Home Industry Deals The biggest deal in history - Vodafone in talks to sell Verizon stake

The biggest deal in history - Vodafone in talks to sell Verizon stake

Vodafone’s biggest asset is its 45% stake in Verizon Wireless in the US. It is now looking to sell. It would be the biggest deal in history. What might it mean for Vodafone Australia?

There has been much speculation over the last year as to whether Vodafone will or won’t sell its share in Verizon Wireless, one of the world’s most valuable telco assets. Sometimes AT&T has also been mentioned as a possible buyer. It has even been considered a possibility that Verizon might buy all of Vodafone.

Now Vodafone has confirmed that it is in talks to sell its stake in Verizon – to Verizon. Most reports refer back to a Wall Street Journal article which is behind a Murdoch paywall, but extremely credible. Vodafone has released a statement saying:

"Vodafone notes the recent press speculation and confirms that it is in discussions with Verizon Communications regarding the possible disposal of Vodafone's US group whose principal asset is its 45% interest in Verizon Wireless. There is no certainty that an agreement will be reached."

Such a sale would inject Croesus-like wealth into the company, but it would also leave Vodafone with little reason to justify its continued existence.And It could have major ramifications in Australia.

Verizon has wanted for years to buy out Vodafone, but the biggest obstacle to the transaction has been the tax ramifications. The money it would bring in would attract a serious capital gains impost. But smart financial brains have been at work, and Verizon has been trawling Wall Street working out how to do it and how to finance it.

Vodafone’s share in Verizon Wireless is worth at least US$100 billion, a figure touted earlier this year as the minimum Vodafone would accept. After news of the talks emerged, figures as high as US$130 billion have been mentioned.

Even in today’s word that is a lot of money. Just think what Vodafone could do with it. It would be the biggest M&A deal in history, in any industry. Say it slowly – One Hundred Billion Dollars (then throw in an extra $20 billion or $30 billion).

Vodafone chairman Gerard Kleisterlee said at the company’s annual general meeting in July that the board might be open to an improved offer. "If we see proposals that generate more value for shareholders we will consider them," he said. And so they are.

What might it mean for Vodafone’s troubled Australia operation? Buying out 50:50 joint venture partner in Vodafone Australia (more correctly called Vodafone Hutchison Australia, or VHA), Hong Kong’s Hutchison Whampoa, would be easy.

Or it might make just as much sense to walk away from the Australian operation altogether, and sell it to someone –like Verizon – at a reasonable (like fire sale() price. Verizon already has considerable enterprise operations in Australia – assuming the role of Australia’s number three carrier would be consistent with its avowed expansion plans in Asia Pacific.

Vodafone’s share price surged by 9% to a 12 year high as news of the possible sale spread. It may not happen, of course, but nothing surprises in the modern world.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.