Vodafone is once again being peddled by financial market analysts as a potential bid target for Verizon Communications.
Speculation has been triggered by the $100 billion valuation gap between Vodafone and Verizon Wireless--which the UK company owns a 45 percent stake in, leaving Vodafone looking undervalued.
Morgan Stanley analyst Nick Delfas told the Financial Times: "The classical resolution would be for the more highly rated company to buy out the weaker," but he did, however, caution that the amount of money Verizon would need to fund such a move was just one potential barrier. Both Verizon Communications and Vodafone have ruled out a merger, even though the two companies have been collaborating more closely, especially on business with global enterprise customers.
Investors from both companies have previously called for Vodafone and Verizon to merge, or for Vodafone to sell its 45 per cent stake in Verizon Wireless. But Delfas believes the valuation discrepancy means a merger of equals would be unattractive to Vodafone shareholders, while the tax implications complicated any stake sale.
Goldman Sachs provided added impetus to the speculation by issuing a note carried by Street Insider that rated Vodafone as a "conviction buy," stating that it saw a "substantial rerating potential."
"We forecast solid fiscal 2012 results on May 22. We expect management to reiterate long-term guidance for 1 per cent - 4 per cent revenue growth and stabilising' EBITDA margins,"Goldman's analysts wrote in their research note.
Further good news for Vodafone came with India's Supreme Court dismissing a plea from the country's tax office against a ruling that the mobile phone group was not liable for $2.2 billion (£1.39 billion) tax on its purchase of assets in 2007. The court also directed the Indian government to return a $495 million deposit Vodafone made on the contested tax bill, plus 4 per cent interest.
For more:
- see this Financial Times article (reg. req.)
- see this Street Insider article (sub. req.)
- see this Bloomberg article
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