In a move that is both earlier and more lucrative than expected, the British mobile operator said it would spend GBP 3 billion pounds in Europe, GBP 1.5 billion in its emerging markets and the remainder on enterprise, fixed-line assets and its retail arm.
It will complete the investment programme by March 2016, and hopes to meet consumer demand for on-the-go internet access by smartphones and tablets.
After China Mobile, Vodafone is the world’s second-largest mobile operator by subscribers.
In September, it agreed to sell its US joint-venture stake to Verizon for USD 130 billion; thus completing one of the biggest transactions in international corporate history and funding its current investment.
But Vodafone stated that, having already completed a takeover of Kabel Deutschland – Germany’s biggest cable operator – for EUR 7.7 billion, it had no interest in a subsequent spending spree.
The group intends to return about USD 84 billion to shareholders when the deal is completed, most probably in the first quarter of 2014.
In addition, the sale will “provide us with a strong balance sheet,” the company’s Chief Executive Vittorio Colao noted in a statement.
He furthered that the move will “improve dividend cover and the financial and strategic flexibility to make further investments in the business or returns to shareholders in the future.”
Historic tax claims
In a recent development, the sale triggered Vodafone to claim a colossal GBP 17.67 billion in tax losses from its Luxemburg and German subsidiaries, which has seen its half-year profits skyrocket.
This is turn has sparked fresh controversy over its complex financial arrangements.
However the mobile phone giant has denied any tax avoidance claims, and in an official statement stipulated it “does not change the amount of tax we pay in cash anywhere in the world.”
Pre-tax profit in the half year leading up to September stood at GBP 1.51 billion, but the deferred tax losses – i.e. the company’s balance sheet assets which could be reduce any later period’s income tax – sent post-tax profit soaring to GBP 15.71 billion.
The mobile phone giant had suffered a net loss of GBP 1.98 billion in the same time period of the previous fiscal year, when it was damaged by impairment charges in Spain and Italy.