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Vodafone – Performance
Financial Position and Resources continued
Included in the dividends received from associated undertakings and investments
is an amount of £414 million (2007: £328 million) received from Verizon Wireless.
Until April 2005, Verizon Wireless’ distributions were determined by the terms of the
partnership agreement distribution policy and comprised income distributions
and tax distributions. Since April 2005, tax distributions have continued. Current
projections forecast that tax distributions will not be sufficient to cover the US
tax liabilities arising from the Group’s partnership interest in Verizon Wireless
until 2015 and, in the absence of additional distributions above the level of tax
distributions during this period, will result in a net cash outflow for the Group.
Under the terms of the partnership agreement, the Board has no obligation to
provide for additional distributions above the level of the tax distributions. It is the
current expectation that Verizon Wireless will continue to re-invest free cash flow
in the business and reduce indebtedness.
During the year ended 31 March 2008, cash dividends totalling £450 million
(2007: £450 million) were received from SFR in accordance with the shareholders’
agreement. It is currently expected that future dividends from SFR will reduce,
but by no more than 50%, between 2009 and 2011 inclusive, should SFR increase
debt levels following completion of the purchase of an additional stake in
Neuf Cegetel.
Verizon Communications Inc. (“Verizon”) has an indirect 23.1% shareholding in
Vodafone Italy and, under the shareholders’ agreement, the shareholders have
agreed to take steps to cause Vodafone Italy to pay dividends at least annually,
provided that such dividends will not impair the financial condition or prospects
of Vodafone Italy including, without limitation, its credit rating. During the 2008
financial year, Vodafone Italy declared and paid a gross dividend of €8.9 billion,
of which €2.1 billion was received by Verizon net of withholding tax.
The Vodafone Essar shareholders’ agreement provides for the payment of dividends
to minority partners under certain circumstances but not before May 2011.
Acquisitions and disposals
The Group paid a net £5,268 million cash and cash equivalents from acquisition
and disposal activities, including investments, in the year to 31 March 2008. An
analysis of the main transactions in the 2008 financial year, including the changes
in the Group’s effective shareholding, are shown in the table below. Further details
of the acquisitions are provided in note 28 to the Consolidated Financial Statements.
£m
Acquisitions (1) :
Acquisition of 100% of CGP Investments (Holdings) Limited
(“CGP”), a company with indirect interests in Vodafone Essar
Limited (formerly Hutchison Essar Limited) (5,429)
Tele2 Spain and Italy (from nil to 100%) (451)
Disposals:
Partial disposal of Bharti Airtel (from 9.99% to 5.00%) (1) 654
Other net acquisitions and disposals, including investments (1) (42)
Total (5,268)
Note:
(1) Amounts are shown net of cash and cash equivalents acquired or disposed.
56 Vodafone Group Plc Annual Report 2008
On 8 May 2007, the Group completed the acquisition of 100% of CGP Investments
(Holdings) Limited (“CGP”), a company with indirect interests in Vodafone Essar,
from Hutchison Telecommunications International Limited for cash consideration
of £5,438 million, net of £51 million cash and cash equivalents acquired, of which
£5,429 million was paid during the 2008 financial year. Following this transaction,
the Group has a controlling financial interest in Vodafone Essar. As part of this
transaction, the Group also assumed gross debt of £1,483 million, including £217
million related to written put options over minority interests, and issued a written
put to the Essar group for which the present value of the redemption price at the
date of grant was £2,154 million. See page 58 for further details on these options.
The Group also entered into a shareholders’ agreement with the Essar Group in
relation to Vodafone Essar.
On 9 May 2007, in conjunction with the acquisition of Vodafone Essar, the Group
entered into a share sale and purchase agreement in which a Bharti group
company irrevocably agreed to purchase the Group’s 5.60% direct shareholding
in Bharti Airtel. During the year ended 31 March 2008, the Group received
£654 million in cash consideration for 4.99% of such shareholding. The Group’s
remaining 0.61% direct shareholding was transferred in April 2008 for cash
consideration of £87 million. The Group retains a 4.36% indirect stake in
Bharti Airtel.
On 3 December 2007, the Group completed the acquisition of Tele2 Italia SpA
(“Tele2 Italy”) and Tele2 Telecommunication Services SLU (“Tele2 Spain”) from
Tele2 AB Group for a cash consideration of £452 million, of which £451 million
was paid during the 2008 financial year.
Other returns
The Board will periodically review the free cash flow, anticipated cash
requirements, dividends, credit profile and gearing of the Group and consider
additional shareholder returns.
Treasury shares
The Companies Act 1985 permits companies to purchase their own shares out of
distributable reserves and to hold shares with a nominal value not to exceed 10%
of the nominal value of their issued share capital in treasury. If shares in excess of
this limit are purchased they must be cancelled. While held in treasury, no voting
rights or pre-emption rights accrue and no dividends are paid in respect of
treasury shares. Treasury shares may be sold for cash, transferred (in certain
circumstances) for the purposes of an employee share scheme, or cancelled.
If treasury shares are sold, such sales are deemed to be a new issue of shares
and will accordingly count towards the 5% of share capital which the Company
is permitted to issue on a non pre-emptive basis in any one year as approved by
its shareholders at the AGM. The proceeds of any sale of treasury shares up to the
amount of the original purchase price, calculated on a weighted average price
method, is attributed to distributable profits which would not occur in the case
of the sale of non-treasury shares. Any excess above the original purchase price
must be transferred to the share premium account. The Company did not
repurchase any of its own shares between 1 April 2007 and 31 March 2008.
Shares purchased are held in treasury in accordance with section 162 of the
Companies Act 1985. The movement in treasury shares during the financial year
is shown below:
Number
Million £m
1 April 2007 5,251 8,047
Re-issue of shares (118) (191)
31 March 2008 5,133 7,856