Vodafone investors to share £54bn from Verizon deal

Vodafone shares are set to move into the fast lane after the Verizon deal was confirmed. Picture: Getty Images

Under the deal to sell its 45 per cent stake in Verizon Wireless – the third biggest of all time – investors will receive a total of £54.3bn including £38.9bn in shares in Verizon which form almost half the total value of the transaction.

As well as getting 71 per cent of the net proceeds of the deal, Vodafone said the deal will enable it to increase its planned 2014 dividend by 8 per cent to 11p per share.

Vodafone will use some of the rest of the proceeds of the deal, expected to close in the first quarter of 2014, to embark on a £6bn investment programme to improve its network and service.

Economists have predicted a boost to both the stock market and consumer spending from the deal with some comparing it to the impact seen under the quantitative easing programme.

It is understood no UK tax will be payable by Vodafone on the sale and Margaret Hodge, chairwoman of the Commons public accounts committee, said she wanted the deal to be examined in detail to ensure there was no “aggressive tax avoidance” in the way it has been structured.

“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.”

The confirmation that a deal had been agreed came after the London stock market closed today but news that it was imminent sent shares in Vodafone up 3.4 per cent to close at 213.2p, its highest level for almost a decade.

That took the total rise since the news broke late last week to more than 12 per cent, boosted by hopes of a big payout to shareholders.

The news of an 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 US in 1999 through a series of deals that resulted in the formation of Verizon Wireless in 2000, with Verizon Communications holding 55 per cent of the company and Vodafone the rest. The deal is likely to be the defining event in the careers of Vittorio Colao and Lowell McAdam, the chief executives of Vodafone and Verizon, who rebuilt relations between the two sides to such an extent that they are now close to completing the deal that for long eluded their predecessors.

The two sides initially clashed, and the history of the partnership has over the years been fraught with difficulties, with both partners at times seeking to buy out the other.

Total advisory fees for banks involved in the deal are expected be as much as $250m.