LONDON (Thomson Financial) - The telecoms regulator on Thursday fined the Greek unit of UK mobile giant Vodafone 19.1 mln eur for violating network regulations in a wire-tapping scandal that rocked the country last year.

The fine is the second handed to Vodafone Hellas over the case after a 76 mln eur penalty levelled by Greece's communication privacy watchdog last December.

Some 100 Vodafone cellphones in February 2006 were found to have been compromised by an illicit network that tapped sets used by Greek Premier Costas Karamanlis, his wife and several ministers from June 2004 to March 2005.

The tapping used software slipped into Vodafone's network by unknown perpetrators to illegally activate an Ericsson-made module permitting call interception.

On Thursday, the national telecommunications regulator EETT accused Vodafone of breaching regulations on the protection of telecommunications privacy, network maintenance and quality, and consumer protection.

The company rejected last December's fine as 'illegal, unfair and baseless.'

A Greek parliament committee collecting evidence on the case last November noted the involvement of three employees of telecoms giants Ericsson Hellas and Vodafone Greece, identified only by their initials.

'The whole system could not operate without Ericsson know-how and without access from within (Vodafone),' the report said.

The Greek branch of Swedish telecom equipment giant Ericsson has also been fined 7.36 mln eur over the case.

The parliamentary committee did not rule out the involvement of other people operating outside Greece.

The Greek justice department has opened an investigation into the case but nobody has yet been charged.

Days before the affair came to light, a senior Vodafone expert was found hanged inside his home.

The death of Costas Tsalikidis, manager of Vodafone Greece's network planning section, was linked to the case and his family suspects he was murdered.

Britain has 4G competition as operators jump from one to three

LONDON | Thu Aug 29, 2013 12:07am BST
(Reuters) - Britain will catapult into the superfast mobile top division on Thursday when operators O2 and Vodafone finally launch 4G services to compete with market leader EE.

The arrival of two more operators offering speeds more than five times faster than 3G - ideal for watching video on the go - marks a sharp turnaround from just a year ago when the country was stuck in the mobile slow lane with no 4G service.

Verizon Said Near $130 Billion Buyout of Vodafone Venture

Verizon Communications Inc. is in advanced talks to acquire Vodafone Group Plc (VOD)’s 45 percent stake in their U.S. wireless venture for about $130 billion, according to people with knowledge of the matter.

Verizon is working with several banks to raise $10 billion from each, or enough to finance about $60 billion of a buyout of Verizon Wireless, said two of the people, who asked not to be identified because the talks are private. An announcement could come as soon as Sept. 2, said the people.

Statement Re Press comment

Vodafone notes the recent press speculation and confirms that it is in discussions with Verizon Communications Inc. regarding the possible disposal of Vodafone's US group whose principal asset is its 45% interest in Verizon Wireless.

There is no certainty that an agreement will be reached.

Extended auction.

What could Vodafone do with the Verizon money

Exane BNP Paribas Underperform 204.75 204.75 - 202.00 Reiterates

Citigroup Buy 204.75 204.75 215.00 215.00 Reiterates

Deutsche Bank Buy 204.75 204.75 217.00 217.00 Reiterates

Interesting FT article

Vodafone in talks over selling 45% stake in Verizon Wireless

By Anousha Sakoui and Rob Budden in London and Paul Taylor in New York

The UK’s Vodafone is closing in on a near-$130bn deal to offload its lucrative US wireless stake to joint venture partner Verizon, underlining the shift of power in the telecoms industry from Europe to the Americas.

A sale of Vodafone’s 45 per cent share in Verizon Wireless to the US telecoms group would resolve one of the longest-running stand-offs in recent dealmaking history and mark the third-largest merger and acquisitions deal of all time. It was described by people close to the transaction as providing “a massive quantitative easing injection” for the British economy.

The two companies were aiming to finalise terms by early next week for the buyout of Vodafone’s stake, which would lead to a payout of billions of dollars to pension funds and other shareholders, people close to the talks said.

Once known as “project vulture”, the two groups have long wrestled over the future of the stake, estimated by analysts at Citigroup to be worth between $125bn and $135bn, with Verizon steadily increasing pressure on the UK group to pull out of its US joint venture this year.

Talks have been mooted in the past but the two companies had been thought to be far apart on the valuation of the business, in which Verizon holds the remaining 55 per cent stake and controls dividend payouts of billions of dollars to Vodafone. But the talks restarted in earnest this summer after Vodafone completed a US investor roadshow.

Shares in Vodafone were trading about 8.3 per cent higher in London on Thursday at 205p on confirmation of talks. However, Vodafone added: “There is no certainty that an agreement will be reached.” Verizon has yet to comment.

One of the biggest hurdles to the deal had been the risk of a $40bn capital gains tax bill for Vodafone by selling the stake. However, Verizon said this year that a deal could be achieved without significant tax implications.

According to people close to the matter, such a bill could be in the single-digit-billion dollars if Verizon bought all of a unit called Vodafone Americas Holdings, a vestige of a 1999 deal when Vodafone bought US wireless carrier AirTouch.

I doubt Verizon is willing to pay what Verizon Wireless is worth to Vodafone, but even if the deal happens, I think Vodafone’s share price is more than fair at the current level
- John Karidis, Oriel Securities

A deal of up to $130bn would rank as one of the largest since Vodafone paid $181bn for Mannesmann in 2000 and would highlight the changing dynamics of the global telecoms industry fuelled by the growth of wireless broadband data and the rapid adoption of mobile devices including smartphones and tablets.

Slowing growth, cheap financing and the prospect of tougher price competition, particularly in the more mature mobile markets where economies of scale are vital, have helped to spur the surge in telecoms transactions which already total over $80bn this year, according to figures compiled by Bloomberg.

James Britton, an analyst of Nomura, said Vodafone could be “selling at what might prove to be the peak of Verizon Wireless’s prowess, before new competition comes into the market and at a valuation that is impressive”.

Scepticism remained in some quarters, however, over the likelihood of an agreement.

For both sides the opportunity to do a deal had seemed to be narrowing. Verizon’s share price has weakened in recent weeks, and there are fears rising interest rates could make a near $60bn debt fundraising too expensive.

The risk for Lowell McAdam, chief executive of Verizon, would potentially be to buy out the wireless group at a time when competitive pressures are increasing. For Vodafone’s CEO Vittorio Colao quitting the US would leave the group as a potentially attractive target for takeover.

John Karidis, analyst at Oriel Securities, said: “I doubt Verizon is willing to pay what Verizon Wireless is worth to Vodafone.” Kevin Smithen, analyst at Macquarie Securities, said: “$130bn is a high price as the US wireless market will deteriorate in 2014 and beyond.”

But he added that Verizon Wireless was “perhaps the pre-eminent global wireless asset today and controlling 100 per cent of its free cash flow and board seats gives Verizon more strategic flexibility”.

An exit would leave Vodafone focused on Europe and other emerging markets. Speculation has already begun about how the UK group would use the proceeds to rebuild its global network, with acquisitions in Portugal and Italy already being tipped by analysts. A takeover over the remainder of the Vodafone group though is also likely, with operators such as AT&T, Softbank and America Movil prowling Europe for telecom assets.

“This would be a good deal for Vodafone as it will give them the money to expand in the emerging markets, which will help the company grow,” said one top 10 shareholder in Vodafone. However, analysts have said that shareholders are unlikely to accept an offer below $115bn.

Additional reporting by Henry Mance and David Oakley in London

Vodafone investors split on best use of Verizon windfall

LONDON | Fri Aug 30, 2013 12:51pm BST
(Reuters) - Top investors in Vodafone Group are set to clash over what the company should do with perhaps as much as $130 billion (83 billion pounds) in proceeds from the sale of its stake in Verizon Wireless, which is expected to be announced imminently.

Vodafone shareholders contacted by Reuters as talks continued between the British firm and Verizon Communications were split between those wanting to see the cash returned as dividends and those wanting the firm to invest it.

Telecoms giant Vodafone was continuing to rise after yesterday's impressive surge following the confirmation that it is in talks about selling its 45% stake in Verizon Wireless to US partner Verizon. The sale could generate up to $130bn for the UK group, reports have suggested.

What would the remnants of Vodafone be worth? http://valueshare.co.uk/current-portfolio/vodafone/vodafone-loses-verizon-stake-left/272/

NEW YORK/LONDON (Reuters) - Verizon Communications and Vodafone plan to announce a $130 billion deal on Monday that will give the U.S. telecom giant complete control of Verizon Wireless, subject to final board approval, people familiar with the matter said.

Vodafone said in a statement late on Sunday it was in advanced talks with Verizon to sell its 45 percent stake in the joint venture for $130 billion, comprising cash and common shares, but that there was no certainty an agreement would be reached.

"A further announcement will be made as soon as practicable," it said of the deal to exit the largest mobile operator in the U.S..

Under the terms of the proposed agreement, Vodafone would get $60 billion in cash, $60 billion in Verizon stock, and an additional $10 billion from smaller transactions that will take the total deal value to $130 billion, two of the people familiar with the matter said on Saturday.

To fund the cash portion of the deal, Verizon has lined up as much as $65 billion in financing from four banks: JPMorgan Chase & Co, Morgan Stanley, Barclays Plc and Bank of America Merrill Lynch, they said. The banks have committed to the financing which is expected be split evenly among the four, two people said.

A full announcement of the terms is expected to come after the stock market closes in London on Monday, after the board of Verizon meets earlier in the day to vote on the proposed transaction, people familiar with the matter told Reuters.

Vodafone's board was scheduled to meet on Sunday to approve the deal, the people said. Both groups declined to comment.

If the deal is concluded, it will end one of the longest-running corporate standoffs, which has at times seen both partners seek to buy out the other in times of weakness. For Verizon, it means that it no longer has to share the billions in cash generated by Verizon Wireless.

On the Vodafone side, Chief Executive Vittorio Colao will get a war chest of cash to reward shareholders and potentially carry out acquisitions to strengthen the group's European and emerging market operations.

All the people asked not to be identified because the matter is not public.

HIGHLY PROFITABLE

An agreement over Verizon Wireless would mark the culmination of on-again, off-again discussions going as far back as 2004, when Vodafone bid for AT&T Inc's wireless business in a move that would have required it to shed its Verizon Wireless stake.

The British company lost that bid and has since held on to the Verizon Wireless stake for its exposure to the highly profitable U.S. wireless market, saying it would only sell if Verizon offered a price that was more valuable to its shareholders than the status quo.

At $130 billion, it would be the third-largest corporate deal of all time.

A top 10 Vodafone investor told Reuters last week that $130 billion would be "a good price" that shareholders would welcome.

"Colao's done a good job over the last five years. He's done well not to have sold the U.S. sooner. There were people calling for him to sell the U.S. business three or four years ago and clearly it's been the right thing to do not to do that because it's grown in value hugely over that time.

"Taking the big picture, I think the management has done a good job and if they get the mooted price for Verizon they'll be treated as heroes."

Talks picked up in earnest a few weeks ago, as Verizon grew concerned that its window of opportunity was closing, with interest rates due to rise and its own stock price declining.

That prompted Verizon to raise the offer price from the $100 billion it had initially floated to around $130 billion, sources have said.

Even after the bump in price, the deal is expected to be accretive to Verizon's earnings, one of the sources said.

Another hindrance to a deal has been the possibility of a huge tax bill for Vodafone from the sale, based on Verizon Wireless' massive growth since it was established. But the sources said the deal would be structured in such way that Vodafone's tax bill could be cut to around $5 billion.

A deal would add to the spate of telecom acquisitions this year in Europe and the U.S.. Most recently, Japan's SoftBank Corp took control of Sprint Nextel Corp, the No. 3 U.S. wireless provider, in a $21.6 billion deal that could make the U.S. market more competitive.

Although overall M&A activity remains lower than last year at this time, the telecom sector has been a bright spot of deal-making. According to Thomson Reuters data, telecom deals were up 36 percent this year, with 358 deals worth $60.9 billion, not including the potential Verizon-Vodafone deal.

RESPONSE TO MEDIA SPECULATION

Vodafone confirms that it is in advanced discussions with Verizon Communications Inc. regarding the disposal of Vodafone's US group whose principal asset is its 45% interest in Verizon Wireless for US$130 billion. The consideration would substantially comprise a mixture of Verizon common stock and cash.

There is no certainty that an agreement will be reached. A further announcement will be made as soon as practicable.

LONDON (Reuters) - Verizon Communications was poised on Monday to take full control of its U.S. wireless business with a $130 billion deal to buy out Vodafone and end a decade-long corporate standoff.

The British firm said late on Sunday it was in advanced talks with Verizon to sell its 45 percent stake in the Verizon Wireless joint venture for cash and common shares in what would be the world's third-largest deal of all time.

People familiar with the situation told Reuters they expect a full announcement to come after the London stock market closes on Monday, and after the board of Verizon meets to vote on the proposed transaction for the biggest mobile operator in the United States.

The move to sell Verizon closes a heady expansionist chapter for one of Britain's most famous companies, which grew rapidly over the last 20 years through a spate of aggressive deals to take its red brand into more than 30 countries across Europe, Africa and India.

The world's largest deal, a $203 billion hostile takeover of Germany's Mannesmann in 2000, made Vodafone the company it is today.

The new Vodafone will be smaller, less profitable and more reliant on its core, mature European assets but it is expected to use the windfall to rebuild via smaller acquisitions and higher network investments.

Speculation has already begun that Vodafone could itself become a bid target, and news of the pending deal sent its shares up 4 percent to a more than 12-year high in early London trade on Monday.

Under the terms of the proposed agreement, Vodafone would get $60 billion in cash, $60 billion in Verizon stock, and an additional $10 billion from smaller transactions that will take the total deal value to $130 billion, two of the people familiar with the matter have told Reuters.

To fund the cash portion of the deal, Verizon has lined up as much as $65 billion in financing from four banks: JPMorgan Chase & Co, Morgan Stanley, Barclays Plc and Bank of America Merrill Lynch, they said. The banks have committed to the financing which is expected be split evenly among the four, two people said.

INCREASING PRESSURE

The news that the two sides are nearing a final agreement follows years of speculation as to when and whether Vodafone, the world's second largest mobile operator, would exit the highly successful business.

Vodafone entered the United States in 1999 through a series of deals that resulted in the formation of Verizon Wireless in 2000, with Verizon Communications holding 55 percent of the company and Vodafone the rest.

But the two sides clashed almost immediately and the partnership has over the years been fraught with difficulties, with both partners at times seeking to buy out the other in times of weakness.

Verizon at one point withheld dividends from Vodafone for six years in an effort to force the British group out of the company, a stance that was first resisted by Arun Sarin who led the company from 2003 to 2008 and then by current boss Vittorio Colao.

Their resistance, often in the face of investor demands for a sale, may prove to have been a masterstroke. Verizon Wireless became the largest operator in the U.S., a growing market that boasts high margins and high prices compared with Europe.

For Verizon, a deal means it no longer has to share the billions in cash generated by Verizon Wireless and will in the long run be better able to compete in a country that looks set to turn more competitive.

Deal done, but no details as yet - Vodafone confirms Verizon stake sale

A bit more from reuters.

Verizon, Vodafone say agree to $130 billion Verizon Wireless deal

(Reuters) - Verizon Communications Inc said on Monday it has agreed to buy out Vodafone Group Plc's 45 percent stake in Verizon Wireless for $130 billion, capping its decade-long effort to win full control of the most profitable mobile service provider in the United States.

Under the terms of the deal, Vodafone would get $58.9 billion in cash, $60.2 billion in Verizon stock, and an additional $11 billion from smaller transactions that would take the total deal value to $130 billion, Verizon said in a statement.

The deal marks the third-largest announced acquisition in corporate history and British telecom giant Vodafone's exit from the large but mature U.S. mobile market.

VODAFONE TO REALISE US$130 BILLION FOR ITS 45% INTEREST IN VERIZON WIRELESS

US$84 BILLION EXPECTED RETURN TO SHAREHOLDERS

£6 BILLION ORGANIC INVESTMENT PROGRAMME TO ENHANCE NETWORK AND SERVICE LEADERSHIP

Key highlights
•

Vodafone announces that it has reached agreement to dispose of its US group whose principal asset is its 45% interest in Verizon Wireless ("VZW") to Verizon Communications Inc. ("Verizon" - NYSE: VZ), Vodafone's joint venture partner, for a total consideration of US$130 billion (£84 billion).
•

The consideration1 comprises:
-

US$58.9 billion (£38.0 billion) in cash;
-

US$60.2 billion (£38.9 billion) in Verizon shares2;
-

US$5.0 billion (£3.2 billion) in the form of Verizon loan notes;
-

US$3.5 billion (£2.3 billion) in the form of Verizon's 23% minority interest in Vodafone Italy; and
-

US$2.5 billion (£1.6 billion) through the assumption by Verizon of Vodafone net liabilities relating to the US Group.
•

The VZW Transaction represents an attractive valuation of 9.4x EV / LTM EBITDA and 13.2x EV / LTM OpFCF.
•

Vodafone intends to implement a new organic investment programme, Project Spring, to establish further network and service leadership through additional investments of £6 billion over the next three financial years.
•

At completion, Vodafone shareholders are expected to receive all the Verizon shares and US$23.9 billion of cash (the "Return of Value") totalling US$84.0 billion (£54.3 billion), equivalent to 112p per share and representing 71% of the Net Proceeds.
•

Vodafone expects that strong free cash flow generation will continue to underpin shareholder returns. The Board, therefore, intends to increase the total 2014 financial year dividend per share by 8% to 11p, and intends to grow it annually thereafter.
•

Subject to the satisfaction of certain conditions precedent, the Transactions are expected to complete in Q1 2014.

It seems like the deal has been struck at $135 billion and Vodafone has released some details. The total deal is valued at £1.12 per share. $60.2 Billion of this will be in shares and will be fully distributed to Vodafone shareholders. A further $23.9 billion will be distributed to shareholders as a special dividend. The rest of the proceeds will be used by Vodafone to reduce debt and for business investment. Vodafone seem very positive about the prospects for the remaining group and have announced that they will raise the dividend for next year by 8% to 11p. This seems amazing at the current share price of £2.13 after the Verizon stake that values the rest of the company at £1.01 with a dividend of 11p. That equated to a yield of 10.89%. I would suggest that if the dividend is reliable that they yield could be at least halved which would mean the value of the remaining stake would be doubled to £2.02. When you add the Verizon stake of £1.12 you could argue that Vodafone’s price should be £3.14 which is a significant premium to the current price.

Vodafone has announced a presentation will be held tomorrow so hopefully there will be more information then and if anything significant I will write another update.

Today's "Targets".


HSBC Overweight 222.48 230.00 230.00 Retains

Exane BNP Paribas Underperform 222.48 202.00 202.00 Reiterates

Nomura Buy 222.48 230.00 230.00 Reiterates

Jefferies International Hold 222.48 216.00 216.00 Reiterates

I've taken a daily long position, have VOD as equity also.

Verizon markets $61 billion bridge loan for Vodafone deal: sources

NEW YORK | Mon Sep 2, 2013 10:23pm EDT
(Reuters) - Verizon Communications Inc (VZ.N) has started syndicating the $61 billion bridge loan backing its $130 billion buyout of Vodafone Group's (VOD.L) stake in its U.S. wireless business, banking sources said, adding that some of the loan may actually be drawn upon due to its huge size.

The 364-day billion bridge loan will be refinanced with a permanent capital structure consisting of $49 billion of corporate bonds and $14 billion of loans, sources told Thomson Reuters. The loans will include a $2 billion revolving credit and $12 billion of term loans.

The massive bridge loan is being seen by many banks as a rare opportunity to make money from investment-grade lending. Underwriting fees for bridge loans are generally richer than those paid for more routine refinancings and fees increase further in the rare cases where bridge loans are drawn upon.