Vodafone sounds out market for NZ partial float

Vodafone NZ chief executive Russell Stanners. Photo / Greg Bowker

Britain's Vodafone has embarked on a "non-deal roadshow" to tell the world about its New Zealand operation before a possible partial sale of the company some time next year.

Fund managers said Vodafone presented to New Zealand institutional investors last week and are off on a global road show.

If sufficient interest is shown, the company may then decide to proceed with a more formal initial public offer (IPO) process and float Vodafone NZ on the local exchange.

Buried within Vodafone Plc's first half result, issued on November 14, the company said: "We intend to explore a potential initial public offer Vodafone New Zealand during calendar 2018."

In its result for the six months Vodafone Plc said the New Zealand company's service revenue grew by 0.3 per cent over the half, with growth in mobile partially offset by pressure in fixed line income.

The possible stock exchange debut of Vodafone has been on the cards for some time but it suffered a setback in February when the Commerce Commission knocked back a proposal to merge with Sky Network TV.

By the time the company regrouped after that setback, the proximity of the general election meant an Vodafone offer was off the table, fund managers said.

The non-deal roadshow was designed to gauge interest and to educate prospective investors, but offered little in the way of detailed financial performance.

However, in August the company's books were back in the black after three years in the red, according to accounts registered with the Companies Office.

Vodafone reported a profit of $57.5 million in the 12 months ended March 31, turning around a loss of $18.3m a year earlier.

Earnings before interest, tax, depreciation and amortisation rose 8 per cent to $423.3m. At that level, Vodafone's earnings would represent under half the size of Spark's EBITDA in the year to June, which came to $1.02 billion.

Vodafone NZ would be a welcome sight on the NZX, which has been starved of new listings in recent years and which now faces the departure of one of its star performers, Xero, when that company makes Australia its primary listing location next year.

"It will be a very interesting business if we can get it on the market," Salt Funds Management managing director Paul Harrison said.

"It will depend on the price that Vodafone can get for it," he said.

"We have seen, conceptually, what they have presented, so we would need to see the final numbers before you could get a final valuation it."

One other fund manager said Vodafone was "an income-producing business that may generate an OK dividend".

Aside from the possible debut of Vodafone, fund managers see little else on the IPO horizon, aside from the usual top-up capital raising that companies require from time to time.

How the company is received abroad may depend on the overseas perception of New Zealand's macro-economic situation at the time, he said.

The Government will face economic headwinds next year, according to Westpac economists - who have joined a growing list of analysts downgrading the short-term outlook for GDP growth.

The now-defunct Sky TV deal involved Sky buying Vodafone New Zealand for $3.44 billion in cash and shares in a reverse takeover which would have seen Vodafone Plc own 51 per cent.

Auckland-based Vodafone was formed in 1998, after Vodafone purchased Bell South's New Zealand operations.