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Vodafone sells SFR to Vivendi for £6.8bn cash

Vodafone has announced it will sell its entire 44% shareholding in French mobile network SFR to Vivendi for £6.8bn in cash.

It will also receive a final dividend from SFR of £176m on completion of the transaction. Vodafone and SFR will sign a partner agreement to maintain their commercial co-operation.

Vodafone said it would return £4bn to shareholders with a share buy-back. It will use the rest to reduce the group's net debt, which was £66.1bn on 31 March 2010.

The price is a £2.5bn premium over SFR's book value in Vodafone's accounts, and 6.7 times EV/EBITDA for calendar 2010. SFR contributed £573m to Vodafone's adjusted operating profit in the financial year to 31 March 2010, and £284m in the six months to 30 September 2010.

Vodafone CEO Vittorio Colao said the company was still tidying up its non-controlled assets. "The sale of our stake in SFR, at an attractive multiple, represents a significant further step in the execution of this strategy," he said in a statement.

Ovum analyst Emeka Obiodu said the deal marked another chapter in the re-alignment of Vodafone's strategic assets.

"The plans to return £4bn via a share buyback will please shareholders. And they will be hoping for more soon. With SFR gone, attention will now shift to the 24.4% stake in Poland's Polkomtel and the 45% stake in America's Verizon Wireless," he said.

Vivendi could now fuse SFR's telecoms business with its TV and music empires, he said. "The combined entity will be a much bigger player in France and will have more clout in facing up to France Telecom's dominance in the market. Sadly, the third French mobile operator, Bouygues Telecom, has the most to worry about."

Emeka Obiodu said that at £6.8bn, the price was noticeably higher than what Vivendi was reportedly prepared to pay.

"Several years ago, Vodafone was favoured to take over SFR. By 2010, a shift in focus at Vivendi, and Vodafone's unwillingness to hang onto minority stakes made a deal possible now," Obiodu said.


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