Vodafone is on the verge of selling its 45% stake in Verizon Wireless to Verizon, according to weekend news report

May 15, 2006

2 Min Read
Verizon Reportedly Close to Vodafone Deal

Vodafone Group plc (NYSE: VOD) will agree in the next few weeks to sell its 45 percent stake in Verizon Wireless to Verizon Communications Inc. (NYSE: VZ) in a deal worth $56 billion, according to British newspaper report over the weekend.

The Observer newspaper, citing unnamed sources, reported that Verizon is set to buy Vodafone's stake for $48 billion and assume $8 billion in debt. It also said the deal could be signed before May 30, when Vodafone will present its new strategy, including an entry into the fixed broadband market, to investors and analysts. (See Mobile Giants Size Up DSL.)

The news sent Vodafone's share price up by 2.25 pence, nearly 2 percent, to 126 pence in morning trading on the London Stock Exchange .

The Observer report is the latest to suggest Vodafone will cash in on its Verizon stake as part of its new ownership strategy, which has also seen the global mobile giant exit the Japanese market. Analysts believe the Vodafone board, and investors, have been holding on for a deal worth more than $45 billion. (See Verizon-Vodafone Vagaries, Vodafone Cashes In on Japan, and Verizon: All Together Now?.)

Vodafone, though, has constantly reiterated that it has no intention of selling its stake in Verizon Wireless in the near term as it is such a valuable asset. (See Vodafone Sticks With Verizon.)

Analysts at Lehman Brothers believe a deal valued at $50 billion or more would be acceptable to Vodafone. In a research note issued this morning the Lehman team suggested that most of the proceeds would likely to be returned to investors in the form of a special dividend or share buyback.

They also believe the May 30 strategy day will herald "considerable change" at the carrier, and that this is a good time to invest in the mobile giant. In addition to sealing an investor-friendly deal with Verizon, the Lehman team expects Vodafone to announce a revamp that puts cost cutting at "center stage," a move that could boost pre-tax earnings by several percent.

— Ray Le Maistre, International News Editor, Light Reading

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