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Verizon Finally Seals Deal To Buy Out Vodafone Stake

Verizon Finally Seals Deal To Buy Out Vodafone Stake
By Jennifer LeClaire

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"There's both a good part and a bad part" to Verizon's agreement to buy out Vodafone's stake, said analyst Jeff Kagan. "It's fortunate that Verizon got this deal done now because Verizon Wireless is only increasing in value and it will only cost more as time goes by. It's unfortunate that Verizon had to wait this long and pay this much."
 


After years of on-again, off-again talk, Verizon Communications and Vodafone have finally inked a deal over the wireless assets they jointly own. Verizon will acquire Vodafone's 45 percent stake in Verizon Wireless for $130 billion in a cash-stock deal. The transaction is expected to close in the first quarter of 2014.

When the ink dries, Verizon will own 100 percent of the largest wireless carrier in the United States. The company said the wireless division will be better equipped to leverage changing competitive dynamics in the market and capitalize on the evolution of consumer demand for wireless, video and broadband services.

"The capabilities to wirelessly stream video and broadband in 4G LTE complement our other assets in fiber, global IP and cloud," said Lowell McAdam, Verizon chairman and CEO. "These assets position us for the rapidly increasing customer demand for video, machine-to-machine and Big Data. We are confident of further growth in wireless, and our business in its entirety."

Timing Was Right

Continuing to make his case for the megadeal, McAdam said the acquisition will enhance value across platforms and allow Verizon to operate more efficiently, so the company can continue to focus on "producing more seamless and integrated products and solutions for our customers."

McAdam also believes full ownership will drive new opportunities in the enterprise and consumer wireline markets. His conclusion: "The timing was right to execute a transaction that benefits both companies and their shareholders."

Reacting to the deal, Jeff Kagan, an independent wireless analyst, told us Verizon has been trying to acquire the Vodafone portion of Verizon Wireless for many years and it's great news for the U.S. carrier on several fronts.

"One of which is the world is rapidly moving toward wireless and there are still enormous opportunities for growth going forward," Kagan said. "That means even though they paid quite a bit to get this deal done, it could still be a very good deal for them going forward."

Worth the Wait?

Verizon Wireless already owns 100.1 million retail connections and operates the country's largest 4G LTE network. As of July 2013, the network was available to 301 million people in 500 markets across the U.S. As of the end of the second quarter of 2013, the company had 73,400 employees and operated more than 1,900 retail locations in the U.S.

"There's both a good part and a bad part to this deal. It's fortunate that Verizon got this deal done now because Verizon Wireless is only increasing in value and it will only cost more as time goes by," Kagan said. "It's unfortunate that Verizon had to wait this long and pay this much. If they had just done this deal years ago it would have cost them much less."

As Kagan sees it, waiting may have cost Verizon a pretty penny, but at least the company will now finally own all of Verizon Wireless. That, he said, means they now control the direction of the company, for better or worse.
 

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