Friday, March 17, 2006

Verizon Stuck With Vodafone In Wireless Arm, For Now

Cellular-News reports that Vodafone "fresh off its agreement to sell its Japanese wireless business to Softbank Corp. for US$15 billion," has "dashed Verizon's hopes - at least for the moment - of buying out the 45% stake in Verizon Wireless it doesn't own." Vodafone Chief Executive Arun Sarin said, "We are happy with our position in the U.S. and have no current plans to exit."

Roger Entner at Ovum said, "Both want the other to leave, but it's such a fruitful business that the one leaving would be severely hurt. I don't see the ownership structure change any time soon."

Entner added, "I can understand selling the Japan business when you're losing your shirt with no hope of winning it back. Verizon Wireless is the one that's really doing well here. Why sell a winner?"

According to the article, "few believe that an AT&T Wireless business backed by a combined AT&T will significantly cut into Verizon Wireless' base of loyal customers. Analysts generally acknowledge Verizon Wireless as the strongest wireless carrier, with industry-low turnover and higher margins and average revenue per user."

David Dixon at RBC Capital Markets said, "There's no immediate pressure. The AT&T deal won't accelerate (Verizon's) plans." Dixon opined that "eventually, Verizon will need to take full control of Verizon Wireless to enable the same kinds of cost savings AT&T will churn out with its integration of Cingular. But that may not occur for another year or two."

Two potential acquisitions for Verizon include Alltel and Qwest Communications. Albert Lin at American Technology Research said, "The nightmare situation is for AT&T to buy Qwest." Lin argued that "Qwest's market may actually be an attractive place for Verizon to expand its super-fast fiber network, since the area likely would be less demanding than a metropolitan site in terms of construction costs and community demands."