Vodafone targets Irish mobile group as it moves nearer to Infostrada sale

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The Independent Online

Vodafone yesterday became the favourite to secure a 5bn (£3bn) euro buyout of Ireland's Eircell, while moving closer to an 11bn euro sale of Infostrada, its Italian fixed-line business.

Vodafone yesterday became the favourite to secure a 5bn (£3bn) euro buyout of Ireland's Eircell, while moving closer to an 11bn euro sale of Infostrada, its Italian fixed-line business.

The mobile giant refused comment on either deal, although analysts said the continued shuffling of its European assets would ultimately prove beneficial in cutting debt and boosting the company's mobile network coverage.

However, despite the expected net gain to its balance sheet that the combination of both deals would make, Vodafone shares slid 10p to 243p. That leaves the stock, the biggest in the FTSE 100, just above its 12 month low of 236p and 39 per cent below its February peak of 400p.

High debt levels and the cost of obtaining next generation licences and building the new networks has cut a swath through mobile operators' valuations across Europe.

For Vodafone, a successful disposal of Infostrada, inherited from the UK company's £110bn buyout of Mannesmann of Germany in February, could help cut its debt. However, Vodafone is expected to have to accept a combination of cash and shares for the fixed-line unit.In Italy, sources said that Enel, the power utility, would buy Infostrada without the immediate help of France Telecom, its joint venture partner in the Italian telecoms group Wind. France Telecom is apparently reluctant to invest heavily in Infostrada, preferring to focus financial resources on expanding its mobile business, which has been integrated with Orange following acquisition of the UK company in May.

In Ireland, Eircom, the former state-owned monopoly and the country's biggest phone company, officially put its Eircell mobile business up for sale. The move comes on the back of severe investor criticism reflected at Eircom's annual shareholders meeting in September.

Eircom stock stage a partial rebound yesterday, gaining 27 cents to 2.76 euros. That leaves it nearly 30 per cent below its mid-1998 initial public offer price.

Eircom has about 1.1 million mobile subscribers, accounting for market share of around 60 per cent. The mooted 5bn euro price tag for Eircom's mobile business represents over 80 per cent of its 6.1bn euro market value. Noted one analyst: "Eircom is selling off the crown jewel. It's growing fast in the fastest growing economy in Europe."

It is thought that Eircom, like its UK counterpart British Telecom, is trying to respond to institutional criticism about its stock market performance. Unloading the mobile arm could also see the remaining fixed-line rump succumb to a takeover from an overseasoperator.

Analysts downplayed the significance of an Eircell buyout to Vodafone, whose market capitalisation stands at £149bn. One telecoms specialist noted: "It's a nice opportunity, were it to happen, but it's not a gigantic deal."

France Telecom, meanwhile, formalised the top two positions at Orange, appointing Hans Snook executive chairman and Jean Francois Pontal as chief executive. Mr Pontal has been a key France Telecom executive and worked with its chairman Michel Bon previously at Carréfour, the French retailer.

The move appears to underline earlier indications that Orange, although controlled by France Telecom, will operate independently. It had been expected that Mr Bon would become chairman of Orange.

France Telecom inserted its mobile assets, notably Internis, France's biggest mobile operator with 11 million customers, into Orange after it bought the mobile operator earlier this year for £32.5bn. A flotation in Paris and London is expected later this year.

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