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The Risks in a $100 Billion-Plus Verizon Wireless Deal

Moffett, who left Bernstein Research earlier in 2013, held a "underperform" rating for Verizon, which was somewhat vindicated by fourth-quarter earnings laden with a multibillion-dollar pension charge and high iPhone subsidies that drained wireless profit margins.

A large seller of Verizon Wireless such as Vodafone may very well consider doing so opportunistically, as the Verizon's shares sit near-record highs and earnings trajectories in the ever-changing wireless market remain a question mark.

For Vodafone investors, a Verizon Wireless sale, meanwhile, may be the last thing investors want even if deal speculation has proven a catalyst for shares in 2013.

John Hempton of hedge fund Bronte Capital recently wrote in a blog post on Bronte's Web site that if Vodafone just sold Verizon Wireless and not the whole company, its entire board should be fired on the spot.

Bernstein Research and Citigroup analysts note that after a prospective Verizon Wireless stake sale, Vodafone would be left with a deteriorating European wireless business and an even less exciting wireline presence.

David Einhorn of hedge fund Greenlight Capital said in his fourth-quarter investor letter he's betting on Verizon's acquisition of all of Vodafone, given the prospect that the wireline business holds value at bargain basement prices.

In the letter, Einhorn said Greenlight's been adding to its holding of Vodafone given his expectation Verizon might make a play for the whole company.

"It wouldn't surprise us if Verizon decided to buy all of Vodafone to gain full ownership of Verizon Wireless. It could decide to become a global telecom leader or it could spin out parts of VOD that it's not interested in owning," wrote Einhorn.

Analysts see differently, with Citigroup's analysis indicating that the prospect of a full merger is remote at best.

"Verizon's management has made clear that it is not attracted by Vodafone's non-US assets and so while a top company merger remains a possibility we now see it as less likely than an exit by Vodafone from Verizon Wireless, possibly in stages. We also do not believe that it would be beneficial to execute a topco merger first as a route to then separating," Citigroup wrote.

All told, there may be some underappreciated risks for investors to what could be a record-sized deal.

The prospect that Vodafone sells its stake in Verizon Wireless may augur poorly for the unit's continued earnings and margin growth.

For Vodafone investors, the quick payoff from a Verizon Wireless sale, were a deal to be executed, could quickly fade given the company's less attractive non-US assets.

Peter W. Thonis, a spokesperson for Verizon declined to comment for this article. Jonathan Gasthalter, a spokesperson for Greenlight Capital, declined to comment.

-- Written by Antoine Gara in New York.

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