Vodafone mulls mega sale of Verizon Wireless stake
By Ben Perry, AFPLONDON -- Vodafone is in talks on a possible sale of its stake in U.S. joint-venture Verizon Wireless said to be worth more than US$100 billion, the British mobile phone giant announced on Thursday.
August 30, 2013, 11:41 am TWN
While Vodafone stressed that any deal to sell its 45-percent stake to U.S. telecommunications group Verizon may well not be concluded, investors dived in to buy the British company's shares.
A deal would help Vodafone, which is looking to bounce back from hefty losses, to pay down its debt, allow it to consider making further acquisitions and to return money to shareholders, analysts said.
“Vodafone notes the recent press speculation and confirms that it is in discussions with Verizon Communications Inc. regarding the possible disposal of Vodafone's U.S. group whose principal asset is its 45-percent interest in Verizon Wireless,” Vodafone said in a statement.
“There is no certainty that an agreement will be reached,” Vodafone added in a short release to the London Stock Exchange.
The Wall Street Journal, citing people familiar with the matter, reported on Wednesday that Verizon and Vodafone had resumed talks over a deal that could cost Verizon in excess of US$100 billion (75 billion euros).
Verizon has been looking to pay about US$100 billion for the stake, while Vodafone is seeking around US$130 billion, the Journal added.
Vodafone's share price surged on the news, topping London's FTSE 100 index in early deals with a gain of 9.1 percent to 206.5 pence. The overall index was up 0.63 percent at 6,470.37 points.
“A disposal around US$130 billion is a transformational fortune changing deal which is likely to see Vodafone become the new darling of the telecom sector,” said Joe Rundle, head of trading at ETX Capital.
In May, Vodafone reported a 90-percent plunge in annual net profit after taking a vast impairment charge relating to poor business in debt-laden eurozone nations Italy and Spain.
Profit after tax nosedived to 673 million pounds in the group's financial year to the end of March compared with 7.0 billion pounds in 2011-2012.
Since then it has announced rising first-quarter sales, as strength in emerging markets such as in Africa and Asia counters weakness in Europe.
Hit by eurozone strains, Vodafone in June launched a 7.7-billion-euro cash offer for Kabel Deutschland, Germany's biggest cable operator.
“Speculation had increased in the wake of the Kabel deal that a deal (for Verizon Wireless) could be in the offing as the company looks to free up cash to push down its debt pile and acquire some more fixed line assets,” said Michael Hewson, senior analyst at traders CMC Markets UK.
“In an environment when mobile costs are getting squeezed across Europe due to the implementation of the European roaming charges directive, and the shrinkage of its previously lucrative Italian and Spanish businesses the pressure has been increasing for management to act to diversify,” he added in a note to clients.