What now for Vodafone's potential cash mountain?

It now looks increasingly certain that Vodafone will dispose of its 3.2 per cent holding in China Mobile, valued at over £4 billion.

Such a move would fit with recent statements from Vodafone management that it wants to remove itself from minority holdings in other operators as part of a forthcoming strategy review.

Now rumours have begun to circulate that Vodafone is considering the sale of its 4.4 per cent holding in Bharti Airtel--India's leading mobile operator; albeit that Bharti's chairman has downplayed the idea.

Another long-running debate took a new twist last week with Vivendi CEO, Jean-Bernard Levy, claiming that Vodafone doesn't seem interested in selling its 44 per cent holding in France's second largest operator, SFR, to the giant French media firm.

With Vivendi holding the remaining 56 per cent of SFR, this comment by Levy could be read as an attempt to provoke Vodafone into negotiations--albeit that it might cost Vivendi around £8.5 billion to purchase Vodafone's share.

Of note is a recent study by market watchers at Sanford C. Bernstein claiming that the current £81 billion market valuation of Vodafone is being held back by around 40 per cent due to its somewhat messy array of minority interests in mobile operators around the world.

The assumption being offered by some financial analysts is that Vodafone execs believe that the company can generate a higher rate of return from its own networks than is reflected in its share price.

While it's clearly understood that there will be a need to invest in 4G spectrum licences and infrastructure equipment--and it's sure to have been factored into Vodafone's internal business model--the question remains as to what the UK company might do with the huge chunks of cash that would be generated by these sales?

What hasn't been mentioned recently is what approach Vodafone will take with its minority holding in Verizon Wireless. Much has been speculated, little has been forthcoming from the company.

But this elephant-in-the-room question must be at the forefront of Vodafone's strategic review--and needs to be convincingly answered and communicated. - Paul

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