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Vodafone boosts spending, but will it boost your investment?
Vodafone reports a record fall in quarterly service revenue. It was down 4.9 percent due to weak trading in Europe.
The Chief Executive Officer, Vittorio Colao says trading remains tough but “we are encouraged by the forecast return to economic growth over the next two years.”
Overall first half earnings were down 4.1 percent at GBP6.6bn, well below estimates. But the company says it is still on target to “deliver adjusted operating profit of around GBP5 billion and free cash flow in the GBP4.5 – GBP 5.0 billion range.”
Saxo Bank’s Peter Garnry says things should stabilize next year but at the moment it doesn't look good. He is disappointed with the companies emerging market revenue.
Vodafone also announced further details of “Project spring.” The group said it will spend GBP7 billion over the next 2 years to improve its networks. The investment is designed to meet the growing demand of consumers who want to access the internet via smartphones and tablets.
Peter says “it’s about time. Vodafone has lagged its competitors in investing, but only time will tell if it works.”
It follows the sale of its US business, Verizon Communications for USD130bn. The sale is due to be completed in the first quarter of next year.
The mobile giant also said it would increase its interim dividend by 8 percent and promised more when the sale has gone through.
Peter says although the stock is overvalued by around 15 percent they are neutral on the stock, but says the “risk reward ratio isn’t great”
01:44 minutes
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