Vodafone's �7bn sale of a share in French mobile group SFR looks insignificant compared with the sums at stake in its Verizon Wireless joint venture
When you declare that you are willing to sell an asset that has only one possible buyer, there is a clear risk that you will get thumped on price. Happily for Vodafone shareholders, chief executive Vittorio Colao somehow seems to have avoided this fate in his deal to sell 44% of SFR to Vivendi, owner of the rest of France's second largest mobile phone network.
At ?7.95bn (�7bn), Vodafone will receive at least ?1bn more than some gloomy predictions. Indeed, Vivendi itself had been hinting that it might be able to get away with paying as little as ?6bn. It is not clear why the French firm was pushed so much higher but the suspicion is that Vivendi's need to shake up its portfolio to satisfy frustrated shareholders was even greater than Vodafone's.
"We are not here to manage minorities," Colao said last summer, and the latest disposal ? plus last week's $5bn deal to buy the outstanding third of Vodafone Essar in India ? are part of that story. The 3.3% holding in China Mobile has also been turned into cash and a smaller Polish investment is likely to go the same way. The old criticism that Vodafone is a telecoms investment trust is becoming harder to sustain.
The big holding, though, remains: the 45% stake in Verizon Wireless in the US. Exiting or restructuring that investment is where Colao will earn his corn. The drumbeat towards a deal has been getting louder as Verizon Wireless moves to a position of distributing dividends next year, which has always been regarded as the trigger for action.
The broad analysis seems correct but doesn't offer a guide as to who will win the negotiations. It's not just price, where estimates of a "good" outcome for Vodafone range from $50bn to $65bn. There is also a potentially huge capital gains tax bill to contemplate, or to be mitigated, which is why a grand merger between Vodafone and Verizon cannot be ruled out.
The uncertainty is perhaps the reason Vodafone's share price barely budged afterthe SFR stake disposal; ?1bn saved in France is welcome news but Colao is playing for much bigger money in the US.
Source: http://www.guardian.co.uk/business/2011/apr/04/vodafones-big-call-in-the-us
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