks in Europe and elsewhere. It aims to expand 4G coverage to more than 90 per cent of the population by 2017 in its five main European markets – Germany, Britain, Italy, Spain and the Netherlands.
Up to a quarter of the cash will be spent on investing in services for businesses, such as cloud computing, improving its stores, both bricks and mortar and online, and on modernising its customer support systems, the company said.
The remainder of the money will be spent on improving high-speed broadband, the latest sign of how once mobile-focused Vodafone has pivoted to fixed-line services.
In June, Vodafone agreed to buy Germany's largest cable operator, Kabel Deutschland, for €7.7bn (£6.5bn) to help defend itself against mounting competition in its most important market.
Colao said Vodafone would continue to take a market-by-market approach on whether to buy fixed-line assets, build them alone or with partners, or keep renting capacity from competitors.
Bankers have said Vodafone could spend heavily on further acquisitions with the proceeds from the Verizon sale, such as Italy's Fastweb, which is owned by Swisscom, and Spanish cable operator Ono.
Colao played down such talk. "We have no intention to throw money away so we will be disciplined. The decision is not an emotional one; if buying assets is too expensive then we will build them."