Vodafone sells rail unit

January 25, 2002 Posted: 1356 GMT

LONDON (CNN) -- Britain's Vodafone agreed on Friday to sell its Arcor unit's railways fixed-line telecoms network to Deutsche Bahn for 1.15 billion euros ($1 billion).

Vodafone, the world's biggest mobile phone operator, said the sale to Germany's state-owned railway operator would enable Arcor, the country's second-largest fixed line telecoms operator, to focus on its voice, data and Internet services.

The Newbury-based company acquired a 73.6 percent stake in Arcor as part of its $178 billion acquisition of German mobile phone company Mannesmann in February 2000. Vodafone is selling parts of the Mannesmann business that are not included in its plan to develop a global mobile phone operator.

The sale is expected to clear the way for a stock market listing of Arcor, which it had hoped to float a year ago but the plan was blocked by Deutsche Bahn. It feared it could lose control of its own communications infrastructure, Reuters said.

Vodafone said the sale of the Telematik signaling communications unit was expected to be complete by April 2002. Deutsche Bahn will retain its 18.2 percent stake in Arcor, but will lose its veto rights on key decisions.

Under the deal, Arcor will sell Telematik's physical infrastructure and 49.9 percent of Telematik's equity to Deutsche Bahn, and grant it an option to buy the remaining 50.1 percent stake from July 1, 2002.

Earlier this month, Vodafone sold its stake in Atecs Mannesmann, an engineering and automotive business, for 3.6 billion to Siemens, Germany's biggest telecom equipment maker.

Vodafone may use some of the proceeds from the sale to pay off some of its £17 billion of debt.

Vodafone's stock fell 1.7 percent to 162 pence in afternoon trading in London on Friday.