VODAFONE, the mobile phone group, has shelved the sale of Arcor, its €1 billion (£680 million) German fixed-line operation, until the end of the year at the earliest.
The company had been preparing to start an auction of the business this autumn and had asked UBS, its main banking adviser, to undertake preparatory work.
However, Vodafone has concluded that it has no immediate need for the cash, with its debt at the historic low of £8.5 billion and that, with Arcor’s profits rising, it can hold off until at least 2005.
Vodafone may also have struggled to get the valuation it was hoping for. Venture capitalists, in particular, had been looking at Arcor in the hope that they could pick up the business for as little as €500 million, but the mobile phone group is now hoping for more than €1 billion.
Arcor is Germany’s second biggest fixed-line company after Deutsche Telekom, with nearly three million customers. It was acquired by Vodafone as part of the £101 billion acqusition of Mannesmann in early 2000.
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Mannesmann’s strategy was to offer integrated fixed and mobile services, unlike Vodafone, whose approach is built on the belief that mobile phones will gradually displace fixed phones for personal calls. At various times Vodafone has acquired fixed businesses as part of mobile acquisitions, but the company always seeks to sell them when it can.
The British group failed to find a buyer for Arcor when telecoms valuations were high, and has hung on to the business since. Last year Arcor turned profitable for the first time after a period in which turnover grew by 16 per cent to about €1.4 billion. Profits are not disclosed.
By the standards of the past five years, Vodafone has been in a fairly quiet phase in terms of buying and selling assets, following its abortive attempt to buy AT&T Wireless, the third largest mobile phone business in the US.
The only major deal completed by Mr Sarin, chief executive, was the £2.6 billion buyout of minority investors in the company’s Japanese subsidiary, and the only deal the company is publicly pursuing is the forthcoming £1.1 billion of auction of a majority stake in Cesky Telecom, market leader in the Czech Republic.