Talks continue between Verizon and Vodafone over the potential buyout of the U.K. carrier's 45 percent stake in joint venture Verizon Wireless, which could move the companies closer to completing negotiations which have been on the table for years.
However, an agreement does not seem likely in the near future despite worries that interest rates could eventually make the buyout too expensive.
As reported by the Wall Street Journal, the carriers have confirmed that discussions have been rekindled after cooling off in recent months. Sources close to the matter told the publication that the potential buyout of Vodafone's 45 percent stake could cost Verizon over $100 billion, and so the New York-based firm is also in talks with banks to discuss ways to raise the capital required.
Verizon has attempted to buy out the U.K. carrier's stake in Verizon Wireless for years. Based in New Jersey, the U.S.'s second-largest carrier has over 100 million customers. Verizon Wireless is estimated to be worth roughly $133 billion. While Verizon has a controlling stake of 55 percent, the company has to pay large dividends to Vodafone due to the company's 45 percent stake.
A recent round of talks ended earlier this year as the two companies failed to agree on price. According to sources, Verizon wants to pay roughly $100 billion, while Vodafone seeks closer to $130 billion. Verizon and Vodafone went back to the drawing board in July.
While the Journal's sources say that a deal could be reached soon, a Vodafone spokesperson told ZDNet:
"Vodafone notes the recent press speculation and confirms that it is in discussions with Verizon Communications Inc. regarding the possible disposal of Vodafone's U.S. group whose principal asset is its 45 percent interest in Verizon Wireless.
There is no certainty that an agreement will be reached."
One of the main roadblocks to deal agreement is the potential tax implications. If Verizon buys out Vodafone using both cash -- including billions in loans -- and stock, the company says a large tax bill could be avoided. However, the U.K. carrier argues that a buyout could trigger a tax bill reaching over $10 billion. Vodafone shareholders have also expressed concern that a deal could leave the company more vulnerable to changing European markets.
As interest rates have risen in recent months, both firms may be willing to resurrect a possible buyout before U.S. legislation and tax rates makes future agreements of this magnitude too expensive to consider. Craig Moffett, senior research analyst at Moffett Research, told the publication:
"Interest rates are presumably the real catalyst here. With interest rates rising, there has to be some sense of urgency that is now or never."