Vodafone Group Plc (VOD) Shares Rise On Talk of Verizon-AT&T Bid

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Vodafone Group Plc (VOD) Shares Rise On Talk of Verizon-AT&T Bid

Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) shares rallied up on Tuesday morning after the speculations that Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) are working together on a break-up bid for the telecom operator.

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As reported by FT, the rumoured deal includes a payment of 260p a share, which is a 40 percent premium to the Vodafone’s share price on Monday. Currently, Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) owns 45 percent stake in Verizon Wireless, and Verizon Communications own the rest. Verizon Communications Inc. (NYSE:VZ) will acquire Vodafone’s Verizon Wireless stake while AT&T Inc. (NYSE:T) will buy the Vodafone’s non-US assets, says the report.

There have been some concerns regarding the future of Vodafone’s Verizon stake, but the tax liabilities that Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) might face is an obstacle. The deal, if goes through, will be the biggest M&A deal till now, as going by the terms of the deal enterprise value for Vodafone comes at $245 billion.

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Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) shares gained about 6 percent on the news. In mid-morning trading, the stocks were trading up 4.7 per cent at 195p, and looks well set to beat their highest close since November 2007. The London benchmark FTSE 100 index was up 1 per cent.

Traders were surprised with the spike in the stock’s volumes in morning trading.

“The trading volumes have been much higher than expected for morning trading,” one trader at a London-based brokerage said.

“The story is starting to spread – I expect the shares go higher when Americans wake up,” the trader added.

The news (though still a rumor) lifted the investors mood a bit who were disappointed with the falling revenues and margins squeezed amid fierce competition in the European telecoms sector. In Paris, shares of France Telecom gained 1.6 per cent €8.01 and Bouygues stock rallied by 2.2 per cent to €21.62. Telecom Italia shares were up rose 0.5 per cent to €0.55 while shares of Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) rose 1.1 per cent to €8.34.

Analyst at Bernstein considers the deal talks a bit distant. He believes that the structure of European wireless businesses is in a worse condition than U.S. businesses; and he believes that if the deal goes through, it will be huge. Verizon Communications Inc. (NYSE:VZ) are clear on their on their strategy that they do not want to acquire any European assets and AT&T Inc. (NYSE:T)’s plans will not be much different either, says the analyst.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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