Vodafone says sales will cut debt, pay for 3G
(UPDATE: Adds details from press briefing in paras 6, 10-11, 16-17, 19-20)
By Richard Baum
LONDON, May 30 (Reuters) - Cellphone giant Vodafone AirTouch Plc said on Tuesday its sale of Orange to France Telecom would help it finance its bids for third-generation (3G) licences without fresh funding from shareholders.
Vodafone CEO Chris Gent told a teleconference the deal, plus the sale of shares in other businesses, would more than offset the billions of pounds it will have to pay to run broadband mobile services in the UK, Germany and Italy.
But he slammed the way Britain organised its 3G auction to maximise bids, and threatened to move the headquarters of the world's biggest mobile phone operator out of the UK unless the government changed proposed tax rules.
Gent, who also announced a bigger-than-expected rise in annual earnings, said the combined effect of disposals and licence fees would be to reduce Vodafone's debt to 10 billion pounds.
``The group is in a strong position to meet the requirement of UMTS auctions and to meet its obligations to its bond holders,'' he said. ``We won't have to go to shareholders.''
Pre-tax profits leapt 145 percent to 2.15 billion pounds in the year to March 31, after the acquisition of U.S. Airtouch.
Vodafone said a better measure of its like-for-like performance -- proportionate earnings before interest, tax, depreciation and amortisation (EBITDA) -- rose 30 percent to 3.95 billion pounds. Analysts were forecasting 3.7-3.9 billion billion. Turnover climbed 37 percent to 12.57 billion pounds.
CITY WELCOMES NEWS
Vodafone shares, which had fallen 25 percent in the last three months amid concern over its rising debt, rose 6.4 percent to 299.5 pence.
``I think the price they've got for Orange seems a good one. Certainly the numbers (profits) seem slightly ahead of everyone's forecasts,'' said Christian Maher, an analyst at Investec Henderson Crosthwaite Securities.
The results did not include its 180 billion euro ($168.7 billion) takeover of Mannesmann AG, but Vodafone said its EBITDA would have been about 5.4 billion pounds and its turnover 15.7 billion if the German company's mobile businesses were included.
Vodafone -- which said it planned to drop Airtouch from its group name -- currently had debt of 17.6 billion pounds following the Mannesmann acquisition. This would rise by almost six billion pounds when it paid for its UK 3G licence around September.
The 13.8 billion pounds cash proceeds from the Orange sale, plus other disposals, would offset licence fees in Germany and Italy to reduce its debt back to 10 billion pounds by the end of the current financial year, Gent said.
UK AUCTION ATTACKED
He lambasted the way the British government organised its Universal Mobile Telecommunications Systems (UMTS) auction to maximise its proceeds by reserving a specific licence for a new entrant.
``It was much more than we expected to pay,'' Gent said. ``Other governments are having a more open and transparent process without the reservation of specific slots for newcomers.''
Despite the high price of the licence, Vodafone expected returns of at least 15 percent on its investment in 3G services in the UK.
Explosive growth in short message services (SMS) pointed to strong demand for the type of services 3G would offer, he told a press briefing.
About one billion text messages were sent across the Vodafone network in Europe in March, and data now accounted for six percent of group revenues.
Gent said Vodafone expected to pay more for its German 3G licence than its UK one because of the greater population. The group would raise more money for licence fees by floating two fixed-line businesses acquired with Mannesmann.
It planned an inital public offering in Infostrada of Italy in September or October, and of Arcor of Germany a couple of months later. About 20 percent of Arcor will be listed on the Frankfurt exchange, he said, with a larger slice of Infostrada floating in Milan.
U.S. VENTURE FLOAT
Further funds would come from the sale of a stake in Cegetel of France and the disposal announced on Tuesday of Mannesmann's tube business. It will also float its U.S. mobile joint venture Verizon, probably in 2000, to finance that company's licence bids.
Gent declined to say whether Vodafone planned further acquisitions, but said he wanted to expand in Asia, Latin America and the Middle East.
The Vodafone boss threatened to move the company's headquarters from Britain if talks with the government over tax proposals failed. Vodafone was pushing the government to amend measures aimed at preventing tax avoidance but which Gent said could lead to double taxation.
The company expected to resolve the dispute, but would consider moving overseas ``if all else fails''. A newspaper report on Sunday said the company was considering a move to Ireland.
Vodafone said it had 39.1 million customers at the end of March, 54 percent more than a year earlier. It declared a dividend of 1.335 pence per share. |
