The telecom sector could be in for a massive, multi-billion dollar M&A this year – potentially one of the largest ever - revolving around the future of US cellco Verizon Wireless, according to reports.
Verizon Communications wants to sort out its future relationship with Vodafone – joint owner of Verizon Wireless – this year, sources toldBloomberg. Verizon is considering options including a full buyout or a merger with the UK giant.
Vodafone's 45% stake in Verizon Wireless is worth an estimated $115 billion. According to the insiders, a buyout is emerging as the preferred option for Verizon the parent.
The alternative option – a merger between Verizon Communications and Vodafone – could be among the largest corporate mergers in history. Verizon has an market cap of over $130 billion, while Vodafone's is over $120 billion, Bloomberg estimated.
But according to the report, while both players had been in negotiations over a full merger, talks have stalled due to disagreements over where the merged company would be headquartered and who would lead it.
Specifically, Verizon was reluctant to move to the UK, and Vodafone CEO Vittorio Colao was reticent to cede leadership to Verizon CEO Lowell McAdam.
Verizon and Vodafone have been partners in Verizon Wireless since 1999, when Vodafone's US unit merged with what was then Bell Atlantic.
But Verizon Wireless famously withheld paying a dividend to Vodafone between 2005 and 2011, when it agreed to pay Vodafone $4.5 billion and Verizon Communications $5.5 billion.
Verizon also agreed to pay the partners $8.5 billion as a dividend for the following fiscal year, of which Vodafone was entitled to $3.825 billion.