Bloomberg News

Vodafone Gains as Verizon Signals Mobile Buyout Possible

January 08, 2013

Vodafone CEO Vittorio Colao

Vodafone CEO Vittorio Colao said in November that he wouldn’t rule out a sale of the company’s 45 percent stake in the U.S.’s largest wireless carrier. Photographer: Simon Dawson/Bloomberg

Vodafone Group Plc (VOD) advanced after Verizon Communications Inc. (VZ:US)’s chief executive officer was reported to say that his company could buy the U.K. carrier’s stake in their U.S. joint venture Verizon Wireless.

Vodafone rose 2.8 percent to 164.10 pence at 9:21 a.m. in London, valuing the Newbury, England-based carrier at 80.5 billion pounds ($129.5 billion). The stock declined 14 percent last year. Verizon Communications rose 0.9 percent to $44.69 as of yesterday’s close in New York.

Vodafone CEO Vittorio Colao said in November that he wouldn’t rule out a sale of the company’s 45 percent stake in the U.S.’s largest wireless carrier. A sale would let the British company exit a venture it doesn’t control and focus on struggling regions such as Europe, Sanford C. Bernstein analyst Robin Bienenstock said.

“It would be a good moment for Vodafone to sell,‘‘ Bienenstock said in a note to investors today. ‘‘In spite of continued growth, we may be at a maximum value today given its high multiples.’’

Verizon Communications CEO Lowell McAdam said his company has the strength to buy Vodafone’s stake, the Wall Street Journal reported yesterday. Verizon has always said that it would want to acquire the holding, the newspaper reported McAdam as saying.

Simon Gordon, a Vodafone spokesman, declined to comment.

Investors probably value Verizon Wireless at about nine times earnings before interest, taxes, depreciation and amortization, Bienenstock said. That’s $238.4 billion based on last fiscal year’s Ebitda (VZ:US), valuing Vodafone’s stake at about $107 billion.

Dividend Payments

While Verizon probably can’t afford to buy out its partner outright, Vodafone could sell 60 percent of its stake in exchange for about 30 billion pounds in cash after tax and a 19 percent holding in Verizon Communications, Bienenstock said.

Verizon Wireless was formed in 2000 when what was then Bell Atlantic Corp. combined its U.S. wireless business with that of Vodafone’s. In recent years, the Basking Ridge, New Jersey-based company has outpaced AT&T Inc. (T:US) and Sprint Nextel Corp. (S:US) in adding speedier network technology and attracting customers.

Verizon Wireless’s parents shared a $8.5 billion dividend for 2012, with Vodafone’s share being $3.83 billion. An annual payout isn’t guaranteed and Vodafone, as the minority partner, needs to negotiate every year and that creates uncertainty for Vodafone investors.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • VZ
    (Verizon Communications Inc)
    • $47.39 USD
    • -0.53
    • -1.12%
  • T
    (AT&T Inc)
    • $35.19 USD
    • -1.10
    • -3.13%
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