Vodafone shares reach 10-year high

AT&T and Verizon said to be behind rumoured £161bn takeover bid, with latter keen to buy out Vodafone's stake in joint venture

Vodafone's shares hit a decade high on Tuesday on renewed rumours that the mobile phone company may be subject to a £161bn bid – which would smash previous takeover records.

Shares in Vodafone were trading nearly 6% higher at 197p, the highest the shares have reached since January 2002, following speculation that two US telecom companies are plotting to take over their British rival. The shares closed at 192p.

AT&T and Verizon Communications are said to be preparing to launch a breakup bid for Vodafone. The Financial Times suggested the bid could be pitched at about 260p a share. If the deal goes ahead at this price, it would be the world's biggest ever corporate acquisition, dwarfing the current record holder AOL's $182bn (£120bn) takeover of Time Warner in 2000.

The FT report, which cited "usually reliable people" that it did not identify, said Verizon would buy Vodafone's 45% stake in their Verizon Wireless US mobile joint venture, and AT&T would take on the rest of Vodafone's operations in more than 60 countries around the world.

Verizon issued a statement in which it said it was still interested in buying out Vodafone's stake in Verizon Wireless, but denied that it was looking to partner with AT&T. Verizon said it "does not currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others".

Vodafone and AT&T declined to comment on the rumour. Barclays, which is said to be putting the deal together, also declined to comment.

Vodafone, which with 403 million customers is the world's second-largest mobile phone company after China Mobile (which has 720 million customers), has long been looking for a way to extract value from its stake in Verizon Wireless.

It could choose to sell its Verizon stake, but if it did the British company would then be faced with a capital gains tax bill of up to £20bn as the value of the investment has soared.

There has also been speculation that the parent companies could fully merge. Vodafone and Verizon bosses were said to have discussed the latest iteration of this plan as recently as December, but the talks broke down over who would lead the combined company and where its headquarters would be based, according to Bloomberg.

Last month Vittorio Colao, Vodafone's chief executive, said he kept "an open mind" about the stake and all possible solutions. He said Vodafone's board meets to review the investment at least twice a year.

Richard Perry, chief strategist at Central Markets, said the latest market chatter "has got legs to run on it".

Robin Bienenstock, an analyst at Sanford C Bernstein, said AT&T is interested in buying into European markets but cautioned that "they've always bought at quite low prices" in previous US acquisitions.

Shareholders have been increasing pressure on Vodafone to capitalise on its Verizon Wireless stake. Last month John Hempton of Australian-based hedge fund Bronte Capital attacked Vodafone for incompetently handling the Verizon investment and said the "best outcome would be the sale of the whole of Vodafone at a good price".

In a searing critique, Hempton called for all of Vodafone's board to be sacked if it sells the Verizon Wireless stake because shareholders would suffer an "insane" tax bill of tens of billions of pounds.

"With the demonstrated record of failure of Vodafone over the past decade, Vodafone has surrendered its right to make a deal – any deal – which leaves management to squander the proceeds from the best asset they have – the only asset they did not manage," he added.

Verizon Wireless paid out a $8.5bn dividend split between its parent companies last year. It follows a $10bn dividend in 2011, the first time the joint venture had paid out cash to shareholders after halting dividends to pay down debt in 2005.

Analysts believe AT&T is hungry to make acquisitions after its $39bn bid for T-Mobile US – which would have created America's biggest mobile operator – was blocked by competition regulators two years ago.


Rupert Neate

The GuardianTramp

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