Shares of U.K. telecom firm Vodafone surged as much as 9 percent on Thursday after it confirmed discussions with Verizon Communications over its 45 percent stake in their U.S. joint venture Verizon Wireless.
The company noted that there had been increased media speculation regarding the deal. However, the firm said that there was no certainty that an agreement would be reached.
Joe Rundle, head of trading at ETX Capital, said Vodafone's Verizon Wireless stake could be offloaded in a "staggering" deal worth nearly $130 billion.
In May, Vodafone CEO Vittorio Colao said he would stake his reputation on selling the stake at the right price. Verizon is the leader in the U.S. mobile phone market and has become a valuable asset for Vodafone.
"Very welcome news for Vodafone – this disposal was an overhang in the stock price for some time given the speculation around this, and more importantly, it allows the group to pay down its debt," Rundle said in a morning note.
According to him, if Verizon buys the entire stake, it could save Vodafone from paying as much as $35 billion in taxes.
A major Vodafone shareholder told CNBC: "It is all about the tax deal. Clearly Vodafone has been playing the long game and it's great. But really it comes down to what the price is."
A second shareholder added that Vodafone was expected to hand some back most of the money through a special dividend.
"The market probably wants more than Vodafone wants to give, but that's a debate for the second phase of this deal," they told CNBC. "We are expecting something above or around $125 billion with a tax bill under $10 billion – but we will see." Vodafone would probably use the money they retain to build out Kabel Deutschland-type deals, they added.
Joe Rundle said the deal was game changing. "Vodafone's market cap today jumped up to around $152 billion in U.S. dollar terms so a disposal around $130 billion is a transformational, fortune-changing deal which is likely to see Vodafone become the new darling of the telecom sector," he said.
Another shareholder said Vodafone would not be such a good company going forward.
"How could it be, when it no longer has the Verizon Wireless stake? But it will be cheaper," they told CNBC. "You get what you pay for and we think it would trade at about 225p. If you get a good deal and the tax bill is low then it is good for shareholders. It will also be good for the stock market – because there will be a lot of capital looking to be re-invested."