Vodafone Hints of iPhone Envy

Vodafone has dropped the biggest hint yet that European mobile networks have been demanding Apple offer 3G support in the iPhone. Vodafone Group chief executive Arun Sarin called the lack of 3G support in the iPhone a "concern." "The iPhone is clearly a good, software-driven device, but we're concerned about wideband area coverage. 3G (capability) is something we look forward to and hope Apple moves forward to soon," Sarin said, Reuters reported.

Apple's device uses EDGE (also known as 2.5G) networks for data traffic- however, unlike in the US, European mobile networks have invested billions in building up their 3G networks- they want those networks used. Apple has described its choice of EDGE above 3G as being predicated on the power demands imposed by 3G technology, use of which would impact battery life on the sophisticated device.

However, lack of 3G support is emerging as one of the major market inhibitors to widespread adoption of the device, particularly among mobile and tech-savvy Europeans.

Analysts are split on Apple's 3G plans, some expect the iPhone that ships this year in Europe could be 3G-enabled, others don't anticipate a 3G version until March next year.

Apple's European launch plans remained topic for debate. Vodafone had been expected to clinch the contract on a pan-European basis, but Apple now seems set to favor a country-by-country distribution deal.

It has been widely reported that Apple will shift the iPhone through O2 in the UK and Deutsche Telekom in Germany, and perhaps also through other networks.

Sarin confirmed that "virtually every mobile company" is in discussion with Apple over the iPhone, but refused to confirm or deny his company's involvement, saying that Apple has made no announcement on this.

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Vodafone "looks forward" to 3G iPhone version

Vodafone Group Plc (VOD.L) said on Thursday it was concerned that the current model of iPhone mobile phones -- Apple Inc's (Nasdaq:AAPL - news) latest "killer" gadget -- did not operate on fast 3G networks.

Amid speculation that Apple, the innovative U.S. consumer electronics group, is close to handing a deal to Vodafone's rivals to bring iPhones to European shores, the mobile phone giant said only any deal needed to make sense for shareholders.

"It's clearly a good, software-driven device, but we're concerned about wideband area coverage so that 3G (third-generation) or HSDPA (upgraded 3G) connectivity with the iPhone is something that we look forward to.

"Every product, every alterative, every choice here has a price and we just have to be conscious of what it is that we're doing for our customers and our shareholders," Sarin told a conference call after the company posted strong quarterly numbers.

Analysts expected Vodafone to be in prime position to secure an exclusive, pan-European deal to sell iPhones, which have flown off the shelves in the United States, but warned that Apple was a tough negotiator and liked to dictate terms.

Apple, whose iPhones operate over slower 2.5 generation networks in the United States, is not expected to bring out a 3G version until March 2008, analysts say. And Vodafone has invested heavily in its 3G network and services.

IPhones, which combine Apple's hugely-popular iPod digital music player, a video player and Web browser into a sleek, touch screen device, went on sale in the U.S. in June to the delight of die-hard Apple fans.

Sarin said virtually every mobile company was having a conversation with Apple, but that he could not comment further on any potential decision or announcement.

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Vodafone denies planning $160 bln bid for Verizon

Wireless telecommunications company Vodafone Group Plc (VOD.L) denied a report that it was considering a $160 billion bid for Verizon Communications Inc. (NYSE:VZ - news), a move that would consolidate ownership of their wireless joint venture.

The Financial Times reported in its FT Alphaville blog on Monday that Vodafone was considering such a bid, prompting Verizon's shares to jump more than 12 percent in premarket trade.

Verizon shares gave up most of those gains after Vodafone's denial, and were up only 1 percent at $42.21. Vodafone shares trimmed their earlier losses to trade down 0.25 percent at 163.04 pence.

"Vodafone wishes to make it clear that it has no plans to make such an offer," the company said in a brief statement.

Verizon spokesman Bob Varettoni declined to comment.

A $160 billion bid would represent a 32 percent premium to Verizon's market capitalization of about $121 billion at Friday's close.

Vodafone and Verizon have joint ownership of Verizon Wireless, the second-largest mobile service provider in the United States in terms of subscriber base. Verizon has said it was interested in taking full ownership of the profitable asset.

Atlantic Equity analyst Chris Watts said that regardless of whether Vodafone planned to make such an offer for Verizon, the report drew attention to Verizon's valuations amid a wave of merger activity in the telecom sector.

"It's going to highlight the value of the assets within Verizon at the moment," he said.

Verizon Wireless competes against AT&T Inc. (NYSE:T - news), which took full ownership of its wireless division, formerly known as Cingular, after buying partner BellSouth Corp. late last year.

FT Alphaville, citing unnamed sources, said Vodafone had not yet approached Verizon with an acquisition plan, and there was no certainty a bid will be pursued.

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Vodafone & tax

Vodafone's decision to retain its 45 per cent holding in Verizon (NYSE:VZ - news) Wireless has been vindicated in spectacular style. The stake's equity value has risen by perhaps $10bn to $50bn since grouchy shareholders unsuccessfully lobbied for a sale in early 2006.

A key part of Vodafone's defence was that a US exit would create a huge capital gains tax bill of at least $10bn. Now, ahead of Vodafone's annual general meeting on 24 July, activist group Efficient Capital Structures has alleged that Vodafone's position on tax is "disingenuous". A spin-off of the Verizon stake direct to Vodafone's shareholders, could, ECS say, occur under UK law without creating a big tax bill.

Is this accurate? The chances of a tax-free spin off in fact seems fairly slim. First, in order for a spin-off to avoid a US tax bill, Vodafone would need to demonstrate to the US Internal Revenue Service that it would have an "active trade or business" in America. This looks tough: Vodafone has no other major US assets.

Second, if the stake comprised more than three quarters of the value of the "spin-co", Vodafone would need Verizon's permission. This is not a given. Third, under US rules, Verizon could probably not take over the spin-co for two years without Vodafone incurring tax, and after that Verizon would still need IRS permission.

The exact details of any company's tax position are impossible to know from the outside, both because of its likely complexity and because companies are loath to reveal their hand to the tax authorities.

ECS is correct that tax is critical to Vodafone's US position. But it is wrong to suggest that, as a matter of course, companies should be forced to disclose the gory detail of their tax positions. Vodafone's board exists to scrutinize this on behalf of shareholders and communicate its conclusions. At this stage there is no reason to suppose that it is not doing its jobs properly.

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Vodafone shares hit five-year peak on iPhone rumours

Shares in British mobile phone group Vodafone jumped Thursday to the highest level for about five and a half years on speculation linking it to a European distribution deal for Apple's iPhone.

Vodafone's share price surged as high as 168.70 pence -- the highest since January 11, 2002. It later pulled back to end at 166.20 pence, which marked a gain of 1.47 percent from Wednesday's close.

London's FTSE 100 index, on which Vodafone stock is listed, finished Thursday 0.67 percent higher at 6,571.30 points.

Apple Inc. was set Friday to launch its ground-breaking iPhone in the United States, where it has signed a deal with US telecoms giant ATT.

The iPhone, which will debut in Europe by the end of 2007 and in Asia in 2008, promises all of the newest portable technologies in one pocket-sized personal unit: mobile phone, camera, web browser, music and video player.

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