Friday, March 17, 2006

Buying Out Vodafone Could Cost $50 Billion

Investor's Business Daily writes that it "could take a $50 billion offer for Verizon Communications to wrangle away Vodafone's 45% stake in Verizon Wireless." This is the figure Wall Street is predicting.

It has reportedly mulled a $40 billion offer for Vodafone's stake. But that's probably not enough to get a deal done, analysts say.

Berge Ayvazian at Yankee Group said, "The issue is valuation — if the price is right — and whether Verizon wants to put up the cash that's needed to buy them out. From Verizon's perspective, $50 billion is a big number — especially if they're taking on debt."

The recent move by AT&T to buy BellSouth will "give AT&T 100% ownership of Cingular Wireless," and "Verizon needs to keep pace with AT&T, goes the thinking on Wall Street."

UBS Research thinks "a $50 billion offer would convince Vodafone to sell. But that figure doesn't include about $8 billion in debt that Verizon Communications would also assume." Also "Verizon owns a 23% stake in Omnitel, a wireless firm in Italy. Vodafone owns the rest. Verizon would sell its Omnitel stake to Vodafone as part of a Verizon Wireless deal."

Verizon would also probably have to hike its $36 billion in long-term debt "by $20 billion to $25 billion to acquire Vodafone's wireless stake."

Roger Entner at Ovum said, A Verizon takeover "would get really expensive. Verizon would like to buy out Vodafone. Vodafone would like to buy out Verizon. The most likely scenario is still that nothing happens."