Reports: Verizon, Vodafone Strike $130 Bln Deal On Verizon Wireless Stake Buyout

(RTTNews) - Telecommunications giant Verizon Communications, Inc. (VZ) has finally struck a deal to buyout international partner Vodafone Group Plc.'s (VOD, VOD.L) 45 percent stake in their Verizon Wireless joint venture in a cash and stock deal valued at $130 billion, according to media reports on Sunday. A deal, which is expected to be announced as early as Monday, will give Verizon Communications 100 percent control of the Verizon Wireless. Earlier in the day, British telecom giant Vodafone confirmed the media speculation that it is in advanced talks to sell Vodafone's US group whose principal asset is its 45 percent interest in Verizon Wireless for $130 billion. The company also revealed that the consideration would substantially comprise a mixture of Verizon common stock and cash.

However, Vodafone said there is no certainty that an agreement will be reached, and that a further announcement will be made as soon as practicable.

The $130 billion deal, which is slated to be the second highest all-time corporate deal, is subject to final board approvals. The Vodafone board was reportedly scheduled to meet on Sunday to approve the deal, while the Verizon board was expected to meet after knowing the results of the Vodafone meeting.

Verizon has been contemplating the buyout of the stake several times in the past decade, but pricing has been the biggest stumbling block along with the risk of raking up a huge tax bill nearing $10 billion.

The closest they came to reaching a deal was in 2011. Talks have also failed as recent as earlier this year when Verizon was looking to pay about $100 billion for the stake, but Vodafone was hoping a consideration in excess of $130 billion.

However, the talks accelerated since July due to the rising interest rates and growing competition in the U.S. wireless market.

Reports suggest that the $130 billion deal will see Verizon Communications paying the total consideration equally with cash and Verizon common stock. However, the deal could come under national-security review as it will see the U.K.-based Vodafone gain a big stake in Verizon through the stock consideration for the deal.

Verizon will reportedly fund the cash component of the deal through a $65 billion financing from a group of four banks that include JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Barclays Plc (BCS, BARC.L) and Bank of America Corp. (BAC).

Verizon Wireless, the largest U.S. cellphone carrier, is the US wireless joint venture between Verizon Communications and Vodafone, with Verizon owning a 55 percent stake and Vodafone owning a 45 percent interest. The joint venture began operations as Verizon Wireless on April 4, 2000.

For Verizon, the deal will mean that it no longer has to share the billions in cash generated by Verizon Wireless. In late June, Basking Ridge, New Jersey-based Verizon Wireless had made a dividend payment of $7 billion to its owners. On the basis of ownership, Verizon got $3.85 billion, and Vodafone received $3.15 billion.

Several reports in April had speculated that Verizon Communications was working with its U.S. rival AT&T, Inc. (T) on a potential bid for Vodafone. However, Verizon immediately denied any such move, but reiterated then that it would be a willing purchaser of the 45 percent stake that Vodafone holds in the Verizon Wireless joint venture.

Vodafone Chairman Gerard Kleisterlee also reportedly said last month that he would seriously consider any offer for its stake in Verizon Wireless if it offered more value to investors than the current status quo.

VZ closed Friday's regular trading session at $47.38, down $0.44 or 0.92% on a volume of 13.42 million shares, while VOD closed at $32.35, up $0.55 or 1.73% on a volume of 36.64 million shares.

VOD.L closed in London at 206.25 pence, up 1.50 pence or 0.73% on a volume of 169.25 million shares.