Verizon and Vodafone: What's Going On?
Wireless powerhouse Verizon Communications could take over the world one day (or, at the very least, the world of 4G LTE communication... in America), but when it comes to taking complete control of one of its own brands, Verizon Wireless, the company has lumbered around like an awkward behemoth tripping over its feet. Judging from CEO Lowell McAdam's recent comments around the Consumer Electronics Show, the company is still hungry for more... or is it? What could be going on that keeps Verizon from ultimately taking the plunge?
A brief history of Verizon Wireless
Verizon and British telecom company Vodafone began Verizon Wireless in 2000, and quickly set about sprinkling the country with 3G, 4G, LTE, and other acronyms that few people really understood but everyone wanted for their cell phones. Verizon holds 55% of its wireless brand, and Vodafone owns the rest -- but its CEO suggests that might soon change.
Straight from McAdam's mouth
On Jan. 7, the eve of the 2013 Consumer Electronics Show, McAdams was quoted in Las Vegas as saying that Verizon remained very much interesting in being the sole proprietor of Verizon Wireless. The company "would love to own all of that asset," and an acquisition deal was "feasible" at this point.
It might have been diplomatically worded, but McAdams' recent statement is reportedly his strongest display of rhetoric yet on the topic of a potential buyout of Vodafone's shares in the wireless company. The market seems pretty keen on it, too. Vodafone's stock price rose by 2.6%, and gained 8 points on the London Stock Exchange upon the "feasible" comment. McAdams has changed his tune (slightly) since CES started, however. He clarified that the statement didn't mean a merger was imminent, just that it was possible.
The size of the Vodafone
Verizon Wireless's prolonged joint ownership could be due to the size of the telecom titans holding onto it. In terms of market cap, after the currency conversion, Vodafone's $130 billion beats Verizon's $123.4 billion. As fellow Fool Dan Radovsky detailed, buying out Vodafone's stake in the business would cost Verizon $107 billion. That's 86% of Verizon, and would be way too much debt to have on the books.
However, Verizon's business possesses enough technology to provide wireless and wireline services to a much larger stretch of land than the United Kingdom. The company's physical assets help put it on even footing with Vodafone. If this was a game of tug-of-war, it would be a 12-year draw, and a couple comments from a CEO isn't going to change that.
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The article Verizon and Vodafone: What's Going On? originally appeared on Fool.com.Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool recommends Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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