Vodafone Group (VOD), the world's largest mobile communications company by revenue, said Wednesday that it agreed to sell its entire 3.2% stake in China Mobile (CHL), for £4.3 billion (about $6.5 billion) before taxes and costs.
"Today's transaction achieves a near doubling of Vodafone's original investment in China Mobile and combines our stated portfolio strategy with ongoing cooperation with China's leading telecommunications company," Vittorio Colao, CEO of Vodafone, said in a statement. Vodafone made its original investment in China Mobile in 2000.
Both companies will continue to cooperate in areas such as roaming, network roadmap development, multinational customers and green technology, the statement further said.
The U.K.-based mobile telecom giant said it will return approximately 70% of the net proceeds to shareholders by way of a share buyback, with the remainder used to reduce the Group's net debt.
Since Colao took the top job in the company, investors have been expecting he would sell and divest assets as the company tries to improve its value through a new strategy of exiting non-strategic minority investments, as Reuters reported. According to Bloomberg, Colao has said Vodafone is reviewing all its minority stakes. And China Mobile was deemed the easiest stake to dispose off, an analyst told MarketWatch.
Vodafone also owns 45% of Verizon Wireless, with Verizon Communications (VZ) owning the rest. Disposal of this stake, as well as its 44% stake in SFR, could prove more difficult. The company might be looking for increased dividends rather than disposal, analysts told Bloomberg.
Vodafone has agreed to sell its entire holding of some 642.9 million shares in China Mobile by way of an accelerated bookbuilt offering. Goldman Sachs, Morgan Stanley and UBS are acting as lead managers and bookrunners.
Shares in Vodafone dropped 0.6% on the London Stock Exchange after the announcement, while shares in China Mobile closed down 3.8% in Hong Kong.