Speculation about a Vodafone withdrawal from the US is once again mounting after a report in the UK’s Sunday Times newspaper claimed the UK operator is preparing to sell its 45% stake in Verizon Wireless in a deal that could raise as much as $135 billion.
Without saying where it had obtained the information, the Sunday Times said Vodafone (Newbury, UK) was in discussions with joint venture partner Verizon Communications (New York City, NY, USA) and that a sale could happen by the summer.
The two companies have had a testy relationship and a full takeover of the Verizon Wireless business by Verizon Communications has been seen as an option before now.
Indeed, Verizon Communications attempted to take full control of Verizon Wireless in 2006 but its move ran into fierce resistance from Vodafone.
Earlier this year, Verizon Communications chief executive Lowell McAdam was said to have expressed renewed interest in taking full control of Verizon Wireless, which is the US operator’s most profitable division, although the company subsequently played down the reports.
Currently valued at between $240 billion and $300 billion, Verizon Wireless could net Vodafone as much as $135 billion – based on the UK operator’s 45% stake – if a deal were to happen soon.
That could make it very attractive to Vodafone investors, who may be concerned about rising levels of competition in the US market, with Softbank (Tokyo, Japan) preparing a move for 70% of Sprint (Overland Park, KS, USA) and T-Mobile USA (Bellevue, WA, USA) hoping to merge with MetroPCS (Richardson, TX, USA) (pending the outcome of a MetroPCS shareholder vote scheduled for April 12).
Nevertheless, Vodafone chief executive Vittorio Colao has previously remarked that Verizon Wireless represents a good investment while operations elsewhere are struggling.
For the three months to end December 2012, Verizon Wireless reported year-on-year service revenue growth of 8.5%, compared with a 2.6% decline for Vodafone.
The UK operator’s European businesses are facing weak economic conditions and typically hostile regulation, which is also affecting performance in India, Vodafone’s largest addressable market in terms of customer numbers.
Fierce competition in Europe and India is putting additional pressure on the top line, and has driven up the prices operators have paid for licenses during recent auctions of 4G spectrum.
Given the unfavorable conditions outside the US, one issue for Vodafone may be where to invest the proceeds from a Verizon Wireless divestment.