Vodafone says it will spend £7 billion on its networks after selling its U.S. arm to Verizon. The world's number two mobile operator posted a record drop in quarterly revenue on weak trading in Europe. Market strategist at City Index, Josh Raymond, says post-sale, the telecoms company is cash rich right now and it's worth keeping an eye on what could happen in the coming months and how it may force other telecoms companies to up their game.
LONDON, ENGLAND, UK (REUTERS) - JOSH RAYMOND: "Well, basically, obviously, they're sitting fairly cash-rich now. Obviously, it hasn't sold the U.S. arm to Verizon of course and out of a hefty amount that is of course, so, now they are coming through with this big plan, what they've called Project Spring, sorry, spending GBP7 billion to try and source out the infrastructure and look at the actual technical side of where the stability of the line of their network is essentially in. That's of course very important and the one thing that it may do as well as it may force other suppliers to do something similar as well. You're talking about increasing the scope of the 4G network and increasing the stability of that line as well. So, keep an eye on what it might do to the sector in the coming months."
JOSH RAYMOND: "I don't think so. No, not at this point. I mean, obviously everyone looked at the amount of this sold for Verizon and now you look at the step, the next step that they do once they sit on that cash is strengthening the lines and strengthening the security of their products essentially and the innovation of their products. They're looking at GBP1 billion in terms to, increase the customer experience. They've got GBP7 billion in total over the next five years or so to 2016, sorry, so that's a very strong move that they've done to strengthen up themselves and take them a step forward in terms of what they're able to offer their customers. So, whilst I'm not discounting the fact that they are attractive but an attractive proposition maybe for an acquisition later down the line, I don't foresee that in the coming future at the moment."
JOURNALIST: "All right. A couple of other things quickly. The UK inflation expected at 2.5% I think today. Of course, the inflation report tomorrow is the big one, right?"
JOSH RAYMOND: "Yeah, that's the big one, that's where everyone's looking towards because obviously, we can look at revisions to, not just the inflation and the forward looking elements but also GDP as well. And from that, you're looking at what they're going to do in terms of forward guidance for QE. So, the big thing to, is of course, tomorrow the quarterly inflation report but we are expecting 2.5% on inflation on an annual basis when the number comes out 0930 this morning."
JOURNALIST: "All right. I mentioned the China reform agenda. Nothing yet that I'm seeing on the wire. What kind of impact do you think this will have?"
JOSH RAYMOND: "You might see a knee-jerk in some miners really and that's about it. It's a 10-year plan of course so, it's one thing announcing, another thing is actually implementing, and we've seen previously implementation of these sort of big plans, have never really been all the way through. The one thing just I would keep an eye on particularly for trading and mining stocks is infrastructure spending, have a look at the housing market for instance in China and what they're going to do to try and stimulate that and curtail against excessive pricing which we've seen over the last year or so. So that's the one thing I would look at."