Vodafone's $130bn Windfall After Verizon Deal

Vodafone has confirmed it is selling its stake in America's largest mobile phone company in the third largest corporate deal in history.

Verizon Communications will buy the British firm's 45% stake in their joint US venture Verizon Wireless for $130bn (£84bn), in an agreement which could provide a boost to the UK economy.

Verizon Wireless is most profitable mobile service provider in the US and the new agreement is the culmination of Verizon Communications' decade-long attempt to win full control of it.

Under the terms of the deal, Vodafone would get $58.9bn (£38bn) in cash, $60.2bn (£39bn) in Verizon stock, and an additional $11bn (£7bn) from smaller transactions that would take the total deal value to $130bn, Verizon said.

The deal marks the British telecom giant's exit from the large but mature US mobile market.

The windfall would allow the FTSE 100 company to plot further expansion and return cash to shareholders.

There is speculation it would issue a special dividend which could yield investors up to £40bn in total - cash that might find its way back into the economy, partly through tax.

However, there is also the possibility of controversy over the way the deal is arranged amid reports that Vodafone's tax liabilities will be minimised by completing the transaction through its Luxembourg subsidiaries and other offshore companies.

Verizon Communications will have full control of Verizon Wireless

Margaret Hodge, chairwoman of the Commons Public Accounts Committee which has investigated corporate tax avoidance, said she wanted the deal to be examined in detail.

"Clearly there are concerns on this deal," she said.

"I just want some assurance that HM Revenue and Customs (HMRC) will be going through this deal with a tooth comb to ensure that the taxpayer gets the proper benefit under the law of the tax that Vodafone should pay on this massive windfall profit that they are making."

Mrs Hodge urged HMRC to ensure there was no "aggressive tax avoidance" in the way the deal was done.

Vodafone chief executive Vittorio Colao told Sky News: "We apply standard rules and we have to apply standard laws in all the countires.

"If this transaction happened in the UK, under UK standard rules this transaction would not be taxable. These rules have been there for years.

"Now the transaction happens in Netherlands which are the exactly the same rules as the UK. Now the important thing is there are £54bn going back into our shareholders many millions fo whom are UK and will benefit from transaction."

The only larger deals in corporate history were Vodafone's $183bn acquisition of Mannesmann in 2000 and internet giant AOL's $182bn takeover of Time Warner in 2001.

Verizon has had a long-standing interest in buying out its partner, but the two companies have never managed to agree on a price until now.

Analysts said Verizon wanted to pay around $100bn for Vodafone's stake, while Vodafone had been pressing for the higher sum.

Vodafone shares, which rose sharply last week, rose 4% in early trading on Monday before extending those gains past 12% in the afternoon.

The change is not expected to have much of an effect on Verizon consumers or on its operations as Vodafone had little influence on Verizon Wireless' operations.

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Young Brits 'Could Miss Digital Jobs Boom'

Up to 750,000 jobs could be created in the next five years to fuel Britain's "burgeoning" digital economy, a report has predicted.

Mobile phone giant O2 said the continued growth of the digital sector offers "fantastic opportunities for tech-savvy young people", but warned not enough was being done to harness their skills.

Ronan Dunne, chief executive of the company's parent firm Telefonica, told Sky News: "If we don't generate those jobs using British youngsters with the right skills, businesses will have to look overseas.

"With the situation in the UK, where one million young people are out of work, we have to make sure we get the schooling elements right, the employer elements right and the readiness for work right."

Research by O2 suggests that 20% of the 750,000 possible vacancies would be entry-level jobs, suitable for people entering the world of work for the first time.

Many roles would be linked to the nationwide roll-out of 4G technology, which offers faster mobile internet speeds.

However, Mr Dunne said employers must show a greater willingness to recruit school leavers in order for the digital jobs boom to have a noticeable impact on youth unemployment.

"The onus cannot be on the Government alone," he said.

"Businesses must proactively seek out opportunities to collaborate to maximise the digital growth opportunity and harness the potential of the next generation.

"As digital natives, young people possess valuable skills that will be the future fuel of our economy, but not enough is being done to harness them."

Mr Dunne's comments came at the opening of Campus Party Europe, one of the world's biggest technology festivals.

Up to 60,000 young people are expected to attend the week-long event at The O2 in London.

As well as 100 guest speakers, the event features a digital skills marketplace, where school leavers can meet potential employers, and a hackathon, which aims to teach young people basic coding skills.

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Wonga To Waive Dividend Despite Record Profit

By Mark Kleinman, City Editor

Wonga, the financial services company which has found itself at the heart of the controversy over the payday lending industry, will on Tuesday announce that it made record profits of more than £1m-a-week last year.

Sky News understands that the privately-owned group will report annual earnings of roughly £65m for 2012, an increase of approximately 50% on the previous year, buoyed by a huge spurt in customer numbers and ongoing international expansion.

The results will reinforce Wonga's status as one of the UK's most successful technology companies, although they will also provide further ammunition for critics of the sector weeks after it became the target of a broadside from the Archbishop of Canterbury.

Errol Damelin, Wonga's founder and chief executive, will say on Tuesday that Wonga will maintain its record of eschewing a dividend and ploughing the company's earnings back into product development and a push into new markets.

Referring to the Church of England's desire to participate in the growing credit union movement, Dr Justin Welby said he had told Mr Damelin that he wanted to "compete [the company] out of existence".

The remarks sparked acute embarrassment for the Archbishop, however, when it emerged that the Church of England's pension fund was among the investors in one of Wonga's financial backers.

Wonga has sought to counter many of the criticisms levelled at payday lenders by pointing out that it only makes short-term loans to consumers and highlighting the fact that it only lends money to consumers who have been subjected to credit-checks. Customers can also repay loans early with no additional charge.

Dr Welby subsequently sought to clarify his remarks by praising Mr Damelin's track record as a businessman and denying that he was seeking to portray Wonga as an irresponsible company.

Earlier this year, the payday lending sector was referred to the Competition Commission amid political anger about the activities of some short-term lenders.

In 2014, the industry will come under the remit of the Financial Conduct Authority, and the City regulator will have powers allowing it to ban advertising and impose a cap on interest rates charged by lenders.

In remarks published on its website last month, Wonga said: "Since 2007 Wonga has responsibly lent over £2bn and we now have over a million customers.

"We've done that despite declining three quarters of all first loan applications and ensuring a principal default rate (money lent that we don't get back) of around 7%. This is comparable to other forms of short-term credit, such as credit cards.

"We work hard to lend only to the people who can pay us back, and our mainstream services for individuals and businesses are now available across three continents."

Wonga, which is planning to launch in Spain, declined to comment on its 2012 results ahead of Tuesday's announcement.

The record profits will fuel speculation that Wonga's management and shareholders will look to float the company on New York's Nasdaq technology stock exchange, although such a move is unlikely in the near term.

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Lenders To Fork Out £1bn For Iceland Losses

By Poppy Trowbridge, Business and Economics Correspondent

British banks, building societies and credit unions have begun making multimillion pound payments to cover the costs of the Icelandic banking crisis.

When the banking crisis struck Iceland in 2008, hundreds of thousands of British savers had deposits in Icelandic banks, many through accounts at Icesave which went bankrupt.

At the time, concern mounted over the potential losses for UK customers so the UK Government stepped in to ensure that no one lost their money.

British banks are now repaying the Government for that expense, by writing out cheques for up to £1.089bn of this compensation.

Anthony Browne, chief executive of the British Bankers Association, said: "The UK banking industry is today picking up the tab for £1bn of the costs of the Icelandic banking crisis. This money ensured that no savers who had money in Icelandic banks lost out.

"We hope it gives confidence to consumers that if there is ever another bank failure that their savings will be protected."

Mr Browne says the fact the banks are able to make these repayments now shows that the industry is returning to health.

The money will be paid in three instalments, over three years from today and are required under the Financial Services Compensation Scheme which protects customer deposits in the event of bank failure. 

The scheme now covers all customers' savings up to the value of £85,000 should another bank go into insolvency.

Joe Rundle, head of trading at ETX Capital, told Sky News: "The news is actually positive for the vast majority of savers who are guaranteed by the compensation scheme.

"It is our inherently sturdy, transparent and reassuring compensation scheme which provides comfort and confidence to savers who need protection, especially in times like this."

However, he added: "It couldn't come at more difficult time for the UK banking sector which is evolving rapidly.

"UK banks will ultimately end up having to raise more capital to fund this repayment which will be met with disappoint by shareholders."

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Wonga To Waive Dividend Despite Record Profit

By Mark Kleinman, City Editor

Wonga, the financial services company which has found itself at the heart of the controversy over the payday lending industry, will on Tuesday announce that it made record profits of more than £1m-a-week last year.

Sky News understands that the privately-owned group will report annual earnings of roughly £65m for 2012, an increase of approximately 50% on the previous year, buoyed by a huge spurt in customer numbers and ongoing international expansion.

The results will reinforce Wonga's status as one of the UK's most successful technology companies, although they will also provide further ammunition for critics of the sector weeks after it became the target of a broadside from the Archbishop of Canterbury.

Errol Damelin, Wonga's founder and chief executive, will say on Tuesday that Wonga will maintain its record of eschewing a dividend and ploughing the company's earnings back into product development and a push into new markets.

Referring to the Church of England's desire to participate in the growing credit union movement, Dr Justin Welby said he had told Mr Damelin that he wanted to "compete [the company] out of existence".

The remarks sparked acute embarrassment for the Archbishop, however, when it emerged that the Church of England's pension fund was among the investors in one of Wonga's financial backers.

Wonga has sought to counter many of the criticisms levelled at payday lenders by pointing out that it only makes short-term loans to consumers and highlighting the fact that it only lends money to consumers who have been subjected to credit-checks. Customers can also repay loans early with no additional charge.

Dr Welby subsequently sought to clarify his remarks by praising Mr Damelin's track record as a businessman and denying that he was seeking to portray Wonga as an irresponsible company.

Earlier this year, the payday lending sector was referred to the Competition Commission amid political anger about the activities of some short-term lenders.

In 2014, the industry will come under the remit of the Financial Conduct Authority, and the City regulator will have powers allowing it to ban advertising and impose a cap on interest rates charged by lenders.

In remarks published on its website last month, Wonga said: "Since 2007 Wonga has responsibly lent over £2bn and we now have over a million customers.

"We've done that despite declining three quarters of all first loan applications and ensuring a principal default rate (money lent that we don't get back) of around 7%. This is comparable to other forms of short-term credit, such as credit cards.

"We work hard to lend only to the people who can pay us back, and our mainstream services for individuals and businesses are now available across three continents."

Wonga, which is planning to launch in Spain, declined to comment on its 2012 results ahead of Tuesday's announcement.

The record profits will fuel speculation that Wonga's management and shareholders will look to float the company on New York's Nasdaq technology stock exchange, although such a move is unlikely in the near term.

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Lenders To Fork Out £1bn For Iceland Losses

By Poppy Trowbridge, Business and Economics Correspondent

British banks, building societies and credit unions have begun making multimillion pound payments to cover the costs of the Icelandic banking crisis.

When the banking crisis struck Iceland in 2008, hundreds of thousands of British savers had deposits in Icelandic banks, many through accounts at Icesave which went bankrupt.

At the time, concern mounted over the potential losses for UK customers so the UK Government stepped in to ensure that no one lost their money.

British banks are now repaying the Government for that expense, by writing out cheques for up to £1.089bn of this compensation.

Anthony Browne, chief executive of the British Bankers Association, said: "The UK banking industry is today picking up the tab for £1bn of the costs of the Icelandic banking crisis. This money ensured that no savers who had money in Icelandic banks lost out.

"We hope it gives confidence to consumers that if there is ever another bank failure that their savings will be protected."

Mr Browne says the fact the banks are able to make these repayments now shows that the industry is returning to health.

The money will be paid in three instalments, over three years from today and are required under the Financial Services Compensation Scheme which protects customer deposits in the event of bank failure. 

The scheme now covers all customers' savings up to the value of £85,000 should another bank go into insolvency.

Joe Rundle, head of trading at ETX Capital, told Sky News: "The news is actually positive for the vast majority of savers who are guaranteed by the compensation scheme.

"It is our inherently sturdy, transparent and reassuring compensation scheme which provides comfort and confidence to savers who need protection, especially in times like this."

However, he added: "It couldn't come at more difficult time for the UK banking sector which is evolving rapidly.

"UK banks will ultimately end up having to raise more capital to fund this repayment which will be met with disappoint by shareholders."

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House Prices Surge For Fourth Month In A Row

House prices rose for the fourth consecutive month in August, as Government schemes and improved mortgage lending continued to fuel the revival in the property market.

Property values rose by 3.5% compared with a year ago, taking the average price for a UK home to £170,514, according to the Nationwide building society.

This marked a slight fall on the 3.9% surge seen in July, which was the biggest annual rise for three years.

"Consumer confidence has increased significantly in recent months, thanks to further modest gains in employment and signs that the UK economy is finally gathering momentum," Nationwide chief economist Robert Gardner said.

Prices rose 0.6% between July and August, which was also marginally lower than the 0.9% monthly hike seen in July.

But Nationwide said the quarter-on-quarter change showed underlying price rises have remained robust, up 1.4% in the three months to August - the strongest pace of increase since mid-2010.

The data comes after Bank of England (BoE) governor Mark Carney warned earlier this week over the risks of another housing bubble amid fears that Government stimulus measures are stoking unsustainable price rises.

He said the BoE is "acutely aware" of the potential threats and said action will be taken to clamp down on mortgage lending if needed.

Policy measures such as Funding for Lending and Help to Buy are boosting the market as they help first-time buyers in particular on to the property ladder.

Figures from the Council of Mortgage Lenders recently showed that first-time buyers accounted for 45% of house purchase loans in the second quarter - the highest since records began in 2005.

The Funding for Lending Scheme encourages banks and building societies to lend more in return for discounted loans, and has been credited with improving mortgage availability and reducing rates.

Chancellor George Osborne also launched Help to Buy in April, which allows people to buy a property with a 5% deposit, with the state lending buyers 20% of the value of a new home worth up to £600,000, interest-free for five years.

But there are concerns that these schemes will push up house prices and borrowing levels, rather than spurring on more new home construction.

Mr Gardner added: "While there have been encouraging signs that house building is starting to recover, construction is still running well below what is likely to be required to keep up with demand."

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Data Watchdog Warning Over Staff Home Working

The data watchdog has warned employers about security breaches caused by staff working from home, after it fined a council £100,000 for posting sensitive information about vulnerable children.

The Information Commissioner's Office (ICO) hit Aberdeen City Council with the penalty over what it called a "serious data breach" by social services.

The breach of data occurred after a council employee accessed documents, including meeting minutes and detailed reports, from her home computer.

A file transfer programme installed on the machine automatically uploaded the documents to a publicly-accessible website.

The sensitive information revealed details about several vulnerable children and their families, including details of alleged criminal offences.

The files were uploaded between November 8 and 14, 2011 and remained available online until February 2012.

They were only taken down when another member of staff spotted the documents after carrying out an online search linked to their own name and job title.

The breach was later reported to the ICO.

The ICO's investigation found that the council had no relevant home working policy in place for staff and did not have sufficient measures in place to restrict the downloading of sensitive information from the council's network.

ICO assistant commissioner for Scotland Ken Macdonald said: "As more people take the opportunity to work from home, organisations must have adequate measures in place to make sure the personal information being accessed by home workers continues to be kept secure.

"In this case Aberdeen City Council failed to monitor how personal information was being used and had no guidance to help home workers look after the information.

"On a wider level, the council also had no checks in place to see whether the council's existing data protection guidance was being followed."

He added: "The result was a serious data breach that left the sensitive information of a vulnerable young child freely available online for three months.

"We would urge all social work departments to sit up and take notice of this case by taking the time to check their home working setup is up to scratch."

The council is now in the process of agreeing an undertaking with the ICO, which commits the organisation to improving its compliance with the Data Protection Act.

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Co-op Reports £559m Loss Due To Bank Troubles

The Co-operative group has announced a half-year pre-tax loss of £559m amid a writedown of £496m on loans at its troubled banking arm.

The Co-operative Bank alone made a pre-tax loss of £709.4m in the six months to June and the group said there will be "no quick fixes" as it embarks on a four-year turnaround plan.

It admitted it does not expect its banking arm to make a profit for years and warned a restructuring of the business makes job losses "inevitable".

Part of the loss has been blamed on the installation of a new computer system by the group's former management team.

However, as part of an ambitious growth strategy, it was designed for a much bigger institution and those currently in charge say it does not suit the company's needs as a smaller operation.

Group chief executive Euan Sutherland said: "This has been a very difficult first half for The Co-operative Group and the results highlight both the well-documented challenges faced by The Co-operative Bank and the significant work to do at Group level.

"Importantly, today's announcement also underlines the need for the £1.5bn Capital Action Plan we announced in June to stabilise the Bank, which we reaffirm today and which remains on track."

He said the Co-op has "no plan B" for rescuing the bank and is confident bond holders will accept the current proposals.

He added: "We remain convinced of the considerable potential to be realised across the Group and are confident that we are well placed to restore the Co-operative brand to its rightful place at the heart of communities up and down Britain." 

Mr Sutherland took his position in May and said he has since been focused on stabilising the bank.

Banking Group chief executive Niall Booker said the business continued to see the withdrawal of corporate deposits, while retail customers remained.

Other parts of the business reported profits, with the Co-op's food group making £117m in the same period.

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UK Recovery 'On Stronger Ground'

The British Chambers of Commerce has raised its forecast for growth this year, from 0.9% to 1.3%, raising further optimistic signs of economic recovery.

But the business lobby group warned that the economy could yet be derailed by global jitters and urged the Government and Bank of England to do everything possible to ensure the recovery moves from "good to great".

Britain's growth prospects have been boosted by increasingly upbeat data in recent weeks, including an official upgrade to growth between April and June from 0.6% to 0.7%.

Services, manufacturing, construction and agriculture all expanded - the first time Britain has been firing on all cylinders for nearly three years.

The new quarterly forecast follows another upgrade three months ago when the BCC raised its growth prediction from 0.6%. It also lifted growth forecasts for 2014 and 2015 to 2.2% and 2.5% respectively.

Household consumption should grow by 1.7% this year and 2.3% next year as weakening inflation eases the squeeze on incomes, according to the BCC.

Director general John Longworth said: "Unfortunately, however, the recovery is not yet secure. We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks."

The services sector, which makes up about three-quarters of the economy, will expand by 1.9% this year and 2.6% next year, the BCC said.

But manufacturing will shrink by another 0.8% this year and construction will decline 1.2%, it predicts.

It also expects unemployment to fall to 2.45 million by the third quarter of next year, 200,000 lower than its prediction in May.

It reckons unemployment will hit the Bank of England's threshold of 7% - when the bank will consider raising interest rates - in the fourth quarter of next year. This is earlier than its prediction of late-2016.

The BCC also forecast that net public sector borrowing will come in at £116.3bn this financial year, £3.5bn lower than the Office for Budget Responsibility's prediction in March.

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