BREAKFAST DEALS: Vodafone hang-up

Rumours abound that Vodafone might be exiting the Australian market, while Telstra taps bond markets again.

Telstra and Optus have pursued the mobile customers of the wounded Vodafone Australia with such ferocity that it makes sense the carrier’s owners are reportedly considering getting out of the Australian market. They deny this, but their rehabilitation narrative in a mature mobile phone market isn’t convincing. Meanwhile, News Corp has offloaded a jointly owned set-top box tech company for $US5 billion. Elsewhere, Telstra and Fortescue Metals Group are seeing encouraging signs in the bond markets, while Computershare could be staring at lower proceeds from market raisings. Finally, more options are on the table at CVC Asia Pacific to keep US hedge funds off Nine Entertainment and Rio Tinto will have to kick to a different set of goal posts in Queensland after the federal government upped the environmental conditions for the Great Barrier Reef.

Vodafone Hutchison Australia

Could Vodafone Hutchison be thinking about getting out of the Australian market? That’s what has been suggested by The Australian, with the newspaper of the understanding that a brief information memorandum has been circulated amongst potential buyers from Europe and Asia. First and foremost, the company’s joint owners, Vodafone Group and Hutchison Whampoa, both deny the suggestion, although one of the sources in the story anticipated as much and said the company is definitely being put forward as an asset for sale.

It’s believed that Qtel, Etisalat, Korea Telecom, NTT Docomo and China Telecom have seen the sales document. Quite what they’d be getting is hard to say, because Vodafone’s reputation in Australia has been so comprehensively destroyed by their network issues that it would take a significant reduction in prices or PR campaign to shift the momentum away from Telstra and Optus.

News Corp, NDS, Cisco Systems

News Corp has waved goodbye to its almost 50 per cent share in set-top box software company NDS to US giant Cisco Systems as part of a $US5 billion ($4.76 billion) deal. NDS is jointly owned between private equity firm Permira, which has 51 per cent, and News Corp, which holds the remaining 49 per cent. The deal is seen as an acceleration of Cisco’s move into cable TV software. NDS technology is currently used by BSkyB and Sky Italia, both News Corp assets, in Europe, and Cablevision Systems, Comcast and Rogers Communications in North America.

Telstra

Telstra chief executive David Thodey has tapped European bond markets for the second time in four months as shareholders wait to see what the telco does with NBN-deal payments from the federal government. With the help of JPMorgan, Deutsche Bank and HSBC, Telstra raised €1 billion ($1.23 billion) with a margin of 115 basis points over the mid-swap rate for 10-year bonds, compared to the 145 basis points it paid for the €750 million raising in November for 10.5 year bonds. Telstra was hardly short of takers with €6 billion worth of orders.

Fortescue Metals Group

Fortescue Metals Group is confident that it might leave the name "junk” behind when it comes to the bond market after a five-time oversubscribed – and subsequently doubled – raising prompted thoughts of an investment grading from the ratings agencies. Fortescue is currently rated at BB- by Standard & Poor’s, which means it receives a default "junk” status. But that mightn’t be the case for long.

Fortescue raised $US2 billion ($1.9 billion), which was twice what was originally planned. Half the raising was done at 6 per cent interest over five years, while the other half was 6.875 per cent over 10 years. Fortescue chief financial officer Stephen Pearce said the strong response from the market has given the miner the confidence to start thinking about becoming an investment grade miner.

Computershare

While we’re talking raisings, Computershare is reportedly on the precipice of losing a helpful slice of interest from floats and other market raisings. Up until recently, Computershare would hold on to the funds from floats and the like for as long as it could and collect the interest in the meantime – on such large amounts of cash, this can add up.

According to The Age, Woolworths got out of this "margin income” as part of its recent bond issue and while Computershare chief executive Stuart Crosby says it was just a one-time-only deal, the newspaper understands that ANZ Bank demanded the same conditions on its most recent notes issue. Is this after-party coming to an end?

Austar United Communications, Foxtel

Australia’s top consumer watchdog has received a glowing review from Austar United Communications chief executive John Porter, but that’s hardly surprising now is it? Australian Competition and Consumer Commission chairman Rod Sims "views his role much more as someone to administer,” Porter has been quoted by The Australian telling an audience in Sydney. "He has shown pragmatism and he has been able to get a sense of urgency out of his staff over the last two or three months.”

The expectation is that Sims has set enough provisions to Austar’s $1.9 billion merger with Foxtel over exclusive content to satisfy internet-based rivals, while leaving enough value for the two cable TV companies to link up. Some believe that Graeme Samuel wouldn’t have waived this deal through. Then again, it’s worth remembering that Sims had to watch the federal court rebuff the ACCC’s objections to the Metcash-Franklins merger just months into his tenure. Who knows what his Foxtel-Austar agenda might have been had that decision fallen the other way.

Nine Entertainment, CVC Asia Pacific

It appears that CVC Asia Pacific is willing to do just about anything to make sure that Nine Entertainment doesn’t end up in the hands of the US hedge funds. CVC, along with its advisers Goldman Sachs, Credit Suisse, Macquarie Capital and UBS, are set for a global investor roadshow to generate enough cash to pay off its lenders and keep Nine in its corner.

So far, we’ve heard that CVC is willing to put up ACP Magazines and Ticketek for sale, but even if they managed to get both assets away for a good price – with the approval of the same US hedge funds trying to convert their debt for equity – it would still leave a lot of the $2.7 billion debt burden. The Australian Financial Review says all options are on the table, not just the potential asset sales mentioned. Raising debt from the bond markets – a popular choice for many Australian companies lately – or finding new equity investors.

Rio Tinto

Mining giant Rio Tinto has watched a condition approval of its $1.4 billion South of Embley expansion torn up by the federal government as Labor ramps up the environmental conditions. According to The Australian, the federal governments has slapped new conditions on Rio in order to protect the Great Barrier Reef from the increase ship traffic that’s expected from Rio’s planned expansion to the Abbot Point coal export port near Bowen.

Wrapping up

Coal of Queensland’s Paul Williams is reportedly gearing up for an IPO that could value his company at up to $800 million. The Australian Financial Review reports that Williams has appointed Goldman Sachs as adviser to the move, although onlookers should check their expectations because without port access, the newspaper says the valuations could also be as low as $150 million.

While we’re on resources personalities, the same newspaper says its company chief executive Greg Hywood is saying the board hasn’t sat down to consider Gina Rinehart’s request for a board seat. Chairman Roger Corbett has had a word to Rinehart about how essential editorial independence is to the company.

OneSteel will shut the door on its oil and gas pipeline-making business in Illawarra, NSW, as part of its shift from steel manufacturing. The move comes less than two weeks after OneSteel offloaded its Piping Systems business to US-based MRC Global for $67 million.

And finally, Leighton Holdings subsidiary John Holland and engineering firm MacMahon Holdings have picked up $340 million of work with the Ichthys LNG project, controlled by Japan’s Inpex and France’s Totall.

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