The likelihood of a merger between Vodafone and Verizon is dimming after Vodafone CEO Vittorio Colao put such rumours to bed.
Speaking at a Goldman Sachs conference yesterday, he said: “Theoretically, conceptually, it’s an option, but practically it’s…
The likelihood of a merger between Vodafone and Verizon is dimming after Vodafone CEO Vittorio Colao put such rumours to bed.
Speaking at a Goldman Sachs conference yesterday, he said: “Theoretically, conceptually, it’s an option, but practically it’s less likely than the other two [selling out of Verizon or pressuring Verizon for dividend payments].
The options that Colao envisaged were: First, putting the companies together and resolving the issue through a merger; Second, a complete separation of the companies, with Vodafone selling its stake – valued at £33bn (US$51.3bn) – to Verizon or another bidder, and admitting a failure of the JV, or; Third for Verizon to start paying dividends from Verizon Wireless.
Colao’s statement yesterday seems to have scotched the first option. Alternatively, if Verizon is unwilling to fork out a dividend then Vodafone may put its shares in the company on the market. But with no dividend on offer, it is not certain how appealing those shares will be for another company looking to make a profit.
It is understandable why Verizon is playing hardball over this issue. Verizon’s main business is fixed line, which with the advent of broadband and triple-play has become increasingly capital intensive, and the company needs a cashflow-rich business more than Vodafone. In many ways Verizon Wireless could become more valuable than Verizon itself, so Verizon is loath to give away 45% of that cashflow in dividends – however, US$50-60bn is a lot of money to find in an austere environment.
Vodafone could not add anything further to Colao’s comments. Verizon declined to comment.
