Verizon has hired advisers to prepare a possible US$100 billion (A$96.8 billion) bid to take full control of Verizon Wireless from its partner Vodafone.
Verizon is contemplating a roughly 50:50 cash and stock bid for the 45 percent stake in Verizon Wireless it does not already own, an asset it has long coveted, sources told Reuters. It has not put a proposal to Vodafone yet but has hired banking and legal advisers for a possible offer.
Verizon is ready to push aggressively and hoped to start discussions with Vodafone soon for a friendly agreement. Verizon is also prepared to take a bid public if the British company does not engage in talks, the sources said.
A Verizon spokesman declined to comment. Vodafone declined to comment. Verizon Wireless was not available for comment.
Shares in Vodafone rose 1.6 percent in London, while Verizon shares were up 2.5 percent in New York yesterday.
Verizon, which has made little secret of its wish to buy out its British partner, has ramped up the pressure in recent months, saying that it believed it could buy the asset in a tax-efficient way. The company's move to hire advisers and the sources' revelation of a price range highlight the company's seriousness about doing a deal.
At US$100 billion, a deal would be the third-largest acquisition ever, according to Thomson Reuters data, and would come amid a new round of industry consolidation.
The sources said Verizon is confident it can raise about US$50 billion of bank financing to fund a deal. Market demand for investment-grade debt is proving almost limitless in the current environment, and Verizon could expect a warm welcome from investors, even with a fund-raising as big as US$50 billion, bankers said.
"This is a good time for both sides to think seriously about a transaction. Vodafone's probably never going to get a better multiple than now," New Street analyst Jonathan Chaplin said. "The growth rate (for Verizon Wireless) probably has to slow over time, particularly as Sprint and T-Mobile USA and AT&T improve."
However, analysts and Vodafone investors said the roughly US$100 billion figure contemplated by Verizon was too low and likely more of an opening gambit to bring the British firm to the table. Most analysts had put the value of the Vodafone holding at nearer US$120 billion.
One top-40 Vodafone investor said there was "absolutely no way" it will be US$100 billion, but that US$135 billion would suffice.
Vodafone CEO Vittorio Colao has said he has an open mind on whether to sell the group's 45 percent stake, which has come to make up around 75 percent of the firm's value in recent years as its core European business suffered.
Analysts have said a sale of Verizon Wireless would enable Vodafone to return cash to shareholders, purchase fixed-line assets in Europe, or potentially make the company an attractive takeover target for other telecom giants such as AT&T .
One of Vodafone's 15 largest investors said the company should look to return to shareholders a large portion of the proceeds from a sale, while retaining a small amount to reduce debt and fund bolt-on deals.
Shares in Vodafone have risen 26 percent this year on speculation that it could finally be ready to sell its stake.
Verizon's board is expected to discuss details of a potential Verizon Wireless buyout next week at a regularly scheduled meeting being held ahead of the company's annual shareholder meeting, one of the sources said.