Alternative to selling Verizon stake could save ‘billions in taxes’
British hedge fund manager Bronte Capital is adding to the pressure on Vodafone to resolve its ties with Verizon Communications, suggesting the time is ripe for the UK carrier to sell itself to its American partner.
In recent weeks Vodafone’s share price has yo-yo’d amid speculation that Verizon wanted to buy out Vodafone’s 45 per cent stake in their joint US mobile venture, Verizon Wireless.
If that were to happen, it would give the British carrier a much needed cash injection as it expands into cable operations across Europe. Only yesterday [13th March 2013] it revealed it would be investing hundreds of millions of pounds in building fibre broadband networks in Spain, while a takeover of Germany’s Kabel Deutschland is also thought to be on the cards.
Vodafone’s CEO Vittorio Colao has tried to scotch rumours that he is willing to sell its Verizon Wireless stake, asserting that his company had a healthy balance sheet and could invest when it wants to. But shareholders remain unhappy about its Verizon venture, all the more so while the cash rich subsidiary keeps up a guessing game about dividends – a game in which Verizon Communications, which owns the other 55 per cent, can call the shots.
Now Bronte Capital, a significant Vodafone shareholder, has waded into the dispute saying it would be far more tax efficient for Verizon to buy Vodafone in its entirety than to acquire the UK operator’s stake.
It adds: “Any deal where Vodafone sells its Verizon Wireless stake rather than selling itself starts with a tens-of-billions of dollars disadvantage in post-tax shareholder value. It would be insane.”
Bronte’s comments are set against a current frenzy of mergers and acquisitions in the mobile market. Britain’s largest mobile carrier EE, and Vodafone’s chief rival in the UK, is set to be floated by the end year, though if that fails to happen the company could be bought out by a private equity group Apax and KKR who are in talks with bankers to secure up to £10 billion ($15.7 billion) in possible funding.
* Vodafone has axed its long-running sponsorship of the Formula One team McLaren, worth $75 million a year, following the violence surrounding last year’s Bahrain Grand Prix.
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