NEW YORK -(Dow Jones)- Speculation has again heated up over a deal between Verizon Communications and Vodafone Group over full control of their lucrative joint venture, but some aren't convinced a deal is imminent.
The latest report has New York-based Verizon poised to pay the UK's Vodafone $48 billion for Verizon Wireless, the No. 2 wireless player by subscriber base. The company would also assume another $8 billion in debt, according to U.K.-based The Observer, citing unnamed sources.
Both Verizon and Vodafone declined to comment on the story.
American Technology analyst Albert Lin believes a deal will eventually be struck, but not as soon as the reports suggest. "I'm not expecting a quick deal - it's not the right time for Vodafone to do it," he said.
Stories of Verizon buying out Vodafone's 45% stake in Verizon Wireless have been popped up in the press for the past three months, with financial terms darting up and down. Last week, the U.K.'s Daily Telegraph reported that Vodafone had rebuffed a $38 billion bid for the stake. Vodafone shareholders, who have been the main proponent, railed against the purported offer, but have been more open to the latest one. Prior reports included $40 billion and $50 billion bids.
Tony Dalwood, head of public equities at SVG Capital, said the $48 billion price tag falls in the middle of the expected price range. SVG owns less than 1% of shares in Vodafone.
Vodafone maintains that it is happy with Verizon Wireless, which leads its U.S. wireless peers in important financial metrics, such as the rate of turnover, and boasts a loyal customer base.
The U.K. telecom giant will likely test out the acceptance of its Vodafone Live! mobile television service before considering losing the cash-generation of Verizon Wireless. "They will have to let (Live) run for the next six months before casting off Verizon Wireless," Lin said.
Verizon Chief Executive Ivan Seidenberg, meanwhile, reiterated his desire for full control of the business during the company's quarterly earnings conference call on May 2. "The decision is more in their court at this point," he said.
Verizon has made some moves to free up some capital. Last month, the company reached agreements to sell its Latin American and Caribbean assets to companies owned by Mexican billionaire Carlos Slim Helu on a deal valued at $3.7 billion. The company is also fielding offers for two big packages of traditional phone lines worth up to $8 billion, according to The Wall Street Journal. It is also exploring the sale of its U.S. directories business, which could fetch $17 billion. The company, however, is undergoing a costly upgrade to its network.
With AT&T taking full control of Cingular Wireless through its planned acquisition of BellSouth, analysts believe it is natural for Verizon to do the same with Verizon Wireless.
"Strategically, it's all good for Verizon," Lin said. The analyst has no conflicts of interest with either company.
The phone company has long sought Vodafone's stake in the fast-growing wireless arm. Indeed, a deal was nearly struck when Vodafone agreed to shed its stake to free itself up to acquire AT&T Wireless. But the business was eventually bought by Cingular Wireless in October 2004.
Having full control of Verizon Wireless would yield some advantages, particularly as the industry moves toward integrating wireless and fixed line communications. The wireless arm currently runs as an independent operation, and some believe it may benefit Verizon to exert tighter control because the company could make strategic moves such as acquisitions or technology upgrades without consulting Vodafone.
As subscriber growth slows in the wireless industry, carriers have put a priority on defending their customer bases. The industry has been pushing data services such as text messaging and video downloads as a way of augmenting lower voice revenue, so having that base to sell the additional services is critical.
-By Roger Cheng; Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com
(Kay Larsen contributed to this story.)
(END) Dow Jones Newswires "
Posted to the site on 15th May 2006
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