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Verizon in talks to acquire Vodafone's 45% stake in wireless

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By Bloomberg News
Friday, Aug. 30, 2013, 12:01 a.m.
 

Verizon Communications Inc. is in talks to acquire United Kingdom partner Vodafone Group Plc's 45 percent stake in Verizon Wireless in what would be the biggest deal in more than a decade.

The carriers are in advanced discussions about a sale of the holding for about $130 billion, according to people with knowledge of the matter. Verizon is working with several banks to raise $10 billion from each, or enough to finance about $60 billion of the buyout, two of the sources said, asking not to be identified because the talks are private.

An announcement could be made as early as Monday, sources said. The acquisition would give Verizon full ownership of the most profitable mobile phone company, ending a partnership of more than a decade that has paid billions in dividends to Vodafone. Verizon shares jumped 2.7 percent, and Vodafone surged 8.2 percent to its highest price since 2002.

“Verizon wants to be completely in control of its own destiny,” said Jan Dawson, chief telecommunications analyst with the New York office of London-based research firm Ovum. “This is fundamentally a recognition that wireless is the future.”

At $130 billion — almost Verizon's entire market value — the deal would be the biggest since Vodafone's acquisition of Mannesmann AG in 2000 and would give the U.K. carrier's finances a boost as Chief Executive Officer Vittorio Colao, 51, tries to revive its European businesses hurt by the region's debt crisis.

As part of the transaction, Verizon probably will sell back to Vodafone its 23 percent stake in Vodafone Italia, which could be worth about $5.3 billion, said two of the people.

In a statement, Newbury, England-based Vodafone said there's “no certainty that an agreement will be reached” as it holds discussions with New York-based Verizon. Bob Varettoni, a spokesman for Verizon, declined to comment.

“This deal is extremely important for Vodafone for their convergence strategy toward more cable assets because pure mobile operators will certainly experience capacity bottlenecks in the future,” said Leopold Salcher, an analyst at Raiffeisen Capital Management, calling $130 billion “a very good price.”

Verizon climbed to $47.82 in New York trading for a market capitalization of $137 billion. Vodafone rose to 204.75 pence in London, giving the company a market value of $154 billion.

“It's certainly a good deal for Vodafone,” said Craig Moffett, an analyst at Moffett Research LLC in New York. “It's probably good news for Verizon as well. This gives them much better growth and it gives them much better dividend coverage, and it's almost certainly going to be accretive to earnings.”

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