Vodafone to Slow Acquisitions, Says It's Not Banking on Them for Expansion
By Anjana Menon
London, March 7 (Bloomberg) -- Vodafone Group Plc, which became the largest wireless company through acquisitions, said it's not banking on more purchases to fuel growth.
Our ``acquisition list is very, very short,'' said Chief Executive Chris Gent at a meeting with analysts. ``It's mainly about countries we're already in and improving our position rather than new countries. We're adopting a more cautious approach.''
Since the start of the year, Vodafone bought an additional 10 percent of Japan Telecom Co., giving it 25 percent of the country's third-largest telephone company. It has also bid to buy Australia's local mobile phone company Cable & Wireless Optus Ltd. to become the No. 2 cellular company in Australia behind Telstra Corp.
Vodafone leapt from being the U.K.'s top wireless phone company to the world's largest in a 24-month period, boosted by a $170 billion purchase of Mannesmann AG in April. It has sold $47 billion of assets from that purchase to build stakes in phone companies around the world, even as cash-strapped rivals have scaled back.
Vodafone now has about 80 million customers and operations in 30 countries.
Gent also said the company will avoid issuing new shares to fund purchases. Almost 6.7 percent of the company is held by shareholders who got Vodafone stock in exchange for their stakes in cellular companies. That includes the former shareholders of Spain's Airtel SA and Hong Kong-based Hutchison Whampoa Ltd., which held a stake in Mannesmann.
``I suspect these shareholders could be asking Vodafone to hold its horses with acquisitions'' because shares could flood the market and lower the price if some of them decide to sell, said John Jensen, an analyst at JP Morgan Chase, who has a ``buy'' recommendation on the stock.
New Networks
Vodafone said it plans to build networks for faster cellular Internet services in heavily populated areas and use slower speed networks in less populated areas, to save costs.
It didn't give details of the cost savings but expects to spend about 10 billion pounds ($14.6 billion) in the next four years on building networks in Europe.
The slower speed networks that use General Packet Radio Services, or GPRS, let users trawl the Web for video and data at 10 times existing speeds compared with faster future services that run at 40 times existing speeds.
``Recognizing the cost of build out we will focus on dense, intensely populated areas,'' said Thomas Geitner, chief executive of Group Products and Services for Vodafone. ``In areas of less intense customer usage we will use GPRS.''
European phone companies are expected to offer the faster wireless services by next year. Vodafone said it's on track to offer the services by that time and will focus on rolling out slower services this year.
``It takes the pressure off opening services prematurely and destroying customer confidence,'' Gent said. He expects the GPRS services to be in use for up to five years.
The company will offer customers 13 models of phones for the slower services. It will spend more than 2 billion pounds by March buying mobile handsets, so it can give them to customers at cheaper costs. Seventy percent the handsets it releases this year will have the ability to trawl the Web at the slower speeds.
New Devices
Vodafone also said it's working with Asian handset manufacturers to develop phones and other handheld wireless devices for the faster services. They include Japanese companies such as Mitsubishi Corp and Panasonic International Inc.
Vodafone said the additional wireless capacity it bought for faster services will help it manage growth in its customer base. The company said it expects non-voice services to contribute between 25 percent to 41 percent of its total sales by 2004.
``In the next three to four years voice will remain the dominant mobile application,'' said Gent. ``Voice is the reason why 700 million people bought mobile phones and data stimulates further voice usage.''
Vodafone said its Internet joint venture with Vivendi SA of France, called Vizzavi, aims to have more than 2 million customers by the end of June this year. The Web-based service expects to break even before interest taxes and depreciation by the end of 2003.
Vodafone also said it expects to see after-tax savings of 600 million pounds by 2004 as it takes advantage of its size when purchasing goods and services.
Shares of the company fell 6 pence, or 2.9 percent, to 202.25p. |
