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Vodafone Qatar Q.S.C., a division of Vodafone Group plc (VOD - Analyst Report), has announced its tie-up with NetComm Wireless Limited to enhance its fixed and mobile networks to incorporate equipment that support Smart City applications such as security systems, intelligent transport systems, smart metering and smart medical devices. The company restrained from divulging financial details.

We believe the Vodafone Qatar partnership with Sydney, Australia based NetComm Wireless Limited would not only enhance product offerings and services of the former but also attract more customers.

Vodafone’s relation withNetComm continues from their partnership for providing MachineLink 3G for Vodafone’s Global Enterprise markets. This partnership has given Vodafone the leading position in the Machine 2 Machine (M2M) technology with the experience of deploying smart city solutions on a global platform.

Hence, with the new agreement, Vodafone aims at bringing the same level of expertise in Quatar and expects it to grow as one of the smartest cities in the next 20 years with advanced M2M technology. 

On a global arena, Vodafone is continuously gaining share in the majority of its markets on strong adoption of data services and migration to smartphones. Vodafone’s future growth hinges on key drivers like increasing mobile data services, growth in enterprise markets through converged fixed and mobile services (Vodafone One Net), new pricing plans such as Vodafone Red, growth in emerging markets including Eastern Europe, India and Africa, growth in machine-to-machine, near-field communications and as well as maintaining liquid investment in quality networks.

The company is also building upon its mobile financial services brand – M-Pesa – by undertaking development initiatives mostly in Africa.  With respectively 18% and 14% market penetration in countries like Kenya and Tanzania, Vodafone foresees exponential businesses growth for M-Pesa in other African markets. The company also views India as a bankable target market with around 700 million untapped customers in mobile financial services.

Despite the strong growth prospects of Vodafone, we are concerned about a decline in service revenues and subscriber count, particularly in the European Continent. Continued economic weakness, regulatory pressure, stiff competition, reduction in mobile termination rates and roaming prices remain detrimental to the company’s growth. However, Vodafone’s strong growth in emerging markets can partially offset challenging market conditions and provide a high profit margin given lower infrastructural costs. Further, the company is increasingly making efforts to shift toward more data-centric services as the level of data services in these markets is considerably low, providing opportunities for deeper penetration. 

Vodafone, which operates with other European carriers like Telef (TEF - Analyst Report) and Orange (ORAN - Analyst Report) and Telecom Italia S.p.A. (TI - Snapshot Report),currently has a Zacks Rank #3 (Hold).

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