Verizon, Vodafone part ways in $130 billion US wireless unit deal
In the second-largest acquisition in history, Verizon Wireless will pay $130 billion to Vodafone to buy out that company's stake in their joint venture, leaving America's largest carrier in full control of its own operations.
The massive agreement will see Verizon paying Vodafone $60.2 billion in stock, 58.9 billion in cash, and the remaining $10 billion in other considerations. It is second in size only to the $172 billion acquisition of Mannesmann AG in 1999. Total fees for the firms advising on the deal and aiding in the logistics could go as high as $500 million, according to The Wall Street Journal.
Observers note that, despite the size of the deal, U.S. Verizon customers will likely see very few effects, if any. Instead, the deal's main impact will be on the bottom lines of both Verizon and Vodafone.
Verizon will get to keep more of its revenue, something it has not been able to do due to the sizable portion that went to Vodafone under the shared ownership agreement. In 2012, Verizon pulled in $10.6 billion in net income but booked only $875 million of that as Verizon profit, as $9.7 billion went to joint venture partners.
Vodafone will come out of the deal with a massive war chest, something that will help the firm cushion the loss of Verizon's hefty profit and also to turn an eye toward other markets. Reportedly, Vodafone is looking to acquire Kabel Deutschland, Germany's largest cable operator, for $10 billion. Over the next few years, though, Vodafone will also be investing roughly $9.3 billion in its own networks and services. It will also return $84 billion to shareholders, including all of the Verizon stock it gets in the deal, as well as $23.9 billion in cash.
Verizon will fund the deal in part by taking on a considerable amount of debt. The carrier could make a bond offering to cover between $20 and $30 billion of the deal. Such an offering would become the largest in history, outstripping even Apple's own historic offering made earlier this year in order to facilitate a $100 billion capital rewards program.
Verizon would look to repay that debt load within just a few years, though, as having such a figure weighing on the bottom line could prove dangerous should the economy take a turn for the worse.
The deal will likely mark an even sharper focus on Verizon's wireless operations going forward, as that segment of the company generated two-thirds of Verizon's $116 billion in revenue for the last year. Apple's iPhone regularly accounts for a significant portion of Verizon's revenue, as the bestselling smartphone made up 51 percent of the carrier's lucrative smartphone activations in the most recent quarter.
The tax price tag associated with the deal will reportedly reach $5 billion. The transaction is not expected to see much in the way of antitrust resistance, given that Verizon already controls the joint venture. It is still subject to approval from both companies' shareholders, the European Union's merger clearance bodies, and the U.S. Federal Communications Commission. According to Verizon, the deal should be completed in the first quarter.
The massive agreement will see Verizon paying Vodafone $60.2 billion in stock, 58.9 billion in cash, and the remaining $10 billion in other considerations. It is second in size only to the $172 billion acquisition of Mannesmann AG in 1999. Total fees for the firms advising on the deal and aiding in the logistics could go as high as $500 million, according to The Wall Street Journal.
Observers note that, despite the size of the deal, U.S. Verizon customers will likely see very few effects, if any. Instead, the deal's main impact will be on the bottom lines of both Verizon and Vodafone.
Verizon will get to keep more of its revenue, something it has not been able to do due to the sizable portion that went to Vodafone under the shared ownership agreement. In 2012, Verizon pulled in $10.6 billion in net income but booked only $875 million of that as Verizon profit, as $9.7 billion went to joint venture partners.
Vodafone will come out of the deal with a massive war chest, something that will help the firm cushion the loss of Verizon's hefty profit and also to turn an eye toward other markets. Reportedly, Vodafone is looking to acquire Kabel Deutschland, Germany's largest cable operator, for $10 billion. Over the next few years, though, Vodafone will also be investing roughly $9.3 billion in its own networks and services. It will also return $84 billion to shareholders, including all of the Verizon stock it gets in the deal, as well as $23.9 billion in cash.
Verizon will fund the deal in part by taking on a considerable amount of debt. The carrier could make a bond offering to cover between $20 and $30 billion of the deal. Such an offering would become the largest in history, outstripping even Apple's own historic offering made earlier this year in order to facilitate a $100 billion capital rewards program.
Verizon would look to repay that debt load within just a few years, though, as having such a figure weighing on the bottom line could prove dangerous should the economy take a turn for the worse.
The deal will likely mark an even sharper focus on Verizon's wireless operations going forward, as that segment of the company generated two-thirds of Verizon's $116 billion in revenue for the last year. Apple's iPhone regularly accounts for a significant portion of Verizon's revenue, as the bestselling smartphone made up 51 percent of the carrier's lucrative smartphone activations in the most recent quarter.
The tax price tag associated with the deal will reportedly reach $5 billion. The transaction is not expected to see much in the way of antitrust resistance, given that Verizon already controls the joint venture. It is still subject to approval from both companies' shareholders, the European Union's merger clearance bodies, and the U.S. Federal Communications Commission. According to Verizon, the deal should be completed in the first quarter.
Comments
With Vodafone still owning $60B of Verizon after this deal is complete, this is far from 'part[ing] ways' yet.
Where does verizon hides 60 billion in cash? you americans are so screwed...
Where do you get that from? You think Apple is the only company with cash on hand?
Quote:
Originally Posted by dasanman69
Where do you get that from? You think Apple is the only company with cash on hand?
Verizon has $60 billion?
LOL! Not even close. They are borrowing that cash.
Originally Posted by pedromartins
you americans are so screwed...
Having what to do with anything?
Most of it, but they do make a nice profit every quarter.
Quote:
Originally Posted by dasanman69
Most of it, but they do make a nice profit every quarter.
You do realize that most of that profit was going to Vodafone.
Some yes not most. They only own 45% on the wireless side, any landline/FiOS profit is all Verizon's.
Quote:
Originally Posted by dasanman69
Some yes not most. They only own 45% on the wireless side, any landline/FiOS profit is all Verizon's.
... and now after your long circuitous route, trying hard to veer away from your original statement...
Unlike Apple, which has loads of cash, Verizon had to borrow most of that money because they don't have loads of cash.
No I was correcting your assumption that Vodafone took most of the profits so Verizon couldn't possibly have any cash. They don't have tons of cash on hand like Apple, but then who except Apple has? Which btw many see it as a negative rather than a plus.
Quote:
Originally Posted by dasanman69
They don't have tons of cash on hand like Apple, but then who except Apple has?
Which is exactly opposite to what you originally said. [ Which was my point all along. ]
"Where do you get that from? You think Apple is the only company with cash on hand?"
Thank you.
Quote:
Originally Posted by Tallest Skil
Originally Posted by pedromartins
you americans are so screwed...
Having what to do with anything?
You guys are robbed each quarter.
Always complaining about your monthly fee, eating it, when companies like Verizon can afford 130 billion deals. In the meanwhile, your country is behind 4g adoption, when the nordic countries and south korea are already past 4g. There's 0 innovation by the carriers.
Then you are robbed by Verizon, ATT, etc. Poor fellas. All of them bleeding money without knowing what to do with it. coverage still sucks in most places.
The difference being the word "tons", they have money just not in the quantities as Apple.
Verizon and AT&T have led the LTE charge and the last I checked they were both profitable. I don't get how you can compare small countries to the USA. Very different set of logistics.
Originally Posted by pedromartins
Always complaining about your monthly fee, eating it, when companies like Verizon can afford 130 billion deals. In the meanwhile, your country is behind 4g adoption, when the nordic countries and south korea are already past 4g. There's 0 innovation by the carriers.
Okay, I'll agree with that 100%.