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Vodafone exits France, collects billions while selling its stake in SFR

Zachary Lutz

Even though we'd much rather be getting our paws all over a new phone, shakeups in the mobile world seem to be a trendy thing as of late, leading us to report that Vodafone has announced the sale of its 44 percent share in French carrier SFR to partner Vivendi. The €7.75 billion deal is leaving the media conglomerate with a 100 percent ownership in France's second largest cellular network, though Voda and SFR have agreed to "maintain their commercial cooperation" for the good of mankind. In case the news slipped by you, the world's wealthiest telecom has been on a selling streak recently, also divesting itself of minority stakes in China and Japan -- all while freeing up gobs of capital to focus on its more strategic markets.

Considering Vodafone owns a 44 percent share in Verizon Wireless, the opportunity is ripe for speculation of what it may do next. While analysts opine that the company may attempt to sell its share in VZW back to Verizon, others see consolidation in the air, hinting that it may do the unthinkable and make a pass at Sprint. While Verizon's CEO has done his utmost to extinguish this rumor, if it were true, the last thing they'd want to do is give it merit -- the result being either driving Sprint's price up, or pushing Verizon's stock down -- depending on the whims of investors. You can now thank us for writing a business article without a single mention of regulators, options or dividends. Oh, wait... there it is.

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Sale of Vodafone's Stake in SFR to Vivendi

03 April 2011

Vodafone1 announces an agreement to sell its entire 44% shareholding in SFR to Vivendi for a cash consideration of €7.75bn (£6.8bn2). Vodafone will also receive a final dividend from SFR of €200m (£176m) on completion of the transaction. In addition, Vodafone and SFR will enter into a Partner Market agreement which will maintain their commercial co-operation.

Vodafone's shareholding in SFR contributed £573m to Vodafone's adjusted operating profit in the financial year to 31 March 2010, and £284m in the six months to 30 September 2010.

£4bn (€4.5bn) of the net proceeds will be returned to shareholders by way of a share buy-back with the remainder of the proceeds used to reduce the Group's net debt. The share buy-back will be carried out after the completion of the existing programme which is expected to be completed in June 2011.

Subject to customary competition authority and regulatory approvals, the transaction is expected to complete during the second calendar quarter of 2011. At 30 September 2010 the SFR investment had a carrying value of €4.9bn (£4.3bn) in Vodafone's accounts. The transaction consideration represents an EV/EBITDA multiple of 6.7x CY10 EV/EBITDA3 and is expected to be neutral to free cash flow per share following completion of the share buy-back.

Commenting on the transaction, Vittorio Colao, Chief Executive of Vodafone said:

"Our Board remains committed to realising maximum value from our non-controlled assets. The sale of our stake in SFR, at an attractive multiple, represents a significant further step in the execution of this strategy. In addition, we have secured a valuable partnership agreement in France which will allow us to continue to deliver compelling cross-border services to both consumer and enterprise customers across the major markets of western Europe.

"By returning £4bn to our shareholders, we are increasing our current buy-back programme to £6.8bn in total, equivalent to over 7% of Vodafone's current market capitalisation."

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