Vodafone Open to Verizon Offer If It Beats Status Quo, BofA Says

Vodafone Group Plc (VOD) would consider exiting its wireless venture with Verizon Communications Inc. only if an offer is better than what the U.K. carrier gets out of its 45 percent stake, Bank of America Merrill Lynch analysts said after meeting with Vodafone Chief Executive Officer Vittorio Colao this week.

“Vodafone will only sell its U.S. stake if a Verizon offer beats the status quo,” analysts led by Emmet Kelly wrote in a report dated today. Vodafone views recent merger and acquisition-related newsflow from Verizon as “tactical posturing,” they wrote.

Verizon will probably need to pay a price of $135 billion to $140 billion to entice Vodafone to sell, the analysts said. Verizon executives recently told analysts that Vodafone’s 45 percent stake has a fair value of about $100 billion, people familiar with the matter have said. Citigroup Inc. said this month it values a possible deal at $120 billion to $135 billion.

Colao sees the U.S. wireless market as remaining structurally the best market despite the possibility of fiercer competition from Sprint Nextel Corp. (S) and Deutsche Telekom AG (DTE)’s T-Mobile US Inc. (TMUS), the Bank of America analysts said.

Vodafone will receive a dividend of $3.15 billion from Verizon Wireless on June 25, the venture said last month. Over the last two fiscal years, Vodafone received about $8 billion in dividends from the venture.

The tax implications on a potential sale are still a significant obstacle to a deal, especially with the recent U.K. tax debates surrounding Apple Inc. and Google Inc., according to the analysts.

Vodafone shares rose 1.8 percent to 191.50 pence at 1:29 p.m. in London, valuing the company at 93.2 billion pounds ($145 billion).

To contact the reporter on this story: Sam Chambers in London at schambers7@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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