Vodafone weighing up IPO

New Zealand investors starved of new company listings would be drawn to the prospect of Vodafone New Zealand joining the stock exchange.

The local unit of British telecommunications carrier Vodafone Group is understood to be testing the waters for a planned initial public offering after last year’s planned merger with Sky Network Television was rejected by the Commerce Commission on the grounds that such an entity would hold too much market power.

While no plans have been firmed up, the Australian Financial Review reported investment bank Deutsche Craigs will be running non-deal roadshows on both sides of the Tasman for a partial listing on the NZX and ASX to raise more than $1billion.

Auckland-based Vodafone New Zealand was valued at $3.44billion in the proposed tie-up with Sky TV using a multiple of 7.1 times projected underlying earnings before interest, tax, depreciation and amortisation of $481million in the year ended June 30, 2017.

Vodafone New Zealand’s accounts for 2017 March year show the company generated ebitda of $423.3million, although since then it has increased mobile and broadband customer numbers.

Grant Williamson, a director of Christchurch brokerage Hamilton Hindin Greene, said the market had been "crying out for equity IPOs’’ and if Vodafone NZ joined the NZX, the stock would be viewed as a ‘‘utility with a pretty large market share".

"At the end of the day, it comes down to pricing and making sure the balance sheet is not too complex and with pretty straight-forward intercompany loans," Mr Williamson said.

Vodafone 2017 accounts show its total assets were valued at $1.98billion as at March 31, of which $895million was ascribed to its network, and it was holding $1.5billion of liabilities, of which $1.01billion was in related party loans.

Investors will have dominant telco Spark New Zealand to use as a benchmark for Vodafone NZ, with the NZX-listed firm recently trading at $3.92, a dividend yield of 6.5% and a price-to-earnings ratio of almost 17 times.