But has UK operator sold jewel in its crown?
Vodafone investors can expect to receive one of the biggest ever payouts in corporate history following the operator’s sale of its stake in Verizon Wireless.
A massive 71 per cent of the proceeds are expected to be handed back in cash and shares, equating to around $84 billion. ”This is a very substantial return to individual shareholders and investment funds that are relied upon by savers and pensioners in the UK, US and internationally, rewarding our investors for their long-term support.” said Vodafone CEO Vittorio Colao yesterday (2nd August 2013), speaking after the deal was apparently settled with a simple handshake at a hotel.
Under the terms of the settlement, Vodafone will receive £38 billion in cash, £39 billion in Verizon stock and a further £7.1 billion made up of smaller transactions.
The £30 billion not returned to shareholders will be used by Vodafone for expansion and improvements elsewhere, with £6 billion to be spent on improving 4G infrastructure for European markets, and £20 billion used to reduce the company’s debt.
The final financial transactions between Vodafone and Verizon Communications are expected to be completed early next year.
But yet to be revealed is how Vodafone might handle calls for it to pay capital gains tax in Britain, with suggestions that it might escape liability – through complex offshore structures – already prompting calls for a UK parliamentary debate.
Meanwhile, with the sale of its 45 stake in Verizon Wireless, some analysts argue the UK operator has sold the jewel in its crown and which hitherto accounted for a major chunk of Vodafone’s global revenues.
Vodafone’s European Central and Northern European operations will now stand as the company’s main money spinners with revenues of £18.8 billion, though there has been little growth in these markets in recent years.
The rest of the world operations make up 30 per cent of total group turnover, with India playing a key part in earnings.
But ongoing rows with Indian government over tax issues leave a question mark over future performance here.
Without future income from Verizon Wireless and lack lustre performance in other part of the world, Vodafone could even become a takeover target itself, believe some analysts.
They cite US giant AT&T as a possible buyer, given that it has already signalled its intention to expand beyond its home shores into Europe.
Other candidates are Carlos Slim’s América Móvil and Japan’s Softbank.