Vodafone confirms talks over $130bn sale of Verizon Wireless

Company in 'advanced discussions' regarding disposal, but it warns there is no certainty of agreement being reached

Vodafone has confirmed it is in "advanced discussions" to sell its stake in Verizon Wireless for $130bn (£84bn), with reports suggesting the largest corporate transaction in a decade could be announced on Monday.

The Vodafone board is understood to have met to approve the deal on Sunday, with Verizon's directors due to meet on Monday. The companies are expected to publish the terms of their agreement later in the day.

In a statement on Sunday night, the British company said: "Vodafone confirms that it is in advanced discussions with Verizon Communications Inc regarding the disposal of Vodafone's US group whose principal asset is its 45% interest in Verizon Wireless for $130bn. The consideration would substantially comprise a mixture of Verizon common stock and cash."

The company warned "there is no certainty that an agreement will be reached", and said a further announcement would be made "as soon as practicable". Goldman Sachs and UBS are advising Vodafone on the deal.

Vodafone is on the verge of relinquishing a 45% interest in America's largest mobile phone company to its joint venture partner Verizon Communications, allowing the fixed-line telecoms group to take full control after 13 years of often fractious shared ownership.

The sale is expected to lead to a multibillion injection of cash into the British economy. Verizon Communications is reportedly offering to pay half of the purchase price in cash and the balance in its own shares, with Vodafone investors lobbying for a majority of the proceeds to be returned to them.

Analysts at Citi said on Friday Vodafone could distribute $40bn in cash and Verizon shares valued at between $26bn and $34bn to shareholders.

They also believe Vodafone can structure its deal so as to reduce tax to $5bn, significantly less than the $40bn that could be due. Under the terms of the deal, Vodafone would sell the US-registered company through which it owns Verizon shares and a number of its European assets to Verizon Communications. The European assets would then be sold back to Vodafone, minimising the tax bill.

Vodafone could also take advantage of UK legislation known as substantial shareholdings exemption, which means companies do not have to pay capital gains tax on profits made from selling shares in another firm.

With proceeds from the blockbuster transaction likely to be out of the reach of the British tax authorities, the deal could deepen the controversy about Vodafone's contributions to the public purse in the UK.

A further $5bn may be deducted from the purchase price in exchange for Verizon relinquishing its stake in Vodafone Italy, leaving $120bn to be paid in cash and shares.

Verizon is understood to be raising $60bn in cash, with the financing in a mixture of loans and corporate bonds arranged by JP Morgan, Morgan Stanley, Barclays and Bank of America Merrill Lynch.

A $60bn payment in Verizon Communications shares would see Vodafone and its investors handed a substantial slice of the US company. As of Friday, Verizon Communications had a stock market value of nearly $136bn.

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.

Article Source : http://www.guardian.co.uk

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Vodafone in multimillion tax deal over Irish office

Previously unreported settlement with HMRC came in wake of dispute over tax paid by subsidiary

Vodafone made a previously unreported multimillion-pound settlement with HM Revenue & Customs in the wake of a dispute over the tax paid by an Irish subsidiary created to collect royalty payments for using its brand.

The UK-based mobile phone group used an Irish subsidiary, which employed no staff between 2002 and 2007, to collect hundreds of millions of pounds a year in royalty payments from operating companies and joint ventures around the world. By 2007, Vodafone Ireland Marketing Ltd, a company registered to an industrial estate in the Dublin suburb of Leopardstown, was reporting a turnover of €380m (£320m) a year.

During a four-year period, these royalty payments, collected from most countries except the UK and Italy, have helped Vodafone send more than €1bn worth of dividends to the low tax jurisdiction of Luxembourg from Dublin. The dividends, which include a final payment of €142m due to be delivered this year, came from profits made after taking advantage of Ireland's low corporation tax rates.

In an arrangement which echoes those made by Apple in Ireland, Vodafone moved senior marketing managers to Dublin to protect global royalty revenues from UK taxation, and trigger a lower Irish corporation tax bill from 25% to 12.5% of profits. This was significantly lower than the UK corporation tax rate, which between 2008 and 2010 was 28% of profits.

Accounts filed in Dublin show that in 2009, HMRC settled a dispute with Vodafone over its Irish tax returns. The overall size of the settlement has not been revealed, but it involved Vodafone reclaiming €67m from the Irish government in tax that should have been paid in the UK. Vodafone, the world's second largest mobile phone company by revenue, has paid no corporation tax in Britain for two successive years, despite paying £2.6bn in international taxes in 2012.

The company confirmed its Irish settlement had never been separately disclosed in its annual reports, and was not connected to a £1.25bn payment to HM Revenue and Customs in 2010 to settle a much publicised dispute over the use of a Luxembourg subsidiary. A spokesman for HMRC refused to confirm whether any settlement over Vodafone's Irish tax affairs had been made, saying it was prevented by law from discussing the affairs of individual taxpayers.

Vodafone went to great lengths to protect its Irish income, eventually relocating a section of its global marketing team from the UK to Dublin in 2007. The transferred staff were responsible for handling such high profile sponsorships as the operator's longstanding deal with Formula 1 and the Champions League.

The Irish brand subsidiary was wound down after the staff were brought back to the UK in 2011. According to a company spokesman the unit's activities have transferred to a UK company which pays all its profits into the British plc and is taxed under UK rules.

The disclosure comes as MPs revealed the British mobile phone group, which is under fire for its minimal corporation tax payments in this country, has emerged as the largest supplier of mobile phones to the government. More than 30 departments and public bodies, including the prime minister's office, have signed contracts worth £14m a year with Vodafone.

In a stand against tax avoidance, ministers updated laws in April to ensure companies whose tax returns have been challenged by HM Revenue & Customs on grounds of tax abuse can be disqualified from working for the government.

Vodafone strongly rejected any suggestion of tax avoidance and said there have been no allegations of wrongdoing from HMRC. The company said its disputes with the UK taxman over its tax arrangements in Ireland and Luxembourg would not block it from government contracts under current rules, but MPs argued there was a principle at stake.

By 2007, a Vodafone subsidiary registered to an industrial estate in Dublin was reporting a turnover of €380m (£320m) a year."The fact that government departments are using companies which have been challenged about the tax they owe clearly shows that current tax laws need reform," said Labour MP Pamela Nash, whose parliamentary questions helped reveal the extent of Vodafone's government work.

The rules which eventually came into force have been described by tax experts as narrow in scope, and Vodafone says they would not have applied to its HMRC settlements, even if they had been in force at the time.

"Vodafone has long been a major supplier to central UK government departments and we have always complied in full with all procurement criteria defined by government," the company said in a written statement.

"In all respects and at every point, Vodafone has conducted itself with the highest integrity and in full compliance with the law."

Vodafone's status as the dominant supplier of mobile phones to government departments was exposed by a series of parliamentary questions asked by Conservative and Labour MPs. Questions were put by Nash, by Labour MPs Dai Havard and Jenny Chapman, and Tory MPs Gary Streeter and Mike Freer.

Steve Barclay, a member of the Commons Public Accounts Committee, which has previously tackled Vodafone's tax affairs, said: "The government now needs to close any existing tax loopholes to ensure that large companies, such as Vodafone, are not legally able to avoid paying their fair share of tax. The need for swift action is particularly highlighted when it is public money that is paying for these substantial contracts with private companies."

Vodafone is the largest or only mobile supplier to a raft of departments, including the Cabinet Office, which covers David Cameron and Nick Clegg's offices, the Treasury, including HMRC, the Department for Business, Innovation and Skills, the Ministry of Defence, the Department of Health, and the Department for Work and Pensions.

Many of the contracts are based on commercial terms agreed between the Cabinet Office and Vodafone in a Memorandum of Understanding that runs from 2010 to 2014. While rival networks EE and O2 have some government work, EE is pushing for more open competition in the awarding of mobile contracts by ministries.

A Cabinet Office spokeswoman said: "Since 2010 we've radically changed the way government buys goods and services to make the most of our unique buying power.

"Last year alone these reforms saved taxpayers £800m by renegotiating contracts with our largest suppliers, of which Vodafone is one.

"We are determined to continue to increase competition and innovation amongst a range of suppliers to make sure that every option to cut waste and make savings are explored, especially when opportunities to review large-scale contracts arise."

Chief secretary to the Treasury Danny Alexander launched an overhaul of the rules around government contracts last year, saying "taxpayers' money should not be funding tax dodgers".

Article Source : http://www.guardian.co.uk

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Vodafone to buy Germany's biggest cable operator Kabel Deutschland

UK mobile phone firm makes its first move into consumer broadband and television in one of the biggest telecoms deals in recent years

Vodafone has agreed to buy Germany's biggest cable company for €7.7bn (£6.6bn) in a deal that sees the UK mobile phone firm make its first move into consumer broadband and television.

The deal has been approved by the board of Kabel Deutschland but could become the subject of a bidding war with US firm Liberty Global, which owns Germany's second biggest cable firm Unity Media.

Vodafone has offered €87 a share, valuing the business at €7.7bn, an increase on an informal offer of €82 a share made two weeks earlier. It will also take on the company's debt of £2bn.

Chief executive Vittorio Colao said: "German consumer and business demand for fast broadband and data services continues to grow substantially as customers increasingly access TV, fixed and mobile broadband services from multiple devices."

Vodafone makes offer for Germany's biggest cable operator, Kabel Deutschland. 

He added that the deal is "consistent with Vodafone's broader strategy of providing unified communications services."

The company has been keen to move into the cable market and wants to tap into "quad play", offering TV, broadband, telephone and mobile.

Colao said the price was "full and fair" believing the company could make cost savings of €300m a year, eventually saving €3bn. The Kabel Deutschland management team would remain in place to run the fixed line business.

The company has 8.5 million customers and its cables pass 15.3m German homes.

If the deal goes through, it would be one of the biggest in the telecoms industry in several years and comes 13 years after Vodafone's first foray into Germany, when it bought mobile phone network Mannesmann for £101bn.

The company will be hoping for better luck with this bid after a move to merge with a Greek rival fell through, and an expansion into Burma ended due to high start-up costs.

It comes a month after Vodafone signed a rental agreement with Deutsche Telekom for its cable capacity, and a year after Vodafone's first fixed-line takeover of business and wholesale provider Cable & Wireless Worldwide last year for £1bn.

However, Colao said the Deutsche Telekom deal, which passes many of the same homes as the Kabel Deutschland cables, would remain in place.

He said: "It won't affect the wholesale agreement. Deutsche Telekom will remain an important deal with us and we will remain important partners with Deutsche Telekom."

Industry analysts have suggested this deal could be followed by bigger acquisitions as the telecoms giant looks to secure its own future and risk any possible takeover.

However, Vodafone played down any future takeovers. Colao said: "I wouldn't have any read across this deal and clearly every situation is different. The intention is to reach homes and offices and I would not comment on any other market.

Its US partner, Verizon, has said it wants to buy Vodafone's 45% stake in Verizon Wireless – worth around $130bn– which could leave Vodafone vulnerable to a takeover. A $100bn offer was rejected by Vodafone two months ago.

The Kabel Deutschland chief executive, Adrian von Hammerstein, said: "Together, we have the opportunity to become Germany's leading telecommunications and television provider and to create what for the German market is a unique, winning combination of fixed line and mobile communications."

The company's revenues hit €1.83bn in the year to the end of March, with pretax profits of €226m.

Article Source : http://www.guardian.co.uk

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Multinational CEOs tell David Cameron to rein in tax avoidance rhetoric

Burberry, Tesco, Vodafone and BAE Systems join CBI chief in lobbying PM to stop moralising on tax ahead of G8 talks

The bosses of some of Britain's largest multinational corporations have urged David Cameron to stop moralising and rein in his rhetoric on tax avoidance ahead of a G8 summit next month.

Chief executives of companies such as Burberry, Tesco, Vodafone, BAE Systems, Prudential and GSK were keen to take a final opportunity to lobby the prime minister in advance of the meeting of political leaders in Northern Ireland.

Cameron has pledged to use Britain's G8 presidency to tackle aggressive tax avoidance by multinationals, but is also keen to heed the counsel of his business advisory group, which he met with on Monday.

Also present was Google's chairman, Eric Schmidt, despite the internet search firm coming under fierce attack from MPs last week because of its tax arrangements.

The president of the Confederation of British Industry, Sir Roger Carr, who was at the meeting, was among those who have taken issue with Cameron's attacks on the ethics of big business tax engineering.

Sir Roger Carr, CBI chairman, said at an earlier meeting that tax avoidance "cannot be about morality – there are no absolutes"

 During a speech earlier in the day at a London event organised by Oxford University's Said business school, Carr said: "It is only in recent times that tax has become an issue on the public agenda – Starbucks, Google, Amazon – businesses that the general public know and believe they understand; businesses with a brand that become a perfect political football, the facts difficult to digest; public passions easy to inflame."

In what appeared to be pointed criticism of increasingly firm rhetoric from Cameron on multinational tax engineering, Carr insisted tax avoidance "cannot be about morality – there are no absolutes".

In January the prime minister used a speech at the World Economic Forum in Davos, Switzerland, to put a marker down on questions of tax structuring by big business. "Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues," he said, urging multinationals to "wake up and smell the coffee".

Carr said: "Tax payments are not, and should not be … a payment viewed as a down payment on social acceptability, or a contribution made by choice in order to defuse public anger or political attack."

The CBI boss, who is being talked of as a successor to Dick Olver as chairman of BAE Systems, invited the G8 to consider three points in relation to tax reform:

• Avoiding the moral debate – "it's all about the rules".

• Fixing the rules on an international stage, not unilaterally.

• Consulting on proposed changes with business.

A Downing Street spokesman said the specific controversy generated by Google's tax affairs was not raised during the meeting with business leaders, though discussions did focus on "explaining the tax and tax transparency part of the G8 agenda".

Also speaking at the Said business school event was Margaret Hodge MP, chair of the public accounts committee and one of parliament's most outspoken critics of tax avoidance. With Starbucks and the big four accountancy firms in attendance, she said: "Your time has now come on accountability. You are now being asked to answer certain questions and it's important that we all engage.

"One could argue that the way some companies organise their affairs is anti-competitive to many British companies. Especially if you look at the way Amazon arranges its affairs."

On Revenue & Customs' appearance before her committee last week, she added: "Their approach, when they came to parliament last week was complacent and patronising, an attitude that actually didn't help take the committee forward. I don't think it helped members work closely together across my committee.

"In my opinion they are not aggressive enough. These are issues of how you judge individual companies, but at the moment I'm not clear how HMRC makes its judgments. So toughen up, HMRC."

Other attendees at the event were representatives of retailer Marks & Spencer, which was accused of running its online business in a similar structure to Amazon's, and pharmacy group Alliance Boots, which recently relocated its headquarters to Switzerland.

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Article source : http://www.guardian.co.uk