Tomahawk, WI 9/04/2013 (BasicsMedia) –  U.K. Telecom major Vodafone Group Plc (ADR) (NASDAQ:VOD) has finally decided to sell its 45% stake in Verizon Wireless to Verizon Communications for $130 billion. This comes at the back of sluggish growth witnessed at the company and strong competition has thinned its margins in European markets. The tax liability for the same in the U.S. would cost Vodafone $5 billion, which it would otherwise save in U.K. after changes in its tax laws since 2002. This would bring an end to the 14 year arrangement with U.K. based telcom giant, whereby now Verizon will now have full share of earnings out of the wireless venture. However, what remains as a challenge for Verizon is to justify the price which the company has paid to get back the stakes. The acquisition is not expected to result in any reduction of costs, or mark the advent of any new product or services, but rather increase its earnings base.

The company plans to return $84 billion to shareholders, in the form of all Verizon stocks along with $23.9 billion in cash. The transaction is to finish by the end of first quarter of 2014. This will help Vodafone better its distributed earnings, by raising dividend by 8% for 2014.

The company has been in such restructuring plans to revamp its revenues which have taken a hit in recent times. The company also plans to fund another project named Project Spring with the remaining $9.4 billion. The company shall also pay its debt with this money, reducing its leverage in such turbulent times. The company’s main focus has been to revamp its Balance sheet. The company intends to reach the figure of 1 X EBITDA as its net debt. The negative of such a reduced debt in its financing structure is its potential to raise debt in future, which was always considered as unnecessary by its investors.

The company has been planning to try its luck in high speed data capacity, and the current Project Spring represents capital commitment towards the same. The company had earlier acquired Kabel Deutscheland.

The company has seen a surge in its share prices by as much as 8% after the news. However, what remains to be seen is the value of Vodafone that remains after such sale. The company’s market capitalization stands at $155 billion. The price which it paid to lose Verizon Wirelesss is $130 billion. What remains after deducting such $130 billion from Vodafone’s current market capitalization stands at a meager $25 billion.

The future of the company now seems bleak, particularly taking into consideration the steps taken by its rivals, such as AT&T which is looking at markets beyond U.S. that would offer a hefty return.

When at one hand, the future prospects of Vodafone is bleak, the same has opened new venues for Verizon, which is on its way to become a mobile and fiber major, providing broadcasts and delivery services. This is in conformity to Verizon’s recent Hughes Telematics which connects machines such as medical devices and cars to Internet for services and monitoring.

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