Vodafone is finally divesting its minority stakes
Finally. Vodafone (VOD) is rumored to be in the process of selling its minority stakes in a number of telecom companies.
Returning Returns At Vodafone
First up on the block is VOD's 3.2% stake in China Mobile (CHL), which is worth approximately $6.47 billion. That's a lot of money, even for a company that's as big as VOD.
The monetization of these assets, which it doesn't seem that Mr. Market is giving it enough credit for, is one of the potential catalysts that I was looking for when I initially invested in Vodafone.
I take exception with the author of this article's interpretation of the action though. Selling Vodafone's small stake in CHL should be a very easy decision for the company's CEO Vittorio Colao to make.
I firmly believe that companies shouldn't just go around investing in the stock of other companies, even ones that are in the same industry, unless there is some strategic business reason for them to do so. If I wanted someone to invest my money for me, and that essentially what Vodafone's cash is to shareholders, I would hire an investment advisor...not a telecom company. Heck, I could buy shares of China Mobile myself if I really wanted to. Companies should either invest their excess cash in parts of their business that can provide attractive ROIC or return the money to shareholders, not use it to speculate in the stock market.