Telecom Lead Europe: Vodafone Group is lining up a deal to sell its 45 percent stake in Verizon, netting around $135 billion.
The exit will enable Vodafone to have huge funds for future Capex (capital expenditure) and buying telecom assets in other markets.
The U.K.-based telecom giant can also reduce its net debt that was already reduced to £23.3 billion in Q3 after receipt of £2.4 billion dividend from Verizon Wireless.
Vodafone’s investment in Verizon is bringing significant revenue as compared with other developed markets which are showing decrease in revenue growth. In Q3 2012-13, Verizon Wireless service revenue grew 8.7 percent driven by strong customer additions.
Verizon Wireless has a net debt of $9.3 billion ($0.7 billion net cash) after payment of $8.5 billion dividend to its parents. Vodafone’s net debt is £23.3 billion.
Verizon does not want to merge with Vodafone as the U.K.-based telecom giant’s service revenue declined 2.6 percent in Q3. In most of the developed markets, Vodafone posted dip in revenue. Service revenue in Germany decreased 0.2 percent; 5.2 percent dip in the U.K; 13.8 percent decrease in Italy, while Spain posted 11.3 percent dip.
Vodafone’s emerging markets supported the group with India showing 9 percent growth; Vodacom 1.9 percent and Turkey 18.4 percent growth in Q3.
Also, Vodafone in February 2013 said that it adjusted operating profit is still expected to be in the upper half of the range of £11.1 billion to £11.9 billion. Despite
the weaker revenue performance, it expects the full year Group EBITDA margin decline to continue its improving trend year-on-year, excluding the impact of M&A and restruct
uring costs, as we increase our focus on value share and make good progress on our cost savings programs.
In fact, Vodafone does not need external funds for its Capex plan.
Vittorio Colao, CEO of Vodafone, recently said: “We continue to make progress in our Vodafone 2015 strategy, with good revenue growth in data and emerging markets, the launch of LTE services in another four markets and the acquisition of new spectrum.”
Though Vodafone had several options including merger with Verizon, it is considering an exit.
The Sunday Times reported that the options have ranged from a merger of the two telecoms giants to a partial sale of Vodafone’s stake holding in the Verizon Wireless venture.
A deal could be struck as soon as the summer.
A disposal would represent the most lucrative overseas investment by a British company.
Verizon Wireless, which is forecast to make a profit of $34 billion this year, is worth between $240 billion and $300 billion.
Until recently, a merger was the most likely option to resolve the complex relationship between Verizon and Vodafone. But shareholders in the American group are understood to have blocked a union as they do not want to own a stake in Vodafone’s troubled European business.
Arvind Krishna
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