Pure Rumor-Source Unknown
Any fall in share price could be accelerated if Vodafone moves to complete its much-rumoured takeover of Verizon Wireless of the US. Today it emerged that Vodafone has brought forward a key analysts’ trip to early March from much later in the year and invited a strong contingent of US analysts to come to the UK to attend the event.
Some analysts close to Vodafone are convinced that Chris Gent, Vodafone's cricket-loving chief executive, plans to make a dramatic announcement that Vodafone is to acquire Verizon Wireless prior to taking it public in the summer, possibly in June.
Vodafone is believed to have scheduled its analysts’ event for March 6, the first anniversary of the stock’s historic high of 399p. The current price is 225.5p. Any prospective deal could be affected by Vodafone's level of corporate debt. It is currently at less than £13bn compared with BT which is labouring under £30bn of debt.
Such a deal could trigger a rapid fall in Vodafone’s share price as US fund managers switch their money into Verizon Wireless. US funds are seen to be keen to move their cash from Europe, where mobile phone penetration is nearing saturation to the US, where there is still perceived to be vast potential for growth.
Vodafone, capitalised at £139bn, currently owns 45% of Verizon Wireless with US-based £98bn Verizon Communications owning 55%. A planned $80bn flotation of Verizon Wireless has already been postponed twice over the last four months, owing to worldwide negative sentiment in the telecoms sector.
City analysts are divided on the crucial question of the timing of Vodafone’s strategy. Some believe that it should delay any acquisition of a controlling share in Verizon Wireless until after it has launched its 3G network at the start of 2002 and the telecoms sector has begun to recover.
John Tysoe, a telecoms analyst at West LB Panmure, said, ‘It would surprise me if Vodafone were to buy a controlling stake in Verizon Wireless this year. I think they have other more pressing issues to address, such as the roll-out of 3G services to their customers.’
But Chris Gent may be tempted to seize the first opportunity to buy a controlling stock in Verizon Wireless rather than wait until after the launch of 3G. Verizon Communications’s recently-announced restructuring could herald such an opportunity. Verizon has said it is to cut 6,000 jobs in its core local and long-distance phone business in order to reduce costs. |
