Vodafone Sells Stake in Verizon Wireless

by Matt Klassen on January 29, 2014

It looks like the all American wireless provider Verizon Wireless will soon, in fact, be all American, as U.K.-based Vodafone, a 45 percent partner with Verizon Communications in the U.S. wireless venture, has received approval from its investors to sell its share to its joint partner.

At the annual meeting of Vodafone investors on Tuesday, an overwhelming majority of 99.8 percent of all investors voted to approve the deal. Completion of the landmark sale—comprised of $58.9 billion return to investors, or 71% of the net proceeds, with more than two-thirds of that total in stock—will make it the largest single investor return in corporate history, the Wall Street Journal reports.

Simply put, the deal allows Verizon to finally fully control its largest asset,America’s largest wireless provider, while Vodafone investors will now be able to retire to a sunny tropical paradise somewhere. But given that Verizon Wireless is Vodafone’s biggest asset, will this be a case of giving up long term gains for short term profits?

Vodafone, which stands as the world’s second largest mobile operator behind China Mobile, said of the sale of its stake in Verizon Wireless and the return to investors was “significant” for both investors and the company as a whole. In fact, company chairman Gerard Kleisterlee said the sale will serve as the beginning of an “important new chapter” for the company.

But as one might expect, despite the windfall for investors there is growing pressure on Vodafone to further articulate its strategy for growth and investment going forward, given that Verizon Wireless was the company’s largest asset, with concerns mounting that by reducing its stake in the American market the company has traded long term stability and value for short term gains.

To that end, Vodafone committed itself to increasing network development spending both in its core European markets and in burgeoning markets likeIndia,Turkey, andSouth Africa. Further, the company has made several other strategic acquisitions of late in an attempt to strengthen its position in markets where competition is not as fierce as the American market and where profits may be easier to come by.

A strange sidebar in all this is that AT&T is rumoured to be interested in purchasing Vodafone, a takeover that would afford Ma Bell the same chance to lessen its dependence on the ultra-competitive American market and diversify into growth markets in Europe and around the world. AT&T has since denied these rumours, but industry analysts continue to see the wisdom in pursuing such an acquisition

“The deal is far from dead and, in fact, we continue to see the industrial logic as AT&T looks to diversify away from an increasingly competitiveU.S.market into a European market in flux,” said Deutsche Bank analyst David Wright.

In the end, while the deal between Vodafone and Verizon is set to be completed by February 21st, with investors receiving their shares on February 24 and cash on March 4th, one has to wonder if their might be some sellers remorse, that uneasy feeling that comes when you’ve just sold your largest asset.

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

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