Nokia admits there may still be some Alcatel Lucent skeletons in the closet

Finnish kit vendor Nokia has filed its annual report with the SEC and in it flagged up some legacy issues from Alcatel Lucent that may still be a problem.

In the lengthy ‘risk factors’ section, Nokia indicates that, even years after it completed the acquisition of Alcatel Lucent, it’s still digging up stuff that may present some kind of threat to the company. Here’s the relevant passage in full.

“During the course of the ongoing integration process, we have been made aware of certain practices relating to compliance issues at the former Alcatel Lucent business that have raised concerns. We have initiated an internal investigation and voluntarily reported the matter to the relevant regulatory authorities, with whom we are cooperating with a view to resolving the matter. The resolution of this matter could result in potential criminal or civil penalties, including the possibility of monetary fines, which could have a material adverse effect on our business, brand, reputation or financial position.”

Asked for further comment on the matter Nokia just stressed that “although this investigation is in a relatively early stage, out of an abundance of caution and in the spirit of transparency, Nokia has contacted the relevant regulatory authorities regarding this review.” There’s no reason not to take that statement at face value at this stage, but while the extent of the material effect this could have on Nokia remains uncapped it will surely remain a significant concern.

Iran is also addressed in the risks section, with Nokia noting the dilemma that, while Europe is relaxing its sanctions against the country, the US is moving in the other direction and ramping them up. “As a European company it will be quite challenging to reconcile the opposing foreign policy regimes of the US and the EU,” it laments.

Since the US has shown an unlimited capacity for vindictiveness towards companies that do business with Iran Nokia has sensible decided not to do any more business there for the time being. “Although we evaluate our business activities on an ongoing basis, we currently do not intend to accept any new business in Iran in 2019 and intend to only complete existing contractual obligations in Iran in compliance with applicable economic sanctions and other trade-related laws,” said the filing.

Lastly the risks section also mentions HMD Global, which licenses the Nokia brand to put on its smartphones. It doesn’t make reference to any specific case but notes “Nokia has limitations in its ability to influence HMD Global in its business and other operations, exposing us to potential adverse effects from the use of the Nokia brand by HMD Global or other adverse development encountered by HMD Global that become attributable to Nokia through association and HMD Global being a licensee of the Nokia brand.” How timely.

América Móvil strengthens its position in Brazil with Nextel acquisition

The Latin American mobile heavyweight América Móvil has agreed to acquire its competitor Nextel in the Brazilian market for $905 million.

Shortly after the deal was announced by América Móvil on Monday, and the board of NII Holdings, which owns 70% of Nextel, announced that it would propose to the shareholders to accept the offer. The other 30% of Nextel is owned by AI Brazil Holdings, the local operation of Access Industries, an American private company whose portfolio includes natural resources, telecoms, internet services, as well as Warner Music, among other media interests.

The nature of the deal, “cash free / debt free”, will let NII and AI Brazil keep all the cash while América Móvil will not assume Nextel’s debts. Although the total transaction value is less than 1.5 times of Nextel’s annual revenues in 2018 ($621 million), it represents almost four times NII’s market capitalisation on its latest trading day on NASDAQ ($229 million), indicating the buyer’s relatively strong confidence in the business prospect.

Brazil is a highly competitive market. According to research by Ovum, by Q4 2018, Vivo (owned by Telefónica) led with one third of the total mobile market, while TIM and Claro (América Móvil’s existing operation in Brazil) were vying for the second place, each serving about a quarter of the total mobile subscribers. Nextel had slightly over 1% market share. The rest of the market is served by Oi (a JV between Altice Portugal, formerly Portugal Telecom, and Telemar, Brazil’s largest integrated telecom operator).

After the acquisition, América Móvil plans to combine Nextel with Claro to “consolidate its position as one of the leading telecommunication service providers in Brazil, strengthening itsmobile network capacity, spectrum portfolio, subscriber base, coverage and quality, particularly in the cities of São Paulo and Rio de Janeiro, the main markets in Brazil.”

For NII, selling Nextel in Brazil represents the end of an era. The company once operated mobile services in multiple North and Latin American markets, including the eponymous professional radio service in the US, which was later acquired by Sprint. Brazil is its last operation, where it has been struggling in a classic four-operator market. Not only has it not been able to break into the leader group, but also seen business declining fast. The revenues in 2018 were a 29% decline from 2017 ($871 million), which itself was a 12% decline from 2016 ($985 million).

“The announcement of this transaction marks the culmination of an extensive multi-year process to pursue a strategic path for Nextel Brazil and provides our best opportunity to monetize our remaining operating assets in light of the competitive landscape in Brazil and long-term need to raise significant capital to fund business operations, debt service and capital expenditures necessary to remain competitive in the future,” said Dan Freiman, NII’s CFO. Earlier potential buyers included Telefónica Brasil, Access Industries (NII’s JV partner), though the most concrete case was TIM, which, according to Reuters, approved a non-binding offer in November last year. None of these negotiations has come to fruition.

“Management and our Board of Directors believe the transaction is in the best interest of NII’s stockholders,” Freiman added.

Ciena bags 20.5% growth perhaps thanks to Huawei dilemma

Optical networking company Ciena posted positive results for the first quarter of 2019, with total revenues of $778.5 million beating analyst expectations.

There have been whispers in corners of various conferences that a Huawei ban could benefit some, and it may well be having a positive impact for Ciena. While there are numerous other companies which would compete with Huawei in the optical equipment segment, with Ciena one of the few ‘pure-play’ companies it might have a more notable impact on the financials.

That said, irrelevant of where the favourable fortune has come from investors will be happy. $778.5 million represents a 20.5% year-on-year increase for the first quarter, while nearly all geographical markets have shown healthy growth.

“We began fiscal 2019 with a very strong first quarter performance, including outstanding top and bottom line growth as well as continued market share gains,” said Gary Smith, CEO of Ciena. “We believe that the combination of our leading innovation and positive industry dynamics will enable us to further extend our leadership position.”

Net income for the quarter stood at $33.6 million, though this is incomparable to the same period of 2018 which registered a loss of $473.4 million thanks to President Donald Trump’s US tax reform.

Looking at the regions, in the US, a market which now accounts for 62% of the company’s total revenues, the earnings grew just over 20% to $485.5 million, while 20% growth was also registered in the APAC region. The big success story however was in Europe, where the team grew the business by 32% to $129.2 million. This is still only 16.6% of the total haul for Ciena, but more geographical diversification will certainly be welcomed.

For Ciena, Europe could be a very interesting market over the next couple of months. With Huawei coming under increasing scrutiny globally, telcos will look to further diversify supply chains to add more resilience and protect themselves from potential government bans. While the anti-China rhetoric being spouted out by the White House is losing momentum, the European Union is reportedly looking some sort of ban, even if this puts the Brussels bureaucrats at odds with some member states.

For such vast investments, telcos will be looking for certainty and consistency from government policies. When looking at Huawei as a potential vendor, telcos will naturally be nervous, even if they don’t want to admit it.

With Huawei’s ban set to have little impact on the US market, it is not a major supplier to the market historically, the Europe could be a hidden goldmine for Ciena.

Interestingly enough, this scenario also seems to be paying off dividend in the APAC markets as well. Smith notes the success in the APAC region has come from Australia, Japan and Korea, three markets where Huawei has either been explicitly banned or is receiving a rather frosty welcome.

O2 confirms 2019 5G launch

Telefonica’s UK business O2 has confirmed it will launch 5G in 2019, though there will be much more of a business twist to the new connected euphoria.

Mixed in with the management team reporting financial results for the last twelve months, the team announced the network upgrade, which will be fuelled by a £1 billion CAPEX investment over 2019. What is worth noting is the O2 management is pitching 5G with more of a business facade than competitors are offering.

Although specific dates have not been revealed, the network will first launch in Belfast, Cardiff, Edinburgh and London, while the rollout will continue throughout the rest of the UK through 2020, as compatible smartphones become more readily available.

“Mobile is one of the most powerful opportunities for growth in the economy and 5G is just the next step,” said COO Derek McManus. “We’re building a 5G economy is coalition with British business.”

What is not entirely clear is how much of this £1 billion investment will be directed towards 5G and what will be left over for the 4G network. O2 has been investing healthily in its network over the last couple of months, CAPEX investments in 2018 accounted for 12.9% of total revenues, and CEO Mark Evans expects this to continue.

According to Evans, 5G will not be forced on consumers once launched, but there will naturally be early adopters queuing up. Selling 5G to the consumer is going to be a tricky task for many telcos, 4G is arguably fast enough for all available applications and services, and to ensure O2 is generating ROI, the enterprise world is going to be a focus for the team.

This is not necessarily out of character for the telco either. Over the last couple of months, O2 has been targeting enterprise for growth, perhaps realising fortunes are not going to be realised in the consumer segment. As the market leader, O2 now has 32.6 million connections on its network (including MVNOs) and the expense of artificially attempting to force future growth might exceed the benefit. Growing in the enterprise market, while maintaining a leadership position in the consumer world, is certainly a sensible strategy.

“The company is taking a cautious wait and see approach to 5G,” said independent analyst Paolo Pescatore. “However, it can’t afford to be left behind. It is apparent that initial consumer appetite for 5G will be limited. A greater focus on enterprises is a sensible approach.”

Over the last couple of months, O2 has been running its FTSE 100 5G testbed to identify the usecases which mean the most to British business. Although McManus was not forthcoming on specific partners and customers, he did suggest there was strong progress being made in the agriculture, retail, transport and industrial segments. O2 will certainly not turn away any consumers who want to upgrade to 5G, but there does seem to be much more of a business twist to the super-charged network plans than we’re seeing at other UK telcos.

That said, while there is certainly a stronger focus on business, fixed wireless access seemingly has not been ruled out as a 5G usecase, potentially opening the door for a convergence offering. Evans pointed out that there would certainly be customers who would use the 5G connectivity for FWA but stopped short of completely ruling out this type of service from O2.

According to both Evans and McManus, FWA can make sense in some circumstances, take rural locations as an example, but long-term there are better options. With the country being fibred up, FWA as 5G validation is weak.

Moving over to the financial results, there are certainly some healthy numbers here. Total revenues for the last twelve months went just past £6 billion, a 5.4% year-on-year increase, while operating income was £1.6 billion, a 11.8% boost in comparison to 2017. O2’s subscription base grew to 25 million, with the total of 32.6 million including MVNOs such as Tesco Mobile, Sky Mobile and Lycamobile, as well as its own sub-brand Giffgaff.

CFO Patricia Cobian pointed towards increased data consumption and the introduction of three new offers as fuel for the positive results. In Q1, O2 updated its roaming plans to include the US and Australia (amongst other countries), while in Q2 the team launched a family plan and in Q3 Custom Plan debuted, allowing customers to decide how they pay for subsidized devices. With net additions standing at 282,000 across 2018 and churn below 1%, the offers certainly seem to be having a positive impact.

The Priority initiative has once again proved successful for the business. Some might feel this is a card which is underplayed by the O2 team, but customers certainly enjoy it. Over 8 million Priority offers accepted across the year, 42 million entries made to prize draws and £26.7 million saved in offers and freebies.

In terms of value adds, O2 is doing a great job in rewarding customers but limiting its own exposure. For example, the Telefonica parent group has relationships in place all around the world to fuel the roaming offer, the custom plans make few changes to revenues and the Priority initiative is more about connecting two parties, rather than a big financial outlay. BT has tried to add value by spending billions on TV content, but O2 is using current assets in an intelligent way to create value for customers and partners.

O2 isn’t changing the world with these results, but the UK is a relatively sedate telco market. That said, the telco is in a very healthy position moving forward. With a sensible touch crafting a business visage to 5G, a loyal customer base and big investment plans, O2 will not be easily giving up its leadership position.

SingTel saw Q4 profit drop by 14%

SingTel reported almost flat revenues and 14% decline in net profit in the quarter ending 31 December 2018, blaming negative influence from its investments in Australia and India.

In its quarterly results announcement, SingTel reported a 1% year-on-year growth in revenues to S$ 4.626 billion (1 Singapore $ = 0.74 US$), or 4% in constant currency, but 11% decline in EBITDA, and 14% decline in net profit. The first nine months of FY2019 saw revenues almost unchanged (up by 0.2%) of the same period the previous year, EBITDA down by 8%, and net profit down by 51%. The total free cash flow is still solid at S$2.5 billion although it went down by 10% from a year ago.

“We have stayed the course despite heightened competition and challenging market and economic conditions. We’ve continued to add postpaid mobile customers across our core business in both Singapore and Australia while making positive strides in the ICT and digital space,” said Chua Sock Koong, Singtel Group CEO. “We remain focused on investing in networks and building our digital capabilities – areas that are important to our customers and our future success. We will also step up on managing costs, growing revenues and driving efficiencies through increased digitalisation efforts.”

The key factor that impacted the results was the return on its investment in regional associates. The total profit before tax (PBT) in its regional associate portfolio went down by 35% to S$342 million. The worst hit was Airtel, which suffered a S$167 million decline in PBT and registered a pre-tax loss of S$129 million. When broken down to different markets, Airtel fared better in Africa but came under “continued pricing pressures” (from Jio)

In Australia, SingTel’s subsidiary Optus has delivered a healthy growth of 16% in total revenues  to A$1.64 billion (1 Australian $ = 0.71 US$). The mobile operator also switched on Australis’s first commercial 5G network in January. The slower than expected migration to NBN by broadband users, however, has brought in a 9% decline in mass market fixed revenue.

Despite lowering its outlook for the full financial year (ending 31 March) from stable EBITDA to single digital decline, SingTel was still confident in its long-term prospective. “Our long-term view on our regional associates remains positive as they continue to ride the growth in data and execute well against the challenges and competition,” added Chua, the CEO. “We expect the regional markets to revert to more sustainable market structures and deliver long-term profitable growth. Meanwhile, we are working closely with them to build a regional ecosystem of digital services that leverages the Group’s strengths and unlocks the value of our joint mobile customer base of over 675 million.”

 SingTel 3QFY2019 results

Legere and T-Mobile running riot again

He might be wild-eyed, egotistical and unconventional, but you can’t argue with the results T-Mobile US CEO John Legere is delivering shareholders.

Reporting 2018 full year financials, T-Mobile US has continued the rip-roaring success of the last few years. Total revenues for 2018 finished at $43.3 billion, up 7% year-on-year, alongside 7 million net customer additions, 4.5 million of which were in the lucrative branded postpaid segment.

“This never gets old,” Legere proclaimed. “T-Mobile finished another year with record breaking financials and our best-ever customer growth. Record revenues, strong net income, record Adjusted EBITDA, our lowest-ever Q4 postpaid phone churn that was better than AT&T for the very first time.

“T-Mobile is competing hard and winning customers – and we continue to deliver results beyond expectations. Our 2019 guidance shows that we expect our incredible standalone momentum to continue.”

All this, and the telco still hasn’t launched the much-anticipated TV offering.

When Legere first walked into the room as CEO in September 2012 investor jaws must have hit the floor. This is not a man who looks like a business leader in one of the most risk-adverse and stuffy industries on the planet, and when the first Uncarrier move was announced in 2013, a few must have been close to passing out.

Going against everything which everyone knew in the industry, March 2013 saw the introduction of the first Uncarrier offer. A new streamlined plan for customers which dropped contracts, subsidized phones, coverage fees for data, and early termination fees. This was certainly a break from the status quo and since this point numerous new Uncarrier moves have been introduced almost doubling revenues (2012 full year was $22.5 billion). It might not be traditional, but this is a success story like few others.

At the end of the three-month period, T-Mobile had a total of 79.6 million customers and a postpaid churn rate of 0.99%. This is still a company which should be considered a challenger, but T-Mobile US is making steady progress. It is not accelerating towards the leadership duo of Verizon and AT&T, but it certainly is not slowing up either. The big question is whether this momentum can be maintained.

With 5G on the horizon, the team certainly have the raw materials to create another few Uncarrier plays. Deployment of 600 MHz is setting the scene for a launch, with the team promising the network will be ready for the introduction of the first standards-based 5G smartphones in 2019. By the end of 2018, T-Mobile US claims to have cleared spectrum for approximately 135 million POPs and with the ambition to clear spectrum covering 272 million POPs by the end of 2019.

All this and the team still hasn’t done anything with the Layer123 purchase of December 2017. Alas, a TV Uncarrier move is just something we’ll have to look forward to over the next couple of months.

If you thought your January was tough, Vodafone Idea just lost 35mn subs

Most people consider January one of the worst months of the year, but Vodafone Idea could potentially trump your misery after reporting a year-on-year decline of 35 million subscriptions.

As is now commonplace with any CEO of a major business, Balesh Sharma was all a twirl spinning off the tough times of the quarter as positives, and in fairness there are some valid points. From a financial perspective, total revenues decreased 2% year-on-year to roughly £1.27 billion, while total subscriptions declined from 422.3 million in Q3 to 387.2 million for the last three months.

“We are progressing well on our stated strategy,” said Sharma. “The initiatives taken during the quarter started showing encouraging trends by the end of the quarter.

“We are moving faster than expected on integration, specifically on the network front, and we are well on track to deliver our synergy targets. We remain focused on fortifying our position in key districts by expanding the coverage and capacity of our 4G network, and target a higher share of new 4G customers, while offering an enhanced network experience to our customers. The proceeds from the announced capital raise will put us in a strong position to achieve our strategic goals.”

Looking at Sharma’s reasons, firstly on the revenues it might not be as bad as it looks. The most recent figures are being compared to a period where the two firms accounting policies were not aligned, while there was always going to be a bit of heavy going through the initial integration process. On the subscriptions front, the team blamed the fact that various customers consolidated spending from multiple to single SIMs.

On the 4G side of things, the total subscription base did increase to 75.3 million, up 9.5 million during the quarter, while coverage has also increased. The combined business is starting to generate notable benefits, national roaming was introduced on both networks, with each brand now offering 4G across all 22 service regions. During the three months, 11,123 4G sites were added to the network.

At first glance, this might not be the most comfortable reading, but you have to bear in mind this is a business which is starting to find its feet. Merging two businesses is never the easiest of jobs, but with the threat of Reliance Jio causing havoc everywhere Indian telco executives look, the pressure is certainly higher.

Reliance Jio has forced evolution onto the Indian telco industry, with victims scattered all over the landscape. The Telenor evacuation was first, Airtel is flagging, Reliance Communications has been decimated and the merger between Vodafone and Idea was the other major casualty. The team has to be given time to create a business which can provide suitable resistance to the Reliance Jio momentum, but Sharma will be wary he doesn’t have much.

Google investors slightly spooked by free-spending execs

Revenues might well be booming again at Google, but it seems shareholders are slightly concerned by increased costs, which is one of the fastest growing columns in the spreadsheet.

Looking at the final quarter, revenues stood at $39.3 billion, up 22% year-on-year, though traffic acquisition costs (TAC), what Google pays to make sure it is the dominant search engine across all platforms, operating systems and devices, were up by over $1 billion. Cost-per-click on Google properties were also down. A glimmering ray of sunshine was higher-than-expected seasonal growth for premium YouTube products and services.

Total revenues for 12 months ending December 31 stood at $136.8 billion, up 23% over 2017, while net income was back up to the levels which one would expect at Google, raking in $30.7 billion. The company is not growing as quickly as it used to, while expenses are starting to stack up. Investors clearly aren’t the happiest of bunnies as share price declined 3.1% in overnight trading.

“Operating expenses were $13.2 billion, up 27% year-over-year,” said Alphabet CFO Ruth Porat. “The biggest increase was in R&D expenses, with the larger driver being headcount growth, followed by the accrual of compensation expenses to reflect increases in the valuation of equity in certain Other Bets.

“Growth in Sales and marketing expenses reflect increases in sales and marketing headcount primarily for Cloud and Ads followed by advertising investments mainly in Search and the Assistant.”

Headcount by the end of the last period was up by more than 18,000 employees to 98,771. While CEO Sundar Pichai was keen to point out the business is continuing to invest in improving its core search product, diversification efforts into areas such as the smart speaker market, cloud and artificial intelligence are hitting home. Perhaps investors have forgotten what it’s like to search for the next big idea.

For years, Google plundering the bank accounts with little profit to offer. These days are a long-distant memory, but it is the same for every business which is targeting astronomical growth. You have to perfect the product and then scale. A dip in share price perhaps indicates shareholders have forgotten this concept, but Google is doing the right thing for everyone involved.

Some businesses search for differentiation and diversification when they have to, some do it because they have ambition to remain on top. Those who are searching because they have to are most likely reporting static or declining numbers each month and did not have the vision to see the good days would not last forever. Google is pumping cash into the next idea so when growth in its core business starts to flatten, something else can pick up the slack and pull the business towards more astronomical growth.

This is what is so remarkable about the ‘other bets’ column on the spreadsheets. It might have costs growth every single year, as does the wider R&D column, but having graduated the cloud computing business and most recently Loon, there are businesses which will start to contribute more than they are detracting. This is a company which never sits still, and this is why it is one of the most admired organizations from an entrepreneurial perspective. Shareholders might do well remembering this every now and then.

Looking at joy around the world for the final quarter, US revenues were $18.7 billion, up 21% year-over-year, while EMEA brought in $12.4 billion, up 20% and APAC accounted for $6.1 billion, up 29%. Revenues in LATAM were $2.2 billion, up 16% year-over-year. APAC and LATAM were subject to negative FX fluctuations, particularly in Australia, Brazil and Argentina.

In the specific business units, Google Sites revenues were $27 billion in the quarter, up 22%, with mobile collecting the lion’s share, though YouTube and Desktop contributing growth also. Cloud, Hardware and Play drove the growth in the ‘other’ revenues for Google, collecting $6.5 billion, up 31% year-over-year for the final quarter.

Although these diversification efforts are growing positively, there are also some risks to bear in mind. Firstly, the cloud computing business is losing pace with Microsoft and AWS. Google is making investments to attempt to buy its way through the chasm, but it will be tough going as both these businesses make positive steps forward also.

Secondly, some properties and developers are choosing to circumnavigate the Google Play Store, instead taking their titles direct to the consumer. This is only a minor segment of the pie for the moment and there will be a very small proportion of the total who actually have the footprint to do this (Fortnite for example), though it is a trend the team will want to keep an eye on. Perhaps the 30% commission Google charges developers will be reconsidered to stem dissenting ideas.

Finally, the data sharing economy which will sit behind the smart speaker and smart home ecosystem is facing a possible threat. Google will not make the desired billions from hardware sales, but it will from the operating systems and virtual assistant powering the devices. Collecting referral fees and connecting buyers with sellers is what Google does very well, though this business model might be under threat from new data protection and privacy regulations.

The final one is not just a challenge to the potential billions hidden between the cushions in the smart home’s virtual sofa, but the entire internet economy. GDPR complaints are currently being considered and potential consequences to how personal data is collected, processed and stored are already being considered. The Google lawyers will have to be on tip-top form to minimise the disruption to the business, and wider data sharing economy.

Costs might be up and while there are dark clouds on the horizon, Pichai and his executives are moving in the right direction. The lawyers can lesson the potential impact of regulation, but the exploration encouraged by the management team in the ‘other bets’ segment is what will fuel Google in the future. Costs should be controlled, but spending should also be encouraged.

Amazon made obscene amounts of money in 2018

Internet giant Amazon made $232.9 billion last year, which was up 31% from the previous year.

The increase was almost exactly the same percentage at the previous year, indicating Amazon’s impressive growth is showing no sign of slowing. Its Q4 revenue growth was a mere 20% to $72.4 billion, but net income was up 58% to $3 billion, which helped amazon reach $10.1 billion net income for the full year, more than triple what it managed in 2017.

By far the main reason Amazon is suddenly so much more profitable is AWS – its cloud services division. Considering its origins as a way to monetize surplus datacentre capacity, it’s especially impressive that this division raked in $25.6 billion last year, yielding an operating income of $7.3 billion. For some reason CEO Jeff Bezos chose to bang on about Amazon’s voice UI platform Alexa instead in his earnings comments.

“Alexa was very busy during her holiday season,” he said. “Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year. The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team’s hard work are clear.

“In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20% through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017. We’re energized by and grateful for the response, and you can count on us to keep working hard to bring even more invention to customers.”

Great, thanks for that Jeff. One other business segment that’s worth noting is appropriately enough, ‘other’. This covers advertising – in this case premium positioning on the Amazon site, especially for Prime subscribers of which there are over 100 million – and it doubled its revenue in the quarter. Thankless investors still drove Amazon’s share price down by 5%, ironically enough, after it announced it expects to increase its investment spend this year.