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Technology Stocks : Vodafone-Airtouch (NYSE: VOD) -- Ignore unavailable to you. Want to Upgrade?

To: MrGreenJeans who wrote (2794)	5/27/2000 2:55:00 PM
From: MrGreenJeans	Read Replies (1) \| Respond to of 3175

Vodafone Remains Robust Reuters 6:00 a.m. May. 26, 2000 PDT LONDON -- For investors worried about how Vodafone AirTouch can cope with the cost of third-generation, or 3G, mobile licenses and the acquisition of Mannesmann AG, next week's annual results may go some way to easing their concerns. With the world's largest mobile phone operator forecast to report operational cash flow of around 3.8 billion pounds ($5.60 billion), the statement should remind the market of how Vodafone is raking in the money. It's the ability of the company to squeeze telephone-number sums of cash out of the airwaves that makes most analysts pretty relaxed about Vodafone's finances, even before it sells Orange and other subsidiaries. Despite some initial jitters as the bidding in Britain's 3G auction escalated beyond all expectations, nobody is predicting the billions of pounds that Vodafone pays out in international licence fees will leave much of a dent in its bottom line. For one thing, the newly acquired European base and the take-off of the mobile Internet are forecast to inflate Vodafone's revenues by more than 20 percent a year over the next five years. For another, the company has numerous options for reducing its debt by selling or floating subsidiaries -- starting with Orange. Vodafone had planned to give away shares in Orange to shareholders -- effectively paying them a special dividend -- but analysts believe the unexpected cost of the licences will force it to sell the British mobile operator to another company, or opt for a public flotation. A sale to France Telecom, which is expected to make a cash-and-share offer for Orange next week, would largely wipe out Vodafone's current debt of around 25 billion pounds. The cost of acquiring third-generation UMTS licences around the world would then saddle it with 20 billion pounds of fresh debt. But Vodafone will offset part of that through the sale of Mannesmann's industrial arm, Atecs, and stakes in U.S. mobile operator Verizon and Australasian unit Vodafone Pacific. The net result would be a more manageable debt load of 12 billion pounds, according to UBS Warburg. Add in the sale of Mannesmann's fixed-line and watch businesses and a 7.5 percent stake in Cegetel of France and the balance sheet starts to look a lot healthier. "We are less concerned than we were about the cash required for UMTS," said Christian Maher of Investec Henderson Crosthwaite Securities. "Vodafone has several sources of cash if it needs it." Shareholders appear to be reaching the same conclusion. After sliding sharply because of the general slump in technology and telecoms stocks and worries about licence costs, Vodafone shares have started recovering on the prospect of an Orange sale. The stock has bounced back to 285 pence from a recent low of 238.5p. But with the shares still well shy of their peak of 401p, most analysts believe it's a steal. Twenty out of 25 brokerages covering Vodafone rate it a strong buy, according to DigitalLook.com. What most excites the City about the company is the evolution of the mobile phone from a voice communication device into a pocket-sized computer. Even with the current slow, low-tech mobile Internet services, the potential of WAP technology for Vodafone is clear. People who once used their mobiles for only a couple of calls a day now reach for their handsets every time they get in a cab or enter a waiting room -- to spend 10 pence a minute reading news off the Internet. Indeed, now that the initial shock over Britain's auction prices has passed, analysts are coming around to the view that the licences will prove excellent value to Vodafone. That's not just because of the multimedia services 3G will provide, but also because the licences will give Vodafone a wide swath of new spectrum to keep adding voice customers. "If you look at the potential these networks have for taking voice minutes off BT or Deutsche Telecom, these licences are not just going to be attractive, but highly attractive," said John Tysoe of West LB Panumure.