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Vodafone Sells Swiss Stake

Vodafone Group plc (NYSE: VOD) has slimmed down its investment portfolio again by selling its 25 percent stake in Swisscom Mobile AG to partner Swisscom AG (NYSE: SCM) for 4.25 billion Swiss francs (US$3.5 billion). (See Vodafone Sells Off.)

The move was not unexpected. Vodafone has been divesting minority stakes, and buying into new territories, during the past year, and CEO Arun Sarin stated in mid-November he would consider a "fair price" for the Swiss stake. (See Vodafone Cashes In on Japan, Belgacom Buys Proximus Stake, and Vodafone Buys Telsim Assets.)

At that time, industry talk suggested an imminent sale for about £1.5 billion ($2.94 billion). (See Vodafone Talks M&A, Mobile Adverts.)

Instead, Vodafone is banking CHF4.25 billion (£1.8 billion/$3.5 billion), a figure at the high end of analyst expectations. However, a generally weak pre-Christmas financial market dragged Vodafone's stock down by nearly 1 percent to 144 pence on the London Stock Exchange , giving the company a market valuation of nearly £71 billion ($139 billion).

Vodafone will use the proceeds of its Swiss sale to reduce its debt.

Swisscom, which now owns 100 percent of its mobile operation, said the acquisition will increase its net income in 2007 by CHF180 million ($148 million) and give it greater flexibility in offering converged service packages.

The two companies will, though, continue to work closely, and have signed a partnership deal for an initial five years. They will provide joint services to international corporate customers, and Swisscom will continue to sell Vodafone's consumer mobile services such as Vodafone live!, the company's multimedia package of entertainment services. (See Vodafone Live! Goes Swiss.)

Swisscom's stock rose by 0.6 percent to CHF455.25 ($374) on the Zurich stock exchange.

It seems likely that M&A attention will now turn to Vodafone's other minority holdings –- such as its 45 percent stake in Verizon Wireless , which has been the subject of much speculation during 2006, and its 44 percent stake in SFR , the French mobile operator that Vodafone has been keen to control for a number of years. Sarin said in November he'd be willing to buy majority control "at a good price." (See Verizon Reportedly Close to Vodafone Deal, Sarin Survives, and Vodafone Loses SFR Battle.)

What seems more likely, though, is that Vodafone will seek ways to boost its EMAPA (Eastern Europe, Middle East, Africa, Asia/Pacific, and Affiliates) holdings, as the emerging markets are regarded as the territories most likely to generate above-average growth. (See Vodafone Updates on EMAPA and Vodafone Looks Beyond Europe.)

— Ray Le Maistre, International News Editor, Light Reading

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