Vodafone is a key holding - primarily due to its high yield >5% and progressive dividend policy. Albeit recently the dividend increases have been low (2% for 2015 & 2016) whilst Vodafone have investing heavily in Project Spring - a colossal £19bn infrastructure upgrade to improve network capacity, quality and efficiency. Now that this investment is complete it's time to see whether it's delivering benefits?

Well Friday's Q1 trading update gave a positive indication with a very strong set of results. AMAP growth excellent (+7.7%) and Europe continued to improve (+0.3%) only the UK (-3.2%) appears disappointing. However, the UK performance is against a strong comparator and the well-publicized billing system problems contributing but nevertheless with good customer metrics.

The Project Spring investment is clearly starting to pay-back, the key metrics are moving in the right direction and so the outlook is very optimistic. Vodafone is being driven forward by the continuing adoption of Smartphones, mobile social media and video streaming. These underlying trends shows no sign of waning and Vodafone is now well-positioned to ride this wave. The evidence:

> huge and growing demand for data - up over 60% year-on-year;
> improvement in customer 'net promoter scores' (NPS) basically response to the question 'would you recommend Vodafone to friends and family?'

The capacity and quality improvements delivered by Spring allows Vodafone to either target consumers with a premium quality 4G service or offer competitively priced 3G services - or indeed both. What Vodafone is actually doing is offering 'more 4 more' - much more quality, much more bandwidth but at a slightly higher price. This is improving their competitive position but also increasing ARPU (average revenue per user).

The picture also looks good on the other areas:
> fixed-line broadband (+32%) including roll-out of their own NGN (Next Generation Network) in Europe (now 5.8m customers); and
> Enterprise (business customers +2.6%): with leading position and strong positioning in 'machine 2 machine (a.k.a Internet of things) and cloud provision.

Whilst it's still early days, post Project Spring, and accepting market uncertainties (esp. regulatory action and competitor responses) the auspices look positive. IMHO this is likely, along with a continuing recovery in Europe, to mean Vodafone will return to growth and prompt a share-price re-rating.

Very…

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