Vodafone 2009 Annual Report Download - page 44

42 Vodafone Group Plc Annual Report 2009
SFR, the Group’s associated undertaking in France. Similarly, the Group does not have
existing obligations under shareholders’ agreements to pay dividends to minority
interest partners of Group subsidiaries or joint ventures, except as specified below.
Included in the dividends received from associated undertakings and investments is
an amount of £333 million (2008: £414 million) received from Verizon Wireless. Until
April 2005, Verizon Wireless’ distributions were determined by the terms of the
partnership agreement distribution policy and comprised income distributions and
tax distributions. Since April 2005, tax distributions have continued. Current
projections forecast that tax distributions will not be sufficient to cover the US tax
liabilities arising from the Group’s partnership interest in Verizon Wireless until 2015.
However, the tax distributions are expected to be sufficient to cover the net tax
liabilities of the Group’s US holding company.
Following the announcement of Verizon Wireless’ acquisition of Alltel, certain
additional tax distributions were agreed. Under the terms of the partnership
agreement, the Verizon Wireless board has no obligation to effect additional
distributions above the level of the tax distributions. However, the Verizon Wireless
board has agreed that it will review distributions from Verizon Wireless on an annual
basis. When considering whether distributions will be made each year, the Verizon
Wireless board will take into account its debt position, the relationship between debt
levels and maturities and overall market conditions in the context of the five year
business plan. It is expected that Verizon Wireless’ free cash flow will be deployed in
servicing and reducing debt for the foreseeable future. Together with Verizon
Communications Inc., the Group agreed to delay a US$250 million gross tax
distribution to April 2009. Both shareholders benefited by enabling Verizon Wireless
to minimise arrangement and duration fees applicable to the bridge facility drawn to
acquire Alltel.
During the year ended 31 March 2009, cash dividends totalling £303 million (2008:
£450 million) were received from SFR in accordance with the shareholders’
agreement. Following SFR’s purchase of Neuf Cegetel, it was agreed that SFR would
partially fund debt repayments by a reduction in dividends between 2009 and 2011,
inclusive. The amount of dividends received fell by 32.7% from the prior year, which
is in line with this agreement.
Verizon Communications Inc. has an indirect 23.1% shareholding in Vodafone Italy
and, under the shareholders’ agreement, the shareholders have agreed to take steps
to cause Vodafone Italy to pay dividends at least annually, provided that such
dividends will not impair the financial condition or prospects of Vodafone Italy
including, without limitation, its credit standing. During the 2009 financial year,
Vodafone Italy paid a dividend net of withholding tax of €424.1 million to Verizon
Communications Inc., which was declared in the previous financial year. On 27 April
2009, Vodafone Italy declared and paid a dividend of €1.3 billion, of which €0.3 billion
was received by Verizon Communications Inc. net of withholding tax.
The Vodafone Essar shareholders’ agreement provides for the payment of
dividends to minority partners under certain circumstances but not before
May 2011.
Acquisitions and disposals
The Group invested a net £1,240 million(1) in acquisition and disposal activities,
including the purchase and disposal of investments, in the year ended 31 March 2009.
An analysis of the significant transactions in the 2009 financial year, including
changes to the Group’s effective shareholding, is shown in the table below.
Further details of the acquisitions are provided in note 29 to the consolidated
financial statements.
£m
Arcor (26.4%)(2) 366
Ghana Telecommunications (70.0%) 486
Polkomtel (4.8%) 171
Gateway Communications (50%)(3) 185
Other net acquisitions and disposals, including investments 32
Total 1,240
Notes:
(1) Amounts are shown net of cash and cash equivalents acquired or disposed.
(2) This acquisition has been accounted for as a transaction between shareholders. Accordingly, the
dif fe ren ce bet ween the cash cons ideratio n paid and the car ryi ng value of net asset s at tr ib utable
to minority interests has been accounted for as a charge to retained losses.
(3) Acquisition undertaken by Vodacom, which at 31 March 2009 was 50% owned by the Group.
On 19 May 2008, the Group acquired 26.4% of Arcor previously held by minority
interests for cash consideration of €460 million (£366 million). Following the
transaction, Vodafone owns 100.0% of Arcor.
On 17 August 2008, the Group completed the acquisition of 70.0% of Ghana
Telecommunications Company Limited (‘Ghana Telecommunications’), a leading
telecommunications operator in Ghana, from the Government of Ghana for cash
consideration of US$900 million (£486 million).
On 18 December 2008, the Group completed the acquisition of an additional 4.8%
stake in Polkomtel S.A. for net cash consideration of €186 million (£171 million). The
acquisition increased Vodafone’s stake in Polkomtel S.A. from 19.6% to 24.4%.
On 30 December 2008, Vodacom acquired the carrier services and business network
solutions subsidiaries (‘Gateway’) of Gateway Telecommunications SA (Pty) Ltd.
Gateway provides services in more than 40 countries in Africa.
Treasury shares
The Companies Act 1985 permits companies to purchase their own shares out of
distributable reserves and to hold shares with a nominal value not to exceed 10% of
the nominal value of their issued share capital in treasury. If shares in excess of this
limit are purchased they must be cancelled. While held in treasury, no voting rights
or pre-emption rights accrue and no dividends are paid in respect of treasury shares.
Treasury shares may be sold for cash, transferred (in certain circumstances) for the
purposes of an employee share scheme, or cancelled. If treasury shares are sold, such
sales are deemed to be a new issue of shares and will accordingly count towards the
5% of share capital which the Company is permitted to issue on a non pre-emptive
basis in any one year as approved by its shareholders at the AGM. The proceeds of any
sale of treasury shares up to the amount of the original purchase price, calculated on
a weighted average price method, is attributed to distributable profits which would
not occur in the case of the sale of non-treasury shares. Any excess above the original
purchase price must be transferred to the share premium account.
The Board considered the market reaction to the Group’s interim management
statement, issued on 22 July 2008, and introduced a £1 billion share repurchase
programme. This programme was completed on 18 September 2008. Details of
shares purchased are shown below:
Maximum
Total number value of
Average price of shares shares that
Total paid per share purchased may yet be
number of inclusive of under share purchased
shares transaction repurchase under the
purchased costs programme(1) programme(1)
Date of share purchase ‘000 Pence ‘000 £m
July 2008 161,364 133.16 161,364 785
August 2008 265,170 138.78 426,534 417
September 2008 309,566 134.71 736,100 –
Total 736,100 135.84 736,100 –
Note:
(1) No shares were purchased outside of the publicly announced share purchase programmes.
Shares purchased are held in treasury in accordance with section 162 of the
Companies Act 1985. The movement in treasury shares during the financial year is
shown below:
Number
Million £m
1 April 2008 5,133 7,856
Reissue of shares (43) (59)
Purchase of shares 736 1,000
Cancelled shares (500) (755)
Other receipts (4) (6)
31 March 2009 5,322 8,036
Financial position and resources continued