Vodafone to begin global retreat with £4bn China sell-off

Vodafone is planning to sell its shares in China Mobile, the world's biggest mobile phone operator, to raise more than £4 billion, say industry sources.

• Vodafone owns 3.2 per cent of China Mobile, which has 550 million customers Picture: Getty

If the proposal gets the formal boardroom green light, the Chinese sell-off is expected to be the first in a flurry of planned disposals by the British mobile telecoms giant.

Vodafone has 3.2 per cent of China Mobile, which is listed on the Hong Kong stock market. Fresh speculation about an imminent selldown of the stake soared last month when Vodafone chief executive Vittorio Colao told the company's AGM that "we are not here to manage minorities".

Analysts said Vodafone had the alternative of seeking a single strategic investor for the shares, or to sell them on the Hong Kong stock market.

Vodafone-watchers expect the deal to go through before Colao is set to update the market on the company's strategy in November.

Vodafone first invested in China Mobile, which has more than 550 million customers, compared with Vodafone's 347 million customers worldwide, in 2000.

The sell-off is one of a number of disposals Vodafone is rumoured to be considering, as it starts a retreat from sprawling international expansion designed to appease investors who believe it needs more discipline.

Bankers and analysts believe the group is likely to sell its near 25 per cent holding in Poland's top mobile telecoms firm Polkomtel as opposed to buying out the other owners. An initial public offering (IPO) is another option.

The review of strategy follows complaints from investors who believe Vodafone's position of owning assets it does not control has produced a disparity between what the shares are worth - 153.6p at Friday's close - and the sum of the company's parts.

The Ontario Teachers' Pension Plan, which holds a 0.4 per cent stake, recently accused the firm of "significant structural and strategic weaknesses".

OTPP believes Vodafone should realise the value of its minority investments - including a 45 per cent stake in US mobile phone operator Verizon Wireless and 44 per cent of French mobile group SFR, as well as China Mobile.

Vodafone reported second quarter figures last month revealing that service revenues had grown for the first time since the global recession.

The Newbury-based operator posted a rise of 1.1 per cent to 10.6bn in the three months to end-June following further robust growth in emerging markets and strong sales of smartphones in the UK.

Meanwhile, it is thought Indian steel-to-shipping conglomerate Essar has decided not to proceed with an IPO of its stake in its telecoms venture with Vodafone.

The Vodafone Essar joint venture has an estimated equity value of between $9bn (5.8bn) and $12bn, analysts said.Vodafone, which under Colao is believed to want to focus on Europe, Africa and India, moved into the Indian market in 2007 with the $11.1bn acquisition of a 67 per cent controlling stake in Hutchison Whampoa's mobile business, in which Essar had been a partner.