Vodafone Seeks Buyers for German Fixed-Line Business

As part of its $183 billion acquisition of Mannesmann AG in 2000, Vodafone Group plc inherited Arcor AG & Co. KG, a German fixed-line phone company that is Deutsche Telekom AG's only domestic competitor. Despite its size, with annual sales of €1.4 billion ($1.7 billion), Arcor has long seemed an odd fit for cellular-only Vodafone. The company has reportedly asked in-house banks UBS AG and Goldman, Sachs & Co. to solicit bids from trade and financial buyers. Analysts say a sale is likely, but possibly not imminent, due to a rumored price tag of about €1 billion, which trade buyers may find too high.

Key Takeaways:

• Vodafone Group plc is reportedly seeking buyers for its German fixed-line business, Arcor AG & Co. KG, which has annual sales of €1.4 billion ($1.7 billion).
• Arcor has long been an odd fit for cellular-only Vodafone, and a sale is likely, but possibly not imminent, due to a rumored price tag of about €1 billion.
• German Internet service provider freenet AG has expressed interest in Arcor, but analyst Ralf Hallman suggested the company would be paying too much to win 200,000 new customers.
• Vodafone inherited Arcor as part of its $183 billion purchase of Mannesmann AG in 2000, and now faces pressure to write off billions related to the purchase.
• Analysts say financial buyers may be Vodafone's only hope, given the asking price and the current state of the German IPO market.

Statistics:

• €1.4 billion: annual sales of Arcor AG & Co. KG
• $1.7 billion: annual sales of Arcor AG & Co. KG in US dollars
• €1 billion: rumored price tag for Arcor
• €640 million: sale price of debitel AG to Permira
• 18%: ownership stake of Deutsche Bahn AG in Mannesmann

Sources:

• "Wirtschaftswoche"
• "Frankfurter Allgemeine Zeitung"
• Bankgesellschaft Berlin AG
• UBS AG
• Goldman, Sachs & Co.
• Vodafone Group plc
• Arcor AG & Co. KG
• Deutsche Telekom AG
• Mannesmann AG
• Permira
• debitel AG
• Swisscom AG
• freenet AG
• Deutsche Bahn AG