Vodafone sells SFR stake as part of streamlining strategy

The UK business, which is on a drive to slim down its portfolio of overseas assets, will return £4bn of the proceeds to shareholders following the sale agreement with media giant Vivendi.

Vodafone also revealed its share buy-back programme now stands at £6.8bn, equivalent to around seven per cent of its market value.

The deal, which is due to complete in June, means Vivendi will have 100 per cent ownership of SFR. Vodafone said it will maintain its relationship with SFR, meaning its customers will continue to use its signal when in France.

Vodafone’s shareholding in SFR contributed £573m to operating profits in the year to March 31 and £284m in the six months to September 30.

The company recently sold minority assets in China and Japan and is expected to consider the disposal of operations in Poland.

Chief executive Vittorio Colao is also pushing for the resumption of dividend payments by Verizon Wireless, the US operator in which Vodafone has a 45 per cent stake.

He said: “Our board remains committed to realising maximum value from our non-controlled assets. The sale of our stake in SFR represents a significant further step in the execution of this strategy.”

Vodafone recently agreed to buy out its Indian partner for $5bn to increase its exposure to the world’s fastest-growing mobile market.

To cope with increased demand from consumers using more smart phones and tablet computers, telecom operators, such as Vodafone and Deutsche Telekom, are cutting down their portfolios to focus on markets where they can achieve scale, unwinding aggressive international expansions undertaken a decade ago. Vivendi’s move for SFR will increase its cash flows and profits, giving it more firepower to fend off increasing competition in the French telecoms market and spend to acquire precious fourth generation mobile spectrum this summer.

Robin Bienenstock, analyst at Sanford Bernstein, said more streamlining could follow.

“You’re going to see a massive portfolio clean-up among telecom operators because they need capital to reinvest in their core networks,” she said.

“The only way to do that is to jettison the weak stuff and plough money into the markets where you are stronger – this is a scale game.”

For Vivendi, the deal brings closer its vision of a new-look group with higher cash flows, more exposure to telecoms and its mature home market of France.

However analysts said Vivendi had paid a full price for the 44 per cent stake. “Initially, the market may react positively to the SFR buyout,” said Polo Tang at UBS. “However, we think Vivendi has potentially paid a premium multiple to almost double its exposure to an asset seeing intensifying competition.”