NEW YORK-Though Verizon Communications Inc. executives say that they have received no official notice that Vodafone Group plc is ready to sell its 45-percent stake in Verizon Wireless, they made it clear during a conference call this week that they “would be interested in increasing ownership of Verizon Wireless, whether in stages or actually acquiring 100 percent of it,” in the words of Ivan Seidenberg, Verizon’s chairman and chief executive officer.
“I would add that we also recognize that the put option is not the preferred vehicle for Vodafone to facilitate any transaction,” Seidenberg said. “We are very open and willing to consider negotiation around that to make sure that it’s efficient for both sides and … we can maximize value for both parties.”
According to a Bear Sterns report on Verizon, Vodafone can exercise a put right that would require Verizon to buy out its shares at market value in July 2006 or July 2007, but the aggregate amount Verizon must pay may not exceed $20 billion and “no single exercise of the right may be for an amount in excess of $10 billion.”
The terms change slightly if Verizon Communications opts to take on the buy-out obligations; Verizon Wireless could still be required to cover $7.5 billion of the repurchasing costs in cash or by other arrangement such as assuming debt, but Verizon’s immediate liability could only go up to $10 billion. If, as is likely, Vodfone’s 45-percent stake is worth more than $20 billion, Vodafone could retain an interest in the wireless carrier, or Verizon could buy out the rest of the stake.
Seidenberg said in the conference call that Verizon would try to fund any transaction with as much cash as possible, from transactions such as divestitures.
Some of Vodafone’s large shareholders have been putting pressure on the company to capitalize on its Verizon Wireless stake and cash out, thereby boosting Vodafone’s shares. But Vodafone’s chief executive officer, Arun Sarin, has said that he has no immediate plans to sell the stake, which has become ever more valuable with Verizon Wireless’ growth.
“I think we need to give Vodafone some room to think through what they want to do,” Seidenberg said. But, he added, “If the opportunity came to be, we would … stand ready to work with them.”
