Vodafone chief throws down gauntlet to BT on broadband

Vodafone boss Vittorio Colao says Britain is ready for megafast broadband as he repeated his challenge to BT and cheered the City with a surprise profit upgrade.

Last week the telecoms giant struck a £500 million deal with CityFibre to bring gigabit speed broadband to a dozen UK cities.

That’s three times faster than the best speed offered by BT’s Openreach arm, a company facing perpetual complaints on service.

Said Colao: “We are a cheaper alternative to Openreach. Openreach will now have to decide whether they want to become more competitive.”

He added: “The UK is waking up to a gigabit society.”

Voda saw half-year revenues slide 4% to 23 billion (£20.5 billion), but profits were higher at 1.23 billion, thanks to cost-cutting that JPMorgan described as “impressive”.

Voda says full-year profits will be 10% better, up from the previously guided range of 4%-8%. That should leave it with earnings of towards 15 billion for the full year, reassuring investors concerned about the dividend.

The half-year divi is up a little to 4.84 cents. JPMorgan said a third of the improvement is down to cost cutting, and that margins improved in nine out of 10 of Voda’s top markets.

Colao said the earnings upgrade is the first “in recent history”.

Vodafone has been especially strong in Europe, which accounts for the bulk of the profits. The latest iPhone has yet to feed into Voda’s figures. Colao said: “The iPhone 10 will probably be a success, but it is too early to see an impact.”

The gigabit initiative is somewhat controversial. Some say it isn’t necessary; others that the future “internet of things” of automated homes and smart cars will require the fastest broadband speed possible.

Vodafone shares rose nearly 5%, up 10p at 226p. That values the company at towards £61 billion.

The shares have been broadly flat for several years since they peaked at 440p in January 2014.