Vodafone has $40bn burning a hole in its pocket and is looking to buy

A man checks his mobile phone as he walks past a shop displaying the Vodafone logo on its shutter in MumbaiYou know that feeling, when you get a nice cash windfall and want to treat yourself to something special? The executive board at Vodafone seems to be experiencing something akin to that as it contemplates the $130bn windfall it will be receiving at the end of the month when it finalises a deal to sell its 45% stake in US telecoms company Verizon to Verizon Communications, which owns the other 55%. After returning about $60bn to shareholders and investing an anticipated $30bn in its networks, Vodafone should have around $40bn left to spend on strategic acquisitions. Rumours are already flying that it is considering making an offer for the Madrid-based ONO, a cable company that offers bundled phone, internet, and TV packages to households. Such a deal would help Vodafone consolidate its dominant position in Europe. – FD

Vodafone Group Plc could have the capacity to spend $30 billion to $40 billion on acquisitions in coming years and no deal should be too big if it makes strategic sense, Chief Executive Vittorio Colao said on Monday.

Colao told reporters he was exploring possibilities for big acquisitions on top of investments in Vodafone’s existing business after a $130 billion windfall it will get from an asset sale to Verizon Communications later this month.

“We are looking at acquisitions that are sizeable and could transform the company,” said the executive at a media roundtable in New York where he laid out his strategy for the world’s second-largest mobile operator.

“The theory is that if an acquisition makes sense you should not be worried by the size because shareholders should approve it,” he added.

Vodafone may have $40 billion spending money after returning most of the Verizon deal proceeds to shareholders and investing $30 billion in its network over roughly two years if the company sticks to its target for a ratio of two to one for debt to earnings before interest, tax, depreciation and amortization, he said.

While the executive was careful not to name any acquisition targets he said Vodafone is keen to build up its fixed-line assets in Europe, its enterprise business around the world and its mobile business in emerging markets.

He said that Vodafone has a roughly 16 to 17 percent share of the total telecommunications market and that it could conceivably increase this to a range of 20 to 23 percent.

Vodafone is selling its 45 percent stake in Verizon Wireless, the biggest U.S. mobile service, to Verizon, which already owns 55 percent of that company and controls the asset.

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