JUST WHEN YOU THINK THE VODAFONE SAGA CAN'T GET ANY DUMBER


VODAFONE'S AUSTRALIAN OPERATION PUT ON THE MARKET
by:
Christian Kerr and Mitchell Bingemann
From:
The Australian March 16, 2012 12:00AM
Source: The Australian

THE owners of embattled telco Vodafone Australia are looking for buyers, industry sources say, with an abbreviated information memorandum circulating among potential purchasers in Europe and Asia.
The Australian understands that a preliminary information memorandum to test the market reaction to a sale has been circulated to cashed-up telcos and sovereign wealth funds in Asia, the Middle East and elsewhere.

Qtel, Etisalat, Korea Telecom and NTT Docomo are believed to have seen the initial sales document, as has China Telecom, a controversial potential purchaser.

"Vodafone might say no, but they are hawking it, no question," one industry source said.

Vodafone Australia and one of its two 50 per cent shareholders, Britain's Vodafone Group, vehemently deny that the mobile operation is flirting with a sale and dismiss the suggestion as rumour.

"Vodafone remains fully committed to our operations in Australia and our sole focus is on the turnaround of the business," said a Vodafone Group spokesman.

...Vodafone Australia's other 50 per cent shareholder, Hutchison Whampoa, has also said it is committed to the local operation, and managing director Canning Fok has pledged financial support through the turnaround.

"We have provided and will continue to provide extensive financial support for VHA to accelerate the work needed to ensure all of our customers in Australia enjoy state-of-the-art mobile network services," Mr Fok has said.

However, analysts and industry sources are not convinced and wonder how much money the troubled mobile carrier's shareholders can commit to it, and for how long, especially after the slew of network disasters, profit erosion and customer defections that have plagued Vodafone in the past 18 months.

The Vodafone joint venture lost $336 million in 2011 and shed 554,000 customers (taking its total subscriber base down to 7 million) as ongoing network issues and customer confidentiality breaches took their toll.

Its customer base shrank by 179,000 in the six months to December, compared with gains of 313,000 at Optus and 958,000 at Telstra over the same period.

Its deteriorating balance sheet and exodus of customers has forced Vodafone Australia to embark on a major cost-cutting program that is expected to result in hundreds of job losses as it strives to reignite its sales performance.

Even though the carrier has injected $1 billion to improve and upgrade its mobile network to lure back customers, some analysts predict two more years of losses as spectrum renewal and interest costs hit the bottom line.

Renewal of its spectrum licences is expected to cost Vodafone $710m over the next two years and that will rise to up to $2bn by 2017 once the government finalises auctions of airwaves currently used by analog TV broadcasters.

Vodafone now needed to put a lot more into capital expenditure than it had in the past "just to put a bandaid on its wounds", said one analyst who declined to be named.

"All the problems Vodafone has experienced over the last 18 months have tested its parent companies' patience and we know that Vodafone Group has sold struggling operations in the past, so you can't entirely rule out a sale," the analyst said.

China Mobile, which has almost 650 million customers and which recently set up an office in Australia, is one potential buyer of Vodafone. The Chinese giant last year reported a profit of $19bn on revenues of $80bn.

With about $US50bn ($47.7bn) in the bank and between $US16bn and $US17bn in free cashflow each year, it has the cash needed to fund an acquisition the size of Vodafone Australia.

However, analysts say the Chinese telco would be unlikely to view Vodafone as an attractive prospect because of the limited growth profile of Australia's maturing mobile market.

"China Mobile has growth aspirations but in the past three to four years they haven't made any acquisitions. I'd be surprised if they ventured into Australia anyway because all they want is growth," the analyst said.

"And I also seriously doubt that too many European carriers would want to come to Australia and compete with Telstra and Optus. Life would be very tough, unless of course Vodafone turns out to be a very cheap asset."

MR.FOK,...YOUR COMPANY HAS LIED ABOUT EVERYTHING ELSE,SO... FOK YOU,MR.FOK!