With a great importance being stressed on telecommunications by modern society, some of the biggest names in cellular are making changes. Verizon, one of the largest telecommunication companies in America, is looking to buy out Vodafone’s financial interest. Vodafone is a multinational company which started in 1982 in Newbury, Berkshire, England. The company has 439 million subscribers in over 70 countries between them and their partners. Currently, Vodafone owns 45 percent of Verizon Wireless.
The negotiation happened on September 3rd, 2013, during the early morning. Verizon offered to buy out Vodafone’s 45 percent stake in the business, which in turn gives them complete ownership of Verizon Wireless. Financially, this is one of the largest cellular deals in U.S. History, making it a significant deal for mobile users and businessmen alike. The largest deal is held by Vodafone, when it bought a German telecommunications company for $202 billion. The second largest was Time Warner when it made a deal with AOL. This epic merger cost more than $180 billion and went so wrong, students getting their finance degree right now are using it as an example of the worst mergers in history. Both deals made changes to the way each company ran and operated, so there is no doubt that both Verizon and Vodafone will be making some major changes.
The agreement was the third largest amount in U.S. history. The proposition will give Vodafone $130 billion dollars for their owned shares of Verizon. Vodafone, which is thrilled by Verizon taking over the wireless division, will be able to focus its efforts more on Project Spring, which is a network investment project expected to be developed over the next three years. Verizon is also thrilled as they will be able to start getting more of the profits from this large company. It is yet to be seen if other shareholders will have the same excitement about the deal and the agreement must still be approved by them and go through standard regulations before it takes full effect.
The payment for Vodafone is being broken up onto a number of different payments. Less than half will be in actual cash. This cash amount still equates to $58.9 billion. The rest of the money will be awarded in notes and stock, but mostly stock.
Code names, breakfast and the gym
The large amounts provided during the deal aren’t the only details being discussed about this billion-dollar deal. Both Verizon’s CEO and Vodafone’s top executive conducted their business over breakfast and a trip to the gym at the Four Seasons in San Francisco. Vodafone’s executive, Vittorio Colao, and Verizon’s CEO, Lowell McAdams, wanted to ensure the deal was done face-to-face in a relaxed environment. In order to keep the information out of the public’s eye until the deal was done, they used a series of code names. The code word for the sale was “River,” and McAdams, Colao and other major players in the deal all were referred to by codename throughout the transaction.
This large and lengthy deal has been a way for Verizon to continue its growth in the wireless industry. Currently, Verizon Wireless has over 100 million subscribers and 22 million landline subscribers.
Decided not to merge
The initial discussion was to merge the companies, rather than discuss a buyout of shares. McAdam had met with the chairman of Vodafone’s board of directors, Gerald Kleisterlee, to discuss a merger in the past. The idea didn’t pan out though, as Verizon realized that it wanted its main focus to stay in America, rather than move over to Europe. The focus of the negotiations then turned into buying the large stake Vodafone has in Verizon Wireless. The deal had started discussions in the first quarter, and they were carefully negotiated and discussed with some of the top shareholders in both companies.
While this new deal was completed at 5 a.m., it has been the buzz of the business world ever since. Verizon re-ensured Vodafone by offering a $10 billion fee should they be unable to raise the money they need for this huge purchase. As Wall Street begins to close the deal with $500 million in merger, legal and financing fees, the entire world is still wondering how this large deal will affect their phone service.