Following weeks of speculation, Verizon Communications and Vodafone pulled the trigger Monday on a deal in which Vodafone will sell its 45% stake in U.S. mobile giant Verizon Wireless to its longtime partner in a deal valued at $130 billion.
Under the deal, Verizon Communications come away with a 100% stake for $58.9 billion in cash, $60.2 billion in Verizon stock to be distributed to Vodafone shareholders, and another $11 billion from other transactions tied to the main deal, including the issuance of $5 billion in notes payable to Vodafone, Verizon’s shedding its 23.1% minority stake in Vodafone Omnitel N.V. to Vodafone for $3.5 billion, and $2.5 billion of the deal's value to be a “combination of other consideration.”
To fund the cash portion, Verizon has secured a $61 billion bridge credit agreement with J.P. Morgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A. and Barclays.
They said the boards of both companies have approved the deal, and expect to close it in the first quarter of 2014.
Founded in 2000 as a joint venture of Verizon Communications and Vodafone, Verizon Wireless posted second quarter revenues of $20 billion, up 7.5% year-over-year, and ended the period with 100.1 million “retail connections” and more than 1,900 retail locations. Verizon Wireless’ U.S. 4G Long Term Evolution (LTE) service has been deployed to 500 markets covering 301 million people.
Verizon chairman and CEO Lowell McAdam said the deal with Vodafone will allow Verizon to boost operational efficiency and integrate its products, including its FiOS-branded video and broadband products, more seamlessly.
“We believe full ownership will provide increased opportunities in the enterprise and consumer wireline markets,” McAdam said, in a statement. “The timing was right to execute a transaction that benefits both companies and their shareholders. Today's announcement is a major milestone for Verizon, and we look forward to having full ownership of the industry leader in network performance, profitability and cash flow."
If regulators allow the deal, Verizon Communications would take full control of one of U.S. cable’s key wireless partners. Verizon Wireless and four cable operators – Comcast, Cox Communications, Bright House Networks and Time Warner Cable – are bundling mobile and cable services; those cable operators also have the option to resell Verizon Wireless services under their own brand at any time. Separately, the cable operators involved in that deal sold their Advanced Wireless Services spectrum to Verizon Wireless for a combined $4 billion.
Verizon has scheduled a call for Tuesday, Sept. 3 at 8 a.m. ET to discuss the deal in more detail.
Word that the deal was in the works has already led to speculation on how it might ripple into other parts of the telecom industry. Liberty Global shares rose last Thursday after Macquarie Equities analyst Amy Yong suggested that a Vodafone sale of its stake in Verizon Wireless could lead the company to target the international cable operator led by John Malone.
“Given the need for scale and scarcity of European cable assets, there are likely significant synergies in a Vodafone-Liberty Global combination,” Yong wrote.