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Vodafone on Tuesday sold its 25 per cent stake in Swisscom Mobile for £1.8bn to Swisscom, the Swiss group’s largest shareholder, as the world’s largest mobile operator continues to reduce its presence in tough markets.
The sale will generate a financial gain of just £100m for Vodafone, which acquired the holding in January 2001. Proceeds from sale will be used to pay down Vodafone’s debt.
The deal is the latest in a series of sales that has seen Vodafone reduce its holdings in established mobile operators to focus on emerging markets where mobile phone ownership is at lower levels.
In March, Vodafone completed the £8.9bn sale of its Japanese mobile unit to Softbank, the mobile telecoms and internet group. Last month it sold a 25 per cent stake in Proximus, the Belgian mobile operator, to Belgacom for €1bn. It has also sold a 100 per cent stake in Vodafone Sweden to Telenor.
However, Vodafone has been active in acquiring a growing presence in emerging markets.
Last year it paid £820m for a 10 per cent stake in Bharti, India’s fastest growing mobile operator. It is also expanding in South Africa and earlier this month became the majority shareholder in its Egyptian mobile subsidiary.
Commenting on Tuesday’s sale, Arun Sarin, Vodafone chief executive, said: “We do not…see ourselves as the most appropriate holder of this minority stake in the longer-term and Swisscom is keen to increase its holding in Swisscom Mobile to drive through synergies in its fixed and mobile businesses.”
Swisscom’s move will be welcomed by investors, who have long argued the debt-free telecoms group should leverage its balance sheet with more borrowings to finance growth.
“In a financial sense this transaction is very attractive for our shareholders”, said Carsten Schloter, chief executive.
Mr Schloter said buying back Vodafone’s 25 per cent stake in Swisscom Mobile would release an additional SFr180m ($147m, £75m) a year for dividends. The transaction would boost earnings per share by 10 per cent.
The money stems from the difference between the roughly SFr300m paid annually to Vodafone in dividends on its Swisscom Mobile stake and the substantially lower interest costs of the long-term money Swisscom will borrow to finance the deal.
“It was attractive for Swisscom to do the deal now”, said Mr Schloter.
Vodafone shareholders have received £700m of dividends in the five years since the acquisition.
Mr Schloter described Vodafone’s willingness to accept a lower price for its stake than originally paid in 2000 as a reflection of the altered value of telecoms assets in Europe.
“The difference between 2000 and 2006 is that there is a little more realism and sobriety in the prospects for the industry. In 2000 we were just before the burst of the bubble,” he said.
Vodafone shares, which broke out of a narrow trading range in September, slipped ¾p to 144½p in early London trading.