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Verizon pays $130B to acquire Verizon Wireless from Vodafone

By Walter Hamilton

Los Angeles Times

LAST UPDATED: 10:43 a.m. HST, Sep 02, 2013

LOS ANGELES » In one of the largest deals in global corporate history, Verizon Communications Inc. agreed to pay $130 billion to buy Vodafone Group's 45 percent stake in Verizon Wireless and take full control of the nation's top wireless carrier.

In an era of ubiquitous cellular service and fast-rising use of smartphones, Verizon was eager to take hold of a business with big challenges but equally significant potential.

Despite heavy competition and slowing subscriber growth, the wireless business is expected to be paced in coming years by growing demand for video and other premium services.

"This is great news for Verizon on many fronts," said Jeff Kagan, an independent technology industry analyst. "One of which is the world is rapidly moving toward wireless, and there are still enormous opportunities for growth going forward."

The buyout is not expected to have an immediate effect on the wireless provider's nearly 100 million subscribers, in terms of monthly fees or new services.

However, wireless providers hope that consumers eventually will use smartphones or other devices for nontraditional functions, such as an elderly person using a home medical device that sends signals directly to a doctor's office.

"These assets position us for the rapidly increasing customer demand for video, machine to machine and big data," said Lowell McAdam, Verizon chief executive. "We are confident of further growth in wireless and our business in its entirety."

The deal calls for Verizon to shell out $58.9 billion in cash, the largest ever in such a deal, and $60.2 billion in stock. The agreement also calls for several smaller financial arrangements, including Verizon selling back its small stake in Vodafone's European division.

The deal will be a windfall for Vodafone shareholders. The British company plans to return a larger-than-expected $84 billion to investors in a combination of cash and Verizon stock.

Shareholders will receive all the Verizon shares, plus $23.9 billion in stock. That could be a boon to the British economy, which has suffered through lean economic times.

Wall Street will be a huge beneficiary, reaping hundreds of millions of dollars in fees for advising the two companies.

The agreement is not expected to face antitrust competition because Verizon already controls the wireless company.

Verizon Wireless was created in 2000 as a joint venture between the two companies following a string of mergers that had altered the contours of the mobile-phone industry.

Verizon had sought repeatedly over the years to acquire its partner's 45 percent stake, but the two could not agree on price.

Verizon effectively controlled the partnership and had wide leeway to make strategic decisions. Owning all of Verizon Wireless would allow the American phone giant to consolidate as a single company and receive the financial benefit of the expected growth.

Verizon Wireless is the largest U.S. carrier in overall market share. And in smartphones, Verizon holds a 36.9 percent to 26.5 percent edge over rival AT&T Inc., according to Kantar Worldpanel ComTech.

Verizon also announced that it will increase its dividend 6 cents a year, to $2.12 from $2.06.

The buyout is the latest sign of the consolidation that has swept through the wireless industry in the last decade. Verizon's primary wireless competitor, AT&T, is considered to be a potential suitor for British-based Vodafone.

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droid wrote:
Despite all of the U.S. government’s best actions and intentions, the monopoly they split up in the 1980s is now back together again. It will be much harder for AT&T to compete now. Ma Bell is here in and in your face, America. At least now we know why. Verizon was one of the first companies to admit they were helping the government conduct surveillance on millions of innocent Americans.

Welcome to the Big Brother nation.
on September 2,2013 | 11:04AM
nodaddynotthebelt wrote:
I've used Verizon and their service is not so great. In my case I was promised by the clerk that I would receive a discount due to my line of work but it was never put into effect. I had to go through the wringer to get that discount. Further, their coverage is not what they claim it to be. I have been in areas where you would think there would be coverage but there is none.
on September 2,2013 | 01:41PM
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