Verizon Communications Inc. (NYSE:VZ) is in talks to buy out a 45 percent stake held by Vodafone Group Plc (NASDAQ:VOD) in their joint U.S. venture -- Verizon Wireless -- as part of efforts by the New York-based company to expand its mobile business.
Vodafone’s statement, on Thursday, confirming the talks ended months of speculation that Vodafone was mulling the sale of its stake reportedly worth more than $115 billion in Verizon Wireless -- the largest wireless operator in the U.S.
“Vodafone notes the recent press speculation and confirms that it is in discussions with Verizon Communications Inc. regarding the possible disposal of Vodafone's US group whose principal asset is its 45% interest in Verizon Wireless,” Vodafone said in a statement. “There is no certainty that an agreement will be reached.”
The news brought cheer to investors as Vodafone shares rose 7.82 percent on the London’s FTSE 100 index on Thursday morning, while Verizon shares rose 6.42 percent in pre-market trading on Thursday.
“If Verizon buys all of the holding company, it could spare Vodafone from paying as much as $35 billion in taxes,” Joe Rundle, head of trading at ETX Capital in London, told CNN Money, describing the development as “very welcome news for Vodafone” as the British telecom major, which posted a net debt of 24.9 billion pounds ($38 billion) in June, is heavily leveraged.
The two companies have been close to striking a deal several times over the past 10 years, but talks fell through for a variety of reasons. If the deal succeeds this time, Vodafone is expected to use the cash from its U.S. stake sale to expand its business in other regions such as Germany, Italy and Africa.