Vodafone: The Solely Bargain That Makes Sense

I read amongst a split of resigned alert that Vodafone is considering selling its stake inwards Verizon Wireless. This is absurd - in addition to if it happens it volition grade an of import business office of the British trace of piece of work concern institution (and the entire Vodafone board) every bit both venal in addition to incompetent. Vodafone is our 3rd biggest seat at Bronte: this matters to us.

Background

Vodafone has - for the final decade or so - been a collection of little success in addition to abject failures - made practiced yesteryear i spectacular success. The spectacular success is that they ain 45 percentage of Verizon Wireless - the best performed wireless carrier inwards the US.

The failures hit from grotesquely overpaying for spectrum inwards the tech bubble (and thence crippling the remainder canvas for a decade) to incompetently stuffing upward the close America-like (hence desirable) marketplace out at that spot (my dwelling marketplace of Australia).

The Australian melt-down of Vodafail has been well documented on this blog - but xviii months later on the video below - in addition to xviii months later on they declared the occupation fixed - Vodafone is silent the butt of television receiver jokes inwards Australia:





Vodafone has had to a greater extent than or less little successes - eg Turkey - but fifty-fifty their dwelling marketplace has been so unprofitable that Vodafail has been questioned for paying no domestic corporate tax. Of course of report they should non pay taxation if they are non required to do so - but every bit a shareholder I would prefer them hold out highly profitable in addition to amongst large taxation bills.

Republic of Republic of India - which should receive got been OK - has too been hard for taxation reasons - caused it seems inwards business office yesteryear inept management.

There has even so been i success - a marvelous success. They ain - but do non command Verizon Wireless. It has been a practiced - no a fantastic property - in addition to their stake is instantly worth to a greater extent than than the entirety of Vodafone.

Pointedly this i smashing success is the i property they do non manage.

This tape has a consequence. Almost all long-term shareholders of Vodafone are non showing substantial gains - in addition to selling their stake would outcome inwards solely a little uppercase gains taxation mouth - if whatever mouth at all.

However because Verizon Wireless has been so successful selling Verizon Wireless would outcome inwards a massive taxation bill.

This makes it far to a greater extent than taxation efficient for Verizon to purchase Vodafone inwards its entirety than to purchase Verizon Wireless. Tens of billions of dollars to a greater extent than efficient.

Any bargain where Vodafone sells its Verizon Wireless stake rather than selling itself starts amongst a tens-of-billions of dollars disadvantage inwards post-tax shareholder value. It would hold out insane.

The solely justification for such a bargain is that shareholders trust Vodafone management to hold out tens of billions of dollars meliorate amongst the shareholder coin than the shareholders would hold out themselves.

And sorry - Vodafone management has non earned in addition to does non deserve that split of trust.

Bluntly, if Vodafone management pursue whatever bargain to resolve the Verizon Wireless number in addition to so the entire Vodafone board should hold out sacked for venal in addition to costly incompetence.

The best outcome would hold out the sale of the whole of Vodafone at a practiced price. (I would hold out happy amongst a combination of cash in addition to Verizon stock.) The side yesteryear side best outcome is no bargain at all. At to the lowest degree the practiced property is good managed yesteryear Verizon.

But amongst the demonstrated tape of failure of Vodafone over the yesteryear decade Vodafone has surrendered its correct to brand a bargain - whatever bargain - which leaves management to squander the proceeds from the best property they receive got - the solely property they did non manage.




John