Vodafone spooked the market on Tuesday with the announcement that it will hike spending levels in the coming year.

The telco group puts capital spending at around the €8 billion mark for financial year 2022, up from €7.9 billion in the year to the end of March and €7.4 billion in fiscal 2020.

“The pandemic has effectively accelerated digitalisation by five years,” Read said on the operator’s full-year results call, at which he presented a set of mid-term targets that included revenue growth in both Europe and Africa, and mid-single digit growth in both EBITDAaL and free cash flow.

“We have a window of opportunity to deliver this growth and we are choosing to invest more,” he said. While incremental 5G investment will be continue to be funded via “internal efficiencies,” as Read put it, “we do plan to step up investment in high-return opportunities, particularly Vodafone Business and Vantage Towers,” he said.

Around a third of the extra capex will go into connectivity, explained finance chief Margherita Della Valle, noting that customer behaviour has changed as a result of the pandemic and that change is likely to be permanent. “We are spending more to service our network performance, which in turn will support our commercial momentum,” she said.

The remainder will be ploughed into new growth areas, split between digital platforms and services and growth capex for Vantage Towers; the latter “is going to give us returns in excess of our cost of capital,” she said.

Read, meanwhile, hammered home the message on growth, pointing out that Vodafone posted a 1.7% growth rate in Q4, excluding roaming. Given that at group level full-year revenues were down 2.6% to €43.8 billion, while adjusted EBITDA fell by 1.2% to €14.4 billion, ‘growth’ might not have been the first reaction of many industry watchers.

“We are growing,” Read said. “This is not capex to create growth, it’s capex to accelerate that growth profile.”

Despite his best efforts to highlight Vodafone’s “resilient” performance in a Covid-hit 2021 financial year, shares dropped by 7% on Tuesday morning. As the financial analysts on the results call pointed out, the group’s free cash flow came in behind consensus at €5 billion – excluding spectrum, restructuring and integration costs – last year, although for Vodafone that was in line with expectations.

A dividend of 9 cents per share was also part of the plan, although the telco reiterated its ongoing message on improving shareholder returns.

“We are firmly focused on continuing to delever without our targeted range, primarily as a function of growth,” Read said. “This growth strategy ultimately translates to driving shareholder returns.”

Repeating the word “growth” was not enough to allay the market’s wobbles on the capex increase, lower free cash flow and so forth, but the coming quarters will show whether that growth really is taking place and whether it does drive the telco’s dividend policy.