Sale of its stake in joint venture looking more feasible
Vodafone’s share price continued its steady ascent this morning [8th January 2013], rising nearly 3 per cent in early trading, following news that its US partner Verizon might want to buy out the UK operator’s stake. Verizon Wireless, 45 per cent owned by Vodafone, has proved to be something of a cash cow for both the UK mobile firm and Verizon’s own parent company Verizon Communications, paying out $18.5 billion in dividends in 2012. The payout provided Vodafone with a welcome boost to its finances, having been hit by falling demand across Europe which accounts for around three quarters of its revenue.
Also proving a strain for Vodafone is the rising cost of acquiring new spectrum around the world, all of which has led to speculation that it might now be ready to sell its share of Verizon.
The rumours were given added credence yesterday [7th January] when Verizon Communication’s CEO, Lowell McAdam, said he was confident his company could agree purchase terms, his comments immediately giving a fillip to Vodafone’s share price on this side of the Atlantic.
The wireless partnership was formed in 2000, allowing the two operators to pool assets and share costs at a time when mobile was still relatively new, but has since grown into more of a money spinner than Verizon Communication’s own traditional landline business.
In some ways, the joint venture’s meteoric rise has made a buy-out proposition even more feasible.
Said McAdam, “Our wireline business is getting stronger and as that gets stronger, it makes a deal easier.”
He added that although buying Vodafone’s stake outright was possible, there were “lots of different ways” a deal could be struck, his remark pointing towards a possible share swap arrangement.
But he added, “I don’t feel compelled to go out and take action to make something happen.”
In early trading on the LSE this morning, Vodafone’s stock stood at 164 pence, compared to a low of 156 pence last Thursday [3rd January 2013].