U.S. exit to leave Vodafone with M&A war chest

Sun Sep 1, 2013 3:01pm EDT
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By Paul Sandle and Leila Abboud

LONDON/PARIS (Reuters) - Vodafone's exit from the United States in a $130 billion deal expected to be sealed on Monday will give it a war chest to make acquisitions even after it rewards its shareholders.

The board of Verizon Communication will meet on Monday morning New York time to vote on buying out Vodafone from its joint venture, meaning a full announcement could come after the London market close, sources said.

Assuming Vodafone receives $116-132 billion from the sale of Verizon Wireless, analysts at Citigroup estimated it could distribute $40 billion in cash and Verizon common stock to shareholders, and still have $30-38 billion in deferred proceeds after paying tax and reducing debt.

With that cash pile, Vodafone boss Vittorio Colao will have to build a new future for the world's second-biggest telecom operator now that it can no longer rely on its U.S. unit to drive growth and provide billions in cash for dividends.

Investment bankers and analysts are already speculating. They say it's too early to know whether Colao will beef up in Europe, look at new countries such as Brazil or even attempt a re-entry to the U.S. market via acquisition.

"It's early days still but I imagine that Vodafone already has some ideas about acquisition targets since they will have a lot of money to play with," said one sector banker who declined to be named.

"Colao's first priority will be to strengthen in countries like Germany, Italy and Spain where Vodafone is already present via a mix of higher network investments and bolt-on acquisitions in fixed or cable," the person said. "Don't expect Vodafone to do some big transformational deal right away."

EUROPE SLUMP   Continued...

A customer walks past the Vodafone logo in a shopping mall in Prague February 7, 2012. REUTERS/David W Cerny