TheStreet.com’s Scott Moritz reports that Verizon is taking a very hard look at Sprint and trying to figure out its future options.
People close to the Verizon camp say the big telco has started a so-called due diligence process at Sprint. The sources describe the work as at the “fact finding” and information-gathering stage, with no formal discussions under way.
Hell this is not the end of it. “Vodafone’s dividend stream from Verizon Wireless expires this Spring,” said Allan Tumolillo, COO of Probe Financial Associates, “and it is highly unlikely that Vodafone would be content to see its cash flow decline dramatically. It is no secret that Vodafone would either want to control Verizon Wireless or to find another property it can control. An unleashed Vodafone could consider taking a run at Sprint-Nextel and establish its own brand name in North America.” He points out with landline valuations tanking, and wireless valuations rising, it makes more sense for companies to become unwired.
Charlie Sierra adds: What runs out is the contractually mandated cash dividend payment formula in the VOD-VZ shareholder agreement. Furthermore it should be intuitively obvious that if VZW were to stop dividend payments to VOD, that means payments would also stop to VZ. Me thinks VZ likes the dividend payment just as much as VOD, if not more. VOD holds all the cards here. They got played by VZ last year in the AWE bidding game, and VZ needs their approval to even think about buying Sprint. (Read more in the comments section)