Verizon Monday revealed plans to buy out Vodafone's stake in its U.S. wireless business, giving the telecommunications giant full ownership over Verizon Wireless, the U.S.' largest mobile operator.
Through the deal, Verizon will plunk down $130 billion in both cash and stock in exchange for Vodafone's 45 percent stake in the Verizon Wireless business. The deal is expected to close in the first quarter of 2014.
According to Verizon, becoming the sole owner of its wireless business will help fuel its attack on emerging markets such as big data and machine-to-machine, while cashing in on increasing demand for 4G LTE and broadband services.
"This transaction will enhance value across platforms and allow Verizon to operate more efficiently, so we can continue to focus on producing more seamless and integrated products and solutions for our customers," Lowell McAdam, Verizon chairman and CEO, said in a statement. "We believe full ownership will provide increased opportunities in the enterprise and consumer wireline markets."
Patrick Moorhead, president and principal analyst at industry research firm Moor Insights & Strategy, also expects Verizon to emerge from the deal with a greater competitive edge in the U.S. service provider market.
"This deal was all about control and cash. Verizon wanted complete control over their own destiny without having to seek approval from Vodafone," Moorhead said in an email to CRN. "Verizon will be much more nimble after this gets approved."
Verizon and Vodafone were in talks for years before settling on the deal announced this week, according to a report from The Wall Street Journal, citing people familiar with the matter. The companies reportedly struggled to agree on a price for Vodafone's stake, with Verizon earlier this year offering $100 billion but Vodafone wanting something closer to the $130 billion range.
Vodafone said it plans to use Verizon's $130 billion payout to provide "substantial returns" to shareholders. The British company also plans to put the funds toward Project Spring, its investment program for 4G LTE, fiber, broadband and other mobile technologies.
"Our sustained investment in Verizon Wireless has created a great deal of value for shareholders from a market leader with great momentum," said Vodafone Group Chairman Gerard Kleisterlee in a statement. "Verizon's offer now provides us with an opportunity to realize this value at an attractive price."
Verizon Wireless is the dominant wireless carrier in the U.S., beating out rivals including AT&T and Sprint. According to industry research firm comScore, Verizon Wireless in 2012 accounted for 31.2 percent of the total U.S. wireless service provider market, followed by AT&T at 27.3 percent, Sprint at 15.7 percent and T-Mobile at 11.6 percent.
PUBLISHED SEPT. 3, 2013