VODAFONE is to spend £7bn upgrading its networks, with an extra £300m committed to the UK, as it prepares for an end to the European economic crisis.

Hundreds of new masts and radios will be installed to boost coverage, with London benefiting from £150m of spend over the next two years, and a 30 per cent increase in masts.

A further £150m will go to the rest of the UK, bringing to £1.2bn the sum Vodafone will spend on its British network over the next three years.

The money is earmarked to improve 3G coverage, provide faster 4G technology and expand Vodafone’s retail empire.

Chief executive Vittorio Colao said: “While trading conditions in Europe remain very tough at present, we are encouraged by the forecast return to economic growth over the next two years and the potential for a shift in regulatory focus to support greater industry investment and consolidation.”

Vodafone added £1bn to the £6bn of cash earmarked for its Project Spring initiative, which will pay for faster and wider mobile internet coverage and expand the group’s TV and broadband activities on the Continent following the £81bn sale of its stake in Verizon Wireless.

The company is betting that a European turnaround will counter another half-year of rapidly falling revenues in its major markets.

Organic service revenue – which includes calls, texts and data charges but excludes handsets – was down nearly five per cent in the six months to September 30 across the group, with northern and central Europe down five per cent and southern Europe nearly 16 per cent. Revenues in Asia and Africa rose by nearly six per cent.

UK service revenue decreased by 4.4 per cent, while in Italy the decline was nearly 17 per cent.

As well as providing cash for networks, the Verizon sale allowed Vodafone to book nearly £17bn of deferred tax losses that it will use to reduce its tax payments over the long term.

The losses, which stem from Vodafone’s acquisition of the German mobile carrier Mannesmann in 2001, could be recognised after the unwinding of the company structures used to hold its US business.

Pre-tax profits for the six months fell four per cent to £6.6bn. That fall contrasted with a £46m profit for the same period last year.

Vodafone is now forecasting £4.5bn to £5bn of operating profits for the full year. It has increased its interim dividend per share of 3.53p by eight per cent, and intends to pay 11p for the full year.

Vodafone’s results came at the same time as fellow UK telecoms firm TalkTalk revealed a £9m pre-tax loss for the six months to the end of September.