6 Billion Reasons Vodafone Connects

10/25/2013 11:00 am EST


Royston Wild

Equity Market Sector Correspondent, Shares Magazine

The recent investments made by the world's second-largest mobile telecommunications company have caused a swell of investor excitement. Royston Wild of The Motley Fool UK shares several reasons he feels this stock is set to skyrocket well into the long-term.

Project Spring program boosts earnings prospects

Vodafone's (LSS:VOD) (NQ:VOD) recent purchase of Kabel Deutschland (LES:0MPU) (OP:KBDHF) has caused a ripple of excitement among investors, the firm's maiden foray into the lucrative multi-services entertainment sphere, providing bubbly earnings potential. This has seen news of Vodafone's Project Spring organic investment program take the back seat, but I believe that the gigantic 6bnp scheme also has the potential to turbocharge revenues in coming years.

Vodafone announced the massive investment scheme after agreeing to offload its 45% stake in Verizon Wireless to Verizon Communications (VZ) for USD130bn in September. The three-year plan will enable the company "to strengthen and accelerate our existing Vodafone 2015 strategy," the company said, "enabling us to take even greater advantage of the growing global demand for ubiquitous high-speed data."

Specifically, the firm plans to plow these vast sums into 4G, 3G, fiber, and broadband services, clearly massive growth areas for communications specialists across the globe.

Vodafone's operations in these areas continue to pull up trees, particularly in respect of rolling out its 4G technology across the UK. The business has signed up 100,000 customers since rollout in August, as of the start of the month, and is stepping up the number of cities which can access its new technology. Vodafone is also boosting its 4G services on the continent, and increased the speed of its LTE network in various cities in Germany to an industry-busting 150Mbps in recent months.

Vodafone's excellent growth potential has seen takeover speculation ratchet up in recent months, and I expect chatter to provide an extra catalyst to share prices sooner rather than later. Recently, broker Credit Suisse said that Vodafone has a 50% chance of being acquired by US telecoms giant AT&T (T). And the broker attached a 280p price target should a bid materialize, providing a 22% premium to current levels.

Now that Vodafone has unattached itself from its Verizon Wireless venture in North America, the telecoms company has become a prime target in, what is becoming, an increasingly frantic industry on the M&A front. But whether or not a takeover approach actually materializes, I believe that Vodafone offers enough growth potential to send shares rocketing higher.

Royston does not own shares in any of the companies mentioned. The Motley Fool has recommended shares in Vodaphone.

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