Vodafone to return £6 billion on Japan sale

Vodafone Group said yesterday it would return £6 billion to shareholders following the sale of its stake in its struggling Japanese unit to Softbank Corp.

The sale of its 97.68 per cent stake values Vodafone Japan at an enterprise value of around £8.9 billion of which £6.8 billion will be received in cash on closing, the company said.

The company said the cash return equates to around 10 pence per share, adding that it did not expect the return of capital to impact its credit ratings.

Vodafone said it would incur an impairment charge of around £4.9 billion in its results for the year to the end of March, 2006, as a result of the stake sale. It added that it now expects to record an impairment charge in the second half of the year ending March 31, 2006, at the upper end of the £23 billion to £28 billion range indicated on February 27.

Vodafone chief executive officer Arun Sarin said the sale price was attractive and would enhance the company's adjusted earnings per share.

"In the case of Japan, we have been making progress on the turnaround in recent months. However, given the relative competitive position of the business, the reduced prospects for superior long term returns and a good offer from Softbank, the board took the decision to sell," Mr Sarin said in a statement. Under the deal Softbank will acquire all of the common equity in Vodafone Japan through its wholly-owned Bidco subsidiary.

At 9:10 a.m., Vodafone shares were up 2.3 per cent at 133 pence, against a 0.7 per cent rise in the FTSE 100 index.

"The market likes it, whether or not it is a sea change for Vodafone we will have to see.

"There are still worries over management but Arun Sarin has fired back at his critics with this one," said one trader.

Vodafone said it expects the transaction to close in the first quarter of the financial year ending March 31, 2007.