Vodafone today said it was upping its investment levels so it could target the EU’s e750 billion pot of Covid recovery grants and loans for projects to upgrade the continent’s digital infrastructure.
Chief executive Nick Read said he had been advising prime ministers and presidents how to improve their countries’ systems to be ready for 5G and have the fastest broadband networks.
A pot of around e360 billion of loans and e310 billion in grants are now being made available to EU countries as part of the region’s efforts to recover from the crisis, 20% of which is earmarked for improvements to digital connectivity and services.
“They can see they’ve got world class industrial sectors - automotive, aerospace and so on, but they need to have world class digital infrastructure too and currently we are falling behind the US and China. Most governments say: ‘We need to progress that at a fast pace.’”
This, he said, “plays into our sweet spot,” so Vodafone will be investing more in its operations to capitalise on the spending boom.
Asked if he feared Vodafone could fall behind in the likely stiff competition to win such contracts in the EU post Brexit, he said: “The UK is out of the EU but Vodafone is definitely not out of Europe. Everyone views us as a European business.”
Shares fell 6% as he unveiled his plan to the markets alongside annual profits slightly behind some analysts’ forecasts.
“After two-to-three years of making the business stronger, we think it is now time to increase our investment levels to capture this opportunity,” he said.
Announcing its profits for the year to March 31, he said investment in Vodafone’s networks had increased from e7.5 billion the year before to e7.9 billion and would go beyond e8 billion next year.
Read sees huge potential to make medium term gains from investing in the network now so it can lead the market in Internet of Things (IoT) and servicing SMEs as they realised during Covid that they have to digitise their businesses.
“We really believe the pandemic has changed the world. Digitalisation has accelerated five years,” said Read.
The extra investment will mean lower free cashflow, he warned, but it would pay off in the longer term.
“This is the next strategic phase for Vodafone,” he said.
Overall profit came in at e536 million against a loss of e455 million a year earlier with underlying operating profit broadly steady and net debt falling around e2 billion to e40.5 billion.
Roaming revenues, where telecoms companies bill extra for people travelling across borders, are still way down due to the pandemic.