Vodafone: Our stake in Verizon Wireless is worth $130 billion

Vodafone: Our stake in Verizon Wireless is worth $130 billion
This may shock some of you, but the executives at Vodafone feel the valuation of Verizon’s potential buyout of the former’s 45% stake in Verizon Wireless is a tad low, roughly $30 billion low based on an assumed tax bill in excess of $10 billion.

No formal offer has yet been made, but the overtures made by Verizon CEO Lowell McAdam and CFO Francis Shammo over the past few months indicate the company could do the deal, and enable Vodafone to escape a hefty tax burden in the process.

By making these feelings known in the public arena, Verizon is sending a message to Vodafone shareholders in an effort to force the hand of Vodafone’s Board of Directors and negotiate a deal.

Verizon last looked seriously at Vodafone’s stake a couple years ago, but then too there were disagreements over the value of that portion of Verizon Wireless. Even with the dividends now paid to Vodafone for its share of Verizon Wireless, the bulk of Verizon’s revenues and nearly all the profits come from the wireless unit. Verizon might be able to buy Vodafone’s stake in stages, but on the face of it, a number of analysts are predicting that Vodafone will not let go of its stake for $100 billion, again over concerns that the tax burden is not as easy to avoid as Verizon suggests.

The challenge for Verizon is that Verizon Wireless is Vodafone’s strongest performer. Despite still turning a profit, European operations are saturated and revenues in some areas are dropping by double-digits. The other challenge for Verizon is the fact that it is the only buyer for this asset, that adds leverage to Vodafone’s position.

Finally, the longer this takes, the harder it is going to get for Verizon. Verizon Wireless is outperforming its competitors in every way which makes the company more valuable. That could fuel a desire on the part of Vodafone
to keep its share.

source: The Wall Street Journal



1. james1

Posts: 97; Member since: Mar 16, 2013

"Verizon Wireless is outperforming its competitors in every way which makes the company more valuable". No they are not. Maybe they have the best coverage but they don't have the best values and prices for services and they also don't have some phones that other carriers got (HTC One, Nexus 4, Nokia Lumia 920), lastly, they don't have unlimited data nor talk and serf feature. Don't even get me started on software updates for Android...

3. mozes316

Posts: 144; Member since: Sep 30, 2011

Verizon Wireless has had talk & surf since their introduction of LTE, but you're pretty much right about everything else.

9. TheMan

Posts: 494; Member since: Sep 21, 2012

I second this comment, but add that from a financial performance view, many of those things raised by James1 matter not one bit.

19. sprockkets

Posts: 1612; Member since: Jan 16, 2012

Surprise, they don't. Only when talk over LTE goes live will verizon's iphone be able to talk and surf at the same time. And that has been pushed from this year to next.

21. 9thWonderful

Posts: 232; Member since: Jan 24, 2013

That's the iPhone...most of the LTE android models have talk & surf & have had it for quite some time now.

23. SirTrollAlot

Posts: 7; Member since: Apr 24, 2013

I've had a 4G Android, on Verizon, for 15 months and I've always been able to simultaneously talk & surf.

24. mozes316

Posts: 144; Member since: Sep 30, 2011

Idk about your iPhone but my Note II, Thunderbolt and Droid Charge could do it.

4. Maxwell.R

Posts: 218; Member since: Sep 20, 2012

Verizon (along with AT&T) earn 100% of the profits in the US market. Their churn is way lower than any of the other major carriers, still adding net-adds in terms of millions of customers per year, and it scores at the top of consumer satisfaction surveys repeatedly. Your points are valid (and we agree with the Android updates and smartphone selection to a point), but they do not play into the value proposition that the money guys on Wall Street see. Verizon is outperforming everyone out there right now.

5. KingKurogiii

Posts: 5713; Member since: Oct 23, 2011

they're the largest carrier in the most consumer driven country in the world and that's because they offer the best service, you won't be getting cheap prices from a company in a position like that but as they are still the largest carrier in the US the premium must be worth it. they have the best coverage including that of 4G LTE coverage by a long, long shot. they may not be getting the One just yet like the other carriers are just now but they have the Droid DNA, a handset that doesn't fall too short of the One and they got it long ago during the most crucial time for sales and is still a respectable offering in their line up plus they have the most successful carrier specific phone in the US which is the Droid Razr and it's line continues with respectable successors in the forms of the Droid Razr M and the Droid Razr MAXX HD both well received phones in the market and add in the equal amount of support as the other carriers received from Samsung as of late and the HTC 8X, the other best WP8 launch device then i don't see how the absence of the models you mentioned is as relevant as you seem to think it is. most Verizon phones now have SVDO. whatever complaints you have about Verizon you cannot deny their dominance.

17. lsutigers

Posts: 832; Member since: Mar 08, 2009

Bigger does not always equal better. I'm a Verizon customer, just saying.

20. KingKurogiii

Posts: 5713; Member since: Oct 23, 2011

in this case it does.

7. corporateJP

Posts: 2458; Member since: Nov 28, 2009

From a disgruntled customer perspective, James1, you are on point. But, like Maxwell said, Wall Street looks at profits, and nobody is bigger than Verizon Wireless in this field.

11. evarod48

Posts: 154; Member since: Oct 30, 2012

they will likely have all of those phones (L928, Nexus 4 LTE, some HTC One varient) but well after their competitors get them, which is extremely frustrating.

15. jcarrigan unregistered

yeah i hear ya bro. thats why Im slowly ending the lines i have with verizon and going to either t-mobile or att.

14. jcarrigan unregistered

Verizon is outperforming all the other competitors in everyway because all that matters is how much money the company is making and how much they have grown. listen...THEY DO NOT CARE ABOUT THE PRICES, THE PLANS, THE PHONES THEY OFFER. What Maxwell is indeed referring too has nothing to do with that sutff because it simply doesnt matter to Verizon. So yes Verizon is top dog in this country and thats why Vodafone doesnt want to give it up.

22. SirTrollAlot

Posts: 7; Member since: Apr 24, 2013

LTE = Voice + Data. It's fast enough to handle both transmissions. Go be mad elsewhere, please, but first learn hard facts before you go on a rant.

2. KingKurogiii

Posts: 5713; Member since: Oct 23, 2011

and the moral of the story is there's a good reason Verizon wants those shares. Vodafone is quite aware of that reason themselves and they have them....

6. Whateverman

Posts: 3295; Member since: May 17, 2009

Verizon getting price gouged...?!? Oh, I love!! Se how it feels Verizon? Lol

8. corporateJP

Posts: 2458; Member since: Nov 28, 2009

^LOL. True story, bro.

10. TheMan

Posts: 494; Member since: Sep 21, 2012

No, more like: "Let the negotiations begin."

16. Whateverman

Posts: 3295; Member since: May 17, 2009

Lol, that may be true. Either way, VZW has been bending us over for years and it's about time someone give it back to em'. Even if they only get an extra couple hundred million out of it, it will be fun to watch!

12. MorePhonesThanNeeded

Posts: 645; Member since: Oct 23, 2011

Lots of comments and the first one misses the point by a country mile. It's all about profitability and VZW is outperform the competition therefore making the company a valuable entity and hard for VZW to buyout the 45% stake that Vodafone controls. Sheesh, people complaining about no unlimited and slow android updates and best price for value...things that the amount of customers they have proves that all that means little in the grand scheme of things does it not? Largest carrier, best coverage, a network that is second to none and marketing profitability that still outstrips the competition handily. This stuff looks good to shareholders, losing money doesn't. I'm on VZW and this may be my last VZW phone but I can't complain they do have excellent service and their techs do know how to trouble shoot quickly.

13. mcshank

Posts: 47; Member since: Apr 24, 2013

People who complain about the prices of service through Verizon dont know how much it costs to maintain the towers and servers and switchboards and everything else out in the fields to make sure they have the best coverage. Look at sprint, Their service SUCKS! but they are also the lowest priced *contract* company in the US and are just now getting LTE in cities while Verizon has had it for years now and are just filling in the smaller regions with it now. Sure I dont like paying 150$+ a month for 1 smartphone and 1 feature phone with only 2gigs data but honestly, I enjoy the aspect of always having service. If you have a high bill, call in about employee discounts. If you dont like high bills, Switch to feature phones or drop data usage and use Wifi more often. Verizon is and will be the number 1 in terms of performance out of any carrier in the US for years to come especially when you think about them launching Volte next year which will reduce costs for them + increase service more for voice.

18. NewWireless

Posts: 27; Member since: Jun 08, 2012

The cool thing about this country is that you have a choice. Those that stay with Verizon and don't like the service, you should leave. Contract or no contract, just bounce and find a company that suits your needs. I used to have Verizon, and yes Big Red has the best network, hands down, and you get what you pay for. My current provider, drops calls all the time and text messages don't go through, etc. But its only $55/month for unlimited everything and I can live with some drop calls and missed text for that. Those that say VZW should be bent over and see how it feels, really shouldn't want Verizon to pay more for that 45% share than they have to. Cause if VZW has to pay more, then customer will have to pay higher prices. People have choices out there, they may not be the best of choices, but you have choices. I chose to get the Nokia Lumia 920, Unlocked version, and went to a cheaper provider, and I love the phone, and the network is soso, but I can live with my $55/month bill. Vodaphone, loves the profits that Verizon generates and who wouldn't? $130Billion is pushing it, but in the last 12 years since I have been a customer with Verizon Wireless, they have made almost $20+ billion dollars in profit every year. Again, that is just Verizon Wireless by itself, that doesn't include Verizon Communication. I think the $130 is too high, but its a drop in the bucket, from what Verizon will make in the next 12 years. Voda, has made a handsome return for there initial investment into Verizon Wireless. I am from the Airtouch days.....and the GTE Days, that is how far back I go when it comes to the industry.

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