Verizon working on $100-bn bid for Vodafone’s stake in Verizon Wireless
25 Apr 2013
US telecom company Verizon Communications Inc is preparing to buy out its joint-venture partner Vodafone Group Plc in Verizon Wireless in a $100-billion cash and stock deal, Reuters yesterday reported, citing two people familiar with the matter.
New York-based Verizon, which already holds 55 per cent stake in Verizon Wireless, is yet to make an offer Vodafone to buy out its interest in the JV, but has hired both banking and legal advisers for a possible bid, the news agency said.
Verizon plans to start a dialogue with its London-based JV partner for a friendly deal but is prepared to go hostile if required, the report added.
Verizon's board is expected to discuss details of taking full control of Verizon Wireless next week at a scheduled meeting which will be held ahead of the company's annual shareholder meeting, one of the sources said.
Bloomberg had last month reported that the two companies have been in informal discussions on several options, including a complete takeover or a merger between Verizon and Vodafone, while the Financial Times early this month reported that Verizon was teaming with AT&T to buy Vodafone, a report that was later refuted by Verizon through a regulatory filing.
Although Verizon declined to comment on Reuters report, spokesman Bob Varettoni said that the company has early this month already issued a statement saying that that Verizon would be a willing to buy Vodafone's stake in Verizon Wireless.
Reuters said that Verizon will take advantage of the record low interest rates as well as its own strong stock price to raise about $50 billion in loans to part fund the deal, while it will pay the remaining part of the acquisition with its own shares.
Verizon Wireless is the largest mobile operator in the US, providing wireless services to 115.78 million subscribers as of Q4 2012.
Based in New Jersey, the company is 55 per cent owned by Verizon and the remaining 45 per cent by Vodafone.
It was the first wireless provider in the US to build and operate the largest 4G LTE network with speeds up to 10 times faster than 3G. It generated revenues of $75.9 billion last year.
A deterrent to the deal is Vodafone may end up paying $29 billion as taxes, which would force Verizon to pay a hefty premium to make the transaction worthwhile for Vodafone.
But sources told Reuters that a deal could be structured in such a way that Vodafone's eventual tax bill would likely be $5 billion or less.
