It’s no secret that Vodafone (LSE: VOD) (NASDAQ: VOD.US) is struggling to grow. Indeed, during the space of the last 18 months, the company’s underlying revenue has fallen at a record rate of 18% within Europe and 4.3% overall.
According to City sources, to try and slow this rate of decline, Vodafone’s management is planning to sell-off non-core assets outside of the company’s “big six” markets.
Specifically, Vodafone is set to consider divesting “a handful of smaller assets” outside markets where it can be a clear market leader or number two.
The company also believes that there could be significant change over the coming years with Europe consolidating down to a handful of larger players. This is what the company’s growth strategy is centered around.
To be the best
To benefit from the European market consolidation, Vodafone is planning to spend £19bn globally over the next two years on ‘Project Spring’. Project Spring’s end goal is for Vodafone to be able to offer its customers the best mobile service within all key markets across Europe.
The project will see Vodafone establish a European high-speed 4G mobile network service, which will hopefully put Vodafone at the forefront of European market consolidation.
What’s more, Vodafone is working on other initiatives to consolidate its position across the media spectrum. The company has already spent around $19bn acquiring Spanish media company Ono and German cable and pay-TV firm Kabel Deutschland. There could be further acquisitions in the works as the European market consolidation continues.
Driving growth
Vodafone’s growth plans extend outside of Europe. However, the company is looking to grow in the most effective way as possible, minimising capital spending, favoring joint ventures.
For example, management inked a deal only this week with Rogers Communications, Canada’s biggest wireless company. The agreement will see the two companies broaden the services they offer each other’s customers.
Additionally, Vodafone is weighing up its options with regards to fixed-line options within the UK, as peer BT looks to start its own mobile operating service.
Running out of time
Despite these plans for growth, there is no way to sugar-coat it: Vodafone is struggling, it’s as simple as that.
However, only time will tell if the company’s ‘Project Spring’ will help boost earnings and allow the company to push ahead of its peers. The project is a big multi-billion pound gamble, and things could get even worse for Vodafone if this spending does not pay off.
Specifically, Vodafone only generated £6.2bn in cash from operations during 2013, while the dividend payout cost £5bn. This does not leave much room for error at all.
