Verizon Again Raises Possibility of $100 Billion Vodafone Buy-Out
Published on: 1st Mar 2013
Note -- this news article is more than a year old.
By: Ian Mansfield
Verizon Communication s Chief Financial Officer Fran Shammo has restated the company s long standing desire to buy out Vodafone s 45 stake in their Verizon Wireless joint venture
Rumours of a buy-out were raised again last month, when the CEO, Lowell McAdam said such a deal was "feasible", although his comments were later downplayed by the company.
"We think we have a way to do this," Mr. Shammo said Monday, referring to a Vodafone deal. He added that "talk is cheap" which has been taken to suggest that there are no active talks taking place at the moment - which fits in with comments from Vodafone in recent months.
The stake could be valued at as much as US$100 billion - or around ten times the recent dividend payments. The Verizon Wireless division also holds low levels of debt, while the dividend payments are helping the two parent companies pay down their own debt piles.
Fitch Ratings recently warned that Vodafone Group's debt ratings are increasingly dependent on dividends from its Verizon Wireless joint venture. The ratings outlook is currently stable.
The formation of Verizon Wireless is the result of a bout of deal making by Vodafone's founding CEO, Chris Gent who won the battle to buy USA based CDMA network, Airtouch Communications in the USA back in January 1999 - beating Bell Atlantic to the prize.
As a result of losing the battle for Airtouch, Bell Atlantic terminated its PrimeCo joint venture with Airtouch, leaving the company with a network that was limited to the Western side of the USA, while Bell retained its Eastern network. Despite this break down in relations, only a few months later, Gent was talking to Bell Atlantic about the creation of a nationwide CDMA network operator, and in late September, the two companies announced the formation of Verizon Wireless.
Vodafone took a 45% stake in the even larger company, while Bell Atlantic, later renamed Verizon Communications took the controlling 55% stake in the mobile network.