Vodafone News Update: Vodafone Pressured into Sale of Verizon Share

vodafone asked to sell verizon stake

 

Vodafone news update: Telecommunications company Vodafone are experiencing pressure from Verizon to sell them their minority stake in the American company.

 

Vodafone have a small stake in the American television, internet and telephone provider Verizon but the company are being pressured into selling this stake back to the company. Verizon have insisted that there will not be any serious tax implications for the company if they were to sell the stake – currently worth $120bn.

 

The following was originally sourced from The Financial Times website.

 

“The US telecoms group estimates the tax bill would be considerably less than feared by many analysts, at under $10bn, people close to the situation said.

 

Some analysts had estimated that Vodafone could face a capital gains tax bill of up to $40bn but Francis Shammo, Verizon’s chief financial officer, told analysts on Thursday that a deal could potentially be done without major tax implications.

 

Speaking on a conference call to discuss Verizon’s first-quarter results, which reflected continued strong growth in the mobile unit, Mr Shammo said that the company was “extremely confident that such a transaction could be accomplished in a manner that is very tax-efficient and would not result in a tax on the gain in that stake”.

 

He did not comment further on the details of the tax structure.

 

Verizon last week reiterated its interest in buying the 45 per cent stake but ruled out a merger with Vodafone in the wake of ongoing speculation.

 

Despite fears that a heavy tax bill would prohibit a deal between the two telecom behemoths, people with knowledge of Verizon’s thinking said that any tax would be levied primarily on the non-US assets held within the VZW holding company.

 

One of those people described it as a “single-digit” billion-dollar tax liability, which the group does not think should pose a hurdle to any future deal to buy Vodafone’s stake in the largest mobile carrier in the US.

 

As the transaction would involve selling a stake in a US domestic asset to a domestic buyer, no tax would be due. There would, however, be tax on the overseas assets held in the holding company that would need to be separated, although these are much smaller than the US operations, the people said.

 

Even if the bill could be lessened – with analysts mixed in their opinion about the likelihood of that outcome – those familiar with Vodafone’s thinking said that from the UK group’s view, tax was not the biggest stumbling block. Indeed, its greatest concern would be how to use the proceeds following the sale of its best business.

 

Without Verizon Wireless, Vodafone would be left with a portfolio of businesses that mainly operate in European telecoms markets undermined by economic and structural pressures.

 

Analysts at Citigroup on Thursday said Verizon’s statement “may have been intended to put some pressure on Vodafone to negotiate” by clarifying the potential capital gains tax liability for a Vodafone exit.

 

Mr Shammo’s comments came on the back of news that Verizon Wireless’s bold change to its pricing plans last year appears to have paid off, as Verizon reported strong revenue and subscriber growth for the first quarter of the year.

 

Verizon’s total revenues were up 6.8 per cent year on year to $19.5bn. Equally significantly, monthly average revenue per account increased 6.9 per cent compared with the first quarter of 2012, to $150.27 a month. This reflects customers continuing to add multiple devices to their accounts, following the introduction last June of the Share Everything Plan – which kicked off a shift among US telecoms towards emphasising charges based on data usage rather than voice call minutes.

 

Overall, Verizon reported 68 cents in earnings per share, a 15.3 per cent rise on first-quarter 2012 earnings of 59 cents per share.

 

“Verizon is off to an excellent start in 2013,” said Lowell McAdam, Verizon Communications’ chief executive.

 

Total operating revenues in the first quarter of 2013 were $29.4bn, a 4.2 per cent increase. Operating income grew 19.8 per cent to $6.2bn.

 

Vodafone shares rose 1.7 per cent to 192.50p on Thursday while Verizon gained 3.6 per cent to 3.5 per cent to $51.25 by afternoon trading in New York.”

 

If you are interested in becoming a Vodafone customer, or indeed if you’re an existing customer looking to alter your account details or the service receive contact the Vodafone customer services department via the following link http://www.customerservicescontact.co.uk/vodafone-customer-services/ and discuss your options.

 

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