Sept 02 - Verizon Communications has agreed to take full control of its U.S. wireless business with a $130 billion deal to buy out Vodafone. Joanna Partridge looks at what impact the third largest deal of all time will have on Vodafone and the UK economy.
A transatlantic deal that's been years in the making. Vodafone will sell its 45% stake in their joint venture Verizon Wireless for $130 billion. The British firm looks set to make $60 billion in cash, $60 billion in Verizon stock and $10 billion from smaller transactions. It's the world's third biggest deal of all time says Chris Hughes from Reuters Breaking Views. SOUNDBITE:Chris Hughes, EMEA Editor, Reuters Breaking Views, saying (English): "That is the number that basically Vittorio Colao has held out for, he's stuck firm and that policy, tactic, whatever you call it has paid off. Verizon has moved his way." PTC The deal brings Vodafone's period of expansion to an end. It's grown rapidly over the past 20 years through a series of aggressive deals, taking its brand into more than 30 countries. The new Vodafone would - initially - be smaller, less profitable, and more reliant on its core European markets. So what to do with its cash windfall? Investors are lining up for a dividend - they're already pleased with the news and Vodafone stock rose 4% to a 12-year high. That's also good news for British pension funds - many of them hold Vodafone stock. But there's some controversy over how the deal will be completed via Vodafone's Luxembourg subsidiaries, meaning the UK Treasury won't benefit. As Vodafone looks to rebuild, it faces a balancing act says Ishaq Siddiqi from ETX Capital Markets. SOUNDBITE: Ishaq Siddiqi, Market Strategist, ETX Capital Markets, saying (English): "In terms of how they're going to make that money work, they're going to have to put it back into the company, they're going to have pay back an enormous amount of debt, and also start really working through some of this acquisition that we've seen this year with the Kabel Deutschland and some of the other smaller companies that they're looking to buy. I think they also need to get back on the acquisition hunt and start buying out new companies in emerging market areas." Analysts have already identified some possible targets on Vodafone's shopping list - such as a Spanish cable operator Ono, Italian broadband specialist Fastweb or Brazil's TIM and GVT. But without a clear strategy, Vodafone could find itself a bid target. U.S. operator AT&T has said it's looking for mobile assets in Europe, while Japan's Softbank has made its global ambitions clear. The Vodafone-Verizon deal could be just the beginning. Analysts are bracing for a flurry of M&A activity in the telecoms sector in Europe and the U.S.