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A Look at Vodafone’s $4.5 Billion Fundraising Plan

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Mar. 20 2019, Published 2:25 p.m. ET

Vodafone avoids outright debt

Vodafone (VOD) is raising about $4.5 billion through the sale of convertible bonds, according to a report from Bloomberg. The company intends to use the proceeds from the bond sale to finance part of the cost of its deal with Liberty Global (LBTYA) in Europe. Last year, Vodafone agreed to purchase some of the European businesses of Liberty Global for $22 billion.

The bonds Vodafone offered for sale are expected to convert into stock between 2021 and 2022. Vodafone’s decision to raise additional capital through the sale of convertible bonds instead of outright debt is viewed as a strategic move by the operator to secure the financing it requires without leveraging its balance sheet too much.

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Vodafone expects to close deal this year

The transaction with Liberty is expected to allow Vodafone to extend its footprint in Europe. The reason Vodafone needed to purchase Liberty’s businesses to bulk up its operations in Europe became clearer after Comcast (CMCSA) last year paid around $40 billion to purchase Sky in order to grow its presence in Europe. Vodafone and Sky run competing businesses in Europe. Comcast fought over Sky with 21st Century Fox (FOXA), which wanted to take full control of Sky by purchasing the stake it didn’t already own in the company.

Vodafone expects to close its transaction with Liberty this year. Revenue fell 6.8% YoY to $12.4 billion at Vodafone in the December quarter. AT&T (T) and T-Mobile recorded revenue growth of 15% and 6.4% YoY, respectively, in the December quarter.

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