AT&T and Verizon, the two leading U.S. wireless carriers by subscribers and revenue, have reportedly joined forces in a massive bid to acquire London-headquartered Vodafone, a multinational telco which operates networks in over 30 countries and has partner networks in over 40 additional countries. The transaction would easily dwarf the monumental AOL/Time Warner merger as Vodafone already is a huge corporation: it’s the world’s second-largest wireless carrier after China Mobile and commands 403 million subscribers worldwide.
This compares to AT&T’s 107 million subscribers, Verizon’s 116 million customers and China Mobile’s 703 million subscribers. What’s really interesting is Vodafone’s existing U.S. partnership with Verizon Wireless: the nation’s leading telco is actually a joint venture of Verizon Communications and Vodafone where the former holds 55 percent ownership and the latter controls the remaining 45 percent ownership of the joint venture.
As Europe has traditionally been Vodafone’s stronghold, the deal would give AT&T a long-rumored entree into the European market while Verizon would get to control its own destiny without oversight from Vodafone…
Financial Times says AT&T and Verizon are willing to pay a 40 per cent premium to Vodafone’s current price. Should the massively complex transaction receive necessary approvals from regulators (part of the reason why AT&T and Verizon are jointly bidding), Vodafone’s enterprise value might reach around $245 billion.
That would dwarf the previous M&A record holder, AOL’s $182 billion takeover of Time Warner in 2000, and would nearly double the total value of global M&A for the year so far. It would, in every sense, be a rather big deal.
Under the rumored terms, Verizon would buy Vodafone’s 45 per cent stake in their Verizon Wireless joint venture and AT&T would take Vodafone’s non-US assets.
Such a reasoning echoes a January 2013 story by the credulous Wall Street Journal which reported that AT&T had been considering a merger with one of the key players in a major European market such as the United Kingdom, Germany or the Netherlands.
Admittedly, the entree into the European market would make AT&T a truly global carrier.
In fact, the telco would become the world’s largest wireless player. More importantly, opening up the European market would help offset AT&T’s slowing growth at home as carriers in Europe have been slow to roll out fourth-generation LTE networks.
AT&T through its European partner could help deploy LTE networks throughout Europe in order to then introduce “more lucrative pricing strategies,” according to the obligatory people familiar with the matter.
More importantly, the joint Vodafone bid could usher in an era of more affordable roaming prices so AT&T or Verizon iPhone users traveling abroad would (theoretically) no longer pay exorbitant roaming fees.