As of right now, Verizon — the corporate parent — only owns just more than half of the Verizon Wireless business, with British telecom Vodafone (VOD) owning the remaining 45% stake.
But recent rumblings of a Verizon buyout of Vodafone’s position in VZ wireless mean the U.S. telecom stock could take over the entirety of operations — via a deal that could be worth north of $115 billion, according to analysts.
Any buyout on that scale between VZ and Vodafone would be one of the largest telecom deals in the past decade.
VOD admitted Thursday that it is in talks with VZ, but that doesn’t guarantee a Verizon Wireless buyout will happen. Since its beginnings in 1999, the partnership has paid billions of dollars in dividends to Vodafone — something the British telecom stock might not be too eager to give up unless the price is right.
In fact, a Vodafone statement on the Verizon Wireless buyout plan simply said: “There is no certainty that an agreement will be reached.”
Of course, that didn’t keep the market from bidding up Vodafone stock. VOD shares gapped up 8% in early trading on the rumors.
There has been no shortage of telecom buyout rumblings lately as the wireless industry reaches critical mass and cable TV faces increasing threats from digital alternatives that include Netflix (NFLX) and Amazon (AMZN) video offerings.
Elsewhere in Europe this year, Vodafone bought German cable company Kabel Deutschland for $10.1 billion in June. Also, Mexican telecom America Movil (AMX) is bidding $9.5 billion for Dutch wireless company KPN.
And in the U.S., of course, we’ve seen AT&T with its $1.2 billion bid for Leap Wireless (LEAP).
It will be interesting to see how things shake out with Verizon and Vodafone, mostly because it is increasingly clear that telecom companies — both in the cable TV and the wireless space — have little organic growth ahead of them in developed markets like the U.S. and Europe. Everyone is already pretty much wired, and from here on out, the only way to expand is to gobble up a smaller competitor.
Or in Verizon’s case, to buy the outstanding stake in an existing venture to make sure you don’t have to share the profits anymore.
- Details on the Verizon/Vodafone deal. (NYT)
- Of course, Christopher Freeburn mentioned rumors of this deal back in April. (InvestorPlace.com)
- Why telecom stocks have been soft lately. (The Motley Fool)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.