Belgiums dominant telecom firm Belgacom will take full control of mobile unit Proximus after agreeing to buy Vodafone Group Plcs 25% stake for 2 billion euros ($2.6 billion), it said on Friday. Vodafone will use the proceeds from what it said was an attractively priced deal to reduce debt.
It said it expects to record a gain of around 450 million pounds ($852.1 million) in its results for the year ending March 31 2007 from the sale. This transaction does not materially affect Vodafones proportionate mobile revenue and EBITDA outlook for the financial year ending March 31, 2007, Vodafone said, but added it would no longer receive anticipated dividend income from Proximus of about 150 million pounds, reducing free cash flow.
The British-based mobile giant has been under pressure to unravel its global structure with minority interests and concentrate on core western European operations. It announced the sale of its Japanese business in March, the first real retreat from an expansionist strategy that has defined it for years. Vodafone stock was up 0.7% at 111-1/2 pence at 0940 GMT, while the Dow Jones Europe telecoms index was flat.
KBC analyst Dirk Saelens said the price for Belgacom was reasonable. He said the company had been paying Vodafone around 140 million euros per year for its minority interest, but would instead now be paying interest closer to 100 million euros.
Chief financial officer Ray Stewart said Belgacom was inclined to fund the deal with a bond and added the purchase should increase 2007 earnings per share by 6% to 7%. Belgacom also said it had agreed to sell its 5.8% stake in Frances number two fixed-line operator Neuf Cegetel to French media group Vivendis mobile phone division SFR for at least 187 million euros. In a final announcement on a busy morning, Belgacom said it would buy back up to 200 million euros of its shares. Belgacom shares had gained 2.2% to 27.74 euros by 0935 GMT.