Vodafone confirms talks with Verizon over US stake sale

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Vodafone has confirmed it is in talks with US company Verizon Communications over the sale of its 45% stake in their joint venture, Verizon Wireless.

Reports earlier this year suggested that Verizon was looking to buy Vodafone's stake in Verizon Wireless for about $100bn (£64.5bn).

However, the latest reports say that Verizon may have to pay about $130bn for the stake.

Shares in Vodafone rose more than 7% on the news and Verizon climbed 3%.

How Vodafone and Verizon stack up

Vodafone:

  • Founded in 1985 in Newbury, Berkshire. Now has its headquarters in London
  • Among the four biggest companies listed on the London Stock Exchange with a market capitalisation of £92bn
  • One of the biggest telecoms companies in the world
  • Operates in 30 countries, partners with other networks in 50 more
  • Serves more than 403 million customers

Verizon Communications:

  • Launched in 1983 in Philadelphia as Bell Atlantic
  • Market capitalisation of $133bn (£86bn)
  • Operates the largest 4G wireless network in the United States.
  • Delivers services to customers in more than 150 countries worldwide
  • Founded Verizon Wireless in 2000 as a joint venture with Vodafone.

Vodafone said in a statement: "Vodafone notes the recent press speculation and confirms that it is in discussions with Verizon Communications Inc. regarding the possible disposal of Vodafone's US group whose principal asset is its 45% interest in Verizon Wireless.

"There is no certainty that an agreement will be reached."

Verizon Wireless is the largest and most profitable phone operator in the US, with 100 million customers.

The deal would be one of the largest corporate transactions of all time if it goes through, and would provide a large cash injection for the UK telecoms firm, but would leave Vodafone without a highly profitable non-European partnership.

Verizon has been looking to buy out Vodafone's stake in Verizon Wireless for some years, however, price has been a consistent hurdle.

It is thought that because Verizon is not expected to be in a position to pay for the deal immediately in cash, it could be done as a 50% cash and 50% stock offer.

A potential problem with a deal, analysts say, is how to arrange it so that Vodafone is not landed with a huge tax bill.

Profit fall

Vodafone's stake in Verizon Wireless has become more important as performance in its key European markets has cooled.

Ronald Klingebiel, from Warwick Business School, said the deal would allow Vodafone to concentrate on improving its European businesses.

"If not passed on in forms of dividends, [the proceeds from the sale] could improve its debt position following the recent Cable & Wireless and Kabel Deutschland deals, and provides Vodafone some leeway to further expand its network presence in Europe.

"Such moves provide the capacity and level of integration necessary for competing effectively in a future pan-European market."

In May, Vodafone revealed a 90% drop in annual net profit after charges relating to poor trading in Italy and Spain.

Profit after tax for the year was £673m compared with £7bn the year before.

However, sales have risen in the first quarter of its financial year, helped by emerging markets in Africa and Asia.

In June, Vodafone agreed a deal to buy German cable operator Kabel Deutschland for 7.7bn euros (£6.6bn; $10bn).

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