Vodafone 2004 Annual Report Download - page 21

Annual Report 2004 Vodafone Group Plc
19
Limited (“Vodacom”), for the sterling equivalent of £78 million. The transaction
increased the Group’s effective interest in Vodacom to 35%.
On 10 January 2003, under an agreement with Mobitelea Ventures Limited, the Group
completed the purchase of a 5% indirect equity stake in the Group’s Kenyan
associated undertaking Safaricom Limited (“Safaricom”) for approximately $10 million
(£6 million), increasing the Group’s effective interest in Safaricom to 35%.
Sales of businesses
As a consequence of certain of the acquisitions described above, the Group also
acquired interests in companies that were either outside the Company’s core
business, or in which the Company was prevented from retaining interests due to
regulatory restrictions. The Group has undertaken a series of transactions to facilitate
the orderly disposal of such interests, as described below.
Disposal of Mannesmann businesses
Following the acquisition of Mannesmann, the Group completed the sale of a number
of Mannesmann businesses. The Group used the proceeds from these divestments to
reduce its indebtedness. Those completed in the three years ended 31 March 2004
are described below.
Disposal of interests in Atecs Mannesmann AG (“Atecs”)
In April 2000, Mannesmann reached an agreement with Siemens AG and Robert
Bosch GmbH for the sale of a controlling interest in Atecs, its engineering and
automotive business. The transaction valued Atecs at approximately a9.6 billion,
including pension and non-trading financial liabilities to be assumed on closing. On
29 September 2000, a payment of approximately a3.1 billion (£1.9 billion) plus
interest was made to Mannesmann in exchange for the transfer of a 50% plus two
shares stake in Atecs, which was completed on 17 April 2001, following approval from
the relevant European and US regulatory authorities. Atecs also repaid Group loans of
a1.55 billion (£1.0 billion) in March 2001.
On 15 January 2002, Vodafone announced that it had exercised put options to sell its
remaining stake in Atecs to Siemens AG. The proceeds from this disposal amounted to
a3.66 billion (£2.2 billion), and were received on 4 March 2002.
Disposal of Orange
As a condition to its approval of the Company’s acquisition of Mannesmann, the
European Commission required the Company to dispose of its interest in Orange,
which Mannesmann had acquired in 1999. Orange became a subsidiary of the
Company as a result of the Mannesmann acquisition. On 19 April 2001, the remaining
cash payment of a4.9 billion that was due to be received from France Telecom in
March 2002, in respect of the disposal of Orange, was monetised for a4.7 billion
(£2.9 billion).
Disposal of Arcor rail business
On 25 January 2002, the Group announced that Arcor, the Group’s German fixed line
business, had agreed terms for the sale of its railway-specific business, Arcor DB
Telematik GmbH (“Telematik”), to the German rail operator Deutsche Bahn, for
a1.15 billion (£709 million), a1 billion of which was received on 26 March 2002. The
sale completed in April 2002 following receipt of all necessary approvals and
registration in the German commercial register. On completion, Arcor sold 49.9% of
Telematik’s equity to Deutsche Bahn and entered into a put / call arrangement
governing the remaining 50.1% equity interest, exercisable from 1 July 2002.
Deutsche Bahn exercised its option to purchase the remaining 50.1% equity interest
for the remaining a0.15 billion on 1 July 2002.
Disposal of tele.ring Telekom Service GmbH (“tele.ring”)
On 8 May 2001, the Group announced that agreement had been reached to sell its
100% equity stake in the Austrian telecommunications company, tele.ring, to Western
Wireless International Corporation. The transaction completed on 29 June 2001,
following receipt of regulatory approval.
Disposal of holding in Ruhrgas AG
On 30 October 2001, the Group announced that it had reached agreement with E.ON
AG for the sale of the Group’s 23.6% stake in Bergemann GmbH, through which it
held an 8.2% stake in Ruhrgas AG. The transaction completed on 8 July 2002,
realising cash proceeds of a0.9 billion.
Disposal of Japan Telecom
On 14 November 2003, Vodafone Holdings K.K. (formerly Japan Telecom Holdings
Co., Ltd.) completed the disposal of its 100% interest in Japan Telecom. Receipts
resulting from this transaction are ¥257.9 billion (£1.4 billion), comprising ¥178.9
billion (£1.0 billion) of cash, ¥32.5 billion (£0.2 billion) of transferable redeemable
preferred equity and ¥46.5 billion (£0.2 billion) withholding tax recoverable, which is
expected to be received in the 2005 financial year. The Group ceased consolidating
the results of Japan Telecom from 1 October 2003.
Other disposals
On 24 August 2001, the Group announced that agreement had been reached to sell
its 11.7% equity stake in the Korean mobile operator, Shinsegi, for an undisclosed
amount to SK Telecom, Ltd. The value of net assets disposed of represented less than
1% of the Group’s net assets at the date of disposal.
During the 2004 financial year the Group disposed of its interests in its associated
undertakings in Mexico, Grupo Iusacell, and India, RPG Cellular.
Formation of Verizon Wireless
The Cellco Partnership, which operates under the name “Verizon Wireless”,was
formed from the combinations of the US mobile operations of the Company, Bell
Atlantic Corporation and GTE Corporation in 2000. The Group owns 45% of Verizon
Wireless and designates four of the nine members of Verizon Wireless’ Board of
Representatives, while Verizon Communications, Inc. (“Verizon Communications”)
designates the five other members.
Proceeds, in addition to those realised prior to 1 April 2001, of £0.2 billion were
realised during the 2002 financial year, following the disposal of overlapping
properties in the US, such disposals being a condition of the regulatory approval of the
transaction. No further proceeds from the disposal of overlapping properties were
received during the 2003 and 2004 financial years.
Mannesmann synergies
Mannesmann has been integrated into the Group and the expected synergies for the
year ended 31 March 2004 announced at the time of the acquisition have been
achieved, exceeding the target mainly as result of higher savings from capital
expenditure, handset procurement and additional revenue opportunities.