By Kate Holton
BARCELONA, Feb 25 (Reuters) - British mobile operatorVodafone said it did not need to sell part of its stakein its highly profitable Verizon Wireless joint venturein the United States to bolster its business in Europe.
Chief executive Vittorio Colao told reporters on MondayVodafone had a healthy balance sheet and could invest when itneeded to, adding it could step up its range of services withouthaving to make acquisitions.
"The two things are not totally linked," Colao said, on thesidelines of the Mobile World Congress when asked about the needto sell down the Verizon stake which contributed over halfVodafone's adjusted first-half operating profit. "If it is rightto make some investments, we will make some investments."
Facing falling revenue in its core European markets fromeconomic pressures and fierce competition, Vodafone has comeunder pressure to cut its 45 percent stake in Verizon to fundthe purchase of fixed-line assets to increase its product range.
Vodafone has hired Goldman Sachs to advise on apossible 10 billion euro ($13 billion) bid for German cableoperator Kabel Deutschland, a source with directknowledge of the matter has told Reuters.
It has been linked with deals in Spain to consolidate amarket which has been hit hard by the economic downturn, withconsumers cutting back on making calls and sending texts.
Vodafone has also been struggling in Italy where Colao, anItalian, said he had seen consumer confidence fall even furthersince October because of political uncertainty as it awaits theresults of an election.
Sector bankers and analysts said Vodafone needs to acquirefixed assets to fight off challenges from low-cost mobileplayers and telecoms and cable rivals pushing discounted,all-inclusive mobile and fixed bundles.
Buying its own fixed assets, such as local cable operators oralternative telecoms providers, would help Vodafone keep up withcompetitors' offers and cut fees paid for fixed access.
It could then also offer so-called quad play services whichincludes fixed, mobile, broadband and TV services, and whichhelp to increase revenues and customer loyalty.
Colao said he would like to offer an array of servicesacross Europe and he could do this either through acquiringassets or renting fixed lines from incumbent operators.
"BIPOLAR" APPROACH
Europe's largest operators have complained since thefinancial crisis hit that there were too many players in eachnational market, resulting in fierce competition and low prices,that hamper their ability to invest in faster networks.
While European regulators recently allowed the cut-throatAustrian market to move to three players from four, Colao saidhe was unsure whether this indicated a change of strategy.
"It is good that it was approved but the undertakings thatwere forced upon them, again indicates a bipolar mentality," hesaid, adding there was pent-up demand across the region forconsolidation.
Vodafone (VOD)