Swisscom AG, Switzerland's former telecom monopoly, will buy back a 25 per cent stake in its mobile-phone unit from Vodafone Group PLC for 4.25 billion Swiss francs (US$3.49 billion), Swisscom said Tuesday.
The transaction will be fully debt-financed and is expected to be completed by Wednesday, the Bern-based company said.
"The move is aimed at enabling Swisscom to improve its position in terms of realizing its convergence strategy while at the same time raising shareholder payouts," it said in a statement.
Vodafone bought the stake in Swisscom Mobile for 4.5 billion francs in March 2001. Last month, Swisscom opened negotiations with the British company to buy it back.
The Swiss government, which still owns more than half of Swisscom's shares, approved the purchase.
Swisscom shares closed up 1.1 per cent at 457.25 francs ($374.42) in Zurich trading. Vodafone shares fell 0.5 per cent to 144.5 pence ($2.82) on the London Stock Exchange.
WestLB analyst Morten Singleton said that, while the deal was unlikely to have much material impact on Vodafone's results, the company's result was good.
"Swisscom have paid a lot for it, but it's a good price for Vodafone - at the expensive end of the range," he said.
Chief executive Carsten Schloter acknowledged that the price paid was "on the high side." But he said on a conference call that Swisscom expects to increase net income and equity free cash flow annually from 2007 by around 180 million francs ($147.9 million) net, after deduction of financing costs.
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