How do You Solve a Problem like Verizon Wireless?

by Matt Klassen on March 6, 2013

The year was 1999 when Bell Atlantic Corp. –the American telephone company that would later become better known as Verizon Communications—and British counterpart Vodafone agreed to merge their mobile units, creating the subsidiary company Verizon Wireless that we all know and love today. Since that day, however, the mobile market has grown exponentially, leading both parties to want a greater stake in their joint venture, with neither willing to budge.

In fact, for several years U.S. based Verizon has sought to buyout Vodafone’s stake in the partnership, increasingly unwilling to share the revenues from the company’s most successful division, while Vodafone, not completely unwilling to listen to offers, has repeatedly pressed for a better return from this valuable mobile asset.

But it looks like both sides are actively working to solve their common Verizon Wireless problem, with Bloomberg reporting that the two companies are in talks to ‘resolve the relationship,’ exploring a wide range of options that extend from ending the joint wireless venture all the way to a full merger of the two telecom companies.

While no formal discussions are currently underway, according to Bloomberg’s unnamed sources the two companies met as recently as December to discuss the options available to them, including Verizon buying out Vodafone’s stake in the company and the possibility of a total merger of the two telecom giants.

As Bloomberg reports, the discussions regarding the latter merger options stalled over disagreements regarding leadership and headquarter locations, not to mention the fact that such a merger would be one the biggest in history, making it no easy feat to pass by regulators on either side of the pond. For those reasons, it is speculated that a buyout would be the best option for all parties involved, as Verizon seeks tighter control over its mobile division while Vodafone, for its part, has been actively selling off its partial stakes in a variety of telecom ventures around the world.

As a brief aside, over the past several years Vodafone CEO Vittorio Colao has enacted a plan to sell all its partial stakes in operators in Europe and Asia, most notably unloading its holdings in SFR, the second largest French mobile operator, back in 2011.

Should Verizon pursue the buyout option, analysts have pegged the valuation of Verizon Wireless at around $115 billion, a number that Vodafone seems to have long taken issue with, wanting more return for an asset that continues to grow.

Again, it should be noted that while unofficial talks have taken place over the future of the Verizon/Vodafone joint venture, such casual meetings have taken place sporadically over the last two years, with both sides consistently getting stuck on issues of valuation, leadership, and locale. That said, insider sources expect talks to resume later this year, perhaps culminating in formal negotiations that would see the end of the most profitable wireless partnership of all time.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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