Friday, September 6, 2013

Vodafone's Last Dance with Verizon

The article is talking about; Vodafone  knows it is playing with dynamite. But holding out for the right price for its 45% stake in U.S. carrier Verizon Wireless is the single most valuable thing Chief Executive Vittorio Colao can do for his investors. Vodafone confirmed talks Thursday with its U.S. wireless joint venture partner Verizon Communications, sending the U.K. telecommunications group's shares up 9% to a 12-year high. The two sides are discussing a deal for Vodafone's Verizon Wireless stake worth as much as $130 billion, according to The Wall Street Journal. 
Conditions for a deal look as good as they are going to get. Verizon would need to borrow a big chunk of the deal's value, perhaps $50 billion to $60 billion, and debt is unlikely to be this cheap for much longer.  The more debt Verizon can raise, the better for Vodafone.
But whereas Verizon has strategic reasons for wanting full control of its wireless business, Vodafone is entirely focused on price. 
The U.K. operator would want its tax bill covered. One option would be for Vodafone to sell its U.S. holding company to Verizon on a tax-free basis. But Vodafone would first need to shift its other European assets held in the U.S. back to a European entity.
One thing is certain: If the pair agree on a deal, Vodafone shareholders will be in for a cash windfall. The U.K.-based operator could use some of the proceeds to mop up other cable assets in Europe.

It has been a long dance to get to this point. Vodafone shareholders should hang around for the grand finale.

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