Vodafone "Insane" to Sell Stake in Verizon Wireless, Says Fund

An Australian hedge fund with a large position in Vodafone says if that company sells off its share in Verizon Wireless, the "entire Vodafone board should be sacked."

Dan Radovsky
Dan Radovsky
Mar 14, 2013 at 12:58PM
Technology and Telecom

The Australian hedge fund Bronte Capital is positively aghast at rumors of Verizon (NYSE:VZ) and Vodafone (NASDAQ:VOD) ending their quite lucrative joint venture known as Verizon Wireless.

"It would be insane," for Vodafone to sell its share in Verizon Wireless, said a post on Bronte Capital's blog, written by chief investment officer John Hempton. "And if it happens it will mark an important part of the British business establishment (and the entire Vodafone board) as both venal and incompetent."

Vodafone is the third-largest position in Bronte Capital's portfolio.

The hedge fund's hackles were raised by a Bloomberg report last week that the two companies held talks in December regarding Verizon either buying out its U.K. partner's 45% stake in Verizon Wireless, or Verizon acquiring Vodafone in its entirety.

Bloomberg's unnamed sources said wrangling over who would be in charge of a combined company caused the talks to halt.

Vodafone has been selling its stakes in phone companies it did not control, and not having control of Verizon Wireless is cited as one reason it is considering selling that unit off and using the money elsewhere. Vodafone's share of Verizon Wireless could be worth as much as $115 billion, according to analyst estimates.

But that's where the "insane" part comes in, according to Bronte Capital. Vodafone's share in Verizon Wireless "has been a good -- no a fantastic asset," the only bright spot over the last 10 years in Vodafone's "collection of modest success and abject failures."

Getting rid of that one outperforming asset just because they did not control it would be nuts. "Pointedly this one great success is the one asset they do not manage," wrote Hempton.

"Bluntly, if Vodafone management pursue any deal to resolve the Verizon Wireless issue then the entire Vodafone board should be sacked for venal and costly incompetence."

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The only deal that would make any sense to the fund would be for Verizon to buy out Vodafone completely.