This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TheDeal: Steep Price to Verizon Wireless Buyout

NEW YORK ( TheStreet) -- As the excitement over the Sprint Nextel (S) and Clearwire (CLWR) takeover battles abates, attention in the telecommunications industry returns to the timeless wireless industry conundrum of Verizon Wireless' ownership.

Verizon Communications (VZ - Get Report) and Vodafone Group (VOD) control a joint venture that is worth at least $250 billion and generates about $20 billion a year in cash that the parents can tap. For years, Verizon has been a willing buyer and Vodafone has been open to a sale of its 45% position.

A buyout would involve an immense payout and a weighty tax bill, and could influence the telecoms' prized credit ratings.

Moody's Investors Service analyst Dennis Saputo said that Verizon could likely maintain its A3 credit rating if it paid Vodafone $100 billion for its minority stake. That sum is unlikely to tempt Vodafone, however.

If the New York carrier upped the price to $130 billion, however, the deal would likely cost Verizon its A3 rating, Saputo said. Verizon's rating could fall as low as Baa1, which is still three levels above speculative grade.

Saputo, who is skeptical that a deal will happen anytime soon, chose the two valuations because of price ranges discussed in recent reports.

Verizon CFO Fran Shammo told Wells Fargo Securities LLC analysts in June that the company is interested in picking up Vodafone's 45% stake, though the window may be closing because of the direction of interest rates and the debt market.

Saputo does not think basis points are the problem. "Yes, certainly, if rates keep moving up and/or Verizon's stock price heads down, it could make a potential transaction even less likely than we think it is today," he said.

"I don't think that's the major issue," Saputo added. "The major problem, from my perspective, is not the capital markets, is not the debt markets, is not the equity markets — it's the inability of the two parties to agree on a multiple and valuation."

The joint venture aside, Verizon and Vodafone are busy with other strategic moves. Verizon is reportedly looking at Canadian wireless operator Wind Mobile, which could set the company back $700 million. Entering Canada could ultimately involve a payout closer to $2 billion if Verizon wanted to buy spectrum and make other moves in the country.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VOD $31.89 0.00%
VZ $42.84 0.00%
AAPL $110.38 0.00%
FB $92.07 0.00%
GOOG $626.91 0.00%


Chart of I:DJI
DOW 16,472.37 +200.36 1.23%
S&P 500 1,951.36 +27.54 1.43%
NASDAQ 4,707.7750 +80.6910 1.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs