S&P Affirms Vodafone Ratings

LONDON -- Standard & Poor's Ratings Services said today it affirmed its ratings on U.K.-based global wireless operator Vodafone Group PLC (Vodafone) and its related entities, including its long-term single-'A' and short-term 'A-1' corporate credit ratings on the group. The affirmation follows Vodafone's announcement that it has agreed to acquire British Telecommunications PLC's (BT; A-/Stable/A-2) 26% stake and U.S.-based SBC Communications Inc.'s (SBC; AA-/Stable/A-1+) 15% stake in French fixed-line and mobile telecommunications company Groupe Cegetel S.A. (Cegetel) for €6.3 billion ($6.12 billion) in cash. Vodafone has also made a nonbinding cash offer to acquire Vivendi Universal's (Vivendi; BB/Watch Dev/B) 44% interest in Cegetel for €6.8 billion. Vodafone's objective is to take control of SFR, Cegetel's mobile subsidiary. The outlook is stable.

Vodafone currently owns 15% of Cegetel and 20% of SFR, which gives it a 32% economic interest in SFR. Completion of the acquisition of the BT and SBC interests would increase Vodafone's interest in Cegetel to 56% and its economic interest in SFR to about 65%. The additional acquisition of Vivendi's holding would give Vodafone 100.0% ownership of Cegetel and a 99.5% economic interest in SFR. Vivendi can preempt either or both of the BT and SBC interests until Nov. 10, 2002. The transactions are also subject to regulatory approval and are expected to be completed by year-end 2002, if Vivendi does not exercise its preemption rights.

"Given Vivendi's preemption rights, and the structure of Vodafone's proposal, the possible outcomes range from a scenario in which Vodafone cannot acquire any additional economic interest in Cegetel, such that net debt does not increase, to a scenario in which Vodafone acquires the interests of BT, SBC, and Vivendi, which is the scenario that results in the largest increase in net debt," said Peter Kernan, head of the European telecoms group at Standard & Poor's Corporate Ratings Europe. "Standard & Poor's has assessed all possible scenarios, on the terms indicated, and today's affirmation covers each scenario."

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