Vodafone leaves China Mobile
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Shares of China Mobile slumped nearly 4 percent Wednesday, the second day after the world's biggest mobile operator Vodafone Group PLC sold its 3.2 percent stake in the company.
UK-based Vodafone said late Tuesday it sold its entire interest in China Mobile for an approximate ￡4.3 billion ($6.64 billion) before tax and transaction costs.
Vodafone is expected to exit from China, Poland and France in a bid to reduce its non-core assets overseas, following investor pressure to reduce capital allocated to non-controlled businesses. China Mobile is the smallest of Vodafone's non-core assets pending for disposal.
Despite the sale, Vodafone said it will keep the coopeartion between the two companies in areas such as roaming, network roadmap development, multinational customers and green technology.
Approximately 70 percent of the net proceeds of the more than 642 million-share sale will be returned to shareholders by way of a share buyback, with the remainder to be used to reduce the group's net debt, Vodafone said in a statement.
Vodafone made its original investment with 2.18 percent stake in China Mobile in 2000. It decided to increase its stake in the telecom giant two years later to 3.27 percent.
"Today's transaction achieves a near doubling of Vodafone's original investment in China Mobile and combines our stated portfolio strategy with ongoing cooperation with China's leading telecommunications company," Vodafone Chief Executive Vittorio Colao said in a brief statement late Tuesday.
The buyback and net debt reduction would contribute to an increase of about 1.5 percent of earnings and free cash flow on an annualized basis, Detushce Bank told the Global Times in a note.
Phones to China Mobile's Hong Kong-based public relations officer went unanswered.
"The dump will drag down China Mobile's short-term stock prices. But it won't influence China Mobile's businesses in the long run," Feng Dandan, Hong Kong-based telecoms analyst for Guotai Junan, told the Global Times.
Shanghai-based Shen Zheyi, research director in the mobile devices and consumer services group at research firm Gartner, also said the dump won't influence China Mobile's businesses.
"Vodafone may have realized it's almost impossible for foreign telecom firms to enter the State-controlled industry," said Shen Zheyi with the mobile devices and consumer services group at research firm Gartner.
