Vodafone sells $9b stake in China

LONDON - Vodafone Group's US$6.6 billion ($9.1 billion) sale of its stake in China Mobile is the biggest divestment since chief executive Vittorio Colao took charge in 2008. Investors want to know what is next.

Vodafone sold its 3.2 per cent stake in China's largest mobile phone company yesterday.

About 70 per cent of the proceeds will be returned to shareholders through a stock repurchase and the rest will be used to pay down debt, Newbury, England-based Vodafone said.

Colao, a former McKinsey partner, has said Vodafone was reviewing all its minority stakes.

The UK company, the world's biggest wireless operator, owns 45 per cent of Verizon Wireless and 44 per cent of SFR, which are majority owned by Verizon Communications and Vivendi, respectively.

"People will of course look through this to future disposals," Mark James, an analyst at Liberum Capital in London. "The bigger ones are likely to prove harder."

Vodafone bought its stake in China Mobile, which is 74 per cent owned by the Chinese state, in two transactions between 2000 and 2002 for US$3.25 billion.

The 642.87 million China Mobile shares were sold at HK$79.20 ($14.20) each, the low end of the offered price and 3.4 per cent below Tuesday's close.

Shareholders have been pushing management to squeeze more out of Vodafone's holdings.

Vodafone has not received a dividend from its 45 per cent stake in Verizon Wireless since 2005.

Vivendi, which owns 56 per cent of SFR, has said it would be interested in buying Vodafone's holding in France's second biggest mobile phone operator.

"They've given a pretty clear steer that they're going to look at asset sales," Steve Malcolm, an analyst at Evolution Securities in London, said of Vodafone by phone.

"They have a good dividend agreement with SFR, but if the price is right they'll sell it. Vivendi has signalled pretty clearly that they're interested."

Colao is also pushing managers to eke out more profit from existing operations.

In 2009, he merged an Australian unit with Hutchison Telecommunications' operation in that country, where growth prospects are slim. Under Colao's predecessor Arun Sarin, Vodafone entered markets such as India and Turkey to make up for a slowdown in Europe.

Colao said earlier this year that Europe was one of the company's three "priority areas" alongside sub-Saharan Africa and India.

Vodafone's profile may soon change in India as well. Vodafone's Indian venture partner Essar Group is weighing an initial public offering of a stake in the companies' joint unit, four people familiar with the matter said on July 17.

Vodafone bought a 67 per cent stake in Hutchison Essar in 2007, before seeing its outlook for India sour when six new national licences were awarded a year later.

- BLOOMBERG