Vodafone could halve debt with £8bn Infostrada sale

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The Independent Online

Vodafone could slash the debt on its balance sheet by nearly half with an £8bn sale of Infostrada, the Italian fixed line telecoms operator.

Vodafone could slash the debt on its balance sheet by nearly half with an £8bn sale of Infostrada, the Italian fixed line telecoms operator.

A deal to sell the unit to Wind, a consortium backed by Enel, the Milan-based electricity supplier, and France Telecom could be announced next week.

News of the sale could help to draw a line under Vodafone's sagging share price performance in recent months. After peaking at 399p, Vodafone stock has sagged, closing last week down 7p at 284p, amid fears that the multi-billion pound fees for third generation network licences may make it difficult to match earlier returns on capital.

Should the sale be finalised, Vodafone's good fortune could provide another black eye for British Telecom. Rival Italian group Albacom, backed by BT, tycoon Silvio Berlusconi's Mediaset television group and Eni, the oil group, are understood to have actively pursued Infostrada. Albacom's reluctance to match Wind's bid may have been partly due to BT's need to cut its debt, which is set to rise to £30bn after recent acquisitions and investment. It is thought Albacom may be prepared to continue its own rapid growth rather than risk overpaying.

Vodafone inherited Infostrada from its successful £110bn buyout of Germany's Mannesmann in February. A sell-off would mark a reversal of Vodafone chief executive Chris Gent's plan to sell a minority stake in the Italian company through an initial public offering.

A sale will mollify City concerns about Vodafone's debt, which stood at nearly £18bn on 31 March. Since then, the company has paid £11bn for universal mobile telecoms service licences in Britain and Germany. Analysts believe that amount will rise as other European countries sell next generation licences.

A possible hazard to the deal could be whether Vodafone is prepared to accept Enel shares for Infostrada. Mr Gent is understood to be seeking cash. Most multi-billion pound telecoms deals use shares due to the sharp rise in telecom sector assets.

Vodafone's near-term ability to make disposals in limited. So far, its biggest disposal has been the £31bn sale of Orange to France Telecom in May.

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