LONDON, Jan 8 (Reuters) – Shares in Vodafone rose
almost 3 percent on Tuesday after its partner in U.S. joint
venture Verizon Wireless said it would be “feasible” to buy out
the British group in what would be one of the biggest corporate
deals ever.
Verizon Communications Chief Executive Lowell McAdam
told the Wall Street Journal that “we have always said we would
love to own all of that asset”, which is 55 percent owned by
Verizon Communications and 45 percent by Vodafone.
Investors in both groups have long speculated about the
future of Verizon Wireless’s ownership, especially after
Vodafone embarked on a programming of selling stakes in
businesses around the world that it did not control.
That was aimed at streamlining its portfolio and returning
cash to shareholders who felt the company’s share price did not
reflect the sum of its many individual parts.
The two parent groups have also clashed in recent years over
when and whether Verizon Wireless should pay its two owners a
dividend and the comments from McAdam are likely to reignite the
issue.
“I think [a deal] is feasible,” he told the newspaper. “Our
wireline business is getting stronger and as that gets stronger,
it makes it easier.”
McAdam added that Verizon could buy the stake outright, or
there are “lots of different ways we could do it”.
“As things change in the environments that both of us
operate in, if there is an opportunity, we would always be in
the position to buy Vodafone out”.
Analysts said the comments were an interesting development
in what is likely to be a long-running issue for the two
companies, but they did not think Vodafone would want to sell
the asset yet.
Vodafone Chief Executive Vittorio Colao said in November
that he could not rule out an exit from the United States,
shortly after reporting financial results that showed how the
Verizon Wireless business had become the main growth engine for
Vodafone, the world’s second largest mobile phone group.
With consumers in Europe cutting back on making phone calls,
the Verizon business contributed over half of Vodafone’s
adjusted operating profit in the first half of the financial
year, and was a key driver of growth.
“It is an interesting opening salvo from the CEO,” Espirito
Santo analyst Will Draper said. “However, we do not believe that
Vodafone is interested in selling at this stage. Verizon
Wireless represents over half its earnings and is a rare source
of growth, as well as underpinning its dividend growth too.
“In other words the offer price from Verizon would need to
be compelling and we are not sure that it has the firepower for
that, yet. It is more likely in our view that the status quo
persists for a while longer.”
Draper said he put the enterprise value of Verizon Wireless
at 168 billion pounds ($270 billion), which on that basis, would
put the 45 percent stake at 76 billion pounds before any
discounts for taxes or the fact it is a minority holding.
Bernstein analyst Robin Bienenstock said she thought it
would be a good moment for Vodafone to sell its stake, as it
could be at the maximum value today.
“We are sceptical that (a) the two companies can find a
price on which they agree and that (b) in the event of any sale
shareholders of Vodafone would simply be handed any proceeds.
“Rather, we think any sale proceeds would be reinvested in
helping solve the difficult structural problems Vodafone faces
in Europe,” she said.
($1=0.6218 British pounds)
(Reporting by Kate Holton; Editing by Greg Mahlich)
