France Telecom acquires Orange
U.K.?s Vodafone agrees to sell mobile phone unit
By Gareth Vaughan, FTMarketWatch
Last Update: 4:58 AM ET May 30, 2000 NewsWatch
Latest headlines
LONDON (FTMW) -- France Telecom agreed to pay Vodafone AirTouch 25.1 billion pounds ($37.6 billion) in cash and stock for U.K. mobile phone operator Orange to become Europe?s No. 2 cell-phone company after Vodafone.
The French company said it would combine Orange with its existing cell-phone operations and list the new unit separately on the stock market. Vodafone plans to use the money from the Orange sale to fund bids for more third generation (3G) cell-phone licenses.
France Telecom, which currently has 19 million customers, will also assume Orange?s net debt of 1.8 billion pounds and the 4.1 billion pounds liability Orange paid the U.K. government for a 3G cell-phone license last month.
Under the terms of the deal, Vodafone will take a stake of slightly less than 10 percent in France Telecom, which it plans to sell on the market some time during a two-year period after a six-month lock up ends. The French government?s stake in France Telecom (FR:013330: news, msgs) will be cut to 54 percent from 61 percent.
Vodafone (UK:VOD: news, msgs)gained control of Orange following its acquisition of Germany?s Mannesmann AG earlier this year. As a condition of approving the Mannesmann deal, European Union regulators ruled that Vodafone must cede control of Orange, its fastest-growing domestic rival.
Shares of Vodafone surged 14.5 pence, or 5.2 percent, to 295.75 in London, while France Telecom shed 4.2 euros, or 2.9 percent, to 140.2 in Paris.
France Telecom sets mobile IPO
France Telecom said it would combine its existing mobile assets -- including Itineris - with Orange and list the company named Orange, separately in London, Paris and New York late this year, or early in 2001. Orange chief executive Hans Snook, who?s highly regarded in the mobile phone industry, will head up the new company.
France Telecom expects Orange to have some 30 million customers by the end of the year and said the deal should have a positive effect on its earnings from 2002. The French colossus also expects cost savings related to the Orange acquisition of more than 800 million euros a year by 2003.
In a conference call with journalists, Vodafone chief executive Chris Gent said France Telecom had beaten off competition from Royal KPN NV (KPN: news, msgs) of the Netherlands and WorldCom Inc. (WCOM: news, msgs) of the U.S. for control of Orange. ?France Telecom was the best prepared and wanted to move quickly,? Gent said, adding that he believed Vodafone?s advisers had spoken to one or two other interested parties.
Gent labeled the price France Telecom is paying for Orange and its more than 6 million customers as ?very good.? Mannesmann paid $33 billion for Orange last October when it had some 4 million customers.
France Telecom had become increasingly keen on Orange after the British operator won one of the 3G mobile phone licenses in Britain, which will allow mobile phones to offer services such as high-speed, always-on Internet, quality video and fax. France Telecom pulled out of the expensive bidding process empty handed.
Vodafone?s profit surges
Separately, Vodafone reported a 145 percent rise in pretax profit for the year ended March 31 2000 to 2.15 billion pounds, and earnings per share rose 25 percent -- in line with analysts expectations -- to 4.71 pence from 3.77 pence in the previous year. The dividend per share rose 5 percent to 1.33 pence from 1.27 pence. Revenue rose 37 percent to 12.57 billion pounds. The figures don?t include Mannesmann.
Vodafone said its customer base -- also excluding Mannesmann -- rose 54 percent to 39.1 million from 25.4 million. Gent also said that geographical expansion in Asia and Latin America are ?our highest priorities.?
Gent revealed that the British company plans IPOs of Mannesmann?s fixed-line operations Arcor and Infostrada within the calendar year.
He said although Vodafone?s debt will rise from 10 billion pounds at the start of the year to as much as 23.6 billion after it pays for its U.K. 3G license, the company hopes to cut this back to the 10 billion pounds level by year end.
Vodafone projects 3G mobile services will boost its average revenue per user by 20 percent to 25 percent by 2004. The company also expects a return of 15 percent or higher on its total capital investment in 3G, Gent said.
Gent added that the fact the sale of Orange is tax-free is an added bonus to his company?s shareholders and said the integration of Mannesmann, which Vodafone acquired in a 180 billion euros all stock deal, is going ?splendidly.?
Mobile portal set for June launch
The first commercial services from the Web portal Vodafone?s launching in partnership with France?s Vivendi SA (FR:020091: news, msgs) will be available in Paris in June and then in the U.K. in July, Gent said.
Vodafone?s chief executive said he?d kept Vivendi informed of the deal with France Telecom and his French partner is satisfied that Vodafone?s stake in France Telecom, Vivendi?s main domestic rival, includes no voting rights and will be sold within two years.
-------------------------------------------------------------------------------- |
