Forget About 2015: Why Vodafone Group plc Remains A Terrific Long-Term Pick

Today I am looking at why I believe Vodafone (LSE: VOD) (NASDAQ: VOD.US) is a shrewd investment for patient investors.

Europe continues to weigh

Vodafone has been struggling to deal with intensifying competition and increased regulatory pressure in its key European marketplaces for what seems an age now.

The region — which accounts for more than two-thirds of group turnover at present — remains a huge bugbear for the company, and the telecoms giant saw organic service revenues slide 2.8% during April-September to £19.1bn, it revealed in this week’s interims.

Against this backcloth, City analysts expect the business to punch a colossal 65% earnings drop during the year concluding March 2015, exacerbated by the vast sums Vodafone is dedicating towards organic investment and acquisition activity.

… but shoots of solid recovery in evidence

Still, a 1% earnings uptick in 2016 suggests that the worst of the company’s problems could be behind it. Indeed, Vodafone noted in its interims that, despite the effect of persistent economic travails in the eurozone, it has witnessed “improvements in our commercial execution and very strong demand for data” in recent months.

Although service revenues from the continent slipped 5% during July-September, this represents a much better performance from the 7.9% drop posted in the previous three months. And Vodafone mentions it has seen improvement across all of its key European markets.

The telecoms giant is undoubtedly reaping the rewards of its massive two-year £19bn Project Spring investment scheme, designed to boost its next-generation data capabilities across the globe. Vodafone now has 4G coverage of 59% across Europe, helping to push its total 4G customer base up to 10.5m. And the firm’s goal to raise this to 90% by the close of fiscal 2016 leaves plenty of room for revenues growth — Vodafone estimates only 6% of its customers are currently using 4G.

But this investment is also paying off handsomely in key growth territories, with the fruits of strong capex flows in India helping to lift organic service revenues from the Africa, Middle East and Asia Pacific (AMAP) region 5.7% during April-September. Vodafone has seen it subscriber numbers balloon in recent times as data-hungry customers clamour for its products.

On top of this, Vodafone continues to chuck the readies at what it considers excellent candidates in red-hot sectors. In particular, I believe that the firm’s entry into the ‘triple services’ entertainment sphere through its acquisition of Germany’s Kabel Deutschland and Spain’s Ono during the past year is likely to represent a lucrative strategy, particularly as it provides plenty of cross-selling opportunities for its mobile services.

In my opinion, Vodafone’s aggressive expansion strategy makes it a tremendous stock pick for those seeking electric long-term earnings growth.

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Royston Wild has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.