This article appeared Sept. 4, 2013, on Real Money. To read more content like this, + see inside Jim Cramer's multi-million dollar portfolio for FREE Click Here NOW.Vodafone (VOD) recently announced its massive deal to sell off the company's 45% stake in Verizon Wireless (VZ - Get Report) for a whopping $130 billion. This was on the high end of what most had estimated the deal would be worth, and it was certainly good news for Vodafone shareholders. The even greater news, however, was how Vodafone plans to spend the proceeds. Management says it will pay off a total of $20 billion in debt and return a massive $84 billion in cash to shareholders, and it will apparently spend a more modest $26 billion on acquisitions and investment. To put this into context, the company's American depositary receipt market capitalization is only $156 billion as of today. For myself, as a Vodafone shareholder, my original fear was that management would plow the majority of proceeds into questing for a newer, bigger buyout, paying an equally big premium and squandering lots of money along the way. But, as we've seen here, Vodafone will actually be quite lean. The acquisitions it is seeking seem focused and thematic. While many large shareholders wanted to see more fireworks on the M&A front, I believe this mix is ideal and shows tremendous capital discipline. It's really a continued validation of Vodafone's record as the most shareholder-friendly big telecom firm in Europe. Fortress Europe Thus far, Vodafone's acquisitions have targeted cable providers in the U.K. and Germany. There is talk of buying Spanish and Swiss cable providers, too. Why cable? It's because Vodafone, as a pure play mobile telecom, faces obsolescence in a world where consumers want the ease and simplicity of "bundled" cable or satellite television, wireless phone, Internet and landline services. This is also why Vodafone is building out its fiber optic network in Europe and launching 3G services in smaller countries. If Vodafone wants to truly leverage mobile data growth in Europe, it needs to be competitive with bundling and raise its numbers in average revenue per user. By making these smaller, strategic cable acquisitions, Vodafone is planting the seeds for the company to grow and remain relevant in Europe without breaking the bank.
Stick With Vodafone
Sep 07, 2013 | 01:00 PM EDT
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas