KEY POINTS:
NEW YORK - British wireless telecommunications company Vodafone Group Plc today said it is not planning to bid for Verizon Communications, responding to a report it was considering a US$160 billion ($204 billion) offer.
The Financial Times' FT Alphaville blog said Vodafone was considering such a bid -- which would consolidate ownership of their wireless joint venture -- prompting Verizon's shares to jump 12 per cent in premarket trading.
The stock gave up most of the gain after Vodafone's denial, and closed up only 2.4 per cent at US$42.76 on the New York Stock Exchange. Vodafone shares trimmed earlier losses to trade down 0.61 per cent at 162.20 pence ($4.22).
"Vodafone wishes to make it clear that it has no plans to make such an offer," the company said in a brief statement.
Verizon officials declined to comment.
FT Alphaville, citing unnamed sources, said Vodafone had not yet approached Verizon with an acquisition plan and there was no certainty a bid will be pursued.
A US$160 billion bid would represent a 32 per cent premium to Verizon's market capitalisation of about US$121 billion at Friday's close.
Vodafone and Verizon jointly own Verizon Wireless, the second-largest US mobile service provider in terms of subscriber base, behind AT&T Inc.
Verizon has a controlling 55 per cent stake in the wireless venture, while Vodafone holds the rest.
The FT Alphaville report surprised investors, who had expected Verizon to be the buyer in any deal for Verizon Wireless. Verizon has said it was interested in taking full ownership of the profitable asset.
"It would make more sense. They (Verizon) could then spin off the non-US assets (of Vodafone)," said Richard Marwood, a fund manager in AXA Investments, which owns Vodafone shares.
The report comes ahead of an August expiry of a put option, a mechanism that would allow Vodafone to sell some of its stake in Verizon Wireless.
Investment group Efficient Capital Structure (ECS) has called on Vodafone to sell its stake in Verizon Wireless and release cash to shareholders.
ECS, which owns 0.0004 per cent of Vodafone's equity, has said it will make the proposal at the company's annual meeting on July 24.
"It's interesting because everyone has been focused on how much it would cost Verizon to buy out Vodafone. Now this kind of gives us another option to weigh," said A.G. Edwards analyst Kent Custer.
Atlantic Equity analyst Chris Watts said that regardless of whether Vodafone makes an offer for Verizon, the FT Alphaville report drew attention to Verizon's valuations amid a wave of merger activity in the telecom sector.
"It's going to highlight the value of the assets within Verizon at the moment," he said.
Alltel, the biggest US rural mobile phone provider, has agreed to be bought by a group of private equity firms in a deal worth US$27.5 billion, including debt. That deal, announced in May, has spurred speculation of more consolidation in the telecommunications sector.
Verizon Wireless competes against AT&T, which took full ownership of its wireless division, formerly known as Cingular, after buying partner BellSouth Corp late last year.
- REUTERS
