Vodafone (LSE:VOD) (NASDAQ: VOD.US) has lost the support of many stakeholders during the past year. And now, for the first time in Vodafone’s history, the majority of City analysts have become concerned about the company’s future.
Now, the City is not always right and analysts, from time to time, can get their forecasts wrong. However, this change of opinion towards Vodafone is concerning because the City has, traditionally, stood by the firm through both thick and thin. This change of stance goes against convention.
Struggling  
The City’s main concern is the fact that Vodafone’s income and revenue is slumping within key markets, such as Europe, with few signs that the trend will change any time soon. In particular, the company reported a double-digit decline in revenue within European markets during the first quarter of this year.
Declines were especially bad within Italy, Spain and southern European markets where revenue fell 17.6%, 10.6% and 13.6% respectively.
However, to combat these declines Vodafone is unleashing its big bazooka, a £19bn infrastructure upgrade programme entitled ‘Project Spring’.
Management expects that this hefty expenditure will impact earnings from 2017, although analysts are now starting to ask if Project Spring is all it’s cracked up to be.Â
Results are worrying
Project Spring has been designed to boost Vodafone’s presence within the 4G market. The investment should make the operator one of the most accessible and high- speed mobile internet providers within Europe.
As a result, Vodafone expects users to upgrade to expensive data heavy contracts. Offsetting declining revenue from traditional services such as voice and text communication.
However, several weeks ago investment bank, Morgan Stanley released a research report on the state of the European mobile telecommunications market. Unfortunately, the report concluded that:
“…in the six major European mobile markets there is little correlation between data consumption and average revenue per user, suggesting the industry’s reliance on pushing data may have been misjudged…”
For Vodafone’s management and shareholders alike, this is a worrying statement. When considering the above statement, it is entirely reasonable to suggest that Vodafone’s £19bn Project Spring investment may not turn the company’s fortunes around as expected.
Running out of timeÂ
Despite these plans for growth, there is no way to sugar-coat it: Vodafone is struggling, it’s as simple as that.
However, only time will tell if the company’s ‘Project Spring’ will help boost earnings and allow the company to push ahead of its peers. The project is a big multi-billion pound gamble, and things could get even worse for Vodafone if this spending does not pay off.Â
Specifically, Vodafone only generated £6.2bn in cash from operations during 2013, while the dividend payout cost £5bn. This does not leave much room for error at all.