In one of the largest telecommunications moves in history, Verizon is buying itself a Wireless provider for $130 billion (with a b). That Wireless Company is… Verizon? Yep. You heard that right. Despite the name, Verizon isn’t a direct subsidiary of Verizon Communications. It’s a joint venture. Verizon Wireless, or Cellco (as it’s legally known), is owned 55% by Verizon and 45% by British cellular giant Vodafone.
The deal for $130 billion includes $58.9 in cash to Vodafone. To fund this part, Verizon is taking out $61 billion in loans from JP Morgan Chase, Barclays, Morgan Stanley, and Bank of America. Another $60.2 billion in Verizon common stock will be handed out to Vodafone shareholders. The remaining money will come from Notes, Verizon selling its stake in a Vodafone Subsidiary, and various other considerations.
Verizon Wireless has its origins in a joint venture between Bell Atlantic Mobile and Vodafone AirTouch Wireless. Bell Atlantic then merged with GTE to form Verizon Communications and rolled its GTE Wireless arm into Verizon Wireless. That merger also gave Verizon Communications a larger share of the joint venture, and for all intents and purposes, control of the company.
That partnership has been an uneasy one for many years with both partners wanting full control of the company. However, neither has been willing to be the party to back down. That changed this year when Verizon became resolved to settle this once and for all. The companies discussed both a buyout and a merger, but in the end, Verizon gave an offer Vodafone could not refuse. The company also needed capital for European operations.
What should this mean for you? Honestly, not much of anything… unless they jack up the prices to help pay for the debt. Vodafone has had very little say on the day to day operations of Verizon Wireless for years. It’s effectively been operating like a wholly owned subsidiary. Take note of this day. It’ll be a while before you before you again see so much money change hands with so little actual change involved. In fact, outside us geeks and the financial crowd, I wonder how many will know this deal ever took place.
If you have any comments or concerns, we’d like to hear what you all think. Post a comment below or interface with John, Cali, or even myself on our social media pages.