Vodafone sees £3bn wiped off its value after announcing it is to invest in upgrading its networks
More than £3billion has been wiped off the value of Vodafone after the telecoms giant said it would spend more upgrading its networks.
Nick Read, the FTSE 100 firm’s boss, said it needed to ‘spend more to grow more’ as it emerges from the pandemic. It means Vodafone is now set to plough hundreds of millions of pounds extra into rolling out new technologies such as 5G across Europe.
But the decision caught investors by surprise yesterday, sending the company’s shares tumbling by 8.9 per cent, or 12.6p to 129.1p – and wiping as much as £3.5billion off its market capitalisation.
Shares slump: Vodafone boss Nick Read (pictured) said the firm needed to ‘spend more to grow more’, as it emerges from the pandemic
Vodafone’s shares are among the most widely held by pension funds and an army of small investors, who Read sought to reassure with a pledge that the annual dividend will not drop below the current level of 7.7p regardless of the changes.
It came as the firm said its profits in the year to March 31 rose from £684million to £3.8billion but its revenues dipped from £38.7billion to £37.7billion, due to reduced income from mobile roaming and handset sales during the Covid-19 crisis.
As western economies reopen Vodafone is expecting to bounce back, with Read saying investment in its infrastructure would help accelerate this growth.
During the pandemic, it has brought forward upgrades of its mobile and broadband networks to ensure it can cope with more people working from home.
But it now wants to plough even more money into technologies such as 5G, to respond to demand from businesses adopting ‘hybrid’ working, and investing in robots and other devices that are connected to the ‘internet of things’.
The firm recently spun off its mobile towers network into a listed company, Vantage Towers, and said about a third of the extra investment would go there.
Another third will go towards its mainly-European broadband networks while the other third will improve digital services that Vodafone’s business arm provides to big clients such as Microsoft.
Read said: ‘Connectivity has never been more critical, post-pandemic. There’s a flight to quality. People want high-quality networks, so we want to make sure we’re there, taking our fair share.
‘These are all areas where we can see line of sight to very clear returns. It is not a case of, ‘I need this investment to get growth.’
‘It is more that we are growing and we are choosing to invest to grow even faster.’
The update came after shares in rival BT plunged last week when boss Philip Jansen revealed that it was looking for a potential investment partner to roll out fibre broadband to an extra 5m homes by 2026.
Asked yesterday whether Vodafone would consider that opportunity, Read said his firm was ‘actively engaged’ with BT’s Openreach over its plans.