BusinessCompany NewsVodafone faces investor demands for £38bn at AGM

Vodafone faces investor demands for £38bn at AGM

Tax issues at the heart of mobile phone operator's battle with activist groups calling for £38bn to be returned to investors

An activist group has found support from fund managers for its demands that
Vodafone return £38bn to investors. Some of Efficient Capital Structures’ (ECS’)
calls have now been backed by a fund managers including Jupiter and Invesco
Perpetual.

The groundswell of support comes after ECS first proposed moves to bolster
Vodafone’s balance sheet by issuing new bonds and spinning off its 45% stake in
Verizon Wireless to Verizon Communications, the US telecoms giant that holds
the controlling 55% of that company.

ECS has said that the spin-off could be achieved in a tax-efficient manner,
but Vodafone has said that the move would generate a capital gains tax bill of
$10bn, the
Financial
Times
reported.

The activist group claimed that Vodafone could slash its tax bill by more
than £607m because the coupon payments on the bonds issued would reduce the
level of its taxable profits.

Vodafone has a ‘put’ option that elapses on August 9, allowing it to sell
$10bn of Verizon Wireless shares back to Verizon Communications. Under the terms
of the contract, $7.5bn of shares are covered by an arrangement that would defer
capital gains tax for eight years.

Vodafone’s
AGM
takes place tomorrow, but industry watchers believe that ECS’ resolutions are
unlikey to be passed.

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