Vodafone 'on the verge of one of biggest deals ever' with Verizon

Jun 3, 2013

Mobile providers in 'stand-off' over deal, which could be worth hundreds of billions of dollars

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VODAFONE could be on the verge of one of the biggest deals ever, reports the Today programme.

The company's key stake in American mobile business Verizon Wireless is worth hundreds of billions of dollars. Verizon wants to buy out Vodafone but, as the BBC notes, it is not yet known whether Vodafone is willing to sell its share.

The Financial Times reported last month there was an ongoing stand-off between Verizon and Vodafone over the deal. Reuters says Verizon shareholders are happy for the company to pay up to $130 billion for Vodafone's stake in its wireless venture.

As the BBC reports, if the deal does go through some of the money Vodafone receives will be passed onto shareholders and then be reinvested in the stock market.

Paul Kavanagh, an analyst at Killik & Co, explains: "Certainly if Vodafone were to dispose of the Verizon stake and they were to hand back, say, half of the cash that would be raised from such a transaction [to shareholders], you're talking about handing the equivalent of a Tesco or a Royal Bank of Scotland back to shareholders." He added that if the deal were to go ahead it would provide a "healthy boost" for companies whose share prices are already on an upward trend.

But there could also be "strikingly controversial" tax implications for Vodafone. Economist John Kay told the BBC recent changes in the political climate surrounding tax avoidance would create an "awkward dilemma" for Vodafone if it was to go through with the deal.

"The norm in the past has been that you structure deals like this in a way that there's little or no corporation/capital gains tax liability," he said. "But in the current climate it will be strikingly controversial if they do that. This would put them in the frontline in the debate about corporation tax avoidance around the world."

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