Notes to the Consolidated Financial Statements
Notes 26-30
- 26. Provisions
- 27. Trade and other payables
- 28. Acquisitions
- 29. Disposals and discontinued operations
- 30. Reconciliations of net cash flows from operating activities
28. Acquisitions
The aggregate cash consideration in respect of acquisitions during the year ended 31 March 2008 was £6,058 million. After deducting aggregate cash and cash equivalents acquired of £59 million, the net cash outflow related to acquisitions completed in the year ended 31 March 2008 was £5,999 million, of which £5,957 million was paid during the year. The aggregate cash consideration included £5,489 million for Vodafone Essar, £457 million for Tele2 and £112 million for other acquisitions. Total goodwill acquired was £4,316 million and included £3,950 million in relation to Vodafone Essar, £256 million in relation to Tele2 and £110 million in relation to other acquisitions.
Vodafone Essar Limited (formerly Hutchison Essar Limited)
On 8 May 2007, the Group completed the acquisition of 100% of CGP Investments (Holdings) Limited (“CGP”), a company with indirect interests in Vodafone Essar Limited (“Vodafone Essar”), from Hutchison Telecommunications International Limited for cash consideration of US$10.9 billion (£5.5 billion). Following this transaction, the Group has a controlling financial interest in Vodafone Essar.
| Book value £m |
Fair value adjustments £m |
Fair value £m |
|
|---|---|---|---|
| Net assets acquired: | |||
| Identifiable intangible assets | 121 | 3,068 | 3,189(1) |
| Property, plant and equipment | 1,215 | (155) | 1,060 |
| Other investments | 199 | – | 199 |
| Inventory | 5 | (2) | 3 |
| Taxation recoverable | 5 | – | 5 |
| Trade and other receivables | 277 | 13 | 290 |
| Cash and cash equivalents | 51 | – | 51 |
| Deferred tax asset/(liability) | 36 | (512) | (476) |
| Short and long term borrowings(2) | (1,467) | (16) | (1,483) |
| Provisions | (11) | – | (11) |
| Trade and other payables | (534) | (35) | (569) |
| (103) | 2,361 | 2,258 | |
| Minority interests | (936) | ||
| Written put options over minority interests(2) | 217 | ||
| Goodwill | 3,950 | ||
| Total consideration (including £34 million of directly attributable costs)(3) | 5,489 |
| Notes: | |
|---|---|
| (1) | Identifiable intangible assets of £3,189 million consist of licences and spectrum fees of £3,045 million and other intangible assets of £144 million. The weighted average lives of licences and spectrum fees, other intangible assets and total intangibles assets are 11 years, two years and 11 years, respectively. |
| (2) | Included within short term and long term borrowings are liabilities of £217 million related to written put options over minority interests. |
| (3) | After deducting cash and cash equivalents acquired of £51 million, the net cash outflow related to the acquisition was £5,438 million, of which £5,429 million was paid during the 2008 financial year. |
The goodwill is attributable to the expected profitability of the acquired business and the synergies expected to arise after the Group’s acquisition of CGP. The results of the acquired entity have been consolidated in the income statement from the date of acquisition. From the date of acquisition, the acquired entity contributed a £219 million loss to the profit attributable to equity shareholders of the Group. As a result of the acquisition of Vodafone Essar, the Group disposed of its 5.60% direct shareholding in Bharti Airtel Limited (see note 29).
Tele2
On 3 December 2007, the Group completed the acquisition of 100%(1) of the issued share capital of Tele2 Italia SpA and Tele2 Telecommunications Services SLU (together referred to as “Tele2”) from Tele2 AB Group for cash consideration of €635 million (£452 million).(1)
The initial purchase price allocation has been determined to be provisional pending the completion of the final valuation of the fair value of assets acquired.
| Book value £m |
Fair value adjustments £m |
Fair value £m |
|
|---|---|---|---|
| Net assets acquired: | |||
| Identifiable intangible assets | 5 | 106 | 111 |
| Property, plant and equipment | 115 | (11) | 104 |
| Trade and other receivables | 149 | – | 149 |
| Cash and cash equivalents | 5 | – | 5 |
| Deferred tax asset/(liability) | 36 | (39) | (3) |
| Short and long term borrowings | (6) | – | (6) |
| Provisions | (1) | (1) | (2) |
| Trade and other payables | (159) | 2 | (157) |
| 144 | 57 | 201 | |
| Goodwill | 256 | ||
| Total consideration (including £6 million of directly attributable costs) (1)(2) | 457 |
| Notes: | |
|---|---|
| (1) | The Group acquired Tele2 for cash consideration of €747 million. 100% of the issued share capital of Tele2 Italia SpA was acquired through Vodafone Omnitel N.V., a joint venture proportionately consolidated by the Group, resulting in an effective Group voting interest of 76.9% and disclosed total cash consideration of €635 million (£451 million). |
| (2) | After deducting cash and cash equivalents acquired of £5 million, the net cash outflow related to the acquisition was £452 million, of which £451 million was paid during the 2008 financial year. |
The goodwill is attributable to the expected profitability of the acquired businesses and the synergies expected to arise after the acquisition. The results of the acquired entities have been consolidated in the income statement from the date of acquisition. The weighted average life of total intangible assets was two years. From the date of acquisition, the acquired entity contributed a £67 million loss to the profit attributable to equity shareholders of the Group.
Pro forma full year information
The following unaudited pro forma summary presents the Group as if CGP and Tele2 had been acquired on 1 April 2007. The impact of other acquisitions on the pro forma amounts disclosed below is not significant. The pro forma amounts include the results of CGP and Tele2, amortisation of the acquired intangible assets recognised on acquisition and the interest expenses on debt issued as a result of the acquisitions. The pro forma amounts do not include any possible synergies from these acquisitions. The pro forma information is provided for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies.
| 2008 £m |
|
|---|---|
| Revenue | 35,931 |
| Profit for the financial year | 6,665 |
| Profit attributable to equity shareholders | 6,575 |
| Price per share | |
|---|---|
| Basic earnings per share | 12.40 |
| Diluted earnings per share | 12.34 |
Other
The Group completed a number of smaller acquisitions for aggregate cash consideration of £112 million, gross of £3 million cash and cash equivalents acquired in the 2008 financial year. £77 million of the net cash consideration was paid during the year. The aggregate fair values of goodwill, identifiable assets, and liabilities of the acquired operations were £110 million, £29 million and £27 million, respectively.