NEWS SNAP: Vodafone To Return GBP6 Billion After Japan Sale

LONDON (Dow Jones)--Vodafone Group, Friday said it will return GBP6 billion in cash to shareholders via a special dividend after agreeing to sell its Japanese unit to Softbank Corp., the Japanese Internet company.

The U.K. wireless operator said it will sell almost 98% of its Japanese division, which has been plagued by competitive problems over the past few years. The deal slaps an enterprise value of GBP8.9 billion on the business.

While the decision to sell out of Japan has been applauded by analysts for signaling a more flexible approach to strategy, expectations of a cash return have helped send the shares higher this month.

Amid boardroom ructions and management departures, the impending sale of Japan has also offered a respite for Chief Executive Arun Sarin, who is under pressure to boost returns.

The distribution from the Japan deal is worth 10 pence a share, and the company said it will disclose final details with preliminary results in May. Vodafone said it intends to complete its existing GBP6.5 billion share buyback program in fiscal 2006.

Analysts said the proceeds from the sale and the cash return to shareholders were higher than expected.

Chris Alliott, an analyst at Nomura Securities, had valued the Japanese unit at GBP7 billion and had expected Vodafone to return GBP5 billion to investors.

"This could be the news flow that flips sentiment in the sector," he said. Nomura rates Vodafone at buy.

At 0938 GMT, the stock was trading up 2.3%, or 3 pence, at 132.75 pence in an overall rising market.

CEO Sarin said the sale will enhance adjusted earnings per share, but didn't specify by how much.

"It has become increasingly clear that the greatest operational benefits come from strong local and regional scale," Sarin said in a statement. "We seek to deploy capital only where we can generate superior returns for our shareholders in markets that offer a strong local position."

Vodafone Japan struggled to win market share off KDDI Corp. and NTT DoCoMo Inc. following the delayed launch of third-generation services.

The UK company Friday revised its targets for fiscal 2006 to reflect the sale of the Japanese business, which will appear as a discontinued operation in the accounts.

For the year ending March 31 2006, Vodafone tweaked its guidance for organic proportionate mobile revenue growth to 8%-9% from a previous range of 6%-9%.

Proportionate figures reflect the equivalent contribution of businesses in which Vodafone doesn't own a majority stake.

The organic proportionate mobile margin - earnings before interest, tax, depreciation and amortization, or EBITDA, as a percentage of sales - is expected to be at the higher end of a forecast ranges of flat to 1% decline.

Cash-flow will reach GBP5.8 billion to GBP6.3 billion, compared with the previous range of GBP6.5 billion to GBP7 billion.

For the year to March 31, 2007, Vodafone maintained its revenue and margin guidance.

Company Web site: http://www.vodafone.com

-By Nic Fildes, Dow Jones Newswires; 44-20-7842-9264; nicolas.fildes@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 17th March 2006