Vodafone seals Verizon Wireless sale
Vodafone has sold its stake in US giant Verizon Wireless in a deal worth £84m. But campaigners fear the public will see little tax returns.
The British mobile phone giant has sold its stake in America’s biggest mobile phone company in a deal that many hope will provide a significant boost to the UK economy.
The $103bn ($84bn) deal was announced by Vodafone after the close of trading on the London Stock Exchange. Its shares rose 3.4 per cent during the day.
The deal ends a long-running saga, with both Vodafone and Verizon trying to take full control of Verizon Wireless over the years, but having been unable to agree a price.
Hugo Dixon of Reuters told Channel 4 News that the move marked a new phase for the company which it must invest into evolution. “Vodafone will be a shrunken organisation after it gives that money back to its own shareholders.
“There is a chance that in its shrunken form it might be an attractive buying target for another mobile phone company: in this case America’s AT&T.”
The deal, the third biggest takeover in stock market history, is a major coup for Vodafone Chief Executive Vittorio Colao. The company will return £60bn to its shareholders, of which £24bn will go to shareholders in the UK.
Cash from the deal returned to UK shareholders is expected to provide what is effectively a fresh dose of quantitative easing to stimulate the economy – to add to the Bank of England’s £375bn programme of asset purchases.
Pension funds with investments in the widely held stock also stand to benefit
Concerns over tax affairs
However there is likely to be controversy over the way the deal is arranged amid reports that Vodafone’s tax liabilities will be minimised by completing the transaction through its Luxembourg subsidiaries and other offshore companies. Some close to the company expect it to pay virtually no tax on the profits because of UK exemption rules on substantial shareholdings in subsidiaries – a move that has delighted City investors but is likely to dismay some tax campaigners.
Margaret Hodge, chairwoman of the Commons public accounts committee which has investigated corporate tax-dodging, said she wanted the deal to be examined in detail.
The Labour MP said: “Clearly there are concerns on this deal. I just want some assurance that HM Revenue & 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.”
Asked if David Cameron was concerned about the possibility of Vodafone taking steps to minimise UK tax liabilities on the deal, the prime minister’s official spokesman said: “I wouldn’t comment on the tax affairs of individual companies.”
Vodafone’s exit from Verizon Wireless would be the largest transaction since Time Warner was bought by AOL in 2001, and the third largest in corporate history, after the AOL deal and Vodafone’s purchase of German telecoms group Mannesmann.
