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Verizon Wireless to pay $130 billion for Vodafone share

06 Sep, 2013

British-based multinational Vodafone Group Plc, is the world’s second-largest mobile communications company – behind China Mobile. And Vodafone is about to gain an estimated $130 billion by selling its 45 percent share of Verizon Wireless, the largest mobile network operator in the U.S. So, this is a big deal, both for mobile and for Wall Street.

Verizon Wireless, founded as a joint venture in 2000 between Verizon Communications and Vodafone, has grown to nearly 100 million subscribers. However, Verizon Wireless has fought to remain non-union, unlike AT&T, the second-largest wireless carrier, with 78 million subscribers.

According to researchers, Vodafone’s long-term investment has an astronomical payout. Stock analysts at Sanford C. Bernstein & Co. estimate that Vodafone’s initial investment was $20 billion, and “the company is getting as much as $125 billion more than that for a sixfold return, according to data compiled by Bloomberg.”

Specifically, according to Reuters, “Under the terms, Vodafone will get $58.9 billion in cash, $60.2 billion in Verizon stock, and an additional $11 billion from smaller transactions in a deal that is due to close in the first quarter of next year.”

Vodafone apparently considered selling off its stake in 2004, but would have realized only $25 billion. Since then, “the value of Vodafone’s stake ballooned as Verizon Wireless became the biggest provider in the U.S., with more than 100 million subscribers.”

For Verizon, said Forbes, “Assuming full ownership will give Verizon complete access to the wireless unit’s profits, a windfall that’ll allow it to build new mobile networks and contend with an increasingly competitive landscape.”

In any case, this deal ranks as the third largest mergers & acquisition in history. However the deal may turn out for U.S. workers and subscribers, it’s clear that Vodafone has struck it rich, and Verizon may as well. Oh, and Wall Street banks are expected to earn $500 million from the transaction.

Vodafone Group Plc. (NY Times Business)

Vodafone Decade of Patience Was a $125 Billion Virtue
(Bloomberg, Sep. 4, 2013)

Verizon, Vodafone agree to $130 billion Wireless deal (Reuters, Sep. 2, 2013)

Verizon-Vodafone $130B Deal Signals Mounting Consolidation And Competition (Forbes, Sep. 2, 2013)

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