Verizon seals $130 billion deal [Virginian - Pilot]
(Virginian - Pilot Via Acquire Media NewsEdge) By Michael J. De La Merced and Mark Scott
The New York Times
Verizon Communications agreed Monday to buy out Vodafone's 45 percent stake in its giant wireless unit in a $130 billion transaction, realigning the global telecommunications landscape in one of the biggest deals on record.
The deal represents the end of a 14-year joint venture between the British and American companies and is the culmination of years of speculation that Vodafone would sell its stake in Verizon Wireless, the largest cellphone operator in the United States.
As part of the deal, Vodafone Group shareholders will receive 71 percent, or $84 billion, of the profits in both cash and shares. That includes $60 billion of Verizon shares, which many Vodafone investors will likely look to offload, and a further $24 billion in cash.
The large payout to investors was larger than many analysts had been expecting, and comes as many market observers still expect the British telecom company to acquire other assets in Europe and emerging markets to keep pace with rival telecom companies.
The deal comes at a critical time for the industry. The American wireless business has seen a gradual slowdown in subscriber growth in the past few years, because many people who want a cellphone already have one.
In the second quarter, the growth rate of the American wireless market was 2.2 percent - the first time it has fallen below 2.5 percent, said Craig Moffett, an analyst for Moffett Research.
The carriers, including Verizon, have said newer devices like tablets would help drive growth. But Moffett said about 90 percent of the tablets that people are buying connect only to Wi-Fi networks, not cellular connections.
For wireless carriers, other markets for potential growth include cars or home security systems. But it is unclear whether those revenue streams will drive much growth for the industry.
"All those futuristic visions are almost certainly real," Moffett said. "The question is whether they are big enough to really move the needle for an industry the size of the U.S. wireless market."
The deal does give Vodafone a huge war chest and could have a big effect on the European telecommunications industry. On Monday, the British company said it planned to spend about $10 billion over three years in high-speed cellphone and broadband services across its markets in Europe and the developing world.
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