Vodafone shares fall after bid denial

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br vodafone (33023227) Bloomberg A pedestrian uses his smartphone while passing the front of a Vodafone Group Plc store in Barcelona, Spain, on Tuesday, Jan. 15, 2013. Vodafone Group Plc, the world's second largest mobile-phone company, plans to reduce the workforce at its Spanish unit as unemployment exceeding 25 percent in the recession-plagued country causes sales to drop. Photographer: David Ramos/Bloomberg

Amy Thomson and Scott Moritz London

VODAFONE shares fell from a five-year high yesterday after Verizon Communications said that it was not considering a bid, denying a report that it was discussing a joint offer for the UK carrier with AT&T.

Verizon said it did not have any intention “to merge with or make an offer for Vodafone, whether alone or in conjunction with others”.

Vodafone fell as much as 3.7 percent, and lost 2.5 percent to £1.87 (R26) just before noon in London.

Vodafone had risen as much as 6.1 percent on Tuesday after the Financial Times blog reported that AT&T and Verizon were considering a joint offer. Verizon reiterated its interest to buy Newbury, England-based Vodafone’s 45 percent stake in the companies’ US mobile venture, Verizon Wireless.

“There never was a bid,” Ottavio Adorisio, an analyst at Société Générale in London, said in an interview. “As far as Verizon is concerned, they have had for the last 10 years one target – it’s to get Vodafone out at a decent price.”

Adorisio recommended selling Vodafone shares.

A joint bid with AT&T could allow Verizon to seize full control of Verizon Wireless, while letting its US rival scoop up the remaining Vodafone assets in Europe. AT&T wireless head Ralph de la Vega said in an interview in February that the company would consider opportunities to expand globally.

Representatives from Vodafone and AT&T declined to comment on takeover scenarios or Verizon’s statement.

Bloomberg News reported last month that New York-based Verizon had considered a full merger with Vodafone as recently as December, although talks faltered because of disagreements over leadership and the location of the new headquarters.

Verizon was now focusing instead on gaining full control of Verizon Wireless, its most valuable asset, officials familiar with the situation said last month. Verizon Wireless was formed in 1999 when Bell Atlantic Corporation, which became Verizon Communications, combined its mobile unit with Vodafone’s. The 45 percent stake is worth about $115 billion (R1 trillion), according to analysts’ estimates.

“As Verizon has said many times, it would be a willing purchaser of the 45 percent stake that Vodafone holds in Verizon Wireless,” Verizon said in the statement.

Verizon Communications, as the 55 percent partner, controls the payments that the wireless venture distributes to the partners, leaving Vodafone with an uneven income from the US.

The cash was becoming increasingly important to Vodafone as its European operations falter, Adorisio said.

Chief executive Vittorio Colao said that he wanted to gain assets that would allow Vodafone to offer bundled internet, mobile and landline phone services across the continent. The company had had internal discussions about an acquisition of German cable company Kabel Deutschland before abandoning the plan, officials said in February.

Under UK takeover rules, Verizon would have to wait six months after Tuesday’s statement to make an offer to buy Vodafone or shares representing more than 30 percent of voting rights in the company. The rules are designed to protect shareholders in companies that are takeover targets and subject to information leaks that affect the stock price.

Exceptions to this rule include scenarios where Vodafone’s board authorises a takeover, a third party makes an offer or there is a “material” change in the company’s circumstances.

Previous efforts at winding down the Verizon Wireless partnership have not been fruitful. – Bloomberg


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