Vodafone Spurns $38 Billion Verizon Wireless Buyout Offer

TechWeb cites U.K. news organization, The Telegraph, which reports "Verizon Communications offered Vodafone $38 billion for the latter company's 45 percent stake in Verizon Wireless, but that the British firm refused the offer."

According to the article, "Vodafone turned down the offer because it believes its stake in the U.S. cellular company is worth $50 billion."

Tole Hart at Gartner Research said, "It (Verizon Wireless) is a very good property and is earning a lot of money, so Vodafone can afford to sell it at a premium." Hart also noted that "another reason the $50 billion price isn't too high is the fact that Cingular paid a reported $41 billion in 2004 for a struggling, and much smaller, AT&T Wireless."

Hart added that Vodafone has long wanted to fully own a cellular operator in the U.S., "but there's nothing available." He pointed out that "Cingular, the largest carrier in the U.S. is co-owned by the recently renamed AT&T (formerly SBC), which is in the process of a acquiring Cingular's other co-owner, BellSouth. Sprint recently acquired Nextel and is probably too large an acquisition for Vodafone. T-Mobile USA is often discussed as a potential takeover target, but probably not for Vodafone."

Hart said, "T-Mobile and Vodafone compete in Europe, so that's not going happen in the U.S."

Hart suggested there wasn't one overriding reason for Verizon for purchasing. He opined, "It would give them (Verizon) more flexibility in terms of direction of the company. Decision-making would be more streamlined because they wouldn't have to consult with Vodafone. And I'd guess they'd be able to offer more consolidated services more easily, such as Wi-Fi, cellular and handsets (that combine those two technologies)."

Hart thought "the main reason Verizon Communications likely wants to buy out Vodafone is the future value of Verizon Wireless." He said, "The price is high now, but it'll be higher in the future. It's more about future opportunity and maybe a matter of pride, too. They'd probably want to own the whole thing themselves."