UK’s Vodafone may sell its assets in Poland, China and France as it withdraws from underperforming international business from expansion

UK based Vodafone, the world’s biggest telecom operator in terms of revenue, may be mulling the sale of its assets in Poland, China and France. The move is targeted at assuaging investors concerned over the firm’s unimpressive international business expansion. It comes as a withdrawal from its underperforming small businesses globally, a move the firm has been pondering for some time.

Vodafone reported that it is reconsidering its approach after shareholders raised concerns over its discipline with regard to its international growth plans. The move is therefore aimed at enhancing the existing investor confidence in the firm than increasing its revenues, said analysts.  Vodafone will dispose off its minority assets in Poland, China and sooner or later, France. Analysts have said the firm is not under any duress to dispose its assets in order to reinforce its balance sheet or cash flow, it is purely a move aimed at soothing investors.

Further to that, analysts said Vodafone investors were worried over the telecoms giant’s deals that it undertook in the past five to seven years. Analysts posited that the investor worries are necessitated by Vodafone’s poor transaction record, a reputation the firm has gained with each overseas asset acquisition it has undertaken in the mentioned years. Vodafone needs to show its investors that it has regained the investment discipline to avoid poor transactions, said analysts.

The assets to be disposed are expected to have no impact on the overall business of Vodafone in terms of earnings per share and free cash flow, even though they contributed to the same. Reports have suggested that Vodafone may be mulling the sale of almost 25% of its holding in Poland’s foremost telecoms company, Polkomtel PTL.UL as opposed to buying out the other owners. For the Chinese investment, Vodafone controls about 3.2% in China Mobile and analysts have viewed this asset as an easier option to dispose.

However, it is expected that the asset sale in the two countries will be followed by asset sale in France, for which Vodafone controls 44% stake in SFR. Vodafone was pushed into reviewing its plans after investors raised concerns over the fact that Vodafone’s ownership of assets it does not control has resulted into a reduction between the shares and sum of the parts. A disposal of small minority stakes could raise well over £10 billion, to be possibly used to pay off debt, any tax bills, buy spectrum and increase share buybacks.

26 Aug 2010