Vodafone Expands Femtocell Coverage – Analyst Blog

Vodafone Group plc (VOD) is conducting several femtocell trial runs in Greece and Egypt. The company has already started offering femtocell services in the two large European markets, the UK and Spain, together with Qatar. While Alcatel-Lucent (ALU) supplied chipsets for Vodafone’s UK and Qatar network, Huawei Technologies Co. Ltd. is the chipset supplier for the carrier’s Spanish network.

 

Globally, femtocell is quickly emerging as a fundamental technology enabler in the deployment of next-generation (3G/4G) wireless network infrastructure. In September 2009, AT&T (T) became the first U.S. wireless carrier to deploy a 3G femtocell base station. The US is likely to undergo a massive wave of 3G femtocell in 2010.

 

A femtocell is a small cellular base station, typically designed for use in a residential or small business environment. This access point communicates to the wireless service providers’ network through a broadband connection. Using the femtocell, a wireless operator can improve both coverage and capacity especially in an indoor area where access would otherwise be limited or unavailable, in a highly cost effective way. This will reduce the carriers operating costs as well as capital expenditures.

 

Deployment of 3G femtocell base station is crucial for Vodafone. The company’s core European wireless markets are highly mature, given the high subscriber penetration rates. This has led to increased competition as large numbers of carriers are battling for the available customers. The company is also concerned about deteriorating margins and aggressive price competition in India. The successful implementation of the femtocell may help the company to improve its operating margin and cash flow.

 

We maintain our Neutral recommendation for Vodafone. Currently, it is a Zacks Rank #3 (Hold) stock.