Following days of reports and speculation regarding the perpetually on again,off-again purchase talks between Verizon Communications and Vodafone for the 45% stake in Verizon Wireless owned by the British conglomerate, both companies have finally and definitively settled on the purchase price for the percentage, to be valued around $130 billion.
This makes the deal one of the largest business transactions in current history, while making it the largest transaction in the domestic wireless telecom industry. Verizon Wireless was born out of a joint venture between Verizon Communications and Vodafone in 1999, whereby both companies setup a joint company merging together multiple smaller mobile providers in the US (many spun off from regional Bell System companies) to create one large nationwide cellular provider.
While Verizon Wireless was technically a part of Vodafone’s holdings and generated a healthy amount of profit for the European conglomerate in the billions at its peak, it was the only cellular affiliate to not directly operate under any Vodafone branding or even share technology with the main company, as Verizon Wireless launched CDMA service in 1999 and continues with the network into the late 2010 launch of LTE. This meant that Vodafone customers could not directly roam in the US without either buying another handset or buying an unlocked handset and roaming on either AT&T or T-Mobile and vice versa with Verizon Wireless customers until the later parts of the decade.
Another issue for Verizon Communications was the fact that the 45% stake prevented the carrier from completely integrating proper triple-play services with its wireless service despite being in direct control of the company, owing to clauses in the agreement that effectively siphoned any profit from integration to Vodafone, making any triple-play deal a money-losing proposition. With the deal now complete, Verizon Communications can now offer such service without any issues regarding profitability.
Finally, this deal will also be a boon for smaller rural carriers looking for better roaming agreements from Verizon Wireless, as its been one of the few carriers open to roaming agreements with favorable rates for rural carriers, opening the door for lower prices for smaller companies and affiliates, as they will be dealing directly with both the wireline and wireless companies, without having to deal with intermediaries from Vodafone.
As for Vodafone, the European carrier is ironically one of the last carriers to roll out LTE service in the UK and continental Europe as of last week, with the goal to offer 97% LTE coverage by 2017, though with the current economic slowdown affecting the UK and the Eurozone, those plans have been continually adjusted further out every quarter. The carrier also has yet to mention how it will manage the funds from the transaction, though many analysts speculate the carrier will issue the profits through additional stock sales or a dividend to shareholders.
For Vodafone to let go of one of its few profit centers at this point in the company’s current position means that it wants to completely reorganize the way it does business in its key markets rather than focus on any ancillary holdings that it had no direct control over. The international markets have also responded favorably to the deal, with the carrier’s stock going up by 5% on the news of the completion of the deal.