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Verizon sale cuts Vodafone’s value by half to $100 billion

Vodafone Group Plc completed the biggest sale of the past decade Friday, leaving the wireless carrier about half the size it was, as Chief Executive Officer Vittorio Colao embarks on a new expansion strategy.

After the disposal of its 45 percent stake in Verizon Wireless, the biggest U.S. mobile-phone company, Vodafone (Nasdaq: VOD) will pay out $82.5 billion to shareholders and consolidate its shares, cutting its market value to about 60 billion pounds ($100 billion) starting next week. Its value was 116 billion pounds, based on last month’s 12-year high of 240 pence.

Colao has spent his tenure pulling Vodafone out of joint ventures and partnerships it doesn’t control. Now that Colao has pulled off his biggest sale, he has to find somewhere to grow as the company grapples with shrinking service revenue in its main European markets.

“The next few months are going to be tough,” Guy Peddy, a London-based analyst at Macquarie Bank Ltd., said in an interview. “Vodafone continues to lose share and is losing share in its major markets at an accelerated rate because it is facing convergence competition from incumbents and price competition from smaller players.”

After pulling off the $130 billion sale, Vodafone will drop from the world’s second-biggest phone company to the fourth, measured by market value, behind China Mobile Ltd., AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE VZ), data compiled by Bloomberg showed. Vodafone’s weighting in share indexes such as the FTSE 100 in London will be cut approximately in half.

Shareholders will get a return of about 102 pence ($1.70) per share. That’s about $23.9 billion in cash and about $58.6 billion in Verizon Communications shares.

Vodafone’s shares rose 3 percent to 236.50 pence at the close in London. Verizon slipped 1.8 percent to $47.27 in New York.

“This is a great day for Verizon,” Verizon CEO Lowell McAdam said in a statement. “The new Verizon now has full ownership of the U.S. wireless industry leader in network performance, profitability and cash flow.”

The deal will help Vodafone pay off debt and help fund 7 billion pounds of additional network investments by March 2016, adding high-speed broadband and wireless coverage across its largest markets.

AT&T target

While Vodafone will remain Europe’s most valuable telecommunications stock, the company is looking to acquisitions for growth. Vodafone may have 10 billion pounds to 15 billion pounds of capacity for deals, Peddy said.

The Newbury, England-based company is interested in bidding for Spanish cable company Grupo Corporativo ONO SA, people familiar with the plans have said. The company has also considered an acquisition of Italian fixed-line company Fastweb SpA, people familiar with the matter said in June.

Vodafone could also make an attractive target for Dallas-based AT&T Inc., people familiar with the matter have said. AT&T is laying the groundwork for a potential takeover this year even after it was compelled to make a public announcement on Jan. 27 to satisfy British stock-market regulations designed to limit merger speculation, the people said last month.

Colao and AT&T CEO Randall Stephenson are among executives scheduled to attend the Mobile World Congress in Barcelona, which begins next week.

Vodafone investors will get the stock portion of the payout on Feb. 24, with the cash coming on March 4. The stock consolidation, in a bid to keep Vodafone’s share price little changed, also happens on the Feb. 24. Investors will get 6 new shares for every 11 old ones.

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