£54bn payout for Vodafone investors

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Vodafone

Investors in Vodafone will receive a £54 billion cash and shares windfall after the telecoms giant sold its share in Verizon Wireless for £84 billion.

The group confirmed one of the biggest corporate deals in history by agreeing to sell its 45% stake in the US operator to its joint venture partner Verizon.


The deal will net investors in Vodafone 23.9 billion US dollars in cash (£15.4 billion), plus Verizon shares, a total 84 billion US dollars (£54.3 billion) payout - equivalent to 112p per Vodafone share.

Vodafone announced the long-anticipated 130 billion US dollar deal after the London stock market had closed.
The bulk of the proceeds from the deal - 71% - will go to Vodafone shareholders, who could cash in their Verizon shares to take the entire windfall as cash.

But the deal will not involve a tax payment to the UK exchequer, the company revealed, risking further controversy after intense scrutiny of its tax affairs.

Vodafone will pay tax of 5 billion US dollars (£3.2 billion) in the US, but said the UK is not a "relevant jurisdiction" because its US arm is owned by a Dutch holding company. It added even if the stake was sold from the UK, it would not be taxable under UK law because of an exemption introduced in 2002.

Boss Vittorio Colao said the sale will mean a "very substantial return to shareholders and to the investments relied upon by savers and pensioners".

The deal has been seen as a major cash injection into the UK economy - effectively another dose of quantitative easing.

Mr Colao said its stake in Verizon Wireless has proved "extremely valuable", but added the £20 billion of cash it retains will go to funding investment in super-fast mobile networks and broadband, as well as paying down debt.

"This transaction has the beauty that it allows both to reward shareholders for their support and strengthen the company for future long-term rewards to shareholders," he said.

Shares in Vodafone closed up 6.95p to 213.2p, a 3.4% gain, in anticipation of the deal.

The third-largest corporate transaction in history comprises 58.9 billion US dollars (£38 billion) in cash and 60.2 billion US dollars (£38.9 billion) in Verizon shares.

Berkshire-based Vodafone said it will plough £6 billion into organic investment - dubbed Project Spring - over the next three years.

Mr Colao said the cash will go on boosting its 4G, 3G, fibre and broadband services, to take advantage of "growing global demand for ubiquitous high-speed data".

He said: "We expect the number of people using video on smartphones to double over the next two years.

"We see an increasing interest and demand for unified communication services from both individuals and businesses."

Verizon Wireless was set up 13 years ago by the two firms, and is the biggest mobile phone operator in the US.

Verizon Communications chairman and chief executive Lowell McAdam said full ownership will give it bigger opportunities in the business and consumer markets.

He said: "The timing was right to execute a transaction that benefits both companies and their shareholders."

The sale is expected to complete in the first quarter of next year, and will need shareholder and regulatory approval.

Vodafone said it will set up a dealing facility for small shareholders, who have fewer than 50,000 Vodafone shares, to cash in their Verizon shares on completion.

The deal is likely to be scrutinised by regulators in the UK, especially around tax.

Margaret Hodge, chairwoman of the Commons Public Accounts Committee, said she wanted the transaction to be examined in detail.

The Labour MP said: "Clearly there are concerns on this deal. I just want some assurance that HM Revenue and Customs (HMRC) will be going through this deal with a tooth comb to ensure that the taxpayer gets the proper benefit under the law of the tax that Vodafone should pay on this massive windfall profit that they are making."

© 2013 Press Association