LONDON -- One thing that can be said for holding shares in mobile-phone operator

Vodafone

(VOD) - Get Report

is that there's never a dull moment.

Vodafone shares had another busy session Monday as it emerged that

Hutchison Whampoa

is disposing of more of its stake in the U.K. mobile-phone operator. At the same time, though, good news came in the form of reports that Vodafone is close to reducing its debt further through the sale of Italian subsidiary

Infostrada

.

Yet for Vodafone investors, there is a more pressing concern than Hutchison's dwindling stake and the company's debt levels. From the fourth quarter, the market is expecting a flood of new shares in mobile-phone operators as Europe's telecommunication companies float their mobile subsidiaries.

Convert if You Believe in Vodafone

Vodafone shares fell sharply this morning as Hutchison announced it was selling between $2.5 billion and $3 billion of convertible bonds, which can be redeemed in Vodafone shares. Hutchison had acquired a 5.2% stake in Vodafone as part of the latter's purchase of Germany's

Mannesmann

earlier this year. Hutchison sold a third of this stake in March for

3.2 billion and there had been much speculation as to what Hutchison would do with more of this stake when a further lockup period expired earlier this month.

Today's sale reduces the Hong Kong-based telco's stake in Vodafone to around 2%. The result was that together with

Merrill Lynch

saying it sold 42 million Vodafone shares today to institutional investors, Vodafone fell as low as 265 pence before recovering to close down 12.75p, or 4.5%, at 271.25.

The recovery illustrates the optimism that Vodafone is not suffering from the same concerns over its debt levels as many of its counterparts.

This morning there were also reports in several newspapers that Vodafone is close to selling the Italian fixed-line business

Infostrada

for around $10 billion, most likely to a venture called

Wind

, which is jointly owned by the Italian utility

Enel

and

France Telecom

(FTE)

.

Vodafone would not comment on the reports, but the sale of Infostrada would continue Vodafone's aim to reduce its net debt levels to around

10 billion at the end of March 2001 from the

17.6 billion at the end of May this year, according to a spokeswoman for Vodafone.

Certainly the rating agencies are showing confidence in Vodafone's ability to reduce its debt. Following the German government's spectrum auction for licenses to provide third-generation mobile-phone services, which went for a total of

TST Recommends

31 billion,

Standard & Poor's

issued a statement saying it was reviewing the debt ratings of all the winners. While

British Telecom

(BTY)

was pegged down a miserable four notches to A-, Vodafone found itself upgraded to A from A-.

Much of this is due to Vodafone's decision to sell U.K. mobile operator

Orange

to France Telecom rather than demerge it. Through this sale, Vodafone received

13.8 billion in cash and

11.3 billion worth of France Telecom shares. Together with France Telecom agreeing to take on Orange's debt and the

4 billion it owed for a mobile license in the U.K., the total enterprise value of Orange came out at

31.9 billion. James McCafferty, an analyst at

SG Cowen

, believes it was a good deal for Vodafone "especially in a difficult market for telecom valuations." SG Cowen has a buy rating on Vodafone and does not have an investment banking relationship with the company.

However, Orange may yet come back to haunt Vodafone investors

A Busy Paper Round

France Telecom is set to join Holland's

KPN

(KPN)

and

Deutsche Telekom

(DT) - Get Report

in floating its mobile assets at the end of this year and the beginning of the next.

"There's a real worry over the number of wireless IPOs there are coming up," says one private banker, who did not wish to named, but is long Vodafone. "The issuing of so much paper is bound to drive down share prices and I think my telecom paper is pretty much dead money for some time to come."

France Telecom would appear to agree. The company's chief, Michel Bon, said at a press conference last month that he would push forward floating Orange to the end of the year because that time provided a "market opening," by which he meant it was before the floats of the mobile divisions of

T-Mobil

and

KPN Mobile

.

However, not everyone is so sure these floats prevent a problem for the likes of Vodafone. One analyst at a major U.S. bank, who declined to be named because his bank has acted as an advisor to one of the telcos planning an IPO of its mobile division, disputes that there will in reality be any new paper coming onto the market.

He says that an investor who buys into a company like France Telecom is buying partly into the mobile division of the telco, so this is included in the market capitalization. As a result, a float of Orange would likely result in a reallocation of funds between the parent and its offspring.

This may be true and investors in Vodafone are surely hoping it is, or else they may have to suffer more exacting times like today.