Sang Tan, File, Associated Press
NEW YORK — Verizon will own its wireless business outright after agreeing to a $130 billion deal to buy the 45 percent stake of Verizon Wireless owned by British cellphone carrier Vodafone.
The buyout, the second-largest acquisition deal on record, would give Vodafone PLC additional cash to pursue its expansion ambitions in Europe. Those ambitions include its push to buy up other cellphone providers and to expand into the lucrative world of mobile services.
The deal announced Monday would also give Verizon Communications Inc., the opportunity to boost its quarterly earnings, as it would no longer have to share a portion of proceeds from the nation's No. 1 wireless carrier with Vodafone.
Verizon expects the deal to boost its earnings per share by 10 percent once the deal closes. It also boosted its dividend.
The deal still has requires approval by regulators and shareholders of both companies. It is expected to close in the first quarter of 2014.
It isn't expected to have much of an effect on Verizon consumers or on the company's operations. Vodafone had little influence on Verizon Wireless' day-to-day operations, and the two companies have kept out of each other's territory.
The Verizon-Vodafone partnership started in 2000, when what was then Bell Atlantic combined its East Coast wireless network with Vodafone's operations on the West Coast. Vodafone had entered the U.S. market a year earlier by outbidding Bell Atlantic to buy AirTouch Communications Inc. of San Francisco.
While Vodafone and Verizon have prospered by building the infrastructure to make cellphone calls, much of the growth in today's market is in providing services that can be used on smartphones over high-speed wireless connections, said Victor Basta, managing director at Magister Advisors.
It's as if the tarmac of the highway has been laid, and now the real action is in the billboards on the side of the road.
"While Vodafone has been pursuing its current strategy, operators have become locked in a galactic fight with online brands such as Google, Facebook, and eBay for mindshare," Basta said. "For these online leaders, winning on the mobile device is not a luxury, it is essential to their own success. The mobile screen is now the main screen in most Western markets."
The windfall from the buyout will give Vodafone, already one of the world's largest cellphone companies, substantial funds to buy other providers — or pay down its debt. Last year, Vodafone spent $1.6 billion in buying up UK telecoms group Cable & Wireless Worldwide and is pushing ahead with a $10.2 billion takeover bid for Germany's biggest cable operator, Kabel Deutschland.
The Kabel deal will help Vodafone expand its foothold in Europe and gain 32.4 million mobile, 5 million broadband and 7.6 million direct TV customers in Germany. It has 19.2 million mobile customers in the UK, and it has been under intense competition.
"The proceeds from the sale, if not passed on in forms of dividends, could improve Vodafone's debt position following the recent Cable & Wireless and Kabel Deutschland deals, and provides Vodafone some leeway to further expand its network presence in Europe," said Ronald Klingebiel, telecommunications specialist at Warwick Business School.
"Such moves provide the capacity and level of integration necessary for competing effectively in a future pan-European market."
The only question is whether Vodafone has waited too long to move on and to pick up companies that do things like provide mobile phone payments, advertising and security, Basta said.
- Dave Ramsey says: Tips for stretching dollars...
- Extended warranties a big sell. Are they...
- Salt Lake City is now 'Ski City USA' in new...
- Vail Resorts buys Park City Mountain Resort...
- 11 jobs that need women ... and men
- 4 financial follies of the millennial generation
- Retail sales are up since last month
- Mega-resort could give boost to Park City,...
- 11 jobs that need women ... and men 15
- Mega-resort could give boost to Park... 5
- Extended warranties a big sell. Are... 4
- Dave Ramsey says: Tips for stretching... 4
- How employers can improve the nation's... 2
- Salt Lake City is now 'Ski City USA' in... 2
- San Diego cabbies cry foul over body... 1
- GM expert says 19 deaths eligible for... 1