Vodafone may dump Verizon Wireless worth $44.6 billion

[jones]

Dump Verizon, Vodafone told

SEVERAL of Vodafone’s 10 largest shareholders have called for the mobile-phone group to sell its American business — a disposal that could raise £25 billion, writes Paul Durman.


Vodafone owns a 45% stake in Verizon Wireless, a fast-growing network operator with 50m subscribers, but has no management control. Verizon has stopped paying it dividends and uses a different brand and network technology.

Some of Vodafone’s biggest shareholders, frustrated by its weak share price, believe that the capital tied up in Verizon should be returned to them. They argue that this would transform Vodafone’s financial profile, and prompt a big jump in its share price. Its biggest shareholders include Capital Research & Management, M&G, Morley, Standard Life and Scottish Widows.

One top shareholder said: “I would be surprised if you could find anyone among the top 10 shareholders who does not want them to sell the US [interests] and give the money back.

There will be a lot of pressure by the time of the results [in May]. We’re going to drift into an area where people expect a change in strategy.”
Selling Verizon would mean Vodafone abandoning its ambition to be the world’s leading cellular company — “the Coca-Cola of mobile”.

Years of poor stock-market performance have undermined investor confidence in the strategy dubbed “bigger is better” by critics. Doubts have grown since a profit warning last November, which highlighted the group’s problems in Japan and the margin squeeze on its mature European operations.

Vodafone said it would be wrong to sell Verizon when it was still growing strongly in a country where mobile usage remains under 70%, and Verizon also stood to benefit from market consolidation that has reduced the number of national mobile carriers from six to four in the past two years.

But investors complain they are receiving no benefit from the growing value of the American business. Some believe Vodafone should capitalise on the high price that Verizon Wireless would fetch, and sell its minority stake to its joint- venture partner, Verizon Communications.

One analyst said a buyback of shares funded by the American disposal could justify a valuation of 170p — far above the 118p at which trading closed on Friday.

Vodafone, along with Telefonica and T-Mobile, appears to have ruled itself out of the bidding for Millicom International Cellular, the mobile firm put on sale last week which operates in 16 African, Asian and Latin American countries.


http://business.timesonline.co.uk/ar...003541,00.html

http://www.mobiletracker.net/archive...rizon-wireless

[Andy]

These kind of "rumors" spread every couple of months- I take no more notice in them. Verizon would be glad to have Vodafone leave them, that's for sure.

[Fathead]

If Voda really wants to sell they won't have any trouble. Verizon Comm. would like nothing more than to keep all the profits.

[cryogenic]

Wirelessly posted (E815: Mozilla/4.0 (compatible; MSIE 4.01; Windows CE; PPC; 240x320))

Originally Posted by Fathead

If Voda really wants to sell they won't have any trouble. Verizon Comm. would like nothing more than to keep all the profits.

I'll agree there. I'm not even sure why vodaphone has bothered to stay in the partnership this long.

[ctk74]

Well, VZW reported 2 million net adds today. An industry record. However, VODAFONE stock sold off beacause they was no mention of a VZW sale to VZ.

[jones]

if this happens,
its good news VZ will own all of VZW,
the bad News VZW may layoff people to
pay Vodafone.

[ctk74]

Originally Posted by jones

if this happens,
its good news VZ will own all of VZW,
the bad News VZW may layoff people to
pay Vodafone.

No different from any other company. This is what happens in business. However, this deal won't happen for a while IMO. The price tag will be to high and the only way VZ will be able to afford it is if they IPO the wireless side which would cause their core stock to tumble. I think right now, this is the best scenario for both companies. Notice I didn't say "the companies shareholders."

[jones]

i guess Vodafone changed its Mind.

UPDATE 5-Vodafone tops forecasts, to keep Verizon stake




(Adds CEO comments, more detail, analyst, updates shares)

By Santosh Menon, European Telecoms Correspondent

LONDON, Jan 24 (Reuters) - Cell phone giant Vodafone <VOD.L> beat forecasts for customer and revenue growth on Tuesday helped by emerging markets and sales of new 3G phones, but disappointed some investors by saying it would keep its U.S. business.

The world's biggest mobile operator by sales, under pressure from some investors to sell its 45-percent stake in U.S. firm Verizon Wireless and return proceeds to shareholders, warned that the competitive pressure it was facing would not ease soon.

Chief Executive Arun Sarin said Vodafone was facing "undoubtedly one of the most difficult operating environments for the telecoms sector in recent times".

"We see this more intense environment continuing over the next 6, 12, 18 months," he told analysts on a conference call.

Vodafone, however, kept its guidance for this financial year and its outlook for the next, and said it was making progress in selling 3G phones that enable video calling and faster Internet access and bring it higher revenues.

It added a net 7.1 million customers in the third quarter of its fiscal year, spanning the key Christmas period, as growth in emerging markets, Spain and the United States offset stiff competition in the UK, Germany and Italy.

"We're encouraged by the fact that although Italy and Germany are worse than expectations, that impact is more than offset by the U.S. and the emerging markets," said Jim Wright, fund manager at the British Steel pension fund.

He said the firm was right to keep its Verizon stake for now. "It's a fantastic asset and I wouldn't want them to sell it for anything other than a very, very high price," he said.

Vodafone shares rallied as much as 2.9 percent in early trade, adding to gains on Monday. But by 1200 GMT they had reversed to trade down 2.5 percent at 119 pence.

"A lot of people bought them on the pretence Vodafone could sell their Verizon stake, and when there was nothing on America, they flushed them out," one dealer said.

An analyst, who asked not to be named, said comments by Vodafone's finance chief Andy Halford that the sale of the Verizon stake could attract a multi-billion-dollar tax bill had dimmed hopes of a deal and also hit the stock.

Analysts had forecast organic quarterly customer growth of between 5.4 and 6.3 million users. Organic numbers refer to the company's own operations and strip out the effect of changes in its stakes in other operators.

Vodafone, which has operations in 27 countries, said its user base stood at 179.3 million at the end of December and that Verizon Wireless, its joint venture with Verizon Communications <VZ.N>, added a record 2 million users in the quarter.

"The financial benefits of our holding on to this asset over the last couple of years have been compelling. That's why the board has chosen not to sell this asset at this time," CEO Sarin told reporters, adding the value of the stake had risen about $10 billion over the past couple of years.

"We're not saying we will not sell this asset in the future, we're simply saying we want to make sure that when we sell this asset we have maximised value for shareholders."


KEEPS GUIDANCE

Vodafone said mobile revenue grew 8 percent in its fiscal third quarter and kept its full-year guidance for growth in the middle of a 6 percent to 9 percent range. It also kept its margin guidance for the current financial year unchanged.

CEO Sarin also reiterated the group's cash flow targets and said its Japanese unit -- long a problem area, but now on the mend -- would deliver positive net additions in the second-half.

But he warned that Japanese net additions in January would not be as good as the previous two months, and reiterated a previous margin guidance for that business. "Progress is being made, but we still have a long way to go," Sarin said.

The numbers from Vodafone came at a time of mounting disquiet about the prospects of the telecoms sector, the worst performer on European stock markets last year.


ARPU HIT

Vodafone said it saw strong customer growth across many markets over Christmas. It added 906,000 customers in Germany, 324,000 in Italy, 561,000 in the UK and 505,000 in Spain.

But the core European business showed scars from the mauling caused by increased competition and falling prices, with blended annual average revenue per user (ARPU) falling 7.8 percent year-on-year in Germany, 8.3 percent in Italy and 4.3 percent in the UK.

Service revenues were flat in Germany, and fell 1.7 percent in Italy, where a 5.7 percent impact from cuts in call termination rates wiped out a 4 percent rise in underlying growth.

"The business has to pedal faster on subscriber growth to offset falling ARPU in order to meet expectations," Investec analyst Christian Maher wrote in a research note, keeping his "reduce" rating on Vodafone shares.

Vodafone shares fell 11 percent in 2005 and had fallen around 3.5 percent this year by Monday's close. The shares trade at around 11.7 times forecast earnings versus a European sector average of 12.4, according to Reuters data.
http://today.reuters.com/business/ne...&imageid=&cap=

[Andy]

Of course Voda won't leave VZW. Even though their networks aren't compatible, it's quite a bit of profit they're getting and it's not a bad partnership in those terms.

[ShoresGuy]

Add to that the thought of what would Vodafone do with the $45 billion? They would be quite dumb to leave the US market because they would have a difficult time getting their foot back in the door.

[Andy]

Originally Posted by ShoresGuy

Add to that the thought of what would Vodafone do with the $45 billion? They would be quite dumb to leave the US market because they would have a difficult time getting their foot back in the door.

Exactly since no other national carrier would sell out to them, and buying just a regional carrier wouldn't make much sense IMO.