Update: Verizon Wireless Files for $5 Billion IPO

Updated from 12:45 p.m. EDT

Verizon Wireless, owned by Verizon Communications(VZ Quote) and Vodaphone Group(VOD Quote), hopes to raise $5 billion in an initial public offering of stock, according to a statement filed with regulators Thursday.

Verizon Wireless has yet to list a price range for the stock or say how many shares it intends to offer, the document filed with the Securities and Exchange Commission showed. The nearly 400-page statement, however, did note that Goldman Sachs and Merrill Lynch will underwrite the offering.

Verizon Wireless, based in Bedminster, N.J., said in the filing that proceeds from the offering would be used to build its network and acquire additional spectrum, wireless licenses and other wireless assets. The initial public offering is planned for this fall, said Nancy Stark, a spokeswoman for the company.

A competitor of AT&T Wireless(AWE Quote), Sprint PCS(PCS Quote) and Nextel Communications(NXTL Quote), Verizon Wireless has the largest customer base of any wireless provider, with 25.4 million subscribers. It also boasts that it has digital coverage in nearly every major American city.

In April, AT&T raised a staggering $10.6 billion when it sold 360 million shares of AT&T Wireless stock to the public. But unlike AT&T, Verizon Communications, formed after the merger of Bell Atlantic and GTE, chose a partial spin-off, rather than issuing a tracking stock. All assets of a business traded as a tracking stock are held by the parent company.

Verizon Wireless is plunging into an uncertain environment. While AT&T Wireless shares closed above 31 on the first day of trading, up from the IPO price of 29 1/2, the stock has dropped more than 20% since then, falling to 24 3/4 on Thursday. Other competitors, like Sprint, have posted lackluster stock performances as well.

But as prices fall, the appetite for wireless technology is only likely to grow, possibly turning industry stocks into good investment prospects, said Ken Hyers, an analyst with Cahners In-Stat Group, a technology market research company. Hyers estimates that the number of wireless subscribers in the U.S. is expected to blossom to 100 million by the end of this year, from a current 93 million, and climb to 123 million by the end of next year.

Challenges on the Horizon

Still, challenges remain for Verizon Wireless, which despite its dominant size lags behind its rivals in some key areas, especially in data services, Hyers argued. For instance, Sprint introduced wireless Internet offerings on Wednesday that are aimed at giving corporate clients faster Web connections from a mobile telephone and wireless access to private email or corporate accounts.

News of the eventual stock offering, coupled with a separate news event, drove shares of Verizon Communications up 1 5/16, or 3%, to close at 41 13/16 on Thursday. Still, the company's stock is well off its 52-week high of 69 1/2, reached last October.

One of the factors that had been putting pressure on Verizon's stock was an 18-day strike against the company by the Communications Workers of America. But Verizon Communications reached a tentative agreement with union negotiators late Wednesday on a new three-year contract for 35,000 workers in six Mid-Atlantic states and Washington, D.C. Roughly 50,000 other workers in New York and New England returned to work on Monday after settling their contracts.

"With this last agreement, all our employees will be back at work, and we can now focus all our resources on serving our customers," Lawrence Babbio Jr, vice chairman and president of Verizon Communications, said in a statement.

The pact gives workers 12.5% higher wages and a 14.7% increase in pension benefits over three years, in addition to stock options. It also sets a cap of 7.5 hours a week of overtime for employees working in Verizon customer service centers.