Motorola sells international stakes for $1 billion

(Telephony) Motorola announced it has received payments this quarter for more than $1 billion in cash by selling its investments in five cellular operating companies in Brazil, Egypt, Israel, Jordan and Pakistan.

In addition, the company expects to generate as much as $2 billion in additional cash or stock by the third quarter of this year from the sale of stakes it holds in Hong Kong and Southern Mexico. The company plans to use the net proceeds from these sales, after paying taxes and transaction-related fees, for general corporate purposes.

So far this quarter, Motorola has sold its 50% stake in Israel’s Pelephone to Shamrock Holdings and its 34% investment in Brazil’s Global Telecom back to the company’s owners (which includes Japan’s DDI).

Motorola has also received payment this quarter from France Telecom for a portion of its investment in Egypt’s MobilNil, a deal that was completed late last year. Plus, it has received advance payment for the sale of its 26% stake in Jordan’s FastLink and its 30% position in Pakistan’s Mobilink--deals with Egypt’s Orascom that are expected to be completed shortly.

Motorola also plans to sell investments ranging from 22% to 35% it currently holds in cellular operating companies in Argentina, Azerbaijan, the Dominican Republic, Honduras, Lithuania, and Uruguay. No firm timetable for these divestitures has been developed to date.

Motorola is divesting its holdings in cellular operating companies in other parts of the world because those companies were starting to compete head-to-head with other Motorola network infrastructure customers, creating a conflict of interest.

“We have been investing in cellular operating companies dating back to about 1985 and, in many cases, we were the first cellular operating company there with our other joint-venture partners,” said a company spokesman.

“But, as cellular telephony became more ubiquitous around the world and other operating companies received licenses and launched cellular services, conflicts started to develop with our traditional cellular network infrastructure customers.”

In the end, Motorola had to decide which relationships were more lucrative, acknowledged the spokesperson.

The seeds for the divestiture were planted last June, when Motorola filed a registration statement with the SEC announcing that it planned to seek an IPO for a company called Propel. Propel had responsibility for Motorola’s investments in various operating companies outside the U.S.

“Once the registration statement was filed, obviously there was a lot of detail in there that hadn’t been made public previously, which attracted a lot of interest from some major telephone telecommunications companies,” explained the Motorola spokesman. Telefonica was one of those companies, as was France Telecom and Orascom.

In October, Motorola announced it had a definitive agreement to sell its cellular holdings in northern Mexico--and to potentially sell other holdings--to Telefonica.

“At that time, the IPO was placed on hold, and, about two weeks ago, the IPO was withdrawn,” said the spokesman. “Instead of having an IPO with a portfolio of these cellular operating companies, the path we’re going down now is to sell them.”