Vodafone's 400,000 Irish shareholders will receive a small measure of relief when the mobile phone giant pays a once-off dividend of 10 pence sterling per share (14.4 cent) following the sale of its Japanese unit for 1,750 billion yen (€12.39 billion).
With 259 million Vodafone shares still in Irish hands almost five years after it bought the former Eircom subsidiary Eircell, the total special dividend payment to Irish shareholders will be some £25.9 million (€37.33 million). Vodafone shares closed down 1p at £1.29 per share in London last night, so most Irish shareholders are still nursing big losses on an investment that followed Eircom's flotation in 1999.
The company's share price remains significantly below the effective price of £1.75 that Irish investors paid for the stock when they exchanged two Eircell shares for 0.948 Vodafone shares. As a result of that deal, in May 2001, the stock is thought to be the most widely held in the State.
Vodafone is using the sale of its Japanese business to Softbank, a Japanese internet services group, to return £6 billion to its shareholders. The special dividend of 10p per share is more than twice the total of 4.07p that the group paid out in its interim and final dividends last year.
Vodafone accepted Softbank's offer in spite of "a serious expression of interest" from Cerberus, a US hedge fund, and Providence Equity Partners, a private equity group. Its chief executive Arun Sarin said he had chosen Softbank because "the probability and certainty of this offer was greater" than the Cerberus proposal, which was contingent on due diligence. Cerberus was unlikely to challenge the agreed deal, analysts said.
The special dividend relieves pressure on Mr Sarin, who has faced boardroom dissent and shareholder calls for more disposals. "I can confidently say my position is secure," he said. "I have no intention to go."
Mr Sarin set out a new strategy for the group, emphasising "strong local and regional scale" rather than a wholly-owned global network. "There will be a refining of our portfolio," he said, but he reiterated his commitment to the US market. Investors have called on Mr Sarin to sell its 45 per cent stake in Verizon Wireless to Verizon, its partner, which has expressed strong interest. But Mr Sarin said: "We are happy with our position [ in the US] and frankly have no current plans to sell the business."
Vodafone will provide substantial vendor finance to Softbank, taking 300 billion yen in preference shares and assuming 100 billion yen in subordinated debt. Softbank will put up 200 billion yen in equity and take on 1,100- 1,200 billion yen in bank loans to finance the deal. Yahoo Japan, in which Softbank owns a 42 per cent stake, will invest 120 billion yen.
The deal ends a tumultuous period for Vodafone in a fiercely competitive market, where it lost ground to the market leader, NTT DoCoMo, and second-ranked KDDI. The Vodafone brand will disappear in Japan.
