Vodafone Group Plc Jumps On Talks Of Deal With Verizon

Vodafone Group Plc Jumps On Talks Of Deal With Verizon
By Kj1595 (Own work) [CC BY-SA 4.0 or Public domain], via Wikimedia Commons

Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) shares shot up by 6 percent on reports that it has discussed a merger with America’s Verizon Communications Inc. (NYSE:VZ), adding more than 8 billion to its market value.

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Vodafone Group Plc Jumps On Talks Of Deal With Verizon

According to the reports of Bloomberg, telecom giant Vodafone discussed with US company Verizon Communications Inc. (NYSE:VZ) regarding ending their American joint venture, known as Verizon Wireless. This could probably lead to Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) selling its 45 percent holding in the US venture.

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There has been rumors and talks going around regarding the potential merger or sale of the joint venture. The shares of Vodafone surged 6 percent on the FTSE 100, in early trade, marking it the biggest rise on London’s benchmark index. Espirito Santo analysts are of the view that Vodafone is probably heading towards making a series of European acquisitions, as the company was recently linked with a bid for Germany’s Kabel Deutschland.

Lionel Jardin, head of institutional sales at Assya, said the Indexes are moving beyond the big resistance levels, and they have the potential to further move upside. The situation, according to Jardin, is that Central banks are very accommodating as of now, and companies are in a good position with tremendous cashflow.

Amrit Panesar, a senior trader at Accendo Market, said in a cautious note that although the share price has moved up, it is not sure that the Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) and Verizon are in talks as these rumors are baseless and come without any specific details.

 “With a breakdown of the recent acquisition of German operator, Kabel Deutschland, we feel that profits should be taken off the table whilst uncertainty remains, with a potential buy on the dip once profit takers disperse.”

However, as per the reports, both companies have discussed various options, including the idea of Verizon Communications Inc. (NYSE:VZ) taking 100 percent of their US wireless partnership, according to the people aware of the situation. According to the analysts, Vodafone Group Plc (NASDAQ:VOD) (LON:VOD)’s 45 percent stake in the joint venture of both the companies is worth $115 billion.

According to sources familiar with the issue, Verizon Communications Inc. (NYSE:VZ) is desperate to take a major share of control in this profitable venture. In the last quarter, Verizon increased its customer base by record 2.1 million overshadowing the growth of AT&T Inc. (NYSE:T) and its other competitors. Verizon’s earning margin was more than 41 percent.

Jonathan Chaplin, an analyst with New Street Research, said Verizon wants to gain control over the best telecom asset on the planet. He said Verizon had a tremendous year of growth and profit and expects the same in the next fiscal.

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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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