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Vodafone to Expand Turkey Network

Zacks Equity Research

Vodafone Turkey, a division of Vodafone Group plc (VOD) has reportedly signed a 15-year deal worth a $61.5 million with state power transmission company – Teias – for providing fiber network. Per the deal, Vodafone will expand its fiber network by two-and-half times to 16,000 kilometers (9,941 miles) by adding lines from Teias.

According to a Bloomberg report, Vodafone Turkey will invest approximately 300 million liras in the infrastructure. We believe that such growth plans in regions like Turkey enable the company foster its business in the European continent.  

The company expects the deal to remain accretive to its infrastructural development including expansion of the fiber lines of Vodafone’s global network to 1 million kilometers. Further, it expects the deal to foster 4G deployment in the country. Currently, the biggest competitor to the company is expected to be Turk Telecom, the largest telecom company in Turkey that boasts fiber deployments of 74,000 kilometers. Further, Vodafone Group expects to continue fiber expansion in other countries like Iran, Syria, Georgia, Iraq, India.  

Besides infrastructural developments, we believe Vodafone’s future growth hinges on key drivers like increasing mobile data services, growth in enterprise markets through converged fixed and mobile services (Vodafone One Net), new pricing plans such as Vodafone Red, growth in emerging markets including Eastern Europe, India and Africa, growth in machine-to-machine, near-field communications and as well as maintaining liquid investment in quality networks.

The company is also building upon its mobile financial services brand – M-Pesa – by undertaking development initiatives mostly in Africa. With respectively 18% and 14% market penetration in countries like Kenya and Tanzania, Vodafone foresees exponential business growth for M-Pesa in other African markets. In this regard, it views India as a bankable target market with 700 million untapped customers in mobile financial services.

Vodafone, which operates with other European carriers like Telef (TEF) and Orange (ORAN) Telecom Italia S.p.A (TI) currently has a Zacks Rank #3 (Hold).

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