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Telecom
Vodafone Hangs Up On Belgium
Parmy Olson and Henry de Renzy-Martin 08.25.06, 3:00 PM ET




Wal-Mart Stores isn't the only company that's been making painful retreats from countries that it had high hopes for. Vodafone has just sold its 25% stake in Proximus, the cell phone unit of Belgium's main telecoms provider, Belgacom. The $2.6 billion deal essentially gives Belgacom full control of the unit.

It comes after Vodafone (nyse: VOD - news - people ) shopped its business in Sweden to the pan-Nordic operator Telenor for $1.32 billion in October 2005, and in April this year sold its operations in Japan to Softbank for $17 billion. Shareholders have been pushing for Vodafone to sell the various minority stakes it has dotted around the globe, and focus on Western Europe.

Selling Belgium seems a little off the mark in that sense, but that may be because major stake holders in Vodafone's ventures have been itching to buy the British company out, according to Emeka Obiodu, an analyst at Global Insight.

"Vodafone has been reluctant to sell because it still believes in the expansionist agenda," he said. "It wants to be the Coca-Cola (nyse: KO - news - people ) of the cellular world and become the most recognized brand."

The sad truth for Vodafone though, is that its late '90s heyday of market dominance and global expansion has slowly been coming to an end.

Arun Sarin, Vodafone's chief executive, admitted that holding onto the Belgium stake was just not viable any more. "We do not… see ourselves as the most appropriate long-term holder of this minority stake," he said in a statement. "In line with our strategy of actively managing our portfolio and maximizing returns, we have achieved an attractive price with this sale."

Analysts seem to agree that Vodafone did get a decent price for its stake. "Vodafone is thinking, if the price is good, let's just sell and go," said Obiodu, adding that the company may at one time have been hoping to buyout Proximus. Vodafone will at least keep some ties with the company: a five-year contract will allow its users who travel to Belgium to use the Proximus' network.

And what of the proceeds? The funds from that mega divestment in Japan had helped placate Vodafone's vexed shareholders with a $6 billion share buyback, but the Belgium sale will now go towards reducing the company's massive debt. It'll also put an extra $852 million on its balance sheet for the year to March 2007.

As for the future, speculation is turning to Vodafone's 25% stake in the wireless unit of Swisscom (nyse: SCM - news - people ), Switzerland's biggest telecoms provider, as well as its 45% holding in the U.S. cellular venture Verizon Wireless. "I wouldn’t be surprised if Vodafone sells Swisscom at end of next year," said Obiodu. Some analysts see that happening even sooner.

Sarin meanwhile is still under intense pressure to resuscitate Vodafone's flagging share price, which some investors believe he's been watering down. "If the pressure becomes too much, there's no guarantee that he'll stay," said Obiodu. "We're waiting to see what the new chairman, Sir John Bond, has to say." If he doesn’t give Sarin maximum support, that could spell the end of tenure.

That, incidentally, has already looked dicey. This latest deal the CEO's first since that demoralizing annual meeting in May which saw 15% of Vodafone's shareholder's choose not to endorse his re-appointment as head of the company.




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