Why Is Vodafone Hesitant to Sell Verizon Shares?

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Vodafone Group PLC (NASDAQ:VOD) has said it will only sell its 45 percent stake in Verizon Wireless (NYSE:VZ) if Verizon’s offer can top what the U.K. carrier currently gets out of the Verizon shares it owns.

While Verizon thinks Vodafone’s shares are only worth $100 billion, analysts have said Verizon would probably need to pay between $135 and $140 billion to get the carrier to sell. Citigroup Inc. (NYSE:C) said earlier this month that it values the deal at $120 to $135 billion.

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Vodafone Chief Executive Officer Vittorio Colao met with Bank of America Merrill Lynch analysts this week. The analysts reported, “Vodafone will only sell its U.S. stake if a Verizon offer beats the status quo.” Colao believes the U.S. has the best wireless market despite competition from Sprint Nextel Corp. (NYSE:S) and T-Mobile.

Even if Verizon is willing to pay up to $140 billion for Vodafone’s shares, the deal could still face some hang-ups regarding taxes. Recent U.K. tax debates surrounding Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) will complicate the deal if Vodafone decides to sell, according to analysts.

Meanwhile, Vodafone is working on a tax settlement in India related to its purchase of Hutchison Whampoa in 2007. The Indian government, which has been cracking down on tax violations lately, claims the company owes $2.2 billion in taxes on the purchase. Vodafone has denied that it owes the money, but has also said it would be willing to come to an interest-free solution. The Indian cabinet granted approval for a proposal that will begin the non-binding concilliation process between Vodafone and the Indian government this week.

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Vodafone is due to receive a dividend of $3.15 billion from Verizon on June 25, adding to the $8 billion in dividends the company has gotten from the venture in the last two years. In London, Vodafone shares rose Thursday by 1.8 percent, bringing the company’s total value to $145 billion.

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