Vodafone studied offer for Verizon

Vodafone recently considered making a full offer for Verizon Communications ( - ) in an attempt to break the impasse over the future of its stake in US mobile phone operator Verizon Wireless.

The UK mobile network operator made clear yesterday that it had "no plans" to make an offer for Verizon Communications, the parent of Verizon Wireless.

However, sources familiar with the situation said the option was one of several scenarios the group has evaluated to improve returns from its 45 per cent stake in Verizon's mobile phone business, while it has the chance to activate a put option.

Vodafone has the rightto require either Verizon Wireless or Verizon Communications to buy interests in the stake with an aggregate market value of up to $20bn. The option may be exercised 30 days either side of July 10.

The Financial Times understands that Vodafone valued Verizon Communications at $172bn, including debt. It then analysed three main scenarios; merge the two companies and immediately sell Verizon's fixed-line business to private equity; issue a tracker stock linked to Verizon's fixed-line operations or buy Verizon, 100 per cent financed by new Vodafone stock.

The question of the future of the stake has come under increasing scrutiny. Last year Verizon Wireless said publicly it wanted to buy Vodafone out of its stakebut made no progress in discussions and has since moved on.

Vodafone, meanwhile, has also come under increasing pressure from some shareholders to improve its returns from the stake. It has not received dividend payments from Verizon Wireless for two years but has also promised a more "active" management of its portfolio. Furthermore, the US market does not fit its strategy of focusing on emerging markets.

At the same time, Verizon Wireless's performance has raised the value of the stake. Analysts at Morgan Stanley recently revised the equity value upwards by £11bnto $58bn.

The revelation comes at a sensitive time for Vodafone.

Efficient Capital Structures, an investment group backed by former Marconi chief executive designate John Mayo, has requisitioned two proposals on the issue at its annual general meeting next week.

Robert Grindle, an analyst at Dresdner Kleinwort, said the idea of Vodafone bidding for Verizon was "not far-fetched and had much logic from a tax perspective".

yahoo.com/