Vodafone open to higher network spending after two-year boost


By Kate Holton

BARCELONA, Nov 20 (Reuters) - Vodafone is open tokeeping network spending above its traditional levels once itstwo-year booster programme has ended if it needs to respond tocustomer demand and competitor moves, its chief executive said.

Vodafone, the world's No. 2 mobile operator, said this monththat it would spend an extra 7 billion pounds ($11.3 billion) onits network in the next two years to put it in pole position forwhen the economy recovers.

The British group usually spends about 6 billion pounds ayear on its network but Chief Executive Vittorio Colao told aMorgan Stanley conference in Barcelona that he could keepspending higher - or reduce it - depending on how hiscompetitors respond.

"We are convinced that this is the right moment, to be verystrong in two years time is the right thing to do," he said."Our current plan is to do a big boost then return to the normallevel.

"But we could come down at a higher level (after the twoyears). Also if tomorrow there is a new macro crisis ... and wethink this (investment) was necessary for four years down theroad and not two years, then we could go lower."

"It is, if you want, a big tap that we can open and close tosome extent."

Strong growth in data consumption by smartphones, tabletsand other devices means network quality is becoming moreimportant in the fight to win and keep customers.

Vodafone believes an expected economic recovery in its coremarkets of Europe in a few years time will coincide with anincrease in the amount of data consumers want to use, makingnetwork quality a big factor in how customers choose whichoperator they take.

With that in mind, Vodafone has decided to plough some ofthe proceeds from the $130 billion sale of its stake in U.S.company Verizon Wireless into infrastructure in a programmecalled Project Spring.

It will spend the 7 billion pounds by March 2016 - a billionpounds more than originally planned and a year earlier thanforecast.

Colao said that within five years he expected the one-timemobile-only company to be able to offer consumers across Europea combined offering of mobile and fixed-line services, with thegroup planning to either buy, build or going into partnershipwith others to access fixed-line assets.

In order to lure customers, he is also keen to offer contentsuch as music and sports clips through partnerships with mediagroups, but Colao made clear he did not want to become a contentowner because the costs tended to only ever increase.

Since announcing the sale of its U.S. arm in the world'sthird biggest deal, investors have started to question whetherVodafone could itself become a bid target now that it will be somuch smaller.

Bankers have told Reuters that AT&T is looking fortargets in Europe, with Vodafone the leading candidate becauseit would provide instant scale across the region.

Asked about his thoughts on a deal, Colao said all he coulddo was focus on improving his own assets.

"You must implement the best strategy for the assets youhave and that is what I think we are now clearly doing," hesaid.

"Then if somebody comes and says you have really beautifulassets ... then that is a statement that has value foreverybody."

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