The blockbuster deal -- which would be one of the biggest transactions in corporate history -- would allow Vodafone to bounce back from hefty losses, pay down debt, make new acquisitions and return money to shareholders, according to analysts.
It would also mark the group's exit from the United States market and inject several billion euros into the British economy that is struggling to lift out of the doldrums.
The company's share price jumped 3.59 percent on Tuesday to close at 213.65 pence before the announcement the deal had been reached, while London's FTSE 100 index rose 1.54 percent overall.
Vodafone had earlier confirmed talks were advanced.
Vodafone said that it would return USD 84 billion of the funds it receives back to shareholders and plough over USD 9 billion into organic investments over the next three years to improve its networks and services.
Vodafone said shareholders would receive all Verizon shares and nearly 24 billion in cash "totalling USD 84.0 billion, equivalent to 112p per share and representing 71 percent of the net proceeds" from the transaction.
Vodafone Group Chairman Gerard Kleisterlee said the company's investment in Verizon Wireless has created a great deal of value for shareholders and "Verizon's offer now provides us with an opportunity to realise this value at an attractive price."
He added the "transaction will position Vodafone strongly to pursue our leadership strategy in mobile and unified communication services for consumers and enterprises both in our developed markets and across our emerging markets businesses."
The gigantic buyout will be the second-biggest merger and acquisition deal in global corporate history, according to data firm Dealogic. The world's biggest M&A deal remains Vodafone's purchase of Germany's Mannesmann for USD 172 billion including debt, in 1999.
The deal would be so big that some analysts said the effect on the British economy would be as great as the hundreds of billions of pounds injected into the British economy since 2009 by the central bank, the Bank of England.
The Verizon Wireless transaction will give US fixed-line company Verizon full control after 13 years of shared ownership.
Atif Latif, director of trading at Guardian Stockbrokers in London, said the deal would create a cash pot to fund acquisitions in Europe.
"With this news we could see more acquisitions within Europe to give then a foothold back into markets where they have fallen behind in recent times," Latif said.
Vodafone's statement did not mention any acquisitions, but promised to increase the 2014 dividend by 8 percent to 11 pence and said that it intends to keep increasing it thereafter.
Latif noted that the potential tax bill would likely be less than expected.
In May, Vodafone revealed that annual net profits had slumped by 90 percent after taking a vast impairment charge relating to poor business in debt-laden eurozone nations Italy and Spain.
Profit after taxation collapsed to 673 million pounds in the group's financial year to the end of March compared with 7 billion pounds in 2011-2012.
Since then it has announced rising first-quarter sales, as strength in emerging markets such as in Africa and Asia counters weakness in Europe.
In June, Vodafone launched a 7.7-billion-euro cash offer for Kabel Deutschland, Germany's biggest cable operator.


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