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Vodafone Sells Stake in China Mobile for $6.5 Billion After Value Doubled
Vodafone Group Plc sold a stake in China Mobile Ltd. for HK$50.9 billion ($6.5 billion) in the biggest divestment since Chief Executive Officer Vittorio Colao took charge in 2008.
Newbury, England-based Vodafone sold about 642.9 million shares for HK$79.20 apiece in a sale that began yesterday and was completed today, according to a term sheet for the sale obtained by Bloomberg News. China Mobile fell the most in more than a year in Hong Kong trading.
Vodafone, which acquired its 3.2 percent stake in China Mobile in two transactions between 2000 and 2002 for $3.25 billion, doubled the value of that investment and has said it doesn’t consider its minority holdings essential. Shareholders have been pushing management to squeeze more out of Vodafone’s holdings, which still include 45 percent of Verizon Wireless and 44 percent of Paris-based SFR, which are majority owned by Verizon Communications Inc. and Vivendi SA, respectively.
“Vodafone built this global wireless empire, buying minority interests throughout the world with the idea they would find synergies,” Paul Wuh, an analyst at Samsung Securities Co. in Hong Kong, said in an interview today. “The strategy hasn’t worked, so they’re saying, ‘Let’s dispose of the non-core assets.’ This one is relatively easy to decide. They only have 3.2 percent interest, and they can’t influence China Mobile.”
Shares Decline
China Mobile dropped 3.9 percent to HK$78.80 as of the midday trading break on the Hong Kong Stock Exchange, headed for the biggest decline since Aug. 17, 2009. Vodafone rose 0.1 percent to close at 159.9 pence in London yesterday.
The sale will have little impact on China Mobile, said Flora Wu, a telecommunications analyst at BDA China Ltd. in Beijing.
“I didn’t see much substantial cooperation” between the companies, Wu said by phone.
China Mobile, 74 percent held by state-owned China Mobile Communications, is the world’s biggest phone carrier by market value and number of subscribers.
About 70 percent of the proceeds from Vodafone’s sale will be returned to shareholders through a stock repurchase, and the rest will be used to pay down debt, Vodafone said yesterday. Morgan Stanley, UBS AG and Goldman Sachs Group Inc. are managing the offer.
Rainie Lei, a Hong Kong-based spokeswoman for China Mobile, said she couldn’t immediately comment. Vodafone is free to sell its shares, she said before the British company released its statement yesterday.
--Edmond Lococo, Zijing Wu. With Assistance from Matthew Campbell in London and Mark Lee in Hong Kong. Editors: Terje Langeland, Jonathan Annells
To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at +86-10-6649-7507 or elococo@bloomberg.net; Zijing Wu in London at +44-20-7330-7613 or zwu17@bloomberg.net
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