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Early this year we did a story on a report from Reuters that Verizon was interest in buying Vodafone’s 45-percent ownership of Verizon Wireless, but that’s all it was, interest. Vodafone’s shareholders turned down Verizon’s $100 Billion offer, insisting the deal was worth much more, in the neighborhood of $120 billion.
Just last week we reported that Verizon was willing to offer $130 Billion this time around, a figure that Analysts thought was a fair price, and this time the shareholders agreed and the Wall Street Journal (WSJ) sent out a tweet today making the official announcement. In fact, earlier, when word got out about a possible deal between the two communications giants, Vodafone stock went up approximately 9.5-percent or $13 billion to Vodafone’s market value.
This deal was no easy task with the size, dollar value, and complexity of the transaction, which will be the third largest corporate deal in history. It was said that Verizon was approaching different banks for $10 billion loans to secure approximately $60 billion of the amount needed to finance the deal. Both companies will benefit with this buyout – Vodafone needed cash to grow their own wireless network and to start more expansion beyond the UK borders. It also gives Verizon Communications the chance to have total control over their entire Verizon Wireless division of their business. The Verizon Wireless division produced 66-percent of Verizon Communication’s total income for 2012, so the more they own, the more income they will receive.
Verizon has been buying up spectrum and smaller companies as its plans to grow and expand their 4G LTE network, although this initial purchase is costing Verizon a bundle of money, by owning 100-percent of their Wireless division, they will begin reaping the entire cash benefits of their operations. The entire repercussions of this deal may not be felt for several years, but it is decision that seems to make good business and Verizon sense.
It will be interesting to see if this deal has any impact on the price Verizon will charge the consumers for their plans and data packages. Anybody out there think Verizon will lower their fees?