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Summary:

A bit of news that went unnoticed over here in the United States. Arun Sarin, chief executive of wireless giant Vodafone said that he has no plans to sell his company’s share in Verizon Wireless. “We’re not saying we will not sell this asset in the […]

A bit of news that went unnoticed over here in the United States. Arun Sarin, chief executive of wireless giant Vodafone said that he has no plans to sell his company’s share in Verizon Wireless.

“We’re not saying we will not sell this asset in the future – we’re simply saying we want to make sure that when we sell this asset we have maximised value for shareholders.”


Many of Sarin’s investors have been campaigning for a quick sellout of the Vodafone 45% stake in Verizon Wireless. The stake is said to be worth between $30-to-$50 billion. Sarin was quick to point out, that in last two years, the value of that bit has gone up a whopping $10 billion. Still, there is perception that with US cellular market penetration over 70%, the upside clearly is limited. The money could be put to better use in shoring up less-than-stellar operations in Japan and buying a piece of the fast growing markets like India, Russia and Brazil.

Sarin’s comments would have come as welcome news inside the VZ executive chambers, because if Vodafone had decided to sell, Verizon would be in a bit of a pickle, as our friends from across like to say. Verizon is spending a lot of money on its high-speed fiber optic network.

Still, the issue is far from settled. June 10, 2006 is when Vodafone will get a “60-day window” to exercise a put option forcing VZ to cough-up about $10 billion of VZ’s stake. I had a little chat with Daniel Berninger, analyst with Tier1 Research. In his estimate, using the Cingular/AT&T Wireless and Sprint-Nextel deals as the yardstick, Vodafone could easily get $66 billion for its stake. He pointed out that Verizon is in fund raising mode. The second largest phone company in the US is selling access lines and directory business to raise cash. Given the recent downgrades from Moody’s and S&P, Berninger points out that bond market may not be as easy to tap now as they were few months ago.

  1. The problem with that $66B valuation is: who could pay it? I don’t see any companies with such deep pockets on the prowl for a minority stake in a wireless company. So if Vodaphone did sell, I don’t think they are going to get any kind of crazy premium. I think if Vodaphone could find a buyer and did sell, it would only be as a sort of 3-way trade where they used the proceeds to acquire T-Mobile USA from DT. There should still be quite a bit left over to pay for the upgrades to the T-Mobile network needed to stay competative going forward.

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