Vodafone will spend £7 billion – more than expected and earlier than expected – to increase the speed and coverage of its networks and reverse a record fall in revenues resulting from its struggling European business.

The world’s second-largest mobile operator, which is using some of the proceeds from the $130 billion sale of its US arm to upgrade its infrastructure, said it would spend £3 billion in Europe, £1.5 billion in its emerging markets and the rest on fixed-line assets, enterprise and its retail arm.

It will complete the programme by March 2016 – a billion pounds more than expected and a year earlier than forecast – to meet the demand of consumers who want on-the-go internet access via smartphones and tablets.

"We expect that during the next three to five years, Europe will definitely improve," said chief executive Vittorio Colao. "Therefore, we prefer to have a stronger . . . more differentiated operation by then so that we can come out at a higher speed than everybody else."

The group, seen as a possible bid candidate for US giant AT&T, set out the details of its “Project Spring” spending programme as it reported first-half results showing the pressures across the group.

Organic service revenue, which strips out items such as handset sales, currency and acquisitions, was down a worse than expected 4.9 per cent in the second quarter due to regulator-imposed price cuts and fierce competition in Italy, Spain, Germany, Turkey and Britain. Civil unrest in Egypt also hit demand.

The 4.9 per cent second quarter fall was worse than the 3.5 per cent drop recorded in the first quarter and well below the last record fall of 4.2 per cent in the fourth quarter.

Credit rating agency Moody’s said yesterday it expected a fifth year of revenue decline in 2014, though operating margins would stabilise, helped by cost cutting and the end of regulatory cuts to mobile call termination fees. – (Reuters)