May 2, 2001 12:00 PM,

Vodafone spreads its wings

Kelly Carroll

(Telephony) Vodafone has acquired British Telecom’s interests in Japan Telecom and the JP Group as well as Spain’s Airtel Moviles for a total of $6.93 billion. For BT, this equals a net reduction in its group debt by $6.31 billion.

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This deal makes Vodafone the largest shareholder and sole telecom partner of Japan Telecom and the J-Phone Communications Group, with 45% interest and 46% interest, respectively. The carrier’s increased interest in Spain’s Airtel gives it a 91.6% stake, which also makes it the sole telecom shareholder in that carrier.

In addition, the increased ownership stake in Japan Telecom will give Vodafone a stronger presence in the growing Japanese wireless market, increased exposure to 3G service development, and a way to gain more wireless Internet experience.

“Unlike other carriers Vodafone has been able to continue making acquisitions,” said Andrew Cole, principal analyst at Adventis. “This is one of the reasons that the carrier is leaving the competition behind and is becoming a larger global player.”

Some speculate that Vodafone’s support could give Japan Telecom--the third-largest telecom company in the country--a competitive edge. In April, the Yankee Group anticipated BT would sell its stakes in Japan Telecom and the J-Phone firms despite indications that it wanted to play a substantial role in Japan’s wireless market.

“Both Vodafone and BT have expressed interest in increasing their stake in Japan Telecom for more control over J-Phone…Vodafone would have a greater chance of winning the bidding due to its unparalleled cash-flow flexibility,” according to the Yankee Group report in April.

Now that Vodafone has squelched BT’s plans of having presence in the high-growth market, it is a matter of time before Vodafone pursues a majority stake in the Japanese carrier--something it has a knack for doing, Cole said.

The acquisition BT’s Airtel interest will be completed by the end of June, and the Japan Telecom and JP Group deals are to be completed by the end of August.