Vodafone shares have edged lower despite confirmation of the sale of its stake in China Mobile for around £4bn, nearly twice what it paid for the shares.
And the City is now looking to see what else Vodafone can sell off. Jefferies International said attention could turn to its stake in SFR, the French mobile group jointly owned with Vivendi:
The China Mobile exit is unlikely to soften pressure on management to also deliver on other asset sales. Expect focus on SFR to intensify. We value Vodafone's 44% equity stake at £6bn. Vivendi said last week that no talks had yet taken place, but reaffirmed its desire to assume control. Vivendi has ample scope to fund a deal with $2bn of proceeds from selling its NBC stake due this month and a total of $6bn by end-December.
[It is] an opportune time to exit SFR. A sale price today would reflect momentum much improved in the last 12 months.
This is long overdue, but a sensible step as the company looks to clean up its portfolio and re-focus on controlled regional hubs. The China Mobile stake is the easiest of Vodafone's many sellable assets to dispose of, although excitement will inevitably grow ahead of its November strategy day.
Vodafone will receive around £3.7bn of net proceeds after capital gains tax and transaction fees of around 13% are deducted from the gross proceeds of £4.3bn. 70% (£2.6bn) of the cash will be used to buy back shares, with the remainder used to reduce debt. We estimate that this is 1-1.5% accretive to free cash flow for Vodafone. Helpful, but hardly a game changer.
Vodafone is currently 0.25p lower at 159.65p, not helped by news an Indian court had dismissed a petition by the company over a tax bill in the country.
