Vodafone CEO Nick Read on Monday indicated that his company will continue to fight against what it perceives to be unfair 5G licensing conditions in Portugal: there is more work to come for the lawyers.

His comments came alongside the publication of the operator group’s first half financial figures – “resilience” was the word of the day there – and a general discussion on the 5G opportunity, particularly in the enterprise space. The chief exec also dripfed some information about Vodafone’s much-hyped upcoming towers IPO, but we won’t have the full picture on that for another 24 hours.

Read delivered the usual line about creating the right market conditions for investment and a healthy structure to ensure returns for shareholders, something that Vodafone believes the Portuguese government failed to do by setting out a 5G licensing process that offered a new market entrant a price break on spectrum and the ability to roam onto other players’ networks rather than rolling out its own infrastructure.

“Where is the incentive for people who really invest?” Read asked, repeating a stance adopted by Vodafone, and its major rivals in the market, a few months ago when draft guidelines emerged. Following pressure from the market’s existing players, Portugal has since rewritten its 5G licensing guidelines so that any new entrant will pay full whack for its spectrum and will have to agree to certain rollout conditions. However, “it has not gone far enough,” Read said. “This is state aid.”

“We are going to continue to litigate…and we will have to consider the investments we are making,” Read said.

Indeed, Vodafone had planned to open a centre of excellence with 400 employees in Portugal but has “put it on pause,” Read said. “We are not going to support governments that work against existing operators.”

This approach mirrors action apparently taken by at least one of Vodafone’s major rivals in Portugal. Regulator Anacom’s publication of the auction rules last week drew an angry outburst from Altice director João Zúquete da Silva, who told the Lusa news agency that his company will suspend all 5G investment projects in Portugal as a result of the regulator’s approach to licensing. The same news outlet also reported that Nos will file legal action against the 5G sale.

Interesting times…

Of course, investment in 5G, or any new technology, is always something of a balancing act for telecoms operators, as they look at spending heavily to capture potential new market opportunities, while at the same time keeping the shareholders and other bean-counters happy.

Vodafone’s pan-European 5G strategy, in a nutshell, is to make it look like it is leading the market while not actually rolling out much 5G infrastructure just yet. Or as Read put it, in a Q&A session with analysts, it is important for Vodafone to be “seen as a leader in 5G” by deploying small pockets of the technology across a wide area: 126 cities in nine countries, to be precise.

At present, it’s “not a coverage message,” Read said. While 3G brought mobile Web browsing the masses and 4G was about mobile video, when it comes to 5G, “it’s about enterprises, it’s about businesses,” he said. Thus, a strategy of focusing rollout on cities and business parks makes sense.

And leaves a less sizeable crater in the balance sheet, one assumes.

Speaking of which, Vodafone reported a 2.3% decline in group revenues in the first half of its financial year to €21.4 billion, while service revenues slid by 0.8% to €18.4 billion, impacted mainly by reduced roaming revenue as a result of Covid-19. However, Read pointed out that despite the pandemic, the service revenue decline in the second quarter was just 0.4% and that the group’s numbers were in line with expectations.

“Our resilient revenue has also been matched by resilient profitability,” said Read, who gave the impression of being in some kind of contest with CFO Margherita della Valle to see who could use variations on the word ‘resilience’ the most often.

Adjusted EBITDA came in at €7 billion, down by 1.9% year-on-year, with cost-saving measures going some way to offsetting the revenue decline. Vodafone effectively raised its adjusted EBITDA outlook for the full year, or at least is now shooting for the high end of its guidance, predicting that earnings will come in at between €14.4 billion and €14.6 billion; that compares with previous guidance of “flat to slightly down” on last year’s €14.5 billion baseline.

Read talked up the progress of Vodafone’s ongoing transformation plan, but admitted it is not yet enough to improve returns for shareholders.

“Our return on capital is still below our weighted average cost of capital,” he said. “I am not happy with our current position.”

The creation of a standalone towers business, Vantage Towers, is a key component of Vodafone’s ambitions to improve that return on capital, and on Monday Read shared a few more details of much-discussed plans to float that business, noting that the telco is “firmly on track” for an IPO in Frankfurt in early 2021.

The creation of the towers business has enabled Vodafone to broker network-sharing deals and reduce its 5G investment burden across Europe – to the tune of €2.5 billion over 10 years – and will continue to benefit Vodafone as a major shareholder in the unit.

Vantage Towers “has some very exciting growth opportunities” to generate good, predictable cashflows for Vodafone, said della Valle, declining to expand for fear of “steal[ing] Vivek’s thunder.” Vantage Towers CEO Vivek Badrinath will head up a capital markets day on Tuesday to share details of the business’s capital structure, strategy and growth plans.

That capital structure will be “efficient,” Read said. However, it will also support organic growth and “inorganic opportunities as they arise.” Further, “we are committed to supporting Vantage Towers to achieve its growth ambitions through our ongoing shareholding.”

We should know more tomorrow. Watch this space.