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The Financial Times reports that Vodafone (NASDAQ:VOD) is pondering a $160 billion acquisition of Verizon (NYSE:VZ). Vodafone says yeah right. But a weak dollar could make the deal possible.

Vodafone said in a statement:

Vodafone notes press speculation that it is considering a possible offer for Verizon Communications.  Vodafone wishes to make it clear that it has no plans to make such an offer.

Now why would Vodafone spend all that dough for Verizon? To own all of Verizon Wireless of course. Currently, Verizon Wireless is a joint venture between Verizon and Vodafone. Apparently, the Financial Times thinks this is a great reason buy all of Verizon and then sell the stuff it doesn’t want–FiOS and the traditional telecom business to private equity players.

Indeed, this potential Vodafone-Verizon bid is audacious. I also don’t doubt the FT’s blog post–of course Vodafone is kicking the idea around (it probably has ever since the Verizon Wireless venture launched).

Here are the key paragraphs in the FT post:

The audacious plan has been discussed in recent weeks as Vodafone has considered whether to trigger a little-known put option it holds over part of its stake in Verizon Wireless — a move that, accompanied by an asset revaluation at the American company, could allow it to suck up to $20bn out of Verizon and distribute this to its shareholders.

The extreme alternative of bidding for Verizon would create a business capitalized at around $300bn — bigger than AT&T (NYSE:T), currently the world’s largest telecom business.

According to well placed financiers, in contemplating such a move, Vodafone has looked at a range of deal structures. These include a plan to buy the whole of Verizon and then simultaneously spin-off its fixed line interests to a private equity consortium. The company has also looked at whether it could part-fund the deal with the issue of a tracker stock for U.S. investors.

If pursued, the private equity side deal alone, valued at around $90bn, would constitute the largest leverage buyout on record.

Translation: This Vodafone bid idea was planted with the FT as a trial balloon. Given all the references to structures and spin-offs it’s obvious that some investment banker cooked up the various scenarios (all for a fee of course). Once Vodafone shares took a hit, the company issued its statement shooting the idea down.

Nevertheless, I doubt this Vodafone-Verizon talk will go away quietly. Shockingly, the biggest argument for the Vodafone-Verizon deal was left out: The weak dollar. Sure, $160 billion is a huge amount, but it’s not nearly as big as it used to be–if you’re paying in British Pounds. The dollar is a downtrodden currency these days. And Vodafone reports its financials in the pound. A Vodafone acquisition of Verizon is the equivalent of a Londoner taking a vacation in the U.S.–it’s a bargain.

And given the dollar only buys .49 of a pound that $160 billion price tag may not be all bad. If Vodafone is paying in pounds the Verizon deal is only $78.5 billion.

Source: Vodafone Denies Intention To Buy Verizon, But Talk Will Persist