Vodafone shares drop after Verizon rules out takeover

Wed Apr 3, 2013 4:43am EDT
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By Kate Holton

LONDON (Reuters) - Shares in Vodafone (VOD.L: Quote) fell on Wednesday after Verizon Communications (VZ.N: Quote) ruled out a full takeover, turning the focus yet again to whether the two telecom giants can do a deal over their Verizon Wireless joint venture.

The British group's shares have risen more than 25 percent this year on hopes that it would sell its 45 percent stake in Verizon Wireless for around $115 billion and end an often fractious relationship.

But with a sale likely to incur a tax bill for Vodafone in the region of $20 billion, investors and analysts had suggested the two groups may prefer to merge. The denial of that option by Verizon late on Tuesday pushed shares in Vodafone down 3.6 percent on Wednesday.

"As Verizon has said many times, it would be a willing purchaser of the 45 percent stake that Vodafone holds in Verizon Wireless," it said. "It does not, however, currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others."

Strategists at Olivetree Securities said the statement was aimed at Vodafone shareholders, to try and break the deadlock that has existed since Verizon Wireless was formed by the two groups in 1999.

"That message appears to be: 'If you want a deal, it's your own management team holding this up - you need to tell them to engage more intensely/shift their price expectations'," Olivetree said.

"Speculation of a resolution to this story will continue and thus Vodafone shares won't fall far."

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A pedestrian passes a Vodafone store on Oxford Street in central London, November 10, 2009. Vodafone, the world's largest mobile phone operator by revenue, has doubled its cost cutting target to 2 billion pounds by 2012, after a successful start to the programme boosted cashflow. REUTERS/Kevin Coombs