Vodafone says no plan to sell Verizon stake
Puts stay put
Vodafone Group Plc has denied reports that it intends to sell its 45% stake in Verizon Wireless, its US joint venture with Verizon Communications, after speculation it was looking to offload its stake in order to fund a bid for a rival US mobile operator.
Vodafone holds "put" options that can be exercised in two tranches over the next four years, starting in July 2003. Vodafone could thus effectively force Verizon to purchase Vodafone's 45% stake, with the initial sale estimated to give Vodafone up to $10bn, depending on an independent valuation.
By selling its Verizon stake, Vodafone could restructure its strategy for the US market, where it does not enjoy a controlling stake in any local operator. Mooted possible takeover targets include VoiceStream, which Deutche Telekom is anxious to offload in order to reduce its debt burden, and AT&T Wireless Services.
Commenting on the speculation, Vodafone said it has "no present intention" of selling its Verizon shareholding, a suitably vague statement that will allow incoming CEO Arun Sari to make his own decision regarding Vodafone's future US strategy. It is known that outgoing CEO, Sir Christopher Gent, regretted his failure to gain control of the venture.
Sari is currently a non executive director and former president of Vodafone's AirTouch subsidiary in the US. He is currently CEO of Accel-KKR Telecom in California, and is expected to start working alongside Gent in April. Gent retires after the Vodafone AGM in July.
Relationships between Vodafone and Verizon have been strained of late. Vodafone was humiliated when Verizon Communications used its majority stake in the venture to install data technology incompatible with Vodafone's network, forcing the Newbury, UK-based operator to spend valuable time and resources developing dual chip mobile devices in response.
Verizon could do with not having to buy back Vodafone's stake because it is $51bn in debt, its local telecom cash cow is under pressure, and its credit rating has recently been downgraded. Instead, it could offer Vodafone joint control of their mobile venture by selling another 5% to Vodafone.
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