VODAFONE DECISION WEIGHS ON VERIZON MERGER PLANS

[Dukedog]

VODA

BYLINE: Toby Weber

BODY:
As Vodafone copes with its operational challenges and strategic direction, there is a growing possibility that the company may disentangle itself from Verizon Wireless, which could restrict the top U.S. carrier's merger plans.
Currently, Vodafone holds a 45% stake in Verizon Wireless, which is majority owned by Verizon Communications. Under the terms of this partnership, Vodafone has the right to give back $20 billion of Verizon Wireless to Verizon starting in July 2003, a commitment that can be fulfilled with either cash or equity.


A spokesman for Vodafone said the company is happy in its relationship with Verizon and that it has "no current plans" to exit the partnership, a statement echoed by a Verizon spokesman.
But over the course of their dealings, Verizon has made some decisions that reportedly have not sat well with Vodafone such as choosing the CDMA standard over GSM. In addition, there has been little progress in meeting Vodafone's desire to bring to market a dual-mode handset that would serve both standards. These strategic differences may lead Vodafone CEO Chris Gent to end his company's dealings with Verizon and possibly seek a new relationship with a different U.S. wireless carrier, said Michael Bowen, principal at SoundView Technology Group.

Pure financial considerations may sway the decision as well. Like almost all European wireless providers, Vodafone has large bills coming due from 3G spectrum auctions, and $20 billion could go a long way toward erasing that debt.

Exiting Verizon Wireless "becomes increasingly likely because Vodafone has to focus on its own European operations," said Rudy Baca, wireless strategist for The Precursor Group. Given how close the bonds between carriers and governments are in Europe, this desire has significant sway.

For Verizon, an exit by Vodafone might come at exactly the wrong time. With the prospects of a $20 billion payment to Vodafone and its unresolved $8.8 billion commitment to the government for the NextWave spectrum, Verizon's ability to consolidate with another carrier is hampered, Baca said.

"They need to have at least one - and probably both - off their books to make a move," he said.

With additional reporting by Donny Jackson in Chicago.

[KevinJames]

<< there has been little progress in meeting Vodafone's desire to bring to market a dual-mode handset that would serve both (CDMA & GSM) standards >>


I remember having raised this as a question back in January (The prior thread). It is interesting that behind the scenes there was indeed a push to do this. I can understand Verizon's concern here. If they had a phone that did GSM and CDMA, we would immediately start seeing posts asking how to take the phone to another carrier. Obviously VZ doesn't want to do anything to "encourage" churn.

[IdiOTeQnoLogY]

ok i see your point about maybe encouraging some churn with dual mode handsets; but in reality how many people that buy cellphones know about locking and unlocking phones and will actually go through with it so that they can switch carriers? sure some will do so but i don't think that is worth 20 billion dollars; there must be a bigger reason verizon is stalling.

also, it would seem verizon would make revenue from vodafone users roaming on its network; unless perhaps the proposal by vodafone for roaming would basically generate no revenue or losses for verizon...perhaps....one can only speculate....

[Kenny]

These strategic differences may lead Vodafone CEO Chris Gent to end his company's dealings with Verizon and possibly seek a new relationship with a different U.S. wireless carrier

ahhh...how about AT&T Wireless? Come on a give 'em a hand with their GSM/GPRS deployment!!!

Wow, they are are right though...Vodafone is facing some heavy debts for all 3G related expenses and $20 Billion would come very handy but it would also be a big financial blow to Verizon. &lt;p&gt;

But I can understand if part of the rift has to do with the diverging vision on both companies with regards to CDMA versus GSM. If Microsoft invested 45% in a software development firm and that firm decides to create a new vision for software development on Linux, you think that will create some kind of rift? The example is not exactly the same but kind of in some sort of way. You think Microsoft will take kindly to the idea that one day the software will work on both platforms? Or how about Nintendo partnering with a gaming software firm only to find out that they will develop a vision for creating the next generation gaming software for Sega Systems. Again, the Vodafone/Verzion scenario is not as dramatic as my examples but it would make sense to invest and partner with someone with similar strategic goals and technological/evolutionary interests from both marketing and engineering standpoints.

[IdiOTeQnoLogY]

AT&T already has a partner. NTTDoComo of japan who is also a huge carrier.....maybe vodafone can hit up cingular the only other carrier deploying gsm with no foreign partner (that i know of could be wrong)

....voicestream being owned by deutsche telekom who bought it at a ridiculous inflated price.

see kenny...those 3g spectrum licenses for wcdma cost a pretty penny [img]i/expressions/face-icon-small-smile.gif[/img]