Verizon Wireless-Vodafone merger will be a tough sell, say experts

Verizon Wireless’ pending dividend payment to its parent companies, Vodafone and Verizon Communications has hit the investors’ nerve. The carrier is still to announce a profit payment that is the delaying Vodafone’s dividend distribution.

Vodafone owns 45 percent stake in the major US carrier, while the rest majority goes to Verizon Communications. The dividend has attracted quite some importance for the UK company as it goes through its own financial woes in Europe.

However, the belated payment has inspired some theorists that both parent might be interested in taking up a full 100 percent stake in the money maker. Verizon Wireless is one of the top earning wireless carrier in the US. Along with AT&T and Sprint, it owns most of the wireless market share. The company states that it covers over 75 percent of the US territory in terms of 4G LTE network.

“Conspiracy theorists have suggested that Verizon’s foot-dragging with respect announcing this year’s Verizon Wireless distribution to its corporate parents is a sign that the companies are working on something grander,” wrote Bernstein analyst Craig Moffett in a report published on Friday.

“Something grander might be a buyout of Vodafone’s stake in Verizon Wireless, or it might be a merger of the two companies. The problem, as ever, is valuation.

In July 2011, Verizon Wireless paid $10 Billion in profits to both companies. Vodafone, in receipt of its $4.5 Billion, paid dividend to its share holders this February. VZ, on the other hand, bumped up the dividend percentage 3 percent.

There are also rumours that both companies might be thinking of a possible merger as both do not have financial prowess to take the 100 percent stake. However, since Verizon Comm is on a detrimental slope because of decreasing wireless business and Vodafone is seeing a decreasing demand in Europe, investors might not approve of the merger.

“In a merger or Verizon Wireless buyout for equity, Vodafone shareholders would be trading paper in wireless for paper in Wireline… and they’d be paying a premium for the privilege. That’s a tough sell.”

Short URL: https://www.newspakistan.pk/?p=33037

Posted by Usman Khalid on Sep 22 2012. Filed under Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.