British mobile phone giant Vodafone Group Plc (VOD) has agreed to sell its entire 24.4% stake in Poland’s Polkomtel to Spartan Capital Holdings for around €920 million ($1.34 billion) in cash, before tax and transaction costs.
The Polkomtel sale is the fourth initiative in Vodafone’s strategy, announced last year, to exit minority holdings. Vodafone, the largest revenue generating international wireless carrier, will use the net proceeds from the sale to pay down debt. The deal is expected to be completed in the fourth quarter of 2011, subject to approval from Polish authorities.
As part of the same strategy, the company sold its 44% stake in the French joint venture, SFR, to Vivendi for €7.95 billion ($11.3 billion). Vodafone is expected to return €4.5 billion ($6.4 billion) of the net proceeds to its shareholders in the form of share buybacks. The remainder will be used to pay down debt.
Moreover, Vodafone sold its entire 3.2% stake in China Mobile last year, for £4.3 billion ($6.6 billion). In addition, the company is in the process of exiting minority holdings in the Japanese wireless operator Softbank Corporation for £3.1 billion ($5 billion).
The first tranche was sold in December 2010 for £1.6 billion and the other is expected in April 2012 for £1.5 billion. These three transactions will help Vodafone to reward shareholders in the form of share buybacks totaling £6.8 billion.
Currently, Vodafone is reviewing the sale of a 45% stake in Verizon Wireless, its venture with Verizon Communications (VZ).
The divestment strategy enables Vodafone to focus particularly on Eastern Europe, Africa and India for the adoption of mobile data. This new strategy, aimed at fully capitalizing the prospects in emerging markets, is expected to generate annual organic service revenue growth in the range of 1% to 4% and free cash flow in the range of £6.0 billion to £7.0 billion over the next three years.
We are currently maintaining our long-term Neutral rating on the stock. Vodafone also retains the Zacks #3 (Hold) Rank for the short term.
VODAFONE GP PLC (VOD): Free Stock Analysis Report
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